Treaty on the Functioning of the European Union - A Commentary: Volume I: Preamble, Articles 1-89 [1st ed. 2021] 3030435091, 9783030435097, 9783030435110

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Springer Commentaries on International and European Law

Hermann-Josef Blanke Stelio Mangiameli Editors

Treaty on the Functioning of the European Union – A Commentary Volume I: Preamble, Articles 1-89

Springer Commentaries on International and European Law

The Springer Commentaries on International and European Law Series publishes practice oriented article-by-article commentaries on legal instruments written for researchers and practitioners.

More information about this series at http://www.springer.com/series/16559

Hermann-Josef Blanke • Stelio Mangiameli Editors

Treaty on the Functioning of the European Union – A Commentary Volume I: Preamble, Articles 1-89

Editors Hermann-Josef Blanke Faculty for Economics, Law and Social Science University of Erfurt Erfurt, Germany

Stelio Mangiameli Universita` degli Studi di Teramo Teramo, Italy

ISSN 2662-9666 ISSN 2662-9674 (electronic) Springer Commentaries on International and European Law ISBN 978-3-030-43509-7 ISBN 978-3-030-43511-0 (eBook) https://doi.org/10.1007/978-3-030-43511-0 # Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG. The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

To Ernesto Rossi and Altiero Spinelli, who in the dark years of confinement dictatorship and war wrote the Ventotene Manifesto, “For a free and united Europe” (1941), to which we can still look with admiration as a founding thought and programme of the European Union

Preface

More than seven years after the publication of the Commentary on the Treaty on European Union, and while crises of European integration follow each other, the editors present the first of the four volumes of the Commentary on the Treaty on the Functioning of the European Union. This publication is greatly delayed, but, despite very considerable impediments, the editors have succeeded to bring together authors from 28 (27) Member States of the Union within this work. In the meantime, on 31 January 2020, the United Kingdom has left the European Union after concluding a Withdrawal Agreement in October 2019. On 24 December 2020, shortly before the end of the transition period and the UK’s leaving of the Internal Market and Customs Union, the European Union/European Atomic Energy Community and the United Kingdom, after tough negotiations, reached a Trade and Cooperation Agreement. Seeking to establish clear and mutually advantageous rules governing trade and investment between the Parties (Preamble), that Agreement aims to provide a legal base for economic partnership. Despite this negotiating success, the United Kingdom’s withdrawal marks a sharp break in the history of European integration. The future relationship between the Union and its new autonomous and sovereign partner across the Channel, “broad”, “close and peaceful” though it is articulated in the Agreement (Article 1), will become more complicated, bureaucratic and time-consuming, to the detriment of citizens and businesses. The editors are grateful to all the authors of this pan-European project for their contributions. In particular, they are grateful to those authors, who had to update their manuscripts several times over the years. Johannes Graf von Luckner, LL.M., deserves many thanks for his revision of several pieces. Special thanks are due to Dr. Robert Bo¨ttner, B.A., LL.M., assistant at the Chair for Public Law, International Public Law and European Integration at the University of Erfurt, Dr. Paolo Colasante, researcher at the Institute for the Study of Regionalism, Federalism and SelfGovernment of the National Research Council (ISSiRFA-CNR), as well as to Manoe¨l Johr, B.A., and Aimee Sander, B.A., both assistants at the Erfurt Chair.

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Preface

For her constant patience and editorial support, our thanks and appreciation go to Dr. Brigitte Reschke from Springer. Erfurt, Germany Teramo, Italy February 2021

Hermann-Josef Blanke Stelio Mangiameli

Structure of the Commentary

The whole Commentary is organised as follows: The Treaty on the European Union (TEU) – A Commentary The Treaty on the Functioning of the European Union (TFEU) – A Commentary Volume I: Preamble—Articles 1–89 Volume II: Articles 90–164 Volume III: Articles 165–358 Volume IV: Protocols (No 3 CJEU, No 4 ESCB and ECB, No 5 EIB, No 19 Schengen)

ix

Contents

Preamble Preamble (Blanke) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Part One

Principles

Article 1. [Functioning of the Union, Treaties Same Value] (Blanke) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Title I

3

61

Categories and Areas of Union Competence

Article 2. [Competences of the Union and Member States] (Mangiameli) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

133

Article 3. [Exclusive Competence of the Union] (Mangiameli) . . . . . . . . .

175

Article 4. [Shared Competence] (Mangiameli) . . . . . . . . . . . . . . . . . . . . . .

197

Article 5. [Coordination of the Economic Policy] (Mangiameli) . . . . . . . .

235

Article 6. [Support, Coordination or Supplement by the Union] (Mangiameli) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

243

Title II

Provisions Having General Application

Article 7. [Policy Consistency; Principle of Conferral of Powers] (Mangiameli) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

255

Article 8. [Equal Treatment, Equality Between Men and Women] (Flo´venz) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

261

Article 9. [Social Aims] (Sommermann) . . . . . . . . . . . . . . . . . . . . . . . . . . .

275

Article 10. [Non-Discrimination] (Davulis) . . . . . . . . . . . . . . . . . . . . . . . . .

281

Article 11. [Compliance with the Requirements of Environmental Protection] (Amato Mangiameli) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

299 xi

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Contents

Article 12. [Consumer Protection] (Jo´zon) . . . . . . . . . . . . . . . . . . . . . . . . .

315

Article 13. [Animal Protection] (Amato Mangiameli) . . . . . . . . . . . . . . . . .

331

Article 14. [Services of General Economic Interest] (Pielow/Schuelken) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

347

Article 15. [Observance of the Principle of Openness] (Porras Ramı´rez) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

371

Article 16. [Protection of Personal Data] (Docksey/Zanfir-Fortuna) . . . . . .

401

Article 17. [Confessional and Non-confessional Organisations] (Di Gesu`) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

431

Part Two

Non-Discrimination and Citizenship of the Union

Article 18. [Combating Discrimination Based on Nationality] (Favilli) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

453

Article 19. [Combating Discrimination Based on Other Grounds] (Favilli) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

469

Article 20. [Union Citizenship] (Hilpold) . . . . . . . . . . . . . . . . . . . . . . . . . . .

489

Article 21. [Free Movement and Establishment] (Morviducci) . . . . . . . . .

517

Article 22. [Right to Vote] (Morviducci) . . . . . . . . . . . . . . . . . . . . . . . . . . .

545

Article 23. [Diplomatic and Consular Protection of Another Member State] (Hilpold) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

563

Article 24. [Participative Rights] (Morviducci) . . . . . . . . . . . . . . . . . . . . . . .

573

Article 25. [Monitoring and Further Development of Union Citizenship] (Hilpold) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

595

Part Three

Union Policies and Internal Actions Title I The Internal Market

Article 26. [Establishing the Internal Market] (Blanke) . . . . . . . . . . . . . . .

601

Article 27. [Exceptions to Internal Market Regulations] (Blanke) . . . . . . .

665

Title II

Free Movement of Goods

Article 28. [Free Movement of Goods] (Lyons) . . . . . . . . . . . . . . . . . . . . .

687

Article 29. [Products from Third Countries] (Lyons) . . . . . . . . . . . . . . . . . .

703

Contents

Chapter 1

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The Customs Union

Article 30. [Prohibition of New Customs Duties or Charges Having Equivalent Effect] (Kerikma¨e/Sa¨rav) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

711

Article 31. [Common Customs Tariff] (Kerikma¨e/Sa¨rav) . . . . . . . . . . . . . .

719

Article 32. [Principles for Commission Duties] (Kerikma¨e/Sa¨rav) . . . . . . .

725

Chapter 2

Customs Cooperation

Article 33. [Customs Cooperation] (Kerikma¨e/Sa¨rav/Hamul’a´k) . . . . . . . . Chapter 3

733

Prohibition of Quantitative Restrictions Between Member States

Article 34. [Prohibition of Quantitative Restrictions on Imports] (Hojnik) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

739

Article 35. [Prohibition of Quantitative Restrictions on Exports] (Hojnik) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

779

Article 36. [Derogations] (Hojnik) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

787

Article 37. [State Monopolies of Commercial Character] (Hojnik) . . . . . .

813

Title III

Agriculture and Fisheries

Article 38. [Common Agriculture and Fisheries Policy] (Jurcewicz/ Popardowski) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

829

Article 39. [Objectives of Common Agricultural Policy] (Jurcewicz/ Popardowski) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

845

Article 40. [Common Organisation of Agricultural Markets] (Jurcewicz/Popardowski) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

879

Article 41. [Measures Under a Common Agricultural Policy] (Jurcewicz/Popardowski) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

909

Article 42. [Application of Rules on Competition] (Jurcewicz/Popardowski) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

913

Article 43. [Implementing the Common Agricultural Policy] (Jurcewicz/ Popardowski) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

933

Article 44. [Countervailing Charge] (Jurcewicz/Popardowski) . . . . . . . . . .

951

xiv

Title IV

Contents

Free Movement of Persons, Services and Capital Chapter 1 Workers

Article 45. [Free Movement of Workers] (Tryfonidou) . . . . . . . . . . . . . . . .

959

Article 46. [Implementation of the Free Movement of Workers] (Tryfonidou) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1013 Article 47. [Exchange of Young Workers] (Tryfonidou) . . . . . . . . . . . . . . . 1017 Article 48. [Social Security] (Tryfonidou) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1021 Chapter 2

Right of Establishment

Article 49. [Freedom of Establishment] (Xuereb) . . . . . . . . . . . . . . . . . . . . 1033 Article 50. [Implementation of the Freedom of Establishment] (Xuereb) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1049 Article 51. [Exemptions in the Exercise of Official Authority] (Xuereb) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1089 Article 52. [Special Provision on Public Policy, Public Security, or Public Health] (Graf Kielmansegg) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1093 Article 53. [Mutual Recognition of Diplomas] (Papadopoulos) . . . . . . . . . 1121 Article 54. [Equality of Treatment of Companies and Firms] (Papadopoulos) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1131 Article 55. [Equal Participation in the Capital of Companies or Firms] (Papadopoulos) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1147 Chapter 3

Services

Article 56. [Freedom to Provide Services] (Segura Serrano) . . . . . . . . . . . 1159 Article 57. [Notion of Services] (Segura Serrano) . . . . . . . . . . . . . . . . . . . . 1191 Article 58. [Services in Transport, Banking, Insurances] (Segura Serrano) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1201 Article 59. [Liberalisation] (Segura Serrano) . . . . . . . . . . . . . . . . . . . . . . . . 1205 Article 60. [Further Liberalisation] (Segura Serrano) . . . . . . . . . . . . . . . . . 1209 Article 61. [Transitional Rules] (Segura Serrano) . . . . . . . . . . . . . . . . . . . . 1211 Article 62. [Application of the Rules on the Right of Establishment] (Segura Serrano) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1213

Contents

xv

Chapter 4

Capital and Payments

Article 63. [Free Movement of Capital and Payment] (Seyad) . . . . . . . . . 1247 Article 64. [Restrictions on Third Countries] (Seyad) . . . . . . . . . . . . . . . . . 1287 Article 65. [Restrictions by Member States] (Seyad) . . . . . . . . . . . . . . . . . 1297 Article 66. [Short-Term Protection Measures] (Seyad) . . . . . . . . . . . . . . . . 1321 Title V

Area of Freedom, Security and Justice Chapter 1 General Provisions

Article 67. [Establishing the AFSJ] (Chevallier-Govers) . . . . . . . . . . . . . . . . 1329 Article 68. [Strategic Guidelines] (Chevallier-Govers) . . . . . . . . . . . . . . . . . 1377 Article 69. [Control by National Parliaments and Subsidiarity Principle] (Olivetti) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1393 Article 70. [Evaluation of the Implementation of the Union Policies] (Oller Rubert/Garcı´a Macho) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1399 Article 71. [Standing Committee and Operational Cooperation on Internal Security] (Thym) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1405 Article 72. [Clause on Maintaining Internal Security by Member States] (Thym) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1407 Article 73. [Interstate Cooperation] (Oller Rubert/Garcı´a Macho) . . . . . . . 1411 Article 74. [Administrative Cooperation] (Oller Rubert/Garcı´a Macho) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1417 Article 75. [Prevention and Combating Terrorism] (Seyad) . . . . . . . . . . . . 1427 Article 76. [Legislative Initiative] (Chevallier-Govers) . . . . . . . . . . . . . . . . . 1439 Chapter 2

Policies on Border Checks, Asylum and Immigration

Article 77. [Features and Measures of the Policy] (Thym) . . . . . . . . . . . . . 1451 Article 78. [Common Policy on Asylum] (Thym) . . . . . . . . . . . . . . . . . . . . 1467 Article 79. [Common Immigration Policy] (Bacˇic´ Selanec) . . . . . . . . . . . . . 1491 Article 80. [Solidarity and Responsibility] (Goldner Lang) . . . . . . . . . . . . . 1517 Chapter 3

Judicial Cooperation in Civil Matters

Article 81. [Judicial Cooperation in Civil Matters] (Rodrı´guez Pineau) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1529

xvi

Chapter 4

Contents

Judicial Cooperation in Criminal Matters

Article 82. [Principle of Mutual Recognition] (De Pasquale/Pesce) . . . . . . 1559 Article 83. [Minimum Harmonisation] (De Pasquale/Pesce) . . . . . . . . . . . . 1581 Article 84. [Promotion of Crime Prevention] (De Pasquale/Pesce) . . . . . . 1597 Article 85. [Eurojust] (Nilsson) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1603 Article 86. [European Public Prosecutor’s Office] (Nilsson) . . . . . . . . . . . . 1623 Chapter 5

Police Cooperation

Article 87. [Establishment and Measures of Police Cooperation] (Milazzo) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1645 Article 88. [Europol] (Milazzo) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1671 Article 89. [Interstate Cooperation] (Milazzo) . . . . . . . . . . . . . . . . . . . . . . 1699 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1705 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1711

Abbreviations

AEUV AFSJ AG All ER arg. BBA BDI BGBl. BGEP BL BN BVerfG BVerfGE CAP CCT CE CEAS CEDH CEPS CETA cf. Chap. CISA cit.

Vertrag u¨ber die Arbeitsweise der Europa¨ischen Union (Treaty on the Functioning of the European Union—TFEU) Area of freedom, security and justice Advocate General All England Law Reports Argumentum British Bankers’ Association Bundesverband der Deutschen Industrie (Federation of German Industries) Bundesgesetzblatt Broad guidelines for the economic policies Basic Law (German Constitution ¼ Grundgesetz) Billion Bundesverfassungsgericht (German Federal Constitutional Court) Entscheidung des Bundesverfassungsgerichts (Decision of the German Federal Constitutional Court) Common agricultural policy Common customs tariff Communaute´ Europe´enne (Treaty establishing the European Community) Common European Asylum System Convention europe´enne des droits de l’homme or Cour europe´enne des droits de l’homme Centre for European Policy Studies Comprehensive Economic and Trade Agreement Confer (compare) Chapter Convention implementing the Schengen Agreement Cited

xvii

xviii

CJEU Statute CJEU CMO CoE COREPER COSAC COSI CSA CSDP CST CUP DEM DG DNA Doc. DPA DPD DVGW e.g. EA EAFRD EAGF EAGGF EAW EBA EC Treaty EC ECB ECHR ECJ Statute ECJ ECN ECOFIN ECR ECSC Treaty ECSC ECSR ECtHR

Abbreviations

Protocol (No 3) on the Statute of the Court of Justice of the European Union Court of Justice of the European Union Common Organisation of the Markets Council of Europe Committee of Permanent Representatives Conference of Parliamentary Committees for Union Affairs of Parliaments of the European Union Standing Committee on Operational Cooperation on Internal Security Community Supported Agriculture Common Security and Defence Policy European Union Civil Service Tribunal Cambridge University Press German Deutsche Mark (currency code) Directorate-General National Anticorruption Directorate Document Data Protection Authority Data Protection Directive Deutscher Verein des Gas- und Wasserfaches Exempli gratia (for example) Euro area European Agricultural Fund for Rural Development European Agricultural Guarantee Fund European Agricultural Guidelines and Guarantee Fund European Arrest Warrant European Banking Authority Treaty establishing the European Community European Community/European Communities European Central Bank European Convention for the Protection of Human Rights and Fundamental Freedoms Protocol (No 3) on the Statute of the Court of Justice of the European Union European Court of Justice (“Luxembourg Court”, see also CJEU) European Competition Network Economic and Financial Affairs Council European Court Reports Treaty establishing the European Coal and Steel Community European Coal and Steel Community European Committee of Social Rights European Court of Human Rights (“Strasbourg Court”)

Abbreviations

xix

Ed. EDA Eds. EEA EEC Treaty EEC EFSF EFSM EFTA EIB Statute

Editor/Edition European Defence Agency Editors European Economic Area Treaty establishing the European Economic Community European Economic Community European Financial Stability Facility European Financial Stability Mechanism European Free Trade Association Protocol (No 5) on the Statute of the European Investment Bank European Investment Bank European Investment Fund European Insurance and Occupational Pensions Authority European Judicial Network European Maritime and Fisheries Fund European Monetary Institute European Monetary System Economic and Monetary Union European Parliament European Patent Convention European Public Prosecutor’s Office European Regional Development Fund (European) Economic and Social Committee European System of National and Regional Accounts European System of Central Banks Protocol (No 4) on the Statute of the European System of Central Banks and of the European Central Bank European Social Fund European Structural and Investment Funds European Stability Mechanism et alii (and others) et sequens, et sequentes (and the following page/s or article/s) European Union European Union Charter of Fundamental Rights Euro (currency) European Atomic Energy Community European Police Office EU-Singapore Free Trade Agreement Vertrag u¨ber die Europa¨ische Union (Treaty on European Union—TEU) Frankfurter Allgemeine Zeitung Federal Constitutional Court Foreign direct investment

EIB EIF EIOPA EJN EMFF EMI EMS EMU EP EPC EPPO ERDF (E)ESC ESA ESCB ESCB Statute ESF ESI ESM et al. et seq(q). EU EUCFR EUR EURATOM EUROPOL EUSFTA EUV F.A.Z. FCC FDI

xx

FIDE fn. FTA GATS GATT GC GC GDP GDPR GDR GG GNI GNP HdR HR i.a. i.e. ibid. ICC ICJ ICR id. IGC ILM ILO IMF JHA LSE MEP MoU MS n. NATO NCA NCB n.F. NGEU NGO No/No. NRP NZZ

Abbreviations

Fe´de´ration Internationale pour le Droit Europe´en (International Federation of European Law) Footnote Free Trade Agreement(s) General Agreement on Trade in Services General Agreement on Tariffs and Trade General Court (part of the CJEU) Grand Chamber/Grande Chambre Gross domestic product General Data Protection Regulation German Democratic Republic Grundgesetz (German Basic Law) Gross national income Gross national product Habilitation a` diriger des recherches (authorised to steer researches) High Representative (of the Union for Foreign Affairs and Security Policy) inter alia (among other things) id est (that is) Ibidem (at the same place) International Criminal Court International Court of Justice International Court Reports idem (the same) Intergovernmental conference International Law Materials International Labour Organization International Monetary Fund Justice and Home Affairs London School of Economics and Political Science Member of the European Parliament Memorandum of Understanding Member State(s) number North Atlantic Treaty Organization National competent authority National Central Bank neue Fassung (new version) Next Generation EU (COVID-19 recovery package) Non-governmental organisation Number National Reform Programme Neue Zu¨rcher Zeitung

Abbreviations

O.J. C O.J. L O.J. OCTs OECD OEEC OLAF OMC OMRs OMT OSCE OUP p./pp. para passim PCIJ PIF PJCC PNR PSD QMV RAP scil. SE SEA Sec./Sect(s). SEK SEPA SGEI SGP SIS SMEs SSM TCA TCE TEC TECSC TEEC TEU

xxi

Official Journal of the European Union (Communications) Official Journal of the European Union (Legislation) Official Journal Overseas Countries and Territories Organisation for Economic Co-operation and Development Organisation for European Economic Co-operation European Anti-Fraud Office Open method of coordination Outermost regions Outright Monetary Transactions Organization for Security and Cooperation in Europe Oxford University Press Pages(s) Paragraph(s) Widely mentioned, at various places Permanent Court of International Justice Protection of the Financial Interests of Union (protection des inte´reˆts financiers) Police and judicial cooperation in criminal matters Passenger name record Payment Services Directive Qualified majority voting Rules of application scilicet (namely) Societas Europaea Single European Act Section(s) Swedish Krona (currency) Single Euro Payments Area Services of general economic interest Stability and Growth Pact Schengen Information System Small- and medium-sized enterprises Single Supervisory Mechanism Trade and Cooperation Agreement Between the European Union and the United Kingdom Treaty establishing a Constitution for Europe; Traite´ instituant la Communaute´ europe´enne Treaty establishing the European Community Treaty establishing the European Coal and Steel Community Treaty establishing the European Economic Community Treaty on European Union (as amended by the Treaty of Lisbon)

xxii

TEU-Amsterdam TEU-Maastricht TEU-Nice TFEU TFUE TiSA TRIPS TSCG TTIP TUE UEF UK UNC UNTS US USA v/v. VAT VCLT Vol. VVDStRL WHO WTO

Abbreviations

Treaty on European Union as amended by the Treaty of Amsterdam Treaty on European Union as drawn up by the Treaty of Maastricht Treaty on European Union as amended by the Treaty of Nice Treaty on the Functioning of the European Union Trattato sul funzionamento dell’Unione europea (Treaty on the Functioning of the European Union—TFEU) Trade in Services Agreement Agreement on Trade-Related Aspects of Intellectual Property Rights Treaty on Stability, Coordination and Governance in the Economic and Monetary Union Transatlantic Trade and Investment Partnership Trattato sull’Unione europea (Treaty on European Union— TEU) Union Europe´enne des Fe´deralistes United Kingdom Charter of the United Nations United Nations Treaty Series United States United States of America Versus (against) Value added tax Vienna Convention on the Law of Treaties (1969) Volume Vero¨ffentlichungen der Vereinigung der Deutschen Staatsrechtslehrer World Health Organization World Trade Organization

Contributors

Agata C. Amato Mangiameli, Dr. Professor of Legal Philosophy, University of Rome Tor Vergata, Rome, Italy Nika Bacˇic´ Selanec, L.L.M. Senior Assistant Lecturer in European Public Law, University of Zagreb, Zagreb, Croatia Hermann-Josef Blanke, Dr. Professor of Public Law, International Public Law and European Integration, University of Erfurt, Erfurt, Germany Constance Chevallier-Govers, Dr. Maıˆtre de confe´rences (HdR), Vice-Dean for International Relations, Chaire Jean Monnet, University Grenoble Alpes, Grenoble, France Tomas Davulis, Dr. Lithuania

Professor of Labour Law, Vilnius University, Vilnius,

Patrizia De Pasquale, Dr. Professor of European Law, Libera Universita` Mediterranea (Jean Monnet University), Casamassima, Bari, Italy Jacopo Di Gesu`, Dr. Official of the Ministry of the Interior, Siracusa, Italy Christopher Docksey Director General at the European Data Protection Supervisor (EDPS), Brussels, Belgium Chiara Favilli, Dr. Associate Professor of European Law, University of Florence, Florence, Italy Brynhildur G. Flo´venz Associate Professor of Equality and Non-Discrimination, Womens Law, Social Law, Gender Based Violence, University of Iceland, Reykjavı´k, Iceland Ricardo Garcı´a Macho, Dr. Professor Emeritus of Public Law, University JaumeI, Castello´n de la Plana, Spain xxiii

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Contributors

Iris Goldner Lang, Dr. Jean Monnet Professor of EU Law and Holder of the UNESCO Chair on Free Movement of People, Migration and Inter-Cultural Dialogue, University of Zagreb, Zagreb, Croatia Ondrej Hamulˇa´k, Dr. Senior Lecturer in European Law, Palacky´ University Olomouc, Olomouc, Czech Republic Peter Hilpold, Dr. Professor of International Law, European Law and Comparative Public Law, University of Innsbruck, Innsbruck, Austria Janja Hojnik, Dr. Professor of Free movement of persons, University of Maribor, Maribor, Slovenia Mo´nika Jo´zon, Dr. Associate Professor of European Law, Sapientia-Hungarian University of Transylvania, Cluj-Napoca, Romania Alina Jurcewicz, Dr. Professor of Law, Institute of Law Studies, Polish Academy of Sciences, Warsaw, Poland Tanel Kerikma¨e, Dr. Professor of European Law, Tallinn University of Technology, Tallinn, Estonia Timothy Lyons, Dr. QC, BL, Barrister at 39 Essex Chambers, London, UK Stelio Mangiameli, Dr. Professor of Constitutional Law, University of Teramo, Teramo and Associated Member of the Institute for the Study of Regionalism, Federalism and Self-Government, National Research Council, Rome, Italy Pietro Milazzo, Dr. Professor of Public Law, University of Pisa, Pisa, Italy Claudia Morviducci, Dr. Professor of European Union Law, University of Roma Tre, Rome, Italy Hans G. Nilsson, Dr. h.c. Belgium

Honorary Professor, College of Europe, Bruges,

Marco Olivetti, Dr. Professor of Public Law, LUMSA University, Rome, Italy Marta Oller Rubert, Dr. Lecturer in Administrative Law, University Jaume I, Castello´n de la Plana, Spain Thomas Papadopoulos, Dr. Assistant Professor of Business Law, University of Cyprus, Nicosia, Cyprus Celeste Pesce Researcher of European Law, Pegaso University, Rome, Italy Johann-Christian Pielow, Dr. Professor of Public Law, Ruhr-University Bochum and Executive Director at the Institute for Mining and Energy Law, Bochum, Germany Paweł Popardowski, Dr. Assistant Professor of Law, Institute of Law Studies, Polish Academy of Sciences, Warsaw, Poland

Contributors

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Jose´ Marı´a Porras Ramı´rez, Dr. Professor of Constitutional Law, University of Granada, Granada, Spain Elena Rodriguez Pineau, Dr. Associate Professor of Private international law, Autonomous University of Madrid, Madrid, Spain Sandra Sa¨rav Global Affairs Director, Office of the Chief Information Officer, Ministry of Economic Affairs and Communications, Tallinn, Estonia Tobias Schuelken, Dr. Lecturer on EU Law, Ruhr-University Bochum, Institute for Mining and Energy Law, Bochum, Germany Antonio Segura Serrano, Dr. Professor of international Public Law, University of Granada, Granada, Spain Sideek Mohamed Seyad, Dr. Associate Professor of European Law, University of Stockholm, Stockholm, Sweden Karl-Peter Sommermann, Dr. Dr. h.c. Professor of Public Law, Political Theory and Comparative Law, University of Administrative Sciences Speyer, Speyer, Germany Daniel Thym, Dr. Professor of Constitutional, European and International Law, University of Konstanz, Konstanz, Germany Alina Tryfonidou, Dr. Professor of Law, University of Reading, Reading, UK Sebastian Graf von Kielmansegg, Dr. Professor of Public Law and Medical Law, University of Kiel, Kiel, Germany Peter G. Xuereb, Dr. Professor of European and Comparative Law, University of Malta, Msida, Malta Gabriela Zanfir-Fortuna, Dr. Senior Policy Counsel (European Privacy Law) at the Future of Privacy Forum, Washington, DC, USA

Preamble

Preamble HIS MAJESTY THE KING OF THE BELGIANS, THE PRESIDENT OF THE FEDERAL REPUBLIC OF GERMANY, THE PRESIDENT OF THE FRENCH REPUBLIC, THE PRESIDENT OF THE ITALIAN REPUBLIC, HER ROYAL HIGHNESS THE GRAND DUCHESS OF LUXEMBOURG, HER MAJESTY THE QUEEN OF THE NETHERLANDS,1 (1)2 DETERMINED to lay the foundations of an ever closer union among the peoples of Europe,4, 7, 11, 17-37 (2) RESOLVED to ensure the economic and social progress of their States by common action to eliminate the barriers which divide Europe,38-47 (3) AFFIRMING as the essential objective of their efforts the constant improvements of the living and working conditions of their peoples,48-51 (4) RECOGNISING that the removal of existing obstacles calls for concerted action in order to guarantee steady expansion, balanced trade and fair competition,52-63 (5) ANXIOUS to strengthen the unity of their economies and to ensure their harmonious development by reducing the differences existing between the various regions and the backwardness of the less favoured regions,64-66 (6) DESIRING to contribute, by means of a common commercial policy,67-69 to the progressive abolition of restrictions on international trade,70-76 (7) INTENDING to confirm the solidarity which binds Europe and the overseas countries and desiring to ensure the development of their prosperity, in accordance with the principles of the Charter of the United Nations,77-81 (8) RESOLVED by thus pooling their resources to preserve and strengthen peace and liberty, and calling upon the other peoples of Europe who share their ideal to join in their efforts,82-83 (9) DETERMINED to promote the development of the highest possible level of knowledge for their peoples through a wide access to education and through its continuous updating,84-87 and to this end HAVE DESIGNATED as their Plenipotentiaries: (List of plenipotentiaries not reproduced) WHO, having exchanged their full powers, found in good and due form, have agreed as follows. 1 The Republic of Bulgaria, the Czech Republic, the Kingdom of Denmark, the Republic of Estonia, Ireland, the Republic of Croatia, the Hellenic Republic, the Kingdom of Spain, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Austria, the Republic of Poland, the Portuguese Republic, Romania, the Republic of Slovenia, the Slovak Republic, the Republic of Finland, and the Kingdom of Sweden have since become members of the European Union. The United Kingdom of Great Britain and Northern Ireland, which had acceded in 1973, withdrew from the European Union on 31 January 2020. 2 The numbers attached to the paragraphs of the Preamble, not present in the original version, have been added by the author to facilitate the reading of the comments.

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Springer Nature Switzerland AG 2021 H.-J. Blanke, S. Mangiameli (eds.), Treaty on the Functioning of the European Union – A Commentary, Springer Commentaries on International and European Law, https://doi.org/10.1007/978-3-030-43511-0_1

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Contents 1.

Development, Context, and Aims of the Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.3. Aims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2. Legal Relevance and Function of the Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.1. Legal Relevance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.2. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3. The Substantive Issues of the Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.1. An Ever-Closer Union Among the Peoples of Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.1.1. The “Ever Closer Union” Topos in the Case Law of the Court of Justice of the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.1.2. The “Ever Closer Union” Topos in Light of the Brexit . . . . . . . . . . . . . . . . . . . 25 3.1.3. Reaffirming the Mission of an “Ever-Closer Union Among the Peoples of Europe” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 3.1.4. Interpreting the Phrase at the Intersection Between National Sovereignty and Democratic Legitimation of the Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3.1.5. The “Ever Closer Union” as a Criterion Determining the Finality of the Union? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 3.2. Economic and Social Progress and Elimination of Barriers . . . . . . . . . . . . . . . . . . . . . . . 38 3.2.1. Economic Progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 3.2.2. Elimination of Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 3.2.3. Social Progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 3.3. Constant Improvements of Living and Working Conditions . . . . . . . . . . . . . . . . . . . . . . . 48 3.4. Steady Expansion, Balanced Trade, and Fair Competition . . . . . . . . . . . . . . . . . . . . . . . . 52 3.4.1. Steady Expansion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 3.4.2. Balanced Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 3.4.3. Fair Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 3.5. The Unity of Economies and Their Harmonious Development . . . . . . . . . . . . . . . . . . . . 64 3.6. A Common Commercial Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 3.6.1. Free Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 3.6.2. The Developmental Dimension of Free Trade Agreements . . . . . . . . . . . . . . . 75 3.7. Solidarity with Overseas Countries and Development of Their Prosperity . . . . . . . . 77 3.8. Preserving and Strengthening Peace and Liberty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 3.9. Development of the Highest Possible Level of Knowledge . . . . . . . . . . . . . . . . . . . . . . . . 84 List of Cases References

1.

Development, Context, and Aims of the Preamble

1.1. Development

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The Preamble to the TFEU is inherited from the Treaty Establishing the European Community (1992/1993), which is derived from the Treaty Establishing the European Economic Community (1957/1958), with the sole addition of paragraph 9 on education and on lifelong training introduced by the Treaty of Amsterdam (1997/1999). The current version of the Preamble is characterised by the Blanke

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following predominantly formal modifications (of editorial nature): the passage that contained the intention of establishing an Economic Union has been dropped. Moreover, a footnote to the Preamble lists all Member States that joined the Union after the original conclusion of the Treaty. However, this footnote only has documentary character. The normative and political statements of the Preamble are borne by each Member State, regardless of the date of accession.3 Finally, the Reform Treaty of Lisbon (2007/2009) has replaced in the second recital the word “countries” with “States”. In the last recital, the words “HAVE DECIDED to create a EUROPEAN COMMUNITY and to this end have designated” has been replaced by “and to this end HAVE DESIGNATED [. . .]”. The Preamble to the TFEU conveys the impression of continuity4 and nourishes the illusion that the TEU and TFEU are two “independent” treaties (Article 1.3 second sentence TEU: “Both Treaties [. . .]”). According to international law, this is true because both Treaties have their own specific and temporal scope and even have their own ratification requirement. In this way, the impression should be avoided that this is the (previously failed) Constitutional Treaty under camouflage. In substance, the Reform Treaty of Lisbon, which is at the same time a dissolution (Article 1.3 third sentence TEU) and amendment treaty, has merged the TEU (Maastricht until Nice) and the EC into one Treaty but outwardly split the contents into two Treaties.5 However, the authors of the Treaty of Lisbon decided not to significantly change the Preamble to the TFEU as they did not consider such changes necessary, and above all, to avoid political discussions on the precise wording of the Preamble between the—at the time of the Treaty of Lisbon—27 Member States.6 Despite a decades-long process of integration and a meanwhile well-established European union of integration (Integrationsverband), the extensive recourse of the authors of the TFEU to the Preamble to the EC Treaty of 1957 shows a “strangely anachronistic” feature.7 The Preamble to the TFEU, due to the lack of designation of core contents regarding common policies that have been developed in recent decades on a supranational level, seems to an extent “have fallen out of time”. Thus, there is no references to recent developments, such as non-discrimination, Union citizenship, the area of freedom, security, and justice, or the meanwhile—even though incompletely—realised economic and monetary union. Only to a limited extend does this Preamble formulate8 “the quintessence of the following Treaty 3

Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 4 (released in 2010). Kotzur, in Geiger et al. (2015), TFEU Preamble para 1, who points out that the text of the Preamble underlines the great continuity on the way from the original Economic Community to the present (economic and political) Union”; see also Heintschel von Heinegg, in Vedder and Heintschel von Heinegg (2018), AEUV Pra¨ambel para 2. 5 Niedobitek (2020), para 45 et seq. 6 Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 5 (released in 2010). 7 Terhechte, in von der Groeben et al. (2015), AEUV Pra¨ambel para 14 (our translation). 8 Ipsen (1972), p. 989, already at the beginning of the 1970s, regarded among the preambles of the integration treaties also the content of the Preamble to the EEC Treaty as “objectively inefficient” insofar as it postulates or promises other targets “than prosperity progress and freedom.” 4

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provisions”.9 Therefore, if taken alone (➔ para 4), the task of the Preamble is limited to being “the prologue and promise of the constitutional Europe”.10 Yet it still includes a reservoir of principles, values, and objectives that, as elements of the European “culture constitutional law”,11 continue to determine the process of European unification in the twenty-first century.

1.2. Context

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The Preamble to the TFEU should also be interpreted contextually (➔ para 9 et seqq.), hence in the overall context of the triad of Preambles of European constitutional law,12 such as the introduction to the Maastricht Treaty on European Union (1992/1993) and later the Treaty of Lisbon (2009), as well as the Charter of Fundamental Rights of the European Union (2000/2007/2009). The numerous protocols attached to the TFEU also include protocol-specific preambles emphasising special aspects of integration policy or fundamental rights— also with a view to their respective scope of application and thus limiting actions to be taken under that protocol.13 In European legal culture, the Preamble to the failed Constitutional Treaty remains memorable. In particular, it reformulated, in close accordance with the Preamble to the EUCFR (➔ para 20), the topos of the “ever closer union”, which had already shaped the Preamble to the ECC Treaty. The peoples of Europe become the driving force behind the emergence of a fateful connection: they “[. . .] [are] united ever more closely, to forge a common destiny” (third recital to the TCE Preamble). This is where the idea of a “Paneurope” of Count Coudenhove-Kalergi is discernible.14 Also, V. Giscard d’Estaing, former Chairman of the European 9

Cf., however, Kotzur, in Geiger et al. (2015), TFEU Preamble para 1. That is the function which Ha¨berle and Kotzur 2016, para 806, ascribe to the Preambles in the European constitutional law. 11 According to Ha¨berle and Kotzur (2016), para 805, the Preambles in the European constitutional law describe “the ‘culture of European constitutional law’ par excellence”; cf. also ibid., para 803 (“Culture”). 12 On the designation of the Community Treaties as a “constitution”, cf. Opinion 1/91, European Economic space (ECJ 14 December 1991) para 21; and Case 294/83 Les Verts v European Parliament (ECJ 23 April 1986) para 23. 13 Cf., e.g., the third recital in the Protocol on Denmark: “CONSCIOUS of the fact that a continuation under the Treaties of the legal regime originating in the Edinburgh decision will significantly limit Denmark’s participation in important areas of cooperation of the Union, and that it would be in the best interest of the Union to ensure the integrity of the acquis in the area of freedom, security and justice”; further the second recital in the Protocol on certain provisions relating to the United Kingdom of Great Britain and Northern Ireland: “GIVEN that on 16 October 1996 and 30 October 1997 the United Kingdom government notified the Council of its intention not to participate in the third stage of economic and monetary union.” 14 Cf. von Coudenhove-Kalergi (1923), p. 153; “The coronation of the pan-European endeavours would be the establishment of the United States of Europe after the model of the United States of America.” Some years later von Coudenhove-Kalergi (1929), p. 2 et seq., commented under the title “Switzerland as a rolemodel” again: “The name ‘United States of Europe’ caused several 10

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Convention, shared that vision. In his acceptance speech, on the occasion of the Charlemagne Prize (2003), he spoke in light of the political intentions of the founding fathers of the “gradual emergence” of a “common destiny”. “It is Europe’s leaders who will carry forward its joint destiny.”15 But the Constitutional Treaty had emerged without the blessing of the “constitutional moment” (B. Ackerman). There is no instrumental relationship between the different preambles, spelt out in different moments of the history of European integration, but a synchronic reading reveals the comprehensiveness of the aims of the aspired integration as laid down in the different preambles or—to put it another way—of the “constitutional principles” of the European edifice (➔ TEU Preamble para 9).

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1.3. Aims

Preambles to international treaties spell out motives, convictions, and aims, which hold the Contracting Parties “together in its innermost core”. They are essential for the treaty-based work of international organisations and shall be guidelines for the interpretation and implementation of the treaty contents (on the part of the treaty organs).16 It has been pointed out that particular considerations of the Preamble to the TFEU seem to be in a certain asymmetrical relation to the contents of the Treaty, at least to the contents of the EEC Treaty (1957/58). The aim of the former Community was to regulate the economic life of the Contracting Parties and create a common legislation for economic purposes, whereas the preamble copes with the more complex issues of European political integration, imposing respect for misunderstandings. It was understood as the European analogy to the United States of America [. . .]. Europe will never be able to copy the American constitution; every attempt to do so, would endanger the pan-European development. Europa cannot follow in its realisation a foreign, but only a European example; not the United States of America, instead the Swiss Confederation.” In his speech delivered at the University of Zurich on 19 September 1946, Churchill, without mentioning Coudenhove-Kalergi, referred to “the Pan-European Union, which owes so much to the famous French patriot and statesman Aristide Briand.” Here, Churchill also called up the “new Europe [. . .] to create the European family in a regional structure called, it may be, the United States of Europe [. . .] [u]nder and within that world concept [. . .] of the United Nations Organisation”. 15 Speech delivered by Giscard d’Estaing (2003), who made reference to Article 1 TEC: “Reflecting the will of the citizens and States of Europe to build a common future [. . .]” and who spoke of the founding fathers’ approach “of a joint destiny” which will “gradually emerge” between the Member States. http://www.karlspreis.de/de/preistraeger/valery-giscard-destaing-2003/rede-vonvalery-giscard-destaing-francais 16 Especially among Germans it is a wide-spread opinion to interpret the Preambles to the European Treaties as the site for codification of “legitimacy bases” that convey identity. Insofar they are brought closer to the preambles to national constitutions in order to get them out of the realm of the classic international treaties. Cf., e.g., Kotzur, in Geiger et al. (2015), TFEU Preamble para 1, who, in this respect, is obviously inspired by P. Ha¨berle; Ha¨berle and Kotzur (2016), para 480: “identity taken out of constitution” (“Identita¨t aus Verfassung”); Otoo (2013), p. 225, in reference to Ha¨berle: “Preambles as the expression of a European Constitution patriotism”; see to the context of the symbols codified in the Constitutional Treaty Mateos y de Cabo, in Alvarez Conde and Garrido Mayol (2004), p. 190 et seq.

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values and aims such as “peace and liberty” and laying the “foundations of an ever closer union among the peoples of Europe”, which are only partially related to the economy (➔ TEU Preamble para 10). The founding fathers were convinced that the EEC Treaty was the nucleus of a future European confederation or even a federal state and a federal Europe. Without even saying so, they believed in a “spill-over” effect, hence the possible automatic transfer of the dynamics of economic-technical integration to political integration.17 Most of the considerations of the TFEU Preamble focus on the aspects of the economic and social policy (see, e.g., recitals 2–4: “to ensure the economic and social progress of their States”, “the constant improvements of the living and working conditions of their peoples”,18 “to guarantee steady expansion, balanced trade and fair competition”). Regardless of whether it is politically oriented or economically focused, all recitals of the Preamble—in contrast to the TEU Preamble—have an approach that does not focus on the position of the citizens in the European union of integration. The focus of the Treaties of Rome was the integration of peoples and markets, and the conferral of internal market freedoms (“rights”) upon individuals19 but not to endow the political animal, called the European citizen, with participatory rights. In that regard, the Preamble to the TFEU underlines that the Community—especially in its beginnings—was merely a work of its constituent states, without the citizens being awarded a direct role in the integration process beyond the market activities.20 Only with the transition towards a political Union on the occasion of the Treaty of Maastricht has this self-perception of the Contracting States changed, which despite of the openness of the integration goal (“an ever closer union”) moved the European citizens from “market citizens” more to the centre of the European unification (Union citizens).21 This paradigm shift has also been expressed in the Preamble to the effective TEU (Lisbon) (➔ TEU Preamble para 11, 24). 17

Kotzur, in Geiger et al. (2015), TFEU Preamble para 2. See the reference by the ECJ to this recital in Case 43/75, Defrenne v Sabena (ECJ 8 April 1976) para 10. 19 Cf. in this respect also Case 26/62, van Gend & Loos (ECJ 5 February 1963), p. 12. 20 Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 11 et seq. (released in 2010). 21 Cf., e.g., the following recitals in the Preamble to the Treaty of Maastricht: (3) “CONFIRMING their attachment to the principles of liberty, democracy and respect for human rights and fundamental freedoms and of the rule of law [. . .]”; (8) “RESOLVED to establish a citizenship common to nationals of their countries [. . .]”, and (11) “RESOLVED to continue the process of creating an ever closer union among the peoples of Europe, in which decisions are taken as closely as possible to the citizen in accordance with the principle of subsidiarity [. . .]”. Against the background of the Constitutional Treaty, Palombella (2004) took a far more critical approach to the inferior role which was ascribed to the “European” citizen in the history of European integration. Among three great distinctive planes of European constitutionalism, which distance it from the overall approach of modern constitutionalism, Palombella (2004), p. 6, 19, identifies “the ‘secondary’ existence of the individual. Quite apart from the provocative slant of this conception, what is important to state is that not only is today’s common European constitutionalism not ideologically “individualist”, but more generally it is in no way concentrated on the individual, whereas the latter used to be the real centre of gravity of “received” constitutionalism. [. . .] In a certain sense, the existence of the [European] constitution produces a complex effect: thus while European citizenship is notoriously secondary, 18

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Legal Relevance and Function of the Preamble

2.1. Legal Relevance

On the occasion of the interpretation of a treaty under international law, according to Article 31.2 of the Vienna Convention on the Law of Treaties, the entire text of the treaty has to be taken into account as “context”, including title, annexes, any protocol, and the preamble. Therefore, it is rightly pointed out that the preambles to international treaties do not have a merely political “role”. Their recitals not only do reflect a statement of the intentions pursued by the Contracting Parties, but they also play a legal role (➔ TEU Preamble para 16). The objectives of the Contracting Parties are at the same time the objectives of the Union and thus not just a legally unbinding declaration of intent.22 Hence, the preamble to a treaty may be useful for determining the object and purpose of the treaty for it is the normal place where the parties would embody an explicit statement to that effect. By stating the aims and objectives of a treaty, a preamble can thus be of both contextual and teleological significance.23 A contextual and teleological significance of the Preamble to the TFEU as part of the triad of European constitutional preambles is to be recognised. Therefore, the preambles in their interaction are a parameter in the framework of the interpretation of Union treaties and the Charter of Fundamental Rights. However, the text of a preamble does not unfold the same binding effect as the articles of a treaty.24 This already follows from the fact that the preamble is detached from the operative part of the treaty, but, especially, that the preamble is not suitable to derive concrete treaty obligations, to determine legal authorisations concerning acts of the organs of the Union or individual rights.25 Consequently, the considerations of a preamble do not cover any legal results that go beyond the operative terms of treaty provisions.26 They do not set any legal boundaries, which bind the decision-makers regarding the further development of the European

adjunctive and derived, the legitimacy of the Union ceases to be derived. It becomes primary, and no longer depends on the legitimacy of the States, being dependent instead on the “public” autonomy of a “sovereign” that is coextensive with the range of influence of the constitutional text. At this moment, in Europe, it is still the constitution that legitimates the European citizen, and not viceversa. But this phase must come to an end if the Constitution is to be historically assimilated [. . .].” 22 Cf. Otoo (2013), p. 162. 23 Do¨rr, in Do¨rr and Schmalenbach (2012), Article 31 para 50; Kotzur, in Geiger et al. (2015), TFEU Preamble para 1. 24 This opinion is also shared by Kotzur, in Geiger et al. (2015) TFEU Preamble para 1. In the final analysis, there is no difference when he writes: “Within the frame of its specific function, the Preamble is of the same binding nature as any other provision of the Treaty, especially in correlation with provisions of the operative part of the Treaty.” 25 Lenz, in Lenz and Borchardt (2012), AEUV Pra¨ambel para 4; Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 16; to the constitutional preambles to the Union Treaties in general see Priollaud and Siritzky (2008), TFUE Pre´ambule, p. 156; Otoo (2013), p. 223; and Niedobitek (2020), para 64. 26 Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 17 (released in 2010).

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integration, for example, certain key issues such as EU enlargement (arg.: Preamble to TFEU, first recital).27 Moreover, the normative force of the European preamble law is (de facto) less than the binding effect of the national constitutional preamble law, such as the one in the German Basic Law (1949), the French Constitution (1958) or the Spanish Constitution (1978).28 The legal validity of the Preamble to the TFEU in particular is also limited due to the fact that the relevance of its considerations no longer corresponds in all respects to the current perspective on European integration.29 In particular, under the EEC Treaty, the Preamble has acquired significance in the case law of the European Court of Justice, which should not be underestimated. With a view “to prevent competition from being distorted to the detriment of the public interest”, the ECJ derived the Community’s task of ensuring “that the rules on competition are applied in the common market [. . .]” directly, inter alia, from the Preamble to the EEC Treaty. In this instance, the Preamble served not only as a means of interpretation to concretise already codified goals but also as an independent source from which the Court derived legally binding Community goals.30 The Court has often referred to this Preamble as a means of interpretation to achieve an integration-friendly result. In particular, in the van Gend & Loos Decision, it derived the essential feature of the effectiveness of Community law, the direct effect of a Treaty provision, from that Preamble (➔ para 12). In the van Gend & Loos case, the Court, with a view to the “direct effects” (of the EEC Treaty (Article 12)) in national law, came to the conclusion “that nationals of Member States may on the basis of this Article lay claim to rights which the national court must protect” and justified this as follows: “To ascertain whether the provisions of an international treaty extend so far in their effects, it is necessary to consider the spirit, the general scheme and the wording of those provisions. The objective of the EEC Treaty, which is to establish a common market, the functioning of which is of direct concern to interested parties in the Community, implies that this Treaty is more than an agreement which merely creates mutual obligations between the contracting states. This view is confirmed by the preamble to the Treaty which refers not only to governments but to peoples [. . .]. The conclusion to be drawn from this is that the Community constitutes a new legal order of international law for the benefit of which the states have limited their sovereign rights, albeit within limited fields, and the subjects of which comprise not only Member States but also their nationals. Independently of the legislation of Member States, 27

Otoo (2013), p. 225. Ha¨berle and Kotzur (2016), para 803; Otoo (2013), p. 223. Ha¨berle and Kotzur have characterized the Preamble to the Spanish Constitution as a “constitutional treasure house” (ibid., para 1296). To the Preambles to the German and French Constitution, cf. Otoo (2013), p. 184 et seqq., 195 et seqq. 29 Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 9 (released in 2010). 30 Case 136/79, National Panasonic (UK) (ECJ 26 June 1980) para 20: “[. . .] as follows from the fourth recital of the preamble to the Treaty, Article 3 point (f) and Articles 85 and 86 [of the EEC Treaty [. . .]].” 28

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Community law therefore not only imposes obligations on individuals but is also intended to confer upon 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 the Member States and upon the institutions of the Community.”31 The Court also justified the very strict interpretation of the competition rules in terms of a barrier-free market (➔ para 52) with reference to the Preamble to the EEC Treaty, which just like the Treaty itself aims at abolishing the barries between states (second, fourth, and sixth recital). “Finally, an agreement between producer and distributor which might tend to restore the national divisions in trade between member states might be such as to frustrate the most fundamental objections of the Community, the Treaty, whose preamble and content aim at abolishing the barriers between states [. . .]”.32 A teleological or “purposive” interpretation and thus an indirect reference to the Preamble is also given when referring to “the spirit of the Treaty”33 or of the “goals” and the “purposes” of the Treaty in the decisions of the CJEU.34 However, references to the Preamble to the TFEU can rarely be found in secondary Union legislation (Article 288 TFEU) but more often in programmes, declarations, and resolutions.35

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2.2. Function

An important function of the Preamble is, according to wide consensus, that it is used in the sense of an “authentic interpretation” of the text of the Treaty to interpret the specific Treaty provisions.36 Article 198.3 TFEU (“The association of the overseas countries and territories”) even refers directly to the principles set out in the Preamble. All other provisions of the TFEU may, if the Preamble in question is pertinent, be interpreted in the light of the overall aims and purposes of the Treaty, i.e., in a systematic-teleological way and thus in the sense of the supporting effect of the Preamble.37 Furthermore, in particular, the Preambles

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Case 26/62, van Gend & Loos (ECJ 5 February 1963), p. 11 et seq.; cf. the contributions by Pescatore, de Witte, Mayer, Halberstam, Fenelly, and Rasmussen, in Poiares Pessoa Maduro and Azoulai (2010). 32 Joined Cases 56 and 58/64, Consten S.a`.R.L. and Grundig-Verkaufs-GmbH (ECJ 13 July 1966), p. 340; Case 374/87, Orkem (ECJ 18 October 1989) para 19. 33 Case 6/64, Costa v. ENEL (ECJ 15 July 1964) para 3. For Beck (2012), p. 321 “spirit of the Treaty” is a synonym for “ever closer union”. 34 Streinz, in Streinz (2018), AEUV Pra¨ambel para 12; Saurugger and Terpan (2017), p. 158. 161. 35 Streinz, in Streinz (2018), AEUV Pra¨ambel para 13. 36 Kotzur, in Geiger et al. (2015), TFEU Preamble para 1; Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 15 (released in 2010); Otoo (2013), p. 223. 37 Terhechte, in von der Groeben et al. (2015), AEUV Pra¨ambel para 3.

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to the TEU and the TFEU can become relevant in the context of Article 352 TFEU insofar as they formulate—together with other Treaty provisions (especially Article 3 TEU)—“the objectives set out in the Treaties”.38 The Preamble also has particular importance for the interpretation of margins of discretion, the determination of the scope of competence standards, and the specification of the tasks and objectives of the EU (Article 3 TEU). In addition, considerations set out in the Preamble can be referred to in order to justify the result of a teleological interpretation of the Treaty, as it has been done by recognising and applying general legal principles in Community law.39 Since the abolition of Article 46 TEU-Nice,40 reference to the Preamble is also a legal requirement with regard to the jurisprudence of the CJEU, as far as preamble considerations can have relevance for the interpretation of Treaty provisions.41

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The Substantive Issues of the Recitals

The Preamble to the TFEU includes nine recitals, which are dedicated to different political integration purposes and aims.

38 Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 16 (released in 2010); Terhechte, in von der Groeben et al. (2015), AEUV Pra¨ambel para 3; Niedobitek (2020), para 64; furthermore on this Otoo (2013), p. 152 et seqq., 162; limiting Streinz, in Streinz (2018), AEUV Pra¨ambel para 29. 39 Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 16 (released in 2010); Terhechte, in von der Groeben et al. (2015), AEUV Pra¨ambel para 3. 40 Article 46 TEU-Nice stated: “The provisions of the Treaty establishing the European Community, the Treaty establishing the European Coal and Steel Community and the Treaty establishing the European Atomic Energy Community concerning the competences of the Court of Justice of the European Communities and the exercise of those competences shall apply only to the following provisions of this Treaty:

(a) provisions amending the Treaty establishing the European Economic Community with a view to establishing the European Community, the Treaty establishing the European Coal and Steel Community and the Treaty establishing the European Atomic Energy Community; (b) provisions of Title VI, under the conditions provided for by Article 35; (c) provisions of Title VII, under the conditions provided for by Articles 11 and 11a of the Treaty establishing the European Community and Article 40 of this Treaty; (d) Article 6(2) with regard to action of the institutions, insofar as the Court has jurisdiction under the Treaties establishing the European Communities and under this Treaty; (e) the purely procedural stipulations in Article 7, with the Court acting at the request of the Member State concerned within one month from the date of the determination by the Council provided for in that Article; (f) Articles 46 to 53.” 41

Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 17 (released in 2010).

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3.1. An Ever-Closer Union Among the Peoples of Europe

The most prominent but also most controversial goal of integration policy between the supporters of a more federalist approach and its opponents42 has been at the forefront of the Preamble recitals since the EEC Treaty (1957): “The contracting states are determined to lay the foundations of an ever closer union among the peoples of Europe.” The phrase has its origins in a political project of establishing a supranational government in Europe.43 Article 2 of the EEC Treaty (“It shall be the aim of the Community [. . .]”) and Article 2 TEC (“The Community shall have as its [. . .] task [. . .]”) thus promote the “spirit” of closer union in its description of the goals or tasks of the Community, ending with “closer relations between the states belonging to it”. This cannot be perceived as the operative extension of the recital on “the ever closer union”,44 but “Ever Closer Union” is deep in the DNA of the Union and may be an existential condition for the effectiveness and viability of the integration project and its future.45 It is characterised by the “network of principles, rules and mutually interdependent legal relations linking the EU and its Member States, and its Member States with each other” (➔ para 23), and thus an integral part of the Union’s “own constitutional framework” and its “legal structure”, which includes also the principle of conferral of powers.46 Following on from the Union Treaty of Maastricht (as amended by the Treaty of Amsterdam), the 13th recital in the Preamble to the TEU-Lisbon and Article 1.2 TEULisbon have revived this aim by characterising the Lisbon Treaty as “a new stage in the process of creating an ever closer union among the peoples of Europe [. . .]” and connecting the topos of an “ever closer Union” with the openness of the decisionmaking process and the principle of subsidiarity (Article 1.2 TEU). The integration is conceptualised as a dynamic development process; the journey is its own reward (➔ Article 1 TEU para 24). The essence of the “Ever Closer Union” clause is founded on the belief that Europe is a society not in being but in becoming, what has been called, in line with an organic version of the political theory of neofunctionalism, the belief in “Everism”.47 Indeed, the Treaties strive for an “ever closer Union among the peoples of Europe” and not primarily among the Member States.48 42

See, e.g., Draghi (2013): “For some people, this [scil. the “ever closer union” phrase] creates anxiety. It seems to promise an inexorable movement towards a future super-state.” 43 Cf. LSE Commission (2016), p. 5 et seq. 44 Kula and Van Wallendael (2016), p. 2. 45 Cf. McCrea (2017), p. 91. 46 Opinion 2/13, Accession of the European Union to the ECHR (ECJ 18 December 2014) para 167, 158, 165, 168. 47 Cf. Groussot and Zemskova (2019), p. 99. 48 The “Solemn Declaration on European Union”—a legally non-binding declaration signed in Stuttgart in 1983 by heads of ten Member States of the EC—openly refers to the idea of an “ever closer union” not only among the peoples, but also the Member States of the European Community; see Bulletin of the European Communities No. 6/1983, p. 24–29.

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In other words, it is an “accord” between equal partners, who do not create a new sovereign.49 This is where the most significant difference to the topos of “a more perfect Union”50 in the Preamble to the Constitution of the United States of America lies. While the topos of “an ever closer Union among the peoples of Europe” reflects the non-codified motto of the Union “United in Diversity”,51 the formula of “a more perfect Union” is indissolubly linked to the de facto motto of the United States “E pluribus unum” (“Out of many, one”), included in the Great Seal of the United States. The meaning of this phrase originates from the concept that out of the union of the original 13 colonies emerged a new single nation with a single people. Due to the completely different self-perception of the European integration and the role of the Member States within this process (“masters of the Treaties”), especially also with regard to the—from the beliefs of the citizens of the US American states—significantly different attitude of the European peoples towards the supranational unification process, the statement of M. Draghi cannot be accepted. He pointed out: “So it is important to understand that the agenda facing Europe today is not adequately captured by the phrase ‘ever closer union’. In my view, it is better encapsulated by wording borrowed from the Constitution of the United States: the establishment of a ‘more perfect union’.”52 A reference to the “peoples of Europe” is also made in the Preamble to the EUCFR, which states their resolution “in creating an ever closer union among them, [. . .] to share a common future based on common values” (first recital) and the Union’s obligation to protect their traditions (third recital). This shows a strong resolve “to share a peaceful future based on common values”. In contrast to this, the “peoples” in the Preamble to the TFEU are not yet risen to real actors regarding the implementation of this aim but rather seem to be subject to a process of political governance (➔ para 29).53 In its core, the commitment to an “ever closer Union” indicates the development of the timeless peace project of the Union through the internationalisation of politics.54 Violent confrontations, as in the first half of the twentieth century between European nations, should be prevented. Details of this “ever closer union” or—the by now rejected objective—of a European federal

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Kula and Van Wallendael (2016), p. 4 et seqq. (7). The Preamble to the Constitution of the United States of America reads as follows: “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.” 51 See Article I-8.3 TCE about the “symbols of the Union”: “The motto of the Union shall be: ‘United in diversity’.” 52 Draghi (2013). 53 Cf. Priollaud and Siritzky (2008), TUE Pre´ambule, p. 28, which see in this “absence de re´ference aux peuples de l’Union” an important proof that the existing European Treaties are not a constitution. 54 LSE Commission (2016), p. 5, 10 et seqq. 50

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state55 are not mentioned.56 In light of this background, the “open finality” of the European unification process was pointed out. It is oriented at an “increasing density of cooperation within the EU”.57 Like all prior integration treaties, the TFEU is so far only a preliminary result that we need to follow up. 3.1.1.

The “Ever Closer Union” Topos in the Case Law of the Court of Justice of the EU

The idea of an “ever closer union” is not an explicit driver of the CJEU rulings, although it has appeared in them from time to time. Since the adoption of the Treaty of Lisbon, the “ever closer union” phrase has gained more attention in this case law than it had experienced ever before. Had the Court been barred from using or even tacitly appealing to this phrase, it most likely would have reached the same conclusions in the 57 occasions when the words appeared in its rulings (57 out of 29,969 between November 1954 and November 201558).59 Three examples from the case law of the Court of Justice of the EU may verify this. In the case Maria Pupino, which concerned the interpretation of several provisions of the Council Framework Decision on the standing of victims in criminal proceedings, the CJEU held: “Irrespective of the degree of integration envisaged by the Treaty of Amsterdam in the process of creating an ever closer union among the peoples of Europe within the meaning of the second paragraph of Article 1 EU, it is perfectly comprehensible that the authors of the Treaty on European Union should have considered it useful to make provision, in the context of Title VI of that treaty, for recourse of legal instruments with effects similar to those provided for by the EC Treaty, in order to protect effectively to the pursuit of the Union’s objectives.”60 In its Opinion 2/13 of 18 December 2014 on “Accession of the European Union to the European Convention for the Protection of Human Rights and Fundamental Freedoms”, the Court has pointed out: “These essential characteristics of EU law have given rise to a structured network of principles, rules and mutually interdependent legal relations linking the EU and its Member States, and its Member States with each other, which are now engaged, as is recalled in the second paragraph of Article 1 TEU, in a ‘process of creating an ever closer union among the peoples of Europe’.”61 55 See, for example, the speech delivered by von Coudenhove-Kalergi (1950), who spoke of the “the biggest hope of our time: The United States of Europe”. 56 Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 19 (released in 2010). 57 Terhechte, in von der Groeben et al. (2015), AEUV Pra¨ambel para 5: “immer sta¨rkere Verdichtung der EU” (above our translation). 58 Cf. Miller (2015), p. 8. 59 LSE Commission (2016), p. 5, 17. According to estimates by Kula and Van Wallendael (2016), p. 10, during the longer time period between 1952 and 2016 there have been only 31 references by the CJEU or an Advocate General to the “ever closer union” phrase. They took 20.683 decisions as a basis. 60 Case C-105/03, Maria Pupino (ECJ 16 June 2005) para 36. 61 Opinion 2/13, Accession of the European Union to the ECHR (ECJ 18 December 2014) para 167.

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In its Opinion delivered on 3 February 2011 in Cases C-403/08 and C-429/08 on the copyright for the live transmission of its football matches, Advocate General Kokott has held: “[. . .] the objectives of the Community as laid down in the Treaty include establishing an ever closer union among the peoples of Europe, fostering closer relations between the States belonging to the Community and ensuring the economic and social progress of the Community countries by common action to eliminate the barriers which divide Europe [. . .]”.62 In its reasoning in the Pupino case, the Court has made a recourse to the systematic and teleological interpretation of the TEU. The aim of building an ever closer union is used as a justification for extending the previously existing principle of conforming interpretation to framework directives adopted in the context of Title VI of the Treaty on European Union. It is perhaps the only landmark case in which the “ever closer union” phrase is invoked by the Court for a rather “communitarian” and not an “inter-governmental” approach, but the mere presence of the phrase in the judgment is by no means a supportive argument for the claim that without this clause there would be a different decision on Pupino.63 The recourse to the “ever closer union” phrase in the case law of the Court of Justice of the EU turns out to be more of a rhetorical descriptive than an argumentativesupporting figure.64 The allegation that the effet utile, which is dominating the interpretation of EU law, can be justified not only by Article 31.1 of the Vienna Convention on the Law of Treaties,65 but also by reference to the “ever closer Union” phrase, thus seeking maximum benefit for the Union from every norm of the Treaties,66 does not appear to be tenable against this background. 3.1.2.

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The “Ever Closer Union” Topos in Light of the Brexit

An extensive interpretation of the “ever closer union” phrase, i.e. to suggest that it aims at a European federal state, is nowadays considerably slowed down, if not even precluded. The optimism of the early years has vanished, and the succession of the financial and banking crises, the national budget and democracy crises, and, not least, the lack of confidence of many British people in the EU which finally culminated in “Brexit”, led the Union to an “existential crisis” (J.-C. Juncker). The decision of former British Prime Minister D. Cameron to hold a national referendum on the withdrawal of the United Kingdom from the EU led in the run-up to the negotiations on “A New Settlement for the United Kingdom in the European Union”. A core element of this was the dispensation of the United 62

Cases C-403/08 and C-429/08, Football Association Premier League & Karen Murphy (Opinion of Advocate General Kokott 3 February 2011) para 29. 63 Kula and Van Wallendael (2016), p. 18. 64 Cf., e.g., Klamert, in Kellerbauer et al. (2019), Article 1 TEU para 5. 65 Article 31.1 of the Vienna Convention on the law of treaties reads as follows: “A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.” 66 Naumann (2009), p. 6.

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Kingdom from the Treaty clause on the “Ever Closer Union”. Convinced that limits to further federalisation (“political centralization”67) were desperately needed,68 Cameron wanted to exempt the UK from the “ever closer union” phrase.69 Such a derogation in favour of the United Kingdom was therefore, inter alia, the subject of certain concessions of the other Member States in February 2016.70 The conclusions of the Council of 18 and 19 February 2016 stated in Section C of Annex I under the title “Sovereignty”: “It is recognised that the United Kingdom, in the light of the specific situation it has under the Treaties, is not committed to further political integration in the European Union. The substance of this will be incorporated into the Treaties at the time of their next revision in accordance with the relevant provisions of the Treaties and the respective constitutional requirements of the Member States, so as to make it clear that the references to ever closer union do not apply to the United Kingdom.” These concessions seem to confirm those who consider that, without prejudice to the historical or integration policy significance of the meaning of the “ever closer union” phrase, the normative meaning of this commitment of the Contracting Parties is “far overrated” and does not create an “obstacle”, if the “way back to a looser community of sovereign states” is requested by individual Member States.71 Others have put that “the methods of integration chosen by those who founded the EEC mean that it is very difficult to call a halt to the integration process, but the drop in political support for further integration raises acute dilemmas for the Union by creating demand for just such a stop”.72 According to this position, “the only way to stop [the] process of integration is to get rid of the ‘Ever Closer Union’ clause”.73 In any event, a Member State of the Union does not regain its “sovereignty” by declaring that the “Ever Closer Union” formula is no longer applicable to it. But the goodwill of the other Member States on this and other issues did not prevent the British from voting in favour of leaving the European Union in a referendum held on 23 June 2016, which turned into a narrow majority (51.89% with a voter turnout of only 72.2%) in favour of a withdrawal of the UK from the Union.

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See Miller (2015), point 1.3. The “F” word is often dismissed in UK circles (the “dreaded F-word”). 69 PM Cameron wrote in The Telegraph of 15 March 2014: “And dealing properly with the concept of ‘ever closer union’, enshrined in the treaty, to which every EU country now has to sign up. It may appeal to some countries. But it is not right for Britain, and we must ensure we are no longer subject to it.” 70 European Concil Conclusions, 18 and 19 February 2016; available at https://www.consilium. europa.eu/media/21787/0216-euco-conclusions.pdf 71 Kula and Van Wallendael (2016), p. 18 et seq. 72 Cf. McCrea (2017), p. 91. 73 Groussot and Zemskova (2019), p. 117. 68

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Reaffirming the Mission of an “Ever-Closer Union Among the Peoples of Europe”

After this turning point in the history of the European integration, the European Parliament adopted on 16 February 2017 the resolution “on possible evolutions of and adjustments to the current institutional set-up of the European Union”, in which it expressed its concern that the “inability of the EU institutions to cope with the deep and multiple crises currently faced by the Union [. . .] [has] led to increased dissatisfaction among a growing section of the population regarding the functioning of the current European Union”.74 It calls upon the EU to “end” the politics of a Europe a` la carte, and in this context, it especially deplores “the fact that every time the European Council decides to apply intergovernmental methods and to bypass the ‘Community or Union method’ as defined in the Treaties, this not only leads to less effective policy-making but also contributes to a growing lack of transparency, democratic accountability and control”. It “[c]onsiders that the ‘Union method’ is the only democratic method for legislating which ensures that all interests, especially the common European interest, are taken into account [. . .]”.75 For the EU Parliament, it is “essential in these circumstances to reaffirm the mission of an ‘ever-closer union among the peoples of Europe’ (Article 1 of the TEU) in order to mitigate any tendency towards disintegration and to clarify once more the moral, political and historical purpose, as well as the constitutional nature of the EU”.76 3.1.4.

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Interpreting the Phrase at the Intersection Between National Sovereignty and Democratic Legitimation of the Union

The “ever closer union” phrase is to be interpreted at the intercept of three various aspects: the sovereignty (of the Member States), as well as the question of finality (➔ para 30 et seqq.) and the democratic legitimation of the Union. Sovereign is the entity that has the power to independently determine its existence, purpose, form, and competences. In the gradually changing mix of competences, which characterises the integration process within the federation between Union and Member States and the resulting “amalgamation of political substance between EU and the Member States”, the orientation of the sovereignty concept is sometimes considered “low”.77 In the Union, this power is a matter of the Member States because they are considered to be the “masters of the Treaties” and to hold the competence-competence (➔ Article 1 TFEU para 11 et seq.; Preamble TEU para 24

74

See European Parliament Resolution of 16 February 2017, 2014/2248(INI) on “improving the functioning of the European Union building on the potential of the Lisbon Treaty”, recital B. Available at http://www.europarl.europa.eu/sides/getDoc.do?type¼TA&language¼EN&reference¼P8-TA2017-0048 75 See European Parliament Resolution of 16 February 2017, 2014/2248(INI), point 6 and 7. 76 See European Parliament Resolution of 16 February 2017, 2014/2248(INI), point 8. 77 Cf. Nettesheim (2012), p. 318 (our translation).

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et seqq.).78 On the other hand, the Union does not have the right of selfdetermination about its existence, legal basis, and competences. Therefore, it does not have constituent power. As far as their respective territory is concerned, the decision on national constitutional matters lies in the hands of the Member States, even though, as a consequence of contractual self-restraint, they are limited in some respects in exercising that power. According to the principle of primacy of Union law, national (constitutional) law, as far as it is incompatible with Union law, does not lose its validity but loses only its applicability. The Member States decide in treaties concluded under international law, and therefore unanimously, on the transferral of single sovereign rights to the Union. Once these powers have been assigned to the Union, their exercise is a matter of the Union. Even if the Member States share in the exercise of a competence with the Union, they do so as members of an organ of the Union, in particular the Council. This is where the selfdetermination of the Member States ends, because the sphere of competence of the Union begins, as long as the supranational organisation does not overstep the bounds of its competence (principle of conferral).79 Whether this justifies the wording of a “sovereign [. . .] European Union”80 in a legal sense is open to dispute.81 Moreover, the conditions for a democratic rule, especially identification, communication, and solidarity, are better developed in the Member States than in supranational organisations. The degree of democratic legitimacy of the Union, as conveyed through the elections to the European Parliament, for a long period has been comparatively low, not so much because the European Parliament—as often assumed—has too few competences but rather because the social conditions for a vibrant democracy are still weak. Therefore, the Union depends to a high degree on

78 The term “masters of the Treaties” was coined by Ipsen (1972), p. 101 and 211, however, in the sense underlying his understanding, it cannot lead to the conclusions reached by the German Constitutional Court, which imply in that judicial context not only the possibility of fractures in the integration process, but even a hypothetical overturning (➔ Preamble TEU para 26). See German Federal Constitutional Court, 2 BvE 2/08 and others (Judgment of 30 June 2009) para 334 et seqq., which uses the term “masters of the Treaties” with regard to the Member States (para 231, 235, 271, 298, 334); most recently also German Federal Constitutional Court, 2 BvR 859/15 and others, Public Sector Asset Purchase Programme—PSPP (Judgment of 5 May 2020) para 111, 157. Regarding Pernice’s position who states an “undecided situation of sovereignty” in the relationship between Member States and Union, see ➔Article 1 TEU para 37; see also ➔Article 1 TFEU para 46, 63 et seqq.; Schmitt (1928), p. 386 et seq., understands the formula “undecided situation of sovereignty”first of all as a “competence for revising the Constitution”; he comments critically on the understanding of the formula as “a common catchword for asovereign power”. 79 Cf. Grimm (2016), p. 57 et seq., 64 et seq.; 80 See the Preamble, third recital, to the Treaty between the Federal Republic of Germany and the French Republic on the German-French cooperation and integration (“Treaty of Aachen”) of 22 January 2019; see already before the Sorbonne speech, delivered by President E. Macron on 26 September 2017, who has used three times the notion of a “sovereign Europe”. 81 See Grimm (2016), p. 55 e seqq., 58 e seqq., 63 e seqq., who denies the phenomenon of a sovereignty shared or pooled between the Member States and the Union.

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the conveyance of legitimation by the Member States. For the time being, it cannot replace this “borrowed” legitimation through its own legitimacy.82 As long as the direct legitimation of the Union through the European Parliament is insufficiently developed, it is crucial for the Union that the indirect chain of legitimation, which the individual Member States by virtue of their democratic roots in the electorate convey to the European Council and the Council, is not weakened. As the control of the political development on Union level by the national parliaments is relatively weak, in fact, the role of national parliaments (Article 12 TEU and Protocol No. 1 TEU) vis-a`-vis the national governments in the phase leading to EU legislation must be strengthened within the Member States.83 3.1.5.

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The “Ever Closer Union” as a Criterion Determining the Finality of the Union?

It is not inconceivable that in a future “European Federation”, neither of the two levels will be sovereign—neither the Member States nor the Union (➔Article 1 TEU para 41). C. Schmitt even considered as characteristic of a “federation” that the question of sovereignty remains open.84 The homogeneity between both levels (Member States and EU) might allow such presumption, however not in the sense of C. Schmitt85 but rather in line with P. Lerche, who spelt out the federal state requirements of “homogeneity in the procedures”, and “a minimum cohesiveness of the existing political centers in the procedures of the resolution of [the] normative disturbances”,86 and read them as a substantial base for integration.87 Of course, “homogeneity in the procedures” is not enough to constitute a federation. Rather, a common supranational experience is needed in order to stimulate the interest of the Union citizens to grow and to remain together (➔ para 37). As long as

82

Cf. Grimm (2016), p. 68, 71 et seqq. Blanke and Bo¨ttner (2015), p. 258 et seqq. (sub 3.2 and 3.3) and p. 268 et seqq., 273 et seqq. (sub 5.2 and 5.3). 84 Cf. Schmitt (1928), p. 373 et seqq.; with regard to the relation of the Union vis-a`-vis the Member States and Franzius (2010), p. 63 et seqq. 85 Cf. Schmitt (1928), p. 375 et seqq. Schmitt regards the substance of homogeneity “mostly in a national similarity of the population”. In addition to this, he points out “the homogeneity of the political principle (monarchy, aristocracy or democracy)” (our translation). Cf. also Scho¨nberger (2004), p. 81 et seqq., and Grimm (2016), p. 64, who refers to the notion of homogeneity of a Federation in the sense of Schmitt. 86 Lerche (1964), p. 85–87 (above our translation): “Das Wichtige und Handfeste scheint mir zu sein, daß die Fo¨deralstruktur alle lebendigen Gewalten in einen realen Status hineinzwingt, der mit einer vorla¨ufigen Formel als ‘Homogenita¨t im Verfahren’ bezeichnet werden mag. [. . .]. Diese Homogenita¨t soll den Eintritt des extremen Konfliktsfalls unmo¨glich machen. [. . .]. Es muß vorhanden sein eine Mindestgeschlossenheit der gegebenen politischen Zentren im Verfahren der Auflo¨sung dieser normativen Sto¨rungen.” 87 Isensee (1994), p. 124. 83

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such a common experience has not occurred, it might be doubtful to compare the actual shape of the Union to a federation (➔ para 33 et seqq.).88 This raises the question of the boundaries of the national constitutional empowerment for integration, in particular the boundaries of the transferability of sovereign powers by the Member States. In the Lisbon Judgment of 30 June 2009, the Federal Constitutional Court held that the German constitution—the Basic Law—“thus not only presumes sovereign statehood for Germany but guarantees it”.89 The Court interprets the eternity guarantee of Article 79.3 of the Basic Law in conjunction with state objectives, as enshrined in Article 20.1 and 2 of the Basic Law, in the way that the ensuring of sovereign statehood requires a minimum standard of democratic assets at national level.90 Although the constitutional structure of the principle of democracy is open to the goal of integrating Germany into an international and European peace order, it does not allow the “non-transferable identity of the constitution” (Article 79.3 of the Basic Law) to be abandoned.91 Rightly so, it has been pointed out that with the increasing density of international relations and the new forms of cooperation and ties between states, new qualifications beyond the binary scheme of state or non-state, are needed.92 At any rate, the traditional categories of confederation and federal state cannot be applied

88 On this requirement of the traditional federal (nation) state, cf. Scheuner (1962), who distinguishes the federal state from the EEC at that time with this criterion. 89 German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 216. 90 German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 210: “The right to equal participation in democratic self-determination (democratic right of participation), to which every citizen is entitled, can also be violated by the organisation of state authority being changed in such a way that the will of the people can no longer effectively be shaped within the meaning of Article 20.2 of the Basic Law and citizens cannot rule according to the will of a majority. The principle of the representative rule of the people may be violated if in the structure of bodies established by the Basic Law, the rights of the Bundestag are considerably curtailed and thus a loss of substance occurs of the democratic freedom of action of the constitutional body which has directly come into being according to the principles of free and equal elections [. . .]”; see also para 230 regarding “the minimum standard protected by Article 79.3 of the Basic Law”. 91 German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 219, 235. 92 In this sense, see Oppermann (1977), p. 685 et seqq., who, in contrast to H. P. Ipsen on the one hand (“special-purpose associations of functional integration”) and W. Hallstein (“federation in development”) on the other, interpreted the European Community as a “para-state superstructure” and attested the Community of that time an “unmistakable identity of its own”. Insofar, in the opinon of Oppermann, it “drew on a wealth of borrowings from the arsenal of experience gained by the state over centuries”; Sommermann (2013), p. 711; Sommermann (2014), p. 47 et seqq., 52: “The increasing density of international relations and the new forms of cooperation and integration require new categorisations beyond the binary scheme of State or Non-State.” According to Nettesheim (2012), p. 321 et seq., the etatist perspective (“nature of the state”) can open up argumentative starting points, but in the run-up to a formal European state founding it cannot offer a convincing solution. In his opinion, this is an approach which, in light of the level of European integration meanwhile achieved, has “something arbitrary”.

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when it comes to the finality of the Union.93 The spectrum of federation or integration models should be expanded (➔Article 1 TFEU para 63 et seqq., 66 et seqq.). Political science speaks of a Europeanised state in its hybrid status between national state and member of the European federation.94 A multi-level system, in which several levels of government exist, depending on the state structure of the Member States, hence (in centrally organised Member States) the level of the Member States is next to the overarching European federal state or even (in [prefederal] Member States) the levels of the Member States and of the regions are arched over by the European federal state, appears conceivable. However, it is also possible to think of a “shared sovereignty”95 that, with regard to “the concerted, legally coordinated cooperation” of the levels, can be conceptualised as “common sovereignty”.96 Already nowadays, the German Basic Law is regarded as a mere “partial constitution of the political”,97 a statement that is readily transferable to the constitutions of the other Member States. Perhaps “the great one-hour of the constitution of a European state”, a Big Bang, however, will never come or is only imaginable as the inevitable long-term consequence of a new European political reality. The abstract formula “Ever Closer Union” does not in itself mean a direction setting towards a division of sovereignty between the Union and the Contracting States or even to a European federal state. This formula does not imply a dissolution of the statehood of the Member States. Such upheavals, which also affect the supposed position of the Member States as “masters of the Treaties” (➔Article 1 TFEU para 4, 45, 91), could ideally only be carried out according to the will of all their peoples within an evolutionary course of the European integration process.98 From a political and pragmatic point of view, no such perspective can be identified, given already the attitude of the Visegrad states. They praise a “Federation of autonomous nations” (V. Orban) as the ideal of integration and discredit any European policy, which aims to deepen the Union, as an aspiration for an “empire”.

93 Ipsen (1972), § 8 (p. 182–206); Scho¨nberger (2004), p. 87 et seqq.; Scho¨nberger (2009), p. 555 et seq. 94 Sturm (2004), p. 383 who speaks of a “Europeanised State in an intermediate position between a national State and a member of the European federation”. 95 To the concept of “shared” or “dual” sovereignty see Huber (2001), p. 210; Calliess (2010), p. 71; Mangiameli (2017), p. 166. 96 Schliesky (2004), p. 529 et seqq., 531; Sommermann (2013), p. 711. 97 Ha¨berle and Kotzur (2016), para 412 et seqq.; Nettesheim (2012), p. 327. 98 Similarly the German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 263, with view to the German constitution and the German people as the sovereign: “If however, the threshold were crossed to a federal state and to the giving up of national sovereignty, this would require a free decision of the people in Germany beyond the present applicability of the Basic Law and the democratic requirements to be complied with would have to be fully consistent with the requirements for the democratic legitimation of a union of rule organised by a state. This level of legitimation could no longer be prescribed by national constitutional orders”. In agreement: Nettesheim (2012), p. 350 et seqq.

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It has been doubted99 whether an eruptive upheaval from the bottom or a European federal state must legally be enshrined in the constitutional orders of the Member States and thus be “legalized”.100 However, regularly, federalisation would be an evolutionary process of political transformation, which takes place within the existing and continuing institutional and legal-cultural context and includes only specific changes. With regard to all Member State constitutions, it can be reasonably assumed that they still hold “integration reserves”101 that—if necessary— would allow, in the context of constitutional amendments but without a total revision or drafting of a new constitution, the transfer of further sovereign rights to the Union. This can be assumed, in particular, to meet the need for a more intense integration in the area of common foreign and security policy and in economic, budgetary, and financial matters (EMU).102 But with the background of the German Basic Law (namely Article 23 and Article 79.3), the setting up of a European economic government with substantial—and not only coordinating (Article 5.1 (1) TFEU)—competences in the economic policy is partially seen as a transgression of 99

Cf. Nettesheim (2012), p. et seqq., who interprets the previously referred statement of the Federal Constitutional Court in such a way that “Article 79.3 of the Basic Law [. . .] protects the political process against itself.” He criticises this position as “a constitutionalism, turned into the legal positivism which reverses, in terms of construction and content, the democratic idea of constituent power into the opposite”. Instead, he advocates to initiate in the relationship between politics and law a “constitutional process in form of an open transitional process”. Also Sommermann (2013), p. 713 critically comments on the Federal Constitutional Court’s position, according to which the process of a complete reform of the national Constitution, has to respect the principles governing the current constitution (especially, Article 79.3 of the Baisic Law); cf. also Blanke (1993), p. 423, who, in light of the Maastricht Treaty on European Union, holds a “shot-in of revolutionary legitimacy” (E. R. Huber) on the part of the Member States is neither foreseeable nor politically desirable. The situation would be different if the peoples of Europe themselves brought about such an eruptive change. This however, is beyond all probability. 100 See in this context German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 217, which refers to Article 146 of the Basic Law: “It may remain open whether, due to the universal nature of dignity, freedom and equality alone, this commitment even applies to the constituent power, i.e. to the case that the German people, in free self-determination, but in a continuity of legality to the rule of the Basic Law, gives itself a new constitution [. . .] Within the order of the Basic Law, the structural principles of the state laid down in Article 20 of the Basic Law, i.e. democracy, the rule of law, the principle of the social state, the republic, the federal state, as well as the substance of elementary fundamental rights indispensable for the respect of human dignity are, in any case, not amenable to any amendment because of their fundamental quality.” 101 On this term, cf. Sommermann (2013), p. 713, for whom this applies in particular to the German Basic Law. Therefore, according to him, a transfer of further competences upon the Union in the area of the European Economic Union would be covered by the current German Basic Law (our translation). 102 Cf. European Parliament, Resolution of 16 February 2017, 2014/2248(INI), point P: “[. . .] whereas this new system of governance implies that the Commission is to become a genuine government, accountable to Parliament and equipped to formulate and implement the common fiscal and macro-economic policies that the euro area needs, and must be endowed with a treasury and budget commensurate with the scale of the tasks at hand; whereas this requires, in addition to measures within the existing primary law, a reform of the Lisbon Treaty [. . .]”. Blanke

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the boundaries of the constitutional integration authorisation (➔ TFEU, Supplement to EMU: Fiscal Union para 95–99).103 Rather, the phrase “ever closer union among the peoples of Europe” reveals the openness of the Union for future developments and integrational advances, which is also found in the Preamble to the TEU (➔ Article 1 TEU para 18); it assigns to the Union a mandate for integration (➔ Article 1 TEU para 26). Ever since the authors of the Treaties of Rome voiced their determination “to lay the foundations of an ever closer union among the peoples of Europe”, this formula has been used to illustrate the Union and European integration as a process (➔ para 18). Also, the TFEU is only an intermediate result, which makes further reform steps necessary.104 The topos “ever closer union” has been interpreted to differentiate the Union from actual states since it is based not on a European nation but on the peoples organised in states as a “compound” or an “association of sovereign states” (Staatenverbund) (➔ Article 1 TEU para 35, Article 1 TFEU para 63 et seqq.)105 or—in accordance with another conceptualisation—as a Verfassungsverbund,106 i.e., “the” European Constitution as a complementary structure of national and European constitutions. More importantly, the idea of an “ever closer union” should be a guiding principle to overcome the architectural defects of the Union, namely regarding the issue of democratic legitimation, the implementation of the principle of subsidiarity, and the concept of pure coordination of the economic policies of the Member States within the Union (Article 119–126 TFEU). The Preamble to the TFEU is proof that the Union, just like the European Economic Community, is a product of the constituting states. The citizens of the Community/Union (recitals 10 and 13 in the TEU Preamble) or even the individuals are not immediately addressed by the authors of this Treaty. At the forefront of the European integration process were the participating states, the markets, and also the ensemble of the peoples but not the citizens (➔ para 8).107 “Ever closer union” in the Treaties is “among the peoples of Europe”, not among the Member States. This 103 In the view of German Federal Constitutional Judge Huber (2011), p. 6, the plan to set up a “European economic government” exceeds the boundaries of the powers granted with a view to European integration (Article 23.1 in conjunction with Article 79.3 of the Basic Law). As to the merits of this political proposal, he interprets its establishment as a “revolution”. To constitutionally legitimise such a reform, he proposes just minor amendments to the German Basic Law (Articles 23 and 79.3), but calls for a referendum in Germany. Pursuant to Article 146 of the Basic Law, this referendum would lead, in his opinion, to a new German constitution. Afterwards “European referenda” should be held in all Member States about a new Reform Treaty, the outcome of which he views with scepticism. 104 Terhechte, in von der Groeben et al. (2015), AEUV Pra¨ambel para 5. 105 The concept of “Verbund” (association) was spelt out by the German Federal Constitutional Court, 2 BvR 2/08 and others, Lissbon (Judgment of 30 June 2009) para 227: “The concept of Verbund covers a close long-term association of states which remain sovereign, a treaty-based association which exercises public authority, but whose fundamental order is subject to the decision-making power of the Member States and in which the peoples, i.e. the citizens of the Member States, remain the subjects of democratic legitimation.” 106 The term was coined by Pernice (1995), p. 261 et seqq.; see also Pernice (2001), p. 163 et seqq. 107 Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 11 et seq. (released in 2010).

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has led many experts to the conclusion that it is not about more centralisation and integration but subsidiarity, i.e. the principle that decisions are made at the lowest appropriate level. By referring to the “peoples of Europe”, the “ever closer union” phrase promotes the citizens of the Contracting Parties, at least indirectly, to carriers of integration (➔ para 18). That is to say that this ever-closer Union shall be established “among” them as a value-based community (Article 3 TEU), which is, according to Article 3.1 TEU, committed to the aim of peace, the realisation of its values, and the well-being of its peoples (“Union of States”). These objectives, as set out at the beginning of the catalogue of Article 3 TEU, illustrate that, first of all, the Contracting Parties wanted to establish a peace project in order to prevent violent confrontations like those in the first half of the twentieth century. The six founding Members have been striving for this common goal of peace in the framework of the European Economic Community after the Treaty Establishing a European Defence Community (EDC) (27 May 1952) failed. Initially, this organisation intended exclusively an economic integration, which ensures the “economic and social progress” of the Member States (second recital in the TFEU Preamble). After the failure of the European Political Union (1961/ 1962), they followed, in essence, this path of economic integration until the adoption of the Treaty of Maastricht, even if Article 30 of the Single European Act (1986/1987), for the first time, enshrined the goal of a European political cooperation in matters of foreign policy in the EC Treaty. While the national state is characterised by a desire of the people to live in a community of common destiny and mutual responsibility, and thereby established solidarity between the citizens, the spiritual-idealistic affinity of the “society (of the) Member States” (Article 2 second sentence TEU), the unity on the basis of common values, is not a sufficient fundament to create a relation of fateful connection in the sense of a community of peoples based on a common will.108 Every Member State draws from the fund of common values and gives shape to them according to national heritage, as well as national historical experiences, and develops these shared values as an element of its own collective identity. Also due to that, sufficient social cohesiveness has not yet developed between the peoples of this supranational association. The objective of an ever-closer union among the peoples of Europe (Article 1.2 TEU) and the simultaneous insistence that the Member States remain sovereign entities (“masters of the Treaties”) marks an— apparent—paradox of the political and constitutional state of the Union.109 This interpretation of the topos underlines again that it does not include a guideline in conformity with the patterns of the theory of state (state—federal state—state union) (➔ para 30 et seqq.) and neither pursues to describe the “nature” or the finality of the Union (“open finality”).110 In fact, the decision of the national 108

Bo¨ckenfo¨rde (2011), p. 276 et seq. (our translation). Blanke and Pilz (2014), p. 547 et seq. 110 See, with regard to the Preamble to the TFEU-Treaty, Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 6 and 19 (released in 2010); Terhechte, in von der Groeben et al. (2015), AEUV Pra¨ambel para 14. 109

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constitutions for an open future of the European integration process, in particular the commitment to a united Europe in the Preamble of the German Basic Law,111 is reflected in the ever closer union topos.

3.2. Economic and Social Progress and Elimination of Barriers

38

In the second recital, the Contracting States are resolutely resolved “to ensure the economic and social progress of their States by common action to eliminate the barriers which divide Europe”. 3.2.1.

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Since its beginning, a central objective of the European integration programme has been the pursuit of economic progress and the limitation of state intervention and regulation in the field of economy. In light of its significance, it was enshrined in the TEU Preamble, in which it is placed namely in the context of sustainable development, the internal market, reinforced cohesion, and environmental protection (ninth recital). Theoretically, this aim is led by the doctrine of the welfare economy, according to which the limited resources of an economy shall be used optimally to maximise the prosperity of the entire population. Goods and resources should be used and distributed in such a way that an optimum of prosperity is achieved. The Contracting States expect welfare gains to be achieved by opening markets.112 Therefore, the borders between the MS and everything separating (“obstacles”) must be removed. 3.2.2.

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Economic Progress

Elimination of Barriers

In the light of Article 3.2 and Article 3.3 (3) TEU, the “action to eliminate the barriers which divide Europe” as an objective of the Contracting States should be 111

Funke (2018), p. 131, 133, with a view to the goal of a “united Europe” as it is anchored in the Preamble of the German Basic Law, takes the view that the term “united” is so “open” that “the institutional form [of the united Europe] does not matter.” [. . .]. It “encompasses any treaty-based relationship between a large number of European states that promotes peaceful coexistence.” Such an interpretation of a legal term, relatively weakly from an institutional point of view, would not require Germany as a Member State of the Union to take additional integration measures. However, this would be in obvious contradiction to the mandate of Article 23 of the Basic Law, which reads: “With a view to establishing a united Europe, the Federal Republic of Germany shall participate in the development of the European Union [. . .]” (emphasis added). To avoid this consequence, Funke (2018), p. 130, distinguishes the concept of a united Europe (Preamble) from the provision of the Basic Law on the participation of Germany in the development of the European Union (Article 23). This position is convincing only in so far as the term “united Europe”, compared to European Union, is more comprehensive, thus enabling different levels of integration within different European organisations. 112 Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 20 (released in 2010).

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understood in a comprehensive political, economic, social, and territorial sense (“cohesion”). The “removal of existing obstacles”, proclaimed in the fourth recital, concretises this comprehensive aim in an economic and trade policy context (➔ para 52 et seqq.). Through the customs union (Articles 28 et seqq. TEU, 206 TFEU) as well as the single market, at the latest since its further development through the concept of the internal market in the Single European Act (1986/87), this borderless Europe became in some way an economic reality (➔ Article 26 TFEU para 32 et seqq., 60), even if the internal market is not yet completed.113 The regulations— normatively already rooted in the so-called third pillar of the Treaty of Maastricht and designated as such by the Treaty of Amsterdam—mark the political project of integration, especially in the form of the guarantees of the “free movement of persons” (Article 3.2 TEU),114 as well as “the absence of internal border controls for persons” (Articles 67.2 and 77.1 point (a) TFEU). The fact that the second recital in the Preamble still includes a justifiable challenge to the Member States became evident at the latest when border controls were partially reintroduced as a result of migration movements. Considering the conflicting obligations of facilitating the cross-border movement of persons within the territory of the Union, while ensuring their internal security through measures to “carry out checks on persons and effective monitoring of the crossing of external borders” (Article 77.1 point (b) TFEU, Article 3.2 TEU), the Union faces far greater challenges than the classic nation states, which were strictly closed to the outside during the twentieth century (“billiard balls” on the game table world arena115). As a result of this change of the political and legal situation, the “open state” must balance the multiple counterpoint between freedom and security (“through measures to prevent and combat crime, racism and xenophobia”—Article 67.3 TFEU), if the freedom of movement shall not be at the expense of citizens’ security. Border checks and checks within the state territory—carried out on the grounds of the Schengen Borders Code (Articles 6–13 and 21 SBC) also address the problem that a policy relying too long on the economic benefits of open borders can bring about, when (terrorist) threats from outside put the functioning of the entire Schengen area at risk.116 The state border and the practical power to its 113 See European Parliament Resolution of 16 February 2017, 2014/2248(INI) on “improving the functioning of the European Union building on the potential of the Lisbon Treaty”, point 72: “[. . .] points out that the single market [. . .] contains a growth potential that has not yet been fully exploited, particularly with reference to the Digital Internal Market, financial services, energy, the banking union and the capital markets union; [. . .].” 114 Pursuant to the concept of Union citizenship, Article 20.2 point (a) TFEU guarantees the citizens’ right “to move and reside freely within the territory of the Member States”. 115 Waltz (1979), p. 102 et seqq., 194 et seqq.; Mearsheimer (2001), p. 29 et seqq. (our translation). 116 See European Commission 2017, Proposal for a Council implementing Decision setting out a Recommendation for prolonging temporary internal border control in exceptional circumstances putting the overall functioning of the Schengen area at risk (Explanatory Memorandum), COM (2017) 40 final. Available at https://ec.europa.eu/home-affairs/sites/homeaffairs/files/what-we-do/ policies/european-agenda-migration/proposal-implementation-package/docs/20170125_recommendation_for_prolonging_temporary_internal_border_control_en.pdf.

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control have, against this background, been termed as “state constituting”;117 the surveillance of the external borders is an existential objective also for the Union. In particular, after the experiences made in 2015 and at the beginning of 2016, it is important to note that the European area without internal borders and “barriers which divide Europe” remains a project that needs further work, mainly through the gradual introduction of an integrated system of controls at the external borders.118 3.2.3. 43

Social Progress

The authors of the Treaties, hereafter then also the framers of the EUCFR (fourth recital in that Preamble) recognise that economic growth requires an accompanying and supportive social policy.119 Pursuant to Article 3 TEU, the aims of the Union are, inter alia, to promote the well-being of its peoples and to work for a highly competitive social market economy, aiming at full employment and social progress. A new cross-sectional clause (Article 9 TFEU) is intended to ensure that requirements linked to the promotion of a high level of employment, the guarantee of adequate social protection, the fight against social exclusion, and promotion of a high level of education is taken into account in all policies and activities of the Union. Other elements in the social area are introduced especially through Article 21.3 TFEU (“citizenship of the Union and social security”) and Article 152 TFEU (“role of the social partners”). The EUCFR safeguards and promotes a number of fundamental principles, which are essential for the European social model regarding equality and solidarity (Articles 20–26 and 27–38): the Union shall combat social exclusion and discrimination and promote social justice and protection, equality between women and men, solidarity between generations, and protection of the rights of the child. It can hardly be overlooked that the limitation of the scope of social rights, which is inherent in different Charter provisions, together with the 117

Di Fabio (2016), p. 64 (our translation), with reference to Jellinek (1900), p. 394 et seqq. See the Proposal of the Council of the EU for a Regulation of the European Parliament and of the Council on the European Border and Coast Guard, 9 April 2019, Interinstitutional File 2018/ 0330(COD); see also the European Parliament Resolution of 16 February 2017, 2014/2248(INI) on “improving the functioning of the European Union building on the potential of the Lisbon Treaty”, point K.: “whereas, as regards Schengen, the free movement of people and the resulting abolition of internal border controls, all formally integrated into the Treaties, ‘opt-outs’ were given to the UK and Ireland; whereas four other Member States are also not taking part, but have the obligation to do so, while ‘opt-ins’ were accorded to three countries outside the European Union; whereas this fragmentation not only prevents the total abolition of some remaining internal borders, but also poses difficulties for the establishment of a true internal market and of a fully integrated area of freedom, security and justice; recalls that integration into the Schengen zone must remain the objective for all EU Member States”. It follows point W.: “[. . .] whereas the Union requires the necessary competences to make progress towards some of its stated objectives such as the completion of the single market including the energy union, social cohesion and aiming at full employment, fair and common migration and asylum management, as well as an internal and external security policy”. 119 Classen (2018), § 29 para 2; Terhechte in von der Groeben et al. (2015), AEUV Pra¨ambel para 6. 118

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specification of certain social rights as “principles”, minimises their potential applicability and impact.120 In the Preamble to the TEU (fifth recital), the Contracting States commit to their “attachment to fundamental social rights as defined in the European Social Charter [. . .] and in the 1989 Community Charter of the Fundamental Social Rights of Workers”. The European Social Charter was adopted in 1961 under great difficulties and differences from the Council of Europe and reflects the lowest common denominator, which the Contracting Parties of the Council of Europe have agreed on for the protection of the fundamental social and economic rights (Social Constitution of Europe). So far it has been ratified by 27 States Parties to the Council of Europe (15 June 2020)121 and is supplemented by three additional protocols: the Protocol of 1991 amending the European Social Charter, which improves the control mechanism of the Charter (ratified by all Parties to the Treaty),122 the Additional Protocol of 1988 to the European Social Charter, which extends the social and economic rights guaranteed by the European Social Charter; and the Additional Protocol of 1995 providing for a System of Collective Complaints.123 After the Treaty of Amsterdam has introduced the social policy in the Union’s legal framework (now: Articles 151 et seqq. TFEU) “for the aspects defined in this Treaty” (Article 4.2 point b), the Union shares competence with the Member States in the area of promotion, employment, improved living and working conditions, proper social protection, dialogue between management and labour, the development of human resources with a view to lasting high employment, and the combating of exclusion (Article 151.1 TFEU). On the other hand, with regard to the social policies of the Member States, the Union can only take “initiatives to coordinate” (Article 5.3 TFEU). Therefore, due to the inseparable connection with the national budget policy, central regulatory areas of social policy, including the organisation of social insurance systems, continue to be the responsibility of the Member States,124

120

See Blanke (2012b), p. 165 et seq.; Bodnar (2015), p. 70 et seqq., 78 et seq. who still denies the significance of the EUCFR as a “milestone in protection of social rights” and with view to its interpretation in the case law of the CJEU comments that “the current stage of the CJEU jurisprudence as regards social rights is rather like a warm-up before the ultimate run to reach that milestone soon”. 121 Available at https://www.coe.int/en/web/conventions/full-list/-/conventions/treaty/035/signatures?p_auth¼KnjGXd8p. 122 The revision of the European Social Charter in 1996 has led to an extension and update of its guarantees. The revised European Social Charter entered into force on 1 July 1999. 123 Available at https://www.coe.int/en/web/conventions/full-list/-/conventions/webContent/ en_GB/7775736. 124 See German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 256, 259, 392; see also European Parliament Resolution of 16 February 2017, 2014/2248 (INI) on “improving the functioning of the European Union building on the potential of the Lisbon Treaty”, point AK.: “whereas on the basis of Article 153(1)(a) to (i) TFEU the Union legislator may adopt minimum harmonisation measures in the area of social policy; whereas such legislation may not affect the right of Member States to define the fundamental principles of their social security systems; whereas such legislation may not significantly affect the financial equilibrium of national

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even though national legislation in matters of social policy is increasingly being transformed by Union law.125 In the area of social policy and the fulfilment of social tasks, the Member States retain a substantial national scope of action for central areas of statutory regulation and spheres of life.126 This limited level of legal capacity of the Union is contrasted by a variety of political demands, especially from the European Parliament, the European Council, and the Council of the EU for “establishing a social Europe”, motivated not least by the consideration “that the European integration project continues to have the support of workers”.127 However, fundamental social rights and social cohesion in conjunction with economic convergence (Articles 162–164 TFEU—European Social Fund) are even more relevant for the cohesion of the Union with a progressive increase in the number of Member States than for the (more homogenous) six founding states. In principle, this is due to demographic change, which all Member States and their different social systems are facing already.128 Welfare state costs will rise significantly due to ageing societies and slow economic growth. Longevity will have a deep impact on public policies and social services far beyond the health and care sectors, from the education system all the way to the need for an age-friendly housing and mobility. Changes in the population of the Member States come at a time of growing urbanisation.129 The “European Pillar of Social Rights”, proclaimed by the European Parliament, the Council, and the European Commission at the Social Summit for Fair Jobs and Growth in Gothenburg on 17 November 2017, establishes a series of principles and rights, which are to serve as a reference framework for employment and social policy at national and European levels.130 It opens an important avenue, social security systems; whereas these limits for social policy harmonisation still give some unused leeway to the Union legislator to adopt measures in the area of social policy”. 125 Cf. Kingreen (2003), p. 295 et seq. 126 With regard to the Federal Republic of Germany as a Member State, cf. German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 256–259, 351. 127 See European Parliament Resolution of 16 February 2017, 2014/2248(INI) on “improving the functioning of the European Union building on the potential of the Lisbon Treaty”, point 91; cf. also the “Declaration of the Leaders of 27 Member States and of the European Council, the European Parliament and the European Commission – The Rome Declaration (27 March 2017)”, point 3; cf. finally point 7 of the Preamble to the European Pillar of Social Rights which has been jointly signed by the European Parliament, the Council and the Commission on 17 November 2017, at the Social Summit for Fair Jobs and Growth in Gothenburg, Sweden. In accordance with point 18 of the Preamble to the European Pillar of Social Rights this proclamation “does not entail an extension of the Union’s powers and tasks as conferred by the Treaties. It should be implemented within the limits of those powers.” Available at https://ec.europa.eu/commission/sites/ beta-political/files/social-summit-european-pillar-social-rights-booklet_en.pdf. 128 From a legal perspective see Iliopoulos-Strangas (2010), p. 717–784. 129 Cf. European Commission, Reflection Paper on the Social Dimension of Europe, COM(2017) 206 of 26 April 2017, p. 14 et seqq., 22 et seqq. 130 The Social Rights booklet is available at https://ec.europa.eu/commission/sites/beta-political/ files/social-summit-european-pillar-social-rights-booklet_en.pdf.

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whereby specific EU actions can be launched to strengthen the E(M)U’s social dimension. But the Union’s tools in this area are limited (Article 4.2 point (b) TFEU). While it does not have the necessary competences to achieve “social justice” and social equality, the objective of social protection of workers (Article 153 TFEU) plays a prominent role alongside the mandate directed at the Union, to ensure the application of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation, including the principle of equal pay for equal work or work of equal value (Articles 157.1 and 3 TFEU ➔ para 49).131 However, even when adopting measures for the social protection of workers, the Union can rely only on fragmented competences (for example, with regard to labour security and working conditions). The powers of the Member States to lay down the basic principles of their respective social security system remain unaffected. Moreover, it is recognised that the competence of the Union is limited to the mere support of the Member States, that is, to supplementing their activities.132 A competence of the Union to set minimum wages133 cannot be inferred from the Treaties (Article 153.5 TFEU), and is also to be considered doubtful with regard to guaranteeing the freedom of establishment and the free movement of capital. Without a guiding European framework, however, this social policy project cannot be implemented at Union level. Therefore, social benchmarks need to acquire greater salience in the coordination of economic policies. A single social security number for every European would support cross-border mobility and the convergence of social standards.134

3.3. Constant Improvements of Living and Working Conditions

The affirmation to constantly improve the living and working conditions of the peoples of the Community (third recital) is inseparably connected with the concept of economic and social progress. Good living and working conditions are part of the well-being of the peoples, an objective to which the Union has committed itself as a consequence of its set of values (Article 3.1 TEU). At the same time, the Union’s catalogue of objectives combines “full employment and social progress”. Pursuant to Article 9 TFEU, the Union, in defining and implementing its policies and activities, shall take into account requirements, inter alia, linked to the promotion of a high level of employment (Articles 145, 147 TFEU), the guarantee of adequate social protection, and the fight against social exclusion. However, also in the area of employment, the Union’s powers are restricted to “take measures to ensure coordination of the employment policies of the 131

Terhechte, in Grabitz et al. (2020), Article 3 EUV para 53 (released in 2014); Krebber, in Calliess and Ruffert (2016), Article 151 AEUV para 20 et seqq., Article 153 para 3. 132 Krebber, in Calliess and Ruffert (2016), Article 153 AEUV para 3, 16, 18. 133 von der Leyen (2019), p. 9. 134 See Pagoulatos (2019), p. 25.

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Member States, in particular, by defining guidelines for these policies” (Article 5.2 TFEU). Nevertheless, already the European Economic Community (Article 119 ECC Treaty) had raised its profile through the guarantee of the right for equal pay for men and women for equal work or work of equal value (Articles 157.1 and 2 TFEU) as a forerunner in the area of socio-economic rights. In addition to the prohibition of discrimination on the ground of nationality (Article 18.1 TFEU), the requirement of equal pay is the basis of an unwritten principle of equal treatment and, as such, a part of the bedrock of the European legislation against discrimination. The Treaty of Amsterdam has extended it into a more comprehensive principle of gender equality in labour law.135 An essential vehicle for the improvement of the living and working conditions is the internal market. It is fundamental to prosperity, growth, and employment in the Union. Freedom of movement, in particular that of workers (Article 45 TFEU), constitutes a fundamental driving force for the completion of the single market.136 In February 2017, the European Parliament set forth that workers’ rights, particularly when they exercise their right of mobility, should be guaranteed along with their social rights, making full use of the relevant legal instruments, as provided for in Titles IV, IX, and X of Part Three of the TFEU and according to the EU Charter of Fundamental Rights (Articles 31 and 32), in order to ensure a stable social basis for the Union. Rights of migrant workers can be derived from 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 States137 and from Regulation (EU) No 492/2011 on freedom of movement for workers within the Union.138 Further keywords in the debate about the social dimension of the European integration (social Union) are especially the idea of a minimum wage (➔ para 47) determined by each Member State, common rules and conditions for the EU labour market, the need to actively include young workers in the labour market, and the establishment of a new social pact. The European Pillar of Social Rights is about delivering such new and more effective rights for citizens (➔ para 47). It is built upon 20 key principles, structured around three categories: equal opportunities and access to the labour market, fair working conditions, and social protection as well as inclusion.139 The creation of legal frameworks in the social and labour market policy, which enable sustainable prosperity increase, also in the context of collective bargaining,

135

Krebber, in Calliess and Ruffert (2016), Article 157 AEUV para 1 and 33 et seqq. See European Parliament Resolution of 16 February 2017, 2014/2248(INI) on “improving the functioning of the European Union building on the potential of the Lisbon Treaty”, point AN and point 72. 137 O.J. L 158/77 (2004). 138 O.J. L 141/1 (2011); see also European Parliament Resolution of 16 February 2017, 2014/2248 (INI) on “improving the functioning of the European Union building on the potential of the Lisbon Treaty”, point 90. 139 See the Social Rights booklet; available at https://ec.europa.eu/commission/sites/beta-political/ files/social-summit-european-pillar-social-rights-booklet_en.pdf. 136

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complies with central requirements for the well-being of the citizens.140 This should also be a major motivation for joining the EU.141 The Union, despite all inner resentments, continues to be a source of hope and, especially for citizens of neighbouring countries, a guarantor for the implementation of democratic values and the improvement of living conditions. This was also apparent on the occasion of the protests on the Kiev Maidan regarding the at first failed (November 2013) association agreement with the EU. Not unreasonably it was called “Euromaidan”.142

3.4. Steady Expansion, Balanced Trade, and Fair Competition

The Contracting States have been “recognising” that steady expansion, balanced trade, and fair competition should result from “the removal of existing obstacles” within the framework of the integration strategy. As a key prerequisite for this, they see a “concerted action” in order order to avoid majorising a partner state. The term “obstacles” appears regularly in the TFEU in connection with the functioning of the European internal market,143 as well as in the area of freedom, security, and justice (Articles 46 point (b), 50.2 point (c), 81.2 point (f), 114.6). It corresponds in this economic and commercial context to the resolution proclaimed in a more comprehensive sense in the second recital of the Preamble, “to eliminate the barriers which divide Europe” (➔ para 40 et seqq.). The Union as well as its organs and institutions have to “[abolish] those administrative procedures and practices [. . .], the maintenance of which would form an obstacle to liberalisation of the movement of workers” (Article 46 point (b) TFEU), reject national provisions that “constitute an obstacle to the functioning of the internal market” (Article 114.6 TFEU), and remove “legal and fiscal obstacles” that hinder cooperation between the Member States (Article 179.2 TFEU). The free movement of persons by abolishing passport checks (Schengen acquis ➔ para 42) and mutually recognising professional qualifications (Article 53 TFEU) have been further essential measures in order to overcome existing obstacles. The removal of existing obstacles shall be carried out in the internal area of the Union, in particular through the customs union (Article 28 et seqq.) and the internal market, which is based on the customs union. Concerning the relations with third countries, the Contracting Parties have expressed in the sixth recital the “desire” to abolish progressively the “restrictions on international trade”. Given the establishment of the customs union, the dismantling of borders within the Community 140

Cf. points 3 and 8 of the Preamble to the European Pillar of Social Rights. Terhechte, in von der Groeben et al. (2015), AEUV Pra¨ambel para 7. 142 Hartwig (2015), p. 783; Marxsen (2014), p. 368 f. 143 See also, e.g., European Economic and Social Committee, Obstacles to the European Single Market. Findings of the Single Market Observatory (SMO), Status: July 2012 A; available at https://www.eesc.europa.eu/sites/default/files/resources/docs/12_362_obstacles-to-the-sm_en_fin_250912.pdf 141

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goes—within the framework of the WTO or regional trade agreements—far beyond the abolition of restrictions on international trade and also beyond the concept of a regional trade liberalisation in the frame of a free trade area. Through Article 206 TFEU (common commercial policy), the dismantling of borders in the internal area of the EU, on the one hand, and in the external relationship, on the other, are linked (“By establishing a customs union [. . .] the Union shall contribute [. . .] to [. . .] the progressive abolition of restrictions on international trade [. . .]”). The economy policy aims “steady expansion, balanced trade and fair competition” can be interpreted as a decision to establish an economic constitution that is based on ordoliberal ideas according to the general conditions of a free market economy.144 As a result of this, the aims shall not be strived for unlimited. That is to say that the “expansion” shall be “steady”, meaning not unbalanced or even unrestricted; that is, the trade shall be “balanced” and the competition “fair”.145 In a more general wording, the Preamble to the EUCFR (third recital) declares— under reference to the principle of sustainability that has been predominant since the eighties of the last century146—that the Union “seeks to promote balanced and sustainable development” and acknowledges in this context at the same time the Union’s obligation to ensure “free movement of persons, services, goods and capital, and the freedom of establishment”. The Court of Justice of the EU derived the aim of the Community to guarantee a balanced trade and a fair competition immediately from the Preamble to the EEC Treaty (➔ para 13). 3.4.1.

55

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Steady Expansion

The Preamble objective of a “steady expansion” has been reintroduced in Article 2 EEC Treaty (“a continuous and balanced expansion”) in a synonymous wording.147 It is inspired by the idea of an equitable growth, an element of the magical rectangle, which is measured at the real gross domestic product. Economic fluctuations preferably are to be avoided. The growth aim is based in the national area on the welfare state principle, which assigns to the state the social responsibility for economic prosperity and a fair economic order. The growth policy strives for an

144

Mussler (1998), p. 58 et seqq., 91 et seqq., 125 et seqq.; Blanke (2012a), p. 370 et seq. Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 22 (released in 2010); Terhechte, in von der Groeben et al. (2015), AEUV Pra¨ambel para 8. 146 Cf. Article 25 of the “Report of the World Commission on Environment and Development: Our Common Future” (Brundlandt Report, 1987): “Humanity has the ability to make development sustainable to ensure that it meets the needs of the present without compromising the ability of future generations to meet their own needs.” 147 Article 2 of the EEC Treaty stated: “It shall be the aim of the Community, by establishing a Common Market and progressively approximating the economic policies of Member States, to promote throughout the Community a harmonious development of economic activities, a continuous and balanced expansion, an increased stability, an accelerated raising of the standard of living and closer relations between its Member States.” (emphasis added). 145

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increase of productivity, national product, and living standards.148 As the Community exercises until now only a coordinating function, the Member States’ governments and parliaments carry the political responsibility in this area. However, as a consequence of the shared competence for the establishment of the internal market (Article 4.2 point (a) TFEU), the Union also has an economic responsibility intraEU and extra-EU. 3.4.2.

Balanced Trade

A balanced trade can be assumed if the trade balance is zero. How “fair” and “balanced” the trade between the EU states and the third countries is can be discovered in the regularly published trade balance of the Member States. In Germany, the trade balance surplus in the time frame between January and December 2018 amounted to EUR 232.8 billion. Negative trade balances were recorded in this time frame in 17 Member States, with the United Kingdom having the worst result of minus EUR 178.8 billion.149 The statistics take into account the extra-EU trade, meaning the trade with states outside the EU and also the trade within the Member States (Member States’ total trade) in a synonymous wording.150 Due to the different conditions, a completely balanced trade between the Member States on one side and third countries on the other is not possible and not even urgently necessary. However, considering the current developments, the balance aim, laid down in the Preamble, proves to be more important than ever. The escalation potential that arises from unbalanced trade can be seen, for example, in the reactions of the other Member States when it comes to the continuously high German export surplus (2019: EUR 223.2 billion).151 In comparison with world trade partners, the price competitiveness of the Union (including the eurozone) has a more or less balanced current account.152 Following 148

Badura (1977), p. 374 et seq. See Eurostat, news release euroindicators of 30/2019 – 15 February 2019; available at http://ec. europa.eu/eurostat/documents/2995521/8663011/6-15022018-AP-EN.pdf/6bf760ed-57af-40a0ae7d-b3b184cc3bb3 150 Article 2 of the EEC Treaty stated: “It shall be the aim of the Community, by establishing a Common Market and progressively approximating the economic policies of Member States, to promote throughout the Community a harmonious development of economic activities, a continuous and balanced expansion, an increased stability, an accelerated raising of the standard of living and closer relations between its Member States.” (emphasis added). 151 ZEIT online, 17 April 2017: “Macron attackiert Deutschland wegen Handelsu¨berschu¨ssen”; available at http://www.zeit.de/wirtschaft/2017-04/frankreich-emmanuel-macron-deutschlandexporte-kritik-handelsueberschuss. Le Point, 11 May 2018: “Emanuel Macron critique le ‘fe´tichisme’ budge´taire allemand”; available at https://www.lepoint.fr/politique/emmanuel-macroncritique-le-fetichisme-budgetaire-allemand-11-05-2018-2217551_20.php 152 See Eurostat, news release euroindicators of 30/2019 – 15 February 2019. The first estimate for extra-EU28 exports of goods in December 2018 was EUR 153.9 billion, down by 3.9% compared with December 2017 (EUR 160.1 bn). Imports from the rest of the world stood at EUR 153.2 bn, up by 4.3% compared with December 2017 (EUR 146.4 bn). As a result, the EU28 recorded a EUR 149

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the global financial crisis of 2008/2009, there has been a certain degree of convergence since 2016, meaning that the imbalance is getting smaller. Within the European Union, since the introduction of the euro in 2002 (third phase), there has been a continuous drifting apart of the competitiveness of Member States, which after the global financial crisis became one of the reasons for the euro crisis (along with the banking and sovereign debt problems).153 In particular, countries in the periphery of the eurozone (Greece, Italy, Portugal, and Spain) have benefited from the eurozone interest spread bonus (their previously high interest rates dropped to the low level of the eurozone) to generate a creditfinanced economic growth, but namely Italy failed to adopt its wages to productivity development in order to ensure competitiveness, which is indispensable for participation in a monetary union. A strong competitiveness within the EU internal market is an essential requirement for the international competitiveness of a Member State. 3.4.3. 58

59

Fair Competition

European market integration assigns to the principle of competition a central role for the functioning of the private sector. It is the Archimedean point of a marketoriented social order the economic life of which takes place on markets and in competition. The competition rules of the Union, which shall ensure a fair competition, are included in Articles 101–106 TFEU and in an increasingly vast amount of secondary law provisions. In economic science, a competition policy is related to the aim of a performance-based distribution of income and a sufficient level of technological progress,154 thereby focusing on the innovative function of “competition as a discovery process” (F. A. v. Hayek). That principle can be regarded as “the decision of the Community Constitution on freedom of competition per se and on its functional suitability as a means of optimal market development and self-regulation”.155 Being an important source of growth, jobs, and innovation, foreign direct investment (FDI) has always been essential for the economic and social development of the Union. It has brought significant benefits to the Union and its citizens, supporting the objectives of the Commission’s Investment Plan for Europe and contributing to other Union projects and programmes. However, in spite of all

0.7 bn surplus in trade in goods with the rest of the world in December 2018, compared with +EUR 14.3 bn in December 2017. Intra-EU28 trade fell to EUR 255.2 bn in December 2018, 1.5% compared with December 2016 (EUR 256.2 bn.). 153 Le Cacheux and Laurent (2015), p. 105 et seqq. 154 Cf. Kantzenbach (1966), p. 16 et seqq. 155 See Ipsen (1972), p. 607, with further references, who points out that it is controversial if and how far this applies (above our translation).

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commitments of the Union to its openness to foreign investment,156 its policy has been partially discredited as “protectionism in disguise”.157 The reason for this criticism is the Regulation establishing a framework for the screening of foreign direct investments into the Union,158 which was adopted on a proposal of Germany, France, and Italy.159 In particular, this Regulation aims to prevent a sale of key technologies of the Member States to third countries such as China.160 The supporters of this Regulation recognise this approach as a “first even tough small step towards the right direction”, which allows the Union to resist the “aggressive Chinese industrial policy”.161 The EU’s major trading partners have such foreign direct investment screening mechanism already in place, for example Australia, Canada, China, India, Japan, and the United States. Also, 12 EU Member States had developed foreign direct investment screening mechanisms even before the adoption of that EU Regulation. In Germany, the federal government started to develop the “National Industry Strategy 2030”. It intends the founding of investment funds through which the state temporarily acquires under strict conditions parts of German companies in the field of leading-edge technology. The highly

156

See the Commission communication of 14 October 2015 entitled “Trade for All – Towards a more responsible trade and investment policy” (COM(2015) 497), p. 8: “Opening up the EU economy to trade and investment is a major source of productivity gains and private investment, both of which the EU sorely needs. They bring ideas and innovation, new technologies and the best research [. . .].” See also European Parliament resolution of 5 July 2017 on building an ambitious EU industrial strategy as a strategic priority for growth, employment and innovation in Europe (P8_TA(2017)0305), point 11: “Underlines that, in order to support the Union’s industry in facing the challenges of rapid economic and regulatory changes in today’s globalised world, it is essential to enhance Europe’s industrial attractiveness for European and foreign direct investment [. . .]”. 157 Kafsack, F.A.Z. 28 August 2017 (our translation); cf. also Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 24 (released in 2010); sceptical also Bundesverband der Deutschen Industrie (BDI) 2017 p. 6 et seq. 158 Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019, O. J. LI 79/1 2019). 159 See “Proposals for ensuring an improved level playing field in trade and investment” of February 2017. In point 1 the “the principle of reciprocity” is set out which “applies in cases where a foreign investor has only limited market access in the country of origin of the acquisition”. Available at http://www.bmwi.de/Redaktion/DE/Downloads/E/eckpunktepapier-proposals-forensuring-an-improved-level-playing-field-in-trade-and-investment.pdf? __blob¼publicationFile&v¼4 160 Juncker (2017): “Let me say once and for all: we are not naı¨ve free traders. Europe must always defend its strategic interests. This is why today we are proposing a new EU framework for investment screening. If a foreign, state-owned company wants to purchase a European harbour, part of our energy infrastructure or a defence technology firm, this should only happen in transparency, with scrutiny and debate. It is a political responsibility to know what is going on in our own backyard so that we can protect our collective security if needed.” One representative of such a position in economics is Krugman (1979), p. 469 et seqq. For case examples regarding Chinese investments in critical areas of the energy sector see, Schuelken (2018), p. 572 et seqq. 161 Bo¨ge, F.A.Z. (12 March 2018), p. 1 (our translation); see also Schuelken (2018), p. 586, who assumes that this Regulation does not encourage protectionism, but on the contrary, rather creates the necessary conditions for a European common market, which is still open to foreign capital.

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controversial objective is to prevent the sale of such companies to foreign investors (in particular China and the USA). Against this backdrop, the main objective of the amendments to the German Foreign Trade and Payments Act and the Foreign Trade and Payments Regulation adopted in July 2020 is to prohibit the acquisition of resident companies by non-Union purchasers on a case-by-case basis if this is indispensable “to safeguard public policy or public security in the Federal Republic of Germany or another Member State of the European Union” or “to safeguard public policy or public security with regard to projects or programmes of Union interest within the meaning of Article 8 of Regulation (EU) 2019/452 [...] of 19 March 2019 establishing a framework for the verification of foreign direct investment [...]”. In the same context, Sec. 5.2. of this Law states as follows: “Restrictions or obligations to act pursuant to Sec. 4.1 no. 4 may be imposed in particular with regard to the acquisition of domestic companies or shares in such companies by non-EU purchasers if public order or security in the Federal Republic of Germany or another Member State of the European Union is likely to be impaired as a result of the acquisition pursuant to Sec. 4.1 no. 4 [...]”.162 The implementation of the Regulation on FDI screening by the Union and the Member States shall “comply [especially] with the relevant requirements for the imposition of restrictive measures on grounds of security and public order in the WTO agreements, including, in particular, Article XIV point (a) and Article XIV bis of the General Agreement on Trade in Services (GATS)”.163 Based on this consideration, the Regulation “establishes a framework for the screening by the Member States and the Commission of foreign direct investments in the Union on the grounds of security or public order and for a mechanism for cooperation between Member States, and between Member States and the Commission, with regard to foreign direct investments likely to affect security or public order” (Article 1). In determining whether a foreign direct investment is likely to affect security or public order, Member States and the Commission “may also take into account, in particular [. . .] whether the foreign investor is directly or indirectly controlled by the government of a third country, including through ownership structure or significant funding (Article 4.2). Member States which have a screening mechanism in place shall maintain, amend or adopt measures necessary to identify and prevent circumvention of the screening mechanisms and screening decisions” (Article 3.6).164 Article XIV point (a) GATS mentions such as a justification for restrictive measures under the “General Exceptions”, which serve “to maintain public order”. “The public order exception may be invoked, only where a genuine and sufficiently

162

Cf. Sect. 4.1 no. 4 and 4a, and Sect. 5.2 of the German Foreign Trade and Payments Act, BGBl. I 2020, p. 1637—emphasis added; see on European law issues of German investment control Herrmann (2019), p. 429 et seqq. 163 See recital 35 of of the Regulation on FDI screening. 164 Cf. in detail Schuelken (2018), p. 582 et seq.

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serious threat is posed to one of the fundamental interests of society.”165 Within the “Security Exceptions”, Article XIV bis, paragraph 1, point (b) GATS gives a Contracting State the right “[to take] any action which it considers necessary for the protection of its essential security interests”. The three areas, in which the GATS recognises this national security interest, are indicated in this provision of the GATS. The exact scope of these regulations is unclear, especially in view of the lack of rulings by the WTO bodies, which is why there is a high risk of abuse due to the application of the undetermined legal concept of “essential security interests”. The exceptions of Article XIV point (a) GATS and Article XIV bis, paragraph 1, point (b) GATS should be applied in a non-discriminatory manner across services originating in countries where the same conditions prevail. WTO members invoking them carry the burden of proof by virtue of the maxim quicumque exceptionem invocat, eiusdem probare debet.166 As the legal minimum standard requires an indiscriminate treatment of services and providers of services, the character of a non-discrimination prohibition is attributed even to market access obligations.167 Investments from third countries in certain projects, which impact the public order and security of the Union as a whole, must be clearly and definitively delineated. The possibility of providing screening rights regarding foreign participations in individual, particularly sensitive sectors of economy, is admittedly limited to an enumerated list of economic sectors and objective criteria, clearly defined by law. A blanket reference to public order and security is not sufficient.168 Accordingly, there is no legal justification for subjecting all foreign investments in, or ownership of, businesses by a particular country in a Member State of the Union to a potential screening. A general and evaluative differentiation between a foreign investor who is directly or indirectly controlled by the government on the one hand and private agents on the other hand faces serious difficulties (Article 4.2 point (a) of the Regulation). The EU Commission should work towards more market access in countries in which protectionism prevails. This is all the more essential in view of rising protectionism around the world. By concluding free trade agreements (FTAs) and bilateral investment treaties (BITs), investment conditions for EU companies in third countries can be improved. Openness in Europe is an important factor for the success of European industry. The EU’s credibility as a champion of open and free markets should not be jeopardised by political measures, which could be interpreted as protectionism (➔ Article 120 para 37 et seq.).169

165 See footnote 5 to Article XIV point (a) GATS as an integral part of the Annexes (Article XXIX) to the GATS. 166 Mavroidis (2005), p. 184 et seq., regarding the corresponding provision in Article XX GATT. 167 Michaelis, in Hilf and Oeter (2010), § 20 para 61. 168 Tietje (2007), p. 9. 169 See Bundesverband der Deutschen Industrie 2017, p. 5, 9, according to which the Regulation tends to the right direction (p. 7). Later the BDI has also welcomed the initiative of the German federal government to develop a “National Industry Strategy 2030”; see Bundesministerium fu¨r Wirtschaft und Energie (2019), p. 15.

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In order to “strengthen the unity of their economies and to ensure their harmonious development”, the signatory states intend to “[reduce] the differences existing between the various regions and the backwardness of the less favoured regions” (fifth recital; see also Article 174.2 TFEU). More than 60 years after its codification, this recital still marks a very timely mandate addressed to the Union: the economic, social, and territorial cohesion (ninth recital in the TEU Preamble ➔ para 49, Article 3.3 (3) TEU, Article 174.1, and Articles 174–178 TFEU).170 The Single European Act (1986/1987) provided the legal basis for the cohesion policy,171 after already in the year 1958 the Social Fund and 1975 the European Regional Development Fond (ERDF) had been set up. Competence for the cohesion policy has since then been shared between the Member States and the Union. The Lisbon Treaty and thereupon the high-ranking EU strategy (Europe 2020172) introduced the third dimension of cohesion policy: i.e. the territorial cohesion. The first period of the programme planning on the basis of common rules for the Structural Funds started in 1989. The recipient states were at that time Ireland, Greece, Spain, Portugal, and, since the 2004 enlargement, predominantly the central and eastern European states.173 The objective of the Union’s cohesion policy is to promote Member States that have a low level of economic development; to reduce economic gaps between the regions of the Union; to promote convergence, regional competitiveness and employment, as well as European territorial cooperation; and to avoid conflictual differences.174 Further, the advantages of regional aid in terms of the development of a less-favoured region must outweigh the resulting distortions of competition.175 The objective of territorial cohesion should also encourage Member States to

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Cf. also Article 14 TFEU, 171.1 third indent, and the Protocol (No 28) on economic, social and territorial cohesion. 171 In Article 23 of the Act the insertion of Title V “Economic and social cohesion” into the EC Treaty (Article 130a et seqq.) was agreed. 172 European Commission, Europe 2020. A strategy for smart, sustainable and inclusive growth, COM(2010) 2020, p. 16 et seqq., 20 et seqq. 173 As a consequence of regional policy investments, the GDPs of Bulgaria, the Czech Republic, Estonia, Croatia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Romania, Slovenia and Slovakia, i.e. of the 13 countries that entered the Union in or after 2004, are expected to increase by around 2.4% per year between 2007 and 2025. 174 See European Commission, My region, My Europe, Our Future. Seventh report on economic, social and territorial cohesion (2017). 175 See the Guidelines on regional State aid for 2014–2020, O.J. C 209/1 (2013), no. 5 which refer in this respect to Case 730/79, Philip Morris (ECJ 17 September 1980) para 17; and to Case C-169/ 95 Spain v Commission (ECJ 14 January 1997) para 20.

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implement cross-border infrastructure projects in order to achieve faster a common high standard by optimising the use of skills, abilities, and economies of scale.176 The cohesion policy is based on three funds, which, in addition to the European Agricultural Fund for Rural Development (EAFRD) and the European Maritime and Fisheries Fund (EMFF), operate under the umbrella of the European Structural and Investment Funds:

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– The European Regional Development Fund (ERDF) shall strengthen regional economic and social cohesion through investments in growth-enhancing industries to boost competitiveness and job creation (Article 176 TFEU). This fund also finances cross-border cooperation projects. – The European Social Fund (ESF) invests in people. Its focus is on improving employment and education opportunities. It shall also support people threatened by poverty and social exclusion (Articles 162–164 TFEU, ➔ para 43). – The Cohesion Fund (CF) invests in environment-friendly growth and sustainable development only in “regions whose development is lagging behind”. It shall improve the “trans-European networks in the area of transport infrastructure” in Member States with a GDP below 90% of the EU-27 average (Article 177.2 TFEU). In the period 2014–2020, the title for cohesion with EUR 351.8 billion is the second-largest item in the budget of the EU.177 It has a particular focus on four key investment priorities: research and innovation, the digital agenda, support for SMEs, and low-carbon economy. Around EUR 100 billion will be dedicated to these sectors, of which EUR 26.7 billion will support the shift to a low-carbon economy (energy efficiency and renewable energies).

3.6. A Common Commercial Policy

The sixth recital is tied to the fourth recital and expresses the decisiveness “to contribute, by means of a common commercial policy, to the progressive abolition of restrictions on international trade”. Hence, it concerns trade relations with 176

See Commission of the European Communities, Green Paper on Territorial Cohesion Turning territorial diversity into strength (SEC/2008/2550), p. 3, 5: “[. . .] the EU harbours an incredibly rich territorial diversity. Territorial cohesion is about ensuring the harmonious development of all these places and about making sure that their citizens are able to make the most of inherent features of these territories. As such, it is a means of transforming diversity into an asset that contributes to sustainable development of the entire EU. [. . .] Increasingly, competitiveness and prosperity depend on the capacity of the people and businesses located there to make the best use of all of territorial assets. In a globalising and interrelated world economy, however, competitiveness also depends on building links with other territories to ensure that common assets are used in a coordinated and sustainable way. [. . .] More balanced and sustainable development, implicit in the notion of territorial cohesion, would achieve a more even and sustainable use of assets, bringing economic gains from less congestion and reduced pressure on costs, with benefits for both the environment and the quality of life. [. . .]”. 177 See European Commission – Regional Policy Glossary; available at http://ec.europa.eu/regional_policy/en/policy/what/glossary/e/economic-and-social-cohesion

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third countries. Already by establishing the customs union (Articles 28–32 TFEU), the Union makes a contribution “to 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). Since the Treaty of Lisbon, the Union has exclusive competence in the area of world trade (Article 3.1 point (e) TFEU). At that time, the Member States agreed to transfer the mandate for the negotiation of trade agreements with third countries to the EU Commission (Article 207.3 (2 and 3) TFEU); once a negotiation is completed and an agreement is signed, it is the competence of the Council and the European Parliament to adopt it (Article 218.2 and subpoint (v) of Article 218.6 (2) point a). The Member States are not entitled to exert any influence on it as far as the agreement is concerned within the exclusive competence of the European Union and therefore not within a competence shared with the Member States (in the latter case, it is a so-called mixed agreement) (➔ para 70 et seqq.).178 The core objective of Article 207 TFEU is to standardise the need for “uniform principles” on which common commercial policy shall be based, as well as “uniformity in measures of liberalisation, export policy and measures to protect trade”.179 This provision requires the Union to respect within its trade policy the principles and objectives of its foreign policy (first paragraph). Furthermore, it specifies the measures of legal implementation as well as—in conjunction with Article 218 TFEU—the procedure for negotiation and conclusion of the trade agreements (paragraphs 2 and 3). As a general rule, such agreements merely require a qualified majority vote in the Council regarding their negotiation and conclusion (218.4 (1)).180 The aim of these provisions is to provide for a common performance of the Union vis-a`-vis third countries. From its beginning, the Community had a strong interest in removing trade barriers with regard to third countries. It views trade agreements as “an important tool to ensure economic growth and employment in whole Europe” (C. Malstro¨m) and follows the insight of P. Samuelson, according to whom free trade equals growth and prosperity.181 Also, trade defence instruments are part of the Union’s trade policy to ensure fair trade.182 For example, sensitive key technologies, such as in the defence or electronics industry, can be subject to strict conditions and export restrictions (➔ para 59 et seqq.). In addition, the Union has a set of instruments against dumping and unfair competition from public investment compatible with the rules of the World Trade Organization (WTO).

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Opinion 2/15, EUSFTA (ECJ 16 May 2017) para 28 et seqq. Cf. Nettesheim (2018), § 40 para 12. 180 Terhechte, in von der Groeben et al. (2015), AEUV Pra¨ambel para 10. 181 Cf., e.g., Samuelson (1938), p. 261 et seqq.; ibid. (1939), p. 195 et seqq.; see also, however, his critical view on globalization in Samuelson (2004), p. 140 et seqq. with “some weighty blows against economists’ oversimple complacencies about globalization”. 182 Cf. Nettesheim (2018), § 40 para 13. 179

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Free Trade Agreements

The Transatlantic Trade and Investment Partnership (TTIP) and the EUCanada Comprehensive Economic and Trade Agreement (CETA) are among the best known free trade agreements, negotiated and signed by the EU Commission in the name and on behalf of the Member States. While TTIP has failed first in September 2017, CETA has entered into force and is considered as a frontrunner for further EU trade agreements,183 followed by agreements with Japan (2018/ 2019) and Mercosur (2019). These are bilateral agreements that go far beyond the removal of tariff barriers. Among others, the Union concluded trade agreements with the Balkan states, Central American states, the Pacific neighbouring states of South America, the countries of the southern tip of the African continent, and other ASEAN states, such as Singapore, South Korea, and Vietnam. Currently (2019), the Union is conducting negotiations with other South American states and also with China, India, and Central African states. The parallel negotiations on an updating of free trade agreements concluded some time ago (e. g., Mexico, Morocco, Tunisia)184 show that also the aim, enshrined in the sixth recital of the TFEU Preamble, remains a constant task. According to the case law of the CJEU, set out in its ruling on the Free Trade Agreement between the EU and Singapore (EUSFTA), the EU has exclusive competence for the conclusion of almost the entire EUSFTA, covering all the areas that are pivotal for the global trade agenda, including trade in goods and services, public procurement, competition, foreign direct investment (FDI), sustainable development, intellectual property rights, and state-to-state dispute settlement. Only the provisions on non-direct investment/portfolio investments provided by CETA—in contrast to the FDI—do not fall within the substantivelegal competence of the Union.185 This distribution of competences is based on a wide interpretation of the Court regarding the common commercial policy under Article 207.1 TFEU and, pursuant to Article 3.2 TFEU, the transferral of an exclusive competence to the Union for the conclusion of international agreements. According to the CJEU, the competence for the institutional provisions is, in principle, determined in compliance with the substantive provisions of an agreement, the effectiveness of which is ensured by the institutional provisions. Thus, apart from those institutional provisions that refer to non-direct investments and the provisions relating to dispute settlement between investors and states, most

183 The Comprehensive Economic and Trade Agreement (CETA) between Canada, of the One Part, and the European Union [. . .], of the Other Part, (signed on 30 October 2016) is available at http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152806.pdf; see also the document of 26 October 2016 on the Joint Interpretative Instrument on this agreement; available at http:// data.consilium.europa.eu/doc/document/ST-13541-2016-INIT/en/pdf 184 See to the state of the negotiations of free trade agreements: European Commission, Overview of FTA and other Trade Negotiations; available at: http://trade.ec.europa.eu/doclib/docs/2006/ december/tradoc_118238.pdf 185 Cf. Mayr (2017), p. 262 et seqq.

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of the institutional provisions of the EUSFTA fall into the exclusive competence of the EU, as far as the Member States are concerned as conflicting parties.186 However, in the run-up to this decision of the CJEU, the German Federal Constitutional Court and Advocate General Sharpston (both in the case of EUSFTA) and also law scholars (with regard to CETA) had assumed broader competences of the Member States in matters of trade agreements.187 It is disputed whether it follows from the ruling of the CJEU in the EUSFTA case that in general—i.e. with regard to all future agreements—mixed agreements must be concluded when free trade and other EU agreements refer to a matter that falls into a competence shared between the Member States and the Union.188 In fact, CETA was concluded as a mixed agreement. In the past, however, many important agreements have been ratified only by the Union, for example the Information Technology Agreement, the Trade Facilitation Agreement, the TRIPS (intellectual property), and the Government Procurement Agreement. Henceforth, CJEU Opinion 2/15 on the Free Trade Agreement with Singapore will have a bearing on the classification of a trade agreement either as “mixed agreement” or as agreements that fall within the exclusive competence of the Union. In the absence of treaty provisions on non-direct-investments and investor-state dispute settlement (ISDS), such agreements may be concluded, as a consequence of the Union’s competence for the common commercial policy and its exclusive implicit competence in external matters, in the shape of “EU-only agreements”.189 What makes the difference between mixed agreements and EU-only agreements most relevant is the participation of all Member States not only through the Council but also through a national ratification procedure in the latter case. Then not only the European Parliament but also—depending on the national constitutional requirements—all parliaments or chambers of the Member State’s parliaments, in 186

Conclusions drawn from Opinion 2/15, EUSFTA (ECJ 16 May 2017) para 305; for this evaluation cf. Behrends et al. (2017), p. 37. 187 Cf. German Federal Constitutional Court, 2 BvR 1368/16 and others, CETA (Judgment of 13 October 2016) para 66 et seqq.; Opinion 2/15, EUSFTA (Opinion of Advocate General Sharpston of 21 December 2016) para 570, regarding the Singapore Agreement. Mayer (2014), p. 10 et seq. assumed regarding CETA further Member State competences, which were affected by the specific agreements (EUSFTA or CETA); available at https://www.bmwi.de/Redaktion/DE/Downloads/CD/ceta-gutachten-einstufung-als-gemischtes-abkommen.pdf?__blob¼publicationFile&v¼4. 188 In support of a transfer to other free trade agreements with comparable provisions see, e.g., Ankersmit (2017); available at https://europeanlawblog.eu/2017/05/18/opinion-215-and thefuture-of-mixity-and-isds/; Mayr (2017), p. 246; Catrain et al. (2017), p. 8, in particular regarding Brexit; Van der Loo (2017), p. 6 according to whom the result of the EUSTFA Opinion applies also to the future EU-UK trade agreement unless it does not include different dispute settlement procedures; available at https://www.ceps.eu/system/files/PI2017-17Gvdl_SingaporeJudgement. pdf. On the contrary, Kleimann and Ku¨bek (2017) remain unsure; available at http://verfassungsblog.de/the-singapore-opinion-or-the-end-of-mixity-as-we-know-it/. Sceptical about a generalisation of the statements which the CJEU made on this in the EUSTFA Opinion: Thym (2017); available at http://verfassungsblog.de/mixity-after-opinion-215-judicial-confusion-over-sharedcompetences/ 189 Behrends et al. (2017), p. 37 et seqq.

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accordance with their competence (on the national or regional level), must approve the agreement. The EU and Member States together are contracting parties to the agreement—such as on the occasion of the EU-Ukraine Association Agreement190 or the Singapore Agreement (EUSFTA).191 Hence, a mixed agreement does not prove a turning towards European integration through intergovernmental cooperation. To overcome the problem that mixed agreements need to be ratified by the European Parliament and all parliaments of the Member States, it was suggested that parties could agree not to include this rule and allow for a limited number of EU Member States not to become a party or to join in at a later stage. Accordingly, whereas a full participation of all Member States could be phrased as an end goal, certain Member States could be given more time, for instance for domestic constitutional reasons. Obviously, this situation should be avoided as it runs counter to the legal as well as political aspects of consistency that are so central in the EU’s external relations. Therefore, a larger, perhaps informal, involvement of national parliaments on the objectives of the negotiations before the negotiating directives could be adopted by the Council, in particular if these dealt with a (presumed) mixed agreement. Together with the European Parliament, these national parliaments would then be provided with a possibility to debate the various aspects of new agreements and signal potential problems at an earlier stage.192 The European Commission has announced that it will not split trade agreements to avoid submitting them to national ratification.193 3.6.2.

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The Developmental Dimension of Free Trade Agreements

The African Caribbean Pacific (ACP) group, which has concluded an economic partnership agreement with the EU (Cotonou Agreement 2000194), can export its goods into the Union duty free and quota free, so without any restrictions. They can also import on more favourable terms the tools needed for the production of goods, such as machinery or components, an approach that is developmentally oriented. 190 The “Deep and Comprehensive Free Trade Agreement” is part of the broader EU-Ukraine Association Agreement. This Agreement, negotiated between 2007 and 2012, has in parts been provisionally applied since 2014, while the provisional application of the commercial part of the Association Agreement began on 1 January 2016. 191 See regarding the qualification of the Singapore Agreement as a “mixed agreement”, Opinion 2/15, EUSFTA (Opinion of Advocate General Sharpston of 21 December 2016) para 74, which inter alia points to the explanations of the Council in the oral negotiations; Opinion 2/15, EUSFTA (ECJ 16 May 2017) para 245, 282, 304, 305. 192 Van der Loo and Wessel (2017), p. 768 et seqq.; to the aspects of democratic legitimation of mixed agreements cf. also Schroeder (2019), p. 119. 193 See European Commission, The Opinion of the European Court of Justice on the EU-Singapore Free Trade Agreement and the Division of Competences in Trade Policy, Factsheet (September 2017). Available at http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156035.pdf 194 The “Cotonou Agreement” (with revisions in 2005 and 2010) is available at http://ec.europa.eu/ development/body/cotonou/pdf/agr01_en.pdf#zoom¼100

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But bilateral free trade agreements, which merely grant tariff freedom to certain partners, dilute the benefits of the preference systems. As tariffs are being replaced by stricter quality standards, which in fact have very similar effects on developing countries, all in all the problem of tariff escalation is only mitigated but not solved. It is ethically doubtful to impose a legal obligation on development countries in order to reduce or even eliminate import tariffs while, at the same time, importing subsidised agricultural products from the Union into their not yet competitive markets. In light of the different economic development standards in industrial nations and emerging countries, the overcoming of protectionism does not seem to be a universal advisable concept, but rather should be politically negotiable as part of the development policy.195 The Union is adapting its trade policy to the criticisms from science and civil society. In autumn 2015, the European Commission presented its new strategy “Trade for all”.196 The future-oriented strategy is based on a balanced and effective trade policy, which is founded upon values and sustainability principles. The criteria “values”, “transparency”, and “effectiveness” define the core of this concept. With a value-based trade policy, the Union aims to achieve an equilibrium between, on one hand, economic growth and, on the other hand, social justice, human rights standards,197 standards in the area of labour, health, and environment protection as well as security, the rule of law and good governance. To this end, the EU is intensifying its dialogue with development countries and incorporating anticorruption provisions in future trade agreements. That value-based approach may also include a future European mandatory due diligence legislation in the global supply chain.198

195 Pinzler (2015), p. 18 et seqq., 22 et seqq., 26 et seqq., 29 et seqq. The author points out that in the past decades the global trade volume has grown faster than the world economy. From 1993 until 2013, the growth of the trade volume averaged 5.3%, while the growth of the world economy was only half of it. The countries that export more could have tended to do a better deal than “the rest” (p. 20). Nevertheless, developing countries which in the last decades, radically and without government backing, implemented neoliberal recipes and abolished barriers to imports can be considered as losers in the duty free system (p. 23 et seq.). With this criticism Pinzler refers to E. Stiglitz, but also to P. Krugmann, who—although a confessing free trader—takes the liberty “to be a sceptic in the concrete case” (p. 19). 196 European Commission, Trade for all. Towards a more responsible trade and investment policy, p. 18 et seqq., 20 et seqq.; available at http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153846.pdf; with regard to the politicization of EU trade policy, cf. Leblond and VijuMiljusevic (2019). 197 Cf. Douma and van der Velde (2016), p. 104 et seqq. 198 See European Parliament (2020), Towards a mandatory EU system on due diligence for supply chains (Briefing).

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3.7. Solidarity with Overseas Countries and Development of Their Prosperity

The intention to reassert solidarity with the overseas (= non-European) countries and territories (as listed in Annex II to the TFEU)199 and to promote their prosperity stems from the responsibility of those Member States that at the time of the founding of the EEC still were colonial rulers.200 Even today, the OCTs are dependent territories, which are constitutionally part of a Member State and thus are not independent states, but often have autonomy in internal affairs (e.g., the collectivite´s d’outre-mer201). Their inhabitants are usually citizens of the Member State with which the country or territory is associated. Those entities that have the OCT status are not part of the European Union and therefore not included in the Schengen area, despite being dependencies of Schengen Member States. On the basis of the mandate laid down in the Preamble, the Member States agree to associate with the Union the non-European countries and territories that have special relations with Denmark, France, and the Netherlands (Article 198.1 first sentence TFEU)202 and also, since the third enlargement of the Community in 1986, with Spain and Portugal. Because of a corresponding vote by the population there, these OCTs remain administered by one of the aforementioned Member States. For the most part, these islands are far behind in development due to particularly unfavourable geographical or economical conditions. Therefore, the purpose of (constitutional) association shall be to promote the economic and social development of these countries and territories and to establish close economic relations between them and the Union as a whole (Article 198.2 TFEU). This association regime is to be distinguished from the legal situation in the nine outermost regions (OMRs), for which the TEU and TFEU are fully applicable (Article 355.1 TFEU) and for which the Council, by virtue of Article 349 TFEU, can adopt structuralpromoting measures. These measures are funded by the European Structural and Investment Funds (ESIF) and by special allocations from the European Regional Development Fund (ERDF). Under the “development aims”, which are legally binding for the overseas countries and territories, the development of the prosperity of the inhabitants has been from the outset a priority in the implementation of this intention codified

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In accordance with the Greenland Treaty (O.J. L 29/1 [1985]), Greenland, which became an autonomous constituent country of Denmark after the home rule referendum in 1979, was associated to the Union as one of the overseas countries and territories. Article 1 of Council Decision 2014/137, O.J. L 76/1 (2014), lays down rules concerning the relations between the Union on the one hand, and Greenland and Denmark on the other (the “partnership”). 200 Nettesheim (2018), § 40 para 54. 201 See Article 74 of the French Constitution. 202 Until its withdrawal from the Union at the end of January 2020 also the UK was one of these Member States.

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in the seventh recital (see also Article 198.3 TFEU203). With this objective, Member States shall apply the same treatment to their trade with the countries and territories as they accord each other pursuant to the Treaties. Another target listed among the objectives of the association (namely also investment promotion) is that each country or territory shall apply to its trade with Member States and with the OCTs the same treatment as that which it applies to the European state with which it has special relations (Article 199 no. 1 and no. 2 TFEU). Since the Treaty of Amsterdam, customs duties and charges having equivalent effect on imports into the Member States of goods originating in the countries and territories shall be prohibited in conformity with the prohibition of customs duties between Member States (Article 200.1 TFEU). Notwithstanding Article 200.2 TFEU, the Union grants as far as possible unilateral trade preferences to all originating products of the OCTs. By virtue of their association with the Union, the OCTs qualify for European Development Fund (EDF) resources.204 Pursuing the objectives set out for the OCTs, the association shall respect the fundamental principles of liberty, democracy, human rights and fundamental freedoms, the rule of law, good governance, and sustainable development.205 Based especially on Article 203 TFEU, the Council has adopted the “Overseas Association Decision”.206 Its core elements are the provisions on “cooperation for sustainable development” and “trade related cooperation” (Parts 2 and 3). They mark the focus of cooperation in the area of development policy (Article 5.3 in conjunction with Article 5.2 of the Overseas Association Decision). The Union undertakes to safeguard these interests of the OCTs under the principles of the United Nations.207 In accordance with Article 73 UNC, “Members of the United Nations which have [. . .] responsibilities for the administration of territories whose people have not attained a full measure of self-government recognize that the interests of the inhabitants of these territories are paramount, and accept [. . .] the obligation to promote to the utmost, within the system of international peace [Article 2 point 3 and point 4 UNC] and security [Chapters VI and VII UNC] [. . .], the well-being of the inhabitants [. . .]”. Besides, the Union commits, namely, to the protection of the inhabitants against abuses, respect for the culture of the peoples (Article 73 point (a) UNC), and the development of a self-government in the sense of an unlimited self-determination of the inhabitants (Article 73 point

Article 198.3 TFEU states: “[. . .] association shall serve primarily to further the interests and prosperity of the inhabitants of these countries and territories in order to lead them to the economic, social and cultural development to which they aspire.” 204 See the contributions by Goldner Lang and Perisˇin (2011), p. 179 et seqq., as well as by Tryfonidou (2011), p. 221 et seqq. 205 Cf. Article 3.3 of the Council “Overseas Association Decision” 2013/755/EU (O.J. L 344/1 [2013]). 206 Council Decision 2013/755/EU of 25 November 2013 on the association of the overseas countries and territories with the European Union, O.J. L 344/1 (2013); see Goldner Lang and Perisˇin (2011), p. 194 et seqq. 207 Cf. Fisch (1984), p. 482 et seq. 203

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(b) UNC). With regard to the last mentioned obligation, Article 5.3 of the Overseas Association Decision formulates first and foremost that the “operation in the areas of mutual interest aims at the promotion of OCTs self-reliance”. An overseas territory or country can declare its independence or leave the association (arg.: Article 97 points (a) and (b) of the Overseas Association Decision). By closely adhering to the UN’s development goals, the Union not only fulfils its obligations under international law but also emphasises the political relationship between regional and global integration.208

3.8. Preserving and Strengthening Peace and Liberty

The determination of the Contracting Parties to a “pooling [of] their resources to preserve and strengthen peace and liberty”, as laid down in the eight recital, proves that already in 1957 they strived for more than just economic purposes and also recognised their historic task in securing peace and freedom in Europe (➔ para 7, 20, 35 et seq.). H. P. Ipsen, however, doubted that “European integration can contribute to world peace”. At the beginning of the 1970s, this was in his opinion “beyond its competences”.209 Given the required interpretation of the TFEU Preamble in its interrelationship with the TEU Preamble and the CFSP, as set out in the TEU, this scepticism has lost its relevance. The pooling of the human and economic “resources” of the Member States shall serve to pursue this existential political goal. Thereby, the States Parties call for “the other peoples of Europe who share their ideal” to “join in their efforts”. This wording seems to invite a dialogue and cooperation with European states outside the Community (in the fifties of the last century, particularly addressed to the peoples behind the Iron Curtain), but, as a final consequence, it could likewise be seen as an indication to keep their ability in order to have access or even accede to the Union.210 Above all, the States Parties emphasise their conviction that the Union is not to be equated with Europe.211 The “Europe of 47”, which includes 820 million citizens (2019), is committed to common values within the Council of Europe. The members of this almost panEuropean organisation commit themselves in its statute to “accept the principles of the rule of law and of the enjoyment by all persons within its jurisdiction of human rights and fundamental freedoms [. . .]” (Article 3). Thus, they aim “to achieve greater unity between [. . .] [them] for the purpose of safeguarding and realising the ideals and principles which are their common heritage and facilitating their economic and social progress” (Article 1). They all have ratified the Convention for the 208

Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 25 (released in 2010); Streinz, in Streinz (2018), AEUV Pra¨ambel para 8. 209 Ipsen (1972), p. 989. 210 Ha¨de, in in Pechstein et al. (2017), AEUV Pra¨ambel para 25. 211 Cf. Isensee, in Kirchhof et al. (1994), p. 120, who with regard to the rise of the European Community after the Second World War is critical on the fact that “‘Europe’ became a synonym for the organised European Community”.

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Protection of Human Rights and Fundamental Freedoms, which in the European network of fundamental rights (Article 6.2 and Article 6.3 TEU) guarantees a minimum protection of human rights and at the same time, especially by means of individual applications (Article 34 ECHR), an effective legal protection by the ECtHR. That Convention is the oldest evidence of Europe’s development into a community of values and fundamental rights.212

3.9. Development of the Highest Possible Level of Knowledge

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It was not until the Treaty of Amsterdam that the ninth recital was added to the Preamble to the EC, proclaiming the objective of the Contracting States to be an “Education and Knowledge Union”.213 Consequently, the sixth recital in the Preamble to the TEU expresses, in conformity with the political aim of the Union, the determination to support cooperation among the Member States in setting up an Education and Culture Community (Article 6 points (c) and (e) TFEU). This creates the need to respect the national and regional diversity of the European peoples and their Member States, that means their cultural traditions and heritage, and at the same time “[to bring] the common cultural heritage to the fore” (Article 167.1 TFEU in conjunction with Article 3.3 (4) TEU). Education and vocational training as well as the promotion of a “knowledge society” are basic preconditions for the prosperity of the Member States and their international competitiveness.214 Given the far-reaching consequences of education for the individuals, the nations involved, and the promotion of scientific and technological advance (Article 3.3 (1) second sentence TEU and Article 4.3 TFEU), supporting measures of the Union in this area seek to strengthen the “social cultural and scientific cohesion” of the Union and between the Union citizens, without which the internal market and the economic and monetary union are not sustainable.215 But the Contracting States do not seek to harmonise the content or organisation of national education systems.216 The Union proclaims the aim to give access to education to all Union citizens (“for their people”) according to their individual interests (“wide access”) and promoting at the same time lifelong learning (“continuous updating”).217 Yet the Member States provide their national education systems as “vehicles” to promoting the “common cultural heritage”.218 The right to education is explicitly enshrined 212

Cf. European Union Agency of Fundamental Rights (2013), p. 7 et seqq.; see also Blanke (2012a), p. 159 et seqq. 213 Blanke (1994), p. 65 et seqq. 214 Streinz, in Streinz (2018), AEUV Pra¨ambel para 4. 215 Blanke, in Grabitz et al. (2020), Artikel 165 AEUV para 1 (released in 2020). 216 Blanke, in Grabitz et al. (2020), Artikel 165 AEUV para 1 (released in 2020). 217 Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 27 (released in 2010). 218 Blanke, in Grabitz et al. (2020), Artikel 165 AEUV para 7 (released in 2020).

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in the European system of human rights protection in Article 2 of the first Additional Protocol to the ECHR and also laid down in Article 14 EUCFR. It guarantees—similar to Article 10 of the European Social Charter—a right to education and to have access to vocational and continuing training. Access to education is subject to the prohibition of discrimination, which finds its equivalent in the requirement of national equal treatment. Accordingly, under the same conditions, citizens of other MS have the same right to access educational institutions and activities as nationals. At an exposed position, the Preamble retraces the incorporation of the policy area “Education and vocational Training” in the EU Treaties (Article 165 and Article 166 TFEU). Its codification, first in the Maastricht Treaty, was the result of a settled case law of the CJEU broadening the competence of the Community in this field.219 Also as a consequence of the numerous CJEU decisions on freedom of movement and non-discrimination in education,220 the Union is competent “to carry out actions to support, coordinate or supplement the actions of the Member States” (Article 6 TFEU). Although this type of competence conveys relatively few powers to the Union, the measures that build upon it can have a considerable impact on the Member States’ education systems.221

List of Cases ECJ

ECJ 05.02.1963, 26/62, van Gend & Loos, ECLI:EU:C:1963:1 [cit. in para 12] ECJ 15.07.1964, 6/64, Costa v ENEL, ECLI:EU:C:1964:66 [cit. in para 3] ECJ 13.07.1966, 56 and 58/64, ConstenS.a`.R.L. and Grundig-Verkaufs-GmbH, ECLI:EU:C:1966:41 [cit. in para 30] ECJ 08.04.1976, 43/75, Defrenne v Sabena, ECLI:EU:C:1976:56 [cit. in para 10] ECJ 26.06.1980, 136/79, National Panasonic (UK), ECLI:EU:C:1980:169 [cit. in para 20] ECJ 17.09.1980, 730/79, Philip Morris, ECLI:EU:C:1980:209 [cit. in para 17] ECJ 23.04.1986, 294/83, Les Verts v Parliament, ECLI:EU:C:1986:166 [cit. in para 23] ECJ 18.10.1989, 374/87, Orkem, ECLI:EU:C:1989:387 [cit. in para 19] ECJ 14.01.1997, C-169/95, Spain v Commission, ECLI:EU:C:1997:10 [cit. in para 20] ECJ 16.06.2005, C-105/03, Maria Pupino, ECLI:EU:C:2005:386 [cit. in para 36] ECJ 18.12.2014, Opinion 2/13, Accession of the EU to the ECHR, ECLI:EU: C:2014:2454 [cit. in para 167] 219

Blanke, in Grabitz et al. (2020), Artikel 165 AEUV para 36 et seqq. (released in 2020). Blanke (1994), p. 41 et seqq., 52 et seqq. 221 Nettesheim, in Grabitz et al. (2020), AEUV Pra¨ambel para 27 (released in 2010). 220

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ECJ 16.05.2017, Opinion 2/15, EUSFTA, ECLI:EU:C:2017:376 [cit. in para 28 et seqq.; 245; 282; 304; 305]

Opinions of the Advocate General

Opinion of Advocate General Kokott 03.02.2011, C-403/08 and C-429/08, Football Association Premier League & Karen Murphy, ECLI:EU:C:2011:43 [cit. in para 29] Opinion of Advocate General Sharpston 21.12.2016, Opinion 2/15, EUSFTA, ECLI:EU:C:2016:992 [cit. in para 74, 570]

German Federal Constitutional Court (Bundesverfassungsgericht)

German Federal Constitutional Court 30.6.2009, 2 BvE 2/08, 2 BvR 1022/08, 2 BvR 1010/08, 2 BvR 1022/08, 2 BvR 1259/08, 2 BvR 182/09, Lisbon German Federal Constitutional Court 13.10.2016, 2 BvR 1368/16, 2 BvR 1444/16, 2 BvR 1482/16, 2 BvR 1823/16, 2 BvE 3/16, CETA German Federal Constitutional Court 05.05.2020, 2 BvR 859/15, 2 BvR 1651/15, 2 BvR 2006/15, 2 BvR 980/16, PSPP (cited in para 111, 157) Retrieved from https://www.bundesverfassungsgericht.de/EN/Homepage/home_node.html

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Schuelken, T. (2018). Der Schutz kritischer Infrastrukturen vor ausla¨ndischen Direktinvestitionen in der Europa¨ischen Union. Zum Vorschlag der EU Kommission fu¨r eine Verordnung zur ¨ berpru¨fung ausla¨ndischer Direktinvestitionen – KOM Schaffung eines Rahmens fu¨r die U (2017) 487 endg. Europarecht, 53(5), 571–586. Sommermann, K.-P. (2013). Integrationsgrenzen des Grundgesetzes. Brauchen wir eine neue Verfassung? Die O¨ffentliche Verwaltung, 66(18), 708–714. Sommermann, K.-P. (2014). The theory of “Essential National Policies” in the Lisbon Judgment of the German Federal Constitutional Court. In T. Giegerich, O. J. Gstrein, & S. Zeitzmann (Eds.), The EU between ‘an ever closer Union’ and inalienable policy domains of member states (pp. 43–58). Baden-Baden: Nomos. Streinz, R. (Ed.). (2018). EUV/AEUV. Vertrag u¨ber die Europa¨ische Union und Vertrag u¨ber die Arbeitsweise der Europa¨ischen Union (3rd ed.). Munich: C. H. Beck. Sturm, R. (2004). Perspektiven des Staates im 21. Jahrhundert. In A. Gallus & E. Jesse (Eds.), Staatsformen. Modelle politischer Ordnung von der Antike bis zur Gegenwart (pp. 371–399). Bo¨hlau-Verlag: Wien. Thym, D. (2017). Mixity after Opinion 2/15. Judicial Confusion over Shared Competences. Verfassungsblog of 31.5.2017. Retrieved from http://verfassungsblog.de/mixity-after-opinion-215-judicial-confusion-over-shared-competences/ Tietje, C. (2007). Beschra¨nkungen ausla¨ndischer Unternehmensbeteiligungen zum Schutz vor “Staatsfonds” – Rechtliche Grenzen eines neuen Investitionsprotektionismus. Policy Papers on Transnational Economic Law, 26(12), 1–9. Tryfonidou, A. (2011). The overseas application of the customs duties provisions of the TFEU. In D. Kochenov (Ed.), EU law of the overseas. Outermost regions, associated overseas countries and territories, Territories Sui Generis (pp. 221–244). Alphen aan den Rijn: Wolters Kluwer. Van der Loo, G. (2017). The Court’s Opinion on the EU-Singapore FTA: Throwing off the shackles of mixity? Policy Insights, 2017(17). Brussels: Centre for European Politics (CEPS). Retrieved from https://www.ceps.eu/wp-content/uploads/2017/05/PI201717Gvdl_SingaporeJudgement.pdf Van der Loo, G., & Wessel, R. A. (2017). The non-ratification of mixed agreements: Legal consequences and solutions. Common Market Law Review, 54(3), 735–770. Vedder, C., & Heintschel von Heinegg, W. (Eds.). (2018). Europa¨isches Unionsrecht. EUV – AEUV – GRCh – EAGV. Handkommentar. Baden-Baden: Nomos. von Coudenhove-Kalergi, R. N. (1923). Paneuropa. Wien: Pan-Europa-Verlag. von Coudenhove-Kalergi, R. N. (1929). Die Schweiz als Vorbild. Paneuropa, 5(10), 1–5. von Coudenhove-Kalergi, R. N. (1950). Speech at the award ceremony for the Charlemagne Prize 1950. Municipality of Aachen. Retrieved from http://www.karlspreis.de/de/preistraeger/ richard-nikolaus-graf-coudenhove-kalergi-1950/rede-von-richard-nikolaus-graf-coudehovekalergi von der Groeben, H., Schwarze, J., & Hatje, A. (Eds.). (2015). Europa¨isches Unionsrecht. Vertrag u¨ber die Europa¨ische Union – Vertrag u¨ber die Arbeitsweise der Europa¨ischen Union - Charta der Grundrechte der Europa¨ischen Union Kommentar (7th ed.). Baden-Baden: Nomos. Waltz, K. N. (1979). Theory of international politics. Reading et al.: Addison-Wesley.

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Part One Principles

Article 1 [Functioning of the Union, Treaties Same Value] 1. This Treaty43-54 organises the functioning of the Union1, 3, 61 and determines the areas of, delimitation of, and arrangements for exercising its competences.4-21 2. This Treaty and the Treaty on European Union constitute the Treaties on which the Union is founded.42-96 These two Treaties, which have the same legal value,60-62 shall be referred to as ‘the Treaties’.

Contents 1. 2.

Genesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Bases of the Functioning of the Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.1. Competences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.1.1. Written Competences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.1.2. Implied Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.1.3. A Competence of the Union to Decide on Its Own Competence? . . . . . . . . . 11 2.2. Delimitation of Competences Between Union and Member States . . . . . . . . . . . . . . . . 15 2.3. The Principles of Institutional Balance and Separation of Powers . . . . . . . . . . . . . . . . . 17 2.4. Forms of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.5. Legislative Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.5.1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.5.2. Binding Force of the Rules of Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2.5.3. Interinstitutional Trilogue Procedures in an Informal Framework . . . . . . . . . 39 3. The Treaties as the Basis of the Union (para 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 3.1. Legal Nature of the Treaties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 3.2. Constitutional Quality of the Treaties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 3.3. Primary Law and Secondary Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 3.3.1. Unwritten Primary Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 3.3.2. The Relationship Between TEU and TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 4. Structure of the Union and Characteristics of Union Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 4.1. The Union as an Association of Sovereign States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 4.2. Characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 4.3. Validity and Autonomy of Union Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 4.4. Direct Applicability and Effect of Union Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 4.5. Primacy of Union Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 4.5.1. Meaning and Justification of the Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 4.5.2. Cases of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 4.5.3. Primacy Over Legislative and Sub-Legislative Acts of the Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 4.5.4. Primacy Over National Constitutional Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 4.5.5. Legal Consequences of the Rule of Primacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 5. Union Law and Public International Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 5.1. The Rank of International Public Law Within the Union Law and Its Direct Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 5.2. Conclusion of Treaties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 5.3. International Treaties Within the Union and Supplementary International Law of the Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 List of Cases References #

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Genesis

Following the failure of the Constitutional Treaty, the Council recommended implementing the substantive aspects of that Treaty by amending the existing ones.1 The Treaty on European Union was to be preserved, and the EC-Treaty renamed “Treaty on the Functioning of the European Union”.2 In the Treaty of Lisbon, Article 1 was created ex novo as an entry rule to the Treaty on the Functioning of the European Union. Neither on the EEC Treaty (1957) nor on the EC Treaty (1992) it was necessary to draft a provision which defines the “functioning of the Community/Union” and emphasises the equal legal value of the Treaties. For the authors of the Lisbon Treaty, this requirement arose from the fact that the former three communities stood side-by-side (“pillar structure”), each based on a specific treaty.3 During the validity of the previous Treaties, it was also not necessary to summarise the contents of a treaty in an introductory provision, in particular because the topos “functioning” is a term used to identify, “the areas of delimitation of, and arrangements for exercising its competences” as the core contents of TFEU which was developed out of the EEC/EC Treaty. Article 1 of the previous Treaties regulated the establishment of the EEC or the EC by the Member States.4 Since the functional succession of the “new” Union regarding the competences of the former European Community (➔ Article 1 TEU para 79), this “Founding Article” has been set out at the top of the Lisbon Reform Treaty, i.e. in Article 1 TEU (➔ Article 1 TEU para 3).

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Part One Principles

Bases of the Functioning of the Union

The purpose of the Treaty is to “[organise] the functioning of the Union”.5 “Functioning” in this context means the way the Union “functions” concerning the exercise of its competences by its organs; this is crucial to the quality and scope of the EU’s competences.

1

Rabe (2007), p. 3154. Council Presidency Conclusion No. 11177/1/07 (2007), Annex 1 para 2; Article 2.1 of the Lisbon Treaty. 3 Cf. Piris (2010), p. 67; see also Obwexer (2009), p. 106. 4 Cf. Article 1 of the EEC Treaty, Article 1 of the EC Treaty. 5 That is the wording of Article 1.1 TFEU (“This Treaty organises the functioning of the Union [. . .]”). 2

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2.1. Competences

Under the principle of conferral (➔ Article 1 TEU para 20–23; Article 5 TEU para 5–6), the Union shall act only within the limits of the competences conferred upon it by the Member States. As the Union has been established by the Member States,6 and its competences are derived from those States, in principle, it cannot have powers that have not been assigned to it.7 This is reflected in the Union’s constitutional reality. Under Article 48 TFEU, amendments to the Treaties require a ratification act of all Member States. The German Federal Constitutional Court, in the judgment on the constitutional complaints about the Treaty of Lisbon, takes a sovereignty-centred view on the German ratification act and refers in this respect to the Member States as “masters of the Treaties”.8 Under the Treaties in force, there is no legitimation of the Union to decide on its own competence, i.e. on the socalled “competence-competence”. A blanket empowerment for the exercise of public authority, in particular one that has a direct binding effect on the national legal system, may not be granted by the national constitutional bodies.9 Rather, the principle of conferral was confirmed by including it in Article 7 TFEU.10 The competences are listed in the Treaties (TEU and TFEU) and can be divided into written and implied competences.

6

See Article 1.1 TEU. Piris (2010), p. 83. 8 German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 231—established case law; most recently German Federal Constitutional Court, 2 BvR 859/ 15 and others, Public Sector Asset Purchase Programme—PSPP (Judgment of 5 May 2020) para 111, 157. In the opinion of Nettesheim, in Grabitz et al. (2020), Article 1 AEUV para 19 (released in 2012), this formula is too undifferentiated because the competence of amending the EU Treaties lies “in joint connection with the Union’s organs and the Member States”. These and other formulas emphasise the role of the German Federal Constitutional Court as the “exclusive protector” of “the shell of national sovereignty”; cf. also Huber (2001) who sees in this quality of the Member States the necessary precondition for “securing the constitutional functions in the EU”. See on the other hand the (ironical) remarks by Häberle and Kotzur (2016), para 368, 412, 1235, 1258, on the idea of the “sovereignty believers” as regards the ascribed capacity of the Member States to be “masters of the Treaties”. Overall, Parts I and II. 3 of the manual of Häberle and Kotzur (2016, para 1235 et seqq., 1252) contain a reckoning with the “old state-dominated sovereignty ideology” in which, in the view of the authors, the Federal Constitutional Court gets entangled in the judgment on the Lisbon Treaty. Critically also: Franzius (2010), p. 28, 34 et seq., with reference to Oeter according to whom the metaphor of the “masters of the Treaties”, taken from the German Empire, “confirms the impression of the return of the undead from the theories of the 19th century”; Mangiameli (2017), p. 141 et seqq., 166, who defines the relationship between Union and Member States, along the lines of a federal model, in terms of the “shared” or “dual Sovereignty”. 9 German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 236 on the German Constitution. 10 Obwexer (2009), p. 100; see also Article 2.13 TEU. 7

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2.1.1. 5

Written Competences

The different categories of competences are listed and defined in Article 2 TFEU; however, the specific scope of each Union’s competence derives from the Treaties’ provisions regarding the individual policy areas (Article 6.6 TFEU). Oriented to federal catalogues of competences, Articles 3 to 6 TFEU allocate in a conclusive (enumerative) manner the policy areas in which the Union is active, under the specific Treaties’ provisions, to the different types of competences. They are divided into exclusive (Articles 2.1 and 3 TFEU), shared (Articles 2.2 and 4 TFEU), coordinating (Articles 2.3 and 5 TFEU) as well as supporting and supplementing (Articles 2.5 (1) and 6 TFEU) competences. Although codified in the TEU (Article 24.1 TEU), and to be differentiated from the supranational instruments laid down in the TFEU, the sui-generis-competences in the area of the CFSP, including the gradual framing of a common defence policy (Article 42.2 (1) TFEU), complete these competences. The latter authorises the Union to “define and implement” (Article 2.4 TFEU) a common defence policy (Article 42.2 (1) TEU). The functional scope of this policy area is set out in Articles 21–46 TEU.11 2.1.2.

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Part One Principles

Implied Powers

The Union also uses so-called implied powers. Under this doctrine,12 a federal state or a supranational organisation has the competence to effectively perform the tasks assigned to it if from the perspective of a teleological interpretation (effet utile13) of explicitly assigned competences results that an implied power of the “Federation” is needed. Thus, the Court of Justice holds that “the rules laid down by an international treaty or a law presuppose the other rules without which that treaty or law would have no meaning or could not reasonably and usefully be applied.”14 In particular, the theory of implied powers was used to justify why the former European Community had the competence to conclude international treaties in

11

Cf. Eilmansberger (2009), p. 195; on this classification of the competences, cf. also Folz (2009), p. 67 et seq. 12 In McCulloch v Maryland (17 U.S. 316 [1819]), a landmark decision on the American federalism, the U.S. Supreme Court under its Chief Justice John Marshall has set forth that Congress as a federal organ, in addition to the explicit competences enumerated in the constitution, has also implied powers which are necessary for the realisation of explicit competences (in the sense of the “necessary and proper clause” under Article 1 Section 8 of the American Constitution of 1788). Since then, this method has been understood as a special kind of teleological interpretation of federal constitutions (interpretation according to the meaning and purpose of the norm). Cf. also ICJ, Reparation for Injuries Suffered in the Service of the United Nations (Advisory Opinion of 11 April 1949), ICJ Reports 1949, p. 174 (182 et seqq.). 13 See Article 31.1 of the Vienna Convention on the Law of Treaties, which states that “a treaty shall be interpreted [. . .] in the light of its object and purpose”. 14 Case 8/55, Fédération Charbonnière de Belgique v High Authority of the European Coal and Steal Community (ECJ 29 November 1956) p. 292 (headnote 2).

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areas in which it had mere internal competences.15 According to some scholars, the clear division of competences between the Union and the Member States provided by the Treaty of Lissbon in Article 2 et seqq. TFEU renders it questionable whether this doctrine can still be applied to the Union.16 However, the German Federal Constitutional Court has designated the implied powers as well as the effet-utile-principle as elements of the process of the Union’s institutions “to form independent opinions” and as part of the “mandate of integration called for by the Basic Law”.17 The integration clauses of the other Member State constitutions can be interpreted accordingly. The principle of the effectiveness of Union law contributes to the development and implementation of this normative programme, in particular for the benefit of the citizens as the holders of subjective rights.18 At the same time, the judges have drawn constitutional limits to the rules of interpretation that extend the competences of the Union, such as the principle of effet utile or the implicit rounding of transferred competences. The judges see the danger that these principles could degenerate into a “blanket empowerment” and the organs of the supranational Community therefore exceed “the predetermined integration programme” and act beyond the powers granted to them. According to this view, the principle of conferral corresponds to a “conceptual responsibility for integration incumbent upon Member States”,19 in particular “for safeguarding the principle of democracy”.20 The German Federal Constitutional Court recognises a “special responsibility” of the federal government and the legislative bodies in the context of Germany’s participation in the European integration process, “which has to comply internally with the requirements under Article 23.1 of the Basic Law”.21 In the transfer of sovereign powers and the elaboration of the European decision-making procedures, “it is aimed at ensuring that, seen overall, the political system of the Federal Republic of Germany as well as that of the European Union comply with democratic principles within the 15

Eeckhout (2012); Jacqué (2018), para 240; see as well Case 22/70, Commission v Council (ECJ 31 March 1971); Case 3, 4 and 6/76 Cornelis Kramer and Others (ECJ 14 July 1976). 16 Jacqué (2018), para 241. 17 German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 237—emphasis added. 18 Snyder (1993), p. 19. 19 German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 238—emphasis added. 20 See German Federal Constitutional Court, 2 BvR 859/15 and others, Public Sector Asset Purchase Programme—PSPP (Judgment of 5 May 2020) para. 158: “The principle of conferral is not solely a principle of EU law but also incorporates constitutional principles from the Member States. [. . .] For safeguarding the principle of democracy, it is thus imperative that the bases for the division of competences in the European Union be respected. The finality of the European integration agenda (Integrationsprogramm) must not lead to the de facto suspension or undermining of the principle of conferral, one of the fundamental principles of the European Union [. . .].” 21 German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 236.

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meaning of Article 20.1 and 20.2 in conjunction with Article 79.3 of the Basic Law”.22 The German Court sees “a risk of transgression of the constitutive principle of conferral and of the conceptual responsibility for integration [. . .] without any outside control, however restrained and exceptional, how treaty law is to be interpreted.”23 Thus, the Court locates the integration responsibility in the sufficient precision of the integration programme and therefore the ensuring of the principle of conferral. In view of this limitation of the concept of the transfer of sovereign rights, its defensive character and the absence of integration-oriented impetus have been criticised.24 In the form of the flexibility clause of Article 352 TFEU, the Treaty contains an explicit provision on implied powers. That provision enables the Union to act even beyond the competences enumerated in Articles 3–6 TFEU. Such an approach is strictly bound to the requirements set out in Article 352 TFEU. Action by the Union is only permitted if it is necessary “within the framework of the policies defined in the Treaties, to attain one of the objectives set out in the Treaties”. Moreover, a unanimous decision of the Council is required (➔ para 14). Although the Council is an organ of the Union, its members are representatives of the States, so that each Member State, through its representative, can prevent Union action outside its written competences.25 However, the German Constitutional Court sees the danger of an “indefinite nature of future application of the flexibility clause” in this “targeted” authorisation,26 and established—especially with a view to the often applied predecessor clause of Article 352 TFEU, Article 308 ECT, in the history of the European Integration—a particular rigid constitutional limitation to the positioning of the German representative in the Council of the European Union. Under Section 8 of the Responsibility for Integration Act,27 the approval or abstention of the German

22

German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 245. 23 German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 238—emphasis added. 24 Calliess (2010), p. 260 et seq.; Classen (2009), p. 883, 886. 25 That corresponds to the request of the German Federal Constitutional Court according to which the German representative may approve a decision or abstain from it in such a case only after the approval of a parliamentary law; see German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 325–328, 417. 26 See German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 328. 27 See Act on the exercise by the Bundestag and by the Bundesrat of their responsibility for integration in matters concerning the European Union Law (Responsibility for Integration Act) of 22 November 2009, BGBl. I, p. 3822, as amended by Article 1 of the Act of 1 December 2009, BGBl. I, p. 3822. Sect. 8 of that Act reads as follows: “The German representative in the Council may approve a decision on the adoption of measures within the meaning of Article 352 of the Treaty on the Functioning of the European Union or abstain from voting on such a decision only after a law to that effect as defined in Article 23(1) of the Basic Law has entered into force. In the

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representative requires the prior adoption of a national law (which under the second sentence of Article 23.1 of the Basic Law is subject to the provisions of paragraphs 2 and 3 of Article 79 of the Basic Law) when it comes to legislative acts based on Article 352 TFEU. Therefore, the German representative in the Council may not express formal approval on behalf of the Federal Republic of Germany of a corresponding law-making proposal of the Commission as long as these constitutionally required preconditions are not met.28 2.1.3.

A Competence of the Union to Decide on Its Own Competence?

In principle, the Union is not authorised to unilaterally expand the catalogue of competences fixed in the Treaties. The principle of conferral (➔ Article 5 TEU para 5 et seq.) prohibits it from claiming powers which are not listed enumeratively in the Union’s catalogue of competences. Thus, in the words of the German Federal Constitutional Court, it does not have the competence to decide on its own competence (Kompetenz-Kompetenz). In a formal sense, the Kompetenz-Kompetenz is the “authorization to make a binding (pre-)decision as to whether the claimed competence exists and what the limits are.”29 In view of the contrary position taken by the Member States on such a comprehensive responsibility of the Union, the Court, in its judgment on the Maastricht Treaty, has clearly pointed out its position in this conflict on the “Judicial Kompetenz-Kompetenz”.30 Accordingly, it considers that parameter to be the insurmountable boundary set to the exercise of competences by the Union, and confirmed this interpretation of the principle of conferral in the judgment on the Lisbon Treaty concerning various provisions of that Treaty.31 The international treaties on which the Union is based (➔ para 42 et seqq.) are not merely the mode of establishing the legal basis for its acting. This contractual basis, unlike the legal basis of a federal state, does not subsequently come to be controlled by the European Union. The Member States have the responsibility for the revision or amendment of the Treaties.32 Hence, one can admittedly say that the sovereignty

absence of such a law, the German representative in the Council must reject the proposal for a decision.”; available at https://www.gesetze-im-internet.de/englisch_intvg/englisch_intvg.html. 28 See German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 328. 29 Lerche (1995), p. 424, who refers to Schmitt (2008/1928), p. 380 et seqq. 30 On this term, see Weiler (1995), p. 1652. On the issue of ultra-vires conflicts between courts in multilevel systems, see Mayer (2000), p. 19 et seqq., who criticises the term of “Judicial Kompetenz-Kompetenz” (p. 28 et seqq.). 31 German Federal Constitutional Court, 2 BvR 2134/92, 2 BvR 2159/92, Maastricht (Judgment of 12 October 1993) para 125 (BVerfGE 89, 155 [195 et seq.]); German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (30 June 2009) para 233, 239, 322, 324, 328 and 332; on the ECTreaty see v. Bogdandy and Bast (2010b), p. 300. 32 Grimm (2016), p. 153.

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of the Member States continues to exist.33 This finding is clearly reflected also in Article 88-1 of the French Constitution, which states that the Member States “have freely chosen to exercise some of their powers in common”.34 Any deviating action by the Union has to be considered as being. Nonetheless, on the wording Kompetenz-Kompetenz, it is doubted whether it is an instructive and illustrative approach to transpose to the Union, as this concept of the constitutional theory characterised the constitution of the German Reich (1871) as a synthesis of federal and unitary state structures.35 A transfer of further competences to the Union is therefore only possible through a Treaty revision. Two procedures are available: first, the ordinary revision procedure (➔ Article 48 TEU para 31 et seqq.) and second the simplified revision procedures (➔ Article 48 TEU para 43 et seqq.). Under Article 48.4 (2) TEU, the amendments made under the ordinary revision procedure shall be ratified by all Member States (➔ Article 48 TEU para 36). Each Member State can freely decide whether to support these amendments. Under the provisions on the simplified revision procedure in Article 48.6 (2) sentence 3 TEU, amendments regarding the internal policies of the EU also require unanimity of all Member States (➔ Article 48 TEU para 44 et seq.). As a part of the simplified revision procedure, Article 48.7 TEU provides for the so-called “bridging clauses”, which are also referred to as passarelles (➔ Article 48 TEU para 47 et seqq.).36 However, additional competences cannot be transferred to the Union using passarelles, but only voting procedures can be amended. Even then, unanimity in the Council is necessary, so that each Member State can prevent its influence from diminishing. On bridging clauses, the German Federal Constitutional Court also ruled that the German representative in the European Council may consent to or abstain from a legislative draft only after a previous legal authorisation by the German legislative bodies. Without such a law, established under Article 23.1 of the Basic Law, the German representative in the European Council must reject such a proposal.37

33 Sovereignty and Kompetenz-Kompetenz are different concepts that should be distinguished; see Schmitt (1928), p. 102 et seq.; Lerche (1995), p. 419 et seqq.; Mayer (2000), p. 29. 34 The original text in French reads as follows: “La République participe à l’Union européenne constituée d’États qui ont choisi librement d’exercer en commun certaines de leurs compétences en vertu du traité sur l’Union européenne et du traité sur le fonctionnement de l’Union européenne, tels qu’ils résultent du traité signé à Lisbonne le 13 décembre 2007.” [“The Republic shall participate in the European Union constituted by States which have freely chosen to exercise some of their powers in common by virtue of the Treaty on European Union and of the Treaty on the Functioning of the European Union, as they result from the treaty signed in Lisbon on 13 December 2007.”]. 35 On the “Kompetenz-Kompetenz”, see Schmitt (1928), p. 102 et seq., 386 et seq., who distinguishes this concept from sovereignty; for criticism, cf. Lerche (1995), p. 414; Oeter (2010), p. 68. 36 Cf. Piris (2010), p. 104. 37 German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 316–319; Blanke (2017), p. 377 et seq. Cf. Sect. 4 of the German Responsibility for Integration Act, which is based on this judgment (above footnote 26). See also Sects. 5 and 6 of that Act that require a mere “resolution” of the German Bundestag in the case of a decision on a

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Consequently, there is no apparent intention on the part of Member States to give the Union a mandate for self-empowerment. Therefore, the Union continues to have no legal power to gain further competences through a broad interpretation of the flexibility clause by its legislative bodies.38 This would be incompatible with the ratio of the Treaties. In the context of a revision of the Treaties, the final decisionmaking authority on the transfer of additional powers to the Union rests with the Member States as the founders of the Community/Union (➔ Article 1 TEU para 4– 6). This is a role they still claim to, although it is increasingly vanishing due to the growing international interdependence.39

2.2. Delimitation of Competences Between Union and Member States

To act lawfully, it is not sufficient that the Union respects the limits of its competences and does not transgress the boundaries of the integration programme; rather, it must comply with the correct procedures (➔ para 30 et seqq.) and apply the correct instruments (➔ para 22 et seqq.). As there are specific legislative procedures in certain areas (Article 289.2 TFEU), it is important to examine the exact basis for a legal measure. First, by applying a Union competence, it is necessary to clarify if its scope authorises the Union’s intended action. If there are overlaps with (competing) Member State competences or other competences of the Union, which are mutually applicable, it is clarified by means of the doctrine about conflicts of laws or rules, in particular the principles of specialty and subsidiarity, on which competence a measure may rely.40 If, concerning the relevant basis of competence, overlaps are still evident, it is necessary to examine whether the measure of the Union is separable content-wise and special parts can be based on a relevant legal provision. Otherwise, it has to be decided according to conflict rules which norm should be considered the legal basis.41 Concerning, these conflict rules, the CJEU has stated that the Union must base the choice of legal basis on “objective factors which are amenable to judicial review”.42 Under the so-called “doctrine of the main or predominant purpose or component” of a Union measure, a legal act must rely on a competence according proposal to be adopted based on the special bridging clauses in the European Council (Sect. 5) or in the Council (Sect. 6). 38 Cf. to such concerns Craig (2010), p. 183. 39 This is the reason for Häberle’s and Kotzur’s criticism of the formula “masters of the Treaties”, used by the Federal Constitutional Court concerning the Member States; see Häberle and Kotzur (2016), para 368, 412, 1235, 1258; see already above footnote 8. 40 Nettesheim, in Grabitz et al. (2020), Article 1 AEUV para 22 (released in 2012). 41 Nettesheim, in Grabitz et al. (2020), Article 1 AEUV para 23 (released in 2012). 42 For the first time in Case 45/86, Commission v Council (ECJ 26 March 1987) para 11; this judgment was affirmed, e.g., in Case C-300/89, Commission v Council (ECJ 11 June 1991) para 10; Case C-271/94, Parliament v Council (EJC 26 March 1996) para 14; Case C-411/06, Commission v Parliament and Council (ECJ 8 September 2009) para 45.

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to its principal objective. Exceptionally, if it is established that the act simultaneously pursues a number of objectives or has several components that are indissociably linked, without one being secondary and indirect in relation to the other, such an act will have to be founded on the various corresponding legal bases.43 This, however, becomes problematic if those legal bases provide for different legislative procedures. In such cases, the Union legislator has to separate the legislative act into different ones, if possible. Although usually, there will be one predominant legal base.

2.3. The Principles of Institutional Balance and Separation of Powers

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The term “organ competence” describes the competences that belong to the particular organs within the Union. The organs of the Union are listed in Article 13.1 (2) TEU. The competences that they are entitled to exercise are principally laid down in Articles 14 et seqq. TEU. Under Article 13.2 sentence 1 TEU (➔ Article 13 TEU para 38 et seq.), the institutions “shall act within the limits of the powers conferred on [them] in the Treaties, and in conformity with the procedures, conditions and objectives set out in them.” The distribution of competences is based on the principle of “institutional balance”, a term coined by the CJEU: “By setting up a system for distributing powers among the different Community institutions, assigning each institution to its own role in the institutional structure of the Community and the accomplishment of the tasks entrusted to the Community, the Treaties have created an institutional balance. Observance of that balance means that each of the institutions must exercise its powers with due regard for the powers of the other institutions.”44 Each organ of the Union must therefore adhere to its responsibilities in the framework of the responsibilities assigned to it by the Treaties according to the distribution of competences (horizontal competence),45 while respecting the core area of the specific competences of other organs.46 This principle has been developed concerning the legislative competences of the European Parliament, but applies to all Union organs and their interrelationship. Its purpose is to ensure that the institutions do not interfere with the constitutional balance between the Council, which represents the Member States, the Commission as the representative of the Union’s interests and the Parliament as the representation of the Union citizens. At the same time, this means that no body may disregard the competences

43 See, e.g., Case C-411/06, Commission v Parliament and Council (ECJ 8 September 2009) para 46 et seq.; Case C-36/98, Spain v Council (ECJ 30 January 2001) para 59; Case C-42/97, Parliament v Council (ECJ 23 February 1999) para 39 et seq. 44 Case C-70/88, European Parliament v (ECJ 22 May 1990) headnote 1. 45 Case 138/79, SA Roquette Frères v Council (ECJ 29 October 1980) para 33. 46 Case C-70/88, European Parliament v Council (ECJ 22 May 1990) para 22.

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assigned by the Treaties to the other organs.47 Moreover, the institutions of the Union are not allowed to reduce the influence of the other bodies. For example, among several possible legal bases, the Council cannot refer to the one that requires the lowest level of participation of the European Parliament, but rather, according to objective criteria, has to choose the one which best covers the matter to be regulated. Those criteria include in particular the aim and content of a measure.48 On the other hand, the Union bodies may not extend the decision-making authority of other institutions, for example, by transferring decisions assigned to them by primary law to other organs by means of secondary legislation. In principle, the Union organs are not authorised to delegate essential competences, such as through the establishment of Union agencies or the delegation of powers to agencies, which are not set out in Union law.49 The situation is different in the case of Article 290 TFEU. It opens up the possibility to delegate to the Commission the power to adopt or amend “non-legislative acts” (e.g., under Article 288.4 TFEU). Even then, however, the “essential aspects of an area” may not be touched.50 These areas shall be subject to legislative acts (Article 290.1 (2) sentence 2 TFEU). The Court of Justice of the EU claims for itself the responsibility “to maintain the institutional balance” and “to review observance of the prerogatives of the various institutions by means of appropriate legal remedies” including the possibility “to penalize any breach of that rule which may occur”.51 Due to the Union’s lack of statehood, the separation of powers between the organs is less developed than in comparison to the national constitutional law of the Member States.52 The judiciary is assigned exclusively to the Court of Justice of the EU. The Parliament exercises clearly legislative functions. Less clear, however, are the roles of the central organs, the Council and the Commission, both of which— often together—exercise executive and legislative functions. The Commission has a dual role as an executive and legislative body. In contrast to the concepts common to national legal orders, the legal instruments of EU law are, according to the conception of Article 288 TFEU, released from fulfilling a separation of powers function. When it comes to legislative actions, the distribution of functions within the Union follows a federal logic: the interaction of Council and Commission on legislation serves to introduce both the national interests—through the Council— and the Union’s interest—through the Commission—into the legislative process. 47

Case C-149/85, Roger Wybot v Edgar Faure and Others (ECJ 10 July 1986) para 23. Case C-70/88 Parliament v Council (ECJ 4 October 1991) para 9. 49 Cf. Case 9/56, Meroni & Co., Industrie Metallurgiche, società in accomandita semplice v High Authority of the European Coal and Steal Community (ECJ 13 June 1958) p. 146 et seqq.; Case C270/12, United Kingdom v Parliament and Council (ECJ 22 January 2014) para 41 et seqq.; Orator (2017), p. 228 et seqq.; Nettesheim, in Grabitz et al. (2020), Article 1 AEUV para 27 (released in 2012). 50 Cf. Craig (2010), p. 57 et seq. 51 Case C-70/88, Parliament v Council (ECJ 22 May 1990) headnote 1. 52 See on the national division of powers and the separation of functions on EU level Weber 2019, para 260 et seqq., 274 et seqq. 48

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As a rule (Article 289.1 in conjunction with Article 294 TFEU), a legislative act, therefore, can only be adopted if both organs take part in this process. A legislative act in the sense of Article 289.3 TFEU which is not based on the proposal of the Commission and which has been adopted within the ordinary legislative procedure under Article 289.1 and 294.15 TFEU is—except in some special cases (Article 289.4 in conjunction with Article 294.15 TFEU)—incorrect and void. Against the background of this interplay between the Council and the Commission, practiced since the Treaty of Rome, the gradually growing role of the European Parliament—described in the Treaty as the direct representation of the citizens at Union level (Article 10.2 (1) TEU)—can be interpreted as a federal element in the legislative procedure of the Union. This body cannot be clearly assigned to either the national or the European level and therefore has a special position in the federally-oriented distribution of tasks.53 Through the Lisbon Reform Treaty, the EP received several participation rights in different policy areas (e.g., the common agricultural and fisheries policy [Article 43.2 TFEU], regular and irregular immigration [Article 78.2 and 79.2 TFEU], Eurojust [Article 85.2 TFEU], Europol [Article 88.2 TFEU ] intellectual property [Article 118.1], energy [Article 194.2 TFEU], etc.).54 In addition, for the first time, in Article 12 TEU the national parliaments are called upon to “contribute to the functioning of the Union”, in particular in the context of monitoring the observance of the subsidiarity principle.55 In some Member States, national parliaments have been even granted further powers to participate in Union affairs.56 In Article 13.1 (1) and 13.2 TEU the principles of “institutional balance” and “separation of powers” are not clearly mentioned, but their content is codified under primary law.

53 The jurisprudence of the German Federal Constitutional Court regarding the European Parliament is to be understood against the background of the difficulties to classify its functions. In the judgment concerning the constitutional complaints against the Treaty of Lisbon, the European Parliament is repeatedly described as a “representative body of the peoples” making up the Union (emphasis added). From this, the Court derives far-reaching consequences with regard to a diminished requirement of democratic legitimation: “As a representative body of the peoples directly elected by the citizens of the Union, the European Parliament is an additional independent source of democratic legitimation. [. . .]. The democratic basic rule of equal opportunities of success (‘one man, one vote’) only applies within a people, not within a supranational representative body, which remains a representation of the peoples linked to each other by the treaties albeit now with special emphasis on citizenship of the Union”; see German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 271, 279. 54 A complete overview is given in “Treaty on the European Union – Treaty on the Functioning of the European Union. List of decision-making procedures” (available at http://ec.europa.eu/codecision/docs/Legal_bases.pdf). 55 Article 12 point (b) in conjunction with Article 3 of the Protocol No. 1 and Protocol No. 2 to the TEU. 56 Piris (2010), p. 237 et seqq.; Blanke and Böttner (2015), p. 260 et seqq., p. 268 ff., with further references. For Germany, see also German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 316–319, 325–328.

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2.4. Forms of Action

The forms of action of the Union are listed in Article 288 TFEU (regulations, directives, decisions, recommendations and opinions). This listing is, however, not complete (no numerus clausus of legal instruments) (argumentum e contrario Article 296 (1) TFEU). It is only a core stock of legal instruments. Only an open system of instruments allows the Union to adopt any well-established instruments from national legal systems, which fit its functional needs.57 In addition, there are also other forms listed in the Treaties. For example, under Article 42 (2) TFEU the Council “may authorise”, under Article 44 (2) TFEU the Commission can “fix” (the amount of [. . .] charges), etc. There are also forms of action of the institutions or bodies that have no legislative power (e.g., the Economic and Social Council). Finally, the Treaty recognises a number of “unlabelled” or “atypical” acts or “sui generis acts”.58 The fact that the regulation has been systematically emphasised in Article 288 (2) TFEU corresponds to its great practical relevance, from which results that it is to be regarded as the standard form of the Union’s legal action. One reason for this is the strict binding nature of a regulation. It has an abstract-general effect, since it is “applicable to objectively determined situations and has legal effects for general and abstractly defined groups of people”.59 In contrast to the equally legally binding directive, it has a fully binding effect, hence not only on the objectives to be achieved but also on the forms and means to be taken. Unlike directives, which are addressed only to Member States and therefore do not contain direct legal obligations for private individuals, regulations can have a horizontal effect between citizens, if they are suitable for the content of individual cases. Member States must ensure that the regulation is “fully applicable” through “appropriate national measures”.60 A directive, which accounts for less than 10% of all Union acts, is a specific indirect legislative instrument of Union law, and has a “gradually binding” character. This means that it is binding for the Member States only in terms of its objective, but not in terms of the form to be chosen. A directive does not itself directly create law in the Member States but must be implemented by them. Article 288.3 TFEU assigns a binding effect to a directive for “each Member State to which [it] is addressed”. In that respect, a directive differs from a regulation, which is not only binding in its entirety but, moreover, applies directly “in all Member States”. To fulfil its obligation to achieve the binding objectives of a directive, Article 288.3 TFEU leaves “the choice of form and means” to the national authorities.

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Cf. Bast (2010), p. 374 et seqq. Geismann, in von der Groeben et al. (2015), Article 288 AEUV para 22 et seq.; Calliess, in Calliess and Ruffert (2016), Article 288 AEUV para 100 et seq. 59 Case 101/76 Koninklijke Scholten Honig NV v Council and Commission (ECJ 5 May 1977) para 20, 23. 60 Case 72/85 Commission v Netherlands (ECJ 20 March 1986) headnote 2. 58

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With this partial binding nature, a directive differs from a regulation, which is comprehensive and consequently binding in its wording, forms and means. However, the significance of the Member States’ right to choose should not be overestimated. It merely grants the right to choose a specific “legal technique” in the implementation procedure of a directive, which can consider the specificities of each national legal system. In principle, it is the Member States’ choice, whether they implement a directive through an Act of Parliament or an executive order, or whether they internally comply with the implementation obligation through measures at central or regional level, provided that they comply with certain Union law limits. These objectives, the structures and the essential terms of each directive are a yardstick for the interpretation of national law. This function derives from the obligation of all public authorities in the Member States to take all appropriate measures to implement a directive within its competences by virtue of the primacy of Union law. The directive-compliant interpretation is a subset of the interpretation conforming to EU law and constitutes a binding guideline for the achievement of a certain result.61 A decision (Beschluss (DE), besluit (NL), décision (FR); ➔ Article 55 TEU para 97) is a legally binding legislative act for individual cases. Only binding acts of the Union’s bodies, which have legal effects, are decisions in the sense of Article 288 (4) TFEU. This is not the case for just provisional measures,62 unless they themselves finalise a specific procedure.63 As can be seen from Article 289.1 and 2 TFEU, a decision may be adopted as a legislative act, but is also possible as an act without legislative character. Recommendations and opinions have in common that they are referred to as non-binding forms of action in Article 288 (5) TFEU. Nonetheless, they are part of applicable Union law, which, in contrast to the traditional legal concept of most Member States, also includes certain forms of non-binding action as an element of legal sources. Although recommendations and opinions are non-binding, they can, like all other acts under Article 288 TFEU, be adopted only in accordance with the principle of conferral of powers.64 Opinions, unlike recommendations, are not aimed directly at behavioural control and therefore do not have a formal addressee. Rather, they are expert or political opinions without binding effect.65 Declarations, as the recommendations and opinions, are part of atypical legislative acts, which are made by the EU institutions or the Member States to document their views on the interpretation of a particular secondary act.66

61

Schroeder, in Streinz (2018) Article 288 AEUV para 72 et seqq., 110 et seqq. Case 60/81, IBM v Commission (ECJ 11 November 1981) para 10. 63 Joined Cases 8-11/66, Cimenteries v Commission (ECJ 15 March 1967) p. 92. 64 This is controversial: cf. Schroeder, in Streinz (2018) Article 288 AEUV para 129 et seq.; Nettesheim, in Grabitz et al. (2020), Article 288 AEUV para 200 with further references (released in 2012); Ruffert, in Calliess and Ruffert (2016), Article 288 AEUV para 97. 65 Geismann, in von der Groeben et al. (2015), Article 288 AEUV para 63. 66 Schroeder, in Streinz (2018), Article 288 AEUV para 34. 62

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In some cases, the provisions on EU competences stipulate a compulsory legal form by determining, for example, the adoption of directives in Article 50.1 TFEU, a decision in Article 108.2 TFEU or regulations in Article 109 TFEU. In this event, the principle of conferral also applies to the form of action. However, there is a legislative discretion, as the majority of competence rules leave it to the institutions themselves to choose the appropriate form of action. The Treaty of Lisbon explicitly enshrines the power of the EU institutions to freely choose forms within the framework of Article 296 (1) TFEU. “In the absence of any authorising provision in [primary Union law] a secondary law act cannot deviate from a provision of the Treaty [. . .]”.67 The precedence of the Treaties reflects, on the supranational level, the national principle of primacy of the constitution. Provisions of secondary Union law shall be interpreted in such a manner as to be compatible with primary Union law.68 Controversial, however, is whether a superior-inferior relationship can be read into the different instruments listed in Article 288 TFEU. Parts of the literature deny the possibility of a grading in the sense of a hierarchy of norms because it lacks the parallel gradation concerning the democratic legitimation.69 According to this view, the respective structural choice in favour of a non-hierarchical unity of secondary law becomes visible in the equality of EU law-making-institutions. Consequently, an act adopted by one institution can be amended or repealed by another, that is to say, the rule lex posterior derogat legi priori (“A later law repeals an earlier law”) applies.70 Other voices in literature point to the intention of introducing such a hierarchy, which is verifiable in the genesis of these provisions. In a norm-hierarchical gradation, legislative acts take precedence over delegated acts and national acts of transposition.71 In the case law of the Court of Justice of the EU, there are only hints for such a grading. In any case, a non-binding act cannot derogate from a binding act, otherwise it would have to assume an effect that does not form part of its own operating mode. Within the framework of equated legislative acts, the general rules of judicial methodology are applicable in Union law and are only modified with some slight changes. The principle lex posterior derogat legi priori applies provided that the acts have been adopted by the same body in the same procedure. Thus, the principle of the equality of the organs and the special functions of specific procedures are

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Case T-51/89, Tetra Pak v Commission (CFI 10 July 1990) para 25. Schroeder, in Streinz (2018), Article 288 AEUV para 20; Habermas (2012), p. 13 et seqq., 16, who speaks about the precedence that take the Treaties over national law of the “first innovation” of the EU legal order compared with a federally structured national state. He distinguishes this innovation from two others: the sharing of the constituent power between EU citizens and European peoples, and the shared sovereignty (p. 18 et seqq., p. 24 et seqq.). 69 Cf. Bast (2010), p. 378 et seq., 380 et seq. 70 Case C-64/98 P, Petrides v Commission (ECJ 9 September 1999) para 40 et seq.; Bast (2010), p. 376 et seq. 71 Ruffert, in Calliess and Ruffert (2016), Article 288 AEUV para 10 et seq. 68

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preserved.72 In the relationship between secondary legislative acts, the principle lex specialis derogat legi generali (“Special law repeals general laws”) must be applied.73

2.5. Legislative Procedure

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By means of the legislative procedures, the Union can create secondary law. Two possible procedures are applicable: the ordinary legislative procedure (Article 289.1 TFEU) and the special legislative procedure (Article 289.2 TFEU). The ordinary legislative procedure is set out in Article 294 TFEU. It comes into play, whenever the formula “in accordance with the ordinary legislative procedure” is used in the Treaties. In total, 74 Treaty provisions require the application of the ordinary legislative procedure.74 Council and European Parliament both have to agree on the legislative proposal with the Commission having the exclusive right of initiative (Article 294.2 TFEU). The Council and the EP must then equally agree on a legislative proposal (arg.: Article 294.13 sentence 2 TFEU). The legislation follows a procedure in which the EP has to adopt its position (first reading) and the Council approves that position (with the effect that the act is adopted “in the wording which corresponds to the position of the European Parliament”—Article 294.3 and 4 TFEU) or rejects it. If the Council does not approve the European Parliament’s position, it shall formulate its position at first reading and communicate it to the EP (Article 294.5 and 6 TFEU). The European Parliament’s positioning on the Council’s position is the subject of the second reading (Article 294.7–9 TFEU). Both the European Parliament and the Council can make amendments to the Commission’s proposal. The European Parliament may also propose amendments to the Council’s position at first reading (Article 294.7 point c TFEU) if it does not (silently) approve it (Article 294.7 point a TFEU) or rejects it (Article 294.7 point b TFEU). This will provide for a maximum of two rounds, the first and the second reading, followed, if appropriate, by a conciliation procedure between the second and third reading (TFEU Article 294.10-12). The third reading is for confirmation or rejection of the conciliation committee’s result (Articles 294.13 and 14 TFEU). This is the last opportunity to agree on a legislative act. It aims to prevent the draft legislation from failing due to some remaining discrepancies at this advanced stage, as this could harm the Union’s interests. In this process, the delegations of the two organs, mediated by the Commission, negotiate the proposed legislative act in the Conciliation Committee (“formal trilogue”) (Article 294.11 TFEU). 72

Geismann, in von der Groeben et al. (2015), Article 288 AEUV para 30. Geismann, in von der Groeben et al. (2015), Article 288 AEUV para 30. 74 For a list, see Ruffert, in Calliess and Ruffert (2016), Article 294 AEUV para 9. 73

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Although the wording of Article 289.2 TFEU might suggest otherwise, the Treaties do not have a generally defined special legislative procedure. Instead, the provision addresses two variants of legislation in which Parliament and Council meet in different roles. Apart from the budgetary procedure governed by Article 314 TFEU, its characteristic consists in the fact that one of the Union’s organs adopts a legislative act that the other body does not take on an equal footing but is instructed or limited to the role of the hearing party to give his consent or to deny the result. Article 289.2 TFEU makes a distinction between procedures in which legislative acts of the European Parliament are adopted with the participation of the Council and those in which the Council adopts the relevant legislative act with the participation of the European Parliament. Which of these variants is relevant in the individual case is assessed based on the respective Treaty authorisation, which, at the same time, determines which form of participation of the Council or of the Parliament takes effect. Like almost all legislative procedures, these procedures are based on a proposal of the Commission. The two variants of the special legislative procedure are:75 l

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Legislative acts adopted by the European Parliament with the participation of the Council are set forth in three cases, all of which constitute, or are connected to, parliamentary law. In this procedure, the regulations and general conditions governing the performance of the duties of the Members of the European Parliament (Article 223.2 TFEU), detailed provisions governing the exercise of the right of inquiry (Article 226 (3) TFEU), as well as the regulations and general conditions governing the performance of the Ombudsman’s duties (Article 228.4 TFEU) are laid down. The participation of the Council is limited to the act of consent or its refusal, while otherwise offering no possibility of legislative influence. The more predominant form of the special legislative procedure is the second variant: the adoption of a legislative act by the Council with the participation of the European Parliament. Under the TFEU, this procedure applies to 27 cases: Article 19.1: Combating discrimination; Article 21.3: Free movement— Social security; Article 22.1 sentence 2: local elections; Article 22.2 sentence 2: elections to the European Parliament; Article 23 (2): coordination of diplomatic protection. Article 25 (2): supplementing the rights of Article 20.2; Article 64.3: Capital movement and payments—step backwards in liberalisation; Article 77.3: passports, identity cards, etc.; Article 81.3 (1): judicial cooperation in family law; Article 86.1: establishment of a European Public Prosecutor’s Office; Article 87.3: police operational cooperation; Article 89: activities in the territory of other Member States; Article 113: tax harmonization; Article 115: approximation of laws—effects on the internal market; Article 118 (2): language arrangements for the European intellectual property rights; Article 126.14 (2): deficit procedure—replacement of the Protocol; Article 127.6: Gellermann, in Streinz (2018), Article 289 AEUV para 5 et seqq.; Schusterschitz (2009), p. 223.

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supervision of credit and financial institutions; Article 153.2 (3): social policy; Article 182.4: research—specific programmes; Article 192.2: environmental policy; Article 194.3: energy; Article 223.1 (2): elections to the European Parliament; Article 262: Court of Justice of the EU—conferral of jurisdiction; Article 308 (3) sentence 2: European Investment Bank—amendments to the Statute of the Bank; Article 311 (3): system of own funds; Article 311 (4): implementing measures; Article 312.2: multiannual financial framework. In addition, the TFEU does not require the special legislative procedure but makes it an option in three cases: Article 203: detailed rules and procedure for the association of the overseas countries and territories with the Union; Article 349 (1): conditions of application of the Treaty to the French overseas departments; Article 352.1: flexibility clause.

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There is a unique procedure for establishing the annual budget: The Commission shall submit to the EP and the Council a proposal containing the draft budget (Article 314.1, 2 TFEU). The Council must forward its position on the draft budget to the Parliament (Article 314.3 TFEU), which the EP approves (Article 314.4 points (a) and—tacit consent—(b) TFEU) or adopts amendments (Article 314.4 point (c) TFEU). In the latter case, a conciliation procedure will be initiated (Articles 314.5 et seqq. TFEU). Article 289.2 TFEU refers to the participation of the Council or the European Parliament in the above-mentioned variants of the special legislative procedure, but it does not contain any statement on the specific form of participation. This is answered based on the Treaty provisions that provide for the special legislative procedure and at the same time determine whether the participation in a hearing (e.g., Article 22.1 and 2, Article 23 (2), Article 77.3 TFEU) is sufficient or if the consent of the other body (e.g., Article 126.14, Article 223.2 TFEU) is required. Legislative acts of the European Parliament always require the approval of the Council under the relevant treaty provisions. On the other hand, in the case of adoption of a legislative act by the Council, Parliament is for the most part limited to a consulting role, whereas its consent is only required in a few cases (Article 19.1, Article 25 (2), Article 86.1, Article 223.1 (2), Article 311 (4) and Article 312.2 (1) TFEU). The Council must consider these positions, without being binding. Article 289.4 TFEU determines that in specific cases provided for by the Treaty, a group of Member States, the European Parliament, the European Central Bank, the Court of Justice of the EU or the European Investment Bank may have the right of initiative for a legislative act. At the initiative of a quarter of the Member States (Article 76 point (b) TFEU: police and judicial cooperation) or of the European Parliament (Article 223.1 TFEU: election; Article 223.2 TFEU: duties of its Members; Article 226 (3) TFEU: right of inquiry; Article 228.4 TFEU: Ombudsman), on the recommendation of the European Central Bank (Article 129.3 sentence 2 TFEU: amendments to the Statute), at the request of the Court of Justice of the EU (Article 257.1 sentence 2 TFEU: specialised courts; Article 281.2 sentence 2 TFEU: amendments to the Statute) or the European Investment Bank (Article 308.3 sentence 2 TFEU: amendments to the Statute) legislative acts may be

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adopted. The derogations resulting therefrom in the ordinary legislative procedure have been incorporated into Article 294.15 TFEU. In addition, there are also the so-called delegated legislative acts (Article 290 TFEU). The Commission may be empowered through a legislative act “to adopt non-legislative acts of general application to supplement or amend certain nonessential elements of the legislative act”. 2.5.2.

Binding Force of the Rules of Procedure

The procedural rules are legally binding and therefore must be complied with.76 Nevertheless, not every procedural error leads to nullity (regulation, directive) or annulment (decision) of the incorrect legislative act.77 The decisive factor is how serious the error weights, which means, whether the violated procedural provision of the Treaty is regarded as “essential”. The distinction is not entirely clear. However, the Court of Justice of the EU has ruled that the failure to involve Union’s organs78 or Member States79 constitutes an “essential” infringement (Article 263 (2) TFEU). The failure to consult the European Parliament is an essential procedural defect that even leads to the nullity of the act.80 When an act is considered void, it is in principle bringing it before the EJC under Article 263 (2) TFEU. This is the case on grounds of a lack of competence of the enacting organ, the infringement of essential procedural requirements, or the (material) breach of the Treaties81 or any legal provision relating to their application or in the case of misuse of powers. 2.5.3.

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Interinstitutional Trilogue Procedures in an Informal Framework

In practice, the interinstitutional trilogue procedures in an informal framework are of paramount importance.82 They are not laid down in the Treaties, but they 76 Cf. Opinion 1/94, Competence of the Community to conclude international agreements concerning services and the protection of intellectual property (ECJ 15 November 1994) para 59. 77 Nettesheim, in Grabitz et al. (2020), Article 1 AEUV para 40 (released in 2012). 78 Case 138/79, SA Roquette Frères v Council (ECJ 29 October 1980) para 33. 79 Case C-199/91, Foyer culturel du Sart-Tilman ASBL v Commission (ECJ 25 May 1993) para 34. 80 Case 138/79, SA Roquette Frères v Council (ECJ 29 October 1980) para 33; Case C-417/93, Parliament v Council (ECJ 10 May 1995) para 9; Case C-392/95, Parliament v Council (ECJ 10 June 1997) para 14. 81 This is a “catchall element” in the sense of “other” provisions of the Treaties, cf. Dörr, in Grabitz et al. (2020), Article 263 AEUV para 174 (released in 2012). 82 In the 6th legislative term (2004–2009), this proportion rose to 82% and in the 7th legislative period (2009–2014) even at 93%. During the first half of the 8th legislative term, approximately 300 trilogues have taken place on the 86 negotiated files that were adopted by the end of 2016; this is an average of just below 4 trilogues per negotiated file (similar to the average during the 7th term). Forty-nine co-decision acts were therefore concluded without formal negotiations by the end of 2016. See European Parliament, Activity Report on the Ordinary Legislative Procedure, 4 July 2014–31 December 2016, p. 19 et seq. (available at http://www.epgencms.europarl.europa.

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have been progressively institutionalised, first in the revised “Joint Declaration on practical arrangements for the co-decision procedure” (points 7 and 8),83 subsequently with their explicit mentioning in the “Rules of Procedure of the European Parliament” (Rule 69f—Conduct of negotiations). Its aim is the reduction of the duration of the legislative procedures. Compromising within the conciliation procedure (“formal trilogue”; ➔ para 31) has proven to be difficult. Unlike the conciliation procedure, which takes only place after the failure of agreement in the second reading (Article 294.8 point (b) TFEU), informal trilogues may be organised at any stage of the legislative procedure (first, second or third reading), after the adoption of a negotiating mandate at the first or second reading stage. In terms of the frequency of its application, the informal trilogue procedure has de facto put the conciliation procedure, which is supposed to take place in the conciliation committee between the second and third reading, ahead of the first reading in the European Parliament to find a compromise (so-called early agreement or first reading agreement). Consequently, the Council does not fix any position in the run-up to which the public can contribute its interests or may at least gather information. In contrast to the conciliation procedure, the negotiation delegations in these “tripartite meetings” are much smaller. Another problem is that in the informal trilogue, although it is only an intermediary, the Commission has a much greater influence on the future legislative procedure than in the formal trilogue. Hence, the two readings, in which at least the less serious differences of opinion on a legislative proposal should be eliminated, do not take place. It is doubtful whether a shortening of the legislative procedure is in proportion to the concomitant disadvantages: the informal trilogue makes the legislative procedure intransparent to the public. It is more prone to “package-deals” and extraneous compensation transactions.84 The European Parliament’s request to the other organs involved in the informal procedure to “ensure greater transparency of informal trilogues”,85 reveals that the more and more frequent practice to enter into an informal trilogue procedure already before the first reading of a legislative proposal is neither compatible with the principle of publicity (Article 15.2 TFEU) which should be applicable to the EP and—in all cases of drawing up legislative proposals and of consultation—to the Council of the EU, nor with the commitment of the institutions of the

eu/cmsdata/upload/7c368f56-983b-431e-a9fa-643d609f86b8/Activity-report-ordinary-legislative-procedure-2014-2016-en.pdf). 83 O.J. C 145/5 (2007). 84 Dauner and Sohn (2015), p. 12 et seqq.; Franchino and Mariotto (2012). 85 European Parliament, while noting the need to maintain “adequate space to think for the colegislators”, called on the institutions to “ensure greater transparency of informal trilogues”. To this end, it proposed a series of measures (such as making lists of trilogue meetings, agendas or summaries of outcomes public), some of which were also subsequently covered in the Ombudsman’s decision of July 2016 concluding her inquiry into the transparency of trilogues; see European Parliament resolution of 28 April 2016 on public access to documents (Rule 116(7)) for the years 2014–2015 (2015/2287(INI)), points 21–27.

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Union to take decisions “as openly as possible and as closely as possible to the citizens” (Article 1 (2)e TEU86) and to “maintain an open, transparent and regular dialogue with the representative associations and civil society” (Article 11.2 TEU).87 However, it is precisely this “transparency deficit” and not so much a “democratic deficit” in a proper sense that the patterns of decision-making in the Union suffer from. Without elements of transparency, there cannot be a proper democratic control, which by definition needs a certain degree of accountability in public affairs,88 especially in the context of legislative procedure.

3.

The Treaties as the Basis of the Union (para 2)

Under Article 1 TEU, “the High Contracting Parties establish among themselves a European Union”. Thus, the idea of the Union as a “Community of law”89 is also anchored in Article 1.2 TFEU corresponding to Article 1.3 TEU: “[. . .] the Treaties on which the Union is founded”.

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3.1. Legal Nature of the Treaties

The original ECSC-Treaty was undoubtedly an international treaty between the Founding States.90 However, already in the explanatory statement by the German Federal Government this first founding treaty of a European community was described as a “European entity of constitutional nature”.91 This very German classification of the ECSC-Treaty of 1951 might have been too emphatic. Rather, it should be regarded as a mere traité-loi, a law-making treaty, which purports to codify generally applicable, substantive rules and institutions of international law in the sphere of this Community as, for example, core elements of the concept of supranationality (e.g., the High Authority as a forerunner of the European Commission).

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In the opinion of Schwarze and Wunderlich in Becker et al. (2019), Article 1 TEU para 3, this is more a programme than a legal rule. 87 Deutscher Industrie- und Handelskammertag (2016), p. 1. 88 Oeter (2010), p. 79. 89 Hallstein (1973), p. 31 et seqq.; cf. Case 294/83, Parti écologiste “Les Verts” v European Parliament (ECJ 23 April 1986) para 23: “The European Economic Community is a Community based on the rule of law”. 90 Cf. Nettesheim, in Grabitz et al. (2020), Article 1 AEUV para 42 (released in 2012); see also Klabbers (2015), p. 52. 91 Bundestagsdrucksache 01/2401, Annex 3, p. 4 (document of the German Bundestag); Bundestagsdrucksache 02/3440, p. 108 (our translation).

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In the leading Decision van Gend & Loos (1963), the Court of Justice then classified the EEC Treaty (1957/58) as a “new legal order of international law”.92 In the Decision Costa v E.N.E.L (1964) the Court clarifies this classification by stating that “[b]y contrast with ordinary international treaties, the EEC 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.”93 At the same time, the Court of Justice justified the direct effect and the primacy of Community law with the features of this legal order in comparison to usual international law (➔ para 78 et seqq.).94 Whether these special interpretative principles, developed by the Court of Justice, distinguish the Treaties from the sphere of international law and how they then may be classified, is still a matter of dispute today. Th. Giegerich emphasises in this respect “the autonomy of the Community constitution against the international law” and spells out thereby that the peoples of the Member States are “co-owners of the constituent power of the Community” and due to the principle of sovereignty have to be regarded as the core element of the common European democracy principle; moreover, Community law excludes the intermediate recourse to international law.95 The fact that even in the Lisbon Treaty there is no normative justification for a legal order outside of international law speaks against the theory of an own legal order of the Union. In particular, the procedure of treaty amendments shows that every amendment requires (de facto) the ratification by the Member States (➔ Article 48 TEU para 36, 44). Furthermore, it may be questioned whether, despite the lack of normative justification, there may be a factual justification. It is pointed out by supporters of Union law being part of international law that, in particular due to the lack of competence-competence of the Union (➔ para 11 et seq.), no autonomous legal order could have arisen.96 This view is reinforced by the formula of the Member States as “masters of the Treaties” found by the German Federal Constitutional Court (➔ para 4; Preamble TEU para 24 et seqq.).97 Moreover, the direct applicability of Union law (➔ para 75 et seqq.) is not a circumstance that speaks in favour of the detachment of the integration Treaties from their international law roots. Already in 1928, the PCIJ had set forth in an advisory opinion that

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Case 26/62, NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration (ECJ 5 February 1963) p. 12. 93 Case 6/64, Flaminio Costa v E.N.E.L. (ECJ 15 July 1964) p. 593—emphasis added. This case law has recently been confirmed: see, e.g., Case C-621/18, Andy Wightman and Others v Secretary of State for Exiting the European Union (ECJ 10 December 2018) para 44 et seq. 94 de Witte (2011), p. 328 et seq. 95 Giegerich (2003), p. 616 et seqq. (618), 631 et seqq. (our translation). 96 See, regarding the different positions of whether EU law is international public law or autonomous law, Streinz (2019), para 125 et seqq. 97 Cf. Huber (2015), p. 893 et seq., who concludes that the validity of the EU-Treaties is but derived from the Member States’ legal orders.

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also treaties under international law could be directly applicable.98 Thus B. de Witte, like A. Bleckmann before,99 concludes that EU-Law is “a branch of international law albeit a branch with some unusual, quasi-federal, blossoms”100 (➔ para 63 et seqq.). The problematic aspect of this view is the strict “either-or”-scheme used to classify the Union Treaties: either they form part of a state legal order with the result that the Union has sovereignty or they are “mere” treaties under international law with the consequence that the control of their implementation remains with the Member States. Both is not the case. For that very reason, different to the Member States,101 the Union does not have sovereignty, since it has not gained power over its contractual legal basis (➔ para 11). On the other hand, the Member States are no longer in full control because Union law, according to the understanding of the Court of Justice, takes complete precedence over the law of the Member States, but not because the involvement of Union organs is required to make amendments to the Treaties (Article 48 TEU para 28 et seq.). The EU can, therefore, not clearly be classified in the scheme of confederation or federal state. Rather, it is a hybrid that combines elements of both. At the same time, the Union is at the intersection of supranationality and intergovernmentalism. Even if the “new intergovernmentalism”102 is limited to certain fields of action, this systemic structure has gained in importance since the Maastricht Treaty, and especially since the financial crisis (ESM, TSCG).103 Intergovernmentalism is based on voluntary agreements between the actors involved and their individual willingness to comply with the common decisions. Legally, this is expressed in international treaties between the cooperating Member States. Given especially the very limited jurisdiction of the Court of Justice in reviewing compliance of the Contracting Parties with obligations under such international agreements (e.g., Article 8 TSCG), the Member States’ influence on policy-making remains greater, while their willingness to deeper policy-implementation is significantly lower compared with the supranational system. Supranationality, on the other hand, is characterised by common institutions that have legislative and enforcement powers and a broad right of initiative (European Commission). Indeed, deeper integration cannot be equated

98 See Advisory Opinion No. 15, Jurisdiction of the Courts of Danzig (PCIJ 3 March 1928), Publications of the Permanent Court of International Justice, Series B No. 15, p. 17 et seq. 99 Bleckmann (1997), para 642 et seqq. On the relationship between the Member States and between Member States and the European Communities, he sees “the general international law superseded as far as possible by European Community law, since in accordance to international public law, treaties between the contracting parties supersede the general international public law” (our translation). 100 de Witte (2011), p. 362. 101 On the sovereignty of the Member States of the EU, cf. Bonnet (2015). 102 Cf. Puetter (2015), p. 2; Bickerton et al. (2015), p. 7; critically comments on the latter study Schimmelpfennig (2015), p. 723 et seqq. 103 Cf. Bauer and Becker (2014), p. 213 et seqq.; Schimmelpfennig (2015), p. 723 et seqq.

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with the development of supranationality,104 but a deepening of supranationality requires the Member States to first reach a political consensus that will bind them together in order to replace certain intergovernmental policy areas with supranational decision-making and monitoring procedures, including through Treaty amendments. In particular, the following supranational elements should be mentioned (➔ Article 1 TEU para 30; Preamble TFEU para 17 et seqq., 28 et seqq. 30 et seqq.):105 1. The competences conferred on the Union are not exercised by a way of delegation by the Member States, but as “proper functions”;106 2. Legislation and decision-making are prepared by an independent institution, namely, the European Commission which “shall promote the general interest of the Union” (Article 17 TEU); 3. The uniform direct effect of (primary and secondary) Union law, i.e. of the supranational organisation vis-à-vis the individual or undertakings; 4. Qualified majority as the default voting rule in the Council; 5. The principle, as developed by the CJEU, of primacy of application of Union law with the consequence of primacy of primary and secondary Union law over constitutional and the ordinary law of the Member States insofar as a situation is covered by Union law. Primacy in international law is less intrusive into national laws; 6. The Member State’s duty, resulting directly from Union law, to ensure the fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union by taking all appropriate means at domestic level (Article 4.3 TEU). International law is less prescriptive as to how obligations are carried out; 7. The existence of an obligatory jurisdiction with the monopoly of interpretation of the Treaties and subordinate law as an autonomous legal order, namely, by way of preliminary references (Article 267 TFEU) and treaty infringement procedures (Article 258, 259 TFEU). This guarantees the unity and effectiveness of the Union’s legal order and safeguards the rights of the citizens. 47

Moreover, the French Conseil constitutionnel describes Union law as a “Community legal order integrated into domestic law and distinct from international law”.107 The German Federal Constitutional Court speaks in contrast to confederation and federal state of an “association of sovereign states” (➔ para 63 et seqq.).108 However, it repeatedly emphasises the international law basis and the importance of 104

Kohler-Koch (2020), p. 368; a strengthening of the supranational systemic structure within Union law advocate Blanke and Pilz (2020), p. 287 et seqq. 105 Cf. Ipsen (1972), § 3 para 44 et seqq.; Weiler (1981), p. 271 et seq. 106 Cf. Schuman’s reference to Reuter (1953), p. 7. 107 French Constitutional Council, Decision No. 2007-560 DC, Treaty of Lisbon (Decision of 20 December 2007) para 7. 108 German Federal Constitutional Court, 2 BvR 2134/92, 2 BvR 2159/92, Maastricht (Judgment of 12 October 1993) especially para 103, 108 et seqq. (BVerfGE 89, 155 [185 et seq., 188 et seqq.]); German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June

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the national acts of approval.109 This tension between the Member States’ and the Union’s view is seen as an important indication of the existence of a federation (Bund, Fédération) (➔ para 64).110

3.2. Constitutional Quality of the Treaties

Equally disputed is the question of whether the Treaties have quality of a constitution. The Court of Justice has referred to the founding Treaties, rather casually, as “the basic constitutional charter”.111 The Treaties are “law making norms”,112 and thereby they couple the relation of politics and law at the level of the Union.113 Furthermore, the ECJ concluded from the constitutional character of the Treaties the requirement of homogeneity of the Union legal system.114 However, on its legal basis, the Union remains subject to the external influences of the Member States. This distinguishes the founding and reform treaties, and even the failed European Constitutional Treaty, from a state constitution in which a political entity determines autonomously the purpose, form and content to become a political community.115 After the failure of the Constitutional Treaty the Heads of States and Governments agreed explicitly at the European Council of 21/22 June 2007 the reform treaty to be drafted to have “no constitutional character”.116 The German Federal Constitutional Court has therefore characterised the European primary law as a “European Constitution in a functional sense”.117 Here, the concept of the constitution becomes synonymous with the current state of integration and the particular state of the European institutions. Other national courts that commented on the Treaties tried to avoid in the recent past this classification.118

2009) para 229, 262, 329. The term Staatenverbund can be found in much of the literature in Member States outside Germany as well; cf., e.g., Blumann and Dubouis (2010), para 109. 109 Cf. Streinz (2019), para 128. 110 Schönberger (2004), p. 107, 120; see also in-depth Marti (2011), para 721 et seqq. 111 Case 294/83, Parti écologiste “Les Verts” v European Parliament (ECJ 23 April 1986) para 23. 112 Kelsen (1925), p. 98, 234 (our translation). 113 Möllers (2010), p. 189. 114 Opinion 1/91, Draft Agreement between the Community, on the One Hand, and the Countries of the European Free Trade Association, on the Other, Relating to the Creation of the European Economic Area (ECJ 14 December 1991) para 21 et seqq. 115 Grimm (2016), p. 153. 116 Cf. European Council document 111218/07, Annex I; on this Mayer (2007), p. 1148 et seqq. 117 German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 231; cf. Streinz (2019), para 146 et seq. 118 Nettesheim, in Grabitz et al. (2020), Article 1 AEUV para 45 (released in 2012). The German Federal Constitutional Court called the EEC Treaty in 1967 “to an extent the constitution of this community”; see German Federal Constitutional Court 1 BvR 248/63, 1 BvR 216/67 (Decision of 18 October 1967) para 12 (BVerfGE 22, 293 [295]); cf. also Bonnet (2015), p. 457, who explains that a “constitution” of the Union would result in losses of the Member States’ sovereignty.

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Insofar as primary European Union law is referred to as constitutional law or a constitutional order or the Treaties underpinning this legal system are called, in comparison with federal constitutions, Constitutional Treaty”,119 this is less a matter of a firm description of the status than the expression of a conviction concerning a particular legal perspective: “the discipline of European constitutional law is only in its making”.120 Against this background, the term “constitution”, when applied to the Union Treaties, needs a more specific definition. If it were a purely integration-political “battle cry”, it would prove unfit to grasp the complex legal structure (“compound technology”121) of the Union’s relations with the Member States and vice versa, but also of the relationship between the Member States. The description of the Union’s primary law as a “constitution” demands at the same time to be aware of the complex triangular relationship between European authorities, national governments of the Member States and citizens’ rights in Europe.122 The topos of a “European composite constitution” (I. Pernice)123 covers the European constitution as a “multi-level system” and “structures it according to comprehensive tasks in the sense of a multi-level constitutionalism”. This is not a given, but at best abandoned, diversity-based entity.124 This concept suggests that the Union Treaties, including the European Charter of Fundamental Rights, form a partial constitution of a European “osmotic constitutional community” in progress (P. Häberle).125 They are supplemented, in particular, by the Member States’ partial constitutions as well as the European Convention on Human Rights, the European Social Charter and the Charter of Paris (OSCE). In reality, the European composite constitution is a network primarily of factual interactions between different constitutional orders.126 A relevant question in this context is the meaning of the term “constitution”, which is to be understood in a formal and substantive sense (➔ Article 1 TEU para 59). Formally, a constitution is a “democratically legitimized basic law of a state, which can be amended, extended or abrogated with a more or less qualified democratic majority”.127 A. D’Atena emphasises in particular the majority aspect. The Treaties all have been adopted with unanimous agreement by the Member States, and therefore can only be amended unanimously. This is a characteristic, 119

See Ipsen (1972) with reference to Haenel (1873), p. 38. Cf. v. Bogdandy and Bast (2010a), p. 3. 121 Voßkuhle (2010), p. 3 et seq. (our translation). 122 Möllers (2010), p. 181. 123 On the term “Verfassungsverbund” cf. Pernice (1995), p. 261 et seqq.; as to the content of the term cf. Pernice (2001), p. 163 et seqq.; Pernice and Mayer (2000), p. 631 et seq.; on the “multilevel constitutionalism”, cf. Pernice (1998), p. 40 et seqq. 124 Cf. Franzius (2010), p. 66. 125 Cf. Häberle and Kotzur (2016), para 399 et seq., 406, 414; Grimm (2016), p. 181 comes to the same conclusion. 126 Grabenwarter (2010), especially p. 127 et seq. 127 Feiler (2010), p. 15 (our translation); see also Zuleeg (2010), p. 763 et seq., who shows that at least in Germany “the view is quite common that constitutions are reserved to states only”. 120

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which implies that the Treaties are not a constitution.128 Moreover, the European Union is not a state.129 According to the formal understanding of a constitution, the state and the constitution are inseparably connected with each other. Hence, without state there can be no constitution.130 A further formal requirement attached to a constitution can be found in Article 16 of the Déclaration des droits de l’homme et du citoyen (1789), which calls for a cumulative guarantee of fundamental rights and a separation of powers. Under Article 6.1 TEU, since the Lisbon Treaty, the Charter of Fundamental Rights of the European Union has the same legal value as the Union Treaties. With this Charter, the Union has a written catalogue of fundamental rights, which under the provisions of Article 51.1 EUCFR are addressed to the institutions, bodies, offices and agencies of the Union, but also to the Member States, when the latter are implementing Union law. While most of the federal states did not have fundamental rights in their original constitutions, the Union, in the form of the Charter of Fundamental Rights, has developed a protective instrument that can easily compete with the guarantees of the democratic constitutional state and the significant international human rights codifications. It was originally the task of the Member States to guarantee the protection of fundamental rights of the individual against encroachment by public authorities.131 Since the founding of the ECCS, the further requirement of the formal constitutional concept, the separation of powers, has almost corresponded to the principle of “institutional balance” (➔ para 18). The reference to such functions and elements is not sufficient, however, to grasp the legitimatory content of the “constitution” and thus the revolutionary impetus of Article 16 of the French Declaration of Human Rights. As K. Hesse has pointed out about German constitutional law, in its case law the German Federal Constitutional Court follows a substantive understanding of the constitution. Accordingly, a constitution is a “set of values” consisting of “values emerging from the positive legal order”.132 For the constitutional debate at the level of the Union as well, such a content-guided constitutional understanding is characteristic. Thus, R. Bieber considers the Treaties to be a “constitution in the substantive sense”, which formulates the essential and highest-ranking foundations of the Union for “existence, activity, legitimacy, and relations to surrounding legal systems.” The existence of constitutional norms can therefore be determined by analysing the “function [of a norm] within the respective legal order”.133 However, even a constitutional perspective cannot be limited to subsuming under a 128

D’Atena (2012), p. 4. On the non-state quality of the EU, see German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 298, 344, 346. 130 Bonnet (2015), p. 457; Pierre-Caps (2015), p. 462. 131 Cf. D’Atena (2012), p. 11 et seq. 132 Hesse (1999), para 3 (our translation); similar also Ipsen (1972), § 2 para 22 et seq., who distinguishes between the “basis for the emergence” (here the Treaties) and the “content and substance” of a constitutional order. 133 Bieber (2010), p. 236 (our translation). 129

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functional, formal or material constitutional concept. Rather, a critical access requires setting the standards to be applied to concrete ways of achieving the Union’s constitution. This applies in particular to the democratic foundation of EU law to ensure that the constituent power of the people in the Union may not pervert into a constitutional process without the people. The interlocking of democratic constitutionalisation and integration—characteristic of the political development of the United States—will still be lacking in the Union in the near future. As the debate on the Constitutional Treaty for Europe has made clear, the central issue is the extent to which the new public authority created by a treaty can emancipate itself from the contracting parties (➔ para 43 et seqq.). The autonomy of a new legal order hardly appears plausible if the old legal orders continue to exist and are expressly recognised by the new order (Article 5.2 TEU).134 In this respect, it cannot be denied that the (reformed) founding documents of the Union, following the international legal nomenclature, are “treaties”. They have not completely detached themselves from their intergovernmental roots.135 This is also evidenced by the provisions on the amendment procedure (➔ Article 48 TEU para 36, 44); generally, the Intergovernmental Conference normally follows a Convention procedure (Article 48.3 TEU). However, this does not exclude a constitutional quality of the Treaties if they are interpreted as an excerpt of the “constitutional European law in public action”,136 which in its fundamental elements, i.e. the supranational provisions of the TEU and the Charter of Fundamental Rights, is interpreted by means of comparative law. Thus, the Treaties in the Union have the function of a basic order for the exercise of political rule,137 which, however, the Member States have established by transferring particular state competences in accordance with their constitutional requirements to the previous Communities. The Treaties establish the legal order of the Union,138 occupy the highest rank within this legal system (➔ para 28, 46, 52, 91, 94 et seqq.) and, in essence, regulate those issues of a community that would be part of the national constitutions within the state legal orders. Therefore, they have an impact on the political rule of a Member State.139 The Treaties reflect the present stage of the evolutionary realisation of a supranational and transnational constitutional order, also in the substantive sense. This supranational constitution is inseparably interwoven with the Member States’ basic orders and fulfils in its strong interconnection with them an integration function for their peoples and citizens (➔ Preamble TFEU para 7 et seqq., 17 et seqq., 28 et seqq.; Article 1 TEU para

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Möllers (2010), p. 171 et seq. Pernice (2001), p. 168 et seqq. 136 Häberle and Kotzur (2016), para 399; Pernice (2001), p. 130 et seqq. 137 Schönberger (2004), p. 112 et seq.; see in this sense also, especially on the values of EU Law, Berthelet (2017), p. 397, 400, who considers the “order of values” as the EU constitution to which, by now, the Treaties evolved into. 138 Schönberger (2004), p. 112 et seq. 139 Bieber (2010), p. 236 et seqq. 135

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61).140 Of course, the term “constitution” has to gradually gain normative value in the further process of integration.

3.3. Primary Law and Secondary Law

Union law consists of primary law and secondary legislation. Primary law refers to those legal sources that owe their validity to the direct application by the Member States. The Treaties have become the constitution of the Union (➔ para 53 et seq.). They occupy the highest level in the legal order of the Union.141 In addition to the TEU and TFEU, there is the EUCFR which, under the first subparagraph of Article 6.1 TEU, has “the same legal value as the Treaties”, and therefore possesses the quality of primary law. The same applies to the protocols (Article 51 TEU).142 This part of the acquis communautaire is supplemented by the unwritten primary law, which essentially results from the case law of the ECJ (➔ para 56 et seqq.). The acts adopted by the Union under the Treaties, which are thus derived from primary law, constitute secondary legislation. These are in particular (but not exclusively) the acts referred to in Article 288 TFEU.143 Within secondary law, there is no hierarchical ordering,144 for example, with reference to the issuing institution. The only decisive factor is whether the act was adopted on a correct legal basis and in compliance with the required procedure. For the Union to be able to adopt legislative acts (secondary law), it must have the appropriate competence (➔ para 4 et seqq.) and, on the other hand, the correct procedure (➔ para 37 et seq.) must be chosen. Secondary legislative acts must not violate primary law. The Court of Justice of the EU reviews claims of such infringements (Article 263 (1) TFEU). 3.3.1.

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Unwritten Primary Law

Influenced by the French legal principle of the prohibition of déni de justice, the ECJ used already in 1957 unwritten rules to decide a case when it could not find sufficient written rules in the Treaty.145 These general principles of law are 140

See Huber (2001), p. 196 et seqq., 199 et seqq., who refers to the legal order of the EU as a “Auffangs- und Kooperationsordnung” (p. 209 et seqq.); see also Pernice (2001), p. 153 et seqq.; 155 et seqq., 163 et seqq.; de Búrca (1999), p. 79 et seq.; Bonnet (2015), p. 457; Häberle and Kotzur (2016), para 400. 141 Herdegen (2019), § 8 para 4; Klamert, in Kellerbauer et al. (2019), Article 1 TFEU para 7, who assumes “a hierarchy between the Treaties constituting primary law on the one hand, and secondary (and tertiary) law on the other”. 142 Cf. Kaczorowska-Ireland (2016), p. 115 et seq. 143 Herdegen (2019), § 8 para 43. 144 Bast (2010), p. 377 et seqq. 145 Joined Cases 7/56 and 3–7/57, Dirke Algera et al. v Common Assembly of the European Coal and Steel Community (ECJ 12 July 1957) p. 55: “Unless the Court is to deny justice it is therefore obliged to solve the problem by reference to the rules acknowledged by the legislation, the learned

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unwritten rules with treaty or constitutional status in the EU legal order.146 The “unwritten primary law” of the EU can be seen, in particular, in the “constitutional traditions common to the Member States” as enshrined in Article 6.3 TEU (➔ Article 6 TEU para 86 et seqq.), i.e., the general principles of law, which are common to the Member States, but also some principles of international law (➔ para 99).147 In particular, the Court of Justice has derived fundamental rights from general principles of law under the EEC Treaty.148 Also in Article 340 (2) TFEU, reference is made to the “general principles common to the laws of the Member States”, which should apply.149 These are norms, which receive fundamental significance due to the cultural influenced perceptions of the people to recognise justice and law.150 One might also think of Article 38.1 point (c) of the ICJ-Statute. However, whilst the Statute regards the legal orders of all “civilized nations” as reference, the EU principles must be common to the legal orders only of the Member States. Even then, it is not necessary for a principle to be accepted as “common to the Member States” to exist in all their legal orders. The ECJ is “inspired” by their national principles and then applies the method of “evaluative comparative law” (wertende Rechtsvergleichung) to outline a common European principle.151 On the fundamental rights in the Union, the Court of Justice of the EU clarifies that “such rights, whilst inspired by the constitutional traditions common to

writing and the case-law of the member countries.” See, regarding this decision, Schwarze (2011), p. 721 et seq.; on this “gap-filling” function cf., in general, Lenaerts and Guliérres-Fons (2010), p. 1631 et seqq. 146 See, regarding this definition, Schwarze (2011), p. 723; see Case C-101/08, Audiolux SA et al. v Groupe Bruxelles Lambert SA (GBL) et al. and Bertelsmann AG et al. (ECJ 15 October 2009) para 63; Case C-174/08, NCC Construction Danmark A/S v Skatteministeriet (ECJ 29 October 2009) para 42. 147 See Jacqué (2018), para 886 et seq. Thus, e.g., the Court applies principles of international law in case of conflicting international treaties, i.e. a contradiction between the EEC Treaty and a thirdparty-agreement; see Case 10/61, Commission v Italy (ECJ 27 February 1962) p. 11; it has also referred to the principle that a state cannot “refuse its own nationals the right to entry or residence”; see Case 41/74, Yvonne von Duyn v Home Office (ECJ 4 December 1974) para 22; on the pacta sunt servanda principle, see Case C-162/96, A. Racke GmbH & Co. v Hauptzollamt Mainz (ECJ 16 June 1998) para 49; on the principle of good faith as a principle of customary international law, cf. Case T-115/94, Opel Austria GmbH v Council (CFI 22 January 1997) para 90. 148 Cf. Case 11/70, Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (ECJ 17 December 1970) para 4: “In fact, respect for fundamental rights forms an integral part of the general principles of law protected by the Court of Justice. The protection of such rights, whilst inspired by the constitutional traditions common to the member states, must be ensured within the framework of the structure and objectives of the Community.” 149 Cf. Schwarze (2011), p. 721. 150 Kotzur (2010), p. 247. 151 Schwarze (2011), p. 723 et seq.; see to this term also Joined Cases 63–69/72, Wilhelm Werhahn Hansamühle et al. v Council (Opinion of Advocate General Roemer of 18 September 1973), p. 1259 et seq.

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the Member States, must be ensured within the framework of the structure and objective of the Community [Union].152 The overriding cultural achievement of the Member States is freedom. The general principles of law are therefore those conditions that are necessary for freedom to be lived out. These are, first, the fundamental rights153 and, second, the constitutional framework alongside the fundamental rights themselves.154 The general principles of law were particularly important for the basic legal doctrine on fundamental rights of the former Community and now the Union. Fundamental rights in the context of the European Communities were developed on this basis by the ECJ.155 However, with the entry into force of the EUCFR, this aspect of Union fundamental rights has become significantly less important. The Court can now rely on a written catalogue in its case law and does not have to develop a European version of fundamental rights out of the Member States’ standards and their judicial and dogmatic concepts. Meanwhile, the constitutional basic framework or rather the catalogue of values of the Union is of crucial significance,156 as they are a result of the constitutional traditions common to the Member States of the Union. These are the principles of democracy, European welfare state and the rule of law, which in turn can be subdivided into several subprinciples, such as legal certainty,157 proportionality158 and separations of powers.159 Also, the principle of the protection of legitimate expectations, although it was first only established in the German legal order,160 has meanwhile become part of the Union’s canon of values.161 Over time, some of these principles have also been incorporated into the Treaties. For example, Title II of the TEU sets out provisions on democratic principles. In

152 Case 11/70, Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (ECJ 17 December 1970) para 4. 153 See Jacqué (2018), para 892 et seq. 154 Kotzur (2010), p. 250. 155 Case 29/69, Erich Stauder v City of Ulm, Sozialamt (ECJ 12 November 1969) para 7. 156 Cf. Marti (2017), p. 607 et seq., on the development from “common values of the Member States” to “values of the EU”, which means substantially that Member States can violate through their own legislation the (former) common values. 157 See Jacqué (2018), para 895 et seq.; first mentioned in Joined Cases 42 and 49/59 Breedband N. V. v Société des Aciéries du Temple, High Authority, Koninlijke Nederlandsche Hoogovens en Staalfabrieken, Società Breda Siderurgica, (ECJ 12 July 1962) p. 158. 158 See Jacqué (2018), para 897 et seq; see with further references Joined Cases C-293/12, C-594/ 12 Digital Rights Ireland Ltd. v Minister for Communications, Marine and Natural Resources and Others and Kärntner Landesregierung and Others (ECJ 8 April 2014) para 46; cf. also Joined Cases C-581/10 and C-629/10 Emeka Nelson and Others v Deutsche Lufthansa AG and TUI Travel plc and Others v Civil Aviation Authority (ECJ 23 October 2012) para 71, where proportionality is called a “general principle of EU law”. 159 Kotzur (2010), p. 251 with further references; Häberle (2010), p. 199; cf. also Jacqué (2018), para 890, who does not qualify the principle of institutional balance a general principle but rather a principle that is derived from the institutional provisions. 160 Blanke (2000), p. 13 et seqq., 19 et seqq., 33 et seqq.; Marti (2017), p. 608. 161 Case 112/77, August Töpfer & Co. GmbH v Commission (ECJ 3 May 1978) para 18 et seq.

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addition, the principle of proportionality is now enshrined in the Treaties (Article 5.4 TEU). The principle of separation of powers is codified in the Treaties, but only in terms of the institutional “balance of powers” (➔ para 18) insofar as the competences of the organs are listed and thus separated from each other (Title III TEU; Part Six, Title I, Chapter 1 TFEU). This principle “is characteristic of the institutional structure of the Community”.162 Legal certainty, on the other hand, fits in with this rather vague category of general legal principles.163 It is defined in the judgment Opel Austria of the Court of First Instance as follows: “The principle of legal certainty requires Community [Union] legislation to be certain and its application foreseeable by individuals and that every Community [Union] measure 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.”164 However, this principle is decisive only in very few cases.165 Finally, also the principles of direct applicability and primacy of EU law fall into the category of unwritten primary law. However, this has to be relativised, since both principles have now been codified at least in part (➔ para 75 et seqq., 78 et seqq.). 3.3.2.

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The Relationship Between TEU and TFEU

Article 1.2 sentence 2 TFEU determines almost in the same wording as Article 1.3 sentence 2 TEU (➔ Article 1 TEU para 58 et seq.) that the Treaties (TFEU and TEU) have the same legal value. Hence, all proposals in terms of legal policy were rejected that a basic treaty on the Union should have superiority over a treaty on the functioning of the Union and the latter one easier to amend.166 Indirectly, this is confirmed by Article 51 TEU, according to which “[t]he Protocols and Annexes to the Treaties shall form an integral part thereof”. These regulations are complemented by Article 6.1 TEU, which stipulates that the EUCFR shall have the same legal value as the Treaties (Article 6.1 (1) TEU; ➔ Article 6 TEU para 19 et seqq.). Consequently, a binary structure exists, consisting of the Treaties with the protocols and declarations on which the Union is based and that is complemented by the EUCFR, codifying the catalogue of fundamental rights. To that extent, the Treaties must be considered as a single text.167 This binary structure replaces the pillar model, which determined the Treaties’ shape and the structure from the Treaty of Maastricht until 162

First in Case 9/56, Meroni & Co., Industrie Metallurgiche, società in accomandita semplice v High Authority of the European Coal and Steel Community (ECJ 13 June 1958) p. 152. 163 Kaczorowska-Ireland (2016), p. 122 et seq. 164 Case T-115/94, Opel Austria GmbH v Council (CFI 22 January 1997) para 14. 165 Jacqué (2018), para 896; an application of this, e.g., in Case 120/86, J. Mulder v Minister van Landbouw en Vissereij (ECJ 28 April 1988) para 23–27. 166 Becker in Becker et al. (2019), Article 1 TFEU para 4. 167 Jacqué (2018), para 876; see also Mangiameli (2012), p. 21 et seq., p. 25 et seq.

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the Treaty of Nice. With the Treaty of Lisbon, the former three pillars (European Communities, the Common Foreign and Security Policy and cooperation in the field of justice and home affairs) became policy fields of the (monolithic) Union (➔ Article 1 TEU para 63 et seqq., 71 et seq.).168 Due to its complete regulation within the TEU (Article 21 et seqq.), the CFSP, the former second pillar of the prior TEU, however, remains an intergovernmental policy area in which special procedures under the principles of public international law apply.169 The Treaties can be distinguished with regard to a “constitutional block” (TEU) and a “block on the organisational law” of the Union (TFEU), the latter containing provisions which put the institutional rules of the TEU in concrete terms concerning Union’s competences, procedures and the range of the various policy areas under its responsibility (the “functioning of the Union”). However, a clear separation between these two blocks was not conceptualised by the Contracting States.170 Mainly, within the provisions on the Union’s organs many duplications can be found.171 The equal value of both Treaties was deemed necessary to underline that there is no hierarchical relationship between them. This provision results from the request by some Member States, in particular the UK, during the course of the treaty negotiations in the Intergovernmental Conference (➔ Article 1 TEU para 71). This equal value also becomes visible in terms of the treaty revision procedure. For both Treaties, the ordinary revision procedure applies in general. Article 48.6 TEU includes an exception, allowing for amendments within the third part of the TFEU in accordance with the simplified revision procedure (➔ Article 1 TEU para 67). As the EUCFR is not part of the Treaties, the ordinary revision procedure insofar does not apply.172 Nevertheless, a certain hierarchy of norms within the Treaties could be seen, in particular with a view to the different provisions concerning the revision of the Treaties.173 Further, the founding and constitutional principles of Union law including the provisions concerning fundamental freedoms and the internal market freedoms could be classified as higher-ranking norms.174 However, a systematic interpretation of the clear wording of sentence 2 of Article 1.2 TFEU does not support the assumption that there is a hierarchy between the norms of primary EU legislation.175 Hence, the lex superior or lex posterior principle cannot be applied 168

Cf. Obwexer (2009), p. 106. Cf. Piris (2010), p. 66, 68 et seq.; Blumann and Dubouis (2010), para 106. 170 Ruffert, in Calliess and Ruffert (2016), Article 1 AEUV para 2; Kadelbach, in von der Groeben et al. (2015), Article 1 AEUV para 2. 171 Ruffert, in Calliess and Ruffert (2016), Article 1 AEUV para 2. 172 Obwexer (2009), p. 103; on detailed information concerning the revision procedures of the EUCFR, cf. Schima (2009), p. 328 et seq. 173 For a profound analysis see Häde, in Pechstein et al. (2017), Article 1 AEUV para 17 et seqq.; v. Arnauld (2003), p. 195 et seq. 174 Cf. v. Arnauld (2003), p. 200 et seq.; with regard to the “founding principles of EU law” see v. Bogdandy (2010), p. 18 et seqq., 26 et seqq., 38 et seqq. 175 Häde, in Pechstein et al. (2017), Article 1 AEUV para 27. 169

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on conflicting norms of primary legislation. Such conflicts methodically can only be resolved through practical concordance (➔ Article 1 TEU para 73 et seq.).176

4.

Structure of the Union and Characteristics of Union Law

4.1. The Union as an Association of Sovereign States

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The vision of some of the founders of the EEC was to create, in the long term, a federal state177 or “the United States of Europe” (➔ Article 1 TEU para 33).178 However, this vision has not become reality. Europe was and still is a project of self-assertion of diverse political spaces.179 There is consensus nowadays that the current Union has no statehood and will not enter statehood in the near future (➔ Article 1 TEU para 32, 34).180 Nevertheless, it is also agreed that the Union is more than a mere confederation of states,181 especially because of the abundance of supranational elements (➔ para 46; Article 1 TEU para 30). To escape the dichotomy of federal state and confederation, the German Federal Constitutional Court has coined the term “association of sovereign states” (Staatenverbund) (➔ para 47). Partially, scholars developed deviant concepts. Thus, for example, the model of a federation is used to capture the Union under constitutional and public international law.182 A federation is described as an intermediate stage between federal state and confederation183 and elements of both forms of organisation are attributed to the Union.184 Overall, however, this latter attempt to classify the Union remains connected to the idea of an “association of sovereign states”, with, indeed, a deviating term (federation). On the other hand, the dichotomy of federal state and confederation is rejected in principle by some authors.185 To describe the Union, the Theory of the Federation is often applied.186 This theory dissolves the

176

Hesse (1999), para 72. See in this sense Hallstein (1969), who called the EEC an “unfinished federal state” (Europe in the making) or a “federal state in development”. 178 In this sense the German Chancellor Kohl (1992), p. 353, who, however, has distanced himself from this position; see Kohl (1993), p. 343 et seq. 179 See Di Fabio, NZZ of 29 July 2019. 180 German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 298. 181 Benz (2010), p. 322. 182 Benz (2010). 183 Benz (2010), p. 322. 184 Burgess (2000), p. 253 et seq.; Benz (2010), p. 323 et seq., discovers some federal elements concerning the organisation of the Union. 185 Schönberger (2004), p. 83 et seqq.; in this sense also Kelsen (1920), p. 281 et seqq. 186 Schönberger (2004), p. 85; Franzius (2010), p. 61 et seqq. (65). The constitutional theory of the Federation (Grundbegriffe einer Verfassungslehre des Bundes) has been developed essentially by 177

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conflicting categories of confederation or federal state, by declaring both statuses extremes on a scale of different types of federations.187 A federation is, according to the definition of C. Schmitt, “a permanent association that rests on a free agreement and that serves the common goal of the political self-preservation of all federation members, through which the comprehensive status of each individual federation member in political terms is changed in regard to the common goal.”188 A special feature of a federation is seen in its “state of limbo” (➔ para 46). The reason for that is that various questions concerning its constitution are not entirely clear. Thus, the withdrawal of a state from the federation is not fully regulated. Although the right of a state to withdraw from it is partially recognised, even then, the modalities have to be negotiated with the federation (➔ Article 50 TEU para 26 et seq.).189 Consequently, both the federation and its members must keep up their existence for the federation to continue to exist.190 Understanding the European Union as a Federal Polity expresses the challenge of modelling the institutional structure of the EU. It does not necessarily mean “federal state”, but may comprise other constructions of a federal nature.191 Imaginable is a “shared sovereignty”192 within this Polity between Union and Member States, which, on “the adjusted, legal coordinated togetherness” of the levels, can be conceptualised at the same time as “common” or “shared sovereignty” (➔ Preamble TFEU para 32).193 Following the two strands of legitimation, which are the Member States and the peoples, the Union Constitution is said to have a dual legitimacy. On a European process of constitutionalisation, there are many perspectives for assuming that it is based on multiple bearers of constitution-making powers, that is, a pouvoir constituant mixte (➔ Article 1 TEU para 23). Its central actors must be the citizens.194

Schmitt (1928), p. 363 et seqq.; see also Beaud (2009); with a focus on the German Confederacy (1815–1866) as a particular case, see Huber (1960), p. 583 et seqq. 187 Schönberger (2004), p. 98 et seq. 188 Schmitt (1928), p. 366 et seq. (our translation). 189 Schönberger (2004), p. 103; Mangiameli (2017), p. 164 et seqq. 190 Schmitt (1928), p. 371. 191 Cf. Oeter (2010), p. 80; prior to him v. Bogdandy (1999), p. 61 et seq., who classified the Union Treaties of Maastricht and Lisbon the creation of a “supranational federalism”. 192 Cf. Calliess (2010), p. 71; Habermas (2012), p. 22, 24 et seqq.; Mangiameli (2017), p. 166. In the opinion of Huber, “there are [at Member State level] not so many areas which are beyond the jurisdiction of the European Union anymore”. Accordingly, it is about “how much can still be cut off from the salami” until “nothing is left over”; see Huber (1993), p. 34. 193 Schliesky (2004), p. 529 et seqq., 531; Sommermann (2013), p. 711; Mangiameli (2017), p. 166. 194 Cf. Franzius (2010), p. 57; according to Giegerich (2003), p. 1430 (thesis II. 9), the Member States and the peoples share the constituent power of the Community together and on the whole; pursuant to Grimm (2016), p. 60, “the foundation of a genuine European democracy is only laid [. . .] when it can be shown that such a [constituent] power of the people exists in Europe”. Blanke

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4.2. Characteristics

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The Union, in its present state, is far more than an international organisation. It is not merely an intergovernmental organisation, but a unique political polity “sui generis”. However, “sui generis formulas alone are not able to show any way out of the dichotomous paradigm of confederation and federal state”.195 The association of sovereign states stands out for its supranational attributes among the international organisations (➔ para 46), but is characterised as a federal political community in particular by the following features:196

67 (1) The association of sovereign states is not a State but a polity able to gain autonomous political legitimacy characterised by a high degree of fragmentation and polycentrism197 (➔ Article 1 TEU para 37 et seqq., 61). Against the background of the two strands of democratic legitimation in the EU, there is a continually growing level of legitimation which stems from the wishes of the peoples of the Union (“citizens”) at EU level. Their wishes are expressed through representational bodies such as the European Parliament (Article 10.1 and 2) and the national parliaments (Article 12 TEU in conjunction with Protocol No. 1). National parliamentary participation procedures (i.e. beyond Article 12 TFEU, such as they have been established under the designation “responsibility for integration” (➔ para 7 et seq.; Article 1 TEU para 12) first in the case law of the German Federal Constitutional Court and then in the accompanying laws to the Lisbon Treaty) are a consequence of the dual legitimation of the Union’s constitution. In particular, these procedures provide the legal framework to make the decision of the national representative how to vote in the European Council or in the Council in case of conferral of sovereign powers upon the EU subject to prior authorisation of the national parliamentary bodies. 195

Cf. v. Bogdandy (2001), p. 10 (our translation); Franzius (2010), p. 24. In the following, reference is made in part to elements of the EU as an “association of sovereign states” which Di Fabio (1998), p. 140 f., has developed without embracing his overall understanding of the Union as an association of sovereign states, in particular of the sovereignty of the Member States as “masters of the constitution of the association of sovereign states” (ibid.). Therefore, the following characteristics of the “association of sovereign states” are neither identical in all respects with the (underlying restrictive) concept, which the German Federal Constitutional Court has developed in the Maastricht (1993) and in the Lisbon Decision (2009) following the coining of this term by P. Kirchhof. According to Kirchhof (1992), p. 43, the “association of sovereign states” has been built to achieve “legal unity in certain areas of life”, i.e., a “community of action for limited tasks” and a “cultural community in the essentials” (➔ Article 1 TEU para 35). The concept of “supranational federalism” (cf. v. Bogdandy 1999, p. 28 and 61 et seq.) which is also based on the concept of the “association” and the classification of the Union as a “political community” (Gemeinwesen) competes with Di Fabio’s specifications of the formula “association of sovereign states”. 197 Cf. Cappelletti et al. (1985) et seqq.; v. Bogdandy (1999), p. 43 et seqq. 196

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(2) The federation of states is a growing and successful Community of law (W. Hallstein198), which binds its sovereign measures to the guarantee of fundamental rights (point 5). (3) Sovereignty lies with the Member States; however, contrary to the attitude revealed by the German Federal Constitutional Court in the Maastricht ruling199 and in the Lisbon judgment,200 this increasingly relativised “supreme power” should not be interpreted in a backward and petrifying way. Instead, its change and its adaptability must be interpreted under the auspices of the openness towards European law (Europarechtsfreundlichkeit) and integration of the Member States’ constitutions. At the same time, this will prevent a preconstitutional concept and a nation-state-shaped understanding of the state. Namely, there can only be as much state as a national constitution in light of its openness towards European law builds up.201 (4) The association has far-reaching powers, comparable to federal quality and quantity, in particular legislative competences, its own administration and its own jurisdiction. (5) Powers of the association are subject to a wide range of fundamental rights (EUCFR), addressed primarily to the Union, and, when implementing Union law, also to the Member States (Article 51.1 first sentence EUCFR). Moreover, fundamental economic freedoms (“internal market freedoms”) bind in the first place the actions of the Member States, and second, those of the European Union as well. (6) The association has organs, partly like in the federal model (Parliament and Council), partly of original (supranational) composition (Commission). Due to the large number of Union peoples represented in the EP, this representation has not become a unitary organ. The multiplicity of Union peoples as a 198

Hallstein (1973), p. 31 et seqq. (our translation). German Federal Constitutional Court, 2 BvR 2134/92, 2 BvR 2159/92, Maastricht (Judgment of 12 October 1993) para 109, 112 (BVerfGE 89, 155 [188 et seq., 190]). 200 Cf. German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 220 et seqq., 248 et seq.; according to the wording used in this context of the judgment, the Federal Constitutional Court, ibid., para 248, seems to confess to a concept of sovereignty that is “demanded by the principle of democracy [and] in the valid constitutional system prescribed by the Basic Law in a manner that is open to integration and to international law.” In particular, in the following description of the tasks of the German state, the Federal Constitutional Court, ibid., para. 249 et seqq., expresses, however, against the background of the concept of sovereignty (instead of the concrete constitution), an anachronistic understanding of sovereignty. 201 Cf. on this understanding, which implicitly also includes a criticism of the concept of Di Fabio (1998), p. 140 (under point 2), in particular Häberle and Kotzur (2016), para 1258 et seq. Di Fabio later became rapporteur of the Second Senate of the German Federal Constitutional Court on the Lisbon Judgment. At least, he recognises that the end of the modern nation-state has come but does not draw the necessary consequences concerning the understanding of sovereignty, Di Fabio (1998), p. 140. Especially characteristic of him is that “the idea of sovereignty [. . .] is the constituent of the modern state thinking that cannot be moved out without the entire architecture collapsing”; it is therefore the “beginning and end of the modern state”; Di Fabio (1998), p. 125, 122. 199

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further characteristic of the polycentric structure of the association cannot be covered up by the fact that the Lisbon Treaty declares the “citizens”—and not the peoples202—to be the subjects directly represented in the European Parliament (Article 10.2 TEU). Nonetheless, the European Parliament is capable of fulfilling the task of defining, with the help of other institutions (in particular the Commission and the Council) and subsidiary bodies, the public interest of the association within the frame of supranational policies and in accordance with the contractually standardised objectives and values (TEU, TFEU, EUCFR).203 (7) The case law of the Court of Justice is independent, thus ensuring the compliance with Union law in the interpretation and application of the Treaties (Article 19.1 TEU) as an autonomous legal source (➔ para 79). In questions concerning fundamental rights protection, a judicial dialogue between the CJEU and the ECtHR has developed. In the relationship between the national Supreme Courts and the CJEU, concerning the protection of fundamental rights when secondary Union law is applied by Member States, a “cooperation” has evolved.204 But in light of the different interpretation of the primacy of Union law (➔ para 28, 44, 86) and the related aspirations of the German Constitutional Court to open up the way of the “ultra vires review” (to verify if obvious transgressions of the boundaries occur when the European Union claims competences) or the “identity review” (to examine whether, due to the action of European institutions, the principles under Article 1 and Article 20 of the Basic Law, declared inviolable in Article 79.3 of the Basic Law, have been violated) (➔ para 69) that cooperation is susceptible to problems.205 (8) Political legitimation is provided exclusively by the citizens of the Union (Article 10.2 (1) and 10.3 TEU), in parts directly (direct election of the European Parliament); in parts indirectly through the national legislative bodies’ election of the national executive bodies represented in the Council, a “choice” (e.g., the Commission—Article 17.3 (2) TEU); or an “appointment” (e.g., the Committee of the Regions—Article 305.3 TFEU). 202

Article 137 of the EEC Treaty referred to the Members of the European Parliament as the “representatives of the peoples of the States brought together in the Community”. 203 See also v. Bogdandy (1999), p. 28, who does not refer to the European Parliament, but speaks of the “public interest pursuit” by the Union; differently, v. Zanthier (1995/2011), p. 261, with a view to the position of the European Parliament pursuant to the Maastricht Treaty. 204 Regarding the cooperation between the Federal Constitutional Court and the Court of Justice of the EU, see German Federal Constitutional Court, 2 BvR 2134/92, 2 BvR 2159/92, Maastricht (Judgment of 12 October 1993) headnote 7 and para 70, 80 (BVerfGE 89, 155 [156, 174 et seq., 177]). Here, the Federal Constitutional Court summarises the reasons for a relationship between the two courts, as it has developed over the years to solve the original conflict on the applicability of national fundamental rights as judicial review standards in the application of secondary Community law. 205 According to Marti (2015), p. 639, due to “appréciations diamétralement opposées”, the judicial dialogue between the national and the EU level is considerably complicated.

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(9) The Commission’s executive and standard-setting activities are cooperative, with Member State executives being strongly involved in committee procedures (comitology). (10) The Union is an independent player on the international stage, but insofar as it is characterised by the principally intergovernmental character of the common foreign and security policy (see Articles 21 TEU et seqq., 23 et seqq., and 42 et seqq.; Article 205 TFEU), it is tied back to the Member States.206

4.3. Validity and Autonomy of Union Law

As early as 1963, the ECJ stated that the EEC Treaty “constitutes a new legal order of international law”.207 In the Decision Costa v E.N.E.L. (1964), the Court then stated that “the EEC 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”.208 Since then, the ECJ has no longer understood European law as part of international law, but much more as its own legal order.209 The Court also applies the usual international interpretative methods only in cases where the Treaties expressly require it.210 An important factor which gives rise to the autonomy of EU law is, in the view of the CJEU, its direct applicability, in particular in the area of fundamental (market) freedoms (➔ para 75 et seqq.). The national case law has adapted conceptually. Thus, the Italian Corte Costituzionale211 and then the German Federal Constitutional Court recognised the Community Treaties as an “independent legal system”, which flows from an “autonomous legal source” and “is neither part of the national legal system nor international law”.212 In fact, many of the Constitutional Courts of the Member States see the validity of the Union law in a national legal duty to apply it, rather than in its direct applicability. The picture that P. Kirchhof, the rapporteur of the 206

This does not apply in the area of trade policy, for which the Union holds the competence since the entry into force of the Treaty of Lisbon (Article 3.1 point (e) in conjunction with Articles 206 et seqq. TFEU). 207 Case 26/62, NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration (ECJ 5 February 1963) p. 12. 208 Case 6/64, Flaminio Costa v E.N.E.L. (ECJ 15 July 1964) p. 593. 209 Cf. Opinion 1/91, Competence of the Community to conclude international agreements concerning services and the protection of intellectual property (ECJ 15 November 1994) para 21. 210 Nettesheim, in Grabitz et al. (2020), Article 1 AEUV para 62 (released in 2012); Stein (1981), p. 1. 211 Italian Constitutional Court (Corte Costituzionale), Decision No. 98/1965, Acciaierie San Michele (Decision of 16 December 1965), EuR 1(2) [1966], p. 146–149 (148). 212 German Federal Constitutional Court, 2 BvL 52/71, Solange I (Decision of 20 May 1974) para 40 (BVerfGE 37, 271 [277 et seq.]); this case law stems from the first judgment of 18 October 1967 on this issue: German Federal Constitutional Court, 1 BvR 248/63, 1 BvR 216/67 (Decision of 18 October 1967) para 12 (BVerfGE 22, 293 [295]).

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Federal Constitutional Court on the constitutional complaints against the Treaty of Maastricht, has drawn about the German legal situation is just as formative as catchy: “In the result, only the German Parliament can build the bridge over that European law flows into Germany and applies here.”213 Therefore, the German Act approving the Union Treaty is decisive. Wherever this normative bridge does not support European Union law, it should at least not be legally binding in Germany.214 Following this “bridge theory”, the Federal Constitutional Court, due to “an application of constitutional law that is open to European law”, has explicitly claimed in the judgment on the Treaty of Lisbon the exclusive competence to declare inapplicable Union law—be it in the frame of an “ultra vires review” or an “identity review”—“to preserve the viability of the legal order of the Community”, and “taking into account the legal concept expressed in Article 100.1 of the Basic Law”.215 However, the Federal Constitutional Court then reduced the aboveoutlined position clearly in its Mangold Decision (2010) (➔ para 91; Article 5 TEU para 32 et seqq.; Protocol 17 para 15; Article 4 TEU para 50 et seqq.).216 Although the German Federal Constitutional Court construes European Union law as a merely “derived fundamental order”, it nonetheless proceeds from a formal separation of the two legal orders and, to that extent, a conceptually limited autonomy of the Union law.217 Thus, the German federal constitutional judges follow the constitutional jurisprudence of Italy,218 Spain219 and Hungary.220 The Czech Ústavní Soud has also stated in a judgment of 2008 that the Treaties are characterised by “the transfer of certain state competences that arises from the free will of the sovereign”.221 The German Constitutional Court thus sees, like others before, a derived legal order in the legal order of the Union. Although the French Conseil constitutionnel speaks of a “Community legal order integrated into

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Kirchhof (2009), p. 26 (our translation); already Kirchhof (1991), p. 15. German Federal Constitutional Court, 2 BvR 2134/92, 2 BvR 2159/92, Maastricht (Judgment of 12 October 1993) para 106 (BVerfGE 89, 155 186 et seq.]). 215 Cf. German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 241. 216 German Federal Constitutional Court, 2 BvR 2661/06, Mangold (Decision of 6 July 2010) para 56, 58 et seqq. 61. 217 German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 231; cf. Streinz (2019), para 130 et seqq. 218 Italian Constitutional Court, Decision No. 183/1973, Frontini (Decision of 18 December 1973), EuR 9(3) [1974], 255–262 (259); Italian Constitutional Court, Decision No. 170/1984, Granital (Decision of 5 Juni 1984), EuGRZ 12(4) [1985], p. 98–100 (99). 219 Spanish Constitutional Court, Declaration 1/2004, Constitutional Treaty (Decision of 13 December 2004) (BOE.No 3 of 4.1.2005, p. 5 et seqq.). 220 Hungarian Constitutional Court, Decision No. 30/1998, Agreement Europe (Decision of 22 June 1998), especially reasoning V. 2. 221 Czech Constitutional Court, Pl. ÚS 19/08, Treaty of Lisbon I (Decision of 26 November 2008) para 108. 214

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domestic law and distinct from international law” (➔ para 47),222 it also states that the constitution is the summit of the domestic legal order and the French participation in European integration is possible only by virtue of a national constitutional authorisation.223 In this context, Article 88-1 of the French Constitution, which describes the Union as an organisation that is “constituted by states”, should also be mentioned. The determination of the relationship between Union law and the national legal order is accompanied in some judgments of certain Member States’ constitutional courts—notably Italy, Germany, Spain, France,224 Poland and the Czech Republic225—with statements on the protection of key guarantees of the national constitutions (➔ Article 4 TEU para 50 et seqq.).226 Those courts have claimed to have their own responsibility to review infringements of their national constitutional identity by secondary legal acts of the Union. The case law of the German Federal Constitutional Court,227 which is most prominent among the courts of the Member States, has established the Union-related constitutional identity of the German Basic Law (Article 23.1 third sentence, Article 79.3 of the German Basic Law) as a fundamentally absolute concept which is only based on the Basic Law.228 It also specifies the requirements of the identity review with a view to the constitutional 222 French Constitutional Council, Decision No. 2007-560 DC, Treaty of Lisbon (Decision of 20 December 2007) para 7. 223 French Constitutional Council, Decision No. 2007-560 DC, Treaty of Lisbon (Decision of 20 December 2007) para 8; most recently French Constitutional Council, Decision No. 2012-653 (Decision of 8 August 2012) para 9. 224 See most recently French Constitutional Council, Decision No. 2017-749 DC, CETA (Decision of 31 July 2017) para 14; see also Mouton (2015), p. 651; Ritleng (2015), p. 632 with further references to the French case law. 225 On Czech, cf. Czech Constitutional Court, Pl. ÚS 19/08, Treaty of Lisbon I (Decision of 26 November 2008) para 91 et seq. 226 On Germany, cf. German Federal Constitutional Court, 2 BvR 197/83, Solange II (Decision of 22 October 1986) para 99 (BVerfGE 73, 339 [373]); the German Court actually used this instrument to reject EU law: German Federal Constitutional Court, 2 BvR 2735/14, Solange III (Decision of 15 December 2015) para 34 et seq., 52. See Blanke (2012), p. 214 et seqq.; Burchardt (2016). 227 German Federal Constitutional Court, 1 BvR 256/08 and others, Vorratsdatenspeicherung (Judgment of 2 March 2010); German Federal Constitutional Court, 2 BvR 987/10 and others, EFS (Judgment of 7 September 2011); German Federal Constitutional Court, 1 BvR 1215/07, AntiTerror-Datei (Judgment of 24 April 2013); German Federal Constitutional Court, 2 BvR 2728/13 and others, OMT (Referral to ECJ) (Order of 14 January 2014); German Federal Constitutional Court, 2 BvR 2735/14, Solange III (Decision of 15 December 2015); German Federal Constitutional Court, 2 BvR 2728/13 and others, OMT (Judgment of 21 June 2016) para 137; German Federal Constitutional Court, 2 BvR 1368/16 and others, CETA (Judgment of 13 October 2016); German Federal Constitutional Court, 2 BvR 859/15 and others, PSPP (Referral to ECJ) (Order of 18 July 2017); German Federal Constitutional Court, 2 BvR 859/15 and others, PSPP (Judgment of 5 May 2020). 228 Cf. Polzin (2018), p. 52 et seq. See my understanding of this case law based on the Lisbon judgment of the Federal Constitutional Court already in ➔ Article 4 TEU para 55 (first edition 2013).

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process as a limit to the precedence of application of Union law (➔ para 67). Finally, it also establishes a duty for the German constitutional organs to oppose measures taken by EU institutions, bodies, offices and agencies, which cause a breach of identity.229 Contrary to the view of the Federal Constitutional Court,230 the EU-oriented concept of constitutional identity has no equivalent in current EU law.231 It was therefore also explicitly criticised by Advocate General Cruz Villalón.232 It differs fundamentally from the case law of the CJEU on the first sentence of Article 4.2 TEU. In particular, German case law regards constitutional identity as the absolute justification for non-compliance with Union law, whereas the CJEU considers the “national identities” under Article 4.2 TEU to be only a criterion to be considered, in particular as regards the justification of breaches of fundamental freedoms.233 A clearly defined legal concept of the Union’s institutions on “national identities, inherent in their fundamental structures, political and constitutional [. . .]” (➔ Article 4 TEU para 39 et seqq.) so far, however, is not recognisable. The result is a non-terminological but factual difference between the CJEU and the highest courts of the Member States on the crucial question from which source the EU law can be deduced. Is there a separate, autonomous legal source, often referred to as the non-deducible “basic norm” (Grundnorm)234 (➔ Article 1 TEU para 61), which feeds Union law in the sense of legal “originality”, or is its validity 229

Polzin (2018), p. 52 et seqq. See German Federal Constitutional Court, e.g., 2 BvR 2728/13 and others, OMT (Judgment of 21 June 2016) para 140: “[. . .] Article 4 sec. 2 sentence 1 TEU essentially provides for identity review [. . .] and therefore it also conforms to the institutional situation of the European Union [. . .]”; ibid., para 188: “This holds all the more true if, as in the case at hand, by way of the principles of democracy and of the sovereignty of the people (Article 20 secs. 1 and 2 GG), the constitutional identity of a Member State is affected, which the European Union is required to respect (Article 4 sec. 2 sentence 1 TEU).” Different still the position of the German Court in the context of the reference for a preliminary ruling concerning “Outright Monetary Transactions (OMT)”; see German Federal Constitutional Court, 2 BvR 2728/13 and others, OMT (Referral to ECJ) (Decision of 14 January 2014) para 29: “Thus, the identity review performed by the Federal Constitutional Court is fundamentally different from the review under Art 4 sec. 2 sentence 1 TEU by the Court of Justice of the European Union. Article 4 sec. 2 sentence 1 TEU obliges the institutions of the European Union to respect national identities. This is based on a concept of national identity which does not correspond to the concept of constitutional identity within the meaning of Article 79 sec. 3 of the Basic Law, but reaches far beyond (cf. Case C-208/09, SaynWittgenstein (ECJ 22 December 2010) para 83: “Law on the Abolition of the Nobility” as an element of national identity). On this basis, the Court of Justice of the European Union treats the protection of national identity, which is required according to Article 4 sec. 2 sentence 1 TEU, as a ‘legitimate aim’, which must be taken into account when legitimate interests are balanced against the rights conferred by Union law [. . .].” 231 Konstadinides (2011), p. 195 et seqq.; Schönberger (2015), p. 54. 232 See Case C-62/14, Gauweiler et al. (Opinion of Advocate General Cruz Villalón of 14 January 2015) para 58–60. 233 See Case C-473/93, Commission v Luxembourg (ECJ 2 July 1996) para 35 et seq. 234 Kelsen (1967), p. 8, 193 et seqq. (Kelsen 1960, p. 8, 196 et seqq.); concerning the autonomy of Union law, Möllers (2010), p. 182, describes this characterisation as being senseless. 230

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ultimately derived from the sovereign, constitutionally sound decision of each individual Member State (“Regelungstotalität”), even if it is not (anymore) a matter of classical international treaty law? Both national and Union law, from their perspective, assert the existence of an autonomous ground of validity and thus their own legal independence. This legal pluralistic hypothesis leaves the respective postulates of autonomy and—consequently—the respective legal systems as incommensurate coexistence and locates them in a horizontal, non-hierarchically structured relation (“constitutional pluralism”). The existence of collisions between two or more legal norms of the two orders is recognised, yet this is not a conflict of validity, but a mere conflict of application in the sense of collision law (➔ para 94 et seqq.).235 The dispute about the ground of validity of Union law continues on the differences about the primacy of Union law (➔ para 84 et seqq.). Although the Member States still have the right to dissolve the Union through an actus contrarius, thereby retrieving sovereign powers conferred before upon the Union, they are de facto hindered from doing so by the wide range of transferral. The unanimity that the Member States demonstrated when it came to reject British ideas for a Brexit makes it clear that they are inextricably linked with each other and the single market as the basis of their economic existence is at stake. The question where Union law is derived from is closely interwoven with the state of limbo that characterises the constitutional and international law classification of the Union (➔ para 64 et seq.). That situation is reminiscent of a prominent label that S. von Pufendorf gave the Holy Roman Empire over 350 years ago: “irregulare aliquod corpus et monstro simile”.236 If the Union and the Member States succeed to further democratise the “Convention model”, which has been tried and tested in the drafting of the Charter of Fundamental Rights, through opening up further for political participation of the Union’s citizens (Article 1.2 TEU) and an evolutionary process of European constitutionalisation that is not aimed at full constitution, the search for the source of Union law is losing relevance.

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4.4. Direct Applicability and Effect of Union Law

The supranationality of the Union has a very decisive element: the direct applicability of EU law. This feature in particular underlines the striking difference between EU law and the codification of “ordinary” international law. Legislative acts of the Union are directly binding on and for the citizens of the Member States, but possibly also concerning third-country nationals who are subject to the sovereignty of the Union. This is clearly reflected in the provision on the legal instrument of the Regulation (Article 288.2 TFEU). However, it follows from the logic of supranationality and the resulting uniform legal order of the Union in the Member 235

Wendel (2011), p. 15 et seqq. v. Pufendorf (1994), p. 198 et seq. (“an irregular body much like a mythical beast”); see on this Osiander (2010), where also this translation is retrieved from. 236

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States that ultimately all Union acts are directly applicable.237 The Court has even ruled that directives and decisions beyond the wording of Article 288 TFEU can become directly applicable.238 The prerequisite for this is that Union law is clear and unconditional.239 In addition, individuals may rely directly on the applicable law of the Union before the authorities or courts of their State of residence. It gives them subjective public rights.240 For the constitutionalisation of the Union, which is extremely advanced in comparison with all other supranational structures, the central role of subjective rights is a decisive factor resulting from the direct applicability of EU law and has led to a judicialisation of Union law.241 The doctrine of the direct applicability of Union law was established for the first time by the ECJ in the van Gend & Loos case of 1963. Here the Court dealt with the direct applicability of primary law, namely, today’s Article 30 TFEU. The court ruled that the legal order of the EU “comprise[s] not only Member States but also their nationals. Independently of the legislation of Member States, Community law therefore not only imposes obligations on individuals but is also intended to confer upon them rights which become part of their legal heritage.”242 Thus, the Court took the decisive step for the further course of integration, namely, the individual law mobilisation of EU citizens. In the following years, the court applied this jurisprudence very extensively. In this way, individuals can also rely on EU law to obtain positive benefits from the state (e.g., the abolition of a discriminatory tax).243 In addition, this principle also works against (private) third parties and thus leads to an amalgamation of private law and “constitutional” guarantees.244

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Nettesheim (1995). Concerning decisions, see Case 9/70, Franz Grad v Finanzamt Trauenstein (ECJ 6 October 1970) para 9; concerning directives, see Case 41/74, Yvonne von Duyn v Home Office (ECJ 4 December 1974) para 15; cf. Horspool and Humphreys (2018), para 7.14. 239 See Case 26/62, NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration (ECJ 5 February 1963) p. 13; Case 57/65, Alfons Lütticke GmbH v Hauptzollamt Saarlouis (ECJ 16 June 1966) p. 210; with reference to further cases, cf. Hellmann (2009), p. 64. 240 Nettesheim, in Grabitz et al. (2020), Article 1 AEUV para 69 (released in 2012). 241 Möllers (2010), p. 180 et seq. 242 Case 26/62, NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration (ECJ 5 February 1963) p. 12. 243 Case 57/65, Alfons Lütticke GmbH v Hauptzollamt Saarlouis (ECJ 16 June 1966) p. 210. 244 Case 43/75, Gabrielle Defrenne v Société anonyme belge de navigation aérienne Sabena (ECJ 8 April 1976) para 38–40; cf. Horspool and Humphreys (2018), para 7.23 et seq. 238

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4.5. Primacy of Union Law

In case of a conflict of application (➔ para 94 et seqq.), at least two legal norms that apply in their respective legal systems and which are not superordinate or subordinate but differ in their legal consequences, require to be applied to the same case. 4.5.1.

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Meaning and Justification of the Doctrine

According to the case law of the CJEU, Union law prevails over every law of the Member States. This is the consequence of the van Gend & Loos Decision and, in particular, the doctrine based on it, according to which Community law constitutes an autonomous legal order (➔ para 44, 77).245 Subsequently, in the Case of Costa v E.N.E.L., the Court found that “the Treaty, an independent source of law, could not, because of its special and original nature, be overdriven by domestic legal provisions, however framed, without being deprived of its character as Community law and without the legal basis of the Community itself being called into question.”246 This case law has been reaffirmed repeatedly in subsequent decisions.247 More recently, the CJEU’s Grand Chamber in Case Winner Betting has once again underlined the primacy of EU law. Thereafter, the mere entry into force of EU law makes any conflicting or restrictive national law inapplicable. Each court must fully apply Union law and not apply conflicting provisions (➔ Declaration No. 17 para 22 et seqq.).248 M. Claes notes that the principle of primacy is not completely unknown in international law either; the specificity of EU law is rather the mixture of primacy and uniform direct effect. Normally, states are free to decide how to ensure primacy.249 In addition to the specific nature of EU law, this case law also seeks to ensure the homogeneity or uniformity of EU law and the achievement of the Union’s objectives (Article 3 TEU) and, in this respect, is linked to the principle of sincere cooperation (➔ Article 4 TEU para 87).250 The doctrine of primacy is a classic element of multi-layered legal orders.251 It shows that Member States retain 245

Cf. Horspool and Humphreys (2018), para 7.35. Case 6/64, Flaminio Costa v E.N.E.L. (ECJ 15 July 1964) p. 594; for an analysis of the Court’s argumentation technique in this decision, cf. Constantinesco (1983), p. 112–115. 247 See, e.g., Case 11/70, Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (ECJ 17 December 1970) para 3; Case 106/77, Amministrazione delle Finanze dello Stato v Simmenthal SpA (ECJ 9 March 1978) para 24—well settled case law. 248 See Case C-409/06, Winner Wetten GmbH v Bürgermeisterin der Stadt Bergheim (ECJ 8 September 2010) para 53 et seqq., with reference to Case 11/70, Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (ECJ 17 December 1970) para 3—well settled case law. 249 Claes (2015), p. 180 et seq. 250 Mangiameli (2012), p. 40; Horspool and Humphreys (2018), para 7.21. 251 Cf. Piris (2010), p. 80, who gives examples of a number of national constitutions such as Article VI.2 of the U.S. Constitution, Article 31 of the Basic Law (GG), and Article 49 of the Swiss Constitution. 246

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their constitutional competence formally but are no longer “unboundedly sovereign” regarding its content. To the extent that, at the level of the Union, the ensemble of the partial constitutional treaties (➔ Preamble TFEU para 27, 37), which has grown up here, fills up with classical and newer topics of the national constitution, the competences of the constitutional constituents of the Member States are diminishing.252 As early as 1984, this principle appeared in the first draft of the TEU (Spinelli Draft). It was followed by a further attempt to incorporate it into the Constitutional Treaty (Article I-6 TCE253). After the failure of this Treaty, some governments opposed the inclusion of the principle in the Treaty of Lisbon. Instead, the compromise solution was found to anchor the primacy in a separate Declaration (No. 17) to the Treaty (➔ Declaration No. 17 para 2 et seq., 9).254 4.5.2.

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Cases of Application

The most obvious application of the primacy principle is the classical norm collision. This case occurs when legal provisions are applicable to the same facts and require different legal consequences. There must, therefore, be a national law and a provision adopted in accordance with EU law or a provision of the Treaties, both applicable to the same facts (➔ Declaration No. 17 para 12). In addition, these two sets of laws must impose different legal consequences. In such a case, Union law prevails over the law of the Member State from the perspective of supranational law. In principle, individual and concrete administrative decisions (administrative acts) may also violate EU law (➔ Declaration No. 17 para 13).255 However, this applies only in exceptional cases256 when legally binding administrative acts that are contrary to European Union law are attacked, namely, if they were adopted before accession but impose a prohibition that continues into the post-accession period.257 Another application of the primacy principle is the undue impairment of the effectiveness of Union law. Hence, “the application of national law must not adversely affect the scope or impair the effectiveness of Community [Union] law”.258 Such situations can be found in breaches of the prohibition of 252

Cf. Häberle and Kotzur (2016) para 427. The wording of this provision was: “The Constitution and law adopted by the institutions of the Union in exercising of their competences conferred on it shall have primacy over the law of the Member States.” 254 Piris (2010), p. 79. 255 Case 158/80, Rewe-Handelsgesellschaft Nord mbH and Rewe-Markt Steffen v Hauptzollamt Kiel (ECJ 7 July 1981) para 43. 256 See just Herdegen (2019), § 10 para 4. 257 Case C-224/97, Erich Ciola v Land Vorarlberg (ECJ 29 April 1999) para 34. 258 See Case 54/81, Firma Wilhelm Fromme v Bundesanstalt für landwirtschaftliche Marktordnung (ECJ 6 May 1982) para 6; see also Case 106/77, Amministrazione delle Finanze dello Stato v Simmenthal SpA (ECJ 9 March 1978) para 21–23. 253

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discrimination, in the “practical impossibility” as well as in the “abolition of practical effectiveness”.259 While violations of the principle of non-discrimination are usually clear, the other two cases require a complex weighting. After all, these are only cases in which there is no classic conflict of norms, but rather, a Member State adopting a provision in an area for which the Union has no legislative power that leads to restrictions of EU law. This makes it necessary to balance the framework of action to which the Member States are entitled and the effective implementation of Union law.260 4.5.3.

Primacy Over Legislative and Sub-Legislative Acts of the Member States

On the primacy of EU law under national law, which is below the constitution, it should be noted that its enforcement at present is unanimously guaranteed in the Member States. While some domestic courts have still sometimes opposed the lexposterior rule or doctrine of implied repeal in effectively enforcing primacy in previous years of integration, this issue can now be considered resolved. This applies in particular to the case law of the French Conseil d’État and the Czech Constitutional Court;261 until the United Kingdom’s withdrawal, the case law of the House of Lords262 and the High Court could also be referred to.263 In addition, legal clarity in the perspective of conflict of law is ensured by positive constitutional regulations that expressly order or recognise the primacy of Union law over ordinary law. More and more Member States’ constitutions have, over time, adopted corresponding primacy clauses in their constitutions (e.g., Article 91 Constitution PL; Article 3a.3 Constitution SL; Article 7.2 second sentence Constitution SK; Article 2 Constitution LT; Article 117.1 Constitution IT), although constitutional reforms of this kind could not prevail in all Member States (e.g., Belgium).264 Overall, it can be noted that the primacy of Union law over national legislative and sub legislative acts is unanimously recognised in the constitutional orders of the Member States.

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Nettesheim, in Grabitz et al. (2020), Article 1 AEUV para 76 (released in 2012). Nettesheim, in Grabitz et al. (2020), Article 1 AEUV para 76 (released in 2012). 261 Cf. Wendel (2011), p. 416 et seqq. 262 Cf. the Factortame Decision of the House of Lords of 18 May 1989 (Factortame I, [1989] 2 All ER 692), of 11 October 1990 (Factortame II, [1991] 1 All ER 70) as well as of 28 October 1999 (Factortame IV, [1999] 4 All ER 906); The Factortame II Decision was preceded by the preliminary ruling in Case C-213/89, The Queen v Secretary of State for Transport, ex parte Factortame Ltd and Others I (ECJ 19 June 1990); and followed by the ruling in Case C-221/89, The Queen v Secretary of State for Transport, ex parte Factortame Ltd and Others II (ECJ 25 May 1991), which again led to the House of Lords’ Decision in Factortame IV. 263 Cf. Wendel (2011), p. 418–422. 264 Cf. Wendel (2011), p. 424 et seqq. 260

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Primacy Over National Constitutional Law

The Court of Justice assumes that even structural principles of the national constitutions are subject to the primacy of Union law (absolute primacy) and thus, in the event of a conflict of norms, must give way to the application of EU law (➔ Declaration No. 17 para 13).265 The same applies to fundamental rights as laid down in the national constitutions. Constitutional orders, in which the primacy of European Union law is fully recognised—also in relation to national constitutional law—even if it is “only” due to a position of the Constitutional or Supreme Courts, represent the numerical exception in the constitutional comparison. The most common approach—in the younger Member States—are differentiating solutions. This is the core of the conflict of laws issue.266 However, the collision scenarios are often hypothetical, which is clear evidence of the practical effectiveness of EU law in everyday legal life. The most frequent and, in practice, the most widely varying model to that extent is the use of judicial scrutiny reservations (gerichtliche Prüfungsvorbehalte) or final decision-making rights by national judicial authorities. The formulation of a fundamental rights-related scrutiny reservation took place for the first time in the history of European integration in Italian constitutional case law. After a substantial limitation of the Italian power of integration on the scale of human rights had already been indicated in a previous Decision of the Corte Costituzionale from 1965,267 the same Court claimed explicitly in its pioneering key Decision Fontine (1973) to have a right to a scrutiny reservation.268 The core contents of the Italian Constitution, protected by this judicial approach, in particular the fundamental rights, are referred to in the literature as “controlimiti”, that is to say as counterlimits to sovereignty restrictions made possible based on Article 11 of the Italian Constitution. In the meantime, by Decision of 16 April 2008, the Italian Constitutional Court has referred questions to the ECJ within the preliminary ruling procedure.269 Thus, it can be assumed a basic acceptance of the primacy of Union law under Italian constitutional law, subject to the proviso that the Corte Costituzionale does not declare, in a specific case, a breach of the fundamental

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See just and especially Case 11/70, Internationale Handelsgesellschaft mbH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (ECJ 17 December 1970) para 3. 266 Cf. Wendel (2011), p. 429 et seqq., 520 et seqq.; according to Huber (2001), p. 219 et seqq., the embodiment of the primacy of Union law and its precedence over conflicting constitutional law of the Member States “stands on feet of clay”. 267 Italian Constitutional Court, No 98/1965, Acciaierie San Michele (Judgment of 16 December 1965), EuR 1(2) [1966], 146–149 (148). 268 Italian Constitutional Court, No. 183/1973, Frontini (Judgment of 18 December 1973), EuR 9 (3) [1974], p. 255–262 (261 et seq.); see also the following Decisions of the Italian Constitutional Court: No. 170/1984, Granital (Judgment of 5 June 1984), EuGRZ 12(4) [1985], p. 98–100; as well as No. 232/1989, Fragd (Judgment of 13 April 1989). 269 Italian Constitutional Court, Nr. 103/2008, Presidente del Consiglio dei ministri v Regione Sardegna (Judgment of 16.4.2008).

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principles of the Italian Constitution or of inalienable human rights, if necessary after having referred to the CJEU for a preliminary ruling (➔ Declaration No. 17 para 14).270 In addition to the protection of national fundamental rights, the second dimension of protection of judicial scrutiny reservations in the case law of the Federal Constitutional Court—quite clearly since the Decision on the Maastricht Treaty on European Union271—has emerged from the issue of whether the measures of the Union are covered by its primary law (Treaties). Such a reservation specifically refers to the power of that Court to decide on any infringements of competences— so-called “ultra vires acts”—by the EU institutions (➔ Article 1 TEU para 44 et seq.).272 In the ruling on the Lisbon Treaty, the Federal Constitutional Court then outlined and varied its case law on “ultra vires review”, finally differentiating it in the Mangold Decision and defining the significant criterion of the apparent transgression of the limits of Union law.273 A preliminary milestone is the leading Decision of the Federal Constitutional Court concerning the ECB’s OMT programme.274 The Court considers ultra vires acts of institutions, bodies, offices and agencies of the European Union to be an infringement of “the European integration agenda laid down in the Act of Approval under Article 23 sec. 1 sentence 2 of the Basic Law and thus also [of] the principle of sovereignty of the people (Article 20.2 sentence 1 of the Basic Law)”. Given their responsibility with respect to European integration, the Federal Constitutional Court binds the German constitutional organs to “counter acts of institutions, bodies, offices and agencies of the European Union that violate the constitutional identity or constitute an ultra vires act.”275 At the same time, it specifies the role of the constitutional identity addressed to the Union as a limit to the primacy of EU law and of the procedural requirements for the constitutional identity review.276 In the PSPP judgment (➔ para 7), the Federal Constitutional Court found that the Federal Government and the German Bundestag failed to take steps challenging that the ECB, in its decisions on the adoption and implementation of the PSPP, 270

Cf. Wendel (2011), p. 442 et seqq. with further references. German Federal Constitutional Court, 2 BvR 2134, 2 BvR 2159/92, Maastricht (Judgment of 12 October 1993) para 106 (BVerfGE 89, 155 [187 et seq.]). 272 On this development, cf. Mayer (2000), p. 87 et seqq.; Ludwigs and Sikora (2016), p. 126 et seqq. 273 German Federal Constitutional Court, 2 BvR 2661/06, Mangold (Decision of 6 July 2010) para 56, 58 et seqq., 61: “Ultra vires review by the Federal Constitutional Court can moreover only be considered if it is manifests that acts of the European bodies and institutions have taken place outside the transferred competences”. On the “ultra vires review” by other national courts, see Huber (2015), p. 900 et seq. 274 See German Federal Constitutional Court, 2 BvR 2735/14, Solange III (Decision of 15 December 2015); 2 BvR 2728/13 and others, OMT (Judgment of 21 June 2016). 275 German Federal Constitutional Court, 2 BvR 2728/13 and others, OMT (Judgment of 21 June 2016) headnotes 2 and 3. 276 German Federal Constitutional Court, 2 BvR 2728/13 and others, OMT (Judgment of 21 June 2016) para 136 et seqq.; cf. Polzin (2018), p. 55. 271

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neither assessed nor substantiated that the measures provided for in these decisions satisfy the principle of proportionality. According to the German judges, the review undertaken by the CJEU in its judgment of 11 December 2018 with regard to whether the ECB’s decisions on the PSPP satisfy the principle of proportionality “is not comprehensible from a methodological perspective [methodisch nicht nachvollziehbar] and must thus be considered arbitrary from an objective perspective”. Therefore, the German Court held that the judgment of the CJEU of 11 December 2018 manifestly exceeds the mandate conferred upon it in Article 19.1 second sentence TEU, “resulting in a structurally significant shift in the order of competences to the detriment of the Member States”. To this extent, the CJEU judgment itself was rendered ultra vires and thus has no binding effect in Germany.277 As a result, the German Federal Constitutional Court for the first time excluded a measure of a Union organ, here a judgment of the European Court of Justice, from the precedence of application of EU law.278 From the point of view of the German Constitutional Court the protected essentials declared not to be open for integration in Article 23.1 third sentence in conjunction with Article 79.3 of the Basic Law must not even exceptionally be relativised. This applies in particular to human dignity as the highest legal value of the constitutional order of the Basic Law.279 The main argument is the principle, already developed in the context of the Lisbon judgment,280 that the legislature may not transfer sovereignty to the Union under the Basic Law if this has an impact on the “constitutional identity” protected by the eternity guarantee of Article 79.3 of the Basic Law.281 Consequently, the legislature cannot transfer such powers to the Union, and, for its part, the European Union does not have such powers. The Court holds that the Union could not build such an interference either upon a per se admissible development of its legal competences, which the German legislature has transferred to the Union in a constitutionally compliant manner, since this also would be an act ultra vires.282 Thus, the German Federal Constitutional Court established the “constitutional identity” of the Basic Law as an interpretative limit of EU law. It states: “The European Union is an association of sovereign states, of constitutions,

277

German Federal Constitutional Court, 2 BvR 859/15 and others, Public Sector Asset Purchase Programme—PSPP (Judgment of 5 May 2020) Headnote 2, para 118 et seqq., 133, 154. 278 German Federal Constitutional Court, 2 BvR 859/15 and others, Public Sector Asset Purchase Programme—PSPP (Judgment of 5 May 2020) para 234. 279 German Federal Constitutional Court, 2 BvR 2735/14, Solange III (Decision of 15 December 2015) para 124, 126, 138. 280 Cf. German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 332, 339. 281 On this see Huber (2015), p. 894–899 as well as pp. 901–903 for the “constitutional identity review” in other national courts. 282 German Federal Constitutional Court, 2 BvR 2735/14, Solange III (Decision of 15 December 2015) para 49; German Federal Constitutional Court, 2 BvR 2728/13 and others, OMT (Decision of 21 June 2016) para 137.

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administrations, and judiciaries (Staaten-, Verfassungs-, Verwaltungs- und Rechtsprechungsverbund) founded upon international treaties concluded between the Member States. [. . .] As masters of the Treaties (Herren der Verträge), the Member States, by ordering the applicability of European law at the national level, decide whether and to what extent Union law may claim applicability and precedence within the respective Member State. [. . .] The precedence of the Constitution (Article 20 sec. 3 GG) also obliges the constitutional organs to ensure that its limits are observed, even when participating in the implementation of the European integration agenda or further shaping or developing it.”283 In the Mangold Decision, the Federal Constitutional Court repeats in line with its previous case law: “The Federal Constitutional Court is hence empowered and obliged to review acts on the part of the European bodies and institutions with regard to whether they take place on the basis of manifest transgressions of competence or on the basis of the exercise of competence in the area of constitutional identity which is not assignable (Article 79.3 in conjunction with Article 1 and Article 20 of the Basic Law) [. . .], and where appropriate to declare the inapplicability of acts for the German legal system which exceed competences.”284 Altogether, the Karlsruhe Court has thus increasingly outlined in a number of Decisions the concept of constitutional identity, which is inextricably interwoven with the “principle” of the “primacy of the [national] constitution” which it developed in parallel since the Solange II Decision (1986).285 Together they should form a protective wall in defence of national constitutional autonomy.286 Increasingly, however, the criticism of the “grand formula” of constitutional identity is growing in the literature287 because it is not supported normatively by the eternity clause of Article 79.3 GG,288 and the “wall” that should be erected with it, because of the disagreement on the constitutional identity in the case law of the Supreme

283

German Federal Constitutional Court, 2 BvR 2728/13 and others, OMT (Judgment of 21 June 2016) para 140, 142, 164. 284 German Federal Constitutional Court, 2 BvR 2661/06, Mangold (Order of 6 July 2010) para 55. 285 German Federal Constitutional Court, 2 BvR 197/83, Solange II (Decision of 22 October 1986) para 104 (BVerfGE 73, 339 [375 et seq.]). 286 Rousseau (2015), p. 96 et seqq. 287 Cf. Lepsius (2015), p. 66 et seqq. mentions in this context the “misery of big constitutional formulas”. Goldhammer (2015), p. 106 et seqq., ironically speaks of a “big concept” (“Großbegriff”); see also Blanke and Pilz (2020), p. 290 et seqq. 288 Polzin (2018), especially at p. 143 et seqq.; Lepsius (2015), p. 65 et seq.; also Häberle and Kotzur (2016), para 1266, comment critically on the concept and scale of the “constitutional identity”, which is pointed out by the Federal Constitutional Court in its judgment on the Treaty of Lisbon; legal vagueness, arbitrariness of its contents, as well as the intentional political use of this “grand formula” are the main points of the critique by Schönberger (2015), p. 58 et seqq., Rousseau (2015), p. 99 et seqq. and Goldhammer (2015), p. 106 et seqq.; on the justification of the concept concerning the relationship between national fundamental rights, fundamental rights of the Union and human rights and fundamental freedoms of the ECHR in the interpretation and application of the ECJ and of the ECtHR cf., on the other hand, Walter and Vordermayer (2015), p. 124 et seqq.

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Courts of the Member States alone, is made of “straw and brushwood”.289 After all, the German Constitutional Court does not deduce from this overall conception, which aims at safeguarding constitutional reserves of the Member States, a general justification for the disregard of the primacy of Union law; however, the precedence of application of EU law should not take effect in exceptional cases in which “obvious transgressions of the boundaries [of open statehood]” might occur due to measures of the Union (➔ para 67; Article 4 TEU para 51 et seqq.). Insofar, in the Lisbon Judgment the Court had pointed out already: “[T]he Federal Republic of Germany does not recognise an absolute primacy of application of Union law, which would meet with constitutional objections, but merely confirms the legal situation as interpreted by the Federal Constitutional Court”290 (➔ Declaration No. 17 para 15).291 Rather, the German Constitutional Court bases such a relativisation of the principle of primacy exclusively on national constitutional law.292 In that respect, it interprets constitutional identity as an external limitation to integration while for European courts (and rightly so, due to the term being part of a concept of Union law) it imposes a mere internal limit (➔ Article 4 TEU para 55).293 The respect for the functioning of the supranational legal Community and the uniform validity of its legal order294 also, in normative terms, suggest that such control should be carried out only preventively, i.e. in particular before the signing of an integration treaty. The claim for a national ultimate responsibility of the judiciary as an emergency reserve must be limited to structural systematic anomalies characterised by disregard for the rule of law not only in depth but also in breadth. The possibility of an infringement of principles of a constitution of a Member State by individual acts of Union law or a single contested (wrong) decision of the CJEU taken alone may not be sufficient to exceed the procedural threshold for substantive review by a national constitutional court.295 A multitude of conflicts between Union law and national constitutional law has already been resolved in the past by means of a mutual interpretation “in conformity”, that means, by an interpretation of national constitutional law in conformity with Union law, and an interpretation of

289

Rousseau (2015), p. 100 (our translation). German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 331. 291 For comprehensive analyses of the national views of some Member States on the concept of “open statehood” see v. Bogdandy et al. (2008), §§ 14–26. 292 Cf. German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 332. 293 As an example of this interpretation in the French case law cf. French Constitutional Council, Decision No. 2017-749 DC, CETA, (Decision of 31 July 2017) para 9 et seq. 294 Cf. German Federal Constitutional Court, 2 BvE 2/08 and others, Lisbon (Judgment of 30 June 2009) para 241 and 337. 295 Cf. Wendel (2011), p. 523. 290

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Union law in conformity with the constitutional law of a Member State (➔ Declaration No. 17 para 16 et seqq.).296 4.5.5.

Legal Consequences of the Rule of Primacy

On the actual legal consequences of the application of the primacy rule, the ECJ merely states that “any provision of national law, which may conflict with [Community law]”, must be “set aside [. . .] whether prior or subsequent to the Community rule” (➔ Declaration No. 17 para 12).297 However, this does not say anything about what this non-application of national law means. More concretely, the question arises as to whether the Union provision prevails over national law or it merely takes precedence in its application. In the case of priority, the national provision, which conflicts with Union law, is suspended, thus this provision is void. The precedence of application, however, only leads to the consequence that the conflicting provision of current national law is “automatically inapplicable”.298 In other words, by virtue of the precedence of application of Union law, the national provision is only replaced by a Union provision on a case-by-case-basis. According to the majority of authors, a mere precedence of application should apply in the relationship between Union law and the law of the Member States.299 This proves to be more lenient for conflicting national law because its applicability remains unaffected in cases not induced by Union law. Moreover, this assumption corresponds more closely to the diction of the CJEU case law, which rules that because of the precedence of application, any provision of national law is “set aside”.300 The objective of the principle of primacy of Union law is thus achieved, while national law is essentially preserved. To enforce this rule, the ECJ states that “it is for the national courts in application of the principle of cooperation laid down in Article 5 of the EEC Treaty [now Article 4.3 TEU], to ensure the legal protection which persons derive from the direct of provisions of Community [Union] law”.301 This means that the individual has a right to effective legal protection by the national courts even if he invokes Union law that conflicts with national law.302 The Spanish Constitutional Court, in its much-publicised Declaration on the European Constitutional Treaty of 13 January 2004, distinguishes between two 296

Cf. Wendel (2011), p. 514 et seq., p. 516 et seq. Case 106/77, Amministrazione delle Finanze dello Stato v Simmenthal SpA (ECJ 9 March 1978) para 21—emphasis added. 298 Case 106/77, Amministrazione delle Finanze dello Stato v Simmenthal SpA (ECJ 9 March 1978) para 17. 299 See, e.g., Herdegen (2019), § 10 para 3; Hellmann (2009), p. 64; Mangiameli (2012), p. 40. 300 See, for example, Case 106/77, Amministrazione delle Finanze dello Stato v Simmenthal SpA (ECJ 9 March 1978) para 21. 301 Case C-213/89, The Queen v Secretary of State for Transport, ex parte Factortame Ltd and Others I (ECJ 19 June 1990) para 19—emphasis added. 302 See also Herdegen (2019), § 10 para 7. 297

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different conceptions of primacy.303 The first concept (so-called “primacia”) refers to the conflict of laws decision between existing provisions from different, but legally coexisting legal systems. Precedence in the sense of this non-hierarchical, pluralistic understanding designates merely a collision rule for the concrete application of the provision. Behind this is the specific understanding of the Union law principle of precedence as a rule of rule-selection. In contrast, the second concept (“supremacía”) refers to the question of the context of creation and therefore of priority of legal provisions within a particular legal order, here the Spanish. This precedence rule, in the sense of normative supremacy, is closely linked to the understanding of sovereignty as the origin and ultimate basis of all positive law within an autonomous entity. This approach of the Spanish Constitutional Court differentiates according to regulatory contexts—order-intern and ordertranscending effect—and thus goes beyond the difference between applicability and validity of a provision. Ultimately, however, the primacy of Union law, albeit not the national validity, is based on the authorisation of the Constitution itself. The application of the Spanish rule of conflict arises in this respect by an implicit reference to the Spanish Constitution.304 It guarantees consistency and contributes in a gentle way to the distribution of tasks in the multi-level system.305

5. 97

Union Law and Public International Law

The Union has undoubtedly emerged from a Treaty under public international law but has since deviated from these roots and forms its own legal order (➔ para 79). However, what is the relationship between Union law and other international law?

5.1. The Rank of International Public Law Within the Union Law and Its Direct Applicability

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99

The rank of public international law in the Union’s legal order is controversial and not necessarily easy to clarify. First, a distinction must be made between the international treaties concluded by the Member States and the general public international law on the one hand and the international agreements of the Union (➔ para 101 et seqq.) on the other. The general rules of international law probably need to be examined on a caseby-case basis concerning their applicability within Union law, especially since many of these rules are, in some way, part of European Union law. However, 303

Cf. Spanish Constitutional Court, Declaration 1/2004, Constitutional Treaty (Declaration of 13 December 2004) (BOE.No 3 of 4 January 2005, p. 5 et seqq.); cf. on this, Wendel (2011), p. 484 et seqq. 304 Cf. the major work by Peters (2001), p. 333 et seqq. 305 Wendel (2011), p. 490.

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Member States are prohibited from sanctioning each other under these rules or from claiming damages for breach of Union law, unless expressly required by Union legislation.306 In addition, Member States are not allowed to call arbitration tribunals in disputes with each other if the contending decrees are those that are part of EU law. In these cases, the CJEU has the sole right of decision (➔ Article 344 TFEU para 3, 6).307 However, many principles of international law are also binding on the Union (➔ para 56). In international agreements concluded by the Member States, the CJEU does not 100 see any commitment from the Union.308 This is not the case if Union law supports the relevant agreements.309 However, it can be seen that Union law, in particular primary law, prevails over international law. The situation is different in the case of obligations under international law which the Union itself has entered into. Such agreements constitute “an integral part of Community [Union] law”.310 They are adopted by the institutions of the Union under the rules of primary law and thus form part of secondary legislation. Later enacted secondary legislation may not contradict the international treaties of the Union.311 In that regard, the same principles apply to these agreements as they apply to other secondary legislation, namely, direct applicability and primacy (➔ para 75 et seqq., 78 et seqq.). Thus, the Court underlines that the fulfilment of obligations under international agreements concluded by the Union is for the Member States mainly a fulfilment of duties towards the Union (Article 216.2 TFEU).312

5.2. Conclusion of Treaties

The Treaty of Lisbon has provided the European Union with the competence to 101 conclude international agreements with third countries or international organisations (Article 216.1 TFEU). To do so, the Treaty requirements must be fulfilled, and the procedure provided for the conclusion (Article 218 TFEU) must be respected. The five alternative conditions for concluding such agreements, that is to say, “any undertaking entered into by entities subject to international law which has binding 306 Case C-5/94, The Queen v Ministry of Fisheries, Agriculture and Food, ex parte Hedley Lomas (Ireland) Ltd (ECJ 23 Mai 1996) para 19 et seq. 307 Case C-459/03, Commission v Ireland (ECJ 30 May 2006) para 121–131; Case C-284/16, Slovak Republic v Achmea BV (ECJ 6 March 2018) para 58–60. 308 See Case 70/87, Fédération de l’industrie de l’huilerie de la CEE (Fediol) v Commission (ECJ 22 June 1989) para 19 with further references. 309 Case 21/72, International Fruit Company NV and Others v Produktschap voor Groenten en Fruit (ECJ 12 December 1972) para 12. 310 Case 181/73, R. & V. Haegeman v Belgian State (ECJ 30 April 1974) para 5. 311 Case 21/72, International Fruit Company NV and Others v Produktschap voor Groenten en Fruit (ECJ 12 December 1972) para 6. 312 Case 104/81, Hauptzollamt Mainz v C.A. Kupferberg & Cie KG a.A. (ECJ 26 October 1982) para 13.

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force, whatever is its formal designation”,313 have been codified in Article 216.1 TFEU as follows:314 The conclusion of such an agreement must be provided for in the Treaties (first alternative); therefore, the Union’s competence to conclude a treaty is subject to the principle of conferral of powers (Article 5.1 TEU). Alternatively, the Union has an implicit competence to conclude treaties if “the conclusion of an agreement is necessary in order to achieve, within the framework of the Union’s policies, one of the objectives referred to in the Treaties” (second alternative) or the conclusion is provided for in a legally binding Union act (third alternative) or is likely to affect common rules (fourth alternative) or alter their scope (fifth alternative). 102 These explicit and implicit contracting powers relate only to the question of whether the Union, as an association of sovereign states, may conclude international treaties (institutional power of the Union). The following question as to whether the Member States may also undertake their own obligations under international law in the concerned policy area is defined by the qualification of the power to conclude treaties as exclusive (Article 2.1 in conjunction with Article 3 TFEU), shared (Article 2.2 TFEU) or parallel competence (Article 4.3 and 4.4 TFEU). In policy areas where part of the international agreement falls within the competence of the Union and another in the competence of the Member States (parallel competence), so-called mixed agreements can be concluded.315 These require ratification in all Member States. 103 The procedure to conclude an agreement is based in principle on Article 218 TFEU. The organ competence in this area lies with the Council. The EP has only a right to be heard, except in the cases of Article 218.6 second sentence point (a) TFEU. It is not involved in the areas of CSFP. Deviating procedures exist, for example, in the cases of Article 207 TFEU or 219 TFEU.

5.3. International Treaties Within the Union and Supplementary International Law of the Union

104 Finally, individual (or all) Member States can conclude international agreements with each other. This is particularly important when an agreement affects only a limited number of Member States and does not fall within the (exclusive) competence of the Union or is not enforceable by the Union organs. This possibility was

313

Opinion 1/75, Local Cost Standard (ECJ 11 November 1975) p. 1360; Case C-233/02, France v Commission (ECJ 23 March 2004) para 45. 314 Before the Lisbon Treaty, the ECJ had settled similar prerequisites in its case law; see Case 22/ 70, Commission v Council (ECJ 31 March 1971) para 23/29, 30/31; Case 3, 4 and 6/76, Cornelis Kramer and Others (ECJ 14 July 1976) para 19 et seq., 30 et seq. 315 Opinion 1/94, Competence of the Community to conclude international agreements concerning services and the protection of intellectual property (ECJ 15 November 1994) para 98, 105; see also Herdegen (2019), § 27 para 12. Blanke

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used for the first time on the Schengen Agreement (1990)316 and of the Prüm Convention (2005),317 hence in policy fields that were later absorbed by the Union’s competence for border checks, asylum and immigration.318 Much attention has recently been paid to the conclusion of the Treaty establishing the European Stability Mechanism (➔ Supplement to EMU: ESM).319 In that regard, a number of legal rules must be observed. “Internal Union treaties 105 of international law” (“binnenunionsvölkerrechtliche Verträge”)320 are permissible both in terms of the existence of the Union itself,321 and as an alternative to enhanced cooperation.322 Member States continue to have the competence to conclude inter-state treaties with each other where they have not conferred powers on the Union.323 Only if the Union has an exclusive competence, such cooperation could be excluded, since that form of competence prohibits national sovereigns from acting in that field.324 Concerning the international agreements concluded between the Member States, it is considered that, despite their formal separation from the Union, they must comply with certain requirements of Union law.325 That obligation to consider the interests of the Union or other Member States arises from the principle of sincere cooperation (➔ Article 4 TEU para 81 et seqq.),326 and is further specified in the specific principles for enhanced cooperation.327 316 Agreement between the Governments of the States of the Benelux Economic Union, the Federal Republic of Germany and the French Republic on the gradual abolition of checks at their common borders. Schengen, 14 June 1985, UNTS I-52750; Convention implementing the Schengen Agreement of 14 June 1985 between the Governments of the Benelux Economic Union, the Federal Republic of Germany and the French Republic on the gradual abolition of checks at their common borders. Schengen, 19 June 1990, UNTS A-52750. 317 Convention between the Kingdom of Belgium, the Federal Republic of Germany, the Kingdom of Spain, the French Republic, the Grand Duchy of Luxemburg, the Kingdom of the Netherlands and the Republic of Austria on the stepping up of cross-border cooperation, particularly in combating terrorism, cross-border crime and illegal migration. Prüm, 27 May 2005, UNTS volume 2617 No. 46562. 318 O.J. L 239/1 (2000). 319 Treaty Establishing the European Stability Mechanism between the Kingdom of Belgium, the Federal Republic of Germany, the Republic of Estonia, Ireland, the Hellenic Republic, the Kingdom of Spain, the French Republic, the Italian Republic, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Grand Duchy of Luxemburg, Malta, the Kingdom of the Netherlands, the Republic of Austria, the Portuguese Republic, the Republic of Slovenia, the Slovak Republic and the Republic of Finland of 2 February 2012, BGBl. II p. 983. 320 Weber (2014) (our translation). 321 v. Arnauld (2013), p. 511 et seq. with further references. 322 v. Arnauld (2013), p. 514 et seq. 323 Cf. Nettesheim (2012), p. 55 et seq. 324 v. Arnauld (2013), p. 512; cf. Case C-370/12, Thomas Pringle v Government of Ireland (ECJ 27 November 2012) para 94, 100 et seq. 325 See also Nettesheim (2012), p. 56. 326 Cf. also Case C-105/03, Criminal Proceedings against Maria Pupino (ECJ 16 June 2005) para 42. 327 v. Arnauld (2013), p. 515 et seq.

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Accordingly, the contracting Member States have to comply with the requirements of subsidiarity, respect for Union law (Article 323 TFEU), respect for the competences, rights and obligations of non-participating Member States (Article 327 TFEU), openness to all Member States (Article 328.1 (1) TFEU), and the rules of procedure to develop an enhanced cooperation (Articles 329 et seq. TFEU). The requirement of subsidiarity is rather weak in this respect. Due to the Member States’ intergovernmental acting, they are basically free in their actions. However, there should be no “escape into international law”. Moreover, the Member States are in a dialogue with the EU.328 The required respect for EU law is far more crucial. For the principle of the primacy of EU law (➔ para 77 et seqq.) continues to apply. Under no circumstances may Member States conclude treaties with each other that violate EU law. Otherwise, an infringement procedure can be initiated against them. A treaty that disregards these requirements is not invalidated but it is inapplicable if there is a violation (➔ Declaration No. 17 para 28 et seqq.).329 However, these treaties themselves, even if they make use of the borrowed EU administration (➔ para 109), do not apply to EU law. The obligation to respect Union law under such treaties ultimately establishes a Member States’ duty not to block or influence decisions at Union level in a way that makes a farce of the voice of other Member States. This strengthens the duty to a dialogue.330 Hence, the ECJ has ruled that a Member State can compromise by acting “without cooperation or consulting the Commission [. . .] the achievement of the Community’s task and the attainment of the objectives of the Treaty”.331 The minimum quorum of nine Member States calling for enhanced cooperation is irrelevant when concluding treaties between Member States. However, the principle of sincere cooperation requires that all Member States can participate in such treaties. Exceptions are cases in which this would be contrary to the purpose of the treaty in question. In particular, agreements are conceivable, in which a certain financial stability is a precondition for the participation in the treaty. An international treaty concluded between Member States can become part of Union law.332 There are no specific procedural requirements for international cooperation between Member States as they apply to enhanced cooperation. However, without the participation of the Union it is not possible for the participating Member States to “borrow” administrative capacities from the Union’s organs (Organleihe). This requires a separate decision on a “borrowed administration” arrangement, which must be taken within the Union. Such as decision was adopted by the Council—and not only by the participating Member States involved—regarding the ESM

328

v. Arnauld (2013), p. 516. v. Arnauld (2013), p. 516 et seq. 330 v. Arnauld (2013), p. 517 et seq. 331 Case C-266/03, Commission v Grand Duchy of Luxembourg (ECJ 2 June 2005) para 61. 332 v. Arnauld (2013), p. 518. 329

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Treaty.333 The Court of Justice is not clear on that point. Rather, it has set up a list of criteria according to which it is forbidden for the organs “to take decisions on their own” in the cases described.334 Additionally, the conferred tasks do not “alter the essential character of the powers conferred on those institutions” by the [. . .] Treaties.335

List of Cases ECJ/CJEU

ECJ 29.11.1956, 8/55, Fédération Charbonnière de Belgique v High Authority, ECLI:EU:C:1956:11 [cit. in para 6] ECJ 12.07.1957, 7/56 and 3-7/57, Algera et al. v Common Assembly, ECLI:EU: C:1957:7 [cit. in para 56] ECJ 13.06.1958, 9/56, Meroni v High Authority, ECLI:EU:C:1958:7 [cit. in para 19, 58] ECJ 27.02.1962, 10/61, Commission v Italy, ECLI:EU:C:1962:2 [cit. in para 56] ECJ 12.07.1962, 42 and 49/59, Breedband N.V. v Société des Aciéries du Temple and Others, ECLI:EU:C:1962:24 [cit. in para 58] ECJ 05.02.1963, 26/62, van Gend & Loos, ECLI:EU:C:1963:1 [cit. in para 44, 68, 75, 77] ECJ 15.07.1964, 6/64, Costa v E.N.E.L., ECLI:EU:C:1964:66 [cit. in para 44, 68, 79] ECJ 16.06.1966, 57/65, Lütticke v Hauptzollamt Saarlouis, ECLI:EU:C:1966:34 [cit. in para 75, 77] ECJ 15.03.1967, 8-11/66, Cimenteries v Commission, ECLI:EU:C:1967:7 [cit. in para 25] ECJ 12.11.1969, 29/69, Stauder v Stadt Ulm, ECLI:EU:C:1969:57 [cit. in para 57] ECJ 06.10.1970, 9/70, Grad v Finanzamt Trauenstein, ECLI:EU:C:1970:78 [cit. in para 75] ECJ 17.12.1970, 11/70, Internationale Handelsgesellschaft, ECLI:EU:C:1970:114 [cit. in para 56, 79, 86] ECJ 31.03.1971, 22/70, Commission v Council, ECLI:EU:C:1971:32 [cit. in para 6, 101] ECJ 12.12.1972, 21/72, International Fruit Company NV and Others v Produktschap voor Groenten en Fruit, ECLI:EU:C:1972:115 [cit. in para 100] ECJ 30.04.1974, 181/73, Haegeman v Belgian State, ECLI:EU:C:1974:41 [cit. in para 100]

333

v. Arnauld (2013), p. 518 et seq. Case C-370/12, Thomas Pringle v Government of Ireland (ECJ 27 November 2012) para 161. 335 Case C-370/12, Thomas Pringle v Government of Ireland (ECJ 27 November 2012) para 162. 334

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ECJ 04.12.1974, 41/74, van Duyn v Home Office, ECLI:EU:C:1974:133 [cit. in para 56, 75] ECJ 11.11.1975, Opinion 1/75, Local Cost Standard, ECLI:EU:C:1975:145 [cit. in para 101] ECJ 08.04.1976, 43/75, Defrenne, ECLI:EU:C:1976:56 [cit. in para 77] ECJ 14.07.1976, 3, 4 and 6/76, Kramer, ECLI:EU:C:1976:114 [cit. in para 6, 101] ECJ 05.05.1977, 101/76, Koninklijke Scholten Honig NV v Council and Commission, ECLI:EU:C:1977:70 [cit. in para 23] ECJ 09.03.1978, 106/77, Simmenthal, ECLI:EU:C:1978:49 [cit. in para 79, 83, 95] ECJ 03.05.1978, 112/77, Töpfer v Commission, ECLI:EU:C:1978:94 [cit. in para 58] ECJ 29.10.1980, 138/79, SA Roquette Frères v Council, ECLI:EU:C:1980:249 [cit. in para 37] ECJ 07.07.1981, 158/80, Rewe v Hauptzollamt Kiel, ECLI:EU:C:1981:163 [cit. in para 82] ECJ 11.11.1981, 60/81, IBM v Commission, ECLI:EU:C:1981:264 [cit. in para 25] ECJ 06.04.1982, 54/81, Fromme v BALM, ECLI:EU:C:1982:142 [cit. in para 83] ECJ 26.10.1982, 104/81, Hauptzollamt Mainz v C.A. Kupferberg & Cie KG a.A., ECLI:EU:C:1982:362 [cit. in para 100] ECJ 20.03.1986, 72/85, Commission v Netherlands, ECLI:EU:C:1986:144 [cit. in para 23] ECJ 23.04.1986, 294/83, Les Verts v Parliament, ECLI:EU:C:1986:166 [cit. in para 42, 48] ECJ 10.07.1986, 149/85, Wybot v Faure, ECLI:EU:C:1986:310 [cit. in para 19] ECJ 26.03.1987, 45/86, Commission v Council, ECLI:EU:C:1987:163 [cit. in para 16] ECJ 28.04.1988, 120/86, J. Mulder v Minister van Landbouw en Vissereij, ECLI: EU:C:1988:213 [cit. in para 58] ECJ 22.06.1989, 70/87, Fediol v Commission, ECLI:EU:C:1989:254 [cit. in para 100] ECJ 22.05.1990, C-70/88, Parliament v Council, ECLI:EU:C:1991:373 [cit. in para 18, 19] ECJ 19.06.1990, C-213/89, The Queen v Secretary of State for Transport, ex parte Factortame Ltd and Others I, ECLI:EU:C:1990:257 [cit. in para 84, 95] ECJ 25.05.1991, C-221/89, The Queen v Secretary of State for Transport, ex parte Factortame Ltd and Others II, ECLI:EU:C:1991:320 [cit. in para 84] ECJ 11.06.1991, C-300/89, Commission v Council, ECLI:EU:C:1991:244 [cit. in para 16] ECJ 14.12.1991, Opinion 1/91, European Economic Area, ECLI:EU:C:1991:490 [cit. in para 48, 68] ECJ 25.05.1993, C-199/91, Foyer culturel du Sart-Tilman ASBL v Commission, ECLI:EU:C:1993:205 [cit. in para 37] ECJ 15.11.1994, Opinion 1/94, Competence of the Community to conclude international agreements concerning services and the protection of intellectual property, ECLI:EU:C:1994:384 [cit. in para 16, 37, 102] Blanke

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ECJ 10.05.1995, C-417/93, Parliament v Council, ECLI:EU:C:1995:127 [cit. in para 37] ECJ 26.03.1996, C-271/94, Parliament v Council, ECLI:EU:C:1996:133 [cit. in para 16] ECJ 23.05.1996, C-5/94, The Queen v Ministry of Fisheries, Agriculture and Food, ex parte Hedley Lomas (Ireland) Ltd, ECLI:EU:C:1996:205 [cit. in para 99] ECJ 02.07.1996, C-473/93, Commission v Luxembourg, ECLI:EU:C:1996:263 [cit. in para 72] ECJ 10.06.1997, C-392/95, Parliament v Council, ECLI:EU:C:1997:289 [cit. in para 37] ECJ 16.06.1998, C-162/96, Racke v Hauptzollamt Mainz, ECLI:EU:C:1998:293 [cit. in para 56] ECJ 23.02.1999, C-42/97, Parliament v Council, ECLI:EU:C:1999:81 [cit. in para 16] ECJ 29.04.1999, C-224/97, Ciola, ECLI:EU:C:1999:212 [cit. in para 82] ECJ 09.09.1999, C-64/98 P, Petrides v Commission, ECLI:EU:C:1999:399 [cit. in para 28] ECJ 30.01.2001, C-36/98, Spain v Council, ECLI:EU:C:2001:64 [cit. in para 16] ECJ 23.03.2004, C-233/02, France v Commission, ECLI:EU:C:2004:173 [cit. in para 101] ECJ 30.05.2006, C-459/03, Commission v Ireland, ECLI:EU:C:2006:345 [cit. in para 99] ECJ 02.06.2005, C-266/03, Commission v Luxembourg, ECLI:EU:C:2005:341 [cit. in para 107] ECJ 16.06.2005, C-105/03, Maria Pupino, ECLI:EU:C:2005:386 [cit. in para 105] ECJ 08.09.2009, C-411/06, Commission v Parliament and Council, ECLI:EU: C:2009:518 [cit. in para 16] ECJ 15.10.2009, C-101/08, Audiolux et al., ECLI:EU:C:2009:626 [cit. in para 56] ECJ 29.10.2009, C-174/08, NCC Construction Danmark, ECLI:EU:C:2009:669 [cit. in para 56] CJEU 08.09.2010, C-409/06, Winner Wetten, ECLI:EU:C:2010:503 [cit. in para 79] CJEU 22.12.2010, C-208/09, Sayn-Wittgenstein, ECLI:EU:C:2010:806 [cit. in para 72] CJEU 23.10. 2012, C-581/10 and C-629/10, Nelson and Others, ECLI:EU: C:2012:657 [cit. in para 58] CJEU 27.11.2012, C-370/12, Pringle, ECLI:EU:C:2012:756 [cit. in para 105, 109] CJEU 22.01.2014, C-270/12, United Kingdom v Parliament and Council, ECLI: EU:C:2014:18 [cit. in para 19] CJEU 08.04.2014, C-293/12, C-594/12, Digital Rights Ireland, ECLI:EU: C:2014:238 [cit. in para 58] CJEU 06.03.2018, C-284/16, Achmea, ECLI:EU:C:2018:158 [cit. in para 99] CJEU 10.12.2018, C-621/18, Wightman, ECLI:EU:C:2018:999 [cit. in para 44]

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CFI

CFI 10.07.1990, T-51/89, Tetra Pak v Commission, ECLI:EU:T:1990:41 [cit. in para 25] CFI 22.01.1997, T-115/94, Opel Austria GmbH v Council, ECLI:EU:T:1997:3 [cited in para 14; 90]

Opinions of the Advocate General

Opinion of Advocate General Roemer of 18.09.1973, 63–69/72, Wilhelm Werhahn Hansamühle et al. v Council [cited in p. 1259 et seq.] Opinion of Advocate General Cruz Villalón of 14.01.2015, C-62/14, Gauweiler et al. [cited in para 58–60]

Czech Constitutional Court (Ústavní Soud)

Czech Constitutional Court 26.11.2008, Pl. ÚS 19/08, Treaty of Lisbon I [cited in para 91 et seq.; 108] (Retrieved from https://www.usoud.cz/en/)

French Constitutional Council (Conseil constitutionnel)

French Constitutional Council 20.12.2007, Decision No. 2007-560 DC, Treaty of Lisbon [cited in para 7; 8] French Constitutional Council 09.08.2012, Decision No. 2012-653 DC, Treaty on Stability, Coordination and Governance in the Economic and Monetary Union [cited in para 9] French Constitutional Council 31.07.2017, Decision No. 2017-749 DC, CETA [cited in para 9 et seq.; 14] (Retrieved from https://www.conseil-constitutionnel.fr/en)

German Federal Constitutional Court (Bundesverfassungsgericht)

German Federal Constitutional Court 18.10.1967, 1 BvR 248/63, 1 BvR 216/67, No constitutional complaint against EEC regulations [cited in para 12 ¼ BVerfGE 22, 293 (295)] German Federal Constitutional Court 20.05.1974, 2 BvL 52/71, Solange I [cited in para 22 ¼ BVerfGE 37, 271 (277 et seq.)] German Federal Constitutional Court 22.10.1986, 2 BvR 197/83, Solange II [cited in para 99; 104 ¼ BVerfGE 73, 339 (373; 375 et seq.)] Blanke

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German Federal Constitutional Court 12.10.1993, 2 BvR 2134/92, 2 BvR 2159/92, Maastricht [cited in headnote 7; para 70; 80; 103; 106; 108 et seqq.; 112; 125 ¼ BVerfGE 89, 155 (156; 174 et seq.; 177; 185 et seq.; 186 et seq.; 188 et seqq.; 190; 195 et seq.)] German Federal Constitutional Court 30.06.2009, 2 BvE 2/08, 2 BvR 1022/08, 2 BvR 1010/08, 2 BvR 1022/08, 2 BvR 1259/08, 2 BvR 182/09, Lisbon [cited in para 220 et seqq.; 229; 231; 232; 233; 236; 237; 238; 239; 241; 245; 262; 271; 279; 298; 316–319; 322; 324; 325–328; 329; 331; 332; 337; 339; 344; 346; 417] German Federal Constitutional Court 02.03.2010, 1 BvR 256/08, 1 BvR 263/08, 1 BvR 586/08, Vorratsdatenspeicherung German Federal Constitutional Court 06.07.2010, 2 BvR 2661/06, Mangold [cited in para 55; 56; 58] German Federal Constitutional Court 07.09.2011, 2 BvR 987/10, 2 BvR 1485/10, 2 BvR 1099/10, EFSF German Federal Constitutional Court 24.04.2013, 1 BvR 1215/07, Anti-TerrorDatei German Federal Constitutional Court 14.01.2014, 2 BvR 2728/13, 2 BvR 2729/13, 2 BvR 2730/13, 2 BvR 2731/13, 2 BvE 13/13, OMT (Referral to ECJ) [cited in 29] German Federal Constitutional Court 15.12.2015, 2 BvR 2735/14, Solange III [cited in para 34 et seq.; 49; 124; 126; 138] German Federal Constitutional Court 21.06.2016, 2 BvR 2728/13, 2 BvR 2729/13, 2 BvR 2730/13, 2 BvR 2731/13, 2 BvE 13/13, OMT [cited in para 136 et seqq.; 140; 142; 164] German Federal Constitutional Court 13.10.2016, 2 BvR 1368/16, 2 BvR 1444/16, 2 BvR 1482/16, 2 BvR 1823/16, 2 BvE 3/16, CETA German Federal Constitutional Court 18.07.2017, 2 BvR 859/15, 2 BvR 1651/15, 2 BvR 2006/15, 2 BvR 980/16, PSPP (Referral to ECJ) German Federal Constitutional Court 05.05.2020, 2 BvR 859/15, 2 BvR 1651/15, 2 BvR 2006/15, 2 BvR 980/16, PSPP (cited in headnote 2, para 111, 118 et seqq., 133, 154, 237) (Retrieved from https://www.bundesverfassungsgericht. de/EN/Homepage/home_node.html – from the Lisbon-Decision onwards)

House of Lords

House of Lords, 18.05.1989, Factortame I, [1989] 2 All ER 692 House of Lords, 11.10.1990, Factortame II, [1991] 1 All ER 70 House of Lords, 28.10.1999, Factortame IV, [1999] 4 All ER 906 (Retrieved from https://publications.parliament.uk/pa/ld/ldjudgmt.htm – full text is only available concerning the 1999 Factortame-Decision)

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Hungarian Constitutional Court (Alkotmánybíróság)

Hungarian Constitutional Court 22.06.1998, Decision No. 30/1998, Agreement Europe [cited in reasoning V. 2] (Retrieved from https://hunconcourt.hu/)

International Court of Justice

ICJ, 11.04.1949, Reparation for Injuries Suffered in the Service of the United Nations, [cited in ICJ Reports 1949, p. 182 et seqq.]

Italian Constitutional Court (Corte Costituzionale)

Italian Constitutional Court 16.12.1965, Decision No 98/1965, Acciaierie San Michele [cited in EuR 1(2) [1966], p. 148] Italian Constitutional Court 18.12.1973, Decision No. 183/1973, Frontini [cited in EuR 9(3) [1974], p. 259; 261 et seq.] Italian Constitutional Court 05.06.1984, Decision No. 170/1984 Granital [cited in EuGRZ 12(4) [1985], p. 99] Italian Constitutional Court 13.04.1989, Nr. 232/1989, Fragd

Spanish Constitutional Court (Tribunal Constitucional)

Spanish Constitutional Court 13.12.2004, Constitutional Treaty (BOE.No 3 of 4.1.2005, p. 5 et seqq.)

Permanent Court of International Justice

United States Supreme Court McCulloch v Maryland (17 U.S. 316 [1819]) (Retrieved from https://supreme.justia.com/cases/federal/us/) PCIJ 03.03.1928, Advisory Opinion No. 15, Jurisdiction of the Courts of Danzig. [cited in Publications of the Permanent Court of International Justice, Series B No. 15, p. 17 et seq.] References336 Bast, J. (2010). Legal Instruments and Judicial Protection. In A. von Bogdandy & J. Bast (Eds.), Principles of European constitutional law (2nd ed., pp. 345–397). Oxford/München: Hart Publishing/C.H. Beck. 336

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Lenaerts, K., & Gutiérrez-Fons, J. A. (2010). The constitutional allocation of powers and general principles of EU law. Common Market Law Review, 47(6), 1629–1669. Lepsius, O. (2015). Souveränität und Identität als Frage des Institutionen-Settings. Jahrbuch des öffentlichen Rechts der Gegenwart, 63, 63–90. Lerche, P. (1995). “Kompetenz-Kompetenz” und das Maastricht-Urteil des Bundesverfassungsgerichts. In J. Ipsen et al. (Eds.), Verfassungsrecht im Wandel. Festschrift für den Carl Heymanns Verlag (pp. 409–424). Köln: Carl Heymanns Verlag. Ludwigs, M., & Sikora, P. (2016). Der Vorrang des Unionsrechts unter Kontrollvorbehalt des BVerfG. Europäisches Wirtschafts- und Steuerrecht, 26(3), 121–131. Mangiameli, S. (2012). The union’s homogenity and its common values in the treaty on European Union. In H.-J. Blanke & S. Mangiameli (Eds.), The European Union after Lisbon. Constitutional basis, economic order and external action (pp. 21–46). Berlin Heidelberg: Springer. Mangiameli, S. (2017). Crisi del costituzionalismo e sovranità in Europa. In A. Ciancio (Ed.), Le trasformazioni istituzionali a sessant’ anni dai Trattati di Roma (pp. 135–174). Turin: G. Giappichelli Editore. Marti, G. (2011). Le pouvoir constituant européen. Brussels: Bruylant. Marti, G. (2015). L’avenir de la primauté : le dialogue des juges ? Revue de l’Union européenne, 593, 638–648. Marti, G. (2017). Les valeurs communes de l’Union européenne et la question du pouvoir constituant. Revue de l’Union européenne, 613, 606–610. Mayer, F. C. (2000). Kompetenzüberschreitung und Letztentscheidung. Das Maastricht-Urteil des Bundesverfassungsgerichts und die Letztentscheidung über Ultra vires-Akte in Mehrebenensystemen. Eine rechtsvergleichende Betrachtung von Konflikten zwischen Gerichten am Beispiel der EU und der USA. München: C.H. Beck. Mayer, F. C. (2007). Die Rückkehr zur Europäischen Verfassung? Ein Leitfaden zum Vertrag von Lissabon. Zeitschrift für ausländisches öffentliches Recht und Völkerrecht, 67(4), 1141–1217. Möllers, C. (2010). Pouvoir constituant – Constitution – Constitutionalisation. In A. von Bogdandy & J. Bast (Eds.), Principles of European constitutional law (2nd ed., pp. 169–204). Oxford/München: Hart Publishing/C.H. Beck. Mouton, J.-D. (2015). Les 50 ans de l’arrêt Costa : de la primauté absolue au dialogue des juges. Revue de l’Union européenne, 593, 649–652. Nettesheim, M. (1995). Der Grundsatz der einheitlichen Wirksamkeit des Gemeinschaftsrechts. In A. Randelzhofer, R. Scholz, & D. Wilke (Eds.), Gedächtnisschrift für Eberhard Grabitz (pp. 447–468). Munich: C.H. Beck. Nettesheim, M. (2012). Der Umbau der europäischen Währungsunion: Politische und rechtliche Grenzen. In S. Kadelbach (Ed.), Nach der Finanzkrise: Politische und rechtliche Rahmenbedingungen einer neuen Ordnung (pp. 31–77). Baden-Baden: Nomos. Obwexer, W. (2009). Aufbau, Systematik und tragende Struktur des Vertrags von Lissabon. In W. Hummer & W. Obwexer (Eds.), Der Vertrag von Lissabon (pp. 95–122). Baden-Baden: Nomos. Oeter, S. (2010). Federalism and democracy. In A. von Bogdandy & J. Bast (Eds.), Principles of European constitutional law (2nd ed., pp. 55–82). Oxford/München: Hart Publishing/C.H. Beck. Orator, A. (2017). Möglichkeiten und Grenzen der Einrichtung von Unionsagenturen. Tübingen: Mohr Siebeck. Osiander, A. (2010). Irregulare Aliquod Corpus Et Monstro Simile: Can historical comparisons help understand the European Union? SSRN Electronic Journal. Pechstein, M., Nowak, C., & Häde, U. (Eds.). (2017). Frankfurter Kommentar zu EUV, GRC und AEUV (Vol. 2). Tübingen: Mohr Siebeck. Pernice, I. (1995). Bestandssicherung der Verfassungen: Verfassungsrechtliche Mechanismen zur Wahrung der Verfassungsordnung. In R. Bieber & P. Widmer (Eds.), L’espace constitutionnel européen. Der europäische Verfassungsraum. The European constitutional area (pp. 225– 264). Schulthess: Zürich.

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Pernice, I. (1998). Constitutional law implications for a state participating in a process of regional integration. German constitution and “Multilevel constitutionalism”. In E. Riedel (Ed.), German reports on public law presented to the XV. International congress on comparative law, Bristol 26 July to 1 August 1998 (pp. 40–66). Nomos: Baden-Baden. Pernice, I. (2001). Europäisches und nationales Verfassungsrecht. Veröffentlichungen der Vereinigung der Deutschen Staatsrechtslehrer, 60, 148–193. Pernice, I., & Mayer, F. C. (2000). De la constitution composée de l’Europe. Revue trimestrielle de droit européen, 36(4), 623–647. Peters, A. (2001). Elemente einer Theorie der Verfassung Europas. Berlin: Duncker & Humblot. Pierre-Caps, S. (2015). Droit constitutionnel européen : une notion ambivalente. Revue de l’Union européen, 590, 461–462. Piris, J.-C. (2010). The Lisbon treaty. A legal and political analysis. Cambridge: Cambridge University Press. Polzin, M. (2018). Verfassungsidentität. Ein normatives Konzept des Grundgesetzes? Tübingen: Mohr Siebeck. Puetter, U. (2015). Deliberativer Intergouvernementalismus und institutioneller Wandel: die Europäische Union nach der Eurokrise. Politische Vierteljahresschrift, 56(3), 406–429. Rabe, H.-J. (2007). Zur Metamorphose des Europäischen Verfassungsvertrags. Neue Juristische Wochenschrift, 60(44), 3153–3157. Reuter, P. (1953). La Communauté européenne du charbon et de l’acier. Paris: Librairie générale de droit et de jurisprudence. Ritleng, D. (2015). Le principe de primauté du droit de l’Union : quelle réalité ? Revue de l’Union européenne, 593, 630–637. Rousseau, D. (2015). Die Verfassungsidentität – Schutzschirm für die nationale Identität oder Teil des europäischen Sterns? Jahrbuch des öffentlichen Rechts der Gegenwart, 63, 91–104. Schima, B. (2009). Grundrechtsschutz. In W. Hummer & W. Obwexer (Eds.), Der Vertrag von Lissabon (pp. 325–342). Baden-Baden: Nomos. Schimmelfennig, F. (2015). What’s the news in ‘New Intergovernmentalism’? A critique of Bickerton, Hodson and Puetter. JCMS: Journal of Common Market Studies, 53(4), 723–730. Schliesky, U. (2004). Souveränität und Legitimität von Herrschaftsgewalt. Die Weiterentwicklung von Begriffen der Staatslehre und des Staatsrechts im europäischen Mehrebenensystem. Tübingen: Mohr Siebeck. Schmitt, C. (2008). Constitutional theory. Duke: Duke University Press; English translation of Schmitt, C. (1928). Verfassungslehre. München: Duncker & Humboldt. Schönberger, C. (2004). Die Europäische Union als Bund: Zugleich ein Beitrag zur Verabschiedung des Staatenbund-Bundesstaat-Schemas. Archiv des öffentlichen Rechts, 129(1), 81. Schönberger, C. (2015). Identitäterä – Verfassungsidentität zwischen Widerstandsformel und Musealisierung des Grundgesetzes. Jahrbuch des öffentlichen Rechts der Gegenwart, 63, 41–62. Schusterschitz, G. (2009). Rechtsakte und Rechtsetzungsverfahren. In W. Hummer & W. Obwexer (Eds.), Der Vertrag von Lissabon (pp. 209–235). Baden-Baden: Nomos. Schwarze, J. (2011). Zwischen Tradition und Zukunft: Die Rolle allgemeiner Rechtsgrundsätze im Recht der Europäischen Union. Deutsches Verwaltungsblatt, 126(12), 721–727. Snyder, F. (1993). The effectiveness of the European Union law. Institutions, processes, tools and techniques. Modern Law Review, 56(1), 19–54. Sommermann, K.-P. (2013). Integrationsgrenzen des Grundgesetzes und europäischer Verfassungsverbund: Brauchen wir eine neue Verfassung?. Die Öffentliche Verwaltung, 66(18), 708–714. Stein, E. (1981). Lawyers, judges, and the making of a transnational constitution. The American Journal of International Law, 75(1), 1. Streinz, R. (Ed.). (2018). EUV/AEUV. Vertrag über die Europäische Union und Vertrag über die Arbeitsweise der Europäischen Union (3rd ed.). Munich: C. H. Beck. Streinz, R. (2019). Europarecht (11th ed.). Baden-Baden: Nomos.

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von Arnauld, A. (2003). Normenhierarchien innerhalb des primären Gemeinschaftsrechts. Gedanken im Prozess der Konstitutionalisierung Europas. Europarecht, 38(2), 191–216. von Arnauld, A. (2013). “Unions(ergänzungs)völkerrecht”. Zur unions- und verfassungsrechtlichen Einbindung völkerrechtlicher Instrumente differenzierter Integration. In M. Breuer, A. Epiney, A. Haratsch, S. Schmahl, & N. Weiß (Eds.), Der Staat im Recht: Festschrift für Eckardt Klein zum 70. Geburtstag (pp. 509–526). Berlin: Duncker & Humblot. von Bogdandy, A. (1999). Supranationaler Föderalismus als Wirklichkeit und Idee einer neuen Herrschaftsform. Zur Gestalt der Europäischen Union nach Amsterdam. Baden-Baden: Nomos. von Bogdandy, A. (2001). Beobachtungen zur Wissenschaft vom Europarecht. Der Staat, 40(1), 3–43. von Bogdandy, A. (2010). Founding principles. In A. von Bogdandy & J. Bast (Eds.), Principles of European constitutional law (2nd ed., pp. 11–54). Oxford/München: Hart Publishing/C.H. Beck. von Bogdandy, A., & Bast, J. (2010a). The constitutional approach to EU law – From taming intergovernmental relationships to framing political processes. In A. von Bogdandy & J. Bast (Eds.), Principles of European constitutional law (2nd ed., pp. 1–7). Oxford/München: Hart Publishing/C.H. Beck. von Bogdandy, A., & Bast, J. (2010b). The federal order of competences. In A. von Bogdandy & J. Bast (Eds.), Principles of European constitutional law (2nd ed., pp. 275–307). Oxford/ München: Hart Publishing/C.H. Beck. von Bogdandy, A., Cruz Villalón, P., & Huber, P. M. (Eds.). (2008). Handbuch Ius Publicum Europaeum. Vol. II: Offene Staatlichkeit – Wissenschaft vom Verfassungsrecht. Heidelberg: C. F. Müller. von der Groeben, H., Hatje, A., & Schwarze, J. (Eds.). (2015). Europäisches Unionsrecht. Vertrag über die Europäische Union – Vertrag über die Arbeitsweise der Europäischen Union – Charta der Grundrechte der Europäischen Union (7th ed.). Baden-Baden: Nomos. von Pufendorf, S. (1667/1994). De Statu Imperii Germanici ¼ Die Verfassung des deutschen Reiches (edt. and translated by H. Denzer). Frankfurt/M. Leipzig: Insel Verlag. von Zanthier, B. (1995/2011). Die Interdependenzen zwischen Währungsunion und Politischer Union in der Europäischen Union des Maastrichter Vertrages. Ökonomische Funktionsbedingungen – nationale Souveränität – Integrationsmechanimus. Hamburg: Diplomica. Voßkuhle, A. (2010). Der europäische Verfassungsgerichtsverbund. Neue Zeitschrift für Verwaltungsrecht, 9(1), 1–8. Walter, C., & Vordermayer, M. (2015). Verfassungsidentität als Instrument richterlicher Selbstbeschränkung in transnationalen Integrationsprozessen. Vergleichende Überlegungen anhand der Rechtsprechung von EuGH und EGMR. Jahrbuch des öffentlichen Rechts der Gegenwart, 63, 129–166. Weber, A. (2014). Europa- und völkerrechtliche Elemente der Gewährleistung von Haushaltsdisziplin in der Währungsunion. In H.-J. Blanke & S. Pilz (Eds.), Die “Fiskalunion” (pp. 3–23). Tübingen: Mohr Siebeck. Weber, A. (2019). European constitutions compared. Munich: C.H. Beck/Hart Publishing/Nomos. Weiler, J. (1981). The community system: The dual character of supranationalism. Yearbook of European Law, 1(1), 267–306. Weiler, J. H. H. (1995). The State “über alles”. Demos, Telos and the German Maastricht Decision. In O. Due, M. Lutter, & J. Schwarze (Eds.), Festschrift für U. Everling (Vol. II, pp. 1651– 1688). Baden-Baden: Nomos. Wendel, M. (2011). Permeabilität im europäischen Verfassungsrecht. Verfassungsrechtliche Integrationsnormen auf Staats- und Unionsebene im Vergleich. Tübingen: Mohr Siebeck. Zuleeg, M. (2010). The advantages of the European constitution – A German perspective. In A. von Bogdandy & J. Bast (Eds.), Principles of European constitutional law (2nd ed., pp. 763– 786). Oxford/München: Hart Publishing/C.H. Beck.

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Article 2 [Competences of the Union and Member States] 1. When the Treaties confer on the Union exclusive competence in a specific area, only the Union may legislate and adopt legally binding acts,32-33 the Member States being able to do so themselves only if so empowered by the Union or for the implementation of Union acts.40-43 2. When the Treaties confer on the Union a competence shared with the Member States in a specific area, the Union and the Member States may legislate and adopt legally binding acts in that area.45-49 The Member States shall exercise their competence to the extent that the Union has not exercised its competence.50-57 The Member States shall again exercise their competence to the extent that the Union has decided to cease exercising its competence.58-61 3. The Member States shall coordinate their economic and employment policies within arrangements as determined by this Treaty, which the Union shall have competence to provide.62-64 4. The Union shall have competence, in accordance with the provisions of the Treaty on European Union, to define and implement a common foreign and security policy,37, 65-70 including the progressive framing of a common defence policy.66 5. In certain areas and under the conditions laid down in the Treaties, the Union shall have competence to carry out actions to support, coordinate or supplement the actions of the Member States, without thereby superseding their competence in these areas.34-36, 71-72 Legally binding acts of the Union adopted on the basis of the provisions of the Treaties relating to these areas shall not entail harmonisation of Member States’ laws or regulations.72-73 6. The scope of and arrangements for exercising the Union’s competences shall be determined by the provisions of the Treaties relating to each area.74-80

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2. 3.

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The Division of Powers Between the European Union and the Member States: History and Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. Structure of the European Institutions and Their Purposes . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.2. Legal Sources of Community Law and Concurrency with National Sources . . . . . . . 9 1.3. Approximation of the Legislations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 1.4. Implied Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Introduction of the Competence Rules in the Treaties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 The Categories of Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 3.1. The Flexibility Clause on Implied Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 3.2. The Limits, Type, and Enumeration of Competences . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 3.3. The Union’s Exclusive Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 3.4. The Shared Competences of the European Union with the Member States . . . . . . . 45 3.4.1 Horizontal Concurrent Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

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3.4.2 Protocol No. 25 on the Exercise of Shared Competence . . . . . . . . . . . . . . . . . . . 3.4.3 Declaration No. 18 on the Delimitation of Competences . . . . . . . . . . . . . . . . . . 3.5. Coordination of the Economic and Employment Policies of the Member States and Powers of the European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6. The Union Competence on a Common Foreign and Security Policy and on a Common Defence Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7. The Complementary Competences of the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Descriptive and Prescriptive Elements in the Proposals on the Division of Powers . . . . . List of Cases References

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The Division of Powers Between the European Union and the Member States: History and Contents

In the original EEC Treaty, there were no norms that can be compared to the rule being commented on here, which was introduced after the revision of the European Treaties by the Lisbon Treaty.1 The classification of the EU competences was made in the Constitutional Treaty in Article I-12 and constituted a sequel to the principles that determine the characteristics of European competence, namely, the principle of conferral, subsidiarity and proportionality, under Article I-11,2 which, with the Lisbon Treaty, were included in Article 5 TEU.3 If one were to ask how these two provisions on European competence are related—Article 2 TFEU and Article 5 TEU—the answer is that these two articles are the outcome of different historic moments and different choices and visions of European integration. The areas of competence and their regulation, under Articles 3, 4, 5, 6, and 352 TFEU for the flexibility clause, were envisaged as being part of the constitutionalization of the European system embodied by the Laeken Convention albeit in the midst of many uncertainties. The fundamental principles on competences first appeared in the 1992 Treaties, at the time of the Maastricht Treaty (Article G and B, which then became Article 5 TEC). They were a response to the huge expansion of European powers from the legal harmonization of the internal market, considerable use of the clause on implied powers, and decisions on competence adopted through the Single European Act. It was their function to curb European powers; or, at least, give the impression to the less pro-Europe public 1 Article 2 TEEC pointed out the “task” of the Community (“to promote throughout the Community a harmonious development of economic activities, a continuous and balanced expansion, an increase in stability, an accelerated raising of the standard of living and closer relations between the States belonging to it”) and the “means” to achieve the general objects of the Community (establishing a common market and progressively approximating the economic policies of Member States). This provision was complemented by Article 3 TEEC, which indicated the Community’s action to achieve the “purposes” set out in Article 2 TEEC (see Monaco 1965). 2 See Calliess (2006b). 3 See Schröder (2004), p. 8; Heemeyer (2004), Wuermeling (2004), Görlitz (2004), Nettesheim (2004), Ruffert (2004), Trüe (2002), Streinz (2005), von Bogdandy et al. (2003), Ritzer (2006), Calliess (2006a), Mayer (2004), Weatherill (2005), and Vadapalas (2006).

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opinion of Member States that there was a limit to the expansion of Europe’s legislative competence. It is no coincidence that the discipline of the fundamental principles on competences was completed with the Amsterdam Treaty of 1997, through Protocol (No 30) on the application of the principles of subsidiarity and proportionality. Therefore, it remains to be assessed which of the two rationales prevails in the current structure of European powers: the constitutionalization approach that, albeit within predetermined rules, would allow European legislative sources to take care of the “general interest” of the Union; or the limiting and pro-State approach set on maintaining or returning legislative powers to Member States. A study of the competences and European policies governed by the Treaties will tell us which prevails, or if a balance has been reached between unification at European level and degree of differentiation of Member States. The recent events linked to the economic and financial crisis that affected Europe and the Member States at a time when the provisions of the Lisbon Treaty were approved and entering into force, no doubt revealed Europe to have a strong power deficit. Indeed, Europe failed to respond adequately to the economic crisis for the lack of adequate legal foundations to act, as also demonstrated by the events linked to the amendment of Article 136 TFEU and the Treaty on the Fiscal Compact (➔ Article 136 TFEU para 28). However, it also showed that the Member States were unable to take measures to fight the crisis because the European rules did not allow them to adopt anti-cyclical public policies.4 From this standpoint, therefore, the issue of the division of competences between the European Union and the Member States is virtually an open issue. Moreover, in particular, the powers and competences of the Union that determine its role versus the Member States and the outside world, in the international community, need to be carefully reconsidered through a revision of the European Treaties.5

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1.1. Structure of the European Institutions and Their Purposes

An examination of European powers and the way they have been exercised shows that the conceptual categories typical of the classification of competences of federal orders—such as exclusive competence and shared competence—were present long before the rules on competence were laid down in the Lisbon Treaty, in the Constitutional Treaty, and in the previous treaties, especially the Maastricht Treaty. As regards the European Union, we need to remember that the division of competences does not lend itself to being examined according to the classical 4

Mangiameli (2016), and Calliess (2012). On this aspect, refer to the scenarios traced by the European Commission, White paper on the future of Europe. Reflections and Scenarios of the EU 27 by 2025, COM(2017)2025 of 1 March 2017. 5

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rules of the federal division of powers, based on the enumeration of powers conferred by Member States to the supranational entity,6 and because the Founding Countries did not intend to give life to a federal aggregation, but rather and quite simply to a Community for a specific purpose7 (Zweckverband funktioneller Integration).8 Still today, although European integration has been taken quite far, the fact of having gone beyond the functionalist theories has not led to the full reception of the federal theories of integration and repeatedly from various, even authoritative quarters, like the German Constitutional Court, it has been pointed out that the European Union is not (and—according to the German Constitutional Court—will never be) a federal State.9 However, this does not mean that the federalist structure was never mentioned in the earlier stages of the planning of the European Institutions, and indeed, there were personalities like Altiero Spinelli.10 Elements of federalism were envisaged as time went by and even progressively introduced into the European Treaties and—before the Treaties—applied in the case law of the EU Court of Justice.11 So much so that, on the definition of the powers of the European Union, common parlance includes terminology such as “exclusive competences”, “concurrent competences”, and “residual powers”, typical of the federal theory, and this despite there still remain many aspects of the functionalist model and original technique used for determining the tasks of the European Institutions. Anyone examining the original versions of the European Treaties will immediately notice the specific aspects of the “purposes” and “aims” of the supranational bodies. These are not comparable with those contained in the federal Constitutions, because the federations, albeit subjected to the principle of enumerated powers, as a rule are not established for sectorial and limited purposes (as instead occurs for international special-purpose organizations), but express the coexistence of a general community, in which both individuals and the constituent bodies (Member States, Regions, Provinces, Länder, etc.) are important and which, in general, give life to the alliance: the foedus.12

6

As already maintained elsewhere (Mangiameli 2006), the Community does not rigorously implement competence by subject matter and, at least up until the Lisbon Treaty, it did not envisage any real supranational enumeration of powers, unlike the tradition of federal systems. 7 See Haas (1958, 1964). 8 Ipsen (1972). 9 German literature is much divided on the scope of the ruling of the German Constitutional Court on the Treaty of Lisbon: the first critical position is due to a group of European law scholars who have signed an appeal (Das Lissabon-Urteil des Bundesverfassungsgerichts: - Auswege aus dem drohenden Justizkonflikt). For the different comments on the Judgment, see Kottmann and Wohlfahrt (2009), Everling (2010), Schwarze (2010), Terhechte (2010), Huber (2013), and Häde (2012, 2013). 10 See Spinelli and Rossi (1941). 11 Cf. Tizzano (1994), Calvano (2004), and van Ooik (2007). 12 On this point, see Di Salvatore (2008a).

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If we briefly read the opening articles of the original Treaties, it is clear that immediately after stating that they are establishing among themselves a “Community . . .” (Article 1 TECSC and Article 1 TEEC), the Member States lay down a provision in which they list the sectors of reference of the Community, which was right from the beginning the “establishment of a Common Market” (Article 2 TECSC and Article 2 TEEC). To be precise, there was a real mismatch between these initial provisions of the Treaties and their respective preambles. In particular, the Preamble to the ECSC Treaty contained the general principles and political values of the Community that range from “world peace” to the creation of a “broader and independent community among (European) peoples” and the “future common destiny” of these peoples, through the overcoming of “historic rivalries” among European peoples, “long divided by bloody conflicts.”13 The Preamble to the EEC Treaty appears to be less ambitious; it speaks about “trade”, “fair competition”, “common commercial policy”, “abolition of restrictions on international trade”, “employment” and “economic and social progress”, but reference is always made to the elimination of “barriers that divide Europe” and to the strengthening of “the safeguards of peace and liberty”.14 In the case of Article 3 TECSC and Article 3 TEEC, there is no real listing of powers but rather a set of tasks are mentioned that are general policy lines in the ECSC Treaty, and more specific, while being also policy lines (considering the gist of the expression “under the conditions and with the timing under this Treaty), in the EEC Treaty. Thus, it has been said that European competence was defined in a functionalist manner and according to an incremental technique and, with respect to this way of defining competence, the categories, typical of federal competence, would not directly apply (which distinguish competences into exclusive, concurrent, and residual). However, all this is not surprising if one considers that as part of the economic integration process, which started in 1951 with the of the ECSC Treaty and was concluded in 1957 with the signing of the EEC and EURATOM Treaties, there was the vicissitude of the “European Political Community”, characterized by authentic federal intentions and linked to the Treaty on the “European Defence Community” concluded on 27 May 1952, but abandoned on 30 August 1954, because France failed to ratify it.15 The limited horizon that set the boundaries of European integration explains therefore not only the different tone of the 1957 Preamble but above all the circumstance that the powers of the Community were expressed not by using a 13 For an analysis of the evolution of the Preambles of the Treaties and the efficacy of their statements, see Mangiameli (2013a). On both elements, see also Amato (2004), Cantaro and Magnani (2005), Corriente Cordoba (1973), Curti Gialdino (2012), Grossi (2004), Fumagalli (2014), Häberle (1982), Kulow (1997), Meyer and Hölscheidt (2019), Miliopoulos (2010), Monaco (1970), Tajadura Tejada (2003), and Trabucchi (1965). 14 See Mangiameli (2013d). 15 See Bertozzi (2003).

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federal language but rather the language typical of treaties which establish international organizations (as had occurred with the ECSC Treaty).16

1.2. Legal Sources of Community Law and Concurrency with National Sources

9

Moreover, unlike the provisions that define purposes and tasks, the European institutions had a federal type of profile right from the beginning given the way they shaped their legal sources (regulations and directives, Article 288 TFEU). Indeed, Community law has always been directly effective on individuals and Member States17 without the need for transposition acts, but their action was teleologically linked to given sectors and did not have the nature of “general power”—or at least it did not up until a given moment—since there always had to be close consequentiality between regulatory act and economic discipline. Nevertheless, even in this phase there was exclusiveness and concurrence of European powers, not in relation to objects or policies attributed to the Community, but concerning the legal sources established by the Treaties. Indeed, by envisaging a common legal system, the Treaties established a system of sources that were concurrent with the internal sources of Member States;18 and the adoption of “regulations” and “directives”, given their ruling in the Treaty, was—in the case of the former—suggestive of the exercise of a total regulatory power whereby the matters disciplined by the European order belonged exclusively to it; while in the case of the directives, by preserving the legislative intervention of Member States, the European legislation established a concurrence of legal sources between the Community and the Member State.19

16 In any case, the assignment of a given subject to one of the mentioned categories depended on how it was defined by case law. This did not contribute to making the system of competences very clear, so much so that this was referred to as a “true labyrinth of acts and procedures” (D’Atena 2005, p. 63). The complication deriving from the “fragmentary nature” of the division of powers in the absence of an exhaustive list is also pointed out by Baratta (2009), p. 111. Less negative is the viewpoint of Tesauro (2010), p. 99. 17 From this point of view, we recall the fundamental ruling by the Court of Justice, judgment 5 February 1963, 26/62, Van Gend en Loos, according to which: “the Community constitutes a new legal order of international law for the benefit of which the states have limited their sovereign rights, albeit within limited fields, and the subjects of which comprise not only Member States but also their nationals. [. . .] Community law therefore not only imposes obligations on individuals but is also intended to confer upon them rights which become part of their legal heritage.” 18 See Mangiameli (2008). 19 For a similar approach see D’Atena (2005), p. 60, who points out that “the regulations are the expression of a sort of konkurrierende Gesetzgebung: concurrent competence as implemented in Germany. This is [. . .] a competence that puts one of the parties in a condition to limit, in varying degrees, the competences of the entities with which it concurs, enabling it even to ‘oust them’ [. . .]. As regards the directives, the model used is called concurrent competence ‘Italian style’ [. . .]. A competence built on the basis of a division that is not only horizontal – or by subject matter, but [also] vertical, namely by type of discipline.”

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In this connection, it must be recalled that for given sectors, the EEC Treaty envisaged that the Community could be active through regulations (prohibition of discrimination, Article 7; elimination of discrimination in transport, Article 79; State aid, Article 94; European Social Fund, Article 125); or via regulations or directives (as in the case of agriculture, Article 43; free movement of workers, Article 49; competition, Article 87); or again, only via directives (customs duties, Article 14; common customs tariffs, Article 21; right of establishment, Article 54 [partly paragraph 3 point (g)], Article 56 and Article 57; services, Article 63; capitals, Article 69 and Article 70; approximation of legislations, Article 100 and Article 101; policy relating to economic trends, Article 103; balance of payments, Article 107; common trade policy, Articles 111, 112 and 113).20 In the application of the Treaty in practice, the European Court of Justice was progressively able to develop a qualification of the different powers, peculiarly based on the idea that “the Community acts normally on the basis of specific powers that do not need to be expressly laid down in the provisions of the Treaty, since they can be inferred, implicitly, from the provisions themselves.”21 In particular, it emphasized that when the competency to adopt measures within the sphere of a common policy (fishing) is transferred “fully and finally to the Community”, the Member States “no longer have the right to exercise autonomous competence over that matter and can act only in the absence of adequate action by the Council and only as managers of the common interest.”22 Moreover, with reference to the hypotheses where the Community legislator could act either through a regulation or a directive, as in the case of the Common Agricultural Policy, the Court has always spoken of a “discretionary power” of the Community “corresponding to the responsibilities laid down in Articles 40 and 43 of the Treaty”;23 and a similar power was recognized implicitly once the transient period was over, in the case of the common trade policy where the Community institutions therefore have “a broad discretionary power.”24

20

As in the case of customs duties, Article 14 TEEC; common customs tariffs, Article 21 TEEC; right of establishment, Article 54 TEEC (partly paragraph 3 point (g)), Article 56 and Article 57 TEEC; services, Article 63 TEEC; capitals, Article 69 and Article 70 TEEC; approximation of legislations, Article 100 and Article 101 TEEC; policy relating to economic cycles, Article 103 TEEC; balance of payments, Article 107 TEEC; common trade policy, Articles 111, 112 and 113 TEEC. 21 Opinion 2/94, Adoption of the Convention for the Protection of Human Rights and Fundamental Freedoms by the Community (ECJ 28 March 1996). 22 Case 269/80, Regina v Robert Tymen (ECJ 16 December 1981). 23 Case C-331/88, The Queen, the Minister of Agriculture v ex parte FEDESA and others (ECJ 13 November 1990). 24 Case C-150/94, United Kingdom v Council (ECJ 19 November 1998).

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11

140

12

13

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Now it is evident that in the first case it was deemed that the Treaty has given rise to an exclusiveness of the European legal system by attributing an immediate and direct efficacy to the provisions of the Treaty and to the regulations; while in the second case, the Treaty leaves it up to the Community legislator to choose between making a given matter of exclusive competence or give rise to a concurrence between European sources (directives) and the sources of domestic legislation. Finally, without considering the subsequent evolution, originated by the Court of Justice that ended up deeply changing the nature of the directive itself,25 for the case in which the Treaty envisaged that the Community should issue only this type of instrument, it may be argued that the “directive” gave rise to a compulsory concurrence between the sources,26 since not only would this be binding “with regard to the result to be achieved”, but above all it would compel the Member States to adjust their systems to the principles laid down in the directive, furthermore preventing the States, while adjustment was pending, from adopting acts going against the achievement of compliance of the internal system with Community law (so-called stand-still);27 the sole exception to this obligation was constituted by the case where the principles of the directive were already in force in the legal system of the Member State.28

1.3. Approximation of the Legislations

14

Among the cases of concurrence between sources (Community and domestic), where the provisions of the Treaty envisaged that the Community could intervene only by issuing “directives”, and where, in line of principle, the intention was not

25

Indeed, acknowledging that, on the one hand, in practice directives are often detailed and have clear normative contents, they do not leave the recipient States with any margin for appreciation in their transposition and, on the other hand, there are many cases of incorrect and belated transposition of the directives, and even failure to do so at all, the Court of Justice has, in time, attenuated the lack of direct effects of the directives. Thus, individuals have been acknowledged the right to challenge the heavily detailed directives before national judges even where they have not been transposed (Case 33/70, SpA SACE v Finance Minister of the Italian Republic (ECJ 17 December 1970); Case 41/74, Yvonne van Duyn v Home Office (ECJ 14 December 1974). In such cases, however, the direct effect is only vertical (between individuals and public administrations) and not also horizontal (between privates), see Case C-91/92, Paola Faccini Dori v Recreb Srl (ECJ 14 July 1994); Case C-103/88, Fratelli Costanzo SpA v Comune di Milano (ECJ 22 June 1989). For a thorough case law review on the topic, see Mori (2014), p. 2258 et seqq. 26 See Conforti (1972), Capelli (1983), and Saulle (1998). 27 Case 41/74, Yvonne van Duyn v Home Office (ECJ 14 December 1974); Case 145/82, Commission v Italy (ECJ 15 March 1983); Case C-129/96, Inter-Environnement Wallonie ASBL v Région wallonne (ECJ 18 December 1997). 28 Case 29/84, Commission v Germany (ECJ 23 May 1985).

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to deprive Member States of their power, the most peculiar was Article 100 TEEC. Indeed, the power to achieve approximation of national legislations acknowledged to the Council, by requiring a unanimous deliberation, achieved the result of inducing Member States to make laws based on common principles hence making the various national legal systems more compatible with each other.29 Briefly, this specific regulatory power, which could only take the form of a directive, was achieved (but as we shall see the principle has remained unchanged in time) through the approximation of the national legislations “to the extent necessary to the setting up and operation of the common market.”30 However, it must be noticed that, alongside this concurrent type of powers formulated in generic terms, the Treaty envisaged also various types of approximation or, as the Treaty stated “harmonization” or “coordination”, which acquired a special characteristic as against the provision which was general in nature, and which by being decided via a directive with a simple or qualified majority vote, also took on the connotation of being an exception.31 For this article, however, it is not important that a deliberation in the case of Article 100 TEEC should be taken unanimously, but rather it is the conditions enabling the adoption of an approximation act that are important since these are responsible for giving concreteness to the power of the Community that cannot be defined preventively by identifying a subject area.32 With reference to the first concept, the provision of the Treaty envisages that the approximation was to have a “direct impact on the establishment and functioning of the common market.” This expression, albeit bound to the principle of proportionality expressed in Article 3.1 point (h) TEEC (“the approximation of the laws of Member States to the extent required for the functioning of the common market;) and consequence of the means envisaged in Article 2 TEEC (“It shall be the aim of the Community, by establishing a Common Market [. . .] to promote”) to achieve the objectives of the Community, (“[. . .] throughout the Community a harmonious development of economic activities, a continuous and balanced expansion, an increased stability, an accelerated raising of the standard of living and closer relationships between its Member States”), did not envisage a “subject matter”,

29

See Draetta (1965), Puglisi (1983), Caruso (1987), Mastroianni (1996), Easson (1981), and Vignes (1990). 30 The present Article 115 TFEU refers to the internal market and not to the common market, with an expression that, according to a part of the literature, should have a broader meaning, see De Pasquale and Pallotta (2014). 31 See Articles 99, 117, 54 point (g), 56, 57, 37 TFEU. 32 The mentioned special cases were envisaged in Articles 37; 54 point (g); 56; 57; 99; 117 TEEC.

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142

16

17

Title I Categories and Areas of Union Competence

but a “dynamic power” for the Community because capable of intervening “to the extent needed” in any field that were to have a “direct impact” on the market. From this view of the approximation of legislations, it can be stated that the Community ab origine was endowed with concurrent powers on all the residual powers of the Member States, which de facto would no longer be protected but left up to the decisions of the European institutions (in particular the Commission, which had the power of initiative, and the Council called upon to issue directives), since the expressions “to the extent required” and “direct incidence” suggest a complete opening to consider the forms of instruments, connections, compenetration, and interference that are not difficult to find among competences. The European Court of Justice has considered this power of the Community over the approximation of legislations to be so penetrating that in the presence of a directive issued for this purpose, it excludes that Member States may invoke the Treaty provisions (Article 36) that justify a different national law on the matter.33 For the same reason, i.e., bridging differences between countries that are an obstacle to the accomplishment of the Common Market, the Court of Justice has imposed the duty to comply with the directive because “its purpose would be frustrated if the competent national authorities in the exercise of the powers reserved to them relating to the form and method of implementing the directive did not keep within the limits of the discretion outlined by this directive. Indeed any overstepping of these limits might create new disparities and therefore fresh barriers to trade and as a result prevent the free movement of goods in a field in which the Community legislature had adopted provisions in order to ensure such freedom.”34 Another issue is the concrete influence of Article 100 TEEC on European legislation (at least up until the adoption of the Single European Act). Indeed, the provision of Article 100 TEEC was meant to cover, concerning the common market, all the aspects not provided for by the many other provisions in various other fields that contributed to establishing the Common Market.35 What is important is that right from its origin, the Community was endowed with concurrent powers extended to all the areas of competence of the Member States, and also for this reason, European legislation has been able to go beyond the narrow boundaries of economics.

1.4. Implied Powers

18

Another element that has characterized the European legal system in the exercise of powers and that has generated concurrency with the legislation of Member States

33

Case 148/78, Tullio Ratti (ECJ 5 April 1979). Case 815/79, Cremonini and Vrankovich (ECJ 2 December 1980). 35 See Saulle (1989), p. 321 et seqq. 34

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derives from the recognition of implied powers as coded in Article 235 TEEC “If any action by the Community appears necessary to achieve, in the functioning of the Common Market, one of the aims of the Community in cases where this Treaty has not provided for the requisite powers of action, the Council, acting by means of a unanimous vote on a proposal of the Commission and after the Assembly has been consulted, shall enact the appropriate provisions.”36 It is known that the implied powers theory has precise forefathers in the US federal law, in the “necessary and proper clause”37 although some worthy discussions are found in the tradition of German federalism, based on the principle of the Bundestreue.38 Consequently, it would not be wrong to say that it was present in the minds of the drafters of the Treaty. Article 235 TEEC is similar to the previously examined article on the approximation of legislations, because it has affected the power of Member States, generating a competition in sources and matters, and because it too expanded the scope of the European order well beyond the economic field.39 While initially, recourse to this provision to provide foundation for the regulatory acts of the Community was very cautious, and the first act founded on Article 235 dates back to 1962,40 at the Conference of the Heads of State and of Governments of December 1969 in the Hague, French President Pompidou advocated the relaunching of the integration process indicating that this be done by achieving three objectives: completion of the agricultural policy; deepening and expansion of the sectors over which the Community had responsibility, and enlargement by accepting applications by candidate countries and greater recourse to the power envisaged in Article 235 (principle that was confirmed at the Paris Conference in October 1972). Gradually, over time, Article 235 became the basis for a wide variety and extremely large number of acts (according to calculations made long before the approval of the Maastricht Treaty, Article 235 was the basis for over 700 Community Acts). This generated multiple problems within the European legal order and considerably altered the relationships with the legal systems of Member States. In particular, the extensive and far-reaching use of Article 235 TEEC brought into question the principle of conferral as foundation for the competencies of the European Institutions and, from this standpoint, it took the process well beyond the European Treaties themselves, and was not offset by the fact that deliberations on the “provisions of the case” required a unanimous vote. Indeed, in the European 36

Considering that the theory of implied powers in the European system has a scope that is broader than that related to Article 235 TEEC (see Giardina 1975); here, the matter is examined exclusively with reference to this Article of the Treaty and in relation to the issue of concurrent powers. 37 See Supreme Court, Mc Culloch See Maryland, Wheaton 316 (1819). 38 See Smend (1916); as well as Smend (1928). Both texts are referred to by Pizzetti (2006). 39 See Calvano (2008), and Eeckhout (2011). 40 This is a regulation concerning compensatory taxes on items resulting from the processing of agricultural products.

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19

20

21

144

22

legal system, the revision of the Treaties and the legislative procedure had already become quite distinct at the time, and the observation that, in any case, overriding the limits had enabled the Community to evolve, regulated in time by the adoption of new policies in the text of the Treaty, does not diminish the complexity of the matter. Indeed, in time, restrictive interpretations were made of Article 235, according to which the opportunities offered by this provision to attract powers to the European level were in any case to be subject to Articles 2, 3, and 4 of the Treaty, namely, closely related to the aims expressed and tasks attributed to the Community. However, according to this interpretation, Article 235, with reference to the matter of concurrent powers, bears its weight. Indeed, there is no doubt that the powers taken on under this provision are in principle powers of the Member States, since the Treaty does not have the juridical foundation to give the Community the power to intervene; and, it is only under the force of the necessity clause that nonrecognized power becomes one with recognized power. Moreover, this structure of the provision determined a competition—once again—with the residual powers of Member States, in that its scope was not defined (indeed necessity cannot be defined) and hence it could cover any subject matter over which Member States had power. Unlike Article 100 TEEC that envisaged an intervention only via directives and adopted a division of powers that implied the intervention of Member States, in the case of Article 235, concurrency with the competence of the States takes the matter from the national level to the European level with Europe’s power becoming one with the power of conferral which does not allow State intervention. These two forms of concurrency: one that generates, concerning State matters, the dual intervention of European sources (for setting the principles) and State sources (for regulating the modalities); and the one that brings matters over which States have power into the arena of European powers, as exclusive competences of the Institutions, have had the effect of expanding European powers to sectors other than the economic sector and were later to be thoroughly reviewed with the constitutionalization of the European legal order and in particular with the acceptance of the subsidiarity principle.41

2. 23

Title I Categories and Areas of Union Competence

Introduction of the Competence Rules in the Treaties

In any case, a clear indication of the change that had occurred is that, for the first time, rules were included in the body of the Treaties on the breakdown of competences between the Community and Member States and it was possible to start distinguishing between an exclusive competence from a shared competence, although the definition of the two types of powers is still not clearly stated and is achieved in a very indirect manner. 41

See Mangiameli (2017a).

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Article 5 TEC, consisting of three paragraphs, laid out a complex system regulating the powers of the Community. First, it stated that “the Community shall act within the limits of the powers that are conferred upon it and of the objectives set for it by this Treaty” and thus the principle of conferrals is expressed and the competences included can be considered “exclusive”; although in the light of this statement, the exclusive powers of the Community were defined without a clear background, both because the link with Articles 3 and 4 TEC was still indirect and because what determined the (exclusive) competence of Europe was in any case the aims laid down in Article 2. In any case, the “Principle of conferral” entailed that the Community could act (make laws) not only in the presence of an express provision empowering it to exercise power and constituting its legal foundation, but it could also act where the conferral of power could be inferred, implicitly, from the provisions of the Treaty;42 on the other hand, the notion of “exclusive competence” meant that the power attributed to a given source (Community source) determined a preclusion for intervention by the national sources, or subordinates the latter in terms of validity and efficacy to the action of the European source. The existence of an exclusive competence of the Community has found expression—with a negative formulation—in paragraph 2 of the mentioned article which states that “in the sectors that are not of exclusive competence the Community intervenes, in accordance with the principle of subsidiarity, only if and to the extent that the objectives of the envisaged action cannot be sufficiently achieved by Member States and can therefore, because of the sizes of effects of the action in question, be better achieved at Community level.”43 As can be noticed, this provision of the Treaty presupposes the existence of sectors of exclusive competence and sectors that do not come under the exclusive competence of the Community, and in this latter assumption, there is no mention of concurrent competence, but of the power for the Community to intervene in fields other than those of exclusive competence. Indeed, if the expression “exclusive competence” is taken in the technical meaning that is given to it in the theory of federal law, then “in the sectors of not exclusive competence” powers are of competence of the other sources, namely, the national sources: the field that does not come under exclusive competence comes, in principle, under the competence of Member States However, first, it must be noted that this concurrence of legal sources, between European law and national law, on matters over which the Member States have competence, is founded differently with respect to concurrence that derives from the power of intervention to approximate legislations (Article 100/94) or to achieve a Community aim and hence for which there is no legal basis in the treaty (Article 235/308). In other words, in the case of concurrence of legal sources envisaged in

42 43

Joined Cases 281, 283–285 and 287/85, Germany v Commission (ECJ 9 July 1987). See Weber (2013).

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24

25

146

26

27

28

Title I Categories and Areas of Union Competence

Article 5.2 of the EC Treaty, the matters, the modes of intervention for the Community and the effects of concurrence have been regulated differently. Now, in fact, the Treaty establishing the European Community had neither a list of exclusive matters nor a list of concurrent powers, and if exclusive powers could somehow be identified via the aims (Article 2) and what entails action by the Community “for the purposes laid down in Article 2” (Articles 3 and 4), concurrent powers—besides exclusive competences—were not delimited in any way versus the “residual powers” of Member States. Consequently, the field of concurrence for the Community—even in this respect—fully coincides with the scope of competence of Member States that, because of the exclusive competences and concurrence of European powers, are left with no exclusive fields of subjects or matters except for the cases—envisaged in the Treaty—where Member States can individually in the presence of given conditions (public morality, public order, public security, health protection of health of peoples’ and animals’ lives or preservation of plants protection of artistic, historic or archaeological national heritage, or protection of industrial and commercial property) legitimately derogate from the common regulations and policies, provided that the resulting laws do not create situations of discrimination.44 Unlike the past, however, in the field of concurrence, the limitation of powers of the Community is no longer purposefully restricted to an impact on the Common Market and to the needs imposed to achieve a Community objective, but rather it derives from the new ways that lend legitimacy to the adoption of a European act, namely, the “principle of subsidiarity” interpreted in an ascending manner, that is to say, as an instrument capable of transferring competence from the Member States to the Community, and the “principle of proportionality”, envisaged by Article 5.3 TEC, according to which “the action of the Community shall not go beyond what is required for achieving the objectives of this treaty.” The principle of subsidiarity, introduced for the first time by Single European Act with reference to environmental policy only,45 was adopted with the Maastricht Treaty as a general parameter of concurrent competence. It presupposes that competence belongs to Member States, but that by exercising their powers individually, they cannot ensure a sufficient achievement of the objectives of a European action and that therefore, “given the dimensions of effects of the action in question”, the objectives may be best achieved at Community level.46 The principle of proportionality, long since a key general principle of the Community system in the exercise of the subsidiary powers of the Community, would limit the action of the European Institutions and the Member States.47

44

Think about Articles 30, 39, 46, 58 of the EC Treaty on the freedom of movement. Article 130 R paragraph 4 SEA. 46 See recently Bartl (2015), Bertrand (2012), Bickenback (2013), Calzolaio et al. (2014), Craig (2012), Villani (2012), Martinico (2011), Favilli (2011), Ippolito (2007), Mellein (2007), and De Pasquale (2000). 47 See Emiliou (1996), Galetta (1993), Ciriello (1999), Harbo (2010), and Potacs (2013). 45

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The principle at hand would have required that in the areas where the Community legislator has broad discretionary power commensurate with the political responsibilities that the Treaty attributes to him (exclusive competences), only the manifestly inappropriate nature of an act may question the legitimacy of the act.48 Differently, in the other fields (where competence is taken on in a subsidiary manner), the principle of proportionality requires that the European legislative act be appropriate and necessary for achieving the objects pursued by the regulatory act at hand, without prejudice to the fact that where it were possible to choose from amongst several appropriate measures, the less restrictive would be adopted and that any inconvenience caused would not be disproportionate with respect to the objectives being pursued.49 The system described in the foregoing, with its various components, has been the maximum extension of the formally recognized competence at European level50 since the exercise of legislative powers assumed through subsidiarity would in any case override the State sources because the object of concurrence would end up in the camp of exclusive powers of the Community.51

48

Case T-162/94, NMB France SARL, NMB-Minebea-GmbH, NMB UK Ltd and NMB Italia Srl v Commission (GC CFI 5 June 1996). 49 Of the two principles considered, despite the importance attributed to subsidiarity, the one that has been applied most often is the principle of proportionality; to date, the case law of the Court of Justice on the principle of subsidiarity is still rather limited and barely significant. Mangiameli and Iacoviello (2013). 50 See Barentes (1993). 51 It is no coincidence that, when the European Court of Justice (Case C-376/98, Germany v Parliament and Council (ECJ 5 October 2000)) declared the annulment of Directive 98/43/EC of the European Parliament and of the Council of 6 July 1998, on the approximation of the laws, regulations and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products, for violation of the principle of the conferred powers (83 “Those provisions, read together, make it clear that the measures referred to in Article 100a (1) of the Treaty are intended to improve the conditions for the establishment and functioning of the internal market. To construe that article as meaning that it vests in the Community legislature a general power to regulate the internal market, would not only be contrary to the express wording of the provisions cited above, but would also be incompatible with the principle embodied in Article 3b of the EC Treaty (now Article 5 EC) according to which, the powers of the Community are limited to those specifically conferred on it”) and the principle of prohibition of distortion of competition within the internal market (106 “In examining the lawfulness of a directive adopted on the basis of Article 100a of the Treaty, the Court is required to verify whether the distortion of competition which the measure purports to eliminate is appreciable”, 107 “In the absence of such a requirement, the powers of the Community legislature would be practically unlimited”), the judgment sparked a broad debate (see Trimidas and Trimidas 2002; Slot 2002; Kumm 2006). However, the European Court of Justice, in the ruling (Case C-547/14, Philip Morris and others v Secretary of State for Health (ECJ 4 May 2016); see Ruiz Cairò 2016), overturned what was a unique case in its jurisprudence and affirmed that “Article 114 TFEU provides an adequate legal basis for the adoption of the Tobacco Products Directive 2014 in full, including measures relating to flavoured tobacco, labelling and packaging, and electronic cigarettes. These measures also comply with the principles of proportionality, subsidiarity, legal certainty, equal treatment and free competition, and the rights of companies under the EU Charter. Member States may introduce further

Mangiameli

29

148

30

31

Title I Categories and Areas of Union Competence

No wonder, then, that this situation has been considered indeed as a situation that strips States of their sovereignty; furthermore the production of law in Member States is closely linked to a very high standard of democracy, whereas the European legislative procedures (Articles 251 and 252 TEC), albeit deeply innovative for the presence of a European Parliament directly elected with universal suffrage by the citizens of Member States, have been accused of being undemocratic.52 According to this criticism, European power, which is already considerably extensive in the forms taken on by the Maastricht Treaty, would become unlimited especially for the possibilities of intervention offered by the principle of subsidiarity, since subsidiarity de facto makes the principle of conferral similar to an exercise in style, a clause that is not truly and concretely capable of limiting European power.53 Moreover, European (legislative) power seems to identify with a politically non-accountable European bureaucracy that in practice makes laws and imposes on Member States its views of the policies laid down in the Treaty. In particular, it encroaches on the prerogatives of national parliaments, which are the seat of national sovereignty and democracy of European peoples. There were immediate reactions to this situation immediately after the adoption of the Maastricht Treaty and some corrections were made in the 1997 Amsterdam Treaty. Regarding subsidiarity, which had historically ended up taking on political meaning, the principle was debated at the intergovernmental conferences of the time,54 and with the Amsterdam Treaty the decision was taken to adopt an ad hoc Protocol (No 30) on the application of the principles of subsidiarity and proportionality in the attempt to specify the scope and limits of subsidiarity. Indeed, the protocol stated that “the principle of subsidiarity does not call into question the powers conferred on the European Community by the Treaty, as interpreted by the Court of Justice” and it went on to say that “subsidiarity is a dynamic concept”, and hence “it allows Community action within the limits of its powers to be expanded where circumstances so require, and conversely, to be restricted or discontinued where it is no longer justified.” Instead, as regards national parliaments—the seat of sovereignty and democracy of European peoples—remedy was sought by adopting with the Amsterdam Treaty a Protocol (No 9) on the role of national Parliaments in the European Union, where a system was introduced to send European draft acts to National Parliaments with the possibility offered to their Committees for European Affairs—through a Conference (COSAC)—to send to the European Institutions “any contributions requirements in relation to packaging of tobacco products that are not harmonised by the Directive” (Ó Cathaoir 2016). 52 Let us recall the misgivings about the so-called democratic deficit expressed by the Bundesverfassungsgericht in the judgment on the Maastricht Treaty of 12 October 1993, in BVerfGE 89, 155. 53 See Moens and Trone (2015). 54 European Council of Birmingham of October 1992 and European Council of Edinburgh of December 1992.

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they may deem useful on the European Union law-making activities, especially with regard to the application of the principle of subsidiarity, the scope for freedom, security and justice as well as on issues related to fundamental rights.”55

3.

The Categories of Competence

The Lisbon Treaty obviously reflects the historic events and political distress of the time and one might say that it was already old when it was born. Indeed, it did not envisage strong European Institutions and hence was unable to face the economic-financial crisis that was already showing initial signs when it came into force (1 December 2009).56 As regards the division of powers between European Union and Member States, the Lisbon Treaty preserves the system inherited from the Maastricht Treaty adding significant specifications and limitations to European action.57 Article 5 TEU, under the common provisions, and Article 2 paragraphs 1 and 2 TFEU reconsider the characteristics of the division of powers and under these articles, the delimitation of powers of the Union is based on the principle of conferral and their exercise is based on the principles of subsidiarity and proportionality. The abovementioned principles are applied by the Institutions consistently with the protocol on the application of the subsidiarity and proportionality principles, and national parliaments supervise compliance with the principle of subsidiarity according to the procedure envisaged in the protocol.58 The definition of the principle of conferral is written with the intent of specifying that this be the core criterion of competence and it is expressed quite emphatically (“The Union shall act only within the limits of competences conferred upon it by Member States in the Treaties to attain the objectives set out therein”) with an adverb that has a significant precedence in the articles of the Confederation59 whose meaning was excluded from the applicability of the theory of implicit powers. Moreover the provision was completed by the so-called “residual powers clause” (“Any competence not attributed to the Union in the Treaties belongs to the 55

See Janowski (2005), Cooper (2006), Mellein (2007). For a recent evaluation of the role of National Parliaments, see Mangiameli (2013b); and also House of Lords (2014). 56 See Mangiameli (2013c). 57 The literature on the competence issue is very wide and copious. See Constantinesco (1974), Tizzano (1981), Dashwood (1996), Jarass (1996), Boeck (2000), Pernice (2000), von Bogdandy and Bast (2001), Mayer (2001), de Burca (2001); von Bogdandy and Bast (2002), Di Fabio (2002), Hetmeier and Richter (2001), Götz and Martinez Soria (2002), Trüe (2002), Michel (2003), Hanf and Baumé (2003), Craig (2004), Dashwood (2004), Blanke (2004), Burgstaller (2004), Becker (2005), Epiney (2006), and Rosas (2007). 58 This is the so-called proceduralization of subsidiarity for which national parliaments are responsible, and which is examined below. 59 Article 2 of Articles of Confederation: “Each state retains its sovereignty, freedom, and independence, and every power, jurisdiction, and right, which is not by this Confederation expressly delegated to the United States, in Congress assembled.”

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Member States”) present in various constitutional texts starting from the X amendment to the 178960 U.S. Constitution, whose proclamation has a symbolic value while its concrete efficacy in delimiting federal powers is somewhat limited.61 The clause on subsidiarity and the clause on proportionality are expressed with the same words used in the EC Treaty: the first refers to sectors that are not under the exclusive competence of the Union and the second, namely, the principle of proportionality that is a general principle of European law, refers to all the types of legislative and non legislative acts adopted by the Union.

3.1. The Flexibility Clause on Implied Powers

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In any case, the Lisbon Treaty preserved the “flexibility clause”, whose new wording however reflects the division of competences. As stated earlier, the formulation of Article 235, at first, and then of Article 308 TEC, has enabled the Community to adopt legislative acts in the absence of an explicit juridical basis, and quite a few matters that were later introduced into the Treaties, were regulated initially via acts adopted based on the flexibility clause of implied powers, for instance, regional policy, the environment, the protection of consumers.62 Now, precisely because the flexibility clause operates in the field of concurrence (that is: if “action by the Union should prove necessary [. . .] and the Treaties have not provided the necessary powers”, Article 352.1 TFEU), the legislative acts of the Union (adopted with a special legislative procedure) come under the procedure for controlling the principle of subsidiarity, and the Commission “shall draw national Parliaments’ attention to proposals based on” the mentioned clause (Article 352.2 TFEU). This appears to be in line with the evolution of the principle of subsidiarity in the Lisbon Treaty, with reference to concurrent competence, and consequently there are no real changes in the flexibility clause in the TFEU, compared to how it had been previously envisaged in the EC Treaty.63

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“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” 61 Mangiameli (2006). 62 See Bungenberg (2000), and Calvano (2008). 63 This statement seems to be confirmed by the decision on the Pringle case of the EU Court of Justice (Case 370/12, Thomas Pringle v Government of Ireland and others (ECJ 27 November 2012) para 67) with the reference to the ESM Treaty; see also Case 22/70, Commission v Council European Agreement on Road Transport (ECJ 31 March 1971) para 95). See de Witte and Beukers (2013), Mengozzi (2013); for a critical position Schwarz (2014).

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What is new with respect to the previous discipline of the flexibility clause are the limits it sets to this power.64 Indeed, in the case where the measures adopted by the Union (where the Treaties have not provided the necessary powers), were to affect the sectors of “complementary competence”, the adopted legislative act could not “entail the harmonisation of Member States’ laws or regulations” (Article 352.3 TFEU), since in these cases harmonization is excluded by the Treaties.65 Obviously then, the flexibility clause “cannot serve as a basis for attaining objectives pertaining to the common foreign and security policy” (Article 352.4 TFEU).66 Finally, the articles adopted based on the flexibility clause shall not affect the application of the procedures nor the extent of the powers of the institutions on the CFSP, including the common defence policy (Article 40.2 TEU).

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3.2. The Limits, Type, and Enumeration of Competences

With the provisions on the TFEU (that has kept the 1957 Preamble without any changes to it), for the first time the division of competences takes on the constitutional characteristics of the federal type, albeit with major limitations, as in the case of the competences on common foreign and security policy (➔ Article 2 para 4 TFEU), including the common defence policy. This accounts for the historic delay with which these policies, typical of the very idea of federalism, have been considered by the Member States with a view to including them in the European order. In addition, the articulation of competences and the language used are not upheld by a favourable policy at the European level (as had occurred during the drafting of the Maastricht Treaty), but rather by the intention of reducing European interference in the public policies of Member States. The types of competences attributed to the Union are different and dealt with in a heterogeneous manner: exclusive competences, concurrent and coordination competences, and “actions intended to support, co-ordinate and supplement the actions of Member States.”67 The competences conferred on the European Union by the Treaties may be increased or reduced by amending the rules on competence contained in the Treaties themselves (Article 48 paragraphs 2 through 5 TEU). However, whereas changing 64

For a comment on the new formulation and differences with respect to the previous clause, see Bariatti (2014), Satzger (2012), Rossi (2011), and Geiss (2012). 65 See Schütze (2017). 66 See Arnaud (2015). 67 See, with reference to the Lisbon Treaty, Draetta (2008), Caruso (2008), Craig (2008, 2010), Braams (2008), Kostandinides (2009), Schütze (2009), Folz (2009), Scharf (2009), Molina del Pozo (2010), Baratta (2009), Potacs (2010), Jürgens (2010), Ziller (2010), Benz and Zimmer (2012), Rossi (2012), Tosato (2012), Weber (2012), Molina del Pozo and Bergamaschine Mata Diz (2013), Orlandi (2014), and Garben and Govaere (2017).

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the enumeration of competences and, in general, the rules conferring the competences contained in various parts of the European Treaties, requires an amendment of the Treaties by means of the ordinary procedure laid down in Article 48 paragraphs 2 through 5 TEU, a simplified procedure (Article 48 paragraph 6 (1) TFEU) may be adopted to amend the provisions on the “internal policies and actions” contained in Part Three of the TFEU (hence the “external” actions regulated in Parts Four and Five of the Treaty are excluded), which are a consequence of the provisions on competences.68 Consequently, even if we consider the provision of paragraph 6 of this article, there could be substantial amendments in the way the competences are used, in particular both in the sense of expanding the space of intervention of national law, and in the sense of restricting it, leaving the enumeration unchanged and regulating in a different manner the provisions that define the “legal basis” for action by the European Union.

3.3. The Union’s Exclusive Powers

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The types of competences attributed to the Union—as we have already mentioned—are different and dealt with in a heterogeneous manner: exclusive competences, concurrent and coordination competences, and “actions intended to support, co-ordinate and supplement the actions of Member States.” Let us begin with the exclusive competences.69 These are envisaged by Article 3 TFEU that lists five sectors: (a) customs union; (b) the establishing of the competition rules necessary for the functioning of the internal market; (c) monetary policy for the Member States whose currency is the euro; (d) the conservation of marine biological resources under the common fisheries policy; (e) common commercial policy. To these we must add the foreign competency of the European Union for concluding international agreements for which a legislative act is necessary “to allow it to exercise its competences at the internal level or to the extent to which it may impact the common regulations or affect their scope.”70 As can be noted, the matters that are of exclusive competence of the EU are rather limited and not all of them refer to the remote tradition of the establishment of the European Order. The legal regime of exclusive competence is expressed in Article 2.1 TFEU and, based on this, exclusiveness is substantiated in the

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See Jimena Quesada (2012). Article 2 TFEU presents the different categories one after the other. It begins with the type of competence that provides for the broadest powers of the Union. It is possible to interpret the competence order as starting with the areas where the transfer of sovereignty reaches its peak (see Blanke 2004; Braams 2008). 70 See Cardwell (2012), Eeckhout (2011), Mengozzi (2011), Neframi (2010), and Mignolli (2009). 69

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law-making power for the sector by the EU,71 but without excluding the possible intervention of Member States.72 Indeed, the latter can still make laws in the sectors of exclusive competence of the EU “if so empowered by the Union or for the implementation of Union acts.”73 If we look closely, the exclusive competences of the European Union are not actually exclusive; hence, the proposal—suggested during the Convention but which was rejected—of calling them “own competences”. Indeed, for the subject matters indicated in Article 3 TFEU, besides the possibility for the acts of European law to delegate given sectors to the national sources, also for the exclusive competences, the rule applies according to which implementation and execution lies mainly with the Member States (Article 291.1 TFEU).74 The peculiar characteristic of this type of competence derives from the circumstance that in exercising it, the Union is not subject to the principles of subsidiarity and proportionality and, hence, it is not subject to control by the National Parliaments. The notion of exclusive competence has long since been in the European order, introduced by the case law of the European Court of Justice75 and—as the Court itself has stated—exclusive competence is such as to create a limitation to national law even where competence is not exercised at the European level.76 Indeed, to protect its exclusive competences, the Union can oppose the interventions of the Member States by bringing matters before the Court of Justice (Article 258 et seq. TFEU), although it has never exercised this power so far. A matter of exclusive competence attributed to the European Union may be regulated by national sources—autonomously—only if, because of the amendments to the Treaties, competence over that matter is returned to the Member States or assigned to a different type of competence that allows for State legislation.77

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3.4. The Shared Competences of the European Union with the Member States

Differently from what happens with exclusive competence, in the division of competences between the EU and Member States, concurrent competence maintains a considerable extension. 71

See von Bogdandy and Bast (2001), Streinz (2018), Nettesheim (2014), and Obwexer (2015). See Schaefer (2008). 73 From these characteristics D’Atena (2005), p. 64, infers that this competence “is not really exclusive (or at least, not in absolute terms)”, because Member States are the holders of an autonomy (that does not require a proxy) and their own implementation power. The same position is held by Tesauro (2010), p. 102. 74 See Schütze (2010). 75 See Joined Cases 3, 4 and 6/76, Cornelis Kramer and others (ECJ 14 July 1976), which also recognizes the exclusive competence to conclude international agreements with third States in the area in which the Community is recognized to have exclusive competence. 76 See Case 804/79, Commission v United Kingdom (ECJ 5 May 1981). 77 See Baratta (2009). 72

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First, Article 4.1 TFEU states that “The Union shall share competence with the Member States where the Treaties confer on it a competence which does not relate to the areas referred to in Articles 3 and 6”, thus adopting a residual definition: whatever does not fall under the exclusive competence nor among the support, coordination and supplementary actions, is shared competence. What is more, for some sectors of competence the Treaties refrain from providing any definition.78 Second, Article 4.2 TFEU contains a rich list of sectors (as many as 11) that are not all the sectors to which shared competence applies, but they constitute the “main” sectors: (a) internal market; (b) social policy, for the aspects defined in this Treaty; (c) economic, social and territorial cohesion; (d) agriculture and fisheries, excluding the conservation of marine biological resources; (e) environment; (f) consumer protection; (g) transport; (h) trans-European networks; (i) energy; (j) area of freedom, security and justice; (k) common safety concerns in public health matters, for the aspects defined in this Treaty. Therefore, the enumeration does not have an absolute nature. It does not delimit the extent of shared competence and includes the sectors mentioned in the Treaties but also sectors not mentioned therein. In principle, European concurrence implies that the exercise of competence by the European Union entails a preclusion for the sources of Member States (vertical concurrence). Hence, “The Member States shall exercise their competence to the extent that the Union has not exercised its competence” and “the Member States shall again exercise their competence to the extent that the Union has decided to cease exercising its competence” (Article 2.2 TFEU). The concurrent legislation model is fashioned according to the German konkurrierende Gesetzgebung (Article 72.1 GG79) and, although it is different from the exclusive competence of the Union, the effects of the acts produced by exercising concurrent competence are quite similar to those of exclusive competence, in that national competence is withheld for as long as the European legal act is in force. The reversibility of concurrent powers—a distinctive feature of the latter—has in fact been implied in the system of competences adopted by the European Treaties right from the beginning. Indeed, this is a consequence, on the one hand, of the rule according to which national sources are overridden by Community law because of the primacy of European law over national law (whose assertion is due to the case law of the European Court of Justice and is now formulated in Declaration 17),80 and, on the other hand, it is the consequence of the obligation of “sincere cooperation” of Member States, coded in Article 4.3 (2) TEU,81 namely, to “take all appropriate measures, whether general or particular, to ensure fulfilment of the

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See Burgorgue-Larsen (2006). Oeter (1999), Württemerger (2005), Degenhart (2006), Ipsen (2006), and Klein and Schneider (2006). 80 See Mangiameli (2012), Di Salvatore (2008b, 2013). 81 On the principle of sincere cooperation, see Blanke (2013), Hatje (2001), Klamert (2012), Neframi (2012), and Pizzetti (2006). 79

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obligations arising out of this Treaty or resulting from action taken by the institutions of the Community.” The provision is hence restricted to expressing the reversibility of concurrent competences,82 within the framework of a system that presents an undoubtedly greater degree of flexibility than it had in the past, and is consistent with all the provisions of the Treaties that emphasize the prerogatives of Member States in the area of competences. Indeed, the “general rules” on competence, alone, do not entirely account for the scope of European concurrence which, albeit unvaried with respect to Maastricht, it is now flecked with a series of limits and reservations in favour of Member States, and hence the concurrence of powers does not lend itself to being dealt with comprehensively. Consequently, by complying with the principle that “the scope and modalities of exercising competences of the Union are determined by the provisions laid down in the Treaties for each sector”, it will be necessary to look at what the Treaties state for each sector to define in detail the characteristics of the concurrence. Moreover, the exercise of EU concurrent competences is subordinate to compliance with the principle of subsidiarity (Article 5.3 TEU) that is capable of determining double consequences on the acts adopted, thanks to the provisions of Protocol No 2 on the application of the principles of subsidiarity and proportionality attached to the TEU, which envisages the possibility that the correct application of the principles may be the object of an ex ante control (of a political nature) and ex post control (of a judicial nature).83 3.4.1.

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Horizontal Concurrent Competence

Apart from anything else, paragraphs 3 and 4 of the same Article 4 indicate the other sectors that need to be considered necessarily for shared competence, but for which there are some limitations. For the sectors considered in paragraph 3 (research, technological development and space), the Union could have the “competence to carry out activities, in particular to define and implement programmes; however, the exercise of that competence shall not result in Member States being prevented from exercising theirs.” Paragraph 4 also discusses the sectors “of development cooperation and humanitarian aid”, over which the Union has the “competence to carry out activities and conduct a common policy; however, the exercise of that competence shall not result in Member States being prevented from exercising theirs.” In these cases therefore the Treaties envisage a “horizontal concurrence” between the power to regulate matters considered by Member States and the intervention on such matters granted to the Union. The legal act with which the 82 See Baratta (2009), who considers this discipline as an expression of the principle of the reversibility of competences, through the simple repeal or modification of the European acts with which it has been exercised. 83 See our comment on TEU Protocol No. 2.

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Union intervenes, albeit binding on Member States does not preclude the intervention of their sources; if anything, here as in other cases of horizontal concurrence, any dispute between regulations will be settled by the “principle of fair cooperation”, under which “the Union and the Member States shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties” (Article 4.3 TEU).84 In particular, under this principle the legislation of Member States must comply with obligations expressly laid down in the Treaties, namely: they shall adopt any measure “ensuing from the acts of the Union’s institutions”, “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.” 3.4.2. 52

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Protocol No. 25 on the Exercise of Shared Competence

The reading of Protocol 25 on the exercise of shared competence is to be different, even from the standpoint of specifying the prerogatives of the State. The Protocol states: “With reference to Article 2 of the Treaty on the Functioning of the European Union on shared competence, when the Union has taken action in a certain area, 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.” This sole Article of the protocol is not limited to referring directly to the principle of conferral and to the principle expressed in Article 4.1 TEU, according to which “in accordance with Article 5, competences not conferred upon the Union in the Treaties remain with the Member States”, and again confirmed in the last sentence of Article 5.2 TEU.85 Indeed, the provision of Protocol No 25 is complementary to Article 2.2, sentences 2 and 3 TFEU, examined above, in that it contributes to delineating the way in which shared competence should function. The two sentences mentioned here preclude the exercise of legislative power and the adoption of any other legally binding act by the Member States if the Union has exercised its competence, thus literally occupying the field of competence and attracting powers to itself on a given matter; with the possibility, based on the principle of reversibility that, if the Union has not yet occupied a given field with its legislation, or decides to cease exercising its concurrent competence over a given area, the Member States may exercise their legislative and regulating powers.86 The provision of the protocol specifies how the relationships between the two sources—the European and the State source—are to be regulated for subject matters over which they have concurrent competence according to the Treaties. In particular, the provision of the protocol does not deal with the coverage of concurrent powers by European legislation, since the latter may vary at the 84

See Blanke (2013), para 185 et seqq. See Blanke (2013). 86 See Baratta (2009). 85

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discretion of the European Institutions, within well defined boundaries, and by the general provisions of the Treaties, with respect to those “relevant to each sector” (in accordance with paragraph 6). The scope of the provision of the protocol concerns the interpretation of European legislation with respect to State powers in the sense that it excludes expansive interpretations and, even more so, comparative interpretations of the European regulations. On the other hand, similar limitations do not apply to the State sources except in the case in which they are not consistent with the provisions of European law. In line of principle, as we know from experience with the European order itself and with federal systems that envisage it, this discipline of European competence is not in itself an effective limitation to the powers of the Union to the benefit of Member States, but merely indicates a residual character of the sharing of competence in the sense that they highlight that the concurrent matters and the elements of the latter that are not regulated by European law can be regulated by State laws.87 However, the last expression of the provision of the protocol: “[. . .] and therefore does not cover the whole area”, would seem to indicate for the Member States not a mere possibility of adopting legislative acts that depend on the legislative decisions of the Union, but the protection of a claim to a material field in which they can legislate, in the sense that for concurrent subjects there would always be both European laws and State laws, and that the latter, subject to their not being in contradiction with the European legislation, would always be necessary to supplement the European legislation which is not entitled to regulating the matter in its entirety. In light of this specification of the Protocol, then, European concurrent competence would end up being very different from the German model of concurrent competence, and would be more similar to concurrent competence as it is implemented in Italy.88 In conclusion, one might say that, as always occurs with concurrent powers, it is difficult to define whether this type of competence has the effect of determining legislative exclusiveness over a matter by the European source, or rather it determines an area that is subject to both European and State sources. The concrete examination of competences, through the provisions on policies as envisaged by the Treaty, and the European legislative acts that regulate these policies, will determine the exact nature of the type of European concurrent competence on a case by case basis. 3.4.3.

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Declaration No. 18 on the Delimitation of Competences

Moreover, Declaration No 18 comes into play in specifying the division of competences. This Declaration, which follows Declaration No 17 on the primacy of 87

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See Häde (2017), Epiney (2006), p. 759; Calliess (2011), and Pelka (2012). [. . .] which allows for joint intervention by the two legal sources, see Mangiameli (2017a). Mangiameli

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European law, states, for the third time, the principle that “competences not conferred upon the Union in the Treaties remain with the Member States” (paragraph 1). This Declaration is important for determining the provision that is the subject of this commentary with reference to the expression “The Member States shall again exercise their competence to the extent that the Union has decided to cease exercising its competence”. Indeed, in one respect, the provision of Article 2.2 TFEU is confirmed according to which “the Member States shall exercise their competence to the extent that the Union has not exercised, or has decided to cease exercising, its competence”, but on the other hand it adds that “the latter situation arises when the relevant EU institutions decide to repeal a legislative act, in particular better to ensure constant respect for the principles of subsidiarity and proportionality” (paragraph 2). Consequently, both the recovery of concurrent competence by the Member States and its transfer to the European Union, derive from the evaluation of competence in light of the principles of subsidiarity and proportionality. However, the Declaration underlines how this evaluation, in the case of reversibility of the competence, may be made by the Council (with a simple majority) at the initiative of one or several of its members (representatives of Member States) and under Article 241 TFEU, requesting “the Commission to submit proposals for repealing a legislative act”. Of course, under Article 241 TFEU, to which the Declaration refers, the Commission may decide not to submit any proposal as indicated by the Council, informing the latter of its reasons for this. Finally, the idea of asserting the prerogatives of the States vis-à-vis the European powers, is found also in the last expression of the Declaration which states—as already specified above—“Equally, the representatives of the governments of the Member States, meeting in an Intergovernmental Conference, in accordance with the ordinary revision procedure provided for in Article 48 paragraphs 2 to 5 of the Treaty on European Union, may decide to amend the Treaties upon which the Union is founded, including either to increase or to reduce the competences conferred on the Union in the said Treaties” (paragraph 3). One may rightly question whether the Declaration has real legal efficacy and whether it adds interpretational clarity to what is already expressed in the European Treaties. Rather it appears to be more an expression of the political intention of the 2007 Conference (as appears also from the phrase stating that “The Conference welcomes the Commission’s declaration that it will devote particular attention to these requests”) which in particular was aimed at satisfying the polemical claims by Member States and various national political forces demanding that powers (and sovereignty) be returned to the Member States. With the economic crisis, many of these anti-European political forces seem to have gained momentum. However, from the scientific standpoint it has been unequivocally demonstrated that this

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tendency, also expressed in Declaration No 18, has turned out to be very wrong and has weakened both the Union and the Member States.89

3.5. Coordination of the Economic and Employment Policies of the Member States and Powers of the European Union

In the provision on competences, Article 2.3 TFEU takes on an important meaning because in principle it provides the grounds for acknowledging competence in favour of the Member States (“The Member States shall coordinate their economic and employment policies within arrangements as determined by this Treaty, [. . .]”) with the reservation of recognizing that the Union has the power to define how such coordination is to be achieved (“[. . .]..which the Union shall have competence to provide”).90 This idea of coordination of competences is further specified in Article 5 TFEU in which—also in this case—obviously there are sectors of shared competence, albeit with a broad meaning and with a discipline that is different from that expressed by the Treaties, for shared competence in the strict sense. Moreover, in this case, we are in the presence of a “horizontal concurrence” between the power attributed to the Union and the main competence on the subject by the Member States. This has induced some commentators to define this type of competence as a “hybrid competence” because it has both the characteristics of concurrent and “complementary” competence (see Article 2.5 and Article 6 TFEU). In Article 5 TFEU mention is made of the economic policies, the euro, employment policies and social policies. For these sectors, whose importance is huge, the extent of the shared power of the EU is determined very clearly. It is not stated that the European Union has a coordination role because it is the Member States that “co-ordinate their economic policies within the Union.” The European level (Council) has competence over the adoption of “measures”, that is to say, a modal discipline based on which the Member States carry out their co-ordination. Some hypotheses offer some specifications of the so-called “measures”, such as “global policies”, “orientations”, and their “specific provisions” (for the Member States whose currency is the euro), which are capable of effectively delimiting the exercise of European powers, in that they indicate the very content of the measure that the Union can adopt.91 The choice of envisaging a single modal discipline, as competence of the Union, for the economic, occupational and social policies of the Member States, although other shortcomings may be found in the monetary and fiscal policy, helps understand that the governments of the Member States were not at all far-sighted in envisaging the powers that would have been needed for the European level to face 89

See Häde (2017). See Krebber (2004), Radaelli (2003), Hochstetter (2007), Bodiroga-Vukobrat et al. (2010), and Hacker (2010). 91 See Caruso and Morvillo (2014), and Porchia (2015). 90

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the economic and financial crisis that struck a profoundly unprepared Europe at the very time when the Lisbon Treaty was being adopted.92

3.6. The Union Competence on a Common Foreign and Security Policy and on a Common Defence Policy

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Among the rules on competence, Article 2.4 TFEU, includes a mention of a common foreign and security policy and a common defence policy;93 from a systematic standpoint this raises some problems; indeed, while for other types of competence there are additional specifications in the subsequent articles, the content of this paragraph of Article 2 is not referred to in any other article in Part one, Title I (Categories and Areas of Union Competence); moreover, the matter is provided for in the Treaty on the European Union. Consequently, although concurrent competences have a residual nature under the definition contained in Article 4.1 TFEU, this qualification does not appear to be applicable to the competences mentioned in Article 2.4 TFEU. Indeed, although the provision is important because of the principle that states that “The Union shall have competence [. . .] to define and implement a common foreign and security policy, including the progressive framing of a common defence policy”, this principle is not expressed in a main clause but as a parenthetical element “in accordance with the provisions of the Treaty on European Union” that refers to another treaty because a common foreign and security policy is not on the list of unified policies, i.e., subject to the legislative power of the Union. Indeed, common foreign and security policy matters are dealt with through intergovernmental (or confederal) procedures, and not federal procedures, as emerges from Article 24 TEU that assigns the definition and implementation of such policies to the European Council and to the Council (with decisions taken unanimously), and excludes the adoption of legislative acts on this matter.94 Therefore, one may wonder what is the point of mentioning the common foreign and security policy in an article of the TFEU that deals with the enumeration of matters that are of competence of the Union, within the structure of exclusive, concurrent, concurrent in different manners, and complementary competences, etc. This reference appears to have two consequences, the first of which is the statement that the Union, which is a subject of international law endowed with treaty-making powers under Article 216 TFEU, can implement a foreign and

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For this aspect refer to Mangiameli (2013c); see also Mangiameli (2017b); Tuori and Tuori (2014), Athanassiou (2011), and Kjaer et al. (2011). 93 See Dumoulin et al. (2003), Novi (2005), Mariani (2005), Morviducci (2006), Linas Nogueras (2006), Gosalbo Bono (2006), Graf von Kielmansegg (2007), Koutrakos (2011), Nitoiu (2011), and Villani (2011). 94 See Bindi and Angelescu (2012), and Finzio and Morelli (2015).

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security policy at least in parallel with that of the Member States also by having recourse to the own competences of the Union. The second is that the foreign policy of Member States, even when decisions are not reached by the European Council and the Council, is not totally unencumbered, in that it is subject, also in this field, to the restraints arising from the principle of fair cooperation towards the European Union. In addition, alongside this rule that is general in nature, more specific rule affects the merits of the decisions taken in the area of common foreign and security policy, including the common defence policy. In other words, the exercise of legislative competences of the Union is protected by Article 40.1 TEU. Because of both these aspects, we may have to admit that the foreign policy of Member States is subject to the exercise of powers by the Union, also in light of the principle of the primacy of European law (laid down in Declaration No 17). However, this principle is not applicable also to the common foreign and security policy of the Union since the latter is protected against the European legislative powers by Article 40.2 TEU.95 Consequently, any case of dispute between European legislation (whether it be shared or exclusive) and the decisions on a common foreign and security policy could not be settled according to the rule of prevalence of legislation on foreign policy decisions, but would certainly need a political clarification within the European institutions to settle any dispute with Member States that might arise in these areas.

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3.7. The Complementary Competences of the EU

Consistently with the provision of Article 2.5, Article 6 TFEU introduces a third type of competence of the European Union, without defining it, which has been qualified as “complementary”.96 This refers to the carrying out of “actions to support, coordinate or supplement the actions of Member States.” For the seven sectors involved that are expressly enumerated “a) protection and improvement of human health, b) industry, c) culture, d) tourism, e) education, professional training, youth and sport, f) civil protection, g) administrative cooperation”), Article 2.5 TFEU subjects the competence of the Union to a double limitation: first, the European action cannot replace the competence of Member States in the sectors considered; second, “the acts that are legally binding of the Union adopted on the basis of Treaty provisions on such sectors cannot entail a harmonization of the legislative and regulatory provisions of Member States.”

95 96

See Fortunato (2014). Caruso (2008).

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As can be noticed, also in this case we might say that we are in the presence of a horizontal concurrence between Union and Member States, only that the boundaries of the action of the Union, besides being defined by the verbs “support”, “coordinate” and “supplement”, with respect to the discipline of the sectors involved over which the Member States have competence, are further marked by the circumstance that the European legislation cannot determine the harmonization of state legislations, which means that these sectors cannot be included in a process of legislative harmonization and, although their events involve the European level, the Treaties expressly lay down the protection of national differentiation. In other words, the sectors of complementary competence could be taken as sectors that characterize the identity of each Member State, as such, protected directly by Article 4.2 TEU. Consequently, from this there derive two important limitations to European law: the first is that its legal sources cannot cause limitations to national sources; and the second has to do with the foreign power of the Union that, for the sectors indicated, and although the Union can exercise limited competences, would lack the capacity to enter into international agreements requiring a harmonization of the legislative or regulatory provisions of Member States.

4.

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Descriptive and Prescriptive Elements in the Proposals on the Division of Powers

The provisions of Article 2 TFEU introduce a more detailed level of European competence compared to the provision of Article 5 TEU. However, besides the enumerations of the areas of different competence, expressed in Articles 3, 4, 5, and 6 TFEU, and with the exception of a common foreign and security policy, what is still missing is a clear structure of the scheme of competences. In particular, we should discuss what is the real nature of the classification that divides competences into exclusive, concurrent and complementary competences; and whether it is prescriptive or whether it is merely a summary of the contents of the Treaty itself that Article 2.6 TFEU seems to refer to (“the scope of and arrangements for exercising the Union’s competences shall be determined by the provisions of the Treaties relating to each area”), but which, on their own, do not have the constitutive characteristics of the powers of the European Union. Ultimately, also the Treaty on the European Economic Community contained a list of activities of the Community (Article 3) and the interpretation of that provision was that it constituted a “contents table of the Treaty laying down its main chapters;97 that is to say it was “a summary of the actions of the Community” whose individual items would necessarily be “elementary”, whereas “their necessary complements would be found in the analytical provisions of the Treaty.” This

97

Monaco (1965).

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defined the empirical method to be used whereby, on a case-by-case basis, “the individual conditions delimiting and specifying the various Community acts would have to be identified.” It is self-evident that this is an interpretational logic arising from the functional and incremental method with which the European Community was formed and which, in that original context, was aimed at establishing a Community order and hence reference to pacing was equally necessary. If we accept that Article 2.6 TFEU still confirms this interpretation of the system of European competences, and that in substance nothing or very little has changed with respect to Article 3 TEEC, then the provisions being examined would have no authentically prescriptive nature, but would be merely descriptive statements and the rationale underlying European powers would still be entirely of the functional type.98 But this type of underlying structure would indeed not be very convincing because it would not consider that the European order has been in place for 70 years and has the stability required to react to very strong institutional crises, like the exit of the United Kingdom (so-called Brexit), or the capacity to withstand the tensions deriving from the integration process like the enlargement of 2004 with the arrival of States that were not fully mature to join the European Union. The competences exercised by the Community at first, and then by the Union, no longer require—as was necessary initially—the gradual approach that affects the strength of the intervention of European sources, but rather, the incremental approach in legislative acts may be a political option to better accomplish a given policy. Moreover, many of the elements that are inferred from the discipline of the policies of Parts III, IV, and V of the TFEU, concern the relationships between the European institutions and not the conferral of competence in favour of the Union. Undoubtedly, in the Articles of the Treaty, there are many limitations to the power of intervention of the European sources, but this does not mean that such limitations are still today the consequence of the functional method, as was the case in 1957. These limitations are important because competences in the systems that distribute legislative powers to the different levels—in the case of Europe between the Institutional and national legislators—considering changing needs, require flexibility and reconcile uniformity with differentiation. It is no coincidence that the list of so-called “concurrent competences” was expanded and deeply diversified both in the Laeken design and in the Lisbon Treaty that transposed its precepts, because “concurrence” has proven to be the best method for adjusting to changes, for exercising legislative powers in a flexible manner and for achieving a balance between uniformity and differentiation. Undoubtedly, based on a comprehensive analysis of the TFEU, it can be stated that the nature of the division of powers between the European Union and the Member States, which has a constitutional nature, remains uncertain; and this explains the many aporias and apparently contradictory choices made in the

98

Baratta (2014).

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division of powers which caused serious problems during the years of the crisis both to the institutions and to Member States. However, we need to consider the progress made by the European Treaties, and hence set aside the functionalist definition of the division of powers. In European law, as in federal law, the delimitation of competences is based on the principle of conferral (Article 1.1 TFEU, Article 3.6 TEU, Article 4.1 TFEU, Article 5.1, phrase 1 and paragraph 2 TEU; Article 7 TFEU),99 the exercise of powers by the Union is based on the principles of subsidiarity and proportionality (Article 5.1 phrase 2 TEU) and also the limits within which each institution can act are determined by the Treaties (Article 13.2 TEU) based on the “powers conferred on it in the Treaties” and “in conformity with the procedures, conditions and objectives set out in them.” Moreover, the Court of Justice has qualified the choice of the legal basis of a legal act as a decision having constitutional significance,100 which is clearly spelled out in the provision of Article 296 TFEU.101 However, it is possible to state that the categories identified in Article 2 TFEU are not merely descriptive, but prescriptive. This would also explain the different revision method for the rules on competence compared to those on policies in Part III (Article 48 TEU). Article 2 TFEU, by using expressions such as “exclusive competences” or “shared competences”, and also “complementary competences”, as defined in the literature in pursuance of the special regime indicated in paragraph 5, has introduced in the law of the treaties concepts borrowed from federal law that have their own legal meaning and their own specific definitions. These concepts now have binding force in the interpretation of the Treaties and, in particular, they are binding on the European Court of Justice. In this way, European competence does not only have a functional character but can be attributed all the characteristics (objective, teleological, systematic, etc.) that are inherent in the conferral of a power. In addition, in this context, although the conferrals resulting from the enumerations are in principle compulsory, and hence it may be presumed that general competence remains with the Member States, the way in which European case law will consider the hypothesis of competences achieved through inference and connection takes on special importance both in the hypothesis of the so-called “implied powers” but also where, to justify the expansion of powers, other clauses or the principles of federal law are invoked (as the necessary and proper clause, Kompetenz kraft Natur der Sache, ungeschriebene Kompetenzen, etc.).102

99

See Case C-93/00, Parliament v Council (ECJ 13 December 2001) para 39; Case C-440/05, Commission v Council (ECJ 23 October 2007) para 61; Case C-370/07, Commission v Council (ECJ 1 October 2009). 100 See Opinion 1/15, Draft agreement between Canada and the European Union (ECJ 6 December 2001) para 71. 101 See Mangiameli (2015). 102 Hence the question of Wyatt (2011): Is the EU an Organisation of Limited Powers?.

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List of Cases ECJ

ECJ 17.12.1970, 33/70, SpA SACE v Finance Minister of the Italian Republic, ECLI:EU:C:1970:118 [cit. in para 13] ECJ 31.03.1971, 22/70, Commission v Council - European Agreement on Road Transport, ECLI:EU:C:1971:32 [cit. in para 35] ECJ 14.12.1974, 41/74, Yvonne van Duyn v Home Office, ECLI:EU:C:1974:133 [cit. in para 13] ECJ 14.07.1976, 3, 4 and 6/76, Cornelis Kramer and others, ECLI:EU:C:1976:114 [cit. in para 44] ECJ 05.041979, 148/78, Tullio Ratti, ECLI:EU:C:1979:110 [cit. in para 16] ECJ 02.12.1980, 815/79, Cremonini and Vrankovich, ECLI:EU:C:1980:273 [cit. in para 16] ECJ 05.05.1981, 804/79, Commission v United Kingdom, ECLI:EU:C:1981:93 [cit. in para 44] ECJ 16.12.1981, 269/80, Regina v Robert Tymen, ECLI:EU:C:1981:303 [cit. in para 10] ECJ 15.03.1983, 145/82, Commission v Italy, ECLI:EU:C:1983:75 [cit. in para 13] ECJ 23.05.1985, 29/84, Commission v Germany, ECLI:EU:C:1985:229 [cit. in para 13] ECJ 09.07.1987, 281, 283-285 and 287/85, Germany v Commission, ECLI:EU: C:1987:351 [cit. in para 24] ECJ 22.06.1989, 103/88, Fratelli Costanzo SpA v Comune di Milano, ECLI:EU: C:1989:256 [cit. in para 13] ECJ 13.11.1990, 331/88, The Queen, the Minister of Agriculture v ex parte FEDESA and others, ECLI:EU:C:1990:391 [cit. in para 11] ECJ 14.07.1994, 91/92, Paola Faccini Dori v Recreb Srl, ECLI:EU:C:1994:292 [cit. in para 13] ECJ 28.03.1996, Opinion 2/94, Adoption of the Convention for the Protection of Human Rights and Fundamental Freedoms by the Community, ECLI:EU: C:1996:140 [cit. in para 28] ECJ 18.12.1997, C-129/96, Inter-Environnement Wallonie ASBL v Région wallonne, ECLI:EU:C:1997:628 [cit. in para 13] ECJ 19.11.1998, C-150/94, United Kingdom v Council, ECLI:EU:C:1998:547 [cit. in para 11] ECJ 05.10.2000, C-376/98, Germany v Parliament and Council, ECLI:EU: C:2000:544 [cit. in para 29] ECJ 06.12.2001, Opinion 1/15, Draft agreement between Canada and the European Union, ECLI:EU:C:2017:592 [cit. in para 79] ECJ 13.12.2001, C-93/00, Parliament v Council, ECLI:EU:C:2001:689 [cit. in para 79]

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ECJ 23.10.2007, C-440/05, Commission v Council, ECLI:EU:C:2007:625 [cit. in para 79] ECJ 01.10.2009, C-370/07, Commission v Council, ECLI:EU:C:2009:590 [cit. in para 79] ECJ 27.11.2012, C-370/12, Pringle, ECLI:EU:C:2012:756 [cit. in para 35] ECJ 04.05.2016, C-547/14, Philip Morris and others v Secretary of State for Health, ECLI:EU:C:2016:325 [cit. in para 29]

CFI/GC

GC 05.06.1996, T-162/94, NMB France SARL, NMB-Minebea-GmbH, NMB UK Ltd and NMB Italia Srl v Commission, ECLI:EU:T:1996:71 [cit. in para 28]

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Article 3 [Exclusive Competence of the Union] 1. The Union shall have exclusive competence in the following areas:1-33 (a) customs union;34-37 (b) the establishing of the competition rules necessary for the functioning of the internal market;38-46 (c) monetary policy for the Member States whose currency is the euro;47-55 (d) the conservation of marine biological resources under the common fisheries policy;56-59 (e) common commercial policy.60-67 2. The Union shall also have exclusive competence for the conclusion of an international agreement when its conclusion is provided for in a legislative act of the Union or is necessary to enable the Union to exercise its internal competence, or in so far as its conclusion may affect common rules or alter their scope.68-82

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The Exclusive Competence and the European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consistency and Extent of the Exclusive Competence of the Union . . . . . . . . . . . . . . . . . . . . Matters of Exclusive Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1. Customs Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2. The Establishing of the Competition Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3. Monetary Policy for the Member States Whose Currency is the Euro . . . . . . . . . . . . 3.4. The Conservation of Marine Biological Resources Under the Common Fisheries Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5. Common Commercial Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. The Union Exclusive Competence for the Conclusion of International Agreements . . . . List of Cases References

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Articles 5 TEU and 2 TFEU are supplemented by Articles 3 to 6 TFEU, which define the sectors of the different types of competence. In this respect too, the division of powers between the European Union and the Member States differs from the provisions of the previous Treaties, where the activities within the Community’s competence were related to the objectives of the Union.1 This innovation

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had already been accomplished with the Constitutional Treaty.2 In the current formulation, the aims of the Union, as expressed in Article 3 TEU, continue to be connected to the exercise of European regulatory powers through Article 5.2 TEU that refers to them expressly (principle of conferral). In addition, Article 3.6 TEU reiterates “The Union shall pursue its objectives by appropriate means commensurate with the competences which are conferred upon it in the Treaties.” As to the Union’s exclusive competence, still in the recent past, it was only presupposed and inferred negatively from Article 5 of the EC Treaty (“In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity [. . .]”)3 but not defined. In fact, it was the Court of Justice that first identified the areas of “exclusive competence” and their characteristics, outlining some supranational powers. In fact, in the Donckerwolke judgment, the European judge, after emphasizing that “the answer to these questions must be derived from the provisions of the treaty concerning the customs union and from the closely related provisions concerning the common commercial policy”, affirms that “as full responsibility in the matter of commercial policy was transferred to the Community by means of article 113 (1) measures of commercial policy of a national character are only permissible after the end of the transitional period by virtue of specific authorization by the Community.”4 The idea that the transfer of competence from the Member States to the Community implied that the power of the former to regulate a particular sector was no longer valid, even if the Council had not legislated in that specific sector, was clearly expressed in several decisions: Case 804/79 of 5 May 19815 the European judge states that “since the expiration on 1 January 1979 of the transitional period laid down by Article 102 of the act of accession, power to adopt, as part of the common fisheries policy, measures relating to the conservation of the resources of the sea has belonged fully and definitively to the Community. Member States are therefore no longer entitled to exercise any power of their own in the matter of conservation measures in the waters under their jurisdiction. The adoption of such measures, with the restrictions which they imply as regards fishing activities, is a matter, as from that date, of Community law” and adds that, “the transfer to the Community of powers in this matter being total and definitive, the fact that the

2 See Part. I, Title III—Union Competences, Articles from I-11, to I-18, included “the common foreign and security policy” (I-16), and the “Flexibility clause” (I-18). Cf. Davies (2003); Becker (2005); Ritzer (2006). 3 This method of definition still remains in the Treaties (Article 5.3 TEU). 4 See Case 41/76, Donckerwolke and Others v Procureur de la République and Others (ECJ 15 December 1976) para 13, 32 and 24 (“it results from the system of the treaty that the application of the principles referred to above is conditional upon the establishment of a common commercial policy”). For the common commercial policy see also, Opinion 1/94, Competence of the Community to conclude international agreements concerning services and the protection of intellectual property (ECJ 15 November 1994) para 22. 5 See Case 804/79, Commission v United Kingdom (ECJ 5 May 1981) summary No 1. Accordingly see Case 269/80, Regina v Robert Tymen (ECJ 16 December 1981) para 7.

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Council has not adopted, within the required period, the conservation measures referred to by Article 102 of the act of accession could not in any case restore to the Member States the power and freedom to act unilaterally in this field.” In particular, in the case under consideration, European competence had not yet been exercised, or if exercised, it had not been exercised exhaustively, and the Court observed: “it may be recalled that that resolution excludes in principle unilateral measures by the Member States and that in the absence of Community measures it admits only of measures adopted to ensure the protection of resources and in a form which avoids discrimination. Furthermore, it emphasizes that such measures shall not prejudice the guide-lines to be adopted for Community policy on the conservation of resources”, requiring that “before adopting such measures the Member State concerned is required to seek the approval of the Commission, which must be consulted at all stages of the procedure. It should be noted that these requirements, [. . .] must be considered henceforth in a new setting, characterized by the exclusive powers of the Community on this subject and by the full effect of the relevant rules of Community law.”6 With the Treaty of Lisbon,7 exclusive competence is expressly defined for the first time in its features by Article 2.1 TFEU while the sectors of exclusive competence are indicated in Article 3.1 TFEU. Exclusive competence indicates an area of competence of the European Union, in which only it can legislate and adopt legally binding acts in that specific area and, conversely, that specific area is removed from the legislating power of Member States which can no longer legislate autonomously, but “only if empowered by the Union or for the implementation of Union acts” (Article 2.1 TFEU). Moreover, under exclusive competence, Member States cannot activate forms of enhanced cooperation (Article 20.1 TEU), the subsidiarity principle does not apply, and, unless previously authorized, any legislative act of a Member State on a matter of exclusive competence of the Union would constitute an infringement. And any legislative act of a State, albeit legitimated by an authorization of the Union, would be overruled by a subsequent legislative act issued by the Union, hence making the state legislative provisions inapplicable. It is quite clear that both the regime of exclusive competence and the relevant subject matters, with the exception of monetary policy and the euro, are codified by the case law of the Court of Justice.8 This circumstance is not entirely positive, rather it constitutes a critical issue in the division of powers between the European Union and the Member States, because it does not adequately consider the

6

Case 804/79, Commission v United Kingdom (ECJ 5 May 1981) para 26 and 27. Accordingly see Case 269/80, Regina v Robert Tymen (ECJ 16 December 1981) para 8; and also Case C-165/88, ORO Amsterdam Beheer en Concerto v Inspecteur der Omzetbelasting (ECJ 5 December 1989). 7 In general, on the division of comptences after the Lisbon Treaty, see Baratta (2010), Caruso (2008), Colasante (2012), De Pasquale (2008), Haratsch et al. (2020), Jürgens (2010), Konstadinides (2011), Sbrescia (2008), and Schu¨tze (2008). 8 Knook (2005).

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6

7

8

9

178

10

11

12

13

14

15

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competences of the Union in relation to its efficiency as a common order of the Member States.9 The technique for dividing competences recalls that of the federal laws, based on the transfer of competences from the Member States to the Federation with the consequent loss of competence on the part of the former. Member States in the federal systems, as well as in the case of the European Union, are recognized a residual competence.10 However, the enumerations of exclusive competences in the Federations historically include more subjects than is the case with the European Union under Article 3, and their importance lies in the fact that these enumerations, in principle, define a “dual” structure of relations, they measure the political action of the Federation and determine its capacity to concentrate legislative power. It is well known that through these enumerations it is not only the legislative powers that are transferred, in the sense that the power is delegated but the ownership continues to remain with the delegator (rectius: the Member States), but the foundations are laid for a limitation of state sovereignty in favor of the Federation which becomes an equally sovereign entity.11 Moreover, the political action of the federations, although limited to the powers transferred by the Member States, involves not only the economic aspects—such as the internal market, trade with third countries and currency—but also taxation and the power of levying taxes, issuing loans and the power of public spending in the general interest and for the well-being of the citizens. However, besides these powers, there are also the powers of representation, defence, justice, and powers inherent in those aspects that make the Federation cohesive, such as citizenship and its rights, the means of communication, sources of energy, cultural heritage, security, etc.. Finally, the experience of the Federations shows that the enumerated exclusive competences attract objects and activities, even in the absence of constitutional clauses that legitimize the implied powers, which can be attained through a teleological interpretation or by connection and inference or they may be linked, thus leading to a reduction in the residual competences of the Member States which lend themselves to being constantly encroached upon as they have not be clearly defined.12 In the case of the European Union, the Court of Justice has stated, in the famous Judgment Costa v. E.N.E.L., that “By creating a Community 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

9

See Mangiameli (2016). See Articles 4 and 5 TEU, as well as Declaration No 18. 11 See Mangiameli (2017). 12 Implied competences can take the form of related competences (Annexkompetenz), connected competences (Kompetenz aus Sachzusammenhang) and competences for the “nature of the thing” (Kompetenz aus der Natur der Sache). For all these concepts, see Mangiameli (1992). 10

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stemming from a limitation of sovereignty or a transfer of powers from the states to the Community, the Member States have limited their sovereign rights and have thus created a body of law which binds both their nationals and themselves”, coming to the conclusion that “The transfer by the states from their domestic legal system to the Community legal system of the rights and obligations arising under the treaty carries with it a permanent limitation of their sovereign rights.”13 However, this idea that the transfer of powers to the European Union is accompanied by a decision that permanently restricts the sovereignty of Member States has been challenged by the constitutional courts of the Member States;14 moreover, on the subject of the sovereignty of the European Union, the question is open and, at the present time, also strongly contested by the so-called sovereignist positions in favor of the Member States, formed in the wake of the economic crisis and the impasse on the counter-cyclical policies of the whole European system (EU and Member States).15 In any case, even if we want to recognize federal features in the European legal system, also for the direct effectiveness of its sources and for the supremacy of its law,16 no competence that is attributed to the EU can be considered to be a transfer of sovereignty, not only for the number and size of the powers transferred exclusively to the Union, which in no way matches the powers transferred to a Federation, but also and above all for the embryonic nature of the common foreign, security and defence policy, to which we might add the absence of true system of European taxation.17 Consequently, the enumeration of the exclusive powers of the Union, Article 3 TFEU, even if in the past they did experience some legislative expansion, as a result of a purpose-related interpretation of competence, favored by the Court of Justice,18 does not delineate an effective “dual” system of competences which would entail a distinction between which powers are of European competence and which powers remain with the Member States. In this sense, anticipating what emerges from the following articles of the Treaty, the prevailing character of the division of powers seems to be not that of exclusivity, but rather that of a sharing of powers and cooperation in exercising such powers. However, what has been expressed so far regarding the image that exclusive powers offer of the Union, leads us to wonder whether the Union, even with the difficulties arising from the global crisis, the weakness of international representation powers, and the lack of real military powers, can actually be reduced to a 13

Case 6/64, Flaminio Costa v E.N.E.L. (ECJ 15 July 1964). In this sense, the sentence on the Lisbon Treaty of the Bundesverfassungsgericht (Judgment 2 BvE 2/2008 of 30 June 2009) is emblematic. 15 Mangiameli (2013a). 16 On the principle of prevalence of European law, there is ample literature. Among the many, see Albi (2007), Baumann (2010), Di Salvatore (2006), Di Salvatore (2013), Dupéré (2005), Mangiameli (2006, 2008), Niedobitek (2001, 2008), Prechal (2007), and Ritleng (2005). 17 The need for an expansion of the European budget has already been mentioned elsewhere, see Mangiameli (2013b). 18 For a framework of the case law of the Court of Justice, see Carlotto (2007). 14

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17

18

19

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20

sort of mere container of the sovereignties of the Member States, characterized simply by a customs union, a common trade policy and a currency (for some states, but not for all). The answer that can be given is that the real image of the Union derives from the standard of fundamental rights that the European legal system ensures and which implies common principles and values that have become deeply rooted in the spirit of European citizens in the course of the last 70 years, even though the provisions on the division of powers do not appear to be capable of embracing them all.

2. 21

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23

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Consistency and Extent of the Exclusive Competence of the Union

The first paragraph of Article 3 TFEU defines the matters of exclusive competence and the enumeration is mandatory, in the sense that the qualification of the competence can only concern those matters.19 However, it is believed that also an exclusive unwritten competence (eine ungeschriebene ausschließliche Kompetenz)20 can be derived from the Treaty. The expression refers to the tradition of German federal law, which was somewhat influenced also by the theory of “implicit powers” which comes from the American experience where in the course of about 150 years there were cases where there was an expansion of the exclusive competence of the federation through clauses not expressed in the Constitution.21 In the case of the European Union, where the interpretation of the competences is in the hands of the European judge, for the determination of “implied powers”22 we need to make a distinction between the application of rules that favor an expansion of the competence, such as the teleological interpretation,23 versus the decisions referring to implied rules (rectius: to implied exclusive competences) as legal foundation for European legislative acts, thanks to which the norms enshrined in the Treaty can be suitably and reasonably applied.24 There are also cases of some ambiguity, where the purpose-related interpretation of the provisions of the Treaty and the implied norm contribute to the providing a foundation for European competence.25 Very eloquent in this sense is the Opinion issued by the Court of Justice on the accession of the Community to the European 19

De Witte (2017). Cf. Häde (2017); Eilmansberger and Jaeger (2012), para 4; Nettesheim (2009). 21 Cf. Schütze (2017). 22 Cf. Nicolaysen (1966), and Calvano (2008). 23 See Joined Cases 281, 283–285 and 287/85, Germany v Commission (ECJ 9 July 1987) para 28: “it must be emphasized that where an article of the EEC Treaty – in this case Article 118 – confers a specific task on the Commission it must be accepted, if that provision is not to be rendered wholly ineffective, that it confers on the Commission necessarily and per se the powers which are indispensable in order to carry out that task.” 24 See Case 20/59, Italy v High Authority (ECJ 15 July 1960). 25 See Case 165/87, Commission v Council (ECJ 27 September 1988) para 8 and 13. 20

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Convention on Human Rights,26 where it is stated that “The Community acts ordinarily on the basis of specific powers which, as the Court has held, are not necessarily the express consequence of specific provisions of the Treaty but may also be implied from them” and that, “in the field of international relations, at issue in this request for an Opinion, it is settled case law that the competence of the Community to enter into international commitments may not only flow from express provisions of the Treaty but also be implied from those provisions.”27 In the opinion referred to, the Court also specifies the relationship between the powers defined implicitly and the (flexibility) clause of what is now Article 352 TFEU, asserting that this provision “is designed to fill the gap where no specific provisions of the Treaty confer on the Community institutions express or implied powers to act, if such powers appear none the less to be necessary to enable the Community to carry out its functions with a view to attaining one of the objectives laid down by the Treaty.”28 The case law of the Court of Justice, indeed, has used the provision referred to in order to ensure the legitimacy of a considerable amount of legislative acts of the Community, even in the absence of an express (or implied) provision for them by the Treaties,29 but without prejudice to the principle that Article 352 TFEU must always be connected to the provisions of the Treaties and to the principle of conferral of powers and that this clause cannot serve as a basis for expanding the Community’s powers, in other terms it must not to be used as a sort of simplified procedure for amending the Treaties. Even in cases where different regulatory powers are found in the European Treaties, for example, to regulate relations within the organs of the Union30 or the European bureaucracy,31 or even of particular formations such as political parties32 or

26

See Opinion 2/94, Accession of the Community to the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECJ 28 March 1996) para 25 and 26. 27 And it continues: “The Court has held, in particular, that, whenever Community law has created for the institutions of the Community powers within its internal system for the purpose of attaining a specific objective, the Community is empowered to enter into the international commitments necessary for attainment of that objective even in the absence of an express provision to that effect.” 28 See, Opinion 2/94, Accession of the Community to the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECJ 28 March 1996) para 28 and 29. 29 Calvano (2008), and Dashwood (2007). 30 See Article 223.2 TFEU that foresees “The European Parliament [...] shall lay down the regulations and general conditions governing the performance of the duties of its Members.” 31 See Article 336 TFEU that foresees “The European Parliament and the Council shall [...] lay down the Staff Regulations of Officials of the European Union and the Conditions of Employment of other servants of the Union.” 32 See Article 224 TFEU: “The European Parliament and the Council [...] shall lay down the regulations governing political parties at European level referred to in Article 10 (4) of the Treaty on European Union and in particular the rules regarding their funding”.

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26

27

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28

29

30

even European funds,33 it has been said that these are cases of exclusive competence.34 The identification of these exclusive competences is claimed to derive from the fact that, for the regulation of the sectors concerned, any possibility of intervention by the Member States is in principle excluded and hence in this sense, the Union is said to have competence for the nature of things (aus der Natur der Sache). However, in this hypothesis, this formula—it too derived from the Germanic tradition35—does not seem useful, because it would refer to areas that fall outside the division of competences. Indeed, in order to speak about an exclusive competence (but also of concurrent competence, coordination or support) there should be grounds for arguing over those areas of legislation with the Member States; on the other hand, when the regulatory powers refer to fields that have been removed from the legislative power of Member States, we most likely find ourselves in front of a reservation of statutory powers, that is when the discipline of an object is reserved for a type of legal source, excluding other sources. One final profile should be considered here. Unlike what happens in the tradition of federal enumerations—where the subject matters of legislation are objects of discipline, legal categories, sectoral activities, etc., in the case of the European enumerations contained in Articles 3–6 TFEU, the enumerated subjects are more precisely policies, which is a set of coordinated activities intended to provide a public service, or an institutional structure or network, such as to allow it to be carried out within a framework where the economic and/or social activities comply with the same body of rules. This also explains why the enumerations are matched with the rules and regulations governing the various sectors contained in the Treaty, which delimit the exercise of competences (according to the wording of Article 2.6 TFEU).

3. 31

32

Title I Categories and Areas of Union Competence

Matters of Exclusive Competence

The areas in which the EU has exclusive competence are simply five: (a) customs union; (b) the establishing of the competition rules necessary for the functioning of the internal market; (c) monetary policy for the Member States whose currency is the euro; (d) the conservation of marine biological resources under the common fisheries policy; (e) common commercial policy. Three exclusive competences—with the monetary union being considered separately even though it comes under the same frame of reference—are closely interconnected and they trace the basic philosophy of the European system,

33 Reference is made to the regulations governing the European Social Fund (Article 164 TFEU) and the other funds that fall within the Economic, Social and Territorial Cohesion Policy (Article 177 TFEU). 34 Cf. Häde (2017), p. 48. 35 Bullinger (1971), and Wipfelder (1982).

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which underpins the institutional system and informs the way in which all other policies of the Union and the Member States are developed. The customs union, the regulations on competition and trade policy were the elements that initially defined the common market, safeguarding its internal functioning and ensuring its external capacity. From the point of view of the European legal system, it is therefore not wrong to state that the common market, first, and the internal market after the SEA, formed a constitutional category,36 corresponding to a structure of the European legal system in which the fundamental freedoms are ensured by the Treaty.37 In the Unitary Patent Case, the Court of Justice has ruled that “[t]he expression ‘relevant provisions of the Treaties’ makes it clear that competences falling within the sphere of the internal market are not confined to those conferred by Articles 114 TFEU and 115 TFEU relating to the adoption of harmonisation measures but cover also any competence attaching to the objectives set out in Article 26 TFEU [. . .].”38

33

3.1. Customs Union

The Treaty affirms that “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” (Article 28.1 TFEU). This provision is complemented by two other provisions of the Treaty: the first includes the prohibition of duties between Member States, not only on products originating in them, but also on those coming from third countries which are in free circulation in Member States (Article 28.2 TFEU);39 the second concerns the explicit prohibition between Member States of “customs duties on imports and exports” and “charges having equivalent effect” and “this prohibition shall also apply to customs duties of a fiscal nature” (Article 30 TFEU). The customs union is therefore a direct effect of the law established by the Treaty, while its discipline (Part three, Title II, Chapter 1) is included in Articles 31 to 32 TFEU: the first attributes to “the Council on a proposal from the Commission” the power to establish “the Common Customs Tariff duties”; while the latter defines the principles that the Commission must abide by in performing its duties in the area of customs union.40

36

Cf. Mangiameli and Saputelli (2013). See Article 14.2 of the EC Treaty; Article 26.2 TFEU. 38 See Joined Cases C-274/11 and C-295/11, Spain and Italy v Council (ECJ 16 April 2013) para 21—emphasis is mine. 39 On that notion, see Article 29 TFEU. 40 Lux (2015). 37

Mangiameli

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35

184

36

37

Title I Categories and Areas of Union Competence

It is remarkable to note that the four principles that should guide the work of the Commission are aimed at jointly considering: the promotion of trade with third countries (a), developments in the conditions of competition within the Union in so far as they lead to an improvement in the competitive capacity of undertakings (b); the requirements of the Union as regards the supply of raw materials and semifinished goods while taking care to avoid distorting conditions of competition between Member States in respect of finished goods (c); and, finally, the need to avoid serious disturbances in the economies of Member States and to ensure rational development of production and an expansion of consumption within the Union (d). It is clear that the determination of customs tariff is not only related to regulating external trade relations with third countries and their products, but also to the functioning of the internal market.

3.2. The Establishing of the Competition Rules

38

39

This exclusive competence refers to the regulation of the competition necessary for the functioning of the internal market.41 The internal market is a prerequisite and its functioning is based on fair competition rules. The regulatory power of the Union is aimed at preventing competition from being distorted. This principle, which substantiates exclusive competence, is conducive to implementing a clear purpose of the Union, for which “the Union shall establish an internal market” and “shall work for the sustainable development of Europe based on balanced economic growth and price stability, on a highly competitive social market economy, aiming at full employment and social progress, [. . .]” (Article 3.3 TEU).42 The exclusive competence for regulating competition in the internal market restricts the margins of shared competence on the internal market envisaged in Article 4.1 point (a) TFEU. The sectoral provisions that define the content of the competence on competition law are laid down in Part Three, Title VII, Chapter 1 of the Treaty, which consists of two parts: the first contains the competence rules that refer to companies (Section 1—Articles 101–106 TFEU); the second part, instead, contains the rules concerning State aid (Section 2—Articles 107–109 TFEU). In a restrictive interpretation, the Court has held that “[t]o regard Article 118 TFEU as forming part of that area would [. . .] be contrary to Article 2(6) TFEU and the result would be to extend unduly the scope of [the Union’s exclusive competence for “the establishing of the competition rules necessary for the functioning of the internal 41

Ibáñez Colomo (2017), Davies (2017). See also the provision of Article 119.1 TFEU (“For the purposes set out in Article 3 of the Treaty on European Union, the activities of the Member States and the Union shall include, as provided in the Treaties, the adoption of an economic policy which is based on the close coordination of Member States’ economic policies, on the internal market and on the definition of common objectives, and conducted in accordance with the principle of an open market economy with free competition”). 42

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market” pursuant to Article 3.1 point (b) TFEU].”43 It is noteworthy that it is the first time that the Court uses the strongly worded formula “the result would be to extend unduly the scope of [the EU’s exclusive competences]” in its extensive competence case law. From the point of view of EU competence law, and especially the essential principle of conferral, it has to be taken into account that decisions for an exclusive competence in case of doubt have to be taken extremely cautiously. Most importantly, however, one has to stress the importance of Article 4.1 TFEU, which states clearly that the default scenario is always that a competence is shared, whereas exclusive competences must be designated clearly in Article 3 TFEU. Also for the rules on competition it can be stated that some aspects of competition are provided for directly by the Treaty, through enjoin provisions that are directly effective for instance where it lays down prohibitions (Article 101.1 TFEU), with the consequence that “Any agreements or decisions prohibited pursuant to this Article shall be automatically void” (Article 101.2 TFEU).44 Within the framework of the enjoin provisions, there is also the definition and the relative prohibition of “abuse of a dominant position within the internal market or in a substantial part of it” by one or more companies (Article 102 TFEU) and the listing of the hypotheses of abusive practices, contained in the second paragraph of Article 102 TFEU, seems to have an illustrative character. These articles, as shown in Article 104 TFEU, directly limit the action of the Member States even in the absence of any European discipline laid down for the implementation of Articles 101 and 102 TFEU. In line with this position, quite recently the Court of Justice has attached a material character to the aforementioned provisions, as stated in Article 3.1 point (b) TFEU.45 Moreover, in the matter of safeguard of the competition, the Court admits a parallel competence of the Member States, since European law and national competition law consider restrictive practices under different aspects. In fact, Articles 101 and 102 TFEU would safeguard trade between Member States, while “national law proceeds on the basis of considerations peculiar to it and considers restrictive practices only in that context.”46 In this way, the exclusive competence recognized by Article 3.1 point (b) TFEU, would result in a legislative power of the Union similar to that granted to the Federation by the clause on interstate trade, provided for in the US Constitution. However, despite the provisions of Articles 101 and 102, TFEU may be directly binding on Member States and on the trade between them, “The appropriate 43 See Joined Cases C-274/11 and C-295/11, Spain and Italy v. Council (ECJ 16 April 2013) para 24. 44 With the exceptions provided by Article 101.3 TFEU. 45 See Case C-52/09, Konkurrensverket v TeliaSonera Sverige AB (ECJ 17 February 2011) para 21 and 22. 46 See Joined Cases C-295/04 to C-298/04, Vincenzo Manfredi and Others v Lloyd Adriatico Assicurazioni SpA and Others (ECJ 13 July 2006) para 38; and there, see other decisions of the Court.

Mangiameli

40

41

42

43

186

44

45

46

Title I Categories and Areas of Union Competence

regulations or directives to give effect to the principles set out in Articles 101 and 102 shall be laid down by the Council, on a proposal from the Commission and after consulting the European Parliament.” The Article that provides competence to regulate competition in the internal market is particularly important because it allows the institutions to intervene on competition by using the two main sources of European law. Alongside the legislative power conferred on the Council, Articles 105 and 106 TFEU attribute regulatory powers to the Commission which is assigned the task to “ensure the application of the principles laid down in Articles 101 and 102” and also to monitor the provisions concerning public enterprises enjoying exclusive rights (monopolies) or providing services of general economic interest. Somewhat different is the position of the principle regarding the prohibition of State aid. Indeed, also this seems to be an enjoin provision, but unlike the prohibitions on cartels (Article 101 TFEU) and dominant positions (Article 102 TFEU), Article 107 TFEU, in paragraphs 2 and 3 in addition to the general prohibition, lists the types of State aid that is compatible with the internal market, provided that it is not misused (Article 108.2 TFEU). Furthermore, it is possible that a particular State aid is requested by a Member State and that the Council, when exceptional circumstances justify such a decision, issues a deliberation allowing such aid “in derogation from the provisions of Article 107 or the regulations provided for in Article 109” (Article 108 paragraphs 2 and 3 TFEU). From this point of view, a special procedure is foreseen to assess the compatibility of State aid with the internal market, based on the permanent examination by the Commission of established State aid and on communication to it “of any plans to grant or alter aid” (Article 108.3 TFEU), recognizing that the Commission has regulatory power over the aid that the Council has declared to be exempt from the assessment procedure (Article 108.4 TFEU). In this context, the European reservation on legislation, safeguarded by Article 3.1 point (b) TFEU is expressed in Article 109 TFEU which provides for a wide discretion on the matter, for which “The Council, on a proposal from the Commission and after consulting the European Parliament, may make any appropriate regulations for the application of Articles 107 and 108 and may in particular determine the conditions in which Article 108 (3) shall apply and the categories of aid exempted from this procedure.”

3.3. Monetary Policy for the Member States Whose Currency is the Euro

47

The third exclusive competence enumerated by Article 3.1 TFEU is among the most significant:47 it refers to monetary policy and the euro and obviously refers only to the nineteen states that have adopted the common currency. The discipline of this policy is contained in Part III, Title VIII, Chapter 2 TFEU (Articles 127–133 47

Waibel (2017).

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TFEU). However, the guiding principle of this policy is contained in Article 119.2 TFEU, which in the context of economic policy, in parallel with the coordination of the economic policies of the Member States, the internal market and the common objectives, “shall include a single currency, the euro, and the definition of a single monetary policy and exchange-rate policy.” According to the Court of Justice “the FEU Treaty, which contains no definition of monetary policy, refers, in its provisions relating to that policy, to the objectives, rather than to the instruments, of monetary policy.”48 The primary objective of monetary policy and exchange-rate policy “shall be to maintain price stability and, without prejudice to this objective, to support the general economic policies in the Union, in accordance with the principle of an open market economy with free competition” (Article 119.1 TFEU).49 In examining the rules of the Treaty laid down in Articles 127–133 TFEU, it is clear that monetary policy comprises three different kinds of provisions: firstly, several articles are limited to envisaging principles and provisions that are directly effective without the need for the intermediation of a legislative act; secondly, several articles refer to the European System of Central Banks and to the European Central Bank, which has been granted an important regulatory power (Article 132 TFEU), alongside consultation and power of initiative; while few provisions actually refer to the European legislator (Council and European Parliament), to entrust it with legislative tasks, which, quite frankly, appear to be somewhat residual for this policy area (Article 127.6, Article 129.3, and Article 133 TFEU). These provisions on competence concern only the Member States whose currency is the euro, while they do not apply to the monetary policy of the other Member States, as specified in Article 139 TFEU. The monetary policy of these Member States is residually included in the provision of Article 4.1 TFEU. The provisions on monetary policy are completed in Articles 136–138 of the Treaty (Chapter 4—Provisions specific to the Member States whose currency is the euro). The powers conferred on the Council by Article 136.1 TFEU are particularly important. Namely they are powers to “adopt measures specific to those Member States whose currency is the euro: (a) to strengthen the coordination and surveillance of their budgetary discipline; (b) to set out the economic policy guidelines for them.” It is plausible, but not certain, that this competence should fall within Article 3.1 point (c) TFEU; in any case, the way in which the Council can adopt the aforementioned “measures” remains open. Furthermore, in order to tackle the economic and financial crisis, which could have devastated the euro, in accordance with the simplified Treaty revision procedure (Article 48 TEU), the European Council Decision of 25 March 2011 (2011/ 199/EU) added a third paragraph to Article 136 to constitute a legal basis for the establishment of a European Stability Mechanism.

48 49

See Case C-370/12, Pringle (ECJ 27 November 2012) para 53. See Case C-370/12, Pringle (ECJ 27 November 2012) para 54.

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49

50

51

52

188

53

54

55

Title I Categories and Areas of Union Competence

However, according to the Court of Justice, although it is part of the Union’s economic policy, the European Stability Mechanism “is not capable of affecting the exclusive competence held by the Union under Article 3 (1) point (c) TFEU in the area of monetary policy for the Member States whose currency is the euro.”50 This is a conclusion that is consistent with the statement that, “consequently, having regard to Articles 4 (1) TEU and 5 (2) TEU, the Member States whose currency is the euro are entitled to conclude an agreement between themselves for the establishment of a stability mechanism of the kind envisaged by Article 1 of Decision 2011/199.”51 Also, Article 138 TFEU establishes a competence reserved to the Union and, specifically, to the Council, but it cannot be said that for this reason it should come under Article 3.1 point (c) TFEU. It is more appropriately a power that completes the monetary policy concerning the definition of a unitary representation of the eurozone in the EU’s relations with international financial institutions and financial conferences.

3.4. The Conservation of Marine Biological Resources Under the Common Fisheries Policy

56

57

58

59

As mentioned above, the exclusive competence of Article 3.1 point (d) TFEU, had already been recognized before the Treaty of Lisbon and, for quite some time, by the Court of Justice.52 This exclusive competence interferes with the common fisheries policy. It is a question of understanding what relationship there is with the latter, since “agriculture and fisheries” are a shared competence (Article 4.2 point (d) TFEU). The Common Fisheries Policy provides for a legislative competence for “the common organisation of agricultural markets provided for in Article 40 (1) and the other provisions necessary for the pursuit of the objectives of the common agricultural and fisheries policy” (Article 43.2 TFEU) and a power of the Council to adopt “measures on fixing prices, levies, aid and quantitative limitations, and on fixing and allocating fishing opportunities.” No normative specification is found in the Treaty concerning the conservation of marine biological resources. As a consequence, the exclusive competence recognized by Article 3.1 point (d) TFEU, should be considered as an indication of a purpose (teleological competence) that encompasses the common fisheries policy and affects the legislative powers recognized within it without the possibility of a prior delimitation, and hence it allows the Union law to regulate matters related to the sea and fishing for purposes other than those of the internal market and competition, to which, for example, fishing quotas are addressed. 50

See Case C-370/12, Pringle (ECJ 27 November 2012) para 63. See Case C-370/12, Pringle (ECJ 27 November 2012) para 68. 52 See C-804/79, Commission v United Kingdom (ECJ 5 May 1981) para 17, 18, 19 and 20. 51

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3.5. Common Commercial Policy

Also the exclusive competence of Article 3.1 point (e) TFEU, had been recognized before the Lisbon Treaty by the Court of Justice.53 The common commercial policy has always been a consequence of the common market and of the customs union and is therefore closely linked to them. The content of this policy concerns “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), on the basis of this, the common commercial policy can be said to be transversal and specifically targeted (purpose oriented); hence, the warning that the exercise of the competences in [. . .] the field of the common commercial policy shall not affect the delimitation of competences between the Union and the Member States, and shall not lead to harmonisation of legislative or regulatory provisions of the Member States in so far as the Treaties exclude such harmonisation” (Article 207.6 TFEU). Further aspects of the common commercial policy are specified in Article 207.1 TFEU which identifies precise objects to be regulated such as “changes in tariff rates”, “conclusion of tariff and trade agreements”, “commercial aspects of intellectual property”, “foreign direct investment” and “achievement of uniformity in measures of liberalisation, export policy and measures to protect trade.” The legislative competence recognized by the Treaty allows for the adoption of “regulations”, according to the ordinary legislative procedures, which regulate “the measures defining the framework for implementing the common commercial policy” (Article 207.2 TFEU). “The common commercial policy shall be conducted in the context of the principles and objectives of the Union’s external action.” As a consequence, this allows for the application of Article 218 TFEU (Article 207.5 TFEU), on the negotiation of international agreements with third States, subject to the specifications contained in Article 207.3 TFEU. For the negotiation and conclusion of the agreements, the Council acts by a qualified majority (Article 207.4 TFEU). Otherwise, the Council may act unanimously for the negotiation and conclusion of agreements in specific areas, such as “trade in services and the commercial aspects of intellectual property as well as foreign direct investment”,54 “trade in cultural and audiovisual services” and “trade in social, education and health services” (Article 207 para 4 (2) and (3) TFEU). The common commercial policy overrides the international trade competence of the Member States, which can take place only with the prior authorization of the 53 See Case 41/76, Donckerwolke and Others v Procureur de la République and Others (ECJ 15 December 1976) para 13, 32 and 24; Opinion 1/94, Competence of the Community to conclude international agreements concerning services and the protection of intellectual property (ECJ 15 November 1994) para 22. 54 “[. . .] where such agreements include provisions for which unanimity is required for the adoption of internal rules.”

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61

62

63

64

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66

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67

Union and without future prejudice to any agreements it may make. However, a gray area in the common commercial policy is given by the presence of the Member States, rather than the Union, within the World Trade Organization. The framework of the common commercial policy does not include, “the production or trade of arms, munitions and war material”, each of which falls within the competence of each Member State because of the “essential interests of its security” (Article 346.1 TFEU); however, the Treaty opens a window of control “with regard to products that are not specifically intended for military purposes.” These are the so-called “Dual use” products, for which the issue is resolved by drawing up a list of military products, which the Council may change by acting unanimously on a proposal from the Commission (Article 346.2 TFEU).55

4.

68

69

70

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The Union Exclusive Competence for the Conclusion of International Agreements

The provision of paragraph 2 refers to the exclusive competence for the conclusion of international agreements56 and to some extent overlaps with Article 216.1 TFEU. The two provisions were already present in the TCE (Article I-13 paragraphs 2 and 3, Article III-323 paragraph 1), but not in the previous European Treaties. Originally, the power to conclude international agreements57 was foreseen in only in a few articles. Despite this, the external powers of the European institutions were formed precisely under the aegis of these treaties. The development of the Union’s external powers was supported by the Court of Justice. In this regard, the AETR58 judgment should be referred to in which the power to sign international agreements derives from the article of the Treaty which attributed a “legal personality” to the Community (Article 210 TEEC). Indeed, the Article states that “this provision [. . .] means that in its external relations the Community enjoys the capacity to establish contractual links with third countries over the whole field of objectives defined in Part One of the Treaty.” Consequently—the Court continues—“to determine in a particular case the Community’s authority to enter into international agreements, regard must be had to the whole scheme of the Treaty no less than to its substantive provisions.” In this way, the power to sign agreements “may flow from other provisions of the treaty and from measures adopted, within the framework of those provisions, by the Community institutions.”59 55

The list is contained in the Council Decision 255/58 of 15 April 1958. Koutrakos (2006), and Cremona (2017). 57 In the EEC Treaty see Articles 113 and 114 for tariff and commercial agreements and Article 238 for association agreements. 58 Case 22/70, AETR (ECJ 31 March 1971) para 13 and 14. 59 Case 22/70, AETR (ECJ 31 March 1971) para 15 and 16. 56

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With regard to the relationships between the Community and the Member States this means that, “each time the Community, with a view to implementing a common policy envisaged by the Treaty, adopts provisions laying down common rules, whatever form these may take, the Member States no longer have the right, acting individually or even collectively, to undertake obligations with third countries which affect those rules. As and when such common rules come into being, the Community alone is in a position to assume and carry out contractual obligations towards third countries affecting the whole sphere of application of the Community legal system.”60 In the conclusion, however, a link is set between internal competence and external competence, in that “with regard to the implementation of the provisions of the Treaty the system of internal Community measures may not therefore be separated from that of external relations.”61 This case law was confirmed in further decisions by the European judge62 and its importance lies in its ability to define the problems that may arise in the Union’s external action, in spite of the provisions introduced in the Treaties. The provision of Article 3.2 TFEU, appears to confirm the principles established by the case law of the Court of Justice in the law of the Treaties and it also requires a systematic interpretation in the light of all the other provisions, and not only as provided for in Article 2.6 TFEU, of those which concern only the area of the external actions of the Union. Indeed, the competence to conclude international agreements may be both explicit and, in this sense, in the Treaties there are many provisions which specifically grant such power, and implied in that it may derive from Treaty provisions that attribute an internal competence to Union. The provision of Article 3.2 TFEU, provides for the three hypotheses in which competence for conclusing international agreements is “exclusive” in nature, that is if the conclusion of the agreement: (a) requires a legislative act of the Union; (b) results from the need to allow the Union to exercise its internal competences; (c) affects common standards or changes their scope. In some cases (sub a and c) it is assumed that internal competence has already been exercised; in others (sub b) that internal competence has not been exercised or is exercised in conjunction with external competence. Furthermore, the competence to conclude international agreements appears to be exclusive, due to the principle of parallel competence, in the case of exclusive and implicitly exclusive internal competences,63 or in the case of concurrent or shared internal competences which provide for the power to enter into international agreements (for example in the case of “cooperation in the field of research, 60

Case 22/70, AETR (ECJ 31 March 1971) para 17 and 18. Case 22/70, AETR (ECJ 31 March 1971) para 19. 62 See Joined Cases 3, 4 and 6/76, Kramer (ECJ 14 July 1976) para 29; Opinion 1/76, Agreement on the establishment of a European Laying-up Fund for Inland Waterway Vessels (ECJ 26 April 1977); Opinion 1/94, Competence of the Community to conclude international agreements concerning services and the protection of intellectual property (ECJ 15 November 1994) para 77. 63 See Opinion 1/03, New Lugano Convention (ECJ 7 February 2006). 61

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78

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technological development and demonstration”),64 or in the case of internal concurrent powers, exercised by the Union, which have a preemptive effect with respect to state legal sources, which in this way is also extended to the international capacity of the Member States. In the latter case, the external competence of the Union does not rely on a specific provision of the Treaty, but depends on the fact that “the conclusion of an agreement is necessary in order to achieve, within the framework of the Union’s policies, one of the objectives referred to in the Treaties, or is provided for in a legally binding Union act” (Article 216.1 TFEU). Recent case law rulings have highlighted the functional link with the objectives of the Union. For example, in Opinion 2/15 on the Free Trade Agreement between the European Union and the Republic of Singapore, whose legal basis is the Union’s exclusive competence in the field of common commercial policy, the Court of Justice states that, in order to classify a Union act as falling within that competence, it is not sufficient for it to have “implications for trade with one or more third States”, given that “an EU act falls within that policy if it relates specifically to such trade in that it is essentially intended to promote, facilitate or govern such trade and has direct and immediate effects on it.”65 The Union’s competence to conclude international agreements, on the other hand, is concurrent in cases where the provisions of the Treaties provide that the exercise of competence by the Union shall not affect the competence of the Member States to negotiate in international fora and to conclude agreements, such as in the case of competence on environmental matters (Article 191 TFEU), or development cooperation (Article 209 TFEU) and humanitarian aid (Article 214 TFEU). Aspects of concurrence in concluding international agreements may also be based on the content of internal competence.66 Concurrence regarding the conclusion of international agreements can also be inferred from Declaration No 36 and concerns judicial cooperation in civil matters, criminal matters and police cooperation (TFEU, Part Three, Title V, Chapters 3, 4 and 5). Indeed, the Conference appears to have confirmed that “Member States may negotiate and conclude agreements with third countries or international organizations” in the areas referred to, “provided that such agreements comply with Union law.” Finally, also “mixed agreements” are possible, in cases where the Union and the Member States jointly participate in the conclusion of an international agreement with third States (all, or even just some of them). This hypothesis materializes when an international agreement may concern the (also exclusive) competences of the Union and the competences of the Member States, or concurrent competences, in 64

Article 186 TFEU. See Opinion 2/15, Free Trade Agreement between the European Union and the Republic of Singapore (ECJ 16 May 2017). 66 See Opinion 2/91, ILO Convention No 170 (ECJ 19 March 1993) para 18; Opinion 1/94, Competence of the Community to conclude international agreements concerning services and the protection of intellectual property (ECJ 15 November 1994) para 78 and 79; Case C-467/98, Commission v Denmark (ECJ 5 November 2002) para 85 and 86. 65

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which the Union could not negotiate without the participation of the Member States, because the agreements “can not be concluded by the Community autonomously”, as they require “the joint participation of the Community and its Member States.”67 In such cases, moreover, it would not be possible for Member States to unilaterally modify the jointly concluded agreements, since “Community participation is indispensable.”68

List of Cases ECJ 15.07.1960, 20/59, Italy v High Authority, ECLI:EU:C:1960:33 [cit. in para 23] ECJ 15.07.1964, 6/64, Flamino Costa v E.N.E.L., ECLI:EU:C:1964:66 [cit. in para 15] ECJ 31.03.1971, 22/70, AETR, ECLI:EU:C:1971:32 [cit. in para 70–74] ECJ 14.07.1976, 3, 4 and 6/76, Kramer, ECLI:EU:C:1976:114 [cit. in para 74] ECJ 15.12.1976, 41/76, Donckerwolke and Others v Procureur de la République and Others, ECLI:EU:C:1976:182 [cit. in para 3, 60] ECJ 26.04.1977, Opinion 1/76, Agreement on the establishment of a European Laying-up Fund for Inland Waterway Vessels, ECLI:EU:C:1977:63 [cit. in para 74] ECJ 05.05.1981, 804/79, Commission v United Kingdom, ECLI:EU:C:1981:93 [cit. in para 4, 5, 56] ECJ 16.12.1981, 269/80, Regina v Robert Tymen, ECLI:EU:C:1981:303 [cit. in para 4, 5] ECJ 09.07.1987, 281, 283–285 and 287/85, Germany v Commission, ECLI:EU: C:1987:351 [cit. in para 23] ECJ 27.09.1988, 165/87, Commission v Council, ECLI:EU:C:1988:458 [cit. in para 24] ECJ 05.12.1989, 165/88, ORO Amsterdam Beheer en Concerto v Inspecteur der Omzetbelasting, ECLI:EU:C:1989:608 [cit. in para 5] ECJ 19.03.1993, Opinion 2/91, ILO Convention No 170, ECLI:EU:C:1993:106 [cit. in para 80] ECJ 15.11.1994, Opinion 1/94, Competence of the Community to conclude international agreements concerning services and the protection of intellectual property, ECLI:EU:C:1994:384 [cit. in para 3, 60, 80]

67

Opinion 1/08, Agreements modifying the Schedules of Specific Commitments under the GATS (ECJ 30 November 2009) para 134. 68 Opinion 1/08, Agreements modifying the Schedules of Specific Commitments under the GATS (ECJ 30 November 2009) para 115.

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ECJ 28.03.1996, Opinion 2/94, Accession of the Community to the European Convention for the Protection of Human Rights and Fundamental Freedoms, ECLI:EU:C:1996:140 [cit. in para 24, 25] ECJ 05.11.2002, C-467/98, Commission v Denmark, ECLI:EU:C:2002:625 [cit. in para 80] ECJ 07.02.2006, Opinion 1/03, New Lugano Convention, ECLI:EU:C:2006:81 [cit. in para 78] ECJ 13.07.2006, C-295/04 to C-298/04, Vincenzo Manfredi and Others v Lloyd Adriatico Assicurazioni SpA and Others, ECLI:EU:C:2006:461 [cit. in para 42] ECJ 30.11.2009, Opinion 1/08, Agreements modifying the Schedules of Specific Commitments under the GATS, ECLI:EU:C:2009:739 [cit. in para 82] ECJ 17.02.2011, C-52/09, Konkurrensverket v TeliaSonera Sverige AB, ECLI:EU: C:2011:83 [cit. in para 41] ECJ 27.11.2012, C-370/12, Pringle, ECLI:EU:C:2012:756 [cit. in para 48, 49, 53, 54] ECJ 16.04.2013, C-274/11 and C-295/11, Spain and Italy v Council, ECLI:EU: C:2013:240 [cit. in para 33, 39] ECJ 16.05.2017, Opinion 2/15, Free Trade Agreement between the European Union and the Republic of Singapore, ECLI:EU:C:2017:376 [cit. in para 79]

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Davies, G. (2003). The Post-Laeken division of competences. European Law Review, 28(5), 686 et seqq. Davies, G. (2017). The competence to create an internal market: Conceptual poverty and unbalanced interests. In S. Garben & I. Govaere (Eds.), The division of competences between the EU and the Member States (pp. 74–89). Portland: Hart Publishing. De Pasquale, P. (2008). Il riparto di competenze tra Unione europea e Stati membri. Diritto Pubblico Comparato ed Europeo, pp. 60–69. De Witte, B. (2017). Exclusive Member State competences – Is there such a thing? In S. Garben & I. Govaere (Eds.), The Division of competences between the EU and the Member States (pp. 59–73). Portland: Hart Publishing. Di Salvatore, E. (2006). The supremacy of European law in the treaty establishing a constitution for Europe in the light of community experience. In H.-J. Blanke & S. Mangiameli (Eds.), Governing Europe under a constitution (pp. 372–400). Heidelberg: Springer. Di Salvatore, E. (2013). Declaration No. 17 concerning primacy. In H.-J. Blanke & S. Mangiameli (Eds.), The treaty on European Union – A commentary (pp. 1757–1778). Heidelberg: Springer. Dupéré, O. (2005). Le contrôle de constitutionnalité du droit dérivé de l’Union européenne. Lectures croisées par le Conseil d’État: Accueil e le Conseil constitutionnel. Revue française de droit constitutionnel, 61(1), 147–169. Eilmansberger, T., & Jaeger, T. (2012). Artikel 3 AEUV. In H. Mayer & K. Stöger (Eds.), Kommentar EUV/AEUV. München-Wien: Beck – Manz. Häde, U. (2017). Artikel 3 AEUV. In M. Pechstein, C. Nowak, & U. Häde (Eds.), Frankfurter Kommentar zu EUV, GRC und AEUV, 4 Bände (p. 47 et seqq.). Tübingen: Mohr Siebeck. Haratsch, A., Koenig, C., & Pechstein, M. (2020). Europarecht (12th ed.). Tübingen: Mohr Siebeck. Ibáñez Colomo, P. (2017). The EU’s exclusive competence in competition law. In S. Garben & I. Govaere (Eds.), The division of competences between the EU and the Member States (pp. 112– 132). Portland: Hart Publishing. Jürgens, F. (2010). Die Kompetenzabgrenzung zwischen der EU und den Mitgliedstaaten. München: UTZ. Knook, A. (2005). The Court, the charter and the vertical division of powers in the European Union. Common Market Law Review, 42, 367 et seqq. Konstadinides, T. (2011). Division of powers in European Union law: The delimitation of internal competence between the EU and the Member States. The Netherlands: Kluwer Law International. Koutrakos, P. (2006). EU external relations law. Oxford: Hart Publishing. Lux, M. (2015). Artikel 31-32 AEUV. In H. Groeben, J. Schwarze, & A. Hatje (Eds.), Europäisches Unionsrecht (pp. 1200–1276). Baden Baden: Nomos. Mangiameli, S. (1992). Le materie di competenza regionale. Milano: Giuffré. Mangiameli, S. (2006). La competenza europea, il suo esercizio e l’impatto sugli ordinamenti degli Stati membri. In S. Mangiameli (Ed.), L’ordinamento europeo. L’esercizio delle competenze (Vol. II, pp. 1–89). Milano: Giuffré. Mangiameli, S. (2008). Integrazione europea e diritto costituzionale. In S. Mangiameli (Ed.), L’esperienza costituzionale europea (pp. 11–92). Roma: Aracne. Mangiameli, S. (2013a). Crisi economica e distribuzione territoriale del potere – Relazione al XXVIII Convegno annuale dell’AIC. Rivista AIC pp. 1–41. Retrieved from https://www. rivistaaic.it Mangiameli, S. (2013b). The European Union and the identity of Member States. L’Europe en formation, 369, 151–168. Mangiameli, S. (2016). Il sistema europeo: dal diritto internazionale al diritto costituzionale e ritorno? Diritto e Società, 1–58. Mangiameli, S. (2017). The constitutional sovereignty of Member States and European constraints: The difficult path to political integration. In S. Mangiameli (Ed.), The consequences of the crisis on European integration and on the Member States – The European governance between Lisbon and fiscal compact (pp. 189–215). Heidelberg: Springer.

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Article 4 [Shared Competence] 1. The Union shall share competence with the Member States where the Treaties confer on it a competence which does not relate to the areas referred to in Articles 3 and 6.1–4 2. Shared competence between the Union and the Member States5–9 applies in the following principal areas:10 internal market;11–17 social policy, for the aspects defined in this Treaty;18–21 economic, social and territorial cohesion;22–26 agriculture and fisheries, excluding the conservation of marine biological resources;27–31 (e) environment;32–40 (f) consumer protection;41–45 (g) transport;46–48 (h) trans-European networks;49–50 (i) energy;51–54 (j) area of freedom, security and justice;55–70 (k) common safety concerns in public health matters, for the aspects defined in this Treaty.71–73 (a) (b) (c) (d)

3. In the areas of research, technological development and space, the Union shall have competence to carry out activities, in particular to define and implement programmes; however, the exercise of that competence shall not result in Member States being prevented from exercising theirs.75–76 4. In the areas of development cooperation and humanitarian aid, the Union shall have competence to carry out activities and conduct a common policy; however, the exercise of that competence shall not result in Member States being prevented from exercising theirs.77–83

Contents 1. 2. 3.

#

A Negative Residual Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Different Types of Shared Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Enumeration of Principal Areas of Shared Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1. Internal Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2. Social Policy for the Aspects Defined in this Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3. Economic, Social and Territorial Cohesion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4. Agriculture and Fisheries, Excluding the Conservation of Marine Biological Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5. Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6. Consumer Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7. Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8. Trans-European Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9. Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Springer Nature Switzerland AG 2021 H.-J. Blanke, S. Mangiameli (eds.), Treaty on the Functioning of the European Union – A Commentary, Springer Commentaries on International and European Law, https://doi.org/10.1007/978-3-030-43511-0_5

1 5 10 11 18 22 27 32 41 46 49 51

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3.10. Area of Freedom, Security, and Justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.11. Common Safety Concerns in Public Health Matters for the Aspects Defined in this Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. The So-called Parallel Competences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1. Research, Technological Development, and Space . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2. Development Cooperation and Humanitarian Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Cases References

1. 1

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A Negative Residual Competence

Shared or concurrent competence is defined under Article 4.1 TFEU through a negative formula:1 the competences conferred by the Treaty that do not fall within the sphere of exclusive competence (Article 3 TFEU), nor within the sphere of complementary competence are shared competences. Although paragraph 2 enumerates the matters over which the Union and the Member States have shared competence, such enumeration, which is more extensive than the list of exclusive competences laid down in Article 3 TFEU, is not exhaustive. As the subjects are simply referred to as the “main areas”, therefore the breadth of shared competence remains undetermined in Article 4 TFEU and a clearcut definition can be achieved only by searching through the body of the Treaty and the application of the residual criterion. The rules of shared competence apply to all the matters that are not listed in the enumeration of exclusive competences or in the areas of complementary competences. As is known, European shared competence has the characteristics highlighted by Article 2.2 TFEU, according to which shared means that the Union and the Member States “can legislate and adopt legally binding acts”. However, Member States can exercise their power only if the Union does not exercise its power over the same matter, or if the Union “has decided to cease exercising its” competence (Article 2.2 TFEU). European competence in concurrent sectors preempts the competence of the Member States, under the Declaration No 18 on the delimitation of competences and Protocol No. 25 on the exercise of shared competence. However, for European preemption to be considered as having been legitimately exercised, the European legislation must comply with the subsidiarity principle (Article 5.3 TEU), which covers the exercise of all European competences, with the sole exception of areas over which the Union has exclusive competence (Article 3 TFEU). Therefore, the application of the principle of subsidiarity concerning shared competences entails that constant reference be made to Protocol No 2, which proceduralizes its application and subjects these powers to oversight by national Parliaments. 1

On Article 4 TFEU, see Mögele and Streinz (2018), Pelka (2019), Stancanelli (2012), Obwexer (2015), Baratta (2014), Calliess (2011) and Nettesheim (2014).

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It remains to be understood whether for certain sectors, which under paragraph 1 must be considered as coming under shared competence, these principles of delimitation of the exercise of competence can be considered exhaustive; or, if within the scope of the Treaty and the general principles underpinning the exercise of competences, there might not be other rules that further specify the areas of shared powers between the Union and the Member States.

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Different Types of Shared Competence

The concept of shared competence, precisely because of the scope it has been given by the TFEU, is certainly ambiguous. Not surprisingly, there are several types of concurrent competence. Moreover, this statement also appears to be consistent with the results of the first constitutions that adopted this type of competence (such as the Constitution of the Reich of 16 April 1871). Regardless of the clarifications deriving from the relevant Protocol (No 25) on the exercise of shared competence, Article 4 paragraphs 3 and 4 TFEU regulate a different type of concurrent competence, which could be defined technically as “divided competence”, even if the common denomination is “parallel competences”. Indeed, the notion of parallel competence should be reserved to the powers that regulate matters which are similar, and which take place both in the European legal order and in that of the Member States. A typical example of this type of competence concerns the organization of the Union and of the Member States, which includes both relationships within the various bodies and bureaucratic relationships. In the case of the European Union, however, this parallelism is not always perfect. Suffice it to think of the election of the European Parliament, which is regulated by the law of the Member States, albeit based on European prescriptions that ensure some degree of uniformity in the procedure, or based on the principles common to all the Member States (Article 223 TFEU). In the case of the sectors of Article 4 paragraphs 3 and 4 TFEU, it does not appear to be possible for the legislative powers of the Union and of the Member States to be exercised in parallel, that is, without ever crossing paths. This overlapping of powers is best understood in the case of the European policy sectors that can be defined as “internal” (paragraph 3), and less well so in the case of “external” sectors (paragraph 4), but even for the latter it is unthinkable that the Union and the Member States could proceed in totally separate ways. This would be illogical and would certainly not respond to the content of the provision. Indeed, the Treaty does not exclude any links between the competences of the Union and of the Member States but governs the division of powers according to a derogatory principle with respect to that indicated by Article 2.2 TFEU, giving rise to a different kind of concurrent power. According to some scholars, European legislation does not give rise to preemption, but this assumption does not seem to be accurate, for the following reasons.

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In this regard, in fact, what is decisive is the way in which the expression “however, the exercise of that competence [of the Union] shall not result in Member States being prevented from exercising theirs” is understood. According to a part of the literature, this type of competence is similar to complementary competence, regulated by Article 2.5 TFEU, and by Article 6 TFEU, but the assumption does not seem convincing for two distinct aspects. First, the legal regime of the sectors listed in Article 6 is profoundly different from that laid down by Article 4 paragraphs 3 and 4 TFEU. Indeed, in the case of Article 6, competence over the material field of legislative discipline lies with the Member States and, with respect to the power reserved to the Member States, the Union is recognized “a competence to carry out actions to support, coordinate or supplement the actions of the Member States”, without entailing a “harmonisation of Member States’ laws or regulations.” Second, assimilating the competence regime of Article 2.2 TFEU to that of Article 2.5 (2) TFEU appears to be in conflict with the structure of the Treaty, since the areas indicated in paragraphs 3 and 4 of Article 4 TFEU have not been placed among the actions of support, coordination, and integration of Article 6 TFEU, but in the Article related to concurrent powers. Consequently, in matters referred to in Article 4 paragraphs 3 and 4 TFEU, we are always within the sphere of shared competence in which the concurrence of European sources with State sources, operates in a different way from that indicated by Article 2.2 TFEU, in the sense that, in addition to the rule that the field occupied by the Union is not available to Member States as it preempts State legislation, for the European legislation there is a limit to the exercise of European competence if its effect is to prevent Member States from exercising theirs. This configuration of competence is possible if there is concurrence for both sources (European and state sources), or by distributing powers vertically on the same matter, or by providing for distinct tasks or distinct goals for the two sources. In the case of the provisions of the Treaty, the tasks of the various sources are distinguished from the qualitative and not from the quantitative point of view; this means that the European sources have the role of guiding, or promoting, or coordinating State actions (this aspect does not profoundly differentiate this competence from that of Article 6 TFEU). In other words, in these sectors the regulations issued by the Union under the provisions of the Treaty, should not be contradicted by the actions carried out by Member States. In this context, it is also worthwhile recalling the sectors provided for by Article 5 TFEU. Under Article 4.1 TFEU, these sectors must also be considered as coming under shared competence, since they are not identified as being of exclusive competence of the Union or as a complementary competence (for which the Union can “carry out actions to support, coordinate or supplement the actions of the Member States”). However, part of the literature has deemed that the areas of competence mentioned by Article 5 TFEU cannot be considered as shared areas of competence, but a type of autonomous competence that cannot be attributed to the concurrent area. Other scholars have defined this type of competence as a “hybrid competence” Mangiameli

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because it has both the characteristics of concurrent and “complementary” competence. Neither of these positions is very convincing: the first, because it would require Article 4.1 TFEU to have a prescriptive character and hence is not empowered to regulate the discipline of competences; the second, adds to this observation, an unclear determination of concurrent competence with respect to complementary competence. Concurrent competence always determines a regulatory constraint with respect to the juridical sources of the Member States, whereas complementary competence concerns only the actions that are aimed at supporting, coordinating and supplementing the actions of the Member States and cannot have a regulatory character nor determine an approximation of the laws of the Member States in the mentioned sectors. The fact remains that this is a shared competence, which also derogates from the preemption envisaged by Article 2.2 TFEU, as it recognizes the constrained contribution of European sources and state sources. In this case, the European discipline more than a material character (as in the case of Article 4 paragraphs 3 and 4 TFEU presents a modal character that is binding on the Member States in framing laws for the sectors considered).

3.

The Enumeration of Principal Areas of Shared Competence

In the European Treaties, concurrent competence is the most complex type of power. The complexity is primarily due to its typology, since it comes under a typical regime (Article 2.2 TFEU) with various derogations (Article 4 paragraphs 3 and 4 TFEU; and also Article 5 TFEU), but also for the way in which it is identified, given that Article 4.2 TFEU indicates only the main sectors, hence implying that areas of shared competence are not enumerated and found throughout the body of the Treaties. Even its definition, or rather the definition of the expressly enumerated voices, does not appear to be a simple task. It is true that—as set out in Article 2.6 TFEU—the actual scope of the respective competences in the individual areas derives solely from the provisions of the treaties relating to the individual areas. However, the enumeration of the main areas of shared competence, according to a systematic interpretation and considering the historical evolution and the functional profiles connected to the experience of the economic and financial crisis which accompanied the implementation of the Lisbon Treaty and which has not entirely disappeared, gives rise to some peculiar problems.

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3.1. Internal Market

The common market was the “foundation” for the construction of Europe as already stated by Article 1 of the ECSC Treaty (“By this Treaty, the High Contracting Parties establish among themselves a European Coal and Steel Community, Mangiameli

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founded upon a common market, common objectives and common institutions”).2 The European Treaties established the common market as a direct and binding act of their prescriptions (Article 2 TECSC and Article 1 TEEC). Even when the common market, because of the evolution of economic relations due to the European Treaties and to the ensuing regulations, with the abolition of duties, quantitative restrictions and obstacles to the free movement of persons, services and capital, and above all thanks to the approximation of national laws, was qualified as an internal market, it was established by virtue of the provisions of the Treaties (Article 13 SEA). Moreover, it must be emphasized that the internal market is a broader notion than that of the common market in that it includes, in addition to the realization of the fundamental freedoms of movement of goods, people, services, and capital, to which its definition refers (Article 13 SEA; ➔ Article 26 TFEU para 14 et seqq.), also the implementation of common policies, progressively introduced by the European Treaties, after the SEA. In addition, the progressiveness of their establishment—defined in terms of timing and contents by the provisions of the Treaties, which laid down the actions required to implement the common market, at first, and then the internal market— explains how these were and remain a consequence of the exercise of the powers conferred by the European Treaties. Consequently, the internal market, as was true for the common market, already represents an element of the constitutional structure of the European system, thanks to which it is possible to exercise European powers; first, the definition of the competition rules necessary for the functioning of the internal market (Article 3.1 point (b) TFEU).3 From this point of view, it is no coincidence that since its appearance the internal market was defined as the element of European construction that “shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured [. . .]” (Article 13 SEA) and this definition, although not exhaustive and more appropriate for the description of the common market, has been preserved in subsequent Treaties, including the Lisbon Treaty, and was then included in the TFEU (Article 26.2 TFEU). The Treaties have always considered the establishment of the internal market as an end to be pursued through the exercise of competences. The Lisbon Treaty also maintained this indication in Article 3.3 TEU, where it states that “The Union shall establish an internal market.” It remains to be understood at this point which area of discipline falls within the shared competence of Article 4.2 point (a) TFEU.

2 On the internal market see Weiss and Kaupa (2013), Vogel (2017), Weatherill (2017), Koutrakos and Snell (2017), Nic Shuibhne (2006) and Daniele (2016). 3 It should not be forgotten that other competences play a role of material delimitation of the internal market, such as that referring to the customs union, the common commercial policy (Article 3.1 points (a) and (e) TFEU) and, for Member States whose currency is euro monetary policy (Article 3.1 point (c) TFEU).

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To some extent, it could be affirmed that the consideration of the internal market as matter of concurrent competence is actually a consequence of a specific case law of the Court of Justice, but the assumption appears to be somewhat questionable due to its incompleteness. In fact, the issue is more complex because on the one hand there is the case law of the Court of Justice in its process of defining competences and, in particular, the concurrent powers, and, on the other, the evolution of the texts of the Treaties, especially the works of the Laeken Convention which drew up the Constitutional Treaty, whose prescriptions, with few exceptions, were then embodied in the Lisbon Treaty. After identifying the common market as an objective in Article 2 TEEC, the Treaty provided that “the Community action [would entail] [. . .] the approximation of national laws to the extent necessary for the functioning of the common market” (Article 3.1 point (h) TEEC). In particular, the approximation of legislations was considered the most appropriate way to have the Member States’ systems comply with the establishment and functioning of the common market (Article 100 TEEC). Objectives, actions (competences), and discipline of the actions were all in agreement. After the adoption of the Single European Act for the establishment of the internal market, referred to in Article 7B TEEC, the same competence was envisaged for adopting “the measures relating to the approximation of the legislative, regulatory and administrative provisions of the Member States which have as their object the establishment and functioning of the internal market” (Article 100A TEEC). The two provisions simply provided for different legislative procedures and, while for the common market these were to take the form of a directive, for the internal market the provision provided for the adoption of (legislative) measures, which makes the powers attributed to the internal market not exactly right. Once the transitional period was over and the subsequent Treaties were adopted, the provisions remained unchanged and, presumably, the enumeration of the EC Treaty was consolidated: Articles 2 and 3 have remained unchanged in their numbering, but vary slightly in content, Article 7B has become Article 14, and Articles 100 and 100A have become Articles 94 and 95. Precisely with reference to the provision on the procedures for the establishment of the internal market, the Court of Justice observed that “the measures referred to in Article 100a (1) of the Treaty are intended to improve the conditions for the establishment and functioning of the internal market. To construe that article as meaning that it vests in the Community legislature a general power to regulate the internal market would not only be contrary to the express wording of the provisions cited above but would also be incompatible with the principle embodied in Article 3b of the EC Treaty (now Article 5.1 and 2 TEU) that the powers of the Community are limited to those specifically conferred on it”. From this point of view, the European judge seeks to define the exercise of competence in the best of ways by linking it to the actual “improvement of the conditions for

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the establishment and functioning of the internal market” and to verifying that “the act whose validity is controversial actually pursues the objectives enforced by the Community legislator.”4 Subsequently, the Court of Justice favored the reconciliation of the internal legislations of the Member States because of the vagueness of the Treaty provision to ensure the establishment of the internal market. In particular, the Court stated that “the principle of subsidiarity applies when the Community legislator uses Article 95 EC, since this provision does not give it exclusive competence to regulate economic activities in the internal market, but only a competence to improve the conditions for the implementation and functioning of the latter, through the elimination of obstacles to the free circulation of goods and the freedom to provide services as well as the elimination of distortions of competition.”5 The motivation is not clear, since it is tied to the limits of the judgment on the concrete case, but it does consider the powers of Article 95 of the EC Treaty as a shared competence in an era in which this competence, like exclusive competence, was not adequately defined by the Treaty, not only for the generic reference to the categories of competences (exclusive and shared), written in relation to the application of the principles of subsidiarity and proportionality,6 but above all, for the lack of correlation between these categories and the competences enumerated by Article 3, to achieve the aims of the Community (Article 2 TEC). With respect to this problem, therefore, no distinction was made regarding the actions indicated in Article 3 that referred to the establishment of the common market and of the internal market, which were exactly: “(c) an internal market characterized by the elimination, between the Member States, of obstacles to the free movement of goods, persons, services and capital”; “(g) a scheme to ensure that competition is not distorted in the internal market”; and “(h) the approximation of their respective laws to the extent necessary for the functioning of the Common Market.” These powers were attributed to the Community right from the beginning. The case law of the Court of Justice, however, was sufficient, during the work of the Laeken Convention, to state that “certain provisions of the treaty are not sufficiently precise, in particular Articles 94, 95 and 308. At the same time, it was widely acknowledged that thanks to these provisions the Union has been able to evolve dynamically” and that “a minority of members has requested that the current system be replaced by a catalog of competences.”7

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Case C-376/98, Germany v Parliament and Council (ECJ 5 October 2000) para 83. See Kumm (2006), pp. 503–533. 5 Case C-491/01, British American Tobacco (ECJ 10 December 2002) para 179. 6 In fact, Article 5 of the EC Treaty established, in addition to the principle of attribution, the principles of subsidiarity and of proportionality. 7 See Delimitation of competence between the European Union and the Member States - Existing system, problems and avenues to be explored, Bruxelles, 15 May 2002, CONV 47/02, p. 3. It should be noted that in the previous Description of the current system for the delimitation of competence between the European Union and the Member States, Bruxelles, 28 March 2002, CONV 17/02, there was still no mention of this issue.

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Consequently, already in the “Draft articles 1 to 16 of the Constitutional Treaty”,8 we find the first formulation of the catalogs of competences and the first of the competences was the “internal market”. It should be noted that in the subsequent debate it was argued that the subject Internal Market be shifted from concurrent to exclusive competence,9 even if in the end in the Constitutional Treaty the “definition of the competition rules necessary for the functioning of the internal market” were included among the sectors of exclusive competence (Article I-13 TCE) and the “internal market” remained in the group of concurrent competence (Article I-14 TCE). The situation has remained unchanged from the Constitutional Treaty to the Lisbon Treaty. From the above analysis, it is clear that concurrent competence regarding the “internal market”, whose definition can be found in Article 26.2 TFEU, as “an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured”, surpasses the competence over the abolition, as between Member States, of obstacles to freedom of movement for persons, services, and capital, which is no longer mentioned and implies a reference to the measures envisaged by the “provisions of the Treaties” on fundamental freedoms (Articles 28 and 29; 34–36; and 44–66 TFEU) and to the legislative powers envisaged for the approximation of the laws (Articles 114–118 TFEU), unless these powers are to be considered as exclusive or complementary or some special type of concurrent competence.

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3.2. Social Policy for the Aspects Defined in this Treaty

The European institutions considered the history of social Europe with considerable delay. After the Social Charter of Turin (1961), Community law, also thanks to the case law of the Court of Justice10 and in the context of the approximation of legislation for the realization of the common market, started to issue rules on safety in the workplace and on social protection, as well as on equal pay. However, it was only in 1989 that a declaration was made through the adoption of the Community Charter of Fundamental Social Rights of Workers, which sets forth the general principles on which the European labor law model is based. With the Maastricht Treaty (1992) came the Protocol on social policy, which, with the Treaty of Amsterdam (1997), was integrated into the body of European

8 See Draft of Articles 1 to 16 of the Constitutional Treaty, Bruxelles, 6 February 2003, CONV 528/03. However, in the previous Preliminary draft Constitutional Treaty, Bruxelles, 28 October 2002, CONV 369/02, the question was still not addressed. 9 See particularly, the amendment submitted by Alain Lamassoure (Reactions to draft Articles 1 to 16 of the Constitutional Treaty - Analysis, Bruxelles, 26 February 2003, CONV 574/1/03 REV 1, p. 87). 10 For the numerous case law, see Anderson (2015) and Schöman et al. (2012).

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Treaties and, with the revision of the Lisbon Treaty, social policy is dealt with in Articles 151–161 TFEU.11 While the social policy objectives are very well defined in Article 151.1 TFEU (“the promotion of employment, improved living and working conditions, so as to make possible their harmonisation while the improvement is being maintained, proper social protection, dialogue between management and labour, the development of human resources with a view to lasting high employment level and the combating of exclusion”), the same cannot be said of their pursuit. In fact, the measures implemented by the Union and the Member States “take into account the diverse forms of national practices” and the “need to maintain the competitiveness of the Union economy” (Article 151.2 TFEU); but, above all, it is believed that this will ensue both “from the functioning of the internal market, which will favour the harmonisation of social systems, but also from the procedures provided for in the treaties and from the approximation of provisions laid down by law, regulation or administrative action” (Article 151.3 TFEU). The problem with this regulatory complex is that, in the TFEU, the legacy of social policy is embodied in a concurrent competence of a weak and limited type. Indeed, on the one hand, it is stated that the action of the Union “shall support and complement the activities of the Member States”, evoking a sort of complementary competence for which there are no grounds (Article 153.1 TFEU); and, on the other hand, limits itself to encouraging cooperation between the Member States with the Commission acting in close contact with the Member States by making studies, delivering opinions and arranging consultations, which appear to be the expressions of the competence referred to in Article 5.3 TFEU (Article 156 TFEU). As for the possible directives, which can be adopted, these are limited only to a few restricted sectors (“the minimum requirements for gradual implementation, having regard to the conditions and technical rules in each of the Member States”, referred to in Article 153.2 point (b) TFEU). Moreover, the Charter of Fundamental Rights of the European Union, which is now primary law, under Article 6 TEU, contains an important provision (Article 34) on safety and welfare. In the Charter, Article 34 has a constitutional tone, but the possible interpretation in light of the explanations accompanying the Charter has so far been similar to the interpretations of the programmatic provisions and, moreover, within the limits of the competences defined by the provisions of the European Treaties. The economic crisis has shown that the weakness of European powers in the field of social policy has in practice determined a strong attenuation of social rights within the Union and, not least, it has created some impairment even to the unity of the internal market.12 11

On EU social policy, see Barnard (2011), Muir (2018), Pennings and Seeleib-Kaiser (2018) and Vandenbroucke et al. (2017). 12 See the numerous criticisms on the Viking and Laval Cases (Case C-438/05, The International Transport Workers’ Federation and The Finnish Seamen’s Union (ECJ 11 December 2007); Case C-341/05, Laval un Partneri (ECJ 18 December 2007); on this theme see Deakin (2012).

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It is no coincidence that in April 2017, after the economic crisis, the Commission proposed to approve the so-called “European Pillar of Social Rights” which contained as many as 20 key principle13 and, in this sense, with the consultation and the social summit of Stockholm of 17 November 2017, after the solemn proclamation of the pillar, a specific procedure was started that in the future could to some extent lead to the Europeanization of social rights.14

3.3. Economic, Social and Territorial Cohesion

“Cohesion is basically a political concept. Cohesion is a fact, its reinforcement is a secondary goal in that it is necessary to promote a harmonious development of the entire Community, which is a primary goal.”15 It is no coincidence that Article 3.3 sub-section 3 TEU states: the Union “shall promote economic, social and territorial cohesion, and solidarity among Member States” and that this policy is included in the sphere of economic development policy (Article 3.3 (1), and Article 175.1 TFEU). Furthermore, it should not be forgotten that the cohesion policy actually has the form of a real federal policy (according to the Grant-in-Aids scheme), since it requires the participation of the Member States and engages a sizeable proportion of the budget of the Union.16 Cohesion policy was not present in the 1957 Treaty of Rome, which did not have the regulatory tools and operational powers required to redress from the outside the 13 See Proposal for a Interinstitutional Proclamation on the European Pillar of Social Rights, Bruxelles, 26 April 2017 COM(2017) 251 final. 14 See particularly the Conclusions of the European Council meeting, 14 December 2017, EUCO 19/1/17 REV 1, where is written that it is necessary “to further develop the social dimension of the Union based on a shared commitment and established competences.” See also the Conclusions of the European Council meeting, 22/23 March 2018, EUCO 1/18, “Delivering on the European Pillar of Social Rights is a shared political commitment and responsibility of the EU and its Member States. Its implementation will be monitored with due regard to the respective competences of the Union and Member States. The European Council invites the Council to examine the initiatives presented by the Commission under the Social Fairness package, including the proposal on a European Labour Authority.” Eventually, see Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee, Monitoring the implementation of the European Pillar of Social Rights, Strasbourg, 13 March 2018, COM (2018) 130 final. 15 Predieri (1996), pp. 15–16. 16 In the period 2000–2006, the commitment was one third of the Community budget. For the subsequent period 2007–2013, the investment in cohesion policy (convergence, competitiveness and employment, territorial cooperation) was 35.7% of the Community budget, approximately 347 billion euros. With the Regulation (EU) 2017/2305 of the European Parliament and of the Council of 12 December 2017 (which amended the previous Council Regulation (EU) No. 1303/2013 regarding the amount of resources for cohesion and for the two Objectives “Investments” and “Cooperation”), the resources for economic, social and territorial cohesion available for the 2014– 2020 budget commitments have been updated and set at 329.978 billion euros, at 2011 prices, of which 325, 9 billion for the structural funds (ERDF, ESF and Cohesion Fund).

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inevitable discrepancies that occurred in the common market; the EEC Treaty offered only the possibility of establishing derogations limited to the common market, accompanying them by compensations. The underlying assumption of this arrangement was a consequence of the belief that the establishment of the common market would lead to the elimination of economic and social inequalities and it would reduce the gap in the degree of development among the Member States. However, it was clear already by the end of the 1960s and in the first half of the 1970s that action was to be taken to remedy the regional imbalances within the Community. In 1975, the decisive step took place with the establishment of the ERDF (European Regional Development Fund) and with the birth of the Regional Policy Committee.17 This tool came to add to the regional policies of the individual Member States but was not yet totally independent from them. The cohesion policy (as an economic and social policy) was introduced by Article 23 of the SEA that provided for the introduction of a new title in the EEC Treaty and the provisions of this new title were consolidated and further specified in the various subsequent treaties beginning with the Maastricht Treaty. The “territorial” profile of cohesion (Article III-220 TCE) was added by the Laeken Convention and from there, thanks to the Lisbon Treaty, it became part of the TFEU (Articles 174–178). It provides that “in order to promote its overall harmonious development, the Union shall develop and pursue its actions leading to the strengthening of its economic, social and territorial cohesion” (Article 174.1 TFEU).18 A reference to the cohesion policy is also contained in the Charter of Fundamental Rights of the EU, within the scope of the right to access services of general economic interest (Article 36 EUCFR). The cohesion policy—as noted—is based on the principle of joint participation of Member States and sub-state tiers of government (especially the regional levels), but this is a sign of competition in the implementation of the policy, rather than a competence attributed concurrently with reference to the legislation. Indeed, Article 175.1 TFEU specifies that the objectives of the economic, social and territorial cohesion policy, established by Article 174 TFEU, are integral to the economic policy and to the internal market and that the Union shall contribute to “the achievement of these objectives by the action it takes through the Structural Funds [. . .], the European Investment Bank and the other existing Financial Instruments” (Article 175 TFEU). Among the funds the most important is the “European Regional Development Fund”, which “is intended to help to redress the main regional imbalances in the

17 Decision 75/185/EEC of 18 March 1975. For this evolution, the 1973 oil crisis and the entry of the United Kingdom, Ireland, and Denmark in the same year were decisive. 18 The additional principles, expressed by Article 174 TFEU, refer to the reduction of the “disparities between the levels of development of the various regions and the backwardness of the least favoured regions” (paragraph 2). It is also provided a particular attention paid to rural “rural areas, areas affected by industrial transition, and regions which suffer from severe and permanent natural or demographic handicaps such as the northernmost regions with very low population density and island, cross-border and mountain regions” (paragraph 3).

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Union through participation in the development and structural adjustment of regions whose development is lagging behind and in the conversion of declining industrial regions” (Article 176 TFEU). Another fund relevant to the policy under examination is precisely the Cohesion Fund, which “shall provide a financial contribution to projects in the fields of environment and trans-European networks in the area of transport infrastructure” (Article 177.2 TFEU). Therefore, the tasks, priority objectives, and the organization of the Structural Funds, as well as the general rules applicable to them and the provisions necessary to ensure their effectiveness and the coordination of the Funds with one another and with the other existing Financial Instruments are determined by “the European Parliament and the Council, acting by means of regulations in accordance with the ordinary legislative procedure and consulting the Economic and Social Committee and the Committee of the Regions” (Article 177.1 and Article 178.1 TFEU, in relation to the European Regional Development Fund). In addition to the structural funds, the Union can act with specific actions, if these “prove necessary outside the Funds” and such actions may be adopted by the Council acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee and the Committee of the Regions” (Article 175.3 TFEU). The legislative competence concerning the structural funds does not follow the regime of concurrent competence, but rather that of exclusive competence, based on the source on which the Treaty confers legislative power, that is to say, the regulations.19 The hypothesis that in the case of the European regulations also State sources can intervene to implement provisions of the non-self-executive regulation does not affect the prerogatives of exclusiveness of the European sources. Moreover, for specific actions external to the funds, the legislative competence must equally be considered exclusive, since the discipline of that matter is referred to the juridical sources of the European order, even if, as can be construed from the Treaty provision, the European legislator can choose whether to act with a regulation or a directive.

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3.4. Agriculture and Fisheries, Excluding the Conservation of Marine Biological Resources

The competence of Article 4.1 point (d) TFEU is defined in relation to the competence indicated in Article 3.1 point (d) TFEU, which is mentioned here to clarify that it is not a shared power.20 19

See Mangiameli (2017). As noted above, the Court of Justice recognized the exclusive competence in the field of conservation of biological resources, considering therefore that in this sector the Member States 20

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The agriculture and fisheries policy has been part of the European structure since the drafting of the 1957 Treaties, and has played a central role in European policies.21 Over time, however, its profile has changed significantly: on the one hand, in addition to the organization of agricultural markets, it expanded to also include a rural development policy (Agenda 2000) aimed at promoting the competitiveness of European agriculture, in which improvements in product diversification and product marketing have been encouraged; on the other hand, the common agricultural policy has experienced a greater market orientation, with less public intervention, and its original importance has been sized down.22 The CAP (Common Agricultural Policy) is defined and regulated by Articles 38 to 44 TFEU and, as stated in Article 38.2 TFEU. Consequently, the provisions relating to the common agricultural policy take precedence over the other internal market rules of the Treaty and are in conflict with them; this also applies to the provisions relating to competition law, which “shall apply to production of and trade in agricultural products only to the extent determined by the European Parliament and the Council within the framework of Article 43 (2) and in accordance with the procedure laid down therein, account being taken of the objectives set out in Article 39” (Article 42.1 TFEU). Its scope of operation is delimited with reference to the subject: the internal market includes agriculture, fisheries and the trade of agricultural products, where the latter are “the products of the soil, of stockfarming and of fisheries, and products of first-stage processing directly related to these products” (Article 38.1 (2) TFEU), with a further specification represented by the analytical list of products in Annex I of the Treaty (Article 38.3 TFEU). The Treaty also identifies the objectives of the common agricultural policy (Article 39 TFEU).23 The primary tool for achieving the objectives of the CAP is the creation of a common organization of agricultural markets, regulated by Article 40 TFEU. To enable the objectives of the CAP to be achieved, effective coordination of the actions undertaken in the sectors of vocational training, research and the dissemination of agronomy can also be put in place, which may involve jointly financed projects or institutions, as well as joint actions, for the development of the consumption of certain products (Article 41 TFEU). could only act as managers of the common interest (Case 804/79, Commission v United Kingdom (ECJ 5 May 1981) para 27–30). 21 On EU agriculture law, see McMahon and Cardwell (2015) and Andries and García Azcárate (2015). 22 See Di Giambattista (2008), p. 503 et seqq.; Cattabriga Visaggio (2004), p. 318 et seqq. 23 The objectives of the CAP are heterogeneous and respond to different political needs, partly economic and partly social, which also allow the development of agricultural policy in different directions. In this regard, the Court of Justice has highlighted that “the Community institutions must secure the permanent harmonization made necessary by any conflicts between [the] objectives [of the common agricultural policy] taken individually and, where necessary, allow any one of them temporary priority in order to satisfy the demands of the economic factors or conditions in view of which their decisions are made” (Case 29/77, Roquette v France (EJC 20 October 1977) para 30.

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From the operational point of view, right from the origins of the common agricultural policy, the European legislator made use of the power provided for by Article 40.3 TFEU, on the basis of which it is possible to create one or more guidance and guarantee funds to allow the common organization of agricultural markets to achieve its objectives (➔ Article 40 TFEU). For the 2014–2020 programming period, the single legal framework for the financing of investment costs related to European agricultural policy is governed by the Regulation (EU) No 1305/2013 of 17 December 2013, which provides for the continuation of the European Agricultural Fund for Rural Development (EAFRD). The European Agricultural Guarantee Fund (EAGF) is not part of the structural funds scheme. It provides direct payments to farmers under support schemes provided for by the common agricultural policy (Regulation (EU) No 1307/2013 of 17 December 2013, amended by Regulation 2017/2393).24 Moreover, the CAP is a policy that sees a strong participation by the Member States, and in this sense, we can say that it is a shared matter, but specifically—as already observed for the cohesion policy—the competences exercised by the Union can be considered exclusive.25 For example, the power to establish common market organizations is to be considered exclusive, with the European legislator having wide discretion as to the definition of the objectives to be pursued, their hierarchy, as well as the nature and scope of the measures to be adopted.26 Moreover, the regulation of funds related to the CAP is to be considered an exclusive power. However, there may be scope for action by Member States where the discipline of the common organization of the market explicitly confers on the national authorities an autonomous power to act.27 And if the European regulations on market organization are not exhaustive, the Member States may adopt supplementary and complementary measures; however, regulatory interventions by the States that derogate from the market organization regulation or constitute a violation of it,

24 The CAP is divided into two “pillars”: the “policy for prices and markets” and the “policy of structures.” The first pillar finances aids granted to primary sector in the form of direct payments to farmers and market regulation measures (CMOs); the spending and market rules are centralized and regulated uniformly by the European legislator. Otherwise, the second pillar supports business investments in rural areas and sees an active involvement of States and Regions that, to implement this policy, develop Rural Development Programs. 25 The Lisbon Treaty included agriculture within concurrent competence between the Union and the Member States (Article 4.2 point (d) TFEU), contrary to the general opinion of the doctrine (see, for all, Germanò 2001, p. 39) and to the legal services of the Commission [SEC (92) 1990 of 27.1992] which until then had considered the CAP an exclusive competence of the Union. 26 From the discretionary nature of this power derives the limits of judicial review that can be exercised by the Court of Justice over regulatory acts on agricultural policy, which are subject exclusively to a proportionality check (Case C-310/04, Spain v Council (ECJ 7 September 2006) para 98). 27 See Case C-309/96, Annibaldi v Sindaco del Comune di Guidonia and Presidente Regione Lazio (ECJ 18 December 1997) para 20.

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which jeopardize its proper functioning or hinder the achievement of its objectives, are prohibited.28 Article 13 TFEU provides that in the formulation and implementation of Union policies in the field of agriculture, the Union and the Member States shall also pay “full regard to the welfare requirements of animals” as sentient beings, “while respecting the legislative or administrative provisions and the customs of the Member States with regard, in particular, to religious rites, cultural traditions and regional heritage.” In addition to this explicit provision, the European agricultural policy presents a series of interferences with many other European policies, such as the policies on the protection of the environment and the landscape, on the protection of consumers and of people’s health, on economic and social cohesion, etc. Consequently, to avoid the risk of conflict with the exercise of competences founded on other specific provisions of the Treaty, the exercise of European competences in the field of agriculture should harmonize its objectives with those of the other European policies with which they may interfere.

3.5. Environment

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33

In the founding Treaties of the European Communities, the protection of the environment was not considered among the objectives, which were the bedrock of the integration process, nor were there any provisions in its favor that legitimized an immediate action by the Community institutions in this regard. However, quite soon the Community faced the issue of the boundaries of the policies over which it had express jurisdiction. As early as November 1973, the Council approved the first action programme on environmental matters29 and in 1977, a second action programme followed, which, besides confirming the guidelines expressed in the previous program,30 emphasized the need to introduce the environmental impact assessment.31 In the absence of a legal basis provided by the Treaties, environmental protection ended up being progressively regulated using two separate provisions, to which reference would be made jointly: Article 100 TEEC on the approximation of the legislative, regulatory, and administrative provisions, and Article 235 TEEC on the exercise of “implicit powers”. The Court of Justice lent its support to the environmental policy of the Community; at first by considering that the environmental provisions should come under 28

See Case C-428/99, Van den Bor (ECJ 8 January 2002) p. I-127. O.J. C 112/1 (1973). 30 O.J. C 139/1 (1977). 31 Even before the Single European Act (SEA), this instrument was disciplined for the first time in Directive 85/337/EEC of 27 June 1985, O.J. L 175/40 (1985). The Directive expressly referred to Articles 100 and 235 TEEC and required to evaluate at national level the impact of the implementation of certain public and private works on the environment. 29

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the approximation of legislation since the European provisions were included “also in the general program for the elimination of technical obstacles to intraCommunity trade deriving from disparities between the laws, regulations and administrative provisions of the Member States;”32 subsequently, but before the SEA, the Court clarified that the protection of the environment was strictly connected to the protection of the market and that this was inferred directly from the objectives of the Treaties;33 and it went so far as to state that “environmental protection [. . .] constitutes one of the essential aims of the Community.”34 It was with the 1986 Single European Act that a special Title dedicated to the environment (Article 25 SEA) was introduced into the EEC Treaty. Furthermore, with the protection of the environment introduced by the SEA in the European system, for the first time the principle of subsidiarity appeared as a rule of European competence (Article 130 R paragraph 4). Finally, the European measures for the protection of the environment in the context of the establishment and functioning of the internal market would, in any case, envisage “a high level of protection” (Article 100A paragraph 3). The 1992 Maastricht Treaty formally consolidated the environment as a Community policy. Article 2 TEC, as amended by the 1997 Amsterdam Treaty, assigned to the Community the task of promoting, among other things, “a harmonious, balanced and sustainable development of economic activities, sustainable and non-inflationary growth, [. . .] a high level of environmental protection and improvement of the latter”, through the implementation of common policies and actions pursuant to Articles 3 and 4. Moreover, the subsequent Article 3 established that, under the conditions and at the pace provided for by the Treaty, the action of the Community should entail “a policy in the field of the environment” (paragraph 1 (1)). In the body of the EC Treaty, Title XIX—“Environment”—consolidated the discipline of the SEA in Articles 174, 175 and 176. Among the changes introduced by the Treaty of Amsterdam, we must also recall the amendment made to the so-called “Principle of integration” of environmental protection in Community policies. This is a rule originally contained in Article 130R paragraph 2 of the SEA, to which we can add the reference to “sustainable development”, which is placed among the “principles” (Article 6 TEC). With the formulation of the Charter of Nice, in 2000, the protection of the environment became a claim that was included the Chapter on solidarity of the Charter (Article 37 EUCFR). The legislative picture that has just been outlined was included in the Constitutional Treaty with all the aims and principles linked to the protection of the

32

Case 91-92/79, Commission v Italy (ECJ 18 March 1980). Case 240/83, Procureur de la République v ADBHU (ECJ 7 February 1985) para 9 and 12. 34 Case 240/83, Procureur de la République v ADBHU (ECJ 7 February 1985) para 13. 33

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environment as a sector of shared competence35 and, almost without changes, it was transposed into the TFEU thanks to the Lisbon Treaty. The Union’s environmental policy is defined and regulated in Title XX of the TFEU, in Articles 191 to 193,36 which define the objectives, principles, harmonization measures, environmental policy conditions, cooperation with the third countries of the Union and the Member States within the scope of their respective competences, and shared competence between the Union and the Member States when interacting with third countries on environmental matters (Article 191 TFEU). Furthermore, different types of interventions (actions, measures, and programs) by the Union are envisaged to achieve the objectives of Article 191 TFEU, and the procedures for assuming the ensuing legal acts (Article 192 TFEU). Finally, provision is made for the principle of greater protection, which means that Member States may introduce measures that are more stringent than the European measures (Article 193 TFEU). The principle of integrating environmental protection requirements into the definition and implementation of the Union’s policies and activities, with a view to promoting sustainable development, is laid down by Article 11 TFEU. The concurrent nature of environmental competence implies that if the Union has not intervened, the State remains free to regulate environmental protection as it sees fit, in compliance, of course, with primary law and, in particular, with the principles that underpin the subject matter. If, instead, the Union has intervened, the concrete space for State action depends on the intensity and type of intervention. This intensity and intervention specifically affect the problem of the division of competences between the European Union and the Member States: this is disciplined by Article 191 TFEU and subsequent Articles of the TFEU and is subject to the application of the principle of subsidiarity. This approach is consistent with the transversal nature of environmental protection that affects most of the European policies which are based mainly on competition. The fundamental rule is the following: when the European Union adopts a normative act following the procedure provided for by Article 192 TFEU, Article 193 TFEU sets forth that Member States may maintain or introduce more stringent protective measures. Such measures must be compatible with the Treaties and shall be notified to the Commission. In the event that the environmental actions are aimed at approximating the legislative, regulatory and administrative provisions of the Member States that have as their object the establishment and functioning of the internal market, the procedures to be complied with are not those of Article 192 TFEU, but rather those of Article 114 TFEU, and concerning the harmonization measures, the aforementioned provision also provides for the possibility of derogations by the States where

35

See Article I-3 paragraph 3 TCE (The Union’s objectives); Article I-14 paragraph 2 point (e); TCE (Areas of shared competence); Article III-119 TCE (in the Title of the Provisions of General Application); and Articles III-233 and III-234 (Environment). 36 On EU environmental law and policy see Burns and Carter (2012), Langlet and Mahmoudi (2016), Haigh (2016) and Jordan and Adelle (2013).

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their environmental protection measures are more stringent (Article 114 paragraphs 4 and 5 TFEU). Failure to comply with the legislation on environmental protection in the legal systems of Member States generally entails penal sanctions, in other words the States have developed an environmental criminal law. The issue of introducing penal provisions on the matter first emerged in 2001, when the Commission presented a proposal to the Council for a Directive aimed at specifically protecting the environment with measures of this type based on the provisions of Article 175.1 TEC. However, since the approval process of the Directive came to a halt, the issue found a specific solution in the context of the third EU pillar (police and judicial cooperation in criminal matters), where the content of the Directive was partly incorporated into Council Decision 2003/80/JHA of 27 January 2003. Subsequently, however, the Court of Justice quashed the Decision, on the assumption that “the entire Framework Decision, being indivisible, infringes Article 47 EU as it encroaches on the powers which Article 175 EC confers on the Community.”37 The Court emphasized that the Community did not have express conferral of power, because, “as a general rule, neither criminal law nor the rules of criminal procedure fall within the Community’s competence”; “however, the last-mentioned finding does not prevent the Community legislature, when the application of effective, proportionate and dissuasive criminal penalties by the competent national authorities is an essential measure for combating serious environmental offences, from taking measures which relate to the criminal law of the Member States which it considers necessary in order to ensure that the rules which it lays down on environmental protection are fully effective”.38 In this way, the Court of Justice opened the door for the protection of the environment under European criminal law, bringing it back within the area of competence of the Treaty39 without encroaching on the autonomy of the criminal law of the Member States, if the European provisions “determine that certain conduct which is particularly detrimental to the environment is to be criminal”, and “leave to the Member States the choice of the criminal penalties to apply, although [. . .] the penalties must be effective, proportionate and dissuasive”.40 Consequently, in due time a Directive 2008/99/EC of the European Parliament and of the Council, “on the protection of the environment through criminal law” was approved.41

37

See Case C-176/03, Commission v Council (ECJ 13 September 2005) para 53. Case C-176/03, Commission v Council (ECJ 13 September 2005) para 47–48. 39 See Case C-176/03, Commission v Council (ECJ 13 September 2005) para 51 (“It follows from the foregoing that, on account of both their aim and their content, Articles 1 to 7 of the Framework Decision have as their main purpose the protection of the environment and they could have been properly adopted on the basis of Article 175 EC”). 40 Case C-176/03, Commission v Council (ECJ 13 September 2005) para 49. 41 O.J. L 328/28 (2008). 38

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3.6. Consumer Protection

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The embryo of a consumer policy dates back to the mid-1970s in particular with the approval of the European Charter on Consumer Protection in 1973 by the Parliamentary Assembly of the Council of Europe. This text listed the rights that required protection by each member Country of the Council.42 The guiding principle of the Charter is defined, in the preamble, as the desire to create a common legal framework for consumer protection with a view to promoting the social and economic development of the European reality.43 This document immediately produced important effects. The European Community, which already included several member countries of the Council of Europe, was urged to take a position on the matter. The main consequence was the adoption by the European Council of an important resolution44 that paved the way for targeted intervention programs in consumer protection policies. This institutional document mentions what is understood as the fundamental principles that are to inspire European policies on consumer protection, namely: protection of consumer health and safety; protection of consumers’ economic interests; consumer information and education; right to representation and advice. A further step forward in consumer protection was made with the Single European Act (Article 18) which introduced the concept of consumers into the Treaty in connection with the establishment and functioning of the internal market: Article 100 A set forth that the Commission’s proposals on health, safety, environmental protection and consumer protection should be based “on a high level of protection”. The Maastricht Treaty raises “consumer protection” to the rank of Community policy by providing for it a special title in the TEC. Article 153 (former Article 129a) constitutes the indisputable legal framework that allows consumer policy to be pursued and represents the legal basis for all subsequent directives. The Treaty of Amsterdam marked the final stage for the full recognition of consumer rights, with the identification of rights subject of provisions, which are no longer of a programmatic nature but are actual norms.45 With the formulation of the Charter of Nice, in 2000, consumer protection became a right that was included in the Charter’s chapter on Solidarity (Article 38 EUCFR).

42

See Resolution of the assembly of the Council of Europe No 543 (1973). Under this Charter, consumers are recognized the following rights: (A) The right of consumers to protection and assistance, with specific attention to comprehensive legal protection and active assistance, (a) Protection against physical damage due to unsafe products, (b) Protection against damage to the economic interest of the consumer; (B) The right to redress against damage (C) The right to consumer information; (D) The right to consumer education; (E) The right to representation and consultation. 44 Council Resolution of 14 April 1975 on a preliminary programme of the European Economic Community for a consumer protection and information policy, O.J. C 92/1 (1975). 45 See Alpa (2006), p. 53. 43

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The foregoing legislative framework was transposed into the Constitutional Treaty with all the aims and principles linked to consumer protection as a sector of concurrent competence46 and was transposed, virtually untouched, from the latter into the TFEU, thanks to the Lisbon Treaty. The Union’s consumer protection policy is defined and regulated in Title XIV, Article 169 TFEU.47 The first paragraph of Article 169 TFEU sets out the aims of the policy in question: “In order to promote the interests of consumers and ensure a high level of consumer protection, the Union shall contribute to protecting the health, safety and economic interests of consumers, as well as to promoting their right to information, education and to organise themselves in order to safeguard their interests.” The expression “promote” suggests that the Union is no longer satisfied with setting protection rules but takes on a propelling and proactive role in the protection of consumer rights; in turn, the expression “ensure” evokes the idea that these rights are actually guaranteed. As regards the division of competences in this area, Article 169.3 TFEU provides that to achieve the policy goals and implement consumer rights, the Union may adopt harmonization measures under Article 114 TFEU, in the context of the completion of the internal market, as well as additional measures for support, integration and control of the policies carried out by the Member States. Measures of the second type are decided by the European Parliament and the Council, in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee. Even in the case of consumer protection, as in the case of the environment, Member States are authorized, pursuant to paragraph 4 of the same Article, to maintain or introduce more stringent consumer protection measures than those adopted by the European legislation, provided that these measures are compatible with the Treaties and are notified to the Commission.

44

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3.7. Transport

The inclusion of transport policy in the EEC Treaty (Article 3.1 point (e)) essentially responded to the need to organize an inexpensive and well-structured transport system that would cater to the rapid expansion of intra-Community trade, and coordinate highly different actions by the States, which without coordination would cause significant distortions in the trade flows. However, despite the explicit provision in the founding Treaties, Community action in this area was rather slow in taking off. In fact, apart from EEC Regulation 46

See Article I-14 paragraph 2 point (f) TCE (Areas of shared competence); Article III-235 and III-234 (Consumer protection). 47 On consumer protection see Devenney and Kenny (2012).

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11/60, of June 1960, which confirmed the prohibition, already established by the Treaty, of applying different prices depending on the country of origin or of destination of transported products, the way towards a legislation in the field of transport was started by a judgment of the Court of Justice in 1985.48 On that occasion, the Court condemned the Council for not having created conditions ensuring the freedom to provide services in the international transport sector and for not having set the conditions required to permit the admission of non-resident carriers to national transport in a Member State.49 In reality, the Treaty regulation on transport has always been rather extensive and complex: The Chapter regulating services envisages that the free movement of services in the field of transport must be regulated by a special title (Article 58.1 TFEU). In compliance with this provision, the European Treaties have dedicated a title to transport which, in the TFEU, is Title VI, from Articles 90 to 100 TFEU and the provisions of the Title apply to transport by rail, road and inland waterway (Article 100.1 TFEU), while appropriate provisions may be established by a specific legislative act for sea and air navigation (Article 100.2 TFEU). It should also be remembered that the Constitutional Treaty (Article I-14 paragraph 2 point (g)) indicated that transport policy should be a shared competence, and this was transposed into the Lisbon Treaty (Article 4.2 point (g) TFEU). The division of powers over transport matters between the States and the EU is determined based on the concept of a “common transport policy” set forth in Article 90 TFEU50 and based on the statements of the TFEU on the limitation of European competence. The Union’s legislative competence covers the fields defined by Article 91.1 TFEU: “common rules applicable to international transport”; “the conditions under which non-resident carriers may operate transport services within a Member State”; “measures to improve transport safety”; and “any other appropriate provisions”. In the absence of European legislation, the principle of non-discrimination “applies to carriers of other Member States as compared with national carriers” (Article 92 TFEU); with reference to prices and transport conditions any discrimination “for the carriage of the same goods over the same transport links on grounds of the country of origin or of destination of the goods in question shall be prohibited” (Article 95 TFEU); finally, always with the same logic, it is forbidden to apply “rates and conditions involving any element of support or protection in the interest of one or more particular undertakings or industries” (Article 96 TFEU), even if exceptions are possible and aid may be admitted if it meets “the needs of

48

See Case 13/83, Parliament v Council (ECJ 22 May1985). Furthermore, the Court found that these measures should have been taken by 31 December 1969 and asked the Council to apply them within a reasonable time. 50 In this regard, Jung 2011, para 3, states that in European law the term “policies” indicates the structural tasks that the Community must fulfill. “Common policy” means: the European Community can enact legislation or decisions and is not charged of adapting national legal systems by Member States.” 49

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coordination of transport or if they represent reimbursement for the discharge of certain obligations inherent in the concept of public service” (Article 93 TFEU). Finally, as regards foreign transport with non-EU countries, the division of powers indicated by the Court of Justice would remain, for which the competence to conclude agreements with third States on transport matters can be implicitly inferred from Treaty provisions, and from the legislative acts adopted, for their implementation “in parallel” with respect to the exercise of internal competences, since the external competence can be exercised only if there is a pre-existing regulatory action within the Union; with the consequence, underlined by the Court, that it is impossible for the Member States to assume obligations concerning the same matter if they diverge from or affect the commitments made at European level.51

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3.8. Trans-European Networks

Based on a concept developed in some Community documents in the early 1990s, the Maastricht Treaty assigned the Community the important task of contributing to the establishment and development of trans-European networks in the field of transport, telecommunications and energy infrastructures. After the European Council of Strasbourg in December 1989 on the subject of trans-European networks, a Resolution was approved in early 1990,52 which marked the beginning of European policies on network infrastructures. Following the Maastricht Treaty, the essential points of the European network policy were established in an important document, the White Paper of the Commission entitled “Growth, Competitiveness, Employment”, presented to the Brussels European Council in December 1993, which attributes an important function to European infrastructure. The White Paper identified 26 priority projects for transport, eight priority projects for energy, and nine sectors of action for the telecommunications system. Article I-14 point (h) TCE indicates the trans-European networks as subjects for concurrent competence of the Union. The importance of this matter is confirmed by the Lisbon Treaty in the TFEU, which regulates this subject matter in Title XVI in Articles 170 to 171 TFEU. The trans-European networks are important for achieving the objectives of the establishment and functioning of the internal market (Article 26 TFEU), the objectives of the cohesion policy (Article 174 TFEU) and “to enable citizens of the Union, economic operators and regional and local communities to derive full benefit from the setting-up of an area without internal frontiers” (Article 170.1 TFEU). In this context, characterized by a system of open and competitive markets, “action by the Union shall aim at promoting the interconnection and 51 52

Case 22/70, Commission v Council (ECJ 31 March 1971) points 6/8–16/19. Council Resolution of 22 January 1990 concerning trans-European networks, O.J. C 27 (1990).

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interoperability of national networks, as well as access to such networks. It shall take account, in particular, of the need to link island, landlocked, and peripheral regions with the central regions of the Union” (Article 170.2 TFEU). The legislative competence of the Union concerns: “a series of guidelines”53 in which “projects of common interest are identified”; actions that prove necessary “to ensure the interoperability of the networks, in particular in the field of technical standadisation”; the possibility of supporting “projects of common interest supported by Member States, which are identified in the framework of the guidelines [. . .], particularly through feasibility studies, loan guarantees or interest-rate subsidies” (Article 171.1 TFEU). The guidelines and projects of common interest which concern the territory of a Member State require the approval of the Member State concerned (Article 172.2 TFEU); furthermore, it is envisaged that “Member States (coordinate) among themselves, in liaison with the Commission, the policies pursued at national level which may have a significant impact on the achievement of the objectives referred to in Article 170” (Article 171.2 TFEU), and in terms of external action, the Union may decide to cooperate with third countries to promote projects of mutual interest and to ensure the interoperability of networks (Article 171.3 TFEU).

3.9. Energy

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Although an attempt had been made with the Amsterdam Treaty to provide a typical legal basis for energy, the express provision of shared competence over energy matters was provided by the Constitutional Treaty (Article I-14 point (i)) and a single article (Article III-256) in a Section (10) of Chapter III, which concerns other policies. The Lisbon Treaty, therefore, in the TFEU, provides for shared competence and Title XXI, with Article 194 TFEU, deals with energy. However, it can be said that the Community at first, and the Union later on, have always been concerned with energy. Indeed, various provisions of the Treaties have constituted the legal basis for the adoption of Community measures in the energy sector: from the provisions on the free movement of goods, to those on the right of establishment and free movement of services, and on the common commercial policy; more recently, energy has appeared in the policy on trans-European networks and on the environment. More in general Articles 94 and 95 EC Treaty (Articles 114 and 115 TFEU) and Article 308 EC Treaty (Article 352 TFEU), which had often allowed the Community institutions to adopt the necessary acts for the functioning of the internal market, have also provided the legal basis for regulating energy matters. It can therefore be said that there have been multiple, variable and fragmented provisions in the Treaties on which to draw for an energy policy in the European 53

By “guidelines” we mean the provision of objectives, priorities, and main lines of the actions envisaged in the sector.

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system, and they have been invoked from time to time according to the aims to be pursued and the matters to be regulated in the secondary legislation on energy matters. Indeed, the directives and other Community measures on energy matters, based on different legal foundations, are more than forty.54 Article 194 TFEU, as mentioned, expressly attributes legislative power to the EU for the adoption of the measures that are necessary to achieve the following objectives: “a) ensure the functioning of the energy market; b) ensure security of energy supply in the Union; c) promote energy efficiency and energy saving and the development of new and renewable forms of energy; d) promote the interconnection of energy networks”. This latter objective has become particularly important, whereas in the past it was implicit in the implementation of the internal energy market. The first three objectives, on the other hand, date further back in time and, in some respects, are the expression not only of the ultimate goals of European energy policy, but also of its underlying principles. As can be seen, European competences are extensive, and their exercise may significantly limit the energy policy of each Member State. However, the Treaty also envisages some residual space for the Member States, by providing that the European legislative provisions should “not affect a Member State’s right to determine the conditions for exploiting its energy sources, its choice between various energy sources and the general structure of its energy supply.” The energy policy also has an international character and the European Union – which has as well signed international agreements on the subject, such as the Treaty of the Energy Charter, signed on 17 December 1994 in Lisbon55 – has competence in terms of how it was defined by the Court of Justice in the abovementioned judgment on the transport case56 (where external competence appears to be a consequence of the extension of the internal competence exercised in practice) and in Opinion 1/94 (which states that, in matters not expressly falling within its exclusive competence, the Community can act outside only if the internal measures have been adopted and implemented in such a way as to guarantee a high degree of Community integration).57

53

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3.10. Area of Freedom, Security, and Justice

This competence offers convergence for many provisions of the European Treaties starting with the Preamble of the TEU (12th recital) through to the protocols and declarations attached to the Treaties. 54

For further explanation, see Canino (2008), p. 651 et seqq. For the EU, see Council Decision of 15 December 1994 on the provisional application of the Energy Charter Treaty by the European Community (94/998/EC), O.J. L 380/1 (1994). 56 Case 22/70, Commission v Council (ECJ 31 March 1971). 57 Opinion 1/94, Agreements annexed to the WTO Agreement (ECJ 15 November 1994). 55

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This is an extremely important aim for the integration process which, if developed coherently, could have an equivalent or even greater weight than the economic aims of the European system, in that it creates the conditions for the freedom of movement and the freedom of residence (for European citizens and legally resident foreigners). Unfortunately, in this area, recently, during humanitarian crisis, it was seen how far behind we are with the integration process.58 Historically, this area was included in the European legal order with the Maastricht Treaty. It represented the third pillar, which with the subsequent Treaty of Amsterdam was partly removed from the intergovernmental method, of which however there are still come traces.59 A fundamental step was the European Council of Tampere (15–16 October 1999), in which, among other things, the body that was to draw up the draft Charter of Fundamental Rights of the European Union was set up, which shows that there is a close relationship between the protection of rights and the area of freedom, security and justice.60 The issue was taken up and discussed further during the preparatory work for the Constitutional Treaty,61 where the principle of offering European citizens an area of freedom, security and justice without internal frontiers”, was directly linked to the offer of “an internal market where competition is free and undistorted” (Article I-3 paragraph 2 TCE) and was characterized as a concurrent competence (Article I-14 TCE). With the Lisbon Treaty, the body of rules related to the area of freedom, security, and justice was further integrated into the European Treaties. Article 3.2 TEU indicates the principle that underlies the EU’s freedom, security and justice policy, which is to offer European 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.” With reference to these aims, the European Union has a different configuration compared to the image of a simple association of States for economic purposes. The creation of the internal market is certainly important, but the tasks that the Union has been attributed in the meantime, take on greater importance. Based on this principle, the TFEU states that the area encompassing freedom, security and justice is subject matter over which it has shared competence (Article 4.1 point (j) TFEU), and it indicates the different fields acting as foundation for this policy. Title V, in addition to being of a general nature (Chapter I), include policies relating to border controls, asylum and immigration (Chapter II), judicial 58

See Mangiameli (2018). See Pernice (1999), pp. 703–750; Dehousse (1998), pp. 525–539; Guild et al. (2010). See also the contributions on the Area of Freedom, Security and Justice in O’Keeffe and Twomey (1999); O’Keeffe, Hedemann-Robinson, M. den Boer, Evangelisti, Hervey, Twomey. 60 See the Presidency Conclusions of the European Council with reference to the special meeting on 15 and 16 October 1999. Available at http://www.europarl.europa.eu/summits/tam_en.htm#c. 61 See Ruffert (2005), p. 14; Henderson (2005); Kornobis-Romanowska (2005). 59

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cooperation in civil matters (Chapter III) and in criminal law (Chapter IV), and police cooperation (Chapter V).62 The principle on which the whole policy is based is that the creation of an area of freedom, security and justice requires respect for fundamental rights and the different legal systems and traditions of the Member States (Article 67.1 TFEU). The creation of the area ensures that there are no internal border controls, but only external border controls of the European Union, hence the need to frame “a common policy on asylum, immigration and external border control, based on solidarity between Member States, which is fair towards third-country nationals” (Article 67.2 TFEU). As regards “security”, this policy is strongly shared with the Member States. In this field, the Union endeavors “to ensure a high level of security through measures to prevent and combat crime, racism and xenophobia, and through measures for coordination and cooperation between police and judicial authorities and other competent authorities” (Article 67.3 TFEU). Although it can be said that we are dealing with a strongly unified European policy, in reality, in these areas there are still elements of the intergovernmental method63 and it is therefore no coincidence that the entire policy for the space of freedom, security, and justice is subject to the strategic guidelines for legislative and operational planning by the European Council (Article 68 TFEU) and that the body of the provisions of the Title requires a unanimous vote or referrals to the European Council (Article 83.3 TFEU). Policies on border controls, asylum and immigration are of particular importance for the functioning of the area of freedom, security and justice. The policy on border controls includes (in addition to the absence of any controls on persons, whatever their nationality, when crossing internal borders), checks on persons and the efficient monitoring of the crossing of external borders and the gradual introduction of an integrated management system for external borders (Article 77.1 TFEU). The common policy on asylum, subsidiary protection and temporary protection is aimed at “offering an appropriate status to any third-country national requiring international protection and ensuring compliance with the principle of non-refoulement”. With this policy, the Union complies with “the Geneva Convention of 28 July 1951 and the protocol of 31 January 1967 relating to the status of refugees” (Article 78.1 TFEU). The common immigration policy is “aimed at ensuring, at all stages, the efficient management of migration flows, fair treatment of third-country nationals residing legally in Member States, and the prevention of, and enhanced measures to combat illegal immigration and trafficking in human beings” (Article 79.1 TFEU).

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For the innovations introduced by the Lisbon Treaty, compared to the previous treaties, see Ruffert (2008), p. 171; Donnelly (2008)/1, p. 19; Coutts (2011), pp. 87–107. 63 See Trauner and Ripoll Servent (2016), pp. 1417–1432.

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For these policies the Union enjoys specific competences, identified by the provisions of the Treaty (Articles 77.2, 78.2, and 79.2 TFEU), which confer the power to adopt “measures” through the ordinary legislative procedure. Therefore, measures do not cover the whole policy and, in some cases, the provisions of the Treaty safeguard the competences of the Member States, as in the case of the maintenance of law and order and the safeguarding of internal security, national security (Articles 72 and 73 TFEU) and the right to determine the “volumes of admission of third-country nationals coming from third countries to their territory to seek work, whether employed or self-employed (Article 79.5 TFEU). Furthermore, in some cases, forms of harmonization of the laws and regulations of Member States are expressly excluded, as in the case of “measures to provide incentives and support for the action of Member States with a view to promoting the integration of third-country nationals residing legally in their territories” (Article 79.4 TFEU). Finally, the implementation of these European policies are “governed by the principle of solidarity and fair sharing of responsibility, including its financial implications, between the Member States” and, whenever necessary, the Union acts adopted pursuant to the relevant provisions “contain appropriate measures to give effect to this principle” (Article 80 TFEU). Within the sphere of asylum and immigration policies, the Union is recognized the power to “conclude agreements with third countries for the readmission to their countries of origin or provenance, of third country nationals who do not or who no longer fulfil the conditions for entry, presence or residence in the territory of one of the Member States” (Article 79.3 TFEU). In the field of civil justice, there is “the principle of mutual recognition of judicial and extrajudicial decisions” (Article 67.4 TFEU), which may include the adoption of measures for the approximation of the laws and regulations of the Member States (Article 81.1 TFEU). There are derogatory rules for family law with cross-border implications. Indeed, family law measures are subject to a special legislative procedure, in which the Council acts unanimously after consulting the European Parliament. The act that can be adopted by the Union is a “decision” against which national parliaments have the right of opposition (Article 81.3 TFEU). In criminal matters, cooperation involves the mutual recognition of criminal judgments and judicial decisions and, to the extent necessary, the approximation of criminal laws” (Article 67.3 and Article 82.1 TFEU.64 For these purposes and to facilitate mutual recognition of judgments and judicial decisions and police and judicial cooperation in criminal matters having a cross-border dimension, the European Parliament and the Council may, by means of directives adopted in

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The “European arrest warrant”, already governed by the Council Framework Decision of 13 June 2002, (2002/584/JHA) is now placed in this area.

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accordance with the ordinary legislative procedure, establish minimum rules. Such rules shall consider the differences between the legal traditions and systems of the Member States (Article 82.2 TFEU). The “European arrest warrant” (“EAW”), in force at 1 January 2004, regulated by the Council Framework Decision of 13 June 2002 (2002/584/JHA),65 is now set in the context of Judicial cooperation in criminal matters. The European arrest warrant has replaced the lengthy extradition procedures between EU Member States. Indeed, the European arrest warrant is a simplified cross-border judicial surrender procedure for prosecuting or executing a custodial sentence or detention order. A warrant issued by one judicial authority of Member States is valid in the entire territory of the European Union.66 The same powers and forms are established for “the definition of criminal offences and sanctions in the areas of particularly serious crimes with a crossborder dimension resulting from the nature or impact of such offences or from a special need to combat them on a common basis” (Article 83 TFEU).67 The European legislator also has the power to “establish measures to promote and support the action of Member States in the field of crime prevention, excluding any harmonisation of the laws and regulations of the Member States” (Article 84 TFEU). A typical feature of this sector—in line with the principles of shared competence—is the oversight of national Parliaments on compliance with the principle of subsidiarity referred to in Article 69 TFEU with reference to the legislative proposals on criminal judicial cooperation and on police cooperation. In addition, national parliaments, based on Article 12.1 point (c) TEU, participate in the evaluation mechanisms for the implementation of the Union policies in the AFSJ (Article 70 TFEU), and in the political monitoring of Europol and the evaluation of Eurojust’s activities (Articles 88 and 85 TFEU). European competence is full for Eurojust and Europol. In fact, in both cases the European legislator intervenes through regulations and according to the ordinary legislative procedure, to determine the structure, functioning, sphere of action and tasks of Eurojust (Article 85.2 TFEU and of Europol Article 88.2 TFEU). The regulations also determine arrangements for involving the European Parliament and national parliaments in the evaluation of the activities of Eurojust and Europol. The provision of a European Public Prosecutor’s Office to combat crimes against the financial interests of the Union, to be established by regulations in accordance with a special legislative procedure, is of particular importance, also for 65

On the function and role of the EAW in judicial cooperation in criminal matters, see European Arrest Warrant. Available at https://e-justice.europa.eu/content_european_arrest_warrant-90-en. do?init¼true. 66 See Pollicino (2008), pp. 1313–1355; van der Mei (2017), pp. 882–904. 67 The areas of crime referred to in the provision are defined by Article 83.1 (2) TFEU and are the following: 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 organized crime.

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the problems it has generated. The procedure provides in principle for the unanimous decision of the Council and prior approval of the European Parliament (Article 86.1 TFEU). The same procedure lays down the conditions and limitations under which the competent authorities of the Member States, both judicial and police (Articles 82 and 87 TFEU), may operate in the territory of another Member State in liaison and in agreement with the authorities of the latter (Article 89 TFEU). On prevention and combating of terrorism, ordinary legislative competence is provided for by regulations to adopt “administrative measures with regard to capital movements and payments, such as the freezing of funds, financial assets or economic gains belonging, owned or held by natural or legal persons, by groups or nonState entities” (Article 75 TFEU).

3.11. Common Safety Concerns in Public Health Matters for the Aspects Defined in this Treaty

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In the case of Article 4.2 point (k) TFEU, this is a very specific shared competence. As will be discussed in the following, “protection and improvement of human health” is an area covered by Article 6 TFEU, for which the Union’s competence is limited to carrying out actions aimed at supporting, coordinating or supplementing the actions of the Member States, without, thereby, superseding their competence in these areas (Article 2.5 TFEU). Article 168 TFEU, which constitutes Title XIV, relating to public health, regulates, in paragraph 4, the derogation from Article 4.2 point (k) TFEU, acknowledging to the European legislator the power to address the common safety concerns in the field of public health, the competence to contribute to the achievement of the objectives inherent to the protection of human health by adopting: a) “measures setting high standards of quality and safety of organs and substances of human origin, blood and blood derivatives”, without this preventing “Member States from maintaining or introducing more stringent protective measures”; b) “measures in the veterinary and phytosanitary fields which have as their direct objective the protection of public health”; c) “measures setting high standards of quality and safety for medicinal products and devices for medical use”. The European Parliament and the Council deliberate these measures in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee and the Committee of the Regions. With the Declaration No 32, attached to the Treaties, the Conference declared that “the measures to be adopted pursuant to Article 168, paragraph 4 point (c) must meet common safety concerns and aim to set high standards of quality where national standards affecting the internal market would otherwise prevent a high level of human health protection being achieved.”

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The So-called Parallel Competences

Earlier in this text, the characteristics of the so-called parallel competences were specified, in the sense that they are a shared competence while in principle implying special rules that involve a contribution of the sources of the Member States and of the European Union, which comply with the limits to action laid down by the rules of the Treaty. This includes the provisions of Article 4.3 and 4.4 TFEU. The first is dedicated to research, technological development and space; the second to development cooperation and humanitarian aid. For both these sectors, the provision on competence provides that: “the Union shall have competence to carry out activities [. . .]; however, the exercise of that competence shall not result in Member States being prevented from exercising theirs.”

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4.1. Research, Technological Development, and Space

“In the areas of research, technological development and space, the Union shall have competence to carry out activities, in particular to define and implement programmes”. This principle, which had had a previous formulation in the Constitutional Treaty (Article I-14 paragraph 3) is specified and better articulated in Title XIX by the Articles 179–190 TFEU.68 The cornerstone of this policy is the realization “of a European research area in which researchers, scientific knowledge and technology circulate freely.” This area is intended to strengthen the Union’s scientific and technological bases, encouraging it to become more competitive, including in its industry, while promoting all the research activities deemed necessary by virtue of other Chapters of the Treaties (Article 179.1 TFEU). The activities that fall under this EU policy, which complement those undertaken by the Member States, are: a) implementation of research programmes, as already mentioned; b) promotion of cooperation; c) dissemination and optimization of the results of the activities; d) stimulation of the training and mobility of researchers in the Union (Article 180 TFEU). Furthermore, for this policy the principle of consideration (Berücksichtigung) of the competence exercised by the other subject applies. Indeed, the Union and the Member States coordinate their action in the field of research and technological development to ensure mutual consistency between national policies and Union policy (Article 181.1 TFEU). The tool for developing this policy is the “multi-annual framework programme”, which includes all the Union’s actions and is adopted in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee. The framework programme is implemented through “specific 68 Thanks to the Maastricht Treaty, research and technological development was included among the Community’s actions (Article 3.1 point (n) TEC) and Title XVIII (Research and technological development) was included in the Treaty, with Articles from 163 to 173 TFEU.

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programmes” developed within each action, which are decided according to a special legislative procedure and after consulting the European Parliament and the Economic and Social Committee.69 Furthermore, “as a complement to the activities planned in the multiannual framework programme”, the European legislator, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, “shall establish the measures necessary for the implementation of the European research area” (Article 182 TFEU). For the implementation of the framework programme, there are several provisions that envisage forms of collaboration between some Member States and the Union, through “supplementary programmes” and that determine the latter’s competences (Articles 184 and 185 TFEU). The provisions, which refer to these Articles, are decided in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, and with the agreement of the Member States concerned (Article 188.2 TFEU). Article 187 TFEU governs the external competence of the Union that, in the implementation of the framework programme, may provide for cooperation on research, technological development and demonstration programmes of the Union with third countries or international organizations; and, to this end, the Union may enter into cooperation agreements between the Union and interested third parties. Within the sphere of research policy, the Union is empowered to “set up joint undertakings or any other structure necessary for the efficient execution of Union research, technological development and demonstration programs” (Article 187 TFEU); in this case the necessary provisions shall be adopted by the Council, on a proposal from the Commission and after consulting the European Parliament and the Economic and Social Committee (Article 188.1 TFEU). The European Union started to adopt a space policy only recently.70 This is a sector where individual European States had already come together through international agreements that had given rise to the creation of the European Space Agency in 1975 (ESA Convention of Paris of May 30), even if the first embryo dates back to 1962 and its reorganization was provided for by the agreement of October 30, 1980.71 The first agreement between the Union and the Agency dates back to May 2004, and until the Lisbon Treaty there was no independent legal basis for a European space policy. Article 189 TFEU provides for the Union to develop a European space policy “to promote scientific and technical progress, industrial competitiveness and the implementation of its policies.” Its competences in this area are limited to promoting “joint initiatives”, supporting “research and technological

69 The Union’s competences on the implementation of the multiannual framework program are established in Article 183 TFEU. 70 This has happened substantially with the Lisbon Treaty, even if the Constitutional Treaty had already prepared this possibility. 71 Reuter and Oberlechner (2004) and Pigliacelli (2006).

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development” and coordinating the “efforts needed for the exploration and exploitation of space.” The “measures” required for the purposes indicated are decided in accordance with the ordinary legislative procedure and they “may take the form of a European space programme, excluding any harmonization of the laws and regulations of the Member States”.

4.2. Development Cooperation and Humanitarian Aid

In this area, the European Community had already carried out a broad policy long before the Maastricht Treaty provided a specific legal basis. The Community, indeed, had found the foundations for its actions in various Treaty provisions: in commercial policy (Article 113 TEEC) and in the relevant agreements (Article 114 TEEC); in foreign policy (Article 228 TEEC) and in the policy on the association with third countries (Article 238 TEEC), as well as, in the absence of references to specific rules, in Article 235 TEEC. With the Maastricht Treaty, development cooperation was formally recognized as a specific Community policy with the introduction, in the TEC, of a new Title (XX), from Article 177 to Article 181, subsequently further supplemented by the Treaty of Nice, with Title XXI (economic, financial, and technical cooperation with third countries; Article 181A). Shared competence in the sector of development cooperation is defined in the Constitutional Treaty (Article I-14 paragraph 4) and the provisions on the policy are found in Part III, in a Chapter (IV—Cooperation with third countries and humanitarian aid), organized in three Sections (Section 1: Development cooperation; Section 2: Economic, financial and technical cooperation with third countries; Section 3: Humanitarian aid). With the Lisbon Treaty, all the provisions concerning politics were placed in the TFEU, in Title III of Part Five, concerning the external action of the Union, divided into three chapters that follow the sections of the TCE and include the Articles from 208 to 214 TFEU.72 Development cooperation policy is regulated in Chapter I. It follows the principles and objectives of external action; this implies a reference to Article 3.5 TEU, and the provisions of Chapter I of Title V of the TEU, in particular: “democracy, the rule of law, universality and indivisibility of human rights and fundamental freedoms, respect for human dignity, principles of equality and solidarity and respect for the principles of the United Nations Charter and international law” (Article 21.1 TEU). On these bases, the Union can conclude with third countries and competent international organizations “any agreement helping to achieve the objectives referred to in Article 21 of the Treaty on European Union” (Article 209.2 TFEU). From this, it follows that cooperation is no longer simply based on economic profiles and fair trade, but on the spreading of the identity of Europe, “in order to promote peace, security and progress in Europe and in the world” (TEU 72

On development cooperation and humanitarian aid, see Saputelli (2008).

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Preamble, 11th recital). The Union’s policy in this area has “as its primary objective the reduction and, in the long term, the eradication of poverty.” Thus, the Union considers the objectives of development cooperation when implementing policies that may affect developing countries (Article 208.1 TFEU). Development cooperation policy implies close cooperation between the Member States and the Union so that national policies and the European policy can complement and reinforce each other (Article 208.1 TFEU). This implies that for this policy, the mere consideration of the policy carried out by the other subject is not sufficient, but compliance with mutually assumed commitments is required. To these ends, “to promote the complementarity and efficiency of their action, the Union and the Member States shall coordinate their policies on development cooperation and shall consult each other on their aid programs, including in international organizations and during international conferences”. In addition, “they may undertake joint action” and Member States shall contribute if necessary, to the implementation of Union aid programmes” (Article 210.1 TFEU). Finally, “The Union and the Member States shall comply with the commitments and take account of the objectives they have approved in the context of the United Nations and other competent international organizations” (Article 208.2 TFEU) and “cooperate with third countries and with competent international organizations” (Article 211 TFEU). Respect for these principles is also important for correct use of the respective international competences in the development cooperation policy, given that the agreements concluded by the Union do not encroach on “Member States’s competence to negotiate in international bodies and to conclude agreements” (Article 209.2 TFEU). The object of development cooperation policy consists of “multi-annual cooperation programmes with developing countries or programmes with a thematic approach”, whose implementation measures are decided in accordance with the ordinary legislative procedure (Article 209.1 TFEU). The policy concerning the “economic, financial and technical cooperation with third countries” is governed by Chapter II. It concerns cooperation actions, including assistance especially in the financial field, with third countries other than developing countries. The framework of this policy is similar to the previous one. In fact, the “economic, financial and technical cooperation measures” with third countries need to be “consistent with the development policy of the Union and conducted within the framework of the principles and objectives of its external action” and “the Union’s operations and those of the Member States shall complement and reinforce each other”(Article 212.1 TFEU). For this policy, “the Union and the Member States shall cooperate with third countries and the competent international organizations” and “the arrangements for Union cooperation may be the subject of agreements between the Union and the third parties concerned”, without prejudice to “the competence of Member States to negotiate in international bodies and to conclude international agreements” (Article 212.3 TFEU). Mangiameli

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The measures necessary for the implementation of the policy of “economic, financial and technical cooperation with third countries” are decided in accordance with the ordinary legislative procedure. Humanitarian aid is regulated in Chapter III. Humanitarian operations are intended “to provide ad hoc assistance, relief and protection for people in third countries who are victims of natural or man-made disasters, in order to meet the humanitarian needs resulting from these different situations” (Article 214.1 TFEU), and “humanitarian aid operations shall be conducted in compliance with the principles of international law and with the principles of impartiality, neutrality and non-discrimination” (Article 214.2 TFEU). Furthermore, “the Union’s measures and those of the Member States shall complement and reinforce each other” (Article 214.1 TFEU). With third countries and competent international organizations, the Union may conclude “any agreement helping to achieve the objectives referred to in paragraph 1 and Article 21 of the Treaty on European Union”, without prejudice to “the competence of Member States to negotiate in international forums and to conclude agreements” (Article 214.4 TFEU). The measures defining the framework for implementing the humanitarian aid operations of the Union are decided in accordance with the ordinary legislative procedure (Article 214.3 TFEU). The Treaty establishes the European voluntary body of humanitarian aid whose statute and the modalities of operation are established with regulations deliberated in accordance with the ordinary legislative procedure.

List of Cases ECJ 31.03.1971, 22/70, Commission v Council, ECR 263 [cit. in para 48, 54] ECJ 20.10.1977, C-29/77, Roquette v France, ECR 1835 [cit. in para 28] ECJ 18.03.1980, C-91-92/79, Commission v Italy, ECR 1099, 1115 [cit. in para 33] ECJ 5.05.1981, C-804/79, Commission v United Kingdom, ECR 1045 [cit. in para 27] ECJ 07.02.1985, 240/83, Procureur de la République v ADBHU, ECR 531 [cit. in para 33] ECJ 22.05.1985, C-13/83, Parliament v Council, ECR 1513 [cit. in para 46] ECJ 15.11.1994, Opinion 1/94, Agreements annexed to the WTO Agreement, ECR I-5267 [cit. in para 54] ECJ 18.12.1997, C-309/96, Annibaldi v Sindaco del Comune di Guidonia and Presidente Regione Lazio, ECR I-7493 [cit. in para 30] ECJ 5.10.2000, C-376/98, Germany v Parliament and Council, ECR I-8419 [cit. in para 14] ECJ 08.01.2002, C-428/99, van den Bor, ECR 2002 p. I-127 [cit. in para 30] ECJ 10.12.2002, C-491/01, British American Tobacco (Investments) and Imperial Tobacco, ECR I-11453 [cit. in para 14] ECJ 13.09.2005, C-176/03, Commission v Council, ECR I-7879 [cit. in para 39] Mangiameli

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ECJ 7.09.2006, C-310/04, Spain v Council, ECR I-7285 [cit. in para 30] ECJ 11.12.2007, C-438/05, The International Transport Workers’ Federation and The Finnish Seamen’s Union, ECR 2007 p. I-10779 [cit. in para 21] ECJ 18.12.2007, C-341/05, Laval un Partneri, ECR 2007 p. I-11767 [cit. in para 21]

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Jordan, A., & Adelle, C. (Eds.). (2013). Environmental policy in the EU: Actors, institutions and processes (3rd ed.). London; New York: Routledge: Earthscan. Jung, C. (2011). Artikel 90. In C. Calliess & M. Ruffert (Eds.), EUV/AEUV (pp. 1193–1198). München: Beck. Kornobis-Romanowska, D. (2005). Developments in the area of freedom, security and justice brought about by the constitutional treaty. German Law Journal, 11, 1623–1639. Koutrakos, P., & Snell, J. (Eds.). (2017). Research handbook on the law of the EU’s internal market. Northampton: Edward Elgar. Kumm, M. (2006). Constitutionalising subsidiarity in integrated markets: The case of Tobacco Regulation in the European Union. European Law Journal, 12(4), 503–533. Langlet, D., & Mahmoudi, S. (2016). EU environmental law and policy. Oxford: Oxford University Press. Mangiameli, S. (2017). Concurrent powers of the European Union and their impact on the powers of Member States. In N. Steytler (Ed.), Concurrent powers in federal systems; meaning, making and managing. Netherlands: Brill NV, Leiden. Mangiameli, S. (2018). The European Union and the humanitarian crisis. Italian Paper on Federalism, No. 1. Retrieved from http://italianpapersonfederalism.issirfa.cnr.it/l-unione-europea-e-la-crisi-umanitaria.html McMahon, J. A., & Cardwell, M. N. (2015). Research handbook on EU agriculture law. Éditeur: Cheltenham: Elgar. Mögele, R., & Streinz, R. (2018). Artikel 4 AEUV. In R. Streinz (Ed.), Vertrag über die Europäische Union und Vertrag über die Arbeitsweise der Europäischen Union (pp. 345– 347). München: Beck. Muir, E. (2018). Drawing positive lessons from the presence of “the social” outside of EU social policy stricto sensu. European Constitutional Law Review, 14(1), 75–95. Nettesheim, M. (2014). Artikel 4 AEUV. In E. Grabitz, M. Hilf, & M. Nettesheim (Eds.), Das Recht der Europäischen Union (pp. 1–6). München: Beck. Nic Shuibhne, N. (2006). Regulating the internal market. Northampton: Edward Elgar. O’Keeffe, D., & Twomey, P. (1999). Legal issues of the Amsterdam Treaty. Oxford: Hart Publishing: D. O’Keeffe, Can the Leopard Change its Spots?: Visas, Immigration and Asylum following Amsterdam (16. Chap.); M. Hedemann-Robinson, The Area of Freedom, Security and Justice with Regard to the UK, Ireland and Denmark: The ‘Opt-in Opt-outs’ Under the Treaty of Amsterdam (17. Chap.); M. den Boer, An Area of Freedom, Security and Justice: Bogged Down by Compromise (18. Chap.); F. Evangelisti, The Role of National Parliaments in the Creation of the area of Freedom Security and Justice: An Italian point of view (19. Chap.); T. K. Hervey, Putting Europe’s House in Order: Racism, Race Discrimination and Xenophobia after the Treaty of Amsterdam (20. Chap.); P. Twomey, Constructing a Secure Space: The Area of Freedom, Security and Justice (21. Chap.). Obwexer, W. (2015). Artikel 4 AEUV. In H. von der Groeben, J. Schwarze, & A. Hatje (Eds.), Europäisches Unionsrecht (pp. 880–887). Baden-Baden: Nomos. Pelka, S. C. (2019). Artikel 4 AEUV. In J. Schwarze (Ed.), EU-Kommentar (pp. 409–412). BadenBaden: Nomos. Pennings, F., & Seeleib-Kaiser, M. (2018). EU citizenship and social rights, entitlements and impediments to accessing. Welfare: Edward Elgar Publishing. Pernice, I. (1999). Multilevel constitutionalism and the Treaty of Amsterdam: European Constitution-making revisited? Common Market Law Review, 36, 703–750. Pigliacelli, F. (2006). Una nuova frontiera per l’Europa. Storia della cooperazione spaziale europea, 1958-2005. Bologna: CLUEB. Pollicino, O. (2008). European arrest warrant and constitutional principles of the Member States: A case law-based outline in the attempt to strike the right balance between interacting legal systems. German Law Journal, 10, 1313–1355. Predieri, A. (1996). Europeità dei fondi strutturali: compendio e metafora. In Fondi strutturali e coesione economica e sociale nell’UE. Milano: Giuffrè.

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Reuter, K. E., & Oberlechner, J. (2004). The ESA history project, ESA Bulletin, No 119. Ruffert, M. (2005). Die unionsverfassungsrechtlichen Grundlagen des Raums der Freiheit, der Sicherheit und des Rechts. In E. Pache (Ed.), Die Europäische Union – Ein Raum der Freiheit, der Sicherheit und des Rechts? (p. 14). Baden-Baden: Nomos. Ruffert, M. (2008). Der Raum der Freiheit, der Sicherheit und des Rechts nach dem Reformvertrag – Kontinuierliche Verfassungsgebung in schwierigem Terrain. In I. Pernice (Ed.), Der Vertrag von Lissabon: Reform der EU ohne Verfassung? (p. 171). Baden-Baden: Nomos. Saputelli, G. (2008). La cooperazione allo sviluppo e la cooperazione finanziaria economica e tecnica con i paesi terzi. In S. Mangiameli (Ed.), L’ordinamento europeo. Le politiche dell’Unione (Vol. III, pp. 1045–1094). Milano: Giuffré. Schöman, I., Lörcher, K., & Bruun, N. (Eds.). (2012). The Lisbon Treaty and Social Europe. Hart Publishing: Oxford. Stancanelli, P. (2012). Articolo 4. In C. Curti Gialdino (Ed.), Codice dell’Unione europea (pp. 444–445). Napoli: Simone. Trauner, F., & Ripoll Servent, A. (2016). The communitarization of the area of freedom, security and justice: Why institutional change does not translate into policy change. Journal of Common Market Studies, 54(6), 1417–1432. van der Mei, A. P. (2017). The European arrest warrant system: Recent developments in the case law of the Court of Justice. Maastricht Journal of European and Comparative Law, 24(6), 882–904. Vandenbroucke, F., Barnard, C., & De Baere, G. (2017). A European social union after the crisis. Cambridge University Press. Vogel, L. (2017). Law of the internal market. Paris: Bruylant. Weatherill, S. (2017). The internal market as a legal concept. Oxford: Oxford University Press. Weiss, F., & Kaupa, C. (2013). European Union internal market law. Cambridge: Cambridge University Press.

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Article 5 [Coordination of the Economic Policy] 1. The Member States shall coordinate their economic policies within the Union.1–6 To this end, the Council shall adopt measures, in particular broad guidelines for these policies.7–12 Specific provisions shall apply to those Member States whose currency is the euro.13–16 2. The Union shall take measures to ensure coordination of the employment policies of the Member States, in particular by defining guidelines for these policies.17–21 3. The Union may take initiatives to ensure coordination of Member States’ social policies.22–24

Contents 1. The Nature of the Competences of Article 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Coordination of Member States’ Economic Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3. Specific Provisions for Euro Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 4. Coordination of the Employment Policies of the Member States . . . . . . . . . . . . . . . . . . . . . . . . . 17 5. Coordination of Member States’ Social Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 List of Cases References

1.

The Nature of the Competences of Article 5

Based on the prevailing viewpoints, the areas governed by Article 5 are considered part of the framework of complementary competences provided for by Article 6 TFEU;1 other scholars, instead, consider these matters as a form of sui generis competence, and as special competences they liken them, at least in part, to the socalled “Parallel competences”, which substantially come under the category of concurrent competences.2 According to the German Constitutional Court, instead, the competences of Article 5 TFEU are considered be similar to the European common security and defence policy—thus assimilating the provisions of Article 2 para 3 and 4 TFEU— as they are not categories of competence but are subject to separate rules.3

1

Häde (2017). Obwexer (2015), Rn. 5. 3 See German Federal Constitutional Court (Bundesverfassungsgericht), 2 BvE 2/08 (30 June 2009) para 58 (“Beyond this competence triad, Article 2 TFEU indicates two areas which are not categories of competence. The coordination of economic and employment policies (third 2

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Both these perspectives appear to be in contrast with the content of the articles of the Treaties. The areas referred to in Article 5 TFEU do not formally relate to complementary competencies due to the provision of Article 4.1 TFEU and, substantially, since the Treaty provisions relating to the areas considered, the only ones that can determine “the scope of and arrangements for exercising the Union’s competences” (Article 2.6 TFEU), do not seem to follow the regime of complementary competences. Therefore, position of the Bundesverfassungsgericht seems to consider the provision of Article 2.3 TFEU as a provision derogating from concurrent competence, while in reality it is a provision conferring a competence specific to the Union which is destined in any case to compete with that of the Member States; this can be inferred also from Article 119 TFEU and the other articles involved, which indicate, in a circular manner, a close correlation between national decisions and supranational decisions. The latter are able to implement constraints and orientations of the former even when they are taken by juridical acts, which, by their nature, do not have a binding nature.4 This also explains why in such a context, where European competences are not exercised by legislative acts (regulations and/ or directives, etc.), there are also rules that safeguard state competences.5 Finally, we must consider that the areas indicated by Article 2.3 TFEU, do not fully coincide with the areas set forth in Article 5 TFEU. In fact, in addition to the coordination of the economic and employment policies of the Member States, Article 5 TFEU also explicitly refers to the coordination of their social policies.

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Coordination of Member States’ Economic Policies

Paragraph 1 maintains the principle that is already present in European law (Article 4 TEC), namely, that the Member States shall coordinate their economic policies within the Union. The expression is very peculiar because it would seem that a task of the Union is attributed to the Member States and not to a European institution. In fact, Article 121.1 TFEU specifies that this coordination of the Member States takes place within the Council, since “the Member States shall regard their economic policies as a matter of common concern.” All this appears to be confirmed by the fact that for these policies the Council would have to adopt measures in the form of “broad guidelines”, according to the procedure provided for by Article 121.2 TFEU, for which “the Council shall, on a recommendation from the Commission, formulate a draft for the broad guidelines of the economic policies of the Member States and of the Union, and shall report the paragraph) and the Common Foreign and Security Policy (fourth paragraph) are regulated independently.”). 4 This is the so-called open method of coordination, following the decisions taken at the Lisbon European Council on 23 and 24 March 2000 (see Presidency Conclusions), for which cf. Radaelli (2003); Szyszczak (2006), pp. 486–502; Zeitlin (2009). 5 See Linselmann and Wessels (2006), p. 108 et seqq.; Rossi (2012b), p. 101.

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findings to the European Council.” Subsequently, the European Council, based on the report from the Council, discusses a conclusion “on the broad guidelines of the economic policies of the Member States and of the Union” and issues a resolution. Consequently, based on the conclusions of the European Council, “the Council shall adopt a recommendation setting out these broad guidelines”, for each Member State, and it shall inform the European Parliament. The discipline of the Treaties, indeed, by affirming something more, envisages that the adoption of an economic policy, necessary for the realization of the goals set out by Article 3 TEU, implies the action of the Member States and of the Union. Therefore, European economic policy is “based on the close coordination of the Member States’ economic policies, on the internal market and on the definition of common objectives” and is “conducted in accordance with the principle of an open market economy and with free competition” (Article 119.1 TFEU). For these purposes, the actions of the Member States and of the Union imply compliance with some guiding principles, such as “stable prices, public finances and sound monetary conditions as well as a sustainable balance of payments” (Article 119.3 TFEU). The transition from coordination to close coordination derives from the exercise of the monitoring power of the Council, based on reports presented by the Commission, referring to the economic developments in each of the Member States and in the Union, as well as consistency of economic policies with the broad guidelines. This creates what is called a “multilateral surveillance” (Article 121.3 TFEU), the outcomes of which are reported to the European Parliament (Article 121.5 TFEU). Moreover, if it is ascertained that the economic policies of a Member State are not consistent with the broad guidelines, or they risk jeopardising the proper functioning of the economic and monetary union, “the Commission may address a warning to the Member State in question” and “the Council, on a recommendation from the Commission, may make the necessary recommendations to the Member State in question” (Article 121.4 TFEU). Multilateral surveillance and related procedures are regulated by a regulation approved under the ordinary legislative procedure (Article 121.6 TFEU). The coordination of national economic policies contains a series of weak points, for instance, the sources that have been foreseen for its realization, that is the “recommendations”, which do not have a binding character. Yet, coordination, which has often been somewhat bland,6 has been a useful tool for strengthening the alignment of Member States’ economic policies, and for supporting Europe’s economic growth. In the years of the crisis, however, the provisions on the coordination of economic policy, even those that provide for exceptional measures, such as the prohibition of certain types of behaviour, solidarity, and financial assistance, as well as the procedure for controlling the budget acts of the Member States (Articles 122

6

See Case C-27/04, Commission v Council (ECJ 13 July 2004), with reference to the excessive deficit procedure.

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to 126 TFEU), were not sufficient for the European Union to implement a counter-cyclical policy and they did not allow the Member States experiencing greater difficulty to adopt effective measures against the crisis. Without prejudice to the substance of the framework of the “European Semester” and the requirements of the European Fiscal Compact (➔ para 16; ➔ Supplement TSCG para 60 et seqq.), this should be a sufficient reason for a careful review of these articles of the Treaties including the provision on competence, obviously in the sense of further strengthening European powers, with an increase also in the fiscal capacity of the Union, as hoped for in the Plan presented in December 2012 by the European Commission.7

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Specific Provisions for Euro Member States

Specific provisions apply to Member States whose currency is the euro (Article 5.1 (2) TFEU). To this end, “in parallel” the action of the European economic policy of the Member States and of the Union “includes a single currency, the euro, as well as the definition and conduct of a single monetary policy and exchange rate policy, which have the main objective of maintaining price stability and, without prejudice to this objective, of supporting general economic policies in the Union in accordance with the principle of an open market economy with free competition” (Article 119.1 TFEU). The specific provisions for the euro exclude “the Member States for which the Council has not decided that they meet the necessary conditions for the adoption of the euro.” These States are called “Member States with a derogation” (Article 139.1 TFEU) and the provisions of the Treaties concerning the following points do not apply to them: a) adoption of the parts of the broad economic policy guidelines which concern the euro area in general (Article 121.2 TFEU), b) coercive means of remedying excessive deficits (Article 126 para 9 and 11 TFEU), c) the objectives and tasks of the ESCB (Article 127 para 1 to 3 and 5 TFEU), d) issue of the euro (Article 128 TFEU), e) acts of the European Central Bank (Article 132 TFEU), f) measures governing the use of the euro (Article 133 TFEU), g) monetary agreements and other measures relating to exchange rate policy (Article 219 TFEU), h) appointment of members of the Executive Board of the European Central Bank (Article 283.2 TFEU), i) decisions establishing common positions on issues of particular relevance for economic and monetary union within the competent international financial institutions and conferences (Article 138.1 TFEU) and j) measures to ensure unified representation within the international financial institutions and conferences (Article 138.2 TFEU). Therefore, in the interpretation of these provisions, Member States “means the Member States whose currency is the euro” (Article 139.2 TFEU). 7

European Commission, A blueprint for a deep and genuine economic and monetary union Launching a European Debate, COM(2012) 777 final/2, Brussels, 30 November 2012.

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In addition to the provisions mentioned, Article 136 TFEU expressly refers to the Member States whose currency is the euro, providing that the Council shall, “in accordance with the relevant procedure from among those referred to in Articles 121 and 126, with the exception of the procedure set out in Article 126 (14), adopt measures specific to those Member States whose currency is the euro to: a) strengthen coordination and surveillance of budgetary discipline; b) set out economic policy guidelines for them, while ensuring that they are compatible with those adopted for the whole of the Union, and are kept under surveillance”. With the European Council Decision of 25 March 2011 (2011/199/EU), during the full-blown financial crisis, a new paragraph was inserted in Article 136 TFEU relating to a stability mechanism for the Member States whose currency is the euro, providing that they could “establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole” and warning that “the granting of any required financial assistance under the mechanism will be made subject to strict conditionality.” This provision constituted the legal basis for the adoption of the “Treaty Establishing the European Stability Mechanism” (TESM);8 it should also be remembered that the Member States whose currency is the euro also signed the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (“TSCG”), also known as “fiscal compact”, to “develop a closer coordination within the euro area with a view to ensuring a lasting, sound and robust management of public finances and thus addresses one of the main sources of financial instability.”9 Although a legal basis is lacking for this second treaty, which therefore ranks out of the law of the European treaties, the Treaty on the European Stability Mechanism states that “this Treaty and the TSCG are complementary in fostering fiscal responsibility and solidarity within the economic and monetary union.”10

4.

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Coordination of the Employment Policies of the Member States

On employment, paragraph 3 outlines a true coordination policy of the Union that concerns the employment policies of the Member States, attributing to the Union the power to define “guidelines” for these policies. Concurrence of the Member 8

On the European Stability Mechanism, see Atik (2016), Ohler (2011), Louis (2012), De Witte and Beukers (2013), Bardutzky (2015), Chiti (2013), Cucchiara (2015), Rivosecchi (2014) and Napolitano (2012). 9 Mangiameli (2017), Tosato (2013), Perez (2012), Calliess (2012), Baratta (2012), Rossi (2012a) and Besselink (2014). 10 See Treaty Establishing the European Stability Mechanism, whereas (5) “It is acknowledged and agreed that the granting of financial assistance in the framework of new programmes under the ESM will be conditional, as of 1 March 2013, on the ratification of the TSCG by the ESM Member concerned and, upon expiration of the transposition period referred to in Article 3(2) TSCG on compliance with the requirements of that article.” Article 3.2 of TSCG concerns the transposition into Member States legal orders of the ‘golden rule’, on the structural balance and the decrease of public debt (Article 3.1 of TSCG).

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States and the Union is determined by the provision of Article 145 TFEU, which provides for “a coordinated strategy for employment”, with certain characteristics of the workforce, such as skills, training, and adaptability to “labour markets responsive to economic change”. The employment policy is also aimed at achieving the objectives of the Union under Article 3 TEU considering a high level of employment “in the formulation and implementation of Union policies and activities” (Article 147.2 TFEU). Considering the objectives indicated, Member States’ action on employment, needs to be consistent with the economic policy guidelines referred to in Article 121.2 TFEU. This means that employment policy is closely linked to economic policy. Moreover, since the employment policies of the Member States represent “a matter of common concern”, they “shall coordinate their actions in this respect.” The coordination procedures, established by Article 148 TFEU, provide for the involvement of the European Council, which adopts its conclusions, on the basis of which the Council draws up guidelines, consistent with the economic policy guidelines, which the Member States must consider in their respective employment policies. Member States send an annual report to the Council and the Commission on the main measures taken to implement their employment policy and the Council, from these reports and the opinions of the Employment Committee, performs an annual review of the implementation of Member States’ employment policies in the light of the employment guidelines. If it considers it appropriate, the Council, on a recommendation from the Commission, may make recommendations to the Member States. Finally, “the Council and the Commission send the European Council a joint annual report on the employment situation in the Union and on the implementation of the employment guidelines”. Regarding employment policies, through its coordination action, the Union can support and, if necessary, complement the action of the Member States. In doing so, it shall respect their competences (Article 147.1 TFEU).11 Finally, the “incentive measures designed to encourage cooperation between Member States and to support their action in the field of employment”, approved according to the ordinary legislative procedure, are even more binding on Member States, even if they do not involve the harmonization of their laws and regulations. Indeed, these measures are aimed at “developing exchanges of information and best practices, providing comparative analyses and advice, as well as promoting innovative approaches and evaluating experiences, in particular by recourse to pilot projects” (Article 149 TFEU).

11 This provision seems to bring part of the Union’s employment policy into complementary competence. However, it should be noted that in this case there is only a simple reference to the respect of state competences, without the constraints of the complementary competence; therefore, the support and integration action of the Union could be more extensive and incisive, also in legal constraints, for Member States’ action.

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Coordination of Member States’ Social Policies

The competence specified in paragraph 3 concerns the initiatives for the coordination of the social policies of the Member States. This is a competence which, on the one hand, appears to be different from that of the other paragraphs of the same Article in which the power of the Union extends to coordination and not only to initiatives for coordination and, on the other hand, it overlaps the concurrent competence competitor of Article 4.2 point (b) TFEU “social policy, for the aspects defined in this Treaty.” As has already been noted, this is a distribution of competence between the Union of Member States with unclear boundaries and which implies some weakness of European powers, which also affects the proper functioning of the internal market. As regards Article 5.3 TFEU specifically, the matters to which it applies are those referred to in Article 156 TFEU,12 for which the Commission “shall encourage cooperation between the Member States and facilitate the coordination of their action in all social policy fields”, by “making studies, delivering opinions and arranging consultations, both on problems arising at national level, and on those of concern to international organizations, [. . .]”. The competence expressed in paragraph 3 also includes the measures referred to in Article 153.2 point (a) TFEU, which serve “to encourage cooperation between Member States through initiatives aimed at improving knowledge, developing exchanges of information and best practices, promoting innovative approaches and evaluating experiences”, excluding, however, “any harmonisation of the laws and regulations of the Member States”. These measures are decided by the European Parliament and the Council under the ordinary legislative procedure.

List of Cases ECJ 13.07.2004, C-27/04, Commission v Council, ECR 436 [cit. in para 12] BVerfG 30.6.2009, 2 BvE 2/08 [cit. in para 3]

References Atik, J. (2016). From “no bailout” to the European stability mechanism. Fordham International Law Journal, 39(5), 1201–1224. Baratta, R. (2012). Legal issues of the “fiscal compact”: Searching for a mature democratic governance of the euro. Il diritto dell’Unione europea, 2012(4), 647–681.

12 Specifically: employment, labor law and working conditions, basic and advanced vocational training, social security, prevention of occupational accidents and diseases, occupational hygiene, the right of association and collective bargaining between employers and workers.

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Bardutzky, S. (2015). Constitutional courts, preliminary rulings and the “new form of law”: The adjudication of the European stability mechanism. German Law Journal, 16(6), 1771–1789. Besselink, L. F. M. (2014). Parameters of constitutional development: The fiscal compact in between EU and Member State constitutions. In L. Rossi & F. Casolari (Eds.), The EU after Lisbon (pp. 21–35). Heidelberg: Springer. Calliess, C. (2012). From fiscal compact to fiscal union? New rules for the eurozone. The Cambridge Yearbook of European Legal Studies, 2011–2012(14), 101–117. Chiti, E. (2013). Il meccanismo europeo di stabilità al vaglio della Corte di giustizia: Corte di giustizia dell’Unione europea, 27 novembre 2012, causa C-370/12: il commento. Giornale di diritto amministrativo, 2013(2), 148–154. Cucchiara, M. F. (2015). Fiscal compact e meccanismo europeo di stabilità: quale impatto sull’equilibrio istituzionale dell’Unione? Il diritto dell’Unione europea, 2015(1), 91–135. De Witte, B., & Beukers, T. (2013). The Court of Justice approves the creation of the European stability mechanism outside the EU legal order: Pringle. Case C-370/12, Thomas Pringle v. Government of Ireland. Common Market Law Review, 50(3), 805–848. Häde, U. (2017). Artikel 5 AEUV. In M. Pechstein, C. Nowak, & U. Häde (Eds.), Frankfurter Kommentar zu EUV, GRC und AEUV (pp. 63–67). Tübingen: Mohr Siebeck. Linselmann, I., & Wessels, W. (2006). Optimal economic governance in an enlarged European Union: Scenarios and options. In K. Dyson (Ed.), Enlarging the euro area. External empowerment and domestic transformation in Est Central Europe (p. 108 et seqq.). Oxford: Oxford University Press. Louis, J.-V. (2012). The unexpected revision of the Lisbon Treaty and the establishment of a European stability mechanism. In L. Rossi & F. Casolari (Eds.), The EU after Lisbon (pp. 284– 320). Heidelberg: Springer. Mangiameli, S. (2017). The consequences of the crisis on European Integration and on the Member States: The European Governance between Lisbon and fiscal compact. Heidelberg: Springer. Napolitano, G. (2012). Il meccanismo europeo di stabilità e la nuova frontiera costituzionale dell’Unione. Giornale di diritto amministrativo, 2012(5), 461–469. Obwexer, W. (2015). Artikel 5 AEUV. In H. von der Groeben, J. Schwarze, & A. Hatje (Eds.), Europäisches Unionsrecht (pp. 885–891). Baden-Baden: Nomos. Ohler, C. (2011). The European stability mechanism: The long road to financial stability in the euro area. German Yearbook of International Law, 2011(54), 47–74. Perez, R. (2012). Il Trattato di Bruxelles e il fiscal compact. Giornale di diritto amministrativo, 2012(5), 469–475. Radaelli, C. M. (2003). The open method of coordination: A new governance architecture for the European Union? Stockholm: Swedish Institute for European Policy Studies. Rivosecchi, G. (2014). Il meccanismo europeo di stabilità e il fiscal compact tra Karlsruhe e Lussemburgo. Quaderni costituzionali, 2014(2), 425–429. Rossi, L. S. (2012a). “Fiscal compact” e Trattato sul meccanismo di stabilità: aspetti istituzionali e conseguenze dell’integrazione differenziata nell’UE. Il diritto dell’Unione europea, 2012(2), 293–307. Rossi, L. S. (2012b). Does the Lisbon Treaty provide a clearer separation of competences between EU and Member States? In A. Biondi, P. Eeckhout, & S. Ripley (Eds.), The EU law after Lisbon (p. 101). Oxford: Oxford press. Szyszczak, E. (2006). Experimental governance: The open method of coordination. European Law Journal, 2006, 486–502. Tosato, G. (2013). Il fiscal compact. Prove di Europa unita, 2013, 27–39. Zeitlin, J. (2009). The open method of coordination and reform of national social and employment policies: Influences, mechanisms, effects. In M. Heidenreich & J. Zeitlin (Eds.), Changing European employment and welfare regimes: The influence of the open method of coordination on national reforms. London/New York: Routledge.

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Article 6 [Support, Coordination or Supplement by the Union] The Union shall have competence to carry out actions to support, coordinate or supplement the actions of the Member States.1–7 The areas of such action shall, at European level, be:8 (a) protection and improvement of human health;9–12 (b) industry;13–15 (c) culture;16–18 (d) tourism;19–21 (e) education, vocational training, youth and sport;22–29 (f) civil protection;30–32 (g) administrative cooperation.33,34 Contents 1. 2.

The Complementary Competencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Sectors of Complementary Competences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.1. Protection and Improvement of Human Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.2. Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.3. Culture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.4. Tourism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2.5. Education, Vocational Training, Youth, and Sport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.6. Civil Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.7. Administrative Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 References

1.

The Complementary Competencies

How should “complementary” competence be treated in future? Should Member States be accorded full competence for matters in which the Union at present has complementary competence, or should the limits of the Union’s complementary competence be spelled out? These questions are the opening statement of the Convention document (CONV 75/02) on the mandate of the working group on complementary competences. The issue had emerged from the controversies that had arisen over the Maastricht Treaty, which had further expanded, after the enlargement of the EU, the list of European policies and introduced most of the sectors to which the current Article 6 TFEU refers.1 Ultimately, on complementary competences, the path chosen was to strongly delimit the powers of the Union.

1

See Articles 3.1, 66, 151, 152, 157 TFEU.

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The provision of Article 6 TFEU stipulates that the actions of the Union are intended to support, coordinate, or supplement the actions of the Member States. Even if supporting actions under Article 6 TFEU are financed from the Union budget, it cannot replace or pre-empt the competences of the Member States because the substantial rule-making competence rests with the Member States. Furthermore, if the Union were to adopt legally binding acts, these shall not entail harmonization of the laws and regulations of the Member States (Article 2.5 TFEU).2 The provision provides that for the sectors that are specifically indicated, the actions of the Union pursue a “European purpose”, referring in this way to the purposes laid down in Article 3 TEU. Consequently, the EU and Member States have concurrent powers over the non-listed sectors for which actions of the same nature are envisaged. However, apart from the sectors considered by Article 6 TFEU (and the exclusive sectors listed in Article 3 TFEU), competences are always concurrent (Article 4.1 TFEU) and, unless expressly prohibited, they allow for forms of harmonisation. In these cases, the European purpose may be absent, and the support, coordination, or supplementing actions decided by the Union may be aimed at pursuing exclusively the aims of the Member States.3 However, it is necessary to consider the regulations governing the sectors to which the adopted measures refer and the objectives to be achieved by the European Union as envisaged in the individual provisions. Since the competences envisaged in Article 6 TFEU are not exclusive competences, they are subject to the provisions of the principle of subsidiarity (Article 5.3 TEU) and to the procedure of the Protocol No 2. The principle of loyal cooperation (Article 4.3 TEU) applies also to the exercise of complementary competences, under which the Member States facilitate the implementation of the Union’s support, coordination, and supplementing actions to achieve the European aims inherent in such actions. Complementary competences may have three different forms: support, coordination, and supplement. These forms are not defined by the Treaties, but their notion can be interpreted from the provisions of the Treaties.4 Support actions refer to measures with which the Union promotes or enhances important projects of the Member States, such as the co-financing of a state action. Coordination, on the other hand, refers to actions of horizontal harmonization of the provisions of the Member States, without them being obliged to comply with binding legal provisions. Finally, the supplementing actions refer to the provisions

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On this provision, see also Baratta (2014). Bodewig and Voß (2003) and Lang and Bergfeld (2005). 4 In general, on the division of competences after the Lisbon Treaty, see Baratta (2010), Carlotto (2007), Caruso (2008), Colasante (2012), Davies (2003), De Pasquale (2008), Konstadinides (2011), Mangiameli (2006), Sbrescia (2008) and Schütze (2017). 3

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of the Union that overlap with those of the Member States, without being limited to simple forms of promotion.5

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The Sectors of Complementary Competences

The enumeration of the seven areas of complementary competence is mandatory, in compliance with the provisions of Article 4.1 TFEU. The discipline of the competence, based on Article 2.6 TFEU, is determined by the provisions of the Treaties that govern the indicated areas. Furthermore, in some fields there is also an intertwining of competences, so that in a certain area both concurrent and complementary competences may be present.6

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2.1. Protection and Improvement of Human Health

Article 6 point (a) TFEU refers to Article 168 TFEU, which states that the Union, on the one hand, “in the definition and implementation of all Union policies and activities” shall guarantee “a high level of human health protection” and, on the other, that “Union action shall complement national policies” and “shall complement the Member States’ action” (para 1).7 Furthermore, the Article envisages that “the Union shall encourage cooperation between the Member States [. . .] and, if necessary, lend support to their action” and that “the Member States shall, in liaison with the Commission, coordinate among themselves their policies and programmes;” for these purposes “the Commission may, in close contact with the Member States, take any useful initiative to promote such coordination” (para 2). Finally, the provision provides that “the Union and the Member States shall foster cooperation with third countries and the competent international organizations in the sphere of public health” (para 3). European legislation may “adopt incentive measures designed to protect and improve human health [. . .], measures concerning monitoring, early warning and combating serious cross-border threats to health, and measures which have as their direct objective the protection of public health regarding tobacco and alcohol abuse, excluding any harmonisation of the laws and regulations of the Member States” (para 5). On the other hand, the Council, on the proposal of the Commission may adopt recommendations for the purposes indicated by Article 168.1 TFEU.

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See Obwexer (2015). See Article 168.4 TFEU. See also Article 4 TFEU. 7 On EU competence on health, see Hervey and McHale (2004). 6

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2.2. Industry

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Article 6 point (b) TFEU refers to Article 173 TFEU, according to which “the Union and the Member States shall ensure that the conditions necessary for the competitiveness of the Union’s industry exist” (para 1). The objectives of this common policy, whose actions are carried out “in accordance with a system of open and competitive markets”, are also indicated. Member States are required to consult each another in liaison with the Commission and, where necessary, coordinate their actions. Instead, the Commission “may take any useful initiative to promote such coordination, in particular initiatives aiming at the establishment of guidelines and indicators, the organisation of exchange of best practice, and the preparation of the necessary elements for periodic monitoring and evaluation.” The European Parliament shall be kept fully informed about these initiatives (para 2). On industrial policy, paragraph 3 states that the Union shall contribute to the achievement of its objectives “through the policies and activities it pursues under the provisions of the Treaties.” In this way, industrial policy can be accomplished through regulations on the internal market, on commercial policy, the protection of competition, etc. In addition to this transversal nature of industrial policy, European legislative competence is recognized to “decide on specific measures in support of action taken in the Member States to achieve the objectives of industrial policy, excluding any harmonization of the laws and regulations of the Member States.”

2.3. Culture

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Article 6 point (c) TFEU refers to Article 167 TFEU, which in paragraph 1 recalls the spirit of the Union motto (“United in diversity”) and some elements of the principles expressed in the 2nd recital of the Preamble of the TEU (“Drawing inspiration from the cultural, religious and humanistic inheritance of Europe [. . .]”). In fact, it states that “the Union shall contribute to the flowering of the cultures of the Member States while respecting their national and regional diversity and at the same time bringing the common cultural heritage to the fore.” In the cultural field, the Union pursues aims of a different kind, with actions aimed at both encouraging cooperation between the Member States, and at supporting and supplementing the action of the latter in such areas as the improvement of the knowledge and dissemination of the culture and history of the European peoples,8 the conservation and safeguard cultural heritage of European significance, non-commercial cultural exchanges and artistic and literary creation, including the audiovisual sector (para 2). Furthermore, the Treaty provides for both the Union and the Member States to foster “cooperation with third 8

Haltern (2011).

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countries and the competent international organisations in the sphere of culture, in particular with the Council of Europe” (para 3). Finally, the cultural aspects are considered in the action that the Union carries out “under other provisions of the Treaties, in particular in order to respect and promote the diversity of its cultures” (para 4). The complementary competence attributed to the Union to accomplish cultural policy objectives allows the European Parliament and the Council to adopt “incentive measures, excluding any harmonization of the laws and regulations of the Member States;” while the Council, on a proposal from the Commission, can adopt recommendations (para 5).

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2.4. Tourism

Article 6 point (d) TFEU refers to Article 195 TFEU. In this field, which is completely new to the European system, “the Union shall complement the action of the Member States”, “promoting the competitiveness of Union undertakings” in the tourism sector (para 1). The aims of the Union’s action are to encourage the creation of a favorable environment for the development of undertakings in the tourism sector and to promote cooperation between the Member States, particularly by the exchange of good practice. The European Parliament and the Council are attributed the competence to establish “specific measures to complement actions within the Member States”, to achieve the objectives indicated by the Treaty in this sector,9 excluding any harmonization of the laws and regulations of the Member States (para 2).

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2.5. Education, Vocational Training, Youth, and Sport

The different areas included in Article 6 point (e) TFEU refer to Articles 165 and 166 TFEU. The first area is education for which the Treaty recognizes “the responsibility of the Member States for the content of teaching and the organization of education systems, and their cultural and linguistic diversity” (Article 165.1 (1) TFEU), but admits that the Union may contribute “to the development of quality education by encouraging cooperation between Member States and, if necessary, by supporting and supplementing their action.”10 The Lisbon Treaty added sport to the education field, recognizing the Union’s task of contributing “to the promotion of European sporting issues, while taking

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Budischowsky (2010). See also Caruso (2003).

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account of the specific nature of sport, its structures based on voluntary activity and its social and educational function” (Article 165.1 (2) TFEU).11 The aims pursued by the Union are: the development of the European dimension of education, “particularly through the teaching and dissemination of the languages of the Member States”; encouraging the “mobility of students and teachers, by encouraging inter alia, the academic recognition of diplomas and periods of study”; the promotion of “cooperation between educational establishments”; the development of “exchanges of information and experience on issues common to the education systems of the Member States”; encouraging “the development of youth exchanges and of exchanges of socio-educational instructors” and encouraging “the participation of young people in democratic life in Europe”; encouraging “the development of distance education” and the “European dimension in sport” (Article 165.2 TFEU). For education, as for culture, both the Union and the Member States are expected to foster “cooperation with third countries and the competent international organizations in the field of education and sport, in particular the Council of Europe” (Article 165.3 TFEU). The complementary competence recognized to the Union to achieve the objectives in the sectors of education and sport allows the European Parliament and the Council to adopt “incentive measures, excluding any harmonisation of the laws and regulations of the Member States”; while the Council, on a proposal from the Commission, can adopt recommendations (Article 165.4 TFEU). Article 166 TFEU refers to vocational training for which the Union “shall support and supplement the action of the Member States, while fully respecting the responsibility of the Member States for the content and organisation of vocational training” (para 1). The aims pursued by the Union for this policy are: to facilitate adaptation to industrial changes, in particular through vocational training and retraining, to improve initial and continuing vocational training to facilitate vocational integration and reintegration into the labor market, to facilitate access to vocational training and encourage mobility of instructors and trainees and particularly young people, to stimulate cooperation on training between educational or vocational training establishments and firms, and to develop exchanges of information and experience on issues common to the training systems of the Member States (para 2). Furthermore, “the Union and the Member States shall foster cooperation with third countries and the competent international organisations in the sphere of vocational training” (para 3). The competence of the European legislative bodies relates to the adoption of measures designed to contribute to the achievement of the objectives of the vocational training policy, excluding any harmonization of the laws and regulations of the Member States; the Council, on a proposal from the Commission shall adopt recommendations (para 4).

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Persch (2010).

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2.6. Civil Protection

The Lisbon Treaty has added the civil protection sector to the complementary competences of the Union. Article 6 point (f) TFEU in which civil protection is mentioned, refers to Article 196 TFEU which envisages “cooperation between Member States in order to improve the effectiveness of systems for preventing and protecting against natural or man-made disasters.” It also requires that the Union should: support and complement Member States’ action at national, regional and local level; promote swift and effective operational cooperation within the Union between national civil protection services; and promote consistency in international civil protection work (para 1).12 These aims can be considered completed by the provisions of the solidarity clause set forth in Article 222 TFEU, for which “the Union and its Member States shall act jointly in a spirit of solidarity if a Member State is the object of a terrorist attack or the victim of a natural or man-made disaster.” In particular, for the second case, the provision envisages the possibility of assisting “a Member State in its territory, at the request of its political authorities, in the event of a natural or manmade disaster.” While for the solidarity clause “the methods of implementation [. . .] by the Union are defined by a decision adopted by the Council, on a joint proposal by the Commission and the High Representative of the Union for Foreign Affairs and Security Policy”, in the case of civil protection, the European legislator is given the power to establish “the necessary measures to help achieve the objectives” established by the Treaty in the specific sector, “excluding any harmonization of the laws and regulations of the Member States” (Article 196.2 TFEU).

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The Lisbon Treaty has added the area of administrative cooperation to the complementary competences of the Union. Article 6 point (g) TFEU refers to Article 197 TFEU. The provision of administrative cooperation derives from the need to ensure an “effective implementation of Union law by the Member States”, considered “essential for the proper functioning of the Union”, and envisaged as “a matter of common interest” (para 1). This is a complementary provision to those present in the body of European Treaties which have always been based on the principle of state execution of European law (so-called “execution federalism”). The main rule in this regard is provided for by Article 291.1 TFEU, for which “the Member States shall adopt all measures of national law necessary to implement legally binding Union acts.” Belonging to this group also are the provisions that involve forms of administrative collaboration between the Member States and between these and the European institutions, in particular the Commission, such 12

Walus (2010).

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as Article 33 TFEU, concerning customs cooperation. All this explains why Article 197.3 TFEU includes a provision safeguarding all other provisions of the Treaties providing for administrative cooperation. The purpose of effectively implementing European law is achieved through the Union’s action to “support the efforts of Member States to improve their administrative capacity to implement EU law” and may consist in particular in “facilitating the exchange of information and of civil servants as well as supporting training schemes.” The European legislator is granted the power, by means of regulations, to establish “the necessary measures to this end, excluding any harmonization of the laws and regulations of the Member States” (Article 197.2 TFEU). Precisely because of the complementary nature of competence in matters of European administrative cooperation, the provision states that “no Member State shall be obliged to avail itself of such support.” However, experience shows that as a whole the European executive regulations, which include also the regulations referred to in Article 197 TFEU, have determined an increase in the efficiency of all of the public administrations thanks to their comparison and participation in the formation of a European administrative law.13

References Baratta, R. (2010). Le competenze interne dell’Unione tra evoluzione e principio di reversibilità. Il diritto dell’Unione europea, 517–554. Baratta, R. (2014). Articolo 6. In A. Tizzano (Ed.), Trattati dell’Unione europea (pp. 393–394). Milano: Giuffré Editore. Bodewig, T., & Voß, T. (2003). Die “offene Methode der Koordinierung” in der Europäischen Union. EuR, 310 et seqq. Budischowsky, J. (2010). Tourismusförderung durch die EU. Ecolex 2010, 109 et seqq. Carlotto, I. (2007). Il riparto delle competenze tra Stati membri ed Unione europea alla luce della giurisprudenza della Corte di Giustizia. Rivista Trimestrale di Diritto Pubblico, 108–133. Caruso, F. (2003). Le competenze dell’Unione europea e degli Stati membri in materia di istruzione. Diritto e Società, 207–220. Caruso, F. (2008). La disciplina dell’esercizio delle competenze di Stati membri ed Unione nel Trattato di Lisbona. In Studi in onore di Umberto Leanza (p. 935 et seqq.). Napoli: Editoriale scientifica italiana. Colasante, P. (2012). Il riparto delle competenze fra Unione europea e Stati membri alla luce del Trattato di Lisbona. In G. Marazzita (Ed.), Il processo di integrazione europea dopo il Trattato di Lisbona (pp. 65–86). Napoli: Edizioni scientifiche italiane. Davies, G. (2003). The post-Laeken division of competences. European Law Review, 28(5), 686 et seqq. De Pasquale, P. (2008). Il riparto di competenze tra Unione europea e Stati membri. Diritto Pubblico Comparato ed Europeo, 60–69. Haltern, U. (2011). Politik der Kultur als Selbstvergewisserung? EuR, 512 et seqq. Hervey, T. K., & McHale, J. V. (2004). Health law and the European Union. Cambridge: Cambridge University Press.

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Obwexer (2015).

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Konstadinides, T. (2011). Division of powers in European Union law: The delimitation of internal competence between the EU and the Member States. The Netherlands: Kluwer Law International. Lang, J., & Bergfeld, K. (2005). Zur “offenen Methode der Koordinierung” als Mittel der Politikgestaltung in der Europäischen Union. EuR, 18 et seqq. Mangiameli, S. (2006). La competenza europea, il suo esercizio e l’impatto sugli ordinamenti degli Stati membri. In S. Mangiameli (Ed.), L’ordinamento europeo. L’esercizio delle competenze (Vol. II, pp. 1–89). Milano: Giuffré. Obwexer, W. (2015). Artikel 6 AEUV. In H. von der Groeben, J. Schwarze, & A. Hatje (Eds.), Europäisches Unionsrecht (pp. 891–895). Baden-Baden: Nomos. Persch, S. (2010). Sportförderung in Europa: Der neue Art. 165 AEUV. NJW 2010, 1917 et seqq. Sbrescia, V. M. (2008). Le competenze dell’Unione europea nel Trattato di Lisbona. Napoli: Editoriale scientifica italiana. Schütze, R. (2017). Classifying EU competences: German constitutional lessons? In S. Garben & I. Govaere (Eds.), The division of competences between the EU and the Member States (p. 33 et seqq.). Bloomsbury: Hart Publishing. Walus, A. (2010). Europäischer Katastrophenschutz – Möglichkeiten und Grenzen im Lichte des Vertrags von Lissabon. Europarecht, 564 et seqq.

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Title II Provisions Having General Application

Article 7 [Policy Consistency; Principle of Conferral of Powers] The Union shall ensure consistency between its policies and activities,1-4 taking all of its objectives into account and in accordance with the principle of conferral of powers.5-15

Contents 1. The Consistency Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. The Provision of Consistency in the Treaties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3. The Subjects of the Obligation of Consistency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4. The Purpose of the Consistency Clause and the Actions of the Union . . . . . . . . . . . . . . . . . . . . 8 5. The Problem of Effective Enforceability of the Principle of Coherence . . . . . . . . . . . . . . . . . . 12 References

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The Consistency Clause

This article was introduced with the Lisbon Treaty. However, the obligation of consistency had been formulated in the Maastricht Treaty of 1992 (Article C, subsequently old version of Article 3 TEU) and slightly modified by the Treaty of Amsterdam (1997). The original formulation of the article obliged the Union to ensure “the consistency and continuity of the actions carried out for the pursuit of its objectives, while respecting and developing the acquis communautaires” (old version of Article 3.1 TEU). In particular, the Union was expected to ensure “the overall consistency of its external action in the field of external relations, security, economy and development policies.” The provision requiring consistency arose from the fact that that system was still based on the dualism between the Union and the European Community, and on the peculiar way of ordering competences based on the so-called three “pillars”.1 Hence, the assertion “of a single institutional framework” for the Union, even if responsibility to ensure consistency was attributed to the Council and the Commission, with the proviso that they would cooperate to that end (introduced by the Treaty of Amsterdam). Reference to the acquis communautaire can be explained in the same light. It is self-evident that with the Lisbon Treaty, after the drafting of the Constitutional Treaty (Article III-115), the consistency clause took on a different

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In general, on the division of competences after the Lisbon Treaty, see Baratta (2010), Carlotto (2007), Caruso (2008), Colasante (2012), Davies (2003), De Pasquale (2008), Konstadinides (2011), Mangiameli (2006), Sbrescia (2008), and Schütze (2017). #

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formulation because the institutional system and that of the European powers were modified. First, the EU/EC dualism was solved by introducing the single legal personality (Article 47 TEU) and the reference to the uniqueness of the institutional framework is not present in the provision of Article 13 TEU, where the institutional framework aims at “ensuring the consistency, effectiveness and continuity of its policies and actions.” Second, as regards the external action of the Union, the obligation of consistency was formalized in Article 16.6 (3) TEU, in Article 18.4 TEU, in Article 21.3 (2) TEU and reiterated in Article 26.2 (2) TEU.2 Finally, competences were ordered in a different way, with the disappearance of the three pillars and competences being ordered in catalogues and according to an articulated nomenclature of European powers; and this explains, on the one hand, the disappearance of the reference to the acquis communautaire and, on the other, the reference “to the principle of attribution of competences.” In fact, this Article, under the Principles (part I), opens Title II of the Treaty on the functioning of the EU, which includes the “provisions of general application.”

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The Provision of Consistency in the Treaties

In the European Treaties, there is a constant drive towards consistency, given the composite nature of the European legal order from an institutional and public policy point of view. In fact, several provisions of the Treaties, in addition to those that refer to the Union’s external action, refer to consistency. Consistency, for example, conditions the evaluation of economic policies which are to comply with the broad guidelines (Article 121.3 TFEU); the same broad guidelines apply to employment policies, and also the guidelines of the Council, which the Member States must take into account in their employment policies, should be consistent with the broad guidelines of Article 121.1 (Articles 146 and 148 TFEU). In the case of research and technological development, moreover, the Treaty requires that the activities of the Union and of the Member States are coordinated so as to ensure that national policies and Union policy are mutually consistent (Article 181 TFEU). Likewise, consistency is also required for economic, financial, and technical cooperation actions with third countries other than developing countries. Indeed, the measures of this policy are consistent with the Union’s development policy and are conducted within the framework of the principles and objectives of external action. Furthermore, the actions of the Union and the Member States complement and reinforce each other (Article 212 TFEU). Finally, consistency is an important element in the exercise of the jurisdiction of the General Court, for the protection of unity and consistency of Union law (Article 256 TFEU); also, in strengthened collaborations between Member States 2

Hillion (2008).

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within the framework of the common foreign and security policy (Articles 329 TFEU) and in general in the actions undertaken within the framework of any enhanced cooperation, for which the consistency of said actions with Union policies must be ensured (Article 334 TFEU). Lastly, with reference to the specific measures adopted by the Council, to establish the conditions of application of the Treaties, including common policies, to the outermost regions, it is necessary to consider the specific characteristics and constraints of the outermost regions without compromising the integrity and consistency of the Union legal order, including the internal market and common policies (Article 349 TFEU).

3.

The Subjects of the Obligation of Consistency

The obligation of coherence represents a clause of general scope that concerns all the institutional behaviours of the entities operating in the Union, including the Member States, by virtue of the principle of sincere cooperation of Article 4.3 TEU. Indeed, consistency is important in all those cases where the aims, objectives and policies of the Treaties are left to the joint action of the Union and the Member States.3 In Article 13.1 TEU, the Institutions of the Union are called upon to “ensure the consistency, effectiveness and continuity of its policies and actions.” In this way institutional responsibility for the consistency of the Union’s actions no longer rests, as it did before, only on the Council and the Commission, but on all the Institutions. Nevertheless, the Council, in its “General Affairs” configuration shall ensure the consistency of the work of the different configurations of the Council (Article 16.6 (2) TEU) and, in the Commission, the President is recognized the power to decide on “the internal organization of the Commission ensuring that it acts consistently, efficiently and as a collegiate body” (Article 17.6 point (b) TEU).

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The Purpose of the Consistency Clause and the Actions of the Union

In relation to the actions of the Union, the principle of consistency affects all its policies in a transversal manner.4 Indeed, its purpose is to ensure convergence of the meanings expressed by the different provisions of the European Treaties to guarantee that every provision can conceptually be compatible with the others and not be formulated in a contradictory manner. The value of the consistency clause of Article 7 TFEU finds its specific reference, first, in the purposes of the Union defined in Article 3 TEU, which are to be consistent, even if only in light of the principle of attribution. This shows that the 3

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consistency clause lends itself to being evaluated through interpretation in European decisions and in the system of competences. Indeed, the provision of consistency with the principle of attribution, expressly referred to, constitutes one of the most important clauses present in the body of the Treaties, and is aimed at avoiding an expansion of European powers through interpretation. Thus, for example, it would not be possible, in the name of consistency, to bridge of the gaps in the legal foundations governed by the Treaties. However, this does not prevent that the various provisions regarding the attribution competences, by being mutually consistent, may give rise to that completeness of action that the individual authorizations of competence could not allow. Consequently, it is not entirely accurate to maintain that the reference to the principle of consistency has a merely declarative and non-constitutive function.5 Moreover, it is no coincidence that the consistency rule is applied, not only to the possible relations between the provisions of a given policy and those of other policies, but above all, to the cases where the provisions of the Treaty affirm that the objectives of a given policy are to be incorporated into all other policies or into the accomplishment of the internal market. An example in this sense, among the principles of the general provisions, is offered by Article 13 TFEU according to which the “needs in terms of animal welfare as sentient beings” are considered “in the formulation and implementation of Union policies in the sectors of agriculture, fisheries, transport, internal market, research, technological development and space.” In this way, it is evident that the scope of the principle of consistency is of a systematic nature and consists in the ability to achieve a general balance of the Institutions, of the content of the policies, and of the rules of European law. Therefore, pursuit of consistency implies that European citizens be treated fairly, concerning the actions of the Union and, in this sense, the consistency clause appears to be complementary to the principle of equality (as prescribed by Article 9 TEU).

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The Problem of Effective Enforceability of the Principle of Coherence

There is a problematic discussion on the possibility of using the principle of consistency as a parameter in the legitimacy judgments of the Court of Justice.6 Certainly, as a provision of the Treaty, Article 7 TFEU can be part of the syllogism of the European judge; more so since the latter is responsible for ensuring that “in the interpretation and application of the Treaties the law is observed” (Article 19.1 TEU). Certainly, however, in the fields in which there is no jurisdiction of the Court, compliance with the principle cannot be assured jurisdictionally. This is the case of 5 6

Schröder (2017). Nilsson et al. (2012)

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the CFSP (Article 275.1 TFEU), two policies for which, from the outset, the principle of coherence has had a particularly significant meaning. In these areas, however, “compliance with Article 40 of the Treaty on European Union” (so-called reciprocal “intangibility clause” among the competences of Articles 3–6 TFEU and the specific competences on foreign policy and of common security) and the “control of the legitimacy of decisions providing for restrictive measures against natural or legal persons adopted by the Council on the basis of Title V, Chapter 2 of the Treaty on European Union” (Article 275.2 TFEU) are subject to the jurisdiction of the Court of Justice. Apart from the common foreign and security policy, judicial control over the principle of consistency is still limited to the legitimacy profiles of the acts concerning the actions of the Union (and of the Member States) and cannot certainly extend to the profiles of merit that concern areas of evaluation of a political nature. Consequently, the enforceability of the consistency clause has a very limited scope, since, being a “rule of conduct relating to the objectives”,7 the requirement of consistency is based on the fact that it is implemented with decisions mainly of a political nature and in the context of Union (or Member State) legislation. Instead, the case in which a concrete provision of a policy contradicts a provision of a different policy is a different matter. Indeed, in this hypothesis it would be a question of considering the use of discretion granted to the organs that adopt the relative measures, even if it is necessary to consider that often the provisions of the Treaties recognize a wide discretion, which makes the judgment of legitimacy difficult, especially when compliance with European law and the decision on measures to be adopted is left to the Member States.

References8 Baratta, R. (2010). Le competenze interne dell’Unione tra evoluzione e principio di reversibilità. Il diritto dell’Unione europea, 517–554. Carlotto, I. (2007). Il riparto delle competenze tra Stati membri ed Unione europea alla luce della giurisprudenza della Corte di Giustizia. Rivista Trimestrale di Diritto Pubblico, 108–133. Caruso, F. (2008). La disciplina dell’esercizio delle competenze di Stati membri ed Unione nel Trattato di Lisbona. In Studi in onore di Umberto Leanza (p. 935 et seqq.). Napoli: Editoriale scientifica italiana. Colasante, P. (2012). Il riparto delle competenze fra Unione europea e Stati membri alla luce del Trattato di Lisbona. In G. Marazzita (Ed.), Il processo di integrazione europea dopo il Trattato di Lisbona (pp. 65–86). Napoli: Edizioni scientifiche italiane. Davies, G. (2003). The Post-Laeken division of competences. European Law Review, 28(5), 686 et seqq. De Pasquale, P. (2008). Il riparto di competenze tra Unione europea e Stati membri. Diritto Pubblico Comparato ed Europeo, 60–69.

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Schorkopf (2013), para 14, 17 and 20; Schuster (2017). All cited internet sources in this comment have been accessed on 9 December 2019.

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Herlin-Karnell, E., & Konstadinides, T. (2017). The rise and expressions of consistency in EU law: Legal and strategic implications for European integration. Cambridge Yearbook of European Legal Studies, 1–30. Retrieved from https://doi.org/10.5235/152888713809813521 Hillion, C. (2008). Coherence in the external relations of the European Union. In M. Cremona (Ed.), Developments in EU external relations law, collected courses of the academy of European law (pp. 10–36). Oxford: Oxford University Press. Konstadinides, T. (2011). Division of powers in European Union law: The delimitation of internal competence between the EU and the Member States. The Netherlands: Kluwer Law International. Mangiameli, S. (2006). La competenza europea, il suo esercizio e l’impatto sugli ordinamenti degli Stati membri. In S. Mangiameli (Ed.), L’ordinamento europeo. L’esercizio delle competenze (Vol. II, pp. 1–89). Milano: Giuffré. Nilsson, M., Zamparutti, T., Petersen, J. E., Nykvist, B., Rudberg, P., & McGuinn, J. (2012). Understanding policy coherence: Analytical framework and examples of sector–environment policy interactions in the EU. Environmental Policy and Governance. Retrieved from https:// doi.org/10.1002/eet.1589 Obwexer, W. (2015). Artikel 7 AEUV. In H. von der Groeben, J. Schwarze, & A. Hatje (Eds.), Europäisches Unionsrecht (p. 896 et seqq.). Baden-Baden: Nomos. Sbrescia, V. M. (2008). Le competenze dell’Unione europea nel Trattato di Lisbona. Napoli: Editoriale scientifica italiana. Schorkopf, F. (2013). Art. 7 AEUV. In E. Grabitz, M. Hilf, & M. Nettesheim (Eds.), Das Recht der Europäischen Union: EUV/AEUV (pp. 1–6). München: Beck. Schröder, R. (2017). Artikel 7 AEUV. In M. Pechstein, C. Nowak, & U. Häde (Eds.), Frankfurter Kommentar zu EUV, GRC und AEUV, 4 Bände (pp. 69–73). Tübingen: Mohr Siebeck. Schuster, U. (2017). Das Kohärenzprinzip in der Europäischen Union. Baden-Baden: Nomos. Schütze, R. (2017). Classifying EU competences: German constitutional lessons? In S. Garben & I. Govaere (Eds.), The division of competences between the EU and the Member States (p. 33 et seq). Bloomsbury: Hart Publishing.

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Article 8 [Equal Treatment, Equality Between Men and Women] (ex-Article 3.2 TEC) In all its activities,14-17 the Union shall aim to eliminate inequalities, and to promote equality,22-36 between men and women.18-21

Contents 1. 2. 3.

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Gender Equality as a General Principle in EU Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Scope of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1. In All Its Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2. Between Men and Women . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Eliminating Inequalities and Promoting Equality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1. Legislative Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2. Gender Mainstreaming . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3. Positive Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Cases References

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Overview

Article 8 TFEU (ex-Article 3.2 EC) is under Title II (Provisions having general application) in Chapter I (General Principles) of the TFEU. The article is short and has two main substantive points. The Union shall aim to, on one hand, eliminate inequalities and, on the other, promote equality between men and women. The following discussion will explain the article’s rationale (➔ para 3–7) and its status. The discussion will emphasise equality between men and women as a general principle of EU law (➔ para 3–12), and what meaning the general principle has in construing the article. The scope of application will be discussed (➔ para 13–21), including what “in all its activities” entails (➔ para 14–17) and what the concepts “men and women” entail (➔ para 18–21). The concepts “aim to eliminate inequalities” and “to promote equality” (➔ para 22–23) will be examined, and how the EU has fulfilled its duties under the article (➔ para 24–36).

2.

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Gender Equality as a General Principle in EU Law

Equality between women and men is one of the EU’s founding principles. It goes back to 1957 when the principle of equal pay for equal work became part of the Treaty of Rome. There in Article 119 TEEC (¼ Article 141 TEC ¼ Article 157 #

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TFEU) was a provision on the duty of MS to ensure the main rule of equal pay for equal work regardless of sex. On the other hand, that treaty did not have a provision on gender equality comparable to Article 8 TFEU. Rather, equality only covered equal pay for equal work. It was not until the Treaty of Amsterdam in 1997 that such a general provision was put into the EC Treaty (Article 3.2 EC). In examining the rationale for Article 8 TFEU, it is necessary to consider its genesis and the perspective underlying Article 119 TEEC and later legislation and judgments in the field of gender equality. The rationale for Article 119 TEEC, and therewith for gender equality in EU law, was originally based on economic justifications. Several MS had put provisions into their national law on equal pay for women and men, and they feared that inexpensive female labour in other MS would distort the competitiveness of companies in those states, and it would therefore be necessary to enact provisions on equal pay.1 However, in 1976, in the Defrenne (II) case, the ECJ ruled that Article 119 TEEC entailed a double aim. First, the court confirmed the economic justification for the provision since the aim of Article 119 TEEC was to prevent competitive disadvantage in intra-Community competition. Second, the article was part of the social objectives of the Community, which was not merely an economic union but also aimed at ensuring social progress and seeking constant improvement of their people’s living and working conditions, as emphasised in the Preamble to the Treaty.2 The court thereby confirmed that Article 119 TEEC also built on social justifications. The judgment also stated that this double aim, which is at once economic and social, shows that the principle of equal pay forms part of the foundations of the Community.3 In the Defrenne cases, ECJ already emphasised respect for fundamental personal human rights as a general principle of Community law. It also confirmed that the elimination of discrimination based on sex is part of those fundamental rights, the observance of which it has a duty to ensure.4 In the Schröder case, the ECJ concluded that in view of numerous case precedents, it must be concluded that the economic aim pursued by Article 119 TEEC is secondary to the social aim pursued by the same provision, which constitutes the expression of a fundamental human right.5 Little by little, the rationale for gender equality within EU has increasingly moved away from economic justifications toward the human rights rationale.6 By implementing Article 3.2 TEC in 1997, entered into force 1 May 1999 by the Amsterdam Treaty and later Article 8 TFEU in 2007, eliminating inequalities and

1

See Barnard (1996), pp. 101–141; More (1999), pp. 517–543. Case 43/75, Defrenne II (ECJ 8 April 1976) para 8–10. 3 Case 43/75, Defrenne II (ECJ 8 April 1976) para 12. 4 Case 149/77, Defrenne III (ECJ 15 June 1978) para 26 and 27 and Joined cases 117/76 and 16/77, Ruckdeschel et al. v Hauptzollamt Hamburg-St Annen (ECJ 19 October 1977) para 7. 5 Case C-50/96, Deutsche Telekom AG and Lilli Schröder (ECJ 10 February 2000) para 56 and 57. 6 Bell (2011), p. 611. 2

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promoting equality between women and men became one of the principles of EC law. Following this, there was considerable development in equality legislation, not least in the ECJ’s case law in which the Court increasingly seems to emphasise human-rights-based reasoning in its judgments. The EU is based on certain fundamental values that have evolved in both EU legislation and the ECJ’s jurisprudence.7 These values have parallels in European and international human rights conventions and constitutions of the MS and are the basis for EU general principles.8 Under Article 2 TEU, these values are: Respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights. Article 2 TEU also states: “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.” Article 2 TEU is identical to Article I-2 of the failed European Constitution of 2004. These values are reflected in the Union’s legislation, whether involving primary or secondary legislation. The TFEU, TEU and EUCFR have provisions intended to institutionalise these values in various ways and create a basis for further legislation within the Union that is intended to ensure EU citizens legal rights based on the Union’s values.9 In accordance with this, equality between women and men is one of the declared fundamental values of the MS of the EU and the Union per se. The Treaty of Rome had no provisions on fundamental human rights. Nevertheless, ideas developed that fundamental human rights were part of the Community law.10 There are various reasons for this. One reason is that general development in many MS has proceeded in the same direction. In addition, the ECtHR judgments have tended to move in the same direction. This development in the EU was at first primarily in the jurisprudence of the ECJ, where the Court, for example, referred to “the fundamental human rights enshrined in the general principles of Community Law and protected by the Court”, in the Stauder case in 1969.11 A year later, the Court took another step, stating that “respect for fundamental rights forms an integral part of the general principles of law protected by the Court of Justice. The protection of such rights, whilst inspired by the constitutional traditions common to the Member States, must be ensured within the framework of the structure and objectives of the Community.”12 The appearance of the EUCFR formally protected fundamental human rights within the Union, and Article 6.1 TEU recognised the rights, freedoms and principles set out in the EUCFR, and the Charter was given the same legal value as the Treaties.

On values and principles, see ➔ Article 2 TEU para 2–10. Tridimas (2006), pp. 14–17; Lourenco (2013), pp. 302–308. 9 Koukoulis-Spiliotopoulos (2008), pp. 15–24; Ellis (2010), pp. 7–13. 10 Walkila (2016), pp. 62–69. 11 Case 29/69, E. Stauder v City of Ulm (ECJ 12 November 1969) para 7. 12 Case 11/70, Internationale Handelsgesellschaft (ECJ 17 December 1970) para 4. 7 8

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Provisions Having General Application

The principle of equality is in the constitutions of most of the states of Europe. However, the provisions vary greatly. They range from being general declarations on equal rights before the law to being more detailed provisions on equal rights and non-discrimination, based on various variables, including gender.13 The constitutions of various MS have special provisions on equality between women and men or on equal rights and non-discrimination, based on sex or gender.14 The constitutions of the MS having no direct reference to gender equality leave little doubt that general provisions on equal rights and non-discrimination cover equal rights based on gender. Although it is clear that the EU MS build on the main rules of citizens’ equal rights, they construe and apply concepts like “equality” and “nondiscrimination” differently.15 In his article “The constitutionalisation of the principle of gender equality” Mark Bell discusses gender equality as a general principle and points out that the importance of a provision like Article 8 TFEU lies in its capacity to legitimise the relevance of gender throughout all policy frames. Indeed, he adds, there is a constitutional duty on the Union to ensure that all policies are mobilised to promote gender equality. Having a strong legal obligation for gender mainstreaming may assist in countering resistance from other policy-makers, as well as defending mainstreaming from subsequent shifts in political commitment.16

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Title II

Scope of Application

Article 8 TFEU does not provide an all-embracing legal basis for the adoption of legislation in the field of gender equality. The provision is the main rule and a declaration that gender equality is an important objective in the EU, which is then further elaborated in other provisions of TFEU, i.e. Article 19 TFEU and Article 157 TFEU. Both of these provisions authorise the adoption of legislation on gender equality and non-discrimination in specific fields. In defining the scope of application of Article 8 TFEU, there are primarily two concepts in the provision requiring definition; on one hand, what do the following words entail: “In all its activities the Union shall. . .” and, on the other, “equality between men and women”.

3.1. In All Its Activities

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In general, reference is made to Article 8 TFEU as ex-Article 3.2 TEC. However, it is important to keep in mind that the provisions are structured differently, and it is

13

McCrudden and Prechal (2009), p. 3 and 19–20. Burri and van Eijken (2015), pp. 1–42. 15 McCrudden and Prechal (2009), p. 1. 16 Bell (2005), p. 10. 14

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not given that their meaning is completely the same. Article 3.2 TEC stated: “In all the activities referred to in this Article, the Community shall aim to eliminate inequalities, and to promote equality, between men and women.” Article 3.1 TEC stated: “For the purposes set out in Article 2, the activities of the Community shall include, [. . .] as provided in this Treaty and in accordance with the timetable set out therein:” (then, the activities were listed in 21 sub-paragraphs (a-u)). With the enactment of the TFEU, the wording changed. It now says: “In all its activities”, i.e. the reference to the activities set out in Article 3.1 TEC was dropped. The provision therefore seems more open now than before although it cannot be inferred that the change entails a substantive difference in the provision’s scope. The provision emphasises that its gist pertains to “In all its activities”. At first glance, one might therefore suppose that Article 8 TFEU covered only the activities of the EU alone and not the activities of the MS. On the other hand, such is not the case. It is clear that ECJ has confirmed in a number of cases that the main rule on equal rights of women and men covers both the Union and the MS.17 It was also immediately clear in the Defrenne II-case that Treaty provisions on gender equality could have a horizontal direct effect. The court stated that “the prohibition of discrimination between men and women applies not only to the action of public authorities, but also extends to all agreements which are intended to regulate paid labour collectively, as contracts between individuals.”18 In defining the scope of the provision, one can consider, by comparison, the scope of the general gender equality provision in Article 23 EUCFR, where it states that equality between women and men must be ensured in all areas. At first glance, the provision therefore appears to be very broad. However, Article 51.1 EUCFR narrows the provision’s scope since this article states that the provisions of the Charter are addressed to the institutions, bodies, offices and agencies of the Union with due regard for the principle of subsidiarity and to the MS only when they are implementing Union law.

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3.2. Between Men and Women

In drafting the Treaty of Rome, the widely accepted view was that the concept of sex had a delimited and definite content. There were two sexes, woman and man. This was assumed a biological fact that was obvious because of the sexes’ different physical characteristics. The knowledge of sex, gender and gender identity has advanced rapidly since 1957, and people’s ideas today about gender and its effect

17

Case C-401/11, Blanka Soukupová v Czech Ministry of Agriculture (ECJ 11 April 2013) para 28. Case C-43/75, Gabrielle Defrenne v Sociéte Anonyme Belge de Navigation Aérienne (ECJ 8 April 1976) para 39.

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are more diverse. It therefore raises some eyebrows that Article 8 still speaks of equality between men and women and not of equal rights based on gender or sex. For these reasons, the Court’s construction is tested more than it otherwise would be. According to the ECJ case law, the scope of the principle of equal treatment for men and women cannot be limited to prohibition of discrimination, because a person is of one sex or the other.19 The Court’s position is reflected in the preamble of Directive 2006/54/EC where recital (3) says that in view of its purpose and the nature of the rights, which it seeks to safeguard, it also applies to discrimination arising from the gender reassignment of a person. In determining whether discrimination, based on a person’s gender reassignment is involved, ECJ, for example, has looked to the European Court of Human Rights’ construction.20 The P v S and Conwall judgment raised questions about how far protection against gender discrimination went and whether the judgment also covered discrimination based on sexual orientation. In Grant v South-West Trains,21 the Court held that such was not the case. It seems that it is still somewhat unsettled what “between men and women” in Article 8 TFEU precisely means when considering ECJ’s judgments, but clarification of the gist may be expected over the next several years, especially regarding gender identity and gender expression.22 It should be said that Article 8 TFEU is a gender neutral provision, i.e. it cannot be inferred from the provision that in reality women are discriminated against. The same can be said about most of the EU’s legislation involving gender equality.

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Title II

Eliminating Inequalities and Promoting Equality

Under the wording of Article 8 TFEU, the duty of action rests on the Union to aim to eliminate inequalities, and promote equality. It follows from the provision’s text that equality between men and women does not prevail in the Union, and that measures shall be taken to remedy this. The undertaking when construing the provision in this regard is therefore to explain what is entailed in the concepts’ aim to eliminate inequalities and to promote equality and which methods the EU has used in particular to achieve this goal. These two concepts can be said to be two sides of the same coin; equality will not be promoted unless inequalities are eliminated and vice versa. These two goals can entail different courses, where enactment of law and political measures can play different roles. Nevertheless, it seems right to discuss here collectively the most 19 Case C-13/94, P v S and Cornwall (ECJ 30 April 1996) para 20; C-423/04, Richards v Secretary of State for Work and Pensions (ECJ 27 April 2006) para 38. 20 Case C-117/01, KB v NHS Trust Pensions Agency (ECJ 7 January 2004) para 33–36. 21 Case C-249/96 Grant v South-West Trains (ECJ 17 February 1998) para 26–28. 22 On discrimination related to gender identity and sexual orientation in EU Law, see Bell (2012), pp. 127–146.

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important remedies to which the EU has resorted in promoting equality and eliminating inequalities. The discussion falls into three parts. The first part is on the EU’s legislative activities in general. The activities aim at ensuring equal treatment of women and men in specific fields of society. The second part discusses gender mainstreaming policies, and the third part positive actions of various kinds.

4.1. Legislative Activities

Legislation as an instrument to equalise the rights of particular groups falls roughly into two categories. On one hand, some legislation primarily aims at prohibiting discrimination based on specific variables, like gender, race and disability, either in general or specific areas of society. Examples of such provisions in TFEU are Article 19 (ex-Article 13 TEC) and Article 18 (ex-Article 12 TEC) that authorise further enactment of law prohibiting discrimination in specific areas of society, and the legislation that has been enacted, based on these articles.23 Such non-discrimination legislation aims primarily at preventing injustice and ensuring for the group that the legislation covers the justice entailed in banning discrimination and remedies to seek one’s rights. Its main goal is therefore to eliminate inequalities. Up to now, such remedies have primarily been an individual litigation model of legal enforcement, where individuals can seek their rights if they think they have been violated. However, there are fewer legal remedies addressing the root of the problem. Although such legal remedies are important and necessary, the disadvantage of such a model is that it primarily addresses individual grievances. However, they do not offer much when it comes to achieving fundamental structural changes, as Christopher McCrudden has pointed out.24 On the other hand, there is legislation aiming at improving the legal status of specific groups (in this case women/men) by imposing positive duties on the MS to ensure their equal rights in respect of men/women in specific fields. Example of such legislation in the TFEU is Article 157 (ex-Article 141 TEC) that imposes the duty on the MS to ensure equal rights to equal pay and grants authority to enact laws in the EU on equal pay, equal opportunities and equal treatment of men and women and as well the legislation that has been enacted based on the article.25 23

Council Directive 2004/113/EC implementing the principle of equal treatment between men and women in the access to and supply of goods and services, O.J. L 373/37 (2004); Council Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation, O.J. L 303/16 (2000); Council Directive 2000/43/EC implementing the principle of equal treatment between persons irrespective of racial or ethnic origin, O.J. L 180/22 (2000). Directive 2000/ 78/EC and Directive 2000/43/EC are all set by the authority of ex- Article 13 TEC (now Article 19 TFEU). 24 McCrudden (2011), p. 3. 25 Parliament/Council Directive 2006/54/EC on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation (recast), O.J. L 204/23 (2006); Parliament/Council Directive 2010/41/EU on the application of the principle of equal treatment between men and women engaged in an activity in a self-employed

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There is not always a clear line between enacting a law, on one hand, prohibiting discrimination, based on gender, and, on the other, ensuring equal rights between women and men. Thus, provisions can be found on positive actions in Directive 2006/ 54/EC and Directive 2004/113/EC, and both Directives have provisions on defending rights and ensuring judicial and/or administrative procedures for the enforcement of obligations under the Directives.26 The main difference lies in provisions on the purpose of the Directives, where the emphasis, on one hand, is combating discrimination based on sex27 and, on the other, ensuring the implementation of the principle of equal opportunities and equal treatment of men and women.28 As mentioned above, provisions on equal rights between women and men are in the primary legislation of the European Union and its predecessor since the approval of the equal pay provision of 1957. Provisions on gender equality are currently found in various parts of the EU’s legislation, in the TEU, TFEU, CFR as well as in secondary legislation.29 The main rule on equal rights of women and men has developed continuously in EU law, on one hand, through enactment of legislation but not less in the jurisprudence of the ECJ. Secondary legislation on equality between women and men, however, has primarily applied to equal rights connected with rights in the labour market and, to some degree, rights regarding social security. It also applies to access to goods and services.

4.2. Gender Mainstreaming

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The concept of gender mainstreaming entered the EC’s parlance in the 1990s. It appeared then as a relatively small but innovative element in the Third Action

capacity, O.J. L 180/1 (2010). Directive 2006/54/EC and Directive 2010/41/EU are set by the authority of ex-Article 141(3) TEC (now Article 157 TFEU). 26 Article 8 in Directive 2004/113/EC and Article 17 in Directive 2006/54/EC. 27 Article 1 in Directive 2004/113/EC. 28 Article 1 in Directive 2006/54/EC. 29 Provisions on gender equality are: Articles 2 and 3 TEU; Articles 8, 10, 19 and 157 TFEU; Articles 21 and 23 EUCFR. EU Directives on equal treatment of men and women: Parliament/ Council Directive 2006/54/EC on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation (recast), O.J. L 204/ 23 (2006); Council Directive 2010/18/EU implementing the revised Framework Agreement on parental leave concluded by BUSINESSEUROPE, UEAPME, CEEP and ETUC, O.J. L 68 (2010); Council Directive 92/85/EEC on the introduction of measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding O.J. L 348 (1992); Council Directive 79/7/EEC on the progressive implementation of the principle of equal treatment for men and women in matters of social security, O.J. L 6/24 (1979); Parliament/Council Directive 2010/41/EU on the application of the principle of equal treatment between men and women engaged in an activity in a self-employed capacity, O.J. L 180/ 1 (2010); Council Directive 2004/113/EC implementing the principle of equal treatment between men and women in the access to and supply of goods and services, O.J. L 373/37 (2004).

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Programme on Equal Opportunities, but the concept remained unrealised during the Third Programme itself (1991–1996).30 In 1996, it may be said that the concept was first recognised as one of the most important remedies for promoting equality between women and men in the EU when the Commission issued the Communication “Incorporating Equal Opportunities for Women and Men into all Community Policies and Activities.”31 Since 1996, the gender mainstreaming approach has been part of the EU’s gender policy, an approach that has increasingly spread into other areas of non-discrimination. In March 2010, in connection with the 15th anniversary of the declaration and platform for action adopted at the Beijing UN World Conference on Women and the 30th anniversary of the UN Convention on the Elimination of All Forms of Discrimination against Women, the Commission adopted the Women’s Charter,32 in which the Commission strengthened its commitment to gender equality and to strengthening the gender perspective in all its policies. In September 2010, the Commission adopted the 2010–2015 strategy for equality between women and men, and in December 2010, the Council adopted conclusions supporting its implementation.33 This strategy should form a framework for the coordination of action in all areas of the EU’s activities, specific policies and actions, including positive action, when appropriate. In the strategy, the EU identified five priority areas: equal economic independence; equal pay for equal work and work of equal value; equality in decision-making; dignity, integrity and an end to gender-based violence and gender equality in external action policy. In December 2015, the Commission approved Strategic Engagement for Gender Equality 2016–2019, in which the same five key areas for action were prioritised.34 All of these resolutions emphasise gender mainstreaming as an instrument to achieve set goals. It is important to keep in mind that gender mainstreaming is not a goal or an end in itself, but a means to a goal or an end, which is equality between women and men. Directive 2006/54/EC (recast) has a special provision, entitled gender mainstreaming in Article 29. It states that the MS shall actively consider the objective of equality between men and women when formulating and implementing laws, regulations, administrative provisions, policies and activities in the areas referred to in the Directive. There is no single universal definition of the concept of gender mainstreaming but what the concept entails varies somewhat. Neither does everyone agree that gender mainstreaming is the important instrument of improving women’s rights it is 30 Commission, Equal Opportunities for Women and Men – The Third Medium-term Community Action Programme 1991-1995, COM 90/449 final. 31 Commission Communication, Incorporating Equal Opportunities for Women and Men into all Community Policies and Activities, COM(1996) 67 final. 32 Commission Communication, A Strengthened Commitment to Equality between Women and Men. A Women’s Charter. COM(2010) 78. 33 Commission Communication, Strategy for equality between women and men 2010-2015, COM (2010) 491 final. See also: SEC(2010) 1079, SEC(2010) 1080. 34 Commission, Strategic Engagement for Gender Equality 2016-2019, SWD (2015) 278 final.

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trumped up to be.35 One of the best-known definitions of the concept is from the UN Economic and Social Council. It defines the concept as follows: “Mainstreaming a gender perspective is the process of assessing the implications for women and men of any planned action, including legislation, policies or programmes, in any area and at all levels. It is a strategy for making the concerns and experiences of women as well as of men an integral part of the design, implementation, monitoring and evaluation of policies and programmes in all political, economic and societal spheres, so that women and men benefit equally, and inequality is not perpetuated. The ultimate goal of mainstreaming is to achieve gender equality.”36 Finally, it can be mentioned that Gender Mainstreaming does not replace positive actions for women but follows what is called a dual-track strategy, i.e. on one hand, gender mainstreaming policy and, on the other, special measures to improve women’s status and redress the discrimination women have endured.37

4.3. Positive Action

32

33

In recent decades, ideas about positive actions as an instrument to promote gender equality have been much discussed and debated since ideas differ on the meaning of the concept. There is no single correct definition of the positive actions concept, and the context may partially determine what is meant each time. In addition, understanding of the concept appears to differ amongst the MS.38 The first authorisation in EU gender-equality legislation for positive action was Article 2.4 of the 76/207 Equal Treatment Directive, which later merged into Directive 2006/54/EC (recast directive) and is now in Article 3 in that Directive.39 There is similar authority in Article 6 in the goods and services Directive 2004/113/ EC.40 There is a provision on positive action in the field of gender equality in both the TFEU and EUCFR. The TFEU authorises positive actions to equalise the status of the sexes on the labour market in Article 157.4 (ex-Article 141.4 TEC). Article 23.2 EUCFR, on equality between women and men, has a provision on positive action as well. 35

Kouvo (2008), pp. 41–42. Report of the UN Economic and Social Council for 1997. General Assembly, Fifty-second Session, Supplement No. 3 (A/52/3/Rev. 1). 37 Waddington (2003), p. 11. 38 See Selanec and Senden (2012), pp. 1–34; Waddington and Bell (2011), pp. 1503–1504. 39 Article 3 of Directive 2006/54/EC (Positive action): Member States may maintain or adopt measures within the meaning of Article 141(4) of the Treaty with a view to ensuring full equality in practice between men and women in working life. 40 Article 6 of Directive 2004/113/EC (Positive action): With a view to ensuring full equality in practice between men and women, the principle of equal treatment shall not prevent any Member State from maintaining or adopting specific measures to prevent or compensate for disadvantages linked to sex. 36

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As seen in these provisions, no duty of the MS to employ positive actions is involved but rather an authorisation. In light of how slow equalising the status of the sexes has gone, the discussion of a duty to employ positive actions has increased in recent years. Several states in Europe, both within the EU and outside it, with Norway in the lead,41 have adopted provisions in recent years in their legislation on gender quotas, which is one kind of special measures/positive actions.42 Such legislation has especially focused on improving the gender balance amongst nonexecutive directors of companies and related measures.43 In the 1990s, the ECJ handed down the first judgments on positive actions.44 The conclusion in those cases, especially in the Kalanke-case, drew considerable criticism, for the Court, in that case, substantially limited the MS’ possibilities to employ positive actions. Since then, there has been some development in the ECJ’s case law regarding positive actions, where conditions for applying such measures have been defined in more detail.45 In November 2012, the Commission adopted a proposal for a Directive improving the gender balance among non-executive directors of companies listed on stock exchanges and related measures.46 The proposal for a Directive was accompanied by a Communication on “Gender balance in business leadership: a contribution to smart, sustainable and inclusive growth”, which complements the proposed legislative measure with policy measures to address the root causes of gender imbalance, to overcome gender stereotypes and to improve work conditions promoting women’s advancement in management.47

5.

34

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Conclusions

Ever since the Defrenne (II) case, we have seen an ongoing evolution of the approach to equality between women and men from a limited social and mostly economic issue to a broader approach to justice. Thus, the concept of equal rights has both expanded and deepened in the development of the EU’s legislation as well as the ECJ’s judgments. After the unfortunate attempt to establish a 41

Examples of countries having statutory gender quotas are France, Iceland, Italy and Norway. See Gender Diversity on European Boards. A study published by European Women on Boards in partnership with ISS (Institutional Shareholder Services Inc.), April 2016. 43 Proposal for a Parliament/Council Directive on improving the gender balance among nonexecutive directors of companies listed on stock exchanges and related measures, COM(2012) 614 final. 44 Case C-450/93, Eckhard Kalanke v Freie Hansestadt Bremen (ECJ 17 October 1995); C-409/95, Hellmut Marschall v Land Nordrhein-Westfalen (ECJ 11 November 1997). 45 Case C-407/98, Katarina Abrahamsson and Leif Anderson v Elisabet Fogelqvist (6 July 2000) ; C-158/97, Georg Badeck and Others v Hessischer Ministerpräsident and Landesanwalt beim Staatsgerichtshof des Landes Hessen (28 March 2000). 46 COM(2012) 614 final. 47 COM(2012) 615 final. 42

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constitution for the EU, it was decided that the Lisbon Treaty should have a nonconstitutional character. Despite this, EU law builds on general principles, fundamental rights and common values, of which equality of the sexes is indisputably a part. There is still a long way to go regarding substantive equal rights for women and men in Europe, and Member States still appear to be reluctant to take active measures to ensure equal rights. It nevertheless seems clear that, with Article 8 TFEU and other provisions of TFEU, TEU and EUCFR, along with the ECJ’s case law, the importance of gender equality as a general principle based on a human rights rationale has grown ever stronger in the European Union.

List of Cases ECJ 12.11.1969, 29/69, E. Stauder v City of Ulm, ECLI:EU:C:1969:57 [cit. in para 9] ECJ 17.12.1970, 11/70, Internationale Handelsgesellschaft v Einfuhr- und Vorratsstelle Getreide und Futtermittel [cit in para 9] ECJ 08.04.1976, 43/75, Gabrielle Defrenne v Sociéte Anonyme Belge de Navigation Aérienne [cit. in para 5 and 16] ECJ 19.10.1977, 117/76, 16/77 Ruckdeschel & Co and Hansa-Lagerhaus Ströh & Co v Hauptzollamt Hamburg-St Annen; Diamalt AG v Hauptzollamt Itzehoe [cit. in para 6] ECJ 15.06.1978, 149/77, Gabrielle Defrenne v Société Anonyme Belge de Navigation Aérienne Sabena [cit. in para 6] ECJ 17.10.1995, C-450/93, Eckhard Kalanke v Freie Hansestadt Bremen [cit. in para 35] ECJ 30.04.1996, C-13/94, P v S and Cornwall [cit. in para 19] ECJ 11.11.1997, C-409/95, Hellmut Marschall v Land Nordhein-Westfalen, [cit. in para 35] ECJ 17.02.1998, C-249/96, Grant v South-West Trains [cit. in para 19] ECJ 10.02.2000, C-50/96, Deutsche Telekom AG and Lilli Schröder [cit. in para 6] ECJ 28.03.2000, C-158/97, Georg Badeck and Others v Hessischer Ministerpräsident and Landesanwalt beim Staatsgerichtshof des Landes Hessen [cit. in para 35] ECJ 06.07.2000, C-407/98, Katarina Abrahamsson and Leif Anderson v Elisabet Fogelqvist [cit. in para 35] ECJ 07.01.2004, C-117/01, KB v NHS Trust Pensions Agency [cit. in para 19] ECJ 27.04.2006, C-423/04, Richards v Secretary of State for Work and Pensions [cit. in para 19] ECJ 11.04.2013, C-401/11, Blanka Soukupová v Czech Ministry of Agriculture [cit. in para 15]

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References Barnard, C. (1996). The economic objectives of Article 119. In T. Hervey & D. O’Keeffe (Eds.), Sex equality law in the European Union (pp. 101–141). Wiley. Bell, M. (2005). The Constitutionalization of the Principle of Gender Equality. Paper presented at The European Consortium for Political Research (ECPR) workshop “The Future of Gender Equality in the European Union” at the University of Granada 14–19 April 2005. Bell, M. (2011). The principle of equal treatment: Widening and deepening. In P. Craig & G. de Búrca (Eds.), The evolution of EU law (pp. 611–639). Oxford: OUP. Bell, M. (2012). Gender identity and sexual orientation: Alternative pathways in EU equality law. The American Journal of Comparative Law, 127, 127–146. Burri, S., & van Eijken, H. (2015). Gender Equality in 33 European Countries: How are EU-rules transposed into national law 2014? European Network of Legal Experts in the Field of Gender Equality (pp. 1–42). European Commission. Ellis, E. (2010). The impact of the Lisbon treaty on gender equality. European Gender Equality Law Review, 1, 7–13. European Women on Boards in partnership with ISS (Institutional Shareholder Services Inc.) (2016). Gender Diversity on European Boards. Koukoulis-Spiliotopoulos, S. (2008). The Lisbon treaty and the charter of fundamental rights: maintaining and developing the axquis in gender equality. European Gender Equality Law Review, 1, 15–24. Kouvo, S. (2008). A “quick and dirty” approach to women’s emancipation and human rights? Feminist Legal Studies, 16(1), 37–46. Lourenco, L. (2013). General principles of European Union law and the charter of fundamental rights. European Law Reporter, 11–12, 203–308. McCrudden, C. (2011). Thinking the unthinkable? European Gender Equality Law Review, 1, 3–6. McCrudden, C., & Prechal, S. (2009). The concepts of equality and non-discrimination in Europe: A practical approach. European Network of Legal Experts in the Field of Gender Equality. European Commission. More, G. (1999). The principle of equal treatment: From market unifier to fundamental right? In P. Craig & G. de Búrca (Eds.), The evolution of EU law (pp. 517–543). Oxford: OUP. Selanec, G., & Senden, L. (2012). Positive action measures to ensure full equality in practice between men and women, including on company boards. European Network of Legal Experts in the Field of Gender Equality. European Commission, 1–34. Tridimas, T. (2006). The general principles of EU law (2nd ed.). Oxford: OUP. Waddington, L. (2003). The expanding role of the equality principle in European Union law. European University Institute Policy Papers, 2003/04. 15–19. Waddington, L., & Bell, M. (2011). Exploring the boundaries of positive action under EU law: A search for conceptual clarity. Common Market Law Review, 48(5), 1503–1526. Walkila, S. (2016). Horizontal effect of fundamental rights in EU law. European Law Publishing.

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Article 9 [Social Aims] In defining and implementing1 its policies and activities, the Union shall take into account3-5 requirements2 linked to the promotion of a high level of employment,7 the guarantee of adequate social protection,8 the fight of social exclusion,9 and a high level of education,10 training10 and protection of human health.11

Contents 1. 2. 3.

Systematic Context and Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Scope of Normativity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 The Policy Goals to be Taken Into Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.1. Promotion of a High Level of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.2. Guarantee of Adequate Social Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3. Fight Against Social Exclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.4. High Level of Education and Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.5. High Level of Protection of Human Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4. Strengthening “Social Market Economy”? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 List of Cases References

1.

Systematic Context and Function

Article 9 TFEU serves as “a ‘cross-cutting’ social protection clause”,1 i.e., as a provision that conveys orientation for all areas of EU policy. It takes up objectives that have already been addressed in the TEU and in the EUCFR or are later concretized in the TFEU itself. Like the other horizontal clauses of Title I, it forms part of the coherence strategy of the EU laid down as a general principle in Article 7 TFEU and evoked in several other provisions of the treaties, such as Article 11.3, Article 13.1 and Article 21.3 (2) TEU. The broad formulation of the policy goals diminishes from the outset the possibility to derive duties to act from this provision alone. It is in conjunction with the more concrete policy regulations of the TFEU that the objectives gain in binding force and develop their coherence promoting effect

1 Opinion of the Advocate General Cruz Villalón, delivered on 5 May 2010, Case C-515/08, para 51; for the character of Article 9 as an horizontal clause see also Müller (2014), p. 155, 168 ff.; Kotzur, in Geiger et al. (2015), Article 9 TFEU para 1 et seq.; Rossi and Krebber, in Calliess and Ruffert (2016), Article 9 TFEU para 1; Kocher, in Pechstein et al. (2017), Article 9 TFEU para 1.

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Scope of Normativity

The normativity of Article 9 TFEU must be measured in conjunction with the other provisions in the Treaties that address the same or similar objectives, in particular with the fundamental provision of Article 3.3 TEU2 and the more specific provisions on policy objectives, such as Articles 151, 165 and 168 TFEU. Article 9 TFEU underlines the obligation to “streamline”3 these objectives into all policy areas covered by EU competences. The term “implementation”, used in Article 9 TFEU, not only refers to legislation and plans and their execution, but also obliges to interpret the whole Union law in conformity with these objectives and to exercise discretionary powers accordingly. The term “requirements” relates to factual and legal preconditions for the realization of the enumerated policy goals. As far as the addressees of the protective and promotional obligations arising from Article 9 TFEU are concerned, the principles developed under Article 3 TEU (➔ Article 3 TEU para 6 et seq.) equally apply to Article 9 TFEU: The obligations are primarily binding upon the EU institutions. However, they also create, at least indirectly, obligations for the MS,4 when they act within the framework of the EU, especially when implementing Union law, or if their action could have effects upon the functioning of the EU. This follows from Article 4.3 (3) TEU, which stipulates that they “shall facilitate the achievement of the Union’s tasks and refrain from any measures which could jeopardise the attainment of the Union’s objectives.” It implicitly includes that the national courts must interpret the Union law in the light of the objectives laid down in Article 9 TEU. This interpretative rule also applies to the national administrative authorities that moreover have to consider it mutatis mutandis when they exercise discretionary powers. In this respect, they are under the same obligation as the institutions of the Union. The broad formulation of the policy goals contained in Article 9 TFEU, and even more the reference to the “requirements” linked to them, diminishes from the outset the possibility to derive concrete duties to act from this provision alone. It is in conjunction with the more concrete policy regulations of the TFEU that the objectives gain in binding force and develop their coherence promoting effect. It goes without saying that the EU institutions, in particular the legislative organs, enjoy a margin of appreciation when concretising and weighing the objectives and their prerequisites and again when determining the measures to be taken. Ultimately, the non-consideration or improper consideration of the protective and

2 Cf. the connection established between Article 3 (3) TEU and Article 9 TFEU by the General Court in its judgment of 24 October 2019, T–310/18, European Federation of Public Service Unions (EPSU) et al., para 99. 3 Schiek et al. (2015), p. 16; cf. also Kocher, in Pechstein et al., Article 9 TFEU para. 14 (“Mainstreaminggebot”). 4 Obligation of the MS are denied by Kocher, in Pechstein et al. (2017), Article 9 TFEU para 13; Kotzur, in Geiger et al. (2015), Article 9 TFEU para 8.

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promotional obligations resulting from Article 9 TFEU can give rise to review by the ECJ (➔ Article 3 TEU para 6 et seq.).5 In its jurisprudence, the ECJ referred to Article 9 TFEU when discussing the existence of “overriding reasons relating to the public interest.”6 Just as has been stated about the objectives enshrined in Article 3 TEU (➔ Article 3 TEU para 12 et seq.), the protective and promotional obligations contained in Article 9 TFEU do not imply the competences necessary for their implementation.7 They may only be pursued to the extent and in the forms and procedures provided for in the specific Treaty rules related to the competences of the Union and of its institutions. In this frame, however, they belong to the norms that can justify restrictions of fundamental rights (➔ infra, para 11).

3.

5

The Policy Goals to be Taken Into Account

Not all policy goals enumerated in Article 9 TFEU are previously laid down in Article 3 TEU. Some are mentioned here for the first time. Most policy goals are further developed in Title X (“Social Policy”), Title XII (“Education, Vocational Training, Youth and Sport”), and Title XIV (“Public Health”) of Part Three (Articles 151–161; 165–166 and 168 TFEU).

6

3.1. Promotion of a High Level of Employment

The goal to promote a high level of employment takes up the objective of full employment put forward in Article 3.3 (1) TEU and is further specified in Title IX of Part Three TFEU, in particular in Article 147 TFEU.

7

3.2. Guarantee of Adequate Social Protection

Social protection as a broad concept cannot be found in Article 3 TEU; only specific aspects are addressed in Article 3.3 (2) TEU: combatting social exclusion and discrimination, promotion of social justice and protection, equality between women and men, solidarity between generations and protection of the rights of the children. In a more systematic way, Title IV EUCFR (especially Article 34) deals with social protection. It distinguishes “between social security for protecting against the risk of losing the capacity to earn one’s living, whether temporary or permanently, and social assistance as systems providing a basic level of combating

5

Cf. also Kotzur, in Geiger et al. (2015), Article 9 TFEU para 8. Case C-201/15, AGET Iraklis v Ypourgos Ergasias et al. (ECJ 16 December 2016) para 78. 7 Schorkopf, in Grabitz et al. (2019), Article 9 TFEU para 7. 6

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poverty.”8 Title X of Part Three TFEU provides for a number of institutional and procedural instruments that is to serve the improvement of the social conditions, mainly of the workers, and can be used for the promotion of social protection. The substantive competences of the EU, however, are very limited. Thus, to promote the cooperation among the MS in matters of social security and social protection, Article 153 and Article 156 TFEU limit themselves, in essence, to the support by consultation procedures. Any harmonization of social standards is explicitly excluded (Article 153.2 (1) point a TFEU).

3.3. Fight Against Social Exclusion

9

The fight against social exclusion takes up the guarantee in Article 34.3 EUCFR and an objective of Article 3.3 (2) TEU, which uses the formula “to combat social exclusion and discrimination”. Under Article 153.1 point (j) TFEU, the Union aims at supporting the MS in the “combatting of social exclusion”. The call for combatting social exclusion can also be understood as a specific manifestation of the principle of non-discrimination laid down in Article 10 TFEU,9 although the scope of Article 9 goes beyond the discriminatory grounds mentioned in this provision.

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The stipulation of a high level of education and training has two sides: On one hand, it aims at the implementation of the right to education enshrined in Article 14 EUCFR. On the other hand, it can be considered as part of the so-called Lisbon strategy “to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion”, as it had been formulated by the Presidency of the European Council in its conclusions at the end of the special meeting on 23/24 March 2000 in Lisbon. Here again, the competences of the EU are quite limited. The relevant articles in Title XII of Part Three (Articles 165 and 166 TFEU) provide for instruments to support and to promote the cooperation among the MS and to this end, set out a number of concrete goals.

3.5. High Level of Protection of Human Health

11

The goal to reach a high level of protection of human health corresponds to everyone’s right of access to preventive health care, which is laid down in Article 8 9

Schiek et al. (2015), p. 46. Eichenhofer, in Streinz (2018), Article 9 TFEU para 1.

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35 EUCFR. Title XII of Part Three (Article 168 TFEU) attributes a complementary function to the EU in relation to national policies. The ECJ has emphasized that “the protection of public health constitutes, as follows also from Article 9 TFEU, an objective of general interest justifying, where appropriate, a restriction of a fundamental freedom” (in this case: limits to the advertising of alcoholic beverages to combat alcohol abuse).10

4.

Strengthening “Social Market Economy”?

It has been said that Article 9 TFEU reflects essential principles of the concept of a “social market economy”, as it is explicitly mentioned in Article 3.3 (1) TEU.11 For sure, it cannot be denied that the objective of a high level of employment, of an educational system that creates equal opportunities and equally an adequate social protection matches important elements of a social market economy. However, the main purpose of Article 9 TFEU is to underline the social dimension of the EU. Therefore, the central element of the social market economy, a real and effective competitive economy, in which the State guarantees “fair play” and thus enables as many subjects as possible to participate in the competition (➔ Article 3 TEU para 34 et seq.), is only indirectly touched upon. Overall, it is not certain if the EU remains near the original concept of a social market economy, which Alfred MüllerArmack defined as a model of regulatory policy “aiming at combining, on the basis of a competitive economy, the free initiative with social progress which particularly is ensured by the performance of market economy.”12

List of Cases Opinion of the Advocate General Cruz Villalón, delivered on 5 May 2010, Case C-515/08, Santos Palhota et al., ECLI:EU:C:2010:589 [cit. in para 1] ECJ 06.09.2012, C-544/10, Deutsches Weintor, ECLI:EU:C:2012:526 [cit. in para 11] ECJ 04.05.2014, C-477/14, Pillbox 38 (UK) Ltd, ECLI:EU:C:2016:324 [cit. in para 11] ECJ 21.10.2016, C-201/15, AGET Iraklis v Ypourgos Ergasias et al., ECLI:EU: C:2016:972 [cit. in para 4] GC 24.10.2019, T–310/18, European Federation of Public Service Unions et al., ECLI:EU:T:2019:757 [cit. in para 2] 10 Case C-544/10, Deutsches Weintor (ECJ 6 September 2012) para 49. Cf. also Case C-477/14, Pillbox 38 (UK) Ltd (ECJ 4 May 2016) para 116, concerning restrictive rules for the sale of electronic cigarettes and refill containers. 11 Cf. Kocher, in Pechstein et al. (2017), Article 9 TFEU para 1. 12 Müller-Armack (1956), p. 390.

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References Calliess, C., & Ruffert, M. (Eds.). (2016). EUV/AEUV. Kommentar (5th ed.). Munich: C.H. Beck. Geiger, R., Khan, D.-E., & Kotzur, M. (Eds.). (2015). European Union treaties. Munich: C.H. Beck. González Pascual, M. (2019). Los derechos sociales en la UME: ¿Son las constitucionales nacionales relevantes? In L. M. Hinojosa Martínez & P. J. Martín Rodríguez (Eds.), International markets regulation and the erosion of the European political and social model / La regulación internacional de los mercados y la erosión del modelo político y social europeo (pp. 357–373). Pamplona: Aranzadi. Grabitz, E., Hilf, M., & Nettesheim, M. (Eds.). (2019 et seqq.). Das Recht der Europäischen Union, EUV/AEUV (loose-leaf). Munich: C.H. Beck. Marín Aís, J. R. (2019). La condicionalidad social en la política comercial común. In L. M. Hinojosa Martínez & P. J. Martín Rodríguez (Eds.), International markets regulation and the erosion of the European political and social model / La regulación internacional de los mercados y la erosión del modelo político y social europeo (pp. 207–238). Pamplona: Aranzadi. Müller, T. (2014). Wettbewerb in der Unionsverfassung. Tübingen: Mohr Siebeck. Müller-Armack, A. (1956). Soziale Marktwirtschaft. In E. Becherath, H. Bente & C. Brinkmann (Eds.), Handwörterbuch der Sozialwissenschaften (Vol. 9, pp. 390–392). Stuttgart et al.: Vandenhoeck & Ruprecht. Pechstein, M., Nowak, C., & Häde, U. (2017). Frankfurter Kommentar zu EUV, GRC and AEUV (Vol. 1). Tübingen: Mohr Siebeck. Schiek, D., Oliver, L., Forde, C., Alberti, G., Doherty, M., Unterschuetz, J., et al. (2015). EU Social and Labour Rights and Internal Market Law. Study for the EMPL Committee. IP/A/ EMPL/ST/2014-02, PE 563.457. Streinz, R. (Ed.). (2018). EUV/AEUV - Kommentar (3rd ed.). Munich: C.H. Beck.

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Article 10 [Non-Discrimination] In defining and implementing its policies and activities,29-30 the Union shall aim to combat31-35 discrimination20-22 based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation.23-26

Contents 1. 2. 3.

The Background and Rationale for the Introduction of a Mainstreaming Provision . . . . . . . 1 Genealogy of Article 10 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 The Role, Legal Nature and Place of the Provision within the TFEU . . . . . . . . . . . . . . . . . . . . 12 3.1. The Role of Article 10 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.2. The Cross-Section Nature of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.3. The Place Within the Framework of Non-Discrimination Law . . . . . . . . . . . . . . . . . . . . 17 4. Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 4.1. Definition of Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 4.2. Grounds of Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4.3. Scope of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 5. The Obligation on the Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 5.1. The Addressees of the Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 5.2. The Intensity of the Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 5.3. No Promotion, No Worsening? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 5.4. Possibility of Judicial Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 List of Cases References

1.

The Background and Rationale for the Introduction of a Mainstreaming Provision

The EU’s commitment to the promotion of equality became one of the most significant features of its supranational legal order. Rooted in a few fragmental provisions at the initial stage of European integration, the principle of non-discrimination has seen unprecedented development. After being recognised as having fundamental status under primary law and in the case law of the Court of Justice, it has been escorted by the system of advanced legal instruments to ensure its effectiveness. The broad attention to the subject both at political and judicial levels has inspired the European legislator to constantly extend the scope of application ratione materiae and ratione personae of this principle.

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Springer Nature Switzerland AG 2021 H.-J. Blanke, S. Mangiameli (eds.), Treaty on the Functioning of the European Union – A Commentary, Springer Commentaries on International and European Law, https://doi.org/10.1007/978-3-030-43511-0_11

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Before the Treaty of Amsterdam, the non-discrimination law of the Community was focused on the elimination of discrimination on the grounds of nationality1 and gender.2 The areas covered by the primary and secondary legislation included free movement of persons3 and equality of men and women in employment/occupation.4 The dynamic interpretation of the principle by the CJEU5 together with comprehensive secondary law rules and policy measures have contributed significantly to the creation of the sophisticated legal framework to combat discrimination on the grounds of nationality and sex. An unseen evolution in terms of widening of the scope of application of equality law occurred with an introduction of Article 13 (today Article 19 TFEU) into the Treaty of Amsterdam. With the newly established competences to adopt legislation against discrimination on the grounds of racial or ethnic origin, religion or belief, disability, age or sexual orientation, the Union expanded its agenda for combating discrimination by multiplying the number of prohibited grounds. Article 19 TFEU provided a legal basis to adopt secondary legislation.6 Shortly after the entry into force of the Amsterdam Treaty we have witnessed the 1 Article 6 TEEC (now Article 18 TFEU) established the general prohibition of any discrimination on the grounds of nationality whilst Article 48 TEEC (now Article 45 TFEU) contained the nondiscrimination on the grounds of nationality clause for the purpose of free movement of workers. 2 Article 119 TEEC (now Article 157 TFEU) obliged the MS to ensure the implementation of the principle of equal pay for men and women. 3 Not only nationals of the MS have been covered by the principle of equal treatment in crossborder situations. The non-discrimination clauses could be found in Community’s various international agreements and treaties (See Wathelet 1996, p. 617 et seq.) and were investigated by Court in number of cases. See, for instance, Case C-171/01, Wählergruppe “Gemeinsam Zajedno/ Birlikte Alternative und Grüne GewerkschafterInnen/UG, and Bundesminister für Wirtschaft und Arbeit and Others (ECJ 8 May 2003) para 92. Years later the discrimination against third country nationals was addressed in the Directive 2003/109/EC regulating the status and (equal treatment) rights of third-country nationals, O.J. L 16/44 (2004). 4 Here we could list only few major Directives: Directive 76/207 on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions, O.J. L 39/40 (1976); Directive 79/7 on the progressive implementation of the principle of equal treatment for men and women in matters of social security, O.J. L 6/24 (1979); Directive 86/613 on the application of the principle of equal treatment between men and women engaged in an activity, including agriculture, in a selfemployed capacity, and on the protection of self-employed women during pregnancy and motherhood, O.J. L 359/56 (1986); Directive 92/85 of 19 October 1992 on the introduction of measures to encourage improvements in the safety and health at work of pregnant workers and workers who have recently given birth or are breastfeeding, O.J. L 348/1 (1992). 5 Only to mention the preliminary rulings of the Court in Case C-177/88, Elisabeth Johanna Pacifica Dekker v Stichting Vormingscentrum voor Jong Volwassenen (VJV-Centrum) Plus (ECJ 8 November 1990); Case 43/75, Gabrielle Defrenne v Société anonyme belge de navigation aérienne Sabena (ECJ 8 April 1976); Case 170/84 Bilka - Kaufhaus GmbH v Karin Weber von Hartz (ECJ 13 May 1986) and others. 6 For the adoption of legislation, the unanimity of the Council, voting on a proposal from the Commission and after consulting the EP, was required, as stated in Article 19 TFEU. The measures “outside harmonisation” may be adopted by the EP and the Council in accordance with the ordinary legislative procedure.

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birth to two Framework Directives—the Race Equality Directive7 and the Equality Framework (or Employment Equality) Directive.8 Both new Directives and the already well-known gender equality Directives (➔ para 2) intend to grant individuals the subjective equality rights to be enforced at the national level through complaints and/or litigation procedures. In such a rightsbased model, the courts and other judicial institutions play the pivotal role,9 whereas the equality bodies10 shall supervise the implementation of the law; while social partners may add value by addressing equality issues in their cooperation or collective bargaining agendas.11 The reversal of the burden of proof in discrimination cases shall facilitate the litigation and the claimants’ position when asserting the rights in judicial institutions.12 However, the problems related to unequal treatment cannot always be resolved through individual litigation. Slow and expensive procedures, a low level of trust in judicial system, problems of proof, low quality of court judgments, exposure and stigmatisation of the victim are among the most significant deficiencies of the rights-based model.13 Even modified systems with a stronger involvement of adjective bodies, conciliators, trade unions, or allowing class actions or initiation of proceedings without identified victim cannot contribute effectively to the changing of stereotypes and attitudes in general.14 In the light of those practical difficulties, the attention slowly has shifted to pro-active measures to promote or achieve full equality in practice and to trigger the development from formal to substantive equality. The new instrument of

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Council Directive 2000/43/EC implementing the principle of equal treatment between persons irrespective of racial or ethnic origin, O.J. L 180/22 (2000). 8 Council Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation, O.J. L 303/16 (2000). 9 See, for example, Article 9 of Directive 2000/78, which requires the MS to ensure the availability of administrative and/or judicial procedures to ensure the enforcement of obligations under the Directive. 10 Article 20 of Directive 2006/54 requires MS to designate and to grant the necessary competences for a body for the promotion, analysis, monitoring and support of equal treatment of all persons without discrimination on grounds of sex. See also Article 13 of Directive 2000/43. 11 See, for instance, Article 13 of Directive 2000/78, which intends to promote social dialogue with view to fostering equal treatment through the monitoring of workplace practices, collective agreements, codes of conduct and through research or exchange of experiences and good practices. 12 Article 8 of Directive 2000/43 introduces the rule that the burden of proof must shift back to the respondent when prima facie evidence of such discrimination is brought by the claimant. Analogous provisions in Article 10 of Directive 2000/78, Article 19 of Directive 2006/54. 13 Fredman (2010), p. 8. 14 Fredman (2010), p. 8 et seq.

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positive action (Article 157.4 TFEU)15 as a form of (positive) discrimination has quickly learned its formal limits in the case law of ECJ.16 The most significant commitment to promote equality outside the rights-based model17 became the policy of “mainstreaming”. S. Fredman outlines the main qualities of such a policy: (1) instead of consisting in reactions to ad hoc claims, the initiative lies with bodies (policy makers and implementers, service providers, employers and trade unions), who are in a position to bring about the change, whether or not they have actually caused the problem; (2) the structural causes of inequality can be diagnosed and addressed institutionally; (3) the change is systematic rather than random or ad hoc, ensuring that all those with a right to equality are covered; (4) there is no need to prove discrimination or find a named perpetrator. Instead, the duty to bring about change lies with those with the power and capacity to do so; (5) the participation of individuals is more active both in norm setting and in norm enforcing.18 6

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The Commission first has underlined the necessity to promote equality by integrating the principle of gender equality in all activities and policies at all levels. In 1996, the Commission described (gender)mainstreaming as: “a policy which involves not restricting efforts to promote equality to the implementation of specific measures to help (women), but mobilising all general policies and measures specifically for the purpose of achieving equality by actively and openly taking into account at the planning stage their possible effects on the respective situations of men and women (gender perspective). This means systematically examining measures and policies and taking into account such possible effects when defining and implementing them: thus, development policies, the organisation of work, choices relating to transport or the fixing of school hours, etc. may have significant differential impacts on the situation of women and men which must therefore be duly taken into consideration in order to further promote equality between women and men.”19 In the sequel, the Commission has started emphasising the importance of mainstreaming for the achievement of effective equality in strategic and action planning 15

Article 5 of Directive 2000/43 reads: “with a view to ensuring full equality in practice, the principle of equal treatment shall not prevent any Member State from maintaining or adopting specific measures to prevent or compensate for disadvantages linked to racial or ethnic origin.” See also analogous provisions in Article 7.1 of Directive 2000/78, Article 3 of Directive 2006/54 and Article 157.4 TFEU, Article 23.2 EUCFR. 16 De Vos (2007), p. 18 et seq. 17 Chalmers et al. (2014), p. 618. 18 Fredman (2010), p. 11. 19 Commission Communication, Incorporating equal opportunities for women and men into all community policies and activities, COM (96) 67 final, p. 2.

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documents, not only in the area of gender, but also in relation to other discrimination grounds.20 The aim was to ensure that non-discrimination and equality concerns are systematically incorporated into all stages of the policymaking, policy implementation and policy evaluation processes in all areas.21 For example, gender equality issues may be specifically addressed in active labour market policies, tax and benefits policies, in the areas of lifelong learning, entrepreneurship, working time, flexibility and work reorganisation, leave and care arrangements.22 The range of questions where special attention shall be paid to the needs of the disabled persons varies from the occupational requirements23 to access to publicly available telephone services24 or special travel arrangements,25 etc. Non-discrimination and equality mainstreaming are a challenging concept to implement. Since it requires a substantial change of work patterns and critical selfevaluation, the existing structures are not always ready to ensure that mainstreaming is implemented and has an impact. The structural deficit lays in the difficulty to define appropriate incentives, sanctions and mechanisms for accountability in order to measure and ensure the fulfilment of obligations.26 Declared political engagement can also be insufficient to provide a new and transformative perspective on equality policy when facing other political and economic priorities.27

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Genealogy of Article 10 TFEU

Article 10 TFEU had no predecessors and was introduced into primary law with the Treaty of Lisbon. This is a direct takeover of Article III-118 TCE. The reason of appearance of the provision in EU primary law is twofold.28 The first proposal to incorporate the explicit equality mainstreaming clause into the draft Constitutional Treaty came from European Convention Working Group No 11 on “Social Europe”, which was established at the later stage of the work of Convention. The final report of the Working Group29 reveals that a substantial number of

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Ellis and Watson (2012), p. 177 et seq. European Commission, Non-discrimination and equal opportunities: A renewed commitment, COM(2008) 420 final, p. 6 et seq. 22 See evidences by Rubery (2002), p. 511 et seq. 23 Article 5 of Directive 2000/78. 24 Article 6–7 of Parliament/Council Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services (Universal Service Directive), O.J. L 108/51 (2002). 25 Article 8 of Parliament/Council Directive 2009/45/EC on safety rules and standards for passenger ships (Recast), O.J. L 163/1 (2009). 26 Fredman (2010), p. 16. 27 MacRae (2010), p. 170 et seq. 28 See details provided by Schorkopf, in Grabitz et al. (2010), Article 10 AEUV para 3–5. 29 CONV 516/1/03 Rev 1, 4 February 2003, p. 20. 21

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members of the group proposed the introduction of a so-called horizontal clause on social values in the Constitutional Treaty.30 This issue was specifically dealt with during the additional plenary session on 5 March 2003 and there was a relative consensus in the Convention about the need for horizontal competences affecting all areas of policy (principle of mainstreaming).31 However, the Praesidium only partially supported this proposal. Therefore, Belgium representative Anne Van Lancker and a group of other members of the Working Group on “Social Europe” approached the Praesidium with the letter arguing that “the large consensus has not been sufficiently taken into account” in the draft Constitution, proposed to the Convention by the Praesidium. The missing reference to the horizontal clause on social values was among those points of criticism.32 The problem happened to coincide with the intensifying Convention’s debate on the Union’s fundamental objectives (Article I-3 TCE). The initial drafts of the Constitutional Treaty drawn up by the Praesidium33 contained no reference to the Union’s objective to combat discrimination. The proposals to develop the reference to non-discrimination, to reproduce and to extend cases of non-discrimination came from various members of the Convention as reactions to first drafts of the Constitutional Treaty.34 Lastly, in the plenary debates some speakers directly suggested including a reference to the promotion of non-discrimination, especially in the fields covered by former Article 13 TEU.35 The issue of non-discrimination was clearly not central to the debate on the objective of the Union,36 but the aim to reinforce the mandate of the Union for the purpose of combating discrimination merited a re-examination of the text prepared by the Praesidium. Finally, the Praesidium suggested that the three new horizontal provisions, including the one on the general aim to combat discrimination, should take their “prominent position” in Part Three of the Constitution.37 The Praesidium’s explanation38 that the concepts used to define the Union’s fundamental objectives in Part One (Article I-3) for the sake of legibility and consistency shall

30 The text of the proposal: “In all activities falling within its competence, the Union shall aim to eliminate inequalities as well as discrimination on the basis of racial or ethnic origin, religion or beliefs, disability, age or sexual orientation, to promote equality between men and women, to promote full employment and a high level of social protection, protection of human health, advancement of education and training, and to guarantee universal accessibility of services of general interest which are financially viable, of high quality and organised on the basis of solidarity by the individual Member States.” 31 CONV 624/03, 17 March 2003 (Convention, additional plenary session of 5 March 2003), p. 4. 32 CONV 780/03, 3 June 2003, p. 4. 33 CONV 369/02 (Praesidium, 28 October 2002), CONV 528/03 (Praesidium, 6 February 2003). 34 CONV 574/1/03 REV 1 (26 February 2003). 35 CONV 674/03, 8 April 2003 (Convention, additional plenary session of 26 March 2003), p. 8. 36 Schorkopf, in Grabitz et al. (2010), Article 10 AEUV para 3. 37 CONV 724/1/03 REV 1 (Praesidium, 28 May 2003), pp. 54–56 38 CONV 724/1/03 REV 1 (Praesidium, 28 May 2003), p. 56.

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correspond to more specific policies and objectives enshrined in Part Three of the Constitution) may seem not sufficiently persuasive to ignore the importance of anti-discrimination goals of the Union when defining objectives of the Union. Therefore, the final draft of the Constitutional Treaty39 (in its Article I-3) acknowledges the general aim of the Union to combat discrimination and to promote equality between men and women. The interplay of those primary law provisions perfects the general framework of the Union’s non-discrimination policy and accords to it a fundamental importance (➔ para 19). The newly drafted horizontal provision appeared as a new Article III-1a of the draft TCE40 and became Article III-118 of the Constitutional Treaty. With minor corrections and adaptations (➔ para 24), it has been transferred to the Treaty of Lisbon.

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The Role, Legal Nature and Place of the Provision within the TFEU

3.1. The Role of Article 10 TFEU

It is important to recognise the political significance of incorporating Article 10 into the TFEU. Article 10 TFEU just like other provisions of general application (Articles 7–9 TFEU) is an outcome of the longer strategy of the Union to present itself as an organisation having an ambitious social agenda based on values. If nondiscrimination on the grounds of nationality has a clear economic integration objective, the provisions on social justice, equality and non-discrimination are based on fundamental rights considerations.41 The aim of Article 10 TFEU is to transmit the objectives of the Union to the substantive part of the primary law. It requires the Union to adjust the policies, actions and the practices to achieve the goal—a society without discrimination (Article 2 TEU). The Union may use all its competences to achieve this aim in all areas covered by the TFEU.

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3.2. The Cross-Section Nature of the Provision

Article 10 TFEU belongs to the Title II “Provisions Having General Application” of the Part One “Principles” of the Treaty. The positioning of the provision as well as the wording ‘in defining and implementing its policies and activities’ indicate the

39 CONV 797/03 (10 June 2003), Revised Text of the Part One, CONV 820/03 (20 June 2003). In the Annex the text of the draft TCE submitted by the President of the Convention to the European Council meeting in Thessaloniki on 20 June 2003. 40 CONV 805/03, (Praesidium, 11 June 2003). 41 Schorkopf, in Grabitz et al. (2010), Article 10 AEUV para 8.

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cross-section (horizontal) nature of the Union’s obligation to combat discrimination in the scope of the application of the TFEU. The wording of Article 10 TFEU dictates that the purpose of the provision is to set an objective. However, the corresponding objectives are already stipulated in Article 3.2 TEU and the genuine meaning and legal nature of the new phenomenon of “cross-section clause” remains somewhat vague. The additional value of the cross-section provisions in comparison with “classical” provisions on objectives remains also unclear.42 In fact, the “last-minute” political decision by the European Convention in relation to Article 10 TFEU (➔ para 9) implies the willingness to create a multi-level approach to non-discrimination—in general by setting political aims and in establishing the broad basis for potential future development of non-discrimination measures in particular. The competences of the Union and its institutions are governed by the principle of conferral (Article 5.1 sentence 1 TEU). As a cross-section clause, Article 10 TFEU does not imply the competences necessary for a declared objective to combat discrimination. Without conferring any additional competences to the Union, it effects the existing competencies by setting an additional obligation of equality mainstreaming. The objective may be pursued only to the extent and in the form and procedure provided for in the competence provisions for the Union and its institutions. The relation between Article 10 TFEU and the formal objectives of the Union (Article 3.2 TEU) or other horizontal provisions of general application (Articles 8, 9 TFEU but also 11, 12, 13 TFEU) is a matter of wide-ranging interpretation. For example, the incentives having an objective of full employment and the competitiveness in terms of productivity can be challenged on the ground that they neglect the non-discrimination, social justice or solidarity goals. Article 7 TFEU tries to solve the potential conflicts by postulating the obligation for the Union to ensure consistency between its policies and activities, taking all of its objectives into account. However, the need to balance competing or diverging objectives in all running “policies and actions” is not an easy requirement, given that the objectives are open to various interpretations. It is rational to expect that a solution shall be adopted which reconciles the different objectives to the highest degree possible. The discretion of the Union’s institutions to assess and weigh up the different conflicting interests is not unrestricted – they have to correspond to the objectives of general interests and to be proportionate (“tolerable interference, not impairing very substance of the rights guaranteed”).43 In addition, they will be bound by the general duty to explain and justify the choice (Article 296 TFEU).44 42

Rebhahn, in Schwarze (2012), Article 10 AEUV para 1. Case C-280/93, Germany v Council (ECJ 5 October 1994) para 78; Case C-44/94, The Queen v Minister of Agriculture, Fisheries and Food, ex parte National Federation of Fishermen’s Organisations and others and Federation of Highlands and Islands Fishermen and others (17 October 1995) para 37. See also Hartley (2010), p. 166. 44 Lenz, in Lenz and Borchardt (2013), Article 10 AEUV para 3. 43

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3.3. The Place Within the Framework of Non-Discrimination Law

Article 10 TFEU shall be seen in the context of a general framework of equality within EU law. The formula “values ➔ objectives ➔ competences/actions ➔ rights” can also be applied here. Article 2 TEU declares non-discrimination as a value of the Union that seeks the creation of a society in which pluralism, nondiscrimination, tolerance, justice, solidarity and equality between women and men prevail. In addition, Article 3.3 (2) TEU levels the ambition to “combat social exclusion and discrimination’ and to promote “equality between women and men” to the formal objectives of the Union. The specific legislative competence to adopt secondary legislation to this end is set out in Article 19 TFEU, but also in Articles 153.1 TFEU and 157.3 TFEU, not to mention other legislative possibilities provided by the Treaty. Subjective rights are provided by the primary law (e.g. Article 157.1 TFEU) and national transposing law (➔ para 4), whereas the foremost subjective equality rights (Articles 21–23 EUCFR) are ensured through the Union’s system of protection of fundamental rights. The Union’s obligation to combat discrimination “in defining and implementing its policies and activities” (Article 10 TFEU) together with the aim “to eliminate inequalities, and to promote equality, between men and women” (Article 8 TFEU) support other anti-discrimination provisions which have a stronger normative character. Both provisions declare the equality as a horizontal aim, which may be achieved by exercising existing competences in other fields of the Union’s activities. They aim to influence general and specific policies of the Union and as such complement this sophisticated legal framework of equality. The similar approach is taken by GA Kokott, who has cited Article 10 TFEU in the context of multiple provisions (Article 3.3 TEU, Articles 21.1 and 23.2 EUCFR) to underline the fundamental nature of the principle of equal treatment of men and women.45 However, this (partial) contribution of Article 10 TFEU does not intend to deny the independent potential of the provision.

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Discrimination

4.1. Definition of Discrimination

“Discrimination”46 is central concept of the cross-section provision. The Treaty contains several other provisions in which the discrimination in various situations is

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Case C-356/09, Dr Christine Kleist (Opinion of GA Kokott of 16 September 2009) para 54; Case C-236/09 Association Belge des Consommateurs Test-Achats ASBL and Others (Opinion of GA Kokott of 30 September 2010) para 31. 46 In principle, the notions of “non-discrimination” and “equality” are interchangeably in the case law of CJEU and in the secondary law.

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explicitly prohibited.47 Even considering particularities of the given subject matter and parties involved, it could be still possible to suggest that there is a (at least widely accepted) general meaning of the “discrimination”. However, the wording of Article 10 TFEU and the close link to the competence clause of Article 19 TFEU makes inevitable our reference to the definitions of “discrimination” elaborated with regard to listed grounds of (prohibited) discrimination. The distinction between “direct discrimination” and “indirect discrimination” was made clear already at the early stage of development of the case law48 and secondary law49 of the EU. The Directives with regard to all grounds of discrimination contain in fact identical definitions. For instance, Article 2.2 of Directive 2000/43 defines a direct discrimination on the ground of racial or ethnic origin as a situation where one person is treated less favourably than another is, has been or would be treated in a comparable situation on grounds of racial or ethnic origin.50 Indirect discrimination, on the grounds of religion or belief, a disability, a age, or a particular sexual orientation, shall be taken to occur where an apparently neutral provision, criterion or practice would put persons having a particular religion or belief, disability, age, or sexual orientation at a particular disadvantage compared with other persons unless that provision, criterion or practice is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary (Article 2.2 (b) of Directive 2000/78).51 In both forms of discrimination, the specific52 and general53 justifications and exclusions are also allowed. In accordance with settled CJEU case law, discrimination consists in the application of different rules to comparable situations or the application of the same

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See Articles 18 TFEU (nationality), 36, 37, 40 TFEU (free movement of goods), 54 TFEU (free movement of workers), Article 65 TFEU (free movement of capital), 95 TFEU (transport), 107 TFEU (state aid), 157.2 TFEU (equal pay), 214 TFEU (humanitarian aid), 326 TFEU (enhanced cooperation). 48 See only Case 96/80, J.P. Jenkins v Kingsgate (Clothing Productions) Ltd. (ECJ 31 March 1981). 49 Article 2 of Council Directive 76/207/EEC on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions, O.J. L 39/40 (1976). 50 See also Article 2.2 (a) of Directive 2000/78, Article 2.1 (a) of Directive 2006/54. 51 See also Article 2.2 (b) of Directive 2000/43, Article 2.1 (b) of Directive 2006/54. Part-time female workers, female workers on parental leave are classical examples of such indirect sex discrimination. 52 With regard to criterion of disability, see Article 2.2 (b) point ii) and Article 5 of Directive 2000/ 78; with regard to religion, see Article 4.2 of Directive 2000/78; with regard to age, see Article 6 of the Directive 2000/78; with regard to sex, see Article 14.2 of Directive 2006/54. 53 Positive action measures: Article 5 of Directive 2000/43, Article 7 of Directive 2000/78, Article 3 of Directive 2006/54.

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rule to different situations.54 In the case of the alleged discrimination, the analysis is mostly focused on identification of comparability of situations and the existence of possible justification in the different treatment.55 The question is still open whether we should always rely on definitions provided by the secondary legislation or accept (at least for some cases) the autonomous primary understanding of the notion of ‘discrimination’. This is particularly important when we consider whether forms of discrimination such as harassment, sexual harassment and instruction to discriminate56 shall fall under the notion of “discrimination” of Article 10 TFEU.57

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4.2. Grounds of Discrimination

Article 10 TFEU obliges the Union to take on the fight of discriminatory practices on eight different grounds, namely, sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation.58 Since the provided list of (prohibited) grounds of discrimination is exhaustive, the provision cannot be seen as a normative expression of the general equality clause. Moreover, it cannot be held as mirroring the overall Union’s engagement to promote equality as a fundamental right simply because the list of Article 10 TFEU is even shorter than provided in the Article 21 EUCFR.59 Article 10 TFEU simply reiterates the grounds of discrimination of Article 19 TFEU which provides for the Union’s competence to adopt secondary legislation in the field of non-discrimination. This rather restrictive approach could be explained by the political will to keep the actions of the Union’s institutions, 54 See, for example, Case C-279/93, Finanzamt Köln-Altstadt v Roland Schumacker Schumacher (ECJ 14 February 1995) para 30; C-342/93, Joan Gillespie and others v Northern Health and Social Services Boards, Department of Health and Social Services, Eastern Health and Social Services Board and Southern Health and Social Services Board (ECJ 13 February 1996) para 16. 55 The examples and analysis of the different approaches towards definitions of equality and discrimination is provided by McCrudden and Prechal (2009), p. 11 et seq. 56 Article 2.2 of Directive 2006/54 reads “for the purpose of this Directive”. 57 In favour of such broad definition is Schorkopf, who advocates for perception of the notion of discrimination in the wider context of social exclusion (Article 3.2 TEU) since the social exclusion is the usual outcome of discrimination. See Schorkopf, in Grabitz et al. (2010), Article 10 AEUV para 19–20. 58 The official texts sometimes may refer not to the grounds but also to “certain forms” (in English), “certain forms” (in French), “bestimmte Formen” (in German). 59 In addition, Article 21.1 EUCFR, even being of exemplary character, explicitly prohibits the discrimination based on colour, social origin, genetic features, language, political or any other opinion, membership of a national minority, property, birth. Some of these grounds (colour, social origin, property, language, political opinion, membership, etc.) may be (at least partially) covered by other grounds listed in Article 10 TFEU. To this end, see Rust, in von der Groeben et al. (2015), Article 10 AEUV para 23 et seq. The hierarchy of “privileged” and “other” grounds of discrimination is reproached by Rebhahn, in Schwarze (2012), Article 10 AEUV para 5.

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which are the addressees of the Article 10 TFEU, within the limits of conferred powers.60 If accepted, the proposals to widen the fight against discrimination by including more grounds61 could have much wider legal consequences than the prohibition of discrimination contained in Article 21.1 EUCFR, the scope of which is clearly limited by Article 51 EUCFR.62 In the “multi-ground” system, the question on hierarchy of the grounds of Article 10 TFEU (and of Article 19 TFEU) is thrilling both for theoretical and practical reasons. Historically, the fight against the discrimination on the grounds of “sex” had a long history and strong political background. The gender equality law constantly has been enriched with increasingly elaborated concepts and legal instruments but was limited in the scope. With inclusion of “sex” into the competence clause of Article 19 TFEU (and of Article 10 TFEU), new opportunities were created to address gender discrimination in a broader perspective. On the other hand, by putting “sex” in the same line with other prohibited grounds, the general equality principle has gained more in terms of political and methodological support. The basis was made to create a more coherent and systematic common legal anti-discrimination framework. It is still unclear how the EU institutions will manage the possible competition between different grounds—if, for example, a measure where special treatment of the disabled will have a negative outcome for different age groups or men and women. Article 8 TFEU alongside with Article 23 EUCFR gives the ground of “sex” a more solid position but the situation with other grounds will have to be resolved in a delicate manner—the institutions will have a wide margin of appreciation but every (temporary) priority will need explanation and justification.

4.3. Scope of Application

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Under the principle of conferred competences, the Union’s mandate to fight discrimination has its limits, which are set by the Treaties. A close look reveals that competences to adopt secondary legislations are differently stipulated with regard to different grounds of discrimination. For example, the “sex/gender” ground historically has undergone a most remarkable evolution—the first gender equality Directives were adopted based on the general economic political

60

Note also the linguistic alteration of the provision made during the incorporation of the Article III-118 TCE into Treaty of Lisbon: “In defining and implementing the policies and activities referred to in this Part, the Union shall aim to combat discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation.” 61 CONV 779/03, p. 4. 62 See also Explanation on Article 21 EUCFR—Non-discrimination—where the MS assert that there is the crucial difference between the provisions of Article 21.1 EUCFR and Article 19 TFEU in terms of purpose and coverage. Explanations relating to the EUCFR. O.J. C 302/24 (2007).

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competences,63 and only the Maastricht Agreement on Social Policy (now Article 153.1 (i) TFEU) and the Treaty of Amsterdam (now Article 157.3 TFEU) created the genuine basis for adopting harmonisation measures to implement the principle of equal opportunities. Both these competence provisions have the essential limitation—even if they cover activities in both private and public spheres, the actions of the Union shall be restricted to the matters of employment and labour market. Article 153.1 (i) TFEU empowers to adopt social policy measures including harmonisation of the national law of the MS to ensure “equality between men and women with regard to labour market opportunities and treatment at work” and Article 157.3 TFEU allows adopting “measures to ensure the application of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation, including the principle of equal pay for equal work or work of equal value”. With an introduction of the new competence in Article 13 (now Article 19 TFEU) the Treaty of Amsterdam has dramatically extended the powers of the Union—the further measures to combat discrimination have almost no formal restrictions with regard to ratione materiae, within the scope of the Treaty. This change in the paradigm is clearly visible from the scope of directives adopted under Article 19 TFEU. Similar to the Gender Equality Directive 2006/54,64 the Equality Framework Directive 2000/78 applies in dependent employment relations stricto sensu65 with an exception of relations related to access to self-employment and promotion which are also covered by the Directive.66 In contrast, the Race Equality Directive 2000/43 goes

63

Article 100 TEEC (Preamble to the Directive 75/117 reads “implementation of the principle that men and women should receive equal pay [. . .] is an integral part of the establishment and functioning of the common market; differences continue to exist in the various Member States”), Article 235 TEEC (Preamble to the Directive 76/207 states that “to achieve the principle of equal treatment for men and women [. . .] the Treaty does not confer the necessary specific powers for this purpose”). Directive 79/7 was based on Article 235 TEEC whereas the Directives 86/378 and 86/613 were adopted based on both Article 100 TEEC and Article 235 TEEC. 64 Adopted under Article 157.3 TFEU. 65 As the Directives do not allow applying the domestic definition of “employee” or “contract or relation of employment”, there is nothing that could suggest that CJEU will deviate from established case law on Community meaning of the notion of “employee”. See Case 66/85, Deborah Lawrie-Blum v Land Baden-Württemberg (ECJ 3 July 1986) para 17; from the latest see Case C-232/09, Dita Danosa v LKB Līzings SIA (ECJ 11 November 2010) para 39 et seq. 66 The CJEU distinguishes the legal nature of “dependent employment” and “self-employment”. See, for example, Case C-268/99, Aldona Malgorzata Jany and Others v Staatssecretaris van Justitie (ECJ 20 November 2001) para 34. For further possible prospects on differences between two types of employment see Case C-413/13, FNV Kunsten Informatie en Media v Staat der Nederlanden (CJEU 4 December 2014) para 37, and Case C-67/96, Albany International BV v Stichting Bedrijfspensioenfonds Textielindustrie (ECJ 21 September 1991) para 87. In those cases, the collective bargaining agreement does not constitute an infringement of Community competition law only and in so far as it has a purpose of regulating dependent employment conditions. A social function of an agreement allows qualifying it as a “measure necessary for the performance of a particular social task of general interest.”

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beyond that67 and also covers such areas as social protection, including social security and health care, education, and access to goods and services which are available to the public, including housing. Thus, the Race Equality Directive addresses the national legal systems of MS in more extensive ways—the domestic branches of public and private law are affected by the harmonisation measures. The deepest intervention in the private law sphere so far is marked with the next legislative initiative—Directive 2004/113 on equal treatment between men and women in the access to and supply of goods and services68 addresses the wide scope of relationships including those between private parties. There is nothing to suggest that the scope of Article 10 TFEU is narrower than that of Article 19 TFEU. In fact, the obligation to fight discrimination on the grounds of sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation is not limited to a particular area of social life (education, culture, sports, corporate law, etc.), but shall be considered in all the actions of the Union, provided they are within the limits of the TFEU.

5.

The Obligation on the Union

5.1. The Addressees of the Obligation

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30

Article 10 TFEU is binding for the Union and its institutions, but not MS.69 The MS can be affected by Article 10 TFEU indirectly by virtue of legislation adopted at the Union’s level. The secondary legislation may also explicitly provide for obligation to include the mainstreaming in the national policies of the MS.70 On a literal interpretation, the “policies and activities” of the Union are those of the Union institutions. The obligation to combat discrimination on various grounds encompasses the non-binding measures as well as binding actions such as legislation. The genesis and positioning of the Article 10 TFEU suggest that it shall apply to the policies and actions of the institutions within the scope of the TFEU, but its close link to the values and the objectives of the Union (Article 2 and Article 3.2 TEU) may speak for a wider application also within TEU.71

67

Both Directives identically apply to conditions of access to employed or self-employed activities, including promotion, access to all types and to all levels of vocational guidance, vocational training, advanced vocational training and retraining, employment and working conditions (including pay and dismissals), membership of, and involvement in, an organisation of employers or workers or any other organisation whose members carry on a particular profession. 68 Directive 2004/113 implementing the principle of equal treatment between men and women in the access to and supply of goods and services, O.J. L 373/37 (2004). 69 Rossi, in Calliess and Ruffert (2016), Article 10 AEUV para 3. 70 Article 29 of Directive 2006/54. 71 Schorkopf, in Grabitz et al. (2010), Article 10 AEUV para 12.

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5.2. The Intensity of the Performance

Article 10 TFEU requires certain action from the institutions of the Union. The provision neither defines the way and methods to achieve the goal nor provides for indicators to measure the fulfilment thereof. On the duty to consider a particular objective, the Treaty sets out several levels of intensity.72 Nevertheless, these linguistic variations may rarely result into considerably differences as they all target the decision making process. The wording of Article 10 TFEU “shall aim to combat” indicates that not the result of the action but the qualitative components (incorporation of the equality and nondiscrimination concerns) of in the policy planning, policy implementation and assessment processes shall be present. This gives to the Union’s institutions a wide room of appreciation and refers equally to the concretisation of the scope of the objectives and to the decisions about the steps to be taken for the realisation of said objectives. In practical terms, the assessment whether the duty of “aim to combat” was properly performed depends on the provided explanation. The duty of reasoning and explanation (Article 294.2 TFEU) is of crucial importance here.

31

5.3. No Promotion, No Worsening?

In comparison to Article 8 TFEU, the provision of Article 10 TFEU does not entail the explicit objective to promote groups of discriminated persons.73 The social policy aims shall be addressed by other provisions of the Treaty. The question can be raised whether Article 10 TFEU prohibits the regression of the position of certain protected groups compared to that it was achieved before. The idea of mainstreaming is not compatible with regression of the achieved status quo of non-discrimination.74 However, if the legislator would like to prohibit the worsening, he would also want to grant the subjective right to the individuals. This is clearly not the intention of Article 10 TFEU. In addition, the Union institutions must establish an equilibrium between conflicting objectives and interests, and this may under certain circumstances even temporarily result in a worsening of the situation with regard to one of the aims. The exemptions from progressive implementation must be allowed if they could be justified after considering different interests and do not violate the core human rights perspective and main objectives the Treaty.

Article 8 TFEU: “shall aim to eliminate [. . .] and promote”, Article 9 TFEU: “shall take into account requirements”, Article 11 TFEU: “requirements shall be integrated”, Article 12 TFEU: “requirements shall be taken into account”, Article 13 TFEU: “shall pay full regard to the requirements”, Article 17 TFEU: “Union respects”. 73 Rossi, in Calliess and Ruffert (2016), Article 10 AEUV para 3. 74 Rust, in von der Groeben et al. (2015), Article 10 AEUV para 40. 72

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5.4. Possibility of Judicial Control

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35

36

As the provision is focused on the institutional procedures, it is difficult to expect that the obligation specifically aims to grant the persons who meet the characteristics (➔ para 23 et seq.) the subjective rights to equal treatment or the right to demand a particular action on the part of institution within their policies or measures to ensure the equality.75 The practical implementation of the general principle of equality requires deep and complex analysis and political decisions, involving economic, social and human rights considerations. In those cases, the Court intends to grant the Union’s institutions a wide margin of discretion, which “cannot, however, render meaningless the implementation of a fundamental principle of Community law, such as elimination of [. . .] discrimination”.76 The test applied by the Court could be even more lenient because of the low normative content of Article 10 TFEU. The control of conformity of a secondary legislation with primary Union law will focus on more specific objectives of the relevant subject-area, which, however, must still be interpreted in the light of the more general objectives of Article 3 TEU and not that of Article 10 TFEU.

List of Cases ECJ 08.04.1976, 43/75, Gabrielle Defrenne v Société anonyme belge de navigation aérienne Sabena, ECR 455 [cit. in para 2] ECJ 31.03.1981, 96/80, J.P. Jenkins v Kingsgate (Clothing Productions) Ltd., ECR 911 [cit. in para 21] ECJ 13.05.1986, 170-84, Bilka - Kaufhaus GmbH v Karin Weber von Hartz, ECR 1607 [cit. in para 2] ECJ 03.07.1986, 66/85, Deborah Lawrie-Blum v Land Baden-Württemberg, ECR I2121 (cit in para 28] ECJ 08.11.1990, C-177/88, Elisabeth Johanna Pacifica Dekker v Stichting Vormingscentrum voor Jong Volwassenen (VJV-Centrum) Plus, ECR I-3941 [cit. in para 2] ECJ 21.09.1991, C-67/96, Albany International BV v Stichting Bedrijfspensioenfonds Textielindustrie, ECR I-5751 [cit. in para 28] ECJ 05.10.1994, C-280/93, Germany v Council, ECR I-911 [cit. in para 16] ECJ 14.02.1995, C-279/93, Finanzamt Köln-Altstadt v Roland Schumacker Schumacher, ECR I-225 [cit. in para 21] ECJ 17.10.1995, C-44/94, The Queen v Minister of Agriculture, Fisheries and Food, ex parte National Federation of Fishermen’s Organisations and others 75

Rossi, in Calliess and Ruffert (2016), Article 10 AEUV para 6. Equally Rust, in von der Groeben et al. (2015), Article 10 AEUV para 31. 76 See Case C-25/02, Katharina Rinke v Ärztekammer Hamburg (ECJ 9 September 2003) para 39. Davulis

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and Federation of Highlands and Islands Fishermen and others, ECR I-3115 [cit. in para 16] ECJ 13.02.1996, C-342/93, Joan Gillespie and others v Northern Health and Social Services Boards, Department of Health and Social Services, Eastern Health and Social Services Board and Southern Health and Social Services Board, ECR I475 [cit. in para 21] ECJ 20.11.2001, C-268/99, Aldona Malgorzata Jany and Others v Staatssecretaris van Justitie, ECR I-8615 [cit. in para 28] ECJ 08.05.2003, C-171/01, Wählergruppe “Gemeinsam Zajedno/Birlikte Alternative und Grüne GewerkschafterInnen/UG, and Bundesminister für Wirtschaft und Arbeit and Others, ECR-4301 [cit. in para 2] ECJ 09.09.2003, C-25/02, Katharina Rinke v Ärztekammer Hamburg, ECR I-8349 [cit. in para 35] ECJ 11.11.2010, C-232/09, Dita Danosa v LKB Līzings SIA, ECR I-11405 [cit. in para 28] ECJ 18.11.2010, C-356/09, Dr Christine Kleist, ECR I-11939 [cit. in para 19] ECJ 01.03.2011, C-236/09, Association Belge des Consommateurs Test-Achats ASBL and Others, ECR I-773 [cit. in para 19] ECJ 04.12.2014, C-413/13, FNV Kunsten Informatie en Media v Staat der Nederlanden, ECLI:EU:C:2014:2411 [cit. in para 28]

References Calliess, C., & Ruffert, M. (Eds.). (2016). EUV/AEUV. Kommentar (5th ed.). Munich: Beck. Chalmers, D., Davies, G., & Monti, G. (2014). European Union law - texts and materials. Cambridge: Cambridge University Press. De Vos, M. (2007). Beyond formal equality - positive action under Directives 2000/43/EC and 2000/78/EC. Brussels: European Commission. Ellis, E., & Watson, P. (2012). EU anti-discrimination law. Oxford: OUP. Fredman, S. (2010). Making equality effective: Proactive measures and substantive equality for men and women in the EU. European Gender Equality Law Review, 2(2010), 7–16. Grabitz, E., Hilf, M., & Nettesheim, M. (Eds.), (2010 et seqq.). Das Recht der Europäischen Union. Kommentar. (Loose-leaf). Munich: Beck. Hartley, T. (2010). The foundations of European community law (7th ed.). Oxford: OUP. Lenz, C. O., & Borchardt, K.-D. (Eds.). (2013). EU-Verträge. Kommentar (6th ed.). Cologne: Bundesanzeiger. MacRae, H. (2010). The EU as a gender equal polity: Myths and realities. Journal of Common Market Studies, 48(1), 155–174. McCrudden, C., & Prechal, S. (2009). The concepts of equality and non-discrimination in Europe: A practical approach. Brussels: European Commission. Rubery, J. (2002). Gender mainstreaming and gender equality in the EU: The impact of the EU on employment strategy. Industrial Relations Journal, 33(5), 500–522. Schwarze, J. (Ed.). (2012). EU-Kommentar (3rd ed.). Baden-Baden: Nomos. von der Groeben, H., Schwarze, J., & Hatje, A. (Eds.). (2015). Europäisches Unionsrecht. Commentary. (7th ed.). Baden-Baden: Nomos. Wathelet, M. (1996). The case law of the European Court of Justice and nationals of NonEuropean Community Member States. Fordham International Law Journal, 20(3), 603–622.

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Article 11 [Compliance with the Requirements of Environmental Protection] (ex-Article 6 TEC) Environmental protection requirements1–11 must be integrated into the definition and implementation of the Union policies and activities,12–21 in particular with a view to promoting sustainable development.22–31

Contents 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Protection of the Environment: Origin and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. The Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. The Principle of Integration and Sustainable Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Final Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Cases References

1.

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Introduction

The changes that occurred initially with the Maastricht Treaty (1993) and then with the Amsterdam Treaty (1999), on the formulation of Article 130R EC Treaty (as determined by the Single European Act1), have made the principle of integration, because of its transversal nature, one of the most significant and most important principles adopted by the EU for global action in protecting the environment. In the TFEU, there are various sectors2 where the principle of integration is expressly recognized, but it is primarily in Article 11 TFEU (former Article 6 EC) that such principle is laid down in explicit and straightforward terms. It must be pointed out, first, that Article 11 TFEU—placed in Part One, Title II, among the “Provisions Having General Application”—is a norm that states principles and values of a general nature. The positioning of Article 13 TFEU—a norm that sets forth the value of the wellbeing of animals, since animals are sentient beings—in the same section bears witness to and explicitly states the attention that the EU and its MS have for environmental needs, for the equilibrium of the ecosystem and for related rights.

1 Which states: “Environmental protection requirements shall be a component of the Community’s other policies” (paragraph 2, 2nd statement). 2 For instance: promotion of employment (Article 147 TFEU), protection of human health (Article 168 TFEU), protection of consumers (Article 169 TFEU), promotion and coordination of economic policies (Article 175 TFEU), development cooperation (Article 208 TFEU).

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Unlike the other norms contained in the provisions having general application, this article has an importance of its own: the imperative to protect the environment (environmental protection requirements must be integrated . . .) conditions the implementation of all European policies with which this norm is integrated, without exception. In other terms, the principle of integrating environmental protection policies into the definition of all the policies and sectors of action of the Union rises to the status of parameter that lends legitimacy to any action of the Union and— under Article 51 EUCFR—of MS in implementing EU regulations. The same does not always apply to the other articles of the provisions having general application, although protection requirements are strengthened (e.g., the protection of consumers (Article 12 TFEU), of animals (Article 13 TFEU), of personal data (Article 16 TFEU), and of churches, religious communities, philosophical organizations (Article 17 TFEU), sometimes run into limits and exceptions. Suffice it to consider Article 13 TFEU, which provides for respect for (legislative or administrative) provisions, customs, religious rites, cultural traditions of MS, and for the protection of regional heritage. In addition, Article 11 TFEU has special importance even with respect to Title XX of the Treaty which concerns the environment. Here, besides stating the goals, procedures, and competences, Articles 191–193 TFEU indicate the principles upheld by the Union to ensure a high level of environmental protection. However, it is the principle of integration that is the overriding principle—it being transversal—for ensuring sustainable development that, according to the first official definition (Brundtland Report) is the principle that—through a careful use of natural resources—can ensure satisfaction of the needs (and the economic and environmental interests) of the present, without undermining the capacity of future generations to meet their needs. Under Article 11 TFEU, the limits produced by fragmented legislation that induced the Court of Justice to say—even when it justified restrictions to the principles of the free movement of goods, of free competition, and free trade to consider the environment—that in any case these were general principles of Community Law, compliance with which was guaranteed by the Court,3 and that, in any case the prohibitions or limitations were to be interpreted in a restrictive and mandatory manner,4 “that is to say by considering environmental protection not in and of itself, but solely in relation to given profiles or objects mentioned in the Treaty and liable to certainly being included in this subject”.5 Now, instead, the idea that environmental protection requirements, besides informing the sectorial policy, should also be integrated into the formulation and implementation of the other policies and actions of the Union, means that the latter are subordinate and can be amended in ensuring effective ecological protection.

3

Case 240/83, Procureur de la République v A.D.B.H.U. (ECJ 7 February 1985), p. 531, point 9. Case 113/80, Commission v Ireland (ECJ 17 June 1981) para 7. 5 According to Di Salvatore (2008), pp. 545–546. 4

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Protection of the Environment: Origin and Development

It must immediately be stated that the EEC Treaty in 1957 did not attribute any specific competence to the Community on environmental matters. Initially, this regulatory vacuum was offset by adopting an extensive interpretation of Article 100 (concerning the approximation of national legislations)6 and of Article 235 of the EEC Treaty (concerning the integration of powers of the Community institutions in cases where action is required to achieve the aims of the Community).7 It should be added that—leaving aside some early recommendations and directives issued in the second half of the 70s (that considered pollution and stressed the need for MS to comply with the provisions of the international conventions), the issue of environmental protection became part of the European acquis officially only in 1987, with the adoption of the Single European Act. The latter broadened and extended Community competences to the areas of research, development, foreign policy, and the environment. In particular, with the introduction of Title VII (Articles 130R, 130S, and 130T),8 the Single Act set forth the legal foundations for a common environmental policy aimed at protecting the environment and human health, and at ensuring a prudent and rational utilization of natural resources. An environmental policy that, among other things, also envisaged the possibility for MS to introduce limits and standards that would be more environment-friendly than those adopted at Community level. Among the fundamental principles introduced by the Single Act the following are worth recalling: taking preventive action, rectifying environmental damage at source (environmental damage must be eliminated in the State where it is produced), subsidiarity,

6

It is interesting to note that the assumption according to which, in the absence of an ad hoc regulation, the adoption of environmental measures could be justified under Article 100 was stated for the first time by the Court of Justice in Case 91/79 (ECJ 18 March 1980). Among its maxims is the following one: “directives on the environment may be based upon article 100 of the treaty since provisions which are made necessary by considerations relating to the environment and health may be a burden upon the undertakings to which they apply and if there is no harmonization of national provisions on the matter competition may be appreciably distorted” (see para 3). 7 On the basis of which “If any action by the Community appears necessary to achieve, in the functioning of the Common Market, one of the aims of the Community in cases where this Treaty has not provided for the requisite powers of action, the Council, acting by means of a unanimous vote on a proposal of the Commission and after the Assembly has been consulted, shall enact the appropriate provisions.” 8 These provisions introduced a real change in the viewpoint of EU law. In particular, Article 130r of the Single European Act assigned to Community law the task “to preserve, protect and improve the quality of the environment”, and contribute towards protecting people’s health and ensure a prudent and rational utilization of natural resources. Furthermore, it laid down that environmental protection requirements were to be a component of the Community’s other policies, like the industrial, agriculture, and energy policies, calling on the European Community to adopt all necessary measures to ensure effective development and prompt implementation. For a more thorough description of the importance and innovative scope of the Single European Act see Barnabò and Majocchi (1990); Cataldi (2001), p. 1 et seq.; Melchionni (2008), p. 103 et seq.; Strozzi and Mastroianni (2016), p. 15 et seq.

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integrating environmental protection requirements into the Community’s other policies, and the “polluter pays” principle. The Single Act was followed by the Maastricht Treaty, thanks to which the European environmental policy made a significant step forward, in that, for the first time, sustainable development was expressly mentioned and included among the fundamental objectives of Europe (Article 2 of the Treaty). Attention to sustainable development was reconfirmed also later, with the adoption of the Amsterdam Treaty9 that, besides confirming the need to ensure sustainable growth, also provided a corollary of objectives and specific actions that were to orientate European policy, like: the protection, defence and improvement of the environment; the protection of human health; moderate and rational use of natural resources; making cost-benefit analyses and making eco-efficiency assessments; as well as the promotion and adoption of measures aimed at solving environmental, regional, and world problems. Being increasingly engaged in integration and in building a better common future, the EU reconfirmed its interest towards the environment also a few years later, at the European Council of Laeken (2001), whose activities and Declaration gave rise to a new, important momentum for sustainable development and for the protection of the quality of life.10 These points were included and further developed in the Lisbon Treaty (2009), which introduced a significant novelty. Indeed, following the amendment to Article 174 ECT, the fight against climate change was officially listed among the objectives of the Union.11 Furthermore, the regulatory framework underlying Europe’s environmental policy was delineated on that occasion.12 This is a policy that—in spite of its intricate and articulated origin, characterized by a continuous alternation of rapid progress and setbacks—has a solid and well structured conceptual framework broken down into a series of fundamental provisions and principles. As to the latter, it is worth recalling the four principles mentioned earlier, namely: l

the principle of precaution that, to protect fundamental assets (such as health, the environment), justifies the adoption or imposition of precautionary measures

9

For a thorough discussion of this issue see Garabello (1999), p. 151 et seq. See Conclusions of the Presidency of the Council of Europe of 14–15 December 2012. Available at https://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/134353.pdf. Still on environmental protection, it is worth recalling, from among the final acts of the Council of Europe of Laeken: the Conclusions of the Council on the key indicators for sustainable development related to the environment to check the progress achieved in implementing the European Union’s strategy for sustainable; the Conclusions of the Council (Environment) on the strategy for sustainable development (follow up to the environmental aspects of the Gothenburg Council); the Conclusions of the Council (Environment) on the global governance of the environment. 11 See Schiano Di Pepe (2012), Ciani Scarnicci et al. (2015), Blaser (2016) and Delreux and Happaerts (2016). 12 Bilancia and D’Amico (2009), Fragola (2010), Costato and Manservisi (2012), Amabili (2012) and Cordini et al. (2017). 10

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to manage the risks associated with cases of uncertainty as to the consequences deriving from actions and behaviours, uncertainties for which one can only assume a situation of risk and not also the probable evolution of the risk at stake;13 the principles of preventive action and of rectifying pollution at source, which represent, in the case of the former the need to preliminarily assess, not only the environmental impact, also the possible risks and hazards entailed by given manufacturing plants for the environment and for health, according to the other, the objective of fighting the negative effects on the environment to avoid their expansion; the principle according to which polluters pay, which is aimed at ensuring that damage caused to the species, protected natural habitats, water, and the soil are repaired.14

In particular, recalling the primary sources of the European acquis, it is worth mentioning some specific regulatory provisions. First, Article 37 EUCFR, which summarizes the contents of the Union’s environmental policy by putting the emphasis on the importance of an integration of the various policies,15 just like Article 3.3 and Article 21.2 point (f) TEU, whereby the Union makes the commitment to ensure a high level of protection and improvement of the quality of the environment and guarantee the sustainable management of global natural resources to ensure sustainable development.

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11

The Principles

Special attention is to be paid to Title XX—Environment, with Articles 191, 192, and 193,16 of the TFEU.17 Article 191 TFEU (former Article 174 EC) is a key provision of the Union’s environmental policy. Indeed, it lays down the principles (precaution, preventive action, rectifying pollution preferably at source, “polluter pays”), it identifies its 13

This principle was originally formulated in Article 15 of the 1992 Rio Declaration: “Where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.” 14 Under this principle, anyone who carries out activities having an environmental impact—such as transportation of hazardous substances or activities entailing the discharge of waste waters—is under the obligation of adopting preventive and precautionary measures on the one hand and of incurring the costs of repair and reinstatement. See, on this point, the recent judgment of the European Court of Justice, Section II of 13 July 2017, no C-129/16, on air pollution cause by the illegal incineration of waste. 15 On the integration of the Union’s policies, refer to the remarks made by Sanchez Galera (2016). 16 See Onida, in Curti Gialdino (2012), Articoli 191–193 TFUE; Pillitu, in Pocar and Baruffi (2014), Articolo 191–193. 17 In particular, on the novelties introduced by the TFEU, see Kingston (2013), García (2015) and Kingston et al. (2017).

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objectives (safeguarding, protection, and improvement of the quality of the environment, health protection, rational use of natural resources, adoption of measures designed to solve environmental problems at the regional and global level, fight against climate change), it traces the main guidelines (emphasizing the need to consider scientific and technical data and make a careful evaluation of the costbenefit ratio), and it outlines the intervention modalities and intervention strategies, envisaging the possibility of cooperation with third countries and with international organizations. This article, which expresses the most significant guiding principles, makes the Union’s environmental policy autonomous and comprehensive with respect to the other policies, and at the same time it strengthens the Union’s international role by requesting that the Institutions carry out a specific activity aimed at entering into international agreements. On the environmental principles, the principle of precaution is the fundamental one that requires the adoption of prevention measures in the event of a threat or risk undermining the resources protected by paragraph 1 of the Article, when there are scientific uncertainties as to the existence and scope of possible risks for the environment and health. It goes without saying that the need for precaution more than any other highlights the two boundaries within which the rules are to be interpreted. On the one hand, the environmental objectives18 and, on the other, the fundamental rights,19 as well as the principles of non-discrimination (or equality) and proportionality with respect to the different requests for protection (e.g., the environment, food safety, of the community, of the workers, etc.),20 that can be met also through the temporary nature of the restrictive measures subject to periodical reviews based on new scientific data. There are no doubts that besides the scientific evaluations, it is up to the European legislator to determine the level of acceptable/unacceptable risk; in practice, it is the Institutions of the Union that have “the right to adopt risk management measures other than those of the reporting Member State.”21 Unlike the principle of precaution, the principle of preventive action provides for the actions to be taken in situations of documented environmental risk. Preventive action is based on the idea of taking action before a harmful event takes 18

Joined Cases C-53/02 and C-217/02, Commun Braine-le-Château and Michel Tillieut and othersi v Région wallonne (ECJ 25 September 2003) para 42 and 43. 19 This is the case, for instance, of the presumption of innocence of the right to defence (Case C344/08, T. Rubach (ECJ 16 July 2009) para 30–34), of the protection of legitimate expectations (Case C-201/08, Plantanol GmbH & Co. KG v Hauptzollamt Darmstadt (ECJ 10 September 2009) para 44–66), of the protection of trade secrets (Case C-1/11, Interseroh Scrap and Metal Trading GmbH v. Sonderabfall-Management-Gesellschaft Rheinland-Pfalz mbH (SAM) (ECJ 29 March 2012) para 41–47). 20 Case C-302/86, Commission v Denmark (ECJ 20 September 1988) para 6 and 9; Case C-389/96, Aher-Waggon v Germany (ECJ 14 July 1998) para 20; Case C-309/02, Radlberger Getränkegesellschaft mbH & Co v Land Baden-Württemberg (ECJ 14 December 2004) para 74 et seq. 21 Case C-77/09, Gowan Comércio Internacional and Serviços Lda v Ministero della Salute (ECJ 22 December 2010) para 60.

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place, because the legislator, in considering the importance of the legal asset that must be protected, has intended to encourage a Community policy that is not limited to repairing damages, but that is aimed also at identifying the possible hazards to which the asset is exposed. Hence, the duty for MS to adopt laws that comply with the principle being examined here, so that the administrative authority may prepare prevention measures suited to preventing the occurrence of the harmful event. When, instead, the harmful event has already taken place, the principle of rectification first at source, i.e., actions aimed at redressing first the sources of the pollution (for instance the decontamination of polluted sites, like stopping traffic in cities when the threshold values are exceeded). It is self-evident that the principle of rectifying pollution at source also has a preventive effect: this is what happens when standards, aimed at avoiding in particular, harmful emissions, are laid down for the manufacturing of some products. Briefly: pollution is stopped at the source and a better suited preventive measure is developed. The same applies for the principle that the polluter should pay because it envisages the adoption of a remedy and the imposition of a sanction (think of the rules on environmental accountability and compensation),22 which has a prevention effect. After all, this latter principle—by focusing attention on the cost of using natural resources and the requirement that such costs be paid directly by those who use the resources and who carry out activities having a strong environmental impact—has the purpose of discouraging activities and conducts that cause damage to the ecosystem while at the same time encouraging, through economic measures23 and incentives of various types (tax relief, loans etc.), the so-called virtuous decisions and conducts. However, it is not a given that the disincentive/incentive rationale, ensuing from the “polluter pays” principle, and hence in some respects linked to the permission and right to pollute, fully accomplishes the goal of bringing about a reduction in pollution.24 Unlike Article 191 TFEU, which is much wider in scope and which, so to speak, embodies the principle and sets broad policy lines, Article 192.1 TFEU25 (former Article 175 EC) provides for the ordinary legislative procedure to be followed when taking action on environmental matters, to achieve the objectives referred to in Article 191 TFEU. A special legislative procedure applies instead in some matters such as: a) provisions primarily of a fiscal nature; b) measures affecting: territorial structure; quantitative management of water resources or affecting, directly or indirectly, the availability of water; land use, with the exception of waste management; c) measures significantly affecting MS’s choice between different energy sources and the general structure of its energy supply State (Article 192.2 TFEU), for which cases the principle requires the Council to take decisions unanimously and

22

Case C-378/08, ERG and others (ECJ 9 March 2010). See Mastragostino (2011). 24 On this viewpoint, Renna (2012), p. 83. 25 See Amadeo, in Tizzano (2014), Articolo 192 TFUE, p. 1638 et seq. 23

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after consulting the EP, the Economic and Social Committee, and the Committee of the Regions. However, the Council may make the ordinary legislative procedure applicable to the regulation of these matters by acting unanimously on a proposal by the Commission and after consulting the EP, the Economic and Social Committee, and the Committee of the Regions. The ordinary legislative procedure is applicable (after consulting the Economic and Social Committee and the Committee of the Regions) for the adoption of general action programmes that set out priority objectives to be attained through environmental policy, while the measures required to implement such programs must be adopted in compliance with the conditions envisaged in paragraph 1 or paragraph 2, depending on the subject matter. The fact that the consultative bodies of the European Union—the Economic and Social Committee and the Committee of the Regions—intervene in both these procedures clearly suggests that environmental policy affects major sectorial economic interests and territorial interests, both for the utilization of natural resources and for the impact of environmental actions on the territories. Hence, the lobbies of heavy industry (oil companies, energy companies, etc.) and the representatives of regional and local territorial bodies (provinces, municipalities) play an important role in the procedure, ahead of the national parliaments or other national institutions. In addition, with reference to the Committee of the Regions, it is worth recalling that the Treaty confers upon the latter also the power to challenge legislative acts before the EU Court of Justice where there are grounds for infringement of the principle of subsidiarity (Article 8.2 of Protocol No. 2). With the exception of some measures that are adopted by the Union, the EU’s environmental policy is implemented (financed and carried out) by the MS. In this context, the “polluter pays” principle constitutes an exception when a measure based on European legislation and involving the objectives of Article 191 TFEU implies costs that are deemed to be out of proportion for the public authorities of an MS; such measure envisages appropriate provisions in the form of temporary derogation and/or financial support by the cohesion fund established in accordance with Article 177 TFEU. Finally, Article 193 TFEU (former Article 176 EC), which completes and closes Title XX, establishes the principle according to which environmental protection measures adopted at European level constitute a minimum mandatory standard for MS which—if they so deem—have the power to adopt more rigorous criteria and to introduce more stringent environmental protection measures. The body of provisions on environmental matters includes the Articles of the TFEU that mention environmental requirements and purposes. Besides Article 11 TFEU,26 the provisions that refer more or less directly to the environment are Article 3.1 point (d) TFEU (exclusive competence for “the conservation of marine biological resources under the common fisheries policy”); Article 4.2 point (e) TFEU (shared competence for “environment”); the previously mentioned Article

26

See Calliess, in Calliess and Ruffert (2016), Article 11 TFEU; Kahl, in Streinz (2018), Article 11 TFEU; Pillitu, in Pocar and Baruffi (2014), Article 11 TFUE; Sjåfjell and Wiesbrock (2015).

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13 TFEU (animal welfare); Article 114.3 and 114.4 TFEU (high level of protection for environmental affairs; maintaining national provisions on grounds of major needs relating to the protection of the environment); and Article 194.1 point (c) TFEU (promoting energy efficiency and energy saving and the development of new and renewable forms of energy with regard for the need to preserve and improve the environment).

4.

The Principle of Integration and Sustainable Development

As stated earlier, compared to the other provisions, Article 11 TFEU is an overriding norm for two reasons: it introduces the principle of integration, i.e., the need for any action or policy to consider environmental protection requirements, and it links this principle to the promotion of sustainable development27 that, in turn is based on “balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment” (Article 3.3 TEU). It is evident that integration and sustainable development are two separate principles but in practice they actually merge and constitute a single principle. The term integration refers to the transversal character of environmental law, precisely because the environment is a fundamentally dependent dimension (where each element depends on all the other elements) where any intervention—even those that do not appear to be of any special importance or have a wide-ranging effect—will always produce a significant impact. In other words, the environment—considered here in its twofold dimension of the biotic sphere (animals, plants, microorganisms, etc.) and the abiotic sphere (soil composition, subsoil, oxygen concentration, and so on) proves to be the point (and value) of confluence and tangence of any decision and of any action. Proof of this is the long list of global and/or local emergencies that are occurring on the planet Earth. Suffice it to mention the Great Pacific and Atlantic Garbage Patch, the two PVC islands, bisphenol A and other harmful substances, that together constitute a sort of floating continent;28 consider Versova Beach in Mumbai and the Accra landfill in Ghana, where technological waste29 is dumped despite the Basel Convention (1989) that forbids the First World from dumping its electronic waste in the Third World, and the European Directive Waste Electrical and Electronics Equipment (WEEE: 2002/ 96/EC) regulates the accumulation, recycling and recovery of electrical and 27

See in particular Fracchia (2010) and Pillitu (2007). A true time bomb that can interfere with reproduction and development processes, it grows by the minute and is now visible from outer space. For further information, see UNEP, Marine plastic debris and microplastics. Global lessons and research to inspire action and guide policy change, Nairobi 2016. Available at https://wedocs.unep.org/rest/bitstreams/11700/retrieve. 29 For a first approach to the impact that e-waste has on the environment and on health, see the documentary by A. Leonard, The story of electronics. Available at www.storyofstuff.org. 28

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electronic devices; consider the conditions of Lake Baikal30 that is cause for growing concern, and the dangers to which the Leuser ecosystem in Indonesia31 is exposed. Further, think again of the growing desertification, the contamination of waste waters, all those interferences with the delicate balance of the ecosystem that without being an actual emergency, and which at first sight might even appear to be harmless,32 are actually causing a water and food crisis.33 This is why any regulatory measure must consider environment requirements, i.e., this “must become a commitment for all involved parties and for all the technical experts involved in the drafting of regulations;”34 thus, any intervention and any action, in any field or subject, must always consider environmental protection. This means, on the one hand, that regulations are to be assessed with a view to their environmental impact and their review following any innovation, or in view of an innovation;35 while on the other, the various stakes involved are to be pondered and compared in light of the priority and fundamental legal interest of the EU, which is environmental protection, a protection that requires the utmost attention in all sectors and in any field of human activity for their possible direct or indirect effects on the environment (damage, threats, dangers). Suffice it to think of the environmental impact products have both during the production phase and during their utilization and disposal, and the need for these products, which are now indispensable, to be improved in various respects, combining environmental optimization with the development of wellbeing and lifestyles and with economic growth: hence, the objective of achieving an integrated product

30 Besides being the deepest lake and containing one third of fresh water of the planet, it is a huge biodiversity reserve and, for this reason, it is inscribed on UNESCO’s World Heritage List. However, because of pollution and environmental exploitation, the presence of sponges in the lake, organisms that are essential for biofiltration, is constantly shrinking as is true also of other species. For instance, the seals are gradually disappearing (see the article that cries out against this situation by R. Castelletti (2017). Siberia, moria di foche nel lago Bajkal. Le ha uccise l’inedia. La Repubblica). 31 A real treasure for (both animal and plant) biodiversity where most of the species that have not yet been discovered by science are to be found, but owing to deforestation and the production of palm oil they are being seriously threatened, and indeed, Rainforest Action Network has started a campaign for its protection The Last Place on Earth - Leuser Ecosystem. 32 Think of the decision to grow kiwis in the farming area (agro pontino) of Lazio that, because of the huge amounts of water required by this type of production is causing a serious impoverishment of the water resources of the territory (cfr. C. Pistilli (2016). Latina, troppa acqua per coltivare i kiwi: terreno in pericolo. “Torniamo a vite e olivo”. La Repubblica). 33 This issue has been extensively dealt with in the recent Global Report on Food Crises 2017. Available at https://ec.europa.eu/europeaid/global-report-food-crises-2017_en. 34 Commission Communication, Integration of Environmental Aspects into European Standardisation, COM(2004) 130 final, para 5.1.1. 35 Commission Communication, Integration of Environmental Aspects into European Standardisation, COM(2004) 130 final, para 5.1.3: “The periodical review process is the appropriate forum for starting to examine the environmental aspects of regulations already in force. During such reviews, the environmental aspects are to be verified systematically, as normally occurs when drawing up new programmes or draft norms, and the results are to be adequately presented.”

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policy based on five fundamental principles: life-cycle thinking, cooperation with the market, involvement of all stakeholders (from design to manufacturing, utilization, and consumption), and multiplicity of instruments for action (from voluntary initiatives to regulatory instruments, from local actions to actions taken at the international level). In particular, an integrated product policy promotes the adoption of the more efficient and less expensive measures (for companies and for society) aimed at reducing the environmental impact of the various steps in the life cycle of products, and envisages the adoption of incentives to induce the market to opt for more sustainable solutions, encouraging the demand and supply of products that are increasingly environmentally-friendly and rewarding the innovative and cutting edge companies that are committed to promoting sustainable development.36 Within this meaning, environmental protection and the achievement of sustainable development cannot exclude the principle of integration that after all shows how important it is, as the EU institutions are asked to comply with it in their law-making activity and the MS are asked to comply with it when they implement the European environmental laws, and when MS are allowed to derogate from the harmonized regulations (under the already mentioned Articles 114.4 et seq., 192.2 and 193 TFEU), in the name of a highly advanced environmental protection. In this way, from the standpoint of being favourable for the environment,37 differential domestic provisions on similar products could be justified, thus making an exception to Article 110 TFEU, provided that the environmental interest is authentic,38 or again restrictive measures on imports or exports could be adopted, provided that the limitations and prohibitions (because the items are dangerous, harmful, etc.) are justified by imperative environmental protection requirements39 and are at the same time proportionate with respect to the rule on the free movement of goods.40 The binomial of integration and sustainable development emphasizes that the imperative of environmental protection requires an understanding of different levels and different spheres. In other terms, there is no subject matter that has nothing to do with the environment just as there is no development that does not affect the environment and its protection. Indeed, if it is true that the environment is the point of convergence of claims and interests that are at times coherent and at times contradictory, it is likewise true that environment and development go hand in hand, mutually affecting and integrating each other. On the other hand, the fact a discussion about the quality of the environment naturally involves aspects that have to do with the quality of life, and a discussion about the availability of present and future natural resources is immediately linked to the possibility for development of 36

Commission Communication, Integrated product policy. Building on Environmental Life-Cycle Thinking, COM(2003) 302 final, para 3. 37 See Amadeo, in Tizzano (2014), Articolo 192 TFUE. 38 Case C-213/96, Outokumpu Oy (ECJ 2 April 1998) para 31–35. 39 Case C-2/90, Commission v Belgium (ECJ 9 July 1992) para 33–36; Case C-203/96, Dusseldorp BV and Others v Minister van Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer (ECJ 25 June 1998) para 41 et seq. 40 Case C-524/07, Commission v Austria (ECJ 11 December 2008) para 51 and 56.

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both current and future generations. To put it in other terms, environmental protection is an integral part of a fair and balanced development, or in current parlance of sustainable development, an integral part of a project that may encourage groups and communities to take care of the environment, setting aside once and for all the concept of dominion. From this standpoint, the constant and mutual intertwining of elements and conditions is what characterizes the vision of sustainable development that constitutes the foundation and driving force of the Union’s legal order: “Sustainable development offers the European Union a positive long-term vision of a society that is more prosperous and more just, and which promises a cleaner, safer, healthier environment—a society which delivers a better quality of life for us, for our children, and for our grandchildren. Achieving this in practice requires that economic growth supports social progress and respects the environment, that social policy underpins economic performance, and that environmental policy is cost-effective. [. . .] achieving the vision offered by sustainable development requires urgent action; committed and farsighted political leadership; a new approach to policymaking; widespread participation; and international responsibility.”41

5. 28

Final Remarks

In spite of the great and widespread attention paid to sustainable development42 and the firm commitment to combat climate change,43 the environment remains an 41 Commission Communication, A Sustainable Europe for a Better World: A European Strategy for Sustainable Development, COM(2001) 264 final, para 1. 42 Consider the document entitled Transforming Our World. The 2030 Agenda 2030 for Sustainable Development (2015), an agenda that identifies 17 global goals: (1) End poverty in all its forms everywhere; (2) End hunger, achieve food security and improved nutrition and promote sustainable agriculture; (3) Ensure health y lives and promote well-being for all at all ages; (4) Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all; (5) Achieve gender equality and empower all women and girls; (6) Ensure availability and sustainable management of water and sanitation for all; (7) Ensure access to affordable, reliable, sustainable and modern energy for all; (8) Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all; (9) Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation; (10) Reduce inequality within and among countries; (11) Make cities and human settlements inclusive, safe, resilient and sustainable; (12) Ensure sustainable consumption and production patterns; (13) Take urgent action to combat climate change and its impacts; (14) Conserve and sustainably use the oceans, seas and marine resources for sustainable development; (15) Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity; (16) Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels; and (17) Strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development. Available at https://ec.europa.eu/epale/it/resource-centre/content/lagenda-2030-losviluppo-sostenibile-nuovo-quadro-strategico-delle-nazioni. 43 Regarding the commitment of the Union in the fight against climate change, it is worth recalling the Commission Communication, A framework for climate and energy in the period from 2020 up to 2030, COM(2014) 15.

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emergency that must be taken seriously, it must be respected and protected because it is a common asset to the benefit of the whole of mankind. Some restrictions to some fundamental rights (for instance private economic initiative) are imposed through laws to protect the environment, which, if damaged, could not be repaired in the strict sense because all possible sources of damage are not controllable in all cases because of the huge space-time dimensions. However, for such restrictions to fundamental rights to be considered legitimate, the law needs to overcome the difficulty it has always had when it has to consider the notion of nature. The endless dispute between the supporters of an anthropocentric criterion (for intergenerational fairness) and the advocates of an ecocentric criterion (for the subjective law of the environment) is proof of a difficult relationship. After all, traditionally for the law, nature “takes on the features of an inanimate object, of an instrument, limit, stage in which, on which and within which unfold the actions of the subjects of law—people or man-created entities: nature is, in a manner of speaking, a non-living entity in the legal sense which interacts with the legal dimension of the lives of human beings and of their organizations and structures.”44 Hence, the difficulty encountered by the law in appreciating the biological richness and the fullness of nature in its being an a priori entity: indeed, while for juridical science the human being is the only living being endowed with a legal life, for ecological science the human being is only one of the many types of organisms (human and non-human) that exist, and hence for the law the ecosystem is only a milieu, or as already stated, it is the set of elements that are both biotic (animals, plants, microorganisms, etc.) and abiotic (soil composition, subsoil, oxygen concentration, and so on) and that constitute a physical, natural, and social scenario (all the surrounding things); instead, for ecology, the ecosystem is “a community system (related to a biotype) that lives, organizes itself and evolves as a whole, and of which the human population is only one of the components, a minority component and in some cases it not even present; while for law the landscape and the ecosystem taken to mean ‘environment’ are portions of territory that substantially overlap, and that may even be important for various purposes on the basis of the legal system, for ecology the landscape is a living system that is hierarchically above the ecosystems, and is to be studied in a fashion that is similar to the way medicine studies the human body and human populations (and from this standpoint we can speak of the ‘disorders’ and ‘syndromes’ of landscapes and their relevant ‘ecological therapies’).”45 The current emergencies and threats require a significant re-reading of the law, transcending the traditional paradigm that, by putting the human being at the center (placing all the rest in the periphery), has lost sight of the meaning of common in the idea of common good (common comes from the Latin adjective communem, composed of cum and munis) which, literally, indicates an asset which is

44 45

According to Monteduro and Tommasi (2015), p. 163. Monteduro and Tommasi (2015), p. 166.

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undoubtedly available to human beings but to which they are co-accountable. An example is the duty to conserve, protect, and maintain nature for the future generations. Reason is intuitive: ecological systems are non-available and necessary, natural laws cannot be violated without annihilating or endangering the very existence of human beings, and on the other hand, the fact of belonging to ecological systems is necessary also for human beings considering the part/whole relationship that exists between organisms, the populations of different biological species, the higher levels in the way life is organized. If this is so, for a re-reading of the law is to be significant, it must abandon some of the preconditions of the Western legal system—it being an accomplice of the various (environmental, economic, and social)46 crises—among which the vertical, rather than horizontal, reconstruction, that strips nature of its generating, ordering and knowledge capacity, and gradually reduces it to a mere sphere in which human beings act and live, a merely functional element at the service of the human being and of his arbitrariness. Abandoning this reconstruction to account for the indissoluble bond between nature and man (one for the other but also one with the other), in the sign of mutual correspondence and of simultaneous implication. There is a term that perhaps is better than any other in summarizing and expressing the essential, uniting, intimate relationship between nature and man: it is the expression that in some respects is untranslatable, Waldeinsamkeit, which in some literary, musical, and pictorial works holds a key position. Indeed, it refers to a sort of overlap, even confusion, between nature (one of its aspects: the forest) and the human being (one of his dimensions: emotions), and more in particular, it is the strong feeling of solitude that affects anyone who wanders into a forest, loses himself, and is enveloped by it momentarily or forever. To quote Waldeinsamkeit by Ralph Waldo Emerson, The forest is my loyal friend, Like God it useth me.

List of Cases ECJ 17.06.1981, C-113/80, Commission v Ireland, ECR 1625 [cit. in para 4] ECJ 07.02.1985, C-240/83, Procureur de la République v A.D.B.H.U., ECR 531 [cit. in para 4] ECJ 20.09.1988, C-302/86, Commission v Denmark, ECR 4607 [cit. in para 14] ECJ 09.07.1992, C-2/90, Commission v Belgium, ECR 4431 [cit. in para 25] ECJ 02.04.1998, C-213/96, Outokumpu Oy, ECR 1777 [cit. in para 25] EC, 25.06.1998, C-203/96, Dusseldorp BV and Others v Minister van Volkshuisvesting, Ruimtelijke Ordening en Milieubeheer, ECR 4075 [cit. in para 25] ECJ 14.07.1998, C-389/96, Aher-Waggon v Germany, ECR 4473 [cit. in para 14] ECJ 01.04.2004, C-53/02 and C-217/02, Commun Braine-le-Château and Michel Tillieut and othersi v Région wallonne, ECR I-03251 [cit. in para 14]

46

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ECJ 14.12.2004, C-309/02, Radlberger Getränkegesellschaft mbH & Co v Land Baden-Württemberg, ECR I-11763 [cit. in para 14] ECJ, 11.12.2008, C-524/07, Commission v Austria, ECR 187 [cit. in para 25]

References47 Amabili, F. (2012). Diritto europeo dell’ambiente. Torino: Giappichelli. Barnabò, L., & Majocchi, L. V. (Eds.). (1990). Europa 1992: dall’atto unico al governo europeo. Milano: Il Sole 24 ore. Bilancia, P., & D’Amico, M. (2009). La nuova Europa dopo il Trattato di Lisbona. Milano: Giuffrè. Blaser, G. (2016). Les critères de durabilité environnementale de l’Union européenne. Geneva: Schulthess Verlag. Calliess, C., & Ruffert, M. (Eds.). (2016). EUV/AEUV. Munich: Beck. Capra, F., & Mattei, U. (2017). Ecologia del diritto. Scienza, politica, beni comuni. Aboca: Aboca Edizioni. Cataldi, G. (2001). Ambiente (tutela dell’) Diritto della Comunità europea. In Enciclopedia Giuridica Treccani. Roma. Ciani Scarnicci, M., et al. (Eds.). (2015). Economia, ambiente e sviluppo sostenibile. Milano: Franco Angeli. Cordini, G., Marchisio, S., & Fois, P. (2017). Diritto ambientale. Profili internazionali, europei e comparati. Torino: Giappichelli. Costato, L., & Manservisi, S. (2012). Profili di diritto ambientale nell’Unione europea. Quaderni del Centro di documentazione e Studi sulle Comunità europee, No. 10. Padova: Cedam. Curti Gialdino, C. (Ed.). (2012). Codice dell’Unione Europea, TUE e TFUE commentati articolo per articolo. Napoli: Simone. Delreux, T., & Happaerts, S. (2016). Environmental policy and politics in the European Union. London: Palgrave MacMillan. Di Salvatore, E. (2008). La tutela dell’ambiente. In S. Mangiameli (Ed.), L’ordinamento europeo, vol. III, Le politiche dell’Unione (pp. 527–556). Milano: Giuffrè. Fracchia, F. (2010). Lo sviluppo sostenibile. La voce flebile dell’altro tra protezione dell’ambiente e tutela della specie umana. Napoli: Editoriale scientifica. Fragola, M. (2010). Il Trattato di Lisbona che modifica il Trattato sull’Unione europea e il Trattato della Comunità europea. Milano: Giuffrè. Garabello, R. (1999). Le novità del Trattato di Amsterdam in materia di politica ambientale comunitaria. Rivista giuridica dell’Ambiente, 14(1), 151–164. García, R. A. (2015). Tratado de Lisboa: y versiones consolidadas de los Tratados de la Unión Europea y de funcionamiento de la Unión Europea. Cizur Menor (Navarra): Thomson-Civitas. Kingston, S. (Ed.). (2013). European perspectives on environmental law and governance. New York: Routledge. Kingston, S., Heyvaert, V., & Čavoški, A. (2017). European environmental law. Cambridge: CUP. Mastragostino, F. (Ed.). (2011). Gli strumenti economici e consensuali del diritto dell’ambiente. Napoli: Editoriale Scientifica. Melchionni, M. G. (2008). Alle origini dell’atto unico europeo. Rivista di Studi Politici Internazionali, 75(1), 103–109. Monteduro, M., & Tommasi, S. (2015). Paradigmi giuridici di realizzazione del benessere umano in sistemi ecologici ad esistenza indisponibile e appartenenza necessaria. In Benessere e regole

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All cited internet sources in this comment have been accessed on 9 December 2019.

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dei rapporti civili. Lo sviluppo oltre la crisi (pp. 161–202). Napoli: Edizioni scientifiche italiane. Pillitu, P. A. (2007). Il principio dello sviluppo sostenibile nel diritto ambientale dell’Unione europea. In P. Fois (Ed.), Il principio dello sviluppo sostenibile nel diritto internazionale ed europeo dell’ambiente (pp. 219–250). Napoli: Editoriale scientifica. Pocar, F., & Baruffi, M. C. (Eds.). (2014). Commentario breve ai Trattati dell’Unione Europea. Padova: Cedam. Renna, M. (2012). I principi in materia di tutela dell’ambiente. Rivista Quadrimestrale di Diritto dell’ambiente, 1–2, 62–83. Sanchez Galera, M. D. (2016). La integración de las políticas energéticas y ambientales en la Unión Europea: Paradojas y contradicciones a la luz del paradigma de la sostenibilidad. Revista General de Derecho Administrativo, 43, 3–28. Schiano Di Pepe, L. (2012). Cambiamenti climatici e diritto dell’Unione Europea. Obblighi internazionali, politiche ambientali e prassi applicative. Torino: Giappichelli. Sjåfjell, B., & Wiesbrock, A. (Eds.). (2015). The greening of European business under EU law: Taking Article 11 TFEU seriously. New York: Routledge. Streinz, R. (Ed.). (2018). EUV/AEUV (3rd ed.). Munich: Beck. Strozzi, G., & Mastroianni, R. (2016). Diritto dell’Unione Europea. Parte istituzionale. Torino: Giappichelli. Tizzano, A. (Ed.). (2014). Trattati dell’Unione europea. Milano: Giuffrè.

Amato Mangiameli

Article 12 [Consumer Protection] (ex-Article 153.2 TEC) Consumer4 protection requirements6–7 shall be taken into account2, 3, 4–5 in defining and implementing2, 5, 10 other Union policies and activities.7, 8, 9, 11

Contents 1. 2.

The Competence Under Article 12 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Constitutional Dimension of Article 12 TFEU Under the Impact of Article 38 EUCFR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 List of Cases References

1.

The Competence Under Article 12 TFEU

The provision is about the competence of the EU without stipulating specific obligations for the EU institutions. It was hoped that the relocation of the socalled “principle of integration”1 (formerly defined in Article 153.2 EC) by Article 12 TFEU at the beginning of the TFEU in Title II, together with other general provisions, will positively affect its role, by its better visibility.2 Article 12 TFEU gives to the EU a shared competence in the meaning of Article 4.2 TFEU, which implies that such competence exists and may be exercised in addition to the competence of the MS, which have the primary responsibility for consumer protection. Although it can be viewed as a quasi-competence norm, Article 12 TFEU does not change the competence of the EU, it only reinforces the exiting concept of the EU’s role in consumer protection. Article 12 TFEU does not drive to implied powers for the EU institutions in the field of consumer policy. Article 12 TFEU is not competing with the provisions of Article 169 TFEU or Article 114 TFEU and does not affect the legislative activity of the EU under these provisions, especially under Article 114 TFEU. Article 12 TFEU does not give a constitutional entitlement to the EU institutions to harmonize consumer law.3 As lex specialis vis-a-vis Article 12 TFEU, Article 114 TFEU provides a higher standard of protection demanding for the “highest level of protection”.4 This is why “the system building role of Article 12 TFEU, as imposing a coherence 1

de Vries (2016), p. 416. Benöhr (2013), p. 42. 3 Weatherill (2013), p. 357. 4 Schmidt-Kessel (2016), p. 240. 2

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requirement for the consumer protection provisions of the policies of the EU in relation to Article 169 TFEU and Article 114 TFEU”,5 is questionable in the light of the above arguments. The addressees of Article 12 TFEU are not explicitly mentioned in its text. It follows from the context that it concerns primarily the institutions of the EU.6 Although Article 12 TFEU does not mention the MS directly, it has been argued that since EU policies and measures are enforced at MS level, it is also addressed to MS.7 From this approach follows that every provision of the secondary law should be interpreted in the light of Article 12 TFEU. However, such a requirement should not affect MS’ broad discretion within the process of implementation of EU consumer policy, and should not imply for them to act autonomously, namely, to initiate or intervene in other policies of the EU, led by consumer protection requirements. Article 12 TFEU may bind the MS to consider consumer protection requirements within the process of implementation and enforcement of Union acts only within the scope of the EU policy concerned. Thus, it is hard to imagine that MS could use Article 12 TEFU for competence enlarging function (Kompetenz-ausweitende Funktion8), leading in practice to more consumer friendly interpretation and enforcement of the EU secondary law, than such acts actually allow. The MS have no tools under Article 12 TFEU to pursue action taking by the EU institutions or to sanction the EU institutions for weak or lack of consideration of consumer interest in other policies. The same is true for the EU institutions (especially the Commission and the CJEU) vis-a-vis the MS. Under Article 12 TFEU, the EU institutions cannot control whether the MS have considered consumer interest when implementing and enforcing other EU policies. All these arguments support the idea, to which I subscribe, that only the institutions of the EU are bound by Article 12 TFEU and not the Member States.9 It is not clear yet what impact the repositioning of this horizontal provision in the text of the TFEU may have on the concept of consumer. In this context, it has been argued that the referral of Article 12 TFEU to “other policies and measures” supposes a strong connection also to Article 169 TFEU, whereas others stress that its roots in former Article 153.2 TEC demands for conceptual separation of the two provisions.10 It remains for the CJEU to elucidate this question. However, considering the very weak practical impact of Article 12 TFEU, it would be utopia to

5

Schmidt-Kessel (2016), p. 256. Lurger, in Streinz (2012), Artikel 12 AEUV para 2; Schmidt-Kessel (2016), p. 255; Pfeiffer, in Grabitz et al. (2010), Artikel 12 AEUV para 3. 7 Schmidt-Kessel (2016), p. 256; Pfeiffer, in Grabitz et al. (2010), Artikel 12 AEUV para 12; Seatzu (2018), p. 127; Pfeiffer, in Grabitz et al. (2019) Artikel 12 AEUV para.3. 8 Schmidt-Kessel (2016), p. 255. 9 Frenz (2010), p. 1224. 10 Schmidt-Kessel (2016), p. 255. 6

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suppose that it may have any significant integrative role in the development of a uniform concept of “consumer” via other “policies and measures” of the EU. The control function of Article 12 TFEU is strongly limited by its lacking justiciability, above all. While some authors do not exclude such possibility,11 it is hard for others to imagine that secondary law will be challenged under Article 12 TFEU.12 Article 12 TFEU is a “principle norm” only. Hence, it does not establish subjective rights for the consumers vis-a-vis the MS authorities13 and does not impose enforceable obligations onto the institutions of the EU or the MS. As not conferring subjective rights onto individuals, compliance of EU institutions with Article 12 TFEU cannot be controlled by affected individuals or associations of individuals, unless subject to regulations or directives under secondary law.14 Only in such context may Article 12 TFEU guide the courts (European and national) to consider the interest of the consumers, while interpreting the Community acts or the national implementing norms. Otherwise, there is no other form of judicial control over the compliance with Article 12 TFEU by the institutions of the EU.15 Article 12 TFEU uses the syntagma “consumer protection requirements” while does not specify whether this includes consumer rights only, as defined by the provisions of primary and secondary consumer law, including the rulings of the CJEU, or also includes the legitimate interests and freedoms of the consumers pursued by fundamental rights and the general principles of EU law (including those of the European private law). Full consideration of the toolbar framing consumer protection at EU level would plead in favor of an extensive interpretation of the syntagma, since the fundamental rights and principles as well are the products of the EU’s policy on consumer protection, developed by legislative or judicial way. In this direction pleads also the inclusion of Article 38 on consumer protection in the Charter of Fundamental Rights and the ongoing process of constitutionalization and proceduralization of consumer law both at EU level and at MS level.16 Furthermore, the consumer protection requirements mentioned in Article 12 TFEU include not only the objectives defined in Article 169.1 TFEU (protection of consumer health, safety, economic interest, the right to information, education, and self-representation), but also those based on Article 169.2 (b) TFEU stemming from EU measures which support, supplement and monitor the policy pursued by the MS. Article 169.1 TFEU and Article 169.2 TFEU also supports that the syntagma “consumer protection requirements” should be interpreted extensively, including both categories of measures. In addition, such requirements may also

11

Others argue for the justiciability of Article 12 TFEU, see Frenz (2010), p. 1219; Lurger, in Streinz (2012), Artikel 12 AEUV para 4. 12 Reich (2010), p. 16. 13 Schmidt-Kessel (2016), p. 255; on Article 153 EC, see Reich (1999), p. 9. 14 Reich and Micklitz (2014), p. 29. 15 Reich and Micklitz (2014), p. 30. 16 On constitutionalization, see Benöhr (2013) and Gutman (2014).

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stem from non-binding EU acts. However, Article 12 TFEU does not require from EU institutions to consider such consumer protection requirements that do not originate from EU law. The requirement of Article 12 TFEU applies to EU policies and measures, including those adopted under Article 352 TFEU.17 Article 12 TFEU demands for extensive interpretation of the term “policy” since in practice any EU policy (not market policies only) may have implications on consumers. However, the provision does not require having in place a policy at EU level for Article 12 TFEU to become applicable.18 The requirement of Article 12 TFEU covers any EU “measures” that may affect the consumers. Article 12 TFEU is meant as a “balancing provision”, meaning, other policies should not lower the level of protection granted to consumers by EU law. Article 12 TFEU is not a conflict norm, since it does not locate consumer policy above other policies of the EU. The legal basis of the EU legislation will define the scope of the EU “policy”, and consumer protection will always be considered within that policy scope. Furthermore, it does not imply for the institutions of the EU a pro-consumer, pro-active attitude. In this context, it must be recalled that consumer protection is not an aim on its own in the EU; most of EU consumer law is market oriented, aimed at the completion of the Internal Market, by mitigating existing differences in market entry costs generated by diversity in legislation at MS level. Article 169 TFEU is clear in this respect by stating that the requirement to promote consumer health, safety, economic interest, right to information and to representation are assured by measures adopted under Article 114 TFEU. On the level of protection, Article 12 TFEU raises the question whether it should be viewed as a weaker tool in the service of the consumers than Article 169 TFEU, Article 114 TFEU, or Article 38 CFR, on the reason that it does not oblige the EU to ensure a high or the highest level of protection. It has been argued in this context that in case of conflict between the requirement of consumer protection and other principles of the EU, Article 12 TFEU should not prevail.19 In practice, this should not matter much because the competence norms (Article 169 TFEU and Article 114 TFEU) that define the substance of the “consumer protection requirements” under the EU law demand for a high level of consumer protection. The practical consequence of Article 12 TFEU remains unclear as it was in case of its predecessor, mainly because there are many linkages between horizontal and sectoral policies and between these and the policies of the Internal Market.20 The weak potential of Article 12 TFEU in enhancing the role of consumer considerations in other policies of the EU is seen mainly in its roots in former Article 153.2 EC, which also had a merely formal role21 and was surrounded with skepticism, because of the lack of any criteria or guidance on establishing which policies

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Schmidt-Kessel (2016), p. 255. Schmidt-Kessel (2016), p. 255. 19 Frenz (2010), p. 1219. 20 Frenz (2010), p. 1291. 21 Reich (1999), p. 4. 18

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and actions are those where the interest of the consumers should be considered.22 Such approaches narrow too much the potential of Article 12 TFEU, which in its current wording could be expanded practically onto all policies of the EU affecting directly or indirectly the consumers, those subordinated to market aims, and those outside market aims. Nevertheless, the main reason beyond the lack of interest of EU institutions to exploit Article 12 TFEU or former Article 153.2 TEC may be that primary EU law has never defined in clear terms the place of consumer policy vis-avis other policies, in broad meaning, the debate being limited at consumer policy subordinated to market aims, the development of the Internal Market of the EU. No legal act can be mentioned that referred to Article 12 TFEU when defining its policy aims. So far for the EU institutions, Article 12 TFEU has rather procedural than substantive implications, this being exhausted in the duty to give reasons for their legislative activity as required by Article 296.2 TFEU, according to which regulations, directives, and decisions shall state the legal basis on which they are based. It is important to emphasize that the obligation of providing the reasons is subject to judicial review by the CJEU and not the actual legal basis chosen. Such control does not result in a substantive review of the policies of the EU on their conformity with the requirement of Article 12 TFEU. It is for the national courts and the CJEU to further elaborate on the potential of Article 12 TFEU and test the boundaries of its horizontal impact, which seem not happening, as it did not happen in the case of its predecessor. Article 12 TFEU may work in the context of the four freedoms in support of non-market values under the heading of mandatory requirements, allowing for limitation of such rights.23 This does not mean that Article 12 TFEU should be treated at the same level of ranking as the economic freedoms, as has been argued in the legal literature.24

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The Constitutional Dimension of Article 12 TFEU Under the Impact of Article 38 EUCFR

The impact of the principle contained in Article 12 TFEU has been envisaged to increase by the effectivity of the Charter of Fundamental Rights of the EU, which in Article 38 by integrating the provision of Article 12 TFEU and Article 169 TFEU states: “Union policies shall ensure a high level of consumer protection”. It has been hoped that Article 38 EUCFR will give to Article 12 TFEU more “human dimension” possibly leading to an improvement of consumer access to justice.25 The “constitutionalized consumer” via fundamental rights was seen as mean of last resort—not only to overcome marketization and fragmentation of consumer law—but also “to save consumer protection” since the emphasize could be placed 22

Stuyck (2000), pp. 386–387. Stuyck (2000), pp. 386–387; Schmidt-Kessel (2016), p. 280. 24 Lurger, in Streinz (2012), Artikel 12 AEUV para 4. 25 de Vries (2016), p. 416. 23

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again on “protection”, which would revitalize the social dimension of consumer law.26 However, the function of Article 38 EUCFR is largely predetermined by being a principle only. Article 51 EUCFR makes distinction between rights and principles in the sense that rights shall be respected and principles shall be observed, and their application promoted within the limits of competence provided in the Treaties. Under Article 51.1 EUCFR, the provisions of the EUCFR are binding for the institutions and bodies of the Union with due regard for the principle of subsidiarity, and to the MS, only when they are implementing union law. Article 51.2 EUCFR is also clear in respect that the EUCFR does not establish any new power or task or modify powers and tasks defined in the Treaty. From Article 52.5 EUCFR also follows that the principles enshrined in the EUCFR are not directly enforceable. The marriage of the two provisions does not extend the scope of the EU‘s legislative competence, and it does not contain enforceable rights, which demand action from EU institutions.27 It also does not impose on the EU institutions to prioritize consumer interest in other policies. Although it is not excluded that in the future Article 38 EUCFR will be more used for judicial elucidation of the interpretation difficulties of other provisions of the primary or secondary Union law that provide individual rights to consumers or of other fundamental rights, it cannot receive by judicial way a function of granting individual rights.28 Article 52 EUCFR on the scope and interpretation of the EUCFR states regarding the role of principles contained in the EUCFR that these “may be implemented by legislative and executive acts taken by institutions, bodies, offices and agencies of the EU and by acts of Member States when they are implementing Union law, in the exercise of their respective powers”. Article 52 EUCFR also adds that “they shall be judicially recognisable only in the interpretation of such acts in the ruling of their legality.” From Article 52 EUCFR follows that under Article 38 EUCFR the chances to pursue a more consumer friendly implementation of enforcement of EU policies are quite low. In line with this argument, it has been correctly advocated that Article 38 EUCFR remains “more of political inspiration than independently enforceable legal norm”, such status of Article 38 EUCFR emphasizing the importance of achieving more influence of the consumer interest in the political negotiations on the aim and content of secondary consumer law.29 From the wording of Article 51 EUCFR also follows that Article 38 EUCFR should not be viewed as a competence norm, it does not add new competences or powers to the EU and does not modify existing ones, it is rather a restatement of rights, making them more visible, more evident. Thus, the relation between Article 12 TFEU and Article 38 EUCFR should be viewed from such perspective. In practice, it is difficult to imagine that a

26

Micklitz (2016), pp. 35–36. Weatherill, in Peers et al. (2014), Article 38 EUCFR p. 1008. 28 Rudolf, in Meyer (2014), Artikel 38 GrCh p. 567. 29 Weatherill (2013), p. 72. 27

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legislative act will be challenged by the CJEU because it does not grant high level of consumer protection under Article 38 EUCFR, since this is never mentioned as sole legal basis of the secondary legislation, but jointly with other provisions on competence.30 Considering that Article 12 TFEU is not a substantive norm imposing rights and duties on its addressees, it is questioned even its independence vis-a-vis Article 38 EUCFR because the limitations enlisted in Article 51 et seq. of the EUCFR and Article 6 TFEU allowing for an extension of competence, do not apply in relation to Article 12 TFEU.31 However, in this question, it should not be ignored that the function of the two also differs; whereas Article 12 TFEU is about the competence of the EU and has a systemic function pleading for coherence in policy and measures, Article 38 EUCFR does not have such a role. Nevertheless, Article 38 EUCFR may have in practice more weight than Article 12 TFEU; hence, consumer law is being increasingly constitutionalized both domestically and at EU level. Article 38 EUCFR is much stronger tool than Article 12 TFEU in two points: the level of protection (high level) and the requirement of “action taking”, suggested by the terms “shall ensure”. However, regarding the level of protection granted under Article 38 CFR, it has been suggested that similar to the principle established in case of Article 114 TFEU, Article 38 EUCFR does not impose on the EU institutions to grant the highest level of protection existing in individual MS.32 From the wording and location of Article 38 EUCFR it follows that it would not change that basic assumption on which is built the ruling of the CJEU in Deposit guarantee33 that the “internal market consideration” prevails over the individual concerns of the MS, meaning, in case a measure of harmonization lowers the national standards of protection in some MS, this does not justify for annulment of the measure.34 In practice, it has not yet been sufficiently perceived that Article 38 EUCFR as “optimizing the room for action by the EU institutions, requiring from the EU the implementation of consumer policies to the larges possible extent.”35 Article 38 EUCFR would imply that exceptions from consumer protection should be interpreted narrowly. Others view such role of Article 38 EUCFR as more limited; it would not mean that in case of doubt, EU law should always be interpreted in favor of the consumer, since Article 38 EUCFR only requires a balancing with other high values of the founding Treaties.36 Consumer protection is complementary to the Internal Market.37 30 Parliament/Council Directive 2013/11/EU on alternative dispute resolution for consumer disputes, O.J. L 165/63 (2013); Parliament/Council Regulation (EU) No 524/2013 on online dispute resolution for consumer disputes, O.J L 165/1 (2013). 31 Schmidt-Kessel (2016), p. 240. 32 Schmidt-Kessel (2016), p. 240. 33 Weatherill, in Peers et al. (2014), Article 38 CFR p. 1018. 34 Case C-233/94, Germany v Parliament and Council (ECJ 13 July 1997). 35 Schmidt-Kessel (2016), p. 280. 36 Schmidt-Kessel (2016), p. 282. 37 Schmidt-Kessel (2016), p. 282.

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Secondary EU law that mention Article 38 EUCFR in preamble clearly refers to it as a “principle”. So far, Article 38 EUCFR has been mentioned in two instances in secondary EU law38 as part of the policy reasoning of the secondary law, along with Article 169.1 and Article 169.2 (a) TFEU, being meant to reinforce the standard setting of Article 114 TFEU: high level of protection. This could suggest that Article 38 EUCFR could be more than Article 169 TFEU, but in fact, its value added vis-a-vis Article 169 TFEU is not elaborated in the preamble of secondary legislation. These secondary laws mention Article 38 EUCFR as standard formula along Article 169 TFEU without packing out its content. Article 38 EUCFR is referred to in the preamble of these legal acts because these concern the consumers’ right to justice, thus enhance procedural justice. At the same time, it is at least interesting that Article 38 EUCFR and not Article 47 EUCFR was mentioned in such context, as usually Article 47 EUCFR being invoked in national and European judicial law as tool of procedural justice. Both legal acts consider important to stress in their preambles the respect for fundamental rights and principles, in particular Articles 7, 8, 38, and 47 EUCFR.39 Worth noticing that Article 38 EUCFR was referred to in the context of consumer protection legal acts adopted within the framework of completion of the Internal Market and not yet in the context of other policies. Both legal acts referred above have chosen Article 114 TFEU as legal basis. Both acts refer to Article 38 EUCFR not as to a competence norm, but as to a tool of enhancing existing consumer rights. The use of Article 38 EUCFR within the context of internal market policies may have indeed a major role in balancing between market policy and non-market consumer interest at level of enforcement, even in case of a consumer protection legislation. The provision covers the existing five scopes of consumer protection at EU level, including those enlisted in Article 169.1 TFEU such as consumer health and safety, economic interest, and the consumers’ right to goods and services.40 However, Article 38 EUCFR should not be treated in practice as only reinforcing the approach of Article 169 TFEU, limited to its means, as has been argued,41 because such approach defines the function of Article 38 EUCFR out of the legal instrument in which the Charter of Fundamental Rights is located. It would be against the aim of the EUCFR, as defined in its Article 51, to limit in practice the reach of Article 38 EUCFR to the field of EU consumer policy because its requirement involves all EU policies. It may certainly drive to limitation of other fundamental rights, such as

38 Parliament/Council Directive 2013/11/EU on alternative dispute resolution for consumer disputes, O.J. L 165/63 (2013); Parliament/Council Regulation (EU) No 524/2013 on online dispute resolution for consumer disputes, O.J L 165/1 (2013). 39 Intend 35 of Regulation (EU) No 524/2013 and intend 61 of Directive 2013/11/EU. 40 Schmidt-Kessel (2016), p. 275. 41 Rudolf, in Meyer (2014), Artikel 38 GrCh p. 564.

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Article 16 EUCFR on the freedom of enterprise or the right to property, under Article 17 EUCFR.42 Although not yet tested in practice, it was also raised in the legal literature that Article 38 EUCFR could be integrated into the legal analysis of the EU’s legislative activity under Article 169 TFEU. It was argued that this could be done based on the approach of the CJEU in the second tobacco advertising case,43 likely without altering the outcome of that case.44 However, it would be too simplistic approach to assimilate Article 38 EUCFR to Article 169 TFEU because the functions of the two are different. Whereas Article 169 TFEU is a real competence norm for the EU, stating that consumer policy is a shared competence, meaning, it lies at MS level, Article 38 EUCFR is a fundamental principle of the EU law, which does not enlarge or modify the scope of competence of the EU in consumer law. Nevertheless, Article 38 EUCFR may contribute to more synergy between the EU and the MS not yet achieved by Article 169 TFEU. It is a different question however, whether it could bring to different outcome the use of Article 38 EUCFR from that under Article 169 TFEU under the current policy of the CJEU. In this context, it was criticized as unacceptable and meaningless the approach of the CJEU45 that assuring a high level of consumer protection does not mean that the EU has to preserve the level of protection existing in the specific MS, if the EU measure contributes to a higher level of protection Union wide.46 Nevertheless, it follows from Article 38 EUCFR that under the obligation of loyalty the MS should not enact measures that would lower the level of protection granted under Article 169 TFEU or its effective implementation, since this would lower the level of protection in the EU that is incompatible with Article 4.2 (f) TFEU.47 Although Article 38 EUCFR does not provide new subjective rights for the consumers and lacks justiciability, which weakens its effectiveness,48 the use of the terms “shall assure” indeed implies for the MS the obligation to provide tools that assure effectiveness of the subjective rights conferred onto consumers under the EU law. Article 38 EUCFR may have a role also in the context of EU measures adopted under Article 169.2 TFEU that supplements MS measures without binding the MS in measures falling outside the competence of the EU. Article 38 EUCFR would assure that other policies of the EU do not conflict with those EU measures that complement MS policies. Here, however, the EU action taking should not lower the level achieved in the Member States, but it should consider those levels. Hence, Article 169.2 (a) TFEU allows for plurality of such MS policies.

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Schmidt-Kessel (2016), p. 280. Case C-380/03, Germany v Commission (ECJ 12 December 2006). 44 Weatherill, in Peers et al. (2014), Article 38 CFR p. 1018. 45 Case C-380/03, Germany v Commission (ECJ 12 December 2006). 46 Knops, in von der Groben et al. (2015), Artikel 38 GrCh para 35. 47 Lurger, in Streinz (2012), Artikel 169 para 18. 48 Weatherill, in Peers et al. (2014), Article 38 CFR p. 1009. 43

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For now, the judicial interpretation of the consumer acquis seems to be the main and the only dimension of Article 38 EUCFR where its function is being tested. Article 38 EUCFR has been referred in a very few preliminary references made to the CJEU,49 and even more rarely in claims made at the Court of First Instance, but usually ignored by the order of the General Court.50 Worth noticing in this context that Article 47 EUCFR has more significant role in enhancing consumer protection in unfair terms law cases than Article 38 CFR, in line with the process of proceduralization of contract fairness law.51 The reason beyond this tendency is simple. Article 47 EUCFR provides rights to consumers, whereas Article 38 EUCFR does not. In those cases, Article 38 EUCFR did not bring to a better outcome for the consumer as compared to the situation when it would have not been invoked. Article 38 EUCFR did not affect so far the existing “instrumentalization” of EU consumer protection for other purposes.52 The approach of the CJEU seems to confirm existing trends instead of advancing innovative solutions. On the other hand, it has been given voice to fears that referral to and use of the standard of high level of consumer protection may even drive to a “judicial competence creep”,53 affecting legal certainty and predictability. Another possible role of Article 38 EUCFR that would enhance its horizontal function would be in free movement law, since it fits into the existing patterns of free movement case law, especially considering the principle of precaution. The case law of the CJEU provides examples on the use of fundamental rights not only as additional tool in justification of mandatory requirements, but as mandatory requirement on its own.54 Such potential of Article 38 of the EUCFR to reinforce existing analytical approaches in free movement law is confirmed by Commission v Austria,55 where the court considered Articles 35 and 37 EUCFR. Thus, the role of Article 38 EUCFR as “a lever to force re-balancing” cannot be denied, even if it has been argued in this context that Article 38 EUCFR may not change the structure of the analysis.56 Nevertheless, the argument that Article 38 EUCFR raised consumer protection at the hierarchical level of the economic

49

Case C-227/08, Eva Martín (ECJ 17 December 2009); Case C-394/11, Belov (ECJ 31 January 2013); Case C-12/11, Denis Macdonagh v Ryanair Ltd. (ECJ 31 January 2013); Case C-413/12, Asocation de Consumidores Independientes de Castilla y León (ECJ 5 December 2013); Case C451/12, Estaban Garcia (ECJ 16 January 2014). 50 Case T-382/11, Cristina Pigui v Commission (GC 9 July 2012). 51 Case C-169/14, Sánchez Morcillo and Abril García (ECJ 17 July 2014); C-472/11, Banif Plus Bank (ECJ 21 February 2013) para 29; Case C-49/14, Finanmadrid EFC (ECJ 18 February 2016) para 98. 52 Schmidt-Kessel (2016), p. 276. 53 Weatherill, in Peers et al. (2014), Article 38 CFR p. 1020. 54 See in general Kingreen, in Calliess and Ruffert (2016), Artikel 34-36 AEUV para 218. 55 Case C-28/09, Commission v Austria (ECJ 21 December 2011). 56 Weatherill, in Peers et al. (2014), Article 38 CFR pp. 1013–1014.

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freedoms57 is only partially standing, although it gave to consumer protection a constitutional dimension that is unquestionable, because it does not provide enforceable new rights. However, it can strengthen existing ones. Constitutionalization of consumer law will certainly expand also to free movement law in an age where both the EU and the MS look at fundamental rights and principles in search for innovative solutions to enhance effectiveness in consumer protection. The location of Article 38 EUCFR under the chapter “solidarity” may also offer considerable creative opportunities for interpretation by judicial ways.58 The CJEU has not yet seen in Article 38 EUCFR a tool in defending specific protection needs of vulnerable consumers and also has not yet elaborated on the interplay of the two provisions of the EUCFR (Article 47 and Article 38) sufficiently, although in some cases admits indirectly that consumers may be vulnerable, which justifies more protection that actually granted under Article 47 EUCFR.59 For example, in Eva Martín,60 the CJEU ignored to consider the legal question in light of Article 38 EUCFR, although the referring court invoked it in support of proceeding on own motion with the test of contract fairness under Directive 93/13/ EC in a case where no plea of nullity was raised by the consumer defendant when submitting its defense. Association belge des consommateurs was the first case in which the CJEU made use (even if marginal) of Article 38 EUCFR in interpreting EU law, although this did not bring a different outcome as in absence of such reference. In this case, the largest consumer association of Belgium invoked Article 11(c) of Commission Regulation 802/2004/EC implementing Council Regulation 139/2004/EC on control of economic concentrations, in a merger case in the field of gas and electricity supply, arguing that the proposed merger affects the competition and by this the interest of the consumers. The General Court in finding that the consumers may rely on the procedural rules of the Commission Regulation 139/2004/EC invoked Article 153.2 TEC, the predecessor of Article 12 TFEU, and mentioned Article 38 EUCFR in support of the requirement of a high level of consumer protection.61 However, the Court rejected the claim of the association because “legal certainty precludes the admissibility of an action before the EU Court from being dependent on whether the national law [. . .] confers on interested third parties more extensive procedural rights and/or judicial protection than provided for under EU law” and declared the claim of the consumer association as inadmissible.62

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Schmidt-Kessel (2016), p. 279. Schmidt-Kessel (2016), p. 256. 59 Micklitz (2016), p. 26. 60 Case C-227/08, Eva Martín (ECJ 17 December 2009). 61 Case T-224/10, Association belge des consommateurs test- achats ASBL (GC 12 October 2011) para 43. 62 Case T-224/10, Association belge des consommateurs test- achats ASBL (GC 12 October 2011) para 83-84. 58

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In Kusionova, Article 38 EUCFR was mentioned in relation to the interpretation of Directive 93/13/EC against a national provision, which enables the creditor to recover sums based on unfair terms by evicting the consumers’ immovable property without the assessment of the contract term as to whether it is unfair. Although the questions referred by the national court did not mention Article 47 EUCFR, the CJEU considered that the two provisions should be analyzed jointly for the elucidation of the interpretation problem, and held that the mandatory requirements of these articles are applicable to the implementation of Directive 93/13/EC.63 In Pohotovost, Article 38 EUCFR was invoked for the interpretation of Articles 6 to 8 of Directive 93/13. The CJEU established that Article 6(1), Article 7(1), and Article 8 of Directive 93/13 read in conjunction with Article 38 EUCFR and Article 47 EUCFR must be interpreted as not precluding national legislation that does not allow a consumer protection association to intervene in support of a consumer in proceedings for enforcement of a final arbitration award.64 However, in this case the CJEU established that the requirement of Article 38 EUCFR that Union policies must ensure a high level of protection also applies to the implementation of Directive 93/13/EC. On the other hand, it has established that “since Directive 93/13/EC does not expressly provide for the consumer protection associations to intervene in individual disputes involving consumers, Article 38 of the EUCFR cannot, by itself, impose an interpretation of that Directive which would encompass such a right.”65 The ruling confirms that Article 38 EUCFR does not grant rights onto the consumers and cannot be used for a more pro–consumer interpretation of the secondary EU law that would exceed the aim and scope of EU directives adopted for the completion of the Internal Market of the EU. In Valierie Hariev Belov, the Bulgarian referring court combined in its question Article 38 EUCFR with the Directive on energy supply when questioning whether the consumers of electricity are entitled to check meter reading regularly.66 The CJEU denied to have jurisdiction in that case, thus did not interpret Article 38 EUCFR in support of a sectoral directive in the field of electricity supply. The cases that in some way refer to Article 38 EUCFR also raise the question whether the requirement of a high level of consumer protection under Article 38 EUCFR has horizontal direct applicability. The Constitutional Court of the Czech Republic answered this question negatively, in the context of analyzing the interplay between the Article 169 TFEU, Article 12 TFEU, and Article 38 EUCFR. It established that Article 38 TFEU “is a principle that EU institutions and Member States reflect upon when transposing EU legislation, whereas is possible to claim the principle of consumer protection before the courts only for the purpose of

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Case C-34/13, Monika Kusionova v SMART Capital (ECJ 10 September 2014) para 45-47. Case C- 470/12, Pohotovost’s s. r.o. v Miroslav Vlasuta (ECJ 27 February 2014) para 57. 65 Case C- 470/12, Pohotovost’s s. r.o. v Miroslav Vlasuta (ECJ 27 February 2014) para 52. 66 Case C-394/11, Belov (ECJ 31 January 2013) para 36. 64

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interpretation and to check the legality of these acts.”67 The Slovak Constitutional Court in general terms admitted that the EUCFR provides a higher-level consumer protection than the Constitution (which does not provide for consumer rights as fundamental rights) and considered that the Charter binds Slovakia.68 The role of Article 38 EUCFR at enforcement level may be enhanced by further elaboration on the general concepts of the provision. It also applies for Article 38 EUCFR that principles may develop into tools by judicial law framing. This elaboration may start with the concept of consumer, on which Article 38 EUCFR is silent. The legislative history of the EUCFR did not consider whether the principle will promote the interest of the average, well informed, and conscious consumer only, or will consider also of those “vulnerable”, who need a different, a higher standard of protection, because that time the need for differentiated consumer protections standards was not yet an issue. This does not bar the national or European judiciary to develop under Article 38 EUCFR differentiated standards of protection. Evolution of a uniform concept in primary law either in the context of Article 12 TFEU or Article 38 EUCFR is considered unrealistic,69 as it is under the rest of competence norms. Thus, Article 38 EUCFR is not bound to develop along the consumer concept of Article 114 TFEU or of Article 169 TFEU. The role of Article 38 EUCFR may develop in the future in line with the rise or fall of the process of constitutionalization of consumer law, as part of the toolbar of “innovative governance”70 in consumer protection and in line with the increasing role of the principles in framing consumer law governance in Europe. Governance by principles and the role of principles based rules is increasing in many areas of EU law, including the field of consumer law, especially in the field of European private law. The interplay of the fundamental rights with competence norms needs to be considered from this perspective as well. However, today the academic discourse on Article 38 EUCFR seems to stagnate too much around the origin of the provision, being step locked in its past, instead of looking to the future, although one must admit that Article 12 TFEU and Article 38 EUCFR are imprecise from a legal drafting point of view and lack institutional tools. It remains the task of national courts and of the European judiciary to further explore and develop the role of Article 12 TFEU and Article 38 EUCFR as tools guarding over the constitutional design of EU consumer policy, keeping in mind that consumer policy is a shared competence within the EU, driven by the principle of subsidiarity. The two provisions should be viewed in their complementarity. Nevertheless, “constitutionalization of consumer law should not be equated with problem-solving, since the courts can do no more than setting

67 Czech Constitutional Court (Ustasni skud), Case III. US 3725/13 (Decision of 10 April 2014), referred to in European Agency of Fundamental Rights, Annual Report 2015, p. 178. 68 Slovakia, Regional Court Prestov, Case C17Co/286/2015 (Decision of 28 June 2016), referred to in European Agency of Fundamental Rights, Annual Report 2017, p. 14. 69 Schmidt-Kessel (2016), p. 276. 70 Term used by Stuyck (2013), p. 393.

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incentives for the political agenda and the CJEU is not in the position to solve conflicts. It can only remind national governments and parliaments of their responsibilities.”71

List of Cases CFI/GC

GC 12.10.2011, T-224/10, Association belge des consommateurs test- achats ASBL, ECLI:EU:T:2011:588 [cit. in para 61 and 62] GC 09.07.2012, T-382/11, Cristina Pigui v Commission, ECLI:EU:T:2012:350 [cit. in para 20]

ECJ

ECJ 13.06.1997, C-233/94, Germany v Parliament and Council, ECLI:EU: C:1997:231 [cit. in para 15] ECJ 12.12.2006, C-380/03, Germany v Commission, ECLI:EU:C:2006:772 [cit. in para 18 and 19] ECJ 17.12.2009, C-227/08, Eva Martín, ECLI:EU:C:2009:792 [cit. in para 23] ECJ 21.12.2011, C-28/09, Commission v Austria, ECLI:EU:C:2011:854 [cit. in para 23] ECJ 31.01.2013, C-12/11, Denis Macdonagh v Ryanair Ltd., ECLI:EU:C:2013:43 [cit. in para 20] ECJ 31.01.2013, C-394/11, Belov, ECLI:EU:C:2013:48 [cit. in para 20] ECJ 21.02.2013, C-472/11, Banif Plus Bank, ECLI:EU:C:2013:88 [cit. in para 20] ECJ 05.12.2013, C-413/12, Asocation de Consumidores Independientes de Castilla y León, ECLI:EU:C:2013:800 [cit. in para 20] ECJ 16.01.2014, C-451/12, Estaban Garcia, ECLI:EU:C:2014:231 [cit. in para 20] ECJ 27.02.2014, C-470/12, Pohotovost’s s. r.o. v Miroslav Vlasuta, ECLI:EU: C:2014:101 [cit. in para 23] ECJ 17.07.2014, C-169/14, Sánchez Morcillo and Abril García, ECLI:EU: C:2014:2099 [cit. in para 20] ECJ 10.09.2014, C-34/13, Monika Kusionova v SMART Capital, ECLI:EU: C:2014:2189 [cit. in para 23] ECJ 18.02.2016, C-49/14, Finanmadrid EFC, ECLI:EU:C:2016:98 [cit. in para 20...]

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Micklitz (2016), pp. 35–36.

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References Benöhr, I. (2013). EU consumer law and human rights. Oxford: Oxford University Press. Calliess, C., & Ruffert, M. (Eds.). (2016). EUV/AEUV. Kommentar. (5th ed.). Munich: Beck. de Vries, S. A. (2016). The Court of Justice’s ‘Paradigm Consumer’ in EU free movement law. In D. Leczykiewicz & S. Weatherill (Eds.), The images of the consumer in EU law (pp. 401–429). Oxford: Hart. Frenz, W. (2010). Handbuch Europarecht (Vol. 6). Heidelberg: Springer. Grabitz, E., Hilf, M., & Nettesheim, M. (Eds.). (2010 et seqq.). Das Recht der Europäischen Union. Kommentar. (Loose-leaf). Munich: Beck. Gutman, K. (2014). The constitutional foundations of European contract law: A comparative analysis. Oxford: Oxford University Press. Meyer, J. (Ed.). (2014). Charta der Grundrechte der Europeaischen Union (4th ed.). BadenBaden: Nomos. Micklitz, H.-W. (2016). The consumer: Marketised, fragmentised, constitutionalised. In D. Leczykiewicz & D. Weatherill (Eds.), The images of the consumer in EU law (pp. 21–41). Oxford: Hart. Peers, S., Hervey, T. K., Kenner, J., & Ward, A. (Eds.). (2014). The EU charter on fundamental rights. Oxford: Hart. Reich, N. (1999). Verbraucherpolitik und Verbraucherschutz im Vetrag von Amsterdam. Verbraucher und Recht, 3–10. Reich, N. (2010). Von der Minimal- zur Voll- zur “Halbharmonisierung”, Zeitschrift für Europäisches Privatrecht, p. 7–39. Reich, N., & Micklitz, H.-W. (2014). Economic law, consumer interests, and EU integration. In H.-W. Micklitz, P. Rott, & N. Reich (Eds.), European consumer law (pp. 1–65). Cambridge: Intersentia. Schmidt-Kessel, M. (2016). Verbraucherschutzrecht in der EU. In M. Gebauer & C. Tiechmann (Eds.), Europäisches Privat-und Unternehmensrecht. Enzyklopädie Europarecht (Vol. 6, pp. 223–379). Nomos: Baden-Baden. Seatzu, F. (2018). On the current meaning and potential effects of the horizontal consumer clause of Article 12 of the TFEU. In F. Ippolito, M. E. Bartoloni, & M. Condinanzi (Eds.), The EU and the proliferation of the integration principles under the Lisbon Treaty (pp. 123–135). Abingdon: Routledge. Streinz, R. (Ed.). (2012). EUV/AEUV. Kommentar. (2nd ed.). Munich: Beck. Stuyck, J. (2000). European consumer law after the Treaty of Amsterdam: Consumer policy in or beyond the internal market. Common Market Law Review, 37, 364–400. Stuyck, J. (2013). The transformation of consumer law in the EU in the last 20 years. Maastricht Journal of European and Comparative Law, 20, 385–402. von der Groeben, H., Schwarze, J., & Hatje, A. (Eds.). (2015). Europäisches Unionsrecht. Commentary. (7th ed.). Baden-Baden: Nomos. Weatherill, S. (2013). EU consumer law and policy. Cheltenham: Edward Elgar.

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Article 13 [Animal Protection] In formulating and implementing the Union’s agriculture, fisheries, transport, internal market, research and technological development and space policies, the Union and the Member States2–4 shall, since animals are sentient beings, pay full regard to the welfare requirements of animals,5–14, 17–19 while respecting the legislative or administrative provisions and customs of the Member States relating in particular to religious rites, cultural traditions and regional heritage.13–14, 20

Contents 1. 2.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Animals As Sentient Beings and the Protection of Their Wellbeing Requirements . . . . . . 5 2.1. Origin and Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2. Principles and Derogations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3. Final Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 List of Cases References

1.

Introduction

Many are the books, essays, and writings on animal liberation1 and on the lives of animals,2 which are informed by either of two fundamental visions: superiority of human beings, hence exploitation and domination over the animal kingdom, or all beings belong to the tree of life, hence empathy and respect. Animals do not speak, they do not pray nor do they cry: it is Ulysses who cries for Argo,3 and yet they have feelings and they suffer,4 and it is for this reason that 1

Adopting the title by Singer (1975). Consider, for instance, the text of the two lectures (Poets and Animals—Philosophers and Animals) delivered by the imaginary character Elizabeth Costello, by Coetzee (1999). 3 See Grenier (1998). 4 This is what Bentham (1907), chapter XVII, section I, no 122, insisted on: “The day has been, I grieve to say in many places it is not yet past, in which the greater part of the species, under the denomination of slaves, have been treated by the law exactly upon the same footing as, in England for example, the inferior races of animals are still. The day may come, when the rest of the animal creation may acquire those rights which never could have been withheld from them but by the hand of tyranny. The French have already discovered that the blackness of the skin is no reason why a human being should be abandoned without redress to the caprice of a tormentor. It may come one day to be recognized, that the number of the legs, the villosity of the skin, or the termination of the os sacrum, are reasons equally insufficient for abandoning a sensitive being to the same fate. What else is it that 2

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they cannot be degraded to the mere status of objects that are entirely at our disposal, nor can they be likened to consumer goods and to property.5 Like Flush, spiritual object beyond/above any price and any interest,6 animals belong to that rare order of assets to which we cannot simplistically attach a monetary value, as if they were immovable property, because they are a sign of life and of the sensitivity with which one perceives and/or shares with others the external experiences (an event, a condition, or action) and also internal experiences that produce emotions of various types: anxiety, pleasure, joy, pain, fear. Philosophy, literature, science, but also law and politics, are all à l’épreuve de l’animalité,7 because the awareness we have achieved in our present day world is that animals must be considered as ends, and not means, the holders of rights and interests that are fundamental for life, freedom, non-suffering,8 and such as to empty cages once and for all instead of merely making them bigger!9 Hence, the various developments in legislation on animal protection and on how they must be kept in all the various circumstances,10 developments so compelling that, not even the EU has been able, or has wanted, to avoid considering, despite all the difficulties and problems associated with this stance.11 Particularly significant and dense, Article 13 TFEU enshrines the value of the wellbeing of animals as sentient beings, which must be taken into full account when the EU and MS frame and implement policies on agriculture, fishing, transportation, internal market, technological research and development, and outer space. Introduced into the TFEU by the Lisbon Treaty, this provision ushers in a major paradigm shift in how man-animal relations are viewed, in that (in its way) it transcends the radical nature of anthropocentric and biocentric12 prejudice, and

should trace the insuperable line? Is it the faculty of reason, or, perhaps, the faculty of discourse? But a full-grown horse or dog is beyond comparison a more rational, as well as a more conversable animal, than an infant of a day, or a week, or even a month, old. But suppose the case were otherwise, what would it avail? the question is not, Can they reason? nor, Can they talk? but, Can they suffer?”. 5 On the issue of considering animals as possessions or objects that can be owned, see the ruling of the United States Court of Appeals, Bilida v. McLeod, 211 F.3d 166 (1st. Cir. 2000), concerning the well-known case of the racoon called Mia. 6 As stated by Woolf (1933). 7 Expression used by de Fontenay (1999). 8 For more on this viewpoint: Broom and Johnson (1993), Francione (1995), Clark et al. (1997) and Wise (2000). 9 Appeal launched by Regan (2004). 10 Including divorce and separation, in the case of pets, see Randolph (2012); Rook (2014), p. 177 et seqq. 11 See Regan (1988), Cavalieri (1999), Lombardi Vallauri (2007), Costato et al. (2011), Mazzoni (2011) and Castignone and Lombardi Vallauri (2012). 12 According to the anthropocentric viewpoint, in the name of a privileged moral status of the homo sapiens, according to the biocentric viewpoint, in the name of the superfluity of human kind, as synthetically expressed by Taylor: if we were to look at the issue from the viewpoint of Nature and if we were to voice its interest, the conclusion of our era, that is six inches long, would be very probably dismissed with a hearty ‘Bon voyage! (Taylor 1998, pp. 76–77).

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acknowledges—for the very first time13—that animals have the status of beings worthy of attention and legal protection, irrespective of how useful they may be for human health, consumer protection, fair competition, protection of biodiversity or for maintaining the balance of a given ecosystem. And in this sense it is important to emphasize that—albeit not going so far as to attribute a true legal subjectivity to animals—Article 13 TFEU marks an important and decisive step forward not only in the range but also and above all in the quality of the legal protection that is attributed to them.14 The policies that are subject to the application of this provision (agriculture, fishing, transportation, internal market, technological research and development, space) are shared competences (Article 4 TFEU)15 and that as such are subject to the principle of subsidiarity (Article 5.3 TEU). Positioned under Title II, and hence among the “provisions for general application”, Article 13 TFEU contains a stipulation with a far-reaching and widespread scope that places it in the ranks of the provisions of principle, namely, Article 8 on the elimination of inequality and promotion of equal opportunities between men and women, Article 11 TFEU on the protection of the environment and on sustainable development, Article 12 TFEU on consumer protection, Article 15 TFEU on transparency, Article 16 TFEU on the protection of personal data, Article 17 TFEU on respect for churches, associations and religious communities, philosophical and non-denomination organizations. That is why Article 13 TFEU has hierarchical pre-eminence over the various community policies. In particular, this is a provision having a cross-sectional scope and as such, it is bound to be applied transversally in all policy-making provisions of the Union. Besides the obvious affinity with other norms contained in Title II having a similarly broad scope, it is important to point out that Article 13 TFEU has three absolutely unique aspects that set it apart from all the other provisions of the TFEU and which contribute to making it a sort of di ἅpax in the European acquis. A first distinctive feature is the fact that Article 13 TFEU is the only provision in the Treaty that is addressed not only to the EU but explicitly and directly also to the MS. The second, instead, is due to the presence in its wording of a twofold restriction to implementation, namely, the peremptory list of policies affected by the

13

Among the Constitutions of the Member States, Article 20a GG, introduced in 1994 and amended in 2002, intends to protect the natural foundations of life and animals in light of the accountability that the State has towards future generations. Indeed Article 20a reads: “Der Staat schützt auch in Verantwortung für die künftigen Generationen die natürlichen Lebensgrundlagen und die Tiere im Rahmen der verfassungsmäßigen Ordnung durch die Gesetzgebung und nach Maßgabe von Gesetz und Recht durch die vollziehende Gewalt und die Rechtsprechung.” See Epiney, in von Mangoldt et al. (2018), Artikel 20a GG; Murswiek, in Sachs (2017), Artikel 20a GG. 14 See Tacchi (2007); Blumann (2009); Sirsi (2011); Giovannelli, in Curti Gialdino (2012), Articolo 13 TFUE p. 481; Sobbrio (2013); Barzanti, in Tizzano (2014), Articolo 13 TFUE p. 415; Scovazzi, in Pocar and Baruffi (2014), Articolo 13 TFUE p. 177. 15 Mangiameli (2006) and Sbrescia (2008).

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provision and the express exception arising from the need to consider the legislative and administrative provisions of MS and their customs, in particular in the areas of religious rites, cultural traditions and regional heritage. Finally, unlike the other norms of Title II, Article 13 TFEU is not presented according to the usual “policy plus actions” formula, in that it refers simply to policies without mentioning the associated actions to be taken.

2.

Animals As Sentient Beings and the Protection of Their Wellbeing Requirements

2.1. Origin and Developments

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In various historic periods, the animal issue was raised by legislators and judges, especially in connection with the aspects of violence in the man-animal relationship. However, the signs of a major shift towards seeing animals as beings deserving a higher degree of respect, with growing evidence of sensitivity towards them, can be observed in the area of international law, especially during the Sixties and Seventies, which culminated with the Universal Declaration of Animal Rights (1978). A symbolic act16 that, albeit simply embodying a political declaration of intent (that had been preceded by the 1953 Delhi Forum Declaration) comprising 14 articles, marked a decisive step in asserting that all forms of life deserve respect and protection. The Declaration introduced the concept of man’s unavoidable responsibility towards animals, because recognition by the human species of the right to existence of the other animal species constitutes the foundation for the coexistence of species in the world, and respect for animals is linked to respect among human beings themselves. The Declaration is clear: all animals are born with an equal claim on life and the same rights to existence (Article 1); they all have the right to respect, attention, care and protection by human beings (Article 2 (a) and (c); all animals have the right to live and grow at the rhythm and under the conditions of life and freedom peculiar to their species (Article 5), similarly they are entitled to a reasonable limitation of the duration and intensity of their work, to the necessary nourishment and to rest (Article 7). In general, animals have dignity that is incompatible with medical, scientific, commercial experimentation, which implies physical or psychic suffering (Article 8), and with exhibitions and being used for the amusement of man (Article 10). In particular, all animals belonging to wild species have the right to liberty in their natural environment whether land, air or water, and should be allowed to procreate (Article 4); all pets have the right to complete their natural lifespan (Article 6).

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To be exact this was a “first symbolic act, albeit historically compelling, in the long path towards the recognition of a legal status to non-human beings” (quote from Tallachini 2010, p. 307).

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We might add to this that man, as an animal species, cannot arrogate to himself the right to exterminate other animals or exploit them, thus violating their rights (Article 2 (b)); man cannot arrogate the right to abandon them (Article 6); and where animals are used in the food industry, they must be nourished, transported and killed without causing anxiety or suffering (Article 9). Hence, the declaration that any act involving the wanton killing of an animal is biocide, in other words a crime against life (Article 11); any act involving mass killing of wild animals is a crime against the species, in other words, genocide (Article 12), and that the rights of animals, like human rights, should enjoy the protection of the law (Article 14). Hence, the obligation that dead animals must be treated with respect and that scenes of violence on animals must be banned from cinema and television, except for scenes intended to show the violations of animal rights (Article 13). Besides the 1978 Declaration, there are also the general conventions on environmental protection that take into account animals secondarily as part of the territory (this is the case of the Convention on the Wetlands of Ramsar (1971),17 the Montego Bay Convention (1982),18 and the Kyoto Protocol (1997)19), and the conventions on the protection of individual species (suffice it to mention the Convention for the Regulation of Whaling (1946),20 the Convention for the Conservation of Antarctic Seals (1972), the Convention on International Trade in Endangered Species of Wild Fauna and Flora (1973)21 and the Convention on Migratory species (1979)22). Parallel to the developments in the law at the international level, starting from the 1970s, there was an equally significant evolution also on the European scene. 17

An intergovernmental treaty that provides a framework for action at national level and for international cooperation aimed at conserving and promoting a “rational” use of the humid areas of the planet and of their resources. It is the only international treaty on the environment that deals with the protection of these special ecosystems, which, besides conserving biological diversity, provide water and primary productivity on which depends the survival of innumerable plant and animal species. Available at https://www.ramsar.org/sites/default/files/documents/library/scan_certified_e.pdf. 18 An intergovernmental treaty that defines the rights and responsibilities of States in the use of the seas and oceans and in the management of mineral resources. Available at https://www.un.org/ depts/los/convention_agreements/texts/unclos/unclos_e.pdf. 19 In other words, the only international agreement aimed at setting forth a limitation on the emissions responsible for the greenhouse effect, climate change, and global warming, currently ratified by 192 States. 20 Available at https://www.loc.gov/law/help/us-treaties/bevans/m-ust000004-0248.pdf. 21 Convention also known under the acronym CITES, whose purpose is to regulate the international trade of endangered species of wild flora and fauna and that affects the trading of both live and dead specimens (whole specimens, body parts or by-products obtained from them), seeking to prevent the commercial exploitation of the endangered species. 22 This Convention encourages international agreements to protect the species that migrate from one Country to another, emphasizing the importance of local activities such as scientific research, monitoring, regulation of hunting, protection and where necessary the reinstatement of resting and mating sites, emphasizing the need to reduce the obstacles to migration and control all elements that may cause hazards.

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In the 1957 EEC Treaty, there was no mention of environmental matters (which obviously include animals) because the purpose of the Treaty was to create a common market and ensure the four freedoms of movement (of people, goods, services and capitals). Apart from the important pro-animal manifestations of the past, the first signs of a change in sensitivity towards animals, apart from important previous proanimal writings that led to a different approach regarding the protection and wellbeing of animals,23 date back to 1964 in England, following the publication of Animal Machines,24 a book by Ruth Harrison, which describes intensive livestock and poultry farming practices. The outcry of the British public regarding the information in the book prompted the British Government to appoint a committee to look into the welfare of farm animals. The Committee produced a report known as the Brambell Report (1965), which identified five fundamental freedoms that all animals should be able to enjoy and without which their wellbeing cannot be ensured. They are (1) freedom from hunger, thirst and bad nutrition; (2) freedom from discomfort by providing an appropriate environment including a shelter and resting area; (3) freedom from pain, injury or disease; (4) freedom to express normal behaviour; (5) freedom from fear and distress. Leaving aside these initial signs of change, the first European legal instrument on the protection and wellbeing of animals is the European Convention for the Protection of Animals during International Transport (1968)25 (revised in 200626). It was followed by the European Convention for the Protection of Animals Kept for Farming Purposes (1976);27 European Convention for the Protection of 23

Consider the contribution given by anti-specie ethics as early as the first half of last century by authors of the likes of Marcucci, Capitini, Pioli, Baglietto, Martinetti (see Marcucci 2011). 24 Harrison (1964). 25 It is worth making some fundamental quotes taken from the General Provisions: “before animals are loaded for international transport, they shall be inspected by an authorized veterinary officer of the exporting country who shall satisfy himself that they are fit for transportation [. . .]. Loading shall be carried out under arrangements approved by an authorised veterinary officer” (Article 3); “Animals likely to give birth during carriage or having given birth during the preceding 48 hours shall not be considered fit for transportation” (Article 4); “Animals shall be provided with adequate space and, unless special conditions require to the contrary, room to lie down [. . .]. The means of transport and containers shall be constructed so as to protect animals against inclement weather conditions and marked differences in climatic conditions. Ventilation and air space shall be adapted to the conditions of transport and be appropriate for the species of animals carried. [. . .] During transport animals shall be offered water and appropriate food at suitable intervals. Animals shall not be left more than 24 hours without being fed and watered. This period may, however, be extended if the journey to the destination where the animals are unloaded can be completed within a reasonable period” (Article 6). Available at https://rm.coe.int/1680072317. 26 Available at https://rm.coe.int/CoERMPublicCommonSearchServices/DisplayDCTMContent? documentId¼0900001680083710. 27 This Convention lays down the regulatory foundations for the protection of livestock welfare requirements and, in particular, of animals in intensive stock farming systems. The Convention requires the adoption of measures designed to ensure animal welfare and confirms the need to

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Animals for Slaughter (1979),28 the European Convention for the Protection of Pet Animals (1987),29 the Additional Protocol to the European Convention for the Protection of Animals during International Transport (1989),30 the Declaration on the Protection of Animals (1991) approved in Maastricht just before the adoption of the Maastricht Treaty, the European Convention for the Protection of Vertebrate Animals used for experimental and other Scientific Purposes (1991),31 the Protocol of Amendment to the European Convention for the Protection of Animals kept for Farming Purposes (1992),32 and the Protocol of Amendment to the European Convention for the Protection of Vertebrate Animals used for experimental and other Scientific Purposes (2005).33 At the level of secondary EU law, measures include: the Directive 119/1993 on the protection of animals at the time of slaughter or killing,34 Council Regulation 338/97 on the protection of species of wild fauna and flora by regulating trade

avoid unnecessary suffering or injury, while stating the right to having their physiological and ethological needs respected. 28 Which sets forth some obligations: “[. . .] While waiting in the means of transport they shall be protected from extremes of weather and provided with adequate ventilation. [. . .]” (Article 3); “The animals shall be unloaded and moved with care. [. . .] The animals shall not be frightened or excited. [. . .] animals shall not be lifted by the head, feet or tail in a manner which will cause them pain or suffering” (Article 4); “Animals shall not be taken to the place of slaughter unless they can be slaughtered immediately” (Article 6). 29 Which states: “Nobody shall cause a pet animal unnecessary pain, suffering or distress. Nobody shall abandon a pet animal” (Article 3); “Any person who keeps a pet animal or who has agreed to look after it, shall be responsible for its health and welfare. Any person who is keeping a pet animal or who is looking after it shall provide accommodation, care and attention which take account of the ethological needs of the animal in accordance with its species and breed, in particular: a) give it suitable and sufficient food and water; b) provide it with adequate opportunities for exercise; c) take all reasonable measures to prevent its escape” (Article 4). 30 Available at https://rm.coe.int/CoERMPublicCommonSearchServices/DisplayDCTMContent? documentId¼0900001680077d99. 31 This Convention seeks to limit the use of animals used for scientific purposes and states that experiments on animals should be the last resort encouraging the use of alternative methods and confirming the obligation to avoid that animals used as guinea pigs be subject to unnecessary suffering. 32 Aimed at expanding the scope of application of the Convention to include biotechnological stock-farming and adapt its provisions to the new circumstances in stock-farming matters. Available at https://rm.coe.int/CoERMPublicCommonSearchServices/DisplayDCTMContent? documentId¼090000168007bd27. 33 Which updated the provisions of the Convention in the light of the more recent scientific applications. Available at https://www.coe.int/it/web/conventions/full-list/-/conventions/rms/ 090000168007f2cc. 34 Council Directive 93/119/EC on the protection of animals at the time of slaughter or killing, O.J. L 340/21. The Directive sets forth that animals must be spared any avoidable pain, distress, or suffering and envisages that the stunning (or killing facilities) be designed in such a way as to ensure rapid stunning and death.

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therein,35 Directive 22/1999 related to the keeping of wild animals in zoos,36 Regulation 998/2003 on the animal health requirements applicable to the noncommercial movement of pet animals,37 Regulation 1/2005 on the protection of animals during transport and related operations,38 Regulation 1523/2007 banning the placing on the market and the import to, or export from, the EC of cat and dog fur, and products containing such fur,39 Regulation 1069/2009 laying down health rules on animal by-products and derived products not intended for human consumption,40 and last, Directive 63/2010 on the protection of animals used for scientific purposes.41 This rapid and concise overview shows how within the European acquis attention to animals and to their wellbeing was definitely clearly articulated and exhaustive. Looking more closely at the origin of Article 13 TFEU, it is interesting to point out that, although this Article integrates an important element of novelty introduced with the Lisbon Treaty (2007), its roots can be traced back to some previous provisions. The Maastricht Treaty (1992) itself contained a clear and unconditional recommendation. Declaration No 24 called upon the European Parliament, the Council and the Commission, as well as the MS, when drafting and implementing Community legislation on the common agricultural policy, transport, the internal market and research, to pay full regard to the welfare requirements of animals.

35

Council Regulation (EC) No 338/97 on the protection of species of wild fauna and flora by regulating trade therein, O.J. L 61/1. 36 Council Directive 1999/22/EC relating to the keeping of wild animals in zoos, O.J. L 94/24. This Directive comprises 11 Articles. Its objectives are “to protect wild fauna and to conserve biodiversity by providing for the adoption of measures by Member States for the licensing and inspection of zoos in the Community, thereby strengthening the role of zoos in the conservation of biodiversity”. 37 Regulation (EC) No 998/2003 of the European Parliament and of the Council on the animal health requirements applicable to the non-commercial movement of pet animals and amending Council Directive 92/65/EEC, O.J. L 146/1. The text was subsequently repealed by Regulation (EU) No 576/2013 of the European Parliament and of the Council on the non-commercial movement of pet animals and repealing Regulation (EC) No 998/2003 Text with EEA relevance, O.J. L 178/1. 38 Council Regulation (EC) No 1/2005 on the protection of animals during transport and related operations and amending Directives 64/432/EEC and 93/119/EC and Regulation (EC) No 1255/ 97, O.J. L 3/1. 39 Regulation (EC) No 1523/2007 of the European Parliament and of the Council banning the placing on the market and the import to, or export from, the Community of cat and dog fur, and products containing such fur, O.J. L 2007 L 343/1. 40 Regulation (EC) No 1069/2009 of the European Parliament and of the Council laying down health rules as regards animal by-products and derived products not intended for human consumption and repealing Regulation (EC) No 1774/2002, O.J. L 300/1 It repealed Regulation (EC) No 1774/2002 of the European Parliament and of the Council laying down health rules concerning animal by-products not intended for human consumption, O.J. L 273/1. 41 Directive 2010/63/EU of the European Parliament and of the Council on the protection of animals used for scientific purposes, O.J. L 276/33.

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With the Amsterdam Treaty (1997) an extra step was taken. On request by the UK government, the text of Declaration No 24 was transposed almost verbatim into Protocol No 33 “on protection and welfare of animals”. It is no coincidence that the opening words of the Protocol states that “the high contracting parties, desiring to ensure improved protection and respect for the welfare of animals as sentient beings; have agreed upon the following provision which shall be annexed to the TEC”, on the basis of which, “in formulating and implementing the Community’s agriculture, transport, internal market and research policies, the Community and the Member States shall pay full regard to the welfare requirements of animals, while respecting the legislative or administrative provisions and customs of the Member States relating in particular to religious rites, cultural traditions and regional heritage”. As is evident, the Protocol of the Amsterdam Treaty introduces two important novelties: (1) it calls attention to the protection of the welfare requirements of animals as sentient beings; (2) it expands the range of recipients of the provision in that it is not addressed only to the EP, to the Council and the Commission, but to the European Community as a whole. Furthermore, the Protocols have the same legal value as the Treaties, unlike the Declarations that express a purely political and programatic commitment, and which, usually, are aimed at shaping a common conscience that, in time, should lead to the adoption of an ad hoc legal norm. On the other hand, however, we cannot fail to note that a counterbalance (and in some respects also some restraint) to these new elements, is the significant derogation to implementation in name of the need to respect the provisions and customs of MS regarding religious rites, cultural traditions and regional heritage. It was not until the approval of the Constitutional Treaty (2003) that the Protocol was incorporated and protection of animal welfare as sentient beings made its way directly into the Treaty (Article III-121). Among the unprecedented aspects introduced by Article III-121 are: (1) a significant and decisive expansion of the range of policies involved, which include fishing, technological development and space; (2) mention—for the first time directly in a European Treaty—that animals are sentient beings; (3) replacement of “regional heritage” in the singular, by the plural “regional heritages”; (4) and obviously the use of the term “Union” instead of “Community”. The provision contained in Article III-121 has been fully transposed into the Lisbon Treaty (2007), except for the expression “regional heritages” that has gone back to being in the singular. Finally, with the Treaty of Lisbon and Article 13 TFEU, we find a counterbalance, in its own way, to the shortcomings in terms of the protection of rights in the constitutions of MS. Apart from a few exceptions (the already mentioned Article 20a Grundgesetz42), the constitutions of MS do not envisage the protection of animal wellbeing among their purposes. It must be further pointed out that also Article 36 TFEU contains a reference to animals. Indeed, the latter envisages that the prohibitions laid down in Articles 34

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and 35 TFEU (namely, qualitative and quantitative restrictions on imports and exports) are not to affect the possibility for MS to maintain and/or envisage prohibitions or restrictions on imports, exports and goods in transit justified on grounds of the protection of the health and life of humans or animals. This norm is undoubtedly significant, as it mentions the protection of animals’ health and alongside the protection of people’s health and life, but its scope and field of application is far more limited than that of Article 13 TFEU.

2.2. Principles and Derogations

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Article 13 TFEU considers and protects animals as beings in themselves irrespective of their belonging to a given species (e.g., endangered species and vulnerable species) or to a specific bio-system. This position goes beyond the former anthropocentric conception that, by viewing animals as entities “in the purview” and “at the disposal” of man, not only did it not recognize any right or protection for them, but also de facto caused them to be equated to mere objects.43 Furthermore, this stance also leads to the emergence of animal rights that, albeit being logically and implicitly connected to environmental law (enshrined in Articles 11, 191, 192 and 193 TFEU), are seen as being so significant and important as to deserve an independent status of their very own. In other terms, animal rights transcend the people’s mere interest in living in a healthy environment or in promoting sustainable development. Article 13 TFEU acknowledges that animals are sentient beings; this is an important legal basis for setting animals apart from objects and material goods. However, the norm does not define the concept of sentience: it does not identify its boundaries, nor does it offer criteria that may prove useful to fully capture its meaning. The same occurs also in the expression “welfare of animals” whose importance is acknowledged by the Union, which invites MS to fully consider when developing and implementing policies. However, the actual notion of animal welfare is not stated explicitly and clarified neither in this Article nor, more importantly, in derived law. This is a vagueness that is typical of general regulations, which lends itself to being read in different ways (extensive or, on the contrary, restrictive) and runs the risk of being exposed to interpretations and applications that are not always uniform and adequately respectful of what is meant to be protected. In general, it can be stated that with the expressions ‘sentience beings’ and ‘animal welfare’ reference is made to a set of conditions and situations concerning non-human animals, since they are beings capable of feeling positive or negative experiences and their welfare is linked to these capacities and awareness (of feeling, obtaining benefits, experiencing, of being damaged).

43

More recently, see Driessen (2017), p. 547 et seqq.

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Sentience decidedly makes animals different from objects and from machines. Evidence for this can be found in language: for instance, if an object or a machine is not working it is defined as being damaged, while in the case of a sentient (animal) the term used is wounded, precisely because animals can feel pain and be aware of the damage they have been caused. Here again it is necessary to agree on the meaning of welfare, whose scope is by definition broad since reference is being made to a favourable state that embraces the biological, physical, psychological, relational and behavioural spheres. In this connection it is worth recalling the definition of welfare44 adopted in 1976 by the World Animal Health Organization: “animal welfare means how an animal is coping with the conditions in which it lives. An animal is in a good state of welfare if (as indicated by scientific evidence) it is healthy, comfortable, well nourished, safe, able to express innate behaviour, and if it is not suffering from unpleasant states such as pain, fear, and distress”. As can be noticed, the term welfare, refers not only to physiological needs but also to a condition of full balance and health (physical and mental), such as to enable the non-human animals to live in harmony with the environment and with the animals around them. This is an articulated and complex notion, which is the result of a theoretical debate in the literature on the issue of animal welfare, in particular of the dispute between the anthropocentric viewpoint and theories that attach moral considerations to non-human animals and propose a broader theory of human rights that cannot be the privilege of men alone if their justification is that they are compulsory.45 By considering animals as being worthy of a moral status, we are attributing to non-human animals needs, interests and rights that we are obliged to respect not only because their protection may carry benefits for us humans, but also because their welfare is morally important in and of itself.46 Besides the different ethics (distinguished in general as “ethics of liberation” and “ethics of human responsibility47) and the reasons for protecting non-human animals based on their characteristics (for instance: their having some degree of cognitive abilities, emotional capacity, and some predisposition to feeling pleasure and/or pain), today’s idea of setting animals apart from objects48 is accompanied by developments of the notion of animal welfare. This notion is central to the 3R method, which must be followed when developing a scientific research protocol: besides replacement (of the animal model with another model where possible) and reduction (reducing unavoidable animal experimentation to the bare minimum), refinement requires that the conditions of animals be improved for their welfare both before, during and after the experimental procedure. In actual fact, the notion has a much broader scope of action because it not only applies to the case of

44

Hughes (1976), pp. 1005–1018. Cavalieri (1999). 46 Warren (1997). 47 Battaglia (1997), p. 35 et seqq. 48 Marguenaud and Dubois (2009). 45

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experimentation, but to any case in which an animal is used, or when a mananimal interaction is involved, as shown by the specialized studies that explore the science and theory of animal welfare, which is now indispensable to formulate standards and guidelines and also to interpret them. Article 13 TFEU confirms the value of the welfare of animals as sentient beings and—thanks to the use of the adverb “fully”—contributes to making sure that this legal protection becomes a primary objective not only of the EU but also of MS, thus paving the way to the possibility of implementing it also at the national level (in the frequent cases where such measures are not in place). On the other hand, however, by virtue of its peculiar wording, the Article leaves ample room to discretion as to its enforcement in MS.49 Margins for evaluation and reflection that may be seem to be even too broad and that, in some cases, runs the risk of strongly curtailing the effectiveness of the guarantees that the Article envisages. While stating the need to protect the welfare requirements of animals, Article 13 TFEU envisages the possibility derogations for MS in the form of the need to respect the legislative or administrative provisions and customs relating in particular to religious rites, cultural traditions and regional heritage. In practice, the pursuit and concrete implementation of animal welfare by MS may be subject to limitations where there is the need to comply with domestic provisions (legislative, administrative and customs) and, in particular religious rites, cultural traditions and regional heritage. Subject areas that have always been particularly controversial and adversarial, thus inevitably become grounds for confrontation/ obstacle to the protection of animal welfare and produce sensitive balancing issues. Suffice it to mention the case of animals used for entertainment, sport, cultural, religious events and all the various practices of ritual slaughtering.50 Bullfights, Palio horse races, jousts, which at times are bloody besides being violent. The legal protection of animals runs into one major obstacle: it depends exclusively on man’s perception of the other, it is unconditionally subject to the intentions of a human being towards the other, and this is independent of the innate abilities or intelligence that an individual has or may develop.51 In the dissenting opinion of Judge Catherine Fraser, in the case of elephant Lucy and the Edmonton zoo, it is stated quite bluntly and without turns of phrases: “And yet, it must be conceded that the basic animal welfare model still involves attempting to balance animal pain against human need or pleasure. This approach is reflected in a number of areas: economic (farming, food production, animal husbandry, etc.); scientific 49

See Picozza (2012). See Michetti (2003). 51 In connection to this aspect Driessen (2017), p. 554, states that: “Many people would not want to forgo their bacon and for that reason treat pigs as food, no matter how intelligent they are. The point is that there is an element of selectivity in the treatment we mete out to animals that does not depend on the level of their innate abilities or intelligence but on factors relating to our perception and use of them. This has an impact on animal welfare, which is thus more geared towards humans’ perceptions and concerns than to the species’ needs.” 50

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(research, medicine, genetics, etc.); and social (entertainment, hunting, exhibition, etc.). Whether and in what circumstances the balancing of competing values should be re-calibrated, or other values weighed in that balance, or perhaps an entirely different model adopted that places greater emphasis on animal rights, is largely a question for the Legislature. [. . .] That said, in examining the arc of history and the relationship between humans and animals, it is clear that the development of the law has been influenced, and will continue to be, by mankind’s deepened understanding of our place in the universe. Humans may be at the top of the evolutionary chain. But with rights come responsibilities and one of them is that we are stewards of the environment. That stewardship is reflected in the legal obligations we have assumed not only to the physical biosphere but also to the animals with whom we share the Earth. Should moral, ethical or spiritual considerations not serve as adequate motivation in shaping those legal obligations, then the fact that this also happens to be in humanity’s own collective enlightened self-interest ought to suffice. Indeed, all evidently have.”52

3.

Final Remarks

With all its implications and consequences, Article 13 TFEU is undoubtedly an extremely important novelty and a real turnabout with respect to the past.53 This provision is the outcome of a more mature and mindful legal attention to the needs of animals as sentient beings. An attention which is reflected in the fact that this norm is placed among the general provisions, undeniably making it a core value, and hence subject to widespread and transversal enforcement. This is an article that opens a legal path that “albeit largely unwritten yet”,54 finally puts on a par human and animal interests,55 by stating that it is important to consider them and protect them.56 Alongside the five freedoms (➔ para 9) this path will take into account above all the right that every animal has of not being abused and killed for unnatural reasons.

52

Court of Appeal of Alberta, Reece v. City of Edmonton, 2011 ABCA 238, Dissenting Reasons for Judgment Reserved of The Honourable Chief Justice Fraser, 57–58. 53 It is interesting to recall that the first explicit reference made by the Court of Justice to Article 13 TFEU was in Case C-533/11, Brouwer (ECJ 14 June 2012), made in a preliminary ruling on the scope of Directive 91/629/EEC on the protection of bull-calves. On case law on the merits—and specifically on the need to protect animals also during transport across the States of the Union—see Joined Cases C-37/06 and C-58-06, Viamex Agrar Handel et ZVK (ECJ 17 January 2008); Case C455/06, Heemskerk BV (ECJ 25 November 2008); Case C-424/13, Zuchtvieh-Export GmbH (ECJ 23 April 2015). 54 Tallachini (2010), p. 322. 55 On this point, see Adinolfi (2016), p. 19 et seqq. 56 Lombardi Vallauri (2014), p. 523 points out: “animals are worthy of protection on the basis of two criteria: value and subjectivity”.

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Natural/unnatural and moral theory: we cannot blame the lion, the wolf and in general animals for their natural behaviour and needs, although this implies killing a gazelle, a deer, and at times even a man. Further, it is pointless to claim that the latter species have the right not to be killed by the former species. Likewise, the killing of animals by human beings (who by nature are omnivorous) is no less moral than the killing of animals by tigers or chimpanzees. While it is useless to claim the right of animals not to be killed, it is not as useless and inappropriate to state that an animal has the right not to be killed for unnatural reasons, that is to say without there being a true need or a true urgency. It is the natural/unnatural dialectics that constitutes the true divide between what is permitted and what is not, and that can be summarized by the expression of the ECtHR: “opposition to hunting cannot be equated with opposition to the slaughtering of animals for human consumption”.57 There certainly is a difference between man, animal, and things, and there is an evident difference between someone and something. The various someones compete against each other for their existence and their perpetuation. Only the individuals who prevail over others can reproduce themselves, transmitting to the subsequent generations the hereditary features that enabled them to survive. Even in the struggle, the various someones may recognize each other: and indeed the last Kantian in Nazi Germany was a dog, Bobby,58 and in the struggle some lines of continuity were traced. In its peculiar way, the original and provocative poem Varning för hunden (“Beware of the Dog!”) by Stig Dagerman confirms this: It is however regrettable that/people who live on social aid/have a dog”, has just declared/a councillor from Värmland./ The law is certainly imperfect:/gives the poor right to a dog./Why do not you get a rat?/ It’s funny and it does not cost money./ There are people in your house/He takes care of a dog all his life./Why not play with flies?/ They are also excellent company?/ The commune is the one that pays./This mode has to be finished/If not, you will see that soon/They will want to have a whale./ I, as a measure, do not see more than one:/kill all the dogs. Or, without hesitation,/to save the last ones of the commune,/It will be the poor who will be killed./

List of Cases ECJ

ECJ 17.01.2008, C-37/06 and C-58-06, Viamex Agrar Handel et ZVK, ECLI:EU: C:2008:18 [cit. in para 21] ECJ 25.11.2008, C-455/06, Heemskerk BV, ECLI:EU:C:2008:650 [cit. in para 21] 57 58

Appl. No 9300/07, Herrmann v Germany (ECtHR (G.C.) 26 June 2012) para 92. Lévinas (1976), p. 213 et seqq.

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ECJ 14.06. 2012, C-533/11, Brouwer, ECLI:EU:C:2013:659 [cit. in para 21] ECJ 23.04. 2015, C-424/13, Zuchtvieh-Export GmbH, ECLI:EU:C:2015:259 [cit. in para 21]

ECtHR

ECtHR 26.06.2012, 9300/07, Herrmann v. Germany [cit. in para 21]

References59 Adinolfi, A. (2016). Il trattamento degli animali nel diritto dell’Unione Europea tra interessi commerciali, protezione ambientale e “benessere”: verso lo sviluppo di valori condivisi? In A. Bianchi et al. (Eds.), Scritti per Luigi Lombardi Vallauri (pp. 19–44). Padova: Cedam. Battaglia, L. (1997). Etica e diritti degli animali. Roma-Bari: Laterza. Bentham, J. (1907). The principles of moral and legislation. London: Clarendon Press. Blumann, C. (2009). Les objectifs économiques et politiques de l’Union européenne: vecteurs ou limite de la protection des animaux. In J.-P. Marguenaud & O. Dubois (Eds.), Les animaux et droits européens au-delà de la distinction entre les hommes et les choses (pp. 81–94). Paris: Pédone. Brambell, F. W. R. (1965). Report of the technical committee to enquire into the welfare of animals kept under intensive livestock husbandry systems. London: Her Majesty’s Stationery Office. Broom, D. M., & Johnson, K. G. (1993). Stress and animal welfare. London: Chapman, & Hall. Castignone, S., & Lombardi Vallauri, L. (Eds.). (2012). La questione animale. Milano: Giuffré. Cavalieri, P. (1999). La questione animale. Per una teoria allargata dei diritti umani. Torino: Bollati Boringhieri. Clark, J. D., Rager, D. R., & Calpin, J. P. (1997). Animal well-being. Laboratory Animal Science, 47, 564–570. Coetzee, J. M. (1999). The lives of animals. Princeton: Princeton University Press. Costato, L., Borghi, P., Russo, L., & Manservisi, S. (Eds.). (2011). Dalla riforma del 2003 alla PAC dopo Lisbona. I riflessi sul diritto agrario alimentare e ambientale. Napoli: Jovene. Curti Gialdino, C. (Ed.). (2012). Codice dell’Unione Europea, TUE e TFUE commentati articolo per articolo. Napoli: Simone. de Fontenay, E. (1999). Le Silence des bêtes. La philosophie à l’épreuve de l’animalité. Paris: Fayard. Driessen, D. (2017). Fundamental animal rights in European law. European Law, 23(3), 547–585. Francione, G. L. (1995). Animals, property, and the law. Philadelphia: Temple University Press. Grenier, R. (1998). Les larmes d’Ulysse. Paris: Gallimard. Harrison, R. (1964). Animal machines. The new factory farming industry. New York: Ballantine Books. Hughes, B. O. (1976). Behaviour as an index of welfare. In Proceedings of the VI European poultry conference. Malta. Lévinas, E. (1976). Nom d’un chien ou le droit naturel. Difficile Liberté. Paris: Albin Michel. Lombardi Vallauri, L. (2007). Animali: istruzioni per il non-uso. Credere oggi, XXVII. Lombardi Vallauri, L. (2014). La questione animale come questione filosofico-giuridica. Rivista di filosofia del diritto, 521–532. 59

All cited internet sources in this comment have been accessed on 9 December 2019.

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Mangiameli, S. (Ed.). (2006). L’ordinamento europeo. L’esercizio delle competenze (Vol. 2). Milano: Giuffré. Marcucci, E. (2011). Che cos’è il vegetarismo? Rome: Edizioni dell’asino. Marguenaud, J.-P., & Dubois, O. (Eds.). (2009). Les animaux et les droits européens au-delà de la distinction entre les hommes et les choses. Paris: Pédone. Mazzoni, C. M. (2011). La questione dei diritti degli animali. Rivista Critica di Diritto Privato, 265–276. Michetti, M. (2003). Libertà religiosa e tutela degli animali: aspetti problematici della macellazione rituale in Germania. Annuario di Diritto tedesco, 539–573. Orrù, R. (2002). Il vento dei nuovi diritti nel Grundgesetz tedesco ora soffia anche sugli animali? Diritto Pubblico Comparato Ed Europeo, 1138–1143. Picozza, E. (2012). La direttiva 2010/63/UE. I poteri della Unione Europea e discrezionalità degli Stati membri. www.dirittoambiente.com Pocar, F., & Baruffi, M. C. (Eds.). (2014). Commentario breve ai Trattati dell’Unione Europea. Padova: Cedam. Randolph, M. (2012). Every Dog’s Legal Guide: a must-have for your owner. Berkeley: Nolo. Regan, T. (1988). The case for animal rights. London: Routledge. Regan, T. (2004). Empty cages: Facing the challenge of animal rights. New York: Rowman & Littlefield Publishers. Rook, D. (2014). Who gets Charlie? The emergence of pet custody disputes in family law: Adapting theoretical tools from child law. International Journal of Law Policy and the Family, 28(2), 177–193. Sachs, M. (Ed.). (2017). Grundgesetz Kommentar. Munich: C.H. Beck. Sbrescia, V. M. (2008). Le competenze dell’Unione Europea nel Trattato di Lisbona. Napoli: Edizioni Scientifiche Italiane. Singer, P. (1975). Animal liberation: A new ethics for our treatment of animals. New York: Random House. Sirsi, E. (2011). Il benessere degli animali nel Trattato di Lisbona. Rivista di Diritto agrario, 191– 210. Sobbrio, P. (2013). Le emozioni negate. Il bilanciamento degli interessi nelle normative sulla tutela, la protezione e il benessere degli animali non umani in Europa. In M. Andreozzi, S. Castignone, & A. Massaro (Eds.), Emotività animali. Ricerche e discipline a confronto (pp. 37–46). Milano: Led. Tacchi, P. (2007). La protezione degli animali in Europa. In Esseri senzienti da tutelare o soggetti pericolosi? Macerata: Eum. Tallachini, M. (2010). Dignità, etica science-based, democrazia: la tutela animale nella società europea della conoscenza. In A. G. Chizzoniti & M. Tallachini (Eds.), Cibo e religione: diritto e diritti (pp. 207–322). Rome: Libellula edizioni. Taylor, P. W. (1998). The ethics of respect for nature. In M. E. Zimmerman et al. (Eds.), Environmental philosophy: From animal rights to radical ecology (pp. 197–218). New Jersey: Prentice Hall. Tizzano, A. (Ed.). (2014). Trattati dell’Unione europea. Milano: Giuffrè. von Mangoldt, H., Klein, F., & Starck, C. (Eds.). (2018). Bonner Grundgesetz Kommentar. Munich: Verlag Franz Vahlen. Warren, M. A. (1997). Moral status. Obligations to persons and other living things. Oxford: Oxford University Press. Wise, S. M. (2000). Rattling the cage. Toward legal rights for animals. Cambridge: Perseus Books. Woolf, V. (1933). Flush: A biography. London: Hogarth Press.

Amato Mangiameli

Article 14 [Services of General Economic Interest] (ex-Article 16 TEC) Without prejudice to Article 4 of the Treaty on European Union or to Articles 93, 106 and 107 of this Treaty, and given the place occupied by services of general economic interest10–12 in the shared values of the Union as well as their role in promoting social and territorial cohesion,13 the Union and the Member States, each within their respective powers and within the scope of application of the Treaties, shall take care that such services operate on the basis of principles and conditions, particularly economic and financial conditions, which enable them to fulfil their missions. The European Parliament and the Council, acting by means of regulations in accordance with the ordinary legislative procedure, shall establish these principles and set these conditions without prejudice to the competence of Member States, in compliance with the Treaties, to provide, to commission and to fund such services.15 Protocol (No 26)18 on Services of General Interest THE HIGH CONTRACTING PARTIES, WISHING to emphasise the importance of services of general interest, HAVE AGREED UPON the following interpretative provisions, which shall be annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union: Article 1 The shared values of the Union in respect of services of general economic interest within the meaning of Article 14 of the Treaty on the Functioning of the European Union include in particular: – the essential role and the wide discretion of national, regional and local authorities in providing, commissioning and organising services of general economic interest as closely as possible to the needs of the users; – the diversity between various services of general economic interest and the differences in the needs and preferences of users that may result from different geographical, social or cultural situations;

Many thanks to Benedikt Sichla for his extraordinary help and support during the preparation of this Chapter. #

Springer Nature Switzerland AG 2021 H.-J. Blanke, S. Mangiameli (eds.), Treaty on the Functioning of the European Union – A Commentary, Springer Commentaries on International and European Law, https://doi.org/10.1007/978-3-030-43511-0_15

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– a high level of quality, safety and affordability, equal treatment and the promotion of universal access and of user rights. Article 2 The provisions of the Treaties do not affect in any way the competence of Member States to provide, commission and organise non-economic services of general interest.

Contents 1. 2.

Introduction/General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Origin and Genesis of Services of General Economic Interest: The Tension Between Competition and Public Welfare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.1. Different Traditions Regarding Services of General Economic Interest Within the EU Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.2. Starting Point: The French Model of Service Public . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.3. Other Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.4. Genesis of a European Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3. Detailed Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.1. Article 14 Sentence 1 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.1.1. Applicability: Services of General Economic Interest . . . . . . . . . . . . . . . . . . . . . . 9 3.1.2. SGEIs Role in Promoting Social and Territorial Cohesion . . . . . . . . . . . . . . . . 13 3.1.3. Judicial Reviewability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.2. Article 14 Sentence 2 TFEU: Regulatory Competence of the Union . . . . . . . . . . . . . . 15 3.3. The Relationship Between Article 14 TFEU and Article 106 TFEU: “Practical Compatibility” or a “Relationship Between Rule and Exception”? . . . . . . . . . . . . . . . . 16 4. Protocol No 26 on Services of General Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 5. Conclusion and Outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 List of Cases References

1. 1

Introduction/General Remarks

The objective of a market-driven economy with free competition forms a central general guideline within the European economic constitution. Therefore, the principle of an open market economy is written down in Article 119.1 TFEU and in addition supported by Protocol No 27 annexed to the Final Act of the Lisbon Treaty, which shall ensure “that competition is not distorted.”1 However, under Article 3.3 sentence 2 TEU, the EU’s economic system should also have a social side. Therefore, it speaks of a highly competitive but also a social market economy.

1

The principle of an open market economy was with the words of Kotzur ‘banned’ from the treaty’s introductory chapter into protocol No 27, see Kotzur (2013), JöR, Vol. 61, 205.

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Within the embodiment of this social side of the EU’s internal market, Services of General Economic Interest (SGEI) play an important role regarding the public’s provision with services serving the common welfare. SGEI are not usually operated for-profit but for the public’s comprehensive provision with generally important services. For this purpose, undertakings serving the common welfare benefit from public financial support or from exclusive special rights that exclude them from facing competition, e.g., in the case of monopoly rights and/or— particularly—in the framework of state aid control.2 The EU has the duty to establish a framework that is able to balance the tension described above between economic competition within a market-driven economy (“market”) and the needs of a traditionally prominent public sector in some parts of the Union3 including special rights for certain public services (“state”). Reconciling these conflicting aims is the main objective of Article 14 TFEU.

2.

Origin and Genesis of Services of General Economic Interest: The Tension Between Competition and Public Welfare

Article 14 TFEU or rather the position of public SGEI within the EU framework was already the subject of lively debates leading up to the adoption of the Rome Treaties.4 Ever since, the discussion has addressed the tension between the conflicting demands of, on the one hand, a viable and effective competition particularly protected and supported by the provisions now contained in Article 26 et seq. and Article 101 et seq. TFEU and, on the other hand, existing or potentially existing anti-competitive preferential rights for undertakings providing SGEI. Until today, there is no binding (legal) definition of SGEI.5 A characteristic feature of SGEIs, nevertheless, is the enhanced (public) interest in the universal supply with particular services, which usually are vital for safeguarding individual and collective existence as well as the exercise of individual and collective freedom. For this purpose, SGEI must be comprehensively and, in terms of price and quality, adequately provided. Moreover, the service providers are normally obliged to contribute their services to the public interest or rather public service obligations.6 Consequently, these service providers can be granted particular

2 See, most recently and among other and extensive jurisprudence, Joined Cases C-434/19 and C435/19, Poste Italiane SpA v Riscossione Sicilia SpA (ECJ 3 March 2021) para 57, 66 et seqq. concerning public postal bank services in Italy. 3 Wide-ranging Mestmäcker, in Immenga and Mestmäcker (2016), Articles 37, 90 para 8–27. 4 About the early debates, especially regarding Article 90.2 EEC Treaty, see Ambrosius, in Cox and Ambrosius (2000), p. 15, 26 et seq.; Löwenberg (2001), p. 125 et seq. 5 Cf. the last leading decision Case T-289/03, BUPA (CFI 12 February 2008) para 165. 6 About the mostly congruent and especially in the secondary law of the EU used terms, see Krajewski (2011), p. 110 et seq.

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compensations by the public authorities.7 Considering the preceding, compensations come into question especially in the fields of public supply,8 infrastructure,9 health—and social care, the education system (including employment agencies),10 in the classical fields of water, energy, mail and the supply with telecommunication services as well as in the field of the public transport system. Moreover, compensations seem worth considering in the waste industry and waste water management, the public broadcasting system and, ultimately, in the banking and financial service industry.11 Furthermore, and in course of digitalization, under the topic of “e-services of general interest” the focus has increasingly turned to the internet industries such as the industry of information or communication technology and (neutral) access to these services.12

2.1. Different Traditions Regarding Services of General Economic Interest Within the EU Member States

4

Due to their importance, SGEI are regularly embedded in a special and independent (national) legal and regulatory framework. In Germany, shown by the example of water supply, essential services are still considered a state responsibility and are insofar exempted from competition.13 7 Cf. Case C-266/96, Corsica Ferries (ECJ 18 June 1998) para 46, 60: Characteristics of a public service are therefore “universality, continuity, satisfaction of public-interest requirements, regulation and supervision by the public authorities”; negative by contrast: Case C-380/11, DI. VI. Finanziaria di Diego della Valle & C. SapA v Administration des contributions en matière d’impôts (ECJ 6 September 2012); suitable also: Commission Communication concerning a Quality Framework for Services of General Interest in Europe, O.J. C 102/35 (2012), p. 4; from literature, instead of everybody Krajewski (2011), p. 142 et seq. 8 Cf. Krajewski (2011), p. 110 et seq.; as well as Pielow (2001), p. 11 et seq. 9 Detailed Hermes (1998), p. 162 et seq. 10 Commission Communication concerning a Quality Framework for Services of General Interest in Europe, O.J. C 102/35 (2012), p. 2. 11 Cf. recently Higher Administrative Court Berlin-Branderburg (Oberverwaltungsgericht BerlinBrandenburg), 1 S 54.13 (24 February 2014) and in addition Zetzsche (2014), p. 958 et seq.; recently about the “Regionalprinzip der Sparkasse” in the light of EU law, see Kerber (2014), p. 1044 et seq.; Eufinger (2014), p. 253 et seq.; and XXth Main Report of the Monopolies Commission, A competitive order for the financial markets, 2014, Chapter VI, especially para 1459 et seq. 12 About broadband expansion or access Kühling and Biendl (2013), p. 459 et seq.; about dangers to the press regarding Article 106 TFEU and considering the 8th amendment to the Act Against Restraints of Competition (exemptions of price fixings to press wholesalers) Kühling (2013), p. 18 et seq.; on the issue of network neutrality esp. Martini (2011), p. 315 et seq., furthermore Gersdorf (2014), p. 642 et seq.; Spies and Ufer (2015), p. 91 et seq.; Säcker and Mengering (2013), p. 559 et seq. 13 Cf. section 50 para 1 Water Resources Act (WHG): “The water supply serving the public (public water supply) is a task of the public service.” (our translation); for the basic responsibility of the municipality section 50 WHG combined with state law, e.g., section 47a State Water Act of North Rhine-Westphalia (Water Act of North Rhine-Westphalia) for the public water supply and for the

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Although former German administrative monopolies such as the “Deutsche Bundespost” (German mail service) are now organized under private law, public undertakings (or publicly mastered undertakings)14 provided with special rights and/or public financial support are still dominating SGEI. From a dogmatic legal point of view, nevertheless, the particular model behind the keyword of services of general interest varies from one national legal system to another.

2.2. Starting Point: The French Model of Service Public

The origin and driving force of debates surrounding SGEI has always been the French model15 of Service Public, which, as a construction of the Droit Administratif respectively the famous School of Bordeaux (L. Duguit, M. Hauriou, etc.), is deeply rooted within the French national identity and, amongst other reasons of course, also affected the French referendum on the EU Constitutional Treaty in 2005. Originally, the system of Service public served to deal with an upcoming idea of a state providing its citizens with several services in the end of the nineteenth century and stated a contrast to the traditional form of an executing administration (puissance publique). In a traditional manner, the term of SGEI primarily refers to state owned or operated as well as state controlled (maitrise) services usually carried out by public undertakings16 and/or third parties entrusted with the operation of SGEI by a concession du Service Public.17 Such undertakings, public or private, are subject to profound governmental control and are obliged to follow special legislation called régime spécial exorbitant du droit commun. This special legislation creates suitable access to public services in both quantitative and qualitative terms and

duty of wastewater disposal Section 56 sentence 1 WHG (the legal entities under public law in duty following state law) combined with e.g., Section 53 of the Water Act of North RhineWestphalia. More detailed, see Ünlü (2009), p. 7 et seq., p. 41 et seq. 14 The EU-Law means (under the Commission Directive 2006/111/EG transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings, O.J. L 318/17 (2016)) companies, directly or indirectly ruled by the state because of property, financial participation or statute. For details, see Kühling, in Streinz (2018), Article 106 TFEU para 15 et seq. 15 Regarding the French as well as the generally very different understanding of public service tasks from s politically, economically and culturally point of view, see Kotzur (2013), JöR, Vol. 61, 198 et seq. 16 Entreprises et établissements à caractère industriel et commercial. “Grands services publics” became famous, e.g., in the area of the postal service (La Poste, France Télécom), the energy supply (Électricité/Gaz de France) or in the transport sector (SNCF, RATP in Paris), cf. Lachaume and Pauliat (2004). 17 See especially in the area of water supply Cour des Comptes Rapport public particulier La gestion des services publics d’eau et d’assainissement (2003).

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in addition establishes an individual and even enforceable entitlement to this access.18

2.3. Other Member States

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In contrast to the French approach, other MS do not have a comparable tradition of cross-sectoral regulation regarding SGEI.19 Especially the German concept of öffentliche Daseinsfürsorge developed by Ernst Forsthoff in sociological terms describes the image of a “providing administration” but without, however, deriving legally binding consequences, for example, regarding the (public) ownership structure of undertakings carrying out public services.20 The same generally applies to other, so-called “Roman”, legal systems, such as the servizi pubblici in Italy or the servicios publicos in Spain, which on the one hand, basically followed the French example of the Service Public but, on the other hand, also lack the cross-sectoral approach. The originally specific concept of Service Public has been eroded to a synonymous term for public services in general.21 Legislative details of SGEI can therefore be found in existing legislation regarding traditionally publicly organized sectors such as the energy sector and the waste and waste water industry. In any case the “public sector” in the field of public utilities is, to varying extents, visible in every EU MS.22 However, despite all the differences just described between the French tradition and other concepts all approaches share similar general principles of Service public such as

18 From the French literature, see Auby and Raymondie (2003), Chevallier (2015), Cadeau et al. (2014) and Le Mestre (2005). From the German literature, see Löwenberg (2001); Pielow (2001), pp. 111 et seq., 149 et seq.; Wernicke, in Grabitz et al. (2020), Artikel 14 AEUV para 24. 19 See further Lippert (Sweden), Donati and Grasse (Italy), Knopp (Polen), Pürgy (Austria), in Krautscheid (2009), p. 315 et seq.; Krajewski (2011), p. 45 et seq.; Krajewski (2003); Pielow (2001), p. 276 et seq.; Tettinger (1996a). Concerning a general European approach, Kotzur is raising the question how best to develop a European system: Either as a ‘bottom-up’ competition between different European systems or ‘top-down’ from European level, see Kotzur (2013), JöR, Vol. 61, 199 et seq. 20 Cf. Tettinger (1996b), p. 56 et seq.; Möstl (2004), p. 961 et seq.; Krajewski (2008), p. 174 et seq.. In depth to the comparison of “Service of General Interest” and Service Public, see Bullinger (2003), p. 597 et seq.; Pielow (2001), p. 392 et seq.; id. (2002), p. 155 et seq.; Püttner (2000), p. 45 et seq.; for Germany-Austria-comparison see Holoubek (2001), p. 513 et seq. For further existing parallels with the schools and the Service public, see Ronellenfitsch (2003a, b), pp. 53–73. 21 The development in Spain, see González-Varas (2002), p. 125 et seq.; Parejo Alfonso (2004), p. 51 et seq. For Italy see Cassese (1996), p. 5 et seq.; id. (2000); Villata (2008). 22 See also studies of the European Centre of Enterprises with Public Participation and of Enterprises of General Economic Interest (CEEP). Mapping the Public services. Available at http://www.mappingpublicservices.eu.

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– providing a general, comprehensive and lasting availability (continuité) – providing a reliable and efficient as well as an adaptable quality (adaptabilité) and – providing the service in a non-discriminatory manner (égalité) concerning the access to the service.

2.4. Genesis of a European Approach

The different national starting points and preconditions—organizationally as well as legally—have created a need for a European approach to services serving the common good. Therefore, at European level, the term of SGEI has replaced different national concepts such as öffentliche Daseinsfürsorge, service public or public utility.23 To consider public interest, Article 106.2 TFEU states the possibility to free undertakings entrusted with the operation of SGEI from the rules contained in the Treaties, particularly from the rules on competition, as far as the application of such rules does not obstruct the performance, in law or fact, of the particular tasks assigned to them.24 The consideration of public interests shown by Article 106.2 TFEU has been part of Union law already since the Rome Treaties but received only little, or even no attention in the first decades of European integration. This changed when the Union started to expand its accelerating single market policy on public sectors—which formerly were excluded from facing any competition—in the course of adopting the Single European Act in 1986/87 and in accordance with an announcement that had already been made in the European Commission’s White Paper on completing the internal market in 1985.25 Since then, a variety of directives and regulations has been enacted to gradually transfer former service monopolies to a competitive market environment (“liberalisation”). This process particularly affected the network industries (telecommunication, energy, railways) by adopting competition “in” the networks, enabling “Third Party Access” and forcing formerly vertically integrated entities to unbundle the respective network and distribution division.26 To monitor this process and to secure genuine undistorted competition, national regulatory authorities were set up. 23 The commission spoke in German text versions of “services of general interests“ (cf. Commission Communication Services of general interest in Europe, O.J. C 17/04 (2001)). Meanwhile, it uses the terminology of Article 36 TFEU. 24 Whereas Article 106.2 TFEU: “The development of trade must not be affected to such an extent as would be contrary to the interests of the Union”. However, there is a possibility of an exception in Article 93 TFEU to state aids, which serves the compensation of public transport services. 25 Cf. the Commission White Paper of 28-29 June 1985 on Completing the internal market, COM (85) 310 final, especially para 71, 86 and 95 et seq. It creates 270 individual measures to eliminate all material, technical and fiscal market barriers to create a “better environment for the promotion of companies, competition and trade” until 1993. 26 See Fehling (1996), p. 59 et seq.; Hermes (1998), p. 256 et seq.; Pielow (2001), p. 537 et seq.; Schneider (1999).

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On the other hand, continuing liberalisation and the opposition of some MS on this point, made EU legislation more sensitive for the interests of public services and caused the creation of various rules in favor of such services:27 First, and in the course of the one regarding the Maastricht Treaty, mainly France, supported by Germany (in particular the “Bundesrat”28 and the municipalities), pursued the objective to defend public services against the primacy of competition contained within the Treaties and achieved the inclusion of Article 16 (former Article 7d) into the “principles” of the EC Treaty (now Article 14 sentence 1 TFEU).29 Against further demands aiming at an even stronger position of SGEI within the Treaties, Article 14 TFEU—because of a political compromise—at least highlights “the place occupied by Services of General Economic Interest in the shared values of the Union” and encourages the Member States to “take care that such services (SGEI) operate on the basis of principles and conditions, [. . .] which enable them to fulfil their mission” but also to do so “within their respective power” and, however, explicitly “without prejudice to [. . .] Article 93, 106 and 107 [TFEU]”. However, Article 14 TFEU also contains a reservation in favor of Article 4 TEU that, among other things, protects the “fundamental structures, political and constitutional” within the Member States and in its second sentence creates a legislative competence for the Union to act “by means of regulations in accordance with the ordinary legislative procedure” but again only “without prejudice to the competence of Member States [. . .] to provide, to commission and to fund” SGEI.30

3.

Detailed Comments

3.1. Article 14 Sentence 1 TFEU

8

Article 14 TFEU forms the central programatic norm within the Lisbon Treaty regarding SGEI. Its first sentence deals with the relationship between the important role of services serving the common welfare, as already highlighted, and the Union’s economic order. In this sense, and under Article 14 sentence 1 TFEU, within their respective power, the MS, on the one hand, shall take care that SGEI operate based on principles and conditions that enable them to fulfil their mission of the public’s comprehensive provision with services serving the common welfare. On the other hand, this shall only happen “without prejudice” to Article 4 TEU or to Articles 93, 106 and 107 TFEU. Article 14 sentence 1 TFEU hereby creates a Mestmäcker and Schweitzer, in Mestmäcker and Schweitzer (2014), § 37 para 1 et seq.; brief of the stages especially the legal policy point of view cf. Waiz (2009), p. 41 et seq. 28 The “Bundesrat” is one of the two German legislative chambers. It is formed from members of the state governments (“Landesregierungen”). 29 On the history of its creation, see Löwenberg (2001), p. 207 et seq.; Rodrigues (1998), p. 37. 30 Details of the amendments to the Article 16 EC, see Frenz (2011), p. 16 et seq.; for more information on the history, cf. Hoffschulte (2005), p. 202 et seq. 27

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reference to the common rules on competition stated in Title VII TFEU including Article 106 TFEU, which, in turn, deals with public undertakings and SGEI. 3.1.1.

Applicability: Services of General Economic Interest

Although SGEI form an important concept within the framework of the Treaties, there is still no general and binding definition at European level.31 Therefore, the identification of SGEI, within a broad discretion regarding the consistent case law of the ECJ, is still a part of the MS’ national competences. Nevertheless, the following essential elements can be discerned:

9

“Services” The term “services” in Article 14 TFEU significantly goes beyond what is meant in the regulations regarding the free movement of services: In contrast to Article 56 and Article 57.1 TFEU, which states that services shall be considered “services” within the Treaties, “in so far as they are not governed by the provisions relating to free movement of goods”, the scope of Article 14 TFEU also—and especially— includes contributions in kind as well as free movement of goods like electricity or water, for example.32 Service providers might in practice regularly be “public” undertakings33 but can—according to the neutrality of property rights stated in Article 345 TFEU as well as the “functional” understanding of “undertakings” in Article 101 et seq. TFEU34—also be accommodated by private or mixedeconomy companies.35

10

“General Economic Interest” Services of “General” Economic Interest apparently go beyond merely private or individual interests.36 They particularly affect the comprehensive supply of SGEI at reasonable prices to make them available to everybody.37 In contrast to others,

31

Cf. Kotzur (2013), JöR, Vol. 61, 203 et seq. Instead of everybody see Rohleder (2019), Article 36 CFR para 10; Mann (2006), § 34 section 21. 33 Different Rohleder (2019), Article 36 para 1 EuGRCh. 34 Cf. Kühling, in Streinz (2018), Article 106 TFEU para 6 et seq. 35 Instead of everybody, see Commission Communication, Services of general interest in Europe, O.J. C 17/4 (2001), p. 8. 36 Cf. Case C-127/73, BRT II (ECJ 27 March 1974) para 23; Immenga and Schweitzer, in Immenga and Mestmäcker (2016), Article 106.2 TFEU para 80. 37 Cf. and in favor of regulated consumer tariffs in the field of natural gas supply Case C-121/15, ANODE (ECJ 7 September 2016), Case T-289/03, BUPA (CFI 12 February 2006) para 186; Koenig and Paul, in Streinz (2018), Article 106 TFEU para 49 et seq. with further references. 32

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urgent public service interests (in a broader sense, for example, the supply of food or clothes)38 for the identification of a service as a service of “general economic interest”, there moreover must be a specific public obligation to provide the service in question.39 This obligation is a response to existing market imperfections or rather a situation in which the services in question “would not be supplied or would be supplied under different conditions in terms of quality, safety, affordability, equal treatment or universal access.”40 Nevertheless, for the existence of a “general economic interest” a veritable market failure in a specific field does not form a precondition. Instead, what is required is the “political understanding of a market failure”.41 Services of “General Interest” 12

Services of “general interest” are, as emphasized in Article 2 of Protocol No 26, to be differentiated from Services of General “Economic” Interest. Regarding its explicit wording, services of “general interest” do not fall within the scope of Article 14 TFEU. However, the Commission defines both kinds of services—economic services as well as non-economic services—as services of “general interest”. Therefore, SGEI form a subset of services of general interest.42 From the beginning “non-economic” services, which were first mentioned as a legal term in Article 2.2 (a) of Directive 2006/123/EC on services in the internal market,43 were excluded from EU legislation, internal market rules or competition rules within the TFEU because they are considered not to be object of (de facto or even potentially) cross-border competition.44 An “economic” service, which is part of market competition, however, constitutes immediate relevance to the internal market and insofar

38

Cf. for distinction problems und case law Immenga and Schweitzer, Article 106.2 TFEU para 81 et seq. with further references. 39 Cf. Case T-289/03, BUPA (CFI 12 February 2006) para 181; Commission Green Paper of 21 May 2003 on Services of General Interest, COM(2003) 374 final, Annex 1, p. 27. 40 Cf. Commission Communication concerning a Quality Framework for Services of General Interest in Europe, O.J. C 102/35 (2012), p. 4. 41 Among others Immenga and Schweitzer, in Immenga and Mestmäcker (2016), Article 106.2 TFEU para 82 with further references. 42 Cf. Commission Communication, Guide to the application of the European Union rules on state aid, public procurement and the internal market to services of general economic interest, and in particular to social services of general interest, SWD(2013) 53 final/2, p. 21 et seq. 43 Szyszczak, in Peers et al. (2014), para 36.24. 44 Cf. Commission Communication concerning a Quality Framework for Services of General Interest in Europe, O.J. C 102/35 (2012), p. 3 et seq.; skeptically referring to the general rules of law and, especially the non-discrimination principle Szyszczak, in Peers et al. (2014), para 36.22 “false hope”.

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opens up the field of rules applying to undertakings contained in Article 101 et seq. TFEU.45 Recognized as non-economic services are especially all acts within the exercise of state power, especially in the fields of external and domestic security, justice, and external relations.46 In other fields, distinctions are less easy. Especially social47 (public health care, hospitals), cultural (public education institutions, research facilities, broadcasting facilities)48 and charitable services are not at all per se “non-economic” services.49 Particularly problematic are justifications with sweeping arguments with a “social” purpose or lacking intent to realize a profit.50 These factors, according to ECJ case law, are irrelevant for both the identification of “undertakings” pursuant to Article 101 et seq. TFEU as well as in the field of internal market basic freedoms.51 Moreover, also social and cultural services are subject to technical, economic and social change. Therefore, the status of a service once identified as “non-economic” is not immutable and may change over time.52 The ECJ, by the way, differentiates between economic and non-economic activities even within the same “social” institution.53 In the end and in accordance with the Commission’s opinion, it neither seems feasible nor desirable to provide a final and definitive a-priori listing of all services

45

Previously cf. Case C-180/98, P. Pavlov (ECJ 12 September 2000), para 74 et seq. with further references. 46 In these respects, there are parallels to Article 45.4, 51 and 62 TFEU, see also Jennert (2004), p. 43 et seq.; from the decisions of the court (precise to the air traffic control) recently cf. Case C-113/ 07, Eurocontrol (ECJ 26 March 2009) para 71; cf. also the Commission Guide, SWD(2013) 53 final/2, p. 33 et seq. 47 Admitted to social security systems with compulsory membership, based on the principle of solidarity and obligations, regulated by the state, cf. Case C-159/91, Poucet and Pistre (ECJ 17 February 1993), para 19; Case C-218/00, INAIL (ECJ 22 February 2002) para 31 et seq., 45. In contrast Case C-67/96, Albany (ECJ 21 September 1999), para 82 et seq., Case C-180/98, P. Pavlov (ECJ 12 September 2000), para 111 et seq., 116. 48 Cf. state education, founded by public budget, Case C-263/86, Humbel (ECJ 27 September 1988) and furthermore Case C-109/92 (ECJ 7 December 1993); Case C-318/05 Commission v Germany (ECJ 11 September 2007). 49 Koenig and Paul, in Streinz (2018), Article 106 TFEU para 52.; Steinberg, in Bungenberg et al. (2004), pp. 189, 195 et seq.; for the problem of “social service of general interest”, cf. SchulzNieswandt (2005), p. 19 et seq.; Vaquer Caballería (2005). 50 E.g., the Decision of the German Federal Council (Bundesrat) regarding the EU summit Laeken, BR-Drs. 992/01, No. 3; justifiably critical Magiera (2001), p. 269 et seq. 51 Cf. Case C-67/96, Albany (ECJ 21 September 1999) para 79, 85; Case C-180/98, P. Pavlov (ECJ 12 September 2000) para 110—each with further references. In the context of the evaluation of the service-freedom: Case C-158/96, Kohll v Union des Caísses de Maladie (ECJ 28 April 1998) para 16 et seq.; Case C-120/95 Decker (ECJ 28 April 1998) para 20 et seq. 52 Szyszczak, in Peers et al. (2014), para 36.26 with further references. 53 Among others Case C-264/01, AOK Bundesverband, (ECJ 16 March 2004) para 47 et seq.; moreover Ehricke, in Loewenheim et al. (2009), Article 86 EGV para 104.

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of general interest that are to be considered “non-economic”.54 However, the Commission is gradually seeking further clarification and has therefore evaluated the latest ECJ decisions on social services of general interest, particularly in respect of the “guide” to the application of the EU rules on state aid, public procurement and the internal market to SGEI, and in particular to social services of general interest (“Almunia-package”). The guide also provides important comments on the scope of national discretion (and its limits) regarding the identification of SGEI.55 3.1.2. 13

Article 14 sentence 1 TFEU states the SGEI’s “role in promoting social and territorial cohesion”. It underlines the importance of SGEI on a European level and might also be understood as an expression of a European “social conscience”.56 Moreover, the above mentioned passage does not refer to the service itself or the access to it. Rather to be promoted is the social and territorial cohesion “within the Union” and thus the EU as a whole. In this sense, it can be understood as a limitation for national legislation on SGEI, which precisely shall not be tolerated rashly and “at any price”. In other words, and similar to Article 106.2 sentence 2 TFEU regarding internal market interests, it requires a balancing between the MS’ interest in the particular regulation concerning SGEI and the social and territorial cohesion in “the Union” as a whole. Difficulties can particularly arise, when national SGEI legislation has adverse effects on the functioning of SGEI in other MS. Illustrative examples can be found in the field of energy supply, more precisely in the course of the German “energy transition”: If, due to excessive grid feed, surplus electricity from renewable sources has to be transmitted into neighboring MS it causes bottlenecks there as well.57 Such tensions constitute an obligation for the EU institutions to coordinate national approaches and delivers justifications for (further) harmonisation measures by approximation of laws under Article 114.1 TFEU. 3.1.3.

14

SGEIs Role in Promoting Social and Territorial Cohesion

Judicial Reviewability

Especially a service’s identification as a service of general economic interest is, largely, the responsibility of the MS (broad discretion). Apart from the identification of SGEI, it also contains the obligation to regulate, how to organize and fund 54 Cf. Commission Green Paper of 21 May 2003 on Services of General Interest, COM(2003) 270 final para 45. 55 Commission Communication of 26 April 2006 on Implementing the Community Lisbon programme: Social services of general interest in the European Union, COM(2006) 177 final; in detail Weiß (2013), p. 669 et seq.; Neergard et al. (2012). 56 Cf. Kämmerer (2002), p. 1041 et seq.; cf. also Commission Green Paper of 21 May 2003 on Services of General Interest, COM(2003) 270 final para 2. 57 At a glance Pielow (2012), para 20.

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SGEI, as well as to decide with which special rights to equip selected undertakings. These national decisions are subject to judicial control, limited to obvious errors of assessment, exercised by the ECJ, and until today have only led to corrections in isolated cases.58 3.2. Article 14 Sentence 2 TFEU: Regulatory Competence of the Union

The failure of the EU Constitutional Treaty, to acknowledge their great importance and to take greater account of the value of SGEI, the former Article 16 was added a specific legislative competence for the EP and the Council to act “by means of regulation in accordance with the ordinary legislative procedure” in Article 14 sentence 2 TFEU.59 However, this competence only applies “without prejudice to the competence of Member States, in compliance with the Treaties, to provide, to commission and to fund such [SGEI] services.” The EP’s and Council’s newly added competence in Article 14 sentence 2 TFEU to set certain regulations is supposed to make the process of establishing principles and setting conditions for SGEI more democratically by disempowering the European Commission that used to have the exclusive right to enact directives and to adopt decisions under Article 106.3 TFEU.60 Nevertheless, the scope of Article 14 sentence 2 TFEU and its connection to other legislative provisions of the Treaty remains anything but clear.61 Moreover and since the Commission Communication “A Quality Framework for Services of General Interest in Europe” of 201162 there seems to be a consensus that at this stage it was not an immediate priority to “continue to examine the need for legislation based on Article 14 TFEU” and that “a sectoral approach, where tailormade solutions can be found to concrete and specific problems in different sectors” was more appropriate.63 Indeed, it appears highly questionable if a cross-sectoral 58 See, e.g., Case C-34/01-38/01, Enirisorse (ECJ 27 November 2003) para 37 et seq.: not sufficiently well defined public service mission of port services; Higher Administrative Court Coblenz (Oberverwaltungsgericht Koblenz), NVwZ 2013, 1173. To the subsequent case law with features in the radio- and telecommunications sector, e.g., Koenig and Paul, in Streinz (2018), Article 106 TFEU para 54 et seq. 59 More in detail about the changes from Article 16 ECT Frenz (2011), p. 16 et seq.; more information on the history: Hoffschulte (2005), p. 202 et seq. 60 Krajewski (2010), p. 75, 94 et seq.; id. Krajewski (2011), 592 et seq.; cf. also Koenig and Paul, in Streinz (2018), Article 14 TFEU para 5 et seq. 11. 61 Krajewski (2011), p. 180 et seq.; further Wernicke, in Grabitz et al. (2020), Artikel 14 AEUV para 56 et seq. with further references. 62 Cf. Commission Communication concerning a Quality Framework for Services of General Interest in Europe, O.J. C 102/35 (2012). 63 Cf. Commission Communication concerning a Quality Framework for Services of General Interest in Europe, O.J. C 102/35 (2012), p. 5 et seq., referring to correlated statements of the parliament (“currently not the central issue”); cf. also Commission Communication of 20 November 2007 on Services of general interest, including social services of general interest: a new European commitment, COM(2007) 725 final, p. 9 et seq.

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approach, which in the beginning and in the shape of a “framework directive”64 on “principles and conditions” of SGEI was urgently requested especially by France, would have been able to regulate something beyond the area-specific legislation that already existed.65 Keeping in mind the high level of abstraction regarding the construct of SGEI, the divergent legal traditions in the MS and the existing frameworks for different service sectors such as water, post and health services, for example, it is very likely that a cross-sectoral approach on SGEI would, if any, only have a limited added value.66 Furthermore, Article 14 sentence 2 TFEU (and in a comparable way Protocol No 26 to the Lisbon Treaty) also limits the EU’s legislative abilities and highlights “the competence of Member States, in compliance with the Treaties, to provide, to commission and to fund” SGEI. Therefore, Article 14 sentence 2 TFEU is built as a legal rule with shared competence between the EU and the MS. Moreover, the principle of subsidiarity (Article 5.3 TEU) applies and limits the EU’s legislative competence.67 This conclusion from Article 14 sentence 1 TFEU can also be drawn from the fact that Article 14 sentence 2 TFEU’s legislative competence has been created primarily (only) to secure the functioning of public services, instead of enforcing the common rules of the internal market or of competition.68

3.3. The Relationship Between Article 14 TFEU and Article 106 TFEU: “Practical Compatibility” or a “Relationship Between Rule and Exception”?

16

Since the principle of competition but also public service obligations hold important positions within the overall concept of the Lisbon Treaty, the interaction especially between Article 14 TFEU and Article 106.2 TFEU remains controversial.69 This significant dispute recently intensified when in the course of 64

Regarding the French request cf. Wernicke, in Grabitz et al. (2020), Artikel 14 AEUV para 8; to further development see Hoffschulte (2005), p. 202 et seq. In detail Krajewski (2011), p. 592 et seq. with further references to the continued development in recent years. 65 Cf. Burgi (2012), pp. 225, 228 et seq.; critically the German Federal Council (Bundesrat), recently: BR-Drs. 877/11 (Order), No. 7, 10 February 2012. 66 Despite the undeniably political pressure to develop a ”social face“, s. a. Knauff (2010), pp. 725, 734 et seq. As well as here Monti (2010), p. 74: “limited added value, if any, and its chances of being adopted would be very small”; also Waiz (2009), pp. 41, 72—“without added value”, with reference to a statement from the author hold at the State Parliament (Landtag) of North RhineWestphalia, in which he indicated a negative influence on the competition interests other EU states (e.g., Germany) of the “service-public”-conception. 67 Explicitly Szyszczak, in Peers et al. (2014), para 36.18. 68 Among others Voet van Vormizeele, in von der Groeben (2015), 14 TFEU para 13 with further references. 69 Cf. Knauff (2010), p. 725: Article 14.1 TFEU solidified Article 16 TEC-related insecurities; therefore, Wernicke (2015), p. 281, regarding the situation since the Altmark-Case (para 17) as “normal” and Article 106 TFEU as an “unspectacular component of the competition-law-dogmatic”.

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and because of the European sovereign debt crisis and the European financial crisis, “market-liberal” positions fell into disrepute. Particularly the European Commission as the supposed driver of “neo-liberal” policy approaches, privatization and deregulation became the target of much criticism.70 In any case, legal opinions that infer an “equal rank” (recently even an “equivalence”71) between the common interest and the competition interest from Article 14 TFEU have increasingly been voiced to level the relationship between rule and exception, between competition and exemptions from it, as stated in Article 106.2 TFEU. These voices argue that since the implementation of Article 16 EEC Treaty (now Article 14 TFEU) it had been acknowledged that the MS shall have the power of legislating in the field of public services and therefore in a field that traditionally had been an as equally an important aim for the EU as the enforcement of competition law. Accordingly, in case of conflict, and pursuant to Article 106.2 TFEU, both principles would have to be balanced in the sense of “practical compatibility”.72 However, even with several changes within the Union’s economic constitution, such as – “banning” regulations regarding the internal market from the TFEU’s general part (previously: Article 14 EC),73 but still see Article 3.3 TEU; – emphasis on the “social” market economy in Article 3.3 TFEU but also as “an open market economy with free competition” under Article 119.1 TFEU in mind, assuming Article 14 TFEU and Article 106 TFEU in a relationship between rule and exception may still be preferable.74 This follows systematically from Article 14 sentence 1 TFEU, which expresses that the Union and the MS shall take care of an effective framework for the operation of SGEI but also imposes the condition only to do so within the rules of the European Union’s economic constitution (“without prejudice” to Article 4 TEU or to Articles 93, 106, and 107 TFEU). In addition, Article 14 TFEU states the

70

See only the title of the following book of Schulz-Nieswandt (2013b): “Das PrivatisierungsDispositiv der EU-Kommission: Das ontologische Existenzial der Daseinsvorsorge, die sakrale Doxa des Binnenmarktes und die ‚kafkaistischen‘ Epiphanien der Regulationskultur”; even bolder Stürner (2007): “Markt und Wettbewerb über alles?”. 71 Meng (2013), p. 587. 72 See recently v. Danwitz (2009), p. 103 (123 et seq.); emphasized by Meng (2013), p. 569; previously Schwarze (2001), p. 334 et seq.; French voices—Ronellenfitsch (2003a), p. 53; id Ronellenfitsch (2003b), p. 132; Löwenberg (2001), p. 307 et seq.; similar: Frenz (2011), p. 16 et seq.; with focus on Article 36, see Mann, in Heselhaus (2018), § 34 section 28; Jarass, in Jarass (2016), Article 36 CFR para 15. 73 Knauff (2010), p. 725; cf. Blanke (2010), p. 1333, 1339 et seq. on the relationship between rule and exception. 74 Among others Koenig and Paul, in Streinz (2018), Article 14 TFEU para 18; Weiß (2003), p. 91; Voet van Vormizeele, in von der Groeben (2015), Article 14 para 14; cf. a. Jarass, in Jarass (2016), Article 36 para 18; recently Mestmäcker and Schweitzer (2014), § 37 section 41 V et seq.; see also Mestmäcker and Schweitzer, in Immenga and Mestmäcker (2016), Article 106.2 TFEU para 29— each with further references.

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MS should only act “within their respective powers”, which means it precisely does not aim at shifting competences between the MS and the EU.75 Moreover, SGEI constitute a very open category that must be specified by the MS and is—unanimously—only checked by the ECJ for obvious mistakes.76 An equal rank of national concepts would result in a “principle of party disposition” in favor of particular derogations and ultimately even in the risk of an erosion of other main “integration values” such as the “social and territorial cohesion” of the Union or the repeatedly emphasized “solidarity” among MS (see, for example, Article 2 TEU).77 Nevertheless Article 106.2 TFEU—which is the only regulation stating legal consequences in this field—turns out to be the central legal provision to solve at first glance existing conflicts between the generally acknowledged importance of services serving the common welfare and a free market economy and hence between Article 14 TFEU and Article 106 TFEU.78 However, on closer examination, other Treaty provisions and especially competition regulations do not conflict with public service obligations. In fact, and clearly in accordance with the “functional guarantee” stated in Article 14 TFEU, Article 106 TFEU aims at an “allocative optimization” by improving the market conditions for services serving the common welfare and creating an environment without unnecessary state interventions.79 The “hierarchical architecture”80 this expresses in the sense of a strict relationship between rule and exception is, indeed, in the light of Article 14 TFEU and increasingly in addition to Protocol No 26 to the Treaties mitigated but under no circumstances repealed or even reversed.81 The newly implemented guarantees only form a “counterweight”82 to the rules on competition. Especially

75

On the latter Koenig and Paul, in Streinz (2018), Article 14 TFEU para 19 et seq.; Voet van Vormizeele, in von der Groeben (2015), Article 14 TFEU para 12. 76 As here especially Voet van Vormizeele, in von der Groeben (2015), Article 14 TFEU para 14. 77 See Wernicke (2015), p. 281 (283, especially with footnote 27). Without any reference to recent Commission Decisions or decisions of the ECJ, cf. Commission Decision No. 2015/1585/EU on the aid scheme SA.33995, O.J. L 250/122 (2015) and Commission Decision of 25.11.2014 on State aid SA.38728 (2014/N)—Germany EEG 2014—Reform of the Renewable Energy Law, C(2014) 8822 final) and Case C-573/12, Ålands Vindkraft (ECJ 1 July 2014). 78 Koenig and Paul, in Streinz (2018), Article 14 TFEU para 16 with further references. 79 Definitely most recent, against all criticism see among others Meng (2013), pp. 596, 594 with further references; Voet van Vormizeele, in von der Groeben (2015), Article 14 TFEU section 14; Koenig (2001), p. 481 et seq.; Koenig and Paul, in Streinz (2018), Article 14 TFEU para 16 et seq.; Rengeling and Szczekalla (2004), para 1028. 80 Cf. Schulz-Nieswandt (2013a), p. 218 et seq. Who denies this because of the “in so far” phrase in Article 106.2 TFEU (e.g., Wernicke, in Grabitz et al. (2020), Artikel 14 AEUV para 46) does not see the reservation in Article 14.1 TFEU in favor of the rules of internal market and competition. 81 Definitely “vice versa” just in segments of the EU-Agricultural-Policy, cf. Article 42 TFEU. Just as here Voet van Vormizeele, in von der Groeben (2015), Article 14 TFUV para 14; Hatje, in Schwarze et al. (2019), Article 14 TFEU para 10; Koenig and Paul, in Streinz (2018), Article 14 TFEU para 17; Jung, in Calliess and Ruffert (2016), Article 14 TFEU para 11, 30. 82 Especially Krajewski (2010), p. 75 (93); in line with his views Schmahl (2011), p. 96 (111).

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Article 14 sentence 1 TFEU contains a positive protection and perhaps an optimization obligation for both, the Union and the MS to enable SGEI to fulfil their purposes.83 This understanding primarily works as an interpretation, but also as a balancing directive regarding all other provisions in the Treaties that have or might have an influence on the functioning or the operation of SGEI.84 Deviations from the “rule” in favor of an “exception” require a sound justification within the mandatory proportionality test.85 However, due to the Treaty of Lisbon, exemptions seem justifiable more than ever. Furthermore, the wording of Article 14 TFEU (“without prejudice”) underlines the special relationship between Article 14 TFEU and Article 4 TEU: The MS’ “national identities” as well as “regional and local self-government” must be considered within the process of balancing the interests at stake. This probably opens up the possibility to play a stronger role for the municipal or “local governments” provision of basic services.86 In conclusion, this way of interpreting the relationship between Article 14 TFEU and Article 106 TFEU is more differentiated than a call for a strict “relationship between rule and exception” or “practical compatibility” even if the results of the different approaches typically might only be marginal.

4.

Protocol No 26 on Services of General Interest

Article 14 TFEU is complemented by Protocol No 24 on Services on General Interest. It stresses the importance of such services and like all protocols it forms an integral part of the Treaties (see Article 51 TEU); yet its scope—especially regarding Article 1—remains unclear.87 It has been argued that the only scope of Protocol No 26 was to specify the content of Article 14 TFEU and to assert awareness of the MS of the special role they have88 while others take the view that Article 1 of Protocol No 26 combined with Article 4.2 sentence 1 TEU constitutes the acknowledgement of the status of local self-government in primary Union law as well as its precedence regarding the performance of services serving the common welfare.89 In the end, it seems convincing to understand Protocol No

83

Already Pielow (2001), p. 100; insofar Wernicke, in Grabitz et al. (2020), Artikel 14 AEUV para 40. 84 Just as here Burgi (2002), p. 255 (266); Kluth, in Henneke et al. (2002), p. 68 (71); Schmidt (2003), p. 225 et seq.; see recently Voet van Vormizeele, in von der Groeben (2015), Article 14 TFEU para 14; expressly GA Poiares Maduro, Opinion, Case C-205/03, FENIN/Komission (ECJ 11 July 2006) para 35 to section 26. 85 Pielow (2006), p. 780. 86 Knauff (2010), p. 725 argues in support of an “increased pressure to justify” EU-law measures, operating on the local self-government. 87 Voet van Vormizeele, in von der Groeben (2015), Article 14 TFEU section 14. 88 Knauff (2010), p. 725. 89 Jung, in Calliess and Ruffert (2016), Article 14 TFEU para 27.

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26 as a complement to Article 14 TFEU, which together must be considered regarding the interpretation and application of Article 106.2 TFEU.90 Article 1 deals with the “shared values of the Union” in respect of SGEI and emphasizes “in particular” – the wide discretion of national, regional and local authorities in providing, commissioning and organising SGEI as closely as possible to the needs of the users, – the diversity between various Services (of General Economic Interest) and the differences in the needs and preferences of users that may result from different geographical, social or cultural situations as well as – a high level of quality, safety and affordability, equal treatment, and the promotion of universal access and of user rights. Article 2 TFEU states that the provisions of the Treaties “do not affect in any way the competence of Member States” to provide, commission and organize noneconomic services of general interest.

5. 19

Conclusion and Outlook

The former understanding of Article 14 TFEU only as a loose “political statement” has given way to the concrete demand for a stronger consideration of services serving the common welfare compared to a purely marked-oriented economic system. This is also reflected by the implementation of Article 36 EUCFR, which awards “constitutional rank” to the SGEI and makes it a general principle of the Union’s law. Moreover, Protocol No 26 emphasizes the importance of services of general interest as well as the (exclusive) competence of MS to provide, commission and organize non-economic services of general interest. It also consolidates the primary authority given to the MS in EU primary law. At the same time, and in the course of implementation of the Lisbon Treaty, Article 14 TFEU was given a legislative competence to enable the Union to set conditions to provide, to commission and to fund SGEI (see Article 14 sentence 2 TFEU) that clearly underlines the increased importance of services serving the common welfare. In the end, numerous conflicts regarding the application and interpretation of the relevant provisions on services of general (economic) interest within the framework of EU legislation remain unsolved and open to further discussion while more and more (new) conflict zones appear. For example, there is the delicate question of access to “social” and other services of general interest for nationals of other EU MS but also—and probably of even greater significance—for non-EU citizens

90

Voet van Vormizeele, in von der Groeben (2015), Article 14 TFEU para 14.

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(asylum seekers, [economic] refugees!).91 Moreover and in a world of advancing globalization, world trade legislative requirements gain importance, or even create a new “threat scenario” when it comes to services serving the common welfare,92 also against a backdrop of a possible transatlantic free trade agreement.93 Moreover and in the context of an emerging public sensitivity for environmental and climate issues increased pressure is placed on a universal and especially save as well as cost-effective supply of SGEI and causes more and more tensions between the need for public service infrastructures in the interest of security of supply and demands of environmental and climate protection. This tension field can be observed in the context of the (German) energy transition with, on the one hand, growing public resistance against coal power plants and, on the other, obstacles to the construction of high voltage power lines or renewable energy generation plants emerging from EU and national nature, landscape and species protection legislation, and again from neighbors (“Nimby”) resistance against infrastructure projects. Finally, in course of the United Kingdom’s withdrawal from the Union (“Brexit”), the EU will lose one of its market and competition-friendliest voices. This very likely strengthens the group of those who advocate a more state-oriented interpretation of the EU’s economic system that will also have an impact on SGEI.

List of Cases CFI

CFI 12.02.2008, T-289/03, BUPA, ECLI:EU:T:2008:29 [cit. in para 3, 11] CFI 10.05.2016, T-47/15, Germany v. Commission, ECLI:EU:T:2016:281 [cit. in para 2]

ECJ

ECJ 27.03.1974, C-127/73, BRT II, ECLI:EU:C:1974:25 [cit. in para 11] ECJ 17.02.1993, C-159/91, Poucet and Pistre, ECLI:EU:C:1993:63 [cit. in para 12] ECJ 07.12.1993, C-109/92, Humbel, ECLI:EU:C:1993:916 [cit. in para 12] ECJ 21.09.1996, C-67/96, Albany, ECLI:EU:C:1999:430 [cit. in para 12] ECJ 28.04.1998, C-120/95, Decker, ECLI:EU:C:1998:167 [cit. in para 12] ECJ 28.04.1998, C-158/96, Kohll, ECLI:EU:C:1998:171 [cit. in para 12] ECJ 18.06.1998, C-266/96, Corsica Ferries, ECLI:EU:C:1998:306 [cit. in para 3] ECJ 12.09.2000, C-180/98, P. Pavlov, ECLI:EU:C:2000:428 [cit. in para 12] ECJ 27.11.2003, C-34/01-38/01, Enirisorse, ECLI:EU:C:2003:640 [cit. in para 14] 91

Szyszczak, in Peers et al. (2014), para 36.42, 36.54. In detail, Simon (2009), p. 40 et seq.; Krajewski (2011), p. 117 et seq. 93 As well as Krajewski (2015), p. 301 et seq.; Reichert and Hellriegel (2014), p. 151. 92

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ECJ 16.03.2004, C-264/01, AOK Bundesverband, ECLI:EU:C:2004:150 [cit. in para 12] ECJ 11.07.2006, C-205/03, FENIN, ECLI:EU:C:2006:453 [cit. in para 17] ECJ 11.09.2007, C-318/05, Commission v. Germany, ECLI:EU:C:2007:495 [cit. in para 12] ECJ 26.03.2009, C-113/07, Eurocontrol, ECLI:EU:C:2009:191 [cit. in para 12] ECJ 06.09.2012, C-380/11, DI. VI. Finanziaria di Diego della Valle & C., ECLI: EU:C:2012:552 [cit. in para 3] ECJ 01.07.2014, C-573/12, Ålands Vindkraft, ECLI:EU:C:2014:2037 [cit. in para 16] ECJ 07.09.2016, C-121/15, ANODE, ECLI:EU:C:2016:637, [cit. in para 37] ECJ 28.05.2019, C-405/16 P, Germany v. Commission, ECLI:EU:C:2019:268 [cit. in para 2] ECJ 03.03.2021, C-439/19 and C-435/19, Poste Italiane SpA, ECLI:EU: C:2021:162 [cit. in para 1]

References94 Auby, J.-F., & Raymondie, O. (2003). Le service public. Paris: Le Moniteur. Blanke, H.-J. (2010). Kommunale Selbstverwaltung und Daseinsvorsorge nach dem Unionsvertrag von Lissabon. Deutsches Verwaltungsblatt, 125, 1333–1343. Bullinger, M. (2003). Französischer service public und deutsche Daseinsvorsorge. JuristenZeitung, 597–604. Burgi, M. (2002). Verwalten durch öffentliche Unternehmen im europäischen Institutionenwettbewerb. Verwaltungsarchiv, 93, 255–277. Burgi, M. (2012). Privatisierung und Rekommunalisierung aus rechtswissenschaftlicher Sicht. Niedersächsische Verwaltungsblätter, 19, 225–232. Cadeau, E., Linotte, D., & Romi, R. (2014). Droit du service public. New York: LexisNexis. Calliess, C., & Ruffert, M. (Eds.). (2016). EUV/AEUV (5th ed.). Munich: C.H. Beck. Cassese, S. (1996). La trasformazione dei servizi pubblici in Italia. Economia pubblica, 26(5), 5– 14. Cassese, S. (2000). La nuova costituzione economica. Roma-Bari: Laterza. Chevallier, J. (2015). Le service public. Paris: PUF. Cox, H., & Ambrosius, G. (Eds.). (2000). Daseinsvorsorge und öffentliche Dienstleistungen in der Europäischen Union. Baden-Baden: Nomos. Eufinger, A. (2014). Das sparkassenrechtliche Regionalprinzip aus europarechtlicher Sicht. Europäisches Wirtschafts- und Steuerrecht, 253–257. Fehling, M. (1996). Mitbenutzung Dritter bei Schienenwegen, Energieversorgungs- und Telekommunikationsleitungen vor dem Hintergrund staatlicher Infrastrukturverantwortung. Archiv des öffentlichen Rechts, 121, 60–95. Frenz, W. (2011). Konkretisierungsbedürftige Dienste von allgemeinem wirtschaftlichem Interesse. Gewerbearchiv, 16–19. Gersdorf, H. (2014). Regulierung der Netzneutralität in der Europäischen Union: Gebot der Gleichbehandlung von linearen und nichtlinearen Mediendiensten. Kommunikation und Recht, 642–647.

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González-Varas, S. (2002). Die Verwaltung in Privatrechtsform in Spanien und Deutschland. Bern: Peter Lang. Grabitz, E., Hilf, M., & Nettesheim, M. (Eds.). (2020). Das Recht der Europäischen Union. Kommentar. (Loose-leaf). Munich: Beck. Hermes, G. (1998). Staatliche Infrastrukturverantwortung. Tübingen: Mohr Siebeck. Heselhaus, S. (2018). Handbuch der Europäischen Grundrechte. Munich: C.H. Beck. Hoffschulte, H. (2005). Kommunale Selbstverwaltung im Entwurf des EU-Verfassungsvertrages. Deutsches Verwaltungsblatt, 202–211. Holoubek, M. (2001). Der Staat als Wirtschafssubjekt und Auftraggeber. VVDStRL, 60, 515–661. Berlin: De Gruyter. Immenga, U., & Mestmäcker, E. J. (2016). Wettbewerbsrecht. Munich: C.H. Beck. Jarass, H. D. (2016). Charta der Grundrechte der EU. Munich: C.H. Beck. Jennert, C. (2004). Wirtschaftliche Tätigkeit als Voraussetzung für die Anwendbarkeit des europäischen Wettbewerbsrechts. Wirtschaft und Wettbewerb, 37–46. Kämmerer, J. A. (2002). Daseinsvorsorge als Gemeinschaftsziel oder Europas “soziales Gewissen”. Neue Zeitschrift für Verwaltungsrecht, 1041–1046. Kerber, M. C. (2014). Regionalprinzip des Sparkassenverbundes vs. Wettbewerb? – Versuch einer kartellrechtlichen Klarstellung. JuristenZeitung, 1044–1048. Kluth, W. (2002). Zur Bedeutung des Artikel 16 EGV für die Wahrnehmung von Aufgaben der Daseinsvorsorge durch die Kommunen. In H. G. Henneke (Ed.), Kommunale Perspektiven im zusammenwachsenden Europa: Professorengespräch 2002 des Deutschen Landkreistages am 21. und 22. März in Metzingen /Landkreis Reutlingen (pp. 68–87). Stuttgart: Boorberg. Knauff, M. (2010). Die Daseinsvorsorge im Vertrag von Lissabon. Europarecht, 725–745. Koenig, C. (2001). Daseinsvorsorge durch Wettbewerb! Europäische Zeitschrift für Wirtschaftsrecht, 481. Kotzur, M. (2013). Daseinsvorsorge als Unionsaufgabe. Überlegungen zur sozialen Integration in Europa. Jahrbuch des öffentlichen Rechts, 6, 195–211. Krajewski, M. (2003). Public services and trade liberalization: Mapping the legal framework. Journal of International Economic Law, 6(2), 341–367. Krajewski, M. (2008). Rechtsbegriff Daseinsvorsorge? Verwaltungsrachiv, 99, 174–196. Krajewski, M. (2010). Dienstleistungen von allgemeinem Interesse im Vertrag von Lissabon. Zeitschrift für öffentliche und gemeinwirtschaftliche Unternehmen, 75–96. Krajewski, M. (2011). Grundstrukturen des Rechts öffentlicher Dienstleistungen. Heidelberg: Springer. Krajewski, M. (2015). Schutz öffentlicher Dienstleistungen in EU-Freihandelsabkommen. Europäische Zeitschrift für Wirtschaftsrecht, 301–305. Krautscheid, A. (2009). Die Daseinsvorsorge im Spannungsfeld von europäischem Wettbewerb und Gemeinwohl. Heidelberg: Springer. Kühling, J. (2013). Kartellrechtliche Befreiung und Betrauung des Presse-Grossos in der GWBNovelle. Zeitschrift für Urheber- und Medienrecht, 18–28. Kühling, J., & Biendl, M. (2013). EU-verordnete Aktivierung von Synergien beim Ausbau von Next-Generation-Networks. Kommunikation und Recht, 459–465. Lachaume, J.-F., & Pauliat, H. (2004). Grands services publics. Paris: Armand Colin. Le Mestre, R. (2005). Droit du service public. Torino: Gualino. Loewenheim, U., Meessen, K. M., & Riesenkampff, A. (2009). Kartellrecht. Munich: C.H. Beck. Löwenberg, F. (2001). Service public und öffentliche Dienstleistungen in Europa. Baden-Baden: Nomos. Magiera, S. (2001). In J. Ipsen & E. Schmidt-Jortzig (Eds.), Recht - Staat - Gemeinwohl: Festschrift für Dietrich Rauschning (p. 269 et seq). Köln: Carl Heymanns Verlag. Mann, T. (2006). § 34 Zugang zu Dienstleistungen von allgemeinem wirtschaftlichem Interesse. In S. Heselhaus (Ed.), Handbuch der Europäischen Grundrechte. Munich: C.H. Beck. Martini, M. (2011). Wie viel Gleichheit braucht das Internet? Netzneutralität als Stellschraube für die Zukunft des Internets. Verwaltungsrachiv, 315–342.

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Meng, W. (2013). Die “Dienste von allgemeinem wirtschaftlichen Interesse” – ein Problem der Normenklarheit im EU-Recht. In M. Breuer, A. Epiney, A. Haratsch, S. Schmahl, & N. Weiß (Eds.), Der Staat im Recht.: Festschrift für Eckart Klein zum 70. Geburtstag (p. 569 et seqq.). Berlin: Duncker & Humblot. Mestmäcker, E. J., & Schweitzer, H. (2014). Europäisches Wettbewerbsrecht. Munich: C.H. Beck. Monti, M. (2010). A new strategy for the single market – Report to the President of the European Commission. Retrieved from http://ec.europa.eu/internal_market/strategy/docs/monti_report_final_10_05_2010_en.pdf Möstl, M. (2004). Renaissance und Rekonstruktion des Daseinsvorsorgebegriffs unter dem Europarecht. In M. Möstl, M. Brenner, & P. Huber (Eds.), Der Staat des Grundgesetzes - Kontinuität und Wandel: Festschrift für Peter Badura zum siebzigsten Geburtstag (p. 951 et seqq.). Tübingen: Mohr Siebeck. Neergard, U., Szyszczak, E., Van den Gronden, J. W., & Krajewski, M. (2012). Social services of general interest in the EU (Legal issues of services of general interest). Heidelberg: Springer. Parejo Alfonso, L. (2004). Servicios Públicos y Servicios de Interés General: La renovada actualidad de los primeros. Revista de Derecho de la Unión Europea, 7, 51–68. Peers, S., Hervey, T., Kenner, J., & Ward, A. (Eds.) (2014). The EU Charter of Fundamental Rights: A Commentary. München: C.H. Beck. Pielow, J.-C. (2001). Grundstrukturen öffentlicher Versorgung: Vorgaben des Europäischen Gemeinschaftsrechts sowie des französischen und des deutschen Rechts unter besonderer Berücksichtigung der Elektrizitätswirtschaft. Tübingen: Mohr Siebeck. Pielow, J.-C. (2002). Der internationale Vergleich: Frankreich–Service Public. In Hrbek (Ed.) Europäische Union und mitgliedstaatliche Daseinsvorsorge, 155–173. Baden-Baden: Nomos. Pielow, J.-C. (2006). Öffentliche Daseinsvorsorge zwischen Markt und Staat. Juristische Schulung, 2006, 780–784. Pielow, J.-C. (2012). § 22 Energierecht. In D. Ehlers, H. Pünder, & M. Fehling (Eds.), Besonderes Verwaltungsrecht: Band 1: Öffentliches Wirtschaftsrecht (pp. 730–846). London: C.F. Müller. Püttner, G. (2000). Daseinsvorsorge und service public im Vergleich. In H. Cox (Ed.), Daseinsvorsorge und öffentliche Dienstleistungen in der EU (p. 45 et seqq.). Baden-Baden: Nomos. Reichert, I., & Hellriegel, D. (2014). Das Freihandelsabkommen mit den USA und potentielle Auswirkungen für die Daseinsvorsorge. KommunalPraxis spezial, 151–155. Rengeling, H. W., & Szczekalla, P. (2004). Grundrechte in der Europäischen Union - Charta der Grundrechte und Allgemeine Rechtsgrundsätze. Köln: Carl Heymanns Verlag. Rodrigues, S. (1998). Le service public et le traité d’Amsterdam – genèse et portée juridique du projet de nouvel article 16 du traité CE. Revue du Marché Commun, 37–46. Rohleder, K. (2019). In Meyer/Hölscheidt (Ed.), Charta der Grundrechte der Europa¨ischen Union. Baden-Baden: Nomos. Ronellenfitsch, M. (2003a). Daseinsvorsorge als Rechtsbegriff. In W. Blümel (Ed.), Ernst Forsthoff (p. 53 et seqq.). Berlin: Duncker & Humblot. Ronellenfitsch, M. (2003b). Dienste von allgemeinem wirtschaftlichem Interesse in der europäischen Wettbewerbsordnung – eine Perspektive für das öffentliche Kreditwesen. Nordrhein-Westfälische Verwaltungsblätter, 132–139. Säcker, F. J., & Mengering, K. S. (2013). Netzneutralität – oder: die Himmelfahrt des Wortes. Kommunikation und Recht, 559–568. Schmahl, S. (2011). Die mitgliedstaatliche Daseinsvorsorge im Spannungsfeld zum europäischen Binnenmarkt. Wirtschaft und Verwaltung, 96–111. Schmidt, R. (2003). Die Liberalisierung der Daseinsvorsorge. Der Staat, 42, 225 et seq. Schneider, J.-P. (1999). Liberalisierung der Stromwirtschaft durch regulative Marktorganisation: Eine vergleichende Untersuchung zur Reform des britischen, US-amerikanischen, europäischen und deutschen Energierechts. Baden-Baden: Nomos. Schulz-Nieswandt, F. (2005). Soziale Daseinsvorsorge im Lichte der neueren EU-Rechts- und EUPolitikenentwicklungen. Zeitschrift für öffentliche und gemeinwirtschaftliche Unternehmen, 19–33.

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Schulz-Nieswandt, F. (2013a). Lektürelandschaft zu den Dienstleistungen von allgemeinem öffentlichem Interesse: Relevantes, weniger Relevantes, Überflüssiges. Zeitschrift für öffentliche und gemeinwirtschaftliche Unternehmen, 2013, 218–224. Schulz-Nieswandt, F. (2013b). Das Privatisierungs-Dispositiv der EU-Kommission: Das ontologische Existenzial der Daseinsvorsorge, die sakrale Doxa des Binnenmarktes und die ‘kafkaistischen’ Epiphanien der Regulationskultur. Berlin: Duncker & Humblot. Schwarze, J. (2001). Daseinsvorsorge im Lichte des europäischen Wettbewerbsrechts. Europäische Zeitschrift für Wettbewerbsrecht, 334–339. Schwarze, J., Becker, U., Hatje, A., & Sohoo, J. (Eds.). (2019). EU-Kommentar. Baden-Baden: Nomos. Simon, S. (2009). Liberalisierung von Leistungen der Daseinsvorsorge im WTO- und EU-Recht Jus Internationale et Europaeum. Tübingen: Mohr Siebeck. Spies, A., & Ufer, F. (2015). Quo vadis Netzneutralität? Status quo und Ausblick – Ein langer Weg zu einem tragfähigen Kompromiss in der EU, Deutschland und den USA. Multimedia und Recht, 91–97. Steinberg, P. (2004). Daseinsvorsorge im europäischen Mehrebenensystem als geteilte Gewährleistungsverantwortung. In M. Bungenberg, S. Danz, H. Heinreich, et al. (Eds.), Recht und Ökonomik (pp. 189–222). Munich: C.H. Beck. Streinz, R. (Ed.). (2018). EUV/AEUV. Munich: C.H. Beck. Stürner, R. (2007). Markt und Wettbewerb über alles? Gesellschaft und Recht im Fokus neoliberaler Marktideologie. Munich: C.H. Beck. Tettinger, P. (1996a). Strukturen der Versorgungswirtschaft in Europa. Bochum: Boorberg. Tettinger, P. (1996b). Les services publics dans la conception du droit allemand. In Initiative pour des services d’utilité publique en Europe (Ed.), Vers un Service public européen (p. 56 et seqq.). Paris: Éd. ASPE Europe. Ünlü. (2009). Die Liberalisierung der Trinkwasserversorgung in Deutschland (auf dem Prüfstand des gemeinschaftlichen Wettbewerbsrechts). Berlin: Wissenschaftlicher Verlag. Vaquer Caballería, M. (2005). Los problemas de la contraposición entre económico y social en la doctrina europea de los servicios de interés general. Revista General de Derecho Administrativo, (8), 1. von Danwitz, T. (2009). Dienste von allgemeinem wirtschaftlichem Interesse in der europäischen Wettbewerbsordnung. In A. Krautscheid (Ed.), Die Daseinsvorsorge im Spannungsfeld von Europäischem Wettbewerb und Gemeinwohl: Eine sektorspezifische Betrachtung (p. 103 et seqq.). Wiesbaden: VS Verlag für Sozialwissenschaften. Villata, R. (2008). Pubblici Servizi – Discussioni e Problemi. Milan: Giuffrè. von der Groeben, H., Schwarze, J., & Hatje, A. (Eds.). (2015). Europäisches Unionsrecht. Commentary (7th ed.). Baden-Baden: Nomos. Waiz, E. (2009). Daseinsvorsorge in der Europäischen Union – Etappen einer Debatte. In A. Krautscheid (Ed.), Die Daseinsvorsorge im Spannungsfeld von Europäischem Wettbewerb und Gemeinwohl: Eine sektorspezifische Betrachtung (p. 41 et seqq.). Wiesbaden: VS Verlag für Sozialwissenschaften. Weiß, W. (2003). Europarecht und Privatisierung. Archiv für öffentliches Recht, 128, 91–133. Weiß, W. (2013). Öffentliche Daseinsvorsorge und soziale Dienstleistungen – Europarechtliche Perspektiven. Europarecht, 669–687. Wernicke, S. (2015). Die gewandelte Bedeutung des Artikel 106 AEUV: Aus den Apokryphen zum Kanon der Wirtschaftsverfassung. Europäische Zeitschrift für Wirtschaftsrecht, 281–285. Zetzsche, D. (2014). Beihilfe durch staatliche Kreditgewährung an die Entschädigungseinrichtung der Wertpapierhandelsunternehmen: Der Fall Phoenix. Wirtschaft und Wettbewerb, 958–970.

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Article 15 [Observance of the Principle of Openness] (ex-Article 255 TEC) 1. In order to promote good governance and ensure the participation of civil society, the Union’s institutions, bodies, offices and agencies shall conduct their work as openly as possible.1–9 2. The European Parliament shall meet in public, as shall the Council when considering and voting on a draft legislative act.10–18 3. Any citizen of the Union, and any natural or legal person residing or having its registered office in a Member State,20, 24 shall have a right of access to documents25–28 of the Union’s institutions, bodies, offices and agencies,23 whatever their medium, subject to the principles and the conditions to be defined in accordance with this paragraph. General principles and limits on grounds of public or private interest governing this right of access to documents shall be determined by the European Parliament and the Council, by means of regulations,22–31 acting in accordance with the ordinary legislative procedure. Each institution, body, office or agency shall ensure that its proceedings are transparent and shall elaborate in its own Rules of Procedure specific provisions regarding access to its documents, in accordance with the regulations referred to in the second subparagraph.32–36 The Court of Justice of the European Union,38 the European Central Bank39 and the European Investment Bank40 shall be subject to this paragraph only when exercising their administrative tasks. The European Parliament and the Council shall ensure publication of the documents relating to the legislative procedures under the terms laid down by the regulations referred to in the second subparagraph.41–43

Contents 1. 2.

Good Governance, Participation of Civil Society and Openness (Paragraph 1) . . . . . . . . . . Transparency: Public Meetings in the Legislative Procedure (Paragraph 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Right of Access to Documents (Paragraph 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1. Origins and Evolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2. Relevance and Limitations of Regulation (EC) 1049/2001 . . . . . . . . . . . . . . . . . . . . . . . 3.3. Specific Measures Adopted by the European Institutions . . . . . . . . . . . . . . . . . . . . . . . . . 3.4. Peculiarities Affecting the CJEU, the ECB and the EIB . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5. Preferential Access to Legislative Documents of the EP and of the Council . . . . . 4. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Cases References

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The slow integrated development of the European organisational architecture, especially since the enactment of the Treaty of Maastricht, is a story of a constant and uninterrupted process of progressive democratisation of its political structures. However, a complete realisation of the democratic principle at EU level presents more difficulties and challenges than at MS level. As it is well known, the constitutive diversity of the Union and its own internal complexity explain the existence of major obstacles to its execution.1 The emphasised absence of openness, popular participation, transparency and accountability of the European institutions in their decision-making and also the criticised divergence between the European policies and the citizens’ preferences all play a part in the creation of the so-called “democratic deficit” of the EU, generating a notable break or gap in the relationship established between the governing and the governed. Although this circumstance also affects, more or less, to every contemporary democratic regime, it may be in the Union, as a supranational or post-State political organisation, where this effect is more relevant and usually denounced.2 Certainly, the notable extension of the political integration process experienced by the EU to achieve, because of globalisation, new objectives, has generated a relevant enlargement of competences and regulations affecting many new subject matters. Thus, especially after the reform of the constitutive Treaties promoted in Maastricht and Amsterdam, it is possible to notice that the discussion about the “democratic deficit” of the Union goes beyond the traditional references to the underlying tension between intergovernmental and supranational orientations. Thereby the argument about the “lack of democracy” in the Union is related, extensively, to pursuing a real and active involvement of the European citizens in the drafting and implementation of policies. The purpose is the creation, within a federalist framework, of a “grassroots democracy” that implies transparency, dialogue, popular participation and communication of decisions, an accurate valuation of the significance of the principle of subsidiarity (Article 5.3 TEU) in its descendent or vertical dimension, the strengthening of a closer relationship between the European institutions, the MS and the autonomous territories, which are part of them to promote the creation of a “Europe of the Regions”, and openness to completing democratic-social tasks to approach the objectives of the Union regarding citizens’ demands.3 Thus, to modify this situation was considered necessary to establish, not only an institutional framework with essential references to the principle of representative democracy (Article 10 TEU), but also complementary determinations referred to several elements of participatory democracy (Article 11 TEU). The purpose was

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Von Bogdandy (2010), p. 51. Micossi (2008), p. 1. 3 Eriksen and Fossum (2000), passim; Ridola (2010), p. 307. 2

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to achieve a true integration of citizens in the decision-making process of the EU institutions. Thus would derivatively cause a substantial change in the model of EU governance, reinforcing its democratic character. This constant concern in the Treaties is reflected, primarily, in the Preamble of the TEU that declares the desire “to enhance further the democratic and efficient functioning of the institutions so as to enable them better to carry out, within a single institutional framework, the tasks entrusted to them” (7th consideration). Such declaration is accompanied by the resolution “to continue the process of creating an ever closer union among the peoples of Europe, in which decisions are taken as closely as possible to the citizen in accordance with the principle of subsidiarity” (13th consideration). Afterwards, Article 1 (2) TEU declares that the EU decisions shall be taken “as openly as possible and as closely as possible to the citizen” (➔ Article 1 TEU para 44 et seq.). Consequently, Article 10.3 TEU expresses the intention to promote popular participation in the democratic life of the Union. This suggestive and potential paragraph must be systematically interpreted in relation to other remarkable stipulations, like Article 11.1 TEU, that expresses the aspiration of creating channels of communications between citizens, representative associations and the EU institutions, to make possible dialogue and popular participation in every political process; Article 11.2 TEU, which declares the principle establishing the aim to improve the proximity of the EU institutions to representative associations and civil society; Article 11.3 TEU, which enunciates the principle of transparency of Union actions; and Article 11.4 TEU, which states, specifically, the citizens’ initiative (➔ Article 11 TEU para 10).4 Thus, Article 15.1 TFEU, which can be considered a specific development of these general normative stipulations, particularly determines, through a relevant programmatic principle: “In order to promote good governance and ensure the participation of civil society, the Union institutions, bodies, offices and agencies shall conduct their work as openly as possible.” This principle echoes the outstanding Commission Communication of 25 July 2001 “European Governance. A White Paper”5 that had a decisive influence in its drafting. This document proposes several major changes in the functioning of the European institutions that are directed towards the achievement of the mentioned goals. In this regard, such Communication establishes the basic principles of good governance aimed at attaining a better citizen involvement in public affairs (cf. Article 298 TFEU on open European administration). Thus, the cited document recommends that policies should no longer be decided at the top, as the legitimacy of the EU lies with the participation of its citizens in the definition of policies and legislation, which depends on people being able to take part in public debate. For this to happen, citizens and representative associations should be more actively informed about European issues. Therefore, the EU institutions must comply with the requirement of openness, attaching more importance to transparency and

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See also Bouza García (2010), p. 16. See European Commission, European governance - A white paper, COM(2001) 428 final, O.J. C 287 (2001). 5

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communication in their decision-making. For this, it is advisable the gradual building of a culture of dialogue and consultation within the EU that should allow the creation of channels of communication and exchange of information between the Union institutions, bodies, offices and agencies, and civil society (➔ Article 10 TEU para 32). Therefore, Article 15.1 TFEU aims to synthesise the significance given by the relevant White Paper on Governance granting finally full legal effects to its fundamental orientations. In this regard, Article 15 TFEU may be considered a reaction to the fact that, initially, the mentioned Communication declares that its objectives do not necessarily require the reform of the Treaties, as they are, mainly, a question of political will, to which all the institutions and the MS need to commit. Indeed, the document of the Commission tries to represent, as a whole, a conscious strategy for increasing the legitimacy of the EU institutions involving civil society in its functioning. Consequently, the White Paper is limited to identifying a “legitimacy gap” in the EU, a gap that is the result of comparing the standards of legitimate governance expressed by the European institutions and their actual performance. However, unfortunately, the proposals given by the document do not contribute very much to establishing the required procedures supporting the institutional structures of the Union.6 On the contrary, they consolidate and justify the existing governance methods. It is a disappointment because it frustrates the high expectations set. As E. O. Eriksen well noticed, the document still “reflects a rather technocratic attitude on how to solve the problems. The governance path is problematic because it comes down to steering. It is concerned with efficient problem-solving and there is no onus on equal access and popular control.”7 Truly, without detailed legal references, contained in the Treaties, to the proper standards of democracy—i.e. accountability—there can be no adequate way to handle the problems of legitimacy previously denounced.8 The reasonable diagnosis expressed before and the frustrated expectations caused by implementing the White Paper have finally caused the approval of some important and complementary normative stipulations. In this context, Article 15 TFEU, while relevant, just represents one of these references. Not in vain, the White Paper on Governance, at least, set down markers for the debate on the future of Europe and not only guidelines for the behaviour of the institutions of the Union. Hence, it has been supplemented by an extensive process of institutional reforms promoted, initially, by the Laeken European Council, whose Declaration on the Future of the European Union stated that the European institutions, by increasing their democratic legitimacy and transparency, might be brought closer to

6

Follesdal and Hix (2006), p. 533. Eriksen (2001), p. 34; and see for a more favourable commentary Dehousse (2002), p. 207. 8 Bredt (2001), p. 35. 7

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the citizens.9 Such process finally concluded assuming the references included in the Draft Constitutional Treaty, with the signing of the Treaty of Lisbon. Particularly, this Treaty has launched a vast reform of governance to drive forward a wideranging democratic process in the Union. For this purpose, Article 15 TFEU, as a provision of general application, cannot be alone. Thus, the principle that promotes good governance, ensuring the participation of civil society and conducting the work of the Union institutions as openly as possible, should be primarily in connection with the EU Charter of Fundamental Rights that certifies the extraordinary relevance of the European citizens’ rights (Articles 39–46 EUCFR).10 Thus, among its provisions it is possible to highlight the right to good administration (Article 41 EUCFR), the right of access to documents (Article 42 EUCFR), the right to refer to the Ombudsman of the Union any cases of maladministration in the activities of the Union institutions (Article 43 EUCFR), and the right to petition the EP (Article 44 EUCFR).11 Therefore, all these provisions try to promote the strengthening of the democratic functioning of the Union, as they represent the materialisation of the European political integration values and principles that have become elements in identifying a common ownership. In this sense, there is no doubt that the legal recognition of the status of European citizenship is the original source of important political rights and of remarkable channels of democratic participation that imply consequent obligations of openness and transparency for the European institutions.12 Indeed, these complementary normative references contribute to the construction of a “European public space” that relies on the development of a truly communicative and widespread European network; capable of forming a “common political culture”, as an expression and pillar of support for the demands of a pluralistic civil society, filled with different interest groups, citizen initiatives and movements, which can be undertaken to make legally binding decisions within European institutions.13 Thus, the Commission considers that civil society plays an important role in the developments of EU policies. Thus, it will continue to encourage the activities of NGOs, the social partners and civil society in general. However, at the time, the Commission will insist that these organisations representing civil society should themselves apply the principles of good governance as a show of their responsibility and openness.14 In this sense, other relevant documents 9

See Presidency Conclusions European Council meeting in Laeken 14 and 15 December 2001. Annex I: Laeken Declaration on the Future of the European Union. Available at https://ec.europa. eu/dorie/fileDownload.do;jsessionid¼BfT1JXCLqsj0GqG1GmTSb6PW0fPlZyQq7k7z2hxnqtQ8xJmJZJQP!-172979321?docId¼344249&cardId¼344249. 10 Among others, see the commentaries by Kluth (Article 39, 40, 43–46 GrCh), Ruffert (Article 41 GrCh) and Wegener (Article 42 GrCh), in Calliess and Ruffert (2011). 11 Closa Montero (2007), p. 1037; see also EU Network of Independent Experts on Fundamental Rights (2006), p. 125. 12 Habermas (2012), p. 47. 13 Habermas (1999), p. 132. 14 Closa Montero (2003), p. 445

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of the Commission, like its Communication “towards a reinforced culture of consultation and dialogue”,15 underline the general principles and minimum standards for consultation of interested parties by the Commission. Further, the White Paper on a European Communication Policy16 aims to contribute to the creation of a well-informed European public opinion, using techniques associated with the right of information and the freedom of expression to facilitate participation in political affairs. Therefore, the construction of a “European political culture” that supports the authentic democratisation of the Union’s institutional structures is not going to be achieved suddenly. Such a culture can only be developed gradually with the emergence of European political parties (Article 10.4 TEU and Article 224 TFEU) and an increased perceived relevance of European issues in everyday life.17 In fact, it is likely that the application of the EUCFR will do more for the legitimacy of the Union and for the guarantee of its democratic functioning18 than many other partial decisions that have been taken thus far. Thus, largely, we may say that the general requirement expressed in Article 15.1 TFEU, according to which the Union institutions shall conduct their work as openly as possible, is the logical and coherent counterpart to the simultaneous recognition of political rights to the European citizens in the institutional framework of the Union. In sum, openness of the European institutions implies that they should devote more importance to transparency and communication in their decision making as requirements of good governance. Indeed, openness enables citizens to participate more closely in every decision making process and guarantees that the European institutions enjoys greater legitimacy and are more effective and more accountable to the citizen in a democratic political system. Thus, openness contributes decisively to strengthening the principles of democracy, expressed in Title II TEU and respect for fundamental rights as laid down in the EUCFR.

2.

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Transparency: Public Meetings in the Legislative Procedure (Paragraph 2)

Article 15.2 TFEU states that the EP shall meet in public, as shall the Council when considering and voting on a draft legislative act. Such rule reflects the intention to ensure the publicity of the actions of these relevant EU political institutions, particularly when they lead to the development of legislative

15

See Commission Communication, Towards a reinforced culture of consultation and dialogue General principles and minimum standards for consultation of interested parties by the Commission, COM(2002) 704 final. 16 See White Paper on a European Communication Policy, presented by the Commission, COM (2006) 35 final. 17 Micossi (2008), p. 7. 18 Menéndez (2009), p. 277.

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procedures (➔ Article 14 TEU para 25 et seq.).19 Therefore, it is clear that the special will that animates the wording of this provision is to eliminate any reasonable criticism that insists on the opaque and arcane condition of such procedures and, by extension, who thus relates to these two European institutions. Truly, it is necessary to recognise that the democratic principle of publicity is inherent in transparent functioning of every political institution. It entails that “decisionmaking processes [. . .] can be generally perceived and understood” by the citizens (➔ Article 1 TEU para 44).20 Thus, at EU level, publicity allows citizens to scrutinise and evaluate the activities and decisions of the public authorities and to call them to account. Therefore, publicity renders more effective the use of political rights like the right to information, improving popular confidence in institutions. The result should not be other than achieving good governance through transparency.21 Accordingly, Article 15.2 TFEU intends to give full visibility to the various stages of the legislative procedures. In the case relating to Parliament, particularly in those stages in which the performance of this institution is obscured. The early stages of the ordinary legislative procedure and the eventual final one must focus attention. Therefore, as the White Paper on Governance previously noted, it is necessary to make the functioning of the institutions more accessible throughout the co-decision procedure. The Code of Conduct for Negotiating in the Context of the Legislative Procedure of 200822 also insisted on the need to increase transparency and accountability at an early stage of the procedure. Thus, with these complementary principles is intended, first, to ensure public access to follow the relevant meetings of the EP and of the Council to guarantee their transparent work, or what is the same, to avoid any accusation of opacity in their decision-making processes.23 As it has been determined according to the Joint Declaration of the EP, the Council and the Commission of 13 June 2007, on Practical Arrangements for the Co-decision Procedure:24 “The institutions undertake fully to respect such commitments in line with the principles of transparency, accountability and efficiency” (No. 3). For that purpose, the Interinstitutional Agreement on Better LawMaking also indicates that the three Institutions agree to ensure transparency “especially in their trilateral negotiations”, but, in any case, they commit to “improve communication to the public during the whole legislative cycle.” Thereby, in particular, they “will announce jointly the successful outcome of the 19

Generally, see also Corbett (2012), p. 249. German Federal Constitutional Court, 2 BvR 2134, 2159/92 (Judgment of 12 October 1993) para 98 -Maastricht (in BVerfGE 89, 155 [185]). 21 Driessen (2012), p. 14; Bonde (2014), passim. 22 As approved by the Conference of Presidents on 18 September 2008, see Annex XX to the EP’s Rules of Procedure. 23 Initially, see Interinstitutional Agreement on Better Law Making, O.J. C 321/1 (2003). 24 See Joint Declaration on practical arrangements for the codecision procedure (Article 251 of the EC Treaty), O.J. C 145/5 (2007). 20

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legislative process in the ordinary legislative procedure once they have reached agreement, namely through joint press conferences or any other means considered appropriate.” Nonetheless, “in order to facilitate traceability of the various steps in the legislative process, the three Institutions undertake to identify ways of further developing platforms and tools to that end, with a view to establishing a dedicated joint database on the state of play of legislative files.”25 Despite what is stated in the mentioned principle and what set the EP’s Rules of Procedure, according to which “Parliament shall ensure that its activities are conducted with the utmost transparency” (Rule 121.1), and in accordance with the stipulation that consequently determines that “Debates in Parliament shall be public” (Rule 121.2), the fact is that not always parliamentary committees have their meetings in public, because, as indicates Rule 121.3, “they may, however, decide, to divide that agenda into items open to the public and items closed to the public. However, if a meeting is held in camera, the committee may decide to make documents from the meeting available for public access.” Even considering the comprehensible exception mentioned before, also made clear in reference to the meetings of the committee responsible of requests relating to procedures on immunity, what is certain is that the EP can be considered, in general, the most transparent EU institution. That is evidenced by the fact that its deliberations take place ordinarily in public. Thus, when the EP assembles, it is transmitted live on the Internet. The EP’s video service broadcasts live from both the plenary sessions, committee meetings and press conferences. Additionally, it is possible to find footage from back to 2006 in the EP’s multimedia library. This public performance is also applied, in general, to the development of the ordinary legislative procedure, also called co-decision procedure (Article 294 TFEU),26 whose fundamental stages are informed by the principle of publicity.27 It should be noted that the additional requirement to ensure more transparency affecting to negotiations that followed during the various stages of the ordinary legislative procedure, especially in relation to those taking place at an early stage of the procedure, where the visibility within Parliament is very limited. This is the case for negotiations developed before the lead parliamentary committee that vote at first reading with the aim of reaching a first-reading agreement (Article 294.6 TFEU), and also after the first reading of the Parliament with the aim of reaching an early second-reading agreement (Article 294.7 TFEU). In that sense, the mentioned Code of Conduct regulates the decision to enter in negotiations, the composition of the negotiating team, its mandate, the organisation of tripartite meetings (“trilogues”), the decision on agreement reached, the assistance to the negotiating team and the finalisation of the procedure. Further, in relation to the eventual third reading stage of the said legislative procedure (Article 294.13 TFEU and Rule 75),

25

See Interinstitutional Agreement between the European Parliament, the Council of the European Union and the European Commission on Better Law-Making, O.J. L 123/1 (2016). 26 Among others, Martínez Sierra (2008), p. 111 27 Best (2008), p. 85; De Witte et al. (2010), p. 26.

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where Parliament has precisely a real say, the Code of Conduct suggests applying the same principles expressed. Therefore, it is after the meetings in the conciliation committee (Article 294.10 TFEU and Rule 75), with the 27 representatives from the MS and the delegation of the Commission, when a compromise agreement between the Council and the EP must be positively adopted by a simple majority in the Parliament. In this regard, it is clear that the joint text, proposed by the conciliation committee, is the result of an informal and reserved “trilogue”, between the Council, the Parliament and the Commission, not always as transparent as it should, because there the requirement of transparency is relaxed: “trilogues [. . .] shall be announced, where practicable.”28 Indeed, only when the decision is voted as a roll-call vote it is possible to check how the MEPs have finally voted. That is the reason the White Paper on Governance proposed introducing more publicity at this stage of the ordinary legislative process. The challenge is to conciliate the flexible informality and confidentiality that governs such tripartite meetings to reach the desired agreement and the required general duty of transparency. Making public, even after the conclusion of the negotiations, minutes expressing successive positions, working documents and proposals, amendments, draft compromise texts and votes (not always registered) issued by the representatives of the institutions concerned, could help satisfy the objective to achieve. Nevertheless, at present, Rule 77.7 states that the deliberations of the delegation of the Parliament “shall not be public”. Thus, just the results of the conciliation shall be reported by the delegation to Parliament (Rule 77.8). This fact considerably limits the legitimate aspirations of transparency. In any case, should be valued positively the remarkable effort made by the mentioned Joint Declaration of 2007 (➔ para 12), the Code of Conduct of 2008 (➔ para 11), and the EP’s Rules of Procedure to enhance transparency during all its stages. For its part, the reference that makes Article 15.2 TFEU also applies to the Council in line with the provisions of Article 16.8 TEU, which states concordantly that the Council shall meet in public when it deliberates and votes on a draft legislative act. Under the Treaty of Lisbon, each Council configuration will deliberate and vote on legislation according to the subject matter dealt with. Those formal meetings of the Council are public but just when legislative acts are deliberated or voted upon. The public parts of Council meetings can be found at the video service of the Council, in all official languages, featuring both live streaming and archive footage. In this sense, an important innovation that has caused the adoption of the Treaty of Lisbon has been opening negotiations, debates and votes in the Council to public on the website of the Council. These relevant changes break the tendency to regard the discussions of the Council inspired by the principle of confidentiality in accordance with its intergovernmental nature.29 However, this opacity was right considered contradictory to the general duty of openness and

28

On “trilogues”, see Joint Declaration on practical arrangements for the codecision procedure (Article 251 of the EC Treaty), O.J. C 145/5 (2007), principles 7 and 9. 29 Stasavage (2006), p. 166.

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transparency that should inspire the functioning of the EU institutions (➔ Article 16 TEU para 55 et seq.).30 It is precisely the co-legislative dimension of the Council, linked to its, even indirect, democratic legitimacy, what requires that its performance should be developed in public. Indeed, the EU has travelled a long and winding road to reach this point.31 In 2006 still the Council’s Rules of Procedure32 kept the criterion according to which the meetings of the Council were not public (Article 5.1), but with some relevant exceptions. Precisely, an important derogation was represented by the rule stating that when the Council deliberates as legislator under the co-decision procedure, its deliberations concerning to the proposal of the Commission as well as the deliberation leading to the vote and the explanation of voting were open to the public (Article 8.1). Nevertheless, for the rest of the legislative proposals, which were not adopted in accordance with the co-decision procedure, the Council had to be open to the public for the first deliberation but only if the Presidency considered them important. However, now, under the Treaty of Lisbon, all Council’s deliberations and voting of draft legislative acts either referred to ordinary or special legislative procedures, must be public. It thus achieves transparency in the legislative proceedings of the Council, equating to this institution with Parliament.33 The current Council’s Rules of Procedure of 200934 confirmed in practice this general principle (Article 5.1 and 7). However, beyond what is formally stated, remains the secret or confidential functioning of the many (more than 150) important working groups and committees that include delegates of MS, linked to the Council’s General Secretariat. They are in charge to materially prepare the documents referred to every draft legislative act, which should be sent to the COREPER and finally to the Council to be formally adopted. Furthermore, demonstrating the intense irradiation of the principle of transparency to the Council activities, despite Article 5.1 of the Rules of Procedure, in line with Article 16.8 TEU, states that “[i]n other cases, meetings of the Council shall not be public”, revealing that the remaining (non-legislative) functions of the Council need not be subject to public scrutiny, the fact is that Article 8.1 of these Rules determines that “[w]here a non-legislative proposal is submitted to the Council relating to the adoption of rules which are legally binding in or for the Member States [. . .], the Council’s first deliberation on important new proposals shall be open to the public.” In those scenarios, the Presidency will decide about that on a case-by-case basis. However, always must be considered excluded of this

30

Curtin (2009), p. 217. Hillebrandt et al. (2014), p. 5 et seq. 32 Council Decision 2006/683/EC adopting the Council’s Rules of Procedure, O.J. L 285/47 (2006). 33 Settembri (2005), p. 651. 34 Council Decision 2009/937/EU adopting the Council’s Rules of Procedure, O.J. L 325/35 (2009). 31

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general duty “internal measures, administrative and budgetary acts, acts concerning inter-institutional or international relations and non-binding acts (such as conclusions, recommendations or resolutions)”. Such a rule, despite the exceptions noted before, relating to preparatory acts, reveals that transparency also affects nonlegislative tasks of the Council, extending to areas previously considered reserved and confidential. In this sense, Article 8.2 of the Rules of Procedure also states, in general, that under certain conditions, “the Council shall hold public debates on important issues affecting the interests of the European Union and its citizens”. In turn, it is considered in Article 8.3 that the General Affairs Council “shall hold a public policy debate on the Council’s 18-month programme” and that “[p]olicy debates in other Council configurations on their priorities shall also be held in public. The Commission’s presentation of its five-year programme, of its annual work programme and of its annual policy strategy, as well as the ensuing debate in the Council, shall be public”. In sum, everything that has been indicated confirms the tendency to increasing the exposure of the activities of the Council to the public discussion. Finally, it is necessary to underline the insistence of Article 15.2 TFEU to make public the Council’s voting results on draft legislative acts.35 Article 9 of the Council’s Rules of Procedure provides this relevant decision insisting that not only discussions or deliberations, but also Council’s votes and their explanations, should be made public. Significantly, referring to the complex third-reading stage of the ordinary legislative procedure, Article 7.4 of the Rules of Procedure states that “[t] he results of votes and explanations of votes by members of the Council or their representatives on the Conciliation Committee provided for under the ordinary legislative procedure, as well as the statements in the Council minutes and the items in those minutes relating to the Conciliation Committee meeting shall be made public.” A similar duty of publicity applies when the Council adopts non-legislative acts (Article 9.1) and “when the acts of the Council pursuant to Title V of the TEU, by a unanimous Council or COREPER decision taken at the request of one of their members” (Article 9.2). However, unfortunately, what we may too often check is when the Council publishes the result of votes in which a large majority of them is unanimous. Just very few of them are against a final proposal of the Presidency or wish to express abstentions. Thus, frequently, no differences of opinions could be noticed in public. The reason is that, in the Council, most draft legislative acts are decided without formal votes, because agreements are achieved through confidential negotiations. Consequently, the formal members of the Council know the outcome previously. That prevents citizens to find out individual opinions and explanations of votes. In such cases, transparency becomes sadly a chimera.

35

Previous normative standard is former Article 207.3 EC.

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Right of Access to Documents (Paragraph 3)

3.1. Origins and Evolution

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Inherent to the requirement of transparency in the functioning of the Union institutions, bodies, offices and agencies is the recognition, made by Article 15.3 TFEU, of the citizens’ right of access to documents of the EU institutions. The original references appeared in the previous Treaty of Maastricht (1992), which adopted several decisions referred to the underlying and current EU objectives of openness and transparency (Article 1 TEU). Its purpose was none other than “strengthening the democratic nature of the EU institutions and the public’s confidence in the administration.”36 Thus, initially, the Commission and the Council adopted a “Code of Conduct on Access to Documents” to providing “the widest possible access to documents.” Subsequently, these institutions and the EP took decisions determining the required conditions for access to information.37 However, it was former Article 255 TEC-Amsterdam, which finally introduced in EU primary law this significant right. According to such reference, the Final Act of the mentioned Treaty contained the Declaration No. 41 “on the provisions relating to transparency, access to documents and the fight against fraud”, which contributes to the delimitation of its scope.38 To this end, this Declaration suggests to the EP, the Council and the Commission to inspire its functioning in such a principle. Since all these goals were defined and declared, the next step, represented by Article 15.3 TFEU was to consider the right of access to documents not merely a strategy or a specific policy to strengthen the legitimacy of the EU institutions, but a consubstantial part of the general principle of transparency and therefore a key element of the democratic functioning of the Union.39 Hence this provision, introduced by the Treaty of Lisbon, despite it does not go as far as did Article I-50 TCE, which placed the precept among the provisions on the democratic principles of the Union, truly gets clarify, systematise and expand all the preceding regulatory stipulations notwithstanding that the resulting normative reference may also appear regulated by the EU Charter of Fundamental Rights, specifically in its Article 42, which is directly linked to the status of citizenship. Indeed, any legitimate institutional framework requires, nowadays, from a democratic perspective, as a guarantee of good government, first, an attitude of openness and transparency of its organs to provide citizens the possibility of 36

Declaration No. 17 on the Right of Access to Information attached to the Treaty of Maastricht. About Swedish influence in the contemporary conception of this right, see Österdahl (1998), p. 336. 37 Council Decision 93/731/EC on public access to Council documents, O.J. L 340/43 (1993); Commission Decision 94/90/ECSC, EC, Euratom on public access to Commission documents, O.J. L 46/58 (1994); and Parliament Decision 97/632/EC, ECSC, Euratom on public access to European Parliament documents, O.J. L 263/27 (1997). 38 Öberg (1998), passim; Ragnemalm (1998), p. 809. 39 González Alonso (2008), p. 681.

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gathering the necessary information about its functioning and, second, the provision of tools allowing the development of citizens’ initiatives aimed at obtaining such information. In any case, the principal goal is to achieve the effective limitation and control of the exercise of public power.40 In this sense, the latter requirement, which has a particular subjective dimension, is expressly recognised in Article 15.3 TFEU, declaring the right of any natural or legal person residing or having its registered office in an MS to have access to documents of the Union institutions, bodies, offices and agencies. The main novelty comes from the fact that here the right of access to information affects not only to documents of the EP, the Council and the Commission, as indicated former Article 255 EC, but also concerns to documents of all the institutions, bodies, offices and agencies of the Union, i.e. to the EU institutional system as a whole. Thus, without prejudice to subparagraph 3 of Article 15.3 TFEU, which states that the CJEU, the ECB and the EIB shall be subject to this paragraph only when exercising their administrative tasks, the point is that Article 15.3 TFEU, in accordance with Article 42 EUCFR, represents a substantial expansion of the scope of application of the right with respect to the provisions of the EU primary law that were in force before.41

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3.2. Relevance and Limitations of Regulation (EC) 1049/2001

Still in line with the standards set out in Amsterdam (former Article 255 EC), and therefore only partially to those laid down in Lisbon, by not been referred to all institutions, bodies, offices and agencies of the Union (Article 15.3 TFEU), the EP and the Council adopted, in accordance with the legislative procedure, Regulation (EC) No. 1049/2001 regarding public access to European Parliament, Council and Commission documents.42 The declared intent or purpose of this original Regulation as set out in Article 1 was “(a) to define the principles, conditions and limits on grounds of public or private interest governing the right of access to European Parliament, Council and Commission [. . .] documents [. . .] in such a way as to ensure the widest possible access to documents, (b) to establish rules ensuring the easiest possible exercise of this right, and (c) to promote good administrative practice on access to documents.” The ductility of this legislation is manifested in the fact that, although formally it involves restricting the scope of application of the right of access to documents of only three institutions, with extension to its agencies and organisms,43 however the Österdahl (1998), p. 336; Harden (2001), p. 163. Case C-213/15 P, Commission v Patrick Breyer (ECJ 18 July 2017) para 52. 42 Council Regulation (EC) No 1049/2001 regarding public access to European Parliament, Council and Commission documents, O.J. L 145/43 (2001). 43 Cf. Joint Declaration relating to Regulation (EC) No 1049/2001 of the European Parliament and of the Council regarding public access to European Parliament, Council and Commission documents, O.J. L 173/5 (2001). 40 41

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referred principles, conditions and limits governing the right, which have been defined by this Regulation, should be considered generally applicable to other EU institutions, as it is required in subparagraph 1 of Article 15.3 TFEU. Hence its extension, in practice, to the whole institutional architecture of the EU, albeit with variable success. This circumstance explains why this Regulation, although it should have been reformed to be adjusted to the relevant changes experienced since its adoption in the design and scope of a real right to information,44 still remains in full force, thanks to the commitments of the EU institutions and to the advanced jurisprudence of the CJEU.45 Therefore, what has been formally the object of a positive reform of this Regulation, according to its original wording, has been the statement, instigated by the EP, indicating that “[t]he institutions may, subject to the same principles, conditions and limits, grant access to documents to any natural or legal person not residing or not having its registered office in a Member State” (Article 2.2). Such determination reveals that the subjective scope of the right is extended beyond the terms of the Treaties, confirming a practice followed by the EP, the Council and the Commission and now recognised in their respective rules of procedure, according to what is declared in subparagraph 2 of Article 15.3 TFEU. However, we must notice that in accordance with the provisions of Article 2.2 of the Regulation, these other applicants are not considered proper right holders stricto sensu, but rather potential beneficiaries of a faculty available to the institutions, which, therefore, may (or may not) grant their access to documents. At the same time, complementary efforts have enabled the adaptation of some of the more indeterminate contents of the Regulation to current needs. This is revealed when we consider the object of the right. Thus, the Regulation provides its own definition of what the word “document” means, which will no longer be just a written paper, like it was understood by the Code of Conduct of 1993, but “any content whatever its medium (written on paper or stored in electronic form or as a sound, visual or audiovisual recording) concerning a matter relating to the policies, activities and decisions falling within the institution’s sphere of responsibility” (Article 3 point a). This definition, which includes databases, allows a modern reconfiguration of the right which thus be considered a genuine right to information, because it goes to show that what matters is not the form, but the content.46 In sum, having access to documents may be direct access to databases47 or implies the

44

Harden (2009), p. 239. Kranenborg (2006), p. 251. See European Commission, Green Paper. Public Access to Documents held by institutions of the European Community. A Review, COM (2007) 185 final; Case C260/04, Commission v Italy, (ECJ 13 September 2007) para 34–35. 46 Case C-353/99 P, Council v Heidi Hautala et al. (ECJ 6 December 2001) para 80. In general, about the promising initial case law on Regulation No. 1049/2001, see Heliskoski and Leino (2006), p. 735. 47 Parliament/Council Regulation (EC) No. 45/2001 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data, O.J. L 8/1 (2001). For a long time, public access to documents containing 45

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right to ask an institution for a document held by an EU institution without the need to specify any reason48 and to receive the information requested or to have the request rejected reasonably under law.49 In turn, we must consider that when Article 15.3 TFEU and, concordantly, Article 42 EUCFR refer to “documents of the institutions”, they are not just alluding to those directly produced by these institutions, bodies, offices and agencies, but to all documents in its possession, regardless its source. Such an extensive interpretation, which corrects and replaces the very restrictive one established by the Code of Conduct of 1993, is consistent with the provisions of Article 2.3 of Regulation 1049/2001, according to which the Regulation shall apply “to all documents held by an institution, that is to say, documents drawn up or received by it and in its possession, in all areas of activity of the European Union.”50 Even so, the mentioned Regulation also ensures cautiously that the opinion of the authors of “third-party documents” (“any natural or legal person, or any entity outside the institutions concerned, including the Member States, other Community or non-Community institutions and bodies and third countries”, Article 3 (b)) should be considered before authorising their disclosure. In this regard, it will assess the nature and provenance of each requested document. Thus, first, there are, under Article 9, “sensitive documents” that deserve an absolute degree of protection. Consequently, these documents require for its disclosure the necessary consent of the author. Thus, these are “documents originating from institutions or agencies established by them, from Member States, third countries or international organisations, classified as “top secret”, “secret” or “confidential” in accordance with the rules of the institution concerned, which protect essential interests of the European Union or of one or more of its Member States” in the areas covered by Article 4.1 point (a), i.e. public interests, “notably public security, defence and military matters”.

personal data has been done according to Case C-28/08 P, Commission v Bavarian Lager (ECJ 29 June 2010) para 45. More recently, see, in general, Parliament/Council Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, O.J. L 119/1 (2016) and more specifically Parliament/Council Directive (EU) 2016/680 on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences or the execution of criminal penalties, and of the free movement of such data, O.J. L 119/89 (2016). These legislative norms and judicial resolutions have been giving a clear prevalence in the weighing to be carried out to the right to the protection of personal data that has resulted in the detriment of the right of access to information. However, a more balanced position is observed from the Case C-615/13 P, ClientEarth and PAN Europe v European Food Safety Authority (ECJ 16 July 2015) in which, to give prevalence to this right, it is emphasised the public relevance of the purpose pursued by requesting information, in the content of the information requested and on the characteristics presented by the applicant. See Cotino Hueso (2017), p. 314. 48 Joined Cases T-391/03 and T-70/04, Franchet and Byck v Commission (CFI 6 July 2006) para 82. 49 Augustyn and Monda (2011), p. 18. 50 González Alonso (2008), pp. 667–668.

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Second, we may found the rest of “third-party documents” that deserve a lower degree of protection. Under Article 4.4, “the institution shall consult the third-party with a view to assessing whether an exception in paragraph 1 or 2 is applicable, unless it is clear that the document shall or shall not be disclosed”. In any case, it is possible that the institution in possession of the requested document decides for itself its disclosure, as has happened, in practice, with MS documents that are held by the Commission. This fact generates the frequent opposition of the authors alleging the restrictive approach of the mentioned legal precept, and results in the most common cause of litigation before the CJEU.51 Thus, every natural or legal person resident or established in the EU enjoys the right to request access to documents held by an EU institution without the obligation to specify any reason. Applications shall be made in a written form, including electronic form, in one of the official languages and in a sufficiently precise manner to enable the institution to identify the document (Article 6.1). The current Regulation should be applied to all documents held by an EU institution, in all areas of its activity. Applications for access to documents will be considered independently of the person who submitted them. Under Articles 6 to 8, each application must be processed by the institutions within 15 working days from the registration of the application, for which the institution has ten days. Nevertheless, the same extent or complexity of the information required allows the institution to have a fortnight more. In case of total or partial refusal, or no response individuals have the right to send a new application to the institution, within fifteen days, asking it to reconsider its position. In any case, the Regulation places the burden of proof on the institution to which the request is addressed. Thus, the rejection decisions may be subject to an internal administrative appeal and, subsequently, to an action of annulment before the European jurisdiction (Article 263 TFEU), while a complaint to the European Ombudsman (Article 228 TFEU).52 As expected, not all documents should be made public, as they can be referred to several subject matters where it is considered necessary to maintain confidentiality and, consequently, restrict public access to documents. Thus, Article 4 of Regulation 1049/2001 contains a list of these exceptions, attributing EU institutions to which the petitions of documents are addressed the right to appreciate if its disclosure would undermine the protection of public or private interests expressly listed in too generic and indeterminate clauses, clarified and better determined subsequently by the jurisprudence of the ECJ. In those matters, the protection of these interests usually prevails over the exercise of the citizens’ right of access to documents. Although when it is demonstrated that disclosure of a document represents an overriding public interest, the right of access to documents shall prevail (Article 4.3).53

51

Flanagan (2007), p. 595. González Alonso (2002), p. 54. 53 Porras Ramírez (2014), p. 290. 52

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Therefore, despite the remarkable effort of transparency represented by the Regulation the truth is that there are still important areas where confidentiality remains. The exceptions to the general access of the public to documents of the EU institutions, bodies, offices and agencies are intended to also protect its “internal consultations and negotiations” where it is necessary for them “to safeguard their ability to carry out their tasks”, as it is declared in the 11th consideration of Regulation 1049/2001. Article 4.3 emphasises this point stating that shall be refused the disclosure of a required document when it has been drawn up by an institution for its internal use or the document has been received by an institution related to a matter where the decision has not been taken by the institution. The reason is that its disclosure would seriously undermine the institution’s decisionmaking process. Moreover, by the same motivation, a required document shall be refused when it contains opinions for internal use as parts of deliberations and preliminary consultations within the institution concerned, even after the decision has been taken. However, in both cases, it is important to underline, as the ECJ has declared insistently according to the mentioned legal precept that disclosure of the document should prevail if “there is an overriding public interest.”54 In this sense, the ECJ has determined, in general, that the exceptions referred in Article 4 of Regulation 1049/2001 should be interpreted narrowly and applied restrictively.55 Meanwhile takes place a broader regulatory reform, the Union has been forced to extend the right of access to documents to all institutions and agencies, even in relation to environmental information, following the signing by the Union of the Aarhus Convention. Article 3 of Regulation No. 1367/2006 on the application of its provisions56 expressly determines: “Regulation (EC) No. 1049/2001 shall apply to any request by an applicant for access to environmental information held by Community institutions and bodies without discrimination as to citizenship, nationality or domicile and, in the case of a legal person, without discrimination as to where it has its registered seat or an effective centre of its activities”. Thereby, for Regulation 1049/2001, the word “institution” shall be read as “Community institution or body”. In any case, we may find the existence of contradictions among the exceptions set out in Regulation 1049/2001 to limit the right of access to documents and those provided by Aarhus Convention, which advises the unifications of criteria. Moreover, we must emphasise that it is precisely on the issue of exceptions where it has generated an increased litigiousness. Thus, in this area the ECJ tries to limit the discretion of institutions for which it requires properly weighing the interests in litigation. It also demands the written motivation of the denial of any Álvarez González (2012), p. 1149. In general, Case C-64/05, Sweden v Commission (ECJ 18 December 2007) para 66; and Case C365/12 P, Commission v Energie Baden Württemberg AG (ECJ 27 February 2014). See Gichot Reina (2011), pp. 135–229. 56 Parliament/Council Regulation (EC) No. 1367/2006 on the application of the provisions of the Aarhus Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters to Community institutions and bodies, O.J. L 264/13 (2006). 54 55

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individual document or the decision to grant only partial access to it. Likewise, the ECJ forces reasoning with accuracy that specific interests legally protected by exceptions can be affected in each case and if the risk of undermining such interest is reasonably foreseeable and not only hypothetical.57

3.3. Specific Measures Adopted by the European Institutions

32

33

Furthermore, the secondary legislation, especially that which is contained in the rules of procedure of the EU institutions, must be interpreted in the light of Regulation 1049/2001, which generally guarantees and make possible, according to its principles and conditions, the citizens’ right of access to documents of the EU institutions, bodies, offices and agencies.58 Consistent with this understanding subparagraph 2 of Article 15.3 TFEU, states that the rules of procedure of each EU institution, body, office or agency should ensure that its proceedings are transparent. Thus, they must contain provisions regarding access to documents, in accordance with the general Regulation referred. Thus, it should be noted that the EP, the Council and the Commission have established specific rules to facilitate the effective exercise of the mentioned right under the general provisions of Regulation 1049/2001. These rules involve, in some cases, a significant improvement over the existing general regulation. Indicated affects, in particular, to the EP that devotes the meticulous Rule 122 of its Rules of Procedure to this question. First, the mentioned Rule set forth provides, generally, that “Parliament documents” and, particularly, “legislative documents”, duly registered must be directly accessible to their applicants. “Categories of documents which are to be directly accessible through Parliament’s register website shall be set out in a list adopted by the Bureau and published on Parliament’s website”. In addition, documents not falling within the categories listed shall be made available on written application. Specific rules laying down arrangements for access shall be adopted by the Bureau of the Parliament and shall be published in the EU’s Official Journal. These rules designate the bodies responsible for handling initial applications. Those bodies shall adopt decisions on confirmatory applications. In any case, one of the Vice-Presidents shall be responsible for supervising the handling of applications for access to documents. A Parliament committee shall prepare an annual report and summit it to the plenary. This same committee shall also examine and evaluate the reports adopted by the other institutions and agencies. In this regard, the Conference of Presidents shall designate Parliament’s representatives on the “interinstitutional committee” 57 As leading cases, see Joined Cases C-39/05 and C-52/05 P, Sweden and Maurizio Turco v Council and Commission (ECJ 1 July 2008) para 36. See also Heremans (2011), p. 3; Porras Ramírez (2014), p. 294; Cotino Hueso (2017), p. 311. 58 Case C-404/10 P, Commission v Éditions Odile Jakobs SAS (ECJ 28 June 2012) para 45. See, expressing the link that exists between transparency and “open government”, Meijer et al. (2012), p. 10.

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established pursuant to Article 15 (2) of Regulation 1049/2001. In a much more specific and concrete form, the Decision of the Bureau of the EU Paliament of 15 april 2013, concerning the rules governing the treatment of confidential information by the European Parliament (2014/C 96/01) provides a special procedure for the consideration of applications requiring sensitive (confidential) documents communicated to Parliament; special rules regulating access by Parliament to sensitive information in the field of security and defence policy;59 special rules regulating personal conflicts of interest; and also this Decision, properly aligns the right of access to information with an appropriate protection of its confidential nature, according to the new tasks assigned by the Treaty of Lisbon to the EP, and also in the light of the Framework Agreement on Relations between the EU Parliament and the European Commission.60 Moreover, although the Commission meetings shall not be public and that their discussions shall be confidential (Article 9 of its Rules of Procedure), which does not make it an institution precisely characterised “prima facie” by its openness and transparency, the fact is that it has adopted an Annex to its Rules of Procedure that contains a Code of Good Administrative Behaviour for Staff of the European Commission in their relations with the Public61 expressing a genuine purpose to be closer to the citizens to promote good governance and ensure the participation of civil society. Such a Code establishes that “where a member of the public requires information relating to a Commission administrative procedure, staff shall ensure that this information is provided within the deadline fixed for the relevant procedure.” Moreover, in relation to the request for documents, it is anticipated that the rules are laid down in a specific measure. Thus, it should be noted the relevant Provisions of the Commission on the Application of Regulation 1049/2001.62 These rules are referred to documents held by the Commission and point features to be submitted requests for access to documents, its processing, especially when they affect to classified documents in accordance with the safety regulations of the Commission, consultations conducted by the Commission if the document requested comes from a third party and the measures that exist to facilitate access to documents. The mentioned provisions contain also important annexes related to documents management, processing of electronic and digitised documents and provisions for the implementation of the Aarhus Convention. Indeed, consequently,

59

See Interinstitutional Agreement between the European Parliament and the Council concerning access by the European Parliament to sensitive information of the Council in the field of security and defence policy, O.J. C 298/1 (2002) and Parliament Decision on the implementation of the Interinstitutional Agreement, O.J. C 298/4 (2002). 60 See Framework Agreement on relations between the European Parliament and the European Commission, O.J. L 304/47 (2010). 61 See Code of Good Administrative Behaviour for Staff of the European Commission in their relations with the Public. Available at https://ec.europa.eu/info/sites/info/files/code-of-goodadministrative-behaviour_en.pdf. 62 Commission Decision 2001/937/EC, ECSC, Euratom amending its Rules of Procedure, O.J. L 345/95 (2001).

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it should be accepted that the Commission has improved remarkably its transparency by providing citizens information, but still subsist derogations, as the one oriented to protect “internal consultations and deliberations” where necessary to safeguard its ability to carry out the tasks of the institution that justifies the confidentiality of the consultations and discussions of the multiple Commission’s working groups. In addition, it should also be noticed the derogation that refers to the need to protect the “personal data”.63 These two derogations are usually alleged by the Commission to refuse access to documents implying, despite the undoubted advances experienced, a pending task for transparency and thus still an open permanent democratic challenge. Meanwhile, the Council’s Rules of Procedure, under its Article 10, have dedicated its relevant Annex II to incorporate “Specific Provisions Regarding Public Access to Council Documents” “subject to the principles, conditions and limits laid down in Regulation 1049/2001.”64 These provisions are related to matters like consultation as regards third-party documents, requests for consultation received from other institutions or from MS, documents originating from MS, referral of request by MS and the processing of applications. It is also included a list of documents directly accessible to the public. However, as in the case of the Commission, derogations introduced by Regulation 1049/2001 are frequently used by the Council to refuse access to a document. In relation with the acts adopted by the Council during an ordinary or a special legislative procedure and joint texts approved by the Conciliation Committee under the ordinary legislative procedure (Article 11.5 (d) of Annex II), the General Secretariat of the Council shall make available to the public any documents relating to these acts drawn up before such as informative notes, reports, progress reports on the state of discussions in the Council or in one of its preparatory bodies (outcomes of proceedings),65 excluding “Legal Service opinions and contributions”, unless they are covered by any of the exceptions laid down in Article 4 of Regulation 1049/2001 (Article 11.6 of Annex II). At the same time, “internal deliberations” and “preliminary consultations within the institution” shall be refused for its disclosure “even after the decision has been taken.” Thus assumes, in practice, that the activities of the working groups in the Council should be still secret. Nonetheless, it is also recognised the right of veto of an MS to make available to the public documents that reflect the individual position of its delegation in the Council. What these exceptions demonstrate is the

63 See the Report from the Commission on the application in 2012 of Regulation (EC) No 1049/ 2001 regarding public access to European Parliament, Council and Commission documents, COM(2013) 515 final. 64 Council Decision 2009/937/EU adopting the Council’s Rules of Procedure, O.J. L 325/35 (2009). 65 In the Turco case, the CJEU called on the Council to strengthen “the democratic right of European citizens to scrutinise the information which has formed the basis of a legislative act”. See Joined Cases C-39/05 P and C-52/05 P, Sweden and Maurizio Turco v Council and Commission (ECJ 1 July 2008) para 36.

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persistence, not always reasonable and justifiable, of institutional transparency brakes. Finally, it is necessary to refer to the European Council’s Rules of Procedure66 whose Article 10.2 states that “[t]he provisions concerning public access to Council documents set out in Annex II to the Rules of Procedure of the Council shall apply ‘mutatis mutandis’ to European Council documents.” Still, Article 11 insists in the fact that “[w]ithout prejudice to the provisions on public access to documents, the deliberations of the European Council shall be covered by the obligation of professional secrecy, except insofar as the European Council decides otherwise.” In practice, such a provision allows the extension of confidentiality to all activities of the institution. That all-embracing power of the European Council is revealed in the following paragraph of Article 11, which states that the said institution may (or may not) authorise the production for use in legal proceedings of a copy of an extract from European Council documents that have not already been released to the public under Article 10. That reveals, once more, the privileged intergovernmental nature of a very singular and pre-eminent institution which is detached from any external obligation to provide information on its activities to citizens to whom is not liable, Article 10.2 TEU (➔ Article 10 TEU para 11; ➔ Article 15 TEU para 32 et seqq.)

36

3.4. Peculiarities Affecting the CJEU, the ECB and the EIB

In any case, it should be noted, as provided in subparagraph 3 of Article 15.3 TFEU, explicit references to institutions that should only assume, with all its consequences, the principle of transparency when they perform administrative tasks. Consequently, the deliberations of the CJEU, the sessions of the Governing Council of the ECB and of the Management Committee of the EIB will not be public. Thus, the citizen right of access to documents finds a major obstacle for its realisation relating to the most important acts of such institutions. This relevant exception is justified by the necessity to ensure the protection of these activities from external interference. However, the institutions listed above may adopt rules providing for further access to their documents on their own initiative. Thus, in the case of the CJEU it should be noted that this crucial institution (➔ Article 19 TEU para 3 et seq.) has issued a Decision concerning public access to documents held by the CJEU in the exercise of its administrative functions,67 which therefore does not apply to legal and judicial documents, although the line between the two kinds of activities of the CJEU is not always easy to draw. The aforementioned Decision shall be enforced to all documents held by the CJEU as 66

European Council Decision 2009/882/EU adopting its Rules of Procedure, O.J. L 315/51 (2009). 67 See Decision of the Court of Justice of the European Union concerning public access to documents held by the Court of Justice of the European Union in the exercise of its administrative functions, O.J. C 445/3 (2016).

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part of the exercise of its administrative functions. Consequently, organisational functioning, human resources management and ensuring infrastructure of the Court are the activities that fall under the administrative category subject to the principle of transparency.68 The beneficiaries of the Decision shall be any citizen of the EU and any natural or legal person residing or having its registered office in an MS. Further, the CJEU may, subject to the same conditions, grant access to documents to any natural or legal person not residing or having its registered office in an MS (Article 2). The list of exceptions incorporated to the Decision is the predictable, analogous to that laid down by Regulation 1049/2001. These exceptions allow the Court to refuse access to documents where disclosure would undermine the protection of public interest, as regards: public security, defence and military matters, international relations, the financial, monetary or economic policy of the EU or an MS (Article 3.1 (a)); the privacy and integrity of the individual, in particular in accordance with European Union legislation regarding the protection of personal data (Article 3.1 (b)); and commercial interests, including intellectual property, court proceedings and legal advice; and the purpose of inspections, investigations and audits (Article 3.2). However, the scope of these exceptions has been moderated by the recognition of the own jurisprudence of the Court. According to it, documents shall also be refused if disclosure would seriously undermine the decision making process of the Court; and documents containing opinions for internal use as parts of deliberations and preliminary consultations within the Court, even after the decision has been taken (Article 3.3). However, if there is an overriding public interest in disclosure affecting to exceptions mentioned in paragraphs 2 and 3 of Article 3 they shall not be applied (Article 3.4). In addition, following its own jurisprudence, the Decision determines that if only parts of the requested document are covered by exceptions the remaining parts of it shall be disclosed (Article 3.5). All these exceptions shall apply only for a maximum period of 30 years. However, exceptions relating to privacy or commercial interests continue to apply, if necessary, after this period (Article 3.6). In any case, as states Article 9 of the Decision, the CJEU shall not grant access to third party documents in its possession until it has received the consent of the third party concerned. In sum, we are in the presence of a more advanced regulation, despite its limitations, which tries to load respectful to the principle of institutional transparency and the citizens’ right of access to information that recognises Article 15.3 TFEU. The ECB (➔ Article 13 TEU para 48 et seq.; Article 282) also approved, by its Governing Council, its own Decision on public access to documents, having regard to the ECB’s Rules of Procedure, and in particular to Article 23 thereof.69 The purpose of this Decision is “to define the conditions and limits according to which the ECB shall give public access to ECB documents and to promote good

68

Alemanno and Stefan (2014), p. 108 et seq. Decision ECB/2004/2 adopting the Rules of Procedure of the European Central Bank, O.J. L 80/ 42 (2004) and see Decision 2011/342/EU amending Decision ECB/2004/3 on public access to European Central Bank documents (ECB/2011/6), O.J. L 158/37 (2011). 69

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administrative practice on public access to such documents” (Article 1). In accordance with this Decision it will be understood by “ECB document” “any content whatever its medium [. . .] drawn up or held by the ECB and relating to its policies, activities and decisions, as well as documents originating from the European Monetary Institute (EMI) and from the Committee of Governors of the central banks of the Member States of the European Union (Committee of Governors).” It is necessary to highlight the exceptions noted by the Decision. They allow the ECB to refuse access to documents where disclosure would undermine the protection of the public interest (the confidentiality of the proceedings of the ECB’s decisionmaking bodies; the financial, monetary or economic policy of the Union or an MS; the internal finances of the ECB or of the NCBs; protecting the integrity of euro banknotes; public security and international financial, monetary or economic relations); the privacy and the integrity of the individual, in particular regarding the protection of personal data; the confidentiality of information protected under union law and the stability of the financial system in the Union or in an MS (Article 4.1). The ECB shall also refuse access to documents to protect the commercial interests of a natural or legal person, court proceedings and legal advice, the purpose of inspections, investigations and audits, unless there is an overriding public interest in disclosure (Article 4.2). Besides, shall be refused documents containing opinions for internal use as part of deliberations and preliminary consultations within the ECB even after the decision has been taken, unless there is an overriding interest in disclosure (Article 4.3). On third-party documents, the ECB shall consult the thirdparty concerned with a view of assessing whether an exception is applicable. On requests for access to European Systemic Risk Board documents, Decision ESRB/2011/570 shall be applied (Article 4.4). It is also expected that if only parts of a requested document are covered by any of the mentioned exceptions, the remaining parts of the document shall be released (Article 4.5). In any case, all these exceptions shall only apply for the period during which protection is justified based on the content of the document. The exceptions may apply for a maximum period of 30 years unless provided otherwise by the ECB’s Governing Council. However, in the case of documents covered by the exceptions relating to privacy or commercial interests, the exceptions may continue to apply after this period (Article 4.6). In sum, according to the mentioned derogations the ECB becomes a sparsely transparent institution, particularly in regards to its strategy, the valuation procedures that follows and the decisions adopted. Its crucial role within the institutional architecture of the monetary Union emphasises democratic deficiencies that require a necessary correction.71

70

ESRB Decision ESRB/2011/5 on public access to European Systemic Risk Board documents, O. J. C 176/3 (2011) in connection with Council Regulation (EU) No 1096/2010 conferring specific tasks upon the European Central Bank concerning the functioning of the European Systemic Risk Board, O.J. L 331/162 (2010). 71 Amtenbrink and van Duin (2009), p. 561

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Lastly, the EIB also issued its own rules on public access to documents for the attention of its departments.72 Previously, the Bank had already adopted rules on public access to its documents73 that, over time, were revealed not in accordance with Regulation 1049/2001. That is why the Bank decided in 2002 to revise its rules to take account of the principles and limits laid down in the mentioned Regulation, but noting that this new rules were published “to the extent that this shall not undermine the full performance of its task as a financial institution as laid down in the Treaty.” In turn, the Bank adopted a “Code of good administrative behaviour for the staff of the EIB in its relations with the public.”74 In 2006 a new Decision approved the EIB Public Disclosure Policy75 supersedes the Bank’s previous regulation. Through it, the EIB establishes its own principles, conditions and limits. Nowadays, it is necessary to refer to the EIB Transparency Policy of 6 March 2015,76 approved by the EIB’s Board of Directors, which has transformed the current regulation, in accordance with Article 18 of the Bank’s Rules of Procedure and following a public consultation process. This document represents a significant progress to increase openness and transparency through the definition and implementation of principles and practices of good government. The purpose is to offer “openness and the highest level of transparency with the underlying presumption that information concerning the Group’s operational and institutional activities will be made available to third parties (the public) until it is subject to a defined exception.” In this way accountability of the EIB is reinforced accountability towards its stakeholders and the EU citizens in general by giving access to information that will enable them to understand its governance, strategy, policies, activities and practices. However, leaving good intentions aside, “while the Bank is committed to a policy of presumption of disclosure and transparency”, must be underlined the exceptions set, since they demonstrate the real vocation of transparency of the institution and its limits. Beyond the usual, which are common to other institutions, and those related with the duty to respect professional secrecy in compliance with European laws, in particular Article 339 TFEU, as well as legislation to protect personal data, Article 5.4 states that that access to all or part of a document shall be refused where its disclosure would undermine the protection of “the public interest, as regards, international relations, the financial, monetary or economic policy of the EU, its institutions and bodies or a Member State; the environment, such as breeding sites of rare species” (a); “privacy and the integrity of the individual, in particular in accordance with EU legislation regarding the 72

European Investment Bank, Rules on public access to documents, O.J. C 292/10 (2002). See European Investment Bank Rules on public access to documents adopted by the Bank’s Management Committee, O.J. C 243 (1997). 74 See Code of good administrative behaviour for the staff of the European Investment Bank in its relations with the public, O.J. C 17 (2001). 75 European Investment Bank Public Discloser Policy. Principles, rules, and procedures, O.J. C 332/45 (2006). 76 See European Investment Bank, Transparency Policy. Available at https://www.eib.org/attachments/strategies/eib_group_transparency_policy_en.pdf. 73

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protection of personal data” (b). In addition, Article. 5.5 refers to “commercial interests of a natural or legal person; intellectual property, court proceedings and legal advice; the purpose of inspections, investigations and audits”. Likewise, shall be refused access to information drawn up by the Bank for internal use or received by the Bank, which relates to a matter where the decision has not been taken (Article 5.6). Nonetheless, it is expected that if there is an overriding public interest in disclosure it will be reasonably appreciated (Article 5.7). The ground of refusal should be interpreted in a restrictive way, taking into account the public interest served by disclosure (article 5.8). In any case, the extensive scope of the derogations set significantly restricts public access to information. Even so, the relevant provisions of the Aarhus Convention, necessarily incorporated to the EIB Transparency Policy, allow people to easily log in environmental information that is available on the EIB website or can be obtained on request. Thus opens a gap in the existing wall of opacity still built by this institution.

3.5. Preferential Access to Legislative Documents of the EP and of the Council

Finally, in accordance with subparagraph 4 of Article 15.3 TFEU, the EP and the Council shall ensure publication of the documents relating to the legislative procedures under the terms laid down by the regulations referred to in the second subparagraph. This provision complements what has been stated in Article 15.2 TFEU. In fact, the respective Rules of Procedure of the two mentioned institutions explicitly guarantee such indication. First, regarding legislative documents that have been discussed and approved by the EP, it should be clearly noted that the so-called “documents relating to legislative procedures” [Article 15.3 (4) TFEU] are, undoubtedly, “Parliaments documents”. Therefore, these documents should be published by its regulatory nature (Rule 203) and, under Rule 122.2, to grant citizens’ right of access to such documents that have been drawn up or received by officers of Parliament. Thus, to guarantee the realisation of the cited right “the Bureau shall lay down rules to ensure that all Parliament documents are registered”. At the same time, Rule 122.3 alludes to the existence of this register of Parliament documents, among which are, indisputably, the legislative. Such register is linked to the need, also recognised by Regulation 1049/2001, to make directly accessible to the people the mentioned documents through it. These documents, also available on written application, shall be set out in a list adopted by the Bureau and published on Parliament’s website.77

77

See the mentioned Annex XIX (Joint Declaration of the EP, the Council and the Commission of 13 June 2007 on practical arrangements for the co-decision procedure’, OJ C 145 (2007), p. 5) and Annex XX (Code of Conduct for negotiating in the context of the ordinary legislative procedures, approved by the Conference of Presidents on 18 September 2008) attached to the Parliament’s Rules of Procedure, as well as the Inter-institutional Agreement on Better Law Making, O.J. L 123/1 (2016).

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For its part, the Council’s Rules of Procedure also devote particular references to the publication of the legislative documents to ensure public access to them. Thus, initially, Article 7 determines that “documents submitted to the Council which are listed under an item on the ‘Legislative deliberations’ part of its agenda shall be made public, and likewise those sections of the Council minutes which relate to that part of the agenda”. However, in addition, under Article 10 of the Rules of Procedure, “the specific provisions regarding public access to Council documents are set out in Annex II”. These “Specific Provisions Regarding Public Access to Council Documents” represent a considerable advance over the stipulations of former Article 207.3 EC, which required the Council to provide for greater access to documents when it acts in its legislative capacity, “while at the same time preserving the effectiveness of its decision-making process.” Among those current “specific provisions” should be emphasised the relevance of its Article 10 that determines that the General Secretariat shall be responsible for providing public access to the register of Council documents. Their content shall be made available on the Internet without prejudice to the provisions of data protection legislation.78 Article 11 expressly refers to legislative documents considered as “documents directly accessible to the public.” They are defined as “any document drawn up or received in the course of procedures for the adoption of a legislative act.” A broad interpretation allow making also available to the public “cover notes and copies of letters concerning legislative acts”; “documents submitted to the Council which are listed under an item on its agenda included in the legislative deliberations”; “notes submitted to the COREPER and/or to the Council for approval [. . .] concerning draft legislative acts”, as well as the “draft legislative acts”; and “acts adopted by the Council during an ordinary or a special legislative procedure and joint texts approved by the Conciliation Committee under the ordinary legislative procedure.” Therefore, after the adoption of one of the acts referred, the General Secretariat shall make available to public any preliminary documents relating to those acts, unless should be applied the exceptions determined in Article 4 of Regulation (EC) No 1049/2001, referred to information notes, reports, progress reports and reports on the state of discussions in the Council or in one of its preparatory bodies (“outcomes proceedings”), excluding Legal Service opinions and contributions. However, it should be emphasised that, at the request of an MS, such documents set out above, when they reflect the individual position of that MS delegation in the Council, shall not be made available to the public, revealing just another sign of the incomplete or limited projection of the democratic principle in the EU institutional system.79 Consequently, not always justifiable restrictions on citizen’s access to information held by the Council persist, what causes this institution remains accused of lack of openness and transparency.

78 Parliament/Council Regulation (EC) No 45/2001 on the protection on individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data, O.J. L 8/1 (2002) and Article 16 of Regulation (EC) No. 1049/2001. 79 Hillebrandt et al. (2014), p. 11.

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Conclusions

In sum, it should be highlighted that to promote good governance and ensure the participation of civil society in the decision-making process of the EU institutions, despite the relevant progress made, still a long road lies ahead. Therefore, to achieve greater openness and transparency of the EU institutions is a permanent pending task that challenges us all daily. Thus, it is necessary to continue advancing in a process that will allow the definition of the original European model of supranational democracy.

List of Cases ECJ

ECJ 6.12.2001, C-353/99 P, Council v Heidi Hautala et al., ECR I-9565 [cit. in para 80] ECJ 13.9.2007, C-260/04, Commission v Italy, ECR I-7083 [cit. in para 34-35] ECJ 18.12.2007, C-64/05, Sweden v Commission, ECR 2007 I-11389 [cit. in para 66] ECJ 1.7.2008, Joined Cases C-39/05 and C-52/05 P, Sweden and Maurizio Turco v Council and Commission, ECR I-4723 [cit. in para 36] ECJ 29.6.2010, C-28/08 P, Commission v Bavarian Lager, ECR I-6055 [cit. in para 45] ECJ 28.6.2012, C-404/10 P, Commission v Éditions Odile Jakobs SAS, ECLI:EU: C:2012:393 [cit. in para 45] ECJ 27.2.2014, C-365/12 P, Commission v Energie Baden Württemberg AG, ECLI: EU:C:2014:112 [cit. in para 64] ECJ 16.7.2015, C-615/13 P, ClientEarth and PAN Europe v European Food Safety Authority, ECLI: EU: C: 2015: 489 [cit. in para 25] ECJ 18.7.2017, C-213/15, Commission v Patrick Breyer, ECLI: C: 2017: 563 [cit. in para 52]

CFI

CFI 6.7.2006, Joined Cases T-391/03 and T-70/04, Franchet and Byck v Commission, ECR II-2033 [cit. in para 82]

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References80 Alemanno, A., & Stefan, O. (2014). Openness at the Court of Justice of the European Union: Toppling a Taboo. Common Market Law Review Reports, 51(1), 97–140. Álvarez González, E. M. (2012). Artículo 42: Derecho de Acceso a los Documentos. In C. Monereo Atienza & J. L. Monereo Pérez (Eds.), La Europa de los Derechos. Estudio sistemático de la Carta de los Derechos Fundamentales (pp. 1143–1170). Granada: Comares. Amtenbrink, F., & van Duin, K. (2009). The European Central Bank before the European Parliament: Theory and practice after ten years of monetary dialogue. European Law Review, 34(4), 561–583. Augustyn, M., & Monda, C. (2011). Transparency and access to documents in the EU: Ten years on from the adoption of Regulation 1049/2001. European Institute of Public Administration, 01/2011, 17–20. Best, E. (2008). Legislative procedures alter Lisbon: Fewer, simpler, clearer? Maastricht Journal of European and Comparative Law, 15(1), 85–96. Bonde, J. P. (2014). Transparency and openness. Comment on Transparency. Retrieved from www.EUABC.com Bouza García, L. (2010). Democracia participativa, sociedad civil y espacio público en la Unión Europea. Madrid: Fundación Alternativas. Bredt, S. (2001). Prospects and limits of democratic governance in the EU. European Law Journal, 17(1), 35–65. Calliess, C., & Ruffert, M. (Eds.). (2011). EUV/AEUV. Kommentar. (4th ed.). Munich: Beck. Closa Montero, C. (2003). El Libro Blanco de la Gobernanza. Revista de Estudios Políticos, 119, 485–504. Closa Montero, C. (2007). European citizenship and new forms of democracy. In G. Amato, H. Bribosia, & B. De Witte (Eds.), Genèse et destinée de la Constitution européene (pp. 1037– 1054). Brussels: Bruyllant. Corbett, R. (2012). The evolving roles of the European Parliament and of national parliaments. In A. Biondi, P. Eeckhout, & S. Ripley (Eds.), EU law after Lisbon (pp. 249–262). Oxford: OUP. Cotino Hueso, L. (2017). El reconocimiento y contenido internacional del acceso a la información pública como derecho fundamental. Teoría y Realidad Constitucional, 40, 279–316. Curtin, D. (2009). Executive power of the European Union: Law, practices and the living constitution. Oxford: OUP. De Witte, B., et al. (2010). Legislating after Lisbon. New opportunities for the European Parliament. Florence: European University Institute. Robert Shuman Centre for Advanced Studies. Dehousse, R. (2002). Misfits: EU law and the transformation of European Governance. In C. Joerges & R. Dehousse (Eds.), Good governance in Europe’s integrated market (pp. 207–248). Oxford: OUP. Driessen, B. (2012). Transparency in EU institutional law. A practitioners handbook (2nd ed.). The Hague: Wolters Kluwer. Eriksen, E. O. (2001). Governance or democracy. The White Paper on European Governance. Jean Monnet Working Paper, 6, 22–38. Eriksen, E. O., & Fossum, J. E. (2000). Democracy in the European Union. Integration through deliberation? London: Routledge. EU Network of Independent Experts on Fundamental Rights. (2006). Article 42: Right of access to documents. In Commentary of the Charter of Fundamental Rights of the European Union (pp. 334–338). Online publication. Retrieved from www.ec.europa.eu/justice/fundamental-rights/ files/networkcommentaryfinal-en.pdf Flanagan, A. (2007). EU freedom of information: Determining where the interest lies. European Public Law, 4(13), 595–632.

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Follesdal, A., & Hix, S. (2006). Why there is a democratic deficit in the EU? A response to Majone and Moravcsik. Journal of Common Market Studies, 44(3), 533–562. Gichot Reina, E. (2011). Transparencia y acceso a la información en el Derecho europeo. Huelva: Universidad. González Alonso, L. N. (2002). Transparencia y Acceso a la Información en la Unión Europea. Madrid: Colex. González Alonso, L. N. (2008). Artículo 42: Derecho de Acceso a los Documentos. In A. Mangas Martín & L. N. González Alonso (Eds.), Carta de los Derechos Fundamentales de la Unión Europea. Comentario artículo por artículo (pp. 678–699). Madrid: Fundación BBVA. Habermas, J. (1999). Remarks on Dieter Grimm’s ‘Does Europe Need a Constitution?’ In J. Habermas (Ed.), La inclusión del otro: estudios de teoría política (pp. 132–135) (Spanish Translation). Barcelona: Paidós. Habermas, J. (2012). Zur Verfassung Europas. Ein Essay (Spanish Translation). Madrid: Trotta. Harden, I. (2001). Citizenship and information. European Public Law, 2(7), 163–193. Harden, I. (2009). The revision of Regulation 1049/2001 on public access to documents. European Public Law, 15(2), 239–256. Heliskoski, J., & Leino-Sandberg, P. (2006). Darkness and the break of noon: The case law on Regulation 1049/2001, on access to documents. Common Market Law Review, 43(3), 735–781. Heremans, T. (2011). Public access to documents: Jurisprudence between principle and practice (between jurisprudence and recast). Egmont Royal Institute for International Relations Working Paper, 50, 3 et seq. Hillebrandt, M. Z., Curtin, D., & Meijer, A. (2014). Transparency in the EU council of ministers: An institutional analysis. European Law Journal, 20(1), 1–20. Kranenborg, H. R. (2006). Is it time to revise the European regulation on public access to documents? European Public Law, 2(12), 251–274. Martínez Sierra, J. M. (2008). El procedimiento legislativo de la codecisión. Valencia: Tirant lo Blanch. Meijer, A., Curtin, D., & Hillebrandt, M. (2012). Open government: Connecting vision and voice. International Review of Administrative Sciences, 10–32. Menéndez, A. J. (2009). The European democratic challenge. The forging of a supranational Volonté. European Law Journal, 15(3), 277–308. Micossi, S. (2008). Democracy in the European Union. Brusssels: Centre for European Policy Studies. Working Document No. 286. Öberg, U. (1998). Public access to documents after the entry into force of Amsterdam Treaty: Much Ado about nothing? European Integration online Papers, 8-2. Retrieved from http:// eiop.or.at/eiop/texte/1998-008.htm Österdahl, I. (1998). Openness v. Secrecy: Public access to documents in Sweden and the European Union. European Law Review, 23, 336–356. Porras Ramírez, J. M. (2014). Los Límites a la Transparencia. El Menguado Alcance del Derecho de los Ciudadanos a Acceder a la Información en Poder de las Instituciones Europeas. Teoría y Realidad Constitucional, 33, 283–304. Ragnemalm, H. (1998). Démocratie et Transparence: Sur le Droit General d’Acces des Citoyens de l’Union Européenne aux Documents Détenus par les Institutions Communautaires. In Scritti in Onore di Giuseppe Federico Mancini. Volume II: Diritto dell’Unione Europea (pp. 809– 830). Milan: Giuffré. Ridola, P. (2010). Diritto Comparato e Diritto Costituzionale Europeo. Torino: G. Giappichelli. Settembri, P. (2005). Transparency and the EU legislator: Let he who is without sin cast the first stone. Journal of Common Market Studies, 637–654. Stasavage, D. (2006). Does transparency make a difference? The example of the European Council of Ministers. In C. Hood & D. Heald (Eds.), Transparency: The key to better governance? (pp. 166–184). Oxford: OUP. Von Bogdandy, A. (2010). Founding principles. In A. Von Bogdandy & J. Bast (Eds.), Principles of European constitutional law (pp. 11–54). New York: C.H. Beck.

Porras Ramírez

Article 16 [Protection of Personal Data] (ex-Article 286 TEC) 1. Everyone11-12 has the right to the protection22-25 of personal data13-16 concerning them. 2. The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, shall lay down47-58 the rules59-63 relating to the protection of individuals with regard to the processing of personal data by Union institutions, bodies, offices and agencies, and by the Member States when carrying out activities which fall within the scope of Union law, and the rules59-63 relating to the free movement of such data. Compliance with these rules shall be subject to the control of independent authorities.26-46 The rules adopted on the basis of this Article shall be without prejudice to the specific rules laid down in Article 39 of the Treaty on European Union.53 Declaration No. 2054 on Article 16 of the Treaty on the Functioning of the European Union The Conference declares that, whenever rules on protection of personal data to be adopted on the basis of Article 16 could have direct implications for national security, due account will have to be taken of the specific characteristics of the matter. It recalls that the legislation presently applicable (see in particular Directive 95/46/EC) includes specific derogations in this regard. Declaration No. 2155 on the protection of personal data in the fields of judicial cooperation in criminal matters and police cooperation The Conference acknowledges that specific rules on the protection of personal data and the free movement of such data in the fields of judicial cooperation in criminal matters and police cooperation based on Article 16 of the Treaty on the Functioning of the European Union may prove necessary because of the specific nature of these fields.

Contents 1. 2. 3.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Context: A Brief History of the Right to the Protection of Personal Data . . . . . . . . . . . . . . . . . 3 Establishing the Fundamental Right to the Protection of Personal Data . . . . . . . . . . . . . . . . . 10 3.1. Personal Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 3.2. Material Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.3. Territorial Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

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3.4. Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5. Supervision by an Independent Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5.1. Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5.2. Accountability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5.3. Tasks and Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.5.4. Reform of the Enforcement Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. The Positive Obligation of the EU Legislator to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. The New Data Protection Legal Framework in the EU, Based on Article 16 TFEU . . . . 6. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Cases References

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22 26 28 33 35 37 47 59 64

Introduction

Article 16 TFEU enshrines the protection of personal data in EU primary law. Its purpose is twofold: it affirms that the right to the protection of personal data is a fundamental right in the EU, reinforcing Article 8 EUCFR, and it establishes a specific legal basis for the EU legislator to act for the adoption of legislation concerning the processing of personal data, both at EU and MS level. The latter objective envisages not only the protection of individuals, giving effect to the affirmation of the right to personal data protection, but also the free movement of personal data within the Union. The insertion of an all-encompassing provision for the protection of personal data in the Lisbon Treaty was part of the Union’s effort to create “a Europe of rights and values.” The Treaty of Lisbon was designed to “introduce a new emphasis on the rights of individuals as citizens in the Union.”1 In fact, the entry into force of the Lisbon Treaty, including Article 16 TFEU and the binding legal effect of the Charter, is considered as having had an “enormous impact on the development of data protection law”,2 visible on a number of different grounds3 and introducing “significant changes to the legal framework for data protection in the EU.”4 The following sections will examine the legal context that led to the adoption of Article 16 TFEU to better understand its impact (➔ para 2 et seq.), the content of the fundamental right to the protection of personal data pursuant to Article 16.1 TFEU (➔ para 10 et seq.), the characteristics and limits of the positive obligation of the EU legislator to act pursuant to Article 16.2 TFEU (➔ para 47 et seq.), the special exemption for the CFSP area (➔ para 59 et seq.), and, finally, the general characteristics of the new data protection legal framework in the EU, adopted based on Article 16 TFEU (➔ para 64 et seq.). The Conclusion will affirm that Article 16 TFEU is the cornerstone of modern data protection law. Commission Communication, Reforming Europe for the 21st Century, COM(2007) 412 final, p. 7. Hustinx (2013), p. 18. 3 For an analysis, see Gonzalez Fuster (2014), pp. 230 et seq. 4 Lynskey (2015), p. 14. 1 2

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Context: A Brief History of the Right to the Protection of Personal Data

To understand the significant impact on data protection law of the adoption of Article 16 TFEU, an overview of the legal landscape before the entry into force of the Lisbon Treaty is necessary. The EC Treaty contained two provisions that referred to the protection of personal data, but they were quite limited in scope. Both were introduced by the Treaty of Amsterdam, in 1999. The first one, Article 286 TEC, referred to processing of personal data by the EU institutions and bodies. The first paragraph called for legislative acts to regulate it, while the second paragraph enshrined a positive obligation for the Council to adopt legislation that established an independent supervisory body responsible for monitoring the application of these acts to Community institutions and bodies. The second provision was Article 30.1 (b) TEU-Amsterdam, which established that common action in the field of police cooperation shall include exchange of information by law enforcement services “subject to appropriate provisions for the protection of personal data.” Article 30 TEU was part of the former third pillar of the EU (Police and Judicial Cooperation in Criminal Matters). Consequently, the adoption of data protection rules in this area was subject to an “intergovernmental regime”,5 where the MS acting in the Council enjoyed significant autonomy and the other EU institutions had a very limited role. Article 286 EC led to the adoption of Regulation 45/2001,6 which sets forth the data protection rules for the processing of personal data by EU institutions and bodies and which established the European Data Protection Supervisor (EDPS) as their supervisory authority.7 Article 30.1 (b) TEU-Amsterdam became one of the legal bases for the adoption of Council Framework Decision 2008/9778 for the protection of personal data in the area of police and judicial cooperation in criminal matters. The safeguards established by the Framework Decision are only applicable to personal data that has been exchanged between the MS, representing a significant limitation of its field of application. The transnational aspect of its material scope, together with the wide margin of maneuver that enjoy for implementing it represent shortcomings in ensuring effective data protection.9

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For an analysis of the institutional limitations of the former third pillar, see Lenaerts (2010). Parliament/Council Regulation (EC) No 45/2001 Protection of personal data by EU institutions and bodies, O.J. L 8/1 (2001). 7 See Articles 41–48 of Regulation (EC) No 45/2001. 8 Council Framework Decision 2008/977/JHA Protection of personal data in the framework of police and judicial cooperation in criminal matters, O.J. L 350/60 (2008). 9 For an analysis, see Hijmans and Scirocco (2009). See also the Commission Communication, Safeguarding Privacy in a Connected World, A European Data Protection Framework for the 21st Century, COM(2012) 9 of 25 January 2012, Part 4: The use of data in police and criminal justice cooperation. 6

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Provisions Having General Application

The most significant piece of secondary legislation in the field at the time Article 16 TFEU entered into force was Directive 95/46/EC, the Data Protection Directive10 (hereinafter the “Directive”). The Directive was adopted long before data protection was in any way specifically included in the EU treaties, based on Article 95 EC, subsequently Article 110a EC, which referred to the establishment of the single market. Consequently, its scope of application was limited to the former first pillar. The Directive harmonised the existing data protection laws adopted by several MS in the 1970s and 1980s11 and provided rules for lawful grounds for processing (Article 7), principles for fair processing (Article 6)—such as data minimisation (Article 6.1 point c) and purpose limitation (Article 6.1 point b). In addition, it laid down rights for the individuals whose data were being processed to being informed about the processing (Articles 10, 11), accessing their data (Article 12 point a), and asking for the erasure of the data under certain conditions (Article 12 point b) or objecting to the processing (Article 14). Consequently, although the Directive was adopted on the internal market legal basis, it was obvious that there was more to its content than ensuring the free flow of data among MS. This can be seen in its Object set forth in Article 1, which refers both to the free flow of data and to the protection of fundamental rights and freedoms, in particular the right to privacy with respect to the processing of personal data. As Hustinx pointed out, “the fundamental rights perspective has been visible from the beginning.”12 Notably, the CJEU explained in its judgment in the IPI case that “it is apparent from recitals 3, 8 and 10 of Directive 95/46 that the European Union legislature sought to facilitate the free movement of personal data by the approximation of the laws of the Member States while safeguarding the fundamental rights of individuals, in particular the right to privacy, and ensuring a high level of protection in the European Union.”13 Perhaps the clearest sign that there was a need to provide a proper legal basis for the right to personal data protection in the EU legal order came in 2003, when the CJEU emphasised the fundamental rights dimension of the Directive in its judgment in the O¨sterreichischer Rundfunk case. Austrian courts had asked the CJEU, under the preliminary ruling procedure, whether the Directive in conjunction with Article 8 ECHR, the right to privacy, preclude the publication of the names and income of employees of a semi-state broadcasting organisation. In its reply, the Court specifically held that “the provisions of Directive 95/46, in so far as they govern the processing of personal data liable to infringe fundamental freedoms, in 10

Parliament/Council Directive 95/46/EC protection of individuals with regard to the processing of personal data and on the free movement of such data, O.J. L 281 (1995). 11 Sweden adopted the “Datalagen” in 1973; Germany adopted the “Bundesdatenschutzgestez” in 1976, entering into force one year later; France adopted “Loi relatif a` l’informatique, aux fichiers et aux liberte´s” in 1977; the UK adopted the “Data Protection Act” in 1984; The Netherlands adopted “Wet Persoonregistraties” in 1989. For a description of these first generation data protection laws in Europe, see Nugter (1990). 12 Hustinx (2013), p. 44. 13 Case C-473/12, IPI v Englebert et al. (ECJ 7 November 2013), para 28.

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particular the right to privacy, must necessarily be interpreted in the light of fundamental rights.”14 The Court further relied on Article 8 ECHR to lay down under what conditions the disclosure of personal data at issue would not breach the fundamental right to respect for privacy.15 This demonstrated the weakness of the Charter before the Lisbon Treaty. It enshrined both the right to privacy in Article 7 and the right to the protection of personal data in Article 8. The Charter had been proclaimed by the EU institutions in 2000 at the time of the adoption of the Nice Treaty, but it did not have binding effect at the time the CJEU replied to the Austrian courts in O¨sterreichischer Rundfunk. Consequently, the Court relied only on Article 8 ECHR.16 The Charter only became binding under the Treaty of Lisbon in 2009. Nevertheless, this case shows that fundamental rights bring another dimension to data protection rules, foreshadowing the fundamental nature of the right to the protection of personal data. The Constitutional Treaty, signed in 2004 but which never entered into force, enshrined an Article establishing such a right and a legal basis for the EU legislature to adopt acts implementing it—Article I-51, which was meant to replace Article 286 EC, but which was much wider in scope. The content of this article was later enshrined in the Treaty of Lisbon under Article 16 TFEU, with some small changes. Article 16 TFEU maintained intact the general first paragraph affirming the right of “everyone” to enjoy the protection of their personal data. The second paragraph provides for a comprehensive legal basis for the EU to adopt legislative acts in the field of data protection, being clearer on the procedure to be followed compared to Article I-51—the ordinary legislative procedure. Finally, Article 16 introduced a last sentence in the second paragraph, adding that the legislative acts adopted based on Article 16 TFEU will not overrule the specific rules for processing of personal data in the area of CFSP. In fact, the insertion of this last sentence was specifically requested within the mandate adopted by the Council for the Intergovernmental Conference to negotiate the Treaty of Lisbon.17 Accordingly, Article 16 TFEU lays down a specific and comprehensive legal basis for legislative acts regulating the processing of personal data and, together with Article 8 EUCFR, enshrines in primary law the fundamental right to the protection of personal data. It has opened the way and served as the legal basis

Joined Cases C-465/00, C-138/01 and C-139/01, O¨sterreichischer Rundfunk (ECJ 20 May 2003) para 68. 15 Joined Cases C-465/00, C-138/01 and C-139/01, O¨sterreichischer Rundfunk (ECJ 20 May 2003) para 90, 91. 16 For a brief history of how the CJEU incorporated references to Article 8 EUCFR in its case law, see Docksey (2016). More generally, see Iglesias Sa´nchez (2012). 17 Council of the European Union, 11218/07, POLGEN 74, Brussels, 26 June 2007, IGC Mandate, p. 7. The mandate specifically provided that former Article 286, as amended in the 2004 IGC, must contain “a subparagraph stating that the rules adopted on the basis of this Article will be without prejudice to those adopted under the specific legal basis on this subject which will be introduced in the CFSP Title.” 14

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for the revolutionary, “Copernican”18 reform of EU data protection law adopted in 2016, the General Data Protection Regulation19 (GDPR), which will repeal Directive 95/46, and the Data Protection Directive for the law enforcement area20 (DPD), which will repeal Framework Decision 2008/977/JHA. At the beginning of 2017, the European Commission announced two further legislative proposals21 on the legal basis of Article 16 TFEU—the reform of Directive 2002/ 5822 (“the ePrivacy Directive”) in the electronic communications sector and the reform of Regulation 45/2001. It is hoped that both will enter into force on May 25, 2018, the date that the GDPR becomes applicable.

3. 10

Establishing the Fundamental Right to the Protection of Personal Data

Article 16.1 TFEU affirms that “everyone has the right to the protection of personal data concerning them”. It essentially replicates the content of Article 8.1 EUCFR,23 and, together with it, Article 16.1 TFEU “guarantees the fundamental right to the protection of personal data applying to all Union policies.”24 The content of the right to the protection of personal data can only be understood together with the details enshrined in Article 8 paragraphs 2 and 3 EUCFR and the corpus of secondary data protection legislation.25 According to the official

18

Kuner (2012), p. 1. Parliament/Council Regulation (EU) 2016/679 protection of natural persons with regard to the processing of personal data and the free movement of such data (General Data Protection Regulation), O.J. L 119/1 (2016), which will become applicable on 25 May 2018. 20 Parliament/Council Directive (EU) 2016/680 protection of natural persons with regard to the processing of personal data in criminal matters, O.J. L 119/89 (2016). 21 Proposal for a Parliament/Council Regulation concerning the respect for private life and the protection of personal data in electronic communications and repealing Directive 2002/58/EC, COM(2017) 10 final and Proposal for a Parliament/Council Regulation on the protection of individuals with regard to the processing of personal data by the Union institutions, bodies, offices and agencies and on the free movement of such data, and repealing Regulation (EC) No 45/2001 and Decision No 1247/2002/EC, COM (2017)8 final. 22 Parliament/Council Directive 2002/58/EC privacy and electronic communications, O.J. L 201 (2002). 23 The only difference is that the Charter refers to personal data “concerning him or her” and not “them.” 24 Reding (2012). 25 The current EU secondary data protection legal framework is composed of Directive 95/46, Council Framework Decision 2008/977/JHA and Regulation 45/2001; the GDPR will repeal Directive 95/46 when it becomes applicable on 25 May 2018, and the DPD will repeal the Council Framework Decision 2008/977/JHA on 6 May 2018, the deadline for its transposition in national law by the MS. In addition, processing of personal data is regulated in the telecommunications sector by Directive 2002/58/EC (“the ePrivacy Directive”). See Eur-Lex Document 02002L005820091219 for an informal consolidation of the Directive as amended by Directives 2006/24/EC and 2009/136/EC. 19

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“Explanations relating to the Charter of Fundamental Rights”,26 the right to the protection of personal data in Article 8.1 EUCFR has been based on Article 286 TEC and Directive 95/46, as well as on Article 8 ECHR and on the Council of Europe Convention 108,27 while reference is also made to Regulation 45/2001. More importantly, the explanations clarify that “the above-mentioned Directive and Regulation contain conditions and limitations for the exercise of the right to the protection of personal data.”28

3.1. Personal Scope

Rationae personae, the right to the protection of personal data is universal, in that it pertains to “everyone” within the jurisdiction of the EU, regardless of their legal status as EU citizens, residents, asylum seekers, stateless persons or third country nationals that find themselves within the jurisdiction. Only natural persons29 enjoy the protection of this fundamental right,30 a rule established in secondary legislation and ultimately confirmed by the CJEU in the Schecke case, where an exception was sought. The Court ruled that legal persons “can claim the protection of Article 7 and Article 8 EUCFR [. . .] only in so far as the official title of the legal person identifies one or more natural persons”.31 However, the GDPR has made it clear that even in this situation the data protection rights can only be exercised by the natural persons whose names are used, legal persons being altogether excluded from its scope of application.32 The personal scope of the right under Article 16.1 TFEU has two dimensions from the point of view of those who have to comply with its corresponding obligations. First, there is a public law dimension, linked to the second paragraph of Article 16: the obligations are addressed to the EU legislator, which must consider when legislating upon the processing of personal data that the protection of personal data is a fundamental right. Second, there is a private law dimension, 26 Explanations relating to the Charter of Fundamental Rights (2007/C 303/02), O.J. C 303/17 (2007). 27 Council of Europe Convention of 28 January 1981 for the Protection of Individuals with regard to Automatic Processing of Personal Data. 28 Explanations relating to the Charter of Fundamental Rights, supra at p. 20. 29 In contrast, the right to respect for private life in Article 7 EUCFR and in Article 8 ECHR extends to legal persons. Moreover, the ePrivacy Directive, which implements the principle of confidentiality of communications enshrined in Article 7 EUCFR, also protects legal persons. According to Article 1.2 of the ePrivacy Directive, in addition to the protection of natural persons, it provides “for protection of the legitimate interests of subscribers who are legal persons”. 30 Article 2 (a) of Directive 95/46; Article 4.1 GDPR. 31 Joined Cases C-92/09, C-93/09, Schecke v Land Hessen (ECJ 9 November 2010) para 53. 32 Recital 14 of the GDPR states that “this Regulation does not cover the processing of personal data which concerns legal persons and in particular undertakings established as legal persons, including the name and the form of the legal person and the contact details of the legal person.”

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addressed to MS when regulating in this field to transpose EU law provisions or to implement or complement them, where this is possible. The private law dimension places all the corresponding obligations under the right to the protection of personal data on controllers33 and processors34 in limited situations, regardless of whether they are private parties or public authorities at EU or national level.

3.2. Material Scope

13

14

Rationae materiae, Article 16 TFEU covers all areas of EU law, including the area of police and judicial cooperation in criminal matters.35 The processing operations that are part of activities that fall outside EU law, such as national security,36 as well as processing operations that fall within the area of the CFSP, which are covered by the special provisions of Article 39 TEU, are excluded from its scope. The fundamental right to the protection of personal data applies to all processing operations done fully or partly by automated means, or done by non-automated means (manually) for the purposes of a filing system.37 There are two categories of processing operations excluded from the scope of application of this right: processing operations done “by a natural person in the course of a purely personal or household activity.”38 The CJEU explained in Lindqvist that this exception must be interpreted “as relating only to activities which are carried out in the course of private or family life of individuals.” The Court added that this is “clearly not the case with the processing of personal data consisting in publication on the internet so that those data are made accessible to an indefinite number of people.”39 Therefore, it found that the requirements of Directive 95/46 were applicable in the case of an individual publishing a blog about her church community. The strict interpretation of this exception continued in Rynesˇ, where the Court decided that a CCTV system “installed by an individual on his family home for the purposes of protecting the property, health and life of the home

33

As defined in Article 2 (d) of Directive 95/46 and Article 4.7 GDPR. As defined in Article 2 (e) of Directive 95/46 and Article 4.8 GDPR. For what we mean by limited situations, see Article 79.2 GDPR. 35 Kranenborg (2014), p. 225; Reding (2012). 36 Although it should be born in mind that if activities out of scope of EU law derogate from a fundamental right under EU law, those activities may be reviewed under EU law to ensure that the derogation is necessary and proportionate. See Case 222/84, Johnston v. RUC (ECJ 15 May 1986). 37 Article 2.1 GDPR. 38 Article 2.2 lit. C) GDPR. See the analysis in Kranenborg (2014), p. 245. 39 Case C-101/01, Bodil Linqvist (ECJ 3 November 2003), para 47. 34

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owners, but which also monitors a public space”40 does not fall within the “household exception.”41 Recital 18 of the GDPR clarifies that this exception includes “correspondence and the holding of addresses, or social networking and online activity undertaken within the context of such activities.” It also specifies that the Regulation nonetheless applies to controllers or processors that provide the means for processing personal data for such personal or household activities. This means that the user of a social network cannot be considered a controller of the images and other data of other people that he or she shares, but that the social network itself is considered the controller of that data and of the personal data belonging to the user to which the social network has access. The material scope of the right to data protection is further limited by an atypical exception introduced by the GDPR. This exception does not refer to a specific processing operation, but to the liability of intermediary service providers in the context of e-Commerce. Under Article 2.4, the GDPR is without prejudice to the application of Directive 2000/31/EC42 (“the eCommerce Directive”), and in particular to the liability rules of intermediary service providers under the conditions of Articles 12–15 of that Directive. This exception will necessarily need to be clarified by the CJEU. The Court has dealt with the interaction of the provisions of Directive 2002/58 (“the ePrivacy Directive”), Directive 95/46 and Directive 2000/31 in the context of requests to Internet Service Providers to deal with copyright infringements. In Promusicae, the Court clarified that the MS are not required to lay down “an obligation to communicate personal data in order to ensure effective protection of copyright in the context of civil proceedings”, adding that MS, when transposing Directives with conflicting provisions, must “rely on an interpretation of them which allows a fair balance to be struck between the various fundamental rights”43 protected by EU law. Similarly, in SABAM, the Court decided that these three Directives, together with two copyright Directives,44 read in the light of fundamental rights, preclude an injunction made against an ISP that requires it to install a system for filtering all electronic communications passing via its services to detect actual and future copyright infringement.45 The Promusicae judgment affirms the principle of balancing fundamental rights on a case by case basis, while SABAM seems to give priority to the right to privacy in the particular circumstances of a general injunction 40

Case C-212/13, Rynesˇ (ECJ 11 December 2014), para 35. In this case, the proper approach, as pointed out by the Court, would be to use the legitimate interest of the controller under Article 7f of Directive 95/46 as the lawful ground for processing (see para 34). 42 Parliament/Council Directive 2000/31/EC on electronic commerce, O.J. L 178 (2000). 43 Case C-275/06, Promusicae (ECJ 29 January 2008) para 70. 44 Parliament/Council Directive 2001/29/EC copyright and related rights in the information society O.J. L 167/10 (2001) and Parliament/Council Directive 2004/48/EC enforcement of intellectual property rights O.J. L 157/45 (2004). 45 Case C-70/10, Scarlet Extended v SABAM (ECJ 24 November 2011), operative part. 41

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order against an ISP obliging it to interfere with the confidentiality of communications to safeguard copyright. The new exemption in the GDPR for the material scope of application of data protection law seems to give priority a priori to intermediaries in the sense that, whilst they could qualify as controllers, they would not need to comply with the requirements of the GDPR. The exemption raises some questions, for instance whether all processing of personal data done by intermediary service providers is completely exempted from data protection rules. The answer may lie in Recital 14 of the e-Commerce Directive, which refers to Directive 95/46 (which will be replaced by the GDPR) and states that “the implementation and application of this [e-Commerce] Directive should be made in full compliance with the principles relating to the protection of personal data, in particular as regards unsolicited commercial communications and the liability of intermediaries”.

3.3. Territorial Scope

17

18

Establishing the territorial scope of the right to the protection of personal data is one of the most challenging legal aspects of processing personal data, considering the ubiquitous nature of current IT capabilities. Directive 95/46 established the rule that where the processing of personal data takes place “in the context of an establishment of a controller on the territory of a Member State”, the applicable law is the data protection law of that MS (Article 4.1 (a)). The same rule applies where the establishment of the controller is outside of an MS, but the national law of an MS is applicable due to international public law (Article 4.1 (b)). The national law of an MS could still apply to a processing operation even if the controller is not established in that MS, if it uses equipment situated on its territory in processing personal data (Article 4.1 (c)). Consequently, the key to identifying the applicable law under Directive 95/46 is the meaning in practice of processing “in the context of an establishment of a controller on the territory of a Member State.” The CJEU has had several opportunities to clarify this issue. In Google v AEPD, the Court explained that this provision “requires the processing of personal data in question to be carried out not ‘by’ the establishment concerned itself, but rather ‘in the context of the activities’ of the establishment.”46 The CJEU found that Spanish data protection law is applicable to a subsidiary of Google Inc. established in Spain, even if Google Inc. has its seat in a third country and the subsidiary provides only advertising services and not search engine services (which were the ones challenged in the main proceedings). The Court explained that the processing of data by the search engine services is carried out in the context of the activity of the subsidiary: “the activities of the operator of the search engine and those of its establishment situated in the Member State concerned are inextricably linked since the activities relating 46

Case C-131/12, Google v AEPD (ECJ 13 May 2014), para 52.

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to the advertising space constitute the means of rendering the search engine at issue economically profitable and that engine is, at the same time, the means enabling those activities to be performed.”47 Whilst in Google v AEPD the question was whether the EU data protection rules applied at all, in Weltimmo the Court dealt with a case where the applicable law was disputed between two MS, Hungary and Slovakia. The case concerned a company registered in Slovakia, Weltimmo, that offered real estate services to Hungarian residents, for Hungarian properties, via a website. The dispute in the main proceedings referred to complaints submitted to the Hungarian Data Protection Authority (DPA) and administrative decisions by this authority challenged in Hungarian courts by the company because the competent DPA was, in fact, the Slovak one.48 The CJEU highlighted that Directive 95/46 enshrines “a flexible definition of the concept of ‘establishment’, which departs from a formalistic approach whereby undertakings are established solely in the place where they are registered.” The Court continued that, to ascertain whether a company has an establishment in an MS other than the State where it is registered, “both the degree of stability of the arrangements and the effective exercise of activities in that other Member State must be interpreted in the light of the specific nature of the economic activities and the provision of services concerned. This is particularly true for undertakings offering services exclusively over the internet.”49 The CJEU added that “the presence of only one representative can, in some circumstances, suffice to constitute a stable arrangement if that representative acts with a sufficient degree of stability through the presence of the necessary equipment for provision of the specific services concerned in the Member State in question”. The Court decided that the concept of “establishment” extends to “any real and effective activity, even a minimal one, exercised through stable arrangements”.50 However, in VKI v Amazon, the Court explained that “such an establishment cannot exist merely because the undertaking’s website is accessible there”51 (in the MS concerned). This case concerned the situation of e-commerce services provided via a website administered by a company registered in Luxembourg to customers in Austria, in the context of challenging the validity of the website’s Terms and Conditions from a data protection law perspective. The Court stated that the processing of personal data carried out by a controller engaged in e-commerce “is governed by the law of the Member State to which that undertaking directs its activities, if it is shown that the undertaking carries out the data processing in question in the context of the activities of an establishment situated in that

47

Case C-131/12, Google v AEPD (ECJ 13 May 2014), para 56. Case C-230/14, Weltimmo (ECJ 1 October 2015) paras 9–12. 49 Case C-230/14, Weltimmo (ECJ 1 October 2015) para 29. 50 Case C-230/14, Weltimmo (ECJ 1 October 2015) paras 30–31. 51 Case C-191/15, VKI v Amazon (ECJ 28 July 2016) para 76. 48

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Member State” and that “it is for the national court to ascertain whether that is the case.”52 AG Saugmandsgaard Øe had argued that concluding contracts with Austrian consumers via its German-language website does not constitute an “establishment” for Amazon EU in Austria, as “that factor is not in itself sufficient ground for the existence of an establishment [. . .] in the absence of other factors capable of establishing that that company has ‘stable arrangements’ there.”53 He referred to the Court’s broad interpretation of the concept of establishment in the Google v AEPD case and proposed that the interpretation should be stricter in VKI because in VKI the national data protection law of one MS certainly would apply, whereas in Google there was a risk that the persons would not be protected at all.54 The Court did not follow this approach, deciding to confirm what is now settled law and thus not to add criteria to the conditions of the territorial scope provision of Directive 95/ 46.55 Essentially, the Court has left it to the national courts to decide whether the criteria developed in Weltimmo are applicable to the facts of the case. The GDPR modernises these applicable law rules in two significant respects. Article 3, the “territorial scope” provision, no longer distinguishes between the laws of the MS, and it only refers to controllers established in the Union and controllers established outside the Union. For the first category, Article 3.1 of the GDPR maintains the rule that its provisions apply to the processing of personal data “in the context of the activities of an establishment of a controller or a processor in the Union”, but it adds that this happens “regardless of whether the processing takes place in the Union or not”. This means that an EU-based controller cannot “escape” the GDPR rules by outsourcing the storage or other kind of processing of data outside the EU, or by using ubiquitous cloud computing services. As for the second category, of controllers, the new rules have become easier to apply than those under the Directive, as they have been adapted to the digital economy. The GDPR applies by virtue of Article 3.2 to the processing of personal data of data subjects who are in the Union by a controller or processor not established in the Union where the processing activities relate either to offering of goods and services to those data subjects, irrespective if a payment is required, or to monitoring of their behaviour, as long as the behaviour takes place within the Union.

52

Case C-191/15, VKI v Amazon (ECJ 28 July 2016) para 81. Case C-191/15, VKI v. Amazon EU (Opinion of AG Saugmandsgaard Øe of 2 June 2016) para 120. 54 Case C-191/15, VKI v. Amazon EU (Opinion of AG Saugmandsgaard Øe of 2 June 2016) para 124. 55 See also Zanfir-Fortuna (2016). 53

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3.4. Content

The essential elements of the right to the protection of personal data are briefly mentioned in Article 8.2 and 8.3 EUCFR. According to these two paragraphs, the protection of personal data necessarily means that the processing of personal data is done:

22

– “fairly, for specified purposes”, – always having a lawful basis—be it “consent of the person concerned or some other legitimate basis laid down by law”, – guaranteeing transparency rights to the person concerned (“right of access to data”) and intervention rights (“right to have it rectified” is mentioned in the Charter, but other rights are added to it in secondary legislation), and, finally, – under the supervision of an independent authority. All these elements—starting from what constitutes personal data,56 to what constitutes processing of personal data,57 to the principles of fair and lawful processing,58 the rights of the data subject59 and independent supervision,60 are further specified in detail in secondary EU law and in the now considerable body of case law of the CJEU that interprets it.61 As already noted, “the data protection rules lay down a system of checks and balances, including specific rights and obligations, procedures and oversight mechanisms. [. . .] In effect, the data protection rules are the ‘rules of the road’ – part of the digital Highway Code. The aim is to facilitate, not forbid, the processing of personal information by ensuring that it is based on common standards and safeguards [. . .]. As a result, the processing of personal data is a condition for the application of the rules, not an interference with them.”62 Viewed in this way, the right to the protection of personal data may be regarded as an essentially procedural right, enshrining a myriad of primarily positive obligations to ensure the necessary safeguards every time personal information is processed. It may be contrasted with the right to privacy, which enshrines primarily a prohibitive obligation—not to interfere with the private life of persons. While processing of personal information may in certain circumstances represent an interference with the right to privacy that can only be justified by proportionality,

56

Article 2 (a) of Directive 95/46; Article 4.1 GDPR. Article 2 (b) of Directive 95/46; Article 4.2 GDPR. 58 Articles 6 and 7 of Directive 95/46; Articles 5 and 6 GDPR. 59 Articles 10–15 of Directive 95/46; Articles 12–23 GDPR. 60 Article 28 of Directive 95/46; Articles 51–59 GDPR. 61 For a summary of all the relevant CJEU and ECHR case law in the field of data protection, see the “Handbook on European Data Protection law”, published by the European Union Agency for Fundamental Rights, 2018. 62 Docksey (2016), p. 199. 57

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necessity and a legitimate aim,63 the same processing of personal data will necessarily trigger the application of the rules in all cases. In fact, it is important to distinguish the right to the protection of personal data enshrined in Article 16 TFEU and Article 8 EUCFR from the right to privacy enshrined in Article 7 EUCFR and Article 8 ECHR to avoid confusion in practice. While they are indeed connected, as shown perhaps most clearly by Article 1.1 of Directive 95/46, the two rights are significantly different, as explained above.64 The first paragraph of Article 1 of Directive 95/46 states that “in accordance with this Directive, Member States shall protect the fundamental rights and freedoms of natural persons, and in particular their right to privacy with respect to the processing of personal data.” Therefore, the safeguards for persons imposed when processing their personal data were designed to protect in general the fundamental rights of those persons, and in particular their right to privacy. Nevertheless, the individualisation of privacy as the most important fundamental right protected by safeguards has faded together with the evolution of data protection law, and with the evolution of IT capacities and functionalities, for that matter. Article 1.2 of the GDPR generally states that “this Regulation protects fundamental rights and freedoms of natural persons and in particular their right to the protection of personal data”. As explained in Recital 4, “the processing of personal data should be designed to serve mankind”, meaning, that the protection of personal data aims at safeguarding all the fundamental rights of a person.65 The same recital specifies that the GDPR “respects all fundamental rights and observes the freedoms and principles recognised in the Charter as enshrined in the Treaties” and enumerates some of them, including respect for private and family life, but also freedom of thought and religion, or freedom to conduct a business. Gonzalez Fuster observed after analysing the text of the GDPR that the removal of privacy from its provisions is “almost complete”; “remaining allusions66 prove that the role foreseen for privacy is now strictly minor.”67 The fact that the fundamental right to the protection of personal data is provided for in both Article 16 TFEU and Article 8 EUCFR emphasises the importance of ensuring the fair and lawful processing of personal data in our time. The two provisions reinforce each other. Article 16 TFEU guarantees that there is an

63

See Article 52.1 EUCFR and Article 8.2 ECHR. See Kokott and Sobotta (2013) and Gutwirth and de Hert (2008), where the authors distinguish between the two rights using the specific regulatory dichotomy of “transparency tool” (for data protection) and “opacity tool” (for privacy); Lynskey (2014). 65 See Zanfir (2014), pp. 244 et seq. and the doctrine cited therein, in particular Gomes de Andrade (2012), p. 125. 66 The only place in the GDPR where the right to respect for private life is mentioned is Recital 4 of the Preamble, as explained above. It should also be noted how concepts that became famous under privacy related names—privacy by design, privacy impact assessment—were replaced in the GDPR with data protection specific notions (i.e. data protection by design and by default, Article 25 GDPR; data protection impact assessment, Article 35). See also Gonzalez Fuster (2014), p. 244. 67 Gonzalez Fuster (2014), p. 244. 64

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obligation of the EU legislator to regulate how personal information is processed. At the same time, it ensures that legislation in this area adopted pursuant to Article 16.2 TFEU is bound by the existence of a fundamental right to the protection of personal data that pertains to “everyone”, pursuant to Article 16.1 TFEU and reinforced by the essential elements of this fundamental right enshrined in Article 8 EUCFR.

3.5. Supervision by an Independent Authority

Like Article 8.3 EUCFR, Article 16.2 TFEU enshrines a specific element of the right to protection of personal data, the guarantee that “compliance with these rules shall be subject to the control of independent authorities.” These independent data protection authorities are the guarantee of equality in the digital marketplace between individuals and the private and public entities that increasingly process their personal data.68 Across the EU and the EEA, there is a wide diversity of supervisory authorities. Many MS have more than one authority, distinguished territorially or by the subject matter of supervision. Thus, in Germany, there is a federal authority supervising the public sector at federal level and state authorities supervising the private and public sectors in their territory.69 3.5.1.

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27

Independence

Article 28.1 of the Directive requires that national supervisory authorities shall act with complete independence in exercising the functions entrusted to them. This concept of independent supervision has now been enshrined in Article 16.2 TFEU and Article 8.3 EUCFR. The case law of the CJEU has recognised that the requirement of independent supervision is an essential component70 of the right to data protection under primary EU law, including both the Charter and the Treaty. In Commission v Germany,71 the various Land supervisory authorities were subject to oversight by their State governments, either directly subject to instructions or at least as part of the State administration. The Court ruled that the words “complete independence” in the second subparagraph of that article must be given 68

See the Report by the European Fundamental Rights Agency (FRA) on “Access to data protection remedies in EU Member States”, 27 January 2014, which concluded that in practice national supervisory authorities receive the majority of data protection complaints and carry the burden of effectively guaranteeing data protection. 69 See the FRA Report on “Data Protection in the European Union: the role of National Data Protection Authorities”, 6 April 2010. 70 Joined Cases C-293/12, C-594/12, Digital Rights Ireland and Seitlinger (ECJ 8 April 2014) para 68. 71 Case C-518/07, Commission v Germany (ECJ 9 March 2010).

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an autonomous interpretation, with the result that data protection authorities must enjoy an independence that allows them to perform their duties free from external influence, direct or indirect, which is liable to have an effect on their decisions. The Court stressed that freedom from state oversight and the guarantee of the independence of national supervisory authorities means that they must be independent not only from the bodies they supervise but also from government. In Commission v Austria,72 the managing member of the authority was subject to extensive administrative supervision by her hierarchical superior in the government that could conceivably have led to a form of “prior compliance”. Moreover, the integration of the authority with the departments of the Federal Chancellery, and the unconditional obligation to inform the Federal Chancellor of all aspects of the work of the authority meant that the data protection authority was not above all suspicion of partiality. In Commission v Hungary, the Data Protection Commissioner’s office was replaced as part of a legislative reform by a new data protection authority. Consequently, the incumbent commissioner’s term of office was prematurely terminated, without respecting any of the safeguards laid down concerning termination of his mandate. The Court held that if an MS were able to compel a supervisory authority to vacate office in this way before serving its full term, the threat of such premature termination could lead the authority into a form of prior compliance with the political authority, which is incompatible with the requirement of independence.73 Any reform of the institutional model must be organised in such a way as to meet the requirement of independence. The independence of supervisory authorities has been reinforced in the GDPR by clauses consolidating the case law of the Court, requiring that they should be responsible for their own staff, and requiring that they should receive the resources, premises and infrastructure necessary for the effective performance of their tasks.74 In addition, specific provisions of the GDPR provide for the appointment, qualifications and termination of the mandates of the members of supervisory authorities.75 3.5.2.

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Title II

Accountability

In Case C-518/07, Germany argued that the principle of democracy required that Land supervisory authorities should be subject to the political authorities of the States so that they might be accountable and subject to Parliamentary control. The Court found that that principle does not preclude the existence of public authorities outside the classic hierarchical administration and noted the scope for Parliamentary control via nomination of the members of such authorities, definition of their 72

Case C-614/10, Commission v Austria (ECJ 16 October 2012). Case C-288/12, Commission v Hungary (ECJ 8 April 2014) para 54. 74 Article 52 of the GDPR, Independence. 75 Articles 53–54 of the GDPR. 73

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powers and their reporting to the legislature. The Court also stressed that those authorities are required to comply with the law subject to the review of the competent courts.76 More recently, the Court has further developed the requirements of the judicial accountability of supervisory authorities, which operate at national level but exercise tasks directly conferred by primary and secondary EU law. In Schrems, the Court required supervisory authorities to examine complaints with due diligence and to adopt a decision either dismissing a complaint or finding it to be well founded, and in both cases to be subject to judicial proceedings including, in case of doubt, a reference for a preliminary ruling to the Court.77 In effect, supervisory authorities have been embedded in primary law, enjoying constitutional status under the Treaties as organs of EU law as well as operating as national authorities under the GDPR.78 3.5.3.

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Tasks and Powers

Article 28 of Directive 95/46 provides that MS shall establish one or more public authorities to monitor the application at national level of the data protection rules adopted to implement the Directive. These authorities should be consulted on draft administrative measures or legislation relating to the protection of individuals’ rights and freedoms on the processing of personal data, and should have powers of investigation, intervention and to engage in legal proceedings. They should carry out prior checks, hear complaints, and cooperate with one another to the extent necessary for the performance of their duties, in particular by exchanging all useful information. Article 29 of the Directive establishes the advisory group of the various national supervisory authorities, the EDPS and the Commission, known as the “Article 29 Working Party”. It has advisory status and shall act independently. Article 30 sets out its tasks:79 it provides expert advice from national level to the European Commission on any draft legislation on data protection or which affects the right to protection of personal data. It promotes the uniform application of the Directive in all the Member States of the EU and the EEA, and is a powerful tool for cooperation at EU level. The Working Party elects its own President and its Secretariat is provided by the Commission.

76

Case C-518/07, Commission v Germany (ECJ 9 March 2010) para 40–45. Case C-362/14, Schrems v Data Protection Commissioner (ECJ 6 October 2015) para 57, 64 and 65. 78 Hijmans (2016), pp. 25–26. 79 Its tasks also include matters covered by the ePrivacy Directive, pursuant to Article 15.3 thereof. 77

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3.5.4. 37

38

39

40

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Reform of the Enforcement Model

The GDPR significantly reinforces the tasks and powers of national supervisory authorities (Articles 57 and 58), including the new power to impose effective and dissuasive administrative fines (Article 83). In its case law on independence discussed above the CJEU referred to the governance model of the EDPS, which is laid down Articles 41–45 of Regulation 45/2001. The GDPR has consolidated these precedents into a number of provisions regarding the establishment, independence and governance of national supervisory authorities (Articles 51–54).80 In addition the data protection reform has significantly developed the framework in which supervisory authorities exercise their activities, establishing the European Data Protection Board, a new formal entity at EU level, and promoting, indeed imposing, cooperation between supervisory authorities under the one-stop shop and the consistency mechanism. The GDPR has replaced the Article 29 Working Party with a new EU body, the European Data Protection Board (the EDPB or Board). This body has a quite different status and a number of new tasks and powers, notably under the Consistency Mechanism. Under Article 68.1 GDPR, the Board is established as an independent body of the EU, with its own legal personality. It is composed of one national DPA from every MS and the EDPS, with the Commission having the right to attend its meetings. The Board elects a Chair and two Vice-Chairs (Article 73), its Secretariat is provided by the EDPS (Article 75) but shall perform its tasks exclusively under the instructions of the Chair of the Board. The Secretariat of the Board has a broader range of tasks than the simple secretariat provided by the Commission to the Article 29 Working Party, comprising both standard administrative and logistical tasks and substantive analytical tasks such as the preparation, drafting and publication of opinions, decisions and other texts adopted by the Board. Like the Article 29 Working Party, the general role of the Board is to promote the consistent application of the Regulation, advise the Commission and promote cooperation between supervisory authorities throughout the Union. However, the context is very different, of a Regulation rather than a Directive and its differing national implementations. For the first time, there is a generalised core of the same rules applying across the Union which must be interpreted and applied in the same way. Supervisory authorities are now directly responsible for applying Union rules in their areas of jurisdiction and constitute together an independent EU body, the Board.

80

See Case C-518/07, Commission v Germany (ECJ 9 March 2010) para 27–28; Case C-288/12, Commission v Hungary (ECJ 8 April 2014) para 56. Cf. the Court’s approach to budget and resources in Case C-614/10, Commission v Austria (ECJ 16 October 2012) para 58, with Article 52.4 of the GDPR.

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The tasks of the Board are set out in Article 70, a long list of specific activities. Many continue the tasks of the Article 29 Working Party, others are significant additions, notably, at the head of the list, the Board’s task of monitoring and ensuring the correct application of the Regulation by means of the consistency mechanism. In addition, there are a number of general or specific matters on which the Board may issue guidelines, recommendations and best practices.81 Finally, it should be recalled that the Board has a similar role under Article 51 of the DPD.82 The one-stop shop, together with the consistency mechanism, is a new form of reinforced cooperation that constitutes one of the main innovations of the GDPR (recitals 124–128). It addresses the problem of possibly divergent approaches by different competent authorities in cases of cross-border processing of personal data, i.e. where there are a number of establishments of the data controller or where data subjects are affected in a number of MS. It provides for one authority to be the lead authority in such cases, responsible for coordinating cooperation between the authorities concerned, endeavouring to reach consensus, and taking any related decisions. The lead authority in such cases will be the authority in the MS where the sole or principal establishment of the data controller or processor concerned is located, normally where it has its centre of administration in the Union (Article 4.16 GDPR).83 Where the authorities concerned do not agree on the designation of the lead authority, the EDPB may decide the issue (Article 65.1 (b)). In three specific cases, the supervisory authority of the MS concerned will be competent: public authority (Article 55.2), complaints (Article 56.2) and urgency (Article 66). In principle, the lead authority has the exclusive right to take a decision, subject to the consistency mechanism (Article 60.4) or cases of urgency (Article 60.11). Before making that decision, the lead authority must communicate all relevant information to the other authorities, submit a draft decision to them for their opinion and take due account of their views (Article 60.3). The lead authority may request the other supervisory authorities at any time to provide mutual assistance (Article 61) and may conduct joint operations (Article 62), in particular for carrying out monitoring or investigations. To ensure the consistent application of the GDPR throughout the Union, the onestop shop mechanism is supported by a requirement that supervisory authorities cooperate with one another through a consistency mechanism. The consistency mechanism subjects three types of case to a prior opinion by the Board: when there is a disagreement between supervisory authorities under the one-stop shop (Article 60.4); in cases where, in view of the need to ensure a coherent approach, the Board 81

As part of the work of preparing for the GDPR, the Article 29 Working Party adopted Guidelines and FAQs on Data Portability (WP242), Data Protection Officers (WP243) and the Lead Supervisory Authority (WP244) on 13 December 2016, and will prepare further Guidelines on Data Protection Impact Assessments and Certification in 2017. 82 Directive (EU) 2016/680. 83 See the Guidelines for identifying a controller or processor’s lead supervisory authority, WP244.

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must issue an opinion before a supervisory authority may adopt a proposed measure (Article 64.1); and where any supervisory authority, the Chair of the Board or the Commission requests that the Board issue an opinion on a matter of general application or producing effects in more than one MS (Article 64.2). In such cases, a supervisory authority concerned may not adopt a planned measure until it has received the opinion of the Board, and must take utmost account of that opinion (Article 64.7). Where it does not intend to follow the opinion of the Board, then the dispute mechanism by the Board under Article 65 shall apply (Article 64.8). In comparison with the consistency mechanism, decisions taken under the dispute mechanism are binding on all supervisory authorities concerned (Article 65.2). Similarly, the supervisory authorities concerned may not adopt a decision before the decision by the Board (Article 65.4), save in cases of urgency under Article 66. Since the decisions of the Board are legally binding, they may be challenged under Article 263 TFEU in the normal way. During the debates on the data protection reform, questions were raised whether the one-stop shop and its associated mechanisms were lawful, whether because they might interfere with the independence of data protection authorities or because they might obstruct the effective exercise of EU citizens’ rights, in particular by setting up financial and language barriers resulting from having to file complaints in another jurisdiction. As to the independence of supervisory authorities, the CJEU has made it clear that the guarantee of independence was established, not to grant a special status to those authorities per se, but to strengthen the protection of individuals affected by their decisions.84 Consequently, the restrictions on the powers of supervisory authorities imposed in the one-stop shop and the consistency mechanism, notably via decisions of the Board, itself an independent authority made up of those supervisory authorities, cannot be regarded as an infringement of independence so long as the system ensures the effective protection of the individuals concerned. As to the possible interference with the effective protection of individuals, the various mechanisms have been defined in the GDPR to ensure that individuals may resort to their local supervisory authority. In particular, an individual may always complain to a supervisory authority, and that authority has the responsibility of communicating with the complainant (Article 57 (f) and Article 60.7–60.9). Finally, where a supervisory authority considers that there is an urgent need to act to protect the rights and freedoms of data subjects, it may use the urgency procedure to act within its own territory (Article 66.1).

84

Case C-518/07, Commission v Germany (ECJ 9 March 2010) para 25.

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The Positive Obligation of the EU Legislator to Act

Article 16.2 TFEU establishes a positive obligation for the EU legislator to act for the adoption of legislation concerning the processing of personal data both at EU and at MS level. It also indicates that data protection legislation shall be adopted pursuant to the ordinary legislative procedure, involving both the Parliament and the Council. Article 16.2 TFEU is a general mandate of the EU which aims to ensure the effectiveness of the fundamental right to data protection, as recognised in Article 16.1 TFEU and Article 8 EUCFR, while, at the same time, guaranteeing the free flow of personal data within the EU. This right cannot be effectively guaranteed in the absence of secondary legislation laying down specific rules, as illustrated above.85 Under the EDPS, Article 16 TFEU “provides a direct legal basis for a strong EUwide data protection law.” The EDPS explained that “the abolition of the pillar structure obliges the European Parliament and Council to provide for data protection in all areas of EU law. In other words, it allows for a comprehensive legal framework for data protection applicable to the private sector, the public sector in the Member States and the EU institutions and bodies.”86 The fact that Article 16.2 TFEU also covers the adoption of rules at EU level for the private sector is not obvious from the wording of the provision, which lacks clarity and, if applied literally, could be very restrictive. The paragraph refers to putting in place “rules” by the Union regarding processing of personal data by Union institutions, bodies, offices and agencies, on one hand, and “by the Member States when carrying out activities which fall within the scope of Union law” (our emphasis), on the other hand. Construing Article 16 literally would restrict the scope of legislation to the public sector of MS (personal data processed “by” the Member States) and would not allow the EU to legislate upon the processing of personal data by private entities. The CJEU will soon rule on the scope of Article 16.2 TFEU, in the EU-Canada PNR87 case. In this case, the EP requested the Court to give an Opinion on whether the international agreement concluded between the EU and Canada concerning PNR (Passenger Name Records)88 data complies with EU primary law. One of the questions submitted to the Court is whether Article 16 TFEU should be the correct legal basis for the Council decision adopted for concluding the EU-Canada PNR Agreement, instead of the legal basis chosen by the Council—Article 82.1 (d)

85

In this sense, see also Hijmans (2016), p. 235. EDPS Opinion on the Commission Communication, A comprehensive approach on personal data protection in the European Union, 14 January 2011, p. 6. 87 Opinion 1/15, Request for an Opinion submitted by the European Parliament. 88 Agreement between Canada and the European Union on the transfer and processing of Passenger Name Record, Interinstitutional File: 2013/0250, Brussels, 20 November 2013. 86

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TFEU on judicial cooperation in criminal matters within the Union and Article 87.2 point a) on police cooperation in criminal matters within the Union.89 In the EDPS Opinion of 2013 on the EU-Canada PNR Agreement, the EDPS questioned the choice of this legal basis and recommended that the proposal be based on Article 16 TFEU “as a comprehensive legal basis”. In addition, the EDPS argued before the CJEU, as intervenor in the EU-Canada PNR case, that excluding processing of personal data by private parties from the scope of Article 16.2 TFEU would significantly affect the effectiveness of the right to personal and would excessively limit the scope of the broader EU mandate to act in this field intended by replacing Article 286 TEC with Article 16 TFEU. AG Mengozzi supported this approach in his Opinion in that case: to put a strictly literal interpretation on the new legal basis constituted by the first subparagraph of Article 16.2 TFEU would be tantamount to splitting up the system for the protection of personal data. Such an interpretation would run counter to the intention of the High Contracting Parties to create, in principle, a single legal basis expressly authorising the EU to adopt rules relating to the protection of the personal data of natural persons. It would therefore represent a step backwards from the preceding scheme based on the Treaty provisions relating to the internal market, which would be difficult to explain. That strictly literal interpretation of Article 16 TFEU would thus have the consequence of depriving that provision of a large part of its practical effect.90

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The AG concluded that Article 16 TFEU is the correct substantive legal basis for the agreement, but in conjunction with Article 87.2 (a) TFEU.91 In this respect, Article 16.2 TFEU does indeed constitute the legal basis for all rules adopted at EU level relating to the protection of individuals on the processing of their personal data, including the rules within the framework of PJCC.92 The only area of EU law that is excluded from the field of application of Article 16 TFEU is the CFSP, according to the last sentence of Article 16.2 TFEU. Article 39 TEU is the legal basis for rules in the area of the CFSP. Under this provision, solely the Council shall adopt rules on the processing of personal data by MS when carrying out activities related to the CFSP and on the free movement of data in this field. Nevertheless, the rules must be adopted “in accordance with Article 16 TFEU”, which indicates that the dimension of the fundamental right to personal data protection, together with its effectiveness, must be considered when legislating. Moreover, Article 39 TEU also refers to the supervision by an independent body of the activities related to processing of personal data in this area. Therefore, Article 39 TEU seems to establish only a procedural exemption from

89

For accuracy, it should be mentioned that the legal basis of the Council Decision also refers to Articles 218.5 and 218.6 (a) TFEU, which set out the procedure for the EU to negotiate international agreements. 90 Opinion 1/15, EU-Canada PNR (Opinion of AG Mengozzi of 8 September 2016) para 119. 91 Opinion 1/15, EU-Canada PNR (Opinion of AG Mengozzi of 8 September 2016) para 120. 92 Opinion 1/15, EU-Canada PNR (Opinion of AG Mengozzi of 8 September 2016) para 116; Kranenborg (2014), p. 225.

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Article 16 TFEU,93 which requires that data protection rules must be adopted through the co-decision mechanism. The TEU also contains two Declarations referring to data protection and Article 16 TFEU. Declaration 20 establishes that “whenever rules on protection of personal data to be adopted on the basis of Article 16 could have direct implications for national security, due account will have to be taken of the specific characteristics of the matter.” In the last sentence, the Declaration recalls that the current secondary legislation, Directive 95/46, “includes specific derogations in this regard.” The practical effect of this specification is limited, considering that Article 4.2 TEU, last sentence, specifically declares that “national security remains the sole responsibility of each Member State.” However, it should be noted that the legal provisions at MS level in the field of national security touching on the fundamental right to private life must be compliant with the requirements of Article 8 ECHR and those of Convention 108 of the Council of Europe, as interpreted and applied by the European Court of Human Rights in its extensive case law on the matter.94 Declaration 21 is dedicated to the protection of personal data in the fields of judicial cooperation in criminal matters and police cooperation. Under Declaration 21, “it may prove necessary” to adopt specific rules in this area based on Article 16 TFEU, “because of the specific nature of these fields.” Indeed, after the entering into force of the TFEU, separate proposals for reforming EU data protection law were tabled for activities falling under the former first pillar of the Communities—the GDPR, and activities falling under the former third pillar— the DPD. Finally, on the positive obligation of the EU legislator to act for adopting data protection rules, the question arises whether the EU has exclusive or shared competence to legislate. The areas where the EU has exclusive competence are exhaustively enumerated in Article 3 TFEU, and none of them covers data protection. Similarly, data protection is not covered by the areas exhaustively enumerated in Article 6 TFEU, defining the supportive competences of the EU. It follows that adopting data protection rules is a shared competence between the EU and MS, falling under Article 4 TFEU.95 First, Article 4 TFEU contains a nonexhaustive list of areas, and second, a component of data protection legislation (free flow of data) is covered under the internal market rules, which is specifically referred to in Article 4. In practice, sharing the legislative competence means that the MS can exercise their competence to the extent that the Union has not exercised its competence or has decided to cease exercising it (Article 2.2 TFEU).

93

Kranenborg (2014), p. 226. Especially see the Court’s judgments in Appl. No. 5029/71, Klass and Others v. Germany (ECtHR 6 September 1978); 28341/95, Rotaru v. Romania (ECtHR 29 March 2000); 71525/01, Dumitru Popescu v. Romania (ECtHR 26 April 2006); 47143/06, Zackarov v Russia (ECtHR 4 December 2015); 37138/14, Szabo and Vissy v Hungary (ECtHR 12 January 2016). 95 See also Hijmans (2016), pp. 119–123. 94

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When asked in a preliminary reference to what extent MS can add to or derogate from the provisions of Directive 95/46, the CJEU upheld the reading of Recitals 8 and 10 of that Directive and affirmed it is intended to ensure “that the level of protection of the rights and freedoms of individuals with regard to the processing of personal data is equivalent in all Member States” and that “the approximation of national laws applicable in this area must not result in any lessening of the protection they afford but must, on the contrary, seek to ensure a high level of protection in the EU.”96 The GDPR, which will become applicable on 25 May 2018, will restrict even more the margin of manoeuver of the MS in this area, if its rules enjoy direct applicability (cf. Article 288.2 TFEU). However, a remarkable number of provisions of the Regulation allow flexibility at national level, some of them in key aspects of the GDPR, such as the restrictions of the rights of the data subject (Article 23), processing of special categories of data (Article 9.2 (a), (b), (g) to (j) and Article 9.4), the right to erasure (Articles 17.1 (e) and 17.3 (b)), rights in relation to profiling (Article 22.2 (b)) and class actions (Article 80).

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The New Data Protection Legal Framework in the EU, Based on Article 16 TFEU

The European Commission has acknowledged that with Article 16 TFEU “a new legal basis for a modernised and comprehensive approach to data protection and the free movement of personal data, also covering police and judicial cooperation in criminal matters”97 was created. In 2009, the Commission launched a series of public and stakeholder consultations regarding the reform of data protection law, even before the entering into force of the Lisbon Treaty.98 The consultations resulted in two legislative proposals tabled early in 2012, a Regulation to replace Directive 95/46 setting out a general EU framework for data protection and a Directive to replace Framework Decision 2008/977 setting out rules on the protection of personal data processed for the prevention, detection, investigation or prosecution of criminal offences and related judicial activities. The proposals aimed at creating “a strong and consistent legislative framework across Union policies, enhancing individuals’ rights, the Single Market dimension of data protection and cutting red tape for businesses”.99

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Cases C-468/10 and C-469/10, ASNEF (ECJ of 24 November 2011) para 28. Commission Communication, Safeguarding Privacy in a Connected World. A European Data Protection Framework for the 21st century, COM(2012) 9 final, p. 3. 98 Public consultation from July to December 2009 and from November 2010 until January 2011. Targeted consultations, a roundtable and dedicated workshops and seminars on specific issues were organised. See Communication COM(2012) 9 final, footnotes 9 and 10. 99 COM(2012) 9 final, p. 4. 97

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A long legislative process followed, under the co-decision procedure. The two texts were finally adopted in April 2016, as the GDPR100 and the DPD.101 They will, respectively, become applicable and enter into force on 25 May 2018. According to the EDPS, there were several substantive reasons that justified such a comprehensive reform, all based on the “legal impetus for reconsidering the existing rules on data protection” represented by Article 16 TFEU.102 These reasons ranged from technological change since the entering into force of Directive 95/46, to the need for more harmonisation of the internal market, to the global dimension of processing personal data and to the need for change in the area of justice and police cooperation.103 While the changes brought by the reform package were generally welcomed, the EDPS’ main criticism was that the level of protection provided for by the proposed Directive in the area of justice and police cooperation was “by far inferior” to the one of the proposed Regulation.104 The GDPR promotes a responsible, proactive culture within all organisations, be it public or private, that process personal data of persons within the EU, built around the principle of accountability.105 It lays down a comprehensive set of provisions that require controllers to embed data protection rules within all stages of processing personal data, starting from before the processing itself takes place. In this sense, the GDPR introduces requirements for conducting Data Protection Impact Assessments (Article 35), for consulting supervisory authorities before engaging in processing operations that may pose risks to the data subjects (Article 36), and also for applying the principles of data protection by design and data protection by default to their operations (Article 25). The GDPR strengthens the rights of the data subjects (Articles 12–23) and significantly expands the territorial scope of EU data protection rules to cover all controllers that provide services to data subjects within the EU, irrespective of where those controllers are established (Article 3). Moreover, it establishes an innovative supervision and enforcement mechanism (➔ para 26 et seq.) that could serve as model for other EU policy areas in the future if it proves to be efficient in practice. The system of safeguards laid down by the GDPR is reinforced by significant fines up to 20 million EUR or 4% of the annual global turnover, whichever is the higher (Article 83). Following in the footsteps of the Directive, the GDPR has the potential to become a global standard for the protection of personal data in the digital age.106 100 Parliament/Council Regulation (EU) 2016/679 protection of natural persons with regard to the processing of personal data and the free movement of such data (General Data Protection Regulation), O.J. L 119/1 (2016). 101 Parliament/Council Directive (EU) 2016/680 protection of natural persons with regard to the processing of personal data in criminal matters, O.J. L 119/89 (2016). 102 EDPS Opinion on the data protection reform package, 7 March 2012, para 7. 103 EDPS Opinion on the data protection reform package, 7 March 2012, para 8–12. 104 EDPS Opinion on the data protection reform package, 7 March 2012, para 20. 105 Article 5.2 and its implications throughout the GDPR, especially read together with provisions of Chapter IV. 106 See Birnhack (2008).

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Despite the differences in the level of protection afforded to individuals by the GDPR and DPD, the adoption of the DPD was also welcome because it represented a significant step forward compared to the existing EU data protection framework in the area of police cooperation. “Indeed the Council Framework Decision on Data Protection of 2008 only applies where data are exchanged between Member States, not where data remains within the national domestic context. Because of the Directive, European citizens may finally benefit from an updated legislative instrument of the Union which will apply to the entire police and justice sectors”,107 noted the EDPS. The sole legal basis of the DPD is Article 16.2 TFEU. At the beginning of 2017, the European Commission announced new proposals for modernising Regulation 45/2001 for processing of personal data by EU institutions and bodies, bringing it in line with the GDPR, and for reforming the ePrivacy Directive—both proposals relying on Article 16 TFEU as their legal basis. The new ePrivacy rules will take the form of a regulation—“concerning the respect for private life and the protection of personal data in electronic communications”. In the explanatory memorandum accompanying the proposal, the Commission explained that “since an electronic communication involving a natural person will normally qualify as personal data, the protection of natural persons with regard to the privacy of communications and processing of such data should be based on Article 16”.108 However, unlike the GDPR which is solely based on Article 16 TFEU, the ePrivacy regulation will also be based on Article 114 TFEU, since the initiative also pursues the purpose of “achieving the internal market for [. . .] electronic communications”,109 in addition to regulating the processing of personal data.

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Conclusions

This analysis has examined Article 16 TFEU from a number of different angles—as the expression of the nature of the right to the protection of personal data as a fundamental right under primary EU law, as the guarantor of this fundamental right alongside Article 8 EUCFR, as the specific and comprehensive legal basis for adopting EU rules on the processing of personal data, and, finally as the source for a sweeping reform with global impact. The fundamental right to the protection of personal data enshrined in Article 16.1 TFEU is atypical to the extent that its content can only be understood together with its essential elements enshrined in Article 8 EUCFR and the corpus of secondary EU data protection legislation. In this context, looking at Article 16.1 TFEU beyond its personal, material and territorial scope has shown that the right to 107

EDPS Opinion 6/2015, A further step towards comprehensive EU data protection, 28 October 2015, p. 4. 108 COM(2017) 10 final, p. 4. 109 COM(2017) 10 final, p. 4.

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the protection of personal data is essentially a procedural right, enshrining a myriad of mainly positive obligations to ensure safeguards every time personal information is processed. This may be contrasted with the right to privacy, which is enshrined in the Charter but not the Treaty, and which is a classic prohibitive fundamental right consisting primarily of a negative obligation not to interfere with the private life of persons. The assessment has also shown that the existence of an independent supervisory authority is fundamental for the effectiveness of the right to the protection of personal data, having been enshrined in Article 16.2 TFEU and confirmed by the CJEU as an essential component of this right. The positive obligation of the EU legislator to act enshrined in Article 16.2 TFEU is a general mandate of the EU which aims to ensure the effectiveness of the fundamental right to data protection, while, at the same time, guaranteeing the free flow of personal data within the EU. After some hesitation, the EU legislator has acted decisively under this obligation, negotiating a comprehensive reform of the data protection rules both in the field of the single market under the GDPR and police cooperation under the DPDs. Additional reforms grounded on Article 16 TFEU were announced early 2017 to update the general legislative framework to include the data protection rules applicable to the EU institutions and bodies and the rules on processing electronic communications data under the ePrivacy regime. As the world enters the age of intelligent machines,110 the anchoring of the fundamental right to protection of personal data in EU primary law under Article 16 TFEU, read together with Article 8 EUCFR, has proved to be a cornerstone for the effective and comprehensive reform of the secondary legislation implementing this most modern of EU fundamental rights.

List of Cases ECJ

ECJ 15.05.1986, C 222/84, Johnston v. RUC, ECLI:EU:C:1986:206 [cit. in para 13] ECJ 14.11.2002, Opinion of AG Tizzano in C-465/00, C-138/01, C-139/01, O¨sterreichischer Rundfunk, ECLI:EU:C:2002:662 [cit. in para 7] ECJ 03.11.2003, C-101/01, Bodil Linqvist, ECLI:EU:C:2003:596 [cit. in para 14] ECJ 29.1.2008, C-275/06, Promusicae, ECLI:EU:C:2008:54 [cit. in para 16] ECJ 09.03.2010, C-518/07, Commission v Germany, ECLI:EU:C:2010:125 [cit. in para 33] ECJ 09.11.2010, C-92/09, C-93/09, Schecke v Land Hessen, ECLI:EU:C:2010:662 [cit. in para 11] ECJ 24.11.2011, C-70/10, Scarlet Extended v SABAM, ECLI:EU:C:2011:771 [cit. in para 16] 110

See, for instance the prediction of the rise of artificial intelligence in Kurzweil (1990).

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ECJ 24.11.2011, C-468/10, C-469/10, ASNEF, ECLI:EU:C:2011:777 [cit. in para 57] ECJ 16.10.2012, C-614/10, Commission v Austria, ECLI:EU:C:2012:631 [cit. in para 30] ECJ 07.11.2013, C-473/12, IPI v Englebert et al., ECLI:EU:C:2013:715 [cit. in para 5] ECJ 08.04.2014, C-293/12, C-594/12, Digital Rights Ireland and Seitlinger, ECLI: EU:C:2014:238 [cit. in para 28] ECJ 08.04.2014, C-288/12, Commission v Hungary, ECLI:EU:C:2014:237 [cit. in para 38] ECJ 13.05.2014, C-131/12, Google v AEPD, ECLI:EU:C:2014:317 [cit. in para 18, 19, 20] ECJ 11.12.2014, C-212/13, Rynesˇ, ECLI:EU:C:2014:2428 [cit. in para 14] ECJ 01.10.2015, C- 230/14, Weltimmo, ECLI:EU:C:2015:639 [cit. in para 19, 20] ECJ 02.06.2016, Opinion of AG Saugmandsgaard Øe in C-191/15, VKI v Amazon EU, ECLI:EU:C:2016:388 [cit. in para 20] ECJ 28.07.2016, C-191/15, VKI v Amazon, ECLI:EU:C:2016:612 [cit. in para 20] ECJ 08.09.2016, Opinion of AG Mengozzi in Opinion 1/15, EU Canada PNR, ECLI:EU:C:2016:656 [cit. in para 51]

ECtHR

ECtHR 06.09.1978, 5029/71, Klass and Others v. Germany [cit. in para 54] ECtHR 29.03.2000, 28341/95, Rotaru v. Romania [cit. in para 54] ECtHR 26.04.2007, 71525/01, Dumitru Popescu v. Romania [cit. in para 54] ECtHR 04.12.2015, 47143/06, Zackarov v Russia [cit. in para 54] ECtHR 12.01.2016, 37138/14, Szabo and Vissy v. Hungary [cit. in para 54]

References111 Birnhack, M. D. (2008). The EU Data Protection Directive: An engine of a global regime. Computer Law and Security Report, 24, 508–520. Docksey, C. (2016). Four fundamental rights: Finding the balance. International Data Privacy Law, 6(3), 195–209. Gomes de Andrade, N. N. (2012). Oblivion, the right to be different from oneself. Reproposing the right to be forgotten. Revista de Internet, Derecho y Politica, 13, 122–137. Gonzalez Fuster, G. (2014). The emergence of personal data protection as a fundamental right of the EU. Cham: Springer. Gutwirth, S., & de Hert, P. (2008). Regulating profiling in a democratic constitutional state. In M. Hildebrandt & S. Gutwirth (Eds.), Profiling the European Citizen (pp. 271–303). Cham: Springer.

111

All cited internet sources in this comment have been accessed on or before 7 June 2017.

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Hijmans, H. (2016). The European Union as a constitutional guardian of internet privacy and data protection: The story of Article 16 TFEU. PhD thesis, Instituut voor Informatierecht (IViR), University of Amsterdam, Amsterdam. Hijmans, H., & Scirocco, A. (2009). Shortcomings in EU in the second and the third pillar. Can the Lisbon Treaty be expected to help? CMLRev., 46, 1485–1525. Hustinx, P. (2013). EU Data Protection Law: The Review of Directive 95/46/EC and the Proposed General Data Protection Regulation. Retrieved from https://secure.edps.europa.eu/EDPSWEB/webdav/site/mySite/shared/Documents/EDPS/Publications/Speeches/2014/14-0915_Article_EUI_EN.pdf Iglesias Sa´nchez, S. (2012). The Court and the Charter: The impact of the entry into force of the Lisbon Treaty on the ECJ’s approach to fundamental rights. CMLRev., 49, 1569–1573. Kokott, J., & Sobotta, C. (2013). The distinction between privacy and data protection in the jurisprudence of the CJEU and the ECtHR. International Data Privacy Law, 3(4), 222–228. Kranenborg, H. (2014) Article 8. In S. Peers et al. (Ed.), The EU Charter of Fundamental Rights: A commentary (pp. 223–265). HArticle. Kuner, C. (2012). The European Commission’s proposed data protection regulation: A Copernican revolution in European data protection law. BNA Bloomberg Privacy and Security Law Report, 11, 1–15. Kurzweil, R. (1990). The age of intelligent machines. Cambridge, MA: MIT Press. Lenaerts, K. (2010). The contribution of the European Court of Justice to the Area of Freedom, Security and Justice. International and Comparative Law Quarterly, 59, 224–301. Lynskey, O. (2014). Deconstructing data protection: The “Added Value” of a right to data protection in the EU legal order. International and Comparative Law Quarterly, 63, 569–597. Lynskey, O. (2015). The foundations of EU data protection law. London: Oxford University Press. Nugter, A. C. M. (1990). Transborder flow of personal data within the EC. Cham: Springer. Reding, V. (2012). The European framework for the twenty-first century. International Data Privacy Law, 2(3), 119–129. Zanfir, G. (2014). Forgetting about consent: Why the focus should be on suitable safeguards in data protection law. In S. Gutwirth, R. Leenes, & P. de Hert (Eds.), Reloading data protection. Multidisciplinary insights and contemporary challenges (pp. 237–257). Cham: Springer. Zanfir-Fortuna, G. (2016). A missed opportunity: The Amazon case that almost made data subjects into consumers. European Data Protection Law Review, 4, 585–589.

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Article 17 [Confessional and Non-confessional Organisations] 1. The Union respects and does not prejudice9–15 the status22–24 under national law of churches and religious associations or communities in the Member States.41–42, 43–56 2. The Union equally respects the status under national law of philosophical and non-confessional organisations.25–29, 41–42, 43–56 3. Recognising their identity and their specific contribution, the Union shall maintain an open, transparent and regular dialogue with these churches and organisations.30–42

Contents 1. 2. 3. 4. 5.

Introduction and Historic Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Clauses of Europe’s Lack of Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Legal Status of Churches and Religious Associations and Organisations . . . . . . . . . . . Philosophical and Non-confessional Organisations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Duty of Dialogue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1. The Method of Dialogue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2. The Bureau of European Policy Advisers and the European Political Strategy Centre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3. Religious and Philosophical Delegations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4. Relationship Between the Third and the First Two Paragraphs . . . . . . . . . . . . . . . . . . . 6. Some Major Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Cases References

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Article 17 TFEU is the core rule for the definition of relations between the Union and the churches, associations and religious communities, whatever their denomination, as well as the philosophical and non-confessional organisations. The Article constitutes the point of arrival of the long and not always straightforward path towards the attribution of juridical importance in the European order to religious and philosophical matters. It is not necessary here to retrace all the steps that have led to the current European structure and to the evolution of the Community, initially a predominantly economic entity, towards the constitution of a true community of law.1 However, we cannot fail to recall that with the Maastricht Treaty, and even more so with the Treaty of Lisbon and with the attribution of the legal value of Treaties also to the EUCFR, the EU recognised fundamental rights and their protection as a 1

See Opinion 1/1991, EEA Agreement (ECJ14 December 1991).

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defining element of the European legal system, as later confirmed by its signing of the ECHR. Among fundamental rights, the right of religious freedom2 was certainly not attributed a lesser status. Incidentally, it is worth recalling that most of the literature on the subject considers the traditional democratic deficit of the European institutional structure as having been bridged. As we very well know, however, this position is not supported by everyone, and, according to some authors, Article 17 TFEU plays a major role in this very sense; indeed, it fits perfectly “in the framework of an appreciable attempt to recover a by now genetic and overt democratic deficit of the very structure of the Community legal order, a deficit that persists and is bound to remain for a very long time.”3 Concerning, in particular, to the process that has led to the current wording of Article 17 TFEU, it has been pointed out that “it was under Delors’ Presidency that, taking into account the growing importance of religious interests also for social cohesion, the Commission started to look into these issues and to outline a dialogue with denominations and religious communities [. . .]. But it was only in 1998, under Santer’s Presidency that the need for specific attention to spiritual problems was explicitly stated.”4 The first concrete result in this sense was the inclusion of Declaration No. 115 in the 1997 Treaty of Amsterdam, which marked the starting point for the development of Article 17 TFEU. Indeed, the Declaration already envisaged respect for the national status of religious communities of any denomination in the various MS, while at the same time positing the principle of equal respect for philosophical and non-confessional organisations, which inevitably included, among others, the agnostic and atheistic associations, and the so-called “de combat” associations.6 It must then be noted that, with the drafting of the 2004 Constitutional Treaty,7 following a lively debate it was decided not to include the reference to Europe’s “Judaeo-Christian roots”.8 In the Lisbon Treaty only a reference was made to the “cultural, religious and humanist inheritance of Europe, from which have

2 Although according to some observers, the change in approach made to the Treaties by the Lisbon text “does not seem to have led to a substantial tendency for the Community Institutions to evolve in an authentically democratic way” (Montesano 2015, p. 9). 3 Montesano (2015), p. 9. 4 Margiotta Broglio and Orlandi, in Tizzano (2014), Articolo 17 TFUE, p. 455. See also Licastro (2014), p. 189 et seq., who examines the previous Joint Declaration on Mount Athos. 5 Declaration on the Status of Churches and Non-confessional Organisations: “The European Union respects and does not prejudice the status under national law of churches and religious associations or communities in the Member States. The European Union equally respects the status of philosophical and non-confessional organisations.” On this, see also Leustean and Madeley (2009). 6 The wording “atheism de combat” was introduced by Colaianni (2013). 7 Concerning the aspect being examined here, refer to the remarks made by Mangiameli (2009). 8 This exclusion has induced some observers to speak about “European neo-separatism” (Colaianni 2011).

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developed the universal values of the inviolable and inalienable rights of the human person, freedom, democracy, equality and of the rule of law”.9 Nevertheless, as already mentioned, it is to the Treaty currently in force that we owe the inclusion of the “defense of fundamental rights as an element characterizing the whole of the European legal system”10 and, among these, religious freedom. Article 17 TFEU is furthermore linked—or rather “can be viewed as a gender/ species relationship”11—to Article 11 TEU, with which it is hierarchically comparable and which seems to posit a principle of constant cooperation and dialogue, also by having recourse to hearing the opinion of the people and of representative associations, which could include also the religious and non-confessional associations, as suggested also by the similar terminology used in the two Articles.

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8

The Clauses of Europe’s Lack of Competence

The first two paragraphs of Article 17 TFEU provide for the protection12 of the spheres of competence of MS in defining the status13—as defined by national law— of churches, associations, religious communities (paragraph 1), and philosophical and non-confessional organisations (paragraph 2). The provision in question, therefore, reiterates the lack of jurisdiction of the European legal system over such affairs, which is limited to respecting, and therefore, recognising the legal status of such institutions, as defined by the national law of individual MS. This provision has raised distinct orders of problems. First, scholars have speculated about the actual scope of the protection clause contained in Article 17 TFEU. According to a first orientation, with the current formulation of the norm in question, the European primary legislator is deemed to have missed the opportunity to “innovate the legal status of churches and religious communities [. . .], and ended up, confirming the intangibility of the national statutes, losing sight of the originality of the system and perpetuating models that do not respond to the new and important, but different, role that religions and beliefs play in deeply transformed European societies.”14

9

See the second paragraph of the Preamble of the TEU. In this connection, see also McCrea (2009), p. 7. 10 Durisotto (2016), p. 5. 11 Montesano (2015), p. 10. 12 See Cristofori and Ferrari (2011), p. 10. 13 Some authors have tried to attribute a primary meaning to the term “status”, used in Article 17 TFEU, which “seems to refer to a relational dimension in the juridical sense, jointly agreed upon by the state institutions and religious groups, rather than to a real juridical condition in a broad sense of the churches and religious communities with the national system” (see Montesano 2015, p. 16). 14 Margiotta Broglio (2012), p. 34.

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On this, it must be observed that Article 5 TEU enshrined the cornerstone principle of the European legal system, i.e. the principle of conferral of competences, according to which the EU acts exclusively within the limits of the competences attributed to it in the EU Treaties. These powers are defined in Articles 2 to 6 TFEU. From the federal experience with such provisions—and also considering the letter of the Article—it is clear that any matter that does not fall within the scope of powers attributed exclusively to the EU or shared with the EU falls within the purview of MS (except for the well-known mechanisms of erosion of state competences).15 Unless we wish to consider it as being merely pleonastic, therefore,16 it seems necessary to identify the rationale of the rule in question, which, according to some, would represent, at most, “a commitment to maintaining the current legal regime of religious denominations provided for by the various national ecclesiastical laws.”17 According to others, this additional specification with respect to the general rule of attribution was posed, instead, “with the aim in particular of curbing the phenomenon of competences exercised in an implicit manner.”18 In any case, it should be noted that, according to most of the literature, the provisions of Article 17 TFEU do not in any way determine an absolute incompetence of the supranational legislator in religious matters tout court, but only in matters concerning the status of religious or philosophical organisations. On religious freedom in the strict sense, instead, as well as equality in religious matters, these are recognised as much by Article 10 EUCFR, as well as indirectly, by the referrals to the provisions of the ECHR and to the decisions issued by the Court.19 In other words, the legitimation of State powers, expressly reaffirmed by Article 17 TFEU, over the status of religious and philosophical associations has ended up “separating the individual dimension of religious freedom (protected by the law of the Union as well as by the national Constitutions) from the freedom of association (freely regulated at national level).”20 This means, therefore, that in the execution of European law (but also in cases where jurisdiction is strictly national, given the recognition of the right in question by the ECHR as well as the internal constitutions), states are obliged to respect the religious freedom of its citizens, while any conduct that may violate this right is forbidden, conduct that were detected would be sanctioned by the ECJ. However, this does not mean that European law should not intervene (or interfere) also in these areas: in the analysis of Article 17 TFEU, a very important aspect is, in fact, how broad is the scope of the obligation for the EU and its

15

On this, see Mangiameli (2008), p. 131 et seq. Although according to some authors, Article 17 TFEU actually confirms the incompetence of the Union on ecclesiastical matters: see, for instance, Mazurkiewicz (2012), p. 45. 17 Licastro (2014), pp. 197–198. 18 Lugato (2014), p. 307. 19 On this, see Lugato (2013), p. 718 et seq. 20 Margiotta Broglio and Orlandi, in Tizzano (2014), Articolo 17 TFUE, p. 457. 16

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institutions to respect and not to impair the national status, since it is not the intention of this provision to create an area that is totally impermeable to European law. As has been pointed out, indeed, the EU certainly cannot “legislate globally on the status of religious confessions and on other general aspects of religious phenomena. Nor, however, does it have the obligation to refrain from exercising its competences whenever the latter involve religious aspects.”21 Nonetheless, it is not an easy task to identify the rules for tracing the boundaries of concrete cases nor does it appear possible to define formulae or descriptions that could help identify such rules once and for all. There are no doubts that the “national law” referred to in Article 17 TFEU coincides with ecclesiastical law that, in its traditional connotation, receives formal recognition here for the first time in the Treaties. This makes it formally different from the previous Declaration No. 11, because only now do the provisions contained therein assume a mandatory regulatory value and a different “weight” in the interpretation of secondary legislation and in the balancing game with the other provisions having primary value. Nonetheless, there is an objective difficulty in providing an exact definition of this matter, also considering that “only criteria that are not entirely satisfactory can be used to achieve a concrete measure of what is actually covered by this provision, especially because they are not related to universally accepted parameters and, moreover, they are often elaborated by referring to situations that are profoundly different from the current one.”22 In particular, according to some authors, the references to the identity and specific contribution of churches and religious associations, referred to in paragraph 3 of Article 17 TFEU, which constitute the elements justifying the dialogue23 between them and the European institutions, have a determining value. Consequently, “this highlights one of the reasons for the special way they are treated [. . .] in the Union, and expresses the criterion [. . .] for delimiting the sphere within which said treatment can be claimed”. It follows, according to this opinion, that “the Union must, on the basis of Article 17 TFEU, give way to the national regulation of the status of churches and religious associations or communities and establish an open and an on-going dialogue with them - insofar as this is necessary to guarantee their identity and allow them to make their specific contribution to the integration process.”24 Furthermore, it has been excluded “that all regulations having the value of ordinary law in individual countries, on which the rights of religious communities are based, be protected from the effects of European law”,25 as there may be subject matters over which both the States and the Union have competence and over which the latter seems to be able to have an impact.

21

Ventura (2001), p. 185. Licastro (2014), p. 199. 23 Cf. Doe (2009), p. 149 et seq. 24 Lugato (2014), pp. 309–310. 25 Puza (2012), p. 51. 22

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Finally, there are those who—with an approach that is perhaps more evolutionary and less linked to the exclusively literal meaning of the law—claim that guaranteeing the status of churches and religious associations governed by the individual MS, and guaranteeing the basic principles underlying the European legal system are one and the same thing—they cannot be kept separate. In other words, the provision in question contains “a double protection clause: one addressed to individual States, originating from the pressure of the Churches permanently present and/or dominant in the individual systems; the other is a clause of (self-)preservation of the European ecclesiastical identity, which, precisely by virtue of the formalization, assumes a juridical connotation capable of affecting albeit cautiously - the definition of national ecclesiastical rights.”26 Consequently, as a first and immediate effect of this line of reasoning, individual national laws on ecclesiastical matters would no longer be considered individually, in a completely independent and disconnected manner from the supranational level (and consequently also at the horizontal level); vice versa, the supranational level should be considered “connected”, from a “systematic”27 point of view, both to the European legislation on ecclesiastical matters, and to the rulings of the ECJ and the ECtHR. This interpretation, however, has not received unanimous consent within the scientific community: in fact, other authors have observed that “the Community [referable to Article 17 TFEU] excludes forms of ‘circulation’ of national models or results of their substantial ‘homologation’ to form a sort of ecclesiastical law of the Union.”28 As pointed out by Ventura, perhaps in a rather sharp manner, by way of conclusion “the literature has confirmed that the norm is irreducibly indeterminate but, on the other hand, it has produced lots of distinctions [. . .] heavy religious and national presumptions, [. . .] and no doctrinal contribution was capable of overcoming boundaries and prompting a consensus on a European scale.”29 That these problems are not peculiar only to the scientific field, but constitute a concrete issue that is being debated, is also represented by the 1995 memorandum that the German Churches adopted on the legal status of churches and of religious communities (precisely the subject of Article 17 TFEU) in pursuance of the Community law in force at that time, in which “they pointed out, in particular, the risk that the legitimacy of the mandatory ecclesiastical tax rule (Kirchenssteuerrecht) could be questioned in the light of the rules of the Treaty.”30

26

Montesano (2015), p. 19. Montesano (2015), p. 20. 28 Licastro (2014), p. 208. 29 Ventura (2014), p. 299. 30 Morini, in Curti Gialdino (2012), Articolo 17 TFUE, p. 543. 27

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The Legal Status of Churches and Religious Associations and Organisations

There is an additional circumstance that refers to the various systems of relations between the denominations and the states within the different national laws. As is well known, indeed, the legal status referred to in Article 17 TFEU is certainly not homogeneous across the various MS, being regulated, in some cases, by constitutional provisions, in others by ordinary law and, in others, by agreements or acts of international law.31 Thus, countries that can truly be defined as secular such as France or Italy (albeit in a particular sense), coexist within the Union alongside countries in which a state religion is recognised, such as, for example, Malta, and, up until Brexit, Great Britain, where the Head of State is also the Head of the Anglican Church.32 According to some scholars,33 the rule in question is not well thought out, not even for the systems defined as having a “special ecclesiastical law” (among which Italy or Germany); and, for the systems where the regulation of religious phenomena is provided for by the general legislation, there are doubts that the provisions of Article 17 TFEU might actually be effective. This assumption, probably too peremptory and extreme in its conclusions, nevertheless poses an issue whose interpretation by legal experts is neither easy nor free from possible ambiguities. Regarding Article 17.1 TFEU, it has been pointed out that the protection clause contained therein has had the indirect effect of protecting the status quo ante of the various religious or philosophical associations or communities, thus crystallising the privileges acquired34 over time by this Church or that in the individual states.

4.

22

23

24

Philosophical and Non-confessional Organisations

Article 17.2 TFEU concerns the “status under national law of philosophical and non-confessional organisations”. The provision, which tends to equate these organisations with churches and religious communities, in fact, constitutes recognition of the secular35 character of the EU and of pluralism in religious matters, and is in line with the principle set out in the second point of the Preamble of the TEU, in which the equal reference made to the cultural, religious and humanistic heritages of Europe does not suggest the pre-eminence of the confessional aspect 31

On this, see Pierucci (2002), p. 18. See also Cranmer (2011) and Parmena Olimid (2013). It may very well be that the choice of Article 17 TFEU not to assign any competence to the EU in this area may be associated from this heterogeneous context. 33 See Licastro (2014), p. 210 et seq. as well as Ventura (2014), p. 300 et seq. 34 For instance, Tozzi (2014), p. 16 speaks about privileges. Similarly, Parisi (2005), p. 20, describes this situation as a “privileged legal regime” attributed to the main Churches by the domestic legal orders. 35 According to Mangiameli (2009), p. 9, tale prospettazione andrebbe meglio definita come “laicista”. 32

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over the aspect defined as “philosophical”—or rather, non-confessional—in the foundations of the European edifice. However, this equivalence cannot be called complete or perhaps even acceptable—according to some scholars—as it would be “objectively imposed and alien to the common constitutional traditions of European countries”; this because “the Churches and the religious communities present an unquestionable specificity not only with respect to these organisations but, more generally, with respect to any other social organisation, both for historic and/or sociological and/or institutional reasons, and above all, for their very nature, which determines their own characteristics as regards the foundation, the purposes and the structure of these subjects.”36 On the contrary, it has been observed that a similar body of rules both for religious communities and for non-confessional organisations would be indispensable in a truly secular perspective, since “both solutions constitute different answers to the same problem and to the same questions”,37 so that a substantial difference in treatment between the two cases would be unjustified. The choice of regulating the status of religious organisations and the status of philosophical and non-confessional organisations in two different paragraphs has led, in any case, part of the literature to question the reason for this choice.38 According to these authors, this option cannot be attributed to the intention of considering the two types of organisations as being comparable and making the distinction only for reasons of “opportunity”. Indeed, it was pointed out that the literal interpretation of the rules would imply that “the EU undertakes to guarantee respect and to take positive action aimed at not undermining the internal organisation of only the bodies belonging to the first category”, while the EU would be more restrictive on the latter, “since it would be limited to respecting the status conferred by the domestic regulations”.39 According to the members of this scientific community, it follows that the EU has no obligation to guarantee equal treatment for religious and philosophical or non-confessional bodies. However, according to others, paragraph 2—far from intending to equate the two cases, with its references to the identity and specific contribution of the two types of bodies—provides for the adoption of “diversified regulatory contents and instruments, which in any case should be at least adequate to the specificities of such entities, with the exclusion of course - of discriminatory effects.”40 This second opinion is perhaps more in keeping with the letter and the spirit of Article 17 TFEU, which allows for “total parity in participating in the dialogue with the European institutions”41 both for churches and non-confessional organisations.

36

Marano (2014), p. 1113. Cardia (1999), p. 176. 38 A choice that, as already pointed out, had already been made in Declaration no. 11 of 1997. 39 Honorati, in Pocar and Baruffi (2014), Articolo 17 TFUE, pp. 200–201. 40 Floris (2011), p. 100. 41 Durisotto (2016), p. 27. 37

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However, doubts persist as to what should be concretely understood by philosophical and non-confessional associations: according to a part of the literature, in fact, they should include “the Masonic lodges [. . .] and also sects [. . .], while other scholars suggest that also associations of atheists, rationalists, and agnostics should be included.”42 However—as has already been said in relation to the limits of European law in religious matters—there is no immutable formula or definition establishing with certainty, and once and for all, which associations should be included and which, instead, should not; indeed, great caution should be exercised in making this assessment given the consequences that inclusion or exclusion would entail for such bodies, and considering how important they would be for the European citizens’ forum internum.

5.

28

29

The Duty of Dialogue

Article 17.3 TFEU—unlike the first two paragraphs—constitutes an element of novelty with respect to what had already been established by the “progenitor” of this article, namely, Declaration No. 11 to the Treaty of Amsterdam. It requires the EU and its institutions to maintain an open, transparent and regular dialogue with churches and religious associations or communities, as well as with philosophical and non-confessional organisations, recognising their identity and their specific contribution. According to some, Article 17 TFEU is emblematic of the “hybrid” nature of the EU which is not the expression of a pure federal model, but is contaminated by intergovernmental elements and traces of international organisations. In fact, according to this doctrine “the third paragraph [of Article 17 TFEU], where it recognizes the right of the European institutions to establish an open, transparent and regular dialogue with religious denominations and philosophical organisations, is in line with the federalist philosophy, while the regulatory provision contained in the first paragraph is not”. Indeed, the latter “instead expresses the formal renunciation by the European institutions to exercise sovereignty in favour of Member States and of the most representative national religious organizations.”43 While the combined provisions of the first two paragraphs of the Article provide for a European legal system that is secular—as defined in its primary law and as there is no dependence or special relation with any religious confession and the European institutions are called upon to carry out their tasks in a manner that is unencumbered by any moral or ideological conditioning of a religious type—the third paragraph, instead, defines the main characteristics of the “secular” attribute, i. e. it is an interactive, open and inclusive type of secularism. 42

Margiotta Broglio and Orlandi, in Tizzano (2014), Articolo 17 TFUE, p. 460, where the main orientation of the literature on this issue can be found. 43 Mazzola (2014), p. 3.

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Indeed, the rule in question seems to shy away from a secularism that is hostile or indifferent to religious phenomena (traditionally attributable to the French paradigm44), where the public sphere would seem to be impermeable to the latter, confined to the internal forum of the (faithful) citizen and totally irrelevant in the public sphere.45 On the other hand, this phenomenon should be associated with an “individual and collective dimension that is collateral to the political and juridical events of the Union which could not refrain from establishing some forms of dialogue, especially in the light of the renewed role that religious groups have taken on in recent decades”,46 which seems to suggest that the interest groups indicated in Article 17 TFEU are contributing to the definition of the European process through their influence, their messages and the interests they represent.47

5.1. The Method of Dialogue

34

35

What is new about this paragraph is that it refers more to the mechanism defined therein (i.e. the method) than to the recognition of the role that such entities can play in the European apparatus and in its “form of state”, since, even the 2001 White Paper on Governance recognised that “churches and religious communities have a special contribution to make”48 to the policies and to the external characterisation of the EU. On the other hand, concerning dialogue,49 it should be noted that this provision is linked to Article 19 TFEU—suggesting that “it should not develop as much on a bilateral level (as it does with concordats) but on a multilateral level, where the institutions of the Union are required to refrain from any discriminatory attitude and are obliged to give all interlocutors the opportunity to make their voices heard”50 (and this, above all, to participate in the decision-making processes of the Union)— and to Article 11 TEU (in particular with paragraph 2), with which it seems to be in a gender-species relationship, since also in that case, the primary rule establishes that the institutions should maintain an open, transparent and regular dialogue with representative associations and civil society, which, of course, include religious

44

Also according to Mangiameli (2009), p. 11. In this sense, see also Mirabelli (2006). 46 Montesano (2015), p. 22. 47 The ruling by the European Ombudsman of 25 January 2013 (➔ para 45), shows that this body adopts this position by stating that the concept of separation between religion and politics “does not mean that there should not be an appropriate dialogue with churches and religious organisations, but rather that the churches and religious organisations should not have any inappropriate privileged position in relation to their dialogue with the EU institutions”. 48 European Commission, European Governance—A White Paper, COM(2001) 428 final, points 8 and 9. 49 On this, see also McCrea (2009), p. 16 et seq. 50 Margiotta Broglio and Orlandi, in Tizzano (2014), Articolo 17 TFUE, p. 461. 45

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associations and communities, as well as philosophical or non-confessional organisations.51

5.2. The Bureau of European Policy Advisers and the European Political Strategy Centre

Although dialogue as a method is new to Treaties, in some respects this choice “constitutionalised” a practice that had been established as early as the 1990s and to which, on the other hand, it gave new momentum. A number of representations of religious groups already carry out activities of “religious lobbying”52 within the EU body specifically designated for this purpose. This body was initially the Forward Studies Unit (FSU), established in 1989, then replaced by the Bureau of European Policy Advisers (BEPA), which took on a decisive role in the relations between the European institutions and the religious, philosophical and nonconfessional associations and communities in the 2004–2014 period, during which, among other things, the Treaty of Lisbon entered into force and, consequently with it, the inclusion of the rule of dialogue in the Treaties. This organ represented an element of undisputed centrality in the relations between the EU and religious and non-confessional organisations, above all through “the organization of various initiatives, among which the annual meetings with the religious leaders [of] philosophical and non-confessional organizations and the thematic seminars.”53 The BEPA also carried out a “political advisory function for the President and for the Services Committee on the issues on the chairman’s agenda, as well as on the future of EU policies.”54 This function is now carried out by the European Political Strategy Centre (EPSC), which has in turn replaced the BEPA. The EPSC, today, is not an organ dedicated exclusively to maintaining relations with religious or non-confessional associations, but it also performs other functions, while the maintenance of dialogue is attributed to the first Vice President of the European Commission. Article 17.3 TFEU seems to make dialogue a mandatory method (“maintain” and not “can maintain”) in the EU, without setting limitations to the choice of subjects with whom relations are to be entertained. This is a decision that is fully inspired by the idea of equality and prohibition to discriminate between religious confessions and between the latter and non-confessional organisations.55 Hence, this choice must be looked upon favourably, even more so, if we consider that there are still some systems—among the EU MS—in which decisions on the possible 51

However, some scholars deem that having placed this provision in a different Treaty (the TFEU instead of the TEU) and, hence, in a different position from that of the policy provisions, may weaken the mechanisms and diminish the strength of the norm (see Margiotta Broglio 2012, p. 35). 52 On this, see extensively Macrì (2004), and also, Macrì (2016), p. 103 et seq., Macrì (2012), p. 75 et seq. On this, refer also to Houston (2009), p. 208 et seq. 53 Perico (2015), p. 537. 54 Durisotto (2016), p. 22. 55 See Doe (2009), p. 154 et seq. Di Gesù

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conclusion of memorandums or agreements, whatever their denomination, aimed at defining the relations between the latter and religious confessions, are left to the discretion of the executive.56

5.3. Religious and Philosophical Delegations

38

39

40

The path of dialogue with religious and philosophical bodies, as already mentioned, that had been taken even before the entry into force of the Lisbon Treaty, has also had an additional effect in terms of greater equality among confessions, in particular by attenuating the privileged position enjoyed by the Catholic Church. Indeed, the latter is the only religious confession that also has the status of a subject of international law through the Holy See and, since the 1970s there, is the figure of the Apostolic Nuncio who is present in the Union as “foreign” emissary of the Holy See. Currently, there are about fifty religious and philosophical delegations participating in the decision-making processes of the Union through the mechanism referred to in Article 17.3 TFEU, i.e. the instrument of dialogue. These include the KEK (Konferenz Europäischer Kirchen), founded in 1959, an organisation that comprises several churches while, for the Catholic Church, there is the CCEE (Council of the Bishops’ Conferences of Europe) and the COMECE (Commission of the Bishops’ Conferences of the European Community); for the Islamic religion, the organisation of reference is the Conseil musulman de cooperation en Europe, which is however less important than the Christian counterparts, since it cannot be considered representative “of all the Islamic communities that have taken root in several European countries.”57 Such bodies also have the effect of giving a voice at European level to those organisations that, otherwise, would be deprived of this power: this is so because the “condition for the application of [Article 17.3 TFEU] is, however, that the legal status of such bodies be recognized by a national state”,58 also based on the guidelines adopted by the European Commission. 56

This is the case, for example, of Italy: Article 8.3 of the Constitution states that relations between religious confessions, other than the Catholic Church, and the State are regulated by law on the basis of agreements with the relevant representatives, without prejudice, in any case, to the principle of equality before the law of such bodies, as enshrined in the first paragraph of the same article. This circumstance was clarified by the Constitutional Court following an intricate conflict between powers raised by the executive against a judicial decision which admitted a representative association of agnostic and atheist interests at the start of negotiations in order to reach an agreement. In this judgment, the Constitutional Court rejected the request that negotiations be started, considering, in particular, that “for the Government, the identification of the subjects who may be admitted to negotiations, and the subsequent initiation of negotiations, are important determinations, which involves its political discretion and the responsibility that normally derives from it in a form of parliamentary government” (see Italian Constitutional Court, Case No. 52/2016, point 5.2 of the merits), configuring it, therefore, as a political act, as such not subject to constitutional judgment. 57 Cardia (2003), p. 14. 58 Honorati, in Pocar and Baruffi (2014), Articolo 17 TFUE, p. 202. Di Gesù

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5.4. Relationship Between the Third and the First Two Paragraphs

Finally, it is worth pointing out that, according to some observers, there is an irredeemable contradiction between the provisions of the first two paragraphs of Article 17 TFEU and the provisions of the third. It has been observed, indeed, that it is difficult to understand exactly “what matters may be the subject of the dialogue if paragraphs 1 and 2 of the same provision state that traditional [. . .] ecclesiastical matters59 fall within the purview of national legislation”. This aspect has been more thoroughly explored by the scholars who have noted elements of contradiction between the paragraphs of Article 17 TFEU, considering that, while on the one hand, “the dialogue referred to in the third paragraph postulates a co-responsibility between the Union and confessional and philosophical associations, a relationship in which one influences the other”, on the other “the clause favourable to national law in the first two paragraphs, [. . .] is intended to cut the Union out, enshrining a rigid and separate vision, albeit inapplicable due to the indeterminacy of its object.”60 However, as noted above, EU law may affect the disciplines related to religious and non-religious communities, when they intertwine with European areas of competence, and in such cases dialogue with these realities could be a system for channelling religious philosophical views (at least) in such, relevant, fields.

6.

41

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Some Major Cases

It would be in the least difficult to list all the acts adopted by the European institutions and bodies concerning issues relating to ecclesiastical law, also considering that the grounds for linking them with Article 17 TFEU are truly very vague and ill defined.61 For this paper, therefore, reference will be made only to the “politically” relevant cases within the European legal system. Because of this, it was decided first to report two particularly significant cases related to “European ecclesiastical policy” as defined after the entry into force of the Lisbon Treaty. In particular, a paradigmatic case is represented by the decision of the European Ombudsman of 25 January 201362 following a position taken by the Commission, 59

Before the entry into force of the Lisbon Treaty, several authors had asked a rhetorical question “if all ecclesiastical matters come under the power of Member States, what would the dialogue be about?”, considering them to be irremediably “two contrasting principles”; see Margiotta Broglio (2005), p. 467. 60 Ventura (2014), p. 300. 61 As an example of such relevant European legislation, see Council Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation, O.J. L 303/16 (2000), which has had a remarkable impact on national orders. 62 European Ombudsman, complaint 2097/2011/RA (decision of 25 January 2013). On the decision, see, for instance, Toscano (2014); D’Angelo (2017), p. 103 et seq., and also Annicchino (2013), p. 747 et seq.

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which was most likely skewed in favour of the protection clause contained in the first two paragraphs of Article 17 TFEU, which, in fact, seemed to deprive the provision of paragraph three of legislative meaning. In particular, the Ombudsman noted a case of maladministration by the Commission in the application of the Treaty rules in response to requests made by a non-confessional organisation regarding the organisation of a seminar and the subsequent refusal by the Commission. The Ombudsman, in particular, noted that “except in the most extreme cases, open dialogue is positive. It is furthermore his view that, unless the Commission were to demonstrate that a particular dialogue would be contrary to the Union’s core values, as set out in article 2 TEU, the Commission is free to engage in an open and frank discussion.” In addition, “conducting a dialogue on an issue dealt with in existing legislation cannot but constitute a constructive action. In particular, it cannot, in itself, call into question “the status, under national law, of churches, religious associations or communities, and philosophical and non-confessional organisations.”63 According to the European decision-making body, therefore, the mere fact that there is a possibility of establishing a dialogue on a matter touched on by European law is a positive element, which is appropriate, moreover, to exclude the involvement of the status referred to in the first two paragraphs of Article 17 TFEU. The Ombudsman, during the run-in phase of the new European post-Lisbon mechanisms, also called on the Commission to specify the practices and the modus operandi, and to draft, if necessary, guidelines for future cases. These “Guidelines for the implementation of Article 17 TFEU” were actually adopted on 23 July 2013.64 The document, which was actually rather disappointing in many respects,65 is organised into three articles, corresponding to the adjectives qualifying the dialogue as enunciated by the primary law, i.e. open, transparent and regular. As to the openness of the dialogue, two paragraphs establish that the interlocutors, irrespective of whether they are churches or non-confessional associations, 63

European Ombudsman, complaint 2097/2011/RA (Decision of 25 January 2013) para 48. See guidelines. Available at https://ec.europa.eu/info/sites/info/files/guidelines-implementation-art-17_en.pdf. 65 Mazzola (2014), pp. 10–11, notes that, “if the confessional interlocutors of the European institutions remain the current ones, there is the risk of not only satisfying the requests and interests of only a part of the religious communities present in Europe, but above all there is the risk of representing and listening exclusively to that part of the organized religious world which presents itself in the classic institutional forms of church, where with ever more insistence new forms of religiosity are emerging across European society, that are distant from the traditional ecclesiastical schemes of the Judaeo-Christian tradition”. In turn, Fattori (2013), p. 234, believes that “the document that incorporates the guidelines for the implementation of Article 17 TFEU may still be too general in light of the scope and specificity of the problems associated with the European harmonization of the norms regulating the religious phenomenon. Furthermore, the uncertain - and perhaps questionable - legal value of the document makes it too weak to have an impact on the problems concerning the underlying differences in the legal orders of Member States. But it is precisely its questionable legal value that makes the text of the Guidelines difficult to subject to interpretations of a more technical nature. Some details, on the other hand, reveal a far deeper legal and political ambivalence.” 64

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need to be as such recognised or registered at national level—since, as stated by the norm, there is no registration at European level, in compliance with the reservation made in the first two paragraphs of Article 17 TFEU—and, of course, such associations must embrace the values that characterise the Union. Of greater importance is the provision that is fully inspired by the third paragraph, also in light of the Ombudsman’s Decision of January 2013, for which “all relevant topics related to the EU agenda can be addressed in this dialogue”;66 the themes are then mutually agreed upon by the two parties. Furthermore, the provision allows the Commission to direct the dialogue according to its political needs. On transparency, the rule states that any relevant information concerning the dialogue will be published on a specific website, without, however, providing not even a summary definition as to when an item of information acquires a minimum level of relevance prescribed by the same rule. Finally, on the regularity of the dialogue, the third article reiterates the Commission’s commitment to this effect, inviting at the same time the interlocutors to contribute to the European policy-making process through the consultations carried out by the Union. This dialogue may be conducted “through inter alia informal meetings hosted by the President of the European Commission, bilateral meetings with Commission representatives at all levels and, in particular, meetings with the responsible Adviser for the dialogue with churches, and religious associations or communities as well as philosophical and non-confessional organisations.”67 As mentioned, all in all, the Article appears to be inadequate or, at least, disappointing in its entirety, since these Guidelines could have provided legal operators with more detailed and useful indications for settling possible interpretative questions in this area. Thus, this Article appears to be nothing more than a missed opportunity in this sense: the provisions contained therein, indeed, only offer a semantic explanation of the meanings of the terms in question, which would probably have required a very different legal explanation, rather than what in many respects can be defined as an apodictic solution. Finally, some recent decisions taken by the CJEU must be considered. Reference is made, in particular, to the Cases C-414/1668 and C-68/17.69 The two judicial decisions stem from a request for a preliminary ruling by the Bundesarbeitsgericht (German Federal Labour Court) of the interpretation of Article 4(2) of Council Directive 2000/78/EC in view of a potential conflict with some provisions of German law arising from the way in which the provisions of the Directive have been transposed. In particular, Article 4(2) of the Directive, in relation to the principle of non-discrimination that regulates employment relations, establishes

66 Guidelines on the implementation of Article 17 TFEU by the European Commission. Available at https://ec.europa.eu/info/sites/info/files/guidelines-implementation-art-17_en.pdf, p.1. 67 Guidelines on the implementation of Article 17 TFEU by the European Commission. Available at https://ec.europa.eu/info/sites/info/files/guidelines-implementation-art-17_en.pdf, p.3. 68 Case C-414/16, Egenberger (ECJ 17 April 2018). 69 Case C-68/17, IR (ECJ 11 September 2018).

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that “Member States may maintain national legislation in force at the date of adoption of this Directive or provide for future legislation incorporating national practices existing at the date of adoption of this Directive pursuant to which, in the case of occupational activities within churches and other public or private organisations the ethos of which is based on religion or belief, a difference of treatment based on a person’s religion or belief shall not constitute discrimination where, by reason of the nature of these activities or of the context in which they are carried out, a person’s religion or belief constitute a genuine, legitimate and justified occupational requirement, having regard to the organisation’s ethos. This difference of treatment shall be implemented taking account of Member States’ constitutional provisions and principles, as well as the general principles of Community law, and should not justify discrimination on another ground. Provided that its provisions are otherwise complied with, this Directive shall thus not prejudice the right of churches and other public or private organisations, the ethos of which is based on religion or belief, acting in conformity with national constitutions and laws, to require individuals working for them to act in good faith and with loyalty to the organisation’s ethos”. Therefore, Article 4(2) of Directive 2000/78 seeks to ensure a balance between the right of autonomy of churches and other organisations, whose ethos is based on religion or belief, and the right of employees, inter alia, during recruitment not to be discriminated against on grounds of religion or belief.70 The Court of Justice states that the examination of the lawfulness of an obligation of good faith and loyalty attitude required by a church or other organisation, whose ethics is based on religion or belief, cannot be done solely with respect national law, but must consider the provisions of Article 4(2) of Directive 2000/78, based on an interpretation consistent with this, or otherwise not apply the national law, and in compliance with the criteria set out therein, of a genuine, legitimate and justified occupational requirement, and with the principle of proportionality. Moreover, the Court emphasises that respect of the criteria cannot be taken away to an effective judicial review by the national courts. In this context, the Court of Justice reaffirmed that “Article 17 TFEU cannot invalidate that conclusion”. Consider that at the time of approval of the Directive, European law was bound by Declaration No. 11 on the status of churches and nonconfessional organisations, the predecessor of Article 17 TFEU. “The fact that Declaration No 11 is expressly mentioned in recital 24 of Directive 2000/78 shows that the EU legislature must have taken that declaration into account when adopting the Directive, especially Article 4(2), since that provision refers precisely to the national legislation and practices in force on the date of adoption of the Directive.” That being so, the Court stated “that Article 17 TFEU expresses the neutrality of the European Union towards the organisation by the Member States of their relations with churches and religious associations and communities. On the other hand, that

70

C-414/16, Egenberger (ECJ 17 April 2018) para 51.

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article is not such as to exempt compliance with the criteria set out in Article 4(2) of Directive 2000/78 from effective judicial review.”71 Consequently, the CJEU has analysed the criteria expressed by the latter provision, stating that the use of the adjective “genuine” means “that, in the mind of the EU legislature, professing the religion or belief on which the ethos of the church or organisation is founded must appear necessary because of the importance of the occupational activity in question for the manifestation of that ethos or the exercise by the church or organisation of its right of autonomy”, as recognised by Article 17 TFEU and Article 10 EUCFR; furthermore, that the use of the term “legitimate” nature of the requirement “shows that the EU legislature wished to ensure that the requirement of professing the religion or belief on which the ethos of the church or organisation is founded is not used to pursue an aim that has no connection with that ethos or with the exercise by the church or organisation of its right of autonomy”; and last, that the term “justified” nature of the requirement “implies not only that compliance with the criteria in Article 4(2) of Directive 2000/78 can be reviewed by a national court, but also that the church or organisation imposing the requirement is obliged to show, in the light of the factual circumstances of the case, that the supposed risk of causing harm to its ethos or to its right of autonomy is probable and substantial, so that imposing such a requirement is indeed necessary.”72 In this way, the Court of Justice has deduced the principle, under Article 17 TFEU, that “a church or other public or private organisation the ethos of which is based on religion or belief can treat its employees in managerial positions differently, as regards the requirement to act in good faith and with loyalty to that ethos, depending on their affiliation to a particular religion or adherence to the belief of that church or other organisation only if, bearing in mind the nature of the occupational activities concerned or the context in which they are carried out, the religion or belief is a genuine, legitimate and justified occupational requirement in the light of that ethos”. Keeping this requirement in mind, it was ruled in case C-68/17 that adherence to the notion of marriage may not be considered to constitute a genuine requirement as lied down in the first subparagraph of Article 4(2) of Directive 2000/ 78 for exercising the professional activity concerned, since similar responsibilities were also assigned to non-Catholic employees.73 Furthermore, the Court of Justice specified that a difference of treatment on grounds of religion or belief must comply with the principle of proportionality that must be determined by national courts,74 meaning “that the national courts must ascertain whether the requirement in question is appropriate and does not go beyond what is necessary for attaining the objective pursued”. At last, the Court has stated that the right of autonomy, as recognised by Article 17 TFEU to churches and non-confessional organisations, allows the national court “to review whether the criteria laid down in Article 4(2) of

71

Case C-414/16, Egenberger (ECJ 17 April 2018) para 56–58. Case C-414/16, Egenberger (ECJ 17 April 2018) para 65–67. 73 Case C-68/17, IR (ECJ 11 September 2018) para 58–59. 74 Case C-68/17, IR (ECJ 11 September 2018) para 61. 72

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Directive 2000/78 are being complied with, existence of the criteria indicated by the Directive”; and this jurisdiction is in complying with Article 47 EUCFR (right to an effective remedy and to a fair trial).75

List of Cases ECJ

ECJ 14.12.1991, Opinion 1/1991, EEA Agreement, ECLI:EU:C:1991:490 [cit. in para 1] ECJ 17.04.2018, C-416/16, Egenberger, ECLI:EU:C:2018:257 [cit. in para 54-56] ECJ 11.09.2018, C-68/17, IR, ECLI:EU:C:2018:696 [cit. in para 56]

Italian Constitutional Court

Italian Constitutional Court, 23.03.2016, case n. 52/2016 [cit. in para 40]

References76 Annicchino, P. (2013). Il Dialogo con i gruppi religiosi e le organizzazioni non confessionali nel Diritto dell’Unione europea: a proposito di una recente pronuncia del Mediatore europeo. Quaderni di diritto e politica ecclesiastica, 16, 747–756. Cardia, C. (1999). Manuale di diritto ecclesiastico. Bologna: Il Mulino. Cardia, C. (2003). Ordinamenti religiosi e ordinamento dello Stato. Profili giurisdizionali. Bologna: Il Mulino. Colaianni, N. (2011). Religioni e ateismi: una complexio oppositorum alla base del neoseparatismo europeo. Stato, Chiese e pluralismo confessionale. https://doi.org/10.13130/ 1971-8543/1140 Colaianni, N. (2013). Ateismo de combat e intesa con lo Stato. Retrieved from www.rivistaaic.it Cranmer, F. (2011). Notes on church and state in the European economic area 2011. Retrieved from http://www.law.cf.ac.uk/clr/networks/Frank%20Cranmer_%20Church%20&%20State% 20in%20W%20Europe.pdf Cristofori, R., & Ferrari, S. (2011). Law and religion in the 21st Century. Burlington: Ashgate. Curti Gialdino, C. (Ed.). (2012). Codice dell’Unione europea operative. Napoli: Simone. D’Angelo, G. (2017). Ordinamenti giuridici e interessi religiosi. Torino: Giappichelli. Doe, N. (2009). Towards a ‘Common Law’ on religion in the European Union. Religion, State and Society, 37(1–2), 147–166. 75 Case C-414/16, Egenberger (ECJ 17 April 2018) para 81, which stated: “where the national court is called on to ensure that Articles 21 [non-discrimination] and 47 of the Charter are observed, while possibly balancing the various interests involved, such as respect for the status of churches as laid down in Article 17 TFEU, it will have to take into consideration the balance struck between those interests by the EU legislature [. . .].” 76 All cited internet sources in this comment have been accessed on 9 December 2019.

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Durisotto, D. (2016). Unione europea, chiese, e organizzazioni filosofiche non confessional. Stato, Chiese e pluralismo confessionale. https://doi.org/10.13130/1971-8543/7301 Fattori, G. (2013). Diritto nazionale e supernazionale. Le prospettive ecclesiasticistiche sul processo giuridico di costruzione europea. Studi Urbinati di scienze giuridiche, politiche ed economiche, 64, 191–236, Nuova Serie A. Floris, P. (2011). Ateismo e Costituzione. Quaderni di diritto e politica ecclesiastica, 14, 87–111. Houston, K. (2009). The logic of structured dialogue between religious associations and the institutions of the European Union. Religion, State and Society, 37(1), 207–222. Leustean, L. N., & Madeley, J. T. S. (2009). Religion, politics and law in the European Union: An introduction. Religion, State and Society, 37(1–2), 3–18. Licastro, A. (2014). Unione europea e “status” delle confessioni religiose. Fra tutela dei diritti umani fondamentali e salvaguardia delle identità costituzionali. Milan: Giuffrè. Lugato, M. (2013). National policy toward religious associations within the framework of European Law. Il diritto dell’Unione europea, 701–723. Lugato, M. (2014). L’Unione europea e le Chiese: l’Article 17 TFUE nella prospettiva del principio di attribuzione, del rispetto delle identità nazionali e della libertà religiosa. Quaderni di diritto e politica ecclesiastica, 17(2), 305–322. Macrì, G. (2004). Europa, Lobbying e fenomeno religioso. Il ruolo dei gruppi religiosi della nuova Europa politica. Torino: Giappichelli. Macrì, G. (2012). Organizzazioni religiose e attività di lobbying. Percorsi costituzionali, 3, 75–90. Macrì, G. (Ed.). (2016). Democrazia degli interessi e attività di “lobbying”. Soveria Mannelli: Rubbettino. Mangiameli, S. (2008). La competenza europea, il suo esercizio e l’impatto sull’ordinamento degli Stati membri. In S. Mangiameli (Ed.), L’esperienza costituzionale europea (pp. 131–211). Rome: Aracne. Mangiameli, S. (2009). L’identità dell’Europa: laicità e libertà religiosa. Retrieved from www. forumcostituzionale.it Marano, V. (2014). La condizione e il contributo delle Chiese nell’Unione europea. In G. Boni et al. (Eds.), Recte sapere. Studi in onore di Giuseppe Dalla Torre (pp. 1109–1119). Torino: Giappichelli. Margiotta Broglio, F. (2005). Sussidiarietà e confessioni religiose nella prospettiva di un nuovo diritto ecclesiastico per l’Europa. In G. Cimbalo & J. I. Alonso Pérez (Eds.), Federalismo, regionalismo e principio di sussidiarietà orizzontale. Atti del convegno Ravenna 27-27 settembre 2003 (pp. 463–470). Torino: Giappichelli. Margiotta Broglio, F. (2012). Confessioni e comunità religiose o “filosofiche” nel Trattato di Lisbona. In L. De Gregorio (Ed.), Le Confessioni religiose nel diritto dell’Unione europea (pp. 33–42). Bologna: Il Mulino. Mazurkiewicz, P. (2012). Competenze dell’Unione europea in materia religiosa. In L. De Gregorio (Ed.), Le Confessioni religiose nel diritto dell’Unione europea (pp. 43–48). Bologna: Il Mulino. Mazzola, R. (2014). Confessioni, organizzazioni filosofiche e associazioni religiose nell’Unione europea tra speranze disilluse e problemi emergent. Stato, Chiese e pluralismo confessionale. https://doi.org/10.13130/1971-8543/3710 McCrea, R. (2009). The recognition of religion within the constitutional and political order of the European Union. LSE ‘Europe in Question’ discussion paper series, 10/2009. Mirabelli, C. (2006). The religious element in the constitution for Europe. In H.-J. Blanke & S. Mangiameli (Eds.), Governing Europe under a constitution. The hard road from the European treaties to a European constitutional treaty (pp. 133–143). Heidelberg: Springer. Montesano, S. (2015). Brevi riflessioni sull’Article 17 TFUE e sul progetto di Direttiva del Consiglio recante disposizioni in materia di divieto di discriminazione. Stato, Chiese e pluralismo confessionale. https://doi.org/10.13130/1971-8543/4828

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Parisi, M. (2005). Il sistema europeo di relazioni tra gli Stati e le organizzazioni religiose: conservazione o innovazione nella prospettiva della Costituzione europea?. Stato, Chiese e pluralismo confessionale. Parmena Olimid, A. (2013). Church–state relations in European law systems. Craiova: Editura universitaria. Perico, F. (2015). L’attività del Bureau of European Policy Advisers nel dialogo con le comunità religiose e le organizzazioni non confessionali (2004–2014). Quaderni di diritto e politica ecclesiastica, 18, 535–540. Pierucci, A. (2002). Après Amsterdam: quelles relations entre Institutions Européennes et Eglises. In A. Chizzoniti (Ed.), Chiese, associazioni, comunità religiose e organizzazioni non confessionali nell’Unione europea: atti del Colloquio, Università cattolica del Sacro Cuore, Milano, 28-29 maggio 1999 (pp. 13–29). Milan: Vita e pensiero. Pocar, F., & Baruffi, M. C. (Eds.). (2014). Commentario breve ai Trattati dell’Unione europea. Padova: Cedam. Puza, R. (2012). Gli effetti dell’ordinamento comunitario sullo status delle confessioni religiose nei paesi dell’Unione europea. In L. De Gregorio (Ed.), Le Confessioni religiose nel diritto dell’Unione europea (pp. 49–62). Bologna: Il Mulino. Tizzano, A. (Ed.). (2014). Trattati dell’Unione europea. Milano: Giuffrè. Toscano, M. (2014). La decisione del Mediatore europeo del 25 gennaio 2013: un passo avanti verso un’applicazione efficace dell’Article 17 del Trattato sul funzionamento dell’Unione europea?. Stato, Chiese e pluralismo confessionale. https://doi.org/10.13130/1971-8543/3764 Tozzi, S. (2014). La libertà religiosa in Italia e nella prospettiva europea. Stato, Chiese e pluralismo confessionale. https://doi.org/10.13130/1971-8543/4444 Ventura, M. (2001). La laicità dell’Unione europea. Diritti, mercato, religion. Torino: Giappichelli. Ventura, M. (2014). L’articolo 17 TFUE come fondamento del diritto e della politica ecclesiastica dell’Unione europea. Quaderni di diritto e politica ecclesiastica, 17, 293–304.

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Part Two Non-Discrimination and Citizenship of the Union

Article 18 [Combating Discrimination Based on Nationality] (ex-Article 12 TEC) Within the scope of application of the Treaties,11–20 and without prejudice to any special provisions contained therein,3–4 any discrimination on grounds of nationality shall be prohibited.7–10 The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may adopt rules designed to prohibit such discrimination.5–6

Contents 1. 2. 3.

Genesis and Rationale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Competence to Adopt Implementing Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Judgment on Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.1. The Concept of Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.2. Comparison, Disadvantage and Objective Justifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4. Scope of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.1. Situations Falling Within the Scope of EU Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.2. European Citizenship and the Prohibition of Discrimination . . . . . . . . . . . . . . . . . . . . . . 15 4.3. Purely Internal Situations and Reverse Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 5. Differences in Treatment Between EU Citizens and Third Country Nationals . . . . . . . . . . . 21 List of Cases References

1.

Genesis and Rationale

The prohibition of discrimination on grounds of nationality was established in the founding Treaties from the beginning of the process of European integration. In a system based on the coexistence of a number of national and EU legal orders, that prohibition has assumed a key role, encouraging the creation of the internal market and the free movement between MS.1 The CJEU itself has specified this rule to be of fundamental importance and producing direct effects, both vertical and horizontal. By virtue of this importance, the CJEU held that this rule would apply to the effects of situations that arose before the accession of all new MS to the EU.2

1

Benedettelli (1989). Case C-122/96, Saldanha (ECJ 2 October 1997); Case C-224/98, D’Hoop (ECJ 11 July 2002). Epiney (2007). 2

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The CJEU has always interpreted the concept of nationality as citizenship of an MS and the two terms, nationality and citizenship, are often used interchangeably. Other grounds must find a different legal protection, as in the case of racial or ethnic origin (Article 19 TFEU); or minorities now expressly mentioned in Article 4.2 TEU. Upon accession, where several categories of citizens exist each State should indicate which ones are subject to the Treaties.3 There are specific prohibitions laid down in Part Three of the Treaty on the internal policies and actions of the Union that correspond to the establishment of the general prohibition of discrimination on grounds of nationality. An explicit reference to the prohibition of discrimination on grounds of nationality is contained in Article 45 TFEU which states that the free movement of workers within the Union entails the abolition of any discrimination based on nationality between workers of the MS on employment, remuneration and other conditions of work. In addition, Article 64 TFEU, concerning the movement of capital, states in paragraph 3 that the national measures still permitted under the preceding paragraphs may not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital. Regarding transport policy, Article 95 TFEU prohibits discrimination in transport within the EU “which take the form of carriers charging different rates and imposing different conditions for the carriage of the same goods over the same transport links on grounds of the country of origin or of destination of the goods”. Although the other rules relating to the movement of services and establishment, designed to prohibit restrictions against nationals of other MS (Articles 49 and 56 TFEU), do not explicitly contain the concept of discrimination, they have always been understood as specifying the prohibition of discrimination on grounds of nationality. Likewise the provisions on “Free movement of goods” that impose the prohibition of quantitative restrictions and any measures having equivalent effect on imports and exports (Articles 34 and 35 TFEU). Additionally, the rules on competition, taxation and approximation of the laws contained in Articles 101 et seq. TFEU, aim to ensure fair competition between enterprises in the European market while also prohibiting differing tax requirements depending on the national origin of the products or any arbitrary discrimination or disguised restriction on trade between MS (Article 110 TFEU). Although the language used by the various provisions is not uniform, these rules prohibit all restrictions and discrimination between goods, persons, services and capital dependent on their nationality, establishment or national origin. The Court of Justice has interpreted the specific prohibitions of discrimination laid down in the Treaties as an expression of the general principle of

3

Case C-192/99, Kaur (ECJ 20 February 2001); Case C-145/04, Spain v. United Kingdom (ECJ 12 September 2006).

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non-discrimination, qualified as a fundamental principle of EU law.4 In the Court’s case law, Article 18 TFEU is often invoked in conjunction with other provisions of the Treaty that provide specific expression to this article. In these cases, the CJEU tends to decide the case by applying the special rule that envisages the prohibition of discrimination on grounds of nationality, as the relevance of Article 18 TFEU is considered in a sense “absorbed” by the special rule. In many cases, there is no essential difference between assessing a case according to the general rule or according to the special rule of non-discrimination. However, while Article 18 TFEU does not allow exceptions to the prohibition, the special rules provide for exceptions and limitations. Hence, if there is a special rule that prohibits discrimination on grounds of nationality in a given area, the CJEU tends to apply this rule.5 Article18 TFEU thus has residual application when either there is no specific rule, or the connection with EU law is less clear.6 The rule that the Court applies is the absolute prohibition of discrimination as interpreted by the Court, which has clarified the definition and effects of this prohibition, in the same way as carried out with respect to the general principle of non-discrimination.

2.

The Competence to Adopt Implementing Measures

Article 18.2 TFEU gives the institutions the power to adopt measures to counter the discrimination prohibited in the first paragraph by following the ordinary legislative procedure. The EU is allowed to adopt measures not limited to “the rights which derive from the first paragraph of that article but may also be concerned with matters in respect of which rules appear to be required in order to ensure that those rights can be effectively exercised.”7 It was thus considered wrong to base Directive 90/366/EEC concerning right of residence for students, on Article 352 TFEU instead of Article 18.2 TFEU. That same Directive, which had greatly expanded the scope of the prohibition of discrimination was amended by Directive 2004/38/ EC on the right of EU citizens and their family members to move and reside freely within the Member States, which unified provisions laid out in various directives into a single text, confirming the founding principles of these regulations and integrating them with those expressed by the Court.8 These include the prohibition of discrimination in Article 18 TFEU, which serves as a legal basis, in conjunction with other provisions of the Treaty. In fact, Article 24 of Directive 2004/38/EC Case C-810/79, Überschär (ECJ 8 October 1980). Case C-332/90, Steen v Deutsche (ECJ 28 January 1992). 6 Cases C-92/92 and C-326/92, Phil Collins (ECJ 20 October 1993); Case C-360/00, Ricordi (ECJ 6 June 2002); Case C-28/04, Tod’s SPA and Tod’s France (ECJ 30 June 2005); Case C-172/98, Commission v Belgium (ECJ 29 June 1999); Case C-274/96, Bickel and Franz (ECJ 24 November 1998); Case C-224/00, Commission v Italy (ECJ 19 March 2002). See Doherty (1999). 7 Case C-295/90, Parliament v Council (ECJ 7 July 1992) para 16–18. 8 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, O.J. L 158/77 (2004). 4 5

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envisages the right to equal treatment of EU citizens and their family members, including third-country nationals who are residing in another MS. Article 18.2 TFEU has not been used to adopt special provisions of implementation that have been enacted, however, in relation to other grounds of discrimination covered by the Treaty and in particular Articles 19 TFEU and 157 TFEU. Based on these articles, directives exclusively dedicated to combat discrimination were in fact adopted, establishing a system of remedies and sanctions, that does not exist in relation to discrimination on grounds of nationality, but for in the context of freedom of workers.9 Its regulation is indeed different compared to that envisaged for other prohibitions of discrimination. On application, this means that the judicial instruments required by the “second-generation directives” are not per se applicable to the prohibition of discrimination on grounds of nationality, to which the national procedural rules must apply. The Court has retained a constant orientation by stating that, where there is a right arising under the EU legal order that does not envisage recourse to an ad hoc remedy, States must apply the existing procedural rules applicable to similar situations under domestic law. These procedural rules must meet the conditions of equivalence and effectiveness as clarified by the Court of Justice.10 These principles are expressly stated in Directive 2014/54/ EU.

3.

Judgment on Discrimination

3.1. The Concept of Discrimination

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In the absence of comprehensive legislation against discrimination on grounds of nationality, the ECJ has developed the essential elements of the judgment on discrimination, to be applied to the relevant cases to assess the existence of discrimination prohibited by the Treaty.11 The ECJ thus held that the prohibition of discrimination should be interpreted as aiming to prohibit both direct discrimination, i.e. differences of treatment based on nationality, and indirect discrimination, occurring when normative acts or practices which, although apparently neutral, in fact have the effects of disadvantaging people who share the same characteristic.12 The protection against indirect discrimination is an aspect that strongly characterises the Union legal order. Indeed, once the national legal orders no longer contained direct discrimination,13 which 9 Directive 2014/54/EU on measures facilitating the exercise of rights conferred on workers in the context of freedom of movement for workers, O.J. L 128/8 (2014). 10 Case C-312/93, Peterbroeck (ECJ 14 December 1995) para 12; Case C-246/09, Bulicke (ECJ 8 July 2010). 11 Dashwood and O’Leary (1997). 12 Case C-419/92, Scholz (ECJ 23 February 1994) para 7. 13 Case C-55/00, Gottardo (ECJ 15 January 2002).

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blatantly discriminates European citizens and is therefore more easily identifiable, the CJEU has predominantly considered cases of indirect discrimination, with a large majority of cases dealing with national provisions based on residence.14

3.2. Comparison, Disadvantage and Objective Justifications

According to the classical Aristotelian maxim, equality entails “equals being treated equally and unequals unequally”, the ECJ only considers cases where unequal treatment is applied to equal situations as being discriminatory. A difference in treatment of different situations that are not comparable does not constitute discrimination and it is therefore legitimate. Technically, you can talk about discrimination only when the difference in treatment is produced by an act relating to comparable situations judged alike, or when the same treatment is applied to objectively different situations.15 Therefore, comparison is the first stage in the application of the prohibition of discrimination. Once the comparability of the situations has been established, it is necessary to ascertain that there is a less favourable treatment of nationals of other MS and that such treatment is produced by a rule or practice based on nationality or seemingly neutral but having a discriminatory effect.16 To this end, it is sufficient to show that a measure risks being more unfavourable to other EU citizens compared to the citizens of the host MS. The proof can be obtained simply from the interpretation of the rule, without having to prove that there has been an adverse effect on a greater number of persons, as it is sufficient that the legislation may have even only a potential prejudice.17 Finally, it is necessary to exclude the existence of an objective justification that makes the contested provision legitimate and compatible with the Treaty. Primarily, it is relevant to clarify that an objective justification is different from an objective difference in the situations at stake that allows a different treatment as already mentioned, treating differently situations that are different is lawful and at times required by the application of the non-discrimination principle.18 Rules applying to objective justification are different whether a direct discrimination or an indirect disrimination occurs. In the former, only those justifications that are expressly provided for in the Treaty or in secondary laws are allowed. We should 14

Case C-350/96, Clean Car (ECJ 7 May 1998); Case C-57/96, Meints (ECJ 27 November 1997); Case 152/73, Sotgiu (ECJ 12 February 1974); Case C-107/94, Asscher (ECJ 27 June 1996); Case C-279/93, Schumacker (ECJ 14 February 1995); Case C-33/88, Allué e Coonan (ECJ 30 May 1989); Case C-27/91, Le Manoir Sarl (ECJ 21 November 1991); Case C-367/11, Prete (25 October 2012); Case C-20/12, Giersch (ECJ 20 June 2013). 15 Case C-148/02, García Avello (ECJ 2 October 2003). 16 Case C-10/90, Masgio (ECJ 7 March 1991); Case C-237/94, O’Flynn (ECJ 23 May 1996) para 18–21. 17 Case C-237/94, O’Flynn (ECJ 23 May 1996) para 21. 18 Case 152/73, Sotgiu (ECJ 12 February 1974).

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mention here the exception to the freedom of movement of workers expressly laid down by the Treaty for reasons of public policy, public security or public health (e. g. Article 45.3 TFEU). These exceptions, in fact, which limit the principle of freedom of movement, envisage that a national of another MS may be treated differently from the European citizens of the host MS.19 When an indirect discrimination occurs, besides express derogations other objective justifications may be applied. Objective justifications are admissible when not grounded on nationality, pursue a legitimate aim and are proportionate, thus ruling out that the same purpose cannot be pursued with a different measure.20

4.

Scope of Application

4.1. Situations Falling Within the Scope of EU Law

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12

13

Originally, the privileged sector of the prohibition was the internal market, which is characterised by the abolition of obstacles to the free movement of goods, persons, services and capital between MS. When these obstacles are based on discriminatory measures, they fall under the general prohibition in Article 18 TFEU or in the specific prohibitions laid down by the other provisions of the Treaty on freedom of movement, which prohibit any form of restriction on the movement of economic factors. The purpose of the rule is not to ensure the equality of citizens of the Union but to ensure equal treatment when citizens move to another MS when exercising their right to free movement. In particular, the prohibition of discrimination on grounds of nationality does not impose that all EU citizens should be treated equally in every situation, but aims to ensure that nationality is not a barrier to their movement to achieve a genuine internal market and a true area of freedom, security and justice. Thus, for example, Article 18 TFEU cannot be invoked to challenge discrimination arising only from the existence of different regulations between the MS that do not limit the enjoyment of rights under EU law.21 Article 18 TFEU does not require the harmonisation of national legislation but it requires equal treatment of people in internal legislation that would fall within the scope of EU law. Likewise, it offers no protection against the inevitable different effects produced by harmonisation that are a consequence of differences in the previous content of national regulations.22 19

Case 41/74, Van Duyn (ECJ 4 December 1974); Adoui and Cornuaille (ECJ 18 May 1982); Cases C-65/95 and C-111/95, Shingara and Radiom (ECJ 17 June 1997); Case C-260/89, ERT (ECJ 18 June 1991); Case C-350/96, Clean Car (ECJ 7 May 1998); Case C-348/96, Calfa (ECJ 19 January 1999); Case C-379/87, Groener (ECJ 28 November 1989). 20 Case C-15/96, Schöning (ECJ 15 January 1998); Case C-29/95, Pastoors and Trans-Cap (ECJ 23 January 1997); Case C-415/93, Bosman (ECJ 15 December 1995); C-176/96, Lehtonen (ECJ 13 April 2000); C-15/96, Schöning (ECJ 15 January 1998). 21 Case C-177/94, Perfili (ECJ 1 February 1996). 22 Case 331/88, Fedesa (ECJ 13 November 1990).

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The Court stated that the prohibition in Article 18 TFEU “requires perfect equality of treatment in the Member States, among those who are in a position governed by Community law and nationals of the Member State in question.”23 This meant that the rule would not apply to citizens of the Union residing in an MS other than that of citizenship should they not perform any work or economic activity of relevance to EU law. A first significant expansion occurred in the early 1990s with the extension of the right to enter and reside to categories that are not economically active, thus allowing them to benefit from the prohibition of discrimination.24 The Court has interpreted broadly the scope of Article 18 TFEU and the rules stipulated therein.25 Thus, the Court held that the situation of citizens who are in an MS other than their own for reasons of tourism or to take advantage of medical care are governed by EU law regarding the provision of a service under Article 60 TFEU. The rule includes, in fact, both providers and users of the services, who should be covered by the prohibition of discrimination on grounds of nationality. The rule was also applied by the Court to a citizen residing in his State where he pursued an activity falling within the provision of services as regulated by Article 56 TFEU that protects both against the State of destination and one’s country of origin, when the entrepreneur operates as a provider of services with a “Community dimension.”26 The extension of the Treaty rules on the free movement of services to tourists has clearly widened the material scope of these rules, and thus paved the way for a possible extension of the scope of application of Article 18 TFEU.27 In particular, according to the Court that principle precludes an MS from granting a right to an EU citizen on condition that they are resident on the territory when such a condition is not required for the State’s own citizens. The Court also specified that the prohibition might extend to overwhelm rules of criminal law or criminal procedure, in principle under the competence of the MS.28 In fact, EU law sets limits to exclusive national competences in that these must neither create discrimination against persons to whom EU law gives the right to equal treatment nor restrict the fundamental freedoms guaranteed by EU law.29

23

Case C-43/95, Data Delecta (ECJ 26 September 1996) para 16. The 1990s’ Directives were replaced in 2004 by 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, O.J. L 229/35 (2004). 25 Cases C-286/82 and C-26/83, Luisi and Carbone (ECJ 31 January 1984); Case C-60/00, Carpenter (ECJ 11 July 2002). 26 Case C-260/89, ERT (ECJ 18 June 1991) para 25; C-368/95, Familiapress, (ECJ 26 June 1997). 27 Case C-186/87, Cowan (ECJ 2 February 1989). 28 Case C-122/96, Saldanha (ECJ 2 October 1996); C-323/95, Hayes (ECJ 20 March 1997); Case C-224/00, Commission v Italy (ECJ 19 March 2002). 29 Case C-222/4/96, Bickel and Franz (ECJ 24 November 1998). 24

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4.2. European Citizenship and the Prohibition of Discrimination

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Further significant expansion of the scope of application of the prohibition of discrimination on grounds of nationality has occurred with the establishment of European citizenship. It is well known that the typical right of European citizens is that of movement and of residence in another MS, under Article 21 TFEU, without prejudice to the limitations and conditions laid down by the Treaty and by the measures adopted thereunder. This clause, for many years, prevented the Court from providing this article with direct effects.30 Nevertheless, the Court has not failed to offer extensive interpretations of its scope, interpreting it in conjunction with Article 18 TFEU. First, the Court stated that the mere legal residence in an MS under Article 21 TFEU, means that the prohibition of discrimination on grounds of nationality is applicable whatever is the legal ground allowing the residence. Thus, there can be no discrimination between EU citizens and the MS will be adopting discriminatory behaviour should it deny a service or a benefit based on the absence of a document that is not required of its own nationals. According to the Court: “Union citizenship is destined to be the fundamental status of nationals of the Member States, enabling those who find themselves in the same situation to enjoy within the scope ratione materiae of the Treaty the same treatment in law irrespective of their nationality, subject to such exceptions as are expressly provided for.”31 Further extension of the scope of Article 21 TFEU and, therefore, of Article 18 TFEU, has followed the recognition of its suitability to produce direct effects.32 The restrictive interpretation of the limits and conditions and the extensive interpretation of the right of residence have effectively widened the cases protected by EU law, thus extending the right to equal treatment to citizens who circulate, regardless of whether they perform a specific activity. When in the territory of another MS, every citizen of the Union may invoke the prohibition of discrimination on grounds of nationality in situations falling under the scope of application of EU law. The Court also managed to further extend the scope of application on the persons covered by the prohibition of discrimination, applying it also to children born in the country against which it is invoked.33 This connection alone is judged sufficient to make the Treaty applicable, laying the foundations for the possible review of any legislation on any matter that may influence the right of movement and residence, including rules of private international law, that were not previously considered 30

Case C-378/97, Wijsenbeek (ECJ 21 September 1999). Case C-184/99, Grzelczyk (ECJ 20 September 2001) para 31. Concerning the exceptions to the right to equal treatment of EU citizens regarding access to social benefit see cases C-333/13, Dano, (ECJ 11 November 2014); C-67/14, Alimanovic, (ECJ 15 September 2015); C-299/14, GarcíaNieto (25 February 2016); C-308/14, European Commission v. United Kingdom (ECJ 14 June 2016). 32 Case C-413/99, Baumbast (ECJ 12 September 2002). 33 Case C-34/09, Zambrano (ECJ 8 March 2011). 31

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under the scope of application of EU law.34 A similar view has been reiterated in cases of enforcement, in tax law and in matters pertaining to social benefits, essentially applying the same consolidated orientation regarding the freedom of movement.35 The Court also recognised that citizens returning to their country of origin after exercising their right to freedom of movement under the Treaty, are in a similar situation to the citizens of other States. The Court has repeatedly stated that “if a national of a Member State, owing to the fact that he has lawfully resided on the territory of another Member State and has acquired a professional qualification there, finds himself with regard to his State of origin in a situation which may be assimilated to that of a migrant worker, he must also be entitled to enjoy the rights and freedoms guaranteed by the Treaty.”36 Similar advantages can be benefited by service providers that, although established in their State of nationality, perform an economic activity that is relevant to apply EU law.37

18

4.3. Purely Internal Situations and Reverse Discrimination

The extension of the scope of the Treaty rules on free movement and residence, and thus also of the prohibition of discrimination on grounds of nationality, can never extend to include the “sedentary” citizens of the Union because, as such, they do not fall within the scope of the Treaty.38 As we know, the Court defines the cases that have no connection with EU law as “purely internal situations”, as they are situated outside the scope of EU law and governed entirely by national law. No purpose is served by denouncing such situations as contrary to the principle of non-discrimination on grounds of nationality, since this principle cannot be applied.39 This implies that if the national legislation of an MS is less favourable than that of the EU, citizens of this State who have not exercised the freedom of movement will have less favourable treatment than the

34 Case C-148/02, García Avello (2 October 2003) para 22-28; Case C-96/04, Standesamt Stadt Niebüll (ECJ 27 April 2006); Ackermann (2007); Case C-353/06, Grunkin and Paul (ECJ 14 October 2008). 35 Case C-430/97, Johannes (ECJ 10 June 1999); Case C-224/02, Pusa (ECJ 29 April 2004); Case C-403/03, Schempp (ECJ 12 July 2005); Case C-192/05, Tas-Hagen and Tas (ECJ 26 Ocotber 2006). 36 C-234/97, Bobadilla (ECJ 8 July 1999); C-115/78, Knoors (ECJ 7 February 1979); Case C-224/ 98, D’Hoop (ECJ 11 July 2002); C-19/92, Kraus (ECJ 31 March 1993); C-370/90, Singh (ECJ 7 July 1992). 37 Case C-60/00, Carpenter (ECJ 11 July 2002). 38 Case C-256/11, Dereci (ECJ 15 November 2011); Case C-434/09, McCarthy (ECJ 5 May 2011). 39 Case C-44/84, Hurd (ECJ 15 January 1986); Case C-299/95, Kremzow (ECJ 29 May 1997); Case C-35/82, Morson and Jhanjan (ECJ 27 October 1982); Case C-112/91, Werner (ECJ 26 January 1993).

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national of an MS who has instead exercised this freedom.40 In such situations there is the so-called reverse discrimination: while citizens or companies from other MS are guaranteed against disadvantage when circulating in a “foreign” territory, the same protection is not afforded to citizens or companies that have always been present in that territory. More specifically, this may occur in two situations: when EU law requires that the principle of mutual recognition applies in a certain sector, or when EU law confers advantages to favour the implementation of free movement. Discrimination between citizens based on whether they have or have not exercised their right to freedom of movement is such as to highlight the evident contrast with the principle of equality in force in the individual MS. This is even more evident when you consider the hypothesis of the citizen who has returned to his/her State of origin: in this case, there is discrimination between citizens of the same State depending on their situation falling under EU law or, on the contrary, under national law. Reverse discrimination is thus due to the rules on free movement that, to facilitate the movement of EU citizens, sometimes confer greater rights to EU citizens who enjoys the right to free movement than to citizens of the host State.41 Reverse discrimination is then a typical product of the application of EU rules.42 The approach of the Court of Justice is to place these situations within national law. Following this reasoning, reverse discrimination is determined by the intersecting of national laws with EU law. The situations falling outside the group of legislation resulting from the intersection between the two legal systems, fall entirely within the jurisdiction of the national laws related to purely national cases. Indeed, there is no element to place such situations outside national laws because no connection with the freedom of movement would be considered relevant from the point of view of EU law. However, the Court of Justice has clearly stated that EU law does not preclude Member States from removing such discrimination by extending EU rules, even to cases falling within national competence.43 Therefore, the removal of reverse discrimination is at the discretion of each MS.44 40

Case C-332/90, Steen (ECJ 28 January 1992); Cases C-64/96 and C-65/96, Uecker and Jacquet (ECJ 5 June 1997). 41 Somek (1998). 42 The Court has stated on the free movement of goods that “Article 30 of the Treaty is 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 [. . .]. It is thus irrelevant that the obligation laid down in Article 30 of the Treaty for a Member State which prohibits the addition of vegetable fats other than cocoa butter to cocoa and chocolate products manufactured within its territory to authorise the marketing under the name ’chocolate’ of cocoa and chocolate products containing such fats which are lawfully manufactured in other Member States is capable of placing the national products of that State at a disadvantage.” Case C-14/00, Commission v Italy (ECJ 16 January 2003) para 72–73. 43 Case C-132/93, Steen (ECJ 16 June 1994). 44 Case C-36/75, Rutili (ECJ 28 October 1975); C-281/98, Angonese (ECJ 6 February 2000); Somek (1998), Spitaleri (2010) and Doherty (1999).

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Differences in Treatment Between EU Citizens and Third Country Nationals

Another controversial aspect of the prohibition of discrimination on grounds of nationality regards whether it applies only to EU citizens or also to nationals of third countries. The concept of nationality contained therein was indeed interpreted narrowly in the same way as the notion of “persons” already contained in former Article 14 TEC (now Article 26.2 TFEU): both have been understood as referring only to nationals of an MS.45 Likewise, the concept of “worker of the Member State” under former Article 39 TEC (now Article 45 TFEU) has always been understood as a worker and “national” of an MS, which is why the paradigm of the passive subject of the prohibition enshrined in Article 18 TFEU is, among persons, the European citizen who has exercised their right to movement. The restrictive interpretation of Article 18 TFEU was reiterated by the Court in Vatsouras, with a judgment in which the Court held, all too laconically, that the “provision concerns situations coming within the scope of Community law in which a national of one Member State suffers discriminatory treatment in relation to nationals of another Member State solely on the basis of his nationality and is not intended to apply to cases of a possible difference in treatment between nationals of Member States and nationals of non-member countries. The answer to the third question, therefore, must be that Article 12 TEC (now Article 18 TFEU) does not preclude national rules which exclude nationals of Member States of the European Union from receipt of social assistance benefits which are granted to nationals of non-member countries.”46 A broader interpretation of Article 18 TFEU, however, could actually be supported by some aspects of the status of third-country nationals.47 The same objective could also be achieved by EU institutions acting under Article 18.2 TFEU itself. The limited use of Article 18 TFEU as a legal basis does not mean there will not be greater recourse to it in the near future. In fact, Article 18.2 TFEU would constitute a solid basis for the adoption of measures to enshrine the prohibition of discrimination on grounds of nationality in all areas located within EU law. This possibility is indeed desirable, as it would also solve the antinomy highlighted above and caused by the stratification of rules adopted pursuant to the development of the European anti-discrimination law. However, the Lisbon Treaty seems to be following the same direction outlined by the ECJ, given that the renewed Article 67.2 TFEU qualifies immigration policy as based on “solidarity” between the MS and “fair” to the citizens of third countries. The trend towards equal treatment of legally residing third-country nationals and EU citizens (only clearly present in the conclusions of the Tampere European Council in

45

Bell (2002). Case C-22/08, Vatsouras (ECJ 4 June 2009); Case C-291/09, Guarnieri (ECJ 7 April 2011); Case C-571/10, Kamberaj (ECJ 24 April 2012). 47 Favilli (2008), pp. 240–246. 46

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1999) is replaced by the goal of fairness, according to which the treatment of third country nationals must be the result of balancing the various legitimate requirements of the Union, and be proportional to the desired objectives. Indeed, following the entry into force of the Amsterdam Treaty, the European Council seemed determined to achieve conditions of equal treatment as similar as possible to those of European citizens. Certain emphatic passages of the conclusions of the Tampere European Council are as well known as they are now obsolete: in October 1999, they set out the objective of a gradual assimilation in the treatment of third-country nationals to that of European citizens, a goal only partly achieved and only in relation to specific rights.48 The subsequent steps have proved trickier and it was not until 2003 that the Directive on the rights of long-term residents, which did not actually equate thirdcountry nationals to European citizens regarding the right of movement and residence but did enshrine the right to equal treatment in the MS and in areas listed, was adopted. In addition to the distinction between European citizens and third-country nationals, it is also important to distinguish between different third-country nationals. In fact, the Union, as well as individual MS, have over the years adopted international agreements to regulate the movement and treatment of the nationals of the Contracting States, resulting in different levels regarding guaranteed rights. A special status is also given to the family members of EU citizens, who enjoy a right of movement and residence dependent on that of the European citizen, but assimilated to it. The right to equal treatment under Article 24.1 of Directive 2004/ 38/EC and, earlier, under Article 10 of Regulation 1612/68 was also, in fact, extended to family members. Moreover, special rules designed to ensure equal treatment are found, among others, in Directive 2003/109/EC regarding the socalled long-term residents (Article 21),49 Directive 2011/98/EU on the so-called single permit (Article 11),50 Directive 2009/50/EC on the blue paper on highly skilled workers (Article 14)51 and in Directive 2005/71/EC on a specific procedure for the admission of third-country nationals for scientific research (Article 12).52 MS and the EU itself are essentially free to regulate the treatment of foreigners in their territory through both internal rules and by means of international agreements, subject to the limitations arising from constitutional or other international

48

Presidency Conclusions, 15-16 October 1999. Available at www.europa.eu.int/council, para. 21. Council Directive 2003/109/EC concerning the status of third-country nationals who are longterm residents, O.J. L 16/44 (2004). 50 Directive 2011/98/EU on a single application procedure for a single permit for third-country nationals to reside and work in the territory of a Member State and on a common set of rights for third-country workers legally residing in a Member State, O.J. L 343/303 (2011). Case C-449/16, Martinez Silva, (ECJ 21 June 2017). 51 Directive 2009/50/EC on the conditions of entry and residence of third-country nationals for the purposes of highly qualified employment, O.J. L 155/17 (2009). 52 Council Directive 2005/71/EC on a specific procedure for admitting third-country nationals for the purpose of scientific research, O.J. L 289/15 (2005). 49

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obligations. In addition to international rules that specifically relate to the treatment of foreigners, primary importance is given to the rules on human rights that, as such, do not admit distinctions based on citizenship.53

List of Cases ECJ

ECJ 12.02.1974, 152/73, Sotgiu, ECR 153 [cit. in para 10] ECJ 04.12.1974, 41/74, Van Duyn, ECR 1337 [cit. in para 10] ECJ 28.10.1975, 36/75, Rutili, ECR 1219 [cit. in para 19] ECJ 07.02.1979, 115/78, Knoors, ECR 399 [cit. in para 18] ECJ 08.10.1980, 810/79, Überschär, ECR 2747 [cit. in para 4] ECJ 27.10.1982, 35/82, Morson and Jhanjan, ECR 3723 [cit. in para 19] ECJ 18.05.1982, 116/81, Adoui and Cornuaille, ECR 1665 [cit. in para 10] ECJ 31.01.1984, C-286/82, Luisi and Carbone, ECR 377 [cit. in para 13] ECJ 15.01.1986, 44/84, Hurd, ECR 29 [cit. in para 19] ECJ 02.02.1989, 186/87, Cowan, ECR 195 [cit. in para 14] ECJ 30.05.1989, 33/88, Allué and Coonan, ECR 1591 [cit. in para 7] ECJ 28.11.1989, C-379/87, Groener, ECR 3967[cit. in para 10] ECJ 13.11.1990, C-331/88, Fedesa, ECR I-4023 [cit. in para 23] ECJ 18.06.1991, C-260/89, ERT, ECR I-2925 [cit. in para 10 and 14] ECJ 07.03.1991, C-10/90, Masgio, ECR I-1119 [cit. in para 9] ECJ 21.11.1991, C-27/91, Le Manoir Sarl, ECR I-5531 [cit. in para 7] ECJ 28.01.1992, C-332/90, Steen, ECR I-341 [cit. in para 4] ECJ 07.07.1992, C-295/90, Parliament v Council, ECR I-4193 [cit. in para 5] ECJ 07.02.1992, C-370/90, Singh, ECR I-4265 [cit. in para 18] ECJ 31.03.1993, C-19/92, Kraus, ECR I-1663 [cit. in para 18] ECJ 20.10.1993, C-92/92, Phil Collins, ECR I-5145 [cit. in para 4] ECJ 26.01.1993, C-112/91, Werner, ECR I-429 [cit. in para 19] ECJ 16.01.1994, C-132/93, Steen, ECR I-2715 [cit. in para 19] ECJ 23.02.1994, C-419/92, Scholz, ECR I-505 [cit. in para 7] ECJ 14.12.1995, C-312/93, Peterbroeck, ECR I-4599 [cit. in para 6] ECJ 15.12.1995, C-415/93, Bosman, ECR I-4921 [cit. in para 10] ECJ 14.02.1995, C-279/93, Schumacker ECR I-225 [cit. in para 7] ECJ 01.02.1996, C-177/94, Perfili, ECR I-161 [cit. in para 22] ECJ 27.06.1996, C-107/94, Asscher, ECR I-3089 [cit. in para 7] ECJ 23.05.1996, C-237/94, O’Flynn, I-2617 [cit. in para 9] ECJ 27.11.1997, C-57/96, Meints, ECR I-6689 [cit. in para 7] ECJ 17.06.1997, C-65/95, Shingara, ECR I-3343 [cit. in para 10] 53

Appl. No. 12313/86, Moustaquim v Belgium (ECtHR 18 February 1991); Appl. No. 21794/93, C. v Belgium (ECtHR 7 August 1996) para 37–38.

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ECJ 23.01.1997, C-29/95, Pastoors and Trans-Cap, ECR I-285 [cit. in para 10] ECJ 26.06.1997, C-368/95, Familiapress, ECR I-3689 [cit. in para 14] ECJ 02.10.1997, C-122/96, Saldanha, ECR I-5325 [cit. in para 1 and 14] ECJ 20.03.1997, C-323/95, Hayes, ECR I-1711 [cit. in para 14] ECJ 29.05.1997, C-299/95, Kremzow, ECR I-2629 [cit. in para 19] ECJ 05.06.1997, C-64/96, Uecker and Jacquet, ECR I-3171 [cit. in para 19] ECJ 15.01.1998, C-15/96, Schöning-Kougebetopoulou, ECR I-47 [cit. in para 10] ECJ 07.05.1998, C-350/96, Clean Car, ECR I-2521 [cit. in para 7 and 10] ECJ 24.11.1998, C-274/96, Bickel and Franz, ECR I-7637 [cit. in para 14 and 4] ECJ 19.01.1999, C-348/96, Calfa, ECR I-11 [cit. in para 10] ECJ 10.06.1999, C-430/97, Johannes, ECR I-3475 [cit. in para 17] ECJ 29.06.1999, C-172/98, Commission v Belgium, ECR I-3999 [cit. in para 4] ECJ 08.07.1999, C-234/97, Bobadilla, ECR I-4773 [cit. in para 18] ECJ 21.09.1999, C-378/97, Wijsenbeek, ECR I-6207 [cit. in para 15] ECJ 13.04.2000, C-176/96, Lehtonen, ECR I-2681 [cit. in para 10] ECJ 06.02.2000, C-281/98, Angonese, ECR I-4139 [cit. in para . . .] ECJ 20.02.2001, C-192/99, Kaur, ECR I-1237 [cit. in para 2] ECJ 20.09.2001, C-184/99, Grzelczyk, ECR 6193 [cit. in para 16] ECJ 12.09.2002, C-413/99, Baumbast, ECR 7091 [cit. in para 17] ECJ 15.01.2002, C-55/00, Gottardo, ECR I-413 [cit. in para 7] ECJ 19.03.2002, C-224/00, Commission v Italy, ECR I-2965 [cit. in para 4] ECJ 06.06.2002, C-360/00, Ricordi, ECR I-5089 [cit. in para 4] ECJ 11.07.2002, C-224/98, D’Hoop, ECR I-6191 [cit. in para 1 and 18] ECJ 11.07.2002, C-60/00, Carpenter, ECR I-06279 [cit. in para 14 and 18] ECJ 02.10.2003, C-148/02, García Avello, ECR I-11613 [cit. in para 17 and 8] ECJ 16.01.2003, C-14/00, Commission v Italy, ECR I-513 [cit. in para 19] ECJ 29.04.2004, C-224/02, Pusa, ECR I-5763 [cit. in para 17] ECJ 30.06.2005, C-28/04, Tod’s SpA and Tod’s France, ECR I-5871 [cit. in para 4] ECJ 12.07.2005, Schempp, C-403/03, ECR I-6421 [cit. in para 17] ECJ 12.09.2006, C-145/04, Spain v. United Kingdom, ECR I-7917 [cit. in para 2] ECJ 27.04.2006, C-96/04, Standesamt Stadt Niebüll, ECR I-3561 [cit. in para 17] ECJ 26.10.2006, C-192/05, Tas-Hagen and Tas, ECR I-10451 [cit. in para 17] ECJ 14.10.2008, C-353/06, Grunkin and Paul, ECR I-7639 [cit. in para 17] ECJ 04.06.2009, C-22/08 and C-23/08, Vatsouras, ECR I-4585 [cit. in para 20] ECJ 08.07.2010, C-246/09, Bulicke, ECR I-7003 [cit. in para 6] ECJ 07.04.2011, C-291/09, Guarnieri, ECR I-2685 [cit. in para 20] ECJ 15.11.2011, C-256/11, Dereci, ECR I-11315 [cit. in para 19] ECJ 05.05.2011, C-434/09, McCarthy, ECR I-3375 [cit. in para 19] ECJ 08.03.2011, C-34/09, Zambrano, ECR I-1177 [cit. in para. 17] ECJ 24.04.2012, C-571/10, Kamberaj, ECLI:EU:C:2012:233 [cit. in para 20] ECJ 25.10.2012, C-367/11, Prete, ECLI:EU:C:2012:668 [cit. in para 13] ECJ 20.06.2013, C-20/12, Giersch, ECLI:EU:C:2013:411 [cit. in para. 7] ECJ 11.11.2014, C-333/13, Dano, ECLI:EU:C:2014:2358, [cit. in para. 17] ECJ 15.09.2015, C-67/14, Alimanovic, ECLI:EU:C:2015:597 [cit. in para. 17] ECJ 25.02.2016, C-299/14, García-Nieto, ECLI:EU:C:2016:114 [cit. in para. 17]; Favilli

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ECJ 14.06.2016, C-308/14, European Commission v. United Kingdom, ECLI:EU: C:2016:436, [cit. in para. 17] ECJ 21.06.2017, C-449/16, Martinez Silva, ECLI:EU:C:2017:485 [cit. in para. 23]

ECtHR

ECtHR 18.02.1991, 12313/86, Moustaquim v Belgium [cit. in para 24] ECtHR 07.08.1996, 21794/93, C. v Belgium [cit. in para 24] References54 Ackermann, T. (2007). Case Garcia Avello. Common Market Law Review, 5, 141–154. Bell, M. (2002). Anti-discrimination law and the European Union. Oxford: Oxford University Press. Benedettelli, M. (1989). Il giudizio comunitario di uguaglianza. Padova: Cedam. Dashwood, A., & O’Leary, S. (Eds.). (1997). The principle of equal treatment in E.C. Law. A collection of papers by the Centre for European legal studies (Cambridge). London: Sweet & Maxwell. Doherty, B. (1999). Bickel-extending the boundaries of European citizenship. Irish Journal of European Law, 1–2, 70–83. Epiney, A. (2007). The scope of Article 12 EC: Some remarks on the influence of European citizenship. European Law Journal, 5, 611–622. Favilli, C. (2008). Il principio di non discriminazione nell’Unione europea. Bologna 2008. Somek, A. (1998). Reverse discrimination revisited (Vienna working paper in legal theory, political philosophy and applied ethics). Retrieved from https://www.juridicum.at/ Spitaleri, F. (2010). Le discriminazioni alla rovescia nel diritto dell’Unione Europea. Roma: Aracne.

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All cited internet sources in this comment have been accessed on 9 December 2019.

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Article 19 [Combating Discrimination Based on Other Grounds] (ex-Article 13 TEC) 1. Without prejudice to the other provisions of the Treaties and within the limits of the powers conferred by them upon the Union, the Council, acting unanimously in accordance with a special legislative procedure and after obtaining the consent of the European Parliament, may take appropriate action to combat discrimination based on sex,18–19 racial or ethnic origin,8–12 religion or belief,13–15 disability,16–17 age20–23 or sexual orientation.18–19 2. By way of derogation from paragraph 1, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may adopt the basic principles of Union incentive measures, excluding any harmonisation of the laws and regulations of the Member States, to support action taken by the Member States in order to contribute to the achievement of the objectives referred to in paragraph 1.

Contents 1. 2. 3.

The Widening of the Non-discrimination Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Rationale and Effects of the Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Grounds of Discrimination Expressly Provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.1. Race, Ethnicity and Nationality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.2. Religion and Belief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.3. Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.4. Sexual Orientation and Sex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 3.5. Age . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 4. The First Implementation and New Directives on Discrimination Based on Sex . . . . . . . . . 31 5. The Relationship with the General Principle of Non-discrimination and with the Charter of Fundamental Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 List of Cases References

1.

The Widening of the Non-discrimination Law

Article 19 TFEU (former Article 13 EC) has been included in the system of the Treaties by the Treaty of Amsterdam, thanks also to the growing demand for greater recognition of social rights in the EU.1 Among the EU institutions, the

1

The Starting Line group played a very active role promoting a campaign named “Starting point” to amend the Treaty, The campaign was supported by more than 250 NGOs based in all the MS. Similar campaigns were promoted by other NGOs combating against discrimination on sexual orientation and disability; Bell and Waddington (1996).

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EP most constantly engaged in the analysis of the phenomena of discrimination thus invoking corresponding initiatives by other political institutions.2 Thanks to the inclusion of Article 19 TFEU, the Union’s system of antidiscrimination protection has changed dramatically. The Union has in fact also been given the power to combat discrimination based on grounds of race, religion or belief, age, disability and sexual orientation, and not just on the grounds of nationality and sex. This article is also part of a process that has seen the prohibitions against discrimination, traditionally contained in the Treaties, going beyond the completion of the internal market, to become a general objective of the Union. With the Treaty of Lisbon, in fact, anti-discrimination and equality between men and women are included among the values of the Union and one of the objectives that the Union must pursue when implementing its policies (Articles 2 and 3.2 TEU). Moreover, the principle of equality of MS (Articles 4.2 TEU) and EU citizens (Article 9 TEU) is also expressly formulated. Finally, a completely new provision has been inserted, i.e. Article 10 TFEU, which contains a mainstreaming principle whereby all EU policies are bound not only to uphold non-discrimination on the grounds specified therein, that are the same as those contained in Article 19 TFEU, but must also aim to eliminate discrimination. Additionally, there are the provisions of the Charter of Fundamental Rights, in which an entire title, the third (Articles 20–26), is devoted to “Equality” and contains a two-paragraph provision on “Non-Discrimination” (Article 21). This is preceded by a broadly formulated provision on ‘Equality before the law’ (Article 20), of which the former is “a particular expression”. Moreover, Title III lays down provisions targeting specific dimensions of the principle of equal treatment, notably the respect for cultural, religious and linguistic diversity (Article 22), equality between women and men (Article 23), and the protection of minor children, the elderly and persons with disabilities (Articles 24, 25 and 26 respectively). The Treaty of Lisbon also involved the shift of Articles 18 and 19 TFEU (formerly Articles 12 and 13 EC) into the second section on “non-discrimination and citizenship of the Union” which comprises Articles 18–25 TFEU. The unification of the rules on non-discrimination and citizenship made it possible to group rules relating to the rights of the person in one part of the Treaty, regardless of the exercise of the rights arising from other parts of the Treaty, especially those relating to the internal market. In addition, the first part of the Treaty has thus been cleared of rules containing a legal basis, maintaining only those that properly define the principles and the basic rules on the functioning of the whole Union. However, this does not mean that the displaced provisions have lost relevance, given that the Court of Justice has rarely given weight to both the literal content and the placement within the Treaty when determining the importance of a provision.

2

See, for instance, European Parliament resolution of 17 May 1995 and 13 March 1996 (doc. A40068-96) claiming for the express reference in the Treaties of the principle of equality and of the duty to act against social exclusion, social injustice and the discrimination, O.J. C 151/56 (1995).

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Rationale and Effects of the Rule

Article 19 TFEU endows the Council with the power to combat discrimination; it does not establish a prohibition of discrimination but gives the Council the power to act against discrimination on the grounds that are exhaustively listed.3 Although hostility towards discrimination on those grounds can be implicitly inferred from the rule, this is not sufficient to confer direct obligations on MS and, even less, on their citizens.4 The grounds of discrimination are listed exhaustively, not allowing for an analogous interpretation or the inclusion of related reasons other than those expressly envisaged.5 Furthermore, Article 19 TFEU does not assign new competence but powers that must be exercised “within the limits of the powers conferred by them upon the Union” and “without prejudice to the other provisions of the Treaties”. This last clause means that Article 19 TFEU cannot be used as a legal basis in the presence of a special rule in the Treaty. The difference in wording compared to the provisions of Article 18 TFEU (“without prejudice to any special provisions contained therein”) suggests that Article 19 TFEU has a residual application compared to all other rules of the Treaty and not only with respect to those specifically related to discrimination in certain specific sectors. This could also result in a sort of subordination of the rule with respect to other provisions of the Treaty.6 The adoption of measures under Article 19.1 TFEU requires that a special legislative procedure be followed in which the Council must act unanimously after approval by the EP. The requirement of a special legislative procedure, rather than the ordinary one as provided for at Article 18 or 157 TFEU, reflects the reluctance of MS to let the EU play its role as legislator, giving to each MS the power to veto any legislative proposal grounded on Article 19 TFEU. The type of procedure justifies why it is important that a specific legal basis envisaged by the Treaty should be used where this exists. In particular, this applies to Article 157 TFEU on the prohibition of discrimination on grounds of sex in employment. There is a potential overlap between this ground of discrimination and its material scope with Article 19 TFEU, which includes sex as one of the grounds of discrimination. The relationship between the two rules should be resolved with Article 157 TFEU prevailing, as this requires the ordinary legislative procedure under which the EP is clearly given a decisive role that envisages qualified majority voting in the Council.

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Barbera (2002). Case C-249/96, Grant (ECJ 17 February 1998). Lengauer (1999), Waddington (1999), Bell (1999) and Flynn (1999). 5 Case C-13/05, Chacón Navas (ECJ 11 July 2006); Case C-310/10, Agafiţei (ECJ 7 July 2011); Case C-571/10, Kamberaj (ECJ 24 April 2012). 6 Flynn (1999), p. 1134. 4

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The Treaty of Nice amended Article 19 TFEU by adding a second paragraph under which the basic principles of incentive measures can be adopted with ordinary legislative procedure. This provision does not alter the nature of Article 19 TFEU, which remains a rule related to powers, but it does allow the adoption of incentive measures according to ordinary legislative procedures and excluding any harmonisation. Among the acts that can be adopted based on this second paragraph are action programmes, i.e. annual or multi-year instruments that the Union uses to fund various activities based on certain priorities and guidelines.7 These activities can be carried out by the Commission, the MS or by private parties based on decisions taken by the Management Committee that establishes an annual programme implemented by the Commission through the publication of notices or contracts. The Council could also adopt different acts since the only condition laid down by Article 19.2 TFEU is that the reference made is to incentive measures and not harmonisation measures.

3.

Grounds of Discrimination Expressly Provided

3.1. Race, Ethnicity and Nationality

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Both in Article 19 TFEU and in Directive 2000/43/EC,8 ethnic origin is listed alongside race, thereby integrating the word that best evokes physical characteristics (race) with a reference to the cultural dimension of the group (ethnicity).9 Race and ethnicity therefore constitute a single concept to ensure that there are no situations in which protection is not afforded purely for terminological reasons.10 Recital 6 of Directive 2000/43/EC states that the EU “rejects theories that attempt to determine the existence of separate human races. The use of the term ‘racial origin’ in this Directive does not imply an acceptance of such theories.” One of the reasons for the inclusion of this recital was to overcome the resistance raised by France that was against the use of the term race to avoid supporting,

7

The 2014–2020 Action Programme, Rights, Equality and Citizenship Programme, is currently underway for the period 2014 to 2020. Regulation 1381/2013 establishing a Rights, Equality and Citizenship Programme for the period 2014 to 2020, O.J. L 354/62 (2013). 8 Council Directive 2000/43/EC implementing the principle of equal treatment between persons irrespective of racial or ethnic origin, O.J. L 180/22 (2000). 9 Case C-83/14, CHEZ Razpredelenie Bulgaria (ECJ 16 July 2015) para 45–46. 10 A similar solution was introduced in the UN Convention on the Elimination of Racial Discrimination (CERD), in which Article 1 uses a series of words to define the notion of racial discrimination, associating the terms race, colour, descent and national or ethnic origin: “1. In this Convention, the term “racial discrimination” shall mean any distinction, exclusion, restriction or preference based on any distinction, exclusion, restriction or preference based on race, colour, descent, or national or ethnic origin [. . .].” Favilli

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even formally, the theory of the division of humanity into different races. On the other hand, the maintenance of the term race was actually necessary to provide protection against all the various hypotheses of discrimination that could arise. Although it is sometimes difficult to differentiate racial discrimination from religious discrimination, in the context of EU law such grounds of discrimination are considered separately, to the extent that one is provided for in Directive 2000/ 43/EC and the other in Directive 2000/78/EC.11 Article 3 of Directive 2000/43/EC excludes from the scope of the Directive “difference of treatment based on nationality and is without prejudice to provisions and conditions relating to the entry into and residence of third-country nationals and stateless persons on the territory of Member States, and to any treatment which arises from the legal status of the third-country nationals and stateless persons concerned.” The provision is reinforced by recital 13 according to which the “prohibition of discrimination should also apply to nationals of third countries, but does not cover differences of treatment based on nationality and is without prejudice to provisions governing the entry and residence of third-country nationals and their access to employment and to occupation.” The rules, therefore, do not preclude the application to nationals of third countries, but exclude that they can be invoked against migration laws or for discrimination based on nationality. Sometimes it is difficult to distinguish whether discrimination is actually based on nationality, race or ethnic origin. In some countries, discrimination on grounds of race or ethnic origin are more easily distinguishable from those on grounds of nationality, as the people of a different race or ethnic origin than that of the majority of the population are also citizens of those countries. In other countries, however, especially those that have seen an influx of migrants in more recent times and whose policies do not facilitate the acquisition of citizenship, any discrimination on grounds of race or ethnic origin can be easily confused with that based on nationality. When discrimination based on nationality also determines indirect discrimination on grounds of race, the Directive can then be applied.12 The CJEU ruled that the recruitment policy of an entrepreneur who had clearly stated that he would not have taken on “migrant workers” amounted to discrimination on grounds of race and ethnic origin.13 The implicit assumption of discrimination of this kind in the category of discrimination on grounds of race and ethnicity could be understood as an endorsement by the CJEU of the orientation that considers discrimination on

11

Council Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation, O.J. L 303/16 (2000). 12 Joint Report on the application of Council Directive 2000/43/EC of 29 June 2000 implementing the principle of equal treatment between persons irrespective of racial or ethnic origin (‘Racial Equality Directive’) and of Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation (‘Employment Equality Directive’), COM(2014) 2 of 17 January 2014, p. 12. 13 Case C-54/07, Feryn (ECJ 10 July 2008).

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grounds of nationality, or xenophobia, as one of the many variants of racial discrimination and racism.14 Technically the exclusion of discrimination on grounds of nationality from the scope of application of Directive 2000/43/EC is also justified based on respect for the principle of conferral of powers, since Article 19 TFEU contains an exhaustive list of grounds, but does not include nationality that is dealt with in Article 18 TFEU. This prohibition has always been understood as a prohibition of discrimination on grounds of citizenship and limited by the CJEU only to EU citizens. Since Article 19 TFEU is without prejudice to the other provisions of the Treaty, the prohibition of discrimination on grounds of nationality continues to be exclusively governed by Article 18 TFEU with the result that any legal act relating to discrimination on grounds of nationality must be based on this Article.

3.2. Religion and Belief

14

Article 19 TFEU and Directive 2000/78/EC associate the term religion with belief. The concept must therefore be interpreted by considering both terms, which are the same as those contained in international conventions that aim to recognise freedom of religion (Article 9 ECHR, Article 18 ICCPR). Considering the ECtHR case law on this subject, the terms should be interpreted broadly to include also the discrimination of churches or, in general, groups around which a religious activity is organised.15 These terms must be understood as intended to provide protection in relation to any religious belief, i.e. connected in any way to a deity, as well as a non-religious belief system that merely constitutes a set of ideas and opinions on life and lifestyle. For example, the concept of non-violence and pacifism would fall within such a notion, as it goes beyond the conceptualisation of peaceful relations between States but rather involves various aspects of human relations.16 On the other hand, mere opinions do not fall within the protected scope of the ground concerned. One of the problems posed by the lack of definition of the concept of religion is whether sects may also be protected by the rules on freedom of religion as well as the rules against discrimination on grounds of religion. Generally, the term sect refers to a group carrying out activities, under the mantle of religion, that 14 Indeed, according to the Durban Declaration of 2001, adopted during the World Conference against Racism, Racial Discrimination, Xenophobia and Related Intolerance, xenophobia and discrimination against migrants are two of the most serious forms of racism in the contemporary age. Available at http://www.un.org/durbanreview2009/pdf/DDPA_full_text.pdf. The declaration was reviewed during the Geneva Conference held on 20–24 April 2009. 15 Appl. No. 7511/76, Campbell and Cosans v UK (ECtHR 16 May 1980); Appl. No. 14307/88, Kokkinakis v Greece (ECtHR 25 May 1993); Appl. No. 23372/94, Larissis and others v Greece (ECtHR 24 February 1998); Appl. No. 24645/94, Buscarini and others v San Marino (ECtHR 18 February 1999); Appl. No. 30814/06, Lautsi v Italy (ECtHR 18 March 2011). 16 Appl. No. 7511/76, Campbell and Cosans v UK (ECtHR 25 February 1982); Appl. No. 25088/ 94, Chassagnou and others v France (ECtHR 29 April 1999).

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are illegal or harmful to its followers and may sometimes violate their dignity. Hence, in 1996 the EP adopted a resolution stating that freedom of religion can be limited when any organisation commits acts of torture, inhuman and degrading treatment or involves serious forms of psychological subjugation, thus urging countries to be cautious in recognising the status of religious confession to sects whose methods are seriously open to question.17 Before introducing Article 19 TFEU into the Treaty, the CJEU had the opportunity to consider the religious factor both in relation to the derogations to the freedom of movement of persons and in relation to the interpretation of the Staff Regulations of Officials of the Commission.18 In this case, the CJEU held that the Commission’s organisation of competitions must be such as to allow all candidates to participate in the tests, respecting the prohibition of discrimination based on religion when appointing staff, although this does not require it to prevent discrimination, but only to consider religious requirements where duly communicated.19 More interesting are two cases decided in 2017 by the CJEU dealing with wearing religious clothing, notably the headscarf.20 Two employers, one in Belgium and the other one in France, had dismissed two Muslim women for wearing a headscarf at work despite being asked to refrain from doing so. When they refused to comply with this request, their employment was terminated. The judgments were much awaited, because the Advocates General had endorsed different approaches, notably concerning the meaning of “direct” and “indirect” discrimination and the concept of “genuine and determining occupational requirements” provided by Directive 2000/78/EC at Article 4.1. In Bougnaoui, the CJEU qualified the meaning of “religion” under Article 10 EUCFR that corresponds to Article 9 ECHR. The Court then qualified both dismissals as different treatments indirectly based on religion or belief under Article 2.2 (b) of Directive 2000/78/EC. This led the Court to explore whether such different treatments were objectively justified by a legitimate aim by the employer “of a policy of neutrality vis-a-vis its customers, and if the meaning of achieving that aim are appropriate and necessary.” As far as the exception provided for in Article 4.1 when a “genuine and determining occupational requirement” occurs, the CJEU clearly states that “it is not the ground on which the difference of treatment is based but a characteristic related to that ground which must constitute a genuine and determining occupational requirement [. . .] It follows from the information set out above that the concept of a ‘genuine and determining occupational requirement’, within the meaning of that provision, refers to a requirement that is objectively dictated by the nature of the occupational activities concerned or of the context in which they are carried out. 17

European Parliament Resolution on cults in Europe, O.J. C 78/31 (1996). Case 41/74, Van Duyn (ECJ 4 December 1974). 19 Case 130/75, Prais (ECJ 27 October 1976). 20 Favilli and Lazzerini (2017), pp. 33–34. Case C-188/15, Bougnaoui (ECJ 14 March 2017); Case C-157/15, G4S Secure Solutions (ECJ 14 March 2017). While the judgments were issued the same day, the AGs’ opinions were published in different times: Case C-157/15, Achbita, (ECJ 31 May 2016); Case C-188/15, Bougnaoui and ADDH (ECJ 13 July 2016). 18

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It cannot, however, cover subjective considerations, such as the willingness of the employer to consider the particular wishes of the customer. Consequently, the answer to the question put by the referring court is that Article 4.1 of Directive 2000/78 must be interpreted to mean that the willingness of an employer to take account of the wishes of a customer to no longer have the services of that employer provided by a worker wearing an Islamic headscarf cannot be considered a genuine and determining occupational requirement within the meaning of that provision. In G4S Secure Solutions, the CJEU proposed the same reasoning on Bougnaoui, as far as the qualification of the difference of treatment as a case of discrimination indirectly based on religion. According to the Court, under Article 2.2 (b) point i of Directive 2000/78, such a difference of treatment does not, however, amount to indirect discrimination within the meaning of Article 2.2 (b) of the Directive if it is objectively justified by a legitimate aim and if the means of achieving that aim are appropriate and necessary. The Court then states ‘that the desire to display, in relations with both public and private sector customers, a policy of political, philosophical or religious neutrality must be considered legitimate and stemming from the freedom to conduct a business that is recognised in Article 16 EUCFR. The Court then clarifies that such a policy of neutrality “is, in principle, legitimate, notably where the employer involves in its pursuit of that aim only those workers who are required to have contacts with the employer’s customers.”21 In WABE and Müller Handels GmbH AG Rantos took the view, referring on the Court’s case law in G4S Secure Solutions and Bougnaoui, that the prohibition on wearing any visible sign of political, philosophical or religious beliefs in the workplace, which results from an internal rule of a private undertaking, does not constitute direct discrimination on the grounds of religion or belief in respect of employees who, due to religious covering requirements, follow certain clothing rules. However, a policy of political, philosophical or religious neutrality pursued by an employer, in its relations with its customers, is not incompatible with the wearing, by its employees, of religious signs, whether visible or not, that are small in scale (in other words, discreet) and which are not noticeable at first glance. Accordingly, an internal rule of a private undertaking which prohibits, in the context of a policy of neutrality, only the wearing of conspicuous, large-scale signs of political, philosophical or religious beliefs in the workplace can be justified. A national court can therefore apply national constitutional provisions that protect the freedom of religion in the examination of an instruction based on an internal rule of a private undertaking, which prohibits the wearing of signs of political, philosophical or religious beliefs in the workplace. But those provisions must not undermine the principle of non-discrimination laid down in the directive on equal treatment in employment and occupation.22 This interpretation is in line with the ECtHR case law on freedom of religion (Article 9 ECHR), where the Court has stated that a limited restriction on the

21

Case C-157/15, G4S Secure Solutions (ECJ 14 March 2017) para 38. Joined Cases C-804/18 and C-341/19, WABE (Opinion of AG Rantos of 25 February 2021) para 47 et seqq., 60 et seqq., 71, 74 et seqq., 89, 112. 22

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freedom of religion is admissible within the framework of the Convention.23 In the reasoning of the CJEU, a key role is played by a policy of neutrality already existing in the company before the dismissal and by its practical implementation. To be admissible, the prohibition of wearing visible religious clothing must be “strictly necessary for the purpose of achieving the aim pursued.” Therefore, national judges must assess if “taking into account the inherent constraints to which the undertaking is subject, and without G4S being required to take on an additional burden, it would have been possible for G4S, faced with such a refusal, to offer her a post not involving any visual contact with those customers, instead of dismissing her.”24 In summary, the Court leaves to national judges to strike a balance between, on one hand, the legitimate aim pursued by an employer through a policy of neutrality and, on the other, the restrictions on the freedom of religion that may be limited to what is strictly necessary.

3.3. Disability

In the original version of Article 13 EC, the term “handicap” appeared, but it was replaced with the more correct term “disability” that is currently employed in Article 19 TFEU. Article 1 of the UN Convention on the Rights of Persons with Disabilities (UNCRPD), adopted on 13 December 2006 and of which the Union is also part, is important in this context.25 The interpretation of the notion of disability in EU law was given by the CJEU, according to which that concept excludes in principle mere disease, unless the disease constitutes an obstacle to the participation of a certain duration in professional life.26 The CJEU also stated that in cases in which the state of obesity of an employee, resulting in particular from physical, mental or psychological impairments may, in interaction with various barriers, hinder the full and effective participation of person concerned in professional life on an equal basis with other workers and if this limitation is of long duration, such a disease may fall within the definition of “disability” within the meaning of Directive 2000/78/EC.27 The CJEU has therefore adhered to a social model of disability, as opposed to the outdated medical model. The political institutions then started to employ the interpretation given by the CJEU.28 Later, the Court stressed 23

Appl. No. 48420/10, 59842/10, 51671/10 and 36516/10, Eweida and Others v. United Kingdom (ECtHR 15 January 2013) para 94. 24 Case C-157/15, G4S Secure Solutions (ECJ 14 March 2017) para 43. 25 The Convention entered into force the 3 May 2008 after the deposit of the twentieth instrument of ratification. Available at www.un.org/disabilities/index.asp. The EU is part of the convention since 23 December 2010. 26 Case C-13/05, Chacón Navas (ECJ 11 July 2006). 27 Case C-354/13, FOA (ECJ 18 December 2014). 28 A definition of disability may however be found in the European Disability Strategy 2010– 2020: A Renewed Commitment to a Barrier-Free Europe, COM(2010)636 final; Favalli and Ferri (2016), p. 3.

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that “the EU concept of disability was explicitly aligned with that of the UN Convention.”29 Clearly, the Court held that the concept of disability must be understood as “a limitation which results in particular from physical, mental or psychological impairments which in interaction with various barriers may hinder the full and effective participation of the person concerned in professional life on an equal basis with other workers.”30 Discrimination may also occur when a person is not himself/ herself disabled but suffers discriminatory behaviour due to their child’s disability.31 Finally, in the preliminary reference in Glatzel,32 which challenged the compatibility of certain EU provisions on driving licenses with the prohibition of discrimination on grounds of disability, the Court applied Article 21 EUCFR relying on the same notion of “disability” it has embraced in the context of Directive 2000/78/EC.

3.4. Sexual Orientation and Sex

23

24

The sexual orientation of individuals is defined as a personal characteristic that is relevant in the choice of that person’s partner. This orientation may be either heterosexual when the choice falls on a partner of the opposite sex, or, conversely, homosexual when the partner chosen is of the same sex or bisexual when partners of both sexes are chosen. The prohibition of discrimination requires that no difference in treatment be practiced because of that choice and aims, in particular, to protect those whose choice is homosexual, as this is considered an exception to the normality of a heterosexual choice. In line with the case law on racial discrimination,33 the CJEU ruled that statements made by an employer against hiring a footballer presented as being homosexual, amounted to discrimination on grounds of sexual orientation.34 Before it was inserted into the Treaty at Article 19, the CJEU had ruled that the notion of sexual orientation could not be included in that of sex in Article 157 TFEU35 similarly to the ruling made in relation to the notion of “transsexual”.36 Thus, the specific mention of sexual orientation in Article 19 TFEU is a fundamental step towards the recognition of the rights of such persons.37 The CJEU has thus 29

Case C-363/12, Z. (ECJ 18 March 2014); Favalli and Ferri (2016), p. 15. Case C-335/11, HK Danmark (ECJ 11 April 2013); Case C-312/11, Commission v Italy (ECJ 4 July 2013); Case C-363/12, Z (ECJ 18 March 2014). 31 Case C-303/06, Coleman (ECJ 28 July 2008). 32 Case C-356/12, Glatzel (ECJ 22 May 2014) para 44–46. 33 Case C-54/07, Feryn (ECJ 10 July 2008). 34 Case C-81/12, Accept (ECJ 25 April 2013). 35 Case C-249/96, Grant (ECJ 17 February 1998). 36 Case C-13/94, P. c. S. (ECJ 30 April 1996). 37 Ceccherini (2001). 30

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ruled that the German legislation that precludes partners of a “life partnership” from benefiting from the same pension as widows or widowers is incompatible with the prohibition of discrimination on grounds of sexual orientation as people of the same sex cannot marry and, are thus unable to acquire the status of a widow/ widower.38 The CJEU considers this to be a case of direct discrimination because in German law life partnership places persons of the same sex in a situation similar to that of spouses in relation to enjoyment of social security benefits, which are of the same type as those involved in the case under consideration. The CJEU held that the German legislation discriminated between the two cases, that of marriage and that of life partnerships, which can be considered similar in this respect.39 The social security benefit in fact was provided for widows/widowers and not for surviving partners of same-sex unions. Sexual orientation may be particularly relevant with respect to EU acts dealing with family status and with freedom of movement of EU citizens. Directive 2004/ 38/EC does not distinguish between same-sex and different-sex spouses, and its Article 3.2 imposes on EU MS a duty to facilitate entry and residence of any family members of an EU citizen. This is particularly relevant when family members are third-country nationals, as they do not enjoy an independent right of free movement. Different treatments may also stem from the Directive’s provision according to which MS shall facilitate the entry and residence of de facto partners of EU citizens only if the partners shared the same household in the country from which they have come, or where there exists a “durable relationship” between them, which must be “duly attested”. By contrast, the obligation is not conditional on the existence in the host MS of a form of registered partnership considered equivalent to marriage. If conditions are satisfied, the host MS is obliged to “facilitate entry and residence” of the partner, considering carefully the personal circumstances of the person concerned and justifying any denial. The EP has already invited the Commission to issue guidelines on the proper implementation of Directive 2004/38/EC on the free movement of citizens and their family members and on Directive 2003/86/EC on the right to family reunification of third-country nationals to “ensure respect for all forms of families legally recognised under Member States’ national laws.”40 The EP also invited the Commission to “make proposals for the mutual recognition of the effects of all civil status documents across the EU, in order to reduce discriminatory legal and administrative barriers for citizens and their families who exercise their right to free movement.” Similarly, the Fundamental Rights Agency addressed these issues in the context of a comprehensive comparative legal analysis on “Protection against discrimination

38

Case C-267/06, Maruko (ECJ 1 April 2008); Case C-147/08, Römer (ECJ 10 May 2011). Case C-423/04, Richards (ECJ 27 April 2006). 40 Resolution on the fight against homophobia in Europe, P7_TA(2012) 0222, Brussels, 24 May 2012; Resolution on the EU Roadmap against homophobia and discrimination on grounds of sexual orientation and gender identity, P7_TA(2014) 0062, Brussels, 4 February, 2014. 39

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on grounds of sexual orientation, gender identity and sex characteristics in the EU.”41

3.5. Age

27

28

29

The specific consideration of age in Article 19 TFEU is one of the biggest innovations both compared to the EU legal order and national and international law. Only a few MS actually had legislation against discrimination on grounds of age, and only part of the collective agreements consider the rights of aged people, despite the fact that surveys on European population demonstrate that the protection of older people is one of the priority issues of social policies. Article 19 TFEU contains the reference to age in the same way as Article 21 EUCFR. In Articles 24 and 25 EUCFR there are specific protections respectively of the rights of children and of the elderly, both in Title III relating to equality. Article 19 TFEU must be interpreted as relating to both the age of the elderly and minors, although the discrimination suffered by the elderly population has aroused greater interest both from the legislator and from public opinion. To give the concept certainty reference must be made exclusively to chronological criterion, and not to a state of mind that can be related to youth or old age regardless of the actual birth date registered. The vast majority of the judgments of the Court of Justice concerning discrimination were based on age, and in particular advanced age. There are numerous cases in which pension schemes and/or mandatory retirement ages were assessed in the light of the prohibition of discrimination on grounds of age as laid down in the Directive. The Court thus had the opportunity to point out that to achieve legitimate objectives of social policy, such as those related to employment policy, the labour market or vocational training, the MS may provide for differences in treatment based on age.42 Among such objectives are the need to establish “an age structure that balances young and older civil servants in order to encourage the recruitment and promotion of young people, to improve personnel management and thereby to prevent possible disputes concerning employees’ fitness to work beyond a certain age, while at the same time seeking to provide a high-quality justice service, can constitute a legitimate aim of employment and labour market policy.”43 However, to rule out discrimination on grounds of age the legitimate aim pursued must be appropriate and necessary, namely, that national provisions do not go beyond what is necessary to achieve the purpose and do not cause excessive injury to the 41 Protection against discrimination on grounds of sexual orientation, gender identity and sex characteristics in the EU—Comparative legal analysis—Update 2015, December 2015. Available at http://fra.europa.eu/en/publication/2015/lgbti-comparative-legal-update-2015. 42 Case C-388/07, Age Concern England (ECJ 5 March 2009) para 46; Case C-88/08, Hütter (ECJ 18 June 2009) para 41; Case C-447/09, Prigge (ECJ 12 September 2011) para 81; Case C-530/13, Schmitzer (ECJ 11 November 2014). 43 Case C-159/10, Fuchs e Köhler (ECJ 21 July 2011) para 50.

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interests of the people to whom those provisions refer, considering both the damage they can cause to the people involved and the benefits that derive to society as a whole and the individuals who make up this society.44 The CJEU has also had occasion to state that the discriminatory aspect of a maximum age limit for access or for the termination of a profession is excluded if it is an essential and genuine requirement of the work, and that the reasonableness of the limit provided for shall be decided case by case.45

4.

30

The First Implementation and New Directives on Discrimination Based on Sex

The implementation of Article 19 TFEU has been particularly swift. The Treaty of Amsterdam came into force on 1 May 1999 and on 25 November, the Commission then presented the package of proposals to implement Article 19, which was approved in all its parts on 27 November 2000. This package of measures consisted of Directive 2000/43/EC that implemented the principle of equal treatment between persons irrespective of racial or ethnic origin;46 that establishes a general framework for equal treatment in employment and working conditions and by Council Decision 2000/750/EC which had established the first Action programme in the fight against discrimination (2001–2006).47 The Directives implementing Article 19 TFEU are called “second-generation directives”, because compared to those previously adopted concerning discrimination on grounds of sex, they regulated a comprehensive system of protection against discrimination that was, for the first time, structured and detailed and based on the abundant case law that the Court of Justice had developed in the field of discrimination on grounds of nationality and sex. The result was a codification of the concepts of discrimination and of a three-phase system of application of the rule: comparison between two similar situations, the verification of the existence of a disadvantage and the exclusion of a justification for discriminatory treatment.48 44

Case C-45/09, Rosenbladt (ECJ 12 October 2010) para 73; Case C-286/12, Commission v Hungary (6 November 2012); Case C-250/09, Georgiev (ECJ 18 November 2010); Case C-297/ 10, Hennings (ECJ, 8 September 2011); Case C-530/13, Schmitzer (ECJ 11 November 2014); Case C-417/13, Starjakob (ECJ 28 January 2015); Case C-515/13, Ingeniørforeningen i Danmark (ECJ 26 February 2015). 45 Case C-229/08, Wolf (ECJ 12.01.2010); Case C-416/13, Vital Pérez (ECJ 13 November 2014); Case C-447/09, Prigge (ECJ 12 September 2011) para 65-76; Case C-341/08, Petersen (ECJ 12 January 2010) para 44–64. 46 See Council Directive 2000/43/EC implementing the principle of equal treatment between persons irrespective of racial or ethnic origin, O.J. L 180/22 (2000). 47 See Council Directive 2000/78/EC establishing a general framework for equal treatment in employment and occupation, O.J. L 303/16; Council Decision (EC) No 2000/750 establishing a Community action programme to combat discrimination (2001 to 2006), O.J. L 303/23 (2000). 48 Case C-83/14, CHEZ Razpredelenie Bulgaria (ECJ 16 July 2015).

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The Directives, which are identical in many parts, contain comprehensive regulations that identify a system of broad protection, with reference to the notion of discrimination, sanctions and remedies, including the locus standi of collective subjects and the shift of the burden of proof.49 Directive 2000/43 deals exclusively with discrimination on grounds of race and ethnicity, while Directive 2000/ 78 concerns all the other grounds with the exclusion of sex (religion and belief, disability, age, sexual orientation); moreover, the former has a wider material scope of application, while the latter is limited to the employment sector. The package of measures to implement Article 19 TFEU was largely inspired by the legislation and action programmes adopted to implement Article 157 TFEU. In turn, the Directives of 2000 created the need to amend the law on discrimination on grounds of sex. Directive 2002/73/EC of 23 September 2002 was thus adopted.50 Although the need for this change is found in Article 19 TFEU, Directive 2002/73/ EC has its legal basis in Article 157 TFEU, as a special rule under Article 19 TFEU. Later, in 2006, Directive 76/207/EEC was the subject of another legislative regulatory intervention.51 The origins of this intervention are entirely different to the previous ones. It came about in the wake of the European institutions’ activity aiming to improve and simplify the state of EU law.52 The legislative activism on the subject ended with the adoption of Directive 2004/113/EC, which implemented the principle of equal treatment between men and women on access to goods and services and their supply.53 This Directive has legal basis in Article 19 TFEU and aims to extend the scope of the prohibition of discrimination on grounds of sex to a sector other than employment. The different legal bases, therefore, tend to generate different regulations while having the same object, which undermines any attempt at simplification that the institutions, as we have seen, wished to pursue. For example, the notions of discrimination are reiterated in both Directives, repeating the definitions provided by the Directives of 2000, as well as the provisions on the judgment of discrimination.

49

Case C-415/10, Meister (19 April 2012); Case C-246/09, Bulicke (ECJ 8 July 2010); Case C429/12, Pohl (ECJ 16 January 2014). 50 See Directive 2002/73/EC of the European Parliament and of the Council amending Council Directive 76/207/EEC on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions, O.J. L 269/15 (2002). 51 Council Directive 2006/54/EC on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation (recast), O.J. L 204/ 23 (2006), envisaged the recasting of the normative content of Directives 75/117/EEC, 76/207/ EEC, 86/378/EEC and 97/80/EC, which were at the same time repealed with effect from 15 August 2009. 52 Unlike consolidation and codification, recasting makes it possible both to bring together regulatory acts relating to the same matter in a single text and to make to any changes required to the regulations based, for example, on the fundamental judgments of the Court of Justice. 53 Council Directive 2004/113/EC implementing the principle of equal treatment between men and women in the access to and supply of goods and services, O.J. L 373/37 (2004).

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The European Commission in 2008 put forward a proposal aiming to extend the scope of Directive 2000/78/EC to the same fields already covered by Directive 2000/43/EC.54 However, several MS have expressed their opposition to the proposal and the Council has not yet been able to reach the majority needed to approve it. Despite slight differences among MS’ positions, their opposition is mainly grounded on the following reasons: failure to respect the principles of subsidiarity and proportionality; lack of legal clarity; existing case law (including infringement proceedings stemming from the other EU anti-discrimination Directives); the need for an impact assessment (a cost-benefit analysis and an assessment of the burden the proposal would impose on private businesses); and the scope of the Directive (certain delegations being opposed to the inclusion of social protection and education). While during the Italian Presidency in the second half of 2014 a consensus was close to being reached, recently the opposition side appears to have become larger. It is worth mentioning that Germany has been against the proposal since its publication, influencing the whole negotiation process. Negotiations within the Council are still going on, but with still different views among MS as the progress reports published by the Council show.55

5.

36

The Relationship with the General Principle of Non-discrimination and with the Charter of Fundamental Rights

Article 19 TFEU, in addition to conferring competence to the Union to adopt legal measures to combat against discrimination, integrates the content of the general principle of non-discrimination. It is well known that the ECJ has recognised a general principle of non-discrimination and of equality in the specific prohibitions laid out in the Treaties.56 To apply the general principle, it is necessary to establish which grounds are relevant as against those that are not and the list provided for at Article 19 TFEU is especially relevant. However, in one of its earliest judgments, the CJEU expressed a very strict interpretation in this regard, although the judgment was passed after the signing of the Treaty of Amsterdam but before the entry into force of this Treaty. The CJEU did in fact deny that protection from discrimination on the grounds of sexual orientation was covered by Community law. The CJEU deemed that discrimination based on sexual orientation did not fall under the notion of sex as laid down in Article 141 TEC (now Article 157 TFEU), nor could it be protected based on a general principle, despite the fact that this was specifically contemplated in Article

54 Commission, Proposal for a Council Directive on implementing the principle of equal treatment between persons irrespective of religion or belief, disability, age or sexual orientation, COM (2008)426 of 2 July 2008. 55 Progress Report, Doc. Cons. No. 14284/16 of 22 November 2016, p. 3. 56 Somek (1999) and Lenaerts (1991).

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13 TEC (now Article 19 TFEU).57 The CJEU had thus denied protection to discrimination on grounds of sexual orientation, ruling that Article 13 TEC (now Article 19 TFEU) was only an enabling provision conferring competence without integrating the content of the general principle of non-discrimination. Some years later, the interpretation of the ECJ shifted decidedly and it went on to recognise the full effect of the general principle of non-discrimination in the light of Article 19 TFEU and of the values that may be inferred from any EU provisions. This means that the ECJ may consider a provision to be in contrast with a general principle of non-discrimination even for a reason that is not expressly mentioned in non-discrimination laws but that is deemed to be covered by EU law, as integrated by other legal sources, such as common constitutional traditions or international rules. To this end, the provisions on human rights are particularly important. The ECJ itself has on certain occasions referred to the principle of non-discrimination as a human right and the EUCFR is of the utmost importance in this regard. In the famous Mangold case, the ECJ not only expressed the existence of a general principle prohibiting discrimination on ground of age, but also made clear that this principle can produce horizontal direct effects and clearly stated that there was a relationship to Directive 2000/78/EC adopted under Article 19 TFEU.58 The two parties involved in the case were private citizens, an employer and an employee, who disputed the compatibility of the national provisions on fixed-term work with Article 8 of Directive 1999/70/EC, as well as the prohibition of age discrimination contained in Directive 2000/78/EC. The ECJ ruled that the national provision was not in conformity with the Directive as it contained a difference in treatment linked solely to age, without considering other aspects linked to the structure of the job market or the personal situation of the workers affected. The unusual nature of the case was that at the time of the dispute Directive 2000/78/EC had not yet transposed into national law; neither had the deadline for its implementation expired. In fact, Germany had taken advantage of the permitted 3-year period that may elapse before implementing provisions dealing with age discrimination under Article 18 of the same Directive. Nevertheless, the ECJ relied on its case law according to which, pending the deadline for implementation, states shall refrain from enacting provisions that may compromise the effective achievement of the outcome sought by the Directive. Moreover, according to the well-established case law of the Court, directives cannot entail direct effect in disputes between private parties (direct horizontal effect). Yet, whilst confirming this case law, in Mangold the Court required the referring judge to disapply the national rule which was in breach of the principle of non-discrimination on grounds of age, whose existence was affirmed for the first time in this case. Indeed, the Court affirmed that “Directive 2000/78 does not itself lay down the principle of equal treatment in the field of employment and occupation. Indeed, under Article 1 thereof, the sole purpose of the Directive is ‘to lay

57 58

Case C-249/96, Grant (ECJ 17 February 1998). Case C-144/04, Mangold (ECJ 22 November 2005).

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down a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation’, the source of the actual principle underlying the prohibition of those forms of discrimination being found, as is clear from the third and fourth recitals in the preamble to the Directive, in various international instruments and in the constitutional traditions common to the Member States.”59 Four years later the ECJ returned to the issue with the case Kücükdeveci.60 Ms. Kücükdeveci was dismissed with a notice period proportional to her length of the employment relationship, excluding the period of service completed under the age of 25. Ms. Kücükdeveci challenged the dismissal before national courts on grounds of age discrimination contrary to EU law. The ECJ invoked the widely criticised Mangold precedent, restating one of the core points of that judgment, i.e. that nondiscrimination on the grounds of age is a general principle of EU law and part of the general principles of equality and non-discrimination. Directive 2000/78/EC gives specific expression to it and lays down a framework to strengthen its application. The ECJ also confirmed that the sources of that general principle are Treaties, the constitutional traditions common to the MS and Article 21 EUCFR. One considerable difference between Mangold and Kücükdeveci is that in the latter case the time for implementing Directive 2000/78/EC had already expired. In Kücükdeveci, there was no question of anticipatory effects of a directive, but only a question about the scope of application of a general principle of EU law. Whilst in Mangold, the link between the national situation and EU law was given by the application of the Council Directive 1999/70/EEC, Kücükdeveci originated from a referral in which the only provision of EU law in question was Directive 2000/78/EC and the only national provision to be applied was Section 622.1 BGB. The latter was deemed to fall within the scope of EU law because it concerned dismissal, expressly mentioned in Article 3.1 of Directive 2000/78/EC, and the time of implementation was elapsed. Hence, Directive 2000/78/EC applies when the situation falls within the large areas of competence listed in its Article 3, even if there is no other relevant EU rule. The link between EU law and national law can “only” be given by Directive 2000/78/EC, which, in turn, entails the application of EU general principles and fundamental rights and widens their scope. One could argue that, after Directive 2000/78/EC entered into force and the time for implementation had expired, all the general principles of EU law apply in the described areas.61 In 2016 the CJEU added an important precision to its Mangold-Kücükdeveci case law, clarifying that neither the principles of legal certainty and the protection of legitimate expectations nor the possibility to claim liability of the state for the violation of EU law can alter the obligation of a national court, hearing a case between private parties, to disapply national legislation which is in contrast with the general principle prohibiting age discrimination, when the conflict cannot be solved

59

Case C-144/04, Mangold (ECJ 22 November 2005) para 74. Case C-555/07, Kücükdeveci (ECJ 19 January 2010). 61 Case C-356/12, Glatzel (ECJ 22 May 2014); Case C-147/08, Römer (10 May 2011). 60

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through consistent interpretation of the domestic legislation with EU law.62 The Court of Justice reiterated the same reasoning developed in Kücükdeveci: directives lack direct horizontal effect. However, Directive 2000/78/EC merely gives expression to the general principle of EU law prohibiting age discrimination, which is also enshrined in Article 21 of the Charter and applies in all situations falling within the scope of EU law.

List of Cases ECJ

ECJ 04.12.1974, 41/74, Van Duyn, ECR 1337 [cit. in para 15] ECJ 27.10.1976, 130/75, Prais c. Consiglio, ECR 1589 [cit. in para 15] ECJ 30.04.1996, C-13/94, P. c. S., ECR I-2143 [cit. in para 24] ECJ 17.02.1998, C-249/96, Grant, ECR I-1781 [cit. in para 4, 25, 40] ECJ 22.11.2005, C-144/04, Mangold, ECR I-9981 [cit. in para 41] ECJ 27.04.2006, C-423/04, Richards, ECR I-03585 [cit. in para 25] ECJ 11.07.2006, C-13/05,Chacón Navas, ECR I-6467 [cit. in para 5, 21] ECJ 01.04.2008, C-267/06, Maruko, ECR I-1757 [cit. in para 25] ECJ 28.07.2008, C-303/06, Coleman, 2008 I-05603 [cit in para. 22]. ECJ 10.07.2008, C-54/07, Feryn, ECR I-5187 [cit. in para 12] ECJ 05.03.2009, C-388/07, Age Concern England, ECR I-1569 [cit. in para 30] ECJ 18.06.2009, C-88/08, Hütter, ECR I-5325 [cit. in para 30] ECJ 12.01.2010, C-229/08, Wolf, ECR I-1 [cit. in para 30] ECJ 12.01.2010, C-341/08, Petersen, ECR I-47 [cit. in para 30] ECJ 19.01.2010, C-555/07, Kücükdeveci, ECR I-00365 [cit. in para 43] ECJ 08.07.2010, C-246/09, Bulicke, ECR I-7003 [cit. in para 34] ECJ 12.10.2010, C-45/09, Rosenbladt, ECR I-9391 [cit. in para 30] ECJ 18.11.2010, C-250/09, Georgiev, ECR I-11869 [cit. in para 30] ECJ 10.05.2011, C-147/08, Römer, ECR I-3591 [cit. in para 25, 43] ECJ 07.07.2011, C-310/10, Agafiţei, ECR I-5989 [cit. in para 5] ECJ 21.07.2011, C-159/10, Fuchs and Köhler, ECR I-6919 [cit. in para 30] ECJ 08.09.2011, C-297/10, Hennings, ECR I-7965 [cit. in para 30] ECJ 12.09.2011, C-447/09, Prigge, ECR I-8003 [cit. in para 30] ECJ 19.04.2012, C-415/10, Meister, ECLI:EU:C:2012:217 [cit. in para 34] ECJ 24.04.2012, C-571/10, Kamberaj, ECLI:EU:C:2012:233 [cit. in para 5] ECJ 06.11.2012, C-286/12, Commision v. Hungary, ECLI:EU:C:2012:687 [cit. in para 30] ECJ 18.03.2013, C-363/12, Z, ECLI:EU:C:2014:159 [cit. in para 21, 22] ECJ 11.04.2013, C-335/11, HK Danmark, ECLI:EU:C:2013:222 [cit. in para 22] ECJ 25.04.2013, C-81/12, Accept, ECLI:EU:C:2013:275 [cit. in para 24] 62

Case C-441/14, Dansk Industri (DI) (ECJ 19 April 2016).

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ECJ 4.07.2013, C-312/11, Commission v Italy, ECLI:EU:C:2013:446 [cit. in para 22] ECJ 16.01.2014, C-429/12, Pohl, ECLI:EU:C:2014:12 [cit. in para 34] ECJ 22.05.2014, C-356/12, Glatzel, ECLI:EU:C:2014:350 [cit. in para 43] ECJ 11.11.2014, C-530/13, Schmitzer, ECLI:EU:C:2014:2359 [cit. in para 30] ECJ 13.11.2014, C-416/13, Vital Pérez, ECLI:EU:C:2014:2371 [cit. in para 31] ECJ 18.12.2014, C-354/13, FOA, ECLI:EU:C:2014:2463 [cit. in para 21] ECJ 28.01.2015, C-417/13, Starjakob, ECLI:EU:C:2015:38 [cit. in para 30] ECJ 26.02.2015, C-515/13, Ingeniørforeningen i Danmark, ECLI:EU:C:2015:115 [cit. in para 30] ECJ 16.07.2015, CHEZ Razpredelenie Bulgaria, ECLI:EU:C:2015:480, [cit. in para. 8, 33] ECJ 19.04.2016, C-441/14 Dansk Industri (DI), ECLI:EU:C:2016:278, [cit. in para. 44] ECJ 14.03.2017, C-188/15, Bougnaoui, ECLI:EU:C:2017:204, [cit. in para. 16-18] ECJ 14.03.2017, C-157/15, G4S Secure Solutions, ECLI:EU:C:2017:203, [cit. in para. 16-18] ECJ 25.02.2021, Opinion of AG Rantos, IX v. WABE et al., ECLI:EU:C:2021:144 [cit. in para 47 et seqq., 60 et seqq., 71, 74 et seqq., 89, 112]

ECtHR

ECtHR 16.05.1980, 7511/76, Campbell and Cosans v UK [cit. in para 12] ECtHR 25.05.1993, 14307/88, Kokkinakis v Greece [cit. in para 12] ECtHR 24.02.1998, 23372/94, Larissis and others v Greece [cit. in para 12] ECtHR18.02.1999, 24645/94, Buscarini and others v San Marino [cit. in para 12] ECtHR 29.04.1999, 25088/94, Chassagnou and others v France [cit. in para 14] ECtHR 18.03.2011, 7511/76, Lautsi v Italy [cit. in para 12]

References63 Barbera, M. (2002). Not the same? The judicial role in the new community anti-discrimination law context. Industrial Law Journal, 31, 82–91. Bell, M. (1999). The new Article 13 EC treaty: A sound basis for European anti-discrimination law? Maastricht Journal of European and Comparative Law, 6, 5–23. Bell, M., & Waddington, L. (1996). The 1996 intergovernmental conference and the prospects of a non-discrimination treaty article. Industrial Law Journal, 25, 320–336. Ceccherini, E. (2001). Il principio di discriminazione in base all’orientamento sessuale. Un breve sguardo sullo stato del dibattito nelle esperienze costituzionali straniere. Diritto pubblico comparato ed europeo, 39–60. Favalli, S., & Ferri, D. (2016). Defining disability in the EU non-discrimination legislation: Judicial activism and legislative restraints. European Public Law, 22(3), 3. 63

All cited internet sources in this comment have been accessed on 9 December 2019.

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Favilli, C., & Lazzerini, N. (2017). Discrimination(s) as emerging from petitions received (pp. 9– 37). Brussels: European Parliament. Flynn, L. (1999). The implications of Article 13 EC – After Amsterdam, will some forms of discrimination be more equal than others? Common Market Law of Review, 36, 1127–1152. Lenaerts, K. (1991). L’égalité de traitement en droit communautaire: un principe unique aux apparences multiples. Cahiers de droit européen, 3–41. Lengauer, A. (1999). The new general principle of non-discrimination in the EC treaty as amended by the treaty of Amsterdam. Austrian Journal of European and International Law, 3, 369–395. Somek, A. (1999). A constitution for antidiscrimination: Exploring the vanguard moment of community law. European Law Journal, 5, 243–271. Waddington, L. (1999). Testing the limits of the EC treaty on non-discrimination. Industrial Law Journal, 28, 133–152.

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Article 20 [Union Citizenship] (ex-Article 17 TEC) 1. Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union. Citizenship of the Union shall be additional to and not replace national citizenship.22-32 2. Citizens of the Union shall enjoy the rights and be subject to the duties provided for in the Treaties. They shall have, inter alia:17 (a) the right to move and reside freely within the territory of the Member States; (b) the right to vote and to stand as candidates in elections to the European Parliament and in municipal elections in their Member State of residence, under the same conditions as nationals of that State; (c) the right to enjoy, in the territory of a third country in which the Member State of which they are nationals is not represented, the protection of the diplomatic and consular authorities of any Member State on the same conditions as the nationals of that State; (d) the right to petition the European Parliament, to apply to the European Ombudsman, and to address the institutions and advisory bodies of the Union in any of the Treaty languages and to obtain a reply in the same language. These rights shall be exercised in accordance with the conditions and limits defined by the Treaties and by the measures adopted thereunder.18

Contents 1. 2. 3. 4.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Development of the Idea of Union Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The Meaning of the Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 The Single Elements of Union Citizenship and the Further Development of the Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 5. Acquisition and Loss of Union Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 6. Subjects and Addressees of Union Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 7. The Development of the Concept of Union Citizenship by the ECJ . . . . . . . . . . . . . . . . . . . . . . 39 8. The “Substance of Union Citizenship”: The Zambrano Case and the Subsequent Jurisprudence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 9. The New Restrictiveness of the ECJ as to the Enjoyment of Social Benefits by Union Citizens: Dano, Garcia Nieto and Alimanovic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 List of Cases References

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Introduction

The provisions on EU citizenship have been introduced in EU law by the Treaty of Maastricht (Articles 8 to 8c EC). These provisions have been subject to some minor revisions by the subsequent Treaties of Amsterdam (1997), Nice (2001) and Lisbon (2007). The Treaty of Amsterdam clarified that citizenship of the Union “shall be additional to and not replace national citizenship” while by the Treaty of Lisbon Union citizenship was regulated not only in the TFEU (Articles 20 to 25) but additionally in the TEU (Articles 3 and 9 TEU), thereby emphasising the high symbolic and inspirational value of this concept. However, as has been broadly documented in literature, the history of Union citizenship does not start in 1992 but dates far back to the very beginnings of European integration. Already in the preamble of the EEC Treaty of 1957, the founding MS expressed their desire “to lay the foundations of an ever closer union among the peoples of Europe.”1 The creation of a union citizenship has been seen as a formidable instrument to enact such a greater cohesion within the EU. The development of the concept of the Union citizenship is therefore to be seen in close connection with the European integration process and the development of the very idea of a European Union. In fact, while in 1957 European integration was largely seen as a phenomenon of international law to be furthered by the instruments of this order and with the MS as the main driving forces, in the 1960s this perspective was somewhat re-framed with the Van Gend en Loos Decision of 1963 where the ECJ identified the Community as a new legal order provided with direct effect and the Costa/E.N.E.L. decision (1964) where the ECJ stated the supremacy of Community law over the law of the MS. This jurisprudence shifted the attention from MS towards the individual and this process should continue forcefully in the following. The individual was identified as the main driving force for European integration: The citizen should be both the primary beneficiary as the primary driving force for further EU integration. Those powers within the EU that advocated the idea of an “ever closer Union” portrayed the Union citizens as the main addressees of their efforts and thereby tried to forge an alliance with them to further the integration project in the most efficient way. In societal systems becoming ever more individualistic, this was the most logical strategy. European integration could not go much beyond traditional economic integration efforts without transposing the focus of this process from the governments to the individual. This process took place at two different levels. First, a new understanding of economic processes came up according to which it became clear that the profits of transnational economic cooperation are not primarily for states as it was held in the past

1

See the first indent of the EEC Treaty Preamble of 1957 and now the ninth indent of the preamble of the TEU and Article 1.2 TEU.

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according to an economic philosophy still much influenced by mercantilist thought2 but for individuals.3 Further empowering the individual in such a system should enhance economic efficiency. Second, it has become clear that economic empowerment is closely related to political empowerment. The demand for further political rights would flow naturally from the concession of economic rights that involved broad rights and obligations of participation in wide-ranging societal processes. Of course, these developments met with considerable resistance by the governments of the MS, eager to defend their sovereign rights. This was also the main reason why after the introduction by the Treaty of Maastricht Union citizenship saw no relevant further extension on the level of primary law and the flexibility clause in Article 25 TFEU was not made use of up to this date. Nonetheless, the provisions on Unions citizenship were, as some authors put it, “by their very nature destined to consolidate and develop”4 and it was therefore up to the ECJ to “put flesh on the bones”5 on this concept. As it is not part of this Court’s mandate to engage in lawcreating processes, the ECJ had to proceed very carefully with this task. As will be shown, the ECJ might have given important contributions for the further development of Union citizenship but it has never lost sight of the overall political climate. When resistance against a further transnational empowerment of the Union citizen grew too strong, the ECJ was also prepared to set some steps back. This aspect has become particularly relevant in the context of social rights Union citizens intend to exercise in other MS.

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The Development of the Idea of Union Citizenship

As mentioned, the concept of Union citizenship has roots that can be traced far back to history. It can be seen as a process with different roots.6 It refers to a pre2 Of course, mercantilism as a school of economic thought is long passé but nonetheless the practice of trade negotiations and the actual behaviour of states in international trade relations were long strongly influenced by this philosophy in the first decades of European integration and continue to be so up to these days. 3 To a certain extent, this struggle between a governmental and an individualistic approach towards trade relations reflects the contraposition between the prevailing French and German philosophies in this field. As is well-known, the former has long been (and to a certain extent continues to be) informed by the idea of “planification”, the conviction that a wise central bureaucracy should be the main architect of the trade infrastructure while the German ordo-liberal model, conceived mainly by Alfred Müller-Armack and Walter Eucken and afterwards strongly advocated by legal philosophers such as Ernst-Ulrich Petersmann emphasises more the initiative by the individual. 4 See Giegerich (2015), para 14 (“auf Zuwachs angelegt”). 5 For this expression, see O’Leary (1999). 6 See Rabenschlag (2009), p. 50 et seq. who, as to these roots, refers to the concept of “integration through law”, to the various efforts to democratise the EEC and to the attempt to devise a collective identity of nationals of the MS. On the development of Union citizenship, see also Kadelbach (2014), para 4 et seq. and Tryfonidou (2016).

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national historical situation in which the citizen owned a status characterised by a whole plethora of economic and political rights (and corresponding duties) without their existing an exclusive relationship with one social entity requiring absolute and unconditional loyalty. In this sense, Union citizenship evokes associations with the status of citizens in Italian “city states” of the Middle Ages, but also with the position of the individual in the Holy Roman Empire subdivided after 1648 into more than 300 entities sharing their sovereignty with that of the Empire.7 To the “fathers of European integration”, Jean Monnet and Robert Schuman, it was clear from the very beginnings that for this integration project to succeed it had to find support not only by states but also by the “common people”.8 It is said that Jean Monnet already in 1955 had pronounced the following: “We do not create a union of States. We unite people.”9 In the 1960s, various elements emerged that hinted at the emergence of a new actor in EEC law: Already in 1961, the European Commission referred to a “citoyenneté européenne” in the context of free movement within the Common Market.10 In the same year Pierre Duclos qualified the “European” as an “emerging legal category”, while in 1964 Hans-Peter Ipsen introduced the concept of the “market citizen” (“Marktbürger”) and the ECJ started to qualify the citizens of MS as “nationals within the Community”.11,12 At the end of the 1960s and in the first half of the 1970s, the governments of the MS relied on the concept of Union citizenship (in its different variations and in part only indirectly) to relaunch the integration process in the Council and in the European Council that had suffered by internal conflicts (for example, as to the opening of the agricultural markets, strongly opposed by France) and the upcoming world-wide economic crisis. In this sense, the citizen became a means to the end, i.e. a pretext to justify politically stronger efforts to intensify integration. At the summit of The Hague of 1/2 December 1969 the heads of state or government gave the foreign ministers the mandate to look for ways to achieve progress in the attempt to create a political union.13 At the Paris summit (9/10 December 1974) the setting up of a working party was agreed that should “study the conditions and the timing under which the citizens of the nine Member States could be given special rights as members of the Community.”14 In a report presented by Belgian Premier Leo Tindemans in 197515 a “Citizen’s Europe” was proposed that should bring Europe closer to its citizens by providing enhanced protection of

7

See Hilpold (2014b), para 98. See Fischer (1997), p. 247. 9 See Kotalakidis (2000) and Hilpold (2014b), p. 35. 10 See Hatje, in Schwarze (2012), Article 20 AEUV para 3. 11 Case 48/65, Lütticke (ECJ 1 March 1966) p. 210. 12 See Schönberger, in Grabitz et al. (2012), Article 20 AEUV para 7–8, with further references. 13 Para 15 of the final communiqué. 14 See the Final communiqué of the Paris Summit (9/10 December 1974), para 11. 15 Bull. EC, Supplement 1/76. 8

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rights (regulating fundamental rights, consumer rights and environmental rights and introducing a right for individuals to appeal directly to the Court of Justice against an act of an institution in violation of fundamental rights), by the introduction of direct election to the EP and by the establishment of “external signs of solidarity” (leading in particular to the gradual disappearance of frontier controls on persons, to a “passport union” and to a “Health Europe” based on the simplification of procedures for refunding medical expenses incurred by Union citizens in another MS). All these endeavours brought about some material results (since 1976 the EP is elected directly, in 1977 the EP issued together with the Council and the Commission a Joint Declaration on Fundamental Rights16 and the Pass Union became reality in 1985). Generally, however, the external circumstances were not very propitious for an enhancement of European integration as the MS were stuck in a deep economic and political crisis. Only in the 1980s the movement for the creation of a Union citizenship gained new momentum: On 14 February 1984 the EP adopted a draft Treaty on European Union (“Spinelli draft”) that first used the concept of “Union citizenship”. This draft already contained the following provision expressing essential elements of what should later make out Union citizenship:

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The citizens of the Member States shall ipso facto be citizens of the Union. Citizenship of the Union shall be dependent upon citizenship of a Member State; it may not be independently acquired or forfeited. Citizens of the Union shall take part in the political life of the Union in the forms laid down by this Treaty, enjoy the rights granted to them by the legal system of the Union and be subject to its laws.17

The first major substantial treaty revision, the Single European Act of 1985, which entered into force on 1 July 1987, did not, however, refer to Union citizenship. A series of clarifications had yet to be undertaken and to this end the European Council meeting in Fontainebleau in June 1984 set up an ad hoc Committee on a People’s Europe directed by Pietro Adonnino. The Adonnino Report of 1985 already spelled out in much detail the programme for what later should become Union citizenship under Articles 20 et seq. TFEU: The aim of the Committee is to propose arrangements which will be of direct relevance to Community citizens and which will visibly offer them tangible benefits in their everyday lives. Emphasis is laid on arrangements which have a realistic chance of being implemented in the relatively short term. The goal should be an easing of rules and practices which cause irritation to Community citizens. This is of great importance in making the Community more credible in the eyes of its citizens.18

16

See Joint Declaration by the European Parliament, the Council and the Commission, O.J. C 103/1 (1977). 17 See Draft Treaty establishing the European Union, O.J. C 77/33 (1984). 18 Report from the ad hoc Committee on a People’s Europe (1985), para 2.

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It can therefore be said that the Adonnino Report was highly influential but this influence could unfold only on the longer run, when also the necessary political support was given to set such a far-reaching step. Interestingly, in positive EC law, the concept of Union citizenship (“People’s Europe”) first appeared in secondary law without any primary law basis. It was mentioned in the Erasmus Decision by the Council of 15 June 198719 and it stood at the basis of the three Directives on free movement and residence for the retired, students and those with independent means, provided that they had sufficient resources and sickness insurance (Directives 90/364/EEC, 90/365/EEC and 93/ 96/EEC) adopted by the Council in 1990.20 This trend was further taken up by the ECJ which qualified in 1987 the achievement of a people’s Europe as a “general objective of the Community.”21 In primary law, Union citizenship was introduced by the Treaty of Maastricht. This happened towards the end of the negotiations primarily from a Spanish initiative by Premier Felipe Gonzales whereby it was evidenced how strongly the establishment of such a politically highly loaded concept depends on the support by eminent European politicians. The formulation of the relevant provisions (Articles 8-8e EC) was, however, more restrictive than the Spanish proposal. At first, these provisions only repeated what was already part of existing EU law. It was therefore understandable that the first reactions in literature to the introduction of this concept were mostly negative: Some spoke of a “symbolic plaything without substantive content”,22 others “of little more than a cynical exercise in public relations”,23 of a “modest step in the history of European integration”,24 a “catchall term for existing rights”,25 a “blunder”,26 or a “metaphor”,27 where this word was surely negatively connoted as an emotionally loaded word standing for a different reality and not able to keep the promise it evokes. In the meantime, however, literature and practice takes a totally different attitude towards this concept. According to the most prudent vision, the introduction of Union citizenship had, consequently, the strengthening of already existing rights. In a more speculative, more ambitious approach one can say that Union citizenship has become the focal point of any discussion about the present status and the future direction of European integration. 19

Article 2 No. 4 of Council Decision 87/327/EEC, adopting the European Community Action Scheme for the Mobility of University Students (ERASMUS), O.J. L 166/20 (1987). 20 See Magiera, in Streinz (2012), Article 20 AEUV para 7. 21 Magiera, in Streinz (2012), Article 20 AEUV para 7, referring to Case 242/87, Commission v Council (ECJ 30 May 1989) para 29. 22 D’Oliveira (1995), p. 82. 23 See Weiler (1996). 24 See Duff (1994), p. 29. 25 Everling (1992), p. 241 et seq. 26 Isensee (1996) (“Missgriff”); Isensee speaks in this context also of “more illusion than reality” (“mehr Schein als Sein”), p. 95. 27 See Reich (2001).

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The Meaning of the Concept

Article 20 TFEU defines only who is a Union citizen and what are his or her rights and this enumeration of rights is not even exhaustive. The more so a general definition of this concept becomes of paramount importance. The ECJ and the GAs have given a series of hints for such a definition. The most renowned statement in this regard is probably the one provided by the ECJ in 1999 in Grzelczyk: “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.”28 The qualification as a “status” implies that Union citizenship consists of a set of rights that define their position as nationals of MS and therefore in a cross-border perspective. In this perspective it is also the “fundamental” and therefore the essential status, not matched by any other status Union citizens may own. The status of a Union citizen unfolds its effects in a tripolar relationship between the individual, the MS and the Union. Therefore, the rights that make out this status can be exercised in part against the MS and in part against the Union. Even in cases in which this status unfolds its effects in a bipolar relationship the third subject of this relationship is present at least at the background. In Grzelczyk, the ECJ essentially made clear that Union citizenship has to do, first, with the fight against discrimination. The concession of these status rights can therefore be seen as a confirmation and a natural continuation of the prohibition of discrimination on which all the EU law rests. Correctly, with the Treaty of Lisbon this aspect has found expression also in the structure of the TFEU where the provisions on Union citizenship follow those on non-discrimination (Articles 18 and 19). This “fundamental status” relates directly to the essential traits of EU law as far as they refer to the rights of the individual within this system. Given the preeminently economic nature of these rights, Union citizenship to a considerable extent prohibits discrimination exactly in this field. However, the nature of the EU is changing and as the political nature of this integration project gains strength so do the political aspects of Union citizenship. Here again the dynamic nature of Union citizenship comes to bear: As already hinted at, the development of Union citizenship mirrors amply that of the European integration project as a whole. As the political aspects in the European integration process become ever more important also Union citizenship develops in this direction. However, this development is not only a reactive and passive one but Union citizenship as it has been interpreted and applied in particular by the ECJ operates much proactively as to the economic and political empowerment of Union citizens in their status within the Union. The concept of Union citizenship is still of a much symbolic nature but this characteristic eventually begets also substantive consequences as it inspires and directs the

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Case C-184/99, Grzelczyk (ECJ 20 September 2001) para 31.

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creation of new rights.29 Here, the Aristotelean principle applies that the whole is more than the sum of its parts: Union citizenship as a new status constitutes a platform favouring the creation of additional, related status rights and the enlargement of the existing ones.30 The introduction of the concept of Union citizenship had therefore a consolidating effect as to the status rights already achieved rendering them more transparent, it strengthened them by providing a new ambitiously formulated framework31 and it introduced a new dynamic component leaving it open what the final trait of this concept would be. It could even be questioned whether such a “final development stage” of Union citizenship is on the horizon at all. Clearly, primary law sets a limit towards an over-extensive enlargement of this concept by the ECJ jurisprudence but judging by past pronouncements these borders are far from clear. As the German Federal Constitutional Court (BVerfG) has stated in the Maastricht Decision, “[t]he common Union citizenship established by the Maastricht Treaty forms a legal bond between the citizens of the individual Member States which is designed to be lasting; it is not characterised by an intensity comparable to that which follows from common membership in a single State, but it does lend legally binding expression to that level of existential community which already exists (see in particular Article 8 b para. 1 and para. 2).”32 For the BVerfG the empowerment of the Union citizen is an instrument to enhance democratic legitimacy of European institutions provided the citizen operates in an informed way in a transparent setting. For the BVerfG the endowment of the Union citizen with special rights is therefore an important tool for rendering the newly created Union compatible with core fundamental values as they are upheld by this Court. It can therefore be said that the concept of Union citizenship was from the very beginning a constitutive element of Union law. Its main traits can be traced back to the very beginnings of European integration and at the same time this concept reaches out to the future. What was originally seen as nothing more than a restatement of existing rights soon evidenced an enormous dynamics at the hand of two driving forces: the association with the principle of non-discrimination33 and the qualification as “the fundamental status of nationals of the Member States.” In combination, both elements gave Union citizenship an enormous potential reach. If Union citizenship is a status right with no clear-cut contours and if the prohibition of discrimination applies up to the outer end of all possible extensions of this concept it is hard to imagine where EU law should not apply as soon as the

29

See in this sense Schönberger, in Grabitz et al. (2012), Article 20 AEUV para 26. Schönberger, in Grabitz et al. (2012), Article 20 AEUV para 26. 31 See Magiera, in Streinz (2012), Article 20 AEUV para 15. 32 See Cases 2 BvR 2134/92 and 2 BvR 2159/92, In Re Maastricht, BVerfGE 89, 155, p. 17. This translation is based on the translation by Wegen et al., 33 I.L.M. 388 (March, 1994). 33 See Hilpold (2008), p. 11 et seq.; Hatje, in Schwarze (2012), Article 20 AEUV para 3. 30

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Union citizen operates at least potentially in a cross-border situation.34 In addition, the ECJ has widely fathomed the extent of this concept and for some it has gone even beyond its external borders thereby raising the questions of the limits of solidarity. With the financial crisis opposition against an over-extensive interpretation of Union citizenship has grown enormously. It is therefore small wonder that in the last years as the ECJ tried to slow this dynamics in the face of strong MS opposition the rhetoric of the “fundamental status” has somewhat shifted to the background as will be shown below. As to non-discrimination more prudence applies as soon as positive measures—in particular social benefits of a non-contributory nature—are at issue.

4.

The Single Elements of Union Citizenship and the Further Development of the Concept

As “the fundamental status of nationals of the Member States” Union citizenship has a potentially very far outreach covering vast areas of the TFEU and the TEU. Article 20.2 TFEU sets this out very clearly when it states that “citizens of the Union shall enjoy the rights and be subject to the duties provided for in the Treaties.” The list of rights mentioned in Article 20 TFEU is therefore not an exhaustive one as the wording of the provision itself bears out (arg. “they shall have, inter alia. . .”). Paragraph 2 mentions the following rights:

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(a) the right to move and reside freely within the territory of the MS (Article 21 TFEU); (b) the right to vote and to stand as candidates in EP elections (Article 22.1 TFEU), and in municipal elections in their MS of residence (Article 22.2 TFEU), under the same conditions as nationals of that State (Article 22 TFEU); (c) the right to enjoy, in the territory of a third country in which the MS of which they are nationals is not represented, the protection of the diplomatic and consular authorities of any MS on the same conditions as the nationals of that State (Article 23 TFEU); (d) the right to petition the EP (Article 24.2 TFEU and Article 227 TFEU), to apply to the European Ombudsman (Article 24.3 TFEU and Article 228 TFEU), and to address the institutions and advisory bodies of the Union in any of the Treaty languages and to obtain a reply in the same language (Article 24.3 TFEU). As already hinted at and as will be further explained below these rights have been extensively interpreted and further developed by the ECJ although the treaty 34 See also Hailbronner (2004), pp. 2185–2189 and Tomuschat (2000), p. 451: “the requirement that a situation must come within the scope of application of the EC Treaty means very little and provides almost no guidance. It has become clear from the jurisprudence of the Court that almost anything can become enmeshed in the logic of freedom of movement to the extent that it tends either to facilitate or to hamper the full exercise of that right.”

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sets clear limits: “[t]hese rights shall be exercised in accordance with the conditions and limits defined by the Treaties and by the measures adopted thereunder.” Primary law offers thus an interpretative basis that can either be used to extend or to reduce reach and content of the concept of Union citizenship while secondary law, under this provision, can only serve as a tool for restriction. In fact, when the ECJ, in a first period, provided an extensive interpretation of this concept, it referred to primary law. Conversely, when it switched to a more restrictive attitude in the last years (in particular in the cases Garcia Nieto,35 Dano36 and Alimanovic37) it referred exclusively to secondary law.38 The provisions on Union citizenship could not only be revised by a formal treaty amendment under Article 48 TEU but also based on Article 25 TFEU that provides for a simplified procedure.39 Up to this moment, it has never been made use of the simplified treaty amendment procedure. Since 2010 the European Commission has been publishing a European Citizen Report in a three years interval. This Report gives regularly important hints both as to the direction the development of this concept takes and as to the specific measures the European Commission plans to adopt to make this concept more effective.

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Under Article 20.1 TFEU, the Union citizenship is “additional” and does “not replace national citizenship.” In the Amsterdam Treaty of 1997 a slightly different wording was used when it was stated that Union citizenship “shall complement” national citizenship. The difference between these two wordings may not be very far-reaching but it can be argued that according to the wording presently in force the autonomous legal nature of Union citizenship has been emphasised (notwithstanding the fact that as to its origin it depends from national citizenship).40 Generally, it is said that Union citizenship is of an “accessory nature”.41 This signifies that both acquisition and loss of Union citizenship pass through national citizenship. There is no independent Union citizenship; it is not possible to become a Union citizen without being a national of an MS and it is not possible to maintain 35

Case C-299/14, Garcia Nieto and others (ECJ 25 February 2016). Case C-333/13, Elisabeta Dano and Florin Dano v Jobcenter Leipzig (ECJ 11 November 2014). 37 Case C-67/14, Jobcenter Berlin Neukölln v Nazifa Alimanovic and other (ECJ 15 September 2015). 38 See Iliopoulou-Penot (2016), p. 1016. 39 See Haag, in von der Groeben et al. (2015), Article 20 AEUV para 12. 40 See Schönberger, in Grabitz et al. (2012), Article 20 AEUV para 31. 41 See Schönberger, in Grabitz et al. (2012), Article 20 AEUV para 32; Kolonovits, in Mayer and Stöger (2010), Article 20 AEUV para 8; Hatje, in Schwarze (2012), Article 20 AEUV para 6; Haag, in von der Groeben et al. (2015), Article 20 AEUV para 16. 36

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Union citizenship once national citizenship is lost. In this sense, while both forms of citizenship are acquired (or lost) simultaneously, national citizenship is, on the logical plane, a prius. Union citizenship both strengthens and relativises national citizenship. In fact, at the one hand Union citizenship—and the specific rights associated with this status—surely render national citizenship of any MS more valuable. At the other, Union citizenship relativises the importance of every individual national citizenship. Where it is not possible to obtain a specific national citizenship the conferral of the citizenship of another MS may provide a similar status. Acquisition and loss of national citizenship remains within the realm of national sovereignty of MS. MS were very keen not to subject this matter to any form of EU competence or harmonisation. At the time of the conclusion of the Maastricht Treaty this intent was clearly evidenced in the declaration on nationality of the MS: “The Conference declares that, wherever in the Treaty establishing the European Community reference is made to nationals of the Member States, the question whether an individual possesses the nationality of a Member State shall be settled solely by reference to the national law of the Member State concerned. Member States may declare, for information, who are to be considered their nationals for Community purposes by way of a declaration lodged with the Presidency and may amend any such declaration when necessary.”42 Various British declarations have gained wide notoriety according to which British Overseas Citizens should not be awarded the status of citizens according to EU law, as they had no right of residence in Great Britain although they were British citizens following the rules of the Empire.43 “Citizenship” is therefore not an autonomous concept of EU law, in contrast to many other concepts used in the treaty which were originally borrowed from the terminology of the national legal order (such as that of the “worker” under Article 45 TFEU).44 In a series of judgments the ECJ made clear that sovereign powers of MS are very far-reaching in this field. In Micheletti, the ECJ clarified that MS may not make recognition of the status of Community national subject to further conditions.45 In the case at hand, “habitual residence” for a subject, Mr Micheletti, who, having both the Argentine and the Italian citizenship, wanted to settle in Spain as a dentist, via his Italian passport, while the Spanish authorities retained the Argentine citizenship of Mr Micheletti, who habitually resided in Argentina, as the more effective one and wanted to deny him the right to settle in Spain according to Spanish legislation. This judgment further strengthened the relevance of Union citizenship: In fact, MS are free to determine the conditions for the acquisition of citizenship but not to

42

See Treaty on European Union, signed at Maastricht on 7 February 1992, O.J. C 191/98 (1992). See Schönberger, in Grabitz et al. (2012), Article 20 AEUV para 38; Kolonovits, in Mayer and Stöger (2010), Article 20 AEUV para 10. 44 See Magiera, in Streinz (2012), Article 20 AEUV para 26. 45 Case C-369/90, Mario Vicente Micheletti (ECJ 7 July 1992) para 11. 43

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challenge the citizenship of other MS by imposing further conditions that should apply for the recognition of citizenship as a basis for granting Union citizenship. It can therefore be said that European citizenship is derivative as to its acquisition but once it has come into being it is autonomous as to its operation and its interpretation.46 The strong position of MS when it comes to fix the conditions for the acquisition of citizenship has again been re-stated in Zhu and Chen. Mrs Chen wanted to circumvent the Chinese “one-child” policy and gave birth to her second child, Catherine Zhu, in Belfast, who not only became an Irish citizen according to the Irish jus soli principle then in force, but who endowed also her mother as her caretaker of an Union citizen with the right to move with her to Great Britain and to reside there for an indefinite period as Mrs Chen had sufficient resources not to become a burden on the public finances. For the ECJ, contrary to the position taken by Great Britain, this was not an abusive manoeuvre as it is not up to the EU to second-guess the citizenship laws of the MS.47 However, these cases cannot be overgeneralised. The autonomy the MS have when defining the conditions for the acquisition and the loss of citizenship does not signify that they could act in this field fully at their will. First, MS, while exercising this power have to respect Union law. At first, this statement might appear to stay at odds with the fact that this subject is not regulated by Union law but rather falls into the competence of MS. However, the exercise of these sovereign powers might nonetheless infringe EU law. When this happens and what are the exact limits of sovereign national powers in this field is still widely open to debate. In any case, MS action has to be proportional and it must not run counter to the principle of loyalty (Article 4.3 TEU). Of pivotal relevance in this context is the Rottmann case.48 Rottmann was an Austrian citizen who had applied for German citizenship while failing to mention that criminal proceedings were pending against him. After German authorities had come to know about these proceedings and the following condemnation they withdrew the naturalisation with retroactive effect and so Mr Rottmann who had to give up his Austrian citizenship before as Austrian law, as a matter of principle, does not permit dual citizenship,49 lost also his Union citizenship and became stateless. The question was whether this situation still laid in the sovereign (internal) competence of MS. The ECJ on the on the one hand upheld the principle formulated in Micheletti, on the other, however, strongly emphasized the importance of proportionality in all its possible expressions (proportionality in EU law, according national law, under consideration of the specific situation for the 46

See Case C-135/08, Rottmann (Opinion of AG Poiares Maduro of 30 September 2009) para 23; see also Kochenov (2013), p. 132. 47 Case C-200/02, Kunqian Catherine Zhu and Man Lavette Chen (ECJ 19 October 2004) para 39– 40. In the following Ireland changed her citizen law due to the consequences the Zhu and Chen case revealed when the jus soli principle is combined with Union citizenship. 48 Case C-135/08, Rottmann (ECJ 2 March 2010). 49 See Hilpold (2016a).

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individual). It is evident that in this reasoning the far-reaching consequences of statelessness played an important role. It can therefore be said that as a matter of principle MS are free to regulate their citizen law but at the same time national rules must have due regard to EU law. Already the withdrawal of the citizenship in one single case can have consequences that are not permitted by EU law, violating the principle of proportionality, a catchall term referring, i.e. to the principle of cooperation, international law or basic human rights. Recently, in the Tjebbes case,50 the ECJ again emphasised the importance of the proportionality principle in case of loss of nationality of an MS and thereby of Union citizenship. The Court confirmed the applicability of EU law in nationality questions and it ruled that it is legitimate for an MS to make the maintenance of the bond of nationality dependent on the existence of a genuine link between the individual and the State. If this link is missing this may entail the loss of citizenship. However, the competent authorities must have due regard to the principle of proportionality on the consequences of such a loss of citizenship of the person concerned and, if relevant, for that of the members of his or her family.51 The relevant national rules have to permit at any time an individual examination of the consequences of that loss for the persons concerned from the point of view of EU law and in particular the Charter of fundamental rights (para 41 and 45) and where appropriate, to have the person concerned recover his or her nationality ex tunc (para 42). These guarantees apply even if the loss of an MS nationality does not result in statelessness. Therefore, an automatic loss of nationality as foreseen by national legislations of some MS, for example, in case of membership with a terrorist organisation, is no longer admissible. As to the conferral of citizenship a violation of EU law can especially be given if this happens “en masse” as in this case the MS granting citizenship to third country nationals (usually against payment or in return for other services or offers such as investments) may affect the position of other MS in a considerable way. This was the case in 2014 when the Government of Malta intended to sell the Maltese citizenship or to make conferral of this citizenship dependent upon sizeable investments in this country. However, after protests by the European Commission these plans were dropped.52 Special questions arise in case of a withdrawal of an MS from the EU (as it is the case with Great Britain in 2020, “Brexit”) or if parts of MS should secede (as there are tendencies, for example, concerning Catalonia). On the first issue (withdrawal, “Brexit”), there can be no doubt that all citizens of the withdrawing MS lose their Union citizenship automatically as soon as the withdrawal takes place. A solution to the contrary (or even alone an obligation to respect the proportionality principles along the lines of the Tjebbes case) is not

50

Case C-221/17, Tjebbes and Othres v Minister van Buitenlandse Zaken (ECJ 12 March 2019). Ibid, para 40. 52 See Hilpold (2014a). 51

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provided for in Article 50 TEU and it would be irreconcilable with the practical applicability of this provision. More complex is the question of secession. In view of the special protection Union citizenship provides for citizens of MS and in consideration of the findings in the Tjebbes case where the ECJ emphasised the need to protect the fundamental rights of Union citizens and to apply in any case the proportionality principle it could be argued that a loss of Union citizenship in this case is not automatic but an obligation to negotiate for the EU and its MS should apply. Such an approach would seem all the more justified as Union citizenship is an individual right and the individual intended to maintain his or her Union citizenship might also have opted against the act of secession.

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Subjects and Addressees of Union Citizenship

The Union citizenship confers—primarily—rights to natural persons. This is a logical consequence of the fact that this concept was introduced, as shown above, exactly to bring the citizen closer to the Union and win him over as an ally in the attempt to advance the integration process. Some categories of Union citizen rights, in particular most of the political rights, also factually can only be taken advantage of by natural persons.53 The right to petition and the right to apply to the European Ombudsman can, however, be exercised also by legal persons.54 Whether there are further rights within the concept of Union citizenship that can also be taken advantage of by legal persons is open to debate. According to the prevailing position this is possible “as appropriate”.55 It could be argued that also the right to address the institutions and advisory bodies of the Union in any of the Treaty language and to obtain a reply in the same language pertains to legal persons (or, respectively, to their organs). Addressees obliged by the single elements of Union citizenship may be either the Union or the MS (or both). The addressees result—explicitly or implicitly— from the respective provisions. Thus, while the right to free movement under Article 20.2 point (a) TFEU is directed primarily against MS, the right to petition the EP under Article 20.2 point (d) TFEU has the Union itself as its addressee. The right to vote and to stand as candidates in EP elections obliges both the EU and the MS.

53

See Hatje, in Schwarze (2012), Article 20 AEUV para 11. Hatje, in Schwarze (2012), Article 20 AEUV para 11. 55 See Magiera, in Streinz (2012), Article 20 AEUV para 30; Haag, in von der Groeben et al. (2015), Article 20 AEUV para 14; Hatje, in Schwarze (2012), Article 20 AEUV para 11. Critical in this regard Kolonovits, in Mayer and Stöger (2010), Article 20 AEUV para 13, for whom an explicit provision in the treaties for such an extension is required. That legal persons could rely on the provisions on Union citizenship is, instead, categorically excluded by Lang, in Tizzano (2014), Article 20 TFUE, p. 494. In this sense also Heselhaus, in Pechstein et al. (2017), Article 20 TFEU, para 30. 54

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The Union citizen can exercise the rights flowing from this status primarily against MS he is not a citizen of. In purely internal situations the rules on Union citizenship do not apply.56 In cases, however, in which a cross-border situation is given, the Union citizen can exercise these rights also against his home state. In the field of Union citizenship, the ECJ is prepared to recognise such a cross-border situation more easily than regarding fundamental freedoms.57 As to the position of the Union citizen according to the relevant provisions he is only owner of rights and does not bear any duties. However, there are other provisions outside the field of Union citizenship, both in primary and in secondary law, that set out such duties.58 The duty for EU citizens to respect Union law and its limits is of course of a general nature and needs no further specification.59

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The Development of the Concept of Union Citizenship by the ECJ60

Already at a very early stage within the ECJ, the potential residing within the concept of Union citizenship was recognised. At first, the GAs intuited this power, while the Court remained silent. Telling was the statement by GA Léger in Boukhalfa:61 I should like to make one final remark. The Court has not yet had an opportunity to give a ruling on the ‘new’ concept of European citizenship introduced by the European Union Treaty. The recognition of European citizenship, enshrined in Articles 8 to 8e of the EC Treaty, is of considerable symbolic value and is probably one of the advances in the construction of Europe which has received most public attention. Admittedly the concept embraces aspects which have already largely been established in the development of Community law and in this respect it represents a consolidation of existing Community law. However, it is for the Court to ensure that its full scope is attained.

56 See i.e. Joined Cases C-64/97 and C-65/97, Kari Uecker and Vera Jacquet (ECJ 9 June 1997) para 23; Case C-148/02, Carlos Garcia Avello v Belgian State (ECJ 2 October 2003) para 26; Case C 192-05, Tas-Hagen and R. A. Tas (ECJ 26 October 2006) para 23; Case C-499/06, Halina Nerkowska (ECJ 22 May 2008) para 25; Case C-434/09, McCarthy (ECJ 18 December 2014) para 55 et seq.; Case C-499/06, Nerkoska (ECJ 22 May 2008) para 25 and Case C-434/09, McCarthy (ECJ 5 May 2011). 57 See Hatje, in Schwarze (2012), Article 20 AEUV para 12. 58 See Haag, in von der Groeben et al. (2015), Article 20 AEUV para 21. As Haag rightly states, explicit duties for Union citizens could be introduced only via a formal amendment to the TFEU based on Article 48 TEU and not under Article 25.2 TFEU as this provision mentions only the introduction of additional rights. For the conditions, limits and duties inherent to Union citizenship see Nic Shuibhne (2015). 59 Magiera, in Streinz (2012), Article 20 AEUV para 34. 60 See Hilpold (2008); Hilpold (2014b), para 118 et seq. 61 Case C-214/94, Ingrid Boukhalfa v Bundesrepublik Deutschland (Opinion by GA Léger of 14 November 1995) para 63.

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If all the conclusions inherent in that concept are drawn, every citizen of the Union must, whatever his nationality, enjoy exactly the same rights and be subject to the same obligations. Taken to its ultimate conclusion, the concept should lead to citizens of the Union being treated absolutely equally, irrespective of their nationality. Such equal treatment should be manifested in the same way as among nationals of one and the same State.

40

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In Konstantinidis,62 GA Jacobs vigorously emphasised the new role of the Union citizen when he formulated that “he is entitled to say ‘civis europaeus sum’”.63 At first, this may appear to be nothing more than a nice formula dressed in a Latin robe but it was nonetheless indicative of the value at least the GA was inclined to attribute to this concept. At that time, the ECJ was not yet prepared to follow this lead. In Uecker and Jacquet, the ECJ even tried hard to emphasise that the concept of Union citizenship is not suited to extent the applicability of Union law to areas which pertain to the internal competence of MS: “[I]t must be noted that citizenship of the Union, established by Article 8 of the EC Treaty, is not intended to extend the scope ratione materiae of the Treaty also to internal situations which have no link with Community law.”64 In Skanavi, it seemed that the ECJ would relegate Union citizenship to an absolutely marginal role, to a redundant concept that would not even be suited to be taken as a basis for further jurisprudential development.65 In the case at hand that regarded also the right to establishment the ECJ retained it superfluous to consider the provision on Union citizenship as the latter, according to the Court, found specific expression in the former.66 In Bickel and Franz67 it was again a GA, Francis Jacobs, who tried to explore the potential residing within this concept. He found words for it that marked the path for any further discussion in this field: “The notion of citizenship of the Union implies a commonality of rights and obligations uniting Union citizens by a common bond transcending Member State nationality. The introduction of that notion was largely inspired by the concern to bring the Union closer to its citizens and to give expression to its character as more than a purely economic union.”68 The ECJ seemed to capture the sense of this new trend but the Court nonetheless stopped short from officially embracing it. It rather tried to achieve the same result 62

Case C-168/91, Konstantinidis (ECJ 30 March 1993) para 46. Case C-168/91, Konstantinidis (Opinion of GA La Pergola of 9 December 1992). 64 Joined Cases C-64/97 and C-65/97, Kari Uecker and Vera Jacquet (ECJ 9 June 1997) para 23. 65 See Craig and de Búrca (2003), p. 756. 66 Case C-193/94, Sofia Skanavi and Konstantin Chryssanthakopoulos (ECJ 29 February 1996) para 2. 67 Case C-274/96, Bickel and Franz (ECJ 24 November 1998). For a confirmation of the principles set out in Bickel and Franz, see Case C-322/13, Grauel Rüffer/Katerina Pkorná (ECJ 27 March 2014). See, concerning this latter case, Hilpold (2014a). 68 See Case C-274/96, Bickel and Franz (Opinion of GA Francis Jacobs of 29 February 1996) para 32. 63

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by a more conventional approach enhancing freedom of move of Union citizens through an extensive interpretation of the passive freedom to provide services. However, this approach had its limits, and it was in Martinez Sala69 that the ECJ attributed autonomous life to this concept. In a somewhat haphazard reasoning70 the ECJ provided Union citizenship with new power when it combined it with the prohibition of discrimination. Thereby, a totally new potential was unearthed: If the Union citizen’s right to free movement is underpinned with a general right not to be discriminated against the principle of limited EU powers begins to crumble. Consequently, next to any issue the Union citizen may become involved with when exercising his right to free movement can fall into the realm of EU law.71 While in Martinez Sala, the ECJ avoided any emphatic language and tried hard, although not really successfully, to demonstrate continuity in its jurisprudence, in the following Grzelczyk judgment the Court left no doubt that a new epoch had dawned when it qualified Union citizenship as the “fundamental status of nationals of the MS”72 taking up thereby the formula pre-coined by GA La Pergola in the previous Martinez Sala case.73 Union citizens making use of their right to move as students in another MS was not attributed an entitlement to a non-contributory social benefit (minimex)74 in clear departure from the earlier jurisprudence in Brown.75 This was remarkable as the elements that had pre-empted the Court in Brown from such a finding were pretty much present. The education policy has still not been transferred to the Union (and this is the situation up to this day). The rudimentary elements of such a policy (see presently Article 165 and 166 TFEU) are largely of a contributory nature, i.e. the Union gives a contribution for a more effective cooperation of the MS in this field. It was essentially the introduction of Union citizenship that led to a situation where, according to the ECJ, non-contributory social benefits in the form of student grants were no longer ratione materiae outside the scope of Community law. In view of the introduction of

69

Case C-85/96, Martinez Sala (ECJ 17 May 1998). See Tomuschat (2000). 71 See the critical remarks by Hailbronner (2004), p. 2188, who qualified the reference by the Court to the concept of Union citizenship leading to a prohibition of non-discrimination also in the context of non-economic free movement as a “petitio principii”. The European Commission even wanted to derive a general right of free movement from Union citizenship but the ECJ was not prepared to go as far. See also Tomuschat (2000), p. 457: “It has become clear from the jurisprudence of the Court that almost anything can become enmeshed in the logic of freedom of movement to the extent that it tends either to facilitate or to hamper the full exercise of that right.” 72 Case C-184/99, Grzelczyk (ECJ 20 September 2001) para 31. 73 Case C-85/96, Martinez Sala (Opinion of GA La Pergola of 1 July 1997) para 20. 74 Case C-184/99, Grzelczyk (ECJ 20 September 2001) para 46. 75 Case 197/86, Steven Malcolm Brown (ECJ 21 June 1988). 70

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Union citizenship, the parse provisions on education in Union law fully sufficed for non-discrimination to fully unfold in this area.76 In Collins the ECJ had to examine whether a person with US-American and Irish citizenship who had come to Great Britain in May 1998 had an entitlement in June 1998 to a jobseeker’s allowance, a social benefit. The Court made clear that the provisions on the free movement of workers per se provide only a right to nondiscrimination as to the access to employment and not a right to social benefits for the job seeker.77 In view of the introduction of the Union citizenship, however, a totally different pictures emerges: In view of the establishment of citizenship of the Union and the interpretation in the caselaw of the right to equal treatment enjoyed by citizens of the Union, it is no longer possible to exclude from the scope of Article 48(2) of the Treaty — which expresses the fundamental principle of equal treatment, guaranteed by Article 6 of the Treaty — a benefit of a financial nature intended to facilitate access to employment in the labour market of a Member State.78

48

The MS granting such an allowance may require that a genuine link exists between the jobseeker and the employment market of that MS.79 A residence requirement may be appropriate to ensure such a connection but the respective period may not be disproportionate.80 In the end, it remained open how the provisions on free movement of workers and that on Union citizenship interacted but it had become clear that the latter had given enormous additional strength to the former. The ECJ went again a step further in Trojani. A French citizen, Trojani, resided in Belgium with a temporary residence permit and asked for a social assistance benefit (“minimex”). The Belgian authorities denied this to him, as he was neither a Belgian citizen nor could he be qualified as a worker under EU law. However, according to the Court, the equal treatment obligation applied also for Union citizens who lawfully resided in another MS irrespective of the question whether they are economically active.81 The recourse to social assistance benefits may be prove of the fact that the claimant no longer fulfilled the requisites for a legal stay and could therefore be removed, although removal could not take place automatically.82

76 On the EU education policy with particular reference to Union citizenship (and its predecessors) see Hilpold (1995, 2008, 2011). 77 Case C-138/02, Collins (ECJ 23 March 2004) para 58. 78 Case C-138/02, Collins (ECJ 23 March 2004) para 53 79 Case C-138/02, Collins (ECJ 23 March 2004) para 69. 80 Case C-138/02, Collins (ECJ 23 March 2004) para 72. 81 Case C-456/02, Michel Trojani (ECJ 7 September 2004) para 44. 82 Case C-456/02, Michel Trojani (ECJ 7 September 2004) para 45. This jurisprudence started with Case C-184/99, Grzelczyk (ECJ 20 September 2001) para 42–43.

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Union citizenship was on the way of becoming something like a magic wand for realising full integration.83 Based on this jurisprudence, Union citizenship confers a status with a series of rights which in part build on rights already existing in EU law and which may also have direct effect as found by the ECJ in Baumbast on the right to reside of Union citizens.84 When Union citizenship was introduced by the Treaty of Maastricht some feared that this was “essentially a mercantile form of citizenship designed to facilitate economic integration” and be relevant only “to favoured EC nationals”.85 The actual developments proved these fears wrong. In Bidar,86 the ECJ continued along this path. Dany Bidar was a French citizen who had resided in Great Britain since 1998. In 2001 he wanted to start a University study and applied both for tuition assistance and for a maintenance allowance. The first was granted, the second denied in accordance with the Lair and Brown jurisprudence.87 According to the Court the Lair and Brown jurisprudence no longer corresponded to the development of EC law. Following the introduction of Union citizenship and the strengthening of the EC education policy maintenance allowances had to be considered as covered by the Treaty.88 For equal treatment to apply also in this field the MS may require a certain degree of integration into the society of the host MS.89 In this context, the court considered that the necessary degree of integration was given in view of the fact that Mr Bidar was lawfully resident and had received a substantial part of his secondary education in Great Britain. Conversely, the requirement of a settled status, which was practically impossible to obtain by foreign students, was retained to be contrary to EC law.90 Of course, this decision raised the question of the limits of solidarity91 and furthermore it remained still widely unclear when a “certain degree of integration into the society of the host MS” was given. Some important clarifications to this end were given by the ECJ in Förster.92 This case regarded the German student Jacqueline Förster who in 2000 moved to the Netherlands for study reasons and who applied for a maintenance grant in 2003. In the meantime the Netherlands had introduced a five years residence requirement for any such entitlement to come into being. The Court accepted this blanket criterion for the determination of a sufficient integration into the host MS and set at the same time a clear limit to solidarity.

83

See Sander (2005), p. 1018. Case C-413/99, Baumbast (ECJ 17 September 2002) para 84. 85 Kostakopoulou (2008), p. 286. 86 Case C-209/03, Bidar (ECJ 15 March 2005). 87 Case 39/86, Lair (ECJ 21 June 1988) and Case 197/86, Brown (ECJ 21 June 1988). 88 Case C-209/03, Bidar (ECJ 15 March 2005) para 42. 89 Case C-209/03, Bidar (ECJ 15 March 2005) para 57. 90 Case C-209/03, Bidar (ECJ 15 March 2005) para 61. 91 On this issue, see Hilpold (2016b) as well as Hilpold (2015) and Guild (2014). 92 Case C-158/07, Förster (ECJ 18 November 2008). 84

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The judgment of 18 November 2008 was released at a time when a severe financial crisis had set in. It was a signal that entitlements flowing out from Union citizenship would not be extended by the Court in a disproportionate measure. A similar basic attitude can be sensed from the judgment in the Bressol case93 regarding University access. The financial crisis had further spread and now it had to be clarified how far solidarity of MS towards students from other MS should go. Austria and Belgium are both in a very difficult position as to the provision of adequate numbers of study places at their Universities as both countries make part of a larger language region where students in major neighbouring countries (France and, respectively, Germany) who do not obtain a study place in their home country often move to Universities near abroad entering thereby into competition for study places with local (prospective) students. Particularly delicate is the situation in the area of medicine as study places in this field are notoriously expensive, a sufficient supply of physicians is extremely important for any society and the risk arises that students from other MS will go back to their home country after finishing their studies so that in the end one country is financing medical education for the other. If a country like Austria, out of socio-political considerations that no other country has to second-guess, does not request University fees this problem becomes even accentuated. In earlier times Austria had reserved large parts of her study places for Austrian citizens via a system that granted access to Austrian Universities primarily based on the provenience of the secondary school degree (giving preference to Austrian degrees). This system had to be abandoned in 2005 after a clamorous defeat before the ECJ, partly due to a poor defence strategy, partly to a Court willing to provide Union citizenship with new power.94 In this judgment the Court gave solidarity an exorbitant meaning and both Belgium and Austria had to open their Universities to Union citizens. An exception to this was medical education. In this field a moratorium was agreed that permitted the maintenance of national preference rules. In Belgium a student named Bressol wanted to quash this exception but the Court in its judgment of 13 July 2010 was prepared to accept “that a difference in treatment based indirectly on nationality may be justified by the objective of maintaining a balanced high-quality medical service open to all, in so far as it contributes to achieving a high level of protection of health.”95 To admit such an exception, a series of very demanding conditions must be given: There must be a genuine risk to the protection of public health96 and it is for the competent national authorities to show that any such risk actually exists.97 The requirements for such an analysis the Court set out in the Bressol judgment seemed to come close to a “probatio diabolica” as the Court declared not be satisfied with a

93

Case C-73/08, Bressol (ECJ 13 April 2010). Case C-147/03, Commission v Austria (ECJ 7 July 2005). See on this case Hilpold (2005). 95 Case C-73/08, Bressol (ECJ 13 April 2010) para 62. 96 Case C-73/08, Bressol (ECJ 13 April 2010) para 66. 97 Case C-73/08, Bressol (ECJ 13 April 2010) para 71. 94

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mere analysis of the provenience of the students but wanted furthermore to know where the students, both resident and non-resident, would go at the end of their studies.98 Nonetheless, the trend of the past was definitely stopped. The ECJ was prepared to accept exceptions and limitations also in the area of University access, in the past a field that seemed best suited to exert a unifying power and to bring the citizen closer to the Union. It can therefore be said that exercising the right to movement, one of the most important Union citizen rights, enhances the position of Union citizens to a considerable extent and as a rule, no disadvantage should result from this act: A citizen who chooses to move to another MS may gain additional rights and he must not suffer a diminution of his rights. Thus, in Tas-Hagen,99 the ECJ found that Dutch citizens should not lose their entitlement for a Dutch war pensions only because they had moved to Spain at the date of application. Conversely, however, in De Cuyper100 the Court upheld a Belgian measure stopping unemployment allowances to a Belgian citizen because he has moved to France. For the Court this measure, while restrictive in nature, was justified by the need to allow appropriate monitoring by inspection agents.

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The “Substance of Union Citizenship”: The Zambrano Case and the Subsequent Jurisprudence

In the Ruiz Zambrano judgment the ECJ identified something like an “essential substance of Union citizenship” without defining it further. The Court merely stated 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.”101 The case at hand regarded a Columbian citizen who had applied for asylum in Belgium. Asylum was eventually denied but in the meantime Mr Zambrano had become father of two children who had obtained Belgium nationality. Had Mr Zambrano been removed also his children would have been factually compelled to leave Belgium and therefore he obtained a derived right to reside without neither he nor his children ever having exercised a right to movement within the Union. This was a bold step taken by the ECJ implying potentially an enormous extension of the content of Union citizenship. The starting point was the consideration that no Union citizen could be deprived of his right to reside in the MS of which he is a citizen.102 He cannot be removed and this right is awarded to him already by international law. The Ruiz Zambrano jurisprudence went even further as it prohibited governmental 98

Case C-73/08, Bressol (ECJ 13 April 2010) para 73. Case C-192/05, Tas-Hagen (ECJ 26 October 2006). 100 Case C-406/04, Gérald De Cuyper (ECJ 18 July 2006). 101 Case C-34/09, Ruiz Zambrano (ECJ 8 March 2011) para 42. 102 See Schönberger, in Grabitz et al. (2012), Article 20 AEUV para 52. 99

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measures that achieved the same result. Now the question arose of what kind this pressure had to be in order to an impediment to the “genuine enjoyment of the substance of Union citizens’ rights”, a formula that apparently seems to be rather far-reaching. However, in the subsequent jurisprudence the ECJ tried hard to circumscribe the extent of this formula. McCarthy103 and Dereci104 regarded cases of thirdcountry nationals who have married Union citizens who had never made use of their right to free movement. These third country nationals did not obtain a right to reside and had to leave the Union but nonetheless the ECJ saw no violation of their family members’ Union citizen rights whose position could not be compared to that of Ruiz Zambrano’s children: The latter had to leave the territory of the Union had Ruiz Zambrano been removed because otherwise there was nobody there to care for them. In the McCarthy and in the Dereci case the situation was different. For the ECJ no such compelling need to leave the territory of the Union was given and therefore no denial of the genuine enjoyment of the substance of Union citizens’ ensued. Consequently, it became clear that the “genuine enjoyment of the substance of Union citizens’ rights” must be interpreted restrictively. Generally it can be said that the substance of Union citizens’ rights is threatened only if there is an urge to leave the territory of the Union coming from events leaving no space for free deliberation and not if it is the result of a (somewhat) free choice, although a broad grey area remains.105 The “purely internal situations” for which the freedom of movement for Union citizenship does not apply, have been further limited in their scope but this limitation has not been abolished altogether.106

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As shown, starting with Martinez Sala the ECJ developed a rich jurisprudence awarding entitlements for social benefits to Union citizens who move to other MS even if their economic activity in the MS of residence is limited or negligible. If an application for social assistance is made, the MS may take the view that the Union citizen no longer fulfils the conditions for residence but removal may not be an automatism.107 As a consequence, a large grey area arose with Union citizens taking advantage of social benefits in other MS without fulfilling the conditions for 103

Case C-434/09, McCarthy (ECJ 5 May 2011). Case C-256/11, Murat Dereci (ECJ 15 November 2011). 105 As it has been said, the question whether EU citizenship rules applied or a purely internal situation was given seems “to hinge on a relatively slight factual distinction: namely the perceived difference in the degree of dependence and vulnerability of the EU-citizen family member”. See Craig and De Búrca (2011), p. 833. 106 See Morviducci (2012). 107 Case C-184/99, Grzelczyk (ECJ 20 September 2001) para 42–43. 104

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residence according to Directive 2004/38 EC. For some this was expression of EU solidarity for others intolerable abuse. This problem has come about also because Directive 2004/38 is rather unclear as to the entitlement for social assistance benefit of inactive EU citizens without permanent residence right.108 Beginning with the Dano judgment109 the ECJ started to consider the growing resistance against this jurisprudence in large parts of the MS. A year before, in Brey,110 the ECJ seemed to open up Pandora’s box when it set the bar very high for MS when they wanted to stop the concession of social benefits and remove Union citizens. According to the ECJ “the competent national authorities cannot draw [the conclusion that to receive that benefit could be an indication that that national does not have sufficient resources to avoid becoming an unreasonable burden on the social assistance system of the host Member State] without first carrying out an overall assessment of the specific burden which granting that benefit place on the national social assistance system as a whole, by reference to the personal circumstances characterising the individual situation of the person concerned.”111 In literature the doubt was voiced whether such a formula would leave any situation in which social benefits can still be denied.112 The radical turn came in Dano, regarding a Romanian woman who had come to Germany with her son and who had applied for child benefit without undertaking any attempt to seek work or to integrate otherwise in the German society. The ECJ stated that non-contributory social benefits can be denied to Union citizens who have no right to residence. In Alimanovic113 the ECJ developed this jurisprudence further: Ms Alimanovic was a Swedish citizen who had worked in Germany before and who now, after her return to this country in search for work had applied there for family allowances (social assistance) for her three children. According to the ECJ based on Article 24.2 of Directive 2004/38 to Article 14.4 (b) denial of such assistance was in conformity with EU law although job seekers had a right to reside. The Court no longer based itself on primary law and on the Grzelczyk principle of Union citizenship as a “fundamental status of nationals of the Member States” (an expression not even mentioned in this judgment)”, both references that in the past allowed for an extensive interpretation of Union citizenship, but on secondary law that had given a restrictive interpretation to Union citizenship.114 Further, in line

108

See Minderhoud (2014), p. 223. Case C-333/13, Elisabeta Dano und Florin Dano v Jobcenter Leipzig (ECJ 11 November 2014). 110 Case C-140/12, Brey (ECJ 19 September 2013). 111 Case C-140/12, Brey (ECJ 19 September 2013) para 64. 112 See Hailbronner (2014), p. 875. 113 Case C-67/14, Jobcenter Berlin Neukölln v Nazifa Alimanovic and other (ECJ 15 September 2015). 114 See Iliopoulou-Penot (2016), p. 1016. 109

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with this approach, no longer an individual assessment of the burden placed on the national welfare system by an application for social benefit is required. According to the ECJ this proportionality assessment is already implicit in the provisions of Directive 2004/38.115 In Garcia Nieto116 this jurisprudence is extended to first-time job seekers in the first three months of residence in the host State.117 On a whole, this jurisprudence demonstrates that for the time being the ECJ has abandoned its earlier approach to use Union citizenship as a vehicle to promote EU integration. It is rather the case that the ECJ seems to listen more carefully to the overall sentiment in the MS and for some this is expression for a trend to a “renationalisation” of Europe.118

List of Cases ECJ 21.06.1988, 39/86, Sylvie Lair v Universität Hannover, ECLI EU:C:1988:322 [cit. in para 51] ECJ 21.06.1988, 197/86, Steven Malcolm Brown v The Secretary of State for Scotland, ECLI EU:C:1988:323 [cit. in para 51] ECJ 07.07.1992, C-369/90, Mario Vicente Micheletti and others v Delegación del Gobierno en Cantabria, ECLI EU:C:1992:295 [cit. in para 27] ECJ 30.03.1993, C-168/91, Christos Konstantinidis v Stadt Altensteig, ECLI EU: C:1993:115 [cit. in para 40] ECJ 14.11.1995, C-214/94, Ingrid Boukhalfa v Bundesrepublik Deutschland, ECLI EU:C:1996:174 [cit. in para 39] ECJ 29.02.1996, C-193/94, Criminal proceedings against Sofia Skanavi and Konstantin Chryssanthakopoulos, ECLI EU:C:1996:70 [cit. in para 42] ECJ 09.06.1997, Joined Cases C-64/97 and C-65/97, Land Nordrhein-Westfalen v Kari Uecker and Vera Jacquet v Land Nordrhein-Westfalen, ECLI EU: C:1997:285 [cit. in para 41] ECJ 17.05.1998, C-85/96, Martinez Sala v Freistaat Bayern, ECLI EU:C:1998:217 [cit. in para 44, 61] ECJ 24.11.1998, C-274/96, Bickel and Franz, ECLI EU:C:1998:563 [cit. in para 43] ECJ 20.09.2001, C-184/99, Grzelczyk v Centre public d’aide sociale d’OttigniesLouvain-la-Neuve, ECLI EU:C:2001:458 [cit. in para 14] 115 Iliopoulou-Penot (2016), p. 1022. See para 60: “Directive 2004/38, establishing a gradual system as regards the retention of the status of ‘worker’ which seeks to safeguard the right of residence and access to social assistance, itself takes into consideration various factors characterising the individual situation of each applicant for social assistance and, in particular, the duration of the exercise of any economic activity.” 116 Case C-299/14, Garcia Nieto and others (ECJ 25 February 2016). 117 See Iliopoulou-Penot (2016), p. 1024. 118 See Olsen (2014).

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ECJ 17.09.2002, C-413/99, Baumbast v Secretary of State for the Home Department, ECLI EU:C:2002:493 [cit. in para 49, 51] ECJ 02.10.2003, C-148/02, Carlos Garcia Avello v Belgian State, ECLI EU: C:2003:539 [cit. in para 41] ECJ 23.03.2004, C-138/02, Case Brian Francis Collins v Secretary of State for Work and Pensions, ECLI EU:C:1993:847[cit. in para 47] ECJ 07.09.2004, C-456/02, Michel Trojani v Centre public d’aide sociale de Bruxelles, ECLI EU:C:2004:488 [cit. in para 48] ECJ 19.10.2004, C-200/02, Kunqian Catherine Zhu and Man Lavette Chen v Secretary of State for the Home Department, ECLI EU:C:2004:639 [cit. in para 29] ECJ 15.03.2005, C-209/03, Dany Bidar v London Borough of Ealing and Secretary of State for Education and Skills, ECLI EU:C:2005:169 [cit. in para 51] ECJ 07.06.2005, C-147/03, Commission v Austria, ECLI EU:C:2005:427 [cit. in para 55] ECJ 18.06.2006, C-406/04, Gérald De Cuyper v Office national de l’emploi, ECLI EU:C:2006:491 [cit. in para 57] ECJ 26.10.2006, C-192/05, K. Tas-Hagen and R. A. Tas v Raadskamer WUBO van de Pensioen- en Uitkeringsraad, ECLI EU:C:2006:676 [cit. in para 57] ECJ 22.05.2008, C-499/06, Halina Nerkowska v Zakład Ubezpieczeń Społecznych Oddział w Koszalinie, ECLI EU:C:2008:300 [cit. in para 37] ECJ 18.11.2008, C-158/07, Jacqueline Förster v Hoofddirectie van de Informatie Beheer Groep, ECLI EU:C:2008:630 [cit. in para 53] ECJ 02.03.2010, C-135/08 Opinion of AG Poiares Maduro, Janko Rottmann v Freistaat Bayern, ECLI EU:C:2009:588 [cit. in para 31] ECJ 02.03.2010, C-135/08, Janko Rottmann v Freistaat Bayern, ECLI EU: C:2010:104 [cit. in para 31] ECJ 13.04.2010, C-73/08, Nicolas Bressol and Others and Céline Chaverot and Others v Gouvernement de la Communauté française, ECLI EU:C:2010:181 [cit. in para 55, 56] ECJ 8.03.2011, C-34/09, Gerardo Ruiz Zambrano v Office national de l’emploi, ECLI EU:C:2011:124 [cit. in para 58] ECJ 05.05.2011, C-434/09, Shirley McCarthy v Secretary of State for the Home Department, ECLI EU:C:2011:277 [cit. in para 59] ECJ 15.11.2011, C-256/11, Murat Dereci and others v Bundesministerium für Inneres, ECLI EU:C:2011:734 [cit. in para 59] ECJ 19.09.2013, C-140/12, Pensionsversicherungsanstalt v Peter Brey, ECLI EU: C:2013:565 [cit. in para 62] ECJ 11.11.2014, C-333/13, Elisabeta Dano und Florin Dano v Jobcenter Leipzig, ECLI EU:C:2014:2358 [cit. in para 62] ECJ 27.3.2014, C-322/13, Grauel Rüffer/Katerina Pkorná, ECLI EU:C:2014:189 [cit. in para 43] ECJ 15.09.2015, C-67/14, Jobcenter Berlin Neukölln v Nazifa Alimanovic and Others, ECLI EU:C:2015:597 [cit. in para 65]

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ECJ 25.02.2016, C-299/14, Garcia Nieto and Others v Vestische Arbeit Jobcenter Kreis Recklinghausen, ECLI EU:C:2016:114 [cit. in para 65] ECJ 12.03.2019, C-221/17 Tjebbes and Others v. Minister van Buitenlands Zaken, ECLI:EU:C:2019:189 [in para 32 and 34]

References Craig, P., & de Búrca, G. (2003). EU law, text, cases, and materials. Oxford: OUP. Craig, P., & de Búrca, G. (2011). EU law, text, cases, and materials. Oxford: OUP. D’Oliveira, J. (1995). Union citizenship: Pie in the sky? In A. Rosas & E. Antola (Eds.), A Citizen’s Europe (pp. 82–84). Sage: London. Duff, A. (1994). The main reforms. In A. Duff, J. Pinder, & R. Pryce (Eds.), Maastricht and beyond. Building the European Union (pp. 19–35). London: Routledge. Everling, U. (1992). Die Stellung des Bürgers in der Europäischen Gemeinschaft. Zeitschrift für Rechtsvergleichung, 33, 241–256. Fischer, P. (1997). Die Unionsbürgerschaft: ein neues Konzept im Völker- und Europarecht. In Festschrift für Günther Winkler (pp. 237–269). Vienna, New York: Springer. Giegerich, T. (2015). Unionsbürgerschaft, politische Rechte. In R. Schulze, S. Kadelbach, & M. Zuleeg (Eds.), Europarecht (pp. 374–418). Baden-Baden: Nomos. Grabitz, R., Hilf, M., & Nettesheim, M. (Eds.). (2012). Das Recht der Europäischen Union. Commentary. loose-leaf. Munich: C.H. Beck. Guild, E. (2014). Does European Citizenship blur the borders of solidarity? In E. Guild, C. Gortázar Rotaeche, & D. Kostakopoulou (Eds.), The reconceptualization of European Union Citizenship (pp. 189–208). Leiden: Brill. Hailbronner, K. (2004). Die Unionsbürgerschaft und das Ende rationale Jurisprudenz durch den EuGH? Neue Juristische Wochenschrift, 31, 2185–2189. Hailbronner, K. (2014). EU-Freizügigkeit für nicht erwerbstätige Unionsbürger? JuristenZeitung, 18, 869–877. Hilpold, P. (1995). Bildung in Europa. Baden-Baden: Nomos. Hilpold, P. (2005). Hochschulzugang und Unionsbürgerschaft. Europäische Zeitschrift für Wirtschaftsrecht, 16(21), 647–652. Hilpold, P. (2008). Unionsbürgerschaft und Bildungsrechte oder: Der EuGH als “Künstler”. In G. Roth & P. Hilpold (Eds.), Der EuGH und die Souveränität der Mitgliedstaaten – Eine kritische Analyse richterlicher Rechtsschöpfung auf ausgewählten Rechtsgebieten (pp. 11–53). Vienna/ Bern/Stuttgart: Linde/Stämpfli/Boorberg. Hilpold, P. (2011). Unionsbürgerschaft und Hochschulbildung in der EU – Perspektiven einer dynamischen Beziehung. In: K. Odendahl (Ed.), Europäische (Bildungs-)Union? (pp. 147– 182). Berlin: BWV. Hilpold, P. (2014a). Die verkaufte Unionsbürgerschaft. Neue Juristische Wochenschrift, 15, 1071–1074. Hilpold, P. (2014b). Nichtdiskriminierung und Unionsbürgerschaft. In M. Niedobitek (Ed.), Europarecht – Politiken der Union (pp. 1–96). Berlin: de Gruyter. Hilpold, P. (2015). Understanding solidarity within EU law: An analysis of the ‘Islands of Solidarity’ with particular regard to Monetary Union. Yearbook of European Law, 34, 257–285. Hilpold, P. (2016a). Die doppelte Staatsbürgerschaft im Völkerrecht. Europa Ethnica, 73(1/2), 2–4. Hilpold, P. (2016b). Solidarität im EU-Recht: “Die Inseln der Solidarität” unter besonderer Berücksichtigung der Flüchtlingsproblematik und der Europäischen Wirtschafts- und Währungsunion. Europarecht, 51(4), 373–404.

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Iliopoulou-Penot, A. (2016). Deconstructing the former edifice of Union citizenship. The Alimanovic judgment. Common Market Law Review, 53(4), 1007–1036. Isensee, J. (1996). Europäische Union – Mitgliedstaaten. Im Spannungsfeld von Integration und nationaler Selbstbehauptung, Effizienz und Idee. Konferenz der Deutschen Akademien der Wissenschaften, Akademie der Wissenschaften und der Literatur Mainz (Ed.), Europa – Idee, Geschichte, Realität (pp. 71–106). Mainz: Philipp von Zabern. Kadelbach, S. (2014). Unionsbürgerrechte. In D. Ehlers (Ed.), Europäische Grundrechte und Grundfreiheiten (pp. 797–838). Berlin: de Gruyter. Kochenov, D. (2013). The essence of EU citizenship emerging from the last ten years of academic debate: Beyond the Cherry Blossoms and the moon? Int Comp Law J, 62(1), 97–136. Kostakopoulou, Th. (2008). The future of governance of citizenship. Cambridge: Cambridge University Press. Kotalakidis, N. (2000). Von der nationalen Staatsangehörigkeit zur Unionsbürgerschaft. BadenBaden: Nomos. Mayer, H., & Stöger, K. (Eds.). (2010). Kommentar zu EUV und AEUV. loose-leaf. Vienna: Manz. Minderhoud, P. (2014). Directive 2004/38 and access to social assistance benefits. In E. Guild, C. Gortázar Rotaeche, & D. Kostakopoulou (Eds.), The reconceptualization of European Union citizenship (pp. 209–225). Leiden: Brill. Morviducci, C. (2012). Un nuovo diritto di soggiorno per il Cittadino europeo. In M. C. Baruffi & I. Quadranti (Eds.), Libera circolazione e diritti dei cittadini europei (pp. 1–30). Naples: Edizioni Scientifiche Italiane. Nic Shuibhne, N. (2015). Limits rising, duties ascending: The changing legal shape of Union citizenship. Common Market Law Review, 52, 889–938. O’Leary, S. (1999). European communities and EEA, putting flesh on the bones of European Union Citizenship. European Law Review, 24, 68–79. Olsen, E. D. H. (2014). European citizenship: toward renationalization or cosmopolitan Europe? In E. Guild, C. Gortázar Rotaeche, & D. Kostakopoulou (Eds.), The reconceptualization of European Union citizenship (pp. 343–360). Leiden: Brill. Pechstein, M., Nowak, C., & Häde, U. (Eds.). (2017). Frankfurter Kommentar zu EUV, GRC und AEUV. Tübingen: Mohr Siebeck. Rabenschlag, D. (2009). Leitbild Unionsbürgerschaft. Die Auslegung der Unionsbürgerschaft durch den EuGH im Spiegel umstrittener Konzeptionen eines europäischen Bürgerrechts. Baden-Baden: Nomos. Reich, N. (2001). Union citizenship – metaphor or source of rights? European Law Journal, 7, 4–23. Sander, F. (2005). Die Union als Türöffner zu mitgliedstaatlichen Sozialversicherungssystemen? Deutsches Verwaltungsblatt, 120, 1014–1022. Schwarze, J. (Ed.). (2012). EU-Kommentar. Baden-Baden: Nomos. Streinz, S. (Ed.). (2012). EUV/AEUV. Commentary. Munich: C.H. Beck. Tizzano, A. (Ed.). (2014). Trattati dell’Unione Europea. Milan: Giuffré. Tomuschat, C. (2000). Case to C-85/96 María Sala v. Freistaat Bayern, Judgment of 12 May 1998, Full court. [1998] ECR I-2691. Common Market Law Review, 37, 449–457. Tryfonidou, A. (2016). The impact of Union citizenship on the EU’s market freedoms. Oxford: Hart. von der Groeben, H., Schwarze, J., & Hatje, A. (Eds.). (2015). Europäisches Unionsrecht. BadenBaden: Nomos. Weiler, J. (1996). The selling of Europe. Jean Monnet Working Paper, 3.

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Article 21 [Free Movement and Establishment] (ex-Article 18 TEC) 1. Every citizen of the Union shall have the right to move and reside freely within the territory of the Member States,1-4 subject to the limitations32-37 and conditions24-31 laid down in the Treaties7-17 and by the measures adopted to give them effect.38-52 2. If action by the Union should prove necessary to attain this objective and the Treaties have not provided the necessary powers, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may adopt provisions with a view to facilitating the exercise of the rights referred to in paragraph 1.18-23 3. For the same purposes as those referred to in paragraph 1 and if the Treaties have not provided the necessary powers, the Council, acting in accordance with a special legislative procedure, may adopt measures concerning social security or social protection.5-6 The Council shall act unanimously after consulting the European Parliament.

Contents 1. 2. 3.

The Contents of Article 21 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Free Movement and Residence for European Citizens Before Directive 2004/38 . . . . . . . . . 7 Directive 2004/38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.1. General Characteristics of the Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.2. Subjective Scope of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.3. Conditions of Entry and Stay in the Territory of Member States . . . . . . . . . . . . . . . . . . 24 3.4. Limits to the Right of Movement and Residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 4. The Major Unresolved Issues Surrounding the Right of Residence: The Question of Citizens Looking for Work and So-Called Social Tourism . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 4.1. Citizens Looking for Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.2. Inactive European Citizens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 List of Cases References

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Under the first paragraph of Article 21 TFEU (former Article 18 EC), every citizen of the Union shall have the right to move and reside freely within the territory of the MS, subject to the limitations and conditions laid down in the Treaties and by the measures adopted to give them effect.” This right constitutes the essential core of European citizenship, which appears to be the result of the gradual recognition of a series of rights that MS attributed to those of their subjects who made use of free movement and residence. Even the right to vote in local and EP elections, granted

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to European citizens by the Maastricht Treaty, is functionally linked to this freedom, aiming to make it easier to use through improved integration into the local society. Moreover, according to the Court’s established case law, those who have exercised the fundamental freedoms guaranteed by the Treaty—particularly, for present purposes, “those involving the exercise of the right to move and reside freely in another Member State, as conferred by Article 8a of the Treaty” (now Article 21 TFEU)1—can invoke Article 18 TFEU, which prohibits discrimination on the grounds of nationality. By the combined provisions of Articles 18 and 21 TFEU (former Articles 12 and 18 EC), case law has thus had the possibility to build a much more rich and detailed status of the European citizen compared to what is immediately deducible from the Treaty; to eliminate any direct or indirect residual discrimination between nationals and European citizen residents.2 Indeed, it has traced back to the exercise of free movement and residence the allocation of a series of rights that—theoretically—do not seem to share much in common with this freedom (➔ para 11 et seq.). For the Court, “Citizenship of the Union is destined to be the fundamental status of nationals of the Member States, enabling those nationals who find themselves in the same situation to enjoy, within the scope ratione materiae of the EC Treaty, the same treatment in law irrespective of their nationality, subject to such exceptions as are expressly provided for.”3 Especially, due to its importance and in an effort to facilitate its exercise, free movement and residence, first for the economically active, and later for European citizens, was subjected to an important and direct legislative production, which was interpreted by the Court in light of the principle of effectiveness.4 The main act adopted in this regard is Directive 2004/38/EC on the right of EU citizens and their family members to move and reside freely with the territory of the Member States.5 If 1 See for example Case C-184/99, Grzelczyk (ECJ 20 September 2001) para 32–33; Case C-148/ 02, Carlos Garcia Avello (ECJ 2 October 2003) para 24; Case C-209/03, Bidar (ECJ 15 March 2005) para 32–33. On the relationship between the exercise of free movement and the rights of citizenship, see for example Dautricourt and Thomas (2009). 2 Any discrimination in the exercise of fundamental freedoms is, according to the case law, only possible if it is actually justified by provisions of Union law, or state regulations, provided that they are dictated by overriding reasons in the general interest and which are applicable to all persons and undertakings pursuing an activity in the territory of the host MS. Furthermore, to be so justified, the national legislation must be suitable for securing the objective which it pursues and must not go beyond what is necessary to attain it, to accord with the principle of proportionality: cf. for example, Case C-367/98, Commission v Portugal (ECJ 4 June 2002), Case C-483/99, Commission v France (ECJ 4 June 2002), Case C-503/99, Commission v Belgium (ECJ 4 June 2002) and Joined Cases C-282/04 et al., Commission v Netherlands (ECJ 28 September 2006). 3 Cf. Case C-184/99, Grzelczyk (ECJ 20 September 2001) para 31, recalled since in numerous decisions. 4 See Case C-423/12, Flora May Reyes (ECJ 16 January 2014) para 26. 5 See Parliament/Council 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, O.J. L 158/77 (2004). The Directive was adopted under Articles 12, 16, 40, 44 and 52 EC, as, in addition to governing the general free movement of European citizens, it also contains provisions on free movement of workers and freedom of establishment and provision of services.

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additional measures become necessary, as already provided for in Article 8A.2 EC,6 Article 21.2 TFEU, prescribes, under ordinary legislative procedure, the adoption of provisions to ease the exercise of this right: this possibility is, however, residual, since where more specific legal provisions exist, reference is made to the latter7 (namely, to employees and self-employed,8 that is, the people who by the nature of their work have been beneficiaries of free movement from the outset of the Communities). Because of Directive 2004/38 and, primarily, the Court of Justice’s broad interpretation of the rules on European citizenship, the distinction, referred to the right of free movement and residence, between all European citizens and European citizens who belong to specifically mentioned categories in the Treaties is gradually declining, although significant differences still remain, especially in terms of the requirements and conditions for the right of residence for the citizen and his family and other related formalities. European citizen status is therefore the basis for the enjoyment of the right of free movement and residence, or as has also been said, it is the lex generalis on the subject,9 to which is added, by way of lex specialis, additional faculties derived from the exercise of one of the freedoms set out in Articles 45 et seq. TFEU (former Articles 39 et seq. TEC and earlier Articles 48 et seq. TEEC). A significant change to Article 18 TEC was made in paragraph 3. Article 18.3 TEC, as amended by the Treaty of Nice, excluded institutions from exercising the faculty indicated in paragraph 2, to approve measures “relating to passports, identity cards, residence permits or any other such document and [. . .] to social security or social protection.” This provision was edited by Article 21.3 TFEU, which now attaches to the Council, acting unanimously after consulting the Parliament, the power to adopt provisions on social security and social protection,10 as long as the Treaties have not already provided “the necessary powers for this purpose”, remaining silent on other previously excluded matters.11

6

Article 8A.2 provided for the Council to adopt these provisions unanimously on a proposal from the Commission and after obtaining the assent of the EP. The Treaty of Amsterdam changed this provision (Article 18.2), providing for a co-decision procedure in the adoption of these measures. 7 So, Parliament/Council Directive 2014/54/EU on measures facilitating the exercise of rights conferred on workers in the context of freedom of movement for workers, O.J. L 128/8 (2014) was adopted under Article 45 TFEU. This act indeed helps, as mentioned in the preamble, to ensure free movement of European citizens by eliminating some of the difficulties they encounter in moving within the Union, but it is open only to “qualified” citizens, for which ad hoc regulations apply. 8 Such provisions are also found in Directive 2004/38, which regulates in a general way the free movement of EU citizens and their families, while granting a special status to economically active people (➔ para 18 et seq.). 9 Cf. Kovar and Simon (1993); Gautier, in Constantinesco et al. (1995), Article 8 A p. 143 et seqq. 10 See for example the MISSOC, Mutual Information System on Social Protection), which was established in 1990 to promote a continuous exchange of information on social protection among the EU Member States. The system nowadays includes information on Social Protection in the 28 Member States of the European Union, the three countries of the European Economic Area— Iceland, Liechtenstein and Norway—as well as Switzerland. 11 For matters not expressly taken up by Article 21.3 TFEU (see e.g. passports), the legal basis is found in Article 77.3 TFEU; see Caggiano (2008), p. 121.

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On social security, indeed, there is a specific provision (Article 48 TFEU, former Article 42 EC), concerning the adoption of acts guaranteeing the aggregation of contribution periods and the payment of benefits in the various MS to facilitate the exercise of freedom of movement of workers.12 The social protection concept is broader than that of social security, since it includes, in addition to security in the general sense, matters such as social inclusion, employment, solidarity, and “flexicurity”. Some of these objectives can be achieved through the adoption of measures in the field of social security which are necessary to provide freedom of movement for workers, others with the use of incentives and support measures, through the financing of projects and programs of the Union. If, therefore, there was the willingness to approve coordinating measures relevant to welfare sectors other than social security, or for which there are no specific provisions, the special legislative procedure prescribed by Article 21.3 TFEU would need to be referred to.

2.

7

Part Two

Free Movement and Residence for European Citizens Before Directive 2004/38

Since the EEC Treaty (1957), free movement and residence has been instrumental in the construction of the common market.13 Not all were beneficiaries of this right: only those economically active, that is, as inferred by Title III, employees, selfemployed workers and services providers who are nationals of an MS. From the economic point of view which characterised the EEC, people are regarded as productive factors, much like goods and capital, and their ability to move freely did not constitute a right for its own sake, but was intended to construct a market without borders that would guarantee economic growth in a context of gradual liberalisation. The scope of the right’s recipients has gradually expanded, first to the families of workers, who were allowed to reunite in the host country,14 and then, from the Court of Justice’s jurisprudence that extensively ensure a freedom considered essential to the Community system, to employees of the public administration who do not conduct activities that would lead to the exercise of public powers,15 to 12

From Article 42 was adopted the Parliament/Council Regulation (EC) 883/2004 on the coordination of social security systems, O.J. L 166 (2004), amended by Council Regulation (EU) 465/ 2012 amending Regulation (EC) No 883/2004 on the coordination of social security systems and Regulation (EC) No 987/2009 laying down the procedure for implementing Regulation (EC) No 883/2004, O.J. L 149 (2012). 13 Article 3 (c) TEEC provided for the “elimination, between Member States, of obstacles to the free movement of persons, services and capital”, in the times and under the conditions laid down by the EEC Treaty. 14 Article 10 et seq. of Council Regulation (EEC) No 1612/68 on freedom of movement for workers within the Community, O.J. L 257/475 (1968). 15 See, for the first formulation of this principle, Case 149/79, Commission v Belgium (ECJ 17 December 1980) para 11–12.

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those who stayed in other countries in search of work,16 and, above all, to both recipients and providers of services.17 This case law resulted in the extension of free movement and residence to virtually all citizens of the MS and their families, at least for a period compatible with the use or provision of a service. In addition, in 1990 and 1993, three Directives were adopted, granting the right of movement and residence, even beyond the period of time covered by service provisions, to students, those who had ceased working in another MS, and citizens of MS who would not have enjoyed the right by any other means, provided that these groups were in possession of health insurance and enjoyed an adequate income.18 In the end, with the Maastricht Treaty (1992), “the right to move and reside freely within the territory of the Member States” was expressly recognised in Article 8A.1 (later Article 18 TEC and Article 21 TFEU) for European citizens. This right, first granted only to economically active people, hence became a freedom which resulted in the holding of a status, EU citizenship, granted by the Treaty to citizens of any MS.19 Any limits and conditions laid down in the treaties or secondary legislation, precisely because they constitute exceptions to a fundamental freedom, must be strictly interpreted and subjected to judicial review. As mentioned, the possibility to take measures to facilitate the exercise of this right was also provided for, although the institutions have not made use of this provision for over a decade, leaving to the Court of Justice the burden of interpreting Article 8 A (later Article 18) TEC and the consequences which come of it. The wording of Article 8A.1 TEC was not unambiguous: it did enunciate the right to move and reside freely, but not without the exceptions of the limits and conditions laid down in the Treaty and the laws that implement it.20 The question concerned whether this article could produce direct effects, able to be invoked before national bodies, or if the rules on active citizens and the three already approved Directives remained prerequisites for free movement and residence, regardless of the ability, set out in paragraph 2, to adopt provisions to facilitate the exercise of the right recognised in paragraph 1. The Court, after several years in which it avoided ruling on the issue, preferring to refer to the workings of the principle of non-discrimination on the ground of nationality—possibly in

16

Cf. for example Case C-292/89, Antonissen (ECJ 26 February 1991) para 10 et seq. See Case 186/87, Ian William Cowan (ECJ 2 February 1989). 18 See Council Directive 90/364/EEC on the right of residence, Council Directive 90/365/EEC on the right of residence for employees and self-employed persons who have ceased their occupational activity and Council Directive 93/96/EEC on the right of residence for students, all of which have been repealed by Parliament/Council 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, O.J. L 158/77 (2004); cf. also Parliament/Council Directive 2014/54/EU on measures facilitating the exercise of rights conferred on workers in the context of freedom of movement for workers, O.J. L 128/8 (2014). 19 In this sense, unambiguously, Case C-413/99, Baumbast (ECJ 17 September 2002) para 84. 20 See Closa (1992). 17

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conjunction with Article 8A (Article 18) EC21—in the Baumbast ruling of 2002, established that the right of residence in the territory of the MS “is conferred directly on every citizen of the Union by a clear and precise provision of the EC Treaty. Purely as a national of a Member State, and consequently a citizen of the Union, Mr Baumbast therefore has the right to rely on Article 18(1).”22 The limits and conditions recalled in Article 18 EC, as was the case for the limits set out in Articles 39.3 and 46 TEC on the free movement of employees and selfemployed persons,23 in the Court’s reasoning, did not compromise the direct effect, but operated subsequently, as exceptions to the validity of a right granted by the Treaty, nor were they left to the discretion of the States, but must rather be dictated by law and subject to judicial review. The Court therefore decided that the limitations and conditions on the exercise of the right in question “do not prevent the provisions of Art. 18, n. 1 EC from conferring on individuals’ rights which are enforceable and which the national courts must protect.” The conclusion thus reached by the Court was of great importance, not only because it stated that the right of free movement and residence of citizens as such stems directly from the Treaty, but because in this way the right constitutes a parameter through which the compatibility of national legislations can be verified and, also, the European rules, both Treaty and secondary legislation, which limit or condition this freedom, can be interpreted.24 21

See Case C-85/96, Martinez Sala (ECJ 18 May 1998) para 59 et seq. and Case C-184/99, Grzelczyk (ECJ 20 September 2001) para 32 et seq., in which the Court recalled Article 8 A (now Article 21 TFEU), but did not trace the rights of the citizen from the direct effect of that article, but rather from the non-discrimination of Article. 6 (now Article 18 TFEU), operating on European citizens who lawfully reside in another MS. According to the reasoning of the Court in Martinez Sala (para 60–62): “It should, however, be pointed out that, in a case such as the present, it is not necessary to examine whether the person concerned can rely on Article 8a of the Treaty in order to obtain recognition of a new right to reside in the territory of the Member State concerned, since it is common ground that she has already been authorised to reside there, although she has been refused issue of a residence permit. As a national of a Member State lawfully residing in the territory of another Member State, the appellant in the main proceedings comes within the scope ratione personae of the provisions of the Treaty on European citizenship. Article 8(2) of the Treaty attaches to the status of citizen of the Union the rights and duties laid down by the Treaty, including the right, laid down in Article 6 of the Treaty, not to suffer discrimination on grounds of nationality within the scope of application ratione materiae of the Treaty.” 22 Case C-413/99, Baumbast (ECJ 17 September 2002) para 84. The Court therefore concluded 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 18(1) EC” (para 94). 23 Hereafter, use of the term self-employed persons refers to both those who use freedom of settlement and those who use freedom to provide services. 24 Case C-215/03, Salah Oulane (ECJ 17 February 2005) para 16: “the principle of free movement of persons constitutes one of the foundations of the Community. Accordingly, provisions enshrining that principle must be given a broad interpretation (see, inter alia, Case C-357/98 Yiadom [2000] ECR I-9265, paragraph 24) and Case C-291/05, R. N. G. Eind (ECJ 11 December 2007) para 43: “secondary Community legislation on movement and residence cannot be interpreted restrictively.”

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Limitations on the right of free movement and residence certainly include public order, public security, and public health (➔ para 32 et seq.), already provided in the original Treaties for workers in the broadest sense, and in some directives, now repealed,25 these limitations have always been considered by the Court as exceptions to the enjoyment of a fundamental freedom, and therefore subject to strict interpretation.26 To these limitations is added a further condition, peculiar to the status of a non-working European citizen, destined to have a relevant effect on the enjoyment of the right of residence and to become the subject of a significant case law. This condition was included in the 1990 and 1993 Directives relating to nonactive individuals, and was intended to prevent them from becoming an unreasonable burden on the social assistance system of the host countries. To enjoy the right of residence then, students, employees and self-employed persons who have ceased their occupational activity, and nationals of MS who do not enjoy this right under other provisions of Community law, must be in possession of health insurance and sufficient resources. As for workers it was provided by the EEC Treaty that the host state would allow entry and residence in its territory even before the performance of an activity27 and for a period of time after job loss, regardless of the test of economic self-sufficiency, the Directives in question posed precise conditions to prevent beneficiaries of the right of residence from becoming “a burden on the host State’s social welfare.”28 This provision was considered by the Court in the Baumbast ruling. In reconstructing the limits to the right of residence enshrined in Article 18 EC, the judges referred to Directive 90/364 that—due to its attribution of the right to those who are otherwise not entitled to it—could be considered a kind of preview of Article 18 itself. They therefore acknowledged that the right of residence of economically inactive European citizens may be subject to more stringent restrictions and conditions than those laid down in Articles 39, 46 and 55 TEC (now Articles 45,

25

These limits, set out in Articles 39 and 46 EC, were regulated in Directive 64/221 and also recalled in Directives 73/148, 90/364, 90/365 and 93/96; they are now the subject of Chapter VI, “Restrictions on the right of entry and the right of residence on grounds of public policy, public security or public health”, of Directive 2004/38. 26 See in this sense, Case C-33/07, Gheorghe Jipa (ECJ 10 July 2008) para 23. 27 According to the Court, to ensure the effectiveness of Article 48, it must also guarantee the persons concerned a reasonable time to acquaint themselves, in the host State, of offers of employment corresponding to their occupational qualifications (Case C-292/89, Antonissen (ECJ 26 February 1991) para 16). 28 Article 1.1 of Directive 90/364, for example, states that: “1. Member States shall grant the right of residence to nationals of Member States who do not enjoy this right under other provisions of Community law and to members of their families as defined in paragraph 2, provided that they themselves and the members of their families are covered by sickness insurance in respect of all risks in the host Member State and have sufficient resources to avoid becoming a burden on the social assistance system of the host Member State during their period of residence.”

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52 and 62 TFEU),29 attesting, however, that such limitations must operate in accordance with the general principles of Community law, especially that of proportionality.30 In particular, the Court asserted in several judgments that States may take measures to ensure that beneficiaries of the right of residence become not just a mere burden, but an unreasonable burden on the public finances of the host State,31 attesting that the wording of the Directives does not exclude the request for “a certain degree of financial solidarity between nationals of a host Member State and nationals of other Member States, particularly if the difficulties which a beneficiary of the right of residence encounters are temporary.”32 Moreover, according to case law, not only is a Union citizen’s recourse to the host State’s social welfare insufficient grounds to automatically arrange for expulsion,33 but, so long as the citizen is a lawful resident, he can use Article 12 TEC to be “granted the benefit of social assistance,” recognised for all citizens who find themselves in similar financial difficulties.34 Making reference to Article 18 TEC, prerequisite for the practicality of Article 12, the Court came to derive rights not immediately deducible from the exercise of freedom of movement and residence by European citizens, but functional to its effective enjoyment. Indeed, it stated that States must exercise their powers in accordance with this freedom, a compliance which would be hindered not only by discriminating between European citizens and nationals of the host country (for example, on access to higher education,35 grant subsidies for

In particular, the Court affirmed that, “In any event, the limitations and conditions [. . .] are based on the idea that the exercise of the right of residence of citizens of the Union can be subordinated to the legitimate interests of the Member States. In that regard [. . .] beneficiaries of the right of residence must not become an ‘unreasonable’ burden on the public finances of the host Member State” (Case C-413/99, Baumbast (ECJ 17 September 2002) para 90). 30 Case C-413/99, Baumbast (ECJ 17 September 2002) para 91. 31 Recitals 10 and 16 of Directive 2004/38 refer to the “unreasonable” burden. 32 Case C-184/99, Grzelczyk (ECJ 20 September 2001) para 44. In Case C-209/03, Bidar (ECJ 15 March 2005) para 56, the Court added that, “although the Member States must, in the organisation and application of their social assistance systems, show a certain degree of financial solidarity with nationals of other Member States [. . .], it is permissible for a Member State to ensure that the grant of assistance to cover the maintenance costs of students from other Member States does not become an unreasonable burden which could have consequences for the overall level of assistance which may be granted by that State”. On the Court’s role in affirming, in these and in later judgments, the need for “social solidarity” with respect to European citizenship, see Giubboni (2007), and Golynker (2010). 33 See Case C-456/02, Trojani (ECJ 7 September 2004) para 45 (which recalled the Case C-184/ 99, Grzelczyk (ECJ 20 September 2001) para 42–43) and Case C-140/12, Brey (ECJ 19 September 2013) para 68 et seq., especially para 75. The judges referred to recital 16 of Directive 2004/38 and especially its Article 14.3. Under Article 8.4, also, “Member States may not lay down a fixed amount which they regard as “sufficient resources, but they must take into account the personal situation of the person concerned.” 34 Cf. Case C-456/02, Trojani (ECJ 7 September 2004) para 46. 35 See for example Case C-73/08, Bressol (ECJ 13 April 2010). 29

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students,36 or social assistance benefits37) but also between co-nationals that have not moved from the State of origin (such as on pensions38). Indeed, “[. . .] it would be incompatible with the right of freedom of movement were a citizen, in the Member State of which he is a national, to receive treatment less favourable than he would enjoy if he had not availed himself of the opportunities offered by the Treaty in relation to freedom of movement. Those opportunities could not be fully effective if a national of a Member State could be deterred from availing himself of them by obstacles raised to his residence in the host Member State by legislation of his State of origin penalizing the fact that he has used them.”39

3.

Directive 2004/38

3.1. General Characteristics of the Directive

Directive 2004/38, adopted pursuant to, inter alia, Article 18 EC, unitarily governs the matter of freedom of movement and residence of EU citizens and their families.40 As stated in the Preamble, since Union citizenship must be the fundamental status of MS nationals when they exercise the right to free movement and residence, it was “necessary to codify and review the existing Community instruments dealing separately with employed persons, self-employed, students and other inactive persons in order to simplify and strengthen the right of free movement and residence for all Union citizens.”41 The Directive thus replaced or amended a number of acts that had come about over time,42 in a way that was not always coordinated or coherent; particularly, it repealed the three now superfluous 36

See Case C-184/99, Grzelczyk (ECJ 20 September 2001), Case C-209/03, Bidar (ECJ 15 March 2005) and Case C-75/11, Commission v Austria (ECJ 4 October 2012). 37 See Case C-456/02, Trojani (ECJ 7 September 2004) para 44. 38 See Case C-192/05, Tas-Hagen (ECJ 26 October 2006). 39 Cf. Case C-224/02, Heikki Antero Pusa (ECJ 29 April 2004) para 18–19; consistently, Case C406/04, De Cuyper (ECJ 18 July 2006) para 39. So, “Article 18(1) EC is to be interpreted as precluding legislation of a Member State under which it refuses to grant to one of its nationals a benefit for civilian war victims solely on the ground that, at the time at which the application was submitted, the person concerned was resident, not in the territory of that Member State, but in the territory of another Member State.” See Case C-192/05, Tas-Hagen (ECJ 26 October 2006) para 40. 40 On this Directive, see especially Iliopoulou (2004), Carlier (2006), Lang and Nascimbene (2007), Guild et al. (2014). 41 See Joined Cases C-424/10 and C-425/10, Ziolkowski and Szeja (ECJ 21 December 2011) para 37: “the aim of [Directive 2004/38] is to remedy the sector-by-sector piecemeal approach to the right of freedom of movement and residence in order to facilitate the exercise of this right by providing a single legislative act codifying and revising the instruments of European Union law which preceded the Directive.” The Directive was adopted, pursuant to Article 18, and under Articles 12, 40, 44, and 52 TEC (now Articles 18, 46, 50 and 59 TFEU). 42 See recital 4 of Directive 2004/38.

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Directives which, as mentioned above, since the early 1990s gave the right of residence to students, those who have ceased their occupational activity and those who had no other means of access to this right except sufficient income and health insurance. The Directive transposed a large part of the case law on Article 18 EC, but it reiterated the need to respect a number of requirements for the enjoyment of the right to free movement, especially on the part of inactive citizens; indeed, it tried to balance the budgetary needs of the States with the right to stay for considerable periods of citizens who need to take advantage of welfare state services. In turn, the Court of Justice interpreted the Directive in the light of its practical effectiveness, and of its objective, which is “inter alia, to facilitate and strengthen the exercise of Union citizens’ primary right to move and reside freely within the territory of the Member States [. . .].”43 In addition, where the Directive is inapplicable, it appealed directly to Article 18 TEC and, after the Treaty of Lisbon, Articles 20 and 21 TFEU, reconfirming that the right of movement and residence of European citizens is facilitated by, but does not come from,44 secondary legislation.

3.2. Subjective Scope of Application

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The right above belongs to every European citizen, regardless of age and ability to make use of it,45 and to its family members. Family unity is indeed functional to right to move and reside freely within the territory of the Member States, as necessary to ensure its effectiveness. The inability to invoke the freedom in question for family members as well can be an obstacle to moving to another country46 and entails discrimination prohibited by Article 18 TFEU, being based 43 Cf. Case C-140/12, Brey (ECJ 19 September 2013) para 71. In the same sense, Case C-423/12, Flora May Reyes (ECJ 16 January 2014) para 26. 44 See for example Case C-256/11, Dereci (ECJ 15 November 2011) para 50, 59: “[. . .]Directive 2004/38 aims to facilitate the exercise of the primary and individual right to move and reside freely within the territory of the Member States, that is conferred directly on Union citizens by the Treaty and that it aims in particular to strengthen that right [. . .].” Having established that the Directive was not applicable to the situation of the applicant, the Court stated that “Notwithstanding the inapplicability to the disputes in the main proceedings of Directives 2003/86 and 2004/38, it is necessary to consider whether the Union citizens concerned by those disputes may rely on the provisions of the Treaty concerning citizenship of the Union.” 45 See Case C-148/02, Carlos Garcia Avello (ECJ 2 October 2003); Case C-200/02, Zhu and Chen (ECJ 19 October 2004); Case C-353/06, Grunkin and Paul (ECJ 14 October 2008). Particularly, in Case C-200/02, Zhu and Chen (ECJ 19 October 2004) para 20, the Court affirmed that “The capacity of a national of a Member State to be the holder of rights guaranteed by the Treaty and by secondary law on the free movement of persons cannot be made conditional upon the attainment by the person concerned of the age prescribed for the acquisition of legal capacity to exercise those rights personally.” 46 See Case C-291/05, R. N. G. Eind (ECJ 11 December 2007) para 37.

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on nationality. The most interesting aspects of this framework concern family members who are not themselves EU citizens, and therefore can invoke the freedom in question only because of their relationship with a national of an MS. Family is here defined as the spouse; “the partner with whom the Union citizen has contracted a registered partnership, on the basis of the legislation of a Member State, if the legislation of the host Member State treats registered partnerships as equivalent to marriage and in accordance with the conditions laid down in the relevant legislation of the host Member State”; direct descendants who are under the age of 21 or are dependents47 and those of the spouse or partner” and “the dependent direct relatives in the ascending line and those of the spouse or partner” (Article 2).48 Case law has accepted a broad interpretation of the provisions relating to family members of a European citizen who has exercised his right of freedom of movement, Indeed, the Court stated that “nationals of non-member countries who are family members of a Union citizen derive from Directive 2004/38 the right to join that Union citizen in the host Member State, whether he has become established there before or after founding a family”,49 and without distinguishing according to whether the national of a non-member country has already resided lawfully in another MS.50 Article 35 actually provides for the possibility for MS to take the necessary measures to refuse, terminate or withdraw rights under the Directive in cases of abuse of rights or fraud, such as a marriage of convenience.51

47 On the definition of family member under Article 2, see Case C-83/11, Muhammad Sazzadur Rahman (ECJ 5 September 2012) para 18 et seq., Case C-40/11, Yoshikazu Iida (ECJ 8 November 2012) para 54–55 and Case C-423/12, Flora May Reyes (ECJ 16 January 2014) para 21 et seq. A teleological interpretation of the phrase “family members that accompany or join a citizen” was accepted by the Court in Case C-127/08, Metock and Others (ECJ 25 July 2008) para 49 et seq. On family reunification, see also Paladino (2012). 48 The host MS is required also to facilitate entry and residence of others family members who, “in the country from which they have come, are dependants or members of the household of the Union citizen having the primary right of residence, or where serious health grounds strictly require the personal care of the family member by the Union citizen” and “the partner with whom the Union citizen has a durable relationship, duly attested” (Article 3). 49 Case C-127/08, Metock (ECJ 25 July 2008) para 90. 50 See Case C-127/08, Metock (ECJ 25 July 2008) para 70: “Directive 2004/38 confers on all nationals of non-member countries who are family members of a Union citizen within the meaning of point 2 of Article 2 of that Directive, and accompany or join the Union citizen in a Member State other than that of which he is a national, rights of entry into and residence in the host Member State, regardless of whether the national of a non-member country has already been lawfully resident in another Member State.” 51 See Article 35. The European Commission recently intervened on the question of marriages of convenience: see Commission Communication, Helping national authorities fight abuses of the right to free movement: Handbook on addressing the issue of alleged marriages of convenience between EU citizens and non-EU nationals in the context of EU law on free movement of EU citizens, SWD(2014) 284 final, COM(2014) 604 final.

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3.3. Conditions of Entry and Stay in the Territory of Member States

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The right of freedom of movement includes both the right for EU citizens to enter in an MS other than the one of origin and the right to leave the State of origin52 (Article 4 of the Directive 2004/38). European citizens also have the right to return to their country of origin, with its family members: the Directive 2004/38 does not lay down this right, but the Court deduced it from the right to free movement (Article 18 EC).53 The right of a European citizen to enter the territory of an MS is subject, under Article 5 of the Directive, to the possession of an identity card or valid passport; for non-EU family members, a passport is required. Any border controls must aim to identify the person and determine his nationality. The State of entry is also required to grant every reasonable opportunity to a European citizen, and his family, without documentation. One of the major innovations introduced by Directive 2004/38 on freedom of movement and residence consists in having separated the right of residence into three distinct time spans, each with corresponding rights, conditions for enjoyment, and administrative formalities. Article 6 of the Directive takes into consideration a residence of up to three months, stating that within this period the European citizens (as well as their family members who are not nationals of an MS) have the right to reside without any conditions or formalities other than the possession of an identity card or passport,54 as long as they do not become an unreasonable burden on the social assistance system of the host MS under Article 14.1 During this period, European citizens are not entitled to social assistance from the host MS (Article 24.2). The regulation appears to be more complex if the period of stay exceeds three months. First, with respect to type of stay, we can note the on-going difference in 52 See Case C-33/07, Jipa (ECJ 10 July 2008) para 18: “As the Court has already had occasion to state, the fundamental freedoms guaranteed by the EC Treaty would be rendered meaningless if the Member State of origin could, without valid justification, prohibit its own nationals from leaving its territory in order to enter the territory of another Member State.” 53 See Case C-291/05, R. N. G. Eind (ECJ 11 December 2007) para 35–36, and especially case C456/12, O. (ECJ 12 March 2014) para 49: “The grant, when a Union citizen returns to the Member State of which he is a national, of a derived right of residence to a third-country national who is a family member of that Union citizen and with whom that citizen has resided, solely by virtue of his being a Union citizen, pursuant to and in conformity with Union law in the host Member State, seeks to remove the same type of obstacle on leaving the Member State of origin as that referred to in paragraph 47 above, by guaranteeing that that citizen will be able, in his Member State of origin, to continue the family life which he created or strengthened in the host Member State.” 54 For the requirements to those staying for up to 3 months, see most recently Case C-299/14, García-Nieto (ECJ 25 February 2016) para 42: “Article 6(1) of Directive 2004/38 provides that Union citizens have the right of residence on the territory of another Member State for a period of up to three months without any conditions or any formalities other than the requirement to hold a valid identity card or passport and, under Article 14(1) of that Directive, that right is retained as long as the Union citizen and his family members do not become an unreasonable burden on the social assistance system of the host Member State.”

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treatment between the rights recognised for workers, both employees and selfemployed, and those of any other citizen. Article 7 distinguishes between four types of European citizens who may take advantage of the right of residence for a period exceeding three months: (a) employees or self-employed; (b) those who have health insurance covering all risks and sufficient economic resources for themselves and their families so as not to become a burden on the social assistance system of the host MS during their period of residence; (c) students, provided they are themselves in possession of medical insurance and declare that they have sufficient resources for themselves and family members; (d) family members of citizens who fall into the three categories mentioned above. The different categories entail different rights and obligations. In particular, Article 14.4 prohibits expulsion, except for reasons of public health and order, of the following groups, and their families: employees, the self-employed, and those who have entered the territory of the host Member State to look for a job, and can demonstrate their efforts in this regard and their likelihood of finding a job. The right to stay for other citizens, on the other hand, is subject to compliance with the requirements indicated in Article 7 (and, for their families, by Articles 12 and 13). One innovation shared by all of the categories of citizens indicated in Article 7 is that, unlike before, Directive 2004/38 no longer provides for the concession of residence cards to citizens, but only to their family members who are not MS nationals; European citizens are entitled to obtain a registration certificate. Finally, under Article 16 of the Directive, “the Union citizen who has resided legally for a continuous period of five years in the host Member State has the right of permanent residence there.”55 This right also extends to family members who are not Union citizens, who have resided with the citizen for the same period, even if “the spouses merely live separately.”56 Continuity of residence is not affected by temporary absences,57 but is affected by a period of illegal residence.58 An essential characteristic of this right is that the stay no longer requires a person to be economically active or in possession of sufficient income and health insurance; thus for this stay, equal treatment with nationals is guaranteed, with the only

55 On the concept of legal residence and the calculation of its period, see Joined Cases C-424/10 and C-425/10, Ziolkowski and Szeja (ECJ 21 December 2011) para 42 et seq. and Case C-244/13, Ewaen Fred Ogieriakhi (ECJ 10 July 2014) para 28 et seq.; Case C-162/09, Lassal (ECJ 7 October 2010) and Case C-325/09, Maria Dias (ECJ 21 July 2011) para 40–41, specified that the residence period of 5 years shall begin only after the entry into force of Directive 2004/38. 56 See Case C-244/13, Ogieriakhi (ECJ 10 July 2014) para 37. 57 See Article 16.3 of the Directive: “Continuity of residence shall not be affected by temporary absences not exceeding a total of six months a year, or by absences of a longer duration for compulsory military service, or by one absence of a maximum of twelve consecutive months 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.” 58 See Case -378/12, Onuekwere (ECJ 16 January 2014) para 27 and 32.

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exceptions (even these, as shall be seen, are subject to restrictions) stemming from reasons of public order and security. European citizens “shall enjoy equal treatment with the nationals of that Member State within the scope of the Treaty.” This principle is contained in Article 24.1 of the Directive, but, as we have seen above (➔ para 2), it can be deduced from Articles 18 and 21 TFEU (former Articles 12 and 18 EC).59 The Court affirmed this principle before the Directive since the Martinez Sala judgment60 and clarified it in Bidar: indeed, “a national of a Member State who, by virtue of Article 18 TEC and Directive 90/364, is lawfully resident in the territory of another Member State where he intends to start or pursue higher education from relying during that residence on the fundamental principle of equal treatment enshrined in the first paragraph of Article 12 EC.”61 Article 24.2, however, provides for a derogation to this principle, allowing hosting MS not to confer entitlement to social assistance or maintenance aid for some categories of European citizens;62 this rule has raised some concerns about its compliance with Articles 18 and 21 TFEU (➔ para 40 et seq.).

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Limitations on the right of entry and residence for European citizens63 can be imposed for reasons of public order, security, or health. Such limitations are

59 Case law has established that Articles 18 TFEU and 21 TFEU shall be interpreted as “precluding national rules, such as those at issue in the main proceedings, which grant the right to use a language other than the official language of that State in civil proceedings brought before the courts of a Member State which are situated in a specific territorial entity, only to citizens of that State who are domiciled in the same territorial entity;” see case C-322/13, Grauel Rüffer (ECJ 27 March 2014). 60 See case C-45/96, Martinez Sala (ECJ 12 May 1998) para 61–62: “As a national of a Member State lawfully residing in the territory of another Member State, the appellant in the main proceedings comes within the scope ratione personae of the provisions of the Treaty on European citizenship. 62. Article 8(2) of the Treaty attaches to the status of citizen of the Union the rights and duties laid down by the Treaty, including the right, laid down in Article 6 of theTreaty, not to suffer discrimination on grounds of nationality within the scope of application ratione materiae of the Treaty.” 61 See case C-209/03, Bidar (ECJ 15 March 2005) para 46. 62 “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.” 63 The limit also operates on the right to leave the State of origin: see Case C-33/07, Gheorghe Jipa (ECJ 10 July 2008); Case C-434/10, Petar Aladzhov (ECJ 17 November 2011); Case C-249/11, Hristo Byankov (ECJ 4 October 2012).

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subject to strict material and procedural safeguards set out in Chapter VI of the Directive, which largely implemented the Court’s earlier case law concerning above all Directive 64/221.64 Since these are exceptions to the enjoyment of a fundamental freedom, the limits must be necessary to protect overriding interests of the State and must not exceed what is required to achieve this end, in particular, they may not go beyond what is necessary for the protection of those interests in “a democratic society”.65 The cases that can prevent the entry or cause the expulsion of European citizens or their family members cannot therefore be aimed at general prevention66 but must be limited to subjects who pose a danger to society. This danger could derive from physical diseases,67 or from behaviours that set up the “existence, in addition to the perturbation of the social order which any infringement of the law involves, of a genuine and sufficiently serious threat to the requirements of public policy affecting one of the fundamental interests of society.”68 Precisely because the threat must be present,69 Article 32 provides for the possibility of submitting a request to lift the ban on entry in the national territory after the expiration of a reasonable period, determined based on the circumstances and in any event after three years from enforcement of the measure. Article 27.2 of the Directive makes clear that previous criminal convictions cannot in themselves constitute grounds for taking public policy or public security measures; so, according to case law, it must be interpreted as precluding national legislation which requires a third-country national to be automatically refused the grant of a residence permit or to be expulsed on the sole ground that he has a criminal record.70 Article 28.1 also provides that “before taking an expulsion decision on grounds of public policy or public security, the host Member State shall take account of considerations such as how long the individual concerned has resided on its territory, his/her age, state of health, family and economic situation, social and cultural integration into the host Member State and the extent of his/her links with

64 Cf. Council 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, O.J. L 56 (1964), repealed by Directive 2004/38. 65 Cf. Case 36/75, Rutili (ECJ 28 October 1975) para 32. 66 In this sense, see Case C-441/02, Commission v Germany (ECJ 27 April 2006) para 93. 67 This limit may prevent the entry to the MS or lead to removal if the disease occurs within 3 months (Article 29). The Directive does not contain a list of significant diseases, but refers to the WHO epidemiological norms. 68 Cf. Case 30/77, Regina v Pierre Bouchereau (ECJ 27 October 1977) para 35. 69 Cf. Case C-348/96, Arios Pagos v Donatella Calfa (ECJ 19 January 1999) para 22 et seq., especially para 28. 70 See Case C-165/14, Alfredo Rendón Marín (ECJ 13 September 2016) para 60. See also Case C304/14, CS (ECJ 13 September 2016) para. 40 et seq.

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the country of origin.”71 Greater protection is afforded to minors in possession of European citizenship, who can only be dismissed or expelled on imperative grounds of public safety, “except if the expulsion is necessary for the best interests of the child, as provided for in the United Nations Convention on the Rights of the Child of 20 November 1989” (Article 28.3 (b)). Still, under Article 28, after acquiring the right of permanent residence, Union citizens and their family members, whatever their nationality, cannot be expelled except on serious grounds of public policy or public security; after ten years of residence, the EU citizen cannot be expelled except on imperative grounds of public security as defined by the host State.72 The procedural safeguards laid down in Articles 30 and 31 consider the case law of the Court. The interested person must be notified of the measures “in a manner that will enable them to understand their content and consequences.”73 The recipient of a restrictive measure has the right to challenge such acts or to request a judicial, or, if necessary, administrative review; the appeal itself does not suspend the measure.

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The Major Unresolved Issues Surrounding the Right of Residence: The Question of Citizens Looking for Work and So-Called Social Tourism

For European citizens, the right to free movement in the strict sense has, by this point, been largely obtained, although questions arise in certain residual respects, such as the Schengen’s incomplete “communitarisation” or the on-going border controls:74 the right of residence, however, due to its greater impact on the social and normative system of the host State, appears to be not yet fully realised. Its regulation, embodied in the Treaties establishing the Communities of employees and the self-employed, and then extended to all European citizens, still presents 71 The rationale of this article can be found in the grounds of Joined Cases C-482/01 and C-493/01, Georgios Orfanopoulos and Raffaele Oliveri (ECJ 29 April 2004) para 96 et seq. 72 For the Court “The concept of ‘imperative grounds of public security’ 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”; therefore, this concept include of course “a threat to the functioning of the institutions and essential public services and the survival of the population, as well as the risk of a serious disturbance to foreign relations or to peaceful coexistence of nations, or a risk to military interests” but also “objectives such as the fight against crime in connection with dealing in narcotics as part of an organised group”; see Case C145/09, Panagiotis Tsakouridi (ECJ 23 November 2010) para 42 et seq. For further reference on the concept of “threat to public security” see, recently Case C-544/15, Sahar Fahimian (ECJ 4 April 2017) para 37 et seq. 73 To facilitate the act to be appealed, the decision must also indicate the body before which an appeal might be made and the time limit for such an action. The person concerned must be made aware of the deadline by which he must leave the territory, a term that, except in emergencies, should not be less than 1 month: in this way, the person can remain in the host State for the period necessary to complete the formalities for the submission of an appeal. 74 On the point, see Case C-278/12 PPU, Atiqullah Adil (ECJ 19 July 2012).

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unresolved issues. Equal treatment with nationals is, in fact, an objective only partially achieved, despite the work of case law designed to broadly interpret the text of the Treaties and the secondary legislation. Especially, the position of the inactive citizens is, as we have seen, subject to a series of limitations that significantly change their positions from those of nationals.75 Two of these limitations are particularly relevant at present, in political terms as well, since they have been part of the negotiations to persuade the United Kingdom not to withdraw from the Union: the interpretation of the limits to the enjoyment of social benefits for job seekers in another country, and the conditions of sufficient income and medical insurance for inactive citizens to legally reside in an MS. These questions seem to be regulated by Directive 2004/38 (in Articles 24.2,76 and 7.1 (b)) but they were also considered by the Court in the light of Articles 18 and 21 TFEU, either to interpret the Directive correctly or to resolve cases in which the Directive is inapplicable.

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4.1. Citizens Looking for Work

Article 24.2, removes the State obligation to guarantee social assistance77 to three of the categories of European citizens; this particular regime seems counter to the principle of non-discrimination laid down by Article 18 TFEU in conjunction with Article 21. Actually, the question arises particularly for European citizens who move to another MS in search of work,78 in that for those staying less than 3 months, the Court has implicitly acknowledged the compatibility of the exception with the Treaty.79 75

See e.g. Article 7.1 (b) and (c); Article 8; Article 14 No. 2 and 14 of the Directive. “By way of derogation from paragraph 1, 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.” 77 This provision, which appears to consider the interest of MS in discouraging so-called social tourism, was not present in previous Directives 90/364 / EEC, 90/365 / EEC and 93/96 / EEC. This brought about, as will be seen, problems of interpretation and compatibility with Articles 18, 20 and 21 TFEU. 78 European citizens who have lost their jobs in the host State and who retain the right to equal treatment under the conditions provided in Article 7.3 must be distinguished from this class. 79 See for example Joined Cases C-424/10 and C-425/10, Ziolkowski and Szeja (ECJ 21 December 2011) para 39 and especially Case C-333/13, Dano (ECJ 11 April 2014) para 69–70. In Case C299/14, García-Nieto (ECJ 25 February 2016), the Court was specifically requested to rule on the validity of Article 24.2, in the light of Articles 45 and 18 TFEU for stays of less than 3 months; However, since the question was contingent on others questions, the Court decided not to rule on it (para 52): it did at any rate affirm, with reference to the rationale stated in Article 24.2 that: “that provision is consistent with the objective of maintaining the financial equilibrium of the social assistance system of the Member States pursued by Directive 2004/38, as is apparent, in particular, from recital 10 in the preamble to that Directive. Since the Member States cannot require Union 76

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For students,80 the case law has tended towards a strict interpretation of the exception, deeming it operative only for real scholarships and loans, but bringing all other benefits and incentives under the scope of equal treatment, for which the general principle applies.81 As is known, the Court has set up the right, first for nationals of MS and then for European citizens, to travel to another MS to seek work, indicating six months as a suitable period for such a search, but specifying that “if after the expiry of that period the person concerned provides evidence that he is continuing to seek employment and that he has genuine chances of being engaged, he cannot be required to leave the territory of the host Member State.”82 This principle was included in Article 14.483 of Directive 2004/38, which however includes this category of citizens among those subject to the exception in Article 24.2. In this way, attempt had been made to balance the need for States not to shoulder the burden of ensuring welfare benefits to all European citizens, even those without jobs, who move on their territory, with the need to respect the freedom of movement and residence, regarded as a fundamental principle of EU law. The case law on the rights of this category of people, before Directive 2004/38, was not unambiguous. Indeed, notwithstanding the right to reside on the territory of the host State for a period whose fairness was established based on the data remitted to the discretion of the judge a quo, the jobseekers were only accorded the right to obtain benefits intended to facilitate access to the world of work—such as an unemployment benefit, attributable for the Community judges to then Article 39 TEC (now Article 45 TFEU)—but not social benefits.84 This assertion was

citizens to have sufficient means of subsistence and personal medical cover for a period of residence of a maximum of three months in their respective territories, it is legitimate not to require those Member States to be responsible for those citizens during that period” (para 45). This case law seems to run counter to the Trojani judgment of 5 September 2004. 80 They must also be students in the proper sense, not engaged in any work activities; enrolment and attendance in a course of study indeed do not preclude a person from being recognised as a “worker” within the meaning of Article 45 TFEU. In this sense, see for example Case C-46/12, L. N. (ECJ 21 February 2013) para 30 et seq. 81 In this sense, see especially Case C-75/11, Commission v Austria (ECJ 4 October 2012) para 54. 82 Case C-292/89, Antonissen (ECJ 26 February 1991) para 21. 83 Under this provision, “without prejudice to the provisions of Chapter VI, an expulsion measure may in no case be adopted against Union citizens or their family members if: (a) the Union citizens are workers or self-employed persons, or (b) the Union citizens entered the territory of the host Member State in order to seek employment. In this case, the Union citizens and their family members 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.” 84 See especially Case C-138/02, Brian Francis Collins (ECJ 23 March 2004) para 63 and Case C258/04, Ioannis Ioannidis (ECJ 15 September 2005) para 21–22: “nationals of a Member State seeking employment in another Member State fall within the scope of Article 39 EC and therefore enjoy the right to equal treatment [. . .]. In view of the establishment of citizenship of the Union and the interpretation of the right to equal treatment enjoyed by citizens of the Union, it is no longer possible to exclude from the scope of Article 39(2) EC a benefit of a financial nature intended to facilitate access to employment in the labour market of a Member State.”

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punctuated in a case in which the Court was dealing with an appeal on the question of the validity of Article 24.2, under Articles 12 and 39 EC. After repeating that a financial service made to facilitate access to employment on the labour market of an MS can no longer be excluded from the application of Article 39.2 EC, the Court ruled it legitimate for an MS to confer such a benefit only after finding a real link between those who are looking for a job and the job market in that State.85 Even with such a specification, it can be a heavy burden on MS, especially those with systems that best facilitate the integration into the working world. However, the Court has not given up its approach, limiting itself to verifying whether certain benefits fall within those indicated in Article 45.2 TFEU: where such benefits are of a dubious or mixed nature, including the character of welfare or social benefits, it has brought them back under the operation of Article 24.2.86 Explicit reference to this ruling was made in the Agreement reached between the United Kingdom and the EU at the European Council of 18/19 February 2016.87 It recalled the need to provide, at both EU and national levels for measures limiting excessive flows of workers, stating that MS can impose “condition in relation to certain benefits to ensure that there is a real and effective degree of connection between the person concerned and the labour market of the host Member in State.” In addition, it specifies that MS may reject claims for social assistance by EU citizens from other MS who “are entitled to reside on their territory solely because of their job-search. This includes claims by EU citizens from other Member States for benefits whose predominant function is to cover the minimum subsistence costs, even if such benefits are also intended to facilitate access to the labour market of the host Member States.” If these restrictive measures can be considered legitimate under already existing legislation, with a view to counter the pull factor constituted by an MS’s 85

See Joined Cases C-22/08 and C-23/08, Vatsouras and Koupatantze (ECJ 4 June 2009) para 37– 38. The Court then added (para 39) that “The existence of such a link can be determined, in particular, by establishing that the person concerned has, for a reasonable period, in fact genuinely sought work in the Member State in question.” For the conclusions reached by the case law on the rights of those looking for work in the host State, see Wollenschläger and Ricketts (2014). On the genuine link, see also Neuvonen (2014) and Poptcheva (2014), p. 13 et seq. 86 See Case C-67/14, Nazifa Alimanovic and Others (ECJ 15 September 2015) para 44 et seq.: “such benefits are also covered by the concept of ‘social assistance’ within the meaning of Article 24(2) of Directive 2004/38 [. . .] the predominant function of the benefits at issue in the main proceedings is in fact to cover the minimum subsistence costs necessary to lead a life in keeping with human dignity. [. . .] those benefits cannot be characterised as benefits of a financial nature which are intended to facilitate access to the labour market of a Member State [. . .] but must be regarded as ‘social assistance’ within the meaning of Article 24(2) of Directive 2004/38.” The same classification of the benefit requested in the main cases as a welfare benefit and not as a measure intended to facilitate entry into the world of work was also reached in Case C-299/14, García-Nieto (ECJ 25 February 2016) para 36 et seq. 87 European Council Conclusions, 18/19 February 2016, EUCO 1/16 CO EUR 1 CONCL 1, ANNEX I, Decision of the Heads of State or Government, meeting within the European Council, Concerning a New Settlement for the United Kingdom within the European Union”, Section D, Social Benefits and Free Movement, p. 19 et seq.

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employment benefits regime, the Agreement also provides for the amendment of Regulation No. 492/2011 on the free movement of workers within the EU88 to add an alert mechanism and safeguard.89 This proposal aims to respond “to situation of inflow of workers from other MS of an exceptional magnitude over an extended period of time, including as a result of past policies following previous EU enlargements”,90 and must be supported by Governments of the MS.91 We might assert that the amendment of Regulation No. 492/2011 is of doubtful legality under the provision of Articles 18, 21 and 45 TFEU, since it provides that on a proposal from the Commission, the Council may authorise the MS concerned to limit, to the extent necessary, access to non-contributory benefits linked to employment for a total period of up to four years, starting from the beginning of employment.92

4.2. Inactive European Citizens

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The issue of sufficient resources and medical insurance of an inactive citizen who intends to stay for more than 3 months in an MS of which he is not a national has been set before the Court both in cases which directly concerned his right of residence and those which dealt with the host State’s refusal to grant social benefits. In the first case, the Court has, since the Baumbast judgment, configured the possession of resources as a limit, permitted by the Treaty, to the enjoyment of the right of residence, and not as a condition for its use.93 Consequently, it has strictly interpreted this limit, whether set by directives previous to Directive

88

See Parliament/Council Regulation (EU) No 492/2011 on freedom of movement for workers within the Union O.J. L 141/1 (2011). 89 “A Member State wishing to avail itself of the mechanism would notify the Commission and the Council that such an exceptional situation exists on a scale that affects essential aspects of its social security system, including the primary purpose of its in-work benefits system, or which leads to difficulties which are serious and liable to persist in its employment market or are putting an excessive pressure on the proper functioning of its public services.” 90 See European Council Conclusions, 18/19 February 2016, EUCO 1/16 CO EUR 1 CONCL 1, p. 23. Indeed, these situations can undermine essential aspects of a State’s social security system, resulting in serious difficulties that are likely to persist in its labour market, or put excessive pressure on the proper functioning of public services. 91 “The representatives of the Member States, acting in their capacity as members of the Council, will proceed with work on these legislative proposals as a matter of priority and do all within their power to ensure their rapid adoption” (European Council Conclusions, 18/19 February 2016, EUCO 1/16 CO EUR 1 CONCL 1, p. 23). 92 This limitation shall be flexible, evolving from a complete initial exclusion to gradually increasing access to such benefits, considering the increasing worker connection to the labour market of the host State. 93 Case C-413/99, Baumbast (ECJ 17 September 2002) para 84.

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2004/38,94 or applied in Article 7.1 (b) of the latter.95 It was therefore affirmed that the national authorities must not operate automatically, in the face of total or partial deficiency of one of the requirements, but must consider the personal situation of the European citizen. Furthermore, although Article 7.1 (b) and (c) aims to prevent the European citizen from becoming a “welfare burden on the host Member State during their period of residence”, the Court, as seen above, has always talked about excessive or “unreasonable” burden.96 References for a preliminary ruling were also presented to the Court concerning the right to seek welfare benefits from the host State for inactive citizens residing for more than three months, but not yet in possession of a permanent residence right. This category of persons is not expressly mentioned in Article 24.2.97 Legislation from various MS, however, denies them social assistance, on the grounds that the legal residence in its territory of such citizens presupposes the fulfilment of the requirements in Article 7.1 (b) and thus, by definition, they should not need to rely on it. This interpretation gave rise to a significant litigation. At first, the Courts sought to achieve a compromise between the principles of non-discrimination and of free movement and residence—as laid down in the

94

For instance, see Case C-200/02, Zhu and Chen (ECJ 19 October 2004) para 26 et seq., and Case C-408/03, Commission v Belgium (ECJ 23 March 2006) para 39 et seq., which established that the economic resources need not necessarily belong to the citizen making use of the right of residence. In particular, the judgment in Zhu and Chen asserted that the limitations and conditions laid down in Article 18 TEC and by Directive 90/364 are based on the idea that the exercise of the right of residence of Union citizens can be subordinated to the legitimate interests of Member States, but added that the application of those limitations and conditions must operate in compliance with the limits imposed by Community law and in accordance with the principle of proportionality (para 32). 95 See for example Case C-140/12, Brey (ECJ 19 September 2013) para 71: “[. . .] the margin for manoeuvre which the Member States are recognised as having must not be used by them in a manner which would compromise attainment of the objective of Directive 2004/38, which is, inter alia, to facilitate and strengthen the exercise of Union citizens’ primary right to move and reside freely within the territory of the Member States, and the practical effectiveness of that Directive [. . .].” 96 Case C-140/12, Brey (ECJ 19 September 2013) para 63. 97 To understand this choice, see the preparatory works of the directive. The text of Article 21.2— now Article 24.2—of the Commission’s proposal reads: “By way of derogation from paragraph 1, until they have acquired the right of permanent residence, the host Member State shall not be obliged to confer entitlement to social assistance on persons other than those engaged in gainful activity in an employed or self-employed capacity or the members of their families, nor shall it be obliged to award maintenance grants to persons having the right of residence who have come to the country to study.” The amendment to the original text was, however, requested by the EP in so far as the possibility to broadly limit social services was not contained in the Directives on economically inactive people who were to form the minimum basis to which Directive 2004/38 had to comply, and it contrasted with the Court’s case law. It would therefore be a regression in relation to the acquis communautaire (see the Commission’s comment on amendment no. 108 presented after the first reading). The Council accepted the part of the amendment concerning inactive citizens, but imposed the restoration of the limit for residents for a period of less than three months and for those looking for a job.”

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Treaties and already covered by its very broad interpretation98—and the legitimate need for the MS to avoid so-called social tourism.99 This attempt is expressed both by not considering Article 24.2 applicable to the specific case, since the applicant could be regarded as a worker,100 and by accepting an “elastic” interpretation of the requirements of Article 7—also in light of Article 14.3 of the Directive which, by providing that use by an EU citizen or family members of the social assistance system does not automatically give rise to a removal order, implicitly accepts the permanence of the aforementioned requirements for persons in temporary economic difficulty.101 Unlike the MS, therefore, the Court held that the obligation to provide social assistance was not dependent on verification of the legality of the residence under Article 7.1 (b),102 so long as this assistance does not represent an unreasonable burden on the State.103 Consequently, it called on host states to offer “certain financial solidarity with the citizens of another Member State,”104 that they had

98 See Case C-85/96, Martinez Sala (ECJ 18 May 1998) and Case C-456/02, Trojani (ECJ 7 September 2004)., Furthermore relating to students, the Court held that, as an exception to the principle of equal treatment provided for in Article 18 TFEU, Article 24.2 must be interpreted as exclusively concerning aid granted in the form of grants or loans, while any other interpretation of that provision “would run counter to not only its wording but also to the Court’s obligation to interpret that derogation in accordance with the provisions of the Treaty, including those relating to Union citizenship”, Case C-75/11, Commission v Austria (ECJ 4 October 2012) para 55 et seq. 99 The phenomenon of so-called social tourism, already significant in some countries in cases of economic crisis, “intensified as 31 December 2013 approached: the date on which the restrictions on the right of Romanian and Bulgarian citizens to work in certain Member States were to be lifted” (See Poptcheva 2014, p. 3). On the phenomenon in question, see also Nowrot and Struckmeyer-Öner (2014), p. 3. 100 See for example Case C-46/12, L. N. (ECJ 21 February 2013) para 34 et seq., in which the status of student as the basis for the citizen’s entrance in the host State does not “automatically” imply that the person does not have worker status, as long as the national court finds this qualification. 101 The Court also recalled the prohibition in Article 8.4, prohibiting States from indicating the precise amount of resources considered sufficient, since the personal situation of the individual must be considered. 102 See in this sense Case C-140/12, Brey (ECJ 19 September 2013) para 80: “EU law – in particular, as it results from Article 7(1)(b), Article 8(4) and Article 24(1) and (2) of Directive 2004/38 – must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which, even as regards the period following the first three months of residence, automatically – whatever the circumstances – bars the grant of a benefit, such as the compensatory supplement [. . .] to a national of another Member State who is not economically active, on the grounds that, despite having been issued with a certificate of residence, he does not meet the necessary requirements for obtaining the legal right to reside on the territory of the first Member State for a period of longer than three months, since obtaining that right of residence is conditional upon that national having sufficient resources not to apply for the benefit.” For critic remarks, see Verschueren (2014), p. 147 et seq. 103 See Joined Cases C-424/10 and C-425/10, Ziolkowski and Szeja (ECJ 21 December 2011) para 40. 104 For the use of this expression, see for example Case C-184/99, Grzelczyk (ECJ 20 September 2001) para 44 and Case C-209/03, Bidar (ECJ 15 March 2005) para 56.

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instead wanted to exclude, indicating in the Directive precise requirements for the enjoyment of the right of residence. This approach was recently superseded by a case law, which appears innovative in more than one respect. First, in its judgment on the Dano case,105 the Court denied the right to social benefits of a European citizen who resided in Germany for more than three months without seeking work, referring not to paragraph 2 of Article 24, but to paragraph 1. Indeed, it asserted that “Article 24(1) of Directive 2004/38 provides that all Union citizens residing on the basis of the Directive in the territory of the host Member State are to enjoy equal treatment with the nationals of that Member State within the scope of the Treaty. It follows that, so far as concerns access to social benefits, such as those at issue in the main proceedings, a Union citizen can claim equal treatment with nationals of the host Member State only if his residence in the territory of the host Member State complies with the conditions of Directive 2004/38.”106 According to the Court, Article 7.1 (b) of Directive 2004/38 aims to prevent economically inactive Union citizens from using the social protection system of the host MS to finance their livelihood. Any “unequal treatment between Union citizens who have made use of their freedom of movement and residence and nationals of the host Member State with regard to the grant of social benefits is an inevitable consequence of Directive 2004/38. Such potential unequal treatment is founded on the link established by the Union legislature in Article 7 of the Directive between the requirement to have sufficient resources as a condition for residence and the concern not to create a burden on the social assistance systems of the Member States.”107 Without proper economic resources, it is impossible for European citizens to claim the right of residence in the host MS based on Directive 2004/38, and therefore these cannot rely on the principle of non-discrimination set out in Article 24.1 of the Directive. In this judgment, clear consideration is reserved for the interest of MS in defending themselves from abuse by European citizens of their social assistance

105

See Case C-333/13, Dano (ECJ 11 April 2014). The reasoning and conclusions of the Dano judgment were also recalled in Case C-67/14, Nazifa Alimanovic and Others (ECJ 15 September 2015) para 69 et seq. and Case C-299/14, García-Nieto (ECJ 25 February 2016) para 39 et seq. respectively and, most recently, in Case C-308/14, Commission v United Kingdom (ECJ 14 June 2016) para 68 et seq. 106 See Case C-333/13, Dano (ECJ 11 April 2014) para 68–69. 107 See Case C-333/13, Dano (ECJ 11 April 2014) para 76–77. The judgment adds on the subject: “A Member State must therefore have the possibility, pursuant to Article 7 of Directive 2004/38, 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. To deny the Member State concerned that possibility would, as the Advocate General has stated in point 106 of his Opinion, thus have the consequence that persons who, upon arriving in the territory of another Member State, do not have sufficient resources to provide for themselves would have them automatically, through the grant of a special non-contributory cash benefit which is intended to cover the beneficiary’s subsistence costs.” (para 78–79).

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systems,108 a consideration which led the Court not to pose the problem of the compatibility of such a conclusion with Article 18 TFEU and secondary legislation and with its previous case law.109 This question has been faced in a later judgment, where the Court has taken a decision whether the introduction of the right to reside test for granting social benefits in the national legislation inevitably results in direct, or at least indirect, discrimination110 (prohibited by Article 4 of Regulation No 883/2004).111 Although the United Kingdom legislation was recognised by the Court to give rise to be to an indirect discrimination,112 the Judges stated that the measure was justified, because appropriate for securing the attainment of a legitimate objective113 and not going beyond what is necessary to attain that objective.114 Particularly, “the need to protect the finances of the host Member State justifies in principle the possibility of checking whether residence is lawful when a social benefit is granted in particular to persons from other Member States who are not economically active, as such grant could have consequences for the overall level of assistance which may be accorded by that State.”115 Finally, the Court went back on earlier case law concerning the concept of “unreasonable burden on the social assistance system of the host Member State” (Article 14.1). As a matter of fact, in a recent judgment the Court has made clear that assessment of the burden produced on the State must not consider the effect of a single application, but the sum of all possible similar application that

108

The same conclusion was reached in Case C-333/13, Dano (Opinion of AG Wathelet of 20 May 2014) para 103 et seq. See Inter alia Amadeo (2011), Bartoloni (2015), Guimarães (2015). 109 The Court, after excluding the applicability of the principle of equal treatment under Article 24 of the Directive, as it did in other decisions, could have verified whether the principle of nondiscrimination laid down in Article 18 TFEU, was not anyway in force, as in the Trojani case, or whether other articles of the Treaty were not applicable, as in the Dereci case. 110 Indeed, as Commission claimed, “a host Member State which, for the purpose of granting social benefits, such as the social benefits at issue, requires a national of another Member State to be residing in its territory lawfully commits indirect discrimination”; see Case C-308/14, Commission v United Kingdom (ECJ 14 June 2016) para 76. 111 See especially Parliament/Council Regulation (EC) No 883/2004 on the coordination of social security systems, O.J. L 166/1 (2004), Article 4: “Equality of treatment. Unless otherwise provided for by this Regulation, persons to whom this Regulation applies shall enjoy the same benefits and be subject to the same obligations under the legislation of any Member State as the nationals thereof.” 112 For the Court, this “legislation gives rise to unequal treatment between United Kingdom nationals and nationals of the other Member States as such a residence condition is more easily satisfied by United Kingdom nationals [. . .] than by nationals of other Member States, whose residence, by contrast, is generally in a Member State other than the United Kingdom” (Case C308/14, Commission v United Kingdom (ECJ 14 June 2016) para 78). 113 Case C-308/14, Commission v United Kingdom (ECJ 14 June 2016) para 79. 114 See especially Case C-308/14, Commission v United Kingdom (ECJ 14 June 2016) para 81 et seq. 115 Case C-308/14, Commission v United Kingdom (ECJ 14 June 2016) para 80.

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can be submitted to the welfare system.116 Previously, the Court had emphasised the need to perform an individual examination of the requests—including consideration of a series of elements extraneous to the requirements—and to make a subsequent impact assessment of the possible approval of the application in question “on the global level of potential State aid”,117 which seemed to suggest a positive solution to the national courts in this case: qualitative, not quantitative, aspects of the question were being considered. Having considered the impact on systems of social assistance of all similar applications to be proposed, can change conclusion on proportionality of the State measures taken to tackle social tourism. This new approach has also been confirmed regarding directly people staying on the territory of another MS for a period of up to three months.118 The recent case law of the Court of Justice on granting welfare benefits seems, as mentioned, not only more sensitive to the financial needs of MS but also concerned by the potential political effects of its assertions. This reading allows to consider lawful—to both primary and secondary EU law—the interpretation of enforceable limits to stay for inactive citizens that was welcomed with reference to the United Kingdom by the European Council of 18/19 February 2016.

List of Cases ECJ 28.10.1975, 36/75, Rutili, ECLI:EU:C:1975:137 [cit. in para. 32] ECJ 27.10.1977, 30/77, Regina and Pierre Bouchereau, ECLI:EU:C:1977:172 [cit. in para 33] ECJ 17.12.1980, 149/79, Commission v Belgium, ECLI:EU:C:1980:297 [cit. in para 8] ECJ 02.02.1989, 186/87, Ian William Cowan, ECLI:EU:C:1989:47 [cit. in para 8] ECJ 26.02.1991, C-292/89, Gustaff Desiderius Antonissen, ECLI:EU:C:1991:80 [cit. in para 8; 14; 41]

116 See Case C-67/14, Nazifa Alimanovic and Others (ECJ 15 September 2015) para 62: “Moreover, as regards the individual assessment for the purposes of making an overall appraisal of the burden which the grant of a specific benefit would place on the national system of social assistance at issue in the main proceedings as a whole, it must be observed that the assistance awarded to a single applicant can scarcely be described as an ‘unreasonable burden’ for a Member State, within the meaning of Article 14(1) of Directive 2004/38. However, while an individual claim might not place the Member State concerned under an unreasonable burden, the accumulation of all the individual claims which would be submitted to it would be bound to do so.” 117 Cf. Case C-140/12, Brey (ECJ 19 September 2013) para 79, which concludes: “In the present case, it is for the referring court, which alone has jurisdiction to assess the facts, to decide, in light of those elements in particular, whether granting a benefit such as the compensatory supplement to a person in Mr Brey’s situation is likely to place an unreasonable burden on the national social assistance system.” 118 Regarding people staying in the territory of another MS for a period of up to three months, see Case C-299/14, García-Nieto (ECJ 25 February 2016) para 48 et seq.

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ECJ 18.05.1998, C-85/96, Martinez Sala, ECLI:EU:C:1998:217 [cit. in para 11; 47] ECJ 19.01.1999, C-348/96, Arios Pagos v Donatella Calfa, ECLI:EU:C:1999:6 [cit. in para 33] ECJ 20.09.2001, C-184/99, Grzelczyk, ECLI:EU:C:2001:458 [cit. in para 2; 11; 15; 16; 17; 48] ECJ 04.06.2002, C-367/98, Commission v Portugal, ECLI:EU:C:2002:326 [cit. in para 2] ECJ 04.06.2002, C-483/99, Commission v France, ECLI:EU:C:2002:327 [cit. in para 2] ECJ 04.06.2002, C-503/99, Commission v Belgium, ECLI:EU:C:2002:328 [cit. in para 2] ECJ 17.09.2002, C-413/99, Baumbast, ECLI:EU:C:2002:493 [cit. in para 10; 11: 15: 45] ECJ 02.10.2003, C-148/02, Garcia Avello, ECLI:EU:C:2003:539 [cit. in para 2; 20] ECJ 23.03.2004, C-138/02, Brian Francis Collins, ECLI:EU:C:2004:172 [cit. in para 42] ECJ 29.04.2004, C-224/02, Heikki Antero Pusa, ECLI:EU:C:2004:273 [cit. in para 17] ECJ 29.04.2004, Joined Cases C-482/01 and C-493/01, Georgios Orfanopoulos and Raffaele Oliveri, ECLI:EU:C:2004:26 [cit. in para 35] ECJ 07.09.2004, C-456/02, Trojani, ECLI:EU:C:2004:488 [cit. in para 16; 17; 40: 47; 49] ECJ 19.10.2004, C-200/02, Zhu and Chen, ECLI:EU:C:2004:639 [cit. in para 20; 45] ECJ 17.02.2005, C-215/03, Salah Oulane, ECLI:EU:C:2005:95 [cit. in para 12] ECJ 15.03.2005, C-209/03, Dany Bidar, ECLI:EU:C:2005:169 [cit. in para 2; 16; 17; 30; 48] ECJ 15.09.2005, C-258/04, Ioannis Ioannidis, ECLI:EU:C:2005:559 [cit. in para 42] ECJ 23.03.2006, C-408/03, Commission v Belgium, ECLI:EU:C:2006:192 [cit. in para 45] ECJ 27.04.2006, C-441/02, Commission v Germany, ECLI:EU:C:2006:253 [cit. in para 33] ECJ 18.07.2006, C-406/04, De Cuyper, ECLI:EU:C:2006:491 [cit. in para 17] ECJ 28.09.2006, Joined Cases C-282/04 et al., Commission v Netherlands, ECLI: EU:C:2006:608 [cit. in para 2] ECJ 26.10.2006, C-192/05, Tas-Hagen, ECLI:EU:C:2006:676 [cit. in para 17] ECJ 11.12.2007, C-291/05, R. N. G. Eind, ECLI:EU:C:2007:771 [cit. in para12; 20; 24] ECJ 10.07.2008, C-33/07, Gheorghe Jipa, ECLI:EU:C:2008:396 [cit. in para 11; 13; 24] ECJ 25.07.2008, C-127/08, Metock and Others, ECLI:EU:C:2008:449 [cit. in para 21; 22]

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ECJ 14.10.2008, C-353/06, Grunkin and Paul, ECLI:EU:C:2008:559 [cit. in para 20] ECJ 04.06.2009, Joined Cases C-22/08 and C-23/08, Vatsouras and Koupatantze, ECLI:EU:C:2009:344 [cit. in para 42] ECJ 13.04.2010, C-73/08, Bressol, ECLI:EU:C:2010:181 [cit. in para 17] ECJ 07.10.2010, C-162/09, Lassal, ECLI:EU:C:2010:592 [cit. in para 29] ECJ 23.11.2010, C-145/09, Panagiotis Tsakouridi, ECLI:EU:C:2010:708 [cit. in para 36] ECJ 21.07.2011, C-325/09, Maria Dias, ECLI:EU:C:2011:498 [cit. in para 29] ECJ 15.11.2011, C-256/11, Dereci, ECLI:EU:C:2011:734 [cit. in para 19; 49] ECJ 17.11.2011, C-434/10, Petar Aladzhov, ECLI:EU:C:2011:750 [cit. in para 32] ECJ 21.12.2011, Joined Cases C-424/10 and C-425/10, Tomasz Ziolkowski and Barbara Szeja, ECLI:EU:C:2011:866 [cit. in para 18; 29: 40; 48] ECJ 19.07.2012, C-278/12 PPU, Atiqullah Adil, ECLI:EU:C:2012:508 [cit. in para 38] ECJ 05.09.2012, C-83/11, Sazzadur Rahman and Others, ECLI:EU:C:2012:519 [cit. in para 21] ECJ 08.11.2012, C-40/11, Yoshikazu Iida, ECLI:EU:C:2012:691 [cit. in para 21] ECJ 04.10.2012, C-75/11, Commission v Austria, ECLI:EU:C:2012:605 [cit. in para 17; 40; 43] ECJ 04.10.2012, C-249/11, Hristo Byankov, ECLI:EU:C:2012:608 [cit. in para 32] ECJ 21.02.2013, C-46/12, L. N., ECLI:EU:C:2013:97 [cit. in para. 40; 46; 47] ECJ 19.09.2013, C-140/12, Peter Brey, ECLI:EU:C:2013:565 [cit. in para16; 19; 45; 48; 51] ECJ 16.01.2014, C-423/12, Flora May Reyes, ECLI:EU:C:2014:16 [cit. in para. 3; 19; 20] ECJ 11.04.2014, C-333/13, Dano, ECLI:EU:C:2014:2358 [cit. in para 40; 49] ECJ 10.07.2014, C-244/13, Ewaen Fred Ogieriakhi, ECLI:EU:C:2014:2068 [cit. in para. 29] ECJ 16.1.2014, C-378/12, Nnamdi Onuekwere, ECLI:EU:C:2014:13 ([cit. in para. 29] ECJ 15.09.2015, C-67/14, Nazifa Alimanovic and Others, ECLI:EU:C:2015:597 [cit. in para 42; 49; 51] ECJ 25.02.2016, C-299/14, García-Nieto and Others, ECLI:EU:C:2016:114 [cit. in para 27; 40; 42; 49; 51] ECJ 14.06.2016, C-308/14, Commission v United Kingdom, ECLI:EU:C:2016:436 [cit. in para 48; 49; 50] ECJ 13.09.2016, C-165/14, Alfredo Rendón Marín, ECLI:EU:C:2016:675 [cit. in para 34] ECJ 13.09.2016, C-304/14, Secretary of State for the Home Department v CS, ECLI:EU:C:2016:674 [cit. in para 34] ECJ 04.04.2017, C-544/15, Sahar Fahimian, EU:C:2017:255 [ cit. in para 36]

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References119 Amadeo, S. (2011). Il principio di eguaglianza e la cittadinanza dell’Unione: il trattamento del cittadino europeo ‘inattivo’. Il Diritto dell’Unione europea, XVI, 59–64. Bartoloni, M. E. (2015). La libera circolazione dei cittadini europei economicamente inattivi tra principio di non discriminazione e tutela nazionale dei sistemi di welfare. Diritti umani e diritto internazionale, 476–484. Retrieved from www.sidi-isil.org/wp-content/uploads/2015/07/ Caggiano, G. (2008). Le nuove politiche dei controlli alle frontiere, dell’asilo e dell’immigrazione nello Spazio unificato di libertà, sicurezza e giustizia. Studi sull’integrazione europea, III, 105–144. Carlier, Y. (2006). Le devenir de la libre circolation des personnes dans l’Union européenne: régard sur la directive 2004/38. Cahiers de droit européen, 42, 13–34. Closa, C. (1992). The concept of citizenship in the treaty on European Union (Vol. XIX, pp. 1137– 1169). Common Market Law Review. Constantinesco, V., Jacqué, J. P., Kovar, P., & Simon, D. (Eds.). (1995). Traité sur l’Union européenne (signé à Maastricht le 7 février 1992), Commentaire article par article. Paris: Economica. Dautricourt, C., & Thomas, S. (2009). Reverse discrimination and free movement of persons under community law: All for Ulysses, nothing for Penelope? European Law Review, 34, 433–454. Giubboni, S. (2007). Free movement of persons and European solidarity. European Law Journal, 13, 360–379. Golynker, O. (2010). EU Citizenship and the role of the European Court of Justice in reconfiguration of social solidarity in European Union. European University Institute Research Papers, 1– 31. Retrieved from http://www.eui.eu/documents/rscas/research/mwg/200910/mwg2010-0519golynker.pdf Guild, E., Peers, S., & Tomkin, J. (2014). The EU Citizenship Directive. A commentary. Oxford: OUP. Guimarães, D. (2015). The right of free movement and the access to social protection in the EU: The economical dimension. Notes on the Case Elisabeta Dano v Jobcenter Leipzig, C-333/13. European Law Journal, 21, 110–120. Iliopoulou, A. (2004). Le nouveau droit de séjour des citoyens de l’Union et des membres de leur famille: la directive 2004/38. Revue de droit de l’Union européenne, 523–557. Kovar, P., & Simon, D. (1993). La citoyenneté européenne. Cahiers de droit européen, 29, 285–316. Lang, A., & Nascimbene, B. (2007). L’attuazione in Italia della direttiva 2004/38/CE sulla libera circolazione dei cittadini dell’Unione europea. Diritto, immigrazione, cittadinanza, IX, 43–62. Neuvonen, P. J. (2014). In search of (even) more substance for the “real link” test: Comment on Prinz and Seeberger. European Law Review, 39, 125–136. Nowrot, K. & Struckmeyer-Öner, B. (2014). Sozialtourismus in Europa?: Unions- und sozialrechtliche Anmerkungen zu einer aktuellen Debatte. Policy Papers on Transnational Economic Law, No 40. Poptcheva, E.-M. (2014). Freedom of movement and residence of EU citizens. Access to social benefits. Parliamentary Research Service 10/06/2014, 140808REV1. Retrieved from www. europarl.europa.eu/.../2014/.../LDM_BRI(2014)140808_. Paladino, R. (2012). Il ricongiungimento familiare nell’ordinamento europeo, Tra integrazione del mercato e tutela dei diritti fondamentali. Bari: Cacucci. Verschueren, H. (2014). Free movement or benefit tourism: The unreasonable Burden of Brey. Journal of Migration and Law, 16, 147–180. Wollenschläger, F. & Ricketts, J. (2014). Jobseekers’ residence rights and access to social benefits: EU law and its implementation in the Member States. Online Journal for Freedom of Movement of Workers within the European Union, No. 7/2014.

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Article 22 [Right to Vote] (ex-Article 19 TEC) 1. 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 at municipal elections5–8 in the Member State in which he resides, under the same conditions as nationals of that State.11 This right shall be exercised subject to detailed arrangements adopted by the Council, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament;9–10, 16 these arrangements may provide for derogations where warranted by problems specific to a Member State.12–13, 17 2. Without prejudice to Article 223(1) and to the provisions adopted for its implementation,18, 26 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.22, 30 This right shall be exercised subject to detailed arrangements adopted by the Council, acting unanimously in accordance with a special legislative procedure and after consulting the European Parliament;19–23, 25–28 these arrangements may provide for derogations where warranted by problems specific to a Member State.24

Contents 1. 2.

Voting Rights of EU Citizens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Voting Rights in Municipal Elections (Paragraph 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.1. The Right to Vote in Local Elections in Article 8B, Paragraph 1 . . . . . . . . . . . . . . . . . . . 5 2.2. The Implementation of Article 8B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.3. Article 22, Paragraph 1 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3. Voting Rights in European Parliament Elections (Paragraph 2) . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.1. The Right to Vote for European Parliament: Article 8B, Paragraph 2 . . . . . . . . . . . . . 18 3.2. Implementation of Article 8B, Paragraph 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.3. Article 22, Paragraph 2, TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 3.4. Judicial Interpretation of the Right to Vote and to Stand for Election in European Parliament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 List of Cases References

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Voting Rights of EU Citizens

Article 22 TFEU governs voting rights procedures for EU citizens in municipal and EP elections (attributed to Article 20.2 (b) TFEU). This law’s principal aim is to facilitate integration in the host country of those who take advantage of free #

Springer Nature Switzerland AG 2021 H.-J. Blanke, S. Mangiameli (eds.), Treaty on the Functioning of the European Union – A Commentary, Springer Commentaries on International and European Law, https://doi.org/10.1007/978-3-030-43511-0_23

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movement, allowing them to participate in the political process at the local level and to take part in the selection of members of Parliament: the core principle is in fact the State’s obligation to extend to nationals of other MS residing therein the same voting access conditions their own citizens enjoy—not to influence the national electoral process to increase the rate of democracy. It is a right which can therefore be considered to be aimed to promote the right set out in Article 21 TFEU,1 and which constitutes the fulfillment of a process that began many years before the establishment of European citizenship, in the context of free movement and establishment. Nevertheless, the provision of voting rights to EU citizens has major political and sociological implications because it has affected the State’s hitherto exclusive competence in determining their own electorate2 and it has laid the groundwork for the direct political relationship between the citizen and the EU, leading to a “tendency toward denationalization of the political representation in the European Parliament.”3 Since an EU citizen’s residence in another MS is the operative premise of Article 20.2 (b) and of Article 22 TFEU, the voting rights that they enunciate—and the related principles derived from EU law that accompany them—cannot, normally (although it has been attempted4) be invoked by a citizen residing in his own MS who has, for whatever reason, been denied these rights. In addition, voting rights norms for EU citizens shall not affect each MS’s provisions concerning the right to vote and to stand as a candidate in elections for its nationals residing outside its electoral territory.5 The right to vote in local and in EP elections has remained largely unchanged in the various versions of the Treaties. Article 8B TEU-Maastricht prescribed that EU citizens residing in another MS enjoy this right under the same conditions as 1 See Recital 3 of Council Directive 93/109/EC laying down detailed arrangements for the exercise of the right to vote and stand as a candidate in elections to the European Parliament for citizens of the Union residing in a Member State of which they are not nationals, O.J. L 329/34 (1993) and of Council Directive 94/80/EC laying down detailed arrangements for the exercise of the right to vote and to stand as a candidate in municipal elections by citizens of the Union residing in a Member State of which they are not nationals, O.J. L 368/38 (1994). The text states: “(Whereas) the right to vote and to stand as a candidate in municipal elections in the Member State of residence, embodied in Article 8 B (1) of the Treaty establishing the European Community, is an instance of the application of the principle of equality and non-discrimination between nationals and non-nationals and a corollary of the right to move and reside freely enshrined in Article 8a of that Treaty” (emphasis added). 2 See for example Shaw (2007), p. 2552: “they are symbolically important, as they represent an encroachment by the European Union as a political union into traditionally protected areas of national sovereignty, which are concerned with the organization of the political system on a democratic basis.” 3 Adam and Tizzano (2014), pp. 419–420. 4 See Cases C-300/04, M. G. Eman, O. B. Sevinger v College van burgemeester en wethouders van Den Haag (ECJ 12 September 2006); C-535/08, Pignataro v. Ufficio centrale circoscrizionale presso il Tribunale di Catania e altri (ECJ 26 March 2009); C-650/13, Delvigne v. Commune de LesparreMédoc e Préfet de la Gironde, (ECJ 6 October 2015). See amplius on the subject➔ para 29–31. 5 Cf. Article 1.2 of aforementioned Directives 93/109 and 94/80.

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nationals of that State. The provision was not, however, immediately effective as it required norms to regulate key aspects of the right to vote: to this end, it was provided that, by 31 December 1994 for local elections and 31 December 1993 for EP elections, the Council, acting unanimously on a proposal from the Commission and in consultation with Parliament, was to adopt an act that would set the rules for the exercise of such rights and any derogations justified by the specific situations of individual countries. This requirement was fulfilled by the adoption of Directives 94/80 and 93/109.6 Article 19 TEC fully followed Article 8B, with the exception of the repeal of its fixed terms, thus maintaining the possibility of adopting, by the abovementioned procedure, further acts to regulate the manner of exercising EU citizens’ voting rights; indeed Directive 94/80 was, in 1996, amended in accordance with Article 8B to account for the accession of Austria, Finland, and Sweden.7 As mentioned, the Treaty of Lisbon mentions the right in question in two articles: Article 20 TFEU merely states it, whereas Article 22 TFEU, which itself includes the text of Article 8B, provides for the adoption, with a special legislative procedure, of detailed arrangements by the Council, acting unanimously. These arrangements may provide for derogations where warranted by problems specific to an MS. As will be seen, the institutions use this option in 2012 to amend some provisions of Directive 93/109.8 Article 22 TFEU consists of two paragraphs—the first concerns local election voting, while the second deals with EP voting—which establishes common principles regarding the extension of the right to vote and stand for election, nonharmonisation of electoral procedures in compliance with the principle of equal treatment with nationals, and the opportunity to establish derogations due to special circumstances in MS.9

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Voting Rights in Municipal Elections (Paragraph 1)

2.1. The Right to Vote in Local Elections in Article 8B, Paragraph 1

Concession of the right to vote and stand in local elections constitutes perhaps the Maastricht Treaty’s most significant change regarding EU citizenship, touching 6

Cf. Council Directive 93/109/EC and Council Directive 94/80/EC. See Council Directive 96/30/EC, amending Directive 94/80/EC laying down detailed arrangements for the exercise of the right to vote and to stand as a candidate in municipal elections by citizens of the Union residing in a Member State of which they are not nationals, O.J. L. 122/14 (1996). 8 Council Directive 2013/1/EU amending Directive 93/109/EC as regards certain detailed arrangements for the exercise of the right to stand as a candidate in elections to the European Parliament for citizens of the Union residing in a Member State of which they are not nationals, O. J. L 26/27 (2013). The Directive was largely transposed by all MS by May 2014, although some are only partial transpositions. 9 See the Second Report from the Commission on citizenship of the Union, COM(97) 230, p. 7 et seq. 7

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upon one of the most sensitive issues of national sovereignty, namely, the right to vote and, consequently, the composition of political bodies,10 at least locally.11 The long genesis of the right to vote for State residents who are nationals of another MS had already begun in 1972,12 but it developed following the European Council summit in Paris in 1974: the Council wanted to grant “special rights”— including, at least in part, civil and political ones—to facilitate the integration of those who avail themselves of free movement to other States.13 Not until 1985, however, was the issue taken up by the EP, which urged the Commission to present a legislative proposal for granting both municipal and European election voting rights; this proposal, which was presented on 22 June 1988, concerned only “Member States residents’ right to vote in municipal elections in their country of residence”14 and had its legal basis in Article 235 TEEC.15 Although it was never considered by the Council, it is the source of Article 8B. As previously mentioned, Article 8B.2 TEU recognised the right for nationals of MS to vote and stand for election under the same conditions as nationals of their States of residence. It is evident this right was given irrespective of the citizen’s motive for residence and did not presuppose the carrying out of economic activity, since it was concerned in a general way with all EU citizens residing in MS other than their own. One of the most controversial issues debated during the IGC was the ability to apply for a minimum duration of residency.16 Another delicate point

10

On the consequences of the concession of voting rights in local elections for EU citizens for State sovereignty and on States’ opposition thereto, see Gautier (1995), p. 143 f. The need to promote and encourage citizens’ participation in the democratic life of their MS of residence has also been emphasised in Commission Report on the application of Directive 94/80/EC on the right to vote and to stand as a candidate in municipal elections by citizens of the Union residing in a Member State of which they are not nationals, COM(2012) 99 final, point 5.2, p. 13. 11 Extension of the right to vote in regional, if not national, elections to better effect the integration of EU citizens in their state of residence has been proposed unsuccessfully: see Fifth Report from the Commission on citizenship of the Union (1 May 2004–30 June 2007), COM(2008) 85 final, point 4.4., p. 7–8. On this problem, see also Shaw (2007), p. 2558. 12 From the same year is No. 144 Convention on the participation of Foreigners in Public Life at local level, Strasbourg, 5 February 1992 effective 1 May 1997, not ratified, however, by all MS. 13 In its Resolution of 9 February 1976 on “an action programme for migrant workers and members of their families”, O.J. C 34/2 (1976), for example, the Council maintained that: “As regards nationals of Member States resident in another Member State denial of civic and political rights seems to be inconsistent with the spirit of the principle of free movement of persons and with the political objectives of the Community with regard to European union. Moreover, because of their circumstances they are in practice unable to exercise fully their political rights in their own country” (emphasis added). 14 For further information, see Gautier (1995), pp. 144–145; Shaw (2007), pp. 2548–2549. 15 The question of the legal basis has proven complex, as it was proposed that—either by itself or jointly with Article 235—reference be made to the rules on free movement (Articles 48 et seq. TEEC). The choice of Article 235, in addition to being appropriate from a legal perspective, would also prevent restriction of the right to vote only to the beneficiaries of free movement. 16 For example, the project presented by the Luxembourg presidency called for a minimum period of 3 years (see Curti Gialdino 1999, p. 8).

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concerned the possible limitations that could be imposed on voting rights, particularly in places where the number of EU residents would be able to influence election results. Thus, Article 8B.1 TEU in providing for the adoption of an act that would regulate the procedures for exercising the right to vote by 31 December 1994, expressly provided that such procedures included derogations where justified by the specific problems of an MS. Even with these limitations, this provision was a major obstacle for MS during the Maastricht Treaty’s ratification procedures. In fact, several jurisdictions limited—even at the constitutional level—the right to vote to citizens of the State in which the elections were held. This has led to the adoption of constitutional amendments17 in places like France, Germany, and Spain.

8

2.2. The Implementation of Article 8B

Article 8B.1 TEU was implemented with Directive 94/80/EC, which went into effect 2 years later. Considering the political significance of the matters covered, there were, on the States’ part, significant delays in implementation, which gave rise to infringement procedures. According to data reported in the Second Report cited, by 1 January 1997 only eight States had fully implemented the Directive, thus leading the Commission to open infringement procedures against France, Italy, Greece, Sweden, Germany, and Austria. Several procedures were dropped following adoption of a transposition law, while the Court of Justice condemned Belgium18 for failure to communicate national transposition measures to give force to the Directive.19 First, the Directive clarifies the scope in which the right to vote operates: to this end, Article 2 only defines municipal elections as those which aim to appoint the members of the representative council and, here appropriate, the head and members of the executive of a basic local government unit, deferring to an annex the identification of the various State structures corresponding to this notion. Under Article 2.1 (b) of the Directive, “basic local government unit” means the administrative entities which, in accordance with the laws of each MS, contain bodies elected by direct universal suffrage and are empowered to administer, at the basic level of political and administrative organisation, certain local affairs on their own responsibility. Considering the variety of territorial systems in various Countries, MS indicated in the Annex to the Directive which of their territorial branches fall under this definition.

17

See Gautier (1995), p. 148 et seq. Case C-323/97, Commission v Belgium (ECJ 9 July 1988). 19 In 2001, according to the Third Report from the Commission on Citizenship of the Union, COM (2001) 506 final, section 24, all States had complied. 18

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Based on the principle of equality and non-discrimination set forth in Recital 3, it was provided that EU citizens residing in a State other than their own have the right to vote in municipal elections under the same conditions as nationals without, as a rule, any additional requirements, such as minimum period of residence not required of all voters (Article 4).20 Equally, the conditions of access to voting and standing for election, such as age or disqualification causes, are the same, with the exceptions that will be seen later (Article 3) and which also apply to any incompatibilities (Article 6). This implies that those who do not have the right to vote in the State in which they originate can vote in another State that follows different voting criteria; however, the possibility for States of residence to exclude from eligibility those who have been deprived the right to vote in their home MS because of civil or criminal conviction (Article 5) is considered. Prerequisite to the right to vote is that it has been requested and that therefore the EU citizen makes an expression of intent (Article 7). Voter registration is automatic only in the case that it is non-mandatory; otherwise, it must be requested and the citizen is subject to a voting obligation: the terms and conditions for registration, as well as potential means of appeal, are set out in Article 8 et seq. It is possible for a citizen to be registered to vote in both the place of origin and the one in which he resides, thus not expressly excluding, as in the case of EP elections,21 the possibility of a double vote. The most controversial point to emerge during the Directive’s approval process regarded possible derogations from the general rule, provided for in cases justified by particular situations in an MS. The question was actually posed in view of both the possibility of limiting (or conditioning via a minimum period of residence in the municipality) the vote of residents where their number exceeds a certain proportion of total voters and of excluding the right to stand for certain offices. Only the first situation, which has great significance for Belgium in particular, mainly because of the delicate institutional mechanisms designed to ensure a balance between its three ethnic components,22 constituted a true derogation, while reserving certain offices

20 Up until at least 2010, Lithuania and Slovenia did not comply with this principle, calling for a minimum period of residence to permit voting access: see Commission Report on the application of Directive 94/80/EC on the right to vote and to stand as a candidate in municipal elections by citizens of the Union residing in a Member State of which they are not nationals, COM(2012) 99 final, section 3.1 21 See also Recital 6 of the Directive: “Whereas Article 8 B(1) of the Treaty recognizes the right to vote and to stand as a candidate in municipal elections in the Member State of residence, without actually substituting it for the right to vote and to stand as a candidate in the Member State of which the Union citizen is a national.” 22 See Recital 17 of the Directive, which states inter alia: “Whereas the Kingdom of Belgium is characterized by specific features and balances linked to the fact that Articles 1 to 4 of its Constitution provide for three official languages and a territorial division into regions and communities, as a result of which full application of this Directive in certain communes might have effects such as to necessitate providing for the possibility of a derogation from the provisions of this Directive in order to take account of those specific features and balances [. . .].”

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for a State’s own nationals was framed as a more general limit to the operation of free movement and the rights derived therefrom. Both of these situations were included in the Directive: the first among the derogations and transitional provisions under Article 12,23 the second among the causes of ineligibility laid down in Article 5.3.24 The first derogation presents exceptional characteristics with respect to EU law principles of non-discrimination and free movement, and its use is subject to strict control to ensure that it is actually necessary and remains so still.25 On the other hand, the possibility of restricting eligibility for election was reconstructed on the principles laid down in Articles 48.4 and 55 TEEC (now Articles 45 and 51 TFEU), concerning the state reserves for posts in public administration or for carrying out activities connected with the exercise of official authority: in fact it concerns eligibility for the role of “head, deputy or member of the governing college of the executive of a basic local government unit” whose task it is to exercise official authority.26 In turn, Article 5.4 allows States to prohibit those elected at the local level from participating in the designation of parliamentary assembly voters or the election of members of that national assembly election,27 to prevent the right to vote granted EU citizens from going beyond the municipal level.

23

E.g., Article 12.1: “Where, on 1 January 1996, in a given Member State, the proportion of citizens of the Union of voting age who reside in it but are not nationals of it exceeds 20% of the total number of citizens of the Union residing there who are of voting age, that Member State may, by way of derogation from this Directive: (a) restrict the right to vote to voters within the scope of Article 3 who have resided in that Member State for a minimum period, which may not be longer than the term for which the representative council of the municipality is elected; (b) restrict the right to stand as a candidate to persons entitled to stand as candidates within the scope of Article 3 who have resided in that Member State for a minimum period, which may not be longer than twice the term for which the representative council of the municipality is elected; and (c) take appropriate measures with regard to the composition of lists of candidates to encourage in particular the integration of citizens of the Union, who are nationals of another Member State.” 24

Article 5.3 of the Directive provides: “Member States may provide that only their own nationals may hold the office of elected head, deputy or member of the governing college of the executive of a basic local government unit if elected to hold office for the duration of his mandate. The Member States may also lay down that the temporary or interim performance of the functions of a head, deputy or member of the governing college of the executive of a basic local government unit may be restricted to own nationals.” 25 Every 6 years, by the terms of Article 12.4 of the Directive. 26 See Second Report on citizenship, p. 8. 27 See regarding France, Gautier (1995), pp. 149–150; Collard (2010), p. 91 et seq.

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At present, only Luxembourg28 has used the derogation provided for in Article 12; while the right to exclude EU citizens from eligibility for certain municipal functions, such as mayor, is employed by nine MS.29 Hailed as a right of fundamental importance at the time of the Maastricht Treaty, the right to vote in municipal elections has not, in practice, been taken advantage of by EU citizens as might have been imagined.30 The Commission’s data shows a low percentage of voters, due not only to a lack of information31 but also to often complex voter registration procedures.32 In addition, as both the EP and the Commission have argued, the effective exercise of the right to vote, even at the local level, presupposes the effective granting of other rights like the right of association and the right to register with, and even found, political parties. The reason for voting disaffection33 frequently depends on the manner in which States fulfill the obligations incumbent on them.

2.3. Article 22, Paragraph 1 TFEU

16

Article 19.1 TEC adopted the text of Article 8B.1 TEU, providing in turn that the right to vote in local elections would be exercised in accordance with the rules adopted unanimously by the Council, on a proposal from the Commission, after consultation with the EP. This procedure could have also provided the legal basis for any eventual amendments to Directive 94/80/EC, produced by EU enlargement, as in the case of Directive 96/30/EC. In fact, the adjustments made from the enlargements of 2004 and 2007 were founded on a different legal basis,34 just as it

28

Commission Report on granting a derogation pursuant to Article 19(1) of the EC Treaty, presented under Article 12(4) of Directive 94/80/EC on the right to vote and stand as a candidate in municipal elections, COM (2005) 382 final, and Scuto 2013, pp. 4–5. 29 See the Report from the Commission on the application of Directive 94/80/EC, pp. 10–11. 30 Report from the Commission on the application of Directive 94/80/EC, p. 6 et seq.; in particular, the rise in EU citizens residing in Member States not their own did not produce a matching increase in voter registration. See also Strudel (2002), p. 47 et seq. 31 To overcome this problem, the Directive obliges the State of residence to inform citizens from other Member States “in good time and in an appropriate manner” of the State’s arrangements for exercising the right to vote and to stand for local election (Article 11 of the Directive). 32 See also Shaw (2010), p. 8. 33 See the Fifth Report of the Commission on citizenship, p. 7 f. and the Commission Report on the application of Directive 94/80/EC, p. 13. The Commission Report on progress towards effective EU Citizenship 2011–2013, COM (2013) 270 final, pp. 5–6, stresses the importance of granting EU citizens the right to form European parties, basing it on Article 22 TFEU. 34 The adjustment necessitated by the 2004 enlargement was made directly through the Act of Accession, as well as the adjustments to the Treaties on which the European Union is founded, O.J. L 236/33 (2003). For Romania and Bulgaria, on the other hand, Council Directive 2006/106/EC, O.J. L 363/409 (2006) was adopted, based on Article 4 of the Treaty of Accession and Article 56 of the related Act of Accession.

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was done concerning Croatia.35 It would therefore seem that the procedure laid out under Article 22.1 TFEU regards changes to Directive 94/80/EC concerning the regulation of derogations and not merely its adaptation for the entrance of new MS. This also finds support in the choice of a special legislative procedure, with the unanimity of the Council and the mere consultation of Parliament. Adopting this procedure, the IGC that prepared the Treaty of Lisbon wanted to avoid, towards what was still a “sensitive” matter for MS, the ordinary legislative procedure that would have ensured greater participation by the EP. Minor changes, such as updating of entities falling under the category of “basic local government units,” are implemented by executive decision of the Commission.36 A question is raised regarding the compatibility of the derogations adopted in Directive 94/80 pursuant to Article 8B and implicitly reiterated by Article 22 TFEU with Article 40 EUCFR. Indeed, this article states that “Every citizen of the EU has the right to vote and stand in local elections in their Member State of residence, under the same conditions as nationals of that State,” without providing for the possibility of derogation. The pertinent Explanations to the Charter refer in this context to the provision of Article 52 of the Charter, which to this end states that the rights recognised by the Charter “which the Treaties provide for shall be exercised under the conditions and limits defined therein.” Although possible restrictions are consistent with the Charter, it however remains to be seen if those adopted by Directive 94/80 are still compatible with the principle of equal treatment, and the principle of proportionality. Now, while measures such as those stated in Article 5 of Directive 94/80 can be assumed to be validated by their continuity with other Treaty articles on the limits to the exercise of official authority, although these articles must be interpreted strictly, expressly derogative measures inspired by criteria such as those indicated in Article 12 of the same Directive prove obsolete, and may be subject to a review carried out according to the procedure described above.37 In the

35

See Council Directive 2013/19/EU adapting Directive 94/80/EC laying down detailed arrangements for the exercise of the right to vote and to stand as a candidate in municipal elections by citizens of the Union residing in a Member State of which they are not nationals, by reason of the accession of the Republic of Croatia, O.J. L 158/231 (2013), adopted pursuant to Article 3.4 of the Treaty and Article 50 of the Act of Accession. 36 See Commission Implementing Decision No.2012/412/EU, amending the list of ‘basic local government units’ in the Annex to Council Directive 94/80/EC laying down detailed arrangements for the exercise of the right to vote and to stand as a candidate in municipal elections by citizens of the Union residing in a Member State of which they are not nationals, O.J. L 192/29 (2012). 37 For Shaw (2008), p. 186, the matter of the proportionality of the derogation granted in Article 12 could also be posed before the Court: “This is notwithstanding the fact that such whole state derogations are explicitly provided for in Article 19. At the very least, the Court may be asked to assess whether the solution chosen in the two Directives is proportionate and appropriate to the specific situation of Luxembourg as a member state with a very small overall population and a high population of non-national EU citizens. Such an approach should also draw on the distinction made in citizenship cases such as Baumbast between the existence of the basic free movement right in Article 18 EC, which is directly effective, and the conditions which member states may place upon its exercise, which must be proportionate.”

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Report presented in 2010, however, the Commission maintained the view that motives still remained justifying such derogations.38

3.

Voting Rights in European Parliament Elections (Paragraph 2)

3.1. The Right to Vote for European Parliament: Article 8B, Paragraph 2

18

Article 8B.2 granted to any EU citizen the right to vote in and stand for EP election in the State territory in which he resides, even if he is not a national of that State, under the same conditions as nationals of the State,39 without prejudice to the provisions of Article 138.3 EC. This latter concerned the methods of the elections to the EP,40 a subject not covered by the rules governing citizenship, which merely make reference to them. As is known, Article 138.3 provided for the adoption of a uniform voting procedure by unanimous Council vote on a proposal from the EP. Since this provision remained unrealised due to lack of agreement between the MS,41 the Treaty of Amsterdam introduced the possibility that the election happen in accordance also with principles common to all MS. Consequently, the EC/ Euratom Council Decision 2002/772, concerning election to the EP by direct universal suffrage, inserted the principles of proportional representation and incompatibility between national and European mandate.42 MS retain the power 38

Report from the Commission on the application of Directive 94/80/EC, pp. 11–12. This right emphasises the political constraints on the EU citizen participation in Community decision making and, for this reason, it helps to reinforce the significance of Union citizenship on the legal and political level, even more so than the right to participate in municipal elections. “La possibilità di essere eletti in uno Stato membro diverso da quello di cui si è cittadini favorisce l’idea di un mandato parlamentare svincolato dall’appartenenza a uno Stato membro, così concorrendo ad accreditare l’immagine del Parlamento europeo quale istituzione in cui trova espressione la rappresentanza dell’intera popolazione comunitaria e non dei singoli corpi elettorali degli Stati membri.” Cf. Nascimbene and Rossi Dal Pozzo (2012), p. 40. On the origin of Article 8B, paragraph 2, see Gautier (1995), pp. 150–151; Shaw (2008), p. 168 et seq. 40 The provision was resumed by the Treaty of Amsterdam in Article 190 (4) TEC and now in Article 223(1) TFEU. The text of Article 138 established that: “3. The European Parliament shall draw up proposals for elections by direct universal suffrage in accordance with a uniform procedure in all Member States. The Council shall, acting unanimously after obtaining the assent of the European Parliament, which shall act by a majority of its component members, lay down the appropriate provisions, which it shall recommend to Member States for adoption in accordance with their respective constitutional requirements.” On the ratio decidendi of this law, which has still not been implemented, see Constantinesco (1995), p. 508. 41 See, among others, Kostakopoulou (2007), p. 56. 42 See Council Decision 2002/772/EC, Euratom amending the Act concerning the election of the representatives of the European Parliament by direct universal suffrage, annexed to Decision 76/ 787/ECSC, EEC, Euratom, O.J. L 283/1 (2002) and especially its Article 1.1 (“In each Member State, members of the European Parliament shall be elected on the basis of proportional representation, using the list system or the single transferable vote”) and 2 (“In accordance with its specific national situation, each Member State may establish constituencies for elections to the European 39

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to regulate other aspects of the EP election. Article 8B.2 later unchanged as Article 19.2 EC, and now Article 22.2 TFEU, made reference to these national rules on voting procedures to affirm the equal treatment of nationals and other EU residents of the State. The right to vote for the EP was inserted in the Maastricht Treaty on the request of the European Council held in Rome on 13 and 15 December 1990, which asked the IGC to “examine ways for all EU citizens, in their State of residence, to participate in European Parliamentary elections by direct universal suffrage.”43 Article 8B.2 also required implementation rules that would establish detailed arrangements: such measures, which could have also included possible derogations if required by a State’s specific situation, should have been adopted by a Council act by 31 December 1993 to allow EU citizens to vote as early as the next elections scheduled for 1994, as indeed was the case with the approval of the Directive 93/ 109/EC.44

19

3.2. Implementation of Article 8B, Paragraph 2

As planned by Article 8B.2 this Directive was adopted by a unanimous Council vote on a proposal from the Commission after consultation with the EP. In this respect, Article 8B.2 was subjected to criticism by those who emphasised how, just as it provided for the right for EU citizens to vote for the EP, it should have been more closely involved in regulating said right. Indeed, it might have been better to require, as the Dutch Presidency proposed, the consent of the EP instead of a mere consultation,45 since it proved impossible to adopt a uniform electoral procedure— which would have helped create a truly European electorate46—and given greater political content to the vote. Even in this case, however, the sensitivity of the matter led States to adopt a procedure that would guarantee them better. In some MS, problems of constitutionality were also raised with respect to granting non-national citizens the right to vote for the EP; it was however affirmed

Parliament or subdivide its electoral area in a different manner, without generally affecting the proportional nature of the voting system”). 43 See Gautier (1995), p. 150. 44 The Directive 93/109/EC, indeed, imposed implementation on MS by 1 February 1994. Although this deadline was not generally observed, MS managed to transpose the Directive in time to allow expanded voting to EU citizens. 45 Cf. Gautier (1995), p. 151 et seq. (and the authors cited therein) and Curti Gialdino (1999), p. 82. 46 The provision of Article 137 EC, according to which the European Parliament is “composed of representatives of the peoples of the States brought together in the Community,” fought against the configuration of a true “European people” organised in national constituencies: in this situation, EU citizenship would not have limits placed (Constantinesco 1995, p. 505).

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that, since the EP is not in fact an organ of the States, the restriction to grant suffrage only to nationals could not take place.47 Regarding EP elections, the same principle working for local election is in force: EU citizens enjoy the right to vote under the same conditions as nationals of their State of residence. Therefore, reference should be made to this State legislation to verify requirements (Article 3), as long as the citizens have not been forfeited this right in their State of origin (Article 6.1 and Article 7.1). In secondary legislation, the element that most distinguishes the right to vote for the EP from that of local elections is the care taken in Directive 93/109/EC to avoid the possibility of voting in both the State of origin and the State of residence,48 according to a principle already stated in the Act concerning the election of the MEPs by direct universal suffrage from 1976. Under its Article 8, each voter may vote only once for elections of MEPs. The aim was to fully respect the citizen’s freedom of choice; the citizen must express the desire to vote in the country of residence rather than the country of origin, providing a formal declaration: where such desire is not expressed, the EU citizen is not obliged to vote (Article 8), even if EP voting is obligatory in the State of residence. On the right to stand as a candidate, Article 6 provides that the interested party presents, in addition to the documents required of citizens of the voting State, a certificate from the State of origin certifying that the right of eligibility has not been revoked.49 The derogations covered in Article 14 follow the same rationale as Article 12 of Directive 94/80, providing for the possibility of requiring a minimum period of residence where non-nationals exceed 20% of EP voters; clearly, the stipulations for local elections contained in Article 5 are not retained here. EU citizens are showing a growing interest in the right to vote for Parliament, although it is still not satisfactory, either for lack of information50 or for the fact 47 On 26 April 1992, the French Constitutional Council ruled Decision n. 92-308 DC in this way (JORF, 11 April 1992). See also Luciani (1992), p. 663 et seq.; Macera (1998), p. 377 et seq. 48 See Article 4: “1. Community voters shall exercise their right to vote either in the Member State of residence or in their home Member State. No person may vote more than once at the same election. 2. No person may stand as a candidate in more than one Member State at the same election.” The procedures to prevent double voting are set out in Article 13. These procedures are complicated and likely to limit de facto the right to vote: thus, the Commission adopted a recommendation on 12 March 2013 encouraging MS to simplify them. 49 Directive 93/109/EC provides that any citizen of the Union who has been deprived of his right to stand as a candidate under either the law of the MS of residence or the law of his home MS shall be precluded from exercising that right in the MS of residence in EP elections. To that end, Directive 93/109/EC requires a citizen of the Union, when submitting his application to stand as a candidate in an MS other than the home MS, to produce an attestation from the competent administrative authorities of the home MS certifying that the person concerned has not been deprived of the right to stand as a candidate in the home MS or that no such disqualification is known to them (See Directive 2013/1, Recital 3). 50 See the data in the Fifth Report from the Commission on citizenship, p. 5 et seq. The dissatisfaction primarily concerns standing for election. For the Commission, one of the possible reasons for the low number of foreign candidates was also the cumbersome procedure for the submission of applications provided for by Directive 93/109, which has since been remedied (on this subject, cf.

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that, faced with the need to choose the State in which to exercise the vote, about half of EU citizens prefer to return to their country of origin.51 Based on the results of the 2009 elections,52 the Commission observed the need to adopt provisions to increase the number of voters and resident candidates who are not citizens of the State in which the elections are held. To this end, a directive aimed at simplifying the nomination procedures was adopted on 20 December 2012, although it has not significantly changed the situation53 (➔ para 27).

3.3. Article 22, Paragraph 2, TFEU

As noted, the text of Article 22.2 reproduces, almost in its entirety, the text of Article 19.2 EC. It is therefore subject to the possibility that the adoption of a uniform voting procedure (Article 223.1 TFEU) might affect it, while the procedure for establishing new rules for EU citizens’ voting and standing for election, including any derogations, remains one that requires a unanimous Council vote and the mere consultation of the EP. This provision was applied to adopt Directive 2013/1/EU on “certain rules for exercising eligibility rights in European Parliament elections for EU citizens residing in a Member State of which they are not nationals,” which simplifies the nomination procedures for EU citizens.54 In particular, starting from the elections of 2014, the current system replaces the certification from the home State that the also Report of the Commission of 8 May 2013, section 2, which cites the 20 December 2012 adoption of Council Directive 2013/1/EU, facilitating the exercise of the EU citizen’s right to stand as a candidate in the 2014 European Parliament elections, and the Commission Recommendation of 3 December 2013 on enhancing the democratic and efficient conduct of the elections to the European Parliament, C(2013) 1303 final. 51 “A relatively low number of mobile EU citizens made use of their right to vote in their Member State of residence (43). The rates of their participation may be influenced by the fact that they have to choose whether to vote in their Member State of origin or in the Member State to which they have moved (i.e. for different sets of candidates).” See Commission Communication, Report on the 2014 European Parliament elections, p. 11. Available at http://ec.europa.eu/justice/citizen/ files/report_european_parliament_elections_2014_en.pdf. 52 See Report from the Commission on the election of Members of the European Parliament (1976 Act as amended by Decision 2002/772/EC, Euratom) and on the participation of European Union citizens in elections for the European Parliament in the Member State of residence (Directive 93/ 109/EC), COM(2010) 605 final. 53 See the Fifth Report from the Commission on citizenship, p. 13 et seq. 54 See Recital 4 of the Directive, relating to the difficulties encountered by a European citizens, when submitting its application to stand as a candidate in an MS other than the home MS, to produce an attestation from the competent administrative authorities of the home MS certifying that the person concerned has not been deprived of the right to stand as a candidate in the home MS. “These difficulties encountered by such citizens in identifying the authorities empowered to issue that attestation and in obtaining it in good time act as a barrier to the exercise of the right to stand as a candidate and contribute to the low number of citizens of the Union standing as candidates in elections to the European Parliament in their Member State of residence.”

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citizen has not had voting rights revoked with a statement to be included in the formal declarations that EU citizens are required to provide in with their nomination.55 The authorities of the resident MS may contact the State of citizenship to verify the validity of the declaration; to this end, MS shall designate a contact point for notification of information regarding these candidates. This was meant to overcome the difficulties EU citizens encountered in identifying the proper authorities who issue the certificate and in making it out in the appropriate terms, both of which effectively hindered the exercise of the right to stand for election. In this sense, the Directive facilitates the exercise of the right to vote, putting an end to a system that, although based on objective requirements, was effectively discriminatory,56 and contrary to the terms of Article 39.1 EUCFR.

3.4. Judicial Interpretation of the Right to Vote and to Stand for Election in European Parliament

29

30

The right for EU citizens to vote in the EP elections, set out in Article 20.2 (b), and regulated in Article 22.2 TFEU, was, as mentioned, argued before the EU courts with the aim of determining who has the right to vote and to stand as a candidate for Parliament as well as, through a broad interpretation of these articles, of claiming the same rights as European citizens for nationals of the State wherein they vote. The Court rejected these claims, stressing in the first place that Article 19 TEC (later taken up in Articles 20 and 22 TFEU) confines itself to stating a rule of equal treatment for EU citizens on the right to vote and stand for election, without inferring the exclusion of those who do not have EU citizenship. The question was raised in the case of Spain v The United Kingdom, concerning the right to vote in EP elections for citizens of Gibraltar, who do not hold UK citizenship and thus are not EU citizens.57 In interpreting Article 19 EC, the Court held that this provision “limits itself to applying the principle of non-discrimination on grounds of nationality to the exercise of this right,” providing that every EU citizen residing in an MS of which he is not a national has the right to vote and stand for election in the EP under the same conditions as nationals of that State. It cannot be presumed that there is a link between EU citizenship and the right to vote and stand for 55

See Article 1 of Directive 2013/1, which modifies Articles 6 and 10 of Directive 93/109. See above Recital No 4. 57 See case C-45/04, Spain v United Kingdom (ECJ 12 September 2006) para 76 and 78. Accordingly: “It follows from all of those considerations that, in the current state of Community law, the definition of the persons entitled to vote and to stand as a candidate in elections to the European Parliament falls within the competence of each Member State in compliance with Community law, and that Articles 189 EC, 190 EC, 17 EC and 19 EC do not preclude the Member States from granting that right to vote and to stand as a candidate to certain persons who have close links to them, other than their own nationals or citizens of the Union resident in their territory.” On this judgment, see Lindfelt (2007), pp. 269–270; Burgorgue-Larsen (2007), p. 29 et seq.; Shaw (2008), p. 169 et. seq. 56

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election in the EP, nor should it be presumed that an MS which finds itself in a situation like that of the United Kingdom cannot grant the right to vote and stand for election to certain persons with whom it has close ties, even if they do not have the citizenship of any MS. The situation has changed with the Lisbon Treaty, whose Article 14.2 TEU affirms that the EP shall be “composed of representatives of the Union’s citizens.” Not even the argument, recently revived, which claims that the principles that apply to the right to vote and stand for election in EP for European citizens are also valid for nationals, was welcomed.58 In the case of Thierry Delvigne, decided on 6 October 2015, on the incompatibility of Article 39 EUCFR with a French law that provided a lifetime voting ban (including EP elections) for convicts, the Court recalled that the aforementioned Article 39.1 EUCFR corresponds to Article 20 TFEU, adding that: “As regards Article 20(2)(b) TFEU, the Court has already held that that provision is confined to applying the principle of non-discrimination on grounds of nationality to the exercise of the right to vote in elections to the European Parliament, by providing that every citizen of the Union residing in a Member State of which he is not a national is to have the right to vote in those elections in the Member State in which he resides, under the same conditions as nationals of that State [. . .].Thus, Article 39(1) of the Charter is not applicable to the situation at issue in the main proceedings, since, as is evident from the material in

58 See the order of 26 March 2009 Pignataro, para 17-18 and the judgment of 12 September 2006 Eman and Sevinger, para 53: “ Article 19(2) EC, to which reference is made in the question referred, is confined to applying the principle of non-discrimination on grounds of nationality to that right to vote and stand for election, by stipulating that every citizen of the Union residing in a Member State of which he is not a national is to 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 first paragraph of Article 3 of Directive 93/109 provides under (b) that any citizen of the Union who is not a national of the Member State of residence, but satisfies the same conditions in respect of the right to vote and stand as a candidate as that State imposes by law on its own nationals, is to have the right to vote and stand as a candidate in the Member State of residence.” The Court, however, concluded that the Netherlands Electoral Law infringed the principle of equal treatment (and not article 19 TEC) in that” it confers the right to vote and to stand as a candidate in elections to the European Parliament on all Netherlands nationals resident in a non-member country, whereas such a right is not conferred on Netherlands nationals resident in the Netherlands Antilles or Aruba”: indeed, “the Netherlands Government has not sufficiently demonstrated that the difference in treatment observed between Netherlands nationals resident in a non-member country and those resident in the Netherlands Antilles or Aruba is objectively justified and does not therefore constitute an infringement of the principle of equal treatment” (para 56 and 60). For Show 2008, p. 184, Aruba judgment “[. . .] seems a relatively straightforward application of the equal treatment principle, which binds the member states when they are acting within the scope of Community law; clearly they are when organising European Parliament elections, notwithstanding their freedom of action under the Act on Direct Elections. These are not, as such, citizenship cases, or cases directly addressing the scope and nature of political representation in the EU.”

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the file available to the Court, that situation concerns a Union citizen’s right to vote in the Member State of which he is a national.”59

List of Cases ECJ 12.09.2006, C-145/04, Spain v United Kingdom, ECLI:EU:C:2006:543 [cit. in para 2, 30] ECJ 12.09.2006, C-300/04, M. G. Eman, O. B. Sevinger v College van burgemeester en wethouders van Den Haag, ECLI:EU:C:2006:545 [cit. in para. 2, 31] ECJ 26.03.2009, C-535/08, Pignataro v Ufficio centrale circoscrizionale presso il Tribunale di Catania e altri, ECLI:EU:C:2009:204 [cit. in para 2] ECJ 06.10.2015, C-650/13, Delvigne v Commune de Lesparre-Médoc e Préfet de la Gironde, ECLI:EU:C:2015:648 [cit. in para 2, 31]

References60 Adam, R., & Tizzano, A. (2014). Manuale di Diritto dell’Unione europea. Torino: Giappichelli. Burgorgue-Larsen, L. (2007). L’identité de l’Union européenne au cœur d’une controverse territoriale tricentenaire Quand le statut de Gibraltar réapparaît sur la scène judiciaire européenne. Commentaire de l’arrêt du 12 septembre 2006, C-145/04 Royaume d’Espagne c. Royaume-Uni de Grande-Bretagne et d’Irlande du Nord. Revue trimestrielle de droit européen, 25–45. Collard, S. (2010). French municipal democracy: Cradle of European citizenship? Journal of Contemporary European Studies, 18(1), 91–116. Constantinesco, V. (1995). Article 137. In V. Constantinesco, J. P. Jacqué, R. Kovar, & D. Simon (Eds.), Traité sur l’Union européenne (signé a Maastricht le 7 février 1992), Commentaire article par article (pp. 504–510). Paris: Economica. Curti Gialdino, C. (1999). Il Trattato di Maastricht sull’Unione europea. Rome: Istituto Poligrafico e Zecca dello Stato. Gautier, Y. (1995). Article 8B. In V. Constantinesco, J. P. Jacqué, R. Kovar, & D. Simon (Eds.), Traité sur l’Union européenne (signé a Maastricht le 7 février 1992), Commentaire article par article (pp. 143–152). Paris: Economica. Kostakopoulou, D. (2007). Citizenship, identity, and immigration in the European Union: Between past and future. Manchester: Manchester University Press. Lindfelt, M. (2007). Fundamental rights in the European Union: Towards higher law of the land? A study of the scedamtatus of fundamental rights in a broader constitutional setting. Åbo: Åbo Akademi University Press. 59

Case C-650/13, para 42 et seq. The Court, instead, considered to be applicable to M. Delvigne the Article 39.2 of the Charter, which “constitutes the expression in the Charter of the right of Union citizens to vote in elections to the European Parliament in accordance with Article 14(3) TEU and Article 1(3) of the 1976 Act” (para 44). Indeed, “It is clear that the deprivation of the right to vote to which Mr Delvigne is subject under the provisions of national legislation at issue in the main proceedings represents a limitation of the exercise of the right guaranteed in Article 39(2) of the Charter”; so, the Court was to verify whether national provisions were compatible with EU principles (para 46 et seqq.). 60 All cited internet sources in this comment have been accessed on 9 December 2019.

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Luciani, M. (1992). La Constitution italienne et les obstacles à l’intégration européenne. Revue française de droit constitutionnel, (12), 663–677. Macera, B. F. (1998). Articolo 8.B.2 del Trattato della Comunità europea e la sovranità popolare (in relazione all’Article 1, comma 1, della Costituzione). Rivista italiana di diritto pubblico e comunitario, 376–394. Nascimbene, B., & Rossi Dal Pozzo, F. (2012). Diritti di cittadinanza e libertà di circolazione nell’Unione europea. Padova: Cedam. Shaw, J. (2007). E.U. Citizenship and political rights in an evolving European Union. Fordham Law Review, 75(5), 2549–2568. Shaw, J. (2008). The political representation of Europe’s citizens. Developments. European Constitutional Law Review, 162–186. Shaw, J. (2010). Citizenship and political participation: The role of electoral rights under European Union law (Working Paper Series, No 2010/22). University of Edinburgh, School of Law. Strudel, S. (2002). Les citoyens européens aux urnes: les usages ambigus de l’article 8B du Traité de Maastricht. Revue internationale de politique comparée, 9(1), 47–63.

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Article 23 [Diplomatic and Consular Protection of Another Member State] (ex-Article 20 TEC) 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 diplomatic10 or consular authorities of any Member State, on the same conditions as the nationals of that State.13 Member States shall adopt the necessary provisions and start the international negotiations required to secure this protection. The Council, acting in accordance with a special legislative procedure and after consulting the European Parliament, may adopt directives establishing the coordination and cooperation measures necessary to facilitate such protection.15–20

Contents 1. The Relevance of This Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. The Origin of This Provision and Its Further Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3. The Meaning of the Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 4. The Implementation of Article 23 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 5. Further Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 References

1.

The Relevance of This Article

There is some discrepancy between the strong idealistic nature and the considerable potential outreach of this article on the one hand and its limited practical relevance on the other. As to the idealistic ideal of this provision, it must be noted that this provision gives expression, first, to the concept of solidarity as it is enshrined in several articles of the Treaties and as it undergirds a series of further provisions of EU law.1 As it was said, this article (like others in the TFEU) gives expression to “everyday small solidarity”, while Article 222 TFEU creates the basis

1

As is well known, under Article 2 TEU, solidarity is a foundational value of the EU. Under Article 3.3 TEU, the EU aims at promoting “economic, social and territorial cohesion, and solidarity among Member States.” Eight further provisions in the TEU and the TFEU refer expressly to this principle while many others indirectly give expression to it. See Hilpold (2015) as well as Bieber and Maiani (2011/2012). #

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for “big solidarity”.2 Article 23 TFEU is designed to create a specific bond between the Union citizen and both the other MS and the Union itself. On this basis each Union citizen as well as each MS can rely on help and protection by other MS in third countries and thereby perceive European integration as a reality when he is in most urgent need for help. The practical relevance of this norm suffers most by the fact that it regards a very specific subject and it concerns a possibility that is widely unknown by large parts of the population. This provision was of most immediate advantage for the MS themselves which were thereby enabled to reduce expenditure for their missions abroad, secure in the knowledge that their citizens would find protection by other MS. The European Commission has taken a strong commitment to further publicise this provision to enhance protection of Union citizens abroad.

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The Origin of This Provision and Its Further Development

Already, the Adonnino Report of 1985 proposed closer consular cooperation of MS in third countries for citizens as travellers outside the Community.3 During the negotiations for the Maastricht Treaty, more substance was given to this concept.4 In particular, the Spanish representatives at the IGC tabled very far-reaching proposals that also attributed an immediate role to the EU. For a variety of reasons this proposal found, however, no majority. Primarily, such an involvement of the EU in a task that was traditionally considered to stand at the core of national powers would have implied a rather extensive infringement of MS sovereignty. Furthermore, it was not clear in which relationship the powers of these two actors would stand. Finally, the EU by far is not represented in any third country. As a consequence, this competence has been attributed solely to MS and even they may act only in a subsidiary way in respect to the Union citizen’s state of nationality. The European Commission pursues, however, the long term goal of the EU being vested with an autonomous power of consular protection for Union citizens. Article 23 TFEU constitutes an implementation norm regarding Article 20.1 (c) TFEU according to which Union citizens have the right to enjoy, in the territory of a third country in which the MS of which they are nationals is not represented, the protection of the diplomatic and consular authorities of any MS on the same conditions as the nationals of that State. After having been introduced by the Maastricht Treaty the provisions on the protection by diplomatic and consular entities were subject only to minor amendments. Two further provisions of the EU law are also of some help to further clarify the meaning of this concept. 2

See Giegerich (2015), para 101. The “Adonnino Report”—Report to the European Council by the ad hoc committee “On a People’s Europe”, A 10.04 COM 85, SN/2536/3/85, p. 9, para 2.6. 4 It has been remarked that the immediate impulse for this initiative has come from the Gulf War of 1990 which evidenced how lacunary protection of EU citizens abroad was. See Salicetti (2011), p. 93. On the development of this concept see also Bungenberg (2020) and Hatje (2019). 3

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Article 35 TEU (former Article 20 TEU) stipulates an obligation of cooperation by the diplomatic and consular missions of the MS and the Union delegations in third countries and international conferences. This obligation, which makes part of the provisions on the CFSP, is specifically directed at giving a further contribution for the implementation of Article 23 TFEU. The right to protection in third countries by the diplomatic or consular authorities of any MS is further restated by Article 46 EUCFR. This provisions provides the right to protection by diplomatic of consular authorities with a further fundamental rights basis.

3.

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The Meaning of the Right

Considerable controversy has arisen as to the specific meaning of this provision. The uncertainties about the real purview of Article 23 TFEU are mainly due to different wordings in the various language versions of this norm. While the English text (like the text in most other languages of the treaty) is clear in the sense that consular protection is provided by diplomatic and consular entities of MS in third states the German text seems to grant far more extensive rights when it speaks of “diplomatic and consular protection”. As is well known, “diplomatic protection” must be distinguished from “protection by diplomatic entities”. It refers to a far-reaching right by governments to protect the interests of their citizens abroad. According to Article 1 of the Draft Articles on Diplomatic Protection adopted by the International Law Commission in 20065 diplomatic protection “consists of the invocation by a State, through diplomatic action or other means of peaceful settlement, of the responsibility of another State for an injury caused by an internationally wrongful act of that State to a natural or legal person that is a national of the former State with a view to the implementation of such responsibility.” Diplomatic protection is a procedure employed by a State whose nationals have been injured by an internationally wrongful act of another state to secure protection and to obtain reparation.6 In the past diplomatic protection was considered to be exercised primarily in the interest of the state but this position can no longer be upheld as the individual in the meantime has become a subject of international rights on its own.7 While the exact contours up to which extent diplomatic protection is exercised in the primary

5

Official Records of the General Assembly, Sixty-first Session, Supplement No. 10 (A/61/10). Official Records of the General Assembly, Sixty-first Session, Supplement No. 10 (A/61/10), p. 24, Commentary. 7 Official Records of the General Assembly, Sixty-first Session, Supplement No. 10 (A/61/10), p. 24, Commentary. 6

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interest of the state and where the interests of the individual become preponderant are still unclear there can be no doubt that the former interests still weigh heavy.8 If we keep this in mind we can state that the protection of consular rights (by diplomatic of consular entities) has a widely different focus as it focuses immediately on individual rights of nationals in the receiving state. Article 5 of the Vienna Convention on Consular Relations of 1963 gives a detailed description of what consular protection consists in: Article 5 - CONSULAR FUNCTIONS Consular functions consist in: (a) protecting in the receiving State the interests of the sending State and of its nationals, both individuals and bodies corporate, within the limits permitted by international law; (b) furthering the development of commercial, economic, cultural and scientific relations between the sending State and the receiving State and otherwise promoting friendly relations between them in accordance with the provisions of the present Convention; (c) ascertaining by all lawful means conditions and developments in the commercial, economic, cultural and scientific life of the receiving State, reporting thereon to the Government of the sending State and giving information to persons interested; (d) issuing passports and travel documents to nationals of the sending State, and visas or appropriate documents to persons wishing to travel to the sending State; (e) helping and assisting nationals, both individuals and bodies corporate, of the sending State; (f) acting as notary and civil registrar and in capacities of a similar kind, and performing certain functions of an administrative nature, provided that there is nothing contrary thereto in the laws and regulations of the receiving State; (g) safeguarding the interests of nationals, both individuals and bodies corporate, of the sending State in cases of succession mortis causa in the territory of the receiving State, in accordance with the laws and regulations of the receiving State; (h) safeguarding, within the limits imposed by the laws and regulations of the receiving State, the interests of minors and other persons lacking full capacity who are nationals of the sending State, particularly where any guardianship or trusteeship is required with respect to such persons; (i) subject to the practices and procedures obtaining in the receiving State, representing or arranging appropriate representation for nationals of the sending State before the tribunals and other authorities of the receiving State, for the purpose of obtaining, in accordance with the laws and regulations of the receiving State, provisional measures for the preservation of the rights and interests of these nationals, where, because of absence or any other reason, such nationals are unable at the proper time to assume the defence of their rights and interests; (j) transmitting judicial and extrajudicial documents or executing letters rogatory or commissions to take evidence for the courts of the sending State in accordance with international agreements in force or, in the absence of such international agreements, in any other manner compatible with the laws and regulations of the receiving State; (k) exercising rights of supervision and inspection provided for in the laws and regulations of the sending State in respect of vessels having the nationality of the sending State, and of aircraft registered in that State, and in respect of their crews;

8 In any case it can be stated that the complete freedom of action states had enjoyed in this field in the past has now, with the strengthening of fundamental rights protection, subsided to a stricter judicial review. See Battini (2010), p. 1425.

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(l) extending assistance to vessels and aircraft mentioned in sub-paragraph (k) of this Article and to their crews, taking statements regarding the voyage of a vessel, examining and stamping the ship’s papers, and, without prejudice to the powers of the authorities of the receiving State, conducting investigations into any incidents which occurred during the voyage, and settling disputes of any kind between the master, the officers and the seamen in so far as this may be authorized by the laws and regulations of the sending State; (m) performing any other functions entrusted to a consular post by the sending State which are not prohibited by the laws and regulations of the receiving State or to which no objection is taken by the receiving State or which are referred to in the international agreements in force between the sending State and the receiving State.

These consular functions are also often exercised by diplomatic representations and therefore the wording “protection by diplomatic or consular authorities” is fully justified. In German legal literature, many commentators opined that even an erroneous wording of Article 23 TFEU in the German version of the treaties would change nothing as German is an authentic language that must be equally considered in the interpretation process like all other authentic languages. In the end, however, this contention does not convince. In cases like this, Article 33 VCLT can provide help. According to this provision, a difference in meaning between texts of a treaty, which has been authenticated in two or more languages, and which cannot be overcome by the ordinary methods of interpretation according to the Articles 31 and 32 VCLT must be clarified by the adoption of a meaning “which best reconciles the texts, having regard to the object and purpose of the treaty”. All elements to be found in EU treaty law suggest that object and purpose (and in the meantime also language) of the treaties require Article 23 TFEU to be interpreted to refer solely to consular protection: – As seen, diplomatic protection is of a highly political nature and is exercised not by diplomatic authorities but by the central organs. – It implies a difficult weighing and gauging whether the better arguments militate in favour or against exercising this power which can have considerable political repercussion in interstate relations between the states involved. Therefore, in these cases, the very core of state sovereignty is touched upon and it is hardly conceivable that governments of EU MS would risk an infringement of international relations with third countries only to protect nationals of other EU MS. – The degree of discretion whether to exercise diplomatic protection or not and in the affirmative case, in which form, is far higher than in the case of consular protection.9 – Diplomatic protection is often associated with long-lasting negotiations involving central authorities of both states concerned. There is no need to delegate

9

Della Cananea (2010), p. 1441. Della Cananea rightly points out that diplomatic protection and consular protection are functionally so different in nature (consular protection is often required in cases where no question of an injury is at issue) that they should not be placed under the same regime.

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these negotiations to a third state and it would often be highly impracticable to do so. – The urgency this norm at least indirectly refers to is that of a Union citizen in urgent need of some consular services that cannot be obtained directly from the country he is a national of. – In the meantime, also the German wording of EU makes increasingly apparent that Article 23 TFEU is intended to grant mere consular protection. While the German wording of Article 23 TFEU has not been changed the new wording of Article 20.1 point (c) TFEU, introduced by the Treaty of Lisbon, comforts the “institutional” interpretation, according to which Article 23 TFEU refers to consular protection by diplomatic and consular institutions. The same is true of Article 46 EUCFR. Further, the new wording of Article 35 TEU, introduced by the Treaty of Lisbon leads to the same result as this provision refers to “protection” according to Article 20.1 point (c) TFEU and not to the broader wording of Article 23 TFEU.10 13

14

At a next step, the nature of the rights set out in Article 23 TFEU must be addressed. The wording of Article 23 TFEU does not provide for a subjective right to full scale consular protection. First, the addressees of this norm are the MS that must provide such protection and have “to adopt the necessary provisions and start the international negotiations required to secure this protection”. Union citizens are, however, entitled to protection by the diplomatic or consular authorities “on the same conditions as the nationals of that State[s]”. Here a right to non-discrimination applies. This right to non-discrimination is directly applicable11 but whether a subjective right to consular is given at all depends again from national law.12 As to this question, national law in the MS varies considerably.13 Furthermore, there is also a continuing variance in literature as to the question whether this right pertains also to legal persons beside natural ones. From a systematic point of view it has rightly been emphasised that the Treaty distinguishes between the various subsets of Union citizen rights: While Article 24 TFEU in 10 Kolonovits, in Mayer and Stöger (2010), Article 23 AEUV para 9. For the rest, it must be added that uncertainties about the real scope of Article 23 TFEU can also be explained by the drafting process of this provision. In fact, only in the very last stage of the IGC on the “Political Union” in the English version any reference to a “diplomatic protection” and a “consular protection” was deleted so that it became clear that an “institutional interpretation” (in the sense that consular protection had to be provided by diplomatic and consular authorities) had to be adopted. See Salicetti (2011), p. 93. In support of the “institutional approach” also Ruffert (2012), para 25; Ingravallo (2012); Kadelbach (2014), para 81. 11 Magiera, in Streinz (2012), Article 23 AEUV para 12. 12 Haag, in von der Groeben et al. (2015), Article 23 AEUV para 12. 13 See Haag, in von der Groeben et al. (2015), Article 23 AEUV para 12, who points out that the Federal Republic of Germany grants such a right. In Austria, on the other hand, such a right is not foreseen. See Kolonovits, in Mayer and Stöger (2010), Article 23 AEUV para 14. As is wellknown the Constitution of the Republic of Weimar was the first modern constitution to introduce such a right to diplomatic protection. Now, the Constitutions of Portugal, Poland, Romania and Bulgaria, to name only a few, also grant such a right. See Salicetti (2011), p. 97.

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association with Articles 227 and 228 TFEU also attributes the right to petition to legal persons, no such extension of a right to consular protection is foreseen in Article 23 TFEU.14 Some might opine that in international law, diplomatic protection is also granted to legal persons15 but it must be remembered that Article 23 TFEU provides no basis for diplomatic protection in the proper sense but consular protection by diplomatic and consular authorities. Therefore, according to the view held here, consular protection for legal persons cannot be excluded but it has in any case a very limited scope of application.

4.

The Implementation of Article 23 TFEU

Over the years the EU has adopted a series of measures designed to further clarify and to implement this element of Union citizenship. In this context, first, two decisions and one directive must to be mentioned: Decision 95/553/EC regarding protection for EU citizens by diplomatic and consular representations,16 Decision 96/409/CFSP on the establishment of an emergency travel document17 and Directive 2015/637 on the coordination and cooperation measures to facilitate consular protection for unrepresented citizens of the Union in third countries18 (which also repeals Decision 95/553/EC). The European Commission has issued a series of documents paving on the one hand the way for Directive 2015/637 and on the other pointing at future developments of consular protection in the context of which, i.e. EU representations should play a more important role. Decision 95/553/EC laid the ground for a rather restrictive interpretation of Article 23 TFEU. As this decision is repealed by the Directive 2015/637 with effect from 1 May 2018 in the following only Directive 2015/637, which is far more detailed than Decision 95/553/EC, will be examined in more detail. This Directive lays down the coordination and cooperation measures necessary to facilitate the exercise of consular protection of Union citizens in third countries. The scope of application remains restricted to typical consular functions like that foreseen by Decision 95/553/EC. Article 9 of Directive 2015/637 contains a list of cases in which Union citizens could apply for consular protection: (a) (b) (c) (d)

arrest or detention; being a victim of crime; a serious accident or serious illness; death;

14

Kolonovits, in Mayer and Stöger (2010), Article 23 AEUV para 12. Kluth, in Calliess and Ruffert (2016), Article 23 AEUV para 20. 16 O.J. L 14/73 (1995). 17 O.J. L 168/4 (1996). 18 O.J. L 106/1 (2015). 15

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(e) relief and repatriation in case of an emergency; (f) a need for emergency travel documents as provided for in Decision 96/409/ CFSP.

18

19

20

Although being non-exhaustive, this list is likely to cover most of the cases for which MS are prepared to grant consular protection to Union citizens. Article 1 restates the principles of non-discrimination for consular protection to unrepresented citizens in third countries. In principle, this protection is granted by MS’ embassies or consulates but MS may also provide protection by honorary consuls (Article 2.2). An MS is considered not represented in a third country if it has no embassy or consulate established there on a permanent basis, or if it has no embassy, consulate or honorary consul there which is effectively in a position to provide consular protection in a given case (Article 6). As a rule, unrepresented citizens shall be entitled to seek protection from the embassy or consulate of any MS but MS may also conclude practical arrangements on sharing responsibilities in this field. Such arrangements must be notified to the European Commission and to the European External Action Service (EEAS) and be published by the Union and MS to ensure transparency (Article 7.2). Where such an arrangement exists, applications to different embassies or consulates will be redirected to the competent authority, unless protection would thereby be compromised as it would be the case where particular urgency applies (Article 7.3). Union delegations have in particular the function to facilitate cooperation and coordination and to provide relevant information (Article 11). This role is of special importance in cases of crisis and in these cases single MS can also assume the role of a Lead State in coordinating assistance (Article 13). Delicate issues arise if financial assistance is needed. Such assistance is granted only as a measure of last resort and only in exceptional cases but here, the principle of non-discrimination also applies. The Directive contains a set of rules that should ensure financial burden sharing and reimbursements by the MS of which the applicant is a national. In crisis situations simplified procedures apply (Articles 14 and 15). By Decision 96/409/CFSP an emergency travel document was introduced. The issuing of such documents also stands at the core of consular protection for Union citizens. According to Article 23.4 States shall start the international negotiations to secure this protection. Some interpreted this provision as a confirmation of the assumption that Article 23 TFEU would also provide a basis for diplomatic protection. In fact, to provide diplomatic for third country nationals (i.e. in this case Union citizens) according to Article 46 of the Vienna Convention on Diplomatic Relations of 1961 the sending state needs the prior consent of the receiving state while according to Article 8 of the Vienna Convention on Consular Relations for exercising consular protection on behalf of a third state “appropriate notification to the receiving State” is sufficient.

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In reality, however, international negotiations can also facilitate consular protection, although, up to this moment, no such negotiations in the formal sense have been undertaken.

5.

Further Developments

The European Commission tries hard to make consular protection for Union citizens more effective both to enhance free movements and to strengthen the common identity of Union citizens. To this avail the Commission fosters transparency of the relevant norms and procedures and contributes to the cooperation of EU institutions and delegation with MS as well as between MS. As a longer term perspective, the Commission also envisages that consular protection should be carried out immediately by EU delegations. For such a situation to become possible, not only the EEAS will have to be further developed but it has also to be considered that such a step would imply considerable concessions by the MS in a core area of national sovereignty.

References Battini, S. (2010). Il “Diritto Amministrativo Internazionale” oggi: Il caso della assistenza consolare e della protezione diplomatica. Rivista Italiana di Diritto Pubblico Comunitario, 20, 1405–1427. Bieber, R., & Maiani, F. (2011/2012). Ohne Solidarität keine Europäische Union: Über Krisenerscheinungen in der Wirtschafts- und Währungsunion und im Europäischen Asylsystem. In Schweizerisches Jahrbuch für Europarecht (pp. 297–327). Zürich/Bern: Staempfli. Bungenberg, M. (2020). Diplomatischer und konsularischer Schutz. In S. Heselhaus & C. Nowak (Eds.), Handbuch der Europäischen Grundrechte (pp. 1161–1180). Munich: C.H. Beck. Calliess, C., & Ruffert, M. (Eds.). (2016). EUV/AEUV. Commentary. Munich: C.H. Beck. Della Cananea, G. (2010). The European Union and consular protection – A new public law. Rivista Italiana di Diritto Pubblico Comunitario, 20, 1429–1447. Giegerich, T. (2015). Unionsbürgerschaft, politische Rechte. In R. Schulze, S. Kadelbach, & M. Zuleeg (Eds.), Europarecht (pp. 374–418). Baden-Baden: Nomos. Hatje, A. (2019). Artikel 23 AEUV. In J. Schwarze et al. (Eds.), EU-Kommentar. Baden-Baden: Nomos. Hilpold, P. (2015). Understanding solidarity within EU law: An analysis of the ‘Islands of Solidarity’ with particular regard to Monetary Union. Yearbook of European Law, 34, 257–285. Ingravallo, I. (2012). Vingt ans après Maastricht: quelles sont les perspectives de la dimension externe de la citoyenneté européenne? Revue du Droit de l’Union Européenne, 251–273. Kadelbach, S. (2014). Unionsbürgerrechte. In D. Ehlers (Ed.), Europäische Grundrechte und Grundfreiheiten (pp. 797–838). Berlin: de Gruyter. Mayer, H., & Stöger, K. (Eds.). (2010). Kommentar zu EUV und AEUV. Loose-leaf. Vienna: Manz. Ruffert, M. (2012). Diplomatischer und konsularischer Schutz. In Handbuch des Staatsrechts der Bundesrepublik Deutschland, Deutschland in der Staatengemeinschaft (pp. 67–91). Heidelberg: C.F. Müller. 10.

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Salicetti, I. (2011). The protection of EU citizens abroad: Accountability, rule of law, role of consular and diplomatic services (pp. 91–109). European Public Law. Streinz, S. (Ed.). (2012). EUV/AEUV. Commentary. Munich: C.H. Beck. von der Groeben, H., Schwarze, J., & Hatje, A. (Eds.). (2015). Europäisches Unionsrecht. BadenBaden: Nomos.

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Article 24 [Participative Rights] (ex-Article 21 TEC) 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’ initiative7–17 within the meaning of Article 11 of the Treaty on European Union,3–6 including the minimum number of Member States from which such citizens must come. Every citizen of the Union shall have the right to petition the European Parliament18–25 in accordance with Article 227.26–29 Every citizen of the Union may apply to the Ombudsman32–37 established in accordance with Article 228.30–31 Every citizen of the Union may write to any of the institutions or bodies referred to in this Article or in Article 13 of the Treaty on European Union in one of the languages mentioned in Article 55(1) of the Treaty on European Union and have an answer in the same language.38–39

Contents 1. 2.

Overview of Article 24 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Regulation of a Citizens’ Initiative (Paragraph 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.1. The Right of Popular Initiative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.2. Regulation 211/2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.3. Means of Appeal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.4. Actualisation in Practice and Proposed Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 3. The Right to Petition the European Parliament (Paragraph 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.1. Scope and Object of the Right of Petition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.2. Review Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 4. The Right to Apply to the Ombudsman (Paragraph 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.1. Appointment and Authority of the Ombudsman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.2. The Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 5. The Right to Communicate with the Institutions and Bodies of the Union in One of the Languages Mentioned in Article 55 TEU (Paragraph 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 List of Cases References

1.

Overview of Article 24 TFEU

Article 24 TFEU governs the regulation of four European citizens’ rights which do not presuppose that their holders reside in a country in which they are not nationals and which must be invoked toward the Union rather than the MS. Their #

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common aim is to create the most direct and immediate possible relationship between citizens and institutions of the Union, trying to strengthen, or at least offer, a sense of community belonging.1 It is a “miscellaneous” provision that presents a logical problem already observed with respect to the corresponding articles in previous Treaties: three of these rights, also set out in Article 20.2 (d) TFEU, concern, in fact, not only EU citizens but also all residents, as is clear from other provisions from the TFEU and the Charter of Fundamental Rights. Their restatement in Part Two of the TFEU, concerning non-discrimination and EU citizenship, may thus appear overflowing and aimed at enhancing a personal status that is does not directly derive from EU citizenship; only the “citizens’ initiative right” belongs, in fact, exclusively to EU citizens. Article 24.1 TFEU, moreover, does not assign this right (which, as noted, is affirmed in Article 11.4 TEU; ➔ Article 11 TEU para 27); it merely provides the legal basis for regulating the ways in which the initiative is presented. Thus an analysis of Article 24 TFEU must also take into account Article 11.4 TEU, Articles 227 and 228 TFEU, and Articles 41.4, 43 and 44 EUCFR.

2.

Regulation of a Citizens’ Initiative (Paragraph 1)

2.1. The Right of Popular Initiative

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Article 11.4 TEU includes a new device of participatory democracy, which also appeared in Article I-47 TCE (➔ Article 11 TEU para 27).2 It provides that “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 for exercising this right is governed by regulation to be adopted with the procedures listed in Article 24.1 TFEU.3 The regulation was approved on 16 February 2011.4

1

To this aim, with reference to Article 21 EC, see Parlement Européen, Document de Travail, La citoyenneté européenne, Projet politique pour une Union Fédérale, Doc. 299.342, LIBE 114, 1999, p. 37. 2 On Article. I-47 TCE, see Auer (2005), p. 79 et seq. The inclusion of this right had already been proposed during the IGC that led to the Amsterdam Treaty: see Woolfson (2011), p. 53. 3 On the significance of the insertion of Article 24.1—which regulates the Citizens’ Initiative—in the second part of the TFEU regarding European citizenship, see Villani (2013), pp. 198–199. 4 Parliament/Council Regulation (EU) No 211/2011 on the citizens’ initiative, O.J. L 65/1 (2011). Later, the Commission Implementing Regulation (EU) No. 1179/2011, laying down technical specifications for online collection systems pursuant to Regulation (EU) No 211/2011, O.J. L 301 (2011).

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On the rights of EU citizens,5 it is perhaps “one of the major innovations introduced by the Lisbon Treaty”, and the one which has drawn the most concentrated interest of both commentators6 and the institutions themselves: for the EP, as an example, the citizens’ initiative allows citizens “to play a direct role in the exercise of the European Union’s sovereign power by being, for the first time, directly involved in the initiation of European legislative proposals.”7 Although the text of Article 11.4 TEU is cautious, carefully circumscribing the initiative right from matters already under the competence of the Commission, and specifying that the act which the Commission is asked to propose—but remains free to accept or reject—must be deemed necessary to the implementation of the Treaties, the new right remains unique among international organisations and represents “a significant step forward in the democratic life of the Union. It provides a singular opportunity to bring the Union closer to the citizens.”8 In fact, EU citizens have, for a long time, been able to solicit, through petitions to the EP,9 the presentation of legislative proposals on issues that directly affect them; the action resulting from these petitions, however, is often insignificant and, above all, even when the act is presented not by individuals but by organized groups, such as the WWF,10 it lacks political visibility. Consensus that reached at least one million signatures on a single project, conducted among many States, could, at least according to the editors of the provision in question, impel the Commission to, if nothing else, take the initiative seriously.

5 Commission Report on the application of Regulation (EU) No 211/2011 on the citizens’ initiative, COM(2015) 145 final, p. 2. On the potential impact of this initiative, considered at the time of the Treaty’s preparation almost “revolutionary,” see. Dehousse (2013), p. 3 and the bibliography cited therein. 6 On the right of initiative for European citizens in general, see Ferraro (2012), p. 523 et seq.; Levrat (2011), p. 53 et seq.; Morgese (2011), p. 37 et seq.; Caron (2013), p. 2 et seqq; Villani (2013), p. 193 et seq. A Special Issue of the Journal Perspective on European Politics and Society, 2012, was also dedicated to the European initiative; Ponzano (2012) p. 615 et seq. 7 European Parliament Resolution of 7 May 2009 requesting the Commission to submit a proposal for a regulation of the European Parliament and of the Council on the implementation of the citizens’ initiative (2008/2169/INI), Recital C. 8 European Commission, Proposal for a Regulation of the European Parliament and of the Council on the citizens’ initiative, COM(2010) 119 final, p. 2. 9 On the difference between the petition and the citizens’ initiative, see Szeligowska and Mincheva (2012), p. 64. On the right of petition, see ➔ para. 18 et seq. 10 See for example the petition, WWW More Fish of 29 February 2012, to protect marine biodiversity, submitted to the Committee on Petitions of the European Parliament with the goal of influencing the Commission.

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2.2. Regulation 211/2011

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Even before the Treaty of Lisbon had gone into effect, the EP, in its Resolution of 7 May 2009,11 had requested the Commission to take steps to present a proposal for regulations on the matter, in particular identifying the minimum number of States from which the initiative proponents must be subject, as required by Article 24.1 TFEU. The proposal was presented on 31 March 2010 and adopted under ordinary legislative procedure on 16 February 2011 and became applicable starting 1 April 2012 (Article 23). The most important issues raised during the discussions of regulating this right concerned the minimum number of proponents from each MS, the minimum number of MS represented,12 and the choice between automatic acknowledgement of the proposal or prior screening on the part of the Commission. A Green Paper was published on these issues in 2009, presenting options and collecting responses from interested parties:13 there was significant disagreement between those in favor of the new institution, who pressed for the fewest possibly conditions, and those who sought to restrict it through procedures and strict controls, undermining the call for “simple and user-friendly” procedures.14 A close reading of the Regulation reveals, first, that to ensure that the initiative is essentially transnational and representative of Union-wide interest, Article 7 provides two conditions, namely, that the signatories of a citizens’ initiative shall come from at least one quarter of MS15 and that the minimum number of signatories shall correspond to the number of MEPs elected in each MS, multiplied by 750. This coefficient varies from State to State and is established in an Annex.16 The minimum signing age corresponds to that set by each State for EP elections (Article 3.4). The regulation lays out a procedure for the collection of signatures: a committee of promoters—from at least seven MS - must be established to register the

11

See the European Parliament Resolution 2008/2169/INI. For the number of State and citizen proponents, see the Proposal for a Regulation of the European Parliament and of the Council on the citizens’ initiative, COM(2010) 119 final, point 2.2, and 3.1 et seq.; for prior screening of proposals, see points 2.4 and 3.7. 13 See Commission, Green Paper on a European Citizens’ Initiative, COM (2009)622 final. 14 COM (2009)622 final, point 2.1. On the complexities of regulating the popular initiative, see for example Nascimbene and Rossi dal Pozzo (2012), p. 63. 15 The Commission’s initial proposal called for one third of MS; Parliament, to facilitate presentation of the initiative, suggested one fifth. A quarter thus represents a compromise. On the discussions regarding the procedures to be followed in proposing such an initiative, see, in addition to those authors cited in note 6, Szeligowska and Mincheva (2012), p. 59 et seq. 16 On the adoption of this system for calculating the minimum number of signatories, see Villani (2013), p. 208; Cuesta-López (2012), p. 6 et seq., who observes that: “In comparative law, a similar precedent comes again from the United States, where the support of a minimum percentage of voters in each relevant county/constituency is normally required” (p. 13). 12

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initiative before the Commission.17 Registration is completed within 2 months, as long as the proposals are of a serious nature and do not fall outside the Union’s competences18 or violate its values.19 Once registered, the proposed initiative is made public and the committee may commence collecting signatures for a maximum period of 12 months.20 If the collection is successful, the organisers present the proposal to the Commission, which, under Article 10, shall:

11

(a) publish the citizens’ initiative without delay in the register; (b) receive the organisers at an appropriate level to allow them to explain in detail the matters raised by the citizens’ initiative; (c) within 3 months, set out in a communication its legal and political conclusions on the citizens’ initiative,21 the action it intends to take, if any, and its reasons for taking or not taking that action. At this stage, the Commission performs a second examination of the initiative, considering its merits;22 during the 3 months indicated in Article 10, “the organizers shall be given the opportunity to present the citizens’ initiative at a public hearing.”23 As noted, the Commission’s obligation with respect to the proposed

17

The committee must indicate (Article 4.1) “the information set out in Annex II, in particular on the subject matter and objectives of the proposed citizens’ initiative.” 18 On this point, see Villani (2013), p. 202 et seq. This is an admissibility test, not to be confused with the review carried out by the Commission under Article 10 of the Regulation. 19 Article 4.2 sets out the conditions for registration in points (b), (c), and (d): “b) the proposed citizens’ initiative does not manifestly fall outside the framework of the Commission’s powers to submit a proposal for a legal act of the Union for the purpose of implementing the Treaties; c) the proposed citizens’ initiative is not manifestly abusive, frivolous or vexatious; and d) the proposed citizens’ initiative is not manifestly contrary to the values of the Union as set out in Article 2 TEU.” The boundary here refers to the Commission’s powers, not the Union’s; thus, initiatives concerning the CFSP cannot be presented. See Szeligowska and Mincheva (2012), p. 68. The Commission’s examination at this stage is not of a discretionary nature, cf. Morgese (2011), p. 55; Villani (2013), p. 205. 20 Articles 5 and 8 govern the signature collection procedure. Upon completion, “the organisers may submit the citizens’ initiative to the Commission, accompanied by information regarding any support and funding received for that initiative. That information shall be published in the register” (Article 9). 21 The Commission’s assessment may consider legislative initiatives linked to the citizens’ request. See for example the reasoning behind the rejection of the One of us initiative (cf. European Commission, Press release, European Citizens’ Initiative: European Commission replies to ‘One of Us’, Brussels, 28 May 2014), in which the Commission stated that it “has decided not to submit a legislative proposal, given that Member States and the European Parliament have only recently discussed and decided EU policy in this regard”. 22 See Villani (2013), p. 209 et seq.; Cuesta-López (2012), pp. 20–21. 23 “The Commission and the European Parliament shall ensure that this hearing is organised at the European Parliament, if appropriate together with such other institutions and bodies of the Union as may wish to participate, and that the Commission is represented at an appropriate level” (Article 11). On the political importance of this debate, see Morgese (2011), p. 5.

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initiative is completed by informing the organisers, the EP,24 and the Council of its intentions and the rationale behind them.

2.3. Means of Appeal

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The Commission is not required to act on the legislative initiative; thus, its decision on the matter cannot be challenged.25 Instead, a jurisdictional appeal can be filed against the non-registration of the initiative, in which the Commission enjoys no discretion.26 Additionally, EU citizens can submit complaints to the Ombudsman, alleging maladministration by the Commission. Committees of citizens and their representatives have sometimes turned to this tool—to date, however, unsuccessfully.27 Several appeals were presented in Court against the Commission’s refusal to register an initiative, four of which—asserting mainly that the decision manifestly did not contain sufficient elements to enable the applicant to ascertain the reasons for the refusal to register the proposed ECI—were rejected.28 Indeed, in such cases, the General Court, while recognising that “it is incumbent on the Commission, 24 Following the entry into force of Regulation 211/2011, the EP amended two articles of the Rules of Procedure: see new Rule 197 A, (Public hearings on citizens’ initiatives) and new Rule 203 A (Citizens’ Initiative) (see European Parliament decision of 22 May 2012 amending Parliament’s Rules of Procedure with regard to the implementation of the European citizens’ initiative (2011/ 2302(REG)). 25 This conclusion stems first from the discretionary nature of the Commission’s decision and then from the text of Regulations 211/2011, which provides remedies for cases of non-registration; on the contrary, however, see Szeligowska and Mincheva (2012), pp. 72–73; Villani (2013), pp. 209– 210. The matter will be judged by the General Court which was presented an appeal “for annulment of Commission Communication COM(2014) 355 final of 28 May 2014 on the European Citizens’ Initiative ‘One of Us’, still pending (see case T-561/14, Action brought on 25 July 2014). 26 Cf. Article 4.3: “Where it refuses to register a proposed citizens’ initiative, the Commission shall inform the organisers of the reasons for such refusal and of all possible judicial and extrajudicial remedies available to them.” 27 Regarding complaints to the Ombudsman, see for instance Case: 2071/2013/EIS, opened on 2 December 2013—Decision on 12 December 2014 and Case 402/2014, opened on 28 March 2014—Decision on 31 March 2015: European Ombudsman concluded that there was no Commission maladministration. In fact, “after receiving a number of complaints, the Ombudsman decided to investigate the proper functioning of the ECI procedure and the Commission’s role and responsibility in this regard. The Ombudsman invited organisers of ECIs, civil society organizations, and other interested persons to provide input on how well the ECI is working. On the basis of these responses, the Ombudsman made a range of suggestions to the Commission to increase the effectiveness of the ECI process;” see Decision of the European Ombudsman closing her owninitiative inquiry OI/9/2013/TN concerning the European Commission (4 March 2015). 28 See Case T-529/13, Izsák e Dabis v Commission (GC 10 May 2016); Case T-44/14, Costantini v Commission (GC 19 April 2016); Case T-754/14, Efler v Commission (GC 23 May 2016); Case T450/12, Anagnostakis v Commission (GC 30 September 2015), subject to appeal before the ECJ (Case C-589/15 P).

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when it receives a proposal for a citizens’ initiative, to appraise it and also to give reasons for any refusal to register it, given the effect of such a refusal on the effective exercise of the right enshrined in the Treaty”,29 concluded that the statement of reasons although brief, was adequate. Only the action concerning Minority SafePack Initiative was upheld. The General Court decided “that the Commission has failed to comply with its obligation to state reasons by not indicating those of the measures which, among those set out in the annex to the proposed ECI, did not fall within its competence, nor the reasons in support of that conclusion.”30

2.4. Actualisation in Practice and Proposed Amendment

Practice has shown that the hopes placed in the citizens’ initiative, conceived as a tool to further strengthen the democratic legitimacy of the Union were partly exaggerated, as evidenced by the downward trend in presentation and registration of initiatives.31 Of the more than fifty initiatives presented from 2012, in fact, only three have garnered the required number of signatures and been taken into consideration under Article 10 of the regulation.32 Of these, only two underwent further action from the Commission, and this action did not take the form of the presentation of a legislative proposal.33 This outcome prompted the Commission to point out some of the concerns that emerge from Regulation 211/2011, including the legal nature of the committees, the brevity of the signature collection period, and the complicated procedures for identifying signatories.34 It was the EP, though, which made greater investment 29 See Case T-450/12, Anagnostakis v Commission (GC 30 September 2015) para 26. For the Commission, the failure to register the ECI “One million signatures for a Europe of solidarity” was based “on the ground that the ECI manifestly fell outside the scope of its powers to submit a proposal for the adoption of a legal act of the Union for the purpose of implementing the Treaties.” 30 See Case T-646/13, Minority SafePack—one million signatures for diversity in Europe v Commission (GC 3 February 2017) para 34–35. 31 Sixteen were registered in 2012, nine in 2013, and five in 2014 (cf. Report on application of the Regulation 211/2011, p. 3); six in 2015 and three in 2016 (see Commission homepage, EU citizens’ Initiative). 32 The initiatives are: ‘Water and sanitation are a human right! Water is a public good, not a commodity!’ (‘Right2Water’), registered on 10 May 2012, Commission Communication COM (2014) 177 final; ‘One of us’; registered on 11 May 2012, Commission Communication COM (2014) 355 final; and ‘Stop vivisection’, registered on 22 June 2012, Commission Communication C(2015) 3773 final. 33 With ‘One of us’, the Commission decided not to proceed; for ‘Stop vivisection’, it decided against asking for the repeal of Directive 2010/63/EU and proposed the adoption of “some actions to accelerate the development and uptake of non-animal approaches in research and testing”; for ‘Right2Water’, the Commission “is committed to take concrete steps and work on a number of new actions in areas that are of direct relevance to the initiative and its goals.” 34 Cf. Report, p. 15 et seqq.

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in the matter; the EP Committees on Petition has requested a Study to clarify how the ECI was implemented and to propose recommendations to ensure a straightforward ECI process.35 This Report was widely transposed in the EP Resolution of 28 October 2015, which suggests a series of proposals to improve ECI, and calls for a review of the 2012 Regulation.36 The Economic and Social Committee too proposed in 2016 some proposals for reforming the Regulation with a view to making the ECI mechanism simpler and more effective.37 Despite these requests,38 the 2017 Commission work programme did not include any reference to the revision of the Regulation. Nontheless, on 13.9.2017, the European Commission proposed a new regulation on the European citizens’ initiative. Regulation (EU) 2019/788 of the European Parliament and of the Council on the European citizens’ initiative was adopted on 17 April 2019 (Current consolidated version: 01/02/2020) to facilitate the collection of signatures.

3.

The Right to Petition the European Parliament (Paragraph 2)

3.1. Scope and Object of the Right of Petition

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As noted, in addition to the right of initiative, Article 24 TFEU—as Article 21 TEC did -also refers to rights of EU citizens three rights which actually benefit all those residing in the territory of the MS: the right to petition the EP, the right to appeal to the Ombudsman, and the right to address institutions and receive response in one’s own language. The right to petition, typical of parliamentary democracies, was the first tool designed to allow citizens’ direct involvement in the Union’s development process. Thanks to the petitions received, the EP can, through an ad hoc committee established in 1987, exercise practical and steady control over the activities of

35

See Ballesteros (2015). See also the Report of Anglmayer (2015). European Parliament Resolution of 28 October 2015 on the European Citizens’ Initiative (2014/ 2257(INI). In particular, it requests changes to the minimum age, the 12-months period and the procedures for signature collection, and “to revise the wording of Article 10(c) of Regulation (EU) No 211/2011 to allow proper follow-up to a successful ECI.” In case of inaction by the Commission, Parliament proposes “to exercise its right, under the terms of Article 225 TFEU, to ask the Commission to submit an appropriate proposal; considers that, when exercising this right, Parliament’s competent committee should take into account the content of any successful ECI and consult the ECI organisers in another hearing; calls for its Rules of Procedure to be amended accordingly (point 32)”. 37 See the EESC Opinion of 21 January 2016 on The European Citizens’ Initiative (review) (owninitiative opinion), O.J. C 389 (2016). 38 The Commission replied that “it is too early to launch a legislative revision of the Regulation” (see The follow up to the European Parliament resolution on European Citizen’s Initiative, adopted by the Commission on 2 February 2016, p. 2). 36

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the institutions and the implementation of European legislation, as well as take steps to attain the results sought by the citizens, where appropriate. This right was initially planned only by the EP’s Rules of Procedure39 and was the subject of an inter-institutional agreement on 12 April 1989, designed to make it more effective.40 With the Maastricht Treaty, the right to petition was included in Article 8 D and Article 138 D of the EC Treaty. Article 138 D regulated petitions foreseen in Article 8 D, marking EU citizens and natural and legal persons residing in the MS41 as beneficiaries, on condition that petitions concern a matter which comes within the Community’s fields of activity and which affects them directly. The concept of the petition is taken for granted, despite several requests to include a definition in the Rules of Procedure to distinguish the petitions themselves—which correspond to the pertinent committee’s duty to deal with them in the most efficient manner possible, to periodically report to the EP, and to communicate results to proponents—from other acts, such as letters or requests, that must be examined by other bodies or agencies. On 3 May 1994, a plenary session of the EP agreed to consider petitions as “all complaints, requests for an opinion, demands for action, reactions to Parliament resolutions or decisions by other Community institutions or bodies forwarded to it by individuals and associations;” the following year, the Committee on the Rules of Procedure, at its meeting of 23 November 1995, adopted a slightly different and reductive definition which was not followed formally: “requests for intervention, for action, for change of policy or for an opinion, submitted to the Parliament by any citizen of the Union”.42 The content of Articles 8 D and 138 D has not been changed by subsequent versions of the Treaties except with respect to an aspect of the latter that had previously caused problems of interpretation, broadening the object of petitions to the entire range of EU competence (Article 227 TFEU). Before the Treaty of Lisbon, the reference was to the Community’s field of competence: it was therefore wondered whether matters of the Second and especially the Third Pillar could also be object of petitions. Despite the apparently unambiguous wording of Article 138 D and then Article 194 EC, the EP had embraced a liberal interpretation of the right to petition even from the time of its 1993 Rules of Procedure: Article 156.1 in fact spoke of a “matter which comes

39

See Article 139 of the Regulations of the ECSC’s Common Assembly of 1953 and Article 128 of Parliament’s Rules, adopted on 21 March 1981, after the first election by universal suffrage. For the genesis of this right, see Marias (1994), p. 169 et seq.; Nentwich (1995), p. 6 et seq.; Magnette (2002), p. 65 et seq.; Atanassov (2015), p. 2. For the period prior to the Maastricht Treaty, see Surrel (1990), p. 219 et seq. 40 Bollettin EC n. 4-1989, point 2.4.2. 41 Under Article 215.13 of the current EP Rules of Procedure, the option to petition is provided even for natural and legal persons who are not EU citizens or MS residents, although such acts are treated separately. In this way, the Rules even go beyond the provisions of Article 44 EUCFR. 42 See Report of 16 December 1997 on the amendment of Rule 161 of Parliament’s Rules of Procedure, A4-0416/97, PE 223.398/final, pp. 16–17 and 19.

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within the European Union’s fields of activity.” This interpretation was then followed in practice.43 The current text of Article 227 TFEU thus allows a petition to the EP “on a matter which comes within the Union’s fields of activity”. On the other hand, no doubt was placed on the possibility that petitions also concern a State’s failures to implement Community law. Indeed, several infringement procedures have been promoted by the Commission following petitions, which thus become a means of inspecting and developing Community law.44 The binding character of the EUCFR (Article 6.1 TEU) resulted in a considerable increase in petitions that report MS violations of the Charter; those concerning violations of rights under the Charter put in place by States in fields different from the implementation of EU law, under Article 51.1 of the Charter, were however declared inadmissible—with an interpretation upheld by case law.45 A petition can be submitted—individually or in association with other citizens or persons—by any citizen—on condition that the matter directly affects him. Before the Maastricht Treaty, the Rules of Procedure made a generic provision in Article 128 that any Community citizen could petition; on the other hand, Article 138 D, the same as Article 227 TFEU in this respect, required that the issue be of direct concern to the petitioner, and Article 156 of the 1993 Rules adopted this detail, allowing the competent committee to consider a petition inadmissible on this basis. Flexible criteria have been followed in ascertaining interest, rather than demanding that the issue concerns the individual who presents the petition: petitions presented on behalf of family members, for instance, have been deemed admissible. The Charter of Fundamental Rights recognises the right to petition not only for “every citizen” but for every natural or legal person residing in an MS. The Charter does so however without circumscribing the right to matters falling within the Union’s fields of activity and directly concerning the petitioner (Article 44 EUCFR). Still, considering the provisions of Article 52.2, the terms of which state: “Rights recognized by this Charter which are based on the Community Treaties or the Treaty on European Union shall be exercised under the conditions and within the limits defined by those Treaties”, the requirements of Article 227 TFEU should be met.

43

According to the EP, a number of petitions relating to the Second and Third Pillars were submitted in the years immediately following the Maastricht Treaty (Report on the deliberations of the Committee on Petitions for the parliamentary year 1996–1997, 28 May 1997, PE 221.940/ final A4-0190/97, point 18). 44 Report PE 221.940/final A4-0190/97, point 17. In the Report on the activities of the Committee on Petitions 2014, 10 December 2015 (2014/2218(INI)) A8-0361/2015, point 7. Indeed, the Parliament called on the Commission to follow up more often, stating infringement procedures, on petitions indicating failure or inadequate transposition of EU law, and “to keep the Committee on Petitions informed, on a regular basis, of developments in, and of the concrete outcome of, infringement proceedings directly linked to any given petition.” 45 See for example Case T-160/10, J v European Parliament (GC 27 September 2012), upheld in appeal, Case C-550/12 P, J v European Parliament (ECJ 14 November 2013).

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3.2. Review Procedures

The procedure for submission and review of petitions is now governed by Article 215 et seq. of the EP’s Rules of Procedure. Once submitted,46 a petition is registered and undergoes an admissibility screening by ad hoc committee under Article 227 TFEU. If deemed inadmissible, substantiated reasons for the decision must be communicated to the petitioner, who can then seek recourse in the courts.47 Following registration of the petition, it will be handled publicly. Request can be made for anonymous or confidential handling; any breach of this obligation on the part of EU bodies is liable for damages, although case law seems to favour the public form, considering the petition’s role in democratic practice, and the need, as a rule, to handle the issue with the utmost transparency and publicity.48 The Committee on Petitions enjoys a wide discretion over the outcome to be given to the petition, and its works is not subject to judicial review.49 It must however inform the petitioner of its decision and the reasons behind it (Article 216.9 Rules of Procedure). If the petition concerns changes to EU law, the parliamentary committee responsible for the subject is involved in the review. The Commission itself is often called upon to collaborate on the handling of petitions, especially where they concern breaches by MS. In addition, for reviewing petitions, establishing facts, and seeking solutions, fact finding missions can be organised in the MS or region in question. Once the review of a petition is complete, the

46 To be accepted, the petition must be written in one of the official languages, and include the name, surname, nationality and address of its presenter. 47 See Case C-261/13 P, Schönberger v European Parliament (GC 9 December 2014) para 22–23: “In those circumstances, a Decision by which the Parliament considers that a petition addressed to it does not meet the conditions laid down in Article 227 TFEU must be amenable to judicial review, since it is liable to affect the right of petition of the person concerned. 23. The same applies to a Decision by which the Parliament, disregarding the very essence of the right of petition, refuses to consider, or refrains from considering, a petition addressed to it and, consequently, fails to verify whether it meets the conditions laid down in Article 227 TFEU. A negative Decision by which the Parliament takes the view that the conditions laid down in Article 227 TFEU have not been met must provide a sufficient statement of reasons to allow the petitioner to know which of those conditions was not met in his case. In that respect [. . .], that requirement is satisfied by a summary statement of reasons, such as the one provided in the Parliament’s Decision at issue in the case which gave rise to that judgment.” 48 See Case T-343/13, CN v European Parliament (ECJ 3 December 2015) para 67. 49 See Case C-261/13 P, Schönberger v European Parliament (GC 9 December 2014) para 24: “[. . .] it is clear from the provisions of the TFEU and from the rules adopted by the Parliament for the organisation of the right of petition that, where the Parliament takes the view that a petition meets the conditions laid down in Article 227 TFEU, it has a broad discretion, of a political nature, as regards how that petition should be dealt with. It follows that a Decision taken in that regard is not amenable to judicial review, regardless of whether, by that Decision, the Parliament itself takes the appropriate measures or considers that it is unable to do so and refers the petition to the competent institution or department so that that institution or department may take those measures.”

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committee may ask the President to forward its opinion or recommendation to the Commission, the Council, or the MS authority in question to obtain a response. The petition aims to create contact between EU citizens and Parliament, allowing the former to present requests and complaints and to call for action from the institutions, even against their own State, and the latter to better understand the actual wants and needs of its people: most of the petitions concern matters of common interest, such as environmental protection, social welfare, and human rights. In the years following 2006, a significant increase in the number of petitions can be detected, rising from an average of one thousand to more than two thousand in some years,50 which appears to stem not only from the inclusion of new MS but above all from the intention to interact with institutions and promote their activities. In this sense, the marked increase in petitions may have also been influenced by the institutions of the Citizens’ Initiative and a new interest in participatory democracy. At the same time, the ultimately limited number of petitions is a sign of awareness of the limited impact achieved by the results, with the exception of reporting State violations of Community law.

4.

The Right to Apply to the Ombudsman (Paragraph 3)

4.1. Appointment and Authority of the Ombudsman

30

The European Ombudsman is a body established by the Maastricht Treaty (Article 138 E).51 As in the case of the right to petition, regulation of the Ombudsman was contained in the articles concerning the EP, while Article 8 D, paragraph 2 merely reiterates the right of EU citizens to appeal to the Ombudsman. The positioning of Article 138 D derived from the fact that the Ombudsman was nominated for a renewable 5 years term by Parliament, which establishes the Statute52 and general conditions for the exercise of its functions with a Decision 50

In total 2891 Petitions in 2013, 2714 in 2014 but only 1400 in 2015. This decrease is the result of the opening of a “petitions web portal”, available since 2014, “to enable the user-friendly online submission of petitions. The portal also allows citizens to show online support for open petitions declared admissible. This online process has reduced the number of petitions by half by introducing filter questions to pre-screen petitions for admissibility” (See Commission Report, On progress towards effective EU citizenship 2013-2016, COM(2017) 32 final, p. 14). 51 On the establishment of the European Ombudsman with the Maastricht Treaty, see for instance Pliakos (1994), p. 563 et seq.; Gautier (1995), p. 161 et seq.; Peters (2005), p. 697 et seq.; Karagianis and Petit (2007). 52 See Parliament Decision 94/262/ECSC, EC, Euratom on the regulations and general conditions governing the performance of the Ombudsman’s duties, O.J. L 113/116 (1994), amended by its Decisions 2002/262/EC, ECSC, Euratom, O.J. L 92/13 (2002) and 2008/587/EC, Euratom, O.J. L 189/25 (2008). Recently, the Statute was changed with the Parliament Decision on the regulations and general conditions governing the performance of the Ombudsman’s duties (Rules of Procedure of the European Parliament—8th parliamentary term—September 2015, ANNEX X: Performance of the Ombudsman’s duties, p. 211 et seq.).

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in its Rules of Procedure. Despite being an independent body (Article 228.3 TFEU), which should ensure non-judicial protection, the Ombudsman is de facto an additional source of information and control for the Parliament, especially towards the Commission. Article 228 TFEU, to which Article 24.3 TFEU refers for the manner of exercising the right to appeal to the Ombudsman,53 substantially transposed Article 138 E (later Article 195 EC), merely specifying that the object of the Ombudsman’s inquiries concern all institutions, bodies, and offices of the Union, with the exception of the CJEU, and thus the various agencies too.54 Furthermore, due to the absence of the distinction in the Pillars, the Ombudsman can attend to the CFSP55 as well. To amend the Statute, Article 228.4 TFEU requires that Parliament, after consultation with the Commission and approval from the Council, act on its own initiative by way of regulations in accordance with a special procedure. One highly significant change is the rule that Parliament elects, and no longer appoints, the Ombudsman at the beginning of each term for the duration (Article 228.2 (1) sentence 1 TFEU). In addition, the Ombudsman shall be eligible for reappointment (Article 228.2 (1) sentence 2 TFEU). The goal is to accentuate the independent character of this body. Article 219 of the EP’s Rules of Procedures governs the election of the Ombudsman at the beginning of each term.56

53

On Article 228 TFEU, see for example Romito (2011), p. 61 et seq. Article 43 EUCFR has in turn adopted the specification that the powers of the Ombudsman pertain to the acts “of the institutions, bodies, and offices of the Union.” 55 “With the entry into force of the Lisbon Treaty the Ombudsman’s mandate was broadened to include possible maladministration in the framework of the Common Foreign and Security Policy (CFSP), including the Common Security and Defence Policy (CSDP)” (See Committee on Petitions, Report on the annual report on the activities of the European Ombudsman in 2014, 2 February 2016, (2015/2231(INI)), Explanatory Statement). 56 See Rule 291 of the EP Rules of Procedure of 2017: “Election of the Ombudsman At the start of each parliamentary term or in the case of death, resignation or dismissal of the Ombudsman, the President shall call for nominations for the office of Ombudsman and set a time-limit for their submission. A notice calling for nominations shall be published in the Official Journal of the European Union. 2. Nominations must have the support of at least 40 Members who are nationals of at least two Member States. Each Member may support only one nomination. Nominations shall include all the supporting documents needed to show conclusively that the nominee fulfils the conditions laid down in Article 6(2) of Decision 94/262/ECSC, EC, Euratom of the European Parliament on the regulations and general conditions governing the performance of the Ombudsman’s duties. 3. Nominations shall be forwarded to the committee responsible. A full list of the Members who have given their support to the nominees shall be made available to the public in due time. 4. The committee responsible may ask to hear the nominees. Such hearings shall be open to all Members. 5. A list of admissible nominations in alphabetical order shall then be submitted to the vote of Parliament. 6. The Ombudsman shall be elected by a majority of the votes cast. If no candidate is elected after the first two ballots, only the two candidates obtaining the largest number of votes in the second ballot may continue to stand. In the event of any tie, the oldest candidate shall be appointed. 7. Before opening the vote, the President shall ensure that at least half of Parliament’s component Members are present. 8. The Ombudsman shall exercise his or her duties until his or her successor takes office, except in the case of his or her death or dismissal.” 54

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Article 221 provides for the dismissal procedure in cases of gross negligence or if the Ombudsman no longer meets the conditions necessary to exercise his functions. If Parliament requests a resignation and the Ombudsman does not comply, the Court of Justice can dismiss him. The Ombudsman has the power to investigate cases of maladministration57 by Union bodies and institutions: it cannot therefore hear complaints lodged against the activity of MS; nor does it have the ability to present legal proceedings or question the validity of European court decisions. Its investigative powers also stop when a question is presented to the courts. The concept of maladministration is interpreted broadly, and citizens can appeal to the Ombudsman for any hurtful conduct58 on the part of Union bodies. Unlike the petition, the complainant need not prove his direct interest in the matter, and it can be inferred that one of the pursuits of the Ombudsman, in addition to the protection of the individual, is the general oversight of administrative activities. The Ombudsman may act both on request and on ex officio (Statute, Article 3). Upon receipt of a complaint, the Ombudsman investigates the matter and, if an instance of maladministration is found, the institution in question is notified and given 3 months to respond. If in the end a satisfactory solution between claimant and administration—a friendly settlement, according to the Statute (Article 6)59— is not reached, the Ombudsman makes a reasoned decision or recommendation and

57

On the Ombudsman’s role in stimulating and ensuring good administration, see Chiti (2000), p. 303 et seq.; Villamena (2010), p. 251 et seq.; De Leeuw (2011), p. 349 et seq. 58 The notion of maladministration has been difficult for the Ombudsman to reconstruct. In this regard, he referred to the Code of Good Administrative Behaviour that “should apply to all Union institutions, bodies and agencies”, drafted by the Ombudsman himself and adopted by the EP with amendments on 6 September 2001, O.J. C 72/331, (2002), and to Article 41 EUCFR. See Adam and Tizzano (2014), p. 251. See also the recent Parliament Resolution with recommendations to the Commission on a Law of Administrative Procedure of the European Union, 2012/2024(INL); on the developments of this request, see Galetta et al. (2015), p. 1422 et seq. At present, “The Ombudsman’s definition of maladministration, which is endorsed by the European Parliament and the European Commission, is that: ‘Maladministration occurs when a public body fails to act in accordance with a rule or principle which is binding upon it’. For the institutions, this implies respect for the rule of law, for the principles of good administration and for fundamental rights. The Charter of Fundamental Rights includes the right to good administration as a fundamental right for EU citizens (Article 41) and the Charter is binding upon the administrations of EU institutions” (Committee on Petitions, Report on the annual report, 2 February 2016, Explanatory Statement). 59 See Decision of the European Ombudsman adopting implementing provisions, adopted on 8 July 2002 and amended by decisions of the Ombudsman of 5 April 2004 and 3 December 2008. Available at www.ombudsman.europa.eu/en/resources/provisions.faces.

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informs the EP and the institution in question via report.60 Additionally, a report of its activities is submitted to Parliament each year, further confirming the close relationship between the Ombudsman and this institution. There is some confusion as to what distinguishes the powers of the Ombudsman from those of the Committee on Petitions, as both can be called upon to oversee the activities of Community bodies; in any case, petitions typically concern more general problems, while the Ombudsman is occupied (as a rule, although not without exception) with claims of particular cases of maladministration. Under Article 215.12 of the Rules of Procedure, in any case, when the Committee on Petitions deems it appropriate, it may refer matters to the Ombudsman. In carrying out its duties, the Ombudsman is required to guarantee confidentiality to protect those who seek his aid (Article 4 of the Statute). Breach of this obligation results in non-contractual liability for the Ombudsman himself, as established by case law.61

34

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4.2. The Practice

The Ombudsman’s activity is largely discretionary, and therefore complainants only have the right to be informed of the outcome of the complaint, and are unable to appeal for failure to act or annulment. On the first point, the conclusion is supported by the fact that although the Lisbon Treaty allows for actions to be brought against all bodies and institutions (Article 265 TFEU), the nature of the Ombudsman’s acts shelters them from judicial review.62 Equally, citizens cannot seek annulment of an Ombudsman’s Decision, since it has no legal effect.63 60

On the political—not legal—efficacy of the Ombudsman’s recommendations, see Romito (2011), pp. 72–73. In its Report on Activities of the European Ombudsman in 2014 of 2 February 2014, para 26, the EP “Welcomes the EU institutions’ 80% compliance rate with regard to the Ombudsman’s suggestions; is concerned at the persisting 20% non-compliance; is aware that the Ombudsman’s suggestions are not legally binding; urges the institutions, bodies and agencies to react promptly, effectively and responsibly to the Ombudsman’s critical remarks and draft recommendations.” 61 See Case T-412/05, M v European Ombudsman (GC 24 September 2008). The claim was filed under Article 288.2 TEC for the damage suffered by the applicant due to his naming in the European Ombudsman’s Decision of 18 July 2002. 62 For the period before the Treaty of Lisbon, see, unambiguously, Case T-103/99, Associazione delle cantine sociali venete v European Ombudsman and European Parliament (CFI 22 May 2000) and Case T-196/08, Srinivasan v European Ombudsman (CFI 3 November 2008); for the period following, implicitly, Case T-430/14, Mirelta Ingatlanhasznosító v Commission (GC 19 November 2014), upheld in appeal, Case C-576/14 P (ECJ 4 June 2015), and Case T-217/11, Staelen v European Ombudsman (GC 29 April 2015). 63 See especially Case T-196/08, Srinivasan v European Ombudsman (CFI 3 November 2008) para 11–12: “11. Moreover, in accordance with the case law, the Ombudsman does not have the power to take binding measures [. . .] By definition, therefore, the Ombudsman’s report does not produce legal effects vis-à-vis third parties within the meaning of Article 230 EC, and is furthermore not binding on the Parliament, which is free to decide, within the framework of the powers conferred

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The only available recourse is to seek for damages: while the Ombudsman enjoys a wide discretion in carrying out its duties, it is actually bound to respect the principle of good administration, set out in Article 41 EUCFR, by which any serious and manifest error gives rise to Union liability.64 The role of the Ombudsman requires the cooperation of other Union bodies, both in investigating problems and in achieving their solutions.65 Thus, his work involves the principle of sincere interinstitutional collaboration, now invoked in Article 4.3 TU.66 Regarding the efficacy of the Ombudsman’s work, aimed at bringing citizens closer to the institutions and eliminate conduct that, while it may not often lead to legal proceedings, hinders the satisfactory relationship between the institutions of Brussels and individuals, it can be noted that the number of complaints—given the accession of new MS and the informality with which they can be presented—is not particularly high67 and, moreover, that their object is often irrelevant to the Ombudsman’s power (particularly those concerning complaints against State administrations), which is why most of these are declared inadmissible.68

on it by the Treaty, what steps are to be taken in relation to it [. . .] 12. Against that legal background, a reasoned decision by the Ombudsman concluding the substantive examination of a complaint by deciding to take no further action on it does not constitute a measure capable of being challenged by an action for annulment, since such a decision does not produce legal effects on third parties, within the meaning of Article 230 EC.” 64 See Case T-209/00, Lamberts v European Ombudsman (CFI 10 April 2002) and Case C-234/02 P, (ECJ 23 March 2004) and especially, most recently, the judgment in Case T-217/11, Staelen v European Ombudsman (GC 29 April 2015) para 76 et seq. On the Lamberts Decision, see Raimondi (2004), p. 550 et seq. 65 “Compliance with the Ombudsman’s suggestions rose from 80% in 2013 to 90% in 2014” (See Report On progress towards effective EU citizenship 2013–2016, p. 15). 66 This duty of sincere cooperation is, however, not such as to compel the Commission—even if it is found guilty of maladministration, according to the Ombudsman, in the handling of private applications that report non-fulfillment by an MS—to start an infringement procedure or, even less so, to be held responsible for damage caused to the complainants by the failed appeal attempt under Article 258 TFEU. See Case T-42/04, Komninou and Others v Commission (CFI 13 January 2006) and especially the appeal in Case C-167/06 P (ECJ 25 October 2007) para 44-45; see also Case C-576/14 P, Mirelta (ECJ 4 June 2015). 67 In the period 2013–2015, the Ombudsman’s office “registered 6 506 complaints and opened 953 cases. In each of the three years, the majority of complaints concerned an alleged lack of transparency. [. . .] This core complaint-handling work was supplemented in 2013–2014 by strategic own-initiative inquiries, aimed at benefitting as many citizens as possible by examining issues which appear to be systemic, rather than one-off” (See Report On progress towards effective EU citizenship 2013–2016, pp. 14–15). 68 According to the Report of 2 February 2016, point J, “of the total number of 2 163 complaints processed by the Ombudsman, 736 were inside and 1 427 were outside her mandate.”

Morviducci

Article 24. [Participative Rights]

5.

589

The Right to Communicate with the Institutions and Bodies of the Union in One of the Languages Mentioned in Article 55 TEU (Paragraph 4)

This right—already covered by EEC Regulation 1/58 on language use69—was added by the Treaty of Amsterdam (Article 21.3 TEC). It was linked to a wider process—as demonstrated by the addition of Article 255 TEC (now Article 15 TFEU) on the right of access to Union documents—aimed at improving the relationship between citizens and institutions and contributing to good governance of Community law, increasing its legitimacy, effectiveness, and transparency.70 Unsurprisingly, Article 41.4 EUCFR, regarding good administration, recalled this right, affirming that 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. This provision clarifies that it is a right not limited to EU citizens. Although first Article 21 TEC and later Article 24.4 TFEU seem to order otherwise, it is believed that following the Charter’s entry into force, and for reasons of systematic order,71 no other conclusion can be reached.72 Instead, under Article 41 EUCFR, natural and legal persons who are neither citizens of the EU nor residing in MS may still avail themselves of this right, thus further widening the availability of the right in question. The languages in which citizens can write to institutions and bodies of the Union are the official languages mentioned in Article 55.1 TEU. Their significant number, up to 24 following progressive accessions, evidently renders the obligation to communicate with interlocutors in their chosen language an increasingly complicated endeavor, even more so when considering that the Commission has imposed upon itself, for reasons of good administration, short deadlines for replies. This provision however concerns only the institutions and select bodies cited in Article 24.4 TFEU and Article 13 TEU, i.e. the EP, the European Council, the Council, the Commission, the CJEU, the ECB and the Court of Auditors, as well as

69

“Documents which a Member State or a person subject to the jurisdiction of a Member State sends to institutions of the Community may be drafted in any one of the official languages selected by the sender. The reply shall be drafted in the same language” (Article 2 EEC Council Regulation No 1 determining the languages to be used by the European Economic Community, O.J. L 17 of 6 October 1958). On the language requirements, see in general Pusillo (2013). 70 See Nascimbene and Rossi Dal Pozzo (2012), p. 57. 71 The rights referred to in the last three paragraphs of Article 24 TFEU are assigned to citizens, but in reality, as has been seen, the rights to petition and appeal to the Ombudsman refer to other articles that expand their availability. Additionally, considering the close link between the rights of access to documents and of communicating in one’s chosen language, the reference made in Article 15.3, to the right of access for residents as well points to the conclusion indicated in the text. 72 See Morviducci (2017), p. 104.

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the Ombudsman, the Economic and Social Committee and a Committee of the Regions. Appeals brought against other bodies and agencies73 for failure to communicate in the requested language are thus deemed inadmissible; likewise, the court’s interpretation has been strict on the right to address the institutions and bodies in their own language, established in general terms by the Charter, excluding Union officials when they are not acting as ordinary citizens.74 According to the Civil Service Tribunal, in fact, this conclusion derives from both the Union employees’ Statute and the Union’s economic and organisational burdens stemming from the obligation to respond to officials’ communications in their chosen language. The same arguments hinder reliance on Article 41.4 EUCFR.75

List of Cases ECJ

ECJ 09.09.2003, C-361/01 P, Kik v OHIM, ECLI:EU:C:2003:434 [cit. in para 38] ECJ 23.03.2004, C-234/02 P, Ombudsman v Lambert, ECLI:EU:C:2004:174 [cit. in para 35] ECJ 25.10.2007, C-167/06 P, Komninou and Others v Commission, ECLI:EU: C:2007:633 [cit. in para 36] ECJ 14.11.2013, C-550/12 P, J v European Parliament, ECLI:EU:T:2011:95 [cit. in para 23] ECJ 09.12.2014, C-261/13 P, Schönberger v European Parliament, ECLI:EU: C:2014:2423 [ cit. in para 22] ECJ 04.06.2015, C-576/14 P et al. Ingatlanhasznosító kft v Commission and Ombudsman, ECLI:EU:C:2015:370 [cit. in para 36]

73

See for example Case C-361/01 P, Kik v OHIM (ECJ 9 September 2003) para 83: “With regard to relations between citizens and the Community institutions and bodies, Article 8d of the Treaty, as amended by the Treaty of Amsterdam, requires, inter alia, that the institutions and certain bodies correspond with the citizens of the Union in one of the languages mentioned in Article 248 of the Treaty. That provision, which was not yet in force when the contested act was adopted, is not in any event generally applicable to all bodies in the Union. In particular it does not apply to the Office.” 74 See Case F-3/08, Marcuccio v Commission (CST 7 October 2009) para 60 et seq., upheld on appeal, Case T-516/09 P (CFI 18 October 2010). 75 Case F-3/08, Marcuccio v Commission (CST 7 October 2009) para 62-63. In a manner consistent, Cases F-51/05 and F-18/06, Duyster v Commission (CST 13 December 2007) para 58–59.

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CFI/GC

CFI 22.05.2000, T-103/99, Associazione delle cantine sociali venete v European Ombudsman and European Parliament, ECLI:EU:T:2000:135 [cit. in para 35] CFI 10.04.2002, T-209/00, Lamberts v European Ombudsman, ECLI:EU: T:2002:94 [cit. in para 63] CFI 13.01.2006, T-42/04, Komninou and Others v Commission, ECLI:EU: T:2006:12 [cit. in para 36] CFI 24.09.2008, T-412/05, M v European Ombudsman, ECLI:EU:T:2008:397 [cit. in para 34] CFI 03.11.2008, T-196/08, Srinivasan v European Ombudsman, ECLI:EU: T:2008:470 [cit. in para 35] GC 18.10.2010, T-516/09 P, Marcuccio v Commission, ECLI:EU:T:2010:437 [cit. in para 38] GC 27.09.2012, T-160/10, J v European Parliament, ECLI:EU:T:2012:503 [cit. in para 22] GC 19.11.2014, T-430/14, Mirelta Ingatlanhasznosító v Commission, ECLI:EU: T:2014:996 [cit. in para 35] GC 29.04.2015, T-217/11, Staelen v European Ombudsman, ECLI:EU:T:2015:238 [cit. in para 35] GC 30.09.2015, T-450/12, Anagnostakis v. Commissione, ECLI:EU:T:2015:739 [cit. in para 14] GC 03.12.2015, T-343/13, CN v European Parliament, ECLI:EU:T:2015:926 [cit. in para 26] GC 19.04.2016, T-44/14, Costantini v Commission, ECLI:EU:T:2016:223 [cit. in para 14] GC 10.05.2016, T-529/13, Izsák e Dabis v Commission, ECLI:EU:T:2016:282 [cit. in para 14] GC 23.05.2016, T-754/14, Efler v Commission, ECLI:EU:T:2016:306 [cit. in para 14] GC 03.02.2017, T-646/13, Minority SafePack – one million signatures for diversity in Europe and others v Commission, ECLI:EU:T:2017:59 [para 14] GC (pending), T-561/14, One of Us v Commission, (pending) [cit. in para 13]

CST

CST 13.12.2007, F-51/05 and F-18/06, Duyster v Commission, ECLI:EU: F:2007:221 [cit. in para 38] CST 07.11.2009, F-3/08, Marcuccio v Commission, ECLI:EU:F:2009:135 [cit. in para 38].

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Non-Discrimination and Citizenship of the Union

References76 Adam, R., & Tizzano, A. (2014). Manuale di Diritto dell’Unione europea. Torino: Giappichelli. Anglmayer, I. (2015). Implementation of the European citizens’ initiative: The experience of the first three years. EPRS/European Parliamentary Research Service, PE 536.343. Atanassov, N. (2015). The right to petition the European Parliament European Parliamentary Research Service (EPRS) June 2015 (pp. 1–8). Retrieved from www.europarl.europa.eu/ thinktank/fi/document.html?reference¼EPRS Auer, A. (2005). European citizens’ initiative. European Constitutional Law Review, 1, 79–86. Ballesteros, M. (2015). Towards a revision of the European Citizens’ initiative? Study requested by the Committee on Petitions, 2015, PE 519.240. Retrieved from www.europarl.europa.eu/.../ IPOL_STU%282015%29519240_E Caron, A. (2013). L’initiative citoyenne européenne (ICE): Une nouvelle approche du deficit démocratique de l’Union européenne (pp. 2–14). Bruxelles: Institut Emile Vandervelde, April 2013. Chiti, M. P. (2000). Il Mediatore europeo e la buona amministrazione comunitaria. Rivista italiana di diritto pubblico, comunitario, anno X, 303–328. Cuesta-López, V. (2012). A preliminary approach to the regulation on European Citizens’ initiative from comparative constitutional law. Bruges political research papers/Cahiers de recherche politique de Bruges, No 24. Papers prepared for the workshop – The European Citizens’ Initiative – A first assessment, Organised by the European General Studies‘programme of the College of Europe, Bruges, Belgium 25 January 2011 (pp. 6–21). De Leeuw, M. (2011). The European Ombudsman’s role as a developer of norms of good administration. European Public Law, 17, 349–368. Dehousse, R. (in collaboration with D. Verhoeven). (2013). The European citizens’ initiative. Next big thing or new false good idea? Egmont Paper 59, July 2013. Ferraro, F. (2012). Il nuovo istituto di democrazia partecipativa e le sue prime applicazioni. Studi sull’integrazione europea, VII, 523–540. Galetta, D. U., Hoffmann, E. C. H., Mir Puigpelat, O., & Ziller, J. (2015). The general principles of EU administrative procedural law. An in-depth analysis. Rivista italiana di Diritto pubblico comunitario, XVII, 1421–1437. Gautier, Y. (1995). Article 8 B. In V. Constantinesco, J. P. Jacqué, R. Kovar, & D. Simon (Eds.), Traité sur l’Union européenne (signé à Maastricht le 7 février 1992), Commentaire article par article (pp. 143–152). Paris: Economica. Karagianis, S., & Petit, Y. (2007). Le médiateur européen. Bruxelles: Bruylants. Levrat, N. (2011). L’initiative citoyenne européenne: une réponse au deficit démocratique? Cahiers de droit européen, 47, 53–101. Magnette, P. (2002). Vers une citoyenneté européenne directe ? Pratiques du droit de pétition dans l’Union européenne. Revue internationale de politique comparée, 9, 65–78. Marias, E. (1994). The right to petition the European Parliament after Maastricht. European Law Review, 2, 169–181. Morgese, G. (2011). Principio e strumenti della democrazia partecipativa nell’Unione europea. In E. Triggiani (Ed.), Le nuove frontiere della cittadinanza europea (pp. 37–59). Bari: Cacucci. Morviducci, C. (2017). I diritti dei cittadini Europei. Torino: Giappichelli. Nascimbene, B., & Rossi Dal Pozzo, F. (2012). Diritti di cittadinanza e libertà di circolazione nell’Unione europea. Padova: Cedam. Nentwich, M. (1995). Citizens’ involvement in European Union Politics – Towards a more participatory democracy?. European Community Studies Association (ECSA) Conference 1995. Retrieved from https://www.researchgate.net/.../29991084_Citizens’_Involvement_in_European_Union

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Peters, A. (2005). The European Ombudsman and the European Constitution. Common Market Law Review, (42), 697–743. Pliakos, A. (1994). Le médiateur de l’Union européenne. Cahiers de Droit Européen, (30), 563–606. Ponzano, P. (2012). L’initiative citoyenne européenne: la démocratie participative à l’épreuve. Revue du droit de l’Union Européenne, (10), 615–626. Pusillo, E. (2013). Il regime giuridico delle lingue nell’Unione europea, 13 March 2013. Retrieved from http://www.publifarum.farum.it Raimondi, L. (2004). Mediatore europeo e mezzi di ricorso giurisdizionale. Il Diritto dell’Unione europea, anno X, 547–587. Romito, A. M. (2011). Il Mediatore europeo nel Trattato di Lisbona. In E. Triggiani (Ed.), Le nuove frontiere della cittadinanza europea (pp. 61–84). Bari: Cacucci. Surrel, H. (1990). Le droit de pétition au Parlement européen. Revue du marché commun, 219–234. Szeligowska, D., & Mincheva, E. (2012). The European citizens’ initiative – Empowering European citizens within the institutional triangle: A political and legal analysis. Bruges political research papers/Cahiers de recherche politique de Bruges, No 24/February 2012. Papers prepared for the workshop—The European Citizens‘Initiative – A first assessment, Organised by the European General Studies’ programme of the College of Europe, Bruges, Belgium 25 January 2011 (pp. 52–78). Villamena, S. (2010). Mediatore europeo e «buona amministrazione». Profili ricostruttivi della tutela del Mediatore europeo attraverso la buona amministrazione comunitaria. In A. Contieri, F. Francario, M. Immordino, & A. Zito (Eds.), L’interesse pubblico tra politica e amministrazione (pp. 251–270). Napoli: Editoriale scientifica. Villani, U. (2013). Les principes démocratiques et l’initiative citoyenne européenne dans le Traitè de Lisbonne. In M. T. Alessio, V. Kronenberger, & V. Placco (Eds.), De Rome à Lisbonne: les jurisdiction de l’Union européenne à la croisée des chemins, Mélanges en l’honneur de Paolo Mengozzi (pp. 193–211). Bruxelles: Bruylant. Woolfson, T. (2011). L’initiative citoyenne: un pas vers la démocratie directe dans l’Union européenne. In C. Cheneviere & G. Duchenne (Eds.), Les modes d’expression de la citoyenneté européenne. Actes de la journée d’étude organisée à Louvain-la-Neuve le 19 mars 2010 (pp. 51–71). Louvain-la-Neuve: UCL Presses universitaires de Louvain.

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Article 25 [Monitoring and Further Development of Union Citizenship] (ex-Article 22 TEC) The Commission shall report to the European Parliament, to the Council and to the Economic and Social Committee every three years on the application of the provisions of this Part.3 This report shall take account of the development of the Union.4 On this basis, and without prejudice to the other provisions of the Treaties, the Council, acting unanimously in accordance with a special legislative procedure and after obtaining the consent of the European Parliament, may adopt provisions to strengthen or to add to the rights listed in Article 20(2).5 These provisions shall enter into force after their approval by the Member States in accordance with their respective constitutional requirements.

Contents 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. The Reporting Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3. The Implementation of the Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 References

1.

Introduction

Article 25 TFEU is a closing norm within a set of provisions (Part II of the TFEU ranging from Articles 18 to 25) that, up to a certain extent, necessarily have to remain open and incomplete as they concern a concept that is still in the making and which is of decisive importance for the future development of the Union and its resilience against new challenges. There is, therefore, a certain amount of tension between the different aspects of this norm. This requires both monitoring and introspection as well as looking ahead and adapting and further developing the provisions on Union citizenship. Article 25 TFEU tries to accommodate these two goals, first by introducing a reporting obligation by the European Commission and second by providing for a special legislative procedure that should facilitate reform endeavours.

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Non-Discrimination and Citizenship of the Union

The Reporting Obligation

According to paragraph 1, every three years the European Commission shall issue a report on the application of the provisions on Union citizenship that shall also consider the development of the Union. Up to this moment, the Commission has regularly come up to this obligation.1 These reports provide an overview on salient developments in the field of Union citizenship law, including pertinent ECJ jurisprudence, and they set out the agenda for reform and further development of the respective provisions. In substance, these are practice reports that sort out reform needs in view of problems that arise in the last three years and also considering the necessary and the desired development of Union law as a whole.

3. 5

Part Two

The Implementation of the Reports

The insights gained from these reporting processes can lead to implementation processes on various levels. The immediate influence can be of an administrative or a political nature, i.e. it might exercise influence on the way existing norms are applied, interpreted or discussed. At a next step, these reports might be considered when secondary norms are created based on the existing primary law framework that leaves broad leeway for the further norm setting process. At a last step, the findings of these reports can be used for an amendment of primary law that takes place by a special legislative procedure specified in paragraph 2 of Article 25 TFEU. Acting unanimously and after obtaining the consent of the EP, the Council may adopt provisions to strengthen or to add to the rights of Union citizens. For their entry into force, these provisions need furthermore the approval of the MS in accordance with their respective constitutional requirements. This is a special legislative procedure alongside the general revision procedure under Article 48 TEU involving the European Council with or without a Convention.2 By this procedure, it is only possible to strengthen or to add to rights of Union citizens and not to weaken or to diminish them. Thereby, it becomes clear which direction this process should take: The provision on Union citizenship contained in the Treaties are considered to be a first basis from which a process should be started, eventually leading to a far more sophisticated set of rights. In this regard, the following clarifications are needed: 1 COM(1993) 702 final; COM(1997) 230 final; COM(2001) 506 final; COM(2004) 695 final; COM(2008) 85 final; COM(2010) 603 final; COM(2013) 270 final. 2 Lang, in Tizzano (2014), Article 25 TFUE, p. 531, referring to Article 251 TFEU where another example of such a simplified procedure can be found.

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– No time limit is set for this process to start or to be completed. At the same time, however, Article 25 TFEU evidences a clear political will for such a process to take place. – The requirement that such provisions have to strengthen or to add to the rights of Union citizens does not mean that any detail and element of such a future norm has to fulfil this requirement but it is rather the overall scope of such a norm that has to meet these criteria. In fact, to achieve this result some balancing may be necessary.3 Up to this moment, this special legislative procedure has never found application while all treaty revisions since Maastricht (Amsterdam, Nice and Lisbon) have also slightly touched upon the provisions on Union citizenship.4 It has been said that this procedure is far too cumbersome to attain practical relevance.5

References Pechstein, M., Nowak, C., & Häde, U. (Eds.). (2017). Frankfurter Kommentar zu EUV, GRC und AEUV. Tübingen: Mohr Siebeck. Schwarze, J. (Ed.). (2012). EU-Kommentar. Baden-Baden: Nomos. Tizzano, A. (Ed.). (2014). Trattati dell’Unione Europea. Milan: Giuffrè. von der Groeben, H., Schwarze, J., & Hatje, A. (Eds.). (2015). Europäisches Unionsrecht. BadenBaden: Nomos.

3

Hatje, in Schwarze (2012), Article 25 AEUV para 2. Haag, in von der Groeben et al. (2015), Article 25 AEUV para 11. 5 See Heselhaus, in Pechstein et al. (2017), Article 25 AEUV para 31, referring in particular to the prominent role of national Parliaments (and even national constituencies) in this field. 4

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Part Three Union Policies and Internal Actions Title I The Internal Market

Article 26 [Establishing the Internal Market] (ex-Article 14 TEC) 1. The Union shall adopt measures36, 41 et seqq., 44 et seqq., 47 with the aim of establishing or ensuring the functioning of the internal market,50 et seqq., 59 et seqq. in accordance with the relevant provisions of the Treaties.28 2. The internal market shall comprise an area without internal frontiers9, 30 et seqq. in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties.20 et seqq., 35 et seqq. 3. The Council, on a proposal from the Commission, shall determine the guidelines and conditions necessary to ensure balanced progress in all the sectors concerned.48 et seq.

Contents 1.

2.

3.

4.

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The Internal Market: A Cornerstone of the Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Significance for EU Political Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.3. Systematic Classification and Function of Article 26 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . 9 Concept and Organisational Elements of the Internal Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.1. The Difference Between the Terms “Internal Market” and “Common Market” . . . 14 2.2. Legal Definition (Article 26.2 TFEU) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 2.2.1. The Fundamental Freedoms as the Essentials of the Internal Market . . . . . . 21 2.2.2. Further Institutions of the Internal Market: An Overview . . . . . . . . . . . . . . . . . 24 2.2.3. Internal Market and Market Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 2.3. The Concept of the Internal Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.3.1. Internal Market Alignment Through the “Magical Octagon” . . . . . . . . . . . . . . 29 2.3.2. “An Area Without National Frontiers” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 2.3.3. The Relationship Between the Internal Market and the Schengen Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 2.4. Further Features of the Internal Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.4.1. Positive and Negative Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.4.2. Protection of Market Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2.4.3. Development of Trans-European Networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 2.4.4. Relationship with Other Policy Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Competences of the Union in the Area of the Internal Market . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 3.1. Exclusive and Shared Competences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 3.2. The Institutional Power of the Union According to Paragraph 1 . . . . . . . . . . . . . . . . . . 47 3.3. Competence of the Council to Establish Guidelines and Conditions Under Paragraph 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 3.4. Measures to Establish or Ensure the Functioning of the Internal Market . . . . . . . . . . 50 State of Development of the Internal Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 4.1. State of Realisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 4.2. Possible Consequences of “Brexit” for the Internal Market . . . . . . . . . . . . . . . . . . . . . . . 67 4.2.1. The Withdrawal Agreement of October 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 4.2.2. Economic Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

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4.2.3. The Importance of the Financial Services Sector . . . . . . . . . . . . . . . . . . . . . . . . . . 77 4.3. Initial Scenarios for an Economic Relationship Between the EU and the UK (2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 4.4. The Trade and Cooperation Agreement of December 2020 . . . . . . . . . . . . . . . . . . . . . . . 87 List of Cases References

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The Internal Market: A Cornerstone of the Union

1.1. Development

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Article 26 TFEU dates back to the Single European Act1 (SEA) of 1986 and was inserted one year later, in the context of the first great revision of the initial EEC Treaty, as Article 8A.2 The common market is seen as the predecessor of the internal market. Article 2 of the EEC Treaty of 1957 determined that “it shall be the aim of the Community, by establishing a Common Market and progressively approximating the economic policies of Member States, to promote throughout the Community a harmonious development of economic activities, a continuous and balanced expansion, an increased stability, an accelerated raising of the standard of living and closer relations between its Member States.” Following this aim, the EEC Treaty in particular intended the establishment of a common market (Article 8) as well as a customs union (Article 12 et seqq.) and standardised fundamental freedoms in the area of free movement of goods, persons, services and capital (Articles 9–11, 48–73).3 Furthermore, the Treaty of 1957 anchored the establishment of a system of genuine competition4 and—if necessary—the harmonisation of the Member States’ legislation.5 Fundamental freedoms, legislative approximation and the protection of fair competition build since then the constituents of the Single European Market. The economic, integration-policy, and market oriented legal impulse for the codification of Article 8A of the EEC Treaty was given by the “Eurosclerosis”,

1

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”; cf. Single European Act, O.J. L 169/ 2 (1987). 2 In the course of further reform treaties, this provision resulted in: Article 7a TEU in the Maastricht-version and Article 14 TEU in the Amsterdam-version. Cf. Bast, in Grabitz et al. (2020), Article 26 AEUV para 1 (released in 2016); de Keersmaeker and Pauwels (2010), Article 26 TFEU para 26-2; Hummer (2002), p. 79; Korte, in Calliess and Ruffert (2016), Article 26 AEUV para 1 et seq.; Kotzur, in Geiger et al. (2015), Article 26 TFEU para 1; with reference to the SEA; cf. also Baquero Cruz (2002), p. 94; Guild (2002), p. 298 et seq. 3 On this legal situation: cf. Basedow (2008), p. 225. 4 Article 3 point (f) of the EEC Treaty put forward: “the establishment of a system ensuring that competition shall not be distorted in the Common Market”. 5 Article 3 point (h) of the EEC Treaty laid down: “the approximation of their respective municipal law to the extent necessary for the functioning of the Common Market”.

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which was caused by the crises of the national economies of the Community in the beginnings of the 1980s. This led in the end to the promotion of the “internal market concept”. The significant preliminary work was done by the European Commission, which submitted—following a mandate by the European Council from March 19856—under its president Jacques Delors on 14 June 1985 a White Paper on “Completing the Internal Market”.7 This document, which builds on proposals of the Cockfield Report,8 consists of three main parts, and deals with the elimination of barriers that are (or could be) obstacles to the completion of the internal market, and its efficient functioning. It distinguished between “the removal of the physical barriers”, such as the controls of goods and persons, “the removal of technical barriers”, and “the removal of fiscal barriers”, such as divergent rules on the calculation and collection of indirect taxes, which hinder the trade.9 Article 8A of the EEC Treaty was transformed to Article 7a TEC in the Treaty of Maastricht and further to Article 14 TEC10 in the Treaty of Amsterdam, which was not changed in the Treaty of Nice. In the Treaty of Lisbon, the “internal market regulation” of Article 14 TEC was anchored in Article 26 TFEU. Along with that came a systematic modification, namely, the transformation of the provision from the part “Principles” of the EC Treaty into the part “Union Policies and Internal Actions” of the TFEU (➔ para 10). Article 26 TFEU complies widely with Sections 1–3 of Article III-130 TCE.11 By now, Article 26 TFEU serves as the central norm about the European internal market and a connection to the formulations on the economic aim setting in the preamble to the TEU and TFEU and the statutory objective in sentence 1 of Article 3.3 (1) TEU.12 The realisation of the internal market belongs to the main tasks of the European Commission.

6

Bulletin of the EC No 3/1985, p. 13; Bulletin of the EC No 12/1982, p. 9 (10 et seq.). White Paper from the Commission to the European Council (Milano, 28–29 June 1985) COM (85) 310, June 1985; to this Korte, in Calliess and Ruffert (2016), Article 26 AEUV para 2–6; Kotzur, in Geiger et al. (2015), Article 26 TFEU para 3. 8 Lord Francis Arthur Cockfield (1916–2007) was the European Commissioner for internal market and services under the Commission President Jacques Delors. 9 COM(85) 310, p. 9 et seqq., 17 et seqq., 41 et seqq. 10 Article 14.1 TEC laid down: “The Community shall adopt measures with the aim of progressively establishing the internal market over a period expiring on 31 December 1992, in accordance with the provisions of this Article and of Articles 15, 26, 47(2), 49, 80, 93 and 95 and without prejudice to the other provisions of this Treaty.” Article 14.2 laid down: “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.” Article 14.3 TEC stated: “The Council, acting by a qualified majority on a proposal from the Commission, shall determine the guidelines and conditions necessary to ensure balanced progress in all the sectors concerned.” 11 Cf. Pingel, in Pingel (2010), Article 14 CE para 1; Schröder, in Streinz (2018), Article 26 AEUV para 4–6. 12 “The Union shall establish an internal market.” See also Sommermann, in Blanke and Mangiameli (2013), Article 3 TEU para 32 et seq. Cf. further on the development Nowak (2009), p. 130. 7

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1.2. Significance for EU Political Integration

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The economic integration of Europe takes place especially by means of the liberalisation of the internal market. The trade within the European single market was always followed and supported through multilateral trade agreements.13 The establishment of the internal market is regarded as the core element of the European framework on integration14 and it finds expression explicitly in the aims of the Union in sentence 1 of Article 3.3 (1) TEU. Therefore, the realisation and extension of the internal market moves alongside the principles and aims of democracy, rule of law and the social market economy and builds in its entirety the (political and economic) model of the European Union. This model, composed of political and economic elements, clearly differentiates the Union from other supranational organisations, especially from other economic organisations on the regional level.15 The internal market (formerly known as the “Common Market”) is the source of the idea of a European association, the aim being to institutionalise a lasting state of peacefulness in Europe, which historically first only happened between France and Germany. This objective of a peace project was already formulated by Jean Monnet.16 The internal market is regarded as the motor of integration and promotes not only the economic integration process, but also gives impulses to other areas of politics that facilitate integration (“spill over”). In a continuous development of the fundamental freedoms, the establishment of the Banking Union (➔ Supplement to EMU: Banking Union),17 but also in the projects of the Commission, such as the establishment of a “Digital Single Market”,18 the special integration dynamic of the

13

Egan (2015), p. 94. See also Hatje (2010), p. 590. Referring to the economic integration, cf. Baldwin and Wyplosz (2015), p. 302 et seq. 14 Cf. Blanke and Böttner (2020), § 13 para 8; sceptically Bast, in Grabitz et al. (2020), Article 26 AEUV para 7a (released in 2016). Müller-Graff defines the internal market as the “core element” among the achievements of European integration after World War II; cf. Müller-Graff (2015), p. 70. 15 Blanke and Böttner (2020), para 8. For a presentation of the different stages of (economic) integration, cf. Barnard (2010), p. 8; for the European economic integration in comparison with the US cf. Egan (2015), p. 78 et seq. 16 Cf. Jean Monnet’s thoughts on the future, Algiers, 5 August 1943. Available at https://www. cvce.eu/en/obj/note_de_reflexion_de_jean_monnet_alger_5_aout_1943-fr-b61a8924-57bf-48909e4b-73bf4d882549.html; cf. also Müller-Graff (2015), p. 71 with further references. 17 Communication from the Commission to the European Parliament and the Council of 12 September 2012, A Roadmap towards a Banking Union, COM(2012) 510 final.; on this, cf. also: Kämmerer (2013), p. 830; Tusch and Herz (2015), p. 814; Manger-Nestler (2014), p. 299 et seqq. 18 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 6 May 2015, A Digital Single Market Strategy for Europe, COM(2015) 192 final.

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internal market19 becomes visible. It is not driven by a final destination20 and therefore always open for new developments and aims. At the same time, Article 26 TFEU sets an important goal within the economic constitution of the Union21 and its Member States. It obliges both levels, within their competences, to ensure the cross-border market openness and to shape the Union within this free market economy as an area of mobility, which encompasses all economic factors.22 Markets are “those places where rational consumers and profit-maximising businesses get into contact”—and that only due to the scarcity of the traded good. Besides the economic relations between the Member States, it is also the (secondary) law and the decisions of the CJEU which have legally shaped the internal market, which have an integrating function.23 The meaning of Article 26 for the continuity of the integration is not least becoming clear through the legally binding character of the norm. That is to say that the establishment of the internal market it is not (only) a political leitmotif, but rather a legally binding objective of the Treaties.24 Article 26 TFEU is thus to be understood as a binding mandate to act and to legislate.25 Together with the internal market legal principle of solidarity, enshrined in Article 27 TFEU, this provision defines a traditional key concept of European integration, which first reveals this project as an economic one. The guarantee of a legally constituted economic area on a continental scale is seen— besides the area of freedom, security and justice, the Economic and Monetary Union and the common political action on the international level—as one of the main tasks which the Union must fulfil vis-à-vis its citizens. Accordingly, a distinction must be made between “an area conceptualised as internal market without internal borders” and the limited function of guarantees comparable to those of the internal market within association agreements with third countries.26 Insofar, one may speak of a transversal objective of fundamental relevance and of the centre piece of the European integration. The internal market project is consequently of eminent importance for the European integration and the overall

19

Cf. Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 4. Cf. Kotzur, in Geiger et al. (2015), Article 26 TFEU para 2. 21 On economic integration and the constitutional provisions of economic integration, cf. Streit and Mussler (1994), p. 319 et seqq., 328 et seqq. 22 This does not, however, mean that a market political or specific economic direction is given. Cf. Müller-Graff (2015), p. 89; for classification Hatje (2010), p. 605. 23 Cf. Egan (2015), p. 87 et seq., 93 et seq. who speaks of “integration through law”, thus alluding to the transatlantic project of comparative law “Integration Through Law: Europe and the American Federal Experience” (Cappelletti et al. 1986). In view of the substantial impact that the CJEU had and still has on the integration process—in particular regarding the significance of the effet utile method of Treaty interpretation—it seems more fitting to speak of “integration through law and judicial activism”; see below para 21 et seq. 24 Case C-378/97, Wijsenbeek (Opinion of Advocate General Cosmas of 16 March 1999) para 38. Cf. also de Keersmaeker and Pauwels (2010), Article 26 TFEU p. 26-5. 25 Korte, in Calliess and Ruffert (2016), Article 26 AEUV para 14. See also above para 5 et seqq. 26 Bast, in Grabitz et al. (2020), Article 26 AEUV para 5 (released in 2016). 20

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development of the Union.27 Ultimately, the economic prosperity of the Member States is a condition for the political strength of the Union.

1.3. Systematic Classification and Function of Article 26 TFEU

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Placed at the top of the internal policies of the European Union at the beginning of the third chapter of the TFEU, Article 26 TFEU functions as the normative starting point for the realisation of the European internal market. In Article 26.2 TFEU it is spelt out as “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”.28 This provision specifies the internal market objectives anchored in sentence 1 of Article 3.3 (1) TFEU.29 The internal market emerges at its core from the internal market freedoms following Articles 28–37 TFEU and Articles 45–66 TFEU. These four freedoms act above all as measures of “negative integration” within the realisation of the internal market,30 and serve, therefore, for the removal of inter-state trade restrictions (➔ para 35). These fundamental freedoms guarantee access to the market as well as equal treatment between nationals and EU-foreigners; they prohibit the addressee’s disproportional restriction of transnational commercial trade in the area of the European Union, and in States which are connected through association agreements with the Union, like the States of the European Economic Area (EEA)31 or Turkey.32 Under the banner of third-party effect of the fundamental freedoms, private market access barriers are also partly included in the scope of protection of the fundamental freedoms, for example, in the case of the horizontal third-party effect of the free movement of goods or the movement of workers.33 The inclusion of private subjects is due to the 27 To the success of the European Integration (not only through an economic perspective), cf. Nettesheim (2016), p. 89 et seq., who critically asks if the EU is able to handle the concerns and needs of the EU-citizens after the “Brexit-failure”, for example, the surveillance of external borders or the protection from terrorists. To the conflict between market integration and national state monopoles cf. such as Hancher (1999), p. 721 et seqq. 28 Hatje (2010), p. 598; Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 1 et seq. 29 Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 3; cf. Terhechte, in Grabitz et al. (2020), Article 3 EUV para 38 et seqq. (released in 2014) on the objectives of the EU. 30 Cf. Tinbergen (1954), p. 117 et seqq.; Scharpf (1999), p. 47, 52 et seqq.; Korte, in Calliess and Ruffert (2016), Article 26 AEUV para 31 et seq.; Schröder, in Streinz (2018), Article 26 AEUV para 23 (“negative Rechtsangleichung”). 31 Cf. Articles 8 et seqq., 28 et seqq., 31 et seqq., 36 et seqq., and 40 et seqq. of the Agreement on the European Economic Area, O.J. L 1/3 (1994). 32 Cf. Articles 10, 12, 13, 19 and 20 of the Agreement Creating an Association Between the Republic of Turkey and the European Economic Community of 12. September 1963 (Ankara Agreement), O.J. L 361/29 (1977). To the free movement of persons between the EU and Turkey at the time of the constitutional reform of Lisbon, cf. Tezcan-Idriz (2009), p. 1621 et seqq. 33 Cf., e.g., Case C-171/11, Fra.bo, (ECJ 12 July 2012) para 34—to free movement of goods; Case C-281/98, Angonese (ECJ 6 June 2000) para 36—to free movement of workers.

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fact that the internal market aims to protect the transnational private economic activity in its different forms (trade, work, commercial establishment, services, movement of capital)—including the entrepreneurial performance—and therefore, according to the CJEU case law, the fundamental freedoms can be applied to restrictions of the commercial traffic due to market-restricting measures of nonstate actors.34 As a result, “the integrity of the single market and the fact that this cannot be separated from the four fundamental freedoms of the Union [. . .] are essential, indivisible pillars of the Union, as is the existence of a state of law”.35 Article 26 TFEU must be interpreted in the context of the other branches of European economic law.36 Therefore, the antitrust rules which, under Article 101 TFEU et seqq., apply to enterprises are a tool to ensure the better functioning of the internal market. This is confirmed by the Protocol (No 27) on the Internal Market and Competition, according to which “the internal market includes a system ensuring that competition is not distorted”.37 According to the Treaty, the upgrade of trans-European networks in the areas of transport, telecommunications and energy infrastructure is another contribution “[t]o help achieve the objectives referred to in Articles 26 and 174 [internal market]” (sentence 1 of Article 170.1 TFEU). The term “Internal Market” is thus characterised by a fundamental freedoms dimension, a competition law dimension and a trans-European (“super grid”38) dimension.39 Therefore, it is even more surprising that the Lisbon Treaty has not included it in the principles of the TFEU (Part One), but only assigns it to Part Three on “Union Policies and Internal Actions”.40

34 In Case C-281/98, Angonese (ECJ 6 June 2000) para 36, the CJEU extends its jurisdiction towards the third-party effect of fundamental freedoms to an enterprise (bank). It justifies this especially by the general formulated wording of the free movement of workers, as well as by the non-discrimination principle, which not only applies to public authorities, but also to private individuals. In this context, see also further cases which extend the third-party effect to private organisations, e.g.: Case C-415/93, Bosman (ECJ 15 December 1995) para 69 et seq.; Case C-325/ 08, Olympique Lyonnais (ECJ 16 March 2010) para 30 et seq.; Case C-94/07, Raccanelli (ECJ 17 July 2008) para 46. On this, cf.: Schröder, in Streinz (2018), Article 26 AEUV para 24; MüllerGraff (2014), p. 3 et seqq.; with a critical view: Streinz and Leible (2000), p. 459 et seqq.; Lane and Shuibhne (2000), p. 1237 et seqq.; Michaelis (2001), p. 1841 et seq.; Riesenhuber (2003), p. 101 et seqq.; Körber (2004), p. 796 et seq. See also: Jaensch (1997); Preedy (2005); Lengauer (2011); Kellerhals (2015), para 17 et seqq. 35 See Recital 14 of the European Parliament Resolution of 16 February 2017, 2014/2248(INI). 36 In depth on this, cf. Eger and Wagener (2014), para 50 et seqq.: Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 2. 37 Protocol (No 27) on the internal market and competition, O.J. C 115/309 (2008). Cf. Schweitzer (2015), para 9. 38 Cf. the term used in the Commission Communication Europe 2020—A strategy for smart, sustainable and inclusive growth, COM(2010) 2020 final, p. 16. 39 Cf. Blanke (2012), p. 379. 40 The transfer of the norm from the first into the third part of the Treaty (TFEU) in the course of the Reform Treaty of Lisbon was criticised. Korte, in Calliess and Ruffert (2016), Article 26 AEUV para 7, writes, with further references, about a “degradation” of Article 26 TFEU.

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The approximation of laws (Articles 114 and 115 TFEU) serves as an instrument of “positive integration” (➔ para 35 et seq.), which aims for the establishment of the internal market by measures of harmonisation.41 Primarily, the approximation pursues the elimination of obstacles to the exercise of the four freedoms, but also the elimination of discernible distortion of competition—for example, through measures of harmonisation relating to health, safety, environmental protection and consumer protection or the working environment (arg. Article 114.3 and Article 114.4 TFEU) (➔ Article 114 TFEU para 53 et seqq.). On the mechanisms of negative integration, which depend on the interpretation of the CJEU and implementation by the MS, the adoption of moderately harmonising secondary legislation has the advantage of legal certainty and democratic legitimation in terms of measures taken to achieve the objectives of the internal market.42 The relationship between Article 26.1 TFEU and Article 26.2 TFEU shows that, according to the ideas of the Contracting Parties, the internal market is the result of the synchronous effects of positive integration through internal market legislation and negative integration through internal market freedoms.43 It follows from Article 26 TFEU that the European legislator has a continuous political mandate to shape and to guarantee the fully functioning of the internal market, although no competence can be derived from Article 26 TFEU to adopt concrete legal acts.44 This mandate, enshrined in Article 26 TFEU, may be justiciable in case of an evident refusal of the Union’s institutions to realise the internal market. Thus, the Member States, under Article 265 TFEU, could bring an action for failure to act before the CJEU, although, in general, the Union legislator has the discretionary power in carrying out this mandate with all consequences.45

2.

Concept and Organisational Elements of the Internal Market

2.1. The Difference Between the Terms “Internal Market” and “Common Market”

14

Since the entry into force of the Single European Act, two different market terms have been used in the Community Treaty: “Common Market” and “Internal Market”. The relationship between these two notions was clarified neither in the Treaty of 41

Scharpf (1999), p. 47, 70 et seqq.; cf. Blanke and Böttner (2020), para 117 et seq. Cf. Korte, in Calliess and Ruffert (2016), Article 26 AEUV para 33; Schröder, in Streinz (2018), Article 26 AEUV para 28. 43 Blanke and Böttner (2020), para 117; Luczak (2009), p. 417 et seq. 44 Bast, in Grabitz et al. (2020), Article 26 AEUV para 9 (released in 2020); Khan and Eisenhut, in Vedder and Heintschel von Heinegg (2018), Article 26 AEUV para 8; Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 3. 45 Khan and Eisenhut, in Vedder and Heintschel von Heinegg (2018), Article 26 AEUV para 15; Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 3; see also Ehlermann (1987), p. 372; Glaesner (1986), p. 133. 42

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Maastricht nor in the following Treaties of Nice or Amsterdam. The terms internal market46 and common market47 appear in different contexts of the TEC. This dualism was a reason for the emergence of delimiting criteria, which did not lose their relevance until the treaty reform of Lisbon (2007/2009).48 Significant in this context was the question if the internal market term in its content differs from the notion of the common market or if these two terms must be used as synonyms. In this regard, three theories were developed: the “theory of the synonymity of both terms”, the “theory of a restricted interpretation” and the “theory of a broad interpretation”. The theory of the synonymity of the terms “Common Market” and “Internal Market” was favoured by authors who stated the view that there was either a convergent or rather identical or a synonymous use of those two terms and therefore assumed that there were no (significant) differences regarding its content.49 The advocates of the theory of a restricted interpretation and of the theory of a broad interpretation disagreed with this assumption. Following the theory of a restricted interpretation, the internal market is just a sub-structure of the common market, and, therefore, the historically older term of the common market was understood in a much broader sense than the “internal market”.50 In turn, the name “Single Market”, often used namely by the EU Commission and the European Council, stands for the “internal market”. The supporters of the so-called theory of a broad interpretation have taken the view that the “common market” must be understood as a content-wise and temporary precursor to an internal market, which marks a new level of integration. Therefore, the internal market not only includes all the characteristics of the common market, but furthermore deepens these elements. Consequently, in the final analysis the wording “internal market” extends beyond the term of the common market (➔ Article 4 TFEU para 11).51 Already under the EU-Treaty of Nice, these two terms were not used as synonyms or as antonyms, but rather understood as closely interwoven although not congruent.52 Anyhow, the distinction led more into a deadlock than to an enlightening concept about the “area without internal borders”.53 Although the

46 See, for instance, Article 3.1 point (c); Article 3.1 point (g); Article 4.1; Article 14.2; sentence 1 of Article 15 TEC. 47 See, for instance, sentence 1 of Article 2; Article 15.2; Article 32.1; Article 32.2 TEC. 48 Cf. Nowak (2009), p. 132. On the legal status before the treaty reform, cf. Pingel, in Pingel (2010), Article 14 CE para 2. On the current legal status in the course of the reform, cf. Semmelmann (2010), p. 516; Kahn and Eisenhut, in Vedder and Heintschel von Heinegg (2018), Article 26 AEUV para. 5. 49 On this, cf., e.g., Barents (1993), p. 105; Mortelmans (1998), p. 107 et seq. 50 Pescatore (1986), p. 157. 51 Cf., e.g., Dauses (1990), p. 8; de Keersmaeker and Pauwels (2010), Article 26 p. 26; Hummer (2002), p. 81. 52 On the whole presentation, cf. Nowak (2009), p. 136–138. Kotzur, in Geiger et al. (2015), Article 26 TFEU para 4. 53 Cf. Nowak (2009), p. 139.

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dispute has lost some of its relevance and importance, the “internal market” adds integration dynamics to the term “common market”, which embodied the legal economic teleology of the early years of the economic integration within the European Economic Community.54 In the case “Gaston Schul Douane Expediteur”55 (1982) the European Court of Justice took a position on the terms “common market” and “internal market”. In this context it supported the thesis that there is an area of overlap between the two terms. This judicial definition corresponds to the assumption that the “internal market” and the “common market” can go beyond the other term. Therefore, it cannot be regarded as completely congruent. The CJEU noted in this context literally: “The concept of a common market as defined by the Court in a consistent line of decisions involves the elimination of all obstacles to intra-Community trade to merge the national markets into a single market bringing about 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.”56 In consequence, the common market is seen as a preliminary stage of the internal market, which has always been aspired within the concept of the single market. Therefore, the term “internal market” is not only open for enterprises, but also for every individual commercial trader.57 A review of the resolutions of the EP and the documents of the Commission reveals that, years after the entry into force of the Treaty of Lisbon, the term “Single Market” is still used (➔ para 15) apart from the term “internal market” (e.g., “fragmentation of the single market”).

2.2. Legal Definition (Article 26.2 TFEU)

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Article 26.2 TFEU now includes an “incomplete” legal definition of the term internal market that is apparently only guided by the four fundamental freedoms. This provision is based on the Treaty objective “to establish an internal market” according to sentence 1 of Article 3.3 (1) TEU and, following on from this, the rules on legislative approximation, which are the crucial and, relating to the national jurisdictions, at the same time the most interventional instruments serving the establishing of the internal market (Articles 114.1, 115.1, 169.2 point (a) TFEU). The internal market is spelt out in the Treaty as an overarching object of protection, which is a central point of reference for various fields of European integration. The 54

Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 6; cf. also Müller-Graff (2012), Part A I para 126. Integration dynamics in times of the Common Market, cf. e.g., Swann (1996). 55 Case C-461/03, Gaston Schul Douane- Expediteur (ECJ 6 December 2005). 56 Case C-461/03, Gaston Schul Douane- Expediteur (ECJ 6 December 2005) para 33–emphasis is mine. 57 In-depth to the Common Market, cf. Wortley (1974); cf. also the further contributions in the volume published by Wortley.

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internal market assumes special significance as an object of protection,58 a mandate59 or—interpreted in the light of sentence 1 of Article 3.3 (1) TEU—a final target60 in areas such as the harmonisation of national legislations (Articles 114, 115 TFEU), the prohibitions and authorisations in antitrust policy (Articles 101 et seq. TFEU), the State aid policy (Articles 107 and 108.2 TFEU), the coordination of national economic policies (Articles 119.1 and 120 TFEU in conjunction with Article 5 TEU), the social policy (Article 151.3 TFEU), the consumer protection (Article 169 TFEU), the cohesion policy (sentence 2 of Article 175.1 TFEU), the development of trans-European networks (Article 170.1 TFEU) or the energy policy (Article 194.1 TFEU). The CJEU has even deemed consistent with the Treaties that the EU legislature harmonises diverging provisions of the Member States in policy areas where, as in the field of public health policy (➔ para 42 et seq., 55 et seqq.), the Union has only a complementary responsibility. By this means, the internal market can be established even relating to health policy issues, although the Treaty does not refer to the internal market as a target in Article 168 TFEU (“Public Health”),61 but limits itself in Article 114.3 TFEU to ensuring a “high level of protection” in the area of health, as part of the approximation of laws. 2.2.1.

The Fundamental Freedoms as the Essentials of the Internal Market

The wording of Article 26.2 TFEU “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” refers directly to the fundamental freedoms. The internal market is defined as an area without internal frontiers, in which the free movement of goods, services, persons (workers and self-employed persons) and capital is ensured. Moreover, since the Maastricht Treaty first enshrined these fundamental freedoms in the Union’s primary law, the free movement of capital and freedom of payment, the latter of which is considered to be a guarantee annexed to the four freedoms, belongs to these internal market freedoms. Especially in the German terminology the freedom of payment was referred to as the “fifth market freedom”.62 Until the Treaty of 58

Cf. for instance, Articles 101.1 and 102.1 TFEU: “Incompatible with the internal market and forbidden are [. . .]”. 59 Cf. for instance, Article 119.1 TFEU: “[. . .] on the internal market and on the definition of common objectives and conducted in accordance with the principle of an open market economy with free competition.” 60 Cf. for instance, Article 170.1 TFEU which states: “to help achieve the objectives referred to in Articles 26 [. . .].” 61 Case C-380/03, Germany v Parliament and Council (ECJ 12 December 2006) para 36 et seqq., especially 39 et seq. Cf. furthermore, e.g., Riedel (2015), p. 19. 62 On this term, cf. Börner (1965), p. 19. In the past, that means before the Treaty of Maastricht entered in force, the free movement of capital had no meaning in Union law. With the adoption of the Council Directive 88/361/EEC, O.J. L 178/5, for the implementation of Article 67 EEC Treaty the free movement of capital was significantly expanded. With the Treaty of Maastricht, Articles 67–73 EEC Treaty were replaced by the provisions on the free movement of capital. These rules

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Maastricht, the freedom of movement of capital and payments did not play a significant role due to the lack of its direct applicability under the TEEC and because in the case law of the CJEU, this freedom had only relevance as far it served the functioning of the common market.63 Comparable to that of any other market freedom, nowadays an unconditional mandate for liberalisation also applies to the free movement of capital.64 With the economic and legal concept of an extended, refined and modified ordoliberalism in mind,65 the CJEU already in the Cases Van Gend & Loos (1963)66 and Costa/E.N.E.L (1964)67 judicially defined the direct effects of the Union law, which create individual rights that national courts must protect as part of the acquis communautaire. Referring to the primacy of Community law over national law (➔ Article 1 TFEU para 78 et seqq.), the Court ensures that the individual economic operators can rely on the four fundamental freedoms vis-à-vis the Member States—as the primary addressees of Community law68—and therefore, if necessary through a judicial procedure, may demand that a Member State removes all barriers and restrictions which illegally impede their exercise. In conclusion, this case law of the CJEU turns the fundamental freedoms into economic “fundamental rights” of market participants in the transnational circulation of goods, persons, services and capital. Its implementation has largely been put into the hands of these actors, namely, foreign competitors, with the result that they can assert any prejudice to these fundamental freedoms before the national courts. This jurisprudence turns out as an “interpretation of the constitutional relations between the [. . .] Community and its Member States”,69 which henceforth, guided by the methodological principle of effet utile, has led to a broad interpretation of the Community law in a steady judicial practice of the CJEU (“constitutionalisation” of the Treaties). In the 1960s, for the first time, the CJEU presented itself as a “legal-political player” with a “basic activist understanding” who intends to realise are a cornerstone of the Economic and Monetary Union, which was simultaneously institutionalised. Cf. Stefánsson (2016), p. 709 et seq., who also explains in depth the development and functioning of the free movement of capital. 63 Case C-203/80, Casati (ECJ 11 November 1981) para 9 et seq. 64 Bröhmer, in Calliess and Ruffert (2016), Article 63 AEUV para 1; see also Kotzur, in Geiger et al. (2015), Article 63 TFEU para 1 et seq. 65 See Mussler (1998), p. 58 et seqq., 91 et seqq., 125 et seqq.; Joerges in Jachtenfuchs and KohlerKoch (2003), p. 191 et seq., who refers to Müller-Armack (1947/1990), p. 401 et seqq., but also to W. Hallstein and F. Böhm; Blanke (2012), p. 370 et seq. Ruffert, in Calliess and Ruffert (2016), Article 3 EUV para 38, calls for prudence in assuming that the EC’s economic order has simply been taken from the social market economy model as developed in Germany by L. Erhard and A. Müller-Armack. However, the ordoliberal character of the internal market in its principles cannot be ignored. 66 Case 26/62, Van Gend en Loos (ECJ 5 February 1963), p. 13. 67 Case 6/64, Flamino Costa v E.N.E.L. (ECJ 15 July 1964), p. 593 et seq. 68 Cf. Streinz (2010), § 152 para 47. 69 Cf. Case 6/64, Flamino Costa v E.N.E.L. (Opinion of Advocate General Lagrange of 25 June 1964), p. 600.

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“an agenda for progress through integration” (“Integrations-Fortschritts-Agenda”).70 In the end, the CJEU is the institution which decides, within the procedure of preliminary ruling (Article 267 TFEU), about the conformity of national marketrelated prohibitions and restrictions with EU law. As a consequence, the role of the supranational legislator relating to the establishment of the common market (internal market) was diminished in favour of the judicial branch.71 “Normally”, the directly applicable fundamental freedoms are shaped and specified by the enactment of secondary law. Relevant secondary legislation than takes precedence over fundamental freedoms in the application of EU law.72 They are classified as special prohibitions on discrimination that specify the general prohibition of discrimination as anchored in Article 18 TFEU. Discrimination means that a cross-border issue under European Union law is worse off in relation to a purely domestic issue. Discrimination thus refers to nationality, which constitutes a prohibited distinctive feature. Defining indirect discrimination is problematic. Instead of on the form of the measure or the intention underpinning it, indirectly discriminatory measures rely on the effect national rules have on market operators.73 In addition to the requirement of national equal treatment, the fundamental freedoms also include so-called “general prohibitions of restriction”. This kind of prohibition covers all national measures, “which may prevent or otherwise obstruct the activities” of the person who invokes the market freedom74 or “which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade”.75 The unimpeded and, in particular, non-discriminatory and unrestricted freedom of movement in a market not fragmented by internal borders is therefore characteristic of the internal market.76 Regulatory differences between Member States are usually qualified as restrictions but are deemed proportionate.77

70

See Grimm (2016), p. 12. Grimm (2016), p. 12 et seq., 35, who speaks of a “missionary zeal”, because due to the selfempowerment of the CJEU, “the legislator [. . .] is not needed anymore for the establishment of the Common Market”. 72 Case C-120/78, Cassis de Dijon (ECJ 20 February 1979) para 8. 73 Klamert and Lewis, in Kellerbauer et al. (2019), Article 26 TFEU para 23 et seq. 74 Cf. Case 33/74, van Binsbergen (ECJ 3 December 1974) para 10. 75 Cf. Case 8/74, Dassonville (ECJ 11 July 1974) para 5; Klamert and Lewis, in Kellerbauer et al. (2019), Article 26 TFEU para 25 et seqq. 76 Regarding the interaction between the internal market and the freedoms to movement (of goods), see Case C-265/95, Commission v France (ECJ 9 December 1997) para 26 et seq.; Case C-112/00, Schmidberger (ECJ 12 June 2003) para 53 et seq.; Case C-72/03, Carbonati (ECJ 9 September 2004) para 24. See also Schütze (2015), p. 474 et seq. In reference to the principle of non-discrimination, cf. Bieber et al. (2019), § 10 para 1 et seqq. and 9 et seqq. 77 See, e.g., Case 384/93, Alpine Investments (ECJ 10 May 1995) para 51. 71

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Further Institutions of the Internal Market: An Overview

The legal definition of the internal market in Article 26.2 refers mainly, but not entirely, to the fundamental freedoms (➔ para 21 et seq.). It includes, apart from the fundamental freedoms, also the customs union, which, in accordance with Title II of the Treaty, is a detail of the free movement of goods (Article 28 TFEU);78 pursuant to the case law of the CJEU, it is the prerequisite for the movement of goods.79 In order “[. . .] to better protect [the] citizens and [the] single market”, Commission President U. von der Leyen has announced “an integrated European approach to reinforce customs risk management and support effective controls by the Member States [. . .].”80 Within the Single Market, free movement of goods is the most developed among all four fundamental freedoms and generates around 25% of EU GDP and 75% of intra-EU trade.81 Under Article 38.2 TFEU, agriculture and fisheries are also part of the internal market.82 The term “internal market” thus combines the characteristic of transnational mobility rights of the market participants with the feature of integrating markets to ensure equality of competition (Protocol No 27).83 The protection system against distortion of competition serves, under Protocol No 27 and Article 119 TFEU, an open and competitive market economy (➔ para 27 et seq.).84 In addition, the trans-European networks (➔ para 10, 40) shall contribute, under Articles 170–172 TFEU, to the establishment of the European internal market. The implementation of these networks will create connections between countries, regions, centres and peripheries to effectively provide for communication, transport and energy supply, and will benefit Union citizens through the harmonisation of national legislation in the relevant areas (e.g., data protection and geo-blocking) and also the creation of physical connections (Article 171.1 third indent TFEU; ➔ para 40).85 In their entirety, all these elements of the internal market focus on the merger of the national markets into a single market, removing all obstacles to trade. This

78 The internal customs union, because of the the removal of customs barriers between the Member States, is included in the common external custom union, which requires a uniform customs legislation; cf. Korte, in Calliess and Ruffert (2016), Article 27 AEUV para 23; Kotzur, in Geiger et al. (2015), Article 26 TFEU para 4; Pache, in Schulze et al. (2020), § 10 para 60, 63 et seqq. 79 Case C-320/03, Commission v Austria (ECJ 2 October 2003) para 64. 80 von der Leyen (2019), p. 16. 81 Cf. the proposal for a regulation of the European Parliament and the Council on the mutual recognition of goods lawfully marketed in another Member State, COM(2017) 796 final, p. 1. 82 Cf. furthermore Calliess, in Calliess and Ruffert (2016), Article 28 AEUV para. 14. 83 Bast, in Grabitz et al. (2020), Article 26 AEUV para 12 (released in 2016). 84 Müller-Graff (2014), para 100 et seqq. 85 On trans-European networks, cf. Bogs (2002), p. 49 et seq; Koenig and Scholz (2003), p. 223.

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could be seen as an endeavour towards an ideal situation,86 but in essence means that the economic area of the EU should be brought as close as possible to a domestic economic area. Therefore, the establishment of the internal market shall not be confined to the removal of free trade barriers, but rather focus on the elimination of all market-relevant barriers between the Member States.87 Overall, the internal market is characterised by “freedom on the inside and unity on the outside”.88 In the interest of positive integration, however, freedom is increasingly facilitated by providing a “cross-border infrastructure” in favour of the Union citizens, which includes modern “social services of general interest” (Daseinsvorsorge) in the sense of E. Forsthoff,89 namely, trans-European networks. 2.2.3.

Internal Market and Market Economy

“Internal market” should not be confused with “market economy”.90 The concept of the internal market is independent from the market economic system, which shapes the economic system of the Member States. Thus, by virtue of Articles 119.1 and 119.2 TFEU, economic policies coordination between the Member States is committed both to the internal market and to the “principle of an open market economy”. These two terms are used in a different normative context. While the internal market aims to achieve the transnational preference decision of the economic actors, the “market economy”, as enshrined in Article 119 TFEU, serves as orientation principle and guideline for the coordination of the national economic policies with the purpose of ensuring a decentralised and free economic system. Whereas the objective of the establishment of the internal market is the genuine and unhindered transnational access to the market, the principle of a free market

86

Case C-15/81, Gaston Schul (ECJ 5 May 1982) para 33: “to merge the national markets into a single market, bringing about conditions as close as possible to those of a genuine internal market”; also: Case C-300/89, Commission v Council (ECJ 11 June 1991) para 14. 87 Cf. the Political declaration by the Governments of the Member States on the free movement of persons (agreed during the adoption of the SEA), O.J. L 169/24 (1987); Schröder, in Streinz (2018), Article 26 AEUV para 20. 88 Regarding the Common Market Ipsen (1972), p. 551; on the crucial points of the concept of the unity of the internal market, see Klamert and Lewis, in Kellerbauer et al. (2019), Article 26 TFEU para 11. 89 Forsthoff (1938), p. 4 et seqq. 90 The term “market economy”, not defined in the Treaties, includes in particular the following points: 1. Central economic models are excluded. 2. Union and Member States pursue, depending on their competences, a decentral liberal economic order. 3. All measures, taken in the scope of application of EU law, are subject to the requirement of objective justification also by judicial review, if they restrict economic liberty (on this aspect, cf. Müller-Graff 2015, p. 69). 4. All measures regarding economic policies must be embedded in the system of market economy. 5. All measures restricting economic liberty are subject to the principle of proportionality. Cf. also Müller-Graff (2015), p. 75–76.

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economy encompasses all the features of economic policies,91 i.e., measures to fundamentally ensure the functioning of the system of economic policies coordination,92 the management of macroeconomic benchmarks and budgetary policies and, last, sovereign interventions under individual circumstances in protecting public assets and safeguarding the results in the competitive industry.93 However, the market idea is common to both concepts, since both the internal market and the market economy principle are aligned with the rules of the work-diversified economy, namely, the combination of supply and demand, private autonomy and the principle of the least possible state interference in economic activities.94 It is also evident from the wording of Article 26.1 TFEU that the establishment of the internal market cannot be understood as unlimited but must be carried out “in accordance with the relevant provisions of the Treaties”. Under the terms of the Treaties, compliance by the Union with the principle of conferral under Article 5.2 TEU (➔ Article 5 TEU para 5 et seq.) also includes the establishment of the internal market, which means that it has to respect and consider its competences and authorisations.95 However, it is not clear which internal market measures are in conformity with the provisions of the Treaties. According to the Constitutional Convention, all existing harmonised legislation that is necessary for the functioning of the internal market as well as to avoid distortions of competition, should be bundled.96 This assumption is supported by the concept of Article 194 TFEU (Union policy on energy), which does not give priority to a guiding principle of internal market conformity. In general, the guiding principles of EU law must be seen as equal, and to be settled by way of balancing.97 The concept of the “internal market”, beyond its purely economic content, has a fundamental relevance for the living conditions of EU citizens. In the TEU Preamble (ninth recital), the Union refers to the promotion of “economic and social progress for their peoples” as a goal directly related to the internal market and at the same time acknowledges (fourth recital of the TFEU Preamble), to improve constantly “the living and working conditions of their peoples”. Thus, the establishment of the internal market is

91

Cf., e.g., Kempen, in Streinz (2018), Article 119 AEUV para 15. Essential subjects of the Union’s competence to coordinate the national economic policies (Article 119–126 TFEU) are employment policies, structural policies, innovation policies, as well as salary and income policies; see Kempen, in Streinz (2018), Article 119 AEUV para 12. 93 Protective measures happen, e.g., by securing innovation through patents, through neutrality in the web, guarantees in the energy supply, or the Union legal system of agricultural supply reliability; cf. Müller-Graff (2015), p. 67. 94 Müller-Graff (2015), p. 72 et seq. 95 Cf. Schröder, in Streinz (2018), Article 26 AEUV para 10; Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 7. 96 Cf. European Convent of 27 May 2003, CONV 727/03, p. 5. This document is available at: http://www.statewatch.org/news/2003/may/cv00727.en03.pdf. 97 See in this sense Nettesheim, in Grabitz et al. (2020), Article 194 AEUV para 2 (released in 2011), with reference to Joined Cases C-154/04 and C-155/04, Alliance for Natural Health et al. (ECJ 12 July 2005). 92

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embedded in the context of the social and political objectives of the Union. It should, therefore, not be detrimental to the objectives enjoying, in the common will of the Member States, equal protection. Consequently, in achieving the single market objective, the aims of the Union, as laid down in Article 3.3 TEU, as well as the horizontal clauses contained in the TFEU (e.g., Article 9) must be considered. Union and Member States must ensure that the principles governing the services of general economic interest are structured in such a way that they can fulfil their missions (➔ Article 14 TFEU para 12 et seq., 15).98

2.3. The Concept of the Internal Market

2.3.1.

Internal Market Alignment Through the “Magical Octagon”

The so-called “magical octagon” describes the market economy design of the internal market according to sentences 2 and 3 of Article 3.3 (1) TEU. These include “a balanced economic growth” by means of “a highly competitive social market economy, aiming at full employment and social progress, price stability, balanced economic growth, sustainable development, scientific and technological advance, as well as a high level of protection and improvement of the quality of the environment.” In particular, the aims of “full employment and balanced economic growth” are highly relevant internal market factors. The commitment to price stability was inserted at the request of the European Central Bank.99 Europe’s economic development shall be sustainable. This wording refers to the concept of “sustainable development”, which also finds expression in Article 11 TFEU (➔ Article 11 TFEU para 23 et seqq., 27).100 This term shall emphasise that the welfare of future generations shall be considered in every economic activity of the Union, bringing economic, social and environmental objectives into balance. The promotion of “scientific and technological advance” under sentence 3 of Article 3.3 (1) TEU combines the economic and environmental policy and serves as a “motor for innovation” in the area of sustainable research and development (research policy).101

98

Hatje, in Becker et al. (2019), Article 26 AEUV para 12; Voet van Vormizeele, in von der Groeben et al. (2015), Article 26 AEUV para 8. 99 Cf. Jacqué, in von der Groeben et al. (2015), Article 3 AEUV para 4. 100 “Environmental protection requirements must be integrated into the definition and implementation of the Union’s policies and activities, in particular with a view to promoting sustainable development.” 101 Blanke and Böttner (2020), para 99.

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“An Area Without National Frontiers”

Decisive for the removal of the foreclosure effect of national legal systems is primarily the consistent recognition of the country of origin principle,102 also known as the home country control,103 home state rule104 or the principle of mutual recognition.105 This principle was developed by the CJEU in the Case Cassis de Dijon106 and states that goods and services can be offered without restrictions within the Union if their quality complies with the legal requirements of the EU country of origin. It also guarantees that persons entitled to free movement may pursue their professional activities within the territory of the Union if they fulfil the professional requirements of their home country, which must be a member of the EU. As an exception to this principle, only compelling requirements of public interest can be asserted.107 The obstacles arising from the application of such requirements must be removed by means of approximation of laws, which throughout the Union must protect the legal asset in an equivalent manner as it was protected before by the legislation of the Member State of destination. Only then is the Member State of destination released from its obligation to justify the imposition of national restrictive measures regarding goods or services from other Member States. This includes the removal of physical barriers, in particular border controls.108 In addition to the removal of physical barriers, the removal of technical barriers also plays an important role. Technical barriers include “nontariff barriers to trade” in the area of free movement of goods, such as safety and environmental standards, which require that products be designed, manufactured, packaged or labelled differently for different national markets. In the case of technical barriers to trade, the internal market generally requires the application of the principle of mutual recognition, thus a consistent implementation of the country of origin principle. Mutual recognition as a regulatory tool is employed in different contexts in EU internal market law besides the free movement of goods, for example, under the Medical Devices Directive (Directive 93/42/EEC), for professional titles of health (Directive 2005/36/EC) or under the Cross Border

102

In the context of the adoption of the EU Services Directive, the original Commission proposal provided for sole control of the country of origin; this was later dropped in the legislative procedure in favour of the host state rule. This is the reason why the single points of contact were established. Cf. Deuster (2004), p. 526; Hatje (2007), p. 2360; Kugelmann (2005); p. 327 et seq.; Schlichting and Spelten (2005), p. 238 et seq. A full overview, see Barnard and Scott (2002). 103 On this definition, cf., e.g., Schorkopf (2015). 104 Klamert and Lewis, in Kellerbauer et al. (2019), Article 26 TFEU para 17 et seq. 105 See Ankersmit (2013), p. 1387 et seq.; to the comprehension of principle of mutual recognition and the respect of national, regional and local identities, cf. Mattera (2005), p. 1 et seqq. 106 Case C-120/78, Cassis de Dijon (ECJ 20 February 1972) para 8. 107 On this, cf. Fremuth (2006), p. 866–872. 108 Voet van Vormizeele, in von der Groeben et al. (2015), Article 26 AEUV para 24. See below para 31 et seqq.

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Healthcare Directive 2011/24/EU.109 Exceptions are possible only under Article 114.4 TFEU (➔ Article 114 TFEU para 68 et seqq.).110 Not least, the elimination of tax barriers is a major concern. While harmonisation in the area of indirect taxation has already advanced, it must be noted that due to diverging national interests, the country of origin principle in the area of direct taxation has not yet been fully enforced. Instead of border controls, a system of notification requests and simultaneous controls has been established which complicates the free economic movement.111 2.3.3.

31

The Relationship Between the Internal Market and the Schengen Agreement

Given that border crossing formalities inhibit the cross-border movement of goods and prevent its optimal development, the removal of border controls is seen as a key instrument for the establishment of the internal market. Under the heading “Visualization of the Internal Market”, all citizens crossing borders should become aware of the identity of the Union (“Europe for Citizens”).112 The removal of borders within the internal market had already been set out by the Commission in the White Paper of 1985. The necessary measures were taken to compensate for the infringement of border regimes and to protect the legal interests concerned by other means.113 Since the entry into force of the provision on the single market, it has been questionable whether it is already pursuing the objective of removing border controls on all goods and persons. Some argued that the removal of all types of border controls was part of the single market objective. In that regard, in addition to the wording, it is above all pointed out that an area without internal borders would only make sense, if all border controls were removed.114 However, it is 109

Klamert and Lewis, in Kellerbauer et al. (2019), Article 26 TFEU para 19. The conditions are, under Article 114.4 TFEU, as follows: “If [. . .] a Member State deems it necessary to maintain national provisions on grounds of major needs referred to in Article 36, or relating to the protection of the environment or the working environment [. . .]”; cf. Voet van Vormizeele, in von der Groeben et al. (2015), Article 26 AEUV para 25; see also Blanke and Böttner (2020), para 115 et seq. 111 See Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of direct taxation, O.J. L 64/1; see also the Report from the Commission on the application of Council Directive (EU) 2011/16/EU on administrative cooperation in the field of direct taxation, COM(2017) 781 final; Korte, in Calliess and Ruffert (2016), Article 26 AEUV para. 40; Voet van Vormizeele, in von der Groeben et al. (2015), Article 26 AEUV para 2; Nettesheim, in Oppermann et al. (2018), § 31 para 20. 112 Cf. Schröder, in Streinz (2018), Article 26 AEUV para 25. 113 White Paper “Completing the Internal Market” (COM(85) 310 final), p. 640. The Commission emphasises this again in its communications of 7 December 1988 on the abolition of controls of persons at intra-Community borders (COM(88) 640 final) and of 8 May 1992 abolition of border controls (SEC/92/877 final). 114 Cf. Voet van Vormizeele, in von der Groeben et al. (2015), Article 26 AEUV para 31. 110

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questionable whether a corresponding authorisation for the removal of border controls can be derived from Article 26 TFEU. The basis for a right for an “easy border crossing” cannot be Article 26 TFEU, but is the “Schengen Agreement”, consisting of the Schengen I Agreement, which entered into force in 1985, and the corresponding Schengen Convention of 1990, the so-called Schengen II, which has become the basis for the common Schengen Information System to enable a security and border management in Europe. The Schengen area is a territory in which the temporary free movement of people is guaranteed. The Signatory States of the Schengen Agreement have abolished under normal conditions all internal border controls in favour of controls at the external border. It is only in this agreement that common rules and procedures are established for short stay visas, asylum applications and border controls. The opening up of internal borders in 1995 was a precondition for harmonisation measures in the realisation of fundamental freedoms.115 This opening is based on a national decision of the participating states, but not on a harmonisation measure. This highlights the interplay between the national will to European integration and the corresponding European integration measures.116 By Protocol (No 2) to the Treaty of Amsterdam,117 the Member States at the time, with the exception of the United Kingdom and Ireland, adopted the Schengen acquis and formally provided them with legal bases in the EC and the EU Treaties.118 These arrangements were supplemented by Protocol (No 19) to the Treaty of Lisbon on the Schengen acquis: “For the purposes of the negotiations for the admission of new members of the European Union, the Schengen acquis and further measures taken by the institutions within its scope shall be regarded as an acquis which must be accepted in full by all States candidates for admission.”119 This acquis, anchored in primary law, is shaped by the Schengen Borders Code.120

115

Blanke and Böttner (2020), para 37 et seqq. Cf. referring to the Schengen approach, Guild, in Barnard and Scott (2002), p. 301. 117 O.J. C 340/93 (1997). 118 Cf. Blanke and Bunse (2019), p. 69 et seq.; regarding the Schengen acquis, see Council Decisions of May 1999, O.J. L 176/1 et seqq.; cf. also the Schengen acquis-Agreement between the Governments of the States of the Benelux Economic Union, the Federal Republic of Germany and the French Republic on the gradual abolition of checks at their common borders, O.J. L 239/13 (2000); furthermore, an approximation to the supranational acquis was made by Council Decision 2008/615/JHA, O.J. L 210/1 (2008). This Decision, however, had an effect only on those provisions that were already covered by the competences of the EU within the former “third pillar” (Justice and Home Affairs). Cf. Voet van Vormizeele, in von der Groeben et al. (2015), Article 26 AEUV para 32. 119 Article 7 of the Protocol (No 19) on the Schengen Acquis integrated into the framework of the European Union. 120 Cf. Regulation 562/2006, O.J. L 105/1 (2006), replaced by Regulation 2016/399 of 9 March 2016 on a Union Code on the rules governing the movement of persons across borders (Schengen Borders Code), O.J. L 77/1 (2016), as amended by Regulation 2019/817, O.J. L 135/27 (2019). 116

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2.4. Further Features of the Internal Market

2.4.1.

Positive and Negative Integration

The interaction between Article 26.1 and Article 26.2 TFEU reveals that the internal market is the result of the synchronous operating of positive integration through internal market legislation and negative integration through internal market freedoms.121 In the context of the refusal of Switzerland to accede to the EEA, the ECJ referred to the internal market as an “economically integrated entity with a single market, based on common rules between its members” and “an area of total freedom of movement analogous to that provided by a national market, which includes inter alia the freedom to provide services and the freedom of establishment.”122 This statement can be seen to refer to both to positive integration and to negative integration.123 The negative integration includes measures to remove interstate trade restrictions and ease the establishment of the integrated market. Thus, they are “market-creating”. They specifically aim at the abolition of tariffs, qualitative and quantitative trade restrictions as well as the obstacles to free competition. These effects already unfold in the primary legislation of the Union in view of its direct effects. In the area of the internal market, fundamental freedoms in particular have this “market-creating” effect (➔ para 21 et seq.). By contrast, positive integration refers to the exercise of economic-political and regulative competences at the level of the larger economic unit (EU). A distinction should be made between market-creating (such as the harmonisation of product standards) and market-correcting measures (such as labour- and environment protection) of positive integration.124 Positive integration finds normative expression in the formulated objectives of Article 26 TFEU. The measures, to which the Union is thereby empowered, are pursued by the adoption of secondary legislation. In this regard, the measures of legislative approximation play a key role (➔ Article 114 TFEU para 9 et seq.). The fundamental freedoms are concretised by means of secondary legislation to establish the internal market in a targeted way. While fundamental freedoms as primary legislation are reliant on the Union legal interpretation methods, secondary

121 Pinder (1968); Bast, in Grabitz et al. (2020), Article 26 AEUV para 6 (released in 2016); Chiti and Teixeira (2013), p. 692; Menéndez (2013), p. 517. 122 Case 351/08, Grimme (ECJ of 12 November 2009) para 27. 123 Klamert and Lewis, in Kellerbauer et al. (2019), Article 26 TFEU para 10. 124 Tinbergen (1954), who has coined the terms “negative integration” and “positve integration”, applauded the international post-war economic integration movement as it could remove trade barriers (which he dubbed negative economic integration) and could even result in new institutions for co-ordinated and centralized policy-making (positive economic integration). With regard to European integration, this distinction was taken up by Streit and Mussler (1994). On the asymmetry of negative and positive integration, cf. Scharpf (1999), p. 47, 49 et seqq., 52 et seqq.; on elements of the economic integration theory, with a critical view to the conception of Tinbergen, cf. Kösters et al. (2001).

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legislation in the ideal case is characterised by a high degree of certainty and legal clarity. Due to its development within the framework of the European legislative processes, it also has a higher degree of democratic legitimation than the primary legislation as enshrined in the TEU and TFEU, which is the result of international agreements. Therefore, secondary legislative measures are more effective than the fundamental freedoms in bringing the different primary legislative aims and interests of the Union into balance with the internal market concept. In contrast, the balancing of conflicting interests in the exercise of fundamental freedoms is the responsibility of judges and takes place at the level of justifying an interference with the fundamental freedom affected.125 2.4.2. 37

38

Protection of Market Competition

Until the Treaty of Lisbon, the aim of undistorted competition was set out in Article 3.1 point (g) EC,126 which, unlike Article I-3.2 TCE (2004), in particular because of the refusal of the French President at that time, has not found mentioning in Article 3 TEU (Lisbon).127 Thus, the first comments of some scholars spoke in a sceptical attitude of an elimination or rather banishment of competition from the objectives of the reformed EU Treaty, which, on the one side, was expected to have no legal influence, but on the other side, to get a political signal effect in the sense of a progressive departure from the original model of a free and competitive organised Community to which European integration owes its success.128 Nevertheless, it cannot be said that the system of undistorted competition is being banished,129 since the Member States, in the Protocol No 27 as an integral part of European primary law, acknowledge a system of undistorted competition. This system, as spelt out, in particular, in the European antitrust (Articles 101 et seqq. TFEU) and State aid law (Articles 107 et seqq.), therefore remains a constituent element of the internal market.130 Accordingly, “prohibited as incompatible with the internal market [are] all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market” (Article 101 TFEU). Incompatible is also “any abuse by one or more undertakings of a dominant

125

Cf., e.g., Korte, in Calliess and Ruffert (2016), Article 26 AEUV para 31–33; Schröder, in Streinz (2018), Article 26 AEUV para 28 seqq. On the two forms of economic integration, cf., e.g., Koester (2000), p. 21 et seqq.; Schütze (2015), p. 471 et seqq., p. 527 et seqq. 126 With reference to Article 3 point (g) EC, cf. Albors-Llorens (2002), p. 311. 127 Cf. Nowak (2009), p. 189. 128 Cf. Behrens (2008), p. 193, who also mentions the hostile political attitude within the European organs towards competition. 129 Basedow (2008), p. 225; Behrens (2008), p. 193. 130 Nowak (2009), p. 189 with further references.

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position within the internal market or in a substantial part of it” (Article 102 TFEU).131 Another instrument to protect against distortions of competition is the prohibition of aid together with the European supervision of aid under Article 107 TFEU et seqq. Structural distortions of competition, notably in the shape of different taxation and social security charges depending on the individual Member State, are also liable to affect the functioning of the internal market. They can only be overcome by approximation of laws (Articles 114 and 115 TFEU). The ECJ has stressed to that extent that “in order to give effect to the fundamental freedoms [. . .], harmonising measures are necessary to deal with disparities between the laws of the Member States in areas where such disparities are liable to create or maintain distorted conditions of competition. [. . ..].”132 2.4.3.

39

Development of Trans-European Networks

Trans-European networks (Articles 170–172 TFEU) aim to support the development of the internal market by liberalising legislation and administrative provisions. Within the framework of a system of open and competitive markets, action by the Union shall aim at promoting the interconnection and interoperability of national networks as well as access to such networks (Article 170.2 TFEU). These provisions express the “serving role” of Articles 170–172 TFEU in the establishment of the internal market. A functioning networked infrastructure should enable the addressees referred to in Article 170.1 TFEU to exploit the potential in the basic sectors of transport, telecommunications and energy. This applies especially to the establishment of the so-called Digital Single Market and the Energy Union, two mega projects, which are priorities on the agenda of the Union.133 The Digital Single Market is a strategy of the European Commission, giving individuals 131 Cf. Kahn and Eisenhut, in Vedder and Heintschel von Heinegg (2018), Article 26 AEUV para 6; Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 11; Terhechte (2015), p. 70; Voet van Vormizeele, in von der Groeben et al. (2015), Article 26 AEUV para 28; Brauneck (2016), p. 725; cf. also Baquero Cruz (2002), p. 89; Blanke and Böttner (2020), para 116; Nowak (2011), p. 25. Relating to the case law of the CJEU cf. Case C-300/89, Commission v Council (ECJ 11 June 1991) para 8; Case C-78/70, Deutsche Grammophon v Metro (ECJ 8 June 1971) para 12; Joined Cases 56/64 and 58/64, Consten & Grundig v Commission (ECJ 13 July 1966) para 23 et seq. To the Case C-78/70 and its effects on the horizontal level, cf. Krenn (2012), p. 180. 132 Case C-380/03, Germany v Parliament and Council (ECJ 12 December 2006) para 15. 133 Cf., e.g., European Council, A New Strategic Agenda. 2019-2024, available at https://www. consilium.europa.eu/media/39914/a-new-strategic-agenda-2019-2024.pdf; Juncker and Timmermans (2015). See before Communication from the Commission, A Digital Single Market Strategy for Europe, COM(2015) 192 final; Communication from the Commission, A Framework Strategy for a resilient Energy Union with a Forward-Looking Climate Change Policy, COM(2015) 80 final; Regulation 2018/1999 of 11 December 2018 on the Governance of the Energy Union and Climate Action, O.J. L 328/1 (2018), in which “competitiveness” and “competition in the internal market” are recurring issues. On the mentioned priorities, a political continuity of the von der Leyen Commission becomes visible; see von der Leyen (2019), p. 5, 13 et seq. Regarding the Digital Single Market, cf. also Strohmeier and Spichtinger (2016), p. 529 et seqq.

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and enterprises access to online activities under conditions of fair competition, ensuring consumer and data protection, removing geo-blocking and harmonising essential rights of authors and of performers, producers and broadcasters (copyright issues). The Energy Union aims to ensure access to secure, affordable and climatefriendly energy in favour of consumers and businesses (“free flow”). A good infrastructure, above all a fast and reliable internet connection and a stable energy supply, provide the base for marketers, companies and local authorities for the exchange of goods, services, labour and capital.134 In the area of trans-European networks, the Union can legislate, insofar as national measures are not sufficient, given the Union-wide importance of the infrastructure sectors for the (cross-border) internal market. However, if an infrastructural measure in the abovementioned areas concerns, mainly or exclusively, the territory of a Member State, it shall require the agreement of that State Party.135 To avoid any restriction of competition in individual areas of infrastructure, the activities of the Union are subject to market economy principles, and in particular to the system of undistorted competition within the meaning of the Protocol (No 27) on the internal market.136 2.4.4. 41

Relationship with Other Policy Areas

All measures to achieve the establishment of the internal market must also respect other Treaty objectives. In terms of compatibility, their realisation should not be neglected or even endangered. The completion of the internal market itself is characterised by improvements in the economic and social situation of the peoples of the Union.137 For this purpose, the internal market is influenced by horizontal clauses (e.g., Articles 8, 9, 10, 11, 12, 13 TFEU), in particular by the Union’s consumer, environmental or social policies.138 These clauses oblige the Union to consider the principles laid down in the clauses while defining and implementing other Union policies.139 Therefore, one cannot (anymore) speak of an absolute precedence of the internal market objective. Rather, it is essential to reconcile the conflicting aims of Union law within the political decision-making procedures.140

134

Buschle, in von der Groeben et al. (2015), Article 170 AEUV para 11. Cf. Calliess, in Calliess and Ruffert (2016), Article 170 AEUV para. 6; Lübbing, in Pechstein et al. (2017), Article 170 AEUV para 7. 136 Lübbing, in Pechstein et al. (2017), Article 170 AEUV para 10; Voet van Vormizeele, in Becker et al. (2019), Article 170 AEUV para 14. 137 Cf. Voet van Vormizeele, in von der Groeben et al. (2015), Article 26 AEUV para 33. 138 Cf. Müller-Graff (2002), p. 7 et seq. 139 One example would be Article 11 TFEU, which determines that environmental protection requirements must be integrated into the definition and implementation of the Union policies and activities, in particular to promoting sustainable development. 140 Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 15; see also Case C-379/98, Preußen-Elektra (ECJ 13 March 2001) para 76, where environment protection is suppressed to renewably energy. 135

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Under Article 191 TFEU in conjunction with Article 114.1 and Article 114.3 TFEU, a high level of environmental protection must be ensured. Therefore, measures to establish the internal market must consider such a standard of environmental protection. This is especially the case if these measures remove obstacles to the free movement of goods resulting from different Member States’ environmental protection legislation or if they eliminate distortions of competition based on different environmental protection requirements of the Member States. The same applies, according to sentence 1 of Article 114.3 TFEU, to the areas of consumer protection, health and safety.141 In pursuit of the objective of promoting economic and social cohesion by reducing regional disparities of development, Article 175 TFEU expressly requests that the measures to establish the internal market fulfil the objectives set out in Article 174 TFEU. Article 114.3 TFEU (➔ Article 114 TFEU para 53 et seqq.) also sets out that the Union must consider the protection of the safety and health of workers in their working environment, in particular, in the case of measures designed to establish the internal market. The social dimension of the internal market is spelt out in the Commission’s White Paper on social policy.142 It provides for the promotion of a high standard of working conditions as part of a competitive European market, as well as the creation of a European labour market, which inter alia should be characterised by social security and the integration of migrants. Whereas environmental protection as well as regional and social policy must be reconciled with the objectives of the internal market, the objective mentioned in Article 179 TFEU to strengthen the scientific and technological bases for the establishment of a European Research Area fulfils a complementary function. The purpose of this is to help European companies to fully exploit the opportunities of the single market.143 There are, not least, strong links with the provisions on the Economic and Monetary Union. These Treaty objectives, which complement the single market, reveal the growing importance of accompanying policies in the development of the Union. The core idea is to optimise the management of a (not yet) completed single market and its full benefits for citizens.144

3.

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Competences of the Union in the Area of the Internal Market

3.1. Exclusive and Shared Competences

The competences of the European Union for the organization of the internal market are laid down in Article 3.1 point (b) TFEU and Article 4.2 point (a) TFEU. 141

On the mentioned areas, cf. Müller-Graff (2002), p. 7 et seq.; Voet van Vormizeele, in von der Groeben et al. (2015), Article 29 para 34. 142 COM(94) 333 (27 July 1994). 143 Voet van Vormizeele, in von der Groeben et al. (2015), Article 26 AEUV para 40. 144 Voet van Vormizeele, in von der Groeben et al. (2015), Article 26 AEUV para 41.

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Under Article 3.1 point (b) TFEU, the Union has the exclusive competence for the establishment of the competition rules necessary for the functioning of the internal market; the exclusive competence under Article 3.1 point (b) TFEU therefore expressly refers only to the definition of the competition rules.145 Under the shared competence under Article 4.2 point (a) TFEU, the responsibility for the internal market is divided between the Union and the Member States. Both the exclusive and shared competence of the Union relating to different aspects of the single market are governed by the principle of a precise definition of competences on their scope and arrangements (Article 2.6 TFEU) as well as the principle of conferral of powers (Article 5.1 TFEU; ➔ Article 5 TEU para 5 et seq.). In addition, the principles of subsidiarity and proportionality (Article 5.3 and 5.4. TEU) shall apply to the exercise of the shared competence under Article 4.1 point (a) TFEU. Exclusiveness of competence means that only the Union has the right to act and to adopt binding legal rules in this section of the “internal market” area. Action by the Member States is only allowed after explicit authorisation by the Union or relating to the implementation of the acts adopted by it (➔ Article 5 TEU para 16; ➔ Article 3 TFEU para 7 et seq.). The shared competence is given concerning all activities in the area of the internal market, as long as they do not concern the competition rules. Due to the shared competence, the Member States do not have the power to act in matters of the internal market, as soon as and as far as, i.e. either wholly or partially, the Union makes use of its institutional power (blocking effect). The situation is different if “the Union has not exercised its competence” or if “the Union has decided to cease exercising its competence” (sentences 2 and 3 of Article 2.2 TFEU).146 This division in a shared competence for the internal market (Article 4.2 point (a) TFEU) and an exclusive one for the “competition rules necessary for the functioning of the internal market and for the customs union” (Article 3.1 point (b) TFEU) seems partly misleading. Since the fundamental freedoms are immediately applicable, the internal market cannot follow a mere political logic. Moreover, a clear demarcation of the “competition rules necessary for the functioning of the internal market” (Article 3.1 point (b) TFEU), which is an exclusive competence, from further regulatory powers for the internal market (e.g., Article 114 TFEU), which are shared competences (➔ Article 114 TFEU para 11), is vague and crucially depends on the interpretation of these “competition rules” (➔ Article 3 TFEU para 38 et seqq.; ➔ Article 4 TFEU para 11 et seqq.).147 The Union’s competence to harmonise national legislation is indissolubly linked to the establishment of the internal market. Its goal is to eliminate the distortions of competition as well as the obstacles which hinder the functioning of the internal

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Blanke (2004), p. 225; it is controversial which particular regulations of the competition law actually belong to the exclusive competences of the Union. On this, cf. Calliess, in Calliess and Ruffert (2016), Article 3 AEUV para 7. 146 Case 22/70, AETR (ECJ 31 March 1971) para 15/19. 147 Blanke (2004), p. 237; Blanke and Böttner (2020), para 46.

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market; its tool is the approximation of laws (especially Articles 114 and 115 TFEU).148 For as long as the Union refrains from adopting common rules, the Member States have jurisdiction within the meaning of Article 2.2 TFEU.149

3.2. The Institutional Power of the Union According to Paragraph 1

Under Article 26.1 TFEU, the Union shall take all necessary measures to implement the internal market objective in accordance with the relevant provisions. The term “measures” refers to the specific legislative powers with an internal market dimension enshrined in the Treaties that must be carried out by the competent Union organs. However, no statement is made about the respective legislative procedure. Therefore, Article 26.1 TFEU must only be understood as a legal basis for action. The decisive factors in this regard are the respective procedural provisions that apply to the special legislative authorisations. Article 26.1 TFEU imposes on the responsible Union organs an obligation to fulfil or guarantee, which they shall, if necessary, comply with by virtue of the legal basis laid down in the third part of the TFEU.150

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3.3. Competence of the Council to Establish Guidelines and Conditions Under Paragraph 3

Following Article 26.3 TFEU, the Council determines, on a proposal from the Commission, the guidelines and conditions necessary to ensure balanced progress in all sectors concerned. Accordingly, the implementation of the internal market must be geared to a homogeneous economic integration in all areas. Advances in market integration should not be detrimental to other policies, such as economic, social or territorial cohesion, or to non-economic objectives such as social, consumer or environmental protection policies (➔ para 20, 41 et seq.). The aim is, therefore, an economic integration “in all sectors concerned”.151 The purpose of Article 26.3 TFEU is also to provide a reliable basis for the planning of the involved actors. For this reason, the guidelines and conditions adopted by the Council are frameworks to be respected in the event of a subsequent 148 Korte, in Calliess and Ruffert (2016), Article 114 AEUV para 8; Classen, in Oppermann et al. (2018), § 32 para 14; Nettesheim, in Grabitz et al. (2020), Article 4 AEUV para 10, 12 (released in 2014); Schröder, in Streinz (2018), Article 114 AEUV para 19 et seqq., 26 et seqq.; Blanke and Böttner (2020), para 201. 149 Eilmansberger (2009), p. 199. 150 Cf. Bast, in Grabitz et al. (2020), Article 26 AEUV para 8 (released in 2016); Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 18; Voet van Vormizeele, in von der Groeben et al. (2015), Article 26 AEUV para 9. 151 Cf. Ehlermann (1987), p. 373; Voet van Vormizeele, in von der Groeben et al. (2015), Article 26 AEUV para 45; Hatje, in Becker et al. (2019), Article 26 AEUV para 12.

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adoption of measures for the completion of the internal market. This binding effect is a problem because Article 26.3 TFEU does not provide for the involvement of the European Parliament.152 However, this framework defines the subsequent work of the EU legislature and takes a relative precedence over subsequent legal acts adopted for its implementation. Since, however, the Council has not adopted such guidelines so far, paragraph 3 does not yet have any practical relevance. The reason for the lack of action on the part of the Council lies in the nature of the internal market as an executive project of the Commission, which until now has been able to act without the Council. Further, the “EU Single Market Strategy”, presented by the Commission by way of “Communications”, has a certain role.153 Legal bases that provide such an inter-institutional scope for action—in this special case concerning the relationship between Council and Commission—are known as the self-organisation of the legislative bodies.154

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In addition to the effective and therefore unimpeded exercise of market freedoms, the approximation of laws under Article 114 TFEU serves the completion of the internal market. While fundamental freedoms are considered as an element of negative integration, the approximation of legislation serves to promote positive integration, as it harmonises market rules (➔ para 35 et seq.). The approximation of laws will create approximately equal or at least similar conditions within the market.155 Underpinning the idea of approximation of laws reflects the belief that, in the long term, an internal market can only be created if legislative obstacles or the resulting distortions of competition are also eliminated.156 The TFEU contains a number of provisions authorising the approximation of laws and relating to the internal market or related policies. In addition to the main provision, Article 114 TFEU, other provisions such as Articles 46, 50.1, 52.2, 53.1, 62 and 64.2 TFEU (➔ Article 114 TFEU para 63 et seqq.) also apply to the internal market. The concept of “approximation of laws” describes the substantial alignment of national provisions towards a standard of EU law.157 It conveys the idea that, in the long term, harmonisation of legislation will create a functioning internal market. 152

Schröder, in Streinz (2018) Article 26 AEUV para 38. Bast, in Grabitz et al. (2020), Article 26 AEUV para 8 (released in 2016); Khan and Eisenhut, in Vedder and Heintschel von Heinegg (2018), Article 26 para 9; Schröder, in Streinz (2018), Article 26 AEUV para 38; Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 19. Cf., e.g., COM (2015) 550 final on “Upgrading the Single Market: more opportunities for people and business”. 154 Case C-378/00, Commission v Parliament and Council (ECJ 21 January 2003) para 39. 155 Cf., e.g.: Blanke and Böttner (2020), para 117. 156 Cf. Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 12; see also Everling (2001), p. 15 et seq. 157 Cf. Blanke and Böttner (2020), para 118; Classen, in von der Groeben et al. (2015), Article 114 AEUV para 10. 153

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Legislative obstacles like economic barriers, in particular distortions of competition, are likely to threaten the internal market.158 The creation of an internal market thus requires a regulatory level playing field in order not to endanger the effective exercise of market freedoms through national barriers between the Member States. As the harmonisation of laws is suitable to create at least approximately the same conditions, it is even the principal instrument for establishing and ensuring the internal market. In addition to the fundamental freedoms, it is considered the “guarantor” of the full functioning of the internal market.159 Article 114 TFEU is the central provision relating to the approximation of laws. Together with Article 115 TFEU, this provision constitutes a general clause, which faces up to the enabling rules relating to specific policy areas. The application of Article 114 TFEU is conditional on the “functional criterion” that the Union measures must be useful to the internal market, meaning to support the purpose of ensuring the functioning of the internal market (Article 26.1 second alternative TFEU). The delimitation of competences between the Union and the Member States, in the light of this Treaty objective, is not based, as it is common to federal states, on a subject matter, but on a final criterion.160 Therefore, the European Union as an association which pursues the goal of integration (Integrationsverband), through Article 114 TFEU, has related to the establishment of the internal market a “cross-sectional competence”. That empowers it to adopt secondary legal acts referred to in Article 288 TFEU, i.e. especially directives, regulations and decisions. In this way, the Union legislator can extend its political leeway on development of the internal market, even to the detriment of Member State competences.161 Formally, however, the approximation of laws does not mean that the corresponding national legislation is superseded. Due to the primacy of Union law, it continues to exist as such (➔ Article 1 TFEU para 78 et seqq.; ➔ Protocol No 17 para 1, 10 et seqq.). Hence, in terms of content, acts based on Article 114 TFEU may only provide for provisions which could be adopted by the Member States by virtue of their overall competence.162 In its Decision of 5 October 2000 on the Tobacco Advertising Directive 98/43/ EC of 30 July 1998,163 the ECJ specified the conditions for harmonisation of the internal market set out in Article 114 TFEU, according to which the measures to be adopted “should have as their object the establishment and functioning of the internal market”. They must therefore be deemed appropriate to prevent disturbance in the functioning of the internal market: Such “[a] measure [. . .] must genuinely have as its object the improvement of the conditions for the

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Terhechte, in Pechstein et al. (2017), Article 26 AEUV para 12. Cf. Blanke and Böttner (2020), para 119. 160 Cf. Grimm (2016), p. 84 et seq. On the approximation of laws, cf. also, e.g., Dauses and Brigola (2016), p. 233–254. 161 Cf. Blanke and Böttner (2020), para 121. 162 Classen, in von der Groeben et al. (2015), Article 114 AEUV para 11. 163 O.J. L 213/9 (1998). 159

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establishment and functioning of the internal market.”164 That is thus the case, if they contribute, as the ECJ has set out in the Case of Tobacco Advertising Directive 98/43 EC on “prohibiting the advertising of tobacco products in periodicals, magazines and newspapers”, to the removal of obstacles to the free movement of goods or services or to distortions of competition. In contrast, for numerous other types of advertising of tobacco products, such as “on posters, parasols, ashtrays and other articles used in hotels, restaurants and cafés, and the prohibition of advertising spots in cinemas”, the Court found that these “prohibitions [. . .] in no way help to facilitate trade in the products concerned”.165 Although “appreciable distortion of competition could be a basis for recourse” to Article 114 TFEU to prohibit “certain forms of sponsorship”, the Court denied that there were distortions “such as to justify the use of that legal basis for an outright prohibition of advertising of the kind imposed by the Directive”.166 Consequently, Article 114 TFEU is not a general competence of the Union for the adoption of rules for regulating the internal market. Such an interpretation would not only be contrary to the wording of that provision but would also be incompatible with the principle of conferral of competences. However, the ECJ recognises in this first decision on tobacco advertising, with reference to its previous case law,167 that the instrument of approximation can also be used “if the aim is to prevent the emergence of future obstacles to trade resulting from multifarious development of national laws. However, the emergence of such obstacles must be likely and the measure in question must be designed to prevent them.”168 Other conditions for measures under Article 114 TFEU include, inter alia, the existence not only of an “abstract risk of obstacles to the exercise of fundamental freedoms or of distortions of competition liable to result therefrom”,169 but of “differences in legislation [which] give rise to appreciable obstacles to trade or appreciable distortion of competition”.170 The “appreciable distortion of competition” results from a comparison. Thus, distortions of competition can occur, in particular due to different production costs. The Directive 2003/33/EC on advertising and sponsorship of tobacco products171 then replaced Directive 98/43/EC repealed by ECJ. It provides for a complete advertising ban.172 The Federal Republic of Germany requested, among 164

Case C-376/98, Germany v Parliament and Council (ECJ 5 October 2000) para 84: “Those provisions, read together, make it clear that the measures referred to in Article 100a(1) of the Treaty [now: Article 114.1 TFEU] are intended to improve the conditions for the establishment and functioning of the internal market.” 165 Case C-376/98, Germany v Parliament and Council (ECJ 5 October 2000) para 99. 166 Case C-376/98, Germany v Parliament and Council (ECJ 5 October 2000) para 111. 167 Case C-350/92, Spain v Council (ECJ 13 July 1995) para 35. 168 Case C-376/98, Germany v Parliament and Council (ECJ 5 October 2000) para 86. 169 Case C-376/98, Germany v Parliament and Council (ECJ 5 October 2000) para 84. 170 Case C-376/98, Germany v Parliament and Council (ECJ 5 October 2000) para 50. 171 Of 20 June 2003, O.J. L 152/16. 172 See Article 3 of the Directive.

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others the annulment of the provisions of Articles 3 (about advertising in the press and other printed publications) and 4 of the Directive (about radio advertising) on the grounds that “Article 95 EC [now Article 114 TFEU] cannot constitute an appropriate legal basis for the prohibitions on the advertising of tobacco products set out in Articles 3 and 4 of the Directive since the true purpose of those prohibitions is not to improve the conditions for the establishment and functioning of the internal market, but solely to protect public health”.173 In the ruling of 26 May 2003,174 the Court held again that “a mere finding of disparities between national rules is not sufficient to justify having recourse to Article 95 EC [now: Article 114 TFEU], it is otherwise where there are differences between the laws, regulations or administrative provisions of the Member States which are such as to obstruct the fundamental freedoms and thus have a direct effect on the functioning of the internal market”.175 Provided that the conditions for recourse to Article 114 TFEU as a legal basis are fulfilled, “the Community legislature cannot be prevented from relying on that legal basis on the ground that public health protection is a decisive factor in the choices to be made.”176 In the Court’s view, the first subparagraph of Article 168.1 TFEU provides “that a high level of human health protection is to be ensured in the definition and implementation of all Community policies and activities, and that [Article 114.3 TFEU] explicitly requires that, in achieving harmonisation, a high level of protection of human health should be guaranteed”.177 Accordingly, in applying Article 114 TFEU as the legal base, there is no need to determine what is (or is not) concerned by the legal act so that a legal instrument based on it does not have to focus on the objective of eliminating disturbances in the internal market. The Union legislator may, if the conditions for the use of Article 114 TFEU are fulfilled as a legal basis, apply that provision for approximation of laws, even if health protection is of crucial importance in this respect. This case law of the CJEU broadens the scope of Article 114 TFEU and thus in favour of the Union legislator opens up political leeway, which is hardly justiciable by the courts (➔ Article 114 TFEU para 64).178 Such a broad discretion of the Union legislator is confirmed by the CJEU also in the Judgment of 4 May 2016 on Directive 2014/40/EU concerning the manufacture, presentation and sale of tobacco and related products (“advertising ban for tobacco

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Case C-380/03, Germany v Parliament and Council (ECJ 12 December 2006) para 24. O.J. L 2003 152/16. 175 Case C-380/03, Germany v Parliament and Council (ECJ 12 December 2006) para 37. 176 Case C-380/03, Germany v Parliament and Council (ECJ 12 December 2006) para 39. 177 Case C-380/03, Germany v Parliament and Council (ECJ 12 December 2006) para 39 et seq., 91 et seqq., referring inter alia to the Case C-491/01, British American Tobacco (Investments) and Imperial Tobacco (ECJ 10 December 2002) para 62; and Case C-434/02, Arnold André (ECJ 14 December 2004) para 31 et seq. 178 Cf. Blanke and Böttner (2020), para 125 with further references and on other competences; cf. also Schütze (2015), p. 538 et seq. 174

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products containing flavourings”) as well as in other rulings on tobacco products.179 In line of its case law, the Court sets forth that the organs of the Union shall act according to Article 114 TFEU, in case of trade obstacles between the Member States, arising from their different levels of protection or rather standards of protection for tobacco products and hinder the free movement of these products within the Union: “[T]he elimination of the divergences between the national rules as regards the composition of tobacco products or the prevention of the development of divergences between them, including the prohibition, at EU level, of certain additives, seeks to facilitate the smooth functioning of the internal market in the products concerned.”180 The Court stresses that “by using the words ‘measures for the approximation’ in Article 114 TFEU, the authors of the Treaty intended to confer on the EU legislature a discretion, depending on the general context and the specific circumstances of the matter to be harmonised, as regards the method of approximation most appropriate for achieving the desired result, in particular in fields with complex technical features”.181 The Court concludes that the appropriateness of the prohibition of placing on the market of tobacco products having menthol as a characterising flavour in achieving the object of human health protection pursued by it “cannot be called into question”.182 The Union legislator’s discretion is limited by the necessary compliance of the prohibition with Article 114.3 TFEU (“a high level of protection of human health should be guaranteed”) and the required observance of the principles of primary law, in particular the principles of subsidiarity and proportionality.183 However, the CJEU has not yet

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Case C-358/14, Poland v Parliament and Council (ECJ 4 May 2016) para 68, 79, 91; C-477/14, Pillbox 38 (UK) Limited v Secretary of State for Health (ECJ 4 May 2016) para 14 et seqq.; Case C-547/14, Philip Morris Brands SARL (ECJ 4 May 2016) para 29 et seqq. Matter in dispute in Case C-358/14 was the Directive 2014/40/EU of 3 April 2014 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, O.J. L 127/1 (2014). Its objective is “to facilitate the smooth functioning of the internal market for tobacco and related products, taking as a base a high level of protection of human health, especially for young people, and to meet the obligations of the Union under the WHO Framework Convention for Tobacco” (Article 1). It prohibits the placing on the market of tobacco products with a characterising flavour. Furthermore, it contains, inter alia, provisions regarding the labelling and packaging of tobacco products, in particular on the use of combined health warnings (Article 8 et seqq.). Supported by Romania, the Republic of Poland submitted that Article 114 TFEU was not an adequate legal basis for the adoption of the contested provisions of Directive 2014/40, as far as those provisions prohibit the placing on the market of tobacco products containing menthol as a characterising flavour or are closely linked to that prohibition. 180 Case C-358/14, Poland v Parliament and Council (ECJ 4 May 2016) para 64, 68. 181 Case C-358/14, Poland v Parliament and Council (ECJ 4 May 2016) para 37. 182 Case C-358/14, Poland v Parliament and Council (ECJ 4 May 2016) para 84. 183 Case C-358/14, Poland v Parliament and Council (ECJ 4 May 2016) para 78 et seqq., 105 et seqq. Poland, on the other hand, argued that also other means of protecting health would have been possible, such as raising the age limit for the consumption of tobacco products or placing a health warning on the label of the tobacco product (para 71). The Berlin Administrative Court also submitted questions to the CJEU in a preliminary ruling proceeding regarding the conformity of

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ruled out a legal act related to the establishment of the internal market as unlawful for a violation of these principles. It has been noted critically that there is a tendency of the Court to compensate the limited (only complimentary) legislative competence of the Union in the area of health by an often “merely expected” need for harmonisation. According to these critics, the harmonisation of one segment of the conditions of trade in tobacco products, lays the foundations for a further demand for harmonisation.184 In light of the fact that “health” is also an economic factor, the measures of the Union legislator and the corresponding judgments of the CJEU on tobacco products give rise to a more comprehensive discussion about the question to what extent the Union, by the instrument of the internal market, already has an impact on health care and social policies, which goes beyond its powers bestowed on it by the Treaty.185

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State of Development of the Internal Market

4.1. State of Realisation

The internal market cannot be merely described as an economic project of the Member States, since it interacts with other aspects of the protective role and mandate of the European Union. In that regard, questions of the democratic legitimation of the internal market policy of the Union’s organs, their feedback to the Member States or questions on the limits of competences are also important.186 Since the “internal market project” is no longer just a Member State project, the involvement of Union citizens plays an increasingly significant role. The Treaty of Lisbon also led to a strengthening of the subjective legal positions of the actors in the context of the internal market. This is evidenced in particular by various

Directive 2014/40/EU, in particular regarding a possible breach of the principle of legal certainty, due to the uncertainty on which of these tobacco products exactly are prohibited since 20 May 2016 and which will be prohibited from 20 May 2020 and regarding a possible breach of the principle of equal treatment, since the Directive distinguishes between the prohibitions on sales volumes to be imposed by the Member States, without there being any justifiable grounds for doing so; cf. Berlin Administrative Court of 21 April 2017 (Case 14 K 172.16) para 127 et seq. http://www.gerichtsentscheidungen.berlin-brandenburg.de/jportal/?quelle¼jlink&docid¼ JURE170030842&psml¼sammlung.psml&max¼true&bs¼10. In its judgment, the CJEU “disclosed no factor of such a kind as to affect the validity of Article 7(1), (7) and 14 of Directive 2014/ 40”, Case C-220/17, Planta Tabak v Land Berlin (ECJ 30 January 2019) para 29 et seqq. 184 von Jagow (2016), p. 251. 185 On this topic, cf., e.g., van de Gronden (2007); Schmucker (2003), p. 107 et seqq; Verspohl (2011), p. 3 et seqq. 186 Cf. Hatje, in Schwarze (2004), p. 189; on this topic see also Dann (2013), p. 93 et seq.

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guarantees of the Charter of Fundamental Rights, such as the Articles 15 EUCFR187 and 16 EUCFR,188 i.e. the right to pursue a profession and the right of entrepreneurial freedom, as well as the provisions of Title IV on solidarity.189 The interconnection between the internal market with the area of freedom, security and justice, in particular concerning the abolition of border controls (Article 67.2 TFEU),190 is also becoming increasingly important for the development of the internal market. Article 77 TFEU gives the European Union a competence, which is enshrined in the Treaties without reference to the internal market and, therefore, no longer requires international treaties such as the Schengen Agreement.191 But in the context of the Treaties of Maastricht and Amsterdam, the legal requirements for the free movement of persons,192 originally conceived solely as economic freedom, have emancipated from the common market and the internal market goal.193

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Article 15.1 EUCFR: Everyone has the right to engage in work and to pursue a freely chosen or accepted occupation; Article 15.2: Every citizen of the Union has the freedom to seek employment, to work, to exercise the right of Establishment and to provide services in any Member State; Article 15.3: Nationals of third countries who are authorised to work in the territories of the Member States are entitled to working conditions equivalent to those of citizens of the Union. 188 Article 16 EUCFR: The freedom to conduct a business in accordance with Community law and national laws and practices is recognised. 189 These include the workers’ right to information and consultation within the undertaking (cf., e.g., Hüpers and Reese, in Meyer and Hölscheidt [2019], Article 27 para 22 et seqq., 25 et seqq.), the right of collective bargaining and action (cf., e.g., Hüpers and Reese, in Meyer and Hölscheidt [2019], Article 28 para 35 et seqq., 38 et seqq., 40 et seqq., 49 et seqq.), right of access to placement services, protection in the event of unjustified dismissal, prohibition of child labour and protection of young people at work, protection of family and professional life, social security and social assistance, health care, access to services of general economic interest, environmental and consumer protection. For more details on the economic and social rights enshrined in the Charter, refer to the brief annotations in English by Martin (Articles 23 and 26 EUCFR) and Lock (Articles 24, 25–36 EUCFR), in Kellerbauer et al. (2019). 190 Cf. Ziegler (2004), p. 13. 191 Cf. Tohidipur, in Terhechte (2011), p. 1143 et seq. A derogation has been provided for the UK; under Article 1 of Protocol (No 20) on the application of certain aspects of Article 26 TFEU, the UK is “entitled [. . .] to exercise at its frontiers with other Member States such controls on persons seeking to enter the United Kingdom as it may consider necessary” for several purposes laid down in this Article. “The other Member States shall be entitled to exercise at their frontiers or at any point of entry into their territory such controls on persons seeking to enter their territory from the United Kingdom or any territories whose external relations are under its responsibility for the same purposes stated in Article 1 of this Protocol, or from Ireland as long as the provisions of Article 1 of this Protocol apply to Ireland.” (Article 3 of Protocol No 20). 192 Cf., regarding the EU citizenship, the eighth recital of the Preamble, Article 2 third indent, and Article 8–8e TEU-Maastricht; Articles 8, 8a and 8 d TEU-Maastricht have been amended on the occasion of the Treaty of Amsterdam. 193 Insofar, the tenth recital of the TEU-Amsterdam clearly states: “RESOLVED to facilitate the free movement of persons, while ensuring the safety and security of their peoples, by establishing an area of freedom, security and justice, in accordance with the provisions of this Treaty [. . .].” Blanke

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Establishing an internal market is not a state to be reached at a certain point, but rather a process and, with a view to the underlying strategy (internal market strategy194), a permanent task of the Union;195 hence, there is no final or firm aim. This is true not only because there are periodically new obstacles to market access,196 but also because evaluations and risk forecast, made by the European legislator according to consistent observation, may require a balance of interests.197 Since 2012, the Commission provides the other European institutions in addition to the Annual Growth Survey with a report regarding the current implementation of the internal market. The current developments and the state of integration in the area of the internal market are documented in the Internal Market Scoreboard. It specifically reports on the implementation of the Internal Market Directives, analyses the Member States conduct, and thereby puts public pressure on defaulting Member States. The average transposition deficit indicates the percentage of internal market directives which have not been transposed into national law within the prescribed period. Although the internal market shows an enormous success, with an increasing degree of integration, it gets politically more difficult to achieve progress. The “Single Market Scoreboard 2018”, which marks the 25th anniversary of the EU internal market, shows that whilst most barriers to the free movement of persons, services, goods and capital are being eliminated, in some fields the situation is stalling or even worsening. All these reports describe, inter alia, deficits in the fields of openness to cross-border trade in goods and services, fairness of public procurement systems, and the number of infringement proceedings.198 Until 30 April 2010, the year of “A New Strategy for the Single Market”, out of the original 300 proposals listed in the White Paper of 1985 with the aim to establish the internal market, 1486 internal market directives and 999 regulations199 have been enacted according to the Commission.200 This should be understood to mean all acts having an impact on the functioning of the internal market, in particular in

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COM(2015) 550 final. Case C-9/99, Echirolles Distribution (ECJ 3 October 2000) para 23. 196 Bast, in Grabitz et al. (2020), Article 26 AEUV para 6 (released in 2016); Schröder, in Streinz (2018), Article 26 AEUV para 9, who considers Article 26 TFEU as a “future-oriented provision”. 197 Case C-491/01, British American Tobacco (Investments) und Imperial Tobacco (ECJ 10 December 2002) para 77; Case C-58/08, Vodafone (ECJ 8 June 2010) para 34. 198 Cf. also European Commission Member States’ compliance with EU law: the situation improves, but still work to be done, IP/18/4295. 199 Report by Mario Monti “New Strategy for the Single Market. At the service of Europe’s economy and society” to the President of the European Commission of 9 May 2010; available at https://ec.europa.eu/docsroom/documents/15501/attachments/1/translations/en/renditions/pdf. 200 Internal Market Scoreboard, p. 7; available at http://ec.europa.eu/internal_market/score/docs/ score21_en.pdf. 195

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the areas of fundamental freedoms and policies that support the internal market, such as tax, labour and social policies, but also policies in the field of education and culture, health and consumer protection, environment, energy and transport. Shortly before the turn of the millennium, the Commission outlined its “Strategy for Europe’s Internal Market”,201 which set out four objectives: to improve the quality of life for European citizens, to enhance the efficiency of Community product and capital markets, to improve the business environment, and to exploit the achievements of the internal market in a changing world. This was followed a year later by the Commission with a separate paper regarding the service sector. This report on “The State of the Internal Market for Services” drew up a list of numerous barriers which are preventing or slowing down the development of services between Member States, in particular those provided by small and medium-sized enterprises (SMEs), which are the predominant economic operators in the field of services.202 The objective of the Services Directive, which was adopted in 2006 and implemented by all EU countries in 2009,203 is to realise the full potential of service markets in Europe by removing legal and administrative barriers to trade. The simplification measures introduced by the Directive have increased transparency and made it easier for businesses and consumers to provide or use services in the internal market. Other concrete measures that partially followed the “Single Market Strategy” of 1999, concerned the Consumer Protection Directive for improving the quality of life for the citizens, in particular in the area of product- and food security.204 In April 2011, the Commission published a communication entitled “Single Market Act – Twelve levers to boost growth and strengthen confidence”,205 which aimed at the improvement of the internal market conditions for all stakeholders, especially enterprises, mobile workers and consumers. The initiatives set out in the communication address areas as diverse as access to finance for SMEs, mobility of workers, simplification of the regulatory environment, more effective, efficient, and inclusive standardisation procedures, a legislation on alternative dispute resolution for consumers, and a legislation modernising the system for recognising professional qualification. In light of the experiences gained following the economic and financial crisis, which has tested the economies of the Member States and created immense social costs, the Commission recognised the need to achieve a “deeper and fairer internal market”.206 The internal market needs to adapt to a changing environment to better

201

Schröder, in Streinz (2018), Article 26 AEUV para 41. COM(2000) 888. 203 Directive 2006/123 of 12 December 2006, O.J. L 376/36. 204 Cf. Weatherhill (2011), p. 875 et seq. 205 COM(2011) 206 final. 206 Juncker (2014). 202

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face economic and social challenges. The promotion of European industry follows on from the “Europe 2020 Strategy”, where, in March 2010, the Head of States or Governments outlined a concept for “smart, sustainable and inclusive growth” to boost the competitiveness in the EU by strengthening the economic growth and, above all, to influence the employment rate positively. A key element of the strategy has been the adoption of headline targets, including an employment target (that 75% of the population aged 20–64 years are in employment by 2020), and a poverty and social exclusion target (that at least 20 million fewer people are at risk of poverty or social exclusion by 2020). Since March 2020, the COVID-19 pandemic crisis, which has to be managed within a larger environment and climate crisis context, has caused an exogenous shock. It has severely impacted the free movement of persons, goods, and services in the EU, on which the market is based. The Union has acted on many fronts to address the challenges posed by this acute situation. In an ambitious and comprehensive package combining the classical multiannual financial framework (MFF) with an extraordinary Recovery effort under Next Generation EU (NGEU), the European Council has agreed in July 2020 to authorize the European Commission to borrow funds on behalf of the Union on the capital markets up to the amount of EUR 750 billion in 2018 prices. The NGEU includes a Recovery and Resilience Facility (RRF) of EUR 672.5 billion, of which loans are EUR 360 billion and grants EUR 312.5 billion.207 These European Council decisions were subject to the consent of the European Parliament. In spite of all the deficiencies in the areas of healthcare, social, education and economic policies, which became apparent in 2020 and 2021 within the sphere of the Member States, in principle, the crisis has also shown that the EU has got its priorities—smart, social, and sustainable development as well as inclusive growth—right. It brought home the importance of digital technologies and may prompt a general re-evaluation of the role of the state (welfare systems and regulation). The risk of fractured global governance pushes the EU to devise a response to the crisis that relies more on its inner strengths. In contrast to the mainly intergovernmental approach which had a resurgence during the financial crisis (➔ Article 1 TFEU para 46), the Community method is to be expected to re-gain strength.

207 European Council, Conclusions—17, 18, 19, 20, and 21 July 2020, point I, A1 et seqq.; available at https://www.consilium.europa.eu/media/45109/210720-euco-final-conclusions-en. pdf.

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The Withdrawal Agreement of October 2019

In June 2016, the people of the United Kingdom voted to leave the European Union with 51.92 percent in favour (so-called “Brexit”).208 Against this backdrop,209 the British Parliament passed the European Union (Withdrawal) Bill 2017-19 in January 2018.210 The “Withdrawal Bill” regulates the transfer of approximately 12.000 EU directives and regulations of the Union into British law due to the ending of the application of the acquis communautaire in the jurisdiction of the UK (deEuropeanization of the UK legal system). The “Agreement on the withdrawal of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community”,211

208

A first referendum regarding a withdrawal was already held shortly after the UK joined the European Economic Community in 1975. Margaret Thatcher later referred to this again. On the occasion of the Treaty of Maastricht (1992/1993) there was the opt-out of the UK from the Monetary Union (Protocol No 25 on certain provisions relating to the United Kingdom of Great Britain and Northern Ireland [1992], annexed to the Treaty establishing the European Community), which was followed by further opt-outs, such as concerning the Schengen Agreement (limited application to the UK and Denmark since the Treaty of Amsterdam in 1997/1999), the EU Charter of Fundamental Freedoms on the occasion of the Intergovernmental Conference (see the “Protocol on the application of the Charter of Fundamental rights of the European Union to Poland and the United Kingdom”), as well as the Protocol exempting the UK from the abolition of border controls (Protocol No 20 on the application of certain aspects of Article 26 TFEU), that means from the main objective of supranational policy, the internal market, and finally the opt-out from the general application of the provisions about the area of freedom, security and justice due to the Protocol (No 21) on the position of the United Kingdom and Ireland in respect of the area of freedom, security and justice; see also Protocol (No 36) to the Treaty of Lisbon on transitional provisions). To the European politics of the UK since 1973, cf., e.g., Melcher (2014). 209 A withdrawal takes place according to sentence 1 of Article 50.2 TEU starting with the notification of the withdrawal intention to the European Council. Then, an agreement with the withdrawing State shall be concluded (paragraphs 2 and 3). As soon as the Council has approved the agreement, after obtaining the consent of the European Parliament, it can enter into force and replaces the application of the EU Treaties between the two Contracting Parties (sentence 4 of paragraph 2). A withdrawal agreement is not obligatory and no condition for the withdrawal (arg.: sentence 3 of Article 50.2 TFEU). Regarding the UK’s withdrawal and the particular steps of this procedure, the European Council published the “Guidelines following the United Kingdom’s notification under Article 50 TEU” of 15 December 2017, available at http://www.consilium. europa.eu/en/press/press-releases/2017/12/15/european-council-art-50-guidelines-for-brexitnegotiations/, regarding the procedure of withdrawal in general, cf. Wyrozumska, in Blanke and Mangiameli (2013), Article 50 para 22 et seq. 210 The bill is available at https://services.parliament.uk/bills/2017-19/europeanunionwithdrawal. html. 211 Draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community, as agreed at negotiators’ level on 14 November 2018. Available at https://ec.europa.eu/commission/sites/betapolitical/files/draft_withdrawal_agreement_0.pdf; see also European Commission, The EU – UK Withdrawal Agreement Explained (published on 8 February 2019). Available at https://ec.europa.

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signed on 25 November 2018 between the EU and the UK (in political jargon, the “deal”), was subject to revisions under Prime Minister Johnson’s Government in 2019.212 The re-negotiated “New Withdrawal Agreement” was signed on 19 October 2019. It provides for a transition period during which Union law applies to and in the United Kingdom in accordance with that Agreement. This period has ended on 31 December 2020, as the Withdrawal Act has ruled out any extension. During this period, the UK has effectively stayed in the single market to ensure frictionless trade until a long-term relationship finally was agreed in December 2020. Thus, it was allowed for the UK to retain internal market access and to remain part of the customs territory. If no agreement were reached by the end of the transition period, a no-deal Brexit would have remained the default outcome in 2021. It was advocated that “any envisaged ‘creative’ Agreement with the UK should be brought before the ECJ according to Article 218.11 TFEU for obtaining an opinion as to whether it is compatible with primary law,”213 which has been from the very beginning of the negotiations an entirely unrealistic proposal. Unless otherwise provided, during the transition period, the UK was obliged to continue recognising the EU rules (Article 127 of the Agreement), as well as contributing to and participating in the implementation of the Union budgets (Article 135 of the Agreement), without having any rights to submit proposals, initiatives or requests to the institutions or to vote within the institutions of the Union (Article 128 of the Agreement). Compliance with EU competition law (Article 92.1 point (b) of the Agreement), a robust and comprehensive framework for State Aid control (Annex 5 to the Agreement), as well as provisions in case of economic, societal or environmental difficulties (“Safeguards”—Article 16 of the Protocol on Ireland/Northern Ireland) were key conditions for continuing to give the UK access to the internal market. These rules aimed to ensure a level playing

eu/commission/sites/beta-political/files/the_withdrawal_agreement_explained.pdf. On the conformity of the original 2018 Agreement with European Union law, cf. Frau (2019). 212 See the New Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community of 19. October 2019. Available at https://assets.publishing.service.gov.uk/government/uploads/system/ uploads/attachment_data/file/840655/Agreement_on_the_withdrawal_of_the_United_Kingdom_of_Great_Britain_and_Northern_Ireland_from_the_European_Union_and_the_European_Atomic_Energy_Community.pdf. On the replacement of of the Agreement attached to Decision (EU) 2019/274 by the text of the amended Agreement, see Article 2 of the Council Decision (EU) 2019/1750 of 21. October 2019 amending Decision (EU) 2019/274 on the signing, on behalf of the European Union and of the European Atomic Energy Community, of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (O.J. L 274/1). Available at https://eur-lex. europa.eu/eli/dec/2019/1750/oj. On the amendments to the Protocol on Ireland/Northern Ireland, see “The Protocol on Ireland/Northern Ireland included in the Withdrawal Agreement and the consequential technical adaptations to Article 184 ‘Negotiations on the future relationship’ and Article 185 ‘Entry into force and application’ of the [. . .] Withdrawal Agreement”. Available at https://ec.europa.eu/commission/sites/beta-political/files/revised_withdrawal_agreement_including_protocol_on_ireland_and_nothern_ireland.pdf. 213 Cf. Müller-Graff (2019), p. 402.

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field within the “single customs territory”. In addition, approximately three million Union citizens living in the UK before the end of the transition period will be entitled to continue their stay, work or study there (Article 9 et seqq., Article 13 et seqq. of the Agreement). Union citizens and United Kingdom nationals, and their respective family members, who have resided legally in the host State in accordance with Union law for a continuous period of 5 years or for the period specified in Article 17 of Directive 2004/38/EC,214 have the right to reside permanently in the host State under certain conditions (Article 15 of the Agreement). Claims to health insurance, pensions and other social benefits will continue to be guaranteed (Articles 9–39 of the Agreement). Until the end of the transition period, the CJEU had jurisdiction in any proceedings brought by or against the United Kingdom as well as in preliminary rulings on requests from courts and tribunals of the United Kingdom (Article 86 et seqq. of the Agreement). The most controversial issue in the negotiations between the Union and the UK was to avoid a hard border between Northern Ireland and the Republic of Ireland. Reason for this is the Good Friday or Belfast Agreement (10 April 1998), which ended the bloody Northern Ireland conflict between Irish-catholic nationalists and Protestant loyalists. The Good Friday Agreement is based on a border without any controls between Ireland and Northern Ireland. Against this backdrop, the Protocol on Ireland/Northern Ireland sets out “arrangements necessary to address the unique circumstances on the island of Ireland [and] maintain the necessary conditions for continued North-South cooperation” (Article 1.3 of the Protocol 2018 and 2019). The Protocol 2018 created a “backstop solution on Northern Ireland” which was to be replaced by “a subsequent agreement that establishes alternative arrangements for ensuring the absence of a hard border on the island of Ireland on a permanent footing” (fifth recital of the former Protocol 2018). This accord was based on a “scenario of maintaining full alignment with those rules of the Union’s internal market and the customs union which, now or in the future support North-South cooperation, the all-island economy and the protection of the 1998 Agreement, to apply unless and until an alternative arrangement implementing another scenario is agreed” (14th recital of the former Protocol 2018). Therefore, both sides were called upon to conclude, by 31 December 2020, an agreement “which supersedes this Protocol in whole or in part” (Article 2 of the former Protocol 2018) or the Parties “may at any time before 1 July 2020 request the extension of the transition period [. . .]” (Article 3 of the Protocol 2018—“backstop”). Article 3 of the Protocol to the original Withdrawal Agreement (2018) meant that regarding Northern Ireland the rules of the EU internal market would have continued to apply also after the end of the transition period. The backstop was considered by the Union an “insurance to avoid a hard border on the island of Ireland unless and until an alternative is found” (D. Tusk). Like many members of the British House of Commons, the European Union Committee of the House of Lords was very critical on this issue and had emphasised that “UK membership of

214

Of 24 April 2004, O.J. L 158/77.

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the ‘single customs territory’ and the inherent requirement that the UK aligns with the EU’s Common Commercial Policy” would “significantly curtail the UK’s freedom to pursue an independent trade policy”.215 The UK would have been required to align with the EU’s common commercial policy, including tariffs on external trade with third countries and to abide by the EU’s rules on the prohibition of customs duties. Following Theresa May’s replacement as Prime Minister by Boris Johnson in July 2019, it was a central demand of her successor in office to delete the regulations on the backstop annexed to the Agreement 2018. The revised Northern Ireland Protocol, part of the revised Withdrawal Package of October 2019, provides that Northern Ireland will remain part of the UK’s customs territory” (Article 4.1), at the same time as being treated de facto as part of the Union’s customs zone, and directly subject to an (albeit more limited) array of Single Market regulation. In particular, Northern Ireland will remain subject to a large impact through Union legislation covering customs, trade, the manufacture and marketing of goods, VAT, excise duties, and State aid.216 Therefore, “no customs duties shall be payable for a good brought into Northern Ireland from another part of the United Kingdom by direct transport, [. . .], unless that good is at risk of subsequently being moved into the Union, whether by itself or forming part of another good following processing” (Article 5.1 of the Protocol 2019). However, this requires customs controls between Northern Ireland and Great Britain, although exceptions should apply to certain goods. Customs and regulatory checks will take place on trade between Northern Ireland and Great Britain. Trade from Great Britain into Northern Ireland will be subject to all relevant border checks in accordance with Union customs rules; and British goods must be placed on the Northern Irish market in accordance with the applicable Union legislation. The Union has accepted that an external frontier of the Customs Union and Single Market will in future be policed by a third country: many of the Union rules applicable to Northern Ireland will have to be enforced on the ground by the UK authorities. However, those British authorities enforcing Union law in Northern Ireland will be subject to certain forms of Union supervision and enforcement powers (Article 12.4 of the Protocol).217 Contrary to all expectations, however, on September 30, 2020 the House of Commons passed the United Kingdom Internal Market Bill in its first reading.218 Part V (“Northern Ireland Protocol”) of the draft Bill contained provisions concerning some regulations of the Northern Ireland Protocol relating to trade and State aid. Under the heading “Certain provisions to have effect notwithstanding inconsistency or incompatibility with international or other domestic law”, the Bill provided, for

215 House of Lords, European Union Committee, 24th report of Session 2017–19, Brexit: The Withdrawal Agreement and Political Declaration, HL Paper 245, 2018, para 156. Available at https://publications.parliament.uk/pa/ld201719/ldselect/ldeucom/245/245.pdf. 216 Douhan (2020), p. 676 et seqq., 683. 217 Douhan (2020), p. 683 et seqq. 218 Available at: https://publications.parliament.uk/pa/bills/lbill/58-01/135/5801135.pdf.

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example, for a deviation from the provisions of the Withdrawal Agreement and the EU Withdrawal Bill (e.g. Section 45.2 of the Internal Market Bill). The European Commission regarded this as a violation of Article 5 of the Withdrawal Agreement (obligation to cooperate in good faith) and certain provisions of the Protocol on Ireland and Northern Ireland, namely Articles 5.3 and 5.4 and Article 10 on custom legislation and State aid, including among other things, the direct effect of the Withdrawal Agreement (Article 4).219 Against this background, the European Commission has initiated infringement proceedings at the beginning of October 2020 (Article 131 of the Withdrawal Agreement). The EU halted these proceedings after the UK government dropped the offending clauses of the Bill following a UK-EU agreement on the issues concerned through the EU-UK Joint Committee. In addition to the dispute between the UK and France over fishing waters access of French fishers in a zone between six and twelve miles from the UK’s shores up to 2026,220 the application of the Protocol on Ireland and Northern Ireland remained the most controversial issue in the EU-UK relationship. On 3 March 2021, the UK Government stated its intention to unilaterally delay the full application of this Protocol concerning the movement of goods and pet travel from Great Britain to Northern Ireland. Pursuant to Article 12.4 of the Protocol, in conjunction with Article 258 TFEU, the Commission, responding to this situation, sent the UK a Letter of Formal Notice for breaches of substantive provisions of EU law concerning the movement of goods and pet travel made applicable by virtue of the Protocol. The letter requested the UK to carry out swift remedial actions to restore compliance with the terms of the Protocol (15 March 2021). In accordance with the provision on the Common Travel Area “the United Kingdom and Ireland may continue to make arrangements between themselves relating to the movement of persons between their territories [. . .], while fully respecting the rights of natural persons conferred by Union law. The United Kingdom shall ensure that the Common Travel Area and the rights and privileges associated therewith can continue to apply without affecting the obligations of Ireland under Union law, in particular with respect to free movement to, from and within Ireland for Union citizens and their family members, irrespective of their nationality” (Article 3 of the Protocol 2019). Most of the other provisions of the 585-page Withdrawal Agreement of 2018, which lays down the arrangements for the UK’s departure, remained unchanged. On 10 January 2020, the British House of Commons voted at third reading overwhelmingly in favour of the European Union (Withdrawal Agreement) Act 2020 by 330 votes to 231 after having rejected the original Withdrawal Agreement (2018) on three occasions in January and March 2019. On 22 January 2020, the See the Statement by the European Commission and letter by Vice-President Maroš Šefčovič following the extraordinary meeting of the EU-UK Joint Committee, 10 September 2020; available at: https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_20_1607. 220 See Article 2 of the Protocol on access to waters annexed to the TCA, which, under certain conditions, obliges each Party to grant vessels of the other Party full access to its fishing waters within an adjustment period from 1 January 2021 until 30 June 2026. 219

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House of Lords approved the Act after the House of Commons had overturned changes made by the Lords. It received Royal Assent on 23 January 2020 paving the way for formal signature of the Agreement by the UK Government on 24 January 2020; as well as the granting of consent by the European Parliament and conclusion by the Council. All the while, the deadline of two years set out in Article 50.3 second alternative TFEU (i.e. by the end of 29 March 2019—midnight//24:00 hours) had to be extended three times by the European Council.221 Hence, a “no deal Brexit” was averted for the time being. On 31 January 2020 at midnight (Brussels time), the United Kingdom withdrew from the European Union and from the European Atomic Energy Community (Euratom). The Withdrawal Agreement entered into force on 1 February 2020. In the case of a no deal Brexit, the United Kingdom would have assumed a third country status like any other third country with which the European Union has no specific agreements.222 From a macroeconomic point of view, the consequences of a British “disintegration” without a previous agreement would have had the biggest negative impact on the Republic of Ireland, which is the only EU Member State that has a direct border with the UK and pursues a particularly lively trade exchange with the Union, especially in agricultural products.223 Under Article 50.2 TEU, it was envisaged that the Withdrawal Agreement must be accompanied by a (legally non-binding) “Political Declaration setting out the framework for the future relationship between the European Union and the United Kingdom”.224 It established at that time (before the opening of the negotiations on the trade relations between the EU and the UK after the transitional period) the parameters of “an ambitious, broad, deep and flexible partnership across trade and economic cooperation with a comprehensive and balanced Free Trade Agreement at its core, law enforcement and criminal justice, foreign policy, security and defence and wider areas of cooperation.” The Contracting Parties are seeking, inter alia, for “a balance of rights and obligations”, also to ensure “the integrity of the Single Market and the Customs Union and the indivisibility of the four freedoms” (para 3 and 4 of the Declaration). They commit “to develop an ambitious, wide ranging and balanced economic partnership [. . .] to be underpinned by provisions ensuring a level playing field for open and fair competition [. . .] It

221 See European Council Decision 2019/476 (under Article 288.4 TFEU) on extending, for a first time the period of application of the Treaties to the UK under Article 50.3 TEU until 22 May 2019, O.J. L 80/1; then European Council Decision 2019/584 on a further extension until 31 October 2019, O.J. L 101/1; and finally, Article 1 of the European Council Decision 2019/1810 extending the period under Article 50.3 TFEU until 31 January 2020, O.J. L 2781/1. 222 So-called “worst case scenario” or “fall-back scenario”, cf. Amtenbrink et al. (2017), p. 36. 223 Cf. Temple Lang (2017), p. 6. On Ireland and Northern Ireland see also passim Ackermann et al. (2018), p. 2; thoroughly Eeckhout (2017), p. 10; Priebe (2018), p. 3. 224 See now the revised Political Declaration of 19 October 2019. Available at https://assets. publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/840656/ Political_Declaration_setting_out_the_framework_for_the_future_relationship_between_the_European_Union_and_the_United_Kingdom.pdf.

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should facilitate trade and investment between the Parties to the extent possible, while respecting the integrity of the Union’s Single Market and the Customs Union as well as the United Kingdom’s internal market, and recognising the development of an independent trade policy by the United Kingdom” (para 17 in conjunction with Section XIV of Part II of the Declaration). Further, on the financial services sector, which is particularly important to the United Kingdom (➔ para 77 et seq.), both sides agree that “[t]he Parties should conclude ambitious, comprehensive and balanced arrangements on trade in services and investment in services and non-services sectors” (para 27 of the Declaration). Within the context of the overall economic partnership the Parties intend to “establish a new fisheries agreement on, inter alia, access to waters and quota shares” (para 73 of the Declaration). However, the UK wanted trade in fisheries products to be dealt with under the Free Trade Agreement (➔ para 88, 94), with an entirely separate agreement on access to waters and cooperation on conservation and management issues—based on annual negotiations; rejecting the relative stability mechanism employed under Union law; and with a heavy emphasis on combatting illegal fishing activities.225 Moreover, the Parties expected that “the Agreement should include appropriate arrangements for dispute settlement and enforcement, including provisions for expedient problemsolving such as, in certain areas, a flexible mediation mechanism. Such a mediation mechanism would be without prejudice to the Parties’ rights and obligations or to dispute settlement provided for under the Agreement” (para 129 of the Declaration). 4.2.2. 75

Economic Impacts

The primary and secondary legislation on the internal market no longer applies to the UK since its withdrawal from the Union (Article 50.3 TFEU). The UK has a free hand, for example, in granting subsidies and tax benefits while complying with the rules ensuring a level playing field for open and fair competition (➔ para 92). The economic relationship of the UK to the internal market must therefore be reorganised. With a view to the decades-long commitment of the UK to the fundamental freedoms, it is doubtful if, especially concerning the freedom to provide services226 and to the free movement of workers,227 a complete withdrawal of the UK would 225

Douhan (2020), p. 699. The political consensus on fishing achieved within the Trade and Cooperation Agreement of 24 December 2020 (ANNEX FISH.4) includes a five and a half-year transition period from 2021 during which full access to each other’s waters ends and quotas will be introduced. Some 25 percent of EU boats’ fishing rights in British waters will be transferred to the UK fishing fleet. After that, annual talks will set the amount EU boats can catch in British waters and vice versa. 226 On Brexit and the free movement of services, cf. Barrett (2019), p. 213 et seqq. 227 On the movement of workers and migration as well as their connection to the Brexitreferendum in the UK analyses cf. Deakin (2017), p. 14 et seq. To the right of free movement of workers, cf. McCauliff (2016), p. 45 et seq.; Markakis (2019), p. 293 et seqq. On this topic, and also to the divided attitude within the UK to the Brexi-referendum, cf. Shaw (2016), p. 100. Furthermore, on the effects of Brexit for the access to higher education, cf. Bode (2017), p. 401– 433.

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not have been an economically viable position. The national markets got strongly interwoven during the long history of the development of the internal market since the accession of the UK to the European Economic Community (1 January 1973). Considering the fact that, at the beginning, the EEC was conceptualised as a “special-purpose association” (Zweckverband)228 to “stabilise” the integrated European countries economically, a retrogression is hard to imagine. The Withdrawal Agreement was conceived to bring legal certainty especially for economic operators involved in the internal market. Now a lot depended on if and how the Union would agree with the British Government on a future cooperation, a key concept within the Political Declaration (➔ para 68, 74). Also, from an economic point of view, it was necessary to avoid a “hard Brexit”.229 In the relationship between the Union and the UK such a no deal Brexit would have been a step backwards to the applicability of mere framework conditions as they are laid down in the WTO standards regarding economic co-operation of the EU with third countries.230 The resulting costs of a breakdown of negotiations on the future relationship and a “flexible partnership”231 between the EU and the UK would have weighed heavily on companies on both sides of the English Channel. According to forecasts, with a constant trading volume after Brexit, European exports would have incurred average customs duties of 3.6% and more than EUR 10 billion annually. British exports to the remaining EU-27 would have been burdened with an average of 2.8%; the annual payments would then amount to around EUR 5 billion. Such custom duties would have had a massive impact especially on German exporters, as one third of the tariff payments to London would have affected German products.232 Across the English Channel, aside from the financial services industry (➔ para 77 et seqq.), the British car industry would have been severely affected by a no deal scenario. The UK is the fourth largest car producer (2019) but without the internal market the worst-case scenario predictions estimated a production fall of 12% (almost 180,000 cars per year) and prices faced by UK consumers raised by 2.55%, as the cost of imported cars and their components increase.233

Cf. Ipsen (1972), § 8 para 24 et seqq. and § 54 para 124, who describes the originally three European Communities as “Zweckverbände funktionaler Integration” (“special-purpose associations for functional integration”). 229 On the economic implications of leaving the EU for the UK, cf. Matthes (2019), p. 59 et seqq. 230 Cf. Herrmann (2019), p. 100 et seqq., p. 114 et seq. 231 Cf. the revised Political Declaration of 19 October 2019, points 3 and 92. 232 On the economic consequences of a “hard Brexit”, cf. Diermeier and Jung (2018). 233 Cf. Faz Freire (2019), p. 135 et seq. with further references. 228

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The Importance of the Financial Services Sector

The free movement of goods—as measured by exports—contributes considerably less to the British GDP than it does vice versa;234 yet the UK is world leader in many services sectors, including legal, business and, in particular, financial services. Hence, the freedom to provide (financial) services (Articles 56–62 TFEU)235 is of particular interest for the UK.236 The assumed economic effects upon British economy237 result, mainly, from the fact that Brexit will strongly affect foreign direct investment (FDI). Financial services have the largest stock of inward FDI in the UK (45%), constitute 8% of its GDP and generate 12% tax receipts (2019). In this domain, the effects of Brexit are difficult to predict,238 mainly because the regulations agreed in the Trade and Cooperation Agreement are (still) very scarce (➔ para 91). The exercise of the right to provide financial services by the City of London’s financial operators shows precisely how close the UK has been linked up with the European internal market.239 By the end of the transition period, if there were no agreement concluded governing these aspects, the UK financial service industry would not have had access to this market of financial services based on the current “single EU rulebook for financial services” including the so-called “passports”.240 The EU passporting system (nine different passports) for banks and financial services companies enables firms that are authorised in any EU or EEA State to trade freely in any other with minimal additional authorisation. This system once has made the financial centre of London a hub for international financial services within the European market.241 Banks or 234

In 2017, the United Kingdom imported goods worth around EUR 295.5 billion from EU Member States, and goods worth around EUR 274.6 billion from countries outside the EU. Over the same period, the United Kingdom exported goods valued at around EUR 188.5 billion to EU Member States and goods worth around EUR 205.4 billion to countries outside the EU. Cf. Statista, available at https://de.statista.com/statistik/daten/studie/567817/umfrage/grossbritannien-importe-aus-der-eu/. 235 The liberalisation of banking and insurance services connected with movement of capital shall be effected in step with the liberalisation of movement of capital (Article 58.2 TFEU). Therefore, the activities of those institutions, namely, financial services, are to be regarded as services; cf. Blanke and Böttner (2020), para 438. 236 A table of the trade relations between the UK and the other EU Member States for the year 2015 can be found at Lawless and Morgenroth (2016), p. 7. Available at https://www.esri.ie/publications/the-product-and-sector-level-impact-of-a-hard-brexit-across-the-eu/. 237 As an example, one of the economic studies on the consequences of Brexit estimates that the UK consequently may end up losing 2–3% of its GDP; see Gros (2016). 238 Cf. Faz Freire (2019), p. 135, 136 et seq. 239 The financial service location of the London City might have caused (among other factors) that the people of London voted against Brexit. 240 Cf. British Banker’s Association (2016a), Brexit Quick Brief No. 3, p. 1 et seqq. 241 The UK generated an annual global trade surplus of £ 55 billion in financial services. For the UK the loss of passporting rights, could potentially see exports of financial services to the EU halve to around £10 billion. Cf. Grant Thornton’s Financial Services Group (2016), p. 2, available at https://www.grantthornton.co.uk/globalassets/1.-member-firms/united-kingdom/pdf/brexit-

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financial services businesses from countries outside of the EU and the EEA currently cannot access the passporting regime. According to the policy paper about “The future relationship between the United Kingdom and the European Union”, the UK did not intend to adopt these existing rules on banking and payments services. Given that the UK leaves both the EU and the EEA, it will no longer be covered by the passporting frameworks established by EU directives or the freedoms for trade guaranteed by the EU treaties. This will have important implications for banks and financial services firms in both the UK and other EU States. Without passporting, the ability to provide these cross-border services from UK based banks to businesses across the UK and all 27 EU countries will be severely restricted and depend upon whether equivalence is granted, or countryby-country national licensing regimes are available. Such licenses are not available in all EU countries, provide access only to a limited range of services and generally carry no rights to onward cross-border trade from the country of licensing. Already in February 2021, the Financial Times headlined that Amsterdam surpassed London as Europe’s largest share trading centre in January 2021 as the Netherlands scooped up business lost by the UK since Brexit.242 Hence, with the UK outside the internal market, such cross-border services will mainly be guaranteed based on “equivalence frameworks” that include a “‘close and structured’ political and technical regulatory and supervisory cooperation, [. . .] transparency and appropriate consultation on equivalence decisions, information exchange and consultation on regulatory initiatives”.243 Under the freedom of establishment (Articles 49–55 TFEU) “passported” UK based banks also had the right to establish branches across all other EU and EEA countries from which they could offer cross-border banking services without substantial restrictions and without having to go through a lengthy licensing procedure. It is currently (January 2021) not clear how the potential access regimes of the United Kingdom to the European financial services can be developed after the post-Brexit Agreement (➔ para 91).244 In the field of financial services, there are, unlike, for example, in the area of trade in goods, no international agreements that could serve as a model for access regulations. Losing the ability to obtain banking services from the UK will also limit the ability of businesses in the EU to obtain the funding they require for growth.

impact-financial-services.pdf. As a consequence of the loss of this “hub function” of the financial centre of London, Frankfurt might be chosen as new location, because the ECB already has its seat there; cf. Bronger et al. (2016), p. 134. 242 Stafford (2021, February 10), Financial Times. 243 Department for Exiting the European Union, The future relationship between the United Kingdom and the European Union, Policy Paper of 12 July 2018, para 64 et seq.; House of Lords, European Union Committee, 24th report of Session 2017–19, Brexit: The Withdrawal Agreement and Political Declaration, HL Paper 245, 2018, para 222 et seqq. (223). 244 On this, cf. Moloney (2016), p. 77 et seq.

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In the Political Declaration which accompanies the Withdrawal Agreement “the Parties [noted] that the overarching institutional framework could take the form of an Association Agreement” (para 120 of the Declaration). They “aim to deliver a level of liberalisation in trade in services well beyond the Parties’ World Trade Organization (WTO) commitments and building on recent Union Free Trade Agreements (FTAs)” (para 27 of the Declaration). However, the legal rules governing such an agreement will not lead to an interconnection of both sides comparable to what was the case when the UK was still a member of the EU. This applies in particular to legal institutions such as the direct effect of Union law or its primacy over the law of the Member States (➔ para 22).245 Different regulatory models of economic cooperation seeemed to be conceivable, from a total dissociation to remaining in the internal market through the EEA via an EFTA membership.246 A return of the UK to EFTA, whose membership since 1995 has been limited to Iceland, Liechtenstein, Norway and Switzerland, would have been a useful option either economically or politically. The more influence of EU law the UK would have been willing to accept, the more access to the internal market it could have been expected. However, on 8 January 2020, at a meeting with Commission President U. von der Leyen in Downing Street, Prime Minister Johnson had made it clear for the first time that Britain’s future partnership with the EU cannot involve “any kind of [legal] alignment” or any role for the European Court of Justice in the UK. The UK wants to regain its regulatory autonomy (“taking back control”). This is why namely a membership of the UK in the European Economic Area (EEA) was not an option. The EEA is a deep free trade zone between the Union and the European Free Trade Association, which consists of Iceland, Liechtenstein and Norway. The EU internal market is currently being extended to these three countries via the EEA. The EEA Agreement247 draws from primary EU law in particular the basic market freedoms and from secondary law all the provisions which are considered trade and competition relevant, according to the list of secondary law contained in the Annex to the EEA Agreement. Among them are also the so-called “horizontal provisions relevant for the four freedoms” in Articles 66 to 77 of the EEA Agreement which concern social policy, consumer protection,

245

On the effects in the foreign trade relations and regarding the WTO-trade agreements, cf. Herrmann (2017), p. 962 et seqq., as well as Prüm (2017), p. 990. 246 To the models of the House of Lords, European Union Committee, 17th Report of Session 2017–19, UK-EU relations after Brexit, HL Paper 149, 2018, para 64 et seqq. Cf. also Kaiser (2016), p. 605; Basedow (2016), p. 567; Weller et al. (2016), p. 2379; Amtenbrink et al. (2017), p. 32 et seqq.; Repasi (2019), p. 117 et seqq.; Faz Freire (2019), p. 139 et seqq. 247 Agreement on the European Economic Area, O.J. L 1/3 (1994). On the effects of Brexit for the European Economic Area (EEA), cf. Gee et al. (2016), p. 25 et seqq.; Hillion (2018), p. 136 et seqq.

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environment, statistics and company law. In addition, the EEA Agreement contains a smooth amendment procedure “in order to guarantee the legal security and homogeneity of the EEA” (Article 102.1) with the purpose “to promote a continuous and balanced strengthening of trade and economic relations between the Contracting Parties with equal conditions of competition, and the respect for the same rules” (Article 1). The UK would have been obliged to adopt the “acquis communautaire” of the EEA through the EEA Council,248 including, in particular, the free movement of persons and the free movement of workers.249 Although the EFTA States enjoy rights in the shaping of relevant new Union legislation (Articles 99 and 100 of the EEA Agreement) and although any of them can block an amendment (Articles 102.3 and 93.2 of the EEA Agreement), this procedure is obviously one-sidedly orientated to the development of Union legislation and its potential parallelism in EEA law. It was hard to see that such a device would have comforted to the British.250 Furthermore, membership of the EEA offers many economic benefits, such as trade facilitation or exemption from customs duties. In addition, participation in the EEA is associated with significant financial contributions that the UK would have had to accept. It is precisely these constituents of the internal market, however, that the British Government did not intend to apply to the UK after the transition period.251 Remaining in the internal market—through future membership of the EEA— would also have meant that the UK would have been obliged to submit to the jurisdiction of the CJEU what has been rejected by the British Government. Within the EEA, a cooperation model is practiced between the EFTA Court, the CJEU and the Courts of last instance of the EFTA States and serves the objective “to ensure as uniform an interpretation as possible of this Agreement, in full deference to the independence of the courts” (Article 106 of the EEA Agreement). Due to the objective to arrive at “as uniform an interpretation as possible”, the case law of the CJEU, together with EU legislation, limits the scope of national economic policies and thus maintains the functioning of the internal market. To that case law one can ascribe in particular the effective implementation of the concept of approximation of laws. In approving the Trade and Cooperation Agreement that entered into force in 2021, instead of a cooperation model (with a modified judicial

248 Cf. House of Lords, European Union Committee, 17th Report of Session 2017–19, UK-EU relations after Brexit, HL Paper 149, 2018, para 68 et seqq. 249 Cf. the revised Political Declaration of 19 October 2019, points 48 et seqq., on “mobility arrangements”; Weller et al. (2016), p. 2380; Schewe (2019), p. 85 et seqq. 250 Cf. Müller-Graff (2019), p. 404. 251 Cf. Department for Exiting the European Union, The future relationship between the United Kingdom and the European Union, Policy Paper of 12 July 2018, para 72 et seqq.; House of Lords, European Union Committee, 17th Report of Session 2017–19, UK-EU relations after Brexit, HL Paper 149, 2018, para 72. Website of the Government of the United Kingdom, available at https:// www.gov.uk/guidance/exiting-the-european-union. Cf. The Guardian of 17 January 2017, available at https://www.theguardian.com/politics/2017/jan/16/theresa-may-to-confirm-uk-exit-fromeu-single-market-speech.

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autonomy), the absence model has become a reality in the sense that the interpretation of ratified provisions and the protection of affected persons is left to full judicial autonomy of the Parties or an Investor-State dispute settlement system (➔ para 95).252 An agreement based on the “Swiss-Model”253 has been ruled out from the outset by the European Commission. Since the negative referendum of 6 December 1992 on accession to the EEA, the Swiss Federal Government has been pursuing its objective bilaterally of enabling it to participate in the four EEA market freedoms. Unlike the EEA Agreement, there are only two negotiating partners (EU Commission and Swiss Government) in the bilateral negotiations, which made more specific arrangements possible for Switzerland. These concessions from the Union must be regarded as a one-off event in the history of the opening up of the internal market to third countries.254 It consists of a conglomerate of over 120 agreements that have been concluded over several years (“Bilateral I and II”). There, the trading interests have created the widely applied Swiss practice of the so-called “autonomous national adaptation to EU-rules”.255 The objective to arrive at “as uniform an interpretation as possible” in the judicial dialogue (➔ para 81) does not seem to have been achieved under the Lugano Convention in relation to Switzerland.256 The Council of the European Union has rightly characterised this model as “complex”, “creating legal uncertainty”, “unwieldy to manage” and “[. . .] clearly [reaching] its limits”.257 Moreover, a customs union as in the case of Turkey,258 referred to as the “Turkish Model” (1996), has been discussed as a possible way of linking the 252

Cf. Müller-Graff (2019), p. 404 (405 et seqq.) who distinguishes between four models: the absence model, the cooperation model, the common dispute resolution model (e.g., established by the Singapore Agreement) and the inclusion model (e.g., Article 111.3 of the EEA Agreement or Article 322.2 of the EU-Ukraine Association Agreement). 253 The “Swiss-Model” operates in the manner that Switzerland participates in certain areas of the common market based on the bilateral agreements with the Union. As well as the EEA-States Iceland, Norway and Liechtenstein, Switzerland is obliged to pay contributions to the EU budget. Furthermore, the implementation of the relevant EU-law into national law is mandatory and the free movement of EU-citizens must be guaranteed. On this, cf. BBA, Brexit Quick Brief No 1 (2017), p. 4; Gee et al. (2016), p. 30. On the bilateral way which underpins the Bilateral Agreements EU – Switzerland and its characteristics, see Epiney and Affolter (2019), p. 103 et seqq. 254 Cf. Wendland (2017), p. 253 et seq. 255 Cf. Müller-Graff (2019), p. 399 et seq. 256 Cf. Hess (2018), p. 6 et seq. 257 Council of the European Union, Council conclusions on EU relations with EFTA countries, 14 December 2010, para 6; available at https://eeas.europa.eu/sites/eeas/files/council_iceland.pdf. 258 The Ankara Agreement of 12 September 1963 (O.J. L 113/2 [1973] and 361/29 [1977]) and its Additional Protocol of 23 November 1970 (O.J. L 293/3 [1972]) define the scope and content of the association relationship, while the final phase of the customs union is defined in Decision 1/95 of the EC-Turkey Association Council (O.J. L 35/1 [1996]). The Decision 1/2001 of the ECTurkey Customs Cooperation Committee (O.J. L 98/31 [2001]) sets out implementing customs provisions of Decision No 1/95, applicable to trade in goods between the two parts of the customs

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UK with the EU.259 It would mean to set up an association council with the task to enact further secondary law, such as on a customs union and regulated freedom of movement of persons. A customs union, which meanwhile forms an integral part of the Turkish model, is characterised by a greater economic integration than a free trade agreement, as it not only reduces tariffs between Member States, but also unifies customs duties on imports from third countries (Common Customs Tariff). This would have integrated the UK into the markets of the EU Member States concerning trade in (certain) goods. Exporters from the United Kingdom and the EU would not have to pay customs duties for trading in these goods between the two markets and customs formalities for trade would be reduced. However, the UK would have been obliged to harmonise its quality standards for these goods with those of the EU and would have lost the right to impose tariffs on third countries products at its sole discretion.260 A customs union, on the other hand, does not cover the trade in services and would not have created separate rights for UK service companies in the context of their activities within the EU, unless separate supplementary agreements would have been concluded between both sides.261 Given the disadvantages that such a customs union would have entailed for the economic future of the UK and its customs policy vis-à-vis third countries (outside the customs union), this model has been rejected by the British Government.262 If the United Kingdom were treated by the Union as a mere WTO-member, British companies would still be bound by European Union law, also when it comes to complying with product standards or the prohibition of measures restricting competition, if and insofar as they are economically operating within the internal market or their economic activities have an impact on the internal market.263 Other freedoms, such as the freedom of providing services or the free movement of workers are also influenced to a high degree by EU rules. Especially in the case of regulated professions, which depend on an equivalence assessment and an admission, new rules should have been be enacted by the UK legislator in the course of Brexit. Last, a particular problem is the achievement of freedom of establishment, which has led to a large number of start-ups under the legal form of British Limited (Ltd.) with administrative headquarters in other EU Member union and with third countries (amended by Decision No 1/ 2003 (O.J. L 28/51 [2003] – corrigendum O.J. L 74/32 [2003]). 259 Cf. House of Lords, European Union Committee, 17th Report of Session 2017–19, UK-EU relations after Brexit, HL Paper 149, 2018, para 78 et seq. 260 Cf. House of Lords, European Union Committee, 17th Report of Session 2017–19, UK-EU relations after Brexit, HL Paper 149, 2018, para 80 et seq. 261 Cf. House of Lords, European Union Committee, 17th Report of Session 2017–19, UK-EU relations after Brexit, HL Paper 149, 2018, para 80. See, regarding this model, e.g., BBA (2017), p. 4. 262 Cf. The Telegraph of 14 January 2017, available at http://www.telegraph.co.uk/news/2017/01/ 14/theresa-may-side-eurosceptics-major-brexit-speech-revealing/ and The Times of 15 January 2017, available at https //www.thetimes.co.uk/edition/news/may-calls-for-clean-and-hard-brexit5xm8820rz. 263 Cf. Amtenbrink et al. (2017), p. 35; Herrmann (2017), p. 962 et seqq.; Wendland (2017), p. 254 et seq.

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States.264 The establishment and further existence of a Societas Europaea (SE) in the UK (under the Trade and Cooperation Agreement of 2020 converted automatically in a UK societas) will no longer be possible, but the introduction of capital controls between the EU and the UK would have been at least feasible from a legal point of view.265 Unrealistic and impossible to satisfy was the suggestion of some members of the former May Government to maintain access to the internal market while systematically restricting the entry, stay and establishment of EU citizens in the UK.266 On the interplay between rights and obligations in European primary law, this would have been “cherry-picking” that would not only lead to legal uncertainty between the EU and the UK, but also weaken the internal market in its legal fundaments and make it a political football.267 In the light of continued determination of Johnson’s Government to end any kind of legal alignment with the EU and any role of the CJEU within the UK, this aspiration had become obsolete at the latest in 2019. For the functioning of the internal market, it was therefore vital what kind of association agreement between the EU and the UK would be concluded. The adoption of rules of access to the EU internal market in the Trade and Cooperation Agreement (➔ para 87 et seqq.) was a challenge in the common interest of both sides. As the Union and the UK depend on each other in many areas also beyond the internal market, especially regarding the case by case cooperation of the UK within the policy in the area of freedom, security and justice, as well as in the common foreign and security policy, the UK as a “former Member State” of the European Union could not be looked at as a mere third country.268 The success of the 264

Member States of the EU follow in corporate law partially the “foundation theory”, partially the “corporate domicile theory”. According to the domicile theory, a company is subject to the law of the country in which its registered office is located. The establishment theory on the contrary sets forth that the legal status is determined by where the company was founded. According to the case law of the CJEU and the establishment theory, the legal personality continues also when the administrative seat has moved to another Member State. The British legal form of “Limited” was often taken outside the UK, because it offers benefits regarding creditor and capital protection. After the withdrawal, British corporations will no longer be able to use benefits resulting from the freedom of establishment and movement of capital, especially in countries such as Germany, which follows the corporate domicile theory. Cf. Bronger et al. (2016), p. 134 et seq. From 1 January 2021 no SEs can be formed in the UK, or transferred in or out of the UK. 265 The founding of a SE which has its administrative seat outside the EU is not possible. Cf. Article 7 of Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (SE), O.J. L 294/1. 266 Department for Exiting the European Union, The future relationship between the United Kingdom and the European Union, Policy Paper of 12 July 2018, para 89 et seqq. Cf. Piris (2018), p. 4. Of a “signal for withdrawal” for other states, which could lead to “the beginning of the ending of the Union”, speaks Bronger et al. (2016), p. 132. 267 Weber speaks of a “Europe à la carte”, cf. Weber (2017), p. 954; this political desire is also rejected by Piris (2018), p. 4; see also Gee et al. (2016), p. 13; Kainer (2019), p. 149 et seqq. 268 All steps of legal unbundling will break completely new ground and, therefore, turn out to be rather difficult; see Ackermann et al. (2018), p. 16.

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European economic order and thus of the internal market is based on pillars such as the principle of mutual recognition in trade goods (Cassis-de-Dijon) or the removal of non-tariff trade barriers, in particular state authorisation schemes, which go far beyond the conventional rules in a normal free trade agreement.269 However, given that due to the British Prime Minister the transition period did not exceed 11 months (February until December 2020), there were no realistic expectations that there would be more than a free trade agreement at the end of the negotiations between EU and UK—oriented to the single document type of the Comprehensive Economic and Trade Agreement (CETA).270 But close to the European continent the economic and geo-political factors of the UK are not comparable with those of Canada. With a “no deal Brexit” at the end of the transition period, the UK would have finally experienced what it really means to become a third country without special relations with the EU.

4.4. The Trade and Cooperation Agreement of December 2020

On 24 December 2020 the European Union and the United Kingdom reached a comprehensive Trade and Cooperation Agreement (TCA), involving reciprocal rights and obligations, common actions and special procedure.271 Seeking to establish clear and mutually advantageous rules governing trade and investment between the Parties (fourth recital of the Preamble), the Agreement aims to provide a legal base for economic partnership. The TCA is a Framework agreement that is supplemented by further agreements between the Contracting Parties (Article COMPROV.2), e.g. the Security of Information Agreement. The Parties establish a free trade area, in conformity with Article XXIV of GATT 1994 and Article V of GATS (Article OTH.3). The TCA is based on WTO agreements such as the Agreement on Agriculture, Part Two of this Agreement regulates “Trade, Transport, Fisheries and Other Arrangements”. Under its Heading One “Trade”, it contains in different chapters inter alia rules on trade in goods (including rules of origin and provisions on technical barriers), services and investment, digital trade, capital movements, payments, transfers and temporary safeguard measures, and on the level playing field for open and fair competition and sustainable development. In essence, customs duties or taxes on exports or any measures of equivalent effect between the two Parties shall be prohibited (Article GOODS.5 et seqq.). The importing Party shall grant preferential tariff treatment to a product 269 See the presentation from Eeckhout (2017), p. 2 et seqq., who on page 11 made a table with possible economic cooperation forms and their consequences. 270 Cf. Faz Freire (2019), p. 141 et seq.; on CETA as a model, see Kadelbach (2019), p. 19 et seq. 271 O.J. L 444/14 (2020). Pending the completion of the procedures necessary for its entry into force at the beginning of 2021, it was applied on a provisional basis as from 1 January 2021. See Article 12 of Council Decision (EU) 2020/2252, O.J. L 444/2 (2020). After its ratification it is fully applicable as of 1 May 2021.

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originating in the other Party on the basis of a claim by the importer for preferential tariff treatment (Article ORIG.1 et seqq.). Both Parties oblige to facilitate digital trade, to address unjustified barriers to trade enabled by electronic means and to ensure an open, secure and trustworthy online environment for businesses and consumers. They are committed to ensuring cross-border data flows to facilitate trade in the digital economy (Article DIGIT.1 et seqq.). With a view to services and investment (financial services) the Agreement implements “national treatment” (Article SERVIN.2.3) and “most favoured nation treatment” (Article SERVIN.2.4). This applies also to cross-border trade in services (Article SERVIN.3.1 et seqq.). The entry and temporary stay of “intra-corporate transferees” and business visitors is allowed (for “business visitors for establishment purposes” and “short-term business visitors” for a period of up to 90 days in any six-month period272). A Party shall allow a lawyer of the other Party to supply in its territory designated legal services under that lawyer’s home jurisdiction professional title. In Title IV of Part Two, the Contracting parties commit themselves very succintly to enable the free movement of capital and payments (Article CAP.1). However, restrictions are admissible, if a Party experiences serious balance of payments or external financial difficulties, or threat thereof, it may adopt or maintain restrictive measures with regard to capital movements, payments or transfers (Article CAP.6). In exceptional circumstances of serious difficulties for the operation of the EMU, or threat thereof, the Union may also take temporary safeguard measures for a period not exceeding six months (Article CAP.5). The TCA does not contain any decision on “equivalence”,273 which would allow British firms to sell services to the single market. Therefore, the two sides have to try to agree in the near future (until 31 March 2021) on a memorandum of understanding on regulatory cooperation in financial services. Yet, little is expected from such a framework of cooperation in the way of tangible outcomes for investment firms and market participants, and any arrangements provided by the MoU alone would likely be informal in nature and not carry any strict legal obligations.

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For comparison: The permissible length of stay for a period of up to three years shall be for managers and specialists, up to one year for trainee employees. The length of stay of contractual service suppliers and independent professionals shall be for a cumulative period of 12 months, or for the duration of the contract, whichever is less (Articles SERVIN.4.3(2) and SERVIN.4.4(4)). “The Parties note that on the date of entry into force of this Agreement both Parties provide for visa-free travel for short-term visits in respect of their nationals in accordance with their domestic law […] In the event that the United Kingdom decides to impose a visa requirement for short-term visits on nationals of a Member State, that requirement shall apply to the nationals of all Member States” (Article VSTV.1). 273 Equivalence has an important role in financial services trade with the EU. In banking, the EU uses equivalence judgments for two main purposes. The first is as the basis for granting a non-EU bank certain rights in the EU market. The second is in defining the rights and regulatory treatment of EU banks when they operate in a market outside the EU. On the difference between “equivalence” and “passporting”, see British Banker’s Association (2016b), Brexit Quick Brief 4/2016, p. 2, 5 et seqq.

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Title XI of Part Two of the TCA calls for a level playing field for open and fair competition between the Parties. Each Party reaffirms its ambition of achieving economy-wide climate neutrality by 2050 (Article 1.1(3)). Against this background, they recognise in a wide list of principles, in particular the importance of free and undistorted competition in their trade and investment relations, the prohibition of subsidies, rules on state-owned enterprises, enterprises granted special rights or privileges and designated monopolies, good governance in the area of taxation, labour and social as well as environment and climate standards. As a result, the TCA tries to avoid impediments to the functioning of the internal market. It establishes a free trade area ensuring no tariffs, fees, charges having equivalent effect or quantitative restriction across all sectors provided that a level playing field is ensured through robust commitments. However, complex procedures to be established on the base of the Agreement, especially in the field of trade and services, are not least a result of a wide range of needs for technical regulations, standards and conformity assessment procedures, conditions for authorisation etc., characteristic of the Union’s recent generation of free trade agreements as a whole. Although EU and UK pledge to minimise bureaucracy, the bureaucratic burden, mainly at the expense of the manufacturers and merchants, will affect the bilateral trade. The TCA establishes an institutional system with a “Partnership Council” (Article INST.1). It shall comprise representatives of the Union and of the United Kingdom and oversee the attainment of the objectives of this Agreement and any supplementing agreement. It shall have the power in particular to adopt decisions in respect of all matters where this Agreement or any supplementing agreement so provides. The Partnership Council is supported by the Trade Partnership Committee, a number of Specialised Committees (e.g. on trade, energy, air transport, fisheries, law enforcement and judicial cooperation), and Working Groups. The Specialised Committees have the power to monitor and review the implementation and ensure the proper functioning of this Agreement or any supplementing agreement (Article INST.2(4) point a). The European Commission will represent the Union within the Partnership Council, Trade Partnership Committee, Trade Specialised Committees and Specialised Committees.274 Like the other six Parts and the Annexes of the TCA, also the provisions on “Trade” are embedded in this institutional system. Part Six of the TCA establishes a dispute settlement mechanism (Articles INST.9 et seqq.), which applies inter alia “to disputes between the Parties concerning the interpretation and application of the provisions of this Agreement or of any supplementing agreement” (Article INST.10). This system ties into other recent free trade agreements of the Union. With this step, the Contracting Parties draw the consequence from the position taken by the UK under the political leadership of B. Johnson that it is not willing to submit in the future in any way to the jurisdiction of the Court of Justice of the European Union (➔ para 79).

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List of Cases ECJ

ECJ 05.02.1963, 26/62, van Gend & Loos, ECLI:EU:C:1963:1 [cit. in para 22] ECJ 15.07.1964, 6/64, Costa v E.N.E.L., ECLI:EU:C:1964:66 [cit. in para 22] ECJ 13.07.1966, 56/64 and 58/64, Consten & Grundig v Commission, ECLI:EU: C:1966:41 [cit. in para 38] ECJ 31.03.1971, 22/70, AETR, ECLI:EU:C:1971:32 [cit. in para 46] ECJ 08.06.1971, 78/70, Deutsche Grammophon v Metro, ECLI:EU:C:1971:59 [cit. in para 38] ECJ 11.07.1974, 8/74, Dassonville, ECLI:EU:C:1974:82 [cit. in para 23] ECJ 03.12.1974, 33/74, van Binsbergen, ECLI:EU:C:1974:131 [cit. in para 23] ECJ 20.02.1979, 120/78, Cassis de Dijon, ECLI:EU:C:1979:42 [cit. in para 23, 30] ECJ 11.11.1981, 203/80, Casati, ECLI:EU:C:1981:261 [cit. in para 21] ECJ 05.05.1982, 15/81, Gaston Schul, ECLI:EU:C:1982:135 [cit. in para 26] ECJ 11.06.1991, 300/89, Commission v Council, ECLI:EU:C:1991:244 [cit. in para 26, 38] ECJ 10.05.1995, C-384/93, Alpine Investments, ECLI:EU:C:1995:126 [cit. in para 23] ECJ 13.7.1995, C-350/92, Spain v Council, ECLI:EU:C:1995:237 [cit. in para 54] ECJ 15.12.1995, C-415/93, Bosman, ECLI:EU:C:1995:463 [cit. in para 9] ECJ 09.12.1997, C-265/95, Commission v France, ECLI:EU:C:1997:595 [cit. in para 23] ECJ 06.06.2000, C-281/98, Angonese, ECLI:EU:C:2000:296 [cit. in para 9] ECJ 03.10.2000, C-9/99, Echirolles Distribution, ECLI:EU:C:2000:532 [cit. in para 61] ECJ 05.10.2000, C-376/98, Germany v Parliament and Council, ECLI:EU: C:2000:544 [cit. in para 53–54] ECJ 13.03.2001, C-379/98, PreußenElektra, ECLI:EU:C:2001:160 [cit. in para 42] ECJ 10.12.2002, C-491/01, British American Tobacco (Investments) und Imperial Tobacco, ECLI:EU:C:2002:741 [cit. in para 56, 61] ECJ 21.01.2003, C-378/00, Commission v Parliament and Council, ECLI:EU: C:2003:42 [cit. in para 49] ECJ 12.06.2003, C-112/00, Schmidberger, ECLI:EU:C:2003:333 [cit. in para 23] ECJ 02.10.2003, C-320/03, Commission v Austria, ECLI:EU:C:2005:684 [cit. in para 24] ECJ 09.09.2004, C-72/03, Carbonati, ECLI:EU:C:2004:506 [cit. in para 23] ECJ 14.12.2004, C-434/02, Arnold André, ECLI:EU:C:2004:800 [cit. in para 56] ECJ 12.07.2005, C-154/04 and C-155/04, Alliance for Natural Health et al., ECLI: EU:C:2005:449 [cit. in para 28] ECJ 06.12.2005, C-461/03, Gaston Schul, ECLI:EU:C:2005:742 [cit. in para 18] ECJ 12.12.2006, C-380/03, Germany v Parliament and Council, ECLI:EU: C:2006:772 [cit. in para 20, 39, 55–56]

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ECJ 17.07.2008, C-94/07, Raccanelli, ECLI:EU:C:2008:425 [cit. in para 9] ECJ 16.03.2010, C-325/08, Olympique Lyonnais, ECLI:EU:C:2010:143 [cit. in para 9] ECJ 08.06.2010, C-58/08, Vodafone, ECLI:EU:C:2010:321 [cit. in para 61] ECJ 12.07.2012, C-171/11, Fra.bo, ECLI:EU:C:2012:453 [cit. in para 9] ECJ 04.05.2016, C-358/14, Poland v Parliament and Council, ECLI:EU: C:2016:323 [cit. in para 57] ECJ 04.05.2016, C-477/14, Pillbox 38 (UK) Limited v Secretary of State for Health, ECLI:EU:C:2016:324 [cit. in para 57] ECJ 04.05.2016, C-547/14, Philip Morris Brands SARL, ECLI:EU:C:2016:325 [cit. in para 57] ECJ 30.01.2019, C-220/17, Planta Tabak v Land Berlin, ECLI:EU:C:2019:76 [cit. in para 57]

Opinions of the Advocate General

Opinion of Advocate General Lagrange of 25.06.1964, 6/64, Flamino Costa v E.N.E.L. [cit. in p. 600] Opinion of Advocate General Cosmas of 16.03.1999, C-378/97, Wijsenbeek [cit. in para 38]

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Riedel, H. (2015). Das Binnenmarktziel und seine Bedeutung nach dem Vertrag von Lissabon. Eine Analyse der Entwicklung insbesondere in Bezug auf das System des unverfälschten Wettbewerbs. Hamburg: Dr. Kovač. Riesenhuber, K. (2003). System und Prinzipien des Europäischen Vertragsrechts. Berlin: De Gruyter. Scharpf, F. (1999). Regieren in Europa. Effektiv und demokratisch? Frankfurt am Main: Campus Verlag. Schewe, C. (2019). Brexit, EU citizenship, free movement of persons and the impact on Eastern Europe(ans). In S. Kadelbach (Ed.), Brexit – And what it means (pp. 85–101). Baden-Baden: Nomos. Schlichting, J. M., & Spelten, W. (2005). Die Dienstleistungsrichtlinie. Europäische Zeitschrift für Wirtschaftsrecht, 15(8), 238–240. Schmucker, R. (2003). Europäischer Binnenmarkt und nationale Gesundheitspolitik. Zu den Auswirkungen der “vier Freiheiten” auf die Gesundheitssysteme der EU-Mitgliedsländer. Jahrbuch für Kritische Medizin und Gesundheitswissenschaften, 38, 107–120. Schorkopf, F. (2015). Ursprungslandprinzip (Herkunftslandprinzip). In J. Bergmann (Ed.), Handlexikon der Europäischen Union (5th ed.). Baden-Baden: Nomos. Schütze, R. (2015). European Union law. Cambridge: Cambridge University Press. Schweitzer, H. (2015). Das binnenmarktrechtliche Kartellverbot und Freistellungsrecht. In A. Hatje & P. C. Müller-Graff (Eds.), Enzyklopädie Europarecht: Europäisches Wirtschaftsordnungsrecht (Vol. 4) (§ 8). Baden-Baden: Nomos. Semmelmann, C. (2010). The EU’s economic constitution under the Lisbon Treaty: Soul-searching shifts the focus to procedure. European Law Review, 35(4), 516–541. Shaw, J. (2016). Citizenship, migration and free movement in Brexit Britain. German Law Journal, 17(Brexit Supplement), 99–104. Stafford, P. (2021, February 10). Amsterdam ousts London as Europe’s top share trading hub. Financial Times. Stefánsson, S. M. (2016). Die Kapitalverkehrsfreiheit in der Europäischen Union und im Europäischen Wirtschaftsraum. Europarecht, 51(6), 706–723. Streinz, R. (2010). Grundrechte und Grundfreiheiten. In D. Merten & H.-J. Papier (Eds.), Handbuch der Grundrechte in Deutschland und Europa. Vol. VI/1: Europäische Grundrechte I (pp. 663–686). Heidelberg: C. F. Müller. Streinz, R. (Ed.). (2018). EUV/AEUV. Vertrag über die Europäische Union und Vertrag über die Arbeitsweise der Europäischen Union (3rd ed.). Munich: C. H. Beck. Streinz, R., & Leible, S. (2000). Die unmittelbare Drittwirkung der Grundfreiheiten. Europäische Zeitschrift für Wirtschaftsrecht, 11(15), 459–467. Streit, M. E., & Mussler, W. (1994). The economic constitution of the European Community: From “Rome” to “Maastricht”. Constitutional Political Economy, 5(3), 319–353. Strohmeier, R., & Spichtinger, D. (2016). Dealing with data – Legislative challenges and opportunities for the digital single market from the perspective of research. In H.-J. Blanke, P. Cruz Villalón, T. Klein, & J. Ziller (Eds.), Common European legal thinking. Essays in honour of Albrecht Weber (pp. 529–542). Heidelberg: Springer. Swann, D. (1996). European economic integration: The common market, European Union and beyond. Cheltenham: Edward Elgar Publishing. Temple Lang, J. (2017). Brexit and Ireland – Legal, political and economic considerations. In European Parliament. Study for AFCO committee. Retrieved from http://www.europarl. europa.eu/RegData/etudes/STUD/2017/596825/IPOL_STU(2017)596825_EN.pdf Terhechte, J. (2015). “Constitutional moments” im europäischen Wettbewerbsrecht? – Wettbewerbsverfassung – Individualisierung – Ökonomisierung. In P. Behrens, M. Kotzur, & K. Lammers (Eds.), Sechs Dekaden europäischer Integration – eine Standortbestimmung (pp. 65– 83). Baden-Baden: Nomos. Tezcan-Idriz, N. (2009). Free movement of persons between Turkey and the EU: To move or not to move? The response of the judiciary. Common Market Law Review, 46(5), 1621–1665.

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The Guardian. (2017, 17 January). Brexit: May’s threat to Europe: ‘no deal for Britain is better than a bad deal’. Retrieved from https://www.theguardian.com/politics/2017/jan/17/primeminister-vows-to-put-final-brexit-deal-before-parliament The Telegraph. (2017, 14 January). Theresa May to side with Eurosceptics in major Brexit speech revealing what she wants from negotiations. Retrieved from http://www.telegraph.co.uk/news/ 2017/01/14/theresa-may-side-eurosceptics-major-brexit-speech-revealing/ The Times. (2017, 15 January). May calls for clean and hard Brexit. Retrieved from https://www. thetimes.co.uk/edition/news/may-calls-for-clean-and-hard-brexit-5xm8820rz Tinbergen, J. (1954). International economic integration. Amsterdam & Brussels: Elsevier. Tohidipur, T. (2011). Europäisches Migrationsverwaltungsrecht. In J. P. Terhechte (Ed.), Verwaltungsrecht der Europäischen Union (pp. 1143–1187). Baden-Baden: Nomos. Tusch, S., & Herz, B. (2015). Die Entwicklung des europäischen Bankaufsichtsrechts in den Jahren 2014/2015. Europäische Zeitschrift für Wirtschaftsrecht, 26(21), 814–820. van de Gronden, J. W. (2007). Das Gesundheitswesen im Spannungsfeld von Nationalstaat und EU-Binnenmarkt. Ein niederländischer Beitrag zur Frage der Kompatibilität nationaler Gesundheitssysteme und Reformmodelle mit dem EG-Recht. Stuttgart: Lucius & Lucius Verlagsgesellschaft. Vedder, C., & Heintschel von Heinegg, W. (2018). Europäisches Unionsrecht. EUV. AEUV. Grundrechtecharta. Handkommentar. (2nd ed.). Baden-Baden: Nomos. Verspohl, I. (2011). Gesundheitspolitik durch die Hintertür. Der Einfluss der EU auf das deutsche Gesundheitssystem. In Friedrich Ebert Stiftung (Ed.), Internationale Politikanalyse (pp. 3–15). von der Groeben, H., Schwarze, J., & Hatje, A. (Eds.). (2015). Europäisches Unionsrecht. Vertrag über die Europäische Union – Vertrag über die Arbeitsweise der Europäischen Union - Charta der Grundrechte der Europäischen Union Kommentar (7th ed.). Baden-Baden: Nomos. von der Leyen, U. (2019). A Union that strives for more. My Agenda for Europe. Retrieved from https://ec.europa.eu/commission/sites/beta-political/files/political-guidelines-next-commission_en.pdf von Jagow, C. (2016). Gültigkeit der Tabakproduktrichtlinie. Gewerblicher Rechtsschutz und Urheberrecht. Praxis im Immaterialgüter- und Wettbewerbsrecht, 8(11), 251–252. Wahl, R. (2013). Das Recht der Integrationsgemeinschaft Europäische Union. In C. Franzius et al. (Eds.), Beharren. Bewegen. Festschrift für Michael Kloepfer zum 70. Geburtstag (pp. 239– 255). Berlin: Duncker & Humblot. Weatherhill, S. (2011). Consumer policy. In P. Craig & G. de Búrca (Eds.), The evolution of the EU law (2nd ed., pp. 837–867). New York: Oxford University Press. Weber, M. (2017). Beim Brexit geht es um den Erhalt der europäischen Rechtsordnung. Europäische Zeitschrift für Wirtschaftsrecht, 28(24), 953–954. Weller, M., Thomale, C., & Benz, N. (2016). Englische Gesellschaften und Unternehmensinsolvenzen in der Post-Brexit-EU. Neue Juristische Wochenschrift, 69(33), 2378–2383. Wendland, M. (2017). Die Auswirkungen des Brexit auf das Europäische Wettbewerbsrecht. In M. Kramme, C. Baldus & M. Schmidt-Kessel (Eds.), Brexit und die juristischen Folgen – Privatund Wirtschaftsrecht der Europäischen Union (pp. 231–259). Baden-Baden: Nomos. Wortley, B. A. (1974). General introduction: Background and aims. In B. A. Wortley (Ed.), The law of the common market (pp. 1–12). Manchester: Manchester University Press. Ziegler, K. (2004). Grundfreiheiten und soziale Dimensionen des Binnenmarktes: die Verfassung als Impuls? Europarecht, 39(Beiheft 3), 13–39.

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Article 27 [Exceptions to Internal Market Regulations] (ex-Article 15 TEC) When drawing up its proposals9,10,11,13,15,18 with a view to achieving the objectives set out in Article 26,7,9,15,16,17 the Commission shall take into account the extent of the effort that certain economies showing differences in development5,8,12,16,20,26,28 will have to sustain for the establishment of the internal market and it may propose appropriate provisions.4,10,16,18,19 If these provisions take the form of derogations,19,20,21,28 they must be of a temporary nature22,23 and must cause the least possible disturbance to the functioning of the internal market.16,20,24

Contents 1.

Differentiated Establishment of the Internal Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. Development and Purpose of the Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Article 27 TFEU as an Expression of Differentiated Integration for Reasons of Solidarity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2. Obligations of the European Commission (Paragraph 1) and the EU Legislators . . . . . . . . . 9 2.1. The European Commission as the Explicit Addressee of the Rule . . . . . . . . . . . . . . . . . . 9 2.2. Scope of the Duty to Take Into Account the Economic Disparities Between the Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.3. Content of the Duty “to Take Into Account” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.4. Proposing Specific Provisions (Legal Consequences of Paragraph 1) . . . . . . . . . . . . . 18 3. The Adoption of Specific Provisions (Paragraph 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.1. Requirements for Exemptions and Derogations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.2. The Appropriateness of the Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.3. Characteristics and Justiciability of the Special Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4. Practical Scope of Application of the Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 List of Cases References

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Differentiated Establishment of the Internal Market

1.1. Development and Purpose of the Rule

Article 27 TFEU dates back to Article 15 of the Single European Act of 28 February 1986 and was in its version as of 1 July 1987 incorporated as Article 8 C into the EEC Treaty until 31 October 1993. On the Maastricht Reform Treaty, it was codified in the Union’s primary law as Article 7c of the EC Treaty and then since 1 May 1999 until the entry into force of the Treaty of Lisbon as Article 15 TEC-Amsterdam.1 1

On the historical development of this rule, which has its roots in a provision of the gradual establishment of the common market during a twelve-year transitional period ending in 1970, i.e., #

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Since the Single European Act, its content stands almost unchanged in the primary law. This Treaty rule is the result of an initiative of the southern Member States and ought to take into account the expected consequences of the uniform internal market rules in light of greatly differing national economic situations of the Member States.2 Article 27 TFEU is considered one of the first rules that has given rise to the concept of differentiated (graded) integration within the primary Union law (➔ para 5–8).3 The principle of mutual respect, which is laid down here, always applies when the Union, in fulfilment of this legislative mandate, adopts secondary legislation in the area of the internal market. Therefore, this rule refers to all measures of secondary legislation, which provide harmonisation and unification of national laws eliminating barriers to trade, the free movement of persons and exchange of services.4 The wording of Article 27 TFEU differs from the wording of the Maastricht Treaty (1992/1993) only in so far as it relates to the “internal” market (and no longer to the “common” market [➔Article 26 TFEU para 14 et seqq.]). Compared to the Treaty establishing a Constitution for Europe, the rule of Article 27 TFEU stands alone and, unlike Article III-130 TCE, contains a reference to the basic rule on the internal market and to the legislative mandate for its establishment (➔Article 26 TFEU). However, the idea to combine the current Articles 26 and 27 TFEU in one single standard did not gain acceptance. Above all, the fact that all forms of differentiated integration5 have an impact on the unity of EU law is a strong point to maintain the separation of the two provisions. Due to the experiences of recent years, especially this consideration is likely to become even more relevant in the future. Article 27 TFEU refers to the mandate given to the Union to regulate the internal market as defined in Article 26 TFEU. Article 27 TFEU differentiates in its wording between the duty “to take into account” and the proposal of “appropriate provisions”. However, this does not mean that these are two different mandates. The rule has a complementary function on the existing shared competence of the Union for the internal market (Article 4.2 point a TFEU) in the sense of the principle of mutual respect between the Union and its (less developed) Member States, but also between the Member States themselves. Breaking the principle of equality from Article 8 TEEC, subsequently renumbered 7 by the Maastricht Treaty, to its complete abrogation by the Treaty of Amsterdam, and on the development of the following standard on the gradual introduction of the internal market during a transitional period ending at the end of 1992, i.e., from Article 8 A- C TEC-SEA to Article 7a-c TEC-Maastricht and then to Article 15 TEC-Amsterdam (the latter is identical with Article 7c TEC-Maastricht and is now Article 27 TFEU), cf. de Keersmaeker and Pauwels (2010), para 27-03; see also Weiss and Kaupa (2014), p. 9 et seq., Korte, in Calliess and Ruffert (2016), Article 27 AEUV para 2; Terhechte, in Pechstein et al. (2017), Article 27 AEUV para 2. 2 Cf. Pingel, in Pingel (2010), Article 15 CE para 2. 3 Cf. Klamert, in Kellerbauer et al. (2019), Article 27 TFEU para 1. 4 Hatje, in Becker et al. (2019), Article 27 AEUV para 2. 5 Cf. Schröder, in Streinz (2018), Article 27 AEUV para 3; Terhechte, in Pechstein et al. (2017), Article 27 AEUV para 2.

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between Member States, it aims to facilitate the less developed Member States to adapt to the conditions of competition within the internal market. Union law thus fulfils the obligation to respect in solidarity the individual economic situation of Member States (➔ para 5 et seq., 28). However, Article 27 TFEU, to be interpreted as a restrictive exception, does not allow deviations from mandatory norms of primary law,6 including the rights and freedoms guaranteed by the Treaties, not even by means of the case law of the CJEU.7

1.2. Article 27 TFEU as an Expression of Differentiated Integration for Reasons of Solidarity

In the context of the European Treaties, Article 27 TFEU is an early expression of differentiated integration within the completion of the internal market under Article 3.3(1) TEU and Article 26 TFEU.8 Accordingly, when setting up the internal market, the Commission must consider the level of efforts and measures that are or can be requested from several national economies deviating downwards in their economic development concerning the completion of the internal market. Thus, the EU primary law recognises that the national economic performance of each individual Member State differs, with the effect that the contractual recognition of the principle of equality of states9 (➔ Article 4 TEU para 11 et seqq.) in this respect could lead to disadvantages and significant burdens for some economically less developed states (➔ Article 4 TEU para 8 seq.). The purpose of the rule is to make it easier for these weaker economies in the European Union to adapt to the conditions of competition in the internal market (➔ Article 26 TFEU para 37 et seqq.) to protect them from possible excessive and negative consequences resulting from the uniform and complete implementation of this principle. State equality, understood as equality of advantages and obligations that arise for all Member States from the concept of the internal market, is being broken in parts to compensate for disadvantages in competitiveness of the weaker national economies of individual Member States.10 All Member States are obliged to subordinate their national interests to the overall interests of the European Union 6

Cf. Voet van Vormizeele, in von der Groeben et al. (2015), Article 27 AEUV para 11; Hatje, in Becker et al. (2019), Article 27 AEUV para 2; Schröder in Streinz (2018), Article 27 AEUV para 6. 7 Hatje, in Becker et al. (2019), Article 27 AEUV para 3. 8 See Thym, in Hatje and Müller-Graff (2014), § 5; de Búrca (2000), p. 133. 9 On the relationship between the equality of Member States before the Treaties (sentence 1 of Article 4.2 TEU) and the differentiated integration, see, e.g. Wouters and Schmitt (2017), p. 43 et seqq. 10 Bast, in Grabitz et al. (2020), Article 27 AEUV para 7 (released in 2016). Historically, this provision dates back to the so-called southern enlargement on the accession of the Iberian states to the Community in 1986. Their economies were not, and could not have been, as interwoven with the economies of the older Member States as they already were among each other, given their earlier access to the Community. Cf. Voet van Vormizeele, in von der Groeben et al. (2015), Article 27 AEUV para 1, 5.

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to effectively fulfil the objectives and tasks set out in the Treaties.11 However, the standards for the protection of health, safety, the consumer protection and the protection of the environment between the Member States shall not be assimilated.12 Article 27 TFEU is a normative expression of the “interconnected system of effective reciprocity” within the Union.13 The principle of solidarity (Article 3.3(3) TEU; ➔ Article 3 TEU para 41 et seq.) is therefore a significant reason for the introduction of this rule,14 given that it demands the consideration of national, regional and socio-economic characteristics of the Member States,15 and obliges the Union as well as the Member States (➔ Article 4 TEU para 86 and 88 et seqq.). Against this backdrop, Article 27 TFEU should be understood as a compromise, which mediates between the principle of integration (first recital of the Preamble to the TFEU and Article 1.2 TEU), the principle of uniform application of Union law16 as an “essential prerequisite for ensuring the functioning and identity of the Community”,17 and the necessary primacy of the European Union law18 (Declaration No. 17 of the Lisbon Treaty) on one hand, and the principles of solidarity (Article 4.3 TEU) and cohesion (Article 174.1 TFEU) on the other.19 In this context, as part of the implementation of the ambitious internal market concept, a specific form of “differentiated integration”20 has been conceived, which is

11 Cf. Case C-128/78, Commission v UK (ECJ 7 February 1979) para 9, 12; cf. also Case C-304/02, Commission v France (Opinion of Advocate General Geelhoed of 29 April 2005) para 8; Case 22/ 70, Commission v Council (ECJ 31 March 1971) para 77/78. 12 Voet van Vormizeele, in von der Groeben et al. (2015), Article 27 AEUV para 2. 13 Cf. Tomuschat (1987), p. 754 without referring to the predecessor to Article 27 TFEU; following on from this identification, cf. on the principle of solidarity within the Union Blanke and Pilz (2014), p. 545 et seqq. 14 Cf. Klamert, in Kellerbauer et al. (2019), Article 27 TFEU para 1. The obligations to cooperation, collaboration, loyalty and solidarity are an outflow of the principle of sincere cooperation pursuant to Article 4.3 TEU (➔ Article 4 TEU para 81). In view of its open wording, however, Article 4 (3) TEU cannot be interpreted as a legal obligation on the part of the Member States. In the context of interest here, the principle of solidarity is also laid down in the catalogue of values of the Union (➔ Article 2 TEU para 5 et seq., 23). 15 E.g., Joined Cases 6/69 and 11/69, Commission v France (ECJ 10 December 1969) para 14, 17; cf. also Calliess, in Calliess and Ruffert (2016), Article 122 AEUV para 8 et seq. 16 Article 27 TFEU is one of a series of provisions that explicitly permit deviations from the principle of uniform application of Union law, primarily Article 114.3 and 4, 153.4, subparagraph 1 of Article 168.4 point (a), and Articles 169.4 and 193 TFEU, which allow the Member States to adopt stricter national provisions to pursue non-economic objectives. 17 Cf. v. Danwitz (2008), p. 156 with further references. 18 Cf. Case 6/64, Costa v E.N.E.L (ECJ 15 July 1964) p. 1269. 19 Cf. Korte, in Calliess and Ruffert (2020), Article 27 AEUV para 4; Bast, in Grabitz et al. (2020), Article 27 AEUV para 5 (released in 2016); Voet van Vormizeele, in von der Groeben et al. (2015), Article 26 AEUV para 2; regarding the legal significance of the cohesion aim cf. Case C149/96, Portugal v Council (ECJ 23 November 1999) para 86; cf. also the older literature, e.g. Glaesner (1986), p. 134; Hayder (1989), p. 644. 20 Cf. Huber (1996), p. 347; Grieser (2003), p. 30; Janning (1994), p. 527. Cf. also Langeheine (1983), p. 227 seq.: Thym (2004), p. 68 seqq.

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also described under the synonym “federal multi-speed method” (➔ Article 20 TEU para 4) or “two-speed Europe”21 or even “Europe à la carte”.22 However, since the measures aimed at achieving the internal market include all Member States, Article 27 TFEU displays significant differences from the concept of enhanced cooperation laid down in Articles 20 TEU and 326 et seqq. TFEU. Under tight conditions, the rule allows a partial derogation from the performance standards but does not open options to downgrade the internal market objective or to opt out. Hence, Article 27 TFEU introduces an “élément de souplesse”23 or an element of flexibility in view of the imbalanced economic development of the Member States. However, it is also the opposite pool to paragraphs 4 and 5 of Article 114 TFEU, the second variant of Article 153.4 TFEU, point (a) of Article 168.4 (1) TFEU, Article 168.5 TFEU and Article 193 TFEU, which all allow the adoption of stricter national standards to achieve under certain circumstances non-economic objectives.24 The concept of differentiated integration (➔ Article 20 TEU para 3, 5 et seqq.) offers the advantage, that “different speeds” allow some (economically less developed) Member States to accomplish the still necessary adjustment, while other (economically stronger) Member States can proceed in integration policy by cooperating more closely. From this perspective, differentiated integration25 also proves indispensable for the process of establishing the internal market.26

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Obligations of the European Commission (Paragraph 1) and the EU Legislators

2.1. The European Commission as the Explicit Addressee of the Rule

According to its wording, the rule is primarily directed at the Commission. This explicit mandate can be understood as a consequence of its monopoly right of initiative.27 When drawing up its proposals to achieve the objectives “establishing

21

Pescatore (1986), p. 159. The term is known in French as “plusieurs vitesses” and in German as “Europa der zwei Geschwindigkeiten”. Cf. to this also Piris (2012), p. 8 et seq. 22 Cf. Pingel, in Pingel (2010), Article 15 CE para 2 in fine. 23 Cf. Pingel, in Pingel (2010), Article 15 CE para 2, who also refers to Simon, in Constantinesco et al. (1992), p. 82: “un assouplissement indispensable du principe d’unicité du droit communautaire”. 24 Korte, in Calliess and Ruffert (2016), Article 27 AEUV para 5; Terchechte, in Pechstein et al. (2017), Article 27 AEUV para. 4. 25 On the basic details of this concept, see Warleigh (2002), p. 1 et seq., who on pages 57 et seq. also points out its problematic aspects. 26 Cf. Schimmelpfennig et al. (2015), p. 764; also Leruth and Lord (2015), p. 754. 27 Kotzur, in Geiger et al. (2015), Article 27 TFEU para 1.

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or ensuring the functioning of the internal market” (Article 26.1 TFEU)28 under Article 26.3 TFEU, the Commission shall propose the measures, i.e., “the guidelines and conditions necessary to ensure balanced progress in all the sectors concerned”. Furthermore, the scope of Article 27 TFEU comprises all legislators on the Union level, since otherwise the provisions adopted by them would be less “effective”.29 “Appropriate provisions” to be proposed by the Commission must consider the economic disparities between the Member States. However, the proposals of the Commission in this respect are not justiciable, since they are not a suitable subject of an action for annulment under Article 263 TFEU, and cannot be reviewed concerning their validity within the preliminary ruling procedure under Article 267 TFEU (➔ para 26).30

2.2. Scope of the Duty to Take Into Account the Economic Disparities Between the Member States

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The scope of the norm covers all proposals for secondary legal acts, aimed at establishing the internal market that, under Article 26.2 TFEU, focuses on the four fundamental freedoms (“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”), but also protects competition (➔ Article 26 TFEU para 37 et seqq.). In contrast to former Article 14.1 TEC, Article 26.1 TFEU does not provide a list of the relevant legal bases. Rather, it comprises the legislative powers of the Union that aim to contribute directly to remove obstacles hindering the achievement of the internal market freedoms referred to in Article 26.2 TFEU, but also to eliminate serious distortions of competition. In that regard, mention must be made, in particular, to the approximation of laws (Article 114 TFEU) as the fundamental tool for the internal market achievement. However, the rule set out in Article 27 TFEU itself does not constitute a legal basis.31 28

Contrary to the wording of Article 27.1 TFEU (“with a view to achieving the objectives set out in Article 26”), Klamert in Kellerbauer et al. (2019), Article 27 TFEU para 5, wants to limit the scope of application of the provision to the “establishment of the internal market”, and thus exclude all aspects of its “functioning”. However, reference to the “establishment of the internal market” is made here only regarding “the extent of the effort that [certain Member States] will have to sustain for [. . .].” According to Schröder, in Streinz (2018), Article 27 AEUV para 9, this wording is plain evidence of the transitional nature of the provisions adopted under Article 27. 29 Cf. Kotzur, in Geiger et al. (2015), Article 27 TFEU para 1; Korte, in Calliess and Ruffert (2016), Article 27 AEUV para 7; Schröder, in Streinz (2018), Article 27 AEUV para 7. 30 Terhechte, in Pechstein et al. (2017), Article 27 AEUV para 7; also Bast, in Grabitz et al. (2020), Article 27 AEUV para 9 (released in 2016); indecisively Klamert, in Kellerbauer et al. (2019), Article 27 TFEU para 6. 31 Bast in Grabitz et al. (2020), Article 27 AEUV para 8 (released in 2016); Korte, in Calliess and Ruffert (2016), Article 26 AEUV para 6; different Case C-414/04, Parliament v Council (Opinion of Advocate General Geelhoed of 1 June 2006) para 5 et seqq.

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The starting point for the Commission’s duty laid down in Article 27.1 TFEU is the different economic situation of the EU Member States. Implementation difficulties of a legal or even political nature do not fall under Article 27 TFEU. Initially, the rule targeted in particular the four so-called cohesion countries Greece, Portugal, Spain and Ireland, which were considered economically relatively “weak” with a per capita income less than 90% of the Community.32 In the context of the enlargement involving Central, Eastern, and Southern European countries, the economic imbalances within the internal market have increased. Its status quo will continue to determine the European internal market policy in the near future. The achievement of the purpose of Article 27 TFEU depends not only on the volume of national accounts aggregates, but also on a differentiated view of the respective regulated or affected segments. Internal market regulations implemented in a Member State with a high level of development, such as the Federal Republic of Germany, can lead to more burdens for economically less developed regions within this country, as was the case when the new German Länder of Brandenburg, Mecklenburg-Vorpommern, Saxony, Saxony-Anhalt and Thuringia had been included in the territorial scope of application of the Communities’ Treaties. The duty to consider the interests referred to in Article 27.1 TFEU, and the requirement “to take into account the objectives set out in Article 174” (Article 175.1 TFEU), laid down in the context of the economic, social and territorial cohesion policy (Article 174 TFEU), do complement each other.33

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2.3. Content of the Duty “to Take Into Account”

Under Article 27 TFEU, the European Commission must consider the concerns and interests of the economically weaker Member States. Their national interests may be considered by drafting proposals for provisions contributing to the completion of the internal market, which are, if necessary, differentiated. In particular, Article 27 provides for (sufficiently) long deadlines for the adaptation of national legislation and the use of approximation techniques, such as the setting of minimum and maximum standards, or the option between different solutions, which, however, are compatible with each other. Measures considering the specific situation of 32 Voet van Vormizeele, in von der Groeben et al. (2015), Article 27 AEUV para 5. The Cohesion Fund (Article 177 TFEU) is reserved for Member States whose gross national income (GNI) per capita is less than 90% of the EU average. For the 2014–2020, programming period it provided support to investment in the environment, trans-European networks in the area of transport infrastructure, and technical assistance. The original objective of the Cohesion Fund was to support the economically less developed Member States so they can fulfil the criteria of the European Economic and Monetary Union membership; cf. Bache (2010), p. 246 et seqq.; Heinemann et al. (2010), especially Chap. 2, 4, 6; Kauppi and Graves (2013), para 177.03 [2], 177.04 et seq. 33 Bast, in Grabitz et al. (2020), Article 27 AEUV para 9 (released in 2016); Voet van Vormizeele, in von der Groeben et al. (2015), Article 27 AEUV para 2 et seq.; Lux, in Lenz and Borchardt (2012), Article 27 AEUV para 4.

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individual Member States may be adopted as well as measures, which are addressed to all of them if they are adapted to those with an economically weaker level.34 This flexibility is based on the fact that even in the first days of integration, due to the economic heterogeneity of the Member States, progress could only be made in adopting legislative approximation measures, if the specific national concerns were respected. The need for flexibility increased again due to the accession of Central and Eastern European countries to the Union in 2004, 2007 and 2013, whose economies are marked by the transformation process from centrally planned economy to (social) market economy (“convergence”).35 However, the distinction made in Article 27 TFEU according to the particular concerns of each Member State when drawing up the Commission’s proposals for the establishment or ensuring the functioning of the internal market is not sufficient to strengthen economic and social cohesion in the internal market framework. In that regard, additional Union support measures under Articles 176–178 TFEU are required. To best achieve all the objectives of the European Union, including the need for “its overall harmonious development” (➔ para 14; Article 174 TFEU), the extent and limit of the flexibility offered under Article 27 TFEU must be concretised in each case concerning its intended objective of completing the internal market. The specific provisions must cause the least possible disturbance to the functioning of the internal market. They must comply with the principle of proportionality,36 in particular the criterion of necessity, and must therefore not go beyond what is strictly necessary to adapt the less efficient economies to the conditions of competition within the internal market (➔ para 4, 6, 11). The

34

Hatje, in Becker et al. (2019), Article 27 AEUV para 4; cf. also older literature like Ehlermann (1987), p. 374 who refers to the Protocol on Italy of the Treaty establishing the EEC (1957) (available at http://data.europa.eu/eli/treaty/teec/sign), to Protocol No 6 on certain quantitative restrictions relating to Ireland annexed to the Act concerning the Conditions of Accession and the Adjustments to the Treaties (O.J. L 2/10 [1973]), and to Protocol No 7 on imports of motor vehicles and the motor vehicle assembly industry in Ireland (O.J. L 73/168 [1972]) annexed to the Treaty on the accession to the European Communities of the Kingdom of Denmark, Ireland, the Kingdom of Norway and the United Kingdom of Great Britain and Northern Ireland (1972). Another example of differentiated integration as a means of addressing the economic heterogeneity of the Member States were, until the status of Greenland was modified under the Treaty, the differentiations made due to the relationship of the numerous islands belonging to Denmark, in particular Protocol No 4 on Greenland (O.J. L 73/165 [1972]), which was agreed on the occasion of the accession of Denmark to the EEC. 35 See for an analysis of the economic convergence and structural change in the ten central and eastern Member States that joined the EU in 2004 and 2007 (New Member States), Dobrinsky and Havlik (2014); available at https://wiiw.ac.at/economic-convergence-and-structural-change-therole-of-transition-and-euaccession-dlp-3357.pdf. On the development of central and eastern European welfare regimes after 1989, see Walthelm (2015), p. 162 et seqq. 36 Kotzur, in Geiger et al. (2015), Article 27 TFEU para 5; regarding the principle of proportionality in Union law, cf., e.g. Trstenjak and Beysen (2012), p. 265.

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principle of proportionality also requires the establishment of the most “reasonable measure” and, as a final point, the balancing of the conflicting interests.37 In the case of Article 27 TFEU, this means that a balance must be struck between the interests of the economically weak Member State on the one hand and the scope of the derogations for the achievement of the internal market or the objectives of the Union on the other. Consequently, none of the “actions leading to the strengthening of its economic, social and territorial cohesion” and aiming “at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions” (Article 174.1 and 2 TFEU) may affect the achievement of the internal market (Article 26.2 TFEU) beyond what is strictly necessary to facilitate the adjustment of the economically less developed Member States, and justified based on the principle of proportionality. Article 27 TFEU does not provide any information about the respective balance to be made.38 While considering the situation of the underperforming Member States and “the extent of [their] effort [. . .] to sustain for the establishment of the internal market” (Article 27.1 TFEU), the Union legislators must simultaneously always be fully and completely conscious of the fact that these are burdens which ultimately stem from the decisions of the participants in commercial traffic. “Efforts” within the meaning of that rule are therefore all unequally distributed adaptation costs (adjustment burdens) between the Member States arising out for the economic operators in the legislative pursuit of the internal market objective.

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2.4. Proposing Specific Provisions (Legal Consequences of Paragraph 1)

The Commission is required to propose and draft proportional provisions aimed at balancing the interests that diverge between the more efficient and the less productive Member States. It is also possible to apply different methods of partial harmonisation, such as the optional approximation of laws, in which a flexibility clause allows the Member States to maintain or introduce rules for domestic matters that differ from the Union’s standards (➔ Article 114 TFEU para 66 et seqq.).39 In the case of legislative proposals, the Commission must respect the general limits set in Article 114.1 TFEU for the exercise of Union powers and to act within the limits of the principle of proportionality under Article 5.4 TEU. This means that it is within its margin of appreciation how to respond to the economic disparities within the internal market.

37 Cf. Bast, in Grabitz et al. (2020), Article AEUV 27 para 11 (released in 2016); Kotzur, in Geiger et al. (2015), Article 27 TFEU para 5; Korte, in Calliess and Ruffert (2016), Article 27 AEUV para 10 et seq. 38 Hayder (1989), p. 646; Voet van Vormizeele, in von der Groeben et al. (2015), Article 27 AEUV para 7. 39 Cf. Case C-233/94, Germany v Parliament and Council (ECJ 13 May 1997) para 1; Case C-222/ 02, Peter Paul and Others v Germany (ECJ 12 October 2004) para 36 et seqq.

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The underlying concept behind the broad wording of the Treaty rule enshrined in Article 27 TFEU is a differentiation between two forms of derogations. On the one hand, secondary legislation can be enacted for all Member States temporarily or for an indefinite period, or by setting minimum standards, maximum limits, margins schemes or options to choose. Given that in this case not only individual but all Member States are concerned, there is no genuine derogation within the meaning of Article 27 TFEU. The same applies if the legislative act is based on factual differences without specifically addressing individual Member States. On the other hand, the Commission may also propose legislation or specific provisions exempting individual Member States or regions from their scope or referring only to certain Member States or to certain regions.40 In view of the fact that from the start Union law in the area of the internal market will not apply to individual Member States, such a genuine derogation, within the meaning of Article 27.2 TFEU, leads to a special legal situation to relieve the states concerned. Minimum, margin or alternative regimes for the Member States concerned, for example in the approximation of laws, are possible regulation modes under Article 27.1 TFEU.41 However, Article 27 TFEU does not allow the creation of obstacles to the free movement of goods.42 Indeed, according to Article 36 TFEU and the case law of the CJEU, exceptions to the principle of the free movement of goods can only be justified on non-economic grounds.

3.

The Adoption of Specific Provisions (Paragraph 2)

3.1. Requirements for Exemptions and Derogations

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To consider the different levels of development of certain national economies within the Union, Article 27.2 TFEU implicitly paves the way for the organs of the Union, to adopt, if necessary, “appropriate provisions” as mentioned in paragraph 1. In the case of a genuine “derogation” within the meaning of paragraph 2, there is a risk of provoking disintegrating effects in the area of the internal market and thus creating “special advantages” in favour of the concerned states. Therefore, this norm establishes special requirements that must be respected in addition to the 40 Voet van Vormizeele, in von der Groeben et al. (2015), Article 27 AEUV para 9, sees no reason to distinguish between exceptions that apply only to the less developed Member States, on the one hand, and differentiating regulations that apply to all Member States, on the other, when assessing whether differentiations are permissible under EU law or harmless in terms of integration policy. 41 Cf. on the regulating alternatives (including all Member States or creating special provisions taking into account the economic situation of individual Member States) Korte, in Calliess and Ruffert (2016), Article 27 AEUV para 12 et seqq.; Bast, in Grabitz et al. (2020), Article 27 AEUV para 14 et seqq. (released in 2016); Schröder, in Streinz (2018), Article 27 AEUV para 13 et seq.; Ihns (2005), p. 81; on this, cf. also Dougan (2000), p. 854 seqq. 42 Cf. Voet van Vormizeele, in von der Groeben et al. (2015), Article 27 TFEU para 13; Hatje, in Becker et al. (2019), Article 27 AEUV para 6.

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overwhelming limitations which draw a line to the exercise of Union powers. Derogations “must cause the least possible disturbance to the functioning of the internal market”. Further, this is an expression of the principle of proportionality under Article 5.4 TEU (➔ Article 5 TEU para 12 et seq.).43

3.2. The Appropriateness of the Provisions

The term “appropriate” embodies a specific application of the principle of proportionality (➔ para 16). The Commission may propose only those measures that are strictly necessary to prevent or eliminate actual and serious difficulties.44 The regulations conceived to satisfy the needs of the economically less developed Member States, i.e., the genuine “derogations”, must therefore respect the principles of Union law, in particular proportionality and non-discrimination. Hence, they must avoid (in-)direct discrimination45 between producers or consumers from different Member States. The emergence of obstacles to the internal market, in particular, the restriction of market freedoms caused by a derogation must not go beyond what is necessary to achieve its purposes.46 Not “appropriate” per se are proposals that adapt the internal market level to the economically weakest Member State.47 There is a delicate balance between the objectives of achieving the internal market and avoiding excessive burdens for individual Member States. Harmonisation measures, which only temporarily maintain existing differences concerning the regulation of the internal market, are considered proportionate. This is in line with the principle spelt out by the CJEU, according to which the Union legislature is authorised to progressively introduce necessary harmonisation concerning the peculiarities of the regulated matter (➔ Article 114 TFEU para 32).48 On the other hand, harmonisation measures which give all Member States equally broad

43 Korte, in Calliess and Ruffert (2016), Article 27 AEUV para 15; Kotzur, in Geiger (2015), Article 27 TFEU para 5; Kadelbach, in von der Groeben et al. (2015), Article 5 AEUV para 49; Terhechte, in Pechstein et al. (2017), Article 27 AEUV para 9. 44 See for an analogue interpretation, cf. Case 12/88, Schäfer Shop BV v Minister van Economische Zaken (ECJ 21 September 1989) para 19. Here the ECJ dealt with the Protocol on German internal trade and connected problems, which stated in Article 3 that “[e]ach Member State may take appropriate measures to prevent any difficulties arising for it from trade between a Member State and the territories in which the Basic Law of the Federal Republic of Germany does not apply.” 45 On this, cf. also Ambrosini (2017), p. 255 et seqq. 46 Bast, in Grabitz et al. (2020), Article 27 AEUV para 20 (released in 2016); Voet van Vormizeele, in von der Groeben et al. (2015), Article 27 AEUV para 12. 47 Schröder, in Streinz (2018), Article 27 AEUV para 10, 13. 48 Cf. Case C-222/02, Peter Paul and Others v Germany (ECJ 12 October 2004) para 36 et seqq.; Case C-63/89, Les Assurances du Crédit SA and Compagnie Belge d’Assurance Crédit SA v Council and Commission (ECJ 18 April 1991) para 11; Case 37/83, Rewe-Zentral AG v Direktor der Landwirtschaftskammer Rheinland (ECJ 29 February 1984) para 20.

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scope for action or which provide for implementation options in the context of partial harmonisation are not permitted under Article 27 TFEU.49 Various product-related rules with a permanent nature must be considered to be excessive, in particular if justified solely by the difficulties of certain Member States to adapt their national legal order to the standards of the Union.50 Hence, according to paragraph 2, the provisions must be of a temporary nature, meaning limited in time, to be appropriate. It is controversial whether this requirement is satisfied solely by a time limit. In any case, the regulatory purpose of paragraph 2 can only be achieved by a formulation which does not leave the expiry of an exemption to the discretion of the legislator or to the discretion of the Member State concerned. A simple revision clause is therefore not sufficient. There are no fundamental objections to an authorisation of the European Commission, which obliges it, subject to certain conditions, to revoke a derogation.51 Disproportionate and to a large extent contrary to Union law are also “provisions” under paragraph 2 which represent a partial step backwards compared to the achieved level of harmonisation; this endangers the acquis communautaire in the field of market unity.52 The EU legislature is accordingly called upon not to establish avoidable cross-national differences in addition to those which in any case have already arisen or have resulted from the lack or inadequate harmonisation of national legislation.53

3.3. Characteristics and Justiciability of the Special Regime

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Creating specific provisions to consider the situation of differently developed Member States is regarded by some authors as a specific phenomenon of a twospeed Europe, aspired by the Contracting Parties of the SEA already in 1986/87.54 49

Bast, in Grabitz et al. (2020), Article 27 AEUV para 15 (released in 2016). Case C-457/05, Schutzverband der Spiritousen-Industrie (ECJ 4 October 2007) para 37; in detail Gundel 2008, p. 248. 51 Cf. Bast, in Grabitz et al. (2020), Article 27 AEUV para 19 (released in 2016); Hatje, in Becker et al. (2019), Article 27 AEUV para 7. 52 Joined Cases 80/77 and 81/77, Société Les Commissionnaires Réunis and Les fils de Henri Ramel v Receveur des douanes (ECJ 20 April 1978) para 35: “It is clear from all these provisions and their relationship inter se that the extensive powers, in particular of a sectorial and regional nature, granted to the Community institutions in the conduct of the common agricultural policy must, in any event as from the end of the transitional period, be exercised from the perspective of the unity of the market to the exclusion of any measure compromising the abolition between Member States of customs duties and quantitative restrictions or charges or measures having equivalent effect.” 53 Case 41/84, Pinna (ECJ 15 January 1986) para 21. 54 Cf. Pescatore (1986), p. 159. The term “two-speed Europe” was first used by Leo Tindemans (Belgian Prime Minister, from 1965 to 1974 General Secretary of the EU) in his report on the European Union of the year 1975 (Tindemans-Report). Available at http://aei.pitt.edu/942/1/ political_tindemans_report.pdf. 50

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However, the specific provisions are not intended to be permanent, but only pertinent and temporary in specific cases. This mitigates the risk of a Europe drifting apart into two camps, one pursuing a rapid and the other a restrained integration policy.55 Paragraph 2 does not expressly lay down a time limit, but without setting one, it would not be possible to make sure that the specific provisions in favour of a Member State apply only during a limited period. If these provisions are subject to a resolutive condition, there is a risk that ambiguity and dispute arise as to whether the condition is actually fulfilled; then the specific provisions could in fact last longer than necessary. Thus, paragraph 2 must be understood as requiring a deadline for the derogation, to expire to gradually achieve the desired level of integration by all Member States.56 Article 27 TFEU is not intended to prevent structural change, but merely to create optimal conditions for a change towards greater competitiveness in the public interest. Less developed economies therefore do not benefit from a permanent safeguarding (Bestandsschutz) of the concessions made to them.57 The specific provisions referred to in paragraph 2 require an examination in the specific case on the spot and must be justified on objective grounds relating to the risk of a disturbance of the internal market if they are not adopted by the EU legislature.58 If a Member State wishes to benefit from a special regime, the flexibility clause applies pursuant to EU secondary law,59 and in accordance to the legal principles (protection of legitimate expectations, non-discrimination, etc.) and fundamental rights of the Union.60 The Court has consistently held that the scope of the Fundamental Rights Charter of the European Union does apply when Member States use margins of discretion opened up by EU law,61 i.e., in cases in which EU law leaves leeway to the Member States when “implementing Union law” according to sentence 1 of Article 51.1 EUCFR.62 55

See Voet van Vormizeele, in von der Groeben et al. (2015), Article 27 AEUV para 1, 14. See also Voet van Vormizeele, in von der Groeben et al. (2015), Article 27 AEUV para 15. 57 Cf. Schröder, in Streinz (2018), Article 27 AEUV para 15; see also Bast, in Grabitz et al. (2020), Article 27 AEUV para 15 (released in 2016). 58 Bast, in Grabitz et al. (2020), Article 27 AEUV para 18 (released in 2016). 59 On this, cf. Stubb (2002), p. 123 et seqq. 60 Cf. Bast, in Grabitz et al. (2020), Article 27 AEUV para 18a (released in 2016); Kotzur, in Geiger et al. (2015), Article 27 TFEU para 5; Schröder, in Streinz (2018), Article 27 AEUV para 16. 61 Case C-540/03, Parliament v Council (Right to family reunification of minor children) (ECJ 27 June 2006) para 70; Joined Cases C-411/10 and C-493/10, N. S. and M. E. and Others (ECJ 21 December 2011) para 68; C-617/10, Hans Åkerberg Fransson (ECJ 26 February 2013) para 19. To the binding to fundamental rights cf. Case C-370/12, Pringle (ECJ 27 November 2012) para 180. 62 In this respect, the German Federal Constitutional Court, 1 BvF 1/05, Emissions trading for greenhouse gases (Order of 13 March 2007) para 73 et seq., diverges from the case law of the ECJ. The German Federal Constitutional Court spells out that the recognition of early reductions in emissions, as provided for in the German act of transposition, is made expressly a matter for the discretion of the Member States and thus is not of an obligatory nature. The Court distinguishes 56

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Unlike the duty of the Commission to “take into account the extent of the effort that certain economies showing differences in development will have to sustain for the establishment of the internal market” (paragraph 1), the specific provisions set forth in paragraph 2, which must be adopted by the Council and the European Parliament, are subject to judicial review by the CJEU. However, this examination is limited to obvious errors in order not to undermine the wide discretion of the legislative bodies of the Union regarding the conception of economic policy rules. If there are objections to the result of the duty to consider the situation(s) of some or one economically less developed Member State(s), these can only be asserted in court if a legal act in the sense of a specific provision or a derogation has been passed or omitted (➔ para 10). In any event, judicial review of errors of assessment is limited to manifest errors or misuse of power or manifest exceedance of the limits of powers of discretion.63 Some legal scholars, on the other hand, have held the view that Article 27 TFEU is justiciable also concerning the proposals of the Commission, arguing that otherwise the compliance with the required “provisions” could not be reviewed.64

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Practical Scope of Application of the Rule

Allowing differentiated legislation opens a path towards better integration, especially in areas in which a single regulatory regime from the beginning either would lead to excessive burdens on some Member States or could only be achieved at a comparatively low level of adjustment.65 Former Article 8 C of the EEC Treaty as the first predecessor to Article 27 TFEU was mainly introduced for the so-called between the obligatory provisions, including the decision about the system, and the other provisions of an EU directive, which leave the Member States room for manoeuvre in implementation. It holds that only concerning the latter provisions a full national fundamental rights (Basic Law) based review of the constitutionality of the provisions transposing an EU Directive into German law is admissible. See Papier (2010), p. 113 et seqq.; under the umbrella term “co-operative protection of fundamental rights in the European Union”, Calliess (2015), p. 10, 13 et seqq., agrees with this case law of the Federal Constitutional Court. In a subsequent decision the Court, 1 BvR 276/17, Right to be forgotten II (Order of 6 November 2019) para 80, has held: “Whether a margin of discretion is given cannot simply be determined along the lines of indeterminate legal concepts and discretion known in German law, that are not distinguished in EU law and in the law of other Member States in the same way as in German law [. . .]. On the contrary, it is necessary to examine, in relation to the relevant provision of EU law, whether it is oriented towards enabling diversity and to come to different assessments, or whether it should serve only to consider the specific circumstances of a case with sufficient flexibility, but lead by the objective of ensuring the consistent application of Union law”. 63 Cf. Schröder, in Streinz (2018), Article 27 AEUV para 12; Bast, in Grabitz et al. (2020), Article 27 AEUV para 22 (released in 2016); Korte, in Calliess and Ruffert (2016), Article 27 AEUV para 18. 64 Cf. Voet van Vormizeele, in von der Groeben et al. (2015), Article 27 AEUV para 18. 65 Cf. in this sense Joined Cases C-274/11, C-295/11, Spain and Italy v Council (ECJ 16 April 2013) para 75.

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cohesion countries (➔ para 12, 14), and has been applied in particular in the aftermath of the accession of the five “new” German Länder of the former GDR to the Federal Republic of Germany.66 Furthermore, the rule was applied in particular in the areas of movement of capital and services, direct insurance, energy and telecommunications. There are also exemptions from the internal market regime in the field of public procurement.67 If the Union makes use of Article 27 TFEU, often a corresponding consideration can be found in the recitals.68 Given that derogations, set forth beyond Article 27 TFEU, were introduced particularly in the course of the Greek and Portuguese economic and financial crises, this Treaty provision has not acquired any great practical significance.69 An explicit reference to this Article has therefore rarely been made, not least because legal practice has also created derogations in favour of individual Member States, which, for lack of explicit reasoning, do not make clear what justifies their adoption from the point of view of the legislature.70 In case of the newer Member 66

See the sixth recital of the Treaty of 18 May 1990 between the Federal Republic of Germany and the German Democratic Republic establishing a Monetary, Economic and Social Union (BGBl. II 1990, p. 537): “[. . .] Realizing that the provisions of this Treaty are intended to safeguard the application of European Community law following the establishment of national unity”; Article 10.2 of the Unification Treaty of 31 August 1990 between the Federal Republic of Germany and the German Democratic Republic (BGBl. II 1990, p. 889) consequently has set forth: “Upon the accession taking effect, the legislative acts enacted on the basis of the Treaties on the European Communities shall apply in the territory specified in Article 3 of this Treaty unless the competent institutions of the European Communities enact exemptions. These exemptions are intended to take account of administrative requirements and help avoid economic difficulties.” Further, cf. Bast, in Grabitz et al. (2020), Article 27 AEUV para 9 (released in 2016); Korte, in Calliess and Ruffert (2016), Article 27 AEUV para 19; Lopian (1994), p. 171. Specially on the GDR, cf. Kotzur, in Geiger et al. (2015), Article 27 TFEU para 3; Voet van Vormizeele, in von der Groeben et al. (2015), Article 27 AEUV para 22 et seqq. According to Schröder, in Streinz (2018), Article 27 AEUV para 9, derogations under Article 27 TFEU can only be regarded to be allowed when the internal market is extended in scope or in membership, not however when difficulties arise within the existing internal market; similarly, Klamert, in Kellerbauer et al. (2019), Article 27 TFEU para 5. 67 On both cases of application, see, for example, Directive 90/531/ECC on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors, O.J. L 297/1 (1990), which in Article 37 has granted a longer implementation period for Spain, Greece and Portugal, arguing that “they will have to sustain even greater efforts” (last recital). However, this Directive does not even mention Article 8 C TECC (now Article 27 TFEU). 68 Korte, in Calliess and Ruffert (2016), Article 27 AEUV para 19. See, e.g. recital 4 of Council Directive (EU) No. 2018/2057 on the common system of value added tax, O.J. L 329/3 (2018). 69 Cf. Bast, in Grabitz et al. (2020), Article 27 AEUV para 4 (released in 2016). An example for a directive with an exemption rule is the Directive 2002/83/EC of the European Parliament and of the Council of 5 November concerning life assurance, O.J. L 345/1 (2002) (no longer in force). 70 Examples: No. 4 point (d) of Annex I to the Directive 2000/36/EC relating to cocoa and chocolate products intended for human consumption, O.J. L 197/19 (2000); Article 13.5 of the Directive 2000/13/EC on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs, O.J. L 109/29 (2000); Article 10 of the Directive 2003/48/EC on taxation of savings income in the form of interest payments, O.J. L 157/38 (2003); Article 30 of the Directive 2003/71/EC on the prospectus to be published when

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States, also the Acts of Accession may contain provisions that allow the Union to implement derogation clauses into secondary legislation.71 Regardless of the number of applications, the rule contributes to stabilising the culture of legislative compromise in the process of European integration. Article 27 TFEU in conjunction with Article 174.1 TFEU, which sets internal market policy in line with the cohesion objective, outlines the idea of an “internal market in solidarity”,72 the achievement of which requires political sensitivity to the differences in the levels of development of the various states or regions to overcome differences in the medium term. Like Article 80 TFEU, which expressly refers to the principle of solidarity in the context of the common European asylum policy (➔ Article 80 TFEU para 4), also Article 27 TFEU spells out this principle within Union law. Here it demands that the high degree of supranational integration in the internal market must always consider the economic heterogeneity of the Member States.73

List of Cases ECJ/CJEU

ECJ 15.07.1964, 6/64, Costa v E.N.E.L., ECLI:EU:C:1964:66 [cit. in para 7] ECJ 10.12.1969, 6/69 and 11/69, Commission v France, ECLI:EU:C:1969:68 [cit. in para 6] ECJ 31.03.1971, 22/70, Commission v Council, ECLI:EU:C:1971:32 [cit. in para 6] ECJ 20.04.1978, 80/77 and 81/77, Commissionnaires Réunis, ECLI:EU:C:1978:87 [cit. in para 22] ECJ 07.02.1979, 128/78, Commission v United Kingdom, ECLI:EU:C:1979:32 [cit. in para 6] ECJ 29.02.1984, 37/83, Rewe-Zentrale, ECLI:EU:C:1984:89 [cit. in para 21] ECJ 15.01.1986, 41/84, Pinna, ECLI:EU:C:1986:1 [cit. in para 22]

securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (Text with EEA relevance), O.J. L 345/64 (2003); Article 2 of the Directive 2004/39/EC on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC and repealing Council Directive 93/22/EEC, O.J. L 145/1 (2004). 71 This was the case, e.g. in the Act of Accession of Estonia. In Case C-413/04, Parliament v Council (ECJ 28 November 2006), the EP argues that such derogation clauses should be based on Article 15 TEC (now Article 27 TFEU) and not on the provisions of the Accession Act (Case C413/04, Parliament v Council [Opinion of Advocate General Geelhoed of 1 June 2006] para 19). This legal view was, however, in principle dismissed by the Court in so far as a derogation clause for the suspension of the application of a Directive’s requirement could validly be adopted on the basis set in the Act of Accession (Case C-413/04, Parliament v Council [ECJ 28 November 2006] especially para 52). Consequently, the derogation clauses of the Act of Accession must be qualified as a lex specialis vis-à-vis Article 27 TFEU. 72 Cf. Ploscar (2014); Ross (2010); Steinvorth (2017). 73 Bast (2014), p. 157.

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ECJ 21.09.1989, 12/88, Schäfer Shop BV v Minister van Economische Zaken, ECLI:EU:C:1989:338 [cit. in para 21] ECJ 18.04.1991, C-63/89, Assurances du Crédit v Council and Commission, ECLI: EU:C:1991:152 [cit. in para 21] ECJ 13.05.1997, C-233/94, Germany v Parliament and Council, ECLI:EU: C:1997:231 [cit. in para 18] ECJ 23.11.1999, C-149/96, Portugal v Council, ECLI:EU:C:1999:574 [cit. in para 7] ECJ 12.10.2004, C-222/02, Paul and Others, ECLI:EU:C:2004:606 [cit. in para 18, 21] ECJ 27.06.2006, C-540/03, Parliament v Council, ECLI:EU:C:2006:429 [cit. in para 25] ECJ 28.11.2006, C-413/04, Parliament v Council, ECLI:EU:C:2006:741 [cit. in para 28] ECJ 04.10.2007, C-457/05, Schutzverband der Spirituosen-Industrie e. V., ECLI: EU:C:2007:576 [cit. in para 22] ECJ 21.12.2011, C-411/10 and C-493/10, N. S. and M. E. and Others, ECLI:EU: C:2011:865 [cit. in para 25] ECJ 27.11.2012, C-370/12, Pringle, ECLI:EU:C:2012:756 [cit. in para 25] ECJ 26.02.2013, C-617/10, Hans Åkerberg Fransson, ECLI:EU:C:2013:105 [cit. in para 25] ECJ 16.04.2013, C-274/11 and C-295/11, Spain and Italy v Council, ECLI:EU: C:2013:240 [cit. in para 27]

Opinions of the Advocate General

Opinion of Advocate General Geelhoed of 29.04.2005, C-304/02, Commission v France [cit. in para 8] Opinion of Advocate General Geelhoed of 01.06.2006, C-413/04, Parliament v Council [cit. in para 19] Opinion of Advocate General Geelhoed of 01.06.2006, C-414/04, Parliament v Council [cit. in para 5 et seqq.]

German Federal Constitutional Court (Bundesverfassungsgericht)

German Federal Constitutional Court, 13.03.2007, 1 BvF 1/05, Emissions trading for greenhouse gases [cit. in para 25] German Federal Constitutional Court, 06.11.2019, 1 BvR 276/17, Right to be forgotten [cit. in para 25]

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References74 Ambrosini, E. (2017). Reverse discrimination in EU law: An internal market perspective. In L. S. Rossi & F. Casolari (Eds.), The principle of equality in EU law (pp. 255–279). Cham: Springer. Bache, I. (2010). Cohesion policy. A new direction for new times? In H. Wallace, M. A. Pollack, & A. R. Young (Eds.), Policy-making in the European Union (pp. 243–262). Oxford: Oxford University Press. Bast, J. (2014). Solidarität im europäischen Einwanderungs- und Asylrecht. In M. Knodt & A. Tews (Eds.), Solidarität in der EU (pp. 143–161). Baden-Baden: Nomos. Becker, U., Hatje, A., Schoo, J., & Schwarze, J. (Eds.). (2019). Schwarze. EU-Kommentar (4th ed.). Baden-Baden: Nomos. Blanke, H.-J., & Pilz, S. (2014). Solidarische Finanzhilfen als Lackmustest föderaler Balance in der Europäischen Union. Europarecht, 49, 540–565. Calliess, C. (2015). Kooperativer Grundrechtsschutz in der Europäischen Union–Überlegungen im Lichte der aktuellen Rechtsprechung von EuGH und deutschem Bundesverfassungsgericht. Berliner Online-Beiträge zum Europarecht, 101. Retrieved from https://www.jura.fu-berlin. de/forschung/europarecht/bob/berliner_online_beitraege/Paper101-Calliess/Paper101%2D% 2D-Christian-Calliess%2D%2D-Kooperativer-Grundrechtsschutz-in-der-EU.pdf Calliess, C., & Ruffert, M. (Eds.). (2016). EUV/AEUV. Das Verfassungsrecht der Europäischen Union mit Europäischer Grundrechtecharta. Kommentar (5th ed.). Munich: C. H. Beck. Constantinesco, V., Jacqué, J.-P., Kovar, R., & Simon, D. (Eds.). (1992). Traité instituant la CEE. Commentaire article par article. Paris: Economica. de Búrca, G. (2000). Differentiation within the “core”: The case of the internal market. In G. de Búrca & J. Scott (Eds.), Constitutional change in the EU. From uniformity to flexibility? (pp. 133–171). Oxford and Portland: Hart. de Keersmaeker, C., & Pauwels, T. (2010). Chapter 27. Article 27 TFEU on transitory exceptions for economically less developed member states. In H. Smit & P. Herzog (Eds.), On the law of the European Union. Vol. 1, loose-leaf. Newark, NJ: LexisNexis. Dobrinsky, R., & Havlik, P. (2014). Economic convergence and structural change: The role of transition and EU accession. Vienna: The Vienna Institute for International Economic Studies. Dougan, M. (2000). Minimum harmonisation in the internal market. Common Market Law Review, 37(4), 853–885. Ehlermann, C. D. (1987). The internal market following the single European act. Common Market Law Review, 24(3), 361–409. Geiger, R., Khan, D.-E., & Kotzur, M. (Eds.). (2015). European Union treaties. Treaty on European Union. Treaty on the functioning of the European Union. München: C. H. Beck. Glaesner, H.-J. (1986). Die Einheitliche Europäische Akte. Europarecht, 21(2), 119–152. Grabitz, E., Hilf, M., & Nettesheim, M. (Eds.). (2020). Das Recht der Europäischen Union. Kommentar, loose-leaf (last supplement: 70). Munich: C.H. Beck. Grieser, V. (2003). Flexible Integration in der Europäischen Union: Neue Dynamik oder Gefährdung der Rechtseinheit? Berlin: Duncker & Humblot. Gundel, J. (2008). Die “gespaltene Harmonisierung” von Produktnormen durch den Gemeinschaftsgesetzgeber: Ein Fall für die Warenverkehrsfreiheit? Anmerkung zu EuGH Rs. C-457/05 – Schutzverband der Spirituosenindustrie/Diageo Deutschland (“Baileys Minis”). Europarecht, 43(2), 248–256. Hayder, R. (1989). Neue Wege der Europäischen Rechtsangleichung? Die Auswirkungen der Einheitlichen Europäischen Akte von 1986. Rabels Zeitschrift für ausländisches und internationales Privatrecht, 53, 622–698. Heinemann, F., Hagen, T., Mohl, P., Osterloh, S., & Sellenthin, M. O. (2010). Die Zukunft der EUStrukturpolitik. Baden-Baden: Nomos.

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Huber, P. M. (1996). Differenzierte Integration und Flexibilität als neues Ordnungsmuster der Europäischen Union? Europarecht, 31(4), 347–361. Ihns, A. (2005). Entwicklung und Grundlagen der europäischen Rechtsangleichung. Frankfurt/M.: Peter Lang. Janning, J. (1994). Europa braucht verschiedene Geschwindigkeiten. Europa-Archiv, 49(18), 527–536. Kauppi, M., & Graves, P. W. (2013). Chapter 177. Article 177 TFEU on establishment of structural funds/cohesion funds. In H. Smit & P. Herzog (Eds.), On the law of the European Union. Vol. 3. Loose-leaf. Newark, NJ: LexisNexis. Kellerbauer, M., Klamert, M., & Tomkin, J. (Eds.). (2019). The EU treaties and the charter of fundamental rights. A commentary. Oxford: Oxford University Press. Langeheine, B. (1983). Abgestufte Integration. Europarecht, 18(3), 227–260. Lenz, C.-O., & Borchardt, K. D. (Eds.). (2012). EU-Verträge Kommentar. EUV-AEUV-GRCh (6th ed.). Köln: Bundesanzeiger Verlag. Leruth, B., & Lord, C. (2015). Differentiated integration in the European Union: A concept, a process, a system or a theory? Journal of European Public Policy, 22(6), 754–763. Lopian, A. (1994). Übergangsregime für Mitgliedstaaten der Europäischen Gemeinschaften. Baden-Baden: Nomos. Papier, H.-J. (2010). Die Bedeutung des Grundgesetzes im Europäischen Staatenverbund. In K. Stern (Ed.), 60 Jahre Grundgesetz. Das Grundgesetz für die Bundesrepublik Deutschland im Europäischen Verfassungsverbund (pp. 107–119). München: C. H. Beck. Pechstein, M., Nowak, C., & Häde, U. (Eds.). (2017). Frankfurter Kommentar zu EUV, GRC und AEUV (Vol. 2). Tübingen: Mohr Siebeck. Pescatore, P. (1986). Die “Einheitliche Europäische Akte”. Eine ernste Gefahr für den Gemeinsamen Markt. Europarecht, 21(2), 153–169. Pingel, I. (Ed.). (2010). De Rome à Lisbonne. Commentaire article par article des traités UE et CE (2nd ed.). Basel: Helbing Lichtenhahn. Piris, J.-C. (2012). The future of Europe. Towards a two-speed EU? Cambridge: Cambrigdge University Press. Ploscar, P. (2014). The principle of solidarity in EU internal market, PhD. Antwerp: University of Antwerp. Remien, O. (2020). Rechtsangleichung im Binnenmarkt. In R. Schulze, A. Janssen, & S. Kadelbach (Eds.), Europarecht. Handbuch für die deutsche Rechtspraxis (§ 14) (4th ed., pp. 644–678). Baden-Baden: Nomos. Ross, M. (2010). Solidarity – A new constitutional paradigm for the EU? In M. Ross & Y. Borgmann-Prebil (Eds.), Promoting solidarity in the European Union (pp. 23–45). Oxford: Oxford University Press. Schimmelfennig, F., Leuffen, D., & Rittberger, B. (2015). The European Union as a system of differentiated integration: Interdependence, politicization and differentiation. Journal of European Public Policy, 22(6), 764–782. Steinvorth, U. (2017). Applying the idea of solidarity to Europe. In A. Grimmel & S. My Giang (Eds.), Solidarity in the European Union. A fundamental value in crisis (pp. 9–19). Heidelberg: Springer. Streinz, R. (2018). EUV/AEUV. Kommentar (3rd ed.). München: C. H. Beck. Stubb, A. (2002). Negotiating flexibility in the European Union. Amsterdam, Nice and beyond. Hampshire: Palgrave. Thym, D. (2004). Ungleichzeitigkeit und europäisches Verfassungsrecht. Die Einbettung der verstärkten Zusammenarbeit, des Schengener Rechts und anderer Formen von Ungleichzeitigkeit in den einheitlichen rechtlichen und institutionellen Rahmen der Europäischen Union. Baden-Baden: Nomos. Thym, D. (2014). Einheit in Vielfalt. Binnendifferenzierung der EU-Integration. In A. Hatje & P.C. Müller-Graff (Eds.), Europäisches Organisations- und Verfassungsrecht. Enzyklopädie Europarecht (Vol. 1 § 5, pp. 259–307). Baden-Baden: Nomos.

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Tomuschat, C. (1987). Solidarität in Europa. In F. Capotorti et al. (Eds.), Du droit international au droit de l’intégration. Liber amicorum Pierre Pescatore (pp. 729–757). Baden-Baden: Nomos. Trstenjak, V., & Beysen, E. (2012). Das Prinzip der Verhältnismäßigkeit in der Unionsrechtsordnung. Europarecht, 47(3), 265–284. Ţurlea, G., & Bogdanowicz, M. (Eds.). (2008). EU enlargement: economic development and the information society. Brussels: VUBPRESS. v. Danwitz, T. (2008). Europäisches Verwaltungsrecht. Heidelberg: Springer. von der Groeben, H., Schwarze, J., & Hatje, A. (Eds.). (2015). Europäisches Unionsrecht. Vertrag über die Europäische Union – Vertrag über die Arbeitsweise der Europäischen Union – Charta der Grundrechte der Europäischen Union. Kommentar (7th ed.). Baden-Baden: Nomos. Walthelm, J. (2015). Die Entwicklung der Wohlfahrtsstaaten Ostmitteleuropas. In T. Thieme (Ed.), 25 Jahre Systemtransformation in Osteuropa – Bilanz und Perspektiven (pp. 159– 174). Chemnitz: Universitätsverlag Chemnitz. Warleigh, A. (2002). Flexible integration. Which model for the European Union? London and New York: Sheffield Academic Press. Weiss, F., & Kaupa, C. (2014). European Union internal market law. Cambridge: Cambridge University Press. Wouters, J., & Schmitt, P. (2017). Equality among member states and differentiated integration in the EU. In L. S. Rossi & F. Casolari (Eds.), The principle of equality in EU law (pp. 43–82). Heidelberg: Springer.

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Title II Free Movement of Goods

Article 28 [Free Movement of Goods] (ex-Article 23 TEC) 1. The Union shall comprise23,24 a customs union3-11,14,18-20,22,25,29 which shall cover all trade7,26 in goods26,27 and which shall involve the prohibition28-33 between Member States28 of customs duties34 on imports and exports34 and of all charges having equivalent effect,35-38 and the adoption of a common customs tariff14,16 in their relations with third countries.11,12,14,15 2. The provisions of Article 30 and of Chapter 3 of this Title shall apply to products originating5,15,19,30 in Member States and to products coming from third countries which are in free circulation14,27,30 in Member States.

Contents 1. 2. 3. 4. 5. 6.

Introduction: The Broad Significance of Article 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Customs Union v. Sectoral Integration: EEC History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Customs Union: Economic Theory and Political Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Customs Union: EU Exclusive Competence and Own Resources . . . . . . . . . . . . . . . . . . . . . . . . 11 The EU, Third Countries and External Affairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Interpretation: Case Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 6.1. “The Union Shall Comprise a Customs Union” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 6.2. “Which Shall Cover All Trade in Goods” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.3. “Shall Involve the Prohibition Between Member States” and “a Tariff” . . . . . . . . . . 28 6.4. “Of Customs Duties on Imports and Exports” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 6.5. “Charges Having Equivalent Effect” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 7. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 List of Cases References

1.

Introduction: The Broad Significance of Article 28

In stating that: “The Union shall comprise a customs union which shall cover all trade in goods”, Article 28.1 TFEU makes an important general declaration about the nature of the EU. The provision must be considered in a broad context if its full significance is to be appreciated. Article 28 TFEU marks a victory for those who wanted the EEC to stand for general, and not sectoral, economic integration. Therefore, some brief observations on the history of the EEC are important (➔ para 3 et seq.). To appreciate the general role of the customs union in the EU, some reference to the theory of customs unions and their relationship with the politics of integration is necessary (➔ para 8 et seq.). In requiring the EU to comprise a customs union, Article 28.1 TFEU impliedly provides a basis for institutional and financial elements of the EU (➔ para 11 et seq.). It also helps to set the EU in its global context (➔ para 14 et seq.). All these

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matters must be borne in mind in considering the interpretation of the terms of Article 28 TFEU (➔ para 21 et seq.).

2. 3

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Customs Union v. Sectoral Integration: EEC History

In requiring the EU to “comprise a customs union”, Article 28.1 TFEU builds on a long history of European customs unions. In the nineteenth century, there were the German Zollverein, before German unification in 1871, one of which Luxembourg joined in 1842.1 In the next century, in 1921, Luxembourg entered a customs union with Belgium. Later in the twentieth century, discussions about customs unions were motivated by the anticipated and actual need to recover from the Second World War. Marshall Aid from the USA was conditional on intra-European cooperation. That cooperation was in turn linked to the creation of customs unions. In January 1948, Secretary of State Marshall indicated to the Foreign Affairs Committee of the Senate of the USA that the condition of intra-European cooperation was being met because: “The customs union among Belgium, the Netherlands, and Luxemburg is now in operation. Negotiations for a Franco-Italian customs union are proceeding.”2 The Schuman Declaration of 9th May 1950 called for a study of the feasibility of a European free trade area or customs union. A free trade area gives advantages to goods originating in members of the area. A customs union imposes a common customs tariff on all goods entering the customs territory irrespective of their origin. In November 1952, the Netherlands’ foreign minister, J.W. Beyen, requested a study of economic integration, including a customs union, by what became the six founding states of the EEC. His plan was re-tabled by the Dutch government in 1955. The Beyen proposals turned out to be “the bridge which led from the ECSC to the EEC.”3 Unlike Beyen, Jean Monnet did not propose a general customs union. He became the first president of the High Authority of the ECSC which was “more akin” to, but was not, a customs union.4 At least at one point he appears to have preferred the approach taken in the ECSC, and later EURATOM, which was the integration of specific economic sectors under the control of a High Authority.5 Nevertheless, in June 1956, Belgian Foreign Minister Paul Henri Spaak’s committee, set up in Messina in 1955, recommended a general customs union in the first 1

See Mahant and De Vanssay (1994), pp. 189–193. Available at http://marshallfoundation.org/library/wp-content/uploads/sites/16/2014/06/ 48.01.08-Eur-Recov-Pgm-S.pdf. 3 Milward (2000), p. 196. See generally, pp. 173–196, “The Netherlands and the Origins of the Common Market”. 4 Case 36/83, Mabanaft v Hauptzollamt Emmerich (ECJ 28 June 1984) para 22–24. 5 Pogatsa (2015), pp. 100–102. 2

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chapter of the first part of its report.6 The subsequent Treaty of Rome, which was signed in 1957, came into effect on 1st January 1958 and provided for customs union to exist by 1st January 1970. In fact, customs union arrived early on 1st July 1968. Its creation was made easier by tariff cuts resulting from GATT negotiations and the requirements of the ECSC. The completion of the customs union, as much as its conception, owes a considerable debt to external influences. The Luxembourg Treaty of 21st April 1970 made customs revenues part of the own resources of the EEC from 1st January 1971.7 At that relatively early stage in the history of the EU there had come into existence, what Dutch diplomacy had long aimed for and what Europe needed, not merely the sectoral integration of European economies but, as Article 28.1 TFEU says, “a customs union which shall cover all trade in goods.”

3.

7

Customs Union: Economic Theory and Political Integration

When the Treaty of Rome was negotiated, many economists believed, as Meade did in 1955, that a customs union would “almost always” lead to some important gain.8 In 1950, however, Jacob Viner had provided some basis for questioning that view. He acknowledged that customs unions could encourage a switch from high cost to low cost producers within the union (trade creation). However, he said that it might also encourage the purchase of goods from inefficient producers within the union instead of from efficient ones outside it (trade diversion).9 Viner had adopted a classical approach in his work but was said to have “pioneered the whole of second-best as well as customs union theory.”10 The first choice of many economists was unilateral tariff reduction. Viner’s approach began to be qualified. It was pointed out that, amongst other things, the amount of trade diversion may be small, particularly where the customs union in question is large and that joining a customs union may help countries improve the terms of their trade.11 Then, it was noted that the political significance of a customs union might outweigh any economic disadvantages there may be. More recently, the proposition that unilateral tariff reduction was necessarily superior to a customs union has been denied12 and affirmed.13 6

Available at http://www.unizar.es/euroconstitucion/library/historicdocuments/Rome/preparation/Spaakreportfr.pdf. 7 Council Decision No 70/243/EEC on the Replacement of Financial Contributions from Member States by the Communities Own Resources, O.J. L 94/19 (1970). 8 Meade (1968), p. 107. The book is based on three lectures given in the Netherlands in 1955. 9 Viner (1950). 10 Krauss (1972), p. 414. 11 See generally Tovias (1991), especially at pp. 19–23; Swann (2000), p. 123. 12 See Wonnacott and Wonnacott (1992), pp. 119–135; Wonnacott and Wonnacott (2005). 13 See, e.g. El-Agraa and Jones (2000), pp. 301–304.

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The view that customs unions are “a second best strategy” remains powerful.14 No one would contend that they are of necessity economically beneficial. Whether they are beneficial or not depends on specific analysis of the customs union in question. Even where a customs union is beneficial, the gains may be small. The static gains of the EC customs union have been said to be less than 1% of the members’ combined gross national product.15 A justification of the EU customs union may, nevertheless, rest on broad economic considerations and on the economic integration resulting from customs union which “prepares the ground for political integration”.16 In the words of the predecessors of Article 28.1 TFEU and of the Union Customs Code, in recital 9,17 the EU is “based on a customs union”.

4. 11

Title II

Customs Union: EU Exclusive Competence and Own Resources

The existence of an EU customs union logically leads to the EU having exclusive competence in relation to it. The scope of that competence is broad as the CJEU confirmed in its Opinion on the treaty between the EU and Singapore.18 The customs union is the first of the exclusive competences of the EU listed in Article 3.1 (a) TFEU: The last one (Article 3.1 (e) TFEU) is the common commercial policy. Article 3.2 TFEU is also material. Provisions on the common commercial policy are contained in TFEU, Part Five headed “External Action by the Union”, Title II (Articles 206, 207 TFEU). Article 206 TFEU states expressly that by establishing a customs union under Articles 28–32 TFEU, the Union shall contribute to the harmonious development of world trade, the progressive abolition of restrictions on international trade and foreign direct investment and the lowering of customs and other barriers. The objectives of the EU customs union are identified as not merely European. They are international as well (➔ Article 206 TFEU). Articles 206 and 207 TFEU also link the common commercial policy to the creation of an external tariff and the conclusion of trade agreements with third countries. As far as the bilateral treaties affecting trade and customs are concerned, these are entered into by both the EU and the MS. They are known, therefore, as mixed agreements (➔ Article 206 TFEU). The EU’s role in international affairs is well established. The EEC “replaced the Member States”19 and was represented in GATT negotiations from the Dillon Round in 1960–1961 (➔ para 17–20). The EC

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Molle (2006), p. 67. Swann (2000), p. 124. 16 Swann (2000), p. 124. 17 Regulation of the European Parliament and of the Council laying down the Union Customs Code, 952/2013/EU of 9 October 2013. 18 Opinion 2/15, Free Trade Agreement with Singapore (ECJ 16 May 2017). 19 Case 38/75, Douaneagent der NV Nederlandse Spoorwegen (ECJ 19 November 1975) para 16. 15

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is a party to the agreements concluding the Uruguay Round. The Council Decision approving those agreements is referred to later (➔ para 17). The EU is to provide itself with the means necessary to attain its objectives and implement its policies. Without prejudice to other revenue, its budget must be financed wholly from its own resources (see Article 311 TFEU). Own resources of the EU have included customs duties since 1st January 1971 (➔ para 7). For the financial year 2015, the EU’s Budget puts the Revenue from customs duties at €16,701,200,000.20 This is an increase of almost €4.7 billion in comparison with 10 years earlier in 2005 when receipts were put at €12,017,241,801.21 However, the longer term trend has been for the contribution of customs duties to the budget to decrease. For 2015, customs duties and sugar levies together account for 11.92% of the EU budget. The draft budget for 2020 puts the percentage somewhat higher than that22 but it does not match the position towards the end of the twentieth century. In 1997 customs duties and sugar duties contributed 19.1% of total budgetary resources.23 The figure was even higher before then. From 2014, MS retain 20% of the costs of collecting customs duties.24 As from 2001, the figure was 25%.25 Before that, it was 10%.26 The EU obligation to fight fraud affecting its financial interests and own resources (Article 325 TFEU) frequently requires that the European Anti-Fraud Office (OLAF) carries out missions to territories outside the Community customs territory to ensure that, for example, customs requirements in relation to origin are fully met.

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The EU, Third Countries and External Affairs

Article 28.1 TFEU must deal with the relationship between EU MS and other countries. This is inevitable given “the adoption of a common customs tariff in [. . .] relations with third countries.” The nature of that tariff is made clear in Article 31 TFEU (➔ para 16; Article 31 TFEU). The existence of an external element to the customs union is also acknowledged in Article 28.2 TFEU. This

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Definitive Adoption (EU, Euratom) 2015/339 of the EU’s Budget for the financial year 2015, O. J. L 69/1 (2015). 21 Final Adoption of the General Budget of the EU for the year 2006, O.J. L 78/1 (2006). 22 See the Draft General Budget of the EU for the Financial Year 2020, O.J. COM (2019) 600 5 July 2019. 23 Commission Communication concerning a strategy for the Customs Union, COM(2001) 51 final. 24 Article 2.3 of Council Decision No 2014/335/EU, Euratom on the System of the Own Resources of the EU, O.J. L 168/105 (2014). 25 Council Decision No 2000/597/EU, Euratom on the system of the EC’s own resources, O.J. L 253/42 (2000). 26 Council Decision No 728/94/EC, O.J. L 293/9 (1994).

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provides that Article 30 TFEU and Chapter 2 of Title II, which contains just Article 33 TFEU, should apply to products originating in MS and to those originating from third countries in free circulation in MS. Article 30 TFEU contains the prohibition on customs duties and charges having equivalent effect between MS. Article 33 TFEU lays the basis for measures strengthening cooperation between MS and between them and the European Commission. The nature of free circulation is defined in Article 29 TFEU. The bilateral agreements which implement the commercial policy give preferential access to the internal market of the EU and usually contain annexes which deal with how origin of goods must be determined, the administrative procedures which are relevant to that and to cooperation between the EU and third country authorities.27 The determination of preferential origin based on unilateral EU measures is determined by EU legislation, in particular the Union Customs Code, Title II, Chapter 2, Section 2 and Commission Delegated Regulation (EU) 2015/ 2446. The determination of non-preferential origin is also governed by EU legislation, in particular the Union Customs Code, Title II, Chapter 2, Section 1 and Commission Delegated Regulation (EU) 2015/2446. Where agreements with third countries prohibit the imposition of “charges having equivalent effect to customs duties”, that phrase must be construed in the same way as Article 28.128 (➔ para 35–38). Preferential access may also be provided by EU measures, as indicated above. One important example concerns the scheme of generalised tariff preferences.29 In addition to the commercial policy, EU relations with third countries are governed by its development cooperation policy (Article 208 TFEU). Authority of the EU to enter into international agreements is conferred under TFEU Part Five, Title V (Articles 216–219 TFEU). Many important multilateral agreements arise in the context of customs law and administration to which the EU is a party. One example is the Convention on the Harmonized Property Description and Coding System 198730 which establishes the internationally harmonised system of customs classification on which the EU’s Combined Nomenclature (“CN”) is based. The CN was established under Council Regulation (EEC) No 2658/87.31 It was contained in Annex I to that regulation

27

There are many examples of cases which concern verification of origin for customs purposes in the context of agreements between the EU and third countries. For an example of a case, which concerned the Cotonou Agreement, see: Case C-409/10, Afasia Knits Deutschland GmbH (ECJ 15 December 2011). 28 Case C-409/10, Afasia Knits Deutschland GmbH (ECJ 15 December 2011) para 40. 29 The scheme is contained in Parliament/Council Regulation (EU) No 978/2012 applying a scheme of generalised tariff preferences, O.J. L 303/1 (2012). 30 See Council Decision No 87/369/EEC concerning the conclusion of the International Convention on the Harmonized Commodity Description and Coding System and of the Protocol of Amendment thereto, O.J. L 198/1 (1987). 31 Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff, O.J. L 256/1 (1987).

Lyons

Article 28. [Free Movement of Goods]

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which is up-dated annually.32 The CN consists of 21 Sections and 99 Chapters within which goods are classified. Each good has a six-figure classification code number corresponding to headings and sub-headings under the harmonised system. Additional sub-headings and code numbers are given for EU purposes. GATT 94 is a vital multilateral agreement in relation to customs matters and provides the basic international framework with which any customs union, including that of the EU, must comply. The agreements concluding the Uruguay Round and creating the World Trade Organisation were approved on behalf of the EC by a Council Decision of December 1994.33 GATT 94 follows the original GATT agreement of 1947 in that it permits customs unions notwithstanding their breach of the most favoured nation principle in Article 1 of GATT 94. Article XXIV.4 of GATT 94 states that the purpose of a customs union should be “to facilitate trade” and “not to raise barriers”. Article 206 TFEU makes clear that the EU customs union is intended to do just that. Article XXIV.5 of GATT 94 provides that the creation of a customs union is not to be prevented so long as tariff levels on the whole are not higher than the prior general incidence of the duties. These qualifications may reflect the view that customs unions are a “second best” solution (➔ para 8). A customs union must also comply with other provisions of GATT 94. Article XXIV.8 of GATT 94 defines a customs union as the substitution of a single customs territory for two or more customs territories. Internally, duties and other restrictive regulations of commerce must be eliminated with respect to substantially all trade between constituent territories, or at least all trade in products originating in such territories. The external requirement is that, in broad terms, substantially the same duties and other regulations of commerce are applied by each of the members of the union to the trade of territories not included in the union. Article X.3 (a) of GATT 94 requires that laws, regulations, decisions and rulings must be administered in a “uniform, impartial and reasonable manner”. The compliance of the EU customs union with the provisions of Article XXIV GATT was noted by the Court of Justice in 1975.34 More recently, the customs union’s compliance with GATT 94 was tested in proceedings brought by the USA under the dispute settlement procedure of the WTO in European Communities – Selected Customs Matters.35 The regime was found not totally compliant but very substantially so. It may be particularly noted that the USA failed to establish an infringement of Article X.3 in relation to the application of customs penalties 32

The currently applicable version is in Commission Implementing Regulation (EU) 2019/1776 of 9 October 2019 amending Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff, O.J. L 280/1 (2019). 33 Council Decision No 800/94/EC concerning the conclusion on behalf of the European Community, as regards matters within its competence of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994), O.J. L336/1 (1994). See also Case C-122/95, Germany v Council (ECJ 10 March 1998). 34 Case 38/75, Douaneagent der NV Nederlandse Spoorwegen (ECJ 19 November 1975) para 14. 35 WT/DS315/AB/R., 13 Nov. 2006.

Lyons

17

18

19

20

694

Title II

Free Movement of Goods

because of a lack of evidence in the case. The necessary evidence may now be available36 and the possibility of an infringement of Article X.3 is borne in mind by the European Commission in relation to its proposal for a directive on the Union legal framework for customs infringements and sanctions.37

6. 21

22

Interpretation: Case Law

Part Three of the TFEU, in which Article 28 appears, contains a substantial proportion of the provisions of the TFEU (Articles 26–197). It is headed “Union Policies and Internal Actions”. The Part moves logically from the general to the particular. Title I is headed “The internal market”. Article 26 TFEU provides the famous definition which is “an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured”.38 Title II deals with the first of those fundamental freedoms, namely, free movement of goods and Article 28 TFEU is the first of its two introductory articles. After these, comes Chapter 1 of Title II entitled “The customs union”. The position of Article 28 TFEU in the Treaty makes clear that it is concerned with free movement of goods. Therefore, it is referred to as an essential part of the context of cases which are not concerned with the functioning of the customs union but with free movement of goods generally.39 Nevertheless, the establishment of free movement of goods is the governing context in which customs union operates. The Court of Justice bore that in mind and paid attention to the structure of the Treaty in construing a predecessor of Article 28.1 in 1962.40 It continues to bear in mind the importance of free movement for customs union and has said: “The customs union necessarily implies that the free movement of goods should be ensured between Member States and, in more general terms, within the customs union.”41

36 Commission Staff Working Document, Impact Assessment, Proposal for a Directive of the European Parliament and of the Council on the Union legal framework for customs infringements and sanctions, Parts 1/2 and 2/2 SWD(2013) 514 final, and the Final Report of the Project Group on Customs Penalties, July 2010, which is Annex 1-B to the Impact Assessment. 37 Proposal for a Directive of the European Parliament and of the Council on the Union legal framework for customs infringements and sanctions, COM(2013) 884 final. 38 Some of the implications for the customs union of the internal market were noted in T-113/96, Edouard Dubois et Fils SA (CFI 29 January 1998). 39 See, for example, Case C-95/14, UNIC and Uni.co.pel (ECJ 16 July 2015) para 49. 40 Joined Cases 2/62 and 3/62, Commission v Luxembourg and Commission v Belgium (ECJ 14 December 1962). 41 Case C-293/02, Jersey Produce Marketing Organisation Ltd (ECJ 8 November 2005) para 64. See also Case 87/75, Bresciani (ECJ 5 February 1976) para 7; Case 266/81, Societa` Italiana per l’Oleodotto Transalpino (SIOT) (ECJ 16 March 1983).

Lyons

Article 28. [Free Movement of Goods]

695

Free movement in the context of the customs union includes freedom of transit.42 Transit is also a special procedure under the Union Customs Code43 and is the subject of international treaties to which the EU is a party.

6.1. “The Union Shall Comprise a Customs Union”

Article 28.1 TFEU does not say, as do its predecessors in the EEC Treaty (Article 9) and the EC Treaty (Article 23) that the EU is “based” on a customs union. Instead, it says that “The Union shall comprise a customs union”. That slight alteration in the wording does not indicate a reduction in the importance of the customs union. Recital (9) of the Union Customs Code continues to say, “The Union is based upon a customs union.” The change in treaty wording may be thought to reflect two developments occurring long after the establishment of a customs union. First, the modern EU now looks to the broader internal market as a fundamental and established economic element in its constitution that it rightly wishes to acknowledge (Article 3.3 TEU). Second, the modern EU has a strong social element to it, particularly after the creation of the area of freedom, security and justice (Articles 67–89 TFEU). In referring to a “customs union”, Article 28.1 TFEU may be taken to assume that such a union has been established. That is understandable as the external tariff of the EEC was established on 1st July 1968. It is worth noting, however, that in 1982, the European Commission published a document entitled: “1982 Programme for the attainment of the Customs Union.” It said: “Twenty-four years after the creation of the European Community, it must be admitted that full customs union is still a long way off.”44 Then came the requirements of the internal market which entailed the abolition of customs frontiers45 (➔ para 21). In 2013, the European Commission issued a proposal for a Directive on the Union legal framework for customs infringements and sanctions which has yet to be agreed.46 In doing so, it expressly bore in mind the requirements of GATT 94 in relation to customs unions. The Union Customs Code, which for the first time creates a legislative framework appropriate for paperless trade, came into force in May 201647 but the fully computerised 42 Case 266/81, Societa` Italiana per l’Oleodotto Transalpino (SIOT) (ECJ 16 March 1983) para 16. 43 Parliament/Council Regulation (EU) No. 952/2013 laying down the Union Customs Code (recast), O.J. L 269/1 (2013), fully applicable from 1 June 2016: see Article 288 (“the Union Customs Code”), Article 210 (a). 44 1982 Programme for the attainment of the Customs Union. COM(82) 50 final, para 3, p. 2. 45 Case T-113/96, Edouard Dubois et Fils SA (CFI 29 January 1998). 46 A proposal for a Directive on the Union legal framework for customs infringements and sanctions, COM(2013) 884 final. See further, Lyons (2015). 47 Parliament/Council Regulation (EU) No. 952/2013, O.J. L 269/1 (2013), see Article 288.

Lyons

23

24

25

696

Title II

Free Movement of Goods

system is not expected to be operational until 2025.48 The customs union which Article 28.1 TFEU identifies as so important is in its fifth decade of operation. It has been and continues to be a great success, but work on it is not yet complete.

6.2. “Which Shall Cover All Trade in Goods”

26

27

That Article 28.1 TFEU is a basis for the EU as a whole is made clear by the fact that the customs union “shall cover all trade in goods”. This phrase makes clear that there must be a general integration of economies. Integration is not merely a sectoral matter as Jean Monnet had once wanted (➔ para 6). The reference to all trade has proved important in ensuring that movements of goods within an MS, as well as those between MS, are covered by the requirements of the customs union (➔ para 34). Although a “good” must have a physical existence, it is clear that it does not need to be a physical object. As AG Cosmas has noted “electricity and gas are goods for the purpose of . . . the Treaty.”49 They also appear in the Combined Nomenclature. Customs duty though cannot be charged on something merely because it is a “good”. It must be a good that can be put into free circulation as defined in Article 29 TFEU.50 For Article 28 TFEU, as the Court has consistently held, “goods” “means goods which can be valued in money and which are capable, as such, of forming the subject of commercial transactions.”51 Having identified the scope of the customs union, Article 28.1 TFEU then proceeds to articulate the necessity of the important prohibition between MS of customs duties and charges having equivalent effect.

6.3. “Shall Involve the Prohibition Between Member States” and “a Tariff”

28

At the outset, it should be noted that although Article 28.1 TFEU uses the phrase “between Member States”, the prohibition applies within the Union customs 48 Commission Implementing Decision (EU) 2016/578 establishing the Work Programme relating to the development and deployment of the electronic systems provided for in the Union Customs Code O.J. L 99/6 (2016). See more recently the Report from the Commission to the European Parliament and the Council pursuant to Article 278a of the Union Customs Code, on progress in developing the electronic systems provided for under the Code, COM(2019) 629 final. 49 The cases on goods for Treaty purposes include Case C-157/94, Commission v Netherlands (Opinion of AG Cosmas of 23 October 1997) para 17. See also Case C-158/94, Commission v Italy (ECJ 23 October 1997) para 17; Case 79/89, Brown Boveri & Cie AG (ECJ 18 April 1991) para 4; Joined Cases C-92/92 and C-326/92, Phil Collins (ECJ 20 October 1993) para 22. 50 See, for example, Case 50/80, Joszef Horvath (ECJ 5 February 1981) para 11. 51 Case C-301/14, Pfotenhilfe-Ungarn eV v Ministerium fu¨r Energiewende, Landwirtschaft, Umwelt und la¨ndliche Ra¨ume des Landes Schleswig-Holstein (ECJ 3 December 2015) para 47, which refers to Case 7/68, Commission v Italy (ECJ 10 December 1968), p. 428. Paragraph 47 mistakenly refers to Case 7/66.

Lyons

Article 28. [Free Movement of Goods]

697

territory. This is defined in the Union Customs Code, Article 3. It is not exactly co-terminus with the territory of all MS. For example, Monaco is within the territory although not part of a MS. Other territories such as the Faroe Islands and Greenland, under the sovereignty of Denmark, are excluded from the territory (Article 4.1 of the UCC). The Overseas Countries and Territories subject to Part Four of the TFEU (Articles 198–204) and listed in TFEU Annex II (➔ Article 355 TFEU) are not within the Community customs territory. The EU is in a customs union with Andorra, San Marino and Turkey but they are not within the Union customs territory. As is well known the UK has left the EU. The consequent position of the UK and the British Isles is not considered here. One aim of Article 28.1 TFEU is to describe what the customs union involves. It identifies two elements. First, there is the internal prohibition between MS of customs duties and charges having equivalent effect. The actual prohibition is contained in Article 30 TFEU.52 Second, there is the external element of the tariff. This is contained in Article 31 TFEU. These two elements are also identified in the definition of a customs union in Article XXIV.8 of GATT 94 (➔ para 19) Although Article 28.1 TFEU does not contain the prohibition to which it refers, it does clarify it. Article 28.2 TFEU makes clear that the prohibition applies to products originating in MS and to products coming from third countries which are in free circulation in MS.53 The concept of free circulation is defined in Article 29 TFEU. In treating the two categories of goods identically, Art 28.2 foreshadows the concept of “Union goods” which the Union Customs Code defines in Article 5 (23). “Non-Union goods” are defined in Article 5 (24) of the Union Customs Code. Article 28 TFEU identifies an absolute and general prohibition54 which is appropriate in view of the need to ensure free movement of goods. Such duties and charges are prohibited irrespective of their purpose, destination, or size.55 Any possible exception must be clearly laid down.56 If it were otherwise, free movement of goods would be jeopardised. Article 28.1 TFEU does not specify how the prohibition it refers to is to relate to the prohibition on quantitative restrictions and measures having equivalent effect in Article 34 TFEU or to the provisions in the treaty on internal taxation.

52

See Case 26/62, Van Gend en Loos (ECJ 5 February 1963) p. 13. The ECJ noted this in Case C-525/14, Commission v Czech Republic (ECJ 22 September 2016) para 36. 54 See Case C-305/17, FENS spol. s r.o. v Slovak Republic — U´rad pre regula´ciu sietˇovy´ch odvetvı´ (ECJ. 6 December 2018) para 53. 55 Joined Cases 2/69 and 3/69, Sociaal Fonds voor de Diamantarbeiders (ECJ 1 July 1969) para 11–14; Case 30/01, Commission v UK (ECJ 23 September 2003) para 52; Case C-254/13, Orgacom BVBA (ECJ 2 October 2014) para 35. 56 Joined Cases 90/63 and 91/63, Commission v Luxembourg, Commission v Belgium (ECJ 13 November 1964). 53

Lyons

29

30

31

32

698

33

Title II

Free Movement of Goods

The Court of Justice was left to do this. It made clear that a predecessor of Article 34 TFEU did not apply to obstacles of a fiscal nature.57 Nevertheless, obstacles which fell within the provisions on internal taxation in what is now Article 110 TFEU fall outside the prohibition on customs duties and charges having equivalent effect. The prohibition referred to in Article 28 and Article 110 TFEU complement each other.58 They both pursue the objective of prohibiting any national fiscal measure that is liable to discriminate against products coming from or destined for other MS by constituting a restriction on their free movement within the EU in normal conditions of competition.59 Article 28.1 TFEU confines the prohibition which it anticipates to MS. The Court of Justice has made clear that the customs union also involves a prohibition of national customs duties in relation to third countries, pointing out that both the “unicity” of the customs union and the uniformity of the common commercial policy would be “seriously undermined” without it.60

6.4. “Of Customs Duties on Imports and Exports”

34

A customs duty is imposed on goods because they cross a frontier. The duty may be calculated by reference to value of the goods or by reference to some other criterion such as weight. Article 28.1 TFEU, like Article 30 TFEU, refers to customs duties and charges “between Member States”. It refers neither to duties and charges payable on crossing regional boundaries nor to movements of goods within a single MS. However, it is clear that the customs union requires the abolition of regional duties61 and the free movement of goods within a state.62 In setting out the principles of the customs union, Article 28.1 TFEU helped the Court to reach this position. Unlike Article 30 TFEU, Article 28.1 TFEU specifically refers to “all trade in goods” (➔ para 6–7). As the Court of Justice said: “Since the very principle of a customs union covers all trade in goods, as provided

57

Case 74/76, Ianelli & Volpi SpA (ECJ 22 March 1977) para 9. See, for example, Case C-254/13, Orgacom BVBA (ECJ 2 October 2014) para 20; Case C-221/06, Stadtgemeinde Frohnleiten and Gemeindebetriebe Frohnleiten (ECJ 8 November 2007) para 26. 58 See, for example, Case C-290/05, A´kos Na´dasdi and C-333/05 Ilona Ne´meth (ECJ 5 October 2006) para 45. 59 See also Case C-254/13, Orgacom BVBA (ECJ 2 October 2014); Joined Cases C-393/04 and C41/05, Air Liquide Industries Belgium (ECJ 15 June 2006) para 55; Case C-221/06, Stadtgemeinde Frohnleiten and Gemeindebetriebe Frohnleiten (ECJ 8 November 2007) para 30; Case C-206/06, Essent Netwerk Noord (ECJ 17 July 2008) para 40. 60 Case C-125/94, Aprile Srl, in liquidation (ECJ 5 October 1995) para 34. 61 Case C-163/90, Le´opold Legros (16 July 1992) para 16; see also para 17. 62 Joined Cases C-363/93, C-407/93—C-411/93, Rene´ Lancry S.A. (ECJ 9 August 1994) para 29. See also Joined Cases C-485/93 and C-486/93, Simitzi (ECJ 14 September 1995).

Lyons

Article 28. [Free Movement of Goods]

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for by Article [28] of the Treaty, it requires the free movement of goods generally, as opposed to inter-State trade alone, to be ensured with the Union.”63 The reference to imports and exports does not govern the interpretation of the Article. Instead, the governing context is free movement of goods.

6.5. “Charges Having Equivalent Effect”

A charge having equivalent effect is much broader in scope than a customs duty. In certain circumstances, it may be a charge made for a service and it may be paid to an entity which is not an emanation of the state. In determining whether a charge having equivalent effect falls within the scope of the prohibition it is often necessary to engage in an analysis of the charge. This is unnecessary where a customs duty as such is in issue. Therefore, the distinction between customs duties and charges having equivalent effect is a material one in practice. Article 28.1 TFEU does not give a definition of a charge having equivalent effect. If the provision is to achieve its objective and provide the foundation for broad economic integration by means of a general customs union then the definition must be a wide one. What AG Jacobs called “a core definition” was provided by the Court of Justice in 1969. It is indeed broad and covers: “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.”64 Details of charges subject to the prohibition are considered in the commentary to Article 30 TFEU which imposes the prohibition. It may be noted here that the prohibition which Article 28.1 TFEU anticipates was applied as recently as December 2018.65 The phrase “charges having equivalent effect” to customs duties appears also in bilateral agreements between the EU and third countries. In this context, the phrase is given the same interpretation as in Article 28.1 TFEU.66 63

Joined Cases C-363/93, C-407/93—C-411/93, Rene´ Lancry S.A. (ECJ 9 August 1994) para 29. See also Joined Cases C-485/93 and C-486/93, Simitzi (ECJ 14 September 1995) and Case C-293/ 02, Jersey Produce Marketing Organisation Ltd (ECJ 8 November 2005) para 64. 64 Case C-90/94, Haahr Petroleum Ltd (ECJ 27 February 1997) para 41. For a more detailed discussion of this complex area, see ➔ Article 30 TFEU and Lyons (2018), pp. 86–96. For an example of the application of this definition more recently, see Case C-206/06, Essent Netwerk Noord BV (ECJ 17 July 2008) para 41. 65 Case C-305/17, FENS spol. s r.o. v Slovak Republic — U´rad pre regula´ciu sietˇovy´ch odvetvı´ (ECJ. 6 December 2018). See also Case C-39/17 Lubrizol France SAS (ECJ. 14 June 2018); Case C-254/13, Orgacom BVBA (ECJ 2 October 2014). 66 Case C-409/10, Afasia Knits Deutschland GmbH (ECJ 15 December 2011) para 40.

Lyons

35

36

37

38

700

7. 39

Title II

Free Movement of Goods

Conclusion

Article 28 TFEU records the choice of the founders of the EEC to establish general market-based economic integration as opposed to sectoral integration under bureaucratic supervision. It identifies the concept, customs union, on which the EU continues to be based. In doing so, it establishes and maintains the framework within which MS relate to each other, internally, and to the rest of the world, externally. It is no surprise that this fundamental article was referred to by the Court of Justice as recently as December 2018.67 It has an important and continuing role to play in EU law.

List of Cases ECJ

ECJ 14.12.1962, 2/62 and 3/62 Commission v Luxembourg and Commission v Belgium, ECLI:EU:C:1962:45 [cit. in para 22] ECJ 05.02.1963 26/62 Van Gend en Loos, ECLI:EU:C:1963:1[cit. in para 30] ECJ 13.11.1964, 90/63 and 91/63 Commission v Luxembourg, Commission v Belgium, ECLI:EU:C:1964:80 [cit. in para 32] ECJ 10.12.1968, 7/68 Commission v Italy, ECLI:EU:C:1968:51 [cit. in para 27] ECJ 01.07.1969, 2/69 and 3/69, Sociaal Fonds voor de Diamantarbeiders, ECLI: EU:C:1969:30 [cit. in para. 32] ECJ 19.11.1975, 38/75 Douaneagent der NV Nederlandse Spoorwegen, ECLI:EU: C:1975:154 [cit. in para 20] ECJ 05.02.1976, 87/75, Bresciani, ECLI:EU:C:1976:18 [cit. in para 22] ECJ 22.03.1977, 74/76 Ianelli & Volpi SpA, ECLI:EU:C:1977:51 [cit. in para 33] ECJ 05.02.1981 50/80 Joszef Horvath, ECLI:EU:C:1981:34, [cit. in para 27] ECJ 16.03.1981, 266/81, Societa` Italiana per l’Oleodotto Transalpino (SIOT), ECLI:EU:C:1983:77 [cit. in para 22] ECJ 28.06.1984, 36/83, Mabanaft v Hauptzollamt Emmerich, ECLI:EU: C:1984:232 [cit. in para 6] ECJ 18.04.1991, 79/89 Brown Boveri & Cie A, ECLI:EU:C:1991:153, [cit. in para 27] ECJ 16.07.1992, C-163/90 Le´opold Legros, ECLI:EU:C:1992:326 [cit. in para 35] ECJ 20.10.1993 C-92/92 and C-326/92 Phil Collins, ECLI:EU:C:1993:847 [cit. in para 27] ECJ 09.08.1994, C-363/93, C-407/93—C-411/93 Rene´ Lancry S.A., ECLI:EU: C:1994:315 [cit. in para 35]

Case C-305/17, FENS spol. s r.o. v Slovak Republic — U´rad pre regula´ciu sietˇovy´ch odvetvı´ (ECJ. 6 December 2018).

67

Lyons

Article 28. [Free Movement of Goods]

701

ECJ 14.09.1995, C-485/93 and C-486/93, Simitzi, ECLI:EU:C:1995:281 [cit. in para 35] ECJ 05.10.1995, C-125/94 Aprile Srl, in liquidation, ECLI:EU:C:1995:309 [cit. in para 34] ECJ 27.02.1997, C-90/94 Haahr Petroleum Ltd, ECLI:EU:C:1997:368 [cit. in para 37] ECJ 23.10.1997, C-157/94, Commission v Netherlands, ECLI:EU:C:1997:499 [cit. in para 27] ECJ 23.10.1997, C-158/94, Commission v Italy, ECLI:EU:C:1997:500 [cit. in para 27] ECJ 10.03.1998, C-122/95 Germany v Council, ECLI:EU:C:1998:94 [cit. in para 17] ECJ 23.09.2003, 30/01 Commission v UK, ECLI:EU:C:2003:489 [cit. in para 32] ECJ 08.11.2005, C-293/02 Jersey Produce Marketing Organisation Ltd, ECLI:EU: C:2005:664 [cit. in para 22, 35] ECJ 15.06.2006, C-393/04 and C-41/05 Air Liquide Industries Belgium, ECLI:EU: C:2006:403 [cit. in para 33] ECJ 05.10.2006, C-290/05, A´kos Na´dasdi and C-333/05 Ilona Ne´meth, ECLI:EU: C:2006:652 [cit. in para 33] ECJ 08.11.2007, C-221/06, Stadtgemeinde Frohnleiten and Gemeindebetriebe Frohnleiten, ECLI:EU:C:2007:657 [cit. in para 33] ECJ 17.07.2008, C-206/06 Essent Netwerk Noord, ECLI:EU:C:2008:413 [cit. in para 33 and para 37] ECJ 15.12.2011, C-409/10 Afasia Knits Deutschland GmbH, ECLI:EU:C:2011:843 [cit. in para 15, 39] ECJ 02.10.2014, C-254/13, Orgacom BVBA, ECLI:EU:C:2014:2251 [cit. in para 32, 33, 38, 39] ECJ 16.07.2015, C-95/14, UNIC and Uni.co.pel, ECLI:EU:C:2015:492 [cit. in para 22, 40] ECJ 03.12.2015, C-301/14, Pfotenhilfe-Ungarn eV v Ministerium fu¨r Energiewende, Landwirtschaft, Umwelt und la¨ndliche Ra¨ume des Landes SchleswigHolstein, ECLI:EU:C:2015:793 [cit. in para 27] ECJ 22.09.2016, C-525/14, Commission v Czech Republic, ECLI:EU:C:2016:714 [cit. in para 30] ECJ, 16.05.2017, Opinion 2/15, Free Trade Agreement with Singapore, ECLI:EU: C:2017:376 [cit. para 11] Case C-39/17 Lubrizol France SAS (ECJ. 14 June 2018) Case C-305/17, FENS spol. s r.o. v Slovak Republic — U´rad pre regula´ciu sietˇovy´ch odvetvı´ (ECJ. 6 December 2018)

CFI

CFI 29.01.1998, T-113/96, Edouard Dubois et Fils SA, ECLI:EU:T:1998:11 [cit. in para 21, 25] Lyons

702

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References68 El-Agraa, A. M., & Jones, A. J. (2000). On ‘CU can dominate UTR’. Applied Economics Letters, 7 (5), 301–304. Krauss, M. B. (1972). Recent developments in customs union theory: An interpretive survey. Journal of Economic Literature, 10(2), 413–436. Lyons, T. (2015). A customs union without harmonized sanctions – Time for change? Global Trade and Customs Journal, 10(14), 136–142. Lyons, T. (2018). EU customs law (3rd ed.). Oxford: OUP. Mahant, E., & De Vanssay, X. (1994). The origins of customs unions and free trade areas. Journal of European Integration, 17(2-3), 181–210. Meade, J. E. (1968). The theory of customs unions. In 3rd printing. Amsterdam: North-Holland Publishing. Milward, A. S. (2000). The European rescue of the nation-state (2nd ed.). London: Routledge. Molle, W. (2006). The economics of European integration: Theory, practice, policy (5th ed.). Aldershot: Ashgate Publishing. Pogatsa, Z. (2015). The neo-liberal defeat of European integration and the need for a supranational political economy. In R. Fiorentini & G. Montani (Eds.), The European Union and supra-national political economy (pp. 98–115). London: Routledge. Swann, D. (2000). The economics of Europe, from common market to European Union (9th ed.). London: Penguin. Tovias, A. (1991). A survey of the theory of economic integration. Journal of European Integration, 15(1), 5–23. Viner, J. (1950). The customs union issue. London: Stevens & Sons Ltd.. Wonnacott, P., & Wonnacott, R. J. (1992). The customs union issue reopened. Manchester School, LX(2), 119–135. Wonnacott, P., & Wonnacott, R. J. (2005). What’s the point of reciprocal trade negotiations? Exports, imports, and gains from trade. The World Economy, 28(1), 1–20.

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Article 29 [Products from Third Countries] (ex-Article 24 TEC) Products2, 5 coming from a third country1 shall be considered to be in free circulation3–13 in a Member State1, 11, 12 if the import formalities7, 12 have been complied with and any customs duties or charges having equivalent effect1 which are payable8 have been levied8 in that Member State, and if they have not benefited from a total or partial drawback10 of such duties or charges.

Contents 1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. The Importance and Effect of Free Circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 3. The Pre-conditions for Free Circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 4. Free Circulation and Drawback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5. Case Law: The Nature and Scope of Free Circulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 List of Cases Reference

1.

Overview

Article 29 TFEU is the second article of the two introductory articles in Part Three, Title II TFEU headed “Free Movement of Goods”. It defines when products from third countries are in free circulation in the EU. It should be read in conjunction with Articles 28 and 30 TFEU, in particular in relation to the meaning of MS, third country, customs duties and charges having equivalent effect. The opening reference in Article 29 TFEU to products “coming from” a third country introduces the concept of the origin of goods (Article 28 TFEU). This is determined according to rules which apply either in the context of non-preferential treatment or preferential treatment (for the foundation of the relevant rules see Articles 59 to 68 of the Union Customs Code (UCC).1 Unlike Article 28, Article 29 refers to products not goods (as to the meaning of goods ➔ Article 28 TFEU) but this does not imply any limitation on the scope of free circulation. Article 29 TFEU is in the same terms as former Article 24 TEC and in similar terms, although not identical, to former Article 10.1 TEEC. The most important function of Article 29 TFEU is that it provides a definition of the concept of free circulation introduced by Article 28 TFEU. Articles 28 and 29 TFEU are the only two articles in the TFEU that refer to “free circulation” of goods. 1

Parliament/Council Regulation (EU) No 952/2013 laying down the Union Customs Code (recast), O.J. L 269/1 (2013). #

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The Importance and Effect of Free Circulation

To establish free movement of goods coming from outside the EU, it is essential that they are in free circulation within the Union customs territory. Given the fundamental importance of the concept, it is unsurprising that under the Community Customs Code release for free circulation was the first customs procedure to be identified (see Article 4.16 (a) CCC). It was specifically dealt with under Articles 79-83 CCC. The Union Customs Code reduces the number of customs procedures from eight to four but release for free circulation remains the first mentioned customs procedure (see Article 5.16 (a) and Articles 77-80 UCC). When goods that come from third countries are released for free circulation, they are assimilated to goods originating in the MS (➔ para 11–13). Such goods are, therefore, “Union goods” within Article 5.23 (b) of the UCC. In general, all goods within the customs territory of the Union are presumed to be Union goods (see Article 153.1 UCC) The time at which goods are released for free circulation is the time at which the status of Union goods is acquired (see Article 201.3 UCC in Chapter 1 of Title VI “Release for free circulation and relief from import duty”). When non-Union goods are placed under the customs procedure of release for free circulation a customs debt is incurred (see Article 77.1 (a) UCC). As well as being significant in relation to the imposition of customs duty, free circulation is relevant in other contexts involving the movement of goods such as the charge to VAT on importation, the imposition of anti-dumping duty and the protection of intellectual property rights.

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The Pre-conditions for Free Circulation

Release for “free circulation” is said by Article 201.2 UCC to entail the collection of any import duty due, the collection, as appropriate, of other charges, the application of commercial policy measures and the completion of the other formalities laid down in respect of the importation of goods. An example of the application of commercial policy measures is compliance with authorisations relating to import quotas. Other formalities include making a customs declaration, presenting goods to the customs authorities and presenting any necessary certificates in respect of the condition of plants or animals. Article 201.1 UCC provides that it is compulsory for non-union goods intended to be put on the Union market or intended for private use or consumption within the customs territory of the Union to be placed under release for free circulation. They “shall” be so placed. Article 29 TFEU does not, however, require that customs duties or other charges shall have been “paid” before their entry into free circulation. It requires that those duties and charges which are “payable” have been “levied”. Consequently, goods may enter into free circulation where payment has been deferred following the provision of security (see, e.g. Article 110 UCC).

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Article 29. [Products from Third Countries]

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The entry of goods into free circulation does not mean that they are free of all regulation. They may, for example, be subject to customs supervision under the end use regime. They may be subject to provisions established under the common commercial policy or to limitations protecting intellectual property rights.2 The ECJ has made clear that the fact that goods from third countries in free circulation are assimilated with those originating in the MS does not mean that rules governing the protection of trademarks can be avoided3 or that all national regulation is avoided (➔ para 11). The status of Union goods is lost when the goods are removed from the customs territory, where the declaration for free circulation is invalidated after release and in certain other circumstances (see Articles 154-155 UCC).

4.

Free Circulation and Drawback

Goods are not in free circulation where the duty attributable to them has been subject to total or partial drawback. “Drawback” in this context is not synonymous with ad hoc repayment or remission of duty under customs legislation such as may be permitted to avoid specific unfairness or injustice of some kind in the charge to customs duty. It refers to the refunding of duties, properly paid or due, on imported goods which would result in unfair competition in national markets.4

5.

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Case Law: The Nature and Scope of Free Circulation

The CJEU and the ECJ before it has made clear that “as regards free movement of goods within the European Union, goods in free circulation are definitively and wholly assimilated to goods originating in Member States.”5 Although that does not

2

See Parliament/Council Regulation (EU) No 608/2013 concerning customs enforcement of intellectual property rights, O.J. L 181/15 (2013). For an example of goods released for free circulation being subject to action by the proprietor of a trademark, see Case C-379/14, Top Logistics BV v Bacardi and Company Ltd (ECJ 16 July 2015). 3 Case 51/75, EMI Records v CBS (ECJ 15 June 1976) para 16; Case 86/75, EMI Records v CBS (ECJ 15 June 1976) para 19 and Case 96/75, EMI Records v CBS (ECJ 15 June 1976) para 9. 4 See also the definition of “drawback” contained on the Commission website in the context of the “no drawback rule” in provisions of agreements between the EU and third countries. It is available at http://ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-origin/generalaspects-preferential-origin/common-provisions_en#no_drawback_rule. 5 Case C-95/14, UNIC and Uni.co.pel v F S Retail (CJEU 16 July 2015) para 41 and Case 41/76, Donckerwolcke v Procureur de la République (ECJ 15 December 1976) para 17. Case 41/76 was also relied on in Case C-30/01, Commission v UK (ECJ 23 September 2003) para 54 and 50. See also Case 119/78, S.A. des Grandes Distilleries Peureux v Directeur des Services Fiscaux de la Haute-Saône et du Territoire de Belfort (ECJ 13 March 1979) para 26 and Case 59/84, Tezi Textiel v Commission, (ECJ 5 March 1986) para 26.

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mean that all goods originating in MS are necessarily in free circulation. Goods produced in the MS under inward processing arrangements would not be in free circulation in the EU (see 256–258 UCC). Neither does it mean that those goods which are in free circulation may circumvent rules such as those relating to trademark protection (➔ para 9). In the words of the ECJ: “In so far as there are no Community rules harmonising the conditions governing the marketing of the products concerned, the Member State into which they are put into free circulation may prevent their being placed on the market if they do not satisfy the conditions laid down for that purpose under national law.”6 The ECJ has emphasised that goods are in free circulation once import formalities are completed, commercial policy measures have been applied and duty has been paid.7 The Court has resisted attempts to add to the requirements for free circulation set out in Article 29 TFEU. It has said that it is irrelevant that goods are subsequently taken into another MS from the MS of importation.8 Neither is it significant that the goods enter into the first MS under a quota,9 that goods have been subject to a levy at full or reduced rates, or that they have been loaded or unloaded.10 Other attempts to limit the scope of free circulation have also been rejected.11 It is clearly important that goods in an internal market enter into free circulation quickly. Delays in customs procedures can themselves constitute barriers to trade and hindrances to the free movement of goods. The ECJ has referred to certain legislative provisions as being “intended to guarantee rapid and efficient procedures for the release for free circulation.”12 The absence of such procedures can give rise to significant impediments to free movement of goods in the form of non-tariff barriers. A famous example of an MS delaying the introduction into free circulation of goods from outside the EU arose in 1982 when imports of Xerox photocopiers into France were required to pass through the customs office at Poitiers far from their place of importation.13 One of the aims of the WTO’s Trade Facilitation

6

Case C-296/00, Prefetto Provincia di Cuneo v Silvano Carbone (ECJ 30 May 2002) para 32. See Case C-66/99, D Wandel GmbH v Hauptzollamt Bremen (ECJ 1 February 2001) para 36. 8 Case C-83/89, Openbaar Ministerie v Houben (ECJ 22 March 1990) para 9–11. 9 Case 288/83, Commission v Ireland (ECJ 11 June 1985) para 24, 25. See also Case 199/84, Procuratore della Repubblica v Migliorini and Fischl (ECJ 7 October 1985) para 18; Case 51/87, Commission v Council (ECJ 27 September 1988) para 10. 10 Case 69/84, Remo Padovani v Amministrazione delle Finanze dello Stato (ECJ 20 June 1985) para 18. 11 See Case C-467/04, Proceedings in relation to Gasparini (ECJ 28 September 2006) para 50. 12 Case C-290/01, Receveur Principal des Douanes de Villepinte v Derudder & Cie SA (ECJ 4 March 2004) para 45. 13 See further “The ‘Poitiers Effect’” in The World Development Report 1987 of the World Bank, p. 141, Box 8.3. Available at https://openknowledge.worldbank.org/handle/10986/2124, noted in Lyons (2015), especially at p. 19. 7

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Agreement is to expedite further the release and clearance of goods. The Agreement came into force on 22 February 2017.14

List of Cases ECJ 15.06.1976, 51/75, EMI Records v CBS, ECLI:EU:C:1976:85 [cit. in para 9] ECJ 15.06.1976, 86/75, EMI Records v CBS, ECLI:EU:C:1976:86 [cit. in para 9] ECJ 15.06.1976, 96/75, EMI Records v CBS, ECLI:EU:C:1976:87 [cit. in para 9] ECJ 15.12.1976, 41/76, Donckerwolcke v Procureur de la République, ECLI:EU: C:1976:182 [cit. in para 11] ECJ 13.03.1979, 119/78, S.A. des Grandes Distilleries Peureux v Directeur des Services Fiscaux de la Haute-Saône et du Territoire de Belfort, ECLI:EU: C:1979:66 [cit. in para 12] ECJ 11.06.1985, 288/83, Commission v Ireland, ECLI:EU:C:1985:28 [cit. in para 12] ECJ 20.06.1985, 69/84, Remo Padovani v Amministrazione delle Finanze dello Stato, ECLI:EU:C:1985:263 [cit. in para 12] ECJ 07.10.1985, 199/84, Procuratore della Repubblica v Migliorini and Fischl, ECLI:EU:C:1985:397 [cit. in para 12] ECJ 27.09.1988, 51/87, Commission v Council, ECLI:EU:C:1988:455 [cit. in para 12] ECJ 22.03.1990, C-83/99, Openbaar Ministerie v Houben, ECLI:EU:C:2001:31 [cit. in para 12] ECJ 01.02.2001, C-66/99, D Wandel GmbH v Hauptzollamt Bremen, ECLI:EU: C:2001:69 [cit. in para 12] ECJ 30.05.2002, C-296/00, Prefetto Provincia di Cuneo v Silvano Carbone, ECLI: EU:C:2002:316 [cit. in para 11] ECJ 23.09.2003, C-30/01, Commission v UK, ECLI:EU:C:2003:489 [cit. in para 11] ECJ 04.03.2004, C-290/01, Receveur Principal des Douanes de Villepinte v Derudder & Cie SA, ECLI:EU:C:2004:120 [cit. in para 13] ECJ 28.09.2006, C-467/04, Proceedings in relation to Gasparini, ECLI:EU: C:2006:610 [cit. in para 12] ECJ 16.07.2015, C-95/14, UNIC and Uni.co.pel v F S Retail, ECLI:EU:C:2015:492 [cit. in para 11] ECJ 16.07.2015, C-379/14, Top Logistics BV v Bacardi and Company Ltd, ECLI: EU:C:2015:497 [cit. in para 9] ECJ 22.09.2016, C-525/14, Commission v Czech Republic, ECLI:EU:C:2016:714 cit in para 11.

14

WT/L/931, 15th July 2014. available at https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e. htm#currentwork.

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Reference15 Lyons, T. (2015). The interaction of customs and non-tariff barriers. In C. Herrmann, M. Krajewski, & J. P. Terhechte (Eds.), European yearbook of international economic law 2015 (pp. 19–42). Berlin: Springer.

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All cited internet sources in this comment have been accessed on 9 December 2019.

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Chapter 1 The Customs Union

Article 30 [Prohibition of New Customs Duties or Charges Having Equivalent Effect] (ex-Article 25 TEC) Customs duties on imports and exports3–5 and charges having equivalent effect6–10 shall be prohibited between Member States. This prohibition shall also apply to customs duties of a fiscal nature.11

Contents 1. 2.

The Rationale for Adopting Article 30 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Imposing Customs Duties on Imports and Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.1. Pecuniary Border Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.2. Direct Applicability and Concept of a Member State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 3. Charges Having Equivalent Effect (CEE) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.1. Defining Charges Having Equivalent Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.2. Effect, Not Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.3. Exempted Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3.4. Duties of a Fiscal Nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 List of Cases References

1.

The Rationale for Adopting Article 30 TFEU

The concept for gradual abolishing of customs duties and charges having equivalent effect between the MS was first introduced by the 1957 EEC Treaty. This supports the free movement of goods that is the foundation and very core of today’s EU. Following the ECSC, the succeeding customs union and a common customs strategy provide a foundation for the proper functioning of the utmost goal establishing Single Market that applies common rules at internal and external borders. In addition to the ideal of a customs union leading to a Single Market, the common European market sought to carry into effect a stable producing and trading union, fostering a strong dynamic plateau capable of entering into relations with the US and Japanese blooming economies.1 Seeking to establish a fully functional customs union at the time, the TEEC and more specifically, its Article 122 mark the beginning of the gradual elimination of customs duties as financial

1

Foster (2011), p. 265. Article 12 TEEC: “Member States shall refrain from introducing between themselves any new customs duties on imports or exports or any charges having equivalent effect, and from increasing those which they already apply in their trade with each other.” 2

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obstacles to trade between the MS benefitting the producers, consumers, and the Union at a larger scale, alike. Article 12 EEC Treaty, or the Treaty of Rome, set forth that MS had to refrain from introducing new customs duties or any charges having equivalent effect between themselves and were onwards forbidden to increase such duties or charges having equivalent effect. Thus, at the core of the Treaty lied an ultimate goal to progressively abolish existing duties for the achievement of a complete customs union, which had been successfully accomplished by Council Decision of 26 July 1966 as from 1 July 1968.3 Article 25 EC, which is now Article 30 TFEU, has abrogated the discrepancy between new and existing, and thus the time, when any duties or charges equivalent have been imposed, is extraneous.4 After the entry into force of the Single European Act on 1 July 1987, becoming the first significant amendment to the EEC Treaty and setting as its chief objective the enhancing of the process of European construction, which would lead to complete internal market, the European Single Market has aimed to put into force the absolute prohibition of customs duties and charges having equivalent effect between the MS. Such a prohibition is today laid down by Article 30 TFEU in the form of a normative content of an absolute ban,5 and outlaws the EU MS to impose any customs duties and equivalent charges, both to imports and exports. The relevant abolition is regarded as a central principle of the customs union and the EU Single Market.6

2.

Imposing Customs Duties on Imports and Exports

2.1. Pecuniary Border Measures

3

Considering the overall aim or the liberalisation agenda to be the Single Market, the more tangible short-term goal was the liberalisation of trade that was ultimately accomplished by total abolition and prohibition of pecuniary border measures within the EU,7 the latter comprising of both customs duties and charges having equivalent effect. First introduced as a standstill provision barring any new or increase of existing customs duties or charges of equivalent effect on imports and exports by former Article 12 TEEC, Article 25 TEC and today’s Article 30 TFEU, the EU achieved a complete customs union by elimination of border measures on 3

Council Decision No 66/532 concerning the abolition of customs duties, the prohibition of quantitative restrictions as between Member States and the application of the common customs tariff duties for products other than those set out in Annex II to the Treaty, O.J. 2971/66 4 Craig and de Búrca (2011), p. 612. 5 Ortino (2004), p. 41. 6 See, for instance, Craig and de Búrca (2011), p. 611. 7 Ortino (2004), p. 40. Dr. Frederico Ortino, who is an international economic law expert, sees in his book on Basic Legal Instruments for the Liberalisation of Trade that the dealing with pecuniary border measures can be done by drawing a distinction between three main features of (a) normative content, (b) objective element and (c) the exceptions.

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imports and exports between MS. Pursuant to Ortino, the normative content of what is today Article 30 TFEU is thus the straightforward prohibition of customs duties and charges having equivalent effect. Concerning the objective element of the liberalisation policies of the EU, Ortino is referring to the measures falling under the scope of application of the rule in current Article 30 TFEU, including “customs duties”, “charges having equivalent effect” as well as “compensation exception” thereto (➔ para 5–10).8

2.2. Direct Applicability and Concept of a Member State

At the time of Article 12 TEEC, the ECJ gave a ground-breaking ruling in terms of direct applicability, holding that provisions of EU law can be invoked before national courts of the MS while Article 12 produced direct effects, as well as created individual rights, and was hence rendered directly applicable. Pursuant to the landmark Decision in Van Gend en Loos,9 the EEC constituted “a new legal order of international law,” which, in addition to having as its direct subjects the MS, was seen as contributing to the “legal heritage” of the individuals. Customs duties would entirely diminish the underlying purpose as well as the economic ideals of a Common Market entailing free flow of all factors of production.10 Should MS be allowed to levy duties or taxes on goods in trade between the MS, no matter how small the pecuniary charge, the Single Market would face discriminatory forms of protectionism. Therefore, any imposition of such customs duties and charges having equivalent effect in any trade in goods (Article 28 TFEU) is per se unlawful under Article 30 TFEU.11 The Decision meant that the need for interpretation of one Treaty article had provided a vision for the EU as a supranational organisation, existing not independently of, but rather tightly incidental to the legal orders of the MS. The ECJ in Van Gend en Loos emphasised that the interpretation of the provisions of former Article 12 and thus by considering that the absolute prohibition on any customs duties and charges having equivalent effect in Article 30 TFEU has strengthened this principle, also the provisions of the latter, means the obligation for the courts of the MS to protect the direct effects and individuals rights the Treaty has created. The ECJ emphasised that the reason for the higher rate of duty was of no relevance, i.e. any rise of duty, whether coming from actual increase of the rate of customs duty or re-classification of the goods resulting in the placement of such 8

Ortino (2004), p. 47. Case 26/62, Van Gend en Loos (ECJ 5 February 1963). 10 Foster (2011), p. 265. 11 The absolute nature of the fundamental principle to eliminate customs duties and charges having equivalent effect between the MS has been indisputable in various EU case law ever since coming into effect of former Article 12 TEEC. See, for instance: Joined Cases 2-3/62, Commission v Luxembourg and Belgium (ECJ 14 December 1962); Joined Cases 80-81/77, Société Les Commissionnaires Réunis SARL v Receveur des douanes (ECJ 20 April 1978). 9

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goods under a category with heavier duties, was illegal (➔ para 8) under former Article 12.12 As indicated by case law, it is clear that the ECJ considers the concept of Member State to be interpreted encompassing a large scope of bodies whose activities could result in “a protectionist effect”.13 With a view to former Article 12, the flexibility of the concept was avouched in the Edouard Dubois case, which found that any charge levied contrary to former Article 12, even if imposed by private undertakings in the framework of an agreement with its customers, was in conflict with the purpose of former Article 12. Even if the measure originates from the MS, yet is imposed by a series of private contracts resulting in private undertakings as state agents being responsible for collecting certain duties, this MS is in breach of the obligations under current Article 30 TFEU.14 It is the MS’s failure to fulfil its financial obligations if a private undertaking must impose a transit charge to compensate for tasks fulfilled in the public interest; thus, insofar as the concept of an MS has a wide and flexible scope of interpretation, only truly private services are exempt from Article 30 TFEU.15

3.

Charges Having Equivalent Effect (CEE)

3.1. Defining Charges Having Equivalent Effect

6

7

If the normative content of Article 30 TFEU is the uniformly understandable strict prohibition, its objective element leaves room for interpretation. Here, as opposed to relatively straightforward and uniform understanding of customs duties that used to be under specific denomination in MS’ national tariff lists,16 i.e. duties levied on border, charges having equivalent effect are less easily identifiable. Insofar as the implication of Article 12 TEEC, then Article 25 TEC and current Article 30 TFEU have not changed in terms of the normative content—the prohibition of (new) customs duties and charges having equivalent effect, the ECJ case law has firmly fixed the object-matter of those provisions, i.e. the unlawfulness of any tax, regardless of its purpose, caught as a duty or charge, having an analogous effect of a customs duty on exported and imported goods between the MS. Interpretation of the term “charges having equivalent effect” has been provided in various ECJ decisions from as early as the 1962 Gingerbread judgment,17 where 12

Case 26/62, Van Gend en Loos (ECJ 5 February 1963). Snell (2002), pp. 138–139. 14 Case C-16/94, Edouard Dubois v Garanor Exploitation SA (ECJ 11 August 1995) para 19–21. 15 Snell (2002), pp. 138–139. 16 Barents (1978), p. 416. 17 Joined Cases 2-3/62, Commission v Luxembourg and Belgium (ECJ 14 December 1962); followed by, for instance, Case 7/68, Commission v Italy (ECJ 10 December 1968); Case 24/68, Commission v Italy (ECJ 1 July 1969); see also Case 87/75, Bresciani (ECJ 5 February 1976); Joined Cases 2-3/69, Diamantarbaiders (ECJ 1 July 1969) ECR 211. 13

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the court offered their view on a “special import duty” on gingerbread to be prohibited as a CEE, insofar as “whatever it [a charge] is called and whatever its mode of application, may be regarded as a duty imposed unilaterally either at the time of importation or subsequently, and which, if imposed specifically upon a product imported from a Member State to the exclusion of a similar domestic product, has, by altering its price, the same effect upon the free movement of products as a customs duty.”18 It is clear, by wording, as well as by various case law, that not only customs duties that are specifically named so and imposed on imports and exports are prohibited under Article 30 TFEU. During the time of the Gingerbread ruling, the main assessment criterion in terms of whether a tax levied on imports or exports was considered a CEE was the consideration of the charge and whether it had a protectionist and discriminatory effect.19 If the charge reflected the effect of a competition-distorting measure between the MS, it was considered per se unlawful—similarly to any customs duties stricto sensu.20 By the same reasoning, in the Italian Art case, the Italian tax on export of artistic, historical and archaeological items was considered a CEE under what is now Article 30 TFEU, despite Italy claiming the purpose of the tax to be the protection and safety of the aforementioned items, based on the reasoning that the effect of such pecuniary burden on exports was capable of impeding community trade in goods.21 One of the most prevailing definitions to CEE is from the 1969 Commission v Italy22 case, which was repeated and expanded in the Diamantarbeiders23 moved further from the requirement of “protectionist effect” and provided a broader scope, introducing the absolute nature of customs duties and CEE levied on goods meant to be in free circulation between the MS. The Court’s judgment in these cases considered a CEE to customs duty be “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.”24 Thus, the prerequisite indication of a “protectionist effect” became redundant. The Court in the Diamantarbeiders held that the purpose of what is now Article 30 TFEU is not merely to eliminate the protective nature of customs duties levied on imports by solely distinguishing goods that compete with products of the importing country, but to eliminate customs duties and charges having equivalent effect preventing the free movement of goods regardless whether they compete with the domestic products or not.25 Therewith,

18

Joined Cases 2-3/62, Commission v Luxembourg and Belgium (ECJ 14 December 1962), p. 432. Barents (1978), p. 417. 20 Craig and de Búrca (2011), p. 614. 21 Case 7/68, Commission v Italy (ECJ 10 December 1968), p. 429. 22 Case 7/68, Commission v Italy (ECJ 10 December 1968). 23 Joined Cases 2-3/69, Diamantarbaiders (ECJ 1 July 1969). 24 Case 7/68, Commission v Italy (ECJ 10 December 1968) para 9; Joined Cases 2-3/69, Diamantarbaiders (ECJ 1 July 1969) para 11/14. 25 Joined Cases 2-3/69, Diamantarbaiders (ECJ 1 July 1969) para 11/14. 19

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the goal of expanding the objective element of Article 30 TFEU to include both customs duties and charges having equivalent effect on goods circulating between the MS is to achieve prohibition on obstacles to trade in the form of pecuniary charges imposed for the mere purpose that such goods have crossed a national frontier; whereas the pecuniary charge does not have to be levied for the benefit of the state and designed with a protectionist or discriminatory effect.26

3.2. Effect, Not Purpose

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Notwithstanding whether a pecuniary measure has a protectionist effect or a tax is being levied for the sole reason that the good crossed a border within the EU, the ECJ has confirmed that it is, in fact, the effect of the customs duty or a charge having equivalent effect, not its purpose that designates its lawfulness.27 Unlike quantitative restrictions in Articles 34-35 TFEU, the fiscal measures in Article 30 TFEU cannot be justified on grounds of, for instance, the protection of national treasures possessing artistic, historic or archaeological value, or the protection of industrial and commercial property, as clarified in the Italian Art case by the ECJ (Article 36 TFEU). Any tax levied on goods, altering the price, that has a restrictive effect of free circulation of goods, is considered customs duty or a charge having equivalent effect despite its claimed purpose.28 In case MS could justify the duties and charges having equivalent effect by claiming the latter to have, in some way, a non-fiscal nature, the peremptory force of Article 30 TFEU would be undermined.29 Thus, the Court has reiterated its focus on effect rather than purpose with the underlying idea to supplement the prohibition against obstacles to free circulation of goods. The peremptory force has been apparent in various case law of the ECJ in which MS have claimed that the imposed tax is for certain service rendered, as a quid pro quo.30 In most cases, the ECJ sees that the substantial reason for levying a charge still has the effect of a customs duty impeding intra-Union trade. Thus, for instance, in the Bresciani case, the ECJ considered a charge for compulsory veterinary and public-health inspection charge carried out on imported raw cowhides when they crossed the national border to be a CEE. It was regarded to be of no importance that the charge was in fact proportionate to the actual costs of the compulsory public inspection and domestic production was subjected to similar (not equal) burden, for the reason that the national health inspection system could not be considered a 26

Joined Cases 2-3/69, Diamantarbaiders (ECJ 01 July 1969) para 15/18. In addition to the aforementioned cases in given section, for example Case 87/75, Bresciani (ECJ 5 February 1976); Case 63/74, W. Cadsky S.p.A. v. Istituto Nazionale per il Commercio Estero (ECJ 26 February1975). 28 Case 7/68, Commission v Italy (ECJ 10 December 1968) p. 429. 29 Craig and de Búrca (2011), pp. 613–614. 30 Craig and de Búrca (2011), p. 616. 27

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service provided to the importer.31 However, the Court followed by holding that if it could be indicated that national production were subjected to the same charges, according to the same criteria and at the same stage of production, it would be considered to fall under a general system of international taxation, and thus not considered a charge having equivalent effect to a customs duty.32 3.3. Exempted Measures

Although there are no defences to the breach under Article 30 TFEU, the Court has considered certain charges not to fall under its scope. Emanating from the Bresciani judgment, the Court has, in specific cases, exempted inspections and other fulfilment of mandatory requirements from the scope of Article 30 TFEU. If a cost is mandatory under the EU law, the charge is lawful in three situations (noncumulative) as established by Case 18/87 Commission v Germany:33 first, it is “applied systematically and in accordance with the same criteria to domestic products and imported products alike;”34 second, “if it constitutes payment for a service in fact rendered to the economic operator of a sum in proportion to the service;”35 or third, “subject to certain conditions, if it attaches to inspections carried out to fulfil obligations imposed by Community law.”36

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3.4. Duties of a Fiscal Nature

Under Article 30 TFEU and ECJ case law, it is apparent that there is a total ban on customs duties or any charges having equivalent effect within the internal market. What concerns duties of a fiscal nature, these are considered fiscal barriers to trade unless they are genuine taxes, and thus falling under the scope of Article 110 TFEU. The example of a latter can be imposed in a form of consumer tax that has escaped the categorisation of a duty of a fiscal nature in several ECJ decisions where the Court has held that if a tax is part of a general system of internal duties applied in a systematic manner to domestic and imported products alike, it is a genuine tax and does not fall under a customs duty of a fiscal nature.37 Such a duty has been considered a genuine tax even if the importing MS itself does not produce identical and similar products by virtue of the fact that the tax is imposed in accordance with objective criteria regarding the origin of the products.38 31

Case 87/75, Bresciani (ECJ 5 February 1976) para 10–11. Case 87/75, Bresciani (ECJ 5 February 1976) para 11. 33 Case 18/87, Commission v Germany (ECJ 27 September 1988) para 6. 34 Case 132/78, Denkavit v France (ECJ 31 May 1979). 35 Case 158/82, Commission v Denmark (ECJ 9 November 1983). 36 Case 46/76, Bauhuis v Netherlands (ECJ 25 January 1977). 37 Case 90/79, Commission v France (ECJ 3 February 1981). 38 Case 193/85, Cooperativa Co-Frutta Srl v Amministrazione delle finanze dello Stato (ECJ 3 June 1986). 32

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List of Cases ECJ 14.12.1962, 2-3/62, Commission v Luxembourg and Belgium, ECR 425 [cit. in para 4, 7] ECJ 05.02.1963, 26/62, Van Gend en Loos, ECR 13 [cit. in para 4] ECJ 20.04.1978, 80-81/77, Société Les Commissionnaires Réunis SARL v Receveur des douanes, ECR 927 [cit. in para 4] ECJ 10.12.1968, 7/68, Commission v Italy, ECR 423 [cit. in para 7, 8, 9] ECJ 01.07.1969, 24/68, Commission v Italy, ECR 193 [cit. in para 7] ECJ 01.07.1969, 2-3/69, Diamantarbaiders, ECR 211 [cit. in para 8] ECJ 26.02.1975, 63/74, W. Cadsky S.p.A. v Istituto Nazionale per il Commercio Estero, ECR 281 [cit in para 9] ECJ 05.02.1976, 87/75, Bresciani, ECR 129 [cit. in para 7, 9] ECJ 25.01.1977, 46/76, Bauhuis v Netherlands, ECR 5 [cit. in para 10] ECJ 31.05.1979, 132/78, Denkavit v France, ECR 1923 [cit. in para 10] ECJ 03.02.1981, 90/79, Commission v France, ECR 283 [cit. in para 11] ECJ 09.11.1983, 158/82 Commission v Denmark, ECR 3573 [cit. in para 10]. ECJ 03.06.1986, 193/85, Cooperativa Co-Frutta Srl v Amministrazione delle finanze dello Stato, ECR 2085 131 [cit. in para 11] ECJ 27.09.1988, 18/87, Commission v Germany, ECR 5427 [cit. in para 10] ECJ 11.08.1995, C-16/94, Edouard Dubois v Garanor Exploitation SA, ECR I-2421 [cit. in para 5]

References Barents, R. (1978). Charges having an equivalent effect to customs duties. Common Market Law Review, 15(4), 415–434. Craig, P., & De Búrca, G. (2011). EU law, text, cases and materials (5th ed.). Oxford: Oxford University Press. Foster, N. (2011). Foster on EU law (3rd ed.). Oxford: Oxford University Press. Ortino, F. (2004). Basic legal instruments for the liberalisation of trade: A comparative analysis of EC and WTO law. Oxford: Hart Publishing. Snell, J. (2002). Goods and services in EC law. A study of the relationship between the freedoms. Oxford: Oxford University Press.

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Article 31 [Common Customs Tariff] (ex-Article 26 TEC) Common Customs Tariff duties1–7 shall be fixed by the Council on a proposal from the Commission.8–9

Contents 1. 2. 3.

General Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Harmonisation of Customs Rules on External Borders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The Powers of the Council and the Commission on Fixing the CCT . . . . . . . . . . . . . . . . . . . . . . 8 3.1. Fixing the CCT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.2. The Role of the European Parliament . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 List of Cases References

1.

General Background

Within the first decade after coming into force of the EEC Treaty, the Community had been successful in moving towards the goal of a Single Market. Thus, by July 1968, it had accomplished the abolition of customs duties and quantitative restrictions between the MS with the Council Decision 66/532 of 26 July 1966 (➔ Article 30 TFEU para 2). Simultaneously, the market had been strengthened from the external borders of the MS in the same year with the novel concept of Community’s Common Customs Tariff (CCT), the first version of which was published in the form of Council Regulation 950/68 (➔ Article 28 TFEU). Both the removal of customs duties and equivalent charges, as well as the establishment of a CCT, furthered the EU integration, and thus accelerated the completion of a customs union and subsequently the Single Market. Bearing in mind the free movement of goods as one of the four foundational freedoms of the EU internal market, Article 30 TFEU lays down the abolishment of customs duties and similar charges between the MS (➔ Article 30 TFEU para 3). However, besides accomplishing the internal market, the absolute meaning of free circulation of goods, in addition to encompassing internal abolishment of duties and charges having equivalent effect, further embraces the idea that MS should have equal and fair chances to compete with manufacturers from third countries.1 The CCT that is applicable to all EU MS provides different rates to a variety of

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Horspool and Humphreys (2012), pp. 270–271.

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goods depending on the type, origin as well as economic sensitivity that are imported across EU external borders.2 Hence, the EU, at a supranational level, ensures the harmonisation of customs regulations not only within its internal, but also on the external borders to goods being imported for free internal market circulation by regulating trade with third countries by applying a single external tariff that is the CCT.3 Before the adoption of a coherent normative act, the CCT had been determined exclusively by Council decision and applied at discretion of MS on different dates by transposing the CCT into their national systems whereas it was not necessarily uniformly applied.4 Insofar as the unified system of external tariff can only be applied to goods imported to the EU once, after which they can freely circulate within the single market, the agreement of a common tax system that needed to be reached between the original MS required high levels of compromise due to deviating opinions on types of products each MS wanted to protect. Thus, it was found desirable and more effective to develop common customs tariffs in a form of a legal instrument immediately and directly binding on all MS for finding the most vigorous and expedient way for the achievement of a Single Market.5 This was achieved by adoption of a regulation as the most appropriate EU legal instrument thereto—it was therefore decided to publish the new tariffs in the form of Regulation 950/68,6 to be reviewed and consolidated every year.

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Harmonisation of Customs Rules on External Borders

The EU is built upon a customs union, implicating system of common customs duties on imports from third countries.7 The CCT is not conveyed into a single codified law but forms a concept in the form of collection of laws through the application of which the EU allows the internal manufacturers to enjoy terms of fair and equal competition; it combines the classification of goods (nomenclature) and duty rates applying to different classes of goods as well as other EU legislation having effect on the payable customs duty on specific goods imported to the internal market.8

2 European Commission, Taxation and Customs Union. EU Customs Strategy. Available at http:// ec.europa.eu/taxation_customs/customs/policy_issues/customs_strategy/index_en.htm. 3 Horspool and Humphreys (2012). 4 Lasok (1998), pp. 236–237. 5 Moussis (2015), pp. 105–106. 6 Council Regulation (EEC) No 950/68 on the common customs tariff, O.J. L 172/1 (1968). 7 Eeckhout (2011), p. 448. 8 European Commission, Taxation and Customs Union. EU Customs Strategy. Available at http:// ec.europa.eu/taxation_customs/customs/policy_issues/customs_strategy/index_en.htm.

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Provisions related to modifying and suspending duties of the CCT originate from Article 28 TEEC,9 which reads: Any autonomous modification or suspension of duties of the common customs tariff shall be decided upon by the Council acting by means of a unanimous vote. After the expiry of the transitional period, the Council, acting by means of a qualified majority vote on a proposal of the Commission, may, however, decide upon modifications or suspensions not exceeding 20% of the rate of any duty and effective for a maximum period of 6 months. Such modifications or suspensions may only be extended, under the same conditions, for a second period of 6 months. Although opposing in wording the rather laconic current Article 31 TFEU and the previous Article 26 EC, the provisions of their antecedents laid down in Articles 18-29 TEEC elaborated on the future CCT with more restrictive references to the competences of the Council; at the time, the Tariff was based on arithmetical average of duties applied in four customs territories (France, Germany, Italy and the Benelux countries) (Article 19 TEEC). Only if the MS failed to reach an agreement within a certain time limit for specific products, the Council, by means of a unanimous vote and based on a qualified majority vote on a proposal of the Commission, was authorised to fix the duties under the CCT. Thus, the much lengthier provisions mainly concerned modification and suspension of duties in case of inaction of the MS—hence, despite the verbosity, the initial scope of the CCT was more restrictive concerning aptitude of the Council in that it did not include a provision authorising the Council to initiate the fix of external tariffs. With the adoption of the Single European Act, the relevant provisions were reformed to include autonomous alteration or suspension by the Council, acting by a qualified majority on a proposal from the Commission.10 The preceding version to the current Article 31 TFEU, Article 26 TEC-Amsterdam, unprecedentedly included the power of the Council to fix the CCT duties by a qualified majority, on a proposal from the Commission. The tendency towards shifting the power from the MS had already been established by the Court, holding that the Regulation 950/ 68 was meant to be interpreted in a way that MS are not allowed, by decisions at national level, to affect the tariff headings.11 Therefore, the authority to institute a full-scale “list” of CCT, or the combination of Customs Nomenclature and duty rates applying to respective classifications, had been fully shifted from being under the auspices of the MS, to the discretion at supranational level. On the customs union, the Court’s outset for such a division was developed in the Diamantarbeiders case,12 where the ECJ held that Regulation 950/68 on CCT prohibited imposing or introducing any new national charges to goods circulating

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Articles 18-29 TEEC were considering the establishment of a Common Customs Tariff. Single European Act, Article 16.1. 11 See Case 14/70, Deutsche Bakels GmbH v Oberfinanzdirektion München (ECJ 8 December 1970) and Case 165/87, Commission v Council (ECJ 27 September 1988). 12 Joined Cases 2-3/69, Sociaal Fonds voor de Diamantarbaiders v SA Ch. Brachfeld & Sons (ECJ 1 July 1969). 10

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between the MS, which further meant that the MS had lost the power to act thereto at their own discretion.13 Thus, since the completion of the internal market the MS are obliged to do so based on uniform principles applicable to all equally. The underlying idea of the CCT that there can be no differentiation between the customs applied on goods imported from the external borders of the Union on behalf of the MS was re-established in the Generalized Tariff Preferences case.14 The Court held that the intention of the CCT is the equalisation of customs charges levied to goods entering the customs union from third countries at the frontiers of the Union, inter alia, to have a clearly defined uniform system of principles for a common commercial policy eliminating national disparities that may have a disconcerting effect on trade with third countries.

3.

The Powers of the Council and the Commission on Fixing the CCT

3.1. Fixing the CCT

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The CCT collected from goods entering the EU from third countries are charged an equal tariff irrespective of the MS whose border they cross.15 Since the adoption of the CCT Regulation that was first publicised in the form of Council Regulation 950/ 68 of 28 June 1968, the role of the MS to carry out customs policy has been diminished. The MS cannot unilaterally enforce customs policy, hence, they are not allowed to change the CCT that the Council has fixed or suspended customs duties. The authority of the Council to fix the relevant CCT under Article 31 TFEU is one of the three options of determining such tariff rates.16 In addition, the Council may authorise the Commission to negotiate tariff and trade agreements with both third countries and international organisations (Article 207 TFEU); and such tariffs may be fixed in accordance with association agreements (Article 217 TFEU). Under Article 31 TFEU, the level of single external tariff applied to imports from third countries commonly by all EU MS is fixed by the Council. Thus, the MS cannot at their own discretion apply, amend, fix or negotiate tariff matters since the changes to the CCT are done based on decisions of the Council, following the proposal (and negotiations) with the Commission.17 In addition, the EU customs 13

Schütze (2009). Case 51/87, Commission v Council (ECJ 27 September 1988) para 6–9. 15 The import duties, regardless of their country of origin, are charged the same tariff in accordance with the CCT. Such duties collected by customs provide an autonomous source of income for the EU. For example, in 2013, the income from customs collected on external borders of the Union, represented approximately 11% of the EU budget. See: European Commission, 2014, The EU Customs Union: protecting people and facilitating trade. The European Union Explained. Available at http://europa.eu/pol/pdf/flipbook/en/customs_en.pdf. 16 Weiss and Kaupa (2014), p. 51. 17 Moussis (2015), pp. 105–106. 14

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rules consider the WTO respective arrangements under the GATT in regulating the external commercial relations of the EU. Therefore, the Commission acts on a negotiating brief issued by the Council as a negotiator in the international arena with regard.18 In addition to fixing the CCT, the Council can amend the original tariff rate when adopting regulatory measures, concluding international, bilateral agreements or autonomous preferential agreements with certain beneficiary countries, concerning any such tariff procedures for the purpose of, e.g. reducing customs duties or eliminating them completely in trade relations to third countries.19 The aforementioned amendments to initial CCT constitute exceptional circumstances to the normal state of affairs and are referred to as tariff quotas that, during the application period of the Council adopted instruments, can totally or partially wave the duties that would normally be applied to goods imported to the Union from third countries.20

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3.2. The Role of the European Parliament

The scheme from Article 31, shifting the fixing of CCT duties under the Council’s sphere of competences, includes the involvement of the Commission, yet provides no control to the EP. Similarly to the provisions of fixing the CCT now, former Article 133 TEC (now Article 207 TFEU) only provided competence to the Commission and the Council, whereas the procedure of taking action was exactly the same—the Council acted by qualified majority, on a proposal from the Commission not even providing the weakest form of parliamentary involvement, i.e. mere consultation.21 The Lisbon Treaty granted more rights of action to the EP, when including the ordinary legislative procedure under the scope of the new Article 207 TFEU. Insofar as the Common Commercial Policy of the EU (Articles 206-207 TFEU), especially what concerns the CCT, forms an integral part of the EU’s customs union, the impact of the Parliament’s actions can be referred to as indirect, as the EP participates in the adoption of framework implementing the commercial policy as well as in conclusion of international agreements on trade matters (Article 218.6 TFEU).22 The final form of the CCT duty rates together with the Combined Nomenclature for classification purposes is adopted annually by the Commission based on the

18

Moussis (2015), pp. 672–674. Moussis (2015), pp. 105–106. 20 Commission Communication concerning autonomous tariff suspensions and quotas, O.J. C 363/ 6 (2011), p. 2.2.1. 21 Eeckhout (2011), p. 458. 22 Eeckhout (2011), p. 459. 19

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system the Council has fixed, based on the economic sensitivity of the class of products imported to the EU.23 Published in the Official Journal by October 31 of every year, it comes into effect from the upcoming January. The CCT regulatory framework today is enacted in the Union Customs Code (UCC),24 repealing the Modernised Customs Code.25

List of Cases ECJ 01.07.1969, 2-3/69, Sociaal Fonds voor de Diamantarbaiders v SA Ch. Brachfeld & Sons, ECR 211 [cit. in para 6] ECJ 08.12.1970, 14/70, Deutsche Bakels GmbH v Oberfinanzdirektion München, ECR 1001 [cit. in para 6] ECJ 27.09.1988, 165/87, Commission v Council, ECR 5545 [cit. in para 7] ECJ 27.09.1988, 51/87 Commission v Council, EC 5458 [cit. in para 7] References26 Eeckhout, P. (2011). EU external relations law (2nd ed.). Oxford: Oxford University Press. Horspool, M., & Humphreys, M. (2012). European Union law. Oxford: Oxford University Press. Lasok, D. (1998). The trade and customs law of the European Union (3rd ed.). The Hague: Kluwer Law International Ltd. Moussis, N. (2015). Access to the European Union (21st ed.). Cambridge: Intersentia. Schütze, R. (2009). From dual to cooperative federalism: The changing structure of European law. Oxford: Oxford University Press. Weiss, F., & Kaupa, C. (2014). European Union internal market law. Cambridge: Cambridge University Press.

23

European Commission, Taxation and Customs Union. EU Customs Strategy. Available at http:// ec.europa.eu/taxation_customs/customs/policy_issues/customs_strategy/index_en.htm. 24 Parliament/Council Regulation (EU) No 952/2013 laying down the Union Customs Code, O.J. L 269 (2013). 25 Parliament/Council Regulation (EC) No 450/2008 laying down the Community Customs Code (Modernised Customs Code), O.J L 145/1 (2008). 26 All cited internet sources in this comment have been accessed on 9 December 2019.

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Article 32 [Principles for Commission Duties] (ex-Article 27 TEC) In carrying out the tasks entrusted to it under this Chapter2–3 the Commission shall be guided by: (a) the need to promote trade between Member States and third countries;4 (b) developments in conditions of competition within the Union in so far as they lead to an improvement in the competitive capacity of undertakings;5–6 (c) the requirements of the Union as regards the supply of raw materials and semi-finished goods; in this connection the Commission shall take care to avoid distorting conditions of competition between Member States in respect of finished goods;7 (d) the need to avoid serious disturbances in the economies of Member States and to ensure rational development of production and an expansion of consumption within the Union.8

Contents 1. 2.

General Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Guidance for the Commission Under the TFEU Chapter on the Customs Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1. Tasks Under the Chapter on the Customs Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2. Promoting Trade Between Member States and Third Countries . . . . . . . . . . . . . . . . . . . . . 2.3. Developments in Conditions of Competition Within the Union . . . . . . . . . . . . . . . . . . . . . 2.4. Distorting Conditions of Competition Between Member States . . . . . . . . . . . . . . . . . . . . . 2.5. Rational Development of Production and Expansion of Consumption . . . . . . . . . . . . . . References

1.

1 2 2 4 5 7 8

General Background

Article 32 TFEU (former Article 27 EC) encompasses the general guidance the European Commission must consider when exercising its duties and functions concerning the customs union, i.e. Articles 30-32 TFEU, covering prohibition of customs duties and charges having equivalent effect on exports and imports between MS as well as fixing the Common Customs Tariff. Under the Single European Act, Article 29, the four development points that the Commission had to follow were the same; however, the scope of tasks entrusted to the Commission included the section on setting up the Common Customs Tariff (Articles 18-29 of the SEA), yet did not include the elimination of customs duties between MS. The Amsterdam Treaty reduced the much lengthier Chapter 1 on Customs Union (Articles 12-29 of the SEA) by eliminating those articles that had become obsolete due to the shift of power to fix the Common Customs Tariff from the MS to the Council. #

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Guidance for the Commission Under the TFEU Chapter on the Customs Union

2.1. Tasks Under the Chapter on the Customs Union

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A customs union, such as the EU, concerns the application of equal tariffs to goods imported to the internal market from third countries, while eliminating (prohibiting) any internal levying of customs duties or charges of equivalent effect. Since initiating the customs union by the Treaty of Rome, and today, under the TFEU, the EU provides a common market for the free circulation of goods. For a fully effective system, the prohibition on customs duties and charges having equivalent effect (Article 30 TFEU) as well as a Common Customs Tariff framework rules, Articles 28 and 31 TFEU) must be enforced and adhered to, both at the MS and the EU level, where each party has a specific role to play to enable all goods already within the Union to enjoy the benefits of the free movement of goods. Under Article 17 TEU, the European Commission has the institutional framework for exercising coordinating, executive and management functions set forth in the Treaties. In agriculture, which, in general follows the same rules as the entire internal market (Article 38 TFEU), special methods for its application could be used, considering the particular nature of agricultural activity in certain regions (Article 39 TFEU). Within the EU customs union, the goods imported from external borders are subjected to a single tariff, established at the Union level and prohibited to amend or alter at the MS level, which refers to the exclusive Union competence in common commercial policy (Article 3.1 (e) TFEU). In relation to free movement of goods, the European Commission represents and upholds the interests of the EU on the common commercial policy and has, under the Council’s approval, a central role in effectuating and administering the Common Customs Tariffs.1 The framework of the customs union is set forth within the TFEU, foreseeing, in combination with Article 17 TEU, the tasks for the European Commission in promoting the interests of the customs union.

2.2. Promoting Trade Between Member States and Third Countries

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The promotion of trade between the EU MS and third countries refers to the EU’s commitments on a bilateral level, focusing on the EU’s interest in the harmonious development of world trade (Articles 206-207 TFEU). Trade policy is seen to be of central importance in terms of bilateral agreements between the EU and third countries, whereas in many cases customs unions or free-trade areas are established for implementing the policy.2 In fact, promoting trade between the EU, its MS and third countries is deemed a priority of the policy, which, however, might result in 1 2

Steiner et al. (2012), p. 362. Eeckhout (2011), p. 448.

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certain deviations from the Common Customs Tariff in the form of establishing free-trade areas or customs unions arising from bilateral or multilateral agreements. Notable examples for these are the EEA Agreement, the Cotonou Convention, customs unions, such as with Turkey, Andorra and San Marino, or international organisations such as the European Free Trade Association (EFTA). In these cases, generally, the customs duties on imports of goods for the countries parties to the agreement have been abolished similarly as they are within the customs union, i.e. the trade between the MS themselves. It is furthermore of crucial importance that the aforementioned and similar exceptions to CCT are binding agreements to the EU and prevail over the EU legislation in accordance with the pacta sunt servanda principle of international law, must be adhered to by the EU and, provided that MS independently are parties to such agreements as sovereign states, also by the latter.3 Legislative initiatives and customs programmes such as the Union Customs Code4 serve as a framework for rules and procedures applicable for customs across the EU. The Union Customs Code has a general objective to strengthen the internal market by enhancing and promoting cooperation between participating countries, their customs authorities and their officials. The European Commission is responsible for the implementation of the Union Customs Code and related regulative framework together with the Customs 2020 Committee (composed of MS representatives).

2.3. Developments in Conditions of Competition Within the Union

Insofar as protections agreements, concentrations, national aids as well as discrimination in favour of public undertakings are not compatible with the principles of functionality of the common market, the EU institutions are prescribed to exercise control over such possible activities and agreements. The latter competence of the institutions is based on the fact that the MS’ policies on competition rules cannot be effectuated at supranational level. Pursuant to this, the Commission must consider the developments in conditions of competition within the Union under Article 32 TFEU; whereas developments in conditions of competition refers to targeting and restricting unfair competitive advantages in the form of agreements between undertakings, decisions by associations of undertakings, concerted practices or abuses of dominant position, having possible effect on trade between the MS and thus on free circulation of goods within the customs union as a whole (Articles 101102 TFEU).5 Treaty competition rules must be interpreted by and in accordance with Council regulations or directives (Article 103 TFEU); Commission regulations 3

Eeckhout (2011), p. 323 and p. 448. The Union Customs Code (UCC) was adopted on 9 October 2013 as Parliament/Council Regulation (EU) No 952/2013 laying down the Union Customs Code (recast), O.J. L 269/1 (2013), repealing the Regulation (EC) No 450/2008 laying down the Community Customs Code (Modernised Customs Code). 5 Moussis (2015), pp. 395–396. 4

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(Article 105 TFEU), while also considering the Commission Communications and individual decisions.6 The competence of the Commission to control the potential impediments to developments in competition is based on Article 105 TFEU, which grants the Commission the authority to oversee the adherence with the principles of Articles 101-102 TFEU. Council Regulation 1/20037 is one of the legislative initiatives designed to ensure an effective enforcement of competition rules of the Union. The Regulation introduced a decentralised system of application of competition rules, involving national competition authorities and national courts that cooperate with each other through the European Competition Network (ECN) for a more effective control over the adherence to competition rules concerning agreements, decisions of undertakings, restrictive practices (Article 101 TFEU) as well as abuses of dominant position (Article 102 TFEU), countering undertakings that (may) engage in cross-border practices restricting competition.8 Here, the Commission has the power to take decisions, conduct investigations and impose penalties for actions on behalf of undertakings within the Union that restrict the development of competition within the EU.

2.4. Distorting Conditions of Competition Between Member States

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The Commission’s role on import of raw materials and semi-finished goods from third countries is to ensure the free flow of the aforementioned materials and goods from third countries, while at the same time preventing distorting conditions of competition between MS in respect of finished goods. The origin of the given provisions has been considered to stem from potential supply problems that may arise due to different economic advancement levels between the MS and may result in increased price of such goods at the national level.9 Considering that the EU’s import level (goods by weight) from third countries outbalance the level of exports by three times, whereas the physical imports quantitatively mainly comprise of fossil fuels and other raw products,10 the EU has imposed a system of tariff suspensions for enabling the internal market manufacturers to use raw materials and semi-finished goods under the normal level of duties laid down in the CCT.11 6

Moussis (2015), p. 395. Council Regulation (EC) No 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, O.J. L. 1/1 (2003). 8 The basic foundations of the functioning of the ECN are laid out in the “Commission Notice on cooperation within the Network of Competition Authorities” and in the “Joint Statement of the Council and the Commission on the Functioning of the Network of Competition Authorities.” 9 Kerikmäe et al. (2011), §32.04. 10 Source: Eurostat. Physical imports and exports. Available at http://ec.europa.eu/eurostat/statistics-explained/index.php/Physical_imports_and_exports. 11 European Commission. Taxation and Customs Union. EU Customs Strategy. Available at http:// ec.europa.eu/taxation_customs/customs/policy_issues/customs_strategy/index_en.htm. 7

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Stemming from Article 31 TFEU, the autonomous tariff suspensions and quotas must be agreed upon with the Council that acts on the Commission proposal (➔ Article 31 TFEU para 8). The European Commission proposes the list of goods under suspension, following a thorough examination of economic reasons for the requests of suspension, focusing on the benefit for the EU. The suspensions are normally granted to raw materials, semi-finished goods, or to components not available within the EU. Following their import, such goods or products enjoy the free circulation between the MS; thus, once a suspension is granted, all the market players within the EU can benefit from it.12 Deriving from the aforementioned, a request for suspension on behalf of one MS can have effect on all other MS, and therefore the Commission pursues extensive cooperation with national representatives.13 To ensure that the national interests as well as the EU interests are considered, the Commission pursues to avoid discrimination by making sure that suspensions are open to all the importers within the Union as well as to all third country suppliers. Bearing the latter in mind, under specific circumstances, tariff suspensions can be refused to be granted; these are: (1) goods covered by an exclusive trading agreement; or (2) goods traded between related parties with exclusive intellectual property rights over their production; or (3) goods where the description contains internal company specific terms such as company denominations, brand names, specifications, article numbers, etc.14 The suspension list is temporary and must be reviewed systematically to meet the changed (economic) situations as well as the interests of the Union and MS.15

2.5. Rational Development of Production and Expansion of Consumption

Supported by the tariff suspensions (➔ para 7) and the Common Customs Tariff, the EU enforces a common set of measures with the underlying purpose to promote efficiency and competition within the EU and amongst the market players, therewith ensuring the competitive capacity of the EU as a whole.16 The CCT rates enhance the industrial production capacity by ensuring equal framework to all MS. Rational development of production may be interfered and the people directly affected where the competition is distorted or weak. The task of the European 12

Commission Communication concerning autonomous tariff suspensions and quotas, O.J C 363/ 02 (2011), 2.2.2. 13 Commission Communication concerning autonomous tariff suspensions and quotas, O.J C 363/ 02 (2011), 2.2.2. 14 Commission Communication concerning autonomous tariff suspensions and quotas, O.J C 363/ 02 (2011), 2.3.4. 15 Council Regulation (EU) No 1387/2013 suspending the autonomous Common Customs Tariff duties on certain agricultural and industrial products, O.J L 354/201 (2013), recital (5). 16 Commission Communication concerning autonomous tariff suspensions and quotas, O.J C 363/ 02 (2011), 2.1.1.

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Commission (more specifically, DG Competition) thereto is to ensure a fully effective system of competition, benefitting the producers and consumers alike. Another disturbance to rational development of production may occur in instances of state aid systems incompatible with the internal market, whereby the Commission, in cooperation with MS, keeps the national systems of aid (Articles 107-109 TFEU) under constant review. In general, the EU has adopted measures to develop an EU-wide strategy for the evolution of customs union17 and the commonly set goals for the most effective customs union, e.g. customs supervision of goods, customs and trade facilitation are laid down in the Union Customs Code, pursuant to which the Commission adopts delegated acts and specifies by means of implementing acts the common competition rules, as well as exercises supervision over the agreements that potentially affect trade to avoid disturbances in the economies of the MS.18 Therefore, it is the Commission that, inter alia, by its Communications, evaluates the success of the customs union, lays down the challenges and establishes the priorities for reducing the latter and improving trade between the MS and with the third countries. References19 Eeckhout, P. (2011). EU external relations law (2nd ed.). Oxford: Oxford University Press. Kerikmäe, T., Käsper, K., & Pluksna, L. (2011). Commentaries: Articles 29 to 37 TFEU. In P. Herzog, C. Campbell, & G. Zagel (Eds.), Smit & Herzog on the law of the European Union (§ 28.01 - § 37.07). New York: Lexis Nexis Matthew Bender. Moussis, N. (2015). Access to the European Union (21st ed.). Cambridge: Intersentia. Steiner, J., Woods, L., & Watson, P. (2012). Steiner & Woods. EU Law (11th ed.). Oxford: Oxford University Press.

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Commission Communication, Strategy for the evolution of the Customs Union, COM(2008) 169 final. 18 Parliament/Council Regulation (EU) No 952/2013 laying down the Union Customs Code, O.J. L 269 (2013). 19 All cited internet sources in this comment have been accessed on 9 December 2019.

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Chapter 2 Customs Cooperation

Article 33 [Customs Cooperation] (ex-Article 135 TEC) Within the scope of application of the Treaties, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure,3 shall take measures in order to strengthen customs cooperation between Member States and between the latter and the Commission.4–8

Contents 1. General Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Ordinary Legislative Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3. Customs Cooperation Within the EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 References

1.

General Background

Promotion of trade with third countries is one of the objectives of the Commission on common commercial policy (Articles 206-207 TFEU) and the customs union in more general. For an effective system, the EU must consider the needs and economic preparedness of the MS. The function of the Council in these matters is to decide upon the duties, and, together with the EP, to oversee the level and effectiveness of customs cooperation between the MS and between the latter and the Commission.1 A distinction must be made between the trade amongst MS and the trade between the MS and third parties. The customs union and Article 33 TFEU are applicable to internal Union customs cooperation, while the common commercial policy is applicable to customs cooperation with third parties. The common commercial policy has been referred to as the most advanced external policy of the EU, embracing not only common customs tariff, but also a common policy in other trade related issues.2 The policy is designed to ensure a fully functional import and export regime of the Union as well as operational conduct of trade relations with third countries, in which it is an area where the Union has exclusive competence (Article 3.1 (a) TFEU). The customs union, and therefore the customs cooperation, is managed by the Union Customs Code, currently regulated by Regulation (EU) No 952/2013 that sets out the rules for trade between the Union and third parties, both import and 1 European Commission, The EU Customs Union: protecting people and facilitating trade. The European Union Explained, 2014. Available at http://europa.eu/pol/pdf/flipbook/en/customs_en. pdf. 2 Eeckhout (2011), p. 439.

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Ordinary Legislative Procedure

The ordinary legislative procedure was established by the Treaty of Lisbon (formerly known as the “co-decision procedure”). Under Article 289.1 TFEU, it represents the joint adoption of a legislative act, i.e. regulation, directive or decision by the EP and the Council on a proposal from the Commission. The process of adoption of the aforementioned acts by ordinary legislative procedure is laid down in Article 294 TFEU. Most policy areas use the ordinary legislative procedure; therefore, it is a standard procedure for decision-making in the EU.

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export, agreed upon jointly by the European Parliament and the Council, and the provisions of which are revised in collaboration of the Commission and national customs authorities.3 To carry out an expeditious external policy, first, the internal customs cooperation must be effective, and hence measures need to be taken in promoting trade within the internal market. The forerunner to the current Article 33 TFEU was placed at a distance from where it stands now, next to the provisions on basic principles on customs union, under a separate Title X on Customs Cooperation, where it was inserted as Article 135 TEC-Amsterdam. The former Article 135 TEC did not include the competence of the EP and specifically excluded the application of its provisions to national criminal law or national administration of justice.

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Customs Cooperation Within the EU

Article 33 TFEU foresees that the EP in cooperation with the Council takes the measures necessary for strengthening the customs cooperation between the MS and between the latter and the European Commission. Considering the elimination of administrative procedures on internal borders of the Union, the risk of fraud is elevated unless all the MS apply the control measures foreseen ensuring uniform application of the EU rules at the borders contributing to mutual trust and equal conditions of competition.4 One of such measures is the Customs 2020 programme, covering the period 2014–2020, succeeding previous equal programmes since 1991, established in the form of a regulation with the objective to support and modernise the customs union of the EU by enhancing the cooperation level between the national customs

3 European Commission, The EU Customs Union: protecting people and facilitating trade. The European Union Explained, 2014. Available at http://europa.eu/pol/pdf/flipbook/en/customs_en. pdf. 4 Moussis (2015), p. 102.

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authorities.5 More specific aims include, e.g. providing support to customs authorities to protect financial and economic interests of the EU and its MS, combating fraud, protecting intellectual property rights, supporting the customs authorities in their endeavours to increase safety and security, improve administrative capacity. As set out by Article 325 TFEU, all EU MS must combat fraud and other illegal activities that threaten the financial interests of the Union, as they would combat such activities if those were to threaten their own financial interests. The Union shall establish police cooperation involving all the MS’ competent authorities, including police, customs and other specialised law enforcement services in relation to the prevention, detection and investigation of criminal offences, as set out by Article 87 TFEU. All the EU MS as well as candidate countries and potential candidate countries are enjoined to participate in joint actions, IT capacity building initiatives and human competency building under the Customs 2020 programme to achieve a coherent and harmonised system of customs cooperation within the Union. Another measure falling under the scope of Article 33 TFEU is the Naples II Convention on Mutual Assistance and Cooperation between Customs Administrations that covers and regulates particular forms of cooperation between the MS’ customs authorities and regulates such cooperation in cross-border actions for prevention, investigation and prosecution of infringements.6 Such cooperation of national customs authorities increases mutual cooperation between the MS in customs matters, by various endeavours, such as establishing, by mutual agreement, joint investigation teams for cross-border coordination of joint pursuits,7 providing each other assistance with staff and organisational support,8 with the overall aim to make customs cooperation faster and more effective. In terms of cooperation between the MS and the Commission, it is relevant to mention the regulation establishing a customs information system (CIS),9 in the form of a central database, including a Customs Files Identification Database (FIDE), accessible to customs administrations and the Commission, involving data on ongoing and completed investigations and prosecutions of breaches of Union’s customs or agricultural legislation. It belongs under the Anti-Fraud Information System of European Anti-Fraud Office (OLAF) that investigates fraud against EU’s budget as well as corruption and misconducts within the EU institutions by providing a legal framework for mutual assistance between the MS and the 5

Parliament/Council Regulation (EU) No 1294/2013 establishing an action programme for customs in the European Union for the period 2014–2020 (Customs 2020), O.J. L 347/209 (2013). 6 Council Act 98/C 24/01 drawing up, on the basis of Article K3 of the Treaty on European Union, the Convention on mutual assistance and cooperation between customs administrations, O.J. C 24 (1998). 7 Article 24 of Council Act 98/C 24/01. 8 Article 19 of Council Act 98/C 24/01. 9 Council Regulation (EC) No 515/97 on mutual assistance between the administrative authorities of the Member States and cooperation between the latter and the Commission to ensure the correct application of the law on customs or agricultural matters, O.J. L 82 (1997).

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latter and the Commission to ensure a harmonised and most efficient application of legislation on, inter alia, customs matters.10 Insofar as the CIS is applicable to be used for data exchange commands regarding goods circulating between the MS and third countries, it contributes to overall effectiveness of the cooperation at national and Union level. The aforementioned list merely provides an insight to the various measures adopted for the enhancement and development of cooperation in customs matters and is non-exhaustive. Article 33 TFEU has given rise to numerous Directives, Regulations as well as Commission Communications, e.g. Enhancing police and customs cooperation in the European Union,11 promoting cooperation of MS’ police forces and customs administrations in maintenance of security or the Strategy of Customs Union,12 reviewing existing challenges and future cooperation fields in terms of the Customs Union and its key elements. References13 Eeckhout, P. (2011). EU external relations law (2nd ed.). Oxford: Oxford University Press. Moussis, N. (2015). Access to the European Union (21st ed.). Cambridge: Intersentia.

10 OLAF was established by Commission Decision 1999/352/EC, ECSC, Euratom of 28 April 1999 establishing the European Anti-Fraud Office (OLAF), as amended by Decision 478/2013/ EU, O.J. L 136/20 (1999). Subsequent amendments: Commission Decision 2013/478/EU and Commission Decision (EU) 2015/512. 11 Commission Communication, enhancing police and customs cooperation in the European Union, COM(2004) 376 final. 12 Commission Communication concerning a strategy for the Customs Union, COM(2001) 51 final. 13 All cited internet sources in this comment have been accessed on 9 December 2019.

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Chapter 3 Prohibition of Quantitative Restrictions Between Member States

Article 34 [Prohibition of Quantitative Restrictions on Imports] (ex-Article 28 TEC) Quantitative restrictions on imports3 and all measures having equivalent effect4–48 shall be prohibited between Member States.

Contents 1. 2. 3. 4.

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Direct Effect of Article 34 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Prohibition of Quantitative Restrictions on Imports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Prohibition of Measures Having Equivalent Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4.1. Dassonville Formula . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4.2. Trading Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4.2.1. General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4.2.2. No De Minimis Rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.2.3. Addressees of Article 34 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 4.2.4. Actual or Potential Restriction on Trade with Goods . . . . . . . . . . . . . . . . . . . . . . 17 4.2.5. Direct or Indirect Restriction on Trade with Goods . . . . . . . . . . . . . . . . . . . . . . . 21 4.2.6. Cross-Border Element and Reversed Discrimination . . . . . . . . . . . . . . . . . . . . . . 28 4.3. Rules on Circumstances of Trade and Free Movement of Goods . . . . . . . . . . . . . . . . . . 30 4.3.1. Regulating Circumstances of Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.3.2. Keck: “Certain Selling Arrangements” Are Outside the Scope of Article 34 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 4.3.3. Certain Selling Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 4.4. Arrangements on the Use of Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 5. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 List of Cases References

1.

Overview

As noted by the EU Court at several occasions, the free movement of goods between Member States, as expressed in Article 34 TFEU, is a fundamental principle of EU law.1 Prohibition of quantitative restrictions and measures having equivalent effect on imports is pursuing the goal of eliminating all non-tariff barriers to imports of goods. This prohibition is embodied in Article 34 TFEU and complemented by extensive case law, which is presented below to the extent permitted by the limited space of the comment. It may be noted already at the beginning of this comment that the EU Court in its case law on Article 34 TFEU in conjunction with supremacy and direct effect, afforded traders with many rights 1

Case C-672/15, Noria Distribution (ECJ 27 April 2017) para. 17 and Case C-591/17, Austria v Germany (ECJ 18 June 2019) para 119. #

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that should be protected by the national authorities. In doing so, the EU Court provided Article 34 TFEU with a very wide scope, especially if compared with similar provisions of the GATT2 and the US Constitution.3

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The EU Court expressly confirmed that Article 34 TFEU has direct effect only in 1977. In the case of Iannelli, it gave the following explanation to this confirmation: “The prohibition of quantitative restrictions and measures having equivalent effect laid down in article [34] of the Treaty is mandatory and explicit and its implementation does not require any subsequent intervention of the Member States or Community institutions. The prohibition therefore has direct effect and creates individual rights, which national courts must protect.”4 Moreover, in Redmond,5 the EU Court affirmed that Article 34 TFEU is directly applicable and confers on individuals rights, which the courts of MS must respect. On this basis, in particular the companies have achieved the elimination of a number of national measures, which restrict international trade in goods.

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Direct Effect of Article 34 TFEU

Prohibition of Quantitative Restrictions on Imports

Quantitative restrictions relate to the quotas as government measures to restrict the importation or exportation of certain goods within a specified period, to prescribe an upper limit of quantification of the authorised imports. These restrictions are incompatible with the functioning of the internal market, and thus prohibited from the outset.6 Soon they were also eliminated in practice. This development had been supported by the 1955 decision of the Council of the 2

Cf e.g. WTO dispute DS34, Turkey – Textiles, 1999; WTO dispute DS155, Argentina – Hides and Leather, 2001; WTO dispute DS384, United States – Certain Country of Origin Labelling (COOL) Requirements, 2014. 3 Cf Pike v. Bruce Church, Inc., 397 U.S. 137 (1970); City of Philadelphia v. New Jersey, 437 US 617 (1978); Arkansas Electric Co-op. Corp, 461 US 375 (1983); Bendix v. Midwesco, 486 US 888 (1988); National League of Cities v. Usery, 426 US 833 (1976); Head v. Board of Examiners, 374 US 424 (1963); Schmidinger v. City of Chicago, 226 US 578 (1913); Jay Baking Company, 264 US 504 (1924); Plumley v. Massachusetts, 155 US 461 (1894). For a comment, see Barnard (2009b); Hojnik (2012a). 4 Case 74/76, Iannelli & Volpi SpA v Ditta Paolo Meroni (ECJ 22 March 1977) para 13. 5 Case 83/78, Pigs Marketing Board v Raymond Redmond (ECJ 29 November 1978). Cf Joined Cases C-277/91, C-318/91 and C-319/91, Ligur Carni Srl in Genova Carni Srl v Unita` Sanitaria Locale (ECJ 15 December 1993). 6 As found by the WTO panel quantitative restrictions are more dangerous for international trade than customs. In Turkey – Textiles (WT/DS34/R, 1999, para 63–9.65) it has been emphasised that Article XI GATT reflects the fact that the GATT system gives preference to customs over quantitative restrictions when it comes to the need to protect the borders.

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OEEC,7 which called the States to rise up the lower level of liberalisation to 90% of the value of imports. The Treaty of Rome was thus not left with a lot of work in this area and therefore already the Acceleration Decision (fr. De´cision d’acce´le´ration) of the Council of 26 July 19668 found that quotas in trade between MS have been eliminated. In EU internal trade, all the quantitative restrictions have ceased to exist in the sixties of the last century, except in the context of the transitional measures upon entry of the new MS. Moreover, later, the quantitative restrictions have been used very rarely by the MS, as they are transparent and it is very hard for the States to conceal them. Therefore, they were also seldom the subject of legal proceedings. In some cases, however, the EU Court nevertheless held that a national measure presented a quantitative restriction, and not “just” a measure having equivalent effect. One example is the case of Henn and Darby9 that concerned the British ban on the importation of pornographic material, which was defined by the EU Court as a quantitative restriction (although justified based on Article 36 TFEU). This decision is in accordance with the previous decision of the Court in Geddo, where it explained: “the prohibition on quantitative restrictions covers measures which amount to a total or partial restraint of [. . .] exports or goods in transit.”10

4.

Prohibition of Measures Having Equivalent Effect

4.1. Dassonville Formula

In addition to the quantitative restrictions that are quite apparent, there are many diverse forms of measures by which the MS seek to protect their production against foreign competition. Due to this diversity, it is very challenging to give a definition that would cover all possible forms of measures. Although references to the prohibition of measures having equivalent effect to quantitative restrictions were frequent in the 1960s in connection with the organisation of the European agricultural market, the EU Court was asked to define them only in 1974 in the case of Dassonville.11 In this case, it was stated that, to be regarded as measures having equivalent effect, “all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade

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Nowadays, Organisation for economic cooperation and development—OECD. Council Decision No 66/532/EEC concerning the abolition of customs duties, the prohibition of quantitative restrictions between Member States and the application of the duties in the common customs tariff for products other than those listed in Annex II to the Treaty, O.J. 2971 (1966). 9 Case 34/79, Henn and Darby (ECJ 14 December 1979). 10 Case 2/73, Riseria Luigi Geddo v Ente Nazionale Risi (ECJ 12 July 1973) para 7. See also Case C-170/04, Klas Rosengren and Others v Riksa˚klagaren (ECJ 5 June 2007). See more in Weatherill (2017), p. 102. 11 Case 8/74, Procureur de Roi v Dassonville (ECJ 11 July 1974). 8

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are to be considered as measures having an effect equivalent to quantitative restrictions.”12 This definition was literally repeated in a number of subsequent cases, and that is why it is now called formula Dassonville.13 Due to the use of the language from which it is apparent that the EU Court aimed to put a universally applicable legal rule, the Dassonville formula is very similar to the definition of charges having equivalent effect to a customs duty referred to in Article 30 TFEU.14 Nevertheless, despite the considerable similarities between the two decisions there are also relevant differences, which show that the Decision in Dassonville is much bolder and has in comparison to the Decision in the case of Diritto di Statistica moved away from the conventional understanding of free trade from GATT.15 The Dassonville formula can be interpreted extremely broadly—every trading rule that merely potentially or indirectly restricts interstate trade can be prohibited by Article 34 TFEU. The effect of the measure on trade between MS is sufficient to apply this provision. Therefore, Dassonville with the words of Weiler means “all out-rallying cry against the ethos of protectionism.”16 According to him, only the EU Court’s Decision in Keck (➔ Article 34 TFEU para 32) means a return to normality and is an important step in the convergence of the TFEU and the GATT.17

12

Case 8/74, Procureur de Roi v Dassonville (ECJ 11 July 1974) para 5. Reference to direct and indirect, actual or potential hindrance to the trade between the MS the Court “borrowed” from its first ruling in the competition law field—Joined Cases 56/64 and 58/64, E´tablissements Consten S.a`.R.L. and Grundig-Verkaufs-GmbH v Commission (ECJ 13 July 1966) para 6. 13 From the more recent case law in which the EU Court still refers to the Dassonville formula, see e.g. Case C-420/01, Commission v Italy (ECJ 19 June 2003) para 25; Case C-192/01, Commission v Denmark (ECJ 23 September 2003) para 39; Case C-41/02, Commission v Netherlands (ECJ 2 December 2004) para 39, Case C-147/04, De Groot en Slot Allium et Bejo Zaden (ECJ 10 January 2006) para 71, Case C-385/10, Elenca (ECJ 18 October 2012) para 22; Case C-354/14, Capoda Import-Export (ECJ 6 October 2015) para 39; Case C-148/15, Deutsche Parkinson Vereinigung (19 October 2016) para 22; Case C-296/15, Medisanus v SB Murska Sobota (ECJ 8 June 2017) para 64; Case C-169/17, Asociacio´n Nacional de Productores de Ganado Porcino v Administracio´n del Estado (ECJ 14 June 2018) para 21; Case C-387/18, Delfarma sp. z o.o. (ECJ 3 July 2019) para. 20 and Case C-591/17, Austria v Germany (ECJ 18 June 2019) para 120. 14 As defined in the case Diritto di Statistica—Case 24/68, Commission v Italy (ECJ 1 July 1969). In this light Weiler calls the two judgments as the “canon of economic constitution of Europe”, similar as the judgments in the Case 26/62, Van Gend en Loos (ECJ 5 February 1963) and Case 22/ 70, Commission v Council (ERTA) (ECJ 31 March 1971)—present a part of the constitution in structural sense—Weiler (1999), pp. 238–239. 15 Perisˇin (2008), p. 18. 16 Weiler (1999), p. 362. 17 The reflection of Keck in GATT is the case on the growth hormones (EC measures concerning meat and meat products – Hormones, 1998) that has been started by the USA and Canada against the EC.

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4.2. Trading Rules

4.2.1.

General Remarks

In accordance with the Dassonville formula, measures refer to trading rules; this term, however, should be interpreted widely. In a later case law, it has turned out that it is not necessary that a trading rule is at dispute18 and that Article 34 TFEU rather refers to any national rule, although in the last decade, this condition occurs again in the case law of the Court.19 Commission’s Directive 70/50,20 which was formally applicable only during the transitional period, but is still important for understanding measures having equivalent effect, explains in the preamble (recitals 2 and 3) that “‘measures’ means laws, regulations, administrative provisions, administrative practices, and all instruments issuing from a public authority, including recommendations; [. . .] ‘administrative practices’ means any standard and regularly followed procedure of a public authority; whereas ‘recommendations’ means any instruments issuing from a public authority which, while not legally binding on the addressees thereof, cause them to pursue a certain conduct.” It follows that the measures may take the form of a law or just practice; it may or may not be binding. Confirmation that the non-binding measures are prohibited by Article 34 TFEU derives from the case Buy Irish (➔ Article 34 TFEU para 11, 14, 19).21 The Government of Ireland had commissioned an extensive campaign for the promotion of Irish goods in Ireland and defended it before the EU Court, inter alia, with the argument that it was not a binding measure. The Court rejected this justification because the campaign expressed the purpose of the Irish Government to replace imported products with native. Although it was not a binding rule, the campaign established a national practice, the potential effect of which on imports from other MS is comparable to the effect of binding rules.22 4.2.2.

6

7

No De Minimis Rule

Considering the broad scope of the Dassonville formula there was no room for the recognition of the de minimis rule in the context of Article 34 TFEU. This was 18

Cf Case 4/75, Rewe-Zentralfinanz GmbH v Landwirtschaftskammer (ECJ 8 July 1975). Cf Case C-254/98, Schutzverband gegen unlauteren Wettbewerb v TK-Heimdienst Sass (ECJ 13 January 2000) para 22. More on this in Oliver (2010), para 6.20. 20 Commission Directive 70/50/EEC on the abolition of measures which have an effect equivalent to quantitative restrictions on imports and are not covered by other provisions adopted in pursuance of the EEC Treaty, O.J. L 13/29 (1970). 21 Case 249/81, Commission v Ireland (ECJ 24 November 1982). For a comment, see Hojnik (2012b). 22 Case 21/84, Commission v France (ECJ 9 May 1985); Case 95/81, Commission v Italy (ECJ 9 June 1982). 19

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expressly held in Van de Haar,23 where the Court clarified this refusal with the following terms: “Article [34 TFEU], which seeks to eliminate national measures capable of hindering trade between Member States, pursues an aim different from that of Article [101], which seeks to maintain effective competition between undertakings. A Court called upon to consider whether national legislation is compatible with article [34] of the Treaty must decide whether the measure in question is capable of hindering, directly or indirectly, actually or potentially, intraCommunity trade. That may be the case even though the hindrance is slight and even though it is possible for imported products to be marketed in other ways.”24 This position has, however, been refused by AG Jacobs in his well-known opinion in the case of Leclerc-Siplec,25 where he claimed that “all undertakings should have unfettered access to the whole of the Community market”, and concluded that to prove a breach of Article 34 TFEU a “substantial restriction on that access” should be the relevant factor, although this amounts to the introduction of the de minimis rule into Article 34 TFEU.26 Albeit Jacobs was aware that the Court refused to apply the de minimis rule in its previous free movement of goods case law, he insisted that “restrictions on trade should not be tested against local conditions which happen to prevail in each Member State, but against the aim of access to the entire Community market. A discrimination test is therefore inconsistent as a matter of principle with the aims of the Treaty.”27 The Court, however, rejected his proposal altogether and it may thus be concluded that a state measure can constitute a prohibited measure having an equivalent effect even if: (a) it is of relatively minor economic significance; (b) it is only applicable to a very limited geographical part of a national territory; and (c) it only affects a limited number of imports/exports or a limited number of economic operators.28 Gormley recognises the differences between competition law and free movement of goods, emphasising that the internal market and competition law have different roles and subject matter, which makes the de minimis rule more 23 Joined Cases 177/82 and 178/82, Jan van de Haar (ECJ 5 April 1984). See also Case 269/83, Commission v France (ECJ 14 March 1985). 24 Joined Cases 177/82 and 178/82, Jan van de Haar (ECJ 5 April 1984) para 14. Case C-67/97, Ditlev Bluhme (ECJ 3 December 1998). Similarly, the Court refused to apply the de minimis rule also in the Case 16/83, Prantl (ECJ 13 March 1984); Case 269/83, Commission v France (ECJ 14 March 1985); and in Case 103/84, Commission v Italy (ECJ 5 June 1986). 25 Case C-412/93, Edouard Leclerc-Siplec v TF1 Publicite´ (ECJ 9 February 1995) para 195 and 196. See also his opinion in Case C-112/00, Schmidberger v Austria (ECJ 12 June 2003) para 65: “It would seem for example out of the question that a brief delay to traffic on a road occasionally used for intra-Community transport could in any way fall within the scope of Article [34]. A longer interruption on a major transit route may none the less call for a different assessment.” 26 See para 42 of the AG’s opinion. See also Greaves (2006). 27 Case C-412/93, Edouard Leclerc-Siplec (ECJ 9 February 1995), AG’s opinion, para 40. 28 See Joined Cases 177/82 and 178/82, Van de Haar (ECJ 5 April 1984); Case 269/83, Commission v France (ECJ 14 March 1985); Case 103/84, Commission v Italy (ECJ 5 June 1986). See also European Commission (2010).

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appropriate to one field than the other does (Article 101).29 He particularly highlights that competition law concentrates on the effects a measure has on patterns of trade between MS and not on effects on trade itself, which is a much simpler concept.30 At the same time, competition law, as opposed to the internal market, does not assist in the removal of national hindrances to trade between MS through negative integration.31 An additional reason for refusing the de minimis rule to enter the field of the internal market is that the freedoms predominantly concern the measures of MS and not those of private entities, as is the case with competition law. The public bodies should have a greater responsibility for the functioning of the internal market than private entities. In this respect, Barents observed years ago that “state interventions on the market may be said to have an appreciable effect by their very nature”,32 whereas Krenn recently proposed a more convergent approach towards public and private intervention on the market and argued in favour of introducing the horizontal direct effect of Article 34 TFEU accompanied by a recognition of the de minimis rule33 to prohibit only those barriers of private entities that significantly hinder access to the market. Mortelmans pointed out that the de minimis test would not assure clear guidelines for the explanation of judgments by national courts, as it would demand a complete review of the legal and economic framework,34 while Oliver warned that reliance on statistical data would lead to depraved results as the legality of a measure could change on a monthly basis.35 Oliver thus claimed that the application of the de minimis rule to the internal market freedoms would cause practical problems, introduce a new element of legal uncertainty and consequently make it much more difficult for national courts to apply the internal market provisions of the Treaty.36 Nevertheless, certain national rules have been found to fall outside the scope of Article 34 TFEU if their restrictive effect on trade between MS have been considered too uncertain and too indirect. In this respect, the Court held in Burmanjer37 that the national rules at issue, which made the itinerant sale of subscriptions to periodicals subject to prior authorisation, had an effect on the marketing of products from other MS that was too insignificant and too uncertain

29

Gormley (2002), p. 520. See also Gormley (2015). Thereby referring to the Case 15/79, P.B. Groenveld BV (ECJ 8 November 1979). 31 Cf. Davies (2003), pp. 96–98. 32 Barents (1981), p. 287. 33 Krenn (2012), pp. 177–215. 34 Mortelmans (1991), p. 127; Mortelmans (2001), p. 626. 35 Oliver (1999), p. 796. 36 Oliver (2010), pp. 92–93; Hojnik (2013), pp. 25–45; Jansson and Kalimo (2014); Davies (2012), p. 25; Shuibhne (2013), pp. 157–188. 37 Case C-20/03, Burmanjer and Others (ECJ 26 May 2005). 30

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to be regarded as being such as to hinder or otherwise interfere with trade between MS. That the restrictive effects on the free movement of goods are “too uncertain and too indirect to be considered to be an obstacle to trade between the Member States” was further held by the Court in BASF,38 where the President of the German Patent Office ruled that a European patent belonging to BASF was void in Germany on grounds that its proprietor had not filed a German translation of the patent specification. A similar decision was also adopted in Krantz,39 where a German debt collector seized all the movable property found on the premises of the company to recover a tax debt. The Court ruled that the possibility of nationals of other MS hesitating to sell goods on instalment terms to purchasers because such goods could be liable to seizure by the collector of taxes if the purchasers failed to discharge its tax debts was “too uncertain and indirect to warrant the conclusion that a national provision authorizing such seizure is liable to hinder trade between Member States.”40 Finally, in Austria v Germany (vignette case) the EU Court declined the German argument that “any restrictive effects of the infrastructure use charge are too uncertain and indirect to infringe Article 34 TFEU”.41 From this series of cases a conclusion can be made that Article 34 TFEU is not breached by national legislation, which makes no distinction between the origin of the substance transported, whose purpose is not to regulate trade in goods with other MS and whose potential restrictive effects on the free movement of goods are too uncertain and too indirect to be regarded as a hindrance to trade between MS.42 4.2.3. 11

Addressees of Article 34 TFEU

As a matter of principle, Article 34 TFEU only prohibits state measures that limit free movement of goods between MS43—understandably, including central 38

Case C-44/98, BASF v Pra¨sident des Deutschen Patentamts (ECJ 21 September 1999). Case C-69/88, Krantz (ECJ 7 March 1990). 40 Case C-69/88, Krantz (ECJ 7 March 1990) para 11. 41 Case C-591/17, Austria v Germany (ECJ 18 June 2019) para 131. 42 See e.g. Barnard (2001), p. 52. Cf Case C-379/92, Peralta (ECJ 14 July 1994) para 24. The case concerned the rules applicable to the discharge of hydrocarbons and other harmful substances into the sea. See also case C-93/92, CMC Motorradcenter v Pelin Baskiciogullari (ECJ 13 October 1993) para 12. The test has also been applied in Cases C-266/96, Corsica Ferries France (ECJ 18 June 1998) para 31 and C-96/94, Centro Servizi Spediporto (ECJ 5 October 1995) para 41. 43 Similarly as the EU Court also the WTO panel in Argentina – Hides and Leather (WT/DS155/R, 2001, para 11.17) found that: “It is well-established in GATT/WTO jurisprudence that only governmental measures fall within the ambit of Article XI:1.” In an older case Japan – Film (WT/DS44/R, 1998, para 10.56), however, the panel found that: “Past GATT cases demonstrate that the fact that an action is taken by private parties does not rule out the possibility that it may be deemed governmental if there is sufficient governmental involvement with it. It is difficult to establish bright-line rules in this regard, however. Thus, that possibility will need to be examined on a case-by-case basis.” 39

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authorities (e.g. ministries) as well as regional authorities.44 When Buy Irish came before the Court, it was therefore not very surprising that AG Capotorti found: “it would be going too far if, through the inclusion in the concept “measures” of initiatives taken at a level not involving the exercise of public authority, an indirect link with the State were recognized in addition to the potential and indirect nature of the obstacle to imports resulting from advertising in favour of domestic products.”45 In contrast to this, however, the Court took a different stance and nowadays also activities of private entities are prohibited by the Article 34 TFEU if they can be ascribable to the state—be it because they were established by state, mostly financed by the government or through obligatory contribution of companies in certain sector and/or have members that are appointed or controlled by public authorities.46 As such, the campaign of the Irish Goods Council, a private company promoting Irish goods, breached Article 34 TFEU, as it was financed by the Irish government. A fortiori, the German Fund for quality marking was bound by Article 34 TFEU. The Court held that: “Such a body, which is set up by a national law of a Member State and which is financed by a contribution imposed on producers, cannot, under Community law, enjoy the same freedom as regards the promotion of national production as that enjoyed by producers themselves or producers’ associations of a voluntary character [. . .]. Thus it is obliged to respect the basic rules of the Treaty on the free movement of goods when it sets up a scheme, open to all undertakings of the sectors concerned, which can have effects on intraCommunity trade similar to those arising under the scheme adopted by the public authorities.”47 In the more recent case law, the Court even admitted that States are responsible for public statements of their officials that give impression that reflect official viewpoints of the state, even if they have no binding effect.48 In contrast to this, completely private entities were traditionally not bound by the Article 34 TFEU; their actions were normally judged by the competition rules (Article 101 and 102 TFEU). However, in many cases private entities reach the same effect as regards barring free movement of goods as the state authorities, but we cannot capture such activities by the competition rules—e.g. when a private company advertises quality of domestic goods in general or when a supermarket chain promotes a basket of domestic product. Already in 1981, the Court decided in 44

Case 45/87, Commission v Ireland (Dundalk Water Supply) (ECJ 22 September 1988); Case C1/90, Aragonesa de Publicidad v Departamento de Sanidad (ECJ 25 June 1991). 45 Case 249/81, Commission v Ireland (ECJ 24 November 1982). 46 Case 222/82, Apple & Pear Development Council v Lewis (ECJ 13 December 1983); Case 249/ 81, Commission v Ireland (Buy Irish) (ECJ 24 November 1982); Case C-227/06, Commission v Belgium (ECJ 13 March 2008); Case C-325/00, Commission v Germany (ECJ 5 November 2002). 47 Cf Case C-325/00, Commission v Germany (ECJ 5 November 2002) para 18. For a comment see Jarvis (2003), p. 715; Hojnik (2012b). 48 Case C-470/03, A.G.M.-COS.MET Srl v Suomen valtio and Tarmo Lehtinen (ECJ 17 April 2007).

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12

13

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Dansk Supermarked that “it is impossible in any circumstances for agreements between individuals to derogate from the mandatory provisions of the treaty on the free movement of goods.”49 However, this three-judges chamber’s judgment was not confirmed in the subsequent case law and despite the development in the field of other internal market freedoms towards recognising horizontal direct effect, there had been for years no signs of the Court declaring horizontal direct effect of Article 34 TFEU.50 In this respect, the Court held in Sapod Audic51 of 2002 that contractual obligation of labelling the packaging with a Green Dot logo cannot present a barrier to free trade as guaranteed by Article 34 TFEU, as this obligation was not imposed by the State, but was agreed by a private contract between individuals. In July 2012, however, the EU Court decided to give horizontal effect to Article 34 TFEU. In the Fra.bo case, a German court had asked whether a private-law association (DVGW) ought to be subject to the principle of free movement of goods. The organisation at issue operated both to draw up technical standards for products used in the drinking water supply sector and to certify products based on these standards. AG Trstenjak held that the German private organisation DVGW possessed in her view a de facto competence to determine what fittings could be offered for sale on the market in pipes and accessories for drinking water supply in Germany.52 The AG pointed out that horizontal effect was required by the effet utile of EU law53 because the abolition of obstacles to trade imposed on MS might otherwise be compromised by obstacles erected by private parties. In addition, the fact that some MS would rely on public standardisation bodies while others turn to private organisations may lead to inequalities in the application of EU law. The Court followed in principle the AG. It held that the DVGW was a non-profit, private-law body, which was not financed by Germany, or had public bodies any decisive influence over its standardisation and certification activities.54 For the Court, this meant that the Treaty provisions on the free movement of goods only apply “in the light of inter alia the legislative and regulatory context in which [the DVGW] operates” if the latter’s activities have a restrictive effect on the free movement of goods “in the same manner as do measures imposed by the State.”55 The Court then listed three reasons why it considered that the Treaty provisions apply to the DVGW.56 First, German law provided that products certified by DVGW are considered compliant with national law. Second, the DVGW is de facto the only body able to certify the copper fittings at issue in the case according to national law. An alternative procedure allowed entrusting an independent expert

49

Case 58/80, Dansk Supermarked v Imerco (ECJ 22 January 1981) para 17. For a comment, see Baquero Cruz (1999), p. 608. 51 Case C-159/00, Sapod Audic v Eco-Emballages SA (ECJ 6 June 2002) para 74. 52 Case C-171/11, Fra.bo SpA (Opinion of AG Trstenjak of 28 March 2012) para 41. 53 Case C-171/11, Fra.bo SpA (Opinion of AG Trstenjak of 28 March 2012) para 46. 54 Case C-171/11, Fra.bo SpA (ECJ 12 July 2012) para 24. 55 Case C-171/11, Fra.bo SpA (ECJ 12 July 2012) para 26. 56 Case C-171/11, Fra.bo SpA (ECJ 12 July 2012) para 27–30. 50

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to examine the products compliance according to recognised rules of technology and draw up a report. Yet, the administrative difficulties and additional costs incurred render this alternative in practice “of little or no practical use”. Third, lack of certification has had a considerable practical effect. While the pertaining German law only laid down general sales conditions between water supply undertakings and customers, from which departure was possible, in reality virtually all consumers bought copper fittings certified by DVGW. From this, it may be concluded that it is still not clear, whether the Court did in fact acknowledge horizontal direct effect of Article 34 TFEU or rather interpreted the notion of state measures extensively. As in Apple and Pear Development Council and in Buy Irish, there was a strong link between the government and the organisation, although perhaps not as strong as in the previous case law.57 Moreover, considering that horizontal direct effect of Article 56 TFEU on free movement of services has been acknowledged (! para. 9 et seq.), delineation between goods and services remains important under EU law, despite the fact that the delineation is in practice increasingly blurred and hard to formulate.58 It should finally be highlighted that in Commission v France (Spanish strawberries case), the Court held the State responsible for the activities of private individuals (farmers) as it has not “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.”59 Still, less serious barriers to free movement caused by individuals will not be captured by the state responsibility. From the case law of the EU Court, it is clear, however, that Article 34 TFEU applies not only to the actions of MS, but also to the actions of the EU institutions.60 Nevertheless, the EU Court gives wide discretion to the latter, so that the measure will be declared non-compliant with Article 34 TFEU only if it is manifestly inappropriate having regard to the objectives pursued. Thus, in the case of the Alliance for Natural Health,61 the EU legislature restricted the free movement of food supplements in the EU, which was substantiated by considerations on the protection of public health.

57 For comments see: Van de Kooij (2013); Giannino (2013); Shuibhne (2013), p. 106; Brisimi (2014), p. 55; Lundqvist (2014), p. 188; Van Leeuwen (2013). 58 So-called ‘servitization’ is nowadays widely recognised as the process of creating value by adding services to products, thereby creating goods/services bundles—more on this Hojnik (2016). 59 Case C-265/95, Commission v France (Spanish strawberries) (ECJ 9 December 1997) para 65. 60 Case 15/83, Denkavit Nederland (ECJ 17 May 1984) para 15; Case C-114/96, Kieffer and Thill (ECJ 25 June 1997) para 27. 61 Joined Cases C-154/04 and C-155/04, The Queen, ex parte Alliance for Natural Health and Nutri-Link (ECJ 12 July 2005).

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4.2.4. 17

18

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Actual or Potential Restriction on Trade with Goods

In practice, most of the cases in respect of Article 34 TFEU concerned the measures having actual effect on trade—for example, with the ban on the importation of bees on the Danish island it actually could not be traded with them. Most of these measures in practice are in the active form, related to the functioning of the State’s restrictive legislation, implementation of restrictive administrative practices or merely non-binding measures. Furthermore, whereas under Article 4.3 TEU, the MS are obliged to take all appropriate measures to achieve the objectives of the EU and the effet utile of EU law, Article 34 TFEU may be breached even with inactivity, where an MS does not take action that would be needed to eliminate obstacles to the free movement of goods. Such an obstacle may arise from the conduct of the public entities, as in the case of French farmers, but also from the practices of individuals. France was in breach of Article 34 TFEU for not intervening in maltreatment, which has been done by the home farmers against trucks from neighbouring countries and thus destroyed their cargo. The EU Court has emphasised that MS are the only responsible for ensuring public order and security on their territory and must ensure the free movement of goods.62 In addition to the situations presenting actual obstacles to free trade, the EU Court held that Article 34 TFEU is also infringed in case that a measure presents a potential restriction on the movement of goods only.63 This stems from Buy Irish,64 in which the Irish Government justified the campaign to promote Irish products, inter alia, with the argument that the campaign was not successful and the sale of Irish products in the period even declined. The EU Court held the campaign had breached Article 34 TFEU, because it was the intention of the Government of Ireland to sell more domestic products at the expense of a reduction in imports, so that the potential effect of the measure for the movement of goods was indeed restrictive.65 This means that it is not appropriate to consider only the statistical evidence on the volume of the imported goods; even if the imports increased after the adoption of restrictive measure, it could perhaps increase even more had such a measure not been adopted.66

62 Case C-265/95, Commission v France (ECJ 9 December 1997) para 31. Cf Case C-112/00, Schmidberger (ECJ 12 June 2003) para 60. 63 In contrast to this, under GATT an actual barrier to trade needs to be established and a potential restriction only does not suffice—see WTO case Argentina – Hides and Leather (para. 11.20, 11.21); and United States – Certain Country of Origin Labelling (COOL) Requirements. 64 Case 249/81, Commission v Ireland (ECJ 24 November 1982). 65 The EU Court withdrew from this approach in Case 118/86, Openbaar Ministerie v Nertsvoederfabriek Nederland BV (ECJ 6 October 1987) para 10: “Since the rules described do not disclose any prohibition of imports, there is no need to consider Article [34].” 66 Case 249/81, Commission v Ireland (ECJ 24 November 1982) para 22 and 25; Case C-184/96, Commission v France (ECJ 22 October 1998).

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The EU Court thus concluded in Commission v France (foie gras) that Article 34 TFEU “applies therefore not only to the actual effects but also to the potential effects of legislation. It cannot be considered inapplicable simply because at the present time there are no actual cases with a connection to another Member State.”67 Finally, Article 34 TFEU can also set out an obligation of result. The MS is in breach of this obligation, if due to its inactivity or insufficient activity objectives stemming from the Treaty have not been achieved. This derives from a more recent decision of the Court in the case of Radlberger and Spitz68 that concerned the mandatory German system of the collection of disposable beverage packaging that can be recovered, where the Court pointed out that the MS concerned must ensure that the producers and distributors concerned have a reasonable period for the transition to the new system so that they can adapt their production methods and chains of distribution to the requirements of the new system. 4.2.5.

20

Direct or Indirect Restriction on Trade with Goods

Dassonville formula also provides that the national measure shall directly or indirectly impede trade within the EU, if it should be considered a measure having equivalent effect to quantitative restrictions. This requirement prohibits direct and indirect discrimination of imported goods. Admittedly, in the initial case law of the EU Court has not yet talked about discrimination, but about restrictions of the interstate trade. This also follows from Dassonville.69 Nevertheless, it is clear from the Commission Directive 70/50/EEC and subsequent case law of the EU Court that the concept of discrimination is an essential element in the assessment of measures having equivalent effect.

21

Prohibition of Direct Discrimination of Imported Goods According to the prevailing opinion, the requirement for a direct restriction to trade between the Member States referred to in the Dassonville formula requires direct discrimination—i.e. legally less favourable treatment of imported goods in comparison with the domestic goods, which also leads to actually heavier burden upon imported goods. Direct discrimination (or also formal discrimination) is therefore discrimination in law: legal provisions establish two systems of legal rules—one is used for the imported goods, the other (more favourable) for domestic goods. Thus, the legal distinction between imported and domestic goods in cases of direct

67

Case C-184/96, Commission v France (ECJ 22 October 1998) para 17. Case C-309/02, Radlberger and Spitz (ECJ 14 December 2004) para 80. 69 Case 8/74, Dassonville (ECJ 11 July 1974). Thus, the consequent “broadening” of Article 34 TFEU to include indirectly discriminatory meausures in fact meant narrowing the Dassonville formula—Green et al. (1991), p. 53. 68

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discrimination resulted in application of the term “distinctly applicable measures” for this type of obstacles to free movement of goods. In this respect, Article 2 of Directive 70/5070 defines distinctly applicable measures as measures, which “hinder imports which could otherwise take place, including measures which make importation more difficult or costly than the disposal of domestic production. In particular, it covers measures which make imports or the disposal, [. . .] to a condition differing from that required for domestic products and more difficult to satisfy. Equally, it covers, in particular, measures which favour domestic products or grant them a preference.” Directly discriminatory measures therefore treat imported goods expressly less favourably than the domestic. As such, they are considered as a more serious breach of the free movement of goods than indirectly discriminatory measures and may be justified based on Article 36 TFEU only (➔ Article 36 TFEU para 14–16). Trade barriers in the form of direct discrimination come, in practice, in very different forms.71 However, over the last decades certain “typical” categories of direct restrictions have been established through the case law of the EU Court, such as: import authorisations,72 inspections and controls (veterinary, sanitary, phytosanitary, etc.),73 border controls that are part of a general control system,74 enhancing purchasing of domestic products (buy domestic campaigns and quality marks), – requirement to use domestic products,75

– – – –

70 Commission Directive 70/50/EEC on the abolition of measures, which have an effect equivalent to quantitative restrictions on imports, O.J. L 13/29 (1970). 71 For a comment of the post-Dassonville case law see Oliver (1984, 1985, 1986). 72 Case C-189/95, Franzen (ECJ 23 October 1997) para 67–71; Joined Cases 51–54/71, International Fruit Company (ECJ 15 December 1971); Case C-434/04, Ahokainen and Leppik (ECJ 28 September 2006) para 21; Case 124/81, Commission v UK (ECJ 8 February 1983) para 9; Case C304/88, Commission v Belgium (ECJ 5 June 1990) para 14; Case C-54/05, Commission v Finland (ECJ 15 March 2007); Case C-212/03, Commission v France (ECJ 26 May 2005) para 16. In contrast, Article XI of GATT does not prohibit automatic import authorisations—cf Japan – Trade in Semi-conductors—para 118. 73 Case 4/75, Rewe-Zentralfinanz (ECJ 8 July 1975); Case 35/76, Simmenthal (ECJ 15 December 1976); Case C-114/15, Audace (ECJ 27 October 2016); Case C-354/14, Capoda (ECJ 6 October 2015). 74 Case 132/80, United Foods (ECJ 7 April 1981), Case C-128/89, Commission v Italy (ECJ 12 July 1990); Case 42/82, Commission v France (ECJ 22 March 1983); Case C-105/94, Faber (ECJ 5 June 1997); Case C-272/95, Deutsches Milch-Kontor (ECJ 15 April 1997) para 32. 75 Commission Directive 66/683/EEC eliminating all differences between the treatment of national products and that of products which, under Articles 9 and 10 of the Treaty, must be admitted for free movement, O.J. 220/3748 (1966); Case 119/78, SA des grandes distilleries Peureux v Directeur des Services fiscaux (ECJ 13 March 1979); Case 72/83, Campus Oil Limited (ECJ 10 July 1984); Case C-137/91, Commission v Greece (ECJ 24 June 1992); Case C-379/98, PreussenElektra (ECJ 13 March 2001); Case C-21/88, Du Pont de Nemours Italiana (ECJ 20

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– designation of origin and geographical indication,76 – restrictions on the importation of goods for personal use,77 – restrictions on transit, indirect and parallel imports.78 Prohibition of Indirect Discrimination of Imported Goods: Mutual Recognition Principle Despite the broad ratio decidendi of the Dassonville formula, which includes both direct and indirect obstacles to the movement of goods, the EU Court after the decision in Dassonville consistently applied the test of formal discrimination, and only later confirmed that Article 34 TFEU in fact also covers measures, which are legally indistinctly applicable to domestic and imported products, but in fact affect the latter more. The seminal decision of the EU Court in this respect has been issued in Cassis de Dijon.79 The case relates to the German law, which provided that the beverages classified as spirit, if they contain at least 23% alcohol (technical standard). The French, however, were producing Cassis (Pecan sandies liqueur), which contains 16% alcohol. The German law was not formally discriminatory; it required, however, that Cassis could be imported to Germany as a spirit only if it would be stronger. The effect of the rule was the isolation of the German market from the French. The EU Court found that: “In the absence of common rules (. . .) it is for the member states to regulate all matters relating to the production and marketing of (products) on their own territory.”80 March 1990) para 11; Case 45/87, Commission v Ireland (Dundalk Water Supply) (ECJ 22 September 1988); Case C-243/89, Commission v Denmark (ECJ 22 June 1993). 76 Case 113/80, Commission v Ireland (ECJ 17 June 1981); Case C-362/88, GB-INNO-BM v Confe´de´ration du commerce luxembourgeois (ECJ 7 March 1990) para 18; Case 207/83, Commission v UK (ECJ 25 April 1985); Case 12/74, Commission v Germany (ECJ 20 February 1975) para 17; Case 16/83, Karl Prantl (ECJ 13 March 1984); Case C-3/91, Exportur SA v LOR SA in Confiserie du Tech SA (ECJ 10 November 1992); Case C-95/14, UNIC and UNI.co.pel (ECJ 16 July 2015). For a comment, see Steyger (1997), p. 42; Beier (1980), p. 18. See also Council Regulation (EC) No 510/2006 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs, O.J. L 93/12 (2006) and MacMaolain (2001), pp. 413–428. 77 Case 215/87, Schumacher (ECJ 7 March 1989); Joined Cases C-260/06 and C-261/06, Escalier and Bonnarel (ECJ 8 November 2007). 78 Case 13/78, John Eggers (ECJ 12 October 1978); Case 72/83, Campus Oil Limited (ECJ 10 July 1984); Case 78/70, Deutsche Grammophon (ECJ 8 June 1971); Case 229/83, E´douard Leclerc v SARL “Au ble´ vert” (ECJ 10 January 1985); Case 266/81, Societa` Italiana per l’Oleodotto Transalpino (SIOT) (ECJ 16 March 1983) para 16; Case C-320/03, Commission v Austria (ECJ 15 November 2005) para 65; Case C-350/97, Wilfried Monsees (ECJ 11 May 1999); Case C-23/99, Commission v France (ECJ 26 September 2000); Case 104/75, Adriaan de Peijper (ECJ 20 May 1976). 79 Case 120/78, Rewe-Zentral (Cassis de Dijon) (ECJ 20 February 1979). For a comment see Alter and Meunier (1994) and Mattera (1980). 80 Case 120/78, Rewe-Zentral (Cassis de Dijon) (ECJ 20 February 1979) para 8.

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It continued: “Obstacles 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 recognized 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.”81 This means that the EU Court tolerates national legislation, which restricts the free movement of these goods from other MS, if this can be justified by the public interest objective, which is more important than the free movement of goods. In Cassis de Dijon Germany relied on two “mandatory requirements”—health and consumer protection, but the EU Court dismissed them both. In this context, the following sentence from the judgment of the EU Court is of particular importance: “The concept of ‘measures having an effect equivalent to quantitative restrictions on imports’ contained in Article [34] 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.”82 This decision means a refusal of the German Government’s argument that Article 34 TFEU prohibited directly discriminatory measures only and that diverse technical standards should be reduced based on harmonisation legislation and not based on Article 34 TFEU. By this, the EU Court followed the provision of Article 3 of Directive 70/50: the term measures having equivalent effect “also covers measures governing the marketing of products which deal, in particular, with shape, size, weight, composition, presentation, identification or putting up and which are equally applicable to domestic and imported products, where the restrictive effect of such measures on the free movement of goods exceeds the effects intrinsic to trade rules.” With the decision in Cassis de Dijon, the EU Court set a presumption of free trade: a product which is lawfully marketed in one MS shall be, in principle, admitted access to the market in all other MS. This is the so-called principle of mutual recognition or the principle of free movement of goods (principle of equivalence), which requires the recognition of technical standards in other MS and the mutual confidence, while the decision in the Cassis de Dijon also resulted in an increase in competition. This way the EU Court helped to solve the problem of fragmentation of the market: the product produced and sold in one MS in accordance with its rules, due to the different rules of the other MS cannot be placed on the market of the latter. The problem arises because of the effect of the national rules, which may be quite reasonable and non-discriminatory; nevertheless, the diversity of these rules between MS constitutes an obstacle to free trade. The manufacturer must thus

81 82

Case 120/78, Rewe-Zentral (Cassis de Dijon) (ECJ 20 February 1979) para 8. Case 120/78, Rewe-Zentral (Cassis de Dijon) (ECJ 20 February 1979) para 15.

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comply with double set of rules: the rules of the home MS and the rules of the importing MS, including cost related to this adjustment, which for him means a double burden.83 The rule of the importing MS is in this respect indirectly (or substantially) discriminatory, since it implies the same rules for two different situations.84 This has led to the extension of the scope of Article 34 TFEU, which was crucial for future case law. Thus, Article 34 TFEU captured a number of the national rules with which MS have not intended to regulate trade with other countries, but to regulate the market by providing important public objectives, which have not have the nature of economic protectionism. The Cassis de Dijon Decision has hence set the groundwork for free trade and integrated market, which is in the interest of the EU. Based on this decision the EU Court has changed a number of national rules on labelling, composition and other characteristics of the goods. These national rules made it impossible or hard to sell the products, which do not comply with the national requirements set for the protection of consumers, health, fair trade, etc. With the Decision in Cassis de Dijon, the decision in Dassonville gained momentum and scope of Article 34 TFEU actually began to spread, so that it prima facie prohibited all national measures, which interfere with the trade in goods. Similar to the obstacles in the form of direct discrimination also in case of indirect discrimination certain typical forms of trade barriers appeared in the practice, such as: – the requirements of the marketing authorisation;85 – the obligation to appoint a representative or a warehouse in the country of importation;86 – the requirement for a national type-approval;87 83 Weatherill and Beaumont (1999), pp. 565–567. In extreme situation, this could extend to 28times burden. 84 Snell (2002), p. 55. 85 Case C-254/05, Commission v Belgium (ECJ 7 June 2006); Case C-249/07, Commission v Netherlands (ECJ 4 December 2008) para 26. Case C-432/03, Commission v Portugal (ECJ 10 November 2005); Case C-24/00, Commission v France (ECJ 5 February 2004); Case C-150/00, Commission v Austria (ECJ 29 April 2004); Case C-333/08, Commission v France (ECJ 28 January 2010); Case C-443/02, Nicolas Schreiber (ECJ 15 July 2004); Case C-390/99, Canal Sate´lite Digital SL v Administracio´n General del Estado (ECJ 22 January 2002); Case C-525/14, Commission v Czech Republic (ECJ 22 September 2016). 86 Case 155/82, Commission v Belgium (ECJ 2 March 1983) para 7; Case 247/81, Commission v Germany (ECJ 28 February 1984); Case 13/78, John Eggers (ECJ 12 October 1978); Case C-398/ 98, Commission v Greece (ECJ 25 October 2001). 87 Case 21/84, Commission v France (ECJ 9 May 1985); Case 188/84, Commission v France (ECJ 28 January 1986); Joined Cases C-388/00 and C-429/00, Radiosistemi Srl v Prefetto di Genova (ECJ 20 June 2002); Case C-455/01, Commission v Italy (ECJ 16 October 2003); Case C-432/03, Commission v Portugal (ECJ 10 November 2005); Joined Cases C-639/11 and C-61/12, Commission v Poland and Commission v Lithuania (ECJ 20 March 2014); Commission Staff Working Document, Free Movement of Goods, 2009, p. 25.

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the requirement for the use of the national language;88 description of the products—the use of generic terms;89 packaging and labelling of the products;90 ban on the sale of individual products and restrictions on the composition of the products.91

4.2.6. 28

Cross-Border Element and Reversed Discrimination

Furthermore, it should be pointed out that it is clear from the wording of Article 34 TFEU that this provision only applies to barriers to trade between MS. Crossborder element is therefore a precondition for assessment of a potential restriction based on this provision. National measures that concern domestic goods only are therefore not covered. Nevertheless, to determine the existence of a cross-border element, it is sufficient that the measure is only indirectly or potentially restricting trade within the EU.92 Additionally, the requirement for a cross-border element is met, if the goods only pass the State, because the internal market is subject to the freedom of transit. TFEU is limited to trade between MS; however, no provision prohibits restrictions on the movement of goods within the MS. This suggests that it was the position of the authors of the Treaty that the purpose of the EU is not to prevent the MS’ restrictions on the movement of goods within their territory. As found by Oliver, such an approach was in accordance with the principle of subsidiarity, 88

Case C-369/89, Piage`me v Peeters (ECJ 18 June 1991); Case C-85/94, Piage`me v Peeters II (ECJ 12 October 1995); Case C-33/97, Colim NV v Bigg’s Continent Noord NV (ECJ 3 June 1999) para 41–43; Case 27/80, Anton Adriaan Fietje (ECJ 16 December 1980); Cf Written Question 1744/82, O.J. C 92, 1983, p. 20. 89 Case 178/84, Commission v Germany (ECJ 12 March 1987); Case 298/87, Proce´dure de redressement judiciaire v Smanor SA (ECJ 14 July 1988); Case 286/86, Ge´rard Deserbais (ECJ 22 September 1988); Case C-210/89, Commission v Italy (ECJ 11 October 1990); Case C-196/89, Enzo Nespoli and Giuseppe Crippa (ECJ 11 October 1990); Case 182/84, Miro BV (ECJ 26 November 1985); Case C-14/00, Commission v Italy (ECJ 16 January 2003); Case C-12/00, Commission v Spain (ECJ 16 January 2003); Case 193/80, Commission v Italy (ECJ 9 December 1981) and Case 281/83, Commission v Italy (ECJ 15 October 1985). See also Communication on the names under which foodstuffs are sold, O.J. C 270, 1991, p. 2. 90 Case 261/81, Walter Rau Lebensmittel v De Smedt PvbA (ECJ 10 November 1982); Case 179/ 85, Commission v Germany (ECJ 4 December 1986); Case C-470/93, Mars (ECJ 6 July 1995); Case C-217/99, Commission v Belgium (ECJ 16 November 2000); Case C-30/99, Commission v Ireland (ECJ 21 June 2001). 91 Case 407/85, Drei Glocken (ECJ 14 July 1988); Case 130/80, Kelderman (ECJ 19 February 1981); Case 174/82, Sandoz BV (ECJ 14 July 1983); Case C-24/00, Commission v France (ECJ 5 February 2004); Case C-192/01, Commission v Denmark (ECJ 23 September 2003); Case C-41/02; Commission v Netherlands (ECJ 2 December 2004); Case C-420/01, Commission v Italy (ECJ 19 June 2003); Case C-319/05, Commission v Germany (ECJ 15 November 2007); Case C-88/07, Commission v Spain (ECJ 5 March 2009); Case C-473/98, Kemikalieinspektionen v Toolex Alpha AB (ECJ 11 July 2000). 92 Case 8/74, Dassonville (ECJ 11 July 1974) para 5.

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even before this became a recognized principle of EU law.93 This has been confirmed by the EU Court in Oosthoek:94 “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 Articles [34 and 35 TFEU].”95 The requirement for the existence of a cross-border element, however, also means that EU law does not prevent MS to treat domestic goods less favourably than the imported products (reverse discrimination). Reverse discrimination occurs when a national of the MS is aggrieved because it cannot rely on a favourable provision of EU law, whereas a national of another MS in the same circumstances can rely on it.96

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4.3. Rules on Circumstances of Trade and Free Movement of Goods

4.3.1.

Regulating Circumstances of Sale

Rules on circumstances of sale of goods govern the issues of who is selling the product (e.g. a pharmacist), when is it sold (on Sunday nights), where is it sold (at the grocery store, the pharmacy, door to door) and how is it sold (the promotional price, advertising, etc.).97 The special feature of these rules is that similarly to measures having equivalent effect to quantitative restrictions they are restricting the volume of the trade, however, they are not adopted with the intention to protect the domestic market and do not have such an effect.98 In addition, the rules concerning the circumstances of sale usually concern the domestic producer and importer exactly the same, and are therefore non-discriminatory (in law and in fact)— contrarily to measures having equivalent effect, which are in law or in fact discriminatory. In this context, the essential question arises whether rules on the circumstances of the sale of goods are contrary to Article 34 TFEU. Measures having equivalent effect are prohibited by Article 34 TFEU since they cause double burden—the 93

Oliver (2010), p. 147. Cf Joined Cases 314–316/81 and 83/82, Procureur de la Re´publique v Alex Waterkeyn (ECJ 14 December 1982). 94 Case 286/81, Oosthoek (ECJ 15 December 1982). 95 Case 355/85, M. Driancourt v Michel Cognet (ECJ 23 October 1986); Case 98/86, Arthur Mathot (ECJ 18 February 1987). Joined Cases C-321–324/94, Jacques Pistre and others (Opinion of AG Jacobs of 24 October 1996). Cf Case C-363, 407–411/93, Rene´ Lancry (ECJ 9 August 1994) in relation to Article 30 TFEU where the Court adopted a new approach to charges having equivalent effect to customs duties and broadened Article 30 TFEU so that it also covers domestic goods. 96 Pickup (1986), p. 137. 97 Mortelmans (1991), p. 115. 98 See Joined Cases 60/84 and 61/84, Cine´the`que SA and others v Fe´de´ration nationale des cine´mas franc¸ais (Opinion of AG Slynn of 20 March 1985).

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differences between the national rules force the manufacturer or the importer to comply with rules of the home MS as well as with the rules of the host country, and thus increase the cost. The rules about the circumstances of sale, however, do not pose such a double burden; these rules are not directed towards the importer, but towards the seller, and the latter is obliged to respect the rules of the home country only. One could therefore suggest that such rules due to their distance from interstate trade fall within the national regulatory competence of the MS and thus do not infringe Article 34 TFEU. Nevertheless, the Dassonville formula is broad enough that it is possible to place rules on circumstances of sale of goods under the prohibition of measures having equivalent effect. For some time this approach has also been supported by the EU Court.99 However, in 1993 AG Tesauro posed the following fundamental question of the purpose of Article 34 TFEU:100 “Is Article [34] a provision intended to liberalize intra-Community trade101 or is it intended more generally to encourage the unhindered pursuit of commerce in individual Member States?” The answer to this question has particularly troubled the EU Court, but also legal theory has not been uniform.102 AG Tesauro believed that: “the Dassonville test cannot be construed as meaning that a potential reduction in imports caused solely and exclusively by a more general (and hypothetical) contraction of sales, can constitute a measure having equivalent effect to a quantitative restriction on imports. [. . .] measures, whose subject is the manner in which trading activity is carried on, are in principle to be regarded as falling outside the scope of Article [34], inasmuch as they are not designed to regulate trade itself, and have no connection with the parity or disparity of the national laws in point and, moreover, are not liable to make access to the market less profitable for the operators concerned and thus, indirectly, to make access more difficult for the products in question. Such a solution, therefore, based on the principle of mutual recognition, reflects the reasoning underlying the ‘Cassis de Dijon’ approach and does not in any way undermine the truly integrationist inspiration of that approach.”103

99 Case 152/78, Commission v France (ECJ 10 July 1980) para 11; Case 286/81, Oosthoek (ECJ 15 December 1982); Joined Cases 60/84 and 61/84, Cine´the`que SA (ECJ 11 July 1985); Case 145/88, Torfaen BC v B&Q (ECJ 23 November 1989); more on this Arnull (1991), p. 112; Barnard (1994), p. 449; Woude (1990), p. 62; Mortelmans (1991), p. 115. For a different approach see Case 155/80, Oebel (ECJ 14 July 1981); Case 75/81, Belgium v Blesgen (ECJ 31 March 1982); Case 148/85, Direction Ge´ne´rale des Impoˆtsand Procureur de la Re´publique v Forest (ECJ 25 November 1986); Case C-23/89, Quietlynn & Richards v Southend Borough Council (ECJ 11 July 1990). On these cases see Gormley (1989), pp. 198–200. 100 Case C-292/92, Hu¨nermund (Opinion of AG Tesauro of 27 October 1993) para 1. 101 I.e. between the MS—in this case Article 34 TFEU does not apply for measures on circumstances of sale; footnote added. 102 Gormley (1990), p. 149; Arnull (1991), p. 112; Steiner (1993), p. 773. White (1989), p. 235. 103 Case C-292/92, Hu¨nermund (Opinion of AG Tesauro of 27 October 1993) para 25.

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This position was followed by the EU Court in today’s famous Keck and Mithouard104 case, in which the Court reassesed its prior case law and partially rejected some of the decisions taken. 4.3.2.

Keck: “Certain Selling Arrangements” Are Outside the Scope of Article 34 TFEU

Keck and Mithouard were selling goods below cost. Because this violated French legislation, a criminal proceeding has been initiated against them. The defence argued that French law prohibited a certain method of sales and thus limited the scope of the sale of the imported goods, and was thus in breach of Article 34 TFEU. The EU Court did not agree with them. It explained that the purpose of the French rules was to regulate trade in goods,105 although such legislation may have restricted the volume of sales (including the sale of the imported goods).106 The Court then openly acknowledged its intention to halt disgruntled traders in their references to Article 34 TFEU, in any case, when they encounter a rule that is restricting their freedom to sell anything, anywhere and anytime they want. The Court also explained that it is—due to more frequent references to Article 34 TFEU as a means of challenging all of the rules, which restrict the effect of freedom to trade, even when the rules are not focused on products from other MS—forced to re-assess and clarify the case law on this issue.107 Thus, the EU Court made a distinction between the product requirements on the one hand (➔ Article 34 TFEU para 24–27) and certain selling arrangements on the other side. As regards the former, it stated that these present the measures having equivalent effect, and therefore breach Article 34 TFEU, unless they can be justified by the objectives of public interest.108 As regards the rules governing “certain selling arrangement”,109 however, the EU Court in accordance with the AG’s proposal in Hu¨nermund decided to limit the scope of Dassonville formula, so that the rules on selling arrangements should (under certain conditions) be excluded from the formula, even if they have an impact on the overall sales volume: “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. [. . .] provided that those conditions are fulfilled, the application of such rules to the sale of products from another Member State meeting 104

Joined Cases C-267/91 and C-268/91, Keck and Mithouard (ECJ 24 November 1993). Joined Cases C-267/91 and C-268/91, Keck and Mithouard (ECJ 24 November 1993) para 12. Cf Case C-158/94, Commission v Italy (electricity) (ECJ 23 October 1997) para 31. 106 Joined Cases C-267/91 and C-268/91, Keck and Mithouard (ECJ 24 November 1993) para 13. 107 Joined Cases C-267/91 and C-268/91, Keck and Mithouard (ECJ 24 November 1993) para 14. 108 Joined Cases C-267/91 and C-268/91, Keck and Mithouard (ECJ 24 November 1993) para 15. 109 SL: dolocˇeni nacˇini prodaje, FR: certaines modalite´s de vente, DE: bestimmte Verkaufsmodalita¨ten. 105

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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. Such rules therefore fall outside the scope of Article [34 TFEU].”110 In this case, the EU Court, therefore, put the dividing line between those national rules, which concern goods (i.e. determine what kind of goods may be sold) and are considered as measures having equivalent effect and shall be assessed in the light of Cassis de Dijon, and all the other trading rules, which mean the selling arrangement and are not considered as measures having equivalent effect and are hence exempt from Article 34 TFEU and Dassonville formula and which do not have to be justified to be permitted. In the case of the latter, however, two conditions are placed, namely, they shall: • apply to all relevant traders operating within the national territory and • affect in the same manner, in law and in fact, the marketing of domestic products and of those from other MS.111

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Providing that these two conditions be met, the national rule regarding the circumstances of the sale of goods does not constitute a measure having equivalent effect to quantitative restrictions, since it, according to the EU Court, does not restrict the access of goods on the market, nor does it restrict the imported goods more than the domestic does. The decision in this case has provoked numerous comments,112 often extremely negative.113 In general, the Decision in Keck has been criticised as too formalistic and unrealistic, since the EU Court has not defined in sufficient detail, from which case law is it withdrawing and for which categories of rules—i.e. what constitutes certain selling arrangements.114 Poiares Maduro was critical about the Decision because he did not see the logic of the distinction between requirements related to products and selling arrangements,115 Davies, however, adds that a businessperson could not care less, whether the additional costs are caused by the requirement of a physical change in the product or a change in marketing techniques.116 Most intensive disapproval of this judgment, however, follows from the opinion of AG Jacobs in the case of Leclerc-Siplec,117 in which he wrote down that the 110

Joined Cases C-267/91 and C-268/91, Keck and Mithouard (ECJ 24 November 1993) para 16–17. 111 Known as the condititions from para 16 of the Court’s judgment in Keck. 112 Cf. Poiares Maduro (1994), p. 30; Reich (1994); Chalmers (1994), p. 385; Eeckhout (1998), p. 267; Dabbah (1999), p. 84; Enchelmaier (2003), p. 249; Horsley (2012); Wilsher (2008); Schu¨tze (2016). 113 Cf. Gormley (1994), p. 63; Gormley (1996), p. 866. 114 Davies (2003), p. 68. 115 Poiares Maduro (1998), p. 78. 116 Davies (2003), p. 67. 117 Case C-412/93, Leclerc-Siplec (Opinion of AG Jacobs of 24 November 1994).

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design of so inflexible boundaries between different types of measures is not adequate, as well as the concept of discrimination that has again been used by the EU Court. As an alternative solution, Jacobs proposed to apply the market access test, according to which each national rule must be weighed in the light of whether the rule presents a sufficient barrier to market access of goods from other MS. His proposal would in fact mean the enforcement of the de minimis rule within Article 34 TFEU. Additionally, the decision was also criticised for more general political reasons. In this respect, Weiler and Trachtman say: “if one finds a certain emotional edge in the articles dealing with decisions of the European Court in cases such as Keck and others like it, this is understandable. These decisions are painful since they seem like a betrayal from within the Vatican itself.”118 This “betrayal” is reflected in the fact that the decision in this case narrows the scope of Dassonville formula and means a step back in the process of extending the EU competence and market liberalisation. Although the Decision in Keck led to difficulties, in particular regarding national advertising restrictions, and has been criticised by the pro-European legal scholars, it was broadly welcomed by the MS as it confirmed that Article 34 TFEU has its limits. If only for the selling arrangements the return to the discrimination test means the focus of decentralisation and greater national autonomy in this area, which could not have been noticed in the case law of the EU Court for years before this decision. Finally, in Keck the EU Court also gave an answer to AG Tesauro: the purpose of Article 34 TFEU is to free trade between MS, and not to promote the smooth operation of the pursuit of economic activities in the MS in general. 4.3.3.

35

36

Certain Selling Arrangements

For the application of the Keck rule, it is essential to clarify what the concept of “certain selling arrangements” stands for. It is much easier to determine, which measures concern the characteristics of the goods, than when it comes to regulating selling arrangements. The EU Court included on the “list” of selling arrangements the measures that are associated with the conditions and methods of sale, measures laying down the time of the sale of goods, measures in respect of the place of sale or restrictions on who may sell certain goods, and also measures to control the prices.119 To put it simply, these are provisions about where (or who), when and how the goods are being sold.120 118

Weiler and Trachtman (1996–1997), pp. 371–372. See Case C-333/14, Scotch Whisky Association (ECJ 23 December 2015)—for a comment see Alemanno (2016); Case C-221/15, Etablissements Fr. Colruyt (ECJ 21 September 2016); Case C148/15, Deutsche Parkinson Vereinigung (ECJ 19 October 2016). 120 Case C-98/14, Berlington Hungary and Others (ECJ 11 June 2015); Joined Cases C-158/04 and C-159/04, Alfa Vita Vassilopoulos AE (ECJ 14 September 2006); Case C-82/05, Commission v Greece (ECJ 14 September 2006); Case C-416/00, Tommaso Morellato v Comune di Padova (ECJ 119

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The national rules concerning the time and place of the sale of goods do not have a significant effect on interstate trade as these rules apply to sellers and not to manufacturers or importers of the goods. The principle of subsidiarity, therefore, speaks in favour of the claim that regulation of these fields should be in the national competence, and not restricted by Article 34 TFEU. This is supported by the EU Court. Advertising, however, is more complicated and has thus received considerable attention of scholars that have been assessing and commenting diverse EU Court’s rulings in this area. In contrast to the case law concerning the time and place of sale of the goods in respect of which the case law has been more controversial before Keck, the inflamed debate in respect of restrictions on advertising began just after it.121 National Advertising Restrictions

39

In the case law shortly after Keck, the EU Court placed national rules, which prohibit or considerably restrict advertising of certain goods, under selling arrangements and have thus been almost automatically excluded from the scope of application of Article 34 TFEU.122 Adverse consequences of the Decision in Keck become evident, however, when one considers the importance of advertising in the product’s competitive position. It is clear that products that have been imported from other MS, in particular new products on the market and those that are intended for mass sales, are more severely affected by rules restricting or prohibiting advertising than domestic products. This is a form of factual discrimination, which either may slightly or seriously impede access to the market in an MS. Nevertheless, the EU Court had until Gourmet International123 omitted to explain how to determine the extent of the barriers to access to the market established by the national rules.124 In this case, however, considering the emphasis of the AG that the actual hindrance of market access is key to the application of Article 34 TFEU,125 the EU Court in response to a national court’s request for preliminary ruling 18 September 2003); Case 155/80, Sergius Oebel (ECJ 14 July 1981) para 20; Joined Cases C-401/ 92 and C-402/92, Tankstation ’t Heukske vof and J. B. E. Boermans (ECJ 2 June 1994); Joined Cases C-69/93 and C-258/93, Punto Casa SpA v Sindaco del Comune di Capena (ECJ 2 June 1994); Case C-23/89, Quietlynn Limited and Brian James Richards v Southend BC (ECJ 11 July 1990); Case C-391/92, Commission v Greece (ECJ 29 June 1995); Case C-387/93, Giorgio Domingo Banchero (ECJ 14 December 1995); Case C-254/98, Heimdienst (ECJ 13 January 2000); Case C-141/07, Commission v Germany (ECJ 11 September 2007). 121 Case 152/78, Commission v France (ECJ 10 July 1980); Cf Case C-362/88, GB-INNO-BM v Confe´de´ration du commerce luxembourgeois (ECJ 7 March 1990); Case 286/81, Oosthoek’s Uitgeversmaatschappij BV (ECJ 15 December 1982). 122 Case C-292/92, Hu¨nermund (ECJ 15 December 1993); Case C-412/93, Leclerc-Siplec (ECJ 9 February 1995). 123 Case C-405/98, Gourmet International (ECJ 8 March 2001). 124 Joined Cases C-34–36/95, De Agostini (ECJ 9 July 1997). 125 Joined Cases C-34–36/95, De Agostini (ECJ 9 July 1997) para 21. Cf Case C-412/93, LeclercSiplec (Opinion of AG Jacobs of 24 November 1994). para 20 in 21.

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recognised that “a prohibition of all advertising directed at consumers [. . .] 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.”126 In Gourmet, the Court based its interpretation on market access test. It has emphasised that “if national provisions restricting or prohibiting certain selling arrangements are to avoid being caught by Article [34], 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.”127 To determine the existence of factual discrimination of imported goods in comparison to the domestic, it is therefore necessary to use the market access test. This way the EU Court contributed to greater convergence between the rules on free movement of goods and persons, where emphasis on the access of service providers from other MS on the market has been made.128 In the case of Gourmet International, the EU Court took a more realistic approach to the national rules, which prohibit or greatly restrict advertising. In the development of EU law, the decision is important because it stressed the importance of market access as the connecting factor for the assessment of factual discrimination of national rules on selling arrangements that would otherwise be considered legitimate based on the Decision in Keck.129 This was most recently confirmed by the EU Court in the German vignette case,130 where the EU Court held that: “a measure, even if it has neither the object nor the effect of treating goods coming from other Member States less favourably, also falls within the scope of the concept of a ‘measure having equivalent effect to quantitative restrictions’, within the meaning of Article 34 TFEU, if it hinders access to the market of a Member State of products originating in other Member States.” It should also be pointed out that the EU Court has had to rule on situations, when the rules related to advertising through the labels on the products. For these rules, the EU Court held that these rules do not concern selling arrangements but the characteristics of the goods and are thus not exempt from Article 34 TFEU. Each national restriction on advertising on the products must therefore be justified by the MS.131

126

Case C-405/98, Gourmet International (ECJ 8 March 2001) para 21. Case C-405/98, Gourmet International (ECJ 8 March 2001) para 18. 128 Cf. Case C-415/93, Bosman (ECJ 15 December 1995)—although in this case no discrimination had to be proven (as in Gourmet), but only the worker’s position on the labour market has been considered. 129 Case C-239/02, Douwe Egberts NV v Westrom Pharma NV and others (ECJ 15 July 2004); Case C-71/02, Herbert Karner Industrie-Auktionen GmbH v Troostwijk GmbH (ECJ 25 March 2004). For a comment, see Kaczorowska (2004). 130 Case C-591/17, Austria v Germany (ECJ 18 June 2019) para 121. More on this Snell (2010) and Davies (2010). 131 Case C-470/93, Mars (ECJ 6 July 1995); Case C-368/95, Familiapress (ECJ 26 June 1997). 127

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Distance Selling 42

With the development of information and communications technology goods in the internal market are increasingly being sold using these marketing channels. It therefore does not come as a surprise that the EU Court was also asked to explain the relevance of Article 34 TFEU for measures governing internet transactions involving the movement of goods from one MS to another. In the case of DocMorris,132 the EU Court confirmed that regulation of distance selling of goods falls under selling arrangements and confirmed its decision in Gourmet International. DocMorris had a pharmacy in the Netherlands and had been selling medicines over the internet. In Germany, selling of medicines was restricted to pharmacies and sale through the mail was considered illegal. The German pharmaceutical society, therefore, sought to prevent the sale of medicinal products by DocMorris to German consumers over the internet. In the assessment of the conditions for exemption of selling arrangements from the scope of Article 34 TFEU, the EU Court found that the German ban actually discriminated against imported goods. The ban on sales over the internet was considered as a more serious obstacle to the pharmacies not established in Germany in comparison to those within the country. Although pharmacies in Germany could not use the alternative method of gaining access to the German market consisting of end consumers of medicinal products, they were still able to sell the products in their dispensaries. For pharmacies not established in Germany, however, the EU Court found that “the internet provides a more significant way to gain direct access to the German market” and concluded that “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.”133 Due to the different effect of the prohibition, the national rule was in breach of Article 34 TFEU and was finally, in the case of non-prescription medicines, not justified, since adequate advice and information may be provided. However, as far as the prohibition concerned medicines available only on prescription, the Court took the view that allowing such medicines to be supplied on receipt of a prescription and without any other control could increase the risk of prescriptions being abused or incorrectly used. Consequently, a national prohibition on mail order sales of medicinal products available only on prescription can be justified.134

4.4. Arrangements on the Use of Products

43

A new category of restrictions has recently been formed before the EU Court—socalled arrangements on use of products. They concern the national rules, which 132

Case C-322/01, DocMorris (ECJ 11 December 2003). Case C-322/01, DocMorris (ECJ 11 December 2003) para 74. 134 Case C-322/01, DocMorris (ECJ 11 December 2003) para 116 and 124. 133

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permit the sale of goods, but to some extent restrict their use. Requirements in respect of use of the goods usually specify the conditions under which it is accepted to use the object. Such requirements typically include restrictions on the purpose or manner of use, the circumstances and the time of use, the scope or type of use.135 Although a number of such requirements on the use of goods is outside the scope of Article 34 TFEU, some of them constitute measures having equivalent effect to quantitative restrictions. One such example comes from Commission v Portugal, where the EU Court in accordance with the proposal by the AG Trstenjak found that Portugal was in breach of Article 34 TFEU for banning fixing of non-ferrous foils on the glass of motor vehicles. Although the sale of the foil was not banned, the EU Court found that dealers or individuals, knowing that the fixing of the foil on the windshield of motor vehicles is prohibited, in fact, would not be interested in the purchase of such foil.136 The question of the status of the arrangements on use of the goods came in the forefront in 2005 in respect of two cases: Commission v Italy137 and Mickelsson and Roos.138 In the case Commission v Italy, the Commission proposed that the EU Court finds that Italy was in breach of Article 34 TFEU by prohibiting mopeds on the Italian territory to pull trailers. The case Roos and Mickelsson, on the other hand, related to the issue of whether Article 34 TFEU prohibits the Swedish rules on the use of personal watercraft thereby prohibiting the use of personal watercraft other than on a general navigable waterway or waters in respect of which the local authority has issued rules permitting their use. Both cases involved a total restriction on the use of certain goods, which undoubtedly has significant consequences for the sale of the said goods—trailers (perhaps even mopeds) and personal watercraft. In these two cases, three AGs issued their opinion to the EU Court, which offered three possible approaches to addressing these kinds of national restrictions. AG Le´ger issued his opinion in the case Commission v Italy on 5 October 2006 accepting the Commission’s argument, and without hesitation concluded that the prohibition for mopeds to pull trailers restricted the free movement of goods, in particular, trailers, and as such constituted a measure having equivalent effect. Le´ger agreed that the Italian provisions did not prohibit the importation of trailers and their marketing in Italy, however, the rule at issue had an impact on restricting the use of trailers on the whole Italian territory.139 He was of the opinion that this measure could contribute to road safety, but a general and absolute prohibition was nevertheless not considered as a measure, which would be proportionate to this objective.140 Advocate General Le´ger in his opinion, therefore, remained loyal to 135

Commission Staff Working Document, Free Movement of Goods, 2009, pp. 17–18. Case C-265/06, Commission v Portugal (ECJ 10 April 2008) para 33. 137 Case C-110/05, Commission v Italy (ECJ 10 February 2008). 138 Case C-142/05, Mickelsson and Roos (ECJ 4 June 2009). 139 Case C-110/05, Commission v Italy (Opinion of AG Le´ger of 5 October 2006) para 38–40. 140 Case C-110/05, Commission v Italy (Opinion of AG Le´ger of 5 October 2006) para 41, 51 and 61. 136

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45

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the traditional case law of the EU Court, which has evolved before Keck and in its entirety relied on formula Dassonville. His approach can therefore be called as traditional approach to the subject matter. Only 2 months later, AG Kokott put forward her opinion in the second of the above-mentioned cases, thereby proposing an alternative approach towards national rules on use of products. Kokott suggested excluding arrangements for use in principle from the scope of Article 34 TFEU, in the same way as selling arrangements, where the requirement set out by the Court in Keck and Mithouard is met.141 This exclusion was according to her opinion necessary also in the context of arrangements for use, to prevent that individuals might ultimately invoke Article 34 TFEU as a means of challenging national rules whose effect is merely to limit their general freedom of action.142 To escape this situation, Kokott proposed that a national provision restricting or prohibiting certain arrangements for use would not come under the prohibition laid down by Article 34 TFEU, so long as it is not product-related and if two further conditions are met: – that it applies to all relevant traders operating within the national territory and – that it affects in the same manner, in law and in fact, the marketing of domestic products and of those from other MS.143 Consequently, Kokott considered it most appropriate that the EU Court extends the rule from Keck to the rules on use of products and leave it in the regulatory autonomy of the MS. Should the EU Court follow her proposal, it would cause such eagerness by scholars, as witnessed at the outcome of the judgment in Keck. Leaving it to the MS to regulate use of goods would constitute a new step towards decentralisation of decision-making in the EU and would strengthen the sovereignty of the MS in the market field. Therefore, the MS would surely accept it with approval. However, such a step would cause a number of problems in the application of EU law, in particular to the national courts. From their perspective, another exception from Article 34 TFEU would undoubtedly cause a number of ambiguities. The case law of the EU Court should be as clear and understandable as possible as this is the only way to ensure uniform application of EU law by the MS. This is, however, very hard to be achieved in the current situation, given the still present problems of Keck rule for selling arrangements that have led several AGs to call the EU Court to abandon Keck and adopt a more coherent approach in comparison to the other freedoms.144

141

Case C-142/05, Mickelsson and Roos (Opinion of AG Kokott of 14 December 2006) para 47. Case C-142/05, Mickelsson and Roos (Opinion of AG Kokott of 14 December 2006) para 48. 143 Case C-142/05, Mickelsson and Roos (Opinion of AG Kokott of 14 December 2006) para 56. 144 Barnard (2009a), Fromont and Verdure (2011), Rigaux (2009), Azoulai (2011), Gormley et al. (2012), Oliver (2011, 2012), Spaventa (2009), Derle´n and Lindholm (2010), Wolf and Valentin (2007), De Sadeleer (2009), Enchelmaier (2010), Wenneras and Moen (2010) and Fenger (2015). 142

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After AG Kokott proposed to the EU Court to transfer the rule from Keck to restrictions on use of goods, the President of the Court ordered the second opinion in the case Commission v Italy. This task was entrusted to the AG Bot, who on 8 July 2008 proposed to the EU Court a withdrawal from the Keck rule in general and its replacement with the market access test. Had the Court accepted such a proposal, the EU would consolidate the free movement of goods with other freedoms. Bot’s approach could therefore be called as the “convergence approach”. The EU Court in both cases chose the first option and decided that both Italian provisions, which prohibited mopeds to pull trailers on Italian territory, as well as the Swedish rules that restricted use of personal watercraft only on certain waters constitute measures having equivalent effect to quantitative restrictions, which are contrary to Article 34 TFEU.145 The EU Court thus followed the proposal by AG Le´ger, and using the Dassonville formula stayed faithful to the established case law. The key issue thus remains whether the national rules on the use of goods have (actual or potential, direct or indirect) effect on trade between the States and the EU Court remains responsible for assessing this issue.

5.

47

48

Conclusion

It is understandable that the traders of the twentieth century first challenged the most obvious and direct barriers to trade. Thus, in the seventies, most of the cases confronted with the national measures, which required special permits, certificates or border inspections and customs valuation. After the Cassis de Dijon, national rules on the composition of goods came before the EU Court Justice, at the end of the 1980s, however, traders challenged all the broader range of national rules, even the kind that were not directly related to the cross-border trade (e.g. minimum prices of goods, labelling, banning Sunday work and advertising). This dynamic was made possible by the blurring scope of the Decisions in Dassonville and Cassis de Dijon, so that Article 34 TFEU has increasingly spread to more indirect barriers to trade. Although as the EU Court has become overburdened with work, it has, on the other hand, strengthened its legislative role and justified its “aggressive” interpretation of Article 34 TFEU, claiming that traders are not permitted to bear the costs of indecisiveness at EU level. In the absence of harmonisation, the EU Court alone controlled, whether the national legislation has been reasonable and proportionate in the light of Article 34 TFEU. This has, inter alia, led to the EU Court’s Decision in Keck, where Article 34 TFEU was narrowed down to the level that measures for the determination of the circumstances of sale fall, a priori, in the national jurisdiction (and not only in case the Member States manage to justify them). This decision has calmed down neo-liberal plaintiffs who 145

Case C-110/05, Commission v Italy (ECJ 10 February 2008) para 58, and Case C-142/05, Mickelsson and Roos (ECJ 4 June 2009) para 28.

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seek to establish a market without States, whereas on the other hand it has lead to twenty-year long disagreement by scholars and practitioners as to its reasonableness and appropriateness.

List of Cases ECJ

ECJ 05.02.1963, 26/62, Van Gend en Loos, ECR 1 [cit. in para 5] ECJ 13.07.1966, 56/64 and 58/64, Grundig, ECR 429 [cit. in para 4] ECJ 01.07.1969, 24/68, Commission v Italy, ECR 193 [cit. in para 5] ECJ 31.03.1971, 22/70, Commission v Council, ECR 263 [cit. in para 5] ECJ 08.06.1971, 78/70, Deutsche Grammophon, ECR 487 [cit. in para 23] ECJ 15.12.1971, 51–54/71, International Fruit Company, ECR 1107 [cit. in para 23] ECJ 12.07.1973, 2/73, Riseria Luigi Geddo v Ente Nazionale Risi, ECR 865 [cit. in para 3] ECJ 11.07.1974, 8/74, Dassonville, ECR 837 [cit. in para 4–6, 8, 21, 22, 24, 27, 31, 33, 35, 45, 48, 49] ECJ 20.02.1975, 12/74, Commission v Germany, ECR 181 [cit. in para 23] ECJ 08.07.1975, 4/75, Rewe-Zentral, ECR 843 [cit. in para 6] ECJ 20.05.1976, 104/75, Adriaan de Peijper, ECR 613 [cit. in para 24] ECJ 15.12.1976, 35/76, Simmenthal, ECR 1871 [cit. in para 23] ECJ 22.03.1977, 74/76, Iannelli & Volpi SpA v Ditta Paolo Meroni, ECR 557 [cit. in para 2] ECJ 12.10.1978, 13/78, John Eggers, ECR 1935 [cit. in para 23, 27] ECJ 29.11.1978, 83/78, Pigs Marketing Board v Raymond Redmond, ECR 2347 [cit. in para 2] ECJ 13.03.1979, 119/78, SA des grandes distilleries Peureux, ECR 975 [cit. in para 23] ECJ 20.02.1979, 120/78, Rewe-Zentral (Cassis de Dijon), ECR 649 [cit. in para 24– 27, 31, 33, 49] ECJ 10.07.1980, 152/78, Commission v France, ECR 2299 [cit. in para 31] ECJ 08.11.1979, 15/79, P.B. Groenveld BV, ECR 3409 [cit. in para 9] ECJ 14.12.1979, 34/79, Henn and Darby, ECR 3795 [cit. in para 3] ECJ 16.12.1980, 27/80, Anton Adriaan Fietje, ECR 3839 [cit. in para 27] ECJ 22.01.1981, 58/80, Dansk Supermarked, ECR 181 [cit. in para 13] ECJ 17.06.1981, 113/80, Commission v Ireland, ECR 1625 [cit. in para 23] ECJ 19.02.1981, 130/80, Fabriek voor Hoogwaardige Voedingsprodukten Kelderman, ECR 527 [cit. in para 27] ECJ 07.04.1981, 132/80, United Foods, ECR 995 [cit. in para 23] ECJ 14.07.1981, 155/80, Sergius Oebel, ECR 1993 [cit. in para 31, 37] ECJ 09.12.1981, 193/80, Commission v Italy, ECR 3019 [cit. in para 27] ECJ 31.03.1982, 75/81, Belgium v Blesgen, ECR 1211 [cit. in para 31] Hojnik

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ECJ 09.06.1982, 95/81, Commission v Italy, ECR 2187 [cit. in para 7] ECJ 08.02.1983, 124/81, Commission v UK (UHT-milk), ECR 203 [cit. in para 23] ECJ 28.02.1984, 247/81, Commission v Germany, ECR 1111 [cit. in para 27] ECJ 24.11.1982, 249/81, Commission v Ireland (Buy Irish), ECR 4005 [cit. in para 7, 11, 12, 14, 19] ECJ 10.11.1982, 261/81, Walter Rau Lebensmittel v De Smedt PvbA, ECR 3961 [cit. in para 27] ECJ 16.03.1983, 266/81, Societa` Italiana per l’Oleodotto Transalpino (SIOT), ECR 731 [cit. in para 23] ECJ 15.12.1982, 286/81, Oosthoek’s Uitgeversmaatschappij BV, ECR 4575 [cit. in para 29, 31, 38] ECJ 14.12.1982, 314–316/81 and 83/82, Alex Waterkeyn, ECR 4337 [cit. in para 29] ECJ 22.03.1983, 42/82, Commission v France, ECR 1013 [cit. in para 23] ECJ 02.03.1983, 155/82, Commission v Belgium, ECR 531 [cit. in para 27] ECJ 14.07.1983, 174/82, Sandoz BV, ECR 2445 [cit. in para 27] ECJ 05.04.1984, 177/82 and 178/82, Jan van de Haar, ECR 1797 [cit. in para 8] ECJ 13.12.1983, 222/82, Apple & Pear Development Council v Lewis, ECR 4083 [cit. in para 12] ECJ 17.05.1984, 15/83, Denkavit Nederland, ECR 2171 [cit. in para 16] ECJ 13.03.1984, 16/83, Karl Prantl, ECR 1299 [cit. in para 8, 23] ECJ 10.07.1984, 72/83, Campus Oil Limited, ECR 2727 [cit. in para 23] ECJ 25.04.1985, 207/83, Commission v UK, ECR 1202 [cit. in para 23] ECJ 10.01.1985, 229/83, E´douard Leclerc v SARL “Au ble´ vert”, ECR 1 [cit. in para 23] ECJ 14.03.1985, 269/83, Commission v France, ECR 837 [cit. in para 8] ECJ 15.10.1985, 281/83, Commission v Italy, ECR 3397 [cit. in para 27] ECJ 09.05.1985, 21/84, Commission v France, ECR 1355 [cit. in para 7] ECJ 11.07.1985, 60/84 and 61/84, Cine´the`que SA and others v Fe´de´ration nationale des cine´mas franc¸ais, ECR 2605 [cit. in para 30, 31] ECJ 05.06.1986, 103/84, Commission v Italy, ECR 1759 [cit. in para 8] ECJ 12.03.1987, 178/84, Commission v Germany, ECR 1227 [cit. in para 27] ECJ 26.11.1985, 182/84, Miro BV, ECR 3731 [cit. in para 27] ECJ 28.01.1986, 188/84, Commission v France, ECR 419 [cit. in para 27] ECJ 25.11.1986, 148/85, Direction Ge´ne´rale des Impoˆts and Procureur de la Re´publique v Forest, ECR 3449 [cit. in para 31] ECJ 04.12.1986, 179/85, Commission v Germany, ECR 3879 [cit. in para 27] ECJ 23.10.1986, 355/85, M. Driancourt v Michel Cognet, ECR 3231 [cit. in para 29] ECJ 14.07.1988, 407/85, Drei Glocken and others v USL Centro-Sud and others, ECR 4233 [cit. in para 27] ECJ 18.02.1987, 98/86, Arthur Mathot, ECR 809 [cit. in para 29] ECJ 06.10.1987, 118/86, Openbaar Ministerie v Nertsvoederfabriek Nederland BV, ECR 3883 [cit. in para 19] ECJ 22.09.1988, 286/86, Ge´rard Deserbais, ECR 4907 [cit. in para 27] Hojnik

770

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ECJ 22.09.1988, 45/87, Commission v Ireland (Dundalk Water Supply), ECR 4929 [cit. in para 11, 23] ECJ 07.03.1989, 215/87, Schumacher, ECR 617 [cit. in para 23] ECJ 14.07.1988, 298/87, Proce´dure de redressement judiciaire v Smanor SA, ECR 4489 [cit. in para 27] ECJ 20.03.1990, C-21/88, Du Pont de Nemours Italiana, ECR I-889 [cit. in para 23] ECJ 07.03.1990, C-69/88, Krantz, ECR I-583 [cit. in para 10] ECJ 23.11.1989, 145/88, Torfaen BC v B&Q, ECR 3851 [cit. in para 31] ECJ 05.06.1990, C-304/88, Commission v Belgium, ECR I-2901 [cit. in para 23] ECJ 07.03.1990, C-362/88, GB-INNO-BM v Confe´de´ration du commerce luxembourgeois, ECR I-667 [cit. in para 23] ECJ 11.07.1990, C-23/89, Quietlynn Limited and Brian James Richards v Southend BC, ECR I-3059 [cit. in para 31, 37] ECJ 12.07.1990, C-128/89, Commission v Italy, ECR I-3239 [cit. in para 23] ECJ 11.10.1990, C-196/89, Enzo Nespoli and Giuseppe Crippa, ECR I-3647 [cit. in para 27] ECJ 11.10.1990, C-210/89, Commission v Italy, ECR I-3697 [cit. in para 27] ECJ 22.06.1993, C-243/89, Commission v Denmark, ECR I-3353 [cit. in para 23] ECJ 18.06.1991, C-369/89, Piage`me v Peeters, ECR I-2971 [cit. in para 27] ECJ 25.06.1991, C-1/90, Aragonesa de Publicidad v Departamento de Sanidad, ECR I-4151 [cit. in para 11] ECJ 10.11.1992, C-3/91, Exportur SA v LOR SA in Confiserie du Tech SA, ECR I5529 [cit. in para 23] ECJ 24.06.1992, C-137/91, Commission v Greece, ECR I-4023 [cit. in para 23] ECJ 24.11.1993, C-267/91 and C-268/91, Keck and Mithouard, ECR I-6097 [cit. in para 5, 32–40, 45–47, 49] ECJ 15.12.1993, C-277/91, C-318/91 and C-319/91, Ligur Carni Srl in Genova Carni Srl, ECR I-6621 [cit. in para 2] ECJ 13.10.1993, C-93/92, CMC Motorradcenter v Pelin Baskiciogullari, ECR I5009 [cit. in para 10] ECJ 15.12.1993, C-292/92, Hu¨nermund, ECR I-6787 [cit. in para 31, 39] ECJ 14.07.1994, C-379/92, Peralta, ECR I-3453 [cit. in para 10] ECJ 29.06.1995, C-391/92, Commission v Greece, ECR I-1621 [cit. in para 37] ECJ 02.06.1994, C-401/92 and C-402/92, Tankstation ’t Heukske vof and J. B. E. Boermans, ECR I-2199 [cit. in para 37] ECJ 02.06.1994, C-69/93 and C-258/93, Punto Casa SpA v Sindaco del Comune di Capena, ECR I-2355 [cit. in para 37] ECJ 09.08.1994, C-363/93, C-407–411/93, Rene´ Lancry SA v Direction ge´ne´rale des douanes, ECR I-3957 [cit. in para 29] ECJ 14.12.1995, C-387/93, Giorgio Domingo Banchero, ECR I-4663 [cit. in para 37] ECJ 09.02.1995, C-412/93, Leclerc-Siplec, ECR I-179 [cit. in para 8, 34, 39] ECJ 15.12.1995, C-415/93, Bosman, ECR I-4921 [cit. in para 40] ECJ 06.07.1995, C-470/93, Mars, ECR I-1923 [cit. in para 27, 41] ECJ 12.10.1995, C-85/94, Piage`me v Peeters II, ECR I-2955 [cit. in para 27] Hojnik

Article 34. [Prohibition of Quantitative Restrictions on Imports]

771

ECJ 05.10.1995, C-96/94, Centro Servizi Spediporto, ECR I-2883 [cit. in para 10] ECJ 05.06.1997, C-105/94, Celestini, ECR I-2971 [cit. in para 23] ECJ 23.10.1997, C-158/94, Commission v Italy, ECR I-5789 [cit. in para 32] ECJ 07.05.1997, C-321–324/94, Jacques Pistre and others, ECR I-2343 [cit. in para 29] ECJ 09.07.1997, C-34–36/95, De Agostini, ECR I-3843 [cit. in para 39] ECJ 23.10.1997, C-189/95, Franzen, ECR I-5909 [cit. in para 23] ECJ 09.12.1997, C-265/95, Commission v France (Spanish strawberries), ECR I6959 [cit. in para 15, 18] ECJ 15.04.1997, C-272/95, Deutsches Milch-Kontor, ECR I-1905 [cit. in para 23] ECJ 26.06.1997, C-368/95, Familiapress, ECR I-3689 [cit. in para 41] ECJ 25.06.1997, C-114/96, Kieffer and Thill, ECR I-3629 [cit. in para 16] ECJ 22.10.1998, C-184/96, Commission v France, ECR I-6197 [cit. in para 19] ECJ 18.06.1998, C-266/96, Corsica Ferries France, ECR I-3949 [cit. in para 10] ECJ 03.06.1999, C-33/97, Colim NV v Bigg’s Continent Noord NV, ECR I-3175 [cit. in para 27] ECJ 03.12.1998, C-67/97, Ditlev Bluhme, ECR I-8033 [cit. in para 8] ECJ 11.05.1999, C-350/97, Wilfried Monsees, ECR I-2921 [cit. in para 23] ECJ 21.09.1999, C-44/98, BASF v Pra¨sident des Deutschen Patentamts, ECR I6269 [cit. in para 10] ECJ 13.01.2000, C-254/98, Heimdienst, ECR I-151 [cit. in para 6, 37] ECJ 13.03.2001, C-379/98, PreussenElektra, ECR I-2099 [cit. in para 23] ECJ 11.07.2000, C-473/98, Kemikalieinspektionen v Toolex Alpha AB, ECR I-5681 [cit. in para 27] ECJ 26.09.2000, C-23/99, Commission v France, ECR I-7653 [cit. in para 24] ECJ 21.06.2001, C-30/99, Commission v Ireland, ECR I-4619 [cit. in para 27] ECJ 16.11.2000, C-217/99, Commission v Belgium, ECR I-10251 [cit. in para 27] ECJ 25.10.2001, C-398/98, Commission v Greece, ECR I-7915 [cit. in para 27] ECJ 08.03.2001, C-405/98, Gourmet International, ECR I-1795 [cit. in para 39, 40, 42] ECJ 22.01.2002, C-390/99, Canal Sate´lite Digital SL v Administracio´n General del Estado, ECR I-607 [cit. in para 27] ECJ 16.01.2003, C-12/00, Commission v Spain, ECR I-459 [cit. in para 27] ECJ 16.01.2003, C-14/00, Commission v Italy, ECR I-513 [cit. in para 27] ECJ 05.02.2004, C-24/00, Commission v France, ECR I-1277 [cit. in para 27] ECJ 12.06.2003, C-112/00, Schmidberger v Austria, ECR I-5659 [cit. in para 8, 18] ECJ 29.04.2004, C-150/00, Commission v Austria, ECR I-3887 [cit. in para 27] ECJ 06.06.2002, C-159/00, Sapod Audic v Eco-Emballages SA, ECR I-5031 [cit. in para 13] ECJ 05.11.2002, C-325/00, Commission v Germany, ECR I-9977 [cit. in para 12] ECJ 20.06.2002, C-388/00 and C-429/00, Radiosistemi Srl v Prefetto di Genova, ECR I-5845 [cit. in para 27] ECJ 18.09.2003, C-416/00, Tommaso Morellato v Comune di Padova, ECR I-9343 [cit. in para 37] ECJ 23.09.2003, C-192/01, Commission v Denmark, ECR I-9693 [cit. in para 4] Hojnik

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ECJ 11.12.2003, C-322/01, DocMorris, ECR I-14887 [cit. in para 42] ECJ 19.06.2003, C-420/01, Commission v Italy, ECR I-6445 [cit. in para 4] ECJ 16.10.2003, C-455/01, Commission v Italy, ECR I-12023 [cit. in para 27] ECJ 02.12.2004, C-41/02, Commission v Netherlands, ECR I-11375 [cit. in para 4] ECJ 25.03.2004, C-71/02, Herbert Karner, ECR I-3025 [cit. in para 40] ECJ 15.07.2004, C-239/02, Douwe Egberts NV v Westrom Pharma NV and others, ECR I-7007 [cit. in para 40] ECJ 14.12.2004, C-309/02, Radlberger and Spitz, ECR I-11763 [cit. in para 20] ECJ 15.07.2004, C-443/02, Nicolas Schreiber, ECR I-7275 [cit. in para 27] ECJ 26.05.2005, C-20/03, Burmanjer and Others, ECR I-4133 [cit. in para 10] ECJ 26.05.2005, C-212/03, Commission v France, ECR I-4213 [cit. in para 23] ECJ 15.11.2005, C-320/03, Commission v Austria, ECR I-9871 [cit. in para 23] ECJ 10.11.2005, C-432/03, Commission v Portugal, ECR I-9665 [cit. in para 27] ECJ 17.04.2007, C-470/03, A.G.M.-COS.MET Srl v Suomen valtio and Tarmo Lehtinen, ECR I-2749 [cit. in para 12] ECJ 10.01.2006, C-147/04, De Groot en Slot Allium et Bejo Zaden, ECR I-245 [cit. in para 4] ECJ 12.07.2005, C-154/04 and C-155/04, The Queen, ex parte Alliance for Natural Health and Nutri-Link, ECR I-6451 [cit. in para 16] ECJ 14.09.2006, C-158/04 and C-159/04, Alfa Vita Vassilopoulos AE, ECR I-8135 [cit. in para 37] ECJ 28.09.2006, C-434/04, Ahokainen and Leppik, ECR I-9171 [cit. in para 23] ECJ 15.03.2007, C-54/05, Commission v Finland, ECR I-2473 [cit. in para 23] ECJ 05.06.2007, C-170/04, Klas Rosengren and Others, ECLI:EU:C:2007:313 [cit. in para 3] ECJ 14.09.2006, C-82/05, Commission v Greece, ECR I-93 [cit. in para 37] ECJ 10.02.2008, C-110/05, Commission v Italy, ECR I-519 [cit. in para 44–48] ECJ 04.06.2009, C-142/05, Mickelsson and Roos, ECR I-4273 [cit. in para 44–48] ECJ 07.06.2006, C-254/05, Commission v Belgium, ECR I-4269 [cit. in para 27] ECJ 15.11.2007, C-319/05, Commission v Germany, ECR I-9811 [cit. in para 27] ECJ 13.03.2008, C-227/06, Commission v Belgium, ECR I-46 [cit. in para 12] ECJ 08.11.2007, C-260/06 and C-261/06, Escalier and Bonnarel, ECR I-9717 [cit. in para 23] ECJ 10.04.2008, C-265/06, Commission v Portugal, ECR I-2245 [cit. in para 43] ECJ 05.03.2009, C-88/07, Commission v Spain, ECR I-1353 [cit. in para 27] ECJ 11.09.2007, C-141/07, Commission v Germany, ECR I-6935 [cit. in para 37] ECJ 04.12.2008, C-249/07, Commission v Netherlands, ECR I-174 [cit. in para 27] ECJ 28.01.2010, C-333/08, Commission v France, ECR I-757 [cit. in para 27] ECJ 12.07.2012, C-171/11, Fra.bo SpA, ECLI:EU:C:2012:453 [cit. in para 14] ECJ 20.03.2014, C-639/11 and C-61/12, Commission v Poland and Commission v Lithuania, ECLI:EU:C:2014:173 [cit. in para 27] ECJ 11.06.2015, C-98/14, Berlington Hungary, ECLI:EU:C:2015:386 [cit. in para 37] ECJ 16.07.2015, C-95/14, UNIC and UNI.co.pel, ECLI:EU:C:2015:492 [cit. in para 23] Hojnik

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ECJ 23.12.2015, C-333/14, Scotch Whisky Association, ECLI:EU:C:2015:845 [cit. in para 37] ECJ 21.09.2016, C-221/15, Etablissements Fr. Colruyt, ECLI:EU:C:2016:704 [cit. in para 37] ECJ 22.09.2016, C-525/14, Commission v Czech Republic, ECLI:EU:C:2016:714 [cit. in para 27] ECJ 06.10.2015, C-354/14, Capoda, ECLI:EU:C:2015:658 [cit. in para 23] ECJ 19.10.2016, C-148/15, Deutsche Parkinson Vereinigung, ECLI:EU: C:2016:776 [cit. in para 37] ECJ 27.10.2016, C-114/15, Audace, ECLI:EU:C:2016:813 [cit. in para 23] ECJ 18.10.2012, C-385/10, Elenca, ECLI:EU:C:2012:634 [cit. in para 4] ECJ 6.10.2015, C-354/14, Capoda Import-Export, ECLI:EU:C:2015:658 [cit. in para 4] ECJ 19.10.2016 Case C-148/15, Deutsche Parkinson Vereinigung, ECLI:EU: C:2016:776 [cit. in para 4] ECJ 08.06.2017, Case C-296/15, Medisanus v SB Murska Sobota, ECLI:EU: C:2017:431 [cit. in para 4] ECJ 27.04.2017, Case C-672/15, Noria Distribution, ECLI:EU:C:2017:310 [cit. in para 1] ECJ 13.06.2018, Case C-169/17, Asociacio´n Nacional de Productores de Ganado Porcino v Administracio´n del Estado, ECLI:EU:C:2018:440 [cit. in para 4] ECJ 18.06.2019, Case C-591/17, Republic of Austria v Federal Republic of Germany, 18 June 2019, ECLI:EU:C:2019:504 [cit. in para 1, 4, 10] ECJ 03.07.2019, Case C-387/18, Delfarma sp. z o.o. v Prezes Urze˛du Rejestracji Produkto´w Leczniczych, Wyrobo´w Medycznych i Produkto´w Biobo´jczych, ECLI: EU:C:2019:556 [cit. in para 4]

WTO Case Law

WTO dispute BISD 35S/116, Japan – Trade in semi-conductors, 1988 [cit. in para 23] WTO dispute DS44, Japan – Film, 1998 [cit. in para 11] WTO dispute DS26, EC measures concerning meat and meat products – Hormones, 1998 [cit. in para 5] WTO dispute DS34, Turkey – Textiles, 1999 [cit. in para 1, 3] WTO dispute DS155, Argentina – Hides and Leather, 2001 [cit. in para 1, 11 and 19] WTO dispute DS384, United States – Certain Country of Origin Labelling (COOL) Requirements, 2014 [cit. in para 1, 11 and 19]

USA Case Law

Arkansas Electric Co-op. Corp, 461 US 375 (1983) [cit. in para 1] Bendix v. Midwesco, 486 US 888 (1988) [cit. in para 1] Hojnik

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City of Philadelphia v. New Jersey, 437 US 617 (1978) [cit. in para 1] Head v. Board of Examiners, 374 US 424 (1963) [cit. in para 1] Jay Baking Company, 264 US 504 (1924) [cit. in para 1] National League of Cities v. Usery, 426 US 833 (1976) [cit. in para 1] Pike v. Bruce Church, Inc., 397 U.S. 137 (1970) [cit. in para 1] Plumley v. Massachusetts, 155 US 461 (1894) [cit. in para 1] Schmidinger v. City of Chicago, 226 US 578 (1913) [cit. in para 1]

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Eeckhout, P. (1998). Recent case law on free movement of goods: Refining Keck and Mithouard. European Business Law Review, 9, 267–272. Enchelmaier, S. (2003). The awkward selling of a good idea, or: For a traditionalist interpretation of Keck. Yearbook of European Law, 22, 249–321. Enchelmaier, S. (2010). Moped Trailers, Mickelsson & Roos, Gysbrechts: The ECJ’s case law on goods keeps on moving. Yearbook of European Law, 29, 190–223. European Commission. (2010). Free movement of goods, guide to the application of Treaty provisions governing the free movement of goods. Retrieved from http://ec.europa.eu/enterprise/policies/single-market-goods/files/goods/docs/art34-36/new_guide_en.pdf Fenger, N. (2015). To use or not to use – That’s the question, on Article 34 and national rules restricting the use of lawfully marketed products. Retrieved from http://www.jus.uio.no/ifp/ forskning/prosjekter/markedsstaten/arrangementer/2011/free-movement-oslo/speakerspapers/niels-fenger.pdf Fromont, A., & Verdure, C. (2011). La conse´cration du crite`re de l’”acce`s au marche´” en matie`re de libre circulation des marchandises: mythe ou re´alite´?. RTDE, 2011(4), 717–748. Giannino, M. (2013). Standard setting organizations versus free movement of goods: The Fra.bo case, SSRN electronic journal, March 2013. Retrieved from http://ssrn.com/abstract¼2227291 Gormley, L. (1989). Actually or potentially, directly or indirectly? Obstacles to free movement of goods. Yearbook of European Law, 9, 198–200. Gormley, L. (1990). Casenote on Torfaen. CMLRev., 27(1), 141–150. Gormley, L. (1994). Reasoning renounced? The remarkable judgment in Keck & Mithouard. European Business Law Review, 4, 63–67. Gormley, L. (1996). Two years after Keck. Fordham International Law Journal., 19, 866–886. Gormley, L., Nihoul, P., & Van Nieuwenhuyze, E. (2012). What standard after Keck? Free movement provisions and national rules affecting consumer usage or trade access. European Journal of Consumer Law, 2012(2), 193–203. Gormley, L. W. (2002). Competition and free movement: Is the internal market the same as a common market? European Business Law Review, 13(6), 517–522. Gormley, L. W. (2015). Inconsistencies and misconceptions in the free movement of goods. ELRev., 40(6), 925–939. Greaves, R. (2006). A commentary on selected opinions of Advocate General Jacobs. Fordham International Law Journal, 29, 690–715. Green, N., Hartley, T. C., & Usher, J. A. (1991). The legal foundations of the single European market. Oxford: OUP. Hojnik, J. (2012a). Decentralization of the European Union internal market. The Comparative Law Yearbook of International Business, 34, 565–587. Hojnik, J. (2012b). Free movement of goods in a labyrinth: Can buy Irish survive the crises? CMLRev., 49(1), 291–326. Hojnik, J. (2013). De minimis rule within the EU internal market freedoms: Towards a more mature and legitimate market? European Journal of Legal Studies, 6(1), 25–45. Hojnik, J. (2016). The servitization of industry: EU law implications and challenges. Common Market Law Review, 53(6), 1575–1623. Horsley, T. (2012). Unearthing buried treasure: Art. 34 TFEU and the exclusionary rules. ELRev., 37(6), 734–757. Jansson, M. S., & Kalimo, H. (2014). De minimis meets “market access”: Transformations in the substance – and the syntax – of EU free movement law? CMLRev., 51(2), 523–558. Jarvis, M. (2003). Case note on C-325/00, Commission v. Germany. CMLRev., 40, 715–728. Kaczorowska, A. (2004). Gourmet can have his Keck and eat it! ELJ, 10(4), 479–494. Krenn, C. (2012). A missing piece in the horizontal effect “jigsaw”: Horizontal direct effect and the free movement of goods. CMLRev., 49(1), 177–215. Lundqvist, B. (2014). Standardization under EU competition rules and US antitrust laws: The rise and limits of self-regulation. Edward Elgar Publishing.

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Hojnik

Article 35 [Prohibition of Quantitative Restrictions on Exports] (ex-Article 29 TEC) Quantitative restrictions on exports,3 and all measures having equivalent effect,4–11 shall be prohibited between Member States.

Contents 1. 2. 3.

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Quantitative Restrictions on Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Measures Having Equivalent Effect to Quantitative Restrictions on Exports . . . . . . . . . . . . . . 4 3.1. The Groenveld Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3.2. Opportunity for Coherence: Gysbrechts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 List of Cases References

1.

Overview

To assure proper functioning of the internal market not only imports to the other MS needs to be undisturbed, but also exports. Yet, the number of cases before the EU Court of Justice concerning national restrictions of exports is considerably lower in comparison to those concerning import restrictions. The reason for this lies in the fact that MS rarely apply export restrictions as this is normally against their public interest, considering that states usually enhance exports. Article 35 TFEU is therefore relevant mostly in relation to economically and politically sensitive goods (e.g. oil, arts, weapons and live animals). As in relation to Article 34 TFEU, the EU Court has established also in relation to Article 35 TFEU that this provision produces direct effect and that individuals encountering restrictions on export of goods to the other MS may refer to this provision before national authorities.1 Furthermore, as Article 34 TFEU, also Article 35 TFEU prohibits two categories of rules, adopted by the MS—quantitative restrictions and measures having equivalent effect. As explained below, however, the latter are not interpreted in the same way as measures having equivalent effect under Article 34 TFEU.

1 Case 83/78, Pigs Marketing Board v Raymond Redmond (ECJ 29 November 1978) para 66: “It should further be stated in reply to the questions raised by the Resident Magistrate that all the provisions quoted are directly applicable and that as such they confer on individuals rights which the courts of Member States must protect.”

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Springer Nature Switzerland AG 2021 H.-J. Blanke, S. Mangiameli (eds.), Treaty on the Functioning of the European Union – A Commentary, Springer Commentaries on International and European Law, https://doi.org/10.1007/978-3-030-43511-0_36

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2

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2. 3

Quantitative Restrictions on Exports

The concept of quantitative restrictions is interpreted consistently in relation to imports as well as exports (➔ Article 34 TFEU para 3). An important case concerning quantitative restrictions on exports before the EU Court was Delhaize2 concerning a Spanish regulation restricting export quantity of non-bottled vine of Rioja to only 600 hectolitres. Spain argued that the restriction was needed for reasons of protecting geographical origin of wine that requires wine to be bottled in the relevant area; it was, however, disputable that this quantitative restriction was not in force also for domestic sale. The EU Court therefore found that the rule breached Article 35 TFEU. Two other notable cases concerned quantitative restrictions on exports of live animals. In Hedley Lomas,3 the UK restricted export licences for sheep to be slaughtered in Spanish slaughterhouses, whereas in CIWF4 it completely prohibited exportation of calves. Since both quantitative restrictions tried to prevent inhuman treatment of animals, the UK successfully justified them based on Article 36 TFEU (former Article 30 EC).5

3.

4

Chapter 3 Prohibition of Quantitative Restrictions Between Member States

Measures Having Equivalent Effect to Quantitative Restrictions on Exports

In contrast to quantitative restrictions, where the EU Court adopted uniform interpretation of restrictions on imports and exports, the Court’s approach in relation to measures having equivalent effect, with the words of Shuibhne “did not develop along the same trajectory”.6 In its earlier case law the Court still favoured uniform interpretation as evident from Bouhelier, where it found that measures having equivalent effect to quantitative restrictions on exports refer to measures of MS “constituting a direct or indirect, actual or potential obstacle to intra-Community trade”.7 This is in line with its Decision in Dassonville, (➔ Article 34 TFEU para 4–5) nevertheless, two years later in Groenveld, the Court changed its approach towards Article 35 TFEU.

2

Case C-47/90, Delhaize (ECJ 9 June 1992). Case C-5/94, Hedley Lomas (ECJ 23 May 1996). 4 Case C-1/96, Compassion in World Farming (ECJ 19 March 1998). 5 In Case C-424/13, Zuchtvieh-Export GmbH v Stadt Kempten (ECJ 23 April 2015) the EU Court even held that protection for animals under EU law does not stop at the outer borders of the EU and that the requirements relating to watering and feeding intervals and duration of journeys and resting periods also apply to those stages of the transport taking place outside the EU. 6 Shuibhne (2013), p. 195. 7 Case 53/76, Procureur de la République de Besançon v Les Sieurs Bouhelier and others (ECJ 3 February 1977) para 16. 3

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3.1. The Groenveld Test

The central case of the EU Court establishing definition of measures having equivalent effect to quantitative restrictions on export that still applies was Groenveld. It concerned a Dutch regulation prohibiting all producers of meat products to keep horsemeat on stock, while not prohibiting the sales of horsemeat in the country. The ratio of the regulation was to prevent export of products containing horsemeat to the MS that prohibit sales of horsemeat (usually due to considerable age of such meat). EU Court found this regulation not to contradict Article 35 TFEU, thereby explaining that Article 35 TFEU includes measures “which have as their 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.”8 For reasons of frequent referral to this explanation by the EU Court legal theory started to call it “Groenveld test”. It comprises three cumulative criteria: l

l

l

5

6

the object or effect of the measure is the restriction specifically of patterns of exports; the measure gives rise to a difference in treatment between the domestic trade of an MS and its export trade; by virtue of the measure, a particular advantage is provided for national production or for the domestic market of the State in question, at the expense of the trade or production of other MS.9

The EU Court has therefore considerably narrowed its interpretation of Article 35 TFEU in comparison to its earlier Decision in Bouhelier, ruling that it is prohibiting only directly (formally) discriminatory measures having equivalent effect, while permitting indirect (substantive) discrimination that restricts access to the market.10 This approach worked in relation to the national rules determining channels of trade,11 which is mostly relevant in relation to waste. Consequently, in Inter-Huiles12 the EU Court decided that Article 35 TFEU prohibited an MS from

8

Case 15/79, Groenveld (ECJ 8 November 1979) para 7. Since the Dutch regulation in Groenveld did not apply to the goods intended for export only, it did not breach Article 35 TFEU. Cf. Craig and de Burca (2011), p. 650. For a more recent confirmation of the Groenveld case see e.g. Case C108/09, Ker-Optika (ECJ 2 December 2010) para 49. 9 See Case C-205/07, Gysbrechts and Santurel Inter (Opinion of AG Trstenjak of 17 July 2008) para 33. 10 Szydło (2010), claims in this context that inclusion of non-discriminatory measures within the scope of Article 35 TFEU would make the system of fundamental freedoms more transparent and coherent. 11 Cf. Barnard (2013), p. 82. 12 Case 172/82, Inter-Huiles (ECJ 10 March 1983). See also Cases 295/82, Rhône-Alpes Huiles (ECJ 9 February 1984) and C-203/96, Chemische Afvalstoffen Dusseldorp (ECJ 25 June 1998).

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organising on its territory a system for the collection and the disposal of waste oils, which excluded delivery to a disposal, or regenerating undertaking authorised by another MS.13 Outside this line of cases, however, the Court had considerable hardships while determining the ambit of Article 35 TFEU as evident from cases such as Oebel,14 Italo Fenocchio15 and Belgium v Spain (Rioja).16

3.2. Opportunity for Coherence: Gysbrechts

8

9

In 2007, the case of Gysbrechts17 was referred to the EU Court offering a new chance for a more coherent interpretation of Articles 34 and 35 TFEU. Gysbrechts was the business manager of Santurel, a company specialising in the wholesale and retail sale of food supplements. Most of the sales were done over the internet. Gysbrechts was found guilty of offences under the distance-selling provisions of Belgian law, which prohibited requiring a consumer to provide his credit card number before the expiry of the period for withdrawal of seven working days. Gysbrechts and Santurel were found to have required consumers not residing in Belgium to provide the number of their payment card before expiry of the period for withdrawal. They claimed that the seller was not sufficiently protected in cases the consumer refused to pay, particularly in cases of cross-border trade. In her opinion, AG Trstenjak offered three arguments in favour of a more coherent interpretation of Articles 34 and 35 TFEU:18 First, if a product is made solely for the export market, national rules restricting its export could never be prohibited under Article 35 TFEU since no comparative advantage for the domestic market could be shown. Second, she claimed that Articles 34 and 35 TFEU are based on the same principle, i.e. elimination of barriers to trade flows in intraCommunity trade and thirdly, uniform interpretation is justified since the “definition of measures having an equivalent effect to quantitative restrictions on exports remains the only one of the fundamental freedoms in which the Court has persisted in requiring the existence of different treatment in order to find a restriction on that freedom.” The AG derived from the Dassonville formula and proposed to the Court to define measures having an equivalent effect to quantitative restrictions on exports as “any measure of the Member States capable of hindering, directly or indirectly, actually or potentially, intra-Community trade”, but “to exclude from that definition

13

See also Cases C-209/98, Entreprenørforeningens Affalds/Miljøsektion (ECJ 23 May 2000) and 118/86, Openbaar Ministerie v Nertsvoederfabriek Nederland BV (ECJ 6 October 1987). 14 Case 155/80, Sergius Oebel (ECJ 14 July 1981). 15 Case C-412/97, ED Srl v Italo Fenocchio (ECJ 22 June 1999). 16 Case C-388/95, Belgium v Spain (ECJ 16 May 2000). Cf. Gormley (2009), pp. 449–453. 17 Case C-205/07, Gysbrechts (ECJ 16 December 2008). 18 Case C-205/07, Gysbrechts (Opinion of AG Trstenjak of 17 July 2008) para 43–45.

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measures having an effect on exports which is too uncertain and too indirect.”19 For rules concerning selling arrangement Trstenjak proposed to transpose the Keck rules (➔ Article 34 TFEU para 32–36) to the context of Article 35 TFEU, under the condition that it is adapted to the characteristics of exports, thereby also taking into consideration the fact that certain selling arrangements hinder or restrict exit from the market even though they do not discriminate either in law or in fact. These kinds of measures should, according to Trstenjak, fall under Article 35 TFEU.20 Coming to the same result as the AG, the EU Court did not deliberate about her proposal to change interpretation of Article 35 TFEU. The Court accepted that the contested national rule fell within the ambit of Article 35 TFEU although it applied to “all traders active in the national territory”, considering that “its actual effect is none the less greater on goods leaving the market of the exporting Member State than on the marketing of goods in the domestic market.”21 Although some commentators claim that the Court revolutionised the scope of Article 35 TFEU beyond discrimination, it in fact only accepted indirect discrimination within the provision’s ambit. Based on Trstenjak’s arguments the Court could certainly be more ambitious.22 Nevertheless, the Court’s approach has been confirmed in its more recent case law, where the EU Court notes that the prohibition laid down by Article 35 TFEU covers national measures »applicable to all traders active in the national territory whose actual effect is greater on goods leaving the market of the exporting Member State than on the marketing of goods in the domestic market of that Member State”.23

4.

10

11

Conclusion

Development of the EU Court’s case law in the field of Article 35 TFEU proves how two almost identical provision of the Treaty can be interpreted considerably different in practice.24 The Court’s Decision in Gysbrechts proves that it is at this stage not yet ready for a more coherent interpretation of both pillars of free movement of goods, although it is clear that discrimination in Gysbrechts was indeed far less direct than in Groenveld. Perhaps the Court wants to keep broader 19

Case C-205/07, Gysbrechts (Opinion of AG Trstenjak of 17 July 2008) para 53 and 56. Case C-205/07, Gysbrechts (Opinion of AG Trstenjak of 17 July 2008) para 57–65. 21 Case C-205/07, Gysbrechts (ECJ 16 December 2008) para 38–44. 22 For critics see Weatherill (2009), p. 156. See also Tryfonidou (2010), pp. 36–56 and Defossez (2009a, b). 23 Case C-15/15, New Valmar (ECJ 21 June 2016) para 36; Case C-169/17, Asociación Nacional de Productores de Ganado Porcino v Administración del Estado (ECJ 14 June 2018) para 29 and Case C-222/18, VIPA Kereskedelmi (18 September 2019) para 62. 24 Instead of the Court, it was legal theory that offered some argumentation for this different approach. See e.g. Oliver and Enchelmaier (2007), Roth (2004), Dawes (2008, 2009) and Snell and Andenas (2000). 20

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national regulatory autonomy or it might only be awaiting a more appropriate case to move further in this field of free movement of goods.

List of Cases ECJ 03.02.1977, 53/76, Les Sieurs Bouhelier and others, ECR 315 [cit. in para 4] ECJ 29.11.1978, 83/78, Pigs Marketing Board v Raymond Redmond, ECR 2347 [cit. in para 2] ECJ 08.11.1979, 15/79, Groenveld, ECR 3409 [cit. in para 5–7] ECJ 14.07.1981, 155/80, Sergius Oebel, ECR 1993 [cit. in para 7] ECJ 10.03.1983, 172/82, Inter-Huiles, ECR 555 [cit. in para 7] ECJ 09.02.1984, 295/82, Rhône-Alpes Huiles, ECR 575 [cit. in para 7] ECJ 06.10.1987, 118/86, Openbaar Ministerie v Nertsvoederfabriek Nederland BV, ECR 3883 [cit. in para 7] ECJ 09.06.1992, C-47/90, Delhaize, ECR I-3669 [cit. in para 3] ECJ 23.05.1996, C-5/94, Hedley Lomas, ECR I-2553 [cit. in para 3] ECJ 19.03.1998, C-1/96, Compassion in World Farming, ECR I-1251 [cit. in para 3] ECJ 25.06.1998, C-203/96, Chemische Afvalstoffen Dusseldorp, ECR I-4075 [cit. in para 7] ECJ 22.06.1999, C-412/97, ED Srl v Italo Fenocchio, ECR I-3845 [cit. in para 7] ECJ 16.05.2000, C-388/95, Belgium v Spain, ECR I-3123 [cit. in para 7] ECJ 23.05.2000, C-209/98, Entreprenørforeningens Affalds/Miljøsektion, ECR 3743 [cit. in para 7] ECJ 16.12.2008, C-205/07, Lodewijk Gysbrechts and Santurel Inter BVBA, ECR I9947 [cit. in para 8–11] ECJ 02.12.2010, C-108/09, Ker-Optika, ECR I-12213 [cit. in para 5] ECJ 23.04.2015, C-424/13, Zuchtvieh-Export GmbH, ECLI:EU:C:2015:259 [cit. in para 3] ECJ 21.06.2016, Case C-15/15, New Valmar, ECLI:EU:C:2016:464 [cit. in para 11] ECJ 13.06.2018, Case C-169/17, Asociación Nacional de Productores de Ganado Porcino v Administración del Estado, ECLI:EU:C:2018:440 [cit. in para 11] ECJ 18.09.2019, Case C-222/18, VIPA Kereskedelmi és Szolgáltató Kft. v Országos Gyógyszerészeti és Élelmezés-egészségügyi Intézet, ECLI:EU:C:2019:751 [cit. in para 11].

References Barnard, C. (2013). The substantive law of the EU, the four freedoms (4th ed.). Oxford: OUP. Craig, P., & de Burca, G. (2011). EU law, text, cases, and material (5th ed.). Oxford: OUP. Dawes, A. (2008). Importing and exporting poor reasoning: Worrying trends in relation to the case law on the free movement of goods. German Law Journal, 8(8), 761–776. Dawes, A. (2009). A freedom reborn? The new yet unclear cope of Article 29 EC. European Law Review, 34(4), 639–649.

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Defossez, A. (2009a). L’histoire d’une divergence et d’une possible réconciliation: l’article 29 TCE. CDE, 45(3–4), 409–462. Defossez, A. (2009b). Arrêt Gysbrechts: le droit de rétractation du consommateur face au droit communautaire. Revue Européenne de Droit de la Consommation, 2–3, 549–559. Gormley, L. W. (2009). EU law of free movement of goods and customs union. Oxford: OUP. Oliver, P., & Enchelmaier, S. (2007). Free movement of goods: Recent developments in the case law. Common Market Law Review, 44(3), 649–704. Roth, W.-H. (2004). Export of goods and services within the single market: Reflections on the scope of Articles 29 and 49 EC. In T. Tridimas & P. Nebbia (Eds.), European Union law for the twenty-first century: Rethinking the new legal order, Vol. 2: Internal market and free movement community policies (pp. 33–48). Oxford: Hart Publishing. Shuibhne, N. N. (2013). The coherence of EU free movement law, constitutional responsibility and the Court of Justice. Oxford: OUP. Snell, J., & Andenas, M. (2000). How far?, The internal market and restrictions on the free movement of goods and services. International and Comparative Corporation Law Journal, 2, 362–378. Szydło, M. (2010). Export restrictions within the structure of free movement of goods: Reconsideration of an old paradigm. Common Market Law Review, 47(3), 753–789. Tryfonidou, A. (2010). Further steps on the road to convergence among the market freedoms. European Law Review, 35(1), 36–56. Weatherill, S. (2009). Measures of consumer protection as impediments to exports of goods. European Review of Contract Law, 5(2), 149–158.

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Article 36 [Derogations] (ex-Article 30 TEC) 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,3 public policy4 or public security;5 the protection of health and life of humans, animals or plants;6 the protection of national treasures possessing artistic, historic or archaeological value;7 or the protection of industrial and commercial property.8 Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.18–19

Contents 1.

Overview: Protection of Non-economic National Interests and Free Movement of Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Legal Bases for Justification of Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3. Conditions for the Application of Derogations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.1. What Types of Measures Can Be Justified? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.2. Non-harmonisation of the Field . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.3. Prohibition of Arbitrary Discrimination or Disguised Restriction on Trade . . . . . . . 18 3.4. Principle of Proportionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.5. Who Adjudicates on Proportionality: The EU Court or National Courts? . . . . . . . . . 24 3.6. The Burden of Proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 4. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 List of Cases References

1.

Overview: Protection of Non-economic National Interests and Free Movement of Goods

Although national rules in form of quantitative restrictions and measures having equivalent effect hinder the internal market, interests of uniformly regulated market, nevertheless, cannot always automatically override interest pursuit by the national measures. The internal market is in fact just a remedy to achieve EU goals and while the internal market often helps to achieve these goals, it may in certain circumstances produce opposite effects.1 EU law therefore permits national legislation that prima facie restricts free movement of goods from other MS if this “can be justified by a public-interest objective taking precedence over the free

1 E.g. free movement of services may contradict high quality of living goal if it prohibited national rules on consumer protection—see Snell (2002), pp. 170–171; Hojnik (2012b).

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movement of goods”.2 In this respect, scholars as well as the CJEU distinguish between restrictions that are justified based on the TFEU, which may as a matter of principle only serve to justify (formally or directly) discriminatory measures and have been reserved by the MS already at the occasion of drafting the original Treaty. When the EU Court also prohibited those national measures that have not been directly discriminatory, however, it also overtook the role of assessing their justification. That is to say that if a measure is prohibited by the provisions of Articles 34 or 35 TFEU (former Articles 28 and 29 EC) its application by the MS may nevertheless be permitted for two groups of reasons: the first one being determined by Article 36 TFEU (former Article 30 EC); and the second one determined by the so-called rule of reason as set in the case Cassis de Dijon (➔ Article 34 TFEU para 24–27).

2. 2

TFEU contains provisions that give authorisation to the MS to intervene in the field of market rules with the purpose to achieving certain goals important from the perspective of internal regulation of individual MS. Reasons permitting restrictions on imports, exports as well as transit of goods are expressly mentioned in Article 36 TFEU3 and allow the MS to restrict free movement of goods under the condition that the issue or legal field is not regulated by harmonising EU legislation if this is required by reasons of: l l l

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the protection 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.

Public morality derogation gives the MS considerable degree of discretion. Thus in Henn & Darby,4 where obscene material was imported from Holland, the question for the EU Court was whether UK law forbidding those imports could be justified on public morality grounds. The EU Court said it was for each MS “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.” The EU Court held a prohibition on importation was not discriminatory and justification on grounds of morality was not arbitrary discrimination or a disguised restriction on trade between MS, as there was no lawful trade in indecent goods in the UK. On the other hand, in

2

Case C-293/93, Neeltje Houtwipper (ECJ 15 September 1994) para 11. Article 36 TFEU is based upon Article XX GATT that contains a longer list of derogations. Furthermore, additional derogations are provided in Article XI GATT (para. 2). 4 Case 34/79, Henn and Darby (ECJ 14 December 1979) para 16. 3

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Conegate v Commissioners of Customs and Excise5 importation of inflatable rubber dolls from Germany was hindered by the UK authorities. The EU Court repeated the principle from Henn & Darby but found that these items could be lawfully manufactured and marketed freely in the UK subject to a few restrictions. Therefore, Customs & Excise could not rely on public morality to ban them when imported. Public policy is a somewhat vague derogation from Article 34. It derives from the common law system, where it refers to the fundamental benefits of the society. However, the EU Court has interpreted this broad category very strictly. It has thus refused to allow it to include consumer protection: “Whatever interpretation is to be given to the term ‘public policy’, it cannot be extended so as to include considerations of consumer protection.”6 Public policy has only been accepted once by the EU Court. In R v Thompson,7 the importation and exportation of certain types of coins was forbidden under UK law. The export ban was to prevent the melting down of national coins in another MS. The appellants were prosecuted for breaking these laws by exporting British coins, which were minted before 1947 and claimed that the laws infringed Articles 34 and 35 TFEU and could not be justified on the public policy ground in Article 36. The EU Court held that coins, which were currently legal tender, were not goods within the meaning of Articles 34 and 35 but were methods of payment. Whereas the old coins which were no longer legal tender can qualify as goods under Articles 34 and 35. Therefore, the export ban to prevent their destruction was justifiable on the grounds of public policy in Article 36 as it was for each MS to mint its own coinage and protect it from destruction. Public policy has sometimes been referred to jointly with public security, especially when the MS tried to justify restrictions on the free movement of goods by the protesters. As is clear from the Cullet case, the EU Court was not in favour of such a justification.8 In respect of the French law on minimum prices for petrol, the EU Court did not accept that absence of minimum prices would lead to public disturbances and possibly violence. On the other hand, in Campus Oil v Ireland,9 Irish law required importers to purchase 35% of requirements from the Irish state-owned refinery. The EU Court ruled it infringed Article 34; however, Ireland successfully justified the law on grounds of public policy and public security. The EU Court accepted the exceptional importance of petrol products as fundamental to a state’s existence. It may be held that although the EU Court has repeatedly held that Article 36 can only be used to justify non-economic interests, in this case an economic end was also served. As evident from Aime Richardt,10 the

5

Case 121/85, Conegate Ltd v Customs and Excise Commissioners (ECJ 11 March 1986) para 17. Case 177/83, Th. Kohl KG v Ringelhan & Rennett (ECJ 6 November 1984) para 19. 7 Case 7/78, Regina v Thompson, Johnson and Woodiwiss (ECJ 23 November 1978). 8 Case 231/83, Henri Cullet v Centre Leclerc (ECJ 29 January 1985). Advocate General Verloren was of opposing opinion though. 9 Case 72/83, Campus Oil Limited (ECJ 10 July 1984). See also Hojnik (2012a), p. 312. 10 Case C-367/89, Aime Richardt (ECJ 4 October 1991). 6

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public security ground relates to external as well as internal security of the state; however, MS can take certain measures regarding security under Articles 346-348 TFEU. In this respect, AG Jacobs explained in Commission v Greece: “When Article [347 TFEU] speaks of serious internal disturbances affecting the maintenance of law and order, it must in my view be read as envisaging a breakdown of public order on a scale much vaster than the type of civil unrest which might justify recourse to Article 36. What seems to be envisaged is a situation verging on a total collapse of internal security, for otherwise it would be difficult to justify recourse to a sweeping derogation which is capable of authorizing the suspension of all of the ordinary rules governing the common market.”11 The importance of the protection of health and life of humans, animals and plants is the most commonly used justification, to which the MS refer to restrict the free movement of goods from other MS.12 In doing so, the EU Court acknowledged that in the absence of harmonisation the MS are competent to determine the level of health security of its citizens,13 considering various factors such as the climate in the country, a normal diet, etc.14 In addition, it has also pointed out that the protection of the health and life of humans is the most important of all the justifications referred to in Article 36 TFEU,15 while the protection of human health was also mentioned by the EU Court among the mandatory requirements that permit the waiving of the principle of mutual recognition of the goods. Hence, in Criminal Proceedings against Ditlev Bluhme16 a Danish law banned the keeping of bees other than the Laeso Brown Bee on the Danish Island of Laeso to help protect the Laeso Brown Bee from extinction. The EU Court decided that this law could be justified on the ground of protection of life of animals and that it was an appropriate and necessary measure (i.e. it was proportionate).17

11

Case C-120/94 R, Commission v Greece (Opinion of 6 April 1995) para 47. For the relevant case law of the EU Court see also Case 42/82, Commission v France (ECJ 22 March 1983); Case C-17/93, Van der Veldt (ECJ 14 July 1994); Case C-123/00, Christina Bellamy (ECJ 5 April 2001); Case 178/84, Commission v Germany (ECJ 12 March 1987); Case 251/78, Denkavit (ECJ 8 November 1979); Case C-434/04, Ahokainen and Leppik (ECJ 28 September 2006). See also Davies (2004), p. 195 and Commission’s White paper on food safety, COM (1999) 719 final. 13 Appellate Body in EC—Asbestos (para 168) also pointed out: “[W]e note that it is undisputed that WTO Members have the right to determine the level of protection of health that they consider appropriate in a given situation. France has determined, and the Panel accepted, that the chosen level of health protection by France is a ‘halt’ to the spread of asbestos-related health risks. [. . .] Accordingly, it seems to us perfectly legitimate for a Member to seek to halt the spread of a highly risky product while allowing the use of a less risky product in its place.” 14 Case 97/83, CMC Melkunie BV (ECJ 6 June 1984); Case 54/85, Xavier Mirepoix (ECJ 13 March 1986) and Case 94/83, Albert Heijn BV (ECJ 19 September 1984) para 16. 15 Case C-320/93, Lucien Ortscheit GmbH v Eurim-Pharm Arzneimittel GmbH (ECJ 10 November 1994) para 16. 16 Case C-67/97, Ditlev Bluhme (ECJ 3 December 1998). 17 More on this case in Davies P. G. G., 2004, p. 195. 12

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Notwithstanding this, however, the EU Court was distrustful when the MS referred to the protection of health with a view to covertly restrict trade. Although the case law in this area is very extensive, there are certain fundamental principles, which must be respected by the MS. In particular, it is considered that the protection of human health cannot be relied on if the real purpose of the rules is to protect the domestic market, the measures adopted must be proportional, i.e. that they are not more restrictive of the free movement of goods, as is strictly necessary for the protection of human health. In addition, the MS must also submit proof of the fact that there is a serious concern for the health and to carry out serious, thoughtful health policy.18 Hence, in Commission v UK,19 concerning British ban on poultry products from other MS, the UK claimed it was necessary to fight disease, however, the EU Court found that the ban was introduced to protect national market for poultry and not protection of public health. Moreover, in Commission v UK (UHT milk case)20 the UK wanted imported UHT milk to be heat-treated again before being sold in Britain. This would damage imports, as it would involve extra costs and inconvenience. The EU Court decided that a certificate from the home state confirming that the milk had undergone UHT would suffice to protect public health. Can an MS use public health to insist that imports undergo tests even when they have done so in their home country? In Frans-Nederlanse21 the EU Court stated: “in so far as there are uncertainties at the present state of scientific research it is for the Member States, in the absence of harmonisation, to decide what degree of protection of the health and life of humans they intend to assure, having regard however for the requirements of the free movement of goods within the Community.” Sandoz refers to a situation where scientific evidence is still inconclusive.22 The case concerned a Dutch ban on importation of meusli bars to which vitamins had been added. Scientific evidence could not reveal at what level vitamin intake becomes excessive and could be detrimental. The EU Court repeated the FransNederlanse principle and found that the ban here could be justified to protect public health in principle but must be subject to principle of proportionality. In Rewe—Zentralfinanz23 imported apples subjected to phyto-sanitary inspections allegedly on health grounds. In principle, justified under Article 36, however, domestic apples were not subjected to same checks. The EU Court found it was a

18 Case 90/86, Zoni (ECJ 14 July 1988), and Case 118/86, Openbaar Ministerie v. Nertsvoederfabriek (ECJ 6 October 1987). 19 Case 40/82, Commission v UK (ECJ 30 January 1984). 20 Case 124/81, Commission v UK (UHT-Milk) (ECJ 8 February 1983). 21 Case 272/80, Frans-Nederlanse Maatschaapij voor Bioligische Producten (ECJ 17 December 1981). See also C-95/01, Greenham and Abel (ECJ 5 February 2004). 22 Case 174/82, Sandoz (ECJ 14 July 1983). 23 Case 4/75, Rewe-Zentralfinanz eGmbH v Landwirtschaftskammer (ECJ 8 July 1975).

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means of arbitrary discrimination. Moreover, in Commission v Netherlands,24 a Dutch law banned importation of foods to which any of six vitamins or minerals had been added. However, they would grant a derogation if satisfied that the foodstuffs to which micronutrients had been added were not harmful to public health and the addition of the nutrients must meet a real need. The EU Court found this practice was an MEQR but could it be justified on grounds of public health. Although the discretion left to the MS is wide in the case of uncertainties in scientific research an MS still had to comply with the principle of proportionality. A decision to ban imports lawfully made in another Member State had to be based on latest scientific data and Member State had to carry out a detailed risk assessment of likelihood of harm on a case by case basis. Netherlands had failed to produce scientific data on the effects of taking more than daily-recommended intake of the six vitamins and minerals and had failed to assess whether the imports were substitutes for foods in the Dutch diet. The EU Court thus decided the Netherlands had breached EU law and the ban could not be justified on the absence of a real nutritional need. National heritage had been harmed by the numerous wars and general years long neglect of maintenance, as well as by the throngs of tourists who do not only buy souvenirs, but also objects that apply to the national heritage. In the sixties, Italy introduced a law, which in some cases prohibited the export of cultural heritage and in others required the exporter to pay a tax calculated based on the market value of the objects concerned. Italy claimed before the EU Court that items of artistic, historical or ethnographic interest were not goods in the ordinary sense and were therefore not subject to the Treaty provisions on the free movement of goods.25 The EU Court dismissed this argument by ruling that “goods [. . .] must be understood [as] products which can be valued in money and which are capable, as such, of forming the subject of [a] commercial transaction”.26 Consequently, the protection of national heritage cannot be achieved by levying charges on protected objects, as they are considered as charges of equivalent effect to customs duties. Nevertheless, national heritage can be protected through a prohibition on export, as justified by a specific reason provided in Article 36 TFEU. Hence, MS may prevent tourists or other buyers from exporting national heritage, but it is not allowed to make money out of such exports. Because of Council Directive 93/7/EEC on the return of cultural objects unlawfully removed from the territory of a Member State,27 Article 36 TFEU is no longer applicable in this field. Intellectual property rights are a particular challenge for the EU. On the one hand, they are designed to promote innovation, which are of great importance for the EU; on the other hand, their territorial nature means that their enforcement can present an important barrier to cross-border trade. The particular importance of

24

Case C-41/02, Commission v Netherlands (ECJ 2 December 2004). Case 7/68, Commission v Italy (ECJ 10 December 1968). 26 Case 7/68, Commission v Italy (ECJ 10 December 1968) p. 428. 27 See Council Directive 93/7/EEC on the return of cultural objects unlawfully removed from the territory of a Member State, O.J. L 74/74 (1993). 25

Hojnik

Article 36. [Derogations]

793

intellectual property rights is acknowledged by Article 36 TFEU, nevertheless, the task of establishing a balance between free trade and intellectual property was not an easy one.28 Intellectual property rights such as patents, trademarks and copyright offer some exclusive territorial protection to the inventor, musician or author, and thus can conflict with free movement of goods. For many years, the intellectual property rights had been governed solely by national law, although under the influence of various international agreements. Different national rules in this area presented a barrier for the free movement of protected products, as well as for unrestricted competition in the internal market.29 The TFEU does not help to solve this conflict between intellectual property rights and free movement of goods. On the one hand, this is because Article 345 TFEU provides that the Treaties shall in no way prejudice the rules in MS governing the system of property ownership, confirming the first sentence of Article 36 TFEU, which provides for the protection of industrial and commercial property as a derogation from the principles of the free movement of goods.30 This provision therefore upholds the national intellectual property rights and the commentators were initially interpreting Articles 345 and 36 TFEU in the sense that their intention was to ensure the sanctity of property rights of national law. On the other hand, Article 34 TFEU ensures the free movement of goods as a fundamental principle of the internal market and EU law in general. In addition, the second sentence of Article 36 TFEU requires that derogations do not constitute a means of arbitrary discrimination or a disguised restriction on trade. In this context, AG Römer held that the object of Article 345 TFEU “is solely to guarantee in a general manner the freedom of the Member States to organize their own systems of property but not to provide a guarantee that the Community institutions may not in any way intervene in subjective rights of property. The concept of property being extremely wide in the national legal systems, any other argument would result finally in the paralysis of the powers of the Community.”31 In relation to the intellectual property rights, his statement means that such rights may exist and carry out their function, but they cannot be used to override the fundamental principles of the single market, which are uniform and common to all the MS.32 Due to the importance of intellectual property rights, however, the EU must find a compromise, which on the one hand means the installation of the national regimes of protection of intellectual property rights in the system of the internal market and on the other hand the relevant legislation for the establishment of the new regime of intellectual property rights at the EU level. 28

For academic comments see: Tritton et al. (2016), pp. 635 745; Cornish (1996), p. 648; Harris (1976), p. 532; Forrester (2000), p. 513; Rosenberg (1999), p. 224; Wing (1998), pp. 485–494; Dyrberg and Petursson (2002), p. 464; Hays and Hansen (1998), p. 277; Alexander (1999), p. 56; Forman (1999), p. 774; O’Keeffe and Keane (2000), p. 600. 29 Case 24/67, Parke in Davis (ECJ 29 February 1968). 30 For an analysis of this issue, see Akkermans and Ramaekers (2010, 2013). 31 Joined Cases 56/64 and 58/64, Consten and Grundig, AG Römer (27 April 1966). 32 More on this in Lasok (2005), p. 721.

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The EU Court has issued many judgments about the interaction between Article 36 TFEU and intellectual property.33 In doing so, it has firstly set up a rather artificial distinction between the existence and exercise of intellectual property rights, and then developed the key principles of the subject-specific rights and exhaustion. Its case law has clearly developed and build on.34 In the initial decisions of the EU Court, the EU market integration was given priority over the rights of the holders of intellectual property rights. This approach culminated in Hag I and Merck. In its later rulings in cases, such as the Hag II, Silhouette and Davidoff, however, the EU Court became more understanding for the interests of the rights holders. On the other hand, judgments in cases such as Bristol-Myers and Upjohn facilitate parallel imports and opening up the traditionally divided market of medicines for the benefit of consumers. As the EU Court explained in Bauhuis, Article 36 TFEU “constitutes a derogation from the basic rule that all obstacles to the free movement of goods between MS shall be eliminated and must be interpreted strictly.”35 MS therefore cannot enforce measures considered necessary without any control; Article 36 TFEU rule includes an additional sentence, according to which the before mentioned measures may not constitute a means of arbitrary discrimination or a disguised restriction on trade between MS. With some derogations approved in practice (particularly in the field of environmental protection), the Article 36 list is deemed to be exhaustive, meaning, no additional derogations to those expressly enumerated in Article 36 TFEU are permitted and even those need to be interpreted restrictively to protect the importance of Articles 34 and 35 TFEU. 33

See, e.g. Case 78/70, Deutsche Gramophon (ECJ 8 June 1971); Case 15/74, Centrafarm v Sterling Drug (ECJ 31 October 1974); Case 16/74, Centrafarm BV v Winthrop (ECJ 31 October 1974); Case 119/75, Terrapin v Terranova (ECJ 22 June 1976); Case C-206/01, Arsenal Football Club plc v Matthew Reed (ECJ 12 November 2002); Joined Cases 55/80 and 57/80, Musik-Vertrieb membran GmbH and K-tel International v GEMA (ECJ 20 January 1981); Case 187/80, Merck v Stephar (ECJ 14 July 1981); Case 3/78, Centrafarm v American Home Products (ECJ 10 October 1978); Case 102/77, Hoffmann-La Roche v Centrafarm (ECJ 23 May 1978); Joined Cases C-427/ 93, C-429/93 and C-436/93, Bristol Myers-Squibb v Paranova (ECJ 11 July 1996); Case C-379/97, Pharmacia & Upjohn SA v Paranova (ECJ 12 October 1999); Case C-337/95, Parfums Christian Dior v Evora (ECJ 4 November 1997); Case C-143/00, Boehring Ingelheim, Glaxo Welcome (ECJ 23 April 2002); Case C-443/99, Merck, Sharp & Dohme v Paranova (ECJ 23 April 2002); Case C433/00, Aventis Pharma v Kohlpharma (ECJ 19 September 2002); Case C-172/00, Ferring Arzneimittel GmbH v Eurim-Pharm Arzneimittel GmbH (ECJ 10 September 2002), Case C-15/ 01, Paranova Läkemedel AB (ECJ 8 March 2003); Case C-113/01, Paranova Oy (ECJ 8 March 2003); Case C-223/01, AstraZeneca (ECJ 16 October 2003); Case C-251/95, SABEL BV v Puma (ECJ 11 July 1997); Case C-23/01, Robelco v Robeco (ECJ 21 November 2002); Case 192/73, Van Zuylen frères v Hag (ECJ 1 May 1974); Case C-10/89, SA CNL-SUCAL NV v Hag (ECJ 17 October 1990); Case C-9/93, Internationale Heiztechnik v Ideal Standard (ECJ 22 June 1994); Case C-306/ 96, Javico v Ives Saint Laurent (ECJ 28 April 1998); Case C-355/96, Silhouette v Hartlauer (ECJ 16 July 1998); Case C-173/98, Sebago v Unic SA (ECJ 1 July 1999); Joined Cases C-414/99; C416/99, Zino Davidoff SA v Levi Strauss (ECJ 20 November 2001) and C-291/16, Schweppes SA v Red Paralela SL (ECJ 20 December 2017). More on this in Tritton et al. (2016), pp. 635–745. 34 See Barnard (2019), p. 210. 35 Case 46/76, W. J. G. Bauhuis v. Netherlands (ECJ 25 January 1977) para 12.

Hojnik

Article 36. [Derogations]

795

The problem with justifications in Article 36 TFEU is that they are reflecting priorities of the Community in 1957 and although EU competences have since been considerably broadened in the fields such as environmental protection, consumers and culture, these interests have not been included in Article 36 TFEU.36 Consequently, the EU Court has formed a non-exhaustive list of justifications that may justify certain reasonable restrictions to the free movement of goods. This has also been necessary to mitigate consequences of broad interpretation of Article 34 TFEU, particularly before Keck (➔ Article 34 TFEU para 32–38).37 When addressing MS’ arguments in favour of internal market restrictions the EU Court has been concerned with the existence of “mandatory requirements” or “overriding reasons of public interest”.38 The concept of mandatory requirements is a flexible tool for establishing a balance between competitive interests of market integration and market regulation and as complements Article 36 TFEU. This method for justifying measures that partition the internal market had initially been applied precisely in the field of free movement of goods, when the EU Court in Cassis de Dijon39 recognised public health, effective tax control and consumer protection as potential justifications for measures that do not directly discriminate imports.40 In contrast to derogations that are expressly mentioned in the TFEU the concept of mandatory requirements does not mean exhaustively stated justifications, which gave the EU Court an opportunity to gradually recognise additional legitimate justifications for restrictions of the internal market.41 Some of the justifications are of a more general nature, while others being quite specific; all of them, however, present an open category of justifications having various natures, thereby reflecting social, moral and cultural diversity of MS and enforcing a thorough rule of reason in the field of the internal market freedoms.42 Some of the mandatory requirements that may restrict free movement of goods as recognised by the EU Court this far are as follows: effective tax control,43 protection of public health, fairness of

36

Barnard (2001), p. 54. Scott (2002), p. 269. 38 Kelly (1996), p. 17. 39 Case 120/78, Rewe-Zentral AG v. Bundesmonopolverwaltung für Branntwein (Cassis de Dijon) (20 February 1979). 40 The EU Court followed the logics from Cassis de Dijon also in the field of other freedoms—see Torgensen (1999), p. 371. 41 The EU Court derived primarily from other EU policies and from the ECHR—Snell (2002), p. 191. Among the more recent justifications are, e.g. safety of road traffic, social security of workers in the construction industry, the stability of the social care system of the MS and the protection of creditors. 42 The rule expanded from the field of EU competition law to the internal market freedoms and its essence is in defining restrictive measures that are justified in exceptional circumstances for specific reasons determined by the EU Court. 43 Case 120/78, Rewe-Zentral AG v. Bundesmonopolverwaltung für Branntwein (Cassis de Dijon) (20 February 1979). 37

Hojnik

10

11

12

796

13

Chapter 3 Prohibition of Quantitative Restrictions Between Member States

commercial transactions, consumer protection,44 environmental protection,45 protection of working conditions,46 protection of cinematography as a form of culture;47 protection of national or regional socio-cultural characteristics, preservation of media diversity,48 preventing a risk of serious harm to the financial balance of the social security system,49 protection of fundamental rights,50 protection of animal welfare,51 road safety,52 fight against crime,53 etc. Open-ended list of justifiable goals does not, however, mean that any goal of restrictive national measures will be considered legitimate. This is particularly true for goals of economic nature, such as preserving public financial basis, reduction of unemployment or industrial problems of certain sectors.54 Preservation of social peace in relation to the collective bargaining between employers and employees is also considered as an economic goal.55 The puzzle are, however, some quasieconomic objectives that the EU Court may nevertheless consider—in several 44 See, e.g. Case C-244/06, Dynamic Medien Vertriebs GmbH v Avides Media AG (ECJ 14 February 2008); Case 261/81, Walter Rau Lebensmittelwerke v De Smedt PVBA (ECJ 10 November 1982); Case C-315/92, Estée Lauder (ECJ 2 February 1994); Case C-51/94, Commission v Germany (ECJ 26 October 1995); Case 178/84, Commission v Germany (ECJ 12 March 1987); Case 220/81, Timothy Frederick Robertson and others (ECJ 22 June 1982); Case C-205/07, Gysbrechts (ECJ 16 December 2008); Case C-313/94, Graffione v Ditta Fransa (ECJ 26 November 1996). For comments see, e.g. Weatherill (2009), p. 157. For comparison see also US courts’ case law: Schmidinger v. City of Chicago, 226 US 578 (1913); Jay Baking Company v. Bryan, 264 US 504 (1924); Com. v. McArthur, 152 Mass. 522, 25 N. E. 836, and People v. Wagner, 86 Mich. 594, 13 L.R.A. 286, 24 Am. St. Rep. 141, 49 N. W. 609; Plumley v. Massachusetts, 155 US 461 (1894). 45 Case 125/88, H. F. M. Nijman (ECJ 7 November 1989); Case C-400/96, Jean Harpegnies (ECJ 17 September 1998); Case C-473/98, Kemikalieinspektionen v Toolex Alpha AB (ECJ 11 July 2000); Case 240/83, Procureur de la République v ADBHU (ECJ 7 February 1985); Case C-297/ 05, Commission v Netherlands (ECJ 20 September 2007); Case C-463/01, Commission v Germany (ECJ 14 December 2004); Case C-320/03, Commission v Austria (ECJ 15 November 2005); Case 302/86, Commission v Denmark (ECJ 20 September 1988); Case C-389/96, Aher-Waggon (ECJ 14 July 1998). See also Commission Communication, Single Market and Environment, COM (99) 263 final. For academic analysis see Maduro (1997), p. 60; Davies (2004), p. 186; Jans and Vedder (2012); de Sadeleer (2014). 46 Case 155/80, Oebel (ECJ 14 July 1981). 47 Joined Cases 60/84 and 61/84, Cinéthèque (ECJ 11 July 1985). 48 Case C-368/95, Familiapress (ECJ 26 June 1997). 49 Case C-120/95, Nicolas Decker v. Caisse de maladie des employés privés (ECJ 28 April 1998). 50 Case C-112/00, Schmidberger (ECJ 12 June 2003)—for a comment see Agerbeek (2004). 51 Case C-219/07, Nationale Raad van Dierenkwekers en Liefhebbers and Andibel (ECJ 19 June 2008) para 27. 52 Case C-54/05, Commission v Finland (ECJ 15 March 2007). 53 Case C-265/06, Commission v Portugal (ECJ 10 April 2008), para 38. 54 Case 95/81, Commission v Italy (ECJ 9 June 1982), para 27. See also Joined cases 62/81 in 63/ 81, Seco (ECJ 3 February 1982) para 15; and Case C-224/97, Ciola (ECJ 29 April 1999) para 16. See also Hojnik (2012a). 55 Case C-398/95, SETTG (ECJ 5 June 1997) para 23; Case C-265/95, Commission v France (ECJ 9 December 1997).

Hojnik

Article 36. [Derogations]

797

cases concerning health treatment of persons in other MS on the issue of reimbursement of the cost of this treatment, the EU Court considered the maintenance of the national social security system’s financial balance as a justifiable goal to restrict the freedoms.56 Similar to the economic goals the EU Court also had no understanding for administrative justifications, which means that measures whose purpose is to reduce the administrative burden, in particular, or public spending, cannot be justified unless in the absence of these measures burden or spending exceeded reasonable limits.57

3.

Conditions for the Application of Derogations

3.1. What Types of Measures Can Be Justified?

The EU Court in the Cassis de Dijon case introduced the concept of mandatory requirements, it has not, however, explained the relationship between them, and Article 36 TFEU (former Article 30 EC). The question therefore arises, what kind of measures can be justified by Article 36 TFEU (➔ Article 36 TFEU para 3–8) and by the mandatory requirements. Traditionally, the position of the EU Court is that Article 36 TFEU applies only to directly discriminatory measures, while indirectly discriminatory measures must be judged according to the Cassis de Dijon rule. On the other hand, the EU Court has repeatedly ruled that directly discriminatory measures can never be justified on the merits of the rule of reason. This most clearly arises from the case Commission v Ireland,58 related to the Irish request for souvenirs, which were typically Irish, but imported from other MS to bear the designation of origin or the word “foreign”. Therefore, importers of Irish souvenirs were at a disadvantage in comparison to the Irish producers as the Irish rule put an additional burden of marking, but also lowering sale, because the tourists mostly liked original souvenirs. Ireland’s Government has argued that such a measure was necessary for the protection of consumers. However, the EU Court held that the measure was directly discriminatory and could consequently not be justified for the protection of consumers, because it is not listed among the reasons in Article 36 TFEU. Accordingly, in Aragonesa the EU Court explained “the question of imperative requirement [. . .] cannot arise unless the measure in question applies without distinction to both national and imported products”.59 Similarly, the EU Court emphasised in Commission v Belgium that “imperative requirements can indeed be taken into account 56

Case C-120/95, Nicolas Decker v Caisse de maladie des employés privés (ECJ 28 April 1998). Case 104/75, Officier Van Justicitie v de Peijper (ECJ 20 May 1976). More on this in Oliver (2016). 58 Case 113/80, Commission v Ireland (Irish Souvenirs) (ECJ 17 June 1981). 59 Joined Cases C-1/90 and C-176/90, Aragonesa de Publicidad Exterior (ECJ 25 July 1991) para 13. 57

Hojnik

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798

15

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only in the case of measures which apply without distinction to both domestic and imported products.”60 This means that indirectly discriminatory measures benefit from more favourable treatment, since the mandatory requirements apply only to them. It is practically very important, as the list of mandatory requirements is much broader than the values from Article 36 TFEU, while at the same time being of open nature, so the EU Court, in practice, accepted the majority of the mandatory requirements expressed by the MS as a justification for national measures, if only they were not of economic or administrative nature. However, contemporary legal theory states a number of reasonable arguments for the position that the before mentioned distinction for application of the two types of justifications is not reasonable and that mandatory requirements should be interpreted as part of Article 36 TFEU, so both types of justifications could be used for all types of restrictions to free movement of goods.61 The distinction was, at least partly, abandoned by the EU Court itself saying that when the action concerns the domestic as well as imported goods, but has clear discriminatory effects on imports a court may judge its justification also based on Article 36 TFEU. It follows that Article 36 TFEU applies also to indirectly discriminatory measures. This makes sense, because direct discrimination presents a more serious obstacle to the free movement of goods than indirect discrimination, so the latter should be allowed to refer to all the justifications that are available for justifying directly discriminatory restrictions.62 More challenging is the question of whether it is possible to apply mandatory requirements to justify directly discriminatory measures. Although the EU Court (at least explicitly) does not accept this option, Oliver claims, that this approach is unnecessarily strict, because even in cases of necessity it prevents directly discriminatory measures to be justified by, e.g. the protection of consumers and the protection of the environment (while on the other hand, these measures can be justified by the protection of plants). In his opinion, consumer protection and the protection of the environment are not mentioned in Article 36 TFEU, because in 1957 they have not yet been considered as important as today—although it is fair to say that since 1957, MS have had a range of opportunities to supplement Article 36 TFEU, but have not done it.63 Nevertheless, as the existence of a legitimate aim of the measure itself is not sufficient for justification, but it must at the same time also be proportionate, it is hard to understand why in the relevant cases, mandatory requirements could not even justify quantitative restrictions.64 Although the EU 60

Case C-2/90, Commission v Belgium (ECJ 9 July 1992) para 34. Oliver (2010), p. 239; Barnard (2001), p. 54; Weiler (1999), p. 366. 62 EU Court has, e.g. recognised the protection of intellectual property rights that is a legitimate goal from Article 36 TFEU as a mandatory requirement in the field of free movement of services— Case 62/79, Coditel (ECJ 18 March 1980) para 15; Case C-288/89, Mediawet I (ECJ 25 July 1991) para 14. 63 For critics, see Lee (2008), p. 132. 64 Oliver (2010), pp. 311–312. 61

Hojnik

Article 36. [Derogations]

799

Court has made some steps in this direction,65 AG Bot stated in Essent Belgium that it is necessary “to clarify the situation by giving formal recognition to the possibility of relying on environmental protection as a justification for measures which impede the free movement of goods, even if they are discriminatory.”66 Bot found a justification for this statement in “the principle of integration, according to which environmental objectives, the transverse and fundamental nature of which have been noted by the EU Court, should be taken into account in the definition and implementation of European Union policies.”67 Nevertheless, the EU Court made its ruling based on environmental protection as a part of public health protection, which is among the public interest grounds listed in Article 36 TFEU.68 The existence of a reason referred to in Article 36 TFEU, or from the list of mandatory requirements is not sufficient to justify a national measure restricting cross-border trade, but other conditions must as well be satisfied. These conditions apply indistinctly for Article 36 TFEU justifications as well as mandatory requirements. These conditions are discussed below.

3.2. Non-harmonisation of the Field

The first of these conditions is that the references to the provisions of Article 36 TFEU and mandatory requirements occur only in the case when there are no specific EU legal acts in the concerned field. In this respect already in 1976 in Simmenthal,69 which concerned the question whether the systematic veterinary checks on meat imported into Italy from other MS are in accordance with Articles 34 and 36 TFEU, the EU Court found that because EU directives harmonised health 65

The first step was the so-called Walloon waste case, which concerned the Belgian legislation prohibiting treatment in Wallonia of waste originating in another MS or in a region other than the Walloon Region. In that case the EU Court held that “the contested measures cannot be regarded as discriminatory”, in view of the “particular nature of waste”, which must be disposed of as close as possible to the place where it is produced according to the principle that environmental damage should, as a matter of priority, be remedied at source—Case C-2/90, Commission v Belgium (ECJ 9 July 1992) para 32. The second step was taken in PreussenElektra (Case C-379/98, PreussenElektra, ECJ 13 March 2001) that concerned the obligation on electricity suppliers to purchase electricity produced from renewable energy sources at minimum prices. This measure clearly favoured national producers of green electricity, from which traders were obliged to obtain their supplies, the EU Court, without examining whether the measure was directly discriminatory, held that it was justified by its environmental objectives since it contributed to the reduction of greenhouse gas emissions, by its objective of protecting the health and life of humans, animals and plants, and by the particular features of electricity. See also Scott (2002), p. 273. 66 Joined Cases C-204/12 to C-208/12, Essent Belgium (Opinion of AG Bot of 8 May 2013) para 92. 67 Joined Cases C-204/12 to C-208/12, Essent Belgium (Opinion of AG Bot of 8 May 2013) para 97, footnote omitted. 68 Joined Cases C-204/12 to C-208/12, Essent Belgium (ECJ 11 September 2014) para 93. See also Case C-573/12, Ålands vindkraft AB v Energimyndigheten (ECJ 1 July 2014) para 77–82. 69 Case 35/76, Simmenthal (ECJ 15 December 1976).

Hojnik

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Chapter 3 Prohibition of Quantitative Restrictions Between Member States

checks in the country of export, import inspections are not systematically needed and are therefore no longer justified under Article 36 TFEU. In Denkavit the EU Court defined this rule by stating that where “Community directives provide for the harmonization of the measures necessary to ensure the protection of animal and human health and establish Community procedures to check that they are observed, recourse to Article 36 is no longer justified and the appropriate checks must be carried out and the measures of protection adopted within the framework outlined by the harmonizing directive.”70 However, the existence of a directive does not necessarily give any guarantee for the protection of a thorough and urgent interest and therefore does not preclude the application of Article 36 TFEU. In very exceptional cases, this applies even for regulations.71 It is therefore necessary to look at the text of each separate directive or regulation and to assess its scope.72

3.3. Prohibition of Arbitrary Discrimination or Disguised Restriction on Trade

18

19

A further condition for the justification of a restrictive measure is set by Article 36 TFEU itself, namely, in its second sentence, which states that a restrictive national measure that is otherwise lawful exception to Articles 34 and 35 TFEU, shall not constitute a means of arbitrary discrimination or a disguised restriction of trade between MS.73 The two concepts are interrelated and are therefore analysed together.74 The purpose of Article 36 TFEU is not to reserve individual fields in the national jurisdiction, but to permit the MS only to hinder free movement of goods to the extent that is strictly necessary to achieve the objectives in public interest.75,76 In this respect, Public health was in particular often used to justify disguised restrictions on trade. One example is the famous turkeys’ case. A short time before Christmas in 1981, the United Kingdom introduced a policy of slaughter, which was supposed to remove the flock that were infected by Newcastle disease. Before that, UK was using a vaccination policy that the other MS continued to apply. In addition to this change in policy, the United Kingdom also introduced a ban on imports of poultry and eggs from other MS (except Denmark and Ireland) to protect 70

Case 5/77, Denkavit (ECJ 5 October 1977) para 35. This rule has been repeated in several subsequent cases—e.g. C-473/98, Kemikalieinspektionen v. Toolex Alpha AB (ECJ 11 July 2000) para 25. See also Case C-5/94, Hedley Lomas (ECJ 23 May 1996) para 18. 71 See the Commission’s answer to the Written Question No. 468/80, O. J. C 302/3 (1980), on German ban on the planting of hemp for commercial purposes. 72 Case 4/75, Rewe-Zentralfinanz eGmbH v. Landwirtschaftskammer (ECJ 8 July 1975). 73 This condition has been transferred into Article 36 TFEU from Article XX GATT. 74 In US—Gasoline (1996, p. 25) the WTO Appellate Body emphasised that: “‘Arbitrary discrimination’, ‘unjustifiable discrimination’ and ‘disguised restriction’ on international trade may, accordingly, be read side-by-side; they impart meaning to one another.” 75 Case 153/78, Commission v Germany (ECJ 12 July 1979). 76 Case 34/79, Henn and Darby (ECJ 14 December 1979).

Hojnik

Article 36. [Derogations]

801

animal health—the authorities stated that this was necessary to protect British animals susceptible to infection from imported animals. Although there were medical arguments, the EU Court found a different situation: it found that the large increase in imports of turkeys in Britain occurred, particularly from France, prompting British breeders of turkeys to lobby with the Government to adopt safeguard measures.77 This measure was deliberately set out to prevent the importation of Turkey from France at Christmas time.78 Since the British Government has not been consulted on the action by the Commission and did not submit a reasoned scientific evidence for its action, the EU Court ruled that “the second sentence of Article 36 is designed to prevent restrictions on trade mentioned in the first sentence of that article from being diverted from their proper purpose and used in such a way as either to create discrimination in respect of goods originating in other MS or indirectly to protect certain national products.” The court also found that “the real aim of health measures adopted by a Member State is to block, for commercial and economic reasons, imports from other MS”. It was therefore found to “constitute a disguised restriction within the meaning of the second sentence of Article 36.”79 The prohibition of a disguised restriction on trade is therefore bound with the request of good faith.80

3.4. Principle of Proportionality

In addition to the requirement that restrictive national measures may only aim for those purposes they are proclaiming, the EU Court requires that they must also be proportionate.81,82 In Fromançais, the EU Court made the most often quoted definition of proportionality in EU law: “In order to establish whether a provision of Community 77

Case 40/82, Commission v UK (ECJ 31 January 1984) para 22. Case 40/82, Commission v UK (ECJ 31 January 1984) para 37. 79 Case 40/82, summary. Barnard further explains that after this judgment, French turkey breeders sued British Government and were awarded 3.5 million GBP in out-of-court settlement—Barnard (2019), p. 79. 80 Request of good faith also derives from case law of the WTO Appellate Body. In US—Shrimp (para. 158) it was decided: “The chapeau of Article XX is, in fact, but one expression of the principle of good faith. This principle, at once a general principle of law and a general principle of international law, controls the exercise of rights by states. One application of this general principle, the application widely known as the doctrine of abus de droit, prohibits the abusive exercise of a state’s rights and enjoins that whenever the assertion of a right impinges on the field covered by [a] treaty obligation, it must be exercised bona fide, that is to say, reasonably. An abusive exercise by a Member of its own treaty right thus results in a breach of the treaty rights of the other Members and, as well, a violation of the treaty obligation of the Member so acting. Having said this, our task here is to interpret the language of the chapeau, seeking additional interpretative guidance, as appropriate, from the general principles of international law.” 81 Case 155/82, Commission v Belgium (ECJ 2 March 1983). 82 Tridimas (2007), p. 78. 78

Hojnik

20

802

21

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law is consonant with the principle of proportionality it is necessary to establish, in the first place, whether the means it employs to achieve its aim correspond to the importance of the aim and, in the second place, whether they are necessary for its achievement.”83 In the context of the freedoms of the internal market, the proportionality functions as a limitation of the competence of MS in the exercise of legitimate objectives such as the protection of the health and consumer protection. Consequently, a national measure, which is prima facie in breach of Article 34 or 35 TFEU, is considered proportionate, if not excessively restrictive for the functioning of the internal market in comparison with the importance of the objective its pursues and if it is necessary to achieve the objective of the measure.84 In this respect, the EU Court assesses the existence of less restrictive alternatives and potential excessiveness of the restrictive measure, while requiring that if an MS has a choice between several measures with which it is possible to achieve the same objective, it must choose the one that restricts the movement of goods less extensively. As such, the proportionality means to search for the balance between the values of the national rules and the interests of free trade of the EU and is closely associated with the concept of economic freedom.85 In Campus Oil the EU Court explained its approach in the following sense: “Article 36, as an exception to a fundamental principle of the Treaty, must be interpreted in such a way that its scope is not extended any further than is necessary for the protection of the interests which it is intended to secure and the measures taken pursuant to that article must not create obstacles to imports which are disproportionate to those objectives. Measures adopted on the basis of Article 36 can therefore be justified only if they are such as to serve the interest which that article protects and if they do not restrict intra-Community trade more than is absolutely necessary.”86 Thus, national bans on the sale of certain products are normally considered disproportionate.87 The EU Court clarified that it would be possible to protect consumers “by means which do not prevent the importation of products which have been lawfully manufactured and marketed in other MS and, in particular, ‘by the compulsory affixing of suitable labels giving the nature of the product sold’.”88

83

Case 66/82, Fromançais (ECJ 23 February 1983) para 8. See Case C-293/94, Brandsma (ECJ 27 June 1996), Case C-6/98, ARD (ECJ 28 October 1999); Case C-76/90, Säger (ECJ 25 July 1991); Case C-355/98, Commission v Belgium (ECJ 9 March 2000) and Case 155/82, Commission v Belgium (ECJ 2 March 1983). See also Case EC—Asbestos, where the WTO Appellate Body held a measure to be necessary in respect of Article XX(b) GATT: “if an alternative measure which [a Member] could reasonably be expected to employ and which is not inconsistent with other GATT provisions is [not] available to it.” 85 Maduro (1998), p. 53. 86 Case 72/83, Campus Oil Limited (ECJ 10 July 1984) para 37. 87 See Case 178/84, Commission v Germany (ECJ 12 March 1987). 88 Case 178/84, Commission v Germany (ECJ 12 March 1987) para 35. 84

Hojnik

Article 36. [Derogations]

803

The marks on the products are generally a popular solution for the EU Court on a number of issues concerning proportionality. Thus, in the case Rau89 the EU Court accepted in principle that the legislation, which prevents the replacement of butter for margarine, is justifiable, but then decided that the requirement of a certain type of packaging “considerably exceeds the requirements of the object in view”. Consumers may “in fact be protected just as effectively by other measures, for example by rules on labelling, which hinder the free movement of goods less.”90 It follows from the foregoing that the principle of proportionality has been more controversial than the legitimate reasons, since it is possible to doubt that the EU Court even carried out a serious assessment at the level of legitimate entitlements91—it has never decided that certain non-economic cause, which was not purely administrative in nature, could not be used as a justification for indirectly discriminatory measures. Actual control of the EU Court took place in the next stage, i.e. in the assessment of proportionality.92

23

3.5. Who Adjudicates on Proportionality: The EU Court or National Courts?

The fact that based on proportionality test, the rule of an MS that seeks to achieve a legitimate objective will be held invalid if it will be estimated that its effect on the free movement is excessive raises the question whether the proportionality is assessed by the EU Court or national courts. This role is extremely difficult for any court, at practical as well as principle level. English Judge Mustill in a case related to the Sunday trading asked rhetorically: “How could [say] a desire to keep the Sabbath holy be measured against the freetrade economic premises of the common market?” According to him, such balancing processes as foreseen in Cassis de Dijon would be “difficult to the point of impossibility in any but the simplest case, where the balance is to be struck, not between two conflicting trade interests, but between the Community free trade interest on the one hand, and an intelligible and elusive national moral, social or cultural norm on the other.”93 An additional problem of the proportionality assessment by the national courts is also in the fact that the national judges even within the same MS may come to different conclusions.94

89

Case 261/81, Walter Rau Lebensmittelwerke v. De Smedt PVBA (ECJ 10 November 1982). Case 261/81, Walter Rau Lebensmittelwerke v. De Smedt PVBA (ECJ 10 November 1982) para 17. 91 Snell (2002), p. 191. 92 See also WTO Appellate Body’s findings in US—Shrimp (para. 159). 93 W. H. Smith Do-It-All and Payless DIY Ltd v Peterborough City Council, 1990 (2) CMLR 577, para 49 and 50. 94 Snell (2000), pp. 50–51. 90

Hojnik

24

804

25

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EU Court’s practice of preliminary rulings in relation to the question, who is responsible to assess proportionality, is inconsistent. Although, in principle it advocated the view that it is the jurisdiction of the national courts to assess proportionality,95 it has, however, often ruled itself (or at least implied), which restrictions are proportionate and which are not. Obvious example of this is the Danish bottles case96 where the EU Court found the aim of setting the highest possible level of environmental protection as exaggerated.97 In the last few years, however, the EU Court has distanced itself from the assessment of proportionality, leaving it to the national courts. Nevertheless, it still kept opportunity to rule on proportionality through ruling on necessity of national rules.98 In addition, in a number of cases, when the rule was considered justified, the EU Court found the sanctions for its infringement as too high.99 This in fact means assessment of proportionality of national measures.100 Through assessment of the proportionality the EU Court can therefore effectively exercise its vision of the market defending the interests of free trade against other interests represented by the national legislature. This is obvious, especially when comparing its approach to the proportionality of national measures and EU measures; the latter may be found much less rigorous, even when EU acts impede free movement.101

3.6. The Burden of Proof

27

Considering that in the case where an MS is sued for violation of Article 34 TFEU it is for the Commission to prove that infringement,102 it is only logical that in the case where an MS justifies the infringement relying on Article 36 TFEU or on mandatory requirements, the burden of proof is on the State.103 The State also 95 Tridimas finds this to be an appropriate policy, considering that the national courts are better equipped for this assessment while at the same time respecting national autonomy—Tridimas (2007), p. 195. 96 Case 302/86, Commission v Denmark (ECJ 20 September 1988). 97 Hence, the judgment was sharply criticised by environmental law experts—e.g. Krämer (2000), pp. 77–78. 98 See, e.g. case C-368/95, Familiapress (ECJ 26 June 1997), and Case C-124/97, Läärä and others (ECJ 21 September 1999). 99 Case 41/76, Suzanne Criel née Donckerwolcke and Henri Schou (ECJ 15 December 1976) para 36–38; Case 118/75, Lynne Watson and Allessandro Belmann (ECJ 7 July 1976) para 20 and 21. 100 Tridimas (2007), p. 180; Snell (2002), p. 209. 101 See case C-51/93, Meyhui NV v Schott Zwiesel Glaswerke AG (ECJ 9 August 1994)—in respect of the Directive 69/493/EEC on the approximation of the laws of the Member States relating to crystal glass, O.J. L 326/36 (1969). For a commentary, see Snell (2002), p. 214. 102 Case C-160/94, Commission v Spain (ECJ 23 October 1997). 103 Case 227/82, Leendert van Bennekom (ECJ 30 November 1983) para 40; Case 178/84, Commission v Germany (Reinheitsgebot) (ECJ 12 March 1987) para 46. Similar rules are also in force within GATT—see, e.g. WTO panel findings in India—Quantitative Restrictions (1999, para 5.119).

Hojnik

Article 36. [Derogations]

805

holds the burden of proof that the measures taken are proportionate. It is irrelevant which court rules on justification of the measure—the EU Court or national courts.104 In particular, it should be noted that also in cases of application of the precautionary principle, MS need to prove the necessity of such measures.105 In its series of case law on the subject, the EU Court also requires that the MS proves actual risk in the light of the results of international scientific research. MS bear the initial burden of proof that precautionary measures under Article 36 TFEU are necessary; but there is no need to demonstrate a connection between evidence and a clear quantitative risk—namely, it is sufficient that in the field concerned there is scientific uncertainty.106 After the adoption of the measure, the EU institutions decide on its appropriateness. On the issue of the burden of proof, it is also important to take consideration of Regulation (EC) No. 764/2008 on the mutual recognition of products, which defines the procedure, which the public authorities are required to respect when referring to mandatory requirements.107

4.

28

29

Conclusion

The case law of the EU Court related to Article 34 TFEU in conjunction with supremacy and direct effect, acknowledged traders with goods many rights that the national authorities must recognise. In doing so, the EU Court gives Article 34 TFEU a very wide range, especially if one compares it with similar provisions of the GATT and of the US Constitution, and imposed a heavy burden of proof upon the MS when justifying legitimate derogations. Consequently, national courts and 104 Case 251/78, Denkavit (ECJ 8 November 1979); Case C-510/99, Xavier Tridon (ECJ 23 October 2001) para 58. 105 Commission Communication on the precautionary principle, COM(2000) 1 final, p. 8. See also Case 54/85, Ministere public v Xavier Mirepoix (ECJ 13 March 1986) para 16 and 17; Joined Cases C-157/96 and C-180/96, National Farmers’ Union (ECJ 5 May 1998) para 63; Case C-249/ 07, Commission v Netherlands (ECJ 4 December 2008) para 50 and 51; Case C-333/08, Commission v France (ECJ 28 January 2010); Case C-41/02, Commission v Netherlands (ECJ 2 December 2004); Case C-192/01, Commission v Denmark (ECJ 23 September 2003); Case C-24/00, Commission v France (ECJ 5 February 2004) and Case C-446/08, Solgar Vitamin’s France (ECJ 29 April 2010). The so-called SPS Agreement provides in Article 5(7) that: “In cases where relevant scientific evidence is insufficient, a Member may provisionally adopt sanitary or phytosanitary measures on the basis of available pertinent information, including that from the relevant international organizations as well as from sanitary or phytosanitary measures applied by other Members. In such circumstances, Members shall seek to obtain the additional information necessary for a more objective assessment of risk and review the sanitary or phytosanitary measure accordingly within a reasonable period of time.” 106 Commission Staff Working Document, Free Movement of Goods, Guide to the Application of Treaty provisions governing Free Movement of Goods (Articles 28-30 EC), 2nd edition, 2009, p. 40. 107 See particularly Article 6 of the Regulation.

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other authorities must recognise traders the right to free movement of goods in all cases, unless the national authorities prove reasonableness and necessity of the restrictive national measures. With this approach, the EU Court has prompted traders to precourse to the courts as the holders of EU market law—with positive results in some cases, however, it has incited further litigation. The consequences of the EU Court’s case law on Articles 34 to 36 TFEU were of double nature: on the one hand the case law served as the basis for the adaptation of national systems to avoid legal proceedings; towards the end of the 1980s to the present this adjustment was also forced by the Commission’s more frequent use of the lawsuits against MS under Article 258 TFEU (former Article 226 EC).108 On the other hand, a more effective legal system in the implementation of Article 34 TFEU increased pressure of the EU judicial system on the national legislators to harmonise market rules.

List of Cases ECJ 13.07.1966, 56/64 and 58/64, Consten and Grundig, ECR 429 [cit. in para 8] ECJ 29.02.1968, 24/67, Parke in Davis, ECR 81[cit. in para 8] ECJ 10.12.1968, 7/68, Commission v Italy, ECR 423 [cit. in para 7] ECJ 08.06.1971, 78/70, Deutsche Gramophon, ECR 487 [cit. in para 8] ECJ 01.05.1974, 192/73, Van Zuylen frères v Hag, ECR 731 [cit. in para 8] ECJ 31.10.1974, 15/74, Centrafarm v Sterling Drug, ECR 1147 [cit. in para 8] ECJ 31.10.1974, 16/74, Centrafarm v Winthrop, ECR 1183 [cit. in para 8] ECJ 08.07.1975, 4/75, Rewe-Zentralfinanz eGmbH v Landwirtschaftskammer, ECR 843 [cit. in para 6, 17] ECJ 20.05.1976, 104/75, Officier Van Justicitie v de Peijper, ECR 613 [cit. in para 13] ECJ 07.07.1976, 118/75, Lynne Watson and Alessandro Belmann, ECR 1185 [cit. in para 26] ECJ 22.06.1976, 119/75, Terrapin v Terranova, ECR 1039 [cit. in para 8] ECJ 15.12.1976, 35/76, Simmenthal, ECR 1871 [cit. in para 17] ECJ 15.12.1976, 41/76, Suzanne Criel née Donckerwolcke and Henri Schou, ECR 1921 [cit. in para 26] ECJ 25.01.1977, 46/76, W. J. G. Bauhuis v Netherlands, ECR 5 [cit. in para 9] ECJ 05.10.1977, 5/77, Carlo Tedeschi v Denkavit Commerciale, ECR 1555 [cit. in para 17] ECJ 23.05.1978, 102/77, Hoffmann-La Roche v Centrafarm, ECR 1139 [cit. in para 8] ECJ 10.10.1978, 3/78, Centrafarm v American Home Products, ECR 1978, p. 1823 [cit. in para 8]

108

Conant (2007), p. 217.

Hojnik

Article 36. [Derogations]

807

ECJ 20.02.1979, 120/78, Rewe-Zentral AG v. Bundesmonopolverwaltung für Branntwein (Cassis de Dijon), ECR 649 [cit. in para 11,12,14,25] ECJ 12.07.1979, 153/78, Commission v Germany, ECR 2555 [cit. in para 18] ECJ 08.11.1979, 251/78, Denkavit, ECR 3369 [cit. in para 27] ECJ 23.11.1978, 7/78, Regina v Thompson, Johnson and Woodiwiss, ECR 2247 [cit. in para 4] ECJ 14.12.1979, 34/79, Henn and Darby, ECR 3795 [cit. in para 3,18,19] ECJ 18.03.1980, 62/79, Coditel, ECR 881 [cit. in para 15] ECJ 20.01.1981, 55/80 in 57/80, Musik-Vertrieb membran GmbH and K-tel International v. GEMA, ECR 147 [cit. in para 8] ECJ 14.07.1981, 155/80, Oebel, ECR 1993 [cit. in para 12] ECJ 14.07.1981, 187/80, Merck v Stephar, ECR 2063 [cit. in para 8] ECJ 17.12.1981, 272/80, Frans-Nederlanse Maatschaapij voor Bioligische Producten, ECR 3277 [cit. in para 7] ECJ 03.02.1982, 62/81 in 63/81, Seco, ECR 223 [cit. in para 13] ECJ 09.06.1982, 95/81, Commission v Italy, ECR 2187 [cit. in para 13] ECJ 17.06.1981, 113/80, Commission v Ireland (Irish Souvenirs), ECR 139 [cit. in para 14] ECJ 08.02.1983, 124/81, Commission v UK (UHT-Milk), ECR 203 [cit. in para 6] ECJ 22.06.1982, 220/81, Timothy Frederick Robertson and others, ECR 2349 [cit. in para 12] ECJ 10.11.1982, 261/81, Walter Rau Lebensmittelwerke v De Smedt PVBA, ECR 2961 [cit. in para 12, 23] ECJ 31.01.1984, 40/82, Commission v UK, ECR 2793 [cit. in para 19] ECJ 22.03.1983, 42/82, Commission v France, ECR 1013 [cit. in para 6] ECJ 23.02.1983, 66/82, Fromançais, ECR 395 [cit. in para 20] ECJ 02.03.1983, 155/82, Commission v Belgium, ECR 531 [cit. in para 20, 21] ECJ 14.7.1983, 174/82, Sandoz, ECR 2445 [cit. in para 7] ECJ 30.11.1983, 227/82, Leendert van Bennekom, ECR 3883 [cit. in para 27] ECJ 10.07.1984, 72/83, Campus Oil Limited, ECR 2727 [cit. in para 5, 21] ECJ 19.09.1984, 94/83, Albert Heijn BV, ECR 3263 [cit. in para 6] ECJ 06.06.1984, 97/83, CMC Melkunie BV, ECR 2367 [cit. in para 6] ECJ 06.11.1984, 177/83, Th. Kohl KG v Ringelhan & Rennett, ECR 3651 [cit. in para 4] ECJ 29.01.1985, 231/83, Henri Cullet v Centre Leclerc, ECR 305 [cit. in para 5] ECJ 07.02.1985, 240/83, Procureur de la République v ADBHU, ECR 531 [cit. in para 12] ECJ 11.07.1985, 60/84 and 61/84, Cinéthèque, ECR 2605 [cit. in para 12] ECJ 12.03.1987, 178/84, Commission v Germany (Reinheitsgebot), ECR 1227 [cit. in para 12,13,27] ECJ 13.03.1986, 54/85, Ministère Public v Xavier Mirepoix, ECR 1067 [cit. in para 28] ECJ 11.03.1986, 121/85, Conegate Ltd v Customs and Excise Commissioners, ECR 1987, p. 689 [cit. in para 3] ECJ 14.07.1988, 90/86, Zoni, ECR 4285 [cit. in para 6] Hojnik

808

Chapter 3 Prohibition of Quantitative Restrictions Between Member States

ECJ 06.10.1987, 118/86, Openbaar Ministerie v. Nertsvoederfabriek, ECR 3883 [cit. in para 2] ECJ 20.09.1988, 302/86, Commission v Denmark, ECR 1988, p. 4607 [cit. in para 23,25] ECJ 07.11.1989, 125/88, H. F. M. Nijman, ECR 3533 [cit. in para 12] ECJ 17.10.1990, C-10/89, SA CNL-SUCAL NV v Hag, ECR I-3711 [cit. in para 8] ECJ 25.07.1991, C-288/89, Mediawet I, ECR I-4007 [cit. in para 15] ECJ 04.10.1991, Case C-367/89, Aime Richardt, ECR I-4621 [cit. in para 5] ECJ 09.07.1992, C-2/90, Commission v Belgium, ECR I-4431 [cit. in para 14,16] ECJ 25.07.1991, C-1/90 and C-176/90, Aragonesa de Publicidad Exterior, ECR I4151 [cit. in para 14] ECJ 25.07.1991, C-76/90, Säger, ECR I-4221 [cit. in para 21] ECJ 02.02.1994, C-315/92, Estée Lauder, ECR I-317 [cit. in para 12] ECJ 14.07.1994, C-17/93, J. J. J. Van der Veldt, ECR I-3537 [cit. in para 6] ECJ 15.09.1994, C-293/93, Neeltje Houtwipper, ECR I-4249 [cit. in para 1] ECJ 10.11.1994, C-320/93, Lucien Ortscheit GmbH v Eurim-Pharm Arzneimittel GmbH, ECR I-5243 [cit. in para 8] ECJ 09.08.1994, C-51/93, Meyhui NV v Schott Zwiesel Glaswerke AG, ECR I-3879 [cit. in para 26] ECJ 22.06.1994, C-9/93, Internationale Heiztechnik v Ideal Standard, ECR I-2789 [cit. in para 8] ECJ 11.07.1996, C-427/93, C-429/93 and C-436/93, Bristol Myers-Squibb v Paranova, ECR I-3457 [cit. in para 8] ECJ 23.05.1996, C-5/94, Hedley Lomas, ECR I-2553 [cit. in para 17] ECJ 26.10.1995, C-51/94, Commission v Germany, ECR I-3599 [cit. in para 12] ECJ 19.03.1996, C-120/94 R, Commission v Greece, not published in ECR [cit. in para 5] ECJ 23.10.1997, C-160/94, Commission v Spain, ECR I-5851 [cit. in para 27] ECJ 27.06.1996, C-293/94, Brandsma, ECR I-3159 [cit. in para 21] ECJ 26.11.1996, C-313/94, Graffione v Ditta Fransa, ECR I-6039 [cit. in para 12] ECJ 28.04.1998, C-120/95, Nicolas Decker, ECR I-1831 [cit. in para 12,13] ECJ 11.07.1997, C-251/95, SABEL BV v Puma, ECR I-6191 [cit. in para 8] ECJ 09.12.1997, C-265/95, Commission v France, ECR I-6959 [cit. in para 13] ECJ 04.11.1997, C-337/95, Parfums Christian Dior v Evora, ECR I-6013 [cit. in para 8] ECJ 26.06.1997, C-368/95, Familiapress, ECR I-3689 [cit. in para 12,26] ECJ 05.06.1997, C-398/95, SETTG, ECR I-3091 [cit. in para 13] ECJ 28.04.1998, C-306/96, Javico v Ives Saint Laurent, ECR I-1983 [cit. in para 8] ECJ 16.07.1998, C-355/96, Silhouette v Hartlauer, ECR 1998, p. I-4799 [cit. in para 8] ECJ 14.07.1998, C-389/96, Aher-Waggon, ECR I-4473 [cit. in para 12] ECJ 17.09.1998, C-400/96, Jean Harpegnies, ECR I-5121 [cit. in para 12] ECJ 05.05.1998, C-157/96 and C-180/96, National Farmers’ Union, ECR I-2211 [cit. in para 28] ECJ 03.12.1998, C-67/97, Ditlev Bluhme, ECR 8033 [cit. in para 6] Hojnik

Article 36. [Derogations]

809

ECJ 21.09.1999, C-124/97, Läärä and others, ECR I-6067 [cit. in para 26] ECJ 29.04.1999, C-224/97, Ciola, ECR I-2517 [cit. in para 13] ECJ 12.10.1999, C-379/97, Pharmacia & Upjohn SA v Paranova, ECR I-6927 [cit. in para 8] ECJ 28.10.1999, C-6/98, ARD, ECR I-7599 [cit. in para 21] ECJ 01.07.1999, C-173/98, Sebago v Unic SA, ECR I-4103 [cit. in para 16] ECJ 09.03.2000, C-355/98, Commission v Belgium, ECR I-1221 [cit. in para 21] ECJ 13.03.2001, C-379/98, PreussenElektra, ECR I-2099 [cit. in para 16] ECJ 11.07.2000, C-473/98, Kemikalieinspektionen v Toolex Alpha AB, ECR I-5681 [cit. in para 12, 17] ECJ 20.11.2001, C-414/99 and C-416/99, Zino Davidoff SA v Levi Strauss, ECR 2001, p. I-8691 [cit. in para 8] ECJ 23.04.2002, C-443/99, Merck, Sharp & Dohme v Paranova, ECR I-370 [cit. in para 8] ECJ 23.10.2001, C-510/99, Xavier Tridon, ECR 7777 [cit. in para 27] ECJ 05.02.2004, C-24/00, Commission v France, ECR 2004, p. I-1277 [cit. in para 28] ECJ 12.06.2003, C-112/00, Schmidberger, ECR 2003 p. I-5659 [cit. in para 12] ECJ 05.04.2001, C-123/00, Christina Bellamy, ECR I-2795 [cit. in para 6] ECJ 23.04.2002, C-143/00, Boehring Ingelheim, Glaxo Welcome, ECR I-3759 [cit. in para 8] ECJ 10.09.2002, C-172/00, Ferring Arzneimittel GmbH v Eurim-Pharm Arzneimittel GmbH, ECR I-6891 [cit. in para 8] ECJ 19.09.2002, C-433/00, Aventis Pharma v Kohlpharma, ECR I-7761 [cit. in para 8] ECJ 08.03.2003, C-15/01, Paranova Läkemedel AB, ECR I-4175 [cit. in para 8] ECJ 21.11.2002, C-23/01, Robelco v Robeco, ECR 2002, p. I-10913 [cit. in para 8] ECJ 08.03.2003, C-113/01, Paranova Oy, ECR I-4243 [cit. in para 8] ECJ 23.09.2003, C-192/01, Commission v Denmark, ECR I-9693 [cit. in para 28] ECJ 12.11.2002, C-206/01, Arsenal Football Club plc v Matthew Reed, ECR I10273 [cit. in para 8] ECJ 16.10.2003, C-223/01, AstraZeneca, ECR I-11809 [cit. in para 8] ECJ 05.02.2004, C-95/01, Greenham and Abel, ECR I-1333 [cit. in para 7] ECJ 14.12.2004, C-463/01, Commission v Germany, ECR I-11705 [cit. in para 12] ECJ 02.12.2004, C-41/02, Commission v Netherlands, ECR I-11375 [cit. in para 28] ECJ 15.11.2005, C-320/03, Commission v Austria, ECR I-9871 [cit. in para 12] ECJ 28.09.2006, C-434/04 Ahokainen and Leppik, ECR I-9171 [cit. in para 6] ECJ 15.03.2007, C-54/05 Commission v Finland, ECR I-2473 [cit. in para 12] ECJ 20.09.2007, C-297/05, Commission v Netherlands, ECR I-7467 [cit. in para 12] ECJ 14.02.2008, C-244/06, Dynamic Medien Vertriebs GmbH v Avides Media AG, ECR I-505 [cit. in para 12] ECJ 10.04.2008, C-265/06, Commission v Portugal, ECR I-2245 [cit. in para 12]

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ECJ 16.12.2008, C-205/07, Lodewijk Gysbrechts and Santurel Inter BVBA, ECR I9947 [cit. in para 12] ECJ 19.06.2008, C-219/07, Nationale Raad van Dierenkwekers en Liefhebbers and Andibel, ECR I-4475 [cit. in para 12] ECJ 04.12.2008, C-249/07, Commission v Netherlands, ECR I-174 [cit. in para 28] ECJ 28.01.2010, C-333/08, Commission v France, ECR I-757 [cit. in para 28] ECJ 29.04.2010, C-446/08, Solgar Vitamin’s France, ECR I-3973 [cit. in para 28] ECJ 01.07.2014, C-573/12, Ålands vindkraft AB v Energimyndigheten, ECLI:EU: C:2014:2037 [cit. in para 16] ECJ 11.09.2012, C-204-208/12, Essent Belgium, ECLI:EU:C:2014:2192 [cit. in para 16] ECJ 20.12.2017, C-291/16, Schweppes SA v Red Paralela SL, ECLI:EU: C:2017:990 [cit. in para 8]

UK Case Law

UK W. H. Smith Do-It-All and Payless DIY Ltd v Peterborough City Council, 1990 (2) CMLR 577. [cit. in para. 18]

US Case Law

Com. v. McArthur, 152 Mass. 522, 25 N. E. 836 [cit. in para. 12] Jay Baking Company v. Bryan, 264 US 504 (1924) [cit. in para. 12] People v. Wagner, 86 Mich. 594, 13 L.R.A. 286, 24 Am. St. Rep. 141, 49 N. W. 609 [cit. in para. 12] Plumley v. Massachusetts, 155 US 461 (1894). [cit. in para. 12] Schmidinger v. City of Chicago, 226 US 578 (1913) [cit. in para. 12]

WTO Case Law

WTO Appellate Body, DS 2, US—Standards for Reformulated and Conventional Gasoline, 29 April 1996 [cit. in para. 18] WTO panel findings, DS 90, India—Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products, 6 April 1999 [cit. in para. 27] WTO Appellate Body, DS 135, EC—Measures Affecting Asbestos and Products Containing Asbestos, 12 March 2001 [cit. in para. 6, 21] WTO Appellate Body, DS 58, US—Import Prohibition of Certain Shrimp and Shrimp Products, 22 October 2001 [cit. in para. 19, 23]

Hojnik

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References Agerbeek, F. R. (2004). Freedom of expression and free movement in the Brenner Corridor: The Schmidberger case. European Law Review, 29, 255–266. Akkermans, B., & Ramaekers, E. (2010). Article 345 TFEU (ex Article 295 EC), its meanings and interpretations. European Law Journal, 16, 292–314. Akkermans, B., & Ramaekers, E. (2013). Free movement of goods and property law. European Law Journal, 19, 237–266. Alexander, W. (1999). Exhaustion of trade mark rights in the EEA. European Law Review, 24, 56–67. Barnard, C. (2001). Fitting the remaining pieces into the goods and persons jigsaw. European Law Review, 26, 35–59. Barnard, C. (2019). The substantive law of the EU, the four freedoms (6th ed.). Oxford: Oxford University Press. Conant, L. (2007). Judicial politics. In K. E. Jørgensen, M. A. Pollack, & B. Rosamond (Eds.), Handbook of the European Union politics (p. 217). Thousand Oaks: Sage Publications. Cornish, W. R. (1996). Intellectual property: Patents, copyright, trade marks and allied rights. London: Sweet & Maxwell. Davies, P. G. G. (2004). European Union environmental law, an introduction to key selected issues. Thousand Oaks: Ashgate. de Sadeleer, N. (2014). EU environmental law and the internal market. Oxford: Oxford University Press. Dyrberg, P., & Petursson, G. T. (2002). What is consent?, A note on Davidoff and Levi Strauss. European Law Review, 27, 464–471. Forman, J. (1999). The EEA agreement five years on. Common Market Law Review, 36, 751–781. Forrester, I. S. (2000). The repackaging of trade marked pharmaceuticals in Europe: Recent developments. European Intellectual Property Review, 23, 513–516. Harris, B. (1976). The application of Article 36 to intellectual property. European Law Review, 1, 515–534. Hays, T., & Hansen, P. (1998). Silhouette is not the proper case upon which to decide the parallel importation question. European Intellectual Property Review, 21, 277–286. Hojnik, J. (2012a). Free movement of goods in a labyrinth: Can buy Irish survive the crises? Common Market Law Review, 49(1), 291–326. Hojnik, J. (2012b). The EU internal market and national tradition and culture: Any room for market decentralisation? Croatian Yearbook of European Law and Policy, 8, 117–142. Jans, J. H., & Vedder, H. H. B. (2012). European environmental law after Lisbon (4th ed.). Amsterdam: Europa Law Publishing. Kelly, G. (1996). Public policy and general interest exceptions in the jurisprudence of the European Court of justice. European Review of Private Law, 4, 17–40. Krämer, L. (2000). EC environmental law. London: Sweet & Maxwell. Lasok, K. P. E. (2005). Law and institutions of the EU (7th ed.). Oxford: Oxford University Press. Lee, M. (2008). The environmental implications of the Lisbon Treaty. Environmental Law Review, 10(2), 131–138. Maduro, M. P. (1997). Reforming the market or the state? Article 30 and the European Constitution: Economic freedom and political rights. European Law Journal, 3, 55–82. Maduro, M. P. (1998). We the Court: The European Court of justice and the European economic constitution: A critical reading of Article 30 of the EC Treaty. Oxford: Hart Publishing. O’Keeffe, D., & Keane, B. (2000). Annotation of joined cases C-414/99, C-415/99 & C-416/99. Common Market Law Review, 39, 591–607. Oliver, P. (Ed.). (2010). Oliver on free movement of goods in the European Union (5th ed.). Oxford: Hart Publishing. Oliver, P. (2016). When, if ever, can restrictions on free movement be justified on economic grounds? European Law Review, 41(2), 147–175.

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Rosenberg, D., & Van Kerckhove, M. (1999). Upjohn v Paranova, utterly exhausted by a trip too far. European Intellectual Property Review, 22, 223–227. Scott, J. (2002). Mandatory or imperative requirements in the EU and the WTO. In C. Barnard & J. Scott (Eds.), The law of the single European market, unpacking the premises (p. 269). Oxford: Hart Publishing. Snell, J. (2000). True proportionality and free movement of goods and services. European Business Law Review, 11(1), 50–57. Snell, J. (2002). Goods and services in EC law, a study of the relationship between the freedoms. Oxford: Oxford University Press. Torgensen, O.-A. (1999). The limitations of the free movement of goods and the freedom to provide services – In search of a common approach. European Business Law Review, 10, 371–387. Tridimas, T. (2007). The general principles of EU law. Oxford: Oxford University Press. Tritton, G., Davis, R., Roughton, A., & Quintin, T. S. (2016). Intellectual property in Europe. London: Sweet & Maxwell. Weatherill, S. (2009). Measures of consumer protection as impediments to exports of goods. European Review of Contract Law, 5, 149–158. Weiler, J. H. H. (1999). The constitution of the common market place: The free movement of goods. In P. Craig & G. de Burca (Eds.), The evolution of EU law (p. 366). Oxford: Oxford University Press. Wing, M. (1998). Sabel v. Puma – Confusion is King. Journal of Business Law, 1998, 485–494.

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Article 37 [State Monopolies of Commercial Character] (ex-Article 31 TEC) 1. Member States shall adjust7 any State monopolies of a commercial character4–6 so as to ensure that no discrimination9 regarding the conditions under which goods are procured and marketed exists between nationals of Member States. The provisions of this Article shall apply to any body through which a Member State, in law or in fact, either directly or indirectly supervises, determines or appreciably influences imports or exports between Member States. These provisions shall likewise apply to monopolies delegated by the State to others. 2. Member States shall refrain from introducing any new measure which is contrary to the principles laid down in paragraph 1 or which restricts the scope of the articles dealing with the prohibition of customs duties and quantitative restrictions between Member States. 3. If a State monopoly of a commercial character has rules which are designed to make it easier to dispose of agricultural products or obtain for them the best return, steps should be taken in applying the rules contained in this Article to ensure equivalent safeguards for the employment and standard of living of the producers concerned.

Contents 1. 2. 3.

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Definition of the State Monopoly of Commercial Character . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The Conformity of the Exclusive Rights of State Monopolies with the EU Internal Market Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.1. Compliance of the Exclusive Rights with Article 37 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.2. The Relationship Between Articles 37 and 34 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.3. The Relationship Between Articles 37 and 49 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 4. Justifiability of State Monopolies that Restrict Free Movement of Goods . . . . . . . . . . . . . . . . 15 5. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 List of Cases References

1.

Overview

The EU’s economic policy over the past thirty years was considerably marked by the consistent introduction of market rules and the freedom to conduct a business in all economic activities. The main purpose of such a policy was aimed at limiting the influence of the State in the economy, in particular through implementation of

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the liberalisation process and the privatisation of State monopolies.1 In the recent past, many activities were excluded from the application of market rules and competition law under the guise of public interest and have thus acquired a monopoly position. For the ultimate launch of the EU internal market and the successful performance of the European economy on the global market, however, the concept of State monopolies had to be replaced by the concept of liberalisation that is based on the efficient provision of free competition even in those industries that have traditionally been excluded from it. The Spaak report of 1956, which led to the adoption of the Treaty of Rome, highlighted: “A particular problem arises when imports are directly regulated, not by means of quotas, but by the institution of a purchasing monopoly, whether it be for a government agency or for a private grouping which the State authorises to act on its behalf. In those circumstances, the authority which determines the import ceiling and the purchaser itself are one and the same. An automatic formula for increases cannot therefore be applied since there can be no question of making unnecessary purchases obligatory. An important part of the solution is that, by the end of the transitional period, the national purchasing or importing organisations will either have to have disappeared or have adapted to the common market or, if necessary, have been replaced by a common organisation.”2 The first paragraph of Article 37 TFEU (former Article 31 EC) therefore requires MS to adapt national monopolies of commercial character to ensure the elimination of any discrimination between nationals of MS, both as regards the conditions for the purchasing of goods as well as the conditions of their sales.3 Article 37 TFEU is classified among the provisions guaranteeing the free movement of goods. Its fundamental purpose is to prevent MS from using their economic monopolies for protectionist purposes, and thereby the creation of obstacles to the free movement of goods, specifically prohibited by the other provisions of the TFEU.4 Article 37 TFEU therefore constitutes a specific provision aimed at eliminating obstacles to the free movement of goods arising, not from a State measure, but from the conduct of State monopolies.5

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The Definition of the State Monopoly of Commercial Character

Article 37 TFEU refers to state monopolies of commercial character and applies “to any body through which a Member State either directly or indirectly supervises, 1

More on this Szyszczak (2007) and De Lima et al. (2005). Intergovernmental Committee set up by the Messina Conference, Report of the Heads of Delegation to the Ministers for Foreign Affairs, Brussels, 21 April 1956, p. 37. 3 Sauter and Schepel (2009), pp. 131–140; Ugland (2003), p. 159. 4 Jalles (1980), p. 412. 5 Berrod (2004), point 24. Article 37 TFEU is comparable to Article XVII GATT entitled “State Trading Enterprises” that is, however, considerably longer than Article 37 TFEU. 2

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determines or appreciably influences imports or exports between Member States.”6 The EU Court points out that this definition presupposes the existence of two elements—organic and functional.7 In respect of the organic element, Article 37 TFEU requires State-run monopolies of commercial character. This means that each body carries out an economic activity, i.e. the activity of the supply of goods or services on the market.8 The concept of the State monopoly is similar to the concept of an undertaking in competition law, which covers any entity pursuing an economic activity, regardless of its legal status and the way it is financed.9 However, the “State” nature of the monopoly requires a special link with the State. A particular entity may be part of the administration, a public company or a private company, which is granted exclusive or special rights. The main criterion is that a State must have a decisive influence on the activities of that entity. State nature of the monopoly also requires that the entity has its origins in an act of public authority, and that his exclusivity is protected by law. The concept of the State monopoly, therefore, excludes pure economic monopolies, which are subject to the rules of competition law. Finally, the EU Court also confirmed that Article 37 of the TFEU applies only to trade in goods, and not to monopolies in the field of services,10 unless such monopolies can have a direct impact on trade with goods between MS.11 As far as functional element is concerned, Article 37 TFEU applies in situations where the national authorities influence intra-Community trade by means of the abovementioned “bodies” or entities, where such influence may consist “in controlling or supervising, in law or in fact, imports or exports between Member States, or any other type of direct or indirect influence, provided that it is appreciable.”12 On the appreciable impact, it is considered that the State, which has the exclusive right to import and sale of products for 65 per cent of the requirements on

6

Case 59/75, Manghera and others (ECJ 3 February 1976) para 7; and Case 30/87, Bodson (ECJ 4 May 1988) para 11. 7 See Cases C-157/94, Commission v Netherlands, C-158/94, Commission v Italy, C-159/94, Commission v France and C-160/94, Commission v Spain (Opinion of AG Cosmas of 26 November 1996) para 28. 8 See also Ad Article XVII GATT. 9 Case C-41/90, Hoffner and Elser (ECJ 23 April 1991) para 21. 10 Case 155/73, Sacchi (ECJ 30 April 1974) para 10, and Case C-6/01, Anomar and others (ECJ 11 September 2003) para 59. For a comment see Straetmans (2004). 11 Case 271/81, Sociétécoopérative d’amélioration de l’élevage et d’insémination artificielle du Béarn (ECJ 28 June 1983) para 8–13, and Case C-17/94, Gervais and others (ECJ 7 December 1995) para 35 and 37 (monopoly in the field of artificial insemination of animals). For a similar case in Slovenia see Hojnik (2005). Also Ad Article XVII GATT provides: “The term ‘goods’ is limited to products as understood in commercial practice, and is not intended to include the purchase or sale of services.” 12 See Cases C-157/94, Commission v Netherlands, C-158/94, Commission v Italy, C-159/94, Commission v France and C-160/94, Commission v Spain (Opinion of AG Cosmas of 26 November 1996) para 28. Cf. also Case 13/70, Cinzano (ECJ 16 December 1970) para 5; and Case 82/71, SAIL (Opinion of AG Roemer of 23 February 1972).

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the national market, is able to exercise a significant influence on imports of these products from other MS.13

3.

The Conformity of the Exclusive Rights of State Monopolies with the EU Internal Market Principles

3.1. Compliance of the Exclusive Rights with Article 37 TFEU

7

Article 37 TFEU does not require the elimination of State monopolies of commercial character, but only their adjustment, so it will be possible to ensure the elimination of any discrimination between nationals of EU MS on the conditions under which the goods are purchased and sold.14 Because of the provisions of Article 345 TFEU, the MS are not required to remove entities that have exclusive rights, however, the Court of Justice ruled that the obligation of adjustment provided for in Article 37 TFEU may require MS to eliminate certain exclusive rights. Consequently, in the case of Manghera,15 referring to the exclusive right of an Italian monopolist to import tobacco, the EU Court ruled that the exclusive right of importation of products by its very nature involves discrimination which is prohibited by Article 37 TFEU, and that MS are obliged to eliminate such rights, because otherwise complete free movement of goods cannot be guaranteed. Similarly, the EU Court also ruled that the exclusive rights of export are by its very nature contrary to Article 37 TFEU and should be eliminated.16 In the assessment of the conformity of the exclusive rights of the State monopolies, it is therefore necessary to examine whether (and when) a specific exclusive right can be consistent with the provisions of Article 37 TFEU. The Court of Justice ruled on this issue in a number of cases analysed below, from which it follows that the Court has carried out a comprehensive assessment of the individual State monopolies and their exclusive rights, so that it has considered not only the issue of whether the relevant monopoly caused discrimination against goods from other MS, but also whether the monopoly had caused discrimination between domestic manufacturers and traders from other MS.17 In practice, this fact has proved to be very important. If the prohibition laid down in Article 37 TFEU referred only to discrimination between products that would not necessarily require the abolition of the exclusive rights of State monopolies. For 13

Case C-347/88, Commission v Greece (ECJ 13 December 1990) para 41. Case 59/75, Manghera and others (ECJ 3 February 1976) para 5. See also Sauter (2014), pp. 43– 47. 15 Case 59/75, Manghera and others (ECJ 3 February 1976) para 13. 16 Case C-158/94, Commission v Italy (ECJ 23 October 1997). 17 Thus in Case C-347/88, Commission v Greece (ECJ 13 December 1990) para 41–44; the Court ruled that exclusive rights of Greece in respect of importation and selling of the concerned goods present discrimination prohibited under Article 37 TFEU. 14

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monopoly to be in conformity with Article 37 TFEU it would suffice to use identical treatment of domestic and foreign products. On the other hand, the abolition of discrimination between nationals of the MS requires the abolition of exclusive rights, because a legal act, which reserves the right to provide economic services to domestic entities, directly harms entities from other MS regarding the terms and conditions of ordering and selling the goods.18 The CJEU has adopted the latter concept of discrimination and in many cases required the abolition of exclusive rights without adjudicating, whether a monopoly provided equal treatment for domestic and imported goods.19 However, the theoretical discourse in recent years keeps stumble upon a decision of the EU Court, which resigned from the settled case law and took a narrower approach, according to which only discrimination between domestic products and products from other MS is prohibited. In Franzén20 in which the CJEU ruled that the monopoly in question was compatible with the provisions of Article 37 TFEU, as it was estimated that the rules regarding its existence and operation were of the non-discriminatory nature and were in no way making harder importation of goods from other MS.21 Consequently, the Court focused only on assessment of discrimination against goods, but not of discrimination of traders or producers of certain goods from other MS. This approach was often criticised by scholars.22 Considering the enormous case law, which was endorsed by the Grand Chamber of the CJEU, it is prevailing position that Article 37 TFEU not only prohibits discrimination against products from other MS, but above all discrimination against nationals of MS regarding the terms and conditions of ordering and selling the goods. In its rulings in the cases Commission v Netherlands,23 Commission v Italy,24 and Commission v France,25 that were released in 1997, on compliance of State entities’ exclusive rights to import and export of electricity and gas, the EU Court of Justice stated that the existence of the exclusive rights of imports or exports of certain goods in a MS means a discrimination against importers of goods from other MS, which is prohibited by Article 37 TFEU.26 In doing so, the Court added, this stands even if the monopoly provides identical (non-discriminatory) treatment of domestic and imported products. In accordance with the settled case law of the EU Court, therefore the abolition of exclusive rights is required.

18

Quitzow (2001), pp. 36–39. Case 59/75, Manghera and others (ECJ 3 February 1976) para 13. 20 Case C-189/95, Franzén (ECJ 23 October 1997). 21 Kurzer (2001), p. 84; Young and Wallace (2000), p. 113. 22 See e.g. Buendia Sierra (1999), pp. 102–104; Faull and Nikpay (1999), p. 309. 23 Case C-157/94, Commission v Netherlands (ECJ 23 October 1997) para 21–23. 24 Case C-158/94, Commission v Italy (ECJ 23 October 1997) para 22–24. 25 Case C-159/94, Commission v France (ECJ 23 October 1997) para 32–34. 26 Nechvátal et al. (2012), p. 537. 19

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For the definition of infringement of Article 37 TFEU, one or the other form of discrimination will suffice, while discrimination between products is easier to be proven by those traders, who challenge a concrete State monopoly. In relation to discrimination between the products the concept of discrimination referred to in Article 37 TFEU, relates to all the obstacles to free movement of goods. These barriers can have different forms, from customs duties and charges having equivalent effect (Article 30 TFEU) to quantitative restrictions and measures having equivalent effect (Article 34 TFEU) as well as discriminatory internal taxation within the meaning of Article 110 TFEU. Since discrimination covers measures which apply without distinction between domestic and imported products, if it affects free movement of goods, the EU Court of Justice ruled already in 1983 in the French case27 of fixing retail prices of tobacco, that the determination of sales prices by the State monopoly, which is on a different level than that which is determined by manufacturers or importers, is in breach of Article 34 TFEU as well as discrimination which is prohibited by Article 37 TFEU. Similarly, in Commission v Italy,28 the Court of Justice held that the measure involving State monopoly in tobacco industry applied without distinction between domestic and imported products; however, it continued that the measure nevertheless had discriminatory effect within the meaning of Article 37 TFEU. In addition to the determination of sales prices by the public institutions, another common example of discrimination between the products refers to the carrying out of public procurement in a manner that causes the isolation of national markets. The purpose of Article 37 TFEU is therefore to ensure that traders from other MS have the opportunity to offer their products to customers of their choice in the MS where a monopoly exists. On the other hand, this provision guarantees to consumers of the MS with a monopoly to obtain goods from traders in other MS. Article 37 TFEU is therefore not only designed to protect free movement of goods as such, but it is primarily designed to protect the traders who are involved in the movement, and consequently also to protect the interests of the purchasers of individual products.29 In this respect, the meaning of discrimination referred to in Article 37 TFEU differs from discrimination between products, which is prohibited by Articles 30, 34 and 110 TFEU. The EU Court applied this understanding of discrimination in many of its decisions. Thus, in Manghera30 it ruled that the exclusive right of importation of products by its very nature constitutes discrimination against EU exporters and that State-run monopolies must be adapted to the common market in such a way that such special rights are eliminated. The EU Court came to this decision without examining whether the concerned monopoly treated in the same way both domestic

27

Case 90/82, Commission v France (ECJ 21 June 1983) para 27. Case 78/82, Commission v Italy (ECJ 7 June 1983), p. 1955. 29 Case C-189/95, Franzén (Opinion of AG Elmer of 4 March 1997) para 68. 30 Case 59/75, Manghera and others (ECJ 3 February 1976). 28

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and imported products.31 Furthermore, in Commission v Netherlands, it ruled that “free movement is impeded by the very existence of exclusive import rights in a Member State since economic operators in other Member States are thereby deprived of the possibility of offering their products to customers of their choice in the Member State concerned.”32 The approach that assures not only access to products from other MS on the market of the MS concerned, but predominantly provides such access to operators established in other MS, is therefore based on a fundamental criterion, that the economic operators established in other MS have the right to offer their products to customers of their choice in the MS of monopoly, customers in this country, on the other hand, must have the right to request delivery of their choice from entities from other MS. According to this, various types of exclusive rights of supply and distribution of goods reserved to operators in the public sphere are understandably prohibited. In this regard, it should be noted that the EU Court treats exclusive sales right and the licence system in which only those entities that have a specific administrative permission have the right to sell certain products. The authorisation scheme does not mean a monopoly in the economic sense of the word, but “open system” in which any entity which meets the legal conditions, may sale the product in question and also purchase it from suppliers of their choice. Because of these characteristics of the system of permits the EU Court of Justice ruled33 that the licence system, which does not affect the sale of goods from other MS, means “selling arrangement” in the light of the judgment in Keck and Mithouard34 and is consequently outside the range of the TFEU and therefore in the regulatory powers of the MS.

31

Cf. also Case C-347/88, Commission v Greece (ECJ 13 December 1990); Case C-157/94, Commission v Netherlands (ECJ 23 October 1997) para 15; Case C-158/94, Commission v Italy (ECJ 23 October 1997) para 23; and C-159/94, Commission v France (ECJ 23 October 1997) para 33. On the other hand Article XVII GATT provides: “Governmental measures imposed to ensure standards of quality and efficiency in the operation of external trade, or privileges granted for the exploitation of national natural resources but which do not empower the government to exercise control over the trading activities of the enterprise in question, do not constitute ‘exclusive or special privileges’.” Based on this, the panel held in Korea – Various Measures on Beef that “the terms ‘general principle of non-discrimination treatment prescribed in this Agreement’ (Article XVII:1(a)) should be equated with ‘make any such purchases or sales solely in accordance with commercial considerations’ (Article XVII:1(b)). The list of variables that can be used to assess whether a state-trading action is based on commercial consideration (prices, availability etc. . . .) are to be used to facilitate the assessment whether the state-trading enterprise has acted in respect of the general principles of non-discrimination. A conclusion that the principle of nondiscrimination was violated would suffice to prove a violation of Article XVII; similarly, a conclusion that a decision to purchase or buy was not based on ‘commercial considerations’, would also suffice to show a violation of Article XVII.” – Panel Report on Korea – Various Measures on Beef, para 757. 32 Case C-157/94, Commission v Netherlands (ECJ 23 October 1997) para 23. 33 Case C-391/92, Commission v Greece (ECJ 29 June 1995) p. I-1621. 34 Joint Cases C-267/91 and C-268/91, Keck and Mithouard (ECJ 24 November 1993).

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The exclusive right of sale, on the other hand, is a genuine monopoly in the economic sense of the word. It is a closed system, in which a single entity, i.e. a State or State-controlled entity, has authorisation for sale of a particular product. Additionally, the EU Court also levels exclusive sales right and the exclusive right of importation.35 The exclusive right of sale necessarily involves centralising all procurement of the subject matter. The entity, which has the monopoly of the sale of a particular product, awarded with Slovenian regulations, is accordingly not just the only seller of this product in Slovenia, but it is also the only Slovenian purchaser of this product. Manufacturers and wholesalers can indeed turn only to him, to ensure the sale of individual products to customers on the Slovenian market. What is disturbing for the EU Court, is the fact that the national sales-monopolies, as well as import monopolist, alone determines which products will be placed on the market of each MS. The monopolist thus also determines the volume of imports from other MS, the same as the holder of the exclusive import rights.36 It can consequently be concluded (in the words of the EU Court of Justice) that both exclusive import rights as well as exclusive sales rights “directly affect conditions under which goods are marketed only as regards operators or sellers in other Member States.”37 These rights also prevent potential consumers from the individual MS to freely choose the source of supplies from other MS.38 Therefore, not only the exclusive import rights, but also exclusive selling rights are by their very nature contrary to the provisions of Article 37 TFEU. Article 37 TFEU is a fundamental provision concerning the adjustment of State monopolies to the internal market. In addition, the EU law contains other dimensions that can be in conflict with State-run monopolies. The core provisions in this respect are Articles 34 and 49 TFEU.

3.2. The Relationship Between Articles 37 and 34 TFEU

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The EU Court ruled in several cases that when it is determined that exclusive right of the State monopoly contradicts Article 37 TFEU, it no longer needs to assess whether Article 34 TFEU is also breached. The general rule is that considering the more specific nature of Article 37 TFEU, in comparison with Article 34 TFEU, the national measure which is contrary to Article 37 TFEU, is at the same time also in

35

See e.g. Case C-189/95, Franzén (Opinion of AG Elmer of 4 March 1997) para 80–97. See Buendia Sierra (1999), pp. 119–121. Consequently in the Case C-202/88, France v Commission (ECJ 19 March 1991, para 34) the EU Court held that “the existence of exclusive importing and marketing rights deprives traders of the opportunity of having their products purchased by consumers.”Cf. Case C-387/93, Banchero (ECJ 14 December 1995) and Case C189/95, Franzén (Opinion of AG Elmer of 4 March 1997) para 82. 37 Case C-159/94, Commission v France (ECJ 23 October 1997) para 33. 38 Case C-157/94, Commission v Netherlands (ECJ 23 October 1997) para 10, 16 and 17. 36

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contrary to Article 34 TFEU. Article 37 TFEU therefore constitutes a lex specialis in relation to the more general provision of Article 34 TFEU.39 In the case Franzén concerning the Swedish sales monopoly for alcohol the EU Court ruled that “it is necessary to examine the rules relating to the existence and operation of the monopoly with reference to Article 37 [. . .]. On the other hand, the effect on intra-Community trade of the other provisions of the domestic legislation which are separable from the operation of the monopoly although they have a bearing upon it, must be examined with reference to Article [34].”40 This position was supported by the EU Court in Hanner, a case concerning the Swedish monopoly on the sale of medicines, where it has pointed out that the aim of Article 37 TFEU is to eliminate “obstacles to the free movement of goods, save, however, for restrictions on trade which are inherent in the existence of the monopolies.”41 Understanding of the relationship between Articles 34 and 37 TFEU was, however, aggravated by the EU Court in Rosengren42 that referred to the Swedish monopoly in the sale of alcohol. In this case two Advocates-General presented their opinions43 and concluded that the ban on imports and retail monopoly are inextricably linked. In contrast with their position, however, the EU Court has held that it is necessary to examine the Sweden’s provisions pursuant to Article 34 TFEU, and not pursuant to specific provisions on State monopolies.44 In the key paragraphs of the judgment the Court emphasised while “the measure at issue in the main proceedings affects the free movement of goods within the European Community, it does not, as such, govern that monopoly’s exercise of its exclusive right of retail sale of alcoholic beverages on Swedish territory. That measure, which does not, therefore, concern the monopoly’s exercise of its specific function, accordingly cannot be considered to relate to the very existence of that monopoly”.45 The judgment in the case Rosengren surprised many scholars, because it is very restrictive in comparison to the prior case law considering that the Court decided that the specific function assigned to the monopoly consists of the exclusive right of retail sale of alcoholic beverages to consumers and that this exclusive right does not extend to the importation of those beverages. A ban on direct imports of alcoholic beverages by individuals therefore does not govern the monopolist’s

39

Baquero Cruz (2001), p. 98. Case C-189/95, Franzén (ECJ 23 October 1997) para 35–36. Referring to the Case 91/75, Hauptzollamt Göttingen v Miritz (ECJ 17 February 1976) para 5; Case 120/78, Rewe-Zentral (‘Cassis de Dijon’) (ECJ 20 February 1979) para 7; and Case 91/78, Hansen v Hauptzollamt Flensburg (ECJ 13 March 1979) para 9 and 10. 41 Case C-438/02, Krister Hanner (ECJ 31 May 2005) para 35. 42 Case C-170/04, Klas Rosengren and others v Riksåklagaren (ECJ 5 June 2007). 43 Opinion of AG Tizzano of 30 March 2006 and Opinion of AG Mengozzi of 30 November 2006. 44 For a comment see Cramér and Bull (2008), p. 227; Babor et al. (2010), p. 92. 45 Case C-170/04, Klas Rosengren and others v Riksåklagaren (ECJ 5 June 2007) para 21–22. Cf. Case C-186/05, Commission v Sweden (ECJ 4 July 2007). 40

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exclusive rights. As a consequence, the ban does not cover the exercise of its specific function and is thus not related to the actual existence of a monopoly.46 The EU Court of Justice thus expressed the view that only the provisions relating to the methods of the retail set rules on the retail monopoly. With the statement that the purpose of the prohibition of imports did not stipulate the system of selection of goods by a monopolist, its distribution network or organisation of marketing the goods, the EU Court directly contradicted its Decisions in Franzén and Hanner.

3.3. The Relationship Between Articles 37 and 49 TFEU

14

In addition to the provisions on the free movement of goods provisions on freedom of establishment are also important for the functioning of State monopolies. The concept of the establishment of a company is very broad and allows EU citizens to permanently participate in the economic life of an MS other than that from which they originate.47 In this respect, it was adopted that State sales monopoly means a serious obstacle to freedom of establishment, which is guaranteed by Article 49 TFEU. In contrast with a system of permits that allows any entity that meets certain conditions to perform the concerned activity, the exclusive selling right prevents all economic operators from other MS to establish and carry out their activity in the State of the monopoly.48

4.

15

Justifiability of State Monopolies that Restrict Free Movement of Goods

Even if the exclusive right of the State monopoly is characterised as contrary to Article 37 TFEU, it may be justified by specific reasons authorised by the TFEU and the case law of the CJEU. The first question that this raises is the question of the legal basis for the justification of a measure which is contrary to Article 37 TFEU.49 In practice, it was debatable whether the provision of Article 36 TFEU, which is set to justify measures having equivalent effect to quantitative restrictions, may also be used to justify the measures, which are contrary to Article 37 TFEU (➔ Article 36 TFEU para 2–13). While some commentators considered that Article 36 TFEU is limited to potential restrictions of Articles 34 and 35 TFEU and must be interpreted narrowly,50 others were of the opinion that, in respect of the justification of the 46

Johansson (2007). The approach has been confirmed in Case C-198/14, Valev Visnapuu (ECJ 12 November 2015) para 86. 47 Case C-55/94, Gebhard (ECJ 30 November 1995) para 25. 48 Commission’s opinion in Case C-438/02, Krister Hanner (ECJ 31 May 2005) para 111–127. 49 Mathijsen (1972), p. 380. 50 Berrod (2004), para 66 and Mattera (1990), p. 56.

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Article 37. [State Monopolies of Commercial Character]

823

measures there should be no distinction between the obstacles to free movement of goods resulting from a classic State measure, and those resulting from State monopoly activities.51 In its initial case law the EU Court of Justice had ruled in favour of the latter argument, so that a reference to the derogations in Article 36 TFEU was applied when justifying State monopolies.52 However, this approach has changed in 1997 when the Court held: “Since the exclusive import and export rights at issue are therefore contrary to Article 37 of the Treaty, it is unnecessary to consider whether they are contrary to Articles [34 and 36] or, consequently, whether they might possibly be justified under Article 36 of the Treaty. Nevertheless, it is still necessary to verify whether the exclusive rights at issue might be justified under Article [106.2] of the Treaty.”53 This approach was adopted by the Grand Chamber of the EU Court of Justice and it is consequently nowadays clear that the applicable provision for justifications of measures which are contrary to Article 37 TFEU is the second paragraph of Article 106 TFEU, and not Article 36 TFEU.54

5.

16

Conclusion

Article 37 TFEU applies in cases where a measure of an MS awards to a company, an institution or private entity the exclusive right to purchase or sale of goods (not services or capital) and this allows them to control the importation or exportation. TFEU also requires a specific function of the monopoly, so that Article 37 TFEU does not refer to activities that do not have this function. Article 37 TFEU was for a long time considered a very marginal provision for ensuring the free movement of goods, closely tied to Article 34 TFEU, and quite unnecessary if one considered Article 106 TFEU. In the last two decades, particularly after the 1997 judgments regarding the three electric monopolies and in case Franzén, however, this provision is experiencing a peculiar revival.55 On its basis a whole series of national monopolies in important economic sectors of the economy was eliminated. In Rosengren, however, a narrower interpretation of Article 37 TFEU was adopted in comparison to the previous case law and it is therefore expected that 51

Cf. Cases C-157/94, Commission v Netherlands, C-158/94, Commission v Italy, C-159/94, Commission v France and C-160/94, Commission v Spain (Opinion of AG Cosmas of 26 November 1996) and Case C-189/95, Franzén (Opinion of AG Elmer of 4 March 1997). 52 Case 72/83, Campus Oil (ECJ 10 July 1984) para 19; and Case C-347/88, Commission v Greece (ECJ 13 December 1990) para 47–49. 53 Case C-158/94, Commission v Italy (ECJ 23 October 1997) para 33–34; cf. Case C-157/94, Commission v Netherlands (ECJ 23 October 1997) para 24, 25 and 32, and Case C-159/94, Commission v France (ECJ 23 October 1997) para 41, 42 and 49. 54 More on this Biondi and Farley (2011), pp. 277–292. 55 Johnston in Oliver (2010), chapter 12.

Hojnik

17

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this provision will experience a new decline. The current position of the EU Court of Justice is that the specific function of the State monopoly of commercial character is limited by the scope of its exclusive rights. Only the provisions governing the exclusive right of monopoly that are associated with the very existence of a monopoly or which actually govern the operation of the monopoly (e.g. determine methods of sales) fall within the scope of Article 37 TFEU. Provisions that do not meet these criteria, however, must be assessed based on Article 34 TFEU. Thereby, the EU Court of Justice clearly limits the number of national measures that could be included within the scope of Article 37 TFEU. The market operation of public institutes and undertakings must therefore respect the internal market rules, irrespective of the fact that they are non-profit entities governed by public law. Public-law entities are obliged to respect the rules of competition law and State aid and to respect the prohibition of discrimination. Considering that State-run monopolies in the single market are not prohibited ipso jure, but only need to be aligned with the principles of the single market, the process of their adaptation requires assessment of legality of each individual element of the operation of each individual entity in the public sphere. The EU Court has raised only very general criteria, which can and must serve as a guide in the assessment of actors in the public sphere and their entitlements in the market that one way or another exclude or restrict the freedom of economic initiative and other legally protected interests of other operators on the market.

List of Cases ECJ 16.12.1970, 13/70, Cinzano, ECR 1089 [cit. in para 6] ECJ 21.03.1972, 82/71, SAIL, ECR 119 [cit. in para 6] ECJ 30.04.1974, 155/73, Sacchi, ECR 409 [cit. in para 5] ECJ 03.02.1976, 59/75, Manghera and others, ECR 91 [cit. in para 4, 7,10] ECJ 17.02.1976, 91/75, Hauptzollamt Göttingen v Miritz, ECR 217 [cit. in para 12] ECJ 13.03.1979, 91/78, Hansen v Hauptzollamt Flensburg, ECR 935 [cit. in para 12] ECJ 20.02.1979, 120/78, REWE-Zentral (‘Cassis de Dijon’), ECR 649 [cit. in para 12] ECJ 28.06.1983, 271/81, Sociétécoopérative d’amélioration de l’élevage et d’insémination artificielle du Béarn, ECR 2057 [cit. in para 5] ECJ 07.06.1983, 78/82, Commission v Italy, ECR 1955 [cit. in para 9] ECJ 21.06.1983, 90/82, Commission v France, ECR 2011 [cit. in para 9] ECJ 10.07.1984, 72/83, Campus Oil, ECR 2727 [cit. in para 16] ECJ 04.05.1988, 30/87, Bodson, ECR 2479 [cit. in para 4] ECJ 19.03.1991, C-202/88, France v Commission, ECR I-1223 [cit. in para 11] ECJ 13.12.1990, C-347/88, Commission v Greece, ECR I-4747 [cit. in para 6,7,10,16] ECJ 23.04.1991, C-41/90, Hoffner and Elser, ECR I-1979 [cit. in para 5]

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Article 37. [State Monopolies of Commercial Character]

825

ECJ 24.11.1993, C-267/91 and C-268/91, Keck and Mithouard, ECR 1993, p. I-6097. ECJ 29.06.1995, C-391/92, Commission v Greece, ECR I-1621 [cit. in para 11] ECJ 14.12.1995, C-387/93, Banchero, ECR I-4663 [cit. in para 11] ECJ 07.12.1995, C-17/94, Gervais and others, ECR I-4353 [cit. in para 5] ECJ 30.11.1995, C-55/94, Gebhard, ECR I-4164 [cit. in para 14] ECJ 23.10.1997, C-157/94, Commission v Netherlands, ECR I-5699 [cit. in para 4, 6, 8, 10, 11, 15, 16] ECJ 23.10.1997, C-158/94, Commission v Italy, ECR I-5789 [cit. in para 4, 7, 8, 10, 16] ECJ 23.10.1997, C-159/94, Commission v France, ECR I-5815 [cit. in para 4, 8, 10, 11, 16] ECJ 23.10.1997, C-160/94, Commission v Spain, ECR I-5851 [cit. in para 4] ECJ 23.10.1997, C-189/95, Franzén, ECR I-5909 [cit. in para 8, 10, 11, 12, 15] ECJ 11.09.2003, C-6/01, Anomar and others, ECR I-8621 [cit. in para 5] ECJ 31.05.2005, C-438/02, Krister Hanner, ECR I-4551 [cit. in para 12, 14] ECJ 05.06.2007, C-170/04, Klas Rosengren and others v Riksåklagaren, ECR I4071 [cit. in para 13] ECJ 04.07.2007, C-186/05, Commission v Sweden, ECR I-129 [cit. in para 13] ECJ 12.11.2015, Case C-198/14, Valev Visnapuu, ECLI:EU:C:2015:751 [cit. in para 13]

WTO Case Law

WTO dispute DS161, United States v Korea, Korea – Various Measures on Beef, 2000 [cit. in para. 10].

References Babor, T. F., Caetano, R., Casswell, S., Edwards, G., Giesbrecht, N., Graham, K., et al. (2010). Alcohol: No ordinary commodity: Research and public policy. Oxford: OUP. Baquero Cruz, J. (2001). Between competition and free movement: The economic constitutional law of the European Community. Oxford: Hart Publishing. Berrod, F. (2004). Monopoles publics et droit communautaire. Juris - classeur Europe, 2004, fascicule 1510. Biondi, A., & Farley, M. (2011). The relationship between State aid and the single market. In E. Szyszczak (Ed.), Research handbook on European State aid law (pp. 277–292). Edward Elgar Publishing. Buendia Sierra, J.-L. (1999). Exclusive rights and state monopolies under EC law. Oxford: OUP. Cramér, P., & Bull, T. (2008). Swedish studies in European law (Vol. 2). Bloomsbury Publishing. De Lima, P., Ventelou, B., & Hugounenq, R. (2005). Public services and European integration. Public Finance and Management, 5(3), 370. Faull, J., & Nikpay, A. (1999). The EC law of competition. Oxford: OUP.

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Hojnik, J. (2005). The free movement of goods and the Slovenian state monopoly in marketing immunological medicinal products: Implications of the Hanner case. European Journal of Health Law, 12(3), 273–285. Jalles, M. I. (1980). State monopolies of a commercial character (article 37 of the EEC Treaty) and their importance in connection with Portugal’s accession to the European Communities. Georgia Journal of International and Comparative Law, 10(2), 411–448. Johansson, M. (2007). Rosengren – A “Franzén Light”. European Law Reporter, 250–256. Johnston, A. (2010). State monopolies of a commercial character. Oliver on free movement of goods (chapter 12). Oxford: Hart Publishing. Kurzer, P. (2001). Markets and moral regulation: Cultural change in the European Union. Cambridge: CUP. Mathijsen, P. (1972). State aids, state monopolies, and public enterprises in the common market. Law and Contemporary Problems, 37(2), 376–391. Mattera, A. (1990). Le marché unique européen, Ses règles, son fonctionnement. Paris: Jupiter. Nechvátal, I., Pilavachi, P. A., & Kakaras, E. (2012). The role of the European Union in private law relations of organizations operating in the internal electricity or gas market in medium and small size Member States. Energy Policy, 51, 535–543. Quitzow, C. M. (2001). State measures distorting free competition in the EC: A study of the need for a new community policy towards anti-competitive state measures in the EMU perspective. The Hague: Kluwer Law International. Sauter, W. (2014). Public services in EU law. Cambridge: CUP. Sauter, W., & Schepel, H. (2009). State and market in European Union law: The public and private spheres of the internal market before the EU courts. Cambridge: CUP. Straetmans, G. (2004). Case C-6/01, Anomar v. Estado português, Judgment of the Court of 11 September 2003 (Third Chamber), nyr; Case C-243/01, Piergiorgio Gambelli e.a., Judgment of the Court of 6 November 2003 (Full Court), nyr; and C-42/02, Diana Elisabeth Lindman, Judgment of the Court of 13 November 2003 (Fifth chamber), nyr. (Case Law)(Anomar). Common Market Law Review, 41(5), 1409–1429. Szyszczak, E. M. (2007). The regulation of the state in competitive markets in the EU. Oxford: Hart Publishing. Ugland, T. (2003). Adaptation and integration through policy re-categorization. Journal of Public Policy, 23(2), 157–170. Young, A. R., & Wallace, H. (2000). Regulatory politics in the enlarging European Union: Weighing civic and producer interests. Manchester: Manchester University Press.

Hojnik

Title III Agriculture and Fisheries

Article 38 [Common Agriculture and Fisheries Policy] (ex-Article 32 TEC) 1. The Union shall define and implement a common agricultural and fisheries policy.3,4 The internal market shall extend to agriculture, fisheries and trade in agricultural products. “Agricultural products”12–16 means the products of the soil, of stockfarming and of fisheries and products of first-stage processing directly related to these products. References the common agricultural policy or to agriculture, and the use of the term “agricultural”,12 shall be understood as also referring to fisheries,16 having regard to the specific characteristics of this sector.12–25 2. Save as otherwise provided in Article 39 to 44, the rules laid down for the establishment and functioning of the internal market shall apply to agricultural products.6–9 3. The products subject to the provisions of Articles 39–44 are listed in Annex I.26, 13–15 4. The operation and development of the internal market for agricultural products must be accompanied by the establishment of a common agricultural policy.6–9

Contents 1. 2. 3. 4.

5.

6.

7.

8.

#

General Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Evolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Directly Effective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 System Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4.1. Relationship to Other Provisions of the Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4.2. Unity of the Internal Market and Common Agricultural Policy . . . . . . . . . . . . . . . . . . . . 7 4.3. Free Movement of Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.4. Common Commercial Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Objective Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5.1. Priority of Application of Special Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5.2. Forestry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Agricultural Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 6.1. Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 6.2. The Meaning of Article 38.3 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 6.3. Differences Between Article 38.1 and Article 38.3 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . 14 6.4. Fishery Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Extension of the Scope of Annex I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 7.1. Regulation 7 a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 7.2. Cotton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Products Not Included in Annex I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 8.1. The Importance of Article 43 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 8.2. Products Functionally and Economically Related to Products Listed in Annex I . . 21 8.2.1. Agricultural Products Obtained with the Use of Products Not Included in Annex I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Springer Nature Switzerland AG 2021 H.-J. Blanke, S. Mangiameli (eds.), Treaty on the Functioning of the European Union – A Commentary, Springer Commentaries on International and European Law, https://doi.org/10.1007/978-3-030-43511-0_39

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8.2.2. Products Obtained from Basic Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 8.2.3. Substitutes of Products Included in Annex I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 9. Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Annex: List Referred to in Article 38 of the Treaty on the Functioning of the European Union (Annex I to the Treaties) List of Cases References

1. 1

2

Article 38 TFEU establishes the scope of the common market in agriculture and trade in agricultural products and determines the general competences of the EU in this respect. It also defines the general principles of legal order in relation to agriculture. The vast majority of specific provisions of the title on agriculture are contained in Articles 39–44 TFEU. Although Article 38.4 TFEU mentions the “internal market for agricultural products”, the wording of paragraph 1 clearly indicates that this market is not a separate institution but an integral part of the broad, internal market embracing all types of products (➔ para 12–28). Paragraph 4, which refers to EU responsibility for the “operation and development” of the agricultural sector in the internal market, reflects an awareness of the dynamic of its determinants. Under Article 356 TFEU, the functions and competences of the EU concerning agriculture, apart from several exceptions, are continuous and have been granted for an unlimited time. In addition, Article 38 TFEU stipulates that the EU ought to formulate and implement a common agricultural policy, the objective of which is defined in Article 39.1 TFEU (➔ Article 39 TFEU para 16–30). This is a special policy and additional with respect to the other policies laid down in Part 3 of the Treaty.

2. 3

4

General Comments

Evolution

The initial wording of Article 38 TFEU has not changed during over five decades of its effective life. The Lisbon Treaty introduces minor changes in its provisions, adjusting it to the new terminology and numbering of the Treaty, e.g., by replacing the “common market” by the term “internal market”, in reference to Articles 39–44 TFEU. Previously, the provision of Article 38.1 TFEU expressis verbis established the scope of the common agricultural policy and defined agricultural products in terms of basic products, while at present paragraph 1 very clearly articulates the EU competence to define and implement the common agricultural and fisheries policy.

Jurcewicz/Popardowski

Article 38. [Common Agriculture and Fisheries Policy]

3.

831

Directly Effective

Due to the general nature of the provisions of Article 38 TFEU, it is not directly effective.

4.

5

System Context

4.1. Relationship to Other Provisions of the Treaty

In its paragraph 2, Article 38 TFEU stipulates that unless Articles 39–44 TFEU provide otherwise, the general principles laid down by the Treaty shall also apply to agricultural products. This refers to the relationship between the EU internal market and the basic principles, the principle of unity of this market, specifically the principle of free movement of goods, persons, etc. (Articles 26 et seq. TFEU).

6

4.2. Unity of the Internal Market and Common Agricultural Policy

Despite the unlimited scope of the common market under the now ineffective Article 7 TEEC, the inclusion of agriculture within the framework of this market was not as obvious at that time as could be inferred from a literal interpretation of the original wording of Article 38.1 TFEU. Inclusion of the agricultural sector in this market depended on the introduction of a common policy in this sector of the economy. Consequently, the internal market (previously the common market) for agricultural products and the common agricultural policy regulating the functioning of this market are inseparably connected (unity of the market and unity of the policy). In Joined Cases 80-81/77 Ramel,1 the ECJ emphasized the unity of free movement of goods and the common agricultural policy, stating that the “objectives of the freedom of movement of goods and of the Common Agricultural Policy must not be set one against the other nor in order of precedence, but on the contrary combined.” Emphasizing the importance of the free movement of agricultural products the ECJ, in its case law, indicates at the same time that even the absence of a common market organization in individual agricultural sectors may not exclude the application of Articles 28 and 29 TFEU to commercial turnover of products from this sector. The existence of the CAP does not allow a construction of Articles 28 and 29 TFEU whereby the application of free movement of goods concerning agricultural products would depend on the adoption of this measure by the Council, or on the existence within the Union of a common organization for such agricultural

1

Joined Cases 80-81/77, Les Commissionnaires Re´unis (ECJ 20 April 1978) para 21–23.

Jurcewicz/Popardowski

7

832

Title III

Agriculture and Fisheries

products.2 As such, the free movement of goods is an inherent element of the Union market for agricultural products.3

4.3. Free Movement of Persons

8

The principle of free movement of persons also applied to the agricultural sector. The citizens of MS are entitled to exercise their freedom of economic activity under the TFEU, personally or through their companies, in the agricultural or fisheries sector on the territory of other MS, even when it seems that the EU law divides the quotas between individual MS.4 For example, the ECJ ruled that British law, which required owners of fishing vessels or majority shareholders of companies possessing fishing vessels to have a permanent residence in the United Kingdom if such vessels are to be registered as British, breaches the freedom of enterprise under the Treaty.

4.4. Common Commercial Policy

9

Under Article 38.2 TFEU, the principles of common commercial policy defined in Article 206 TFEU also apply to common agricultural policy.5 Consequently, in exercising its own discretion, the EU is bound by the need to achieve a reasonable balance between internal and external interests,6 which, at least in theory, means that the mechanisms of common agricultural policy may breach these provisions.7

5.

Objective Scope

5.1. Priority of Application of Special Provisions

10

Due to its general and introductory nature, Article 38 TFEU touches on a number of issues. Paragraphs 1 and 3 define the types of activity subject to the special 2 Case C-293/02, Jersey Produce Marketing Organisation (ECJ 8 November 2005) para 39–40; Case 68/76, Commission v France “Potatoes” (ECJ 16 March 1977) para 17–21; Case 231/78, Commission v United Kingdom “Potatoes” (ECJ 29 March 1979) para 12–18; Case 288/83, Commission v Ireland (ECJ 11 June 1985) para 23. 3 Jurcewicz and Tomkiewicz (2002), pp. 49–51. 4 See Joined Cases C-46/93 and C-48/93, Brasserie du Peˆcheur (ECJ 5 March 1996). 5 Case 135/79, Gedelfi Großeinkauf GmbH & Co. KG v Hauptzollamt Hambourg-Jonas (ECJ 3 June 1980) para 11–20. 6 Case 112/80, Firma Anton Du¨rbeck v Hauptzollamt Frankfurt am Main-Flughafen (ECJ 5 May 1981) para 35. 7 Case 5/73, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof (ECJ 24 October 1973) para 13–15.

Jurcewicz/Popardowski

Article 38. [Common Agriculture and Fisheries Policy]

833

principles laid down in Title III. Paragraph 2 stipulates that unless Articles 39–44 TFEU provide otherwise, the general principles laid down by the Treaty also apply to agricultural products. This means that the general rule is the priority of application of special provisions pertaining to the establishment of a common agricultural market, including the organizations of individual agricultural markets, over general principles.8 Paragraph 4 on the other hand refers to the establishment and implementation of a common agricultural policy to regulate the operation and development of the market sector governed by Title III. During the initial period, the objective scope of Articles 38–44 TFEU was the subject of numerous discussions and controversies. Article 38.1 TFEU reveals a different approach to the definition of the activity subject to Title III as “agriculture” and “trade in agricultural products.” The Article does not provide a more precise definition of the first of these terms, while at the same time establishing additional rules about the second, in paragraphs 1 and 3. Since Title III of the Treaty imposed a special legal regime on the agricultural sector of the common market, it became necessary to define the scope of the common agricultural policy. This was conducted by using the term “agricultural products” (Articles 38.1 and 38.3 TFEU) (➔ para 13–15), which reflects the fact that initially the common agricultural policy was seen as a tool for introducing the principle of free movement of goods in the agricultural sector (➔ para 7). Consequently, Title III of the Treaty does not mention the issue of free movement of persons, who are or could be the object of such policy. Hence, terms such as “producer” or “organizations engaged in agricultural activity” are not defined.9

5.2. Forestry

The issue whether forestry also belongs to agriculture was initially a subject for discussion, ultimately determined in the affirmative.

6.

11

Agricultural Products

6.1. Definition

The scope of the provisions of the Treaty pertaining to agriculture is determined by the term “agricultural products” (➔ para 10). In the provisions of Article 38 TFEU, these products are specified in two ways. Paragraph 1 defines them as “products of the soil, of stockfarming and of fisheries and products of first-stage processing

8 9

Jurcewicz, in Mia˛sik et al. (2012), Article 38, p. 671. Jurcewicz (2012), p. 16.

Jurcewicz/Popardowski

12

834

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Agriculture and Fisheries

directly related to these products”. In case 185/73 Bielfiel-Ko¨nig,10 the ECJ formulated an express interpretation of the latter term, maintaining that the decisive factor is the economic relationship between the basic product and the processed product, and not the number of successive stages of processing. It stated that there must be a clear economic interdependence between the basic and the processed product.11 On the other hand, those processed products whose costs of processing are so high that in comparison the price of basic products appears as a marginal cost, are not embraced by the definition.

6.2. The Meaning of Article 38.3 TFEU

13

While Article 38.1 TFEU provides a general definition of “agricultural products” limiting this category to basic agricultural products, Article 38.3 TFEU supplements this by virtue of Council decisions. The Council issued Regulation 7a extending the list by other products. The relationship between the products defined in paragraph 1 and paragraph 3 was the object of numerous controversies in early commentaries to the Treaty. Since the basic function of Annex I is to enumerate the products considered to be agricultural products, paragraph 3 explains that notwithstanding the existence of the definition in paragraph 1, the actual scope of the agricultural provisions is defined by the list of products set out in Annex I (which contains a certain number of items included in the Framework of the Common Customs Tariff). Before 1988, the CCT based itself on the Convention of the Customs Cooperation Council issued in 1950 (the “Brussels Nomenclature”) concerning the nomenclature used for classifying products in the customs system. From 1 January 1988, the CCT is based on the provisions of the International Convention on the Harmonized Commodity Description and Coding System. However, Annex I is still based on the old nomenclature, since introducing the harmonized system would require changes in the provisions of the Treaty. Therefore, in case of any doubt as to the precise scope of Annex I, the old nomenclature prevails.

6.3. Differences Between Article 38.1 and Article 38.3 TFEU

14

There are several differences between Article 38.1 and Article 38.3 TFEU. On the one hand, Annex I includes products, which are not covered by the definition set out in Article 38.1 TFEU, such as ethyl alcohol, margarine, cheese, starch or processed fruit. It was necessary to include these products in Annex I because their position on the market is strongly affected by market regulation instruments 10

Case 185/73, Hauptzollamt Bielefeld v Offene Handelsgesellschaft in Firma H. C. Ko¨nig (ECJ 29 May 1974) para 12–13. 11 See Danielsen (2013), p. 13.

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relating to basic products. On the other hand, Annex I omits certain (less important) products, which are included in the definition of Article 38.1. TFEU, such as animal hides, timber, feathers, cotton, jute, or silk. As the ECJ ruled, notwithstanding these differences, Article 38.3. TFEU has precedence over Article 38.1 TFEU regardless whether the mentioned products are processed, or whether they are neither fit for consumption nor as a raw material for the processing industry.12 The travaux pre´paratoires to Title III explain the source of this contradiction. Preliminary French proposals assumed that the common market would embrace both agriculture (basic agricultural products), as well as food products. However, only the products mentioned above and some products from the latter group became the object of the agricultural provisions of the Treaty. The purpose of the definition (in Article 38.1 TFEU) was to explain which products were to be understood as agricultural products, while the comprehensive list was to indicate food products. The reference to food products for some unknown reason disappeared from the final text of the Treaty, while both the list as well as the definition of agricultural products remained.13 Two important aspects of the definition of agricultural products contained in the Treaty require special attention. First, some of the general provisions of the Treaty do not refer to agricultural products although the general rule set out in Article 38.2 TFEU stipulates that they are applicable. Further, conversely, certain special provisions apply only to agricultural products dealt with by Title III. However, in practice it is not always possible to define a clear boundary between agricultural and non-agricultural products that contain an agricultural element.

15

6.4. Fishery Products

Considering the general nature of the term “agricultural products”, special attention must be paid to fishery products. After the accession of the United Kingdom to the EEC in 1973, it was found that Article 102 contained in the 1972 Accession Act, which defines the time limits for the application of the measures of protecting waters, vested the Community with new competences. Nonetheless, the ECJ ruled that marine fishing was always subject to common agricultural policy and the invoked Article 102 only confirmed that the issue of protection of waters lies within Community jurisdiction. Fish, crustaceans, and shellfish are expressly listed in Annex I as agricultural products.14

12 Case 61/80, Coo¨peratieve Stremsel- en Kleurselfabriek v Commission (ECJ 25 March 1981) para 21; Case 77/83, CILFIT (ECJ 29 February 1984) para 11–12. 13 See Barents (1994), p. 27. 14 Case 61/77, Commission v Ireland (ECJ 16 February 1978) para 28–32; Case 141/78, France v United Kingdom (ECJ 4 October 1979) para 6.

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16

836

7.

Title III

Agriculture and Fisheries

Extension of the Scope of Annex I

7.1. Regulation 7 a

17

18

Article 38.3 TFEU authorizes the Council to extend the list of Annex I within two years of the effective date of the Treaty. Pursuant to this provision a number of products were added to the list by Regulation 7a (the binding force of this Regulation was challenged in case 185/73 Ko¨nig15 due to its delayed publication; the ECJ rejected this argument accepting that delay in publication was without major significance due to the date of application and effective date of the regulation). In effect, products not enumerated in Annex I and not included in the list pursuant to Article 38.3 TFEU are not and cannot be embraced by the provisions of the Treaty concerning agriculture, even if they comply with the definition of “agricultural products” set out in Article 38.1 TFEU.16 Since the establishment of the Common Agricultural Policy, the ECJ accepts in its case law that the list of agricultural products in Annex I is exhaustive.17 Hence, the only way to (potentially) extend the scope of the common agricultural policy is in essence reduced to an interpretation of various positions of the CCT. It is also possible to refer to the Explanatory Notes to the Brussels Convention (both before as well as after conclusion of the Treaty), for this purpose.18 In this aspect however, the Court notes that due to the need to ensure certainty of law and facilitate the control of criteria that determine the tariff qualification of goods (including agricultural products), they must be sought in the objective features and attributes of goods derived from the wording of individual items of Unified Nomenclature and the notes to the sections or parts of the Nomenclature.19 Another important issue is that although the notes to the Nomenclature constitute a factor determining the construction of individual tariff items, they have no binding legal force. Consequently, as indicated by case law, the notes ought to comply with the provisions of the Unified Nomenclature and cannot lead to a modification of their scope.20 Summarizing, it must be stated that the lists themselves contain precisely defined products and use the same nomenclature as the CCT. This gives rise to two basic

15 Case 185/73, Hauptzollamt Bielefeld v Offene Handelsgesellschaft in Firma H. C. Ko¨nig (ECJ 29 May 1974) para 5–8. 16 Snyder (1985), p. 17. 17 Joined Cases 2-3/62, Commission v Luxembourg and Belgium “Gingerbread” (ECJ 14 December 1962). 18 Case 61/80, Coo¨peratieve Stremsel- en Kleurselfabriek v Commission (ECJ 25 March 1981) para 19–20. 19 Case C-140/08, Rakvere Lihakombinaat (ECJ 29 October 2009) para 42. 20 Case C-140/08, Rakvere Lihakombinaat (ECJ 29 October 2009) para 42; Case C-495/03, Intermodal Transports BV v Staatssecretaris van Financie¨n (ECJ 15 September 2005) para 48; Case C-445/04, Possehl Erzkontor GmbH v Hauptzollamt Duisburg (ECJ 8 December 2005) para 20; Case C-500/04, Proxxon GmbH v Oberfinanzdirektion Ko¨ln (ECJ 16 February 2006) para 22.

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legal effects. First, a condition for the qualification of a product as an agricultural product is its presence in Annex I or in Regulation 7a. Second, when interpreting these lists, other items of the CCT are considered, as well as the system interpretation guidelines. Case 77/83 CILFIT21 may serve as an example; according to the judgment, although wool is obtained from sheep farming it is not embraced by the definition of “animal products not specified anywhere else” according to item 05.15 b included in Annex I because the annotation to Chapter 5 CCT expressly excluded textiles of animal origin. In addition, wool is the object of regulation in a separate Chapter 53 CCT, which is not included in Annex I. On the other hand, in 61/80 Stremsel22 the Court stated that absent any provisions of Community (Union) law that clarify the terms used in Annex I, references must be made to commentaries to the conventions. Strictly speaking, the own interpretation of the CCT by Union institutions, as long as it is based on the Brussels nomenclature, is essentially excluded for the purpose of extending Annex I. It does seem however, that in this case the Court presents a lenient position. A more creative interpretation resulted from the actual extension of the scope of Annex I. For instance, this annex does not refer to Chapter 50 of the Brussels Nomenclature that applies to silk, among others, although Chapter 1 of this Nomenclature, which applies to live animals, is included in Annex I. Thus, because of the qualification of silk worms as live animals, regulations concerning the production of silk could be based on Article 43 TFEU. A similar example was the inclusion of isoglucose, which was already well known in the 1950s but had no commercial significance for the next decade. As a strong competitor of sugar, this product had to be embraced by the scope of agricultural regulations to maintain the regime of the sugar market. This was performed by including isoglucose in item 17.05 CCT (“other sugars”), which was in turn included in Annex I by Council Regulation 7a. Formally, extension of Annex I requires changes in the Treaty, so the application of Article 268 TFEU for this purpose is ruled out.

7.2. Cotton

Annex I does not include cotton. Considering the importance of cotton production for the Greek economy and recognizing the strictly agricultural nature of this production, Protocol No. 4 to the Greek Accession Act23 introduced special provisions concerning the legal basis for measures regulating the market for this

21

Case 77/83, CILFIT (ECJ 29 February 1984). Case 61/80, Coo¨peratieve Stremsel- en Kleurselfabriek v Commission (ECJ 25 March 1981). 23 Act concerning the conditions of accession of the Hellenic Republic and the adjustments to the Treaties, O.J. L 291/17 (1979), at p. 174. 22

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19

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Title III

Agriculture and Fisheries

product.24 This Protocol, applicable on the entire Union territory, is in essence a change in Annex I.

8.

Products Not Included in Annex I

8.1. The Importance of Article 43 TFEU

20

Since the scope of common agricultural policy is limited to the products listed in Annex I, it is impossible to adopt measures on the grounds of Article 43 TFEU that would directly apply to products not included in the Annex.25 An example of this is timber, the omission of which prevented the Community from adopting instruments to regulate the market for this product within the framework of the common agricultural policy26 and caused a delay in Community actions on forestry. However, such measures may be adopted on the grounds of Article 43 TFEU on products not listed in Annex I if it transpires that they are necessary to regulate the markets for products included in Annex I.27 Consequently, the ECJ’s case law accepts that Article 43 TFEU constitutes the appropriate basis for formulating provisions of Union law that implement one or more of the objectives indicated in Article 39 TFEU, even if such provisions, by way of accessorial application, also relate to products not listed in Annex I.28 The judgment in C-343/07 Bavaria and Bavaria Italia, where the ECJ accepted Article 43 as the appropriate legal basis for introducing Council Regulation (EEC) No. 2081/92 on the protection of geographical designations and names of origin of agricultural and food products, is a reflection of this approach,29 also insofar as this act applies to beer. The ECJ accepted that the fact that beer was not listed in Annex I as an agricultural product does not rule out the binding force of the Council Regulation based on Article 43 TFEU concerning this product. Most of the components needed for the production of beer are agricultural products indicated in Annex I. As such, due to the resulting economic interdependence, inclusion of beer within the scope of application of Council Regulation (EEC) No. 2081/92 must be treated as important from the point of view of the objectives indicated in Article 33 TEEC (Article 39 TFEU). Article 43 TFEU constitutes the appropriate basis for the law-making activity of EU bodies in this respect. 24

Case C-310/04, Spain v Council (ECJ 7 September 2006) para 41–45 and para 49. Case 123/83, BNIC v Guy Clair (ECJ 30 January 1985) para 15. 26 Joined Cases C-346/03 and C-529/03, Giuseppe Atzeni et al. v Regione autonoma della Sardegna (ECJ 23 February 2006) para 43. 27 Barents (1994), p. 29; McMahon (2007), p. 6; Jurcewicz (1995), pp. 72–73. 28 Case C-343/07, Bavaria and Bavaria Italia (ECJ 2 July 2009) para 50–51; Case C-11/88 Commission v Council (ECJ 16 November 1989) para 15; Case 180/96, United Kingdom v Commission (ECJ 5 May 1998) para 134. 29 See Council Regulation (EEC) No 2081/92 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs, O.J. L 2008/1 (1992). 25

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8.2. Products Functionally and Economically Related to Products Listed in Annex I

8.2.1.

Agricultural Products Obtained with the Use of Products Not Included in Annex I

In some cases the production, marketing and purpose, for industrial use or consumption, of products listed in Annex I require the use of products not included in the Annex. Pesticides used for the production of fruits and vegetables and hormonal substances administered to livestock may serve as examples. In these cases, as indicated by case law, Article 43 TFEU provides the appropriate legal basis for adopting measures concerning such products not included in the Annex.30 The ECJ sustained the effective force of the Directive regulating the administration of hormonal substances to livestock. Hormonal substances were the object of these regulations although these products are not included in Annex I. However, to prevent the use of these substances for the production of meat it was necessary to prohibit the administration of these products not included in the Annex to animals. 8.2.2.

Products Obtained from Basic Products

Since Annex I includes mainly basic products, the market regulation measures concerning these products frequently have a considerable impact on the competitive position of certain products not included in Annex I obtained from such basic products. In this case, pricing as well as other mechanisms will unavoidably affect products not included in Annex I. In other cases agricultural products cannot be regulated without simultaneous application of measures concerning their (synthetic) substitutes not included in Annex I. Because of the system of sustaining prices within the framework of common market organizations, the level of internal prices of a number of basic products is usually higher than on the global market, and as such, many products may be exported only with the application of export refunds (➔ Article 40 TFEU para 48– 51). Therefore, the scope of common market organizations must also embrace products not included in Annex I. The legal basis for this extension is Article 43 TFEU. 8.2.3.

21

22

23

Substitutes of Products Included in Annex I

Some of the products not listed in Annex I may be entirely substituted by products from Annex I, for instance, natural and chemical glucose and lactose. Since the natural products are listed in the Annex and embraced by a number of common market organizations, their chemical substitutes also had to be included although as 30

Case 68/86, United Kingdom v Council (ECJ 23 February 1988) para 9–13; Case C-11/88, Commission v Council (ECJ 16 November 1989) para 8.

Jurcewicz/Popardowski

24

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Agriculture and Fisheries

products invented later they are not listed in the Annex. The Community legislator preferred to use Article 352 TFEU for this purpose. However, the framework agreement concerning the import of goods being a result of processing Annex I products, aimed to protect the internal processing industry, is based on Article 31, Article 207, and Article 352 TFEU, contrary to the abovementioned approach that the application of export refunds to these products ought to be based on Article 43 TFEU.31 Reliance on Article 352 TFEU and other provisions of the Treaty is incorrect, as indicated above. Article 43 TFEU provides a sufficient legal basis.

9.

Marketing

25

Article 38 TFEU limits the scope of the common agricultural policy to production and trade. This does not rule out the possibility that on the grounds of Article 43 TFEU measures may be adopted in relation to further stages, e.g., second degree of processing, use for industry or consumption, provided such measures fulfil a dual criterion. They ought to apply to Annex I products and must be necessary and appropriate in the light of Article 39 TFEU. Since both these conditions are not always fulfilled at such subsequent stages, the principal body of agricultural regulations applies to production and trade in Annex I products.

26

Annex: List Referred to in Article 38 of the Treaty on the Functioning of the European Union (Annex I to the Treaties)

(1) No in the Brussels nomenclature CHAPTER 1 CHAPTER 2 CHAPTER 3 CHAPTER 4 CHAPTER 5 05.04 05.15 CHAPTER 6 CHAPTER 7 CHAPTER 8 CHAPTER 9 CHAPTER 10 CHAPTER 11

31

(2) Description of products Live animals Meat and edible meat offal Fish, crustaceans and molluscs Dairy produce; birds’ eggs; natural honey Guts, bladders and stomachs of animals (other than fish), whole and pieces thereof Animal products not elsewhere specified or included; dead animals of Chapter 1 or Chapter 3, unfit for human consumption Live trees and other plants; bulbs, roots and the like; cut flowers and ornamental foliage Edible vegetables and certain roots and tubers Edible fruit and nuts; peel of melons or citrus fruit Coffee, tea and spices, excluding mate´ (heading No 09.03) Cereals Products of the milling industry; malt and starches; gluten; inulin (continued)

Jurcewicz (2012), pp. 28–29.

Jurcewicz/Popardowski

Article 38. [Common Agriculture and Fisheries Policy] (1) No in the Brussels nomenclature CHAPTER 12 CHAPTER 13 ex 13.03 CHAPTER 15 15.01 15.02 15.03 15.04 15.07 15.12 15.13 15.17 CHAPTER 16 CHAPTER 17 17.01 17.02 17.03 17.05a

CHAPTER 18 18.01 18.02 CHAPTER 20 CHAPTER 22 22.04 22.05 22.07 ex 22.08a ex 22.09a

22.10a CHAPTER 23 CHAPTER 24 24.01 CHAPTER 45 45.01

841

(2) Description of products Oil seeds and oleaginous fruit; miscellaneous grains, seeds and fruit; industrial and medical plants; straw and fodder Pectin Lard and other rendered pig fat; rendered poultry fat Unrendered fats of bovine cattle, sheep or goats; tallow (including “premier jus”) produced from those fats Lard stearin, oleostearin and tallow stearin; lard oil, oleo-oil and tallow oil, not emulsified or mixed or prepared in any way Fats and oil, of fish and marine mammals, whether or not refined Fixed vegetable oils, fluid or solid, crude, refined or purified Animal or vegetable fats and oils, hydrogenated, whether or not refined, but not further prepared Margarine, imitation lard and other prepared edible fats Residues resulting from the treatment of fatty substances or animal or vegetable waxes Preparations of meat, of fish, of crustaceans or molluscs Beet sugar and cane sugar, solid Other sugars; sugar syrups; artificial honey (whether or not mixed with natural honey); caramel Molasses, whether or not decolourised Flavoured or coloured sugars, syrups and molasses (including vanilla sugar or vanillin), with the exception of fruit juice containing added sugar in any proportion Cocoa beans, whole or broken, raw or roasted Cocoa shells, husks, skins and waste Preparations of vegetables, fruit or other parts of plants Grape must, in fermentation or with fermentation arrested otherwise than by the addition of alcohol Wine of fresh grapes; grape must with fermentation arrested by the addition of alcohol Other fermented beverages (for example, cider, perry, and mead) Ethyl alcohol or neutral spirits, whether or not denatured, of any strength, obtained from agricultural products listed in Annex I, excluding liqueurs and other spirituous beverages and compound alcoholic preparations (known as “concentrated extracts”) for the manufacture of beverages Vinegar and substitutes for vinegar Residues and waste from the food industries; prepared animal fodder Unmanufactured tobacco, tobacco refuse Natural cork, unworked, crushed, granulated or ground; waste cork (continued)

Jurcewicz/Popardowski

842 (1) No in the Brussels nomenclature CHAPTER 54 54.01 CHAPTER 57 57.01

Title III

Agriculture and Fisheries

(2) Description of products

Flax, raw or processed but not spun; flax tow and waste (including pulled or garnetted rags) True hemp (Cannabis sativa), raw or processed but not spun; tow and waste of true hemp (including pulled or garnetted rags or ropes)

a

Entry added by Article 1 of Regulation No 7a of the Council of the European Economic Community of 18 December 1959 (O.J. No 7, 30.1.1961, p. 71/61)

List of Cases ECJ 14.12.1962, 2/62, 3/62, Commission v Luxembourg and Belgium “Gingerbread”, ECLI:EU:C:1962:45 [cit. in para 17] ECJ 24.10.1973, 5/73, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof, ECLI:EU:C:1973:109 [cit. in para 9] ECJ 29.05.1974, 185/73, Hauptzollamt Bielefeld v Offene Handelsgesellschaft in Firma H. C. Ko¨nig, ECLI:EU:C:1974:61 [cit. in para 12 and 17] ECJ 16.03.1977, 68/76, Commission v France “Potatoes”, ECLI:EU:C:1977:48 [cit. in para 7] ECJ 16.02.1978, 61/77, Commission v Ireland, ECLI:EU:C:1978:29 [cit. in para 16] ECJ 20.04.1978, 80-81/77, Les fils de Henri Ramel v Receveur des douanes, ECLI: EU:C:1978:87 [cit. in para 7] ECJ 29.03.1979, 231/78, Commission v United Kingdom “Potatoes”, ECLI:EU: C:1979:101 [cit. in para 7] ECJ 04.10.1979, 141/78, France v United Kingdom, ECLI:EU:C:1979:225 [cit. in para 16] ECJ 03.06.1980, 135/79, Gedelfi Großeinkauf GmbH & Co. KG v Hauptzollamt Hambourg-Jonas, ECLI:EU:C:1979:225 [cit. in para 9] ECJ 25.03.1981, 61/80, Coo¨peratieve Stremsel- en Kleurselfabriek v Commission, ECLI:EU:C:1981:75 [cit. in para 14, 17 and 18] ECJ 05.05.1981, 112/80, Firma Anton Du¨rbeck v Hauptzollamt Frankfurt am Main-Flughafen, ECLI:EU:C:1981:94 [cit. in para 9] ECJ 29.02.1984, 77/83, CILFIT, ECLI:EU:C:1984:91 [cit. in para 14 nad 18] ECJ 30.01.1985, 123/83, BNIC v Clair, ECLI:EU:C:1985:33 [cit. in para 20] ECJ 11.06.1985, 288/83, Commission v Ireland, ECLI:EU:C:1985:251 [cit. in para 7] ECJ 23.02.1988, 68/86, United Kingdom v Council, ECLI:EU:C:1988:85 [cit. in para 21]

Jurcewicz/Popardowski

Article 38. [Common Agriculture and Fisheries Policy]

843

ECJ 16.11.1989, C-11/88 Commission v Council, ECLI:EU:C:1989:310 [cit. in para 20] ECJ 05.03.1996, C-46/93, C-48/93, Brasserie du Peˆcheur SA v Bundesrepublik Deutschland and The Queen v Secretary of State for Transport, ex parte: Factortame Ltd and others, ECLI:EU:C:1996:79 [cit. in para 8] ECJ 05.05.1998, 180/96, United Kingdom v Commission, ECLI:EU:C:1998:192 [cit. in para 20] ECJ 15.09.2005, C-495/03, Intermodal Transports BV v Staatssecretaris van Financie¨n, ECLI:EU:C:2005:552 [cit. in para 17] ECJ 08.11.2005, C-293/02, Jersey Produce Marketing Organisation, ECLI:EU: C:2005:664 [cit. in para 7] ECJ 08.12.2005, C-445/04, Possehl Erzkontor GmbH v Hauptzollamt Duisburg, ECLI:EU:C:2005:754 [cit. in para 17] ECJ 16.02.2006, C-500/04, Proxxon GmbH v Oberfinanzdirektion Ko¨ln, ECLI:EU: C:2006:111 [cit. in para 17] ECJ 23.02.2006, C-346/03 and C-529/03, Giuseppe Atzeni, ECLI:EU:C:2006:130 [cit. in para 20] ECJ 07.09.2006, C-310/04, Spain v Council, ECLI:EU:C:2006:521 [cit. in para 19] ECJ 02.07.2009, C-343/07 Bavaria NV and Bavaria Italia Srl v Bayerischer Brauerbund eV, ECLI:EU:C:2009:415 [cit. in para 20] ECJ 29.10.2009, C-140/08, Rakvere Lihakombinaat, ECLI:EU:C:2009:667 [cit. in para 17]

References Barents, R. (1994). The agricultural law of the EC. The Hague: Wolters Kluwer International. Danielsen, J. H. (2013). EU agricultural law. The Hague: Wolters Kluwer International. Jurcewicz, A. (1995). Poje˛cie produkto´w rolnych, producenta rolnego i gospodarstwa rolnego w prawie Wspo´lnoty Europejskiej. Pan´stwo i Prawo, 70–76. Jurcewicz, A. (2012). Traktatowe podstawy unijnego prawa rolnego w s´wietle orzecznictwa. Zagadnienia wybrane. Warsaw: Wolters Kluwer Polska. Jurcewicz, A., & Tomkiewicz, E. (2002). Zasada zakładania przedsie˛biorstw rolnych oraz s´wiadczenie usług rolnych w ustawodawstwie wspo´lnotowym. Studia Prawnicze, 49–61. McMahon, J. A. (2007). EU agricultural law. Oxford: OUP. Mia˛sik, D., Po´łtorak, N., & Wro´bel, A. (Eds.). (2012). Traktat o Funkcjonowaniu Unii Europejskiej. Warsaw: Wolters Kluwer Polska. Snyder, F. (1985). Law of the common agricultural policy. London: Sweet & Maxwell.

Jurcewicz/Popardowski

Article 39 [Objectives of Common Agricultural Policy] (ex-Article 33 TEC) 1. The objectives1-4 of the common agricultural policy12-15 shall be: (a) to increase agricultural productivity by promoting technical progress and by ensuring the national development of agricultural production and the optimum utilization of the factors of production, in particular labour,18-20 (b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture,21-24 (c) to stabilize markets,25 (d) to assure availability of supplies,26-27 (e) to ensure that supplies reach consumers at reasonable prices.28 2. In working out the common agricultural policy and the special methods for its application, account shall be taken of:42-59 (a) the particular nature of agricultural activity, which results from the social structure of agriculture and from structural and natural disparities between the various agricultural regions,47-51 (b) the need to effect the appropriate adjustments by degrees, (c) the fact that in the Member States agriculture constitutes a sector closely linked with the economy as a whole.

Contents 1.

2. 3. 4.

5.

#

General Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. Significance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Protected Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3. Addressees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.4. Task . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Evolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Character . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 System Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.1. Relation to Articles 40–42 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.2. Relation to Article 3 TEU and Articles 3–6 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.3. Horizontal Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Objective Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 5.1. Objectives of the Common Agricultural Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 5.1.1. CAP and the Common Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 5.1.2. CAP Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 5.1.3. Complex Nature of the Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 5.2. Catalogue of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

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Agriculture and Fisheries

General Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Increasing Agricultural Productivity (Article 39.1 (a) TFEU) . . . . . . . . . . . . . Ensure a Fair Standard of Living for Agricultural Community and Increasing the Individual Earnings of Persons Engaged in Agriculture (Article 39.1 (b) TFEU) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.4. Stabilisation of Agricultural Markets (Article 39.1 (c) TFEU) . . . . . . . . . . . . 5.2.5. Ensuring of Food Security (Article 39.1 (d) TFEU) . . . . . . . . . . . . . . . . . . . . . . . 5.2.6. Ensuring Reasonable Prices of Food for Consumers (Article 39.1 (e) TFEU) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3. Hierarchy of Objectives in Paragraph 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4. Setting Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. The Functions of Paragraph 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1. Catalogue of Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2. Limits for the Legislator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3. Legal Reinterpretation of the Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4. The Objectives According to the Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5. Modification of the Objectives in Case Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6. Expansion of Tasks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Construction of Article 39.1 TFEU in Case Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Integration of the CAP with SEA Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2. Integration Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3. Strategy of Limiting the Scope of CAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4. The Concept of Agriculture in ECJ Case Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. The Significance of Article 39.2 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1. The Addressees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2. The Relations Between Detailed Policies Implemented by the CAP . . . . . . . . . . . . . 9.3. Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4. Diversification and Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5. Structural Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5.1. Grounds and Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5.2. Relations Between the Market and Incomes Policy (Short Term) and Structural Policy (Long Term) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5.3. Instruments of Structural Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5.4. Distinction Between Market Policy and Structural Policy . . . . . . . . . . . . . . . 9.5.5. Permanent Agricultural Structures Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.6. Priorities of the Common Agricultural Policy in the Context of Article 39.2 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.7. Common Undertakings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.8. Level of Centralization of Both Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.9. Legal Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.10. Agricultural Structures and the Provisions of the Treaty . . . . . . . . . . . . . . . . . . . . . . . . . 9.11. Agricultural Structures and the General Objectives of the Treaty . . . . . . . . . . . . . . . . 9.12. EU Competences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Cases References

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Article 39. [Objectives of Common Agricultural Policy]

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General Comments

1.1. Significance

Article 39 TFEU supplements Article 40 TFEU and contains a broad, and as indicated in Article 40.2 TFEU (➔ Article 40 TFEU para 23–43), comprehensive list of the objectives of the common agricultural policy. Apart from the fundamental Article 3 TEU and Articles 3–6 TFEU, this article appears to be the most important provision of the Treaty having such political overtones. The scope and wording of Article 39 TFEU reflects largely the objectives and methods of agricultural policy formulated at the conference in Stresa in 1955.

1

1.2. Protected Interests

Generally speaking, Article 39.1 TFEU distinguishes general social interests and the special interests of agriculture to which they ought to be subjected.1

2

1.3. Addressees

Contrary to the fact that Article 39.1 TFEU establishes the general conditions and expresses numerous contradictions, it creates a binding provision of the Treaty not only for the EU but also for the MS. Although the MS continue to have certain prerogatives in the area of agriculture, they are bound by the objectives of Article 39.1 TFEU when exercising these prerogatives.2

3

1.4. Task

The tasks set out in Article 39 TFEU together with the principles laid down by Article 43 TFEU determine both the positive as well as negative criteria for the assessment of legality of all instruments applied in agriculture (➔ Article 43 TFEU para 3). ECJ case law emphasizes that the activity of Union legislature in this area ought to always be directed towards the implementation of one or more objectives indicated in Article 39 TFEU, while the basis of law-making competence in this

1

Case 11/70, Internationale Handelsgesellschaft (ECJ 17 December 1970) para 16; Case 25/70, Einfuhr- und Vorratsstelle für Getreide und Futtermittel v Köster and Berodt & Co (ECJ 17 December 1970) para 34 and para 39. See also Barents (1994), p. 32; Constantinides Megret (1991), pp. 5–6. 2 Case 237/82, Jongeneel Kaas (ECJ 7 February 1984) para 13.

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respect consists in Article 43 TFEU.3 Article 43 TFEU grants the Parliament and Council a sufficiently wide scope of freedom on the choice of measures to implement the objectives indicated in Article 39 TFEU. Consequently, only when the adopted measure is obviously inappropriate from the point of view of the implementation of one or more objectives of the common agricultural policy, the ECJ may decide that it was adopted by the body exceeding its scope of competence granted by Article 43 TFEU.

2. 5

6

Evolution

The travaux préparatoires indicate that the final text of Article 39.1 TFEU is a result of a compromise between a more economic approach to agricultural policy and a social approach. This difference essentially corresponds to the geographical location of MS (north-south). On the first two subparagraphs of Article 39.1 TFEU, that is, subparagraphs (a) and (b), the need for technical progress in agriculture was articulated by the Netherlands and Germany. These countries were of the opinion that specialization of production ought to take place not only between the MS, but also with respect to the global market. They also proposed a reference to a satisfactory level of earnings for commercial farms. However, in the final text, under the influence of France and Italy the reference to the global market disappeared. Instead, the important role of the labor factor was underlined. Moreover, under the influence of these countries the reference to increasing individual earnings was added. The wording of subparagraph (b) is a result of the compromise with France, where the “standard of living” was to have a point of reference, namely, “sufficient” (FR: suffisant), achieved because of increasing individual earnings. However, in the final text the word suffisant was replaced by equitable (fair, equitable), which is significant as it excludes an interpretation of Article 39 TFEU whereby the interests of the producer were to have precedence over the interests of the consumer. The sentence about stabilizing markets (subparagraph c) was generally accepted. More liberal (Dutch) proposals concerning only stabilizing prices were rejected. The sentence with a more political character, as previously formulated, concerning security of supplies, was put forward in French and Italian proposals. The Netherlands and Germany suggested that this sentence be made more precise by adding a reference to “reasonable” prices for consumers. This latter proposal became subparagraph (e). The provisions of Article 39 TFEU have not changed since the signing of the Treaty of Rome in 1957.

3

Case C-180/96, United Kingdom v Commission (ECJ 5 May 1998) para 133; Case C-68/86 United Kingdom v Council (ECJ 23 February 1988) para 14; Case C-131/86, United Kingdom v Council (ECJ 23 February 1988) para 19; Case C-131/87, Commission v Council (ECJ 16 November 1989) para 28.

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Character

Article 39.1 TFEU reflects a certain idealistic model, whereby agriculture ought to be characterized by a short as well as long-term balance, being a result of either the operation of market forces or public intervention, which ought to benefit both agricultural producers as well as consumers. Thus, because this provision does not guarantee earnings or ensure a specific profit margin but requires institutions to work towards achieving a balance, it may be qualified as an obligation de moyen (best efforts obligation) both concerning the Community as well as the MS.

4.

7

System Context

4.1. Relation to Articles 40–42 TFEU

The responsibility of the EU for the implementation of the objectives defined in Article 39 TFEU is set out in Article 40.2 (1) and Articles 41 and 42 TFEU, and the limitation of competence in Article 40.2 (2) TFEU. Without defining the common agricultural policy, in Articles 40, 41, and 42 the Treaty only provides guidelines as to the substance and instruments of such policy. A common feature of these provisions is their functional character, enabling the EU to adopt the necessary measures to implement the objectives laid out in Article 39 TFEU.

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9

4.2. Relation to Article 3 TEU and Articles 3–6 TFEU

Article 39 TFEU is not the only provision that formulates the objectives and tasks of the common agricultural policy. According to the TEU system of provisions, in exercising its competence in the sphere of agriculture the legislator was bound by the general tasks of the Treaty set out in Articles 2 and 3. Under former Article 33 (e) EC, the common agricultural policy in itself established the mechanism of implementing these tasks, in other words, it constituted a measure to implement the general objectives of the Treaty.4 At present, this obligation is based on Article 3 TEU and Articles 3–6 (specifically Article 4) TFEU and on Article 39.2 (c) TFEU, as confirmed by the ECJ.5 These provisions also require the EU to prevent imbalances between the agricultural sector and other spheres of the economy. They indicate that the common agricultural policy (on both agricultural structures policy 4 Case 48/74, Charmasson v Minister for Economic Affairs and Finance (ECJ 10 December 1974) para 14. Danielsen (2013), p. 17. 5 Case 72/72, Einfuhr- und Vorratsstelle für Getreide und Futtermittel v Baer-Getreide GmbH (ECJ 22 March 1973); Joined cases 80-81/77, Les fils de Henri Ramel v Receveur des douanes (ECJ 20 April 1978); Case 48/74, Charmasson v Minister for Economic Affairs and Finance (ECJ 10 December 1974).

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as well as market and pricing policy) ought to promote a harmonious increase in agricultural incomes. “Agricultural policy objectives must be conceived in such a manner as to enable the Community institutions to carry out their duties in the light of developments in agriculture and in the economy as a whole”, the ECJ pointed in case 68/86 United Kingdom v Council.6 Consequently, the common agricultural policy is not only a method of introducing a common market, but also of stricter coordination (through the EU) of national economies and other policies. Moreover, the connection between Article 39 and Article 4 TFEU indicates that the common agricultural policy is not justified solely by exercising freedoms, including primarily the free movement of agricultural products. At the same time it ought to contribute to the development of general economic policy, including international trade, social issues, economic and social cohesion (regional development), environment protection, consumer protection, etc., as well as a feasible and balanced budget. As such, the principles and guidelines that apply to other policies are also applicable to the common agricultural policy and its objectives. On its relationship with the common commercial policy, the principles set out in Article 206 TFEU must be considered. The relationship between common agricultural policy and regional development is confirmed in Article 174 TFEU. Furthermore, the common agricultural policy ought to promote the preservation, protection, and improvement of the quality of the natural environment,7 protection of human health8 and rational utilization of natural resources, as stipulated in Article 191 TFEU.

4.3. Horizontal Provisions

11

When exercising its discretion, the EU ought to consider various “horizontal” issues, which, depending on the circumstances, are appropriate for evaluating the situation in the agricultural sector, and to choose the relevant measures. According to the Court, “efforts to achieve objectives of the common agricultural policy, in particular under common organization of the market, cannot disregard requirements relating to the public interest such as the protection of consumers or protection of the health and life of humans and animals, requirements which the Community institutions must take into account in exercising their powers.”9 However, as long as these measures apply only to agricultural products and their purpose is to attain the objectives of Article 39 TFEU, they ought to be based on Article 43 TFEU.

6

Case 68/86, United Kingdom v Council (ECJ 23 February 1988) para 10. Case C-428/07, Horvath (ECJ 16 July 2006) para 29–32. 8 See Jurcewicz (2004), pp. 55–68, Korzycka-Iwanow (2007), p. 21. 9 Case 68/86, United Kingdom v Council (ECJ 23 February 1988) para 12. 7

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Objective Scope

5.1. Objectives of the Common Agricultural Policy

5.1.1.

CAP and the Common Market

As stipulated in Article 38.4 TFEU, the common agricultural policy is a necessary condition for the operation and development of the common market for agricultural products. Article 39 TFEU defines the objectives of the common agricultural policy and indicates the measures and methods of attaining these objectives. Article 39.1 TFEU defines the objectives and as such the scope of common agricultural policy. It specifies the scope of EU responsibility and at the same time limits its powers in the areas for which it is not responsible. The responsibility of EU for the attainment of the objectives set out in Article 39 TFEU is laid out in Articles 40.2 (1), 41, and 42, while the limitation of its powers is provided for in Article 40.2 (2) TFEU. 5.1.2.

CAP Guidelines

Without defining the common agricultural policy, in Articles 40, 41, and 42 TFEU the Treaty only provides guidelines as to the substance and instruments of such policy. The functional nature of these provisions of the Treaty enables the EU to adopt measures required to attain the objectives laid out in Article 39 TFEU. The following definition of the common agricultural policy may be formulated on this basis. First, the provisions clearly indicate that the common agricultural policy consist in measures that contribute to the attainment of the objectives laid out in Article 39 TFEU. Second, under Article 38.2 and 38.3 TFEU, these measures are the object of Title III of the Treaty if they apply, directly or indirectly, to the products listed in Annex I. As such, the common agricultural policy may be briefly defined as a set of instruments applicable to Annex I products, which contribute to the attainment of the objectives defined in Article 39 TFEU. 5.1.3.

12

13

Complex Nature of the Provision

Both the contents as well as the historical background of Article 39.1 TFEU indicate that it is a compromise between differing views of the common agricultural policy. The heterogeneous nature of this article is a result of a number of differences between its paragraphs and the interests they embody. First, the provision may be analyzed from the point of view of the distinction between a long-term structural policy and a short-term market and pricing and incomes policy. From this point of view, subparagraphs (a) and (b) reflect the former, and subparagraphs (d) and (e) the latter approach. This distinction may support conclusions concerning the legality of the market pricing policy oriented towards farmer earnings. The second distinction is a result of the social and economic objectives of the common agricultural policy. In this context the “fair standard of living of the agricultural Jurcewicz/Popardowski

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community” and “reasonable (appropriate) consumer prices” may be treated as (ultimate) social goals, which must be achieved by means of the transitional (indirect) economic objectives defined in subparagraphs (a), (c), and (d). Finally the interests of the producer (subparagraphs a, b, and c) and the consumer (subparagraphs c, d, and e) may be distinguished.10 Considering the latter two distinctions, opinions may be formed as to the hierarchy of the individual subparagraphs.

5.2. Catalogue of Interests

5.2.1. 15

16

General Overview

The historical background and contents of Article 39.1 TFEU clearly indicate that the provision is a catalogue of interests that must be achieved and protected by the common agricultural policy. As stipulated in the introduction to this article (➔ para 2, 5 and 10), before adoption of the TFEU all these interests made up one integrated goal.11 Moreover, attainment of these objectives is the object of the general interest of the Union.12 The nature of Article 39.1 TFEU as a catalogue of often contradictory interests leads to the conclusion that these objectives do not require a specific model of common agricultural policy. For the same reasons a fixed hierarchy between the interests of producers and consumers is also to be rejected. On the other hand, the wording and character of this provision mean that EU institutions have broad discretionary powers to indicate specific priorities. The ECJ outlined the basic directions for interpretation of Article 39.1 TFEU. In case 5/67 Beus, the ECJ pointed out that since the objectives defined in Article 39.1 TFEU are potentially contradictory and essentially differ from each other, they do not have to be fully attained at the same time.13 As such, in case 5/73 Balkan-ImportExport the ECJ accepted that Community institutions may grant some of them temporary precedence depending on economic requirements. However, in doing so they cannot discriminate between producers or between consumers within the EU.14 If necessary, they must also consider the rule of precedence applied by the EU.15 10

See McMahon (2007), p. 22, 24; Danielsen (2013), pp. 17–18; Barents (1994), p. 32; Jurcewicz, in Miąsik et al. (2012), Article 39 p. 681. 11 Case 230/78, Eridania (ECJ 27 September 1979) para 31. 12 Case 25/70, Einfuhr- und Vorratsstelle für Getreide und Futtermittel v Köster and Berodt & Co. (ECJ 17 December 1970) para 32; Case 116/82, Commission v Germany (ECJ 18 September 1986) para 28-29; Joined Cases C-143/88 and C-92/89, Zuckerfabrik Süderdithmarschen AG v Hauptzollamt Itzehoe and Zuckerfabrik Soest GmbH v Hauptzollamt Paderborn (ECJ 21 February 1991) para 51–54. 13 Case 5/67, W. Beus GmbH & Co. v Hauptzollamt München (ECJ 13 March 1968) para III. 14 Case 5/73, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof (ECJ 24 October 1973) para 24. 15 Case 72/69, Hauptzollamt Bremen-Freihafen v Bremer Handelsgesellschaft (ECJ 18 June 1970).

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5.2.2.

853

Increasing Agricultural Productivity (Article 39.1 (a) TFEU)

Increasing Productivity The first sentence of the common agricultural policy refers to increasing agricultural productivity. This objective was obvious at the time, considering the low efficiency of labour and minor capital expenditure in agriculture. Historically speaking, the purpose of this sentence was to ensure self-sufficiency concerning agricultural products of the moderate climate zone, since post-War Europe experienced a shortage of many types of such products. According to the wording of subparagraph (a), this increase was to be achieved by means of technical progress and optimum utilization of the factors of production. There is no doubt that an increase in productivity may be observed over the years, as reflected by the constant presence of surpluses. The question arises therefore to what extent this is caused by the progress of science and technology in this area, and to what extent it is a result of the common agricultural policy. On the latter factor, there is no doubt that until the 1980s of the past century, agricultural legislation contributed significantly to the state of structural surpluses of agricultural products. Only later attempts were made to reform the common agricultural policy with the view to limiting agricultural output. At present, this objective of the common agricultural policy seems quite obsolete.

17

Agricultural Structures The above list of measures indicates that the common agricultural policy also applies to agricultural structures. A broad understanding of this point embraces all aspects of structural policy. Moreover, it must be noted that “rational development of agricultural production” may refer to regional policy, while “optimum utilization of the factors of production” may mean that the effects of agricultural production on the environment must to be considered.

18

Methods of Implementation It is not without significance that subparagraph (a) does not mention whether implementation of these objectives ought to take place on individual initiative or in the form of top-down activities. This once again confirms that the Treaty does not require a special model of regulating agricultural markets. The provision clearly indicates that EU institutions have a wide range of discretionary powers in deciding by what means and to what extent the economic freedom of entities may be limited to attain this objective of the common agricultural policy. Consequently, the ECJ indicates that the attainment of this goal, increasing agricultural productivity, assumes that the Union legislator will adopt measures to ensure rational development of agricultural production and optimum utilization of the means of production. The adoption of such measures is admissible even if they may cause negative economic effects for a certain group of entities, provided their application Jurcewicz/Popardowski

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in relation to the interests of these entities cannot be considered clearly disproportionate in comparison with the adopted objective.16 5.2.3.

Ensure a Fair Standard of Living for Agricultural Community and Increasing the Individual Earnings of Persons Engaged in Agriculture (Article 39.1 (b) TFEU)

The Relationship Between Point (a) and Point (b) 20

Use of the word “thus” indicates that subparagraphs a and b are strictly related to each other. However, since there is no explanation as to the essence of this relationship, the sentence concerning “ensuring a fair standard of living” may be understood in two mutually contradictory ways. On the one hand, it may be claimed that subparagraph (b) indicates the result that must be achieved mainly or even exclusively by the means listed in subparagraph (a) (➔ para 18–20). From this point of view, structural policy measures would be the dominating elements of the common agricultural policy.17 According to this approach, it is even possible to exclude “increasing the individual earnings” because of the policy of sustaining prices. However, the above interpretation overlooks the fact that increased production generally leads to price reduction (on a market characterized by effective competition). This cannot be easily reconciled with the phrase “by increasing individual earnings”, which points not only to the result, but an objective in itself.18 What is more, the fact that Article 40.2 TFEU refers to a common pricing policy and Article 40.3 TFEU provides funding indicates that earnings and price guarantees for producers are not essentially excluded (➔ Article 40 TFEU para 26–29). On the other hand, the relationship between subparagraph (a) and (b) may be interpreted in such a way that increasing individual earnings constitutes a normative element. This would mean that the common agricultural policy ought to lead to this result. According to this approach subparagraph (b) would constitute a type of guarantee of producer earnings, whether group or individual. In practice, this would impose a requirement to implement a policy permanently supporting earnings, either by price intervention or by introducing additional schemes. However, this interpretation is also incorrect, as subparagraph (b) does not mention any criteria on intended increases in individual earnings.19 In particular, increasing farmer earnings that would lead to increasing the level of income from non-agricultural sectors is not required. Moreover, this approach is not supported by case law. The ECJ denied that subparagraph (b) should authorize the producer to utilize his economic 16

Case C-59/11, Association Kokopelli v Graines Baumaux SAS (ECJ 12 July 2012) para 68. Support for this view is found in Joined Cases 36 and 71/80, Irish Creamery Milk Suppliers Association (ECJ 10 March 1981) para 12–13 and Case 297/82, De Samvirkende Danske Landboforeninger v Ministry of Fiscal Affairs (ECJ 26 October 1983) para 8. 18 See Barents (1994), p. 34. 19 Barents (1994), pp. 34–35, McMahon (2007), pp. 22–23. 17

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means to the maximum to achieve a fair standard of living, or that this provision was to provide a guarantee against a reduction in individual earnings because of changes in common agricultural policy.20 Since both interpretations are difficult to defend, it must be accepted that the implementation of (b) objective requires the application of both policies, in a long and short term. Their interrelation is left to the discretion of Union institutions.21 Ensuring a Fair Standard of Living This objective of the common agricultural policy, achieving a fair standard of living for the agricultural community, justifies the historical fixing of prices in the common organizations above world prices. However, the same price guarantees were always given to both small farmers as well as agricultural producers involved in production on an industrial scale. Differences in productivity led to even greater differences in earnings. The key legal issues were related to determining whether prices must be reduced, and if necessary, the threatened activity of small-scale agricultural producers must be assisted by supporting their earnings rather than prices if the intention is to maintain their existing role as agricultural producers. The ECJ’s case law points that the emphasis in Article 39.1 (b) TFEU on ensuring a fair standard of living for farmers cannot be interpreted in such a way that it constitutes an obligation for the Union legislator to ensure that the standard of living of farmers does not change in time.22 A similarly unfounded conclusion is that Article 39.1 (b) TFEU indicates that a fair standard of living of farmers must be achieved, in terms of production, by cultivating one and the same agricultural product.23 At the same time, it is not necessary for the implementation of this objective to be associated with the need to maintain the quantity of production of a specific agricultural product at the same level every year.24 An interpretative approach that would accept unchanging agricultural production would in essence lead to a significant limitation of the freedom of the Union legislator on his ability to attain other CAP objectives set out in Article 39 TFEU, as well as the premise included in Article 39.1 (b) TFEU per se. An assumption that agricultural production (in terms of quantity and type) must be maintained is not tantamount with 20

Case 139/79, Maizena GmbH v Council (ECJ 29 October 1980) para 26; Case 281/84, Zuckerfabrik Bedburg AG and others v Council and Commission (ECJ 14 January 1987) para 23; case C-311/90, Josef Hierl v Hauptzollamt Regensburg (ECJ 19 March 1992) para 10–15. See also Joined Cases 54-60/76, Compagnie industrielle et agricole du comté de Loheac and others v Council and Commission (Opinion of AG Reischl of 10 March 1977). 21 Case 114/76, Bela-Mühle v Grows-Farm (ECJ 5 July 1977) para 6; Case 49/83, Luxembourg v Commission, (ECJ 12 July 1984) para 13–33. 22 Case C-331/88, Fedesa and others (ECJ 13 November 1990) para 26. 23 Case C-373/11, Panellinios Syndesmos Viomichanion Metapoiisis Kapnou (ECJ 19 September 2013) para 55. 24 Case C-373/11, Panellinios Syndesmos Viomichanion Metapoiisis Kapnou (Opinion of AG Jääskinen of 6 February 2013) para 61.

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achieving a fair standard of living by farmers, especially in view of the changing production conditions and demand for agricultural products. Increasing Earnings 23

On the first issue, the objective of the Treaty is to increase individual earnings. No price reductions took place before 1985, although the price increases for some agricultural products were lower than the inflation rate. It must be noted, however, that the exchange rates of the currencies of individual states could may have had a greater practical significance at that time. The preferred method was maintaining common prices by imposing levies, which considerably reduced the level of guaranteed prices of certain producers and in certain circumstances. The coresponsibility levy on the milk market may be quoted as an example, introduced by Council Regulation No. 1079/77,25 which resulted in a reduction of milk prices for all milk producers. The levy was accepted by the ECJ as a market stabilization measure, while Council Regulation No. 856/8426 established “additional levies” for milk supplies exceeding the “guarantee threshold” quantity (the limit above which the system of guaranteed prices did not operate).27 This levy in turn was imposed at a level that could exceed the subsidized guaranteed price, and as such could constitute a penalty. Moreover, the common organization for the sugar market, by Council Regulation No. 1785/81,28 imposed levies even on the basic quotas specified in the Regulation to cover the cost of selling surplus production. Similar solutions were applied in 1986 on grains market. Later on, because of the reforms of the common agricultural policy (starting from the 1991 McSharry reform) the concept of gradual reduction of guaranteed prices for “surplus” agricultural products was adopted, with simultaneous introduction of schemes to directly support farmer earnings.29 5.2.4.

24

Stabilisation of Agricultural Markets (Article 39.1 (c) TFEU)

This point refers to short term policy (up to 1 year) directed at preventing or mitigating excessive fluctuations of prices, supply and demand.30 The provision does not mention the degree or methods of market intervention. Since its scope is

25 Council Regulation (EEC) 1079/77 on a co-responsibility levy and on measures for expanding the markets in milk and milk products, O.J. L 131/6 (1977). 26 Council Regulation (EEC) 856/84 amending Regulation (EEC) 804/68 on the common organization of the market in milk and milk products, O.J. L 90/10 (1984). 27 See Case 138/78, Hans-Markus Stölting v Hauptzollamt Hamburg-Jonas (ECJ 21 February 1979). 28 Council Regulation (EEC) 1785/81 on the common organization of the markets in the sugar sector, O.J. L 177/4 (1981). 29 Popardowski (2010), p. 36. 30 Barents (1994), p. 35. See about role in practice Usher (2001), p. 37.

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limited to “markets”, the policy should not be limited to price intervention; additional income mechanisms as well as production limits may also be applied to stabilize markets.31 Market stabilization cannot be interpreted as elimination of market mechanisms, long-term prices freeze or maintaining unprofitable production. According to common law, an entity cannot demand that its position determined in existing (previous) market conditions be sustained at any cost.32 In effect, this provision may not be understood to mean that the terms and conditions of trade must remain unchanged.33 This objective of the common agricultural policy, stabilizing markets, is in essence linked with another objective of this policy, namely, ensuring supplies of agricultural products. This is because the underlying assumption of agricultural policy is that continuity of supplies may be ensured only by means of production surplus, because it is impossible to expect that the planned quantities of grain or numbers of livestock will be obtained. As such, a system had to be created that would eliminate losses resulting from surplus production as well as shortages caused by production limits. Concerning agricultural products, which the EU was largely capable of providing in sufficient quantities, common organizations (with varying effects) tried to prevent the cyclical appearance of such surpluses and shortages by means of a system of guaranteed prices and guaranteed sales of products for which there was no market. On the one hand the system of price guarantees was to prevent surplus production by reducing guaranteed prices, on the other, undesirable overproduction resulted in imposing the relevant co-responsibility levies mentioned above (as in the case of the milk market). Furthermore, production quotas were imposed (as in case of the sugar market), their legal basis being unsuccessfully challenged before the ECJ, or the “guarantee threshold” rule was introduced, whereby the production surplus could lead to reducing intervention prices (Council Regulation No. 1451/8234).35 5.2.5.

Ensuring of Food Security (Article 39.1 (d) TFEU)

Availability of Supplies This subparagraph applied to the traditional objective of agricultural policy, although it does not indicate the methods to achieve availability of supplies. In 31

Case 46/86, Romkes v Officier van Justitie (ECJ 16 June 1987) para 22. Joined Cases 63-69/72, Wilhelm Werhahn Hansamühle and others v Council (ECJ 13 November 1973) para 11–13; Joined Cases 56-61/74, Kurt Kampffmeyer Mühlenvereinigung KG and others v Commission and Council (ECJ 2 June 1976) para 12; Joined Cases 197-200/80, Ludwigshafener Walzmühle Erling KG and others v Council and Commission (ECJ 17 December 1981) para 28 and 41; Case 106/81, Kind v EEC (ECJ 15 September 1982) para 18. 33 Case 11/74, Union des minotiers de la Champagne v French Government (ECJ 11 July 19754) para 13–26. 34 Council Regulation (EEC) No 1451/82 amending Regulation (EEC) No 2727/75 on the common organization of the market in cereals, O.J. L 164/1 (1982). 35 See Case 250/84, Eridania v Cassa conguaglio zucchero (ECJ 22 January 1986). 32

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effect the objective may be attained by a policy supporting self-sufficiency36 (preference for internal production, public warehousing) or by concluding preferential commercial agreements with third countries. In view of the principles of commercial policy set out in Article 206 (d) TFEU it cannot be used as justification for a policy directed towards total isolation of the internal market from the global market. Supply 26

The term “supplies” fulfils all aspects related to agricultural production. Therefore, decreasing (declining) production may be supported by sustaining prices and subsidies.37 At the same time, this provision justifies changes in the policy in the direction of limiting production surplus, or upholding the policy to secure future supplies.38 The provision also justifies policies concerning the quality of agricultural products to protect public health and consider consumer preferences.39 It also includes measures associated with the intangible aspects of agricultural production, such as humanitarian treatment of animals.40 It is immaterial whether the beneficiaries of the measures leading to ensuring availability of supplies are consumers or the processing industry, it is a sufficient requirement that the products must be included in Annex I.41 5.2.6.

27

Ensuring Reasonable Prices of Food for Consumers (Article 39.1 (e) TFEU)

The fifth point of Article 39.1 TFEU indicates that the scope of common agricultural policy is not limited only to production and first degree processing of agricultural products, but also embraces the distribution stage (“availability”) as well as consumption (“prices”). The “consumer” refers to both the final consumer as well as the processing industry.42 Measures leading to the adoption of evidently inappropriate (unreasonable) prices for the consumer constitute a breach of this provision.43 Another reason why the provision is important is that it reaffirms that Article 39.1 TFEU does not introduce a precedence of interests between the producer and the consumer.44 Nothing seems to indicate that the term “reasonable” (sensible, 36

Usher (2001), p. 37. Case 166/78, Italy v Council (ECJ 12 July 1979) para 18–21. 38 See Joined Cases 3 and 4-6/76, Cornelis Kramer and others (ECJ 14 July 1976) para 21–25. 39 Case 68/86, United Kingdom v Council (ECJ 23 February 1988) para 10; Case 11/88, Commission v Council (ECJ 16 November 1989) para 9. 40 See joined cases 141-143/81, Gerrit Holdijk and others (ECJ 1 April 1982); Case 131/86, United Kingdom v Council (ECJ 23 February 1988). 41 Case C-131/87, Commission v Council (ECJ 16 November 1989) para 23. 42 See case C-131/87, Commission v Council (ECJ 16 November 1989). 43 Case 5/73, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof (ECJ 24 October 1973) para 24–26. 44 Case 31/74, Filippo Galli (ECJ 23 January 1975) para 17. 37

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appropriate) means less in terms of value than “fair” (appropriate) in subparagraph (b) (➔ para 21–24). “Fair” does not mean “highest” (standard of living of farmers), just as “reasonable” does not mean the lowest possible prices.45 The relations between producer earnings and consumer prices, just as their consequences in regulated market conditions, are left to the discretion of the institutions. However, it must be added that few provisions of agricultural law seem to bear in mind ensuring reasonable (appropriate) consumer prices, unless we consider regulations aimed at eliminating product surpluses such as incidental rebates for purchases of specific products (e.g., butter before Christmas). More generally speaking, consumers may benefit from export subsidies if world prices exceed the prices applicable in the EU.46

5.3. Hierarchy of Objectives in Paragraph 1

As indicated above, neither the travaux préparatoires nor the provisions of Article 39.1 TFEU support the interpretation that a certain hierarchy exists between the five subparagraphs of this article. At times literature presents an approach whereby Article 39 TFEU contains a dual hierarchy.47 It is maintained that it contains a distinction between social objectives (“fair standard of living”, “reasonable prices”) and economic ones (“increasing production”, “stabilizing markets”) (➔ para 15– 16). The latter are to constitute the means (methods) of achieving the former. As long as it applies to social objectives, the interests of producers are to have precedence over the interests of consumers (“increasing” individual earnings, reasonable prices). In fact some older judgments48 may be interpreted in the direction that the ECJ was inclined to accept measures preventing market instability (quotas, security instruments) only to the extent they would not threaten the objective of ensuring a fair standard of living. However, the travaux préparatoires indicate that Article 39.1 TFEU was not meant to introduce a hierarchy between various interests but to present a catalogue of all possible objectives characterizing national agricultural policies. It seems that the distinction between social and economic objectives is artificial as each of the points in this article contains economic as well as social implications. The fact that it refers more to production than consumption does not provide an argument that agricultural policy applies primarily to agricultural production and trade, while the measures of protecting consumer interests usually form a part of a general economic policy. Ultimately, as previously mentioned, in many languages the difference between “fair” (equitable) and “reasonable” does not exist. 45

Case 34/62, Germany v Commission (ECJ 15 July 1963). Danielsen (2013), pp. 23–24. 47 Constantinides Megret (1991), p. 5. 48 See Case 34/62, Germany v Commission (ECJ 15 July 1963) and Joined Cases 106-107/1963, Alfred Toepfer and Getreide-Import Gesellschaft v Commission (ECJ 1 July 1965). 46

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5.4. Setting Priorities

29

Since Article 39.1 TFEU contains various contradictory interests either a hierarchy must be established, or priorities must be set by EU institutions acting at their own discretion. The ECJ chose the latter possibility by applying to Article 39 TFEU the principles and interpretations developed with regard to the ECSC Treaty. At an early stage the ECJ stated that “these objectives, which are intended to safeguard the interests of both farmers and consumers, may not all be simultaneously and fully attained, which leads to the conclusion that the Community must balance these interests.”49 Later, the ECJ formulated this approach even more clearly: “In attaining these objectives Community institutions must ensure constant harmonization resulting from the conflict between these objectives taken individually and, where required, grant one of them preference in order to fulfil economic needs or conditions in the context of which the decision is made.”50 This formula became the applicable case law.51 Usually, as reasoning for broad discretionary powers, the ECJ points to the nature of agricultural policy, which requires a constant assessment of the “general economic situation”. Under this approach, the legality of setting precedence is primarily determined by the meaning of the term “temporary”. Further, although this is also a discretionary matter, the use of the word “necessary” (i.e., proportional) subjects this assessment to the ECJ’s review. In this manner a long lasting imbalance between the various interests contained in Article 39.1 TFEU is, at least in theory, excluded.

6.

The Functions of Paragraph 1

6.1. Catalogue of Functions

30

In the light of common law, it is reasonable to raise the question of the significance of Article 39.1 TFEU. The following functions of the provision may be distinguished based on the above comments: (1) it sets the criterion for determining the scope of the common agricultural policy; if a measure is meant to attain one or more objectives set out in Article

49

Case 5/67, Beus (ECJ 13 March 1968) para III. Case 5/73, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof (ECJ 24 October 1973) para 24; Case C-311/90, Josef Hierl v Hauptzollamt Regensburg (ECJ 19 March 1992) para 13; Case C-280/93, Germany v Council (ECJ 5 October 1994) para 47; Case C-324/96, Petridi v Simou and Others (ECJ 26 March 1998) para 3. 51 See, for example, Joined Cases 63-69/72, Wilhelm Werhahn Hansamühle and others v Council (ECJ 13 November 1973); Case 29/77, Roquette Frères (ECJ 20 October 1977); Joined Cases 197200/80, Ludwigshafener Walzmühle Erling KG and others v Council and Commission (ECJ 17 December 1981); Case 59/83, SA Biovilac NV v EEC (ECJ 6 December 1984); Case 203/86, Spain v Council (ECJ 20 September 1988); C-180/96, United Kingdom v Commission (ECJ 5 May 1998). 50

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39.1 TFEU and applies to the agricultural products listed in Annex I it may be based exclusively on Article 43 TFEU;52 (2) it authorizes EU institutions to exercise their discretion on the grounds of Article 43 TFEU;53 (3) it establishes the criterion for appraising the legality of the legal acts based on Article 43 TFEU by the courts;54 (4) the objectives of Article 39.1 TFEU are used to interpret EU legal acts based directly or indirectly on Article 43.55

6.2. Limits for the Legislator

The broad context and diverse features of the objectives set out in Article 39.1 TFEU indicate that the provision does not impose specific (actual) limits on the discretion vested with the EU under Article 43 TFEU (➔ Article 43 TFEU para 14– 15). Since the institutions enjoy a wide scope of discretion in interpreting various interests, they are entitled to set priorities and choose nearly any direction for action depending on their views (political, economic, or social). “Article 39 enables the common agricultural policy to be defined in terms of a wide choice of measures involving guidance or intervention”—as the ECJ stated.56 In effect, Article 39 TFEU does not oblige the EU to conduct an interventionist policy, nor does it require a market economy, essentially leaving the decision on defining the current objectives of the common agricultural policy and the choice of measures to attain them in the sphere of political conditions determined by existing social and economic expectations relating to the agricultural sector.57 According to recent trends in the development of the common agricultural policy, the EU ought to base its policy on the concept of profitable farms, regardless of the fact that most farms are small and play a marginal role in terms of economic conditions. It is true that according to the cited Spaak report one of the objectives of the common agricultural policy ought to be “maintaining the level of sufficient earnings for farms with normal productivity.” However, the wording of Article 39.1 TFEU contains no reference whatsoever to farm productivity. If the purely, or 52

Case 68/86, United Kingdom v Council (ECJ 23 February 1988) para 9. Case 138/78, Stölting v Hauptzollamt Hamburg-Jonas (ECJ 21 February 1979) para 3–7. 54 Case 114/76, Bela-Mühle v Grows-Farm (ECJ 5 July 1977) para 5–6; Case 116/76, Granaria BV v Hoofdproduktschap voor Akkerbouwprodukten (ECJ 5 July 1977) para 15–20; Case 29/77, Roquette Frères (ECJ 20 October 1977) para 29–30; Joined Cases 41-44/70, International Fruit Company and others v Commission (ECJ 13 May 1971) para 70–71. 55 Joined Cases 41-44/70, International Fruit Company and others v Commission (ECJ 13 May 1971) para 70–71; Case 40/72, Schroeder v Germany (ECJ 6 February 1973) para 15–22. 56 See, for example, case 114/76, Bela-Mühle v Grows-Farm (ECJ 5 July 1977) para 6; Case C189/01, Jippes and others (ECJ 12 July 2001) para 80; Case C-331/88, Fedesa (ECJ 13 November 1990) para 8 and 14. 57 See Usher (1988), pp. 40–41; Jurcewicz (2010), pp. 10–11. 53

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predominantly, market oriented approach to the common agricultural policy were to be defended, it would be very difficult to assess, using market criteria, whether the policy contributes to attaining objectives not normally included in these categories, such as, for instance, rural development, humanitarian treatment of animals, environment protection, landscape preservation, etc., which are important for economic cohesion and a social common market.

6.3. Legal Reinterpretation of the Objectives

32

As mentioned above, although the wording of the agricultural provisions of the EEC Treaty has not changed, their interpretation has changed over the years. The same applies to Article 39 TFEU; its interpretation also evolved. The basic objectives of the common agricultural policy indicated in the Treaty were in practice modified by the SEA and were subject to the influences of relevant Commission documents. The SEA established new objectives relating in particular to the issues of social cohesion, regional policy and the environment. The provisions of the SEA in this respect influenced the practice, but not necessarily the law, of EU, and not always in a coherent manner in relation to the changes in the initial assumptions of the common agricultural policy.

6.4. The Objectives According to the Commission

33

On the other hand, in its documents the Commission called for a common agricultural policy adjusted to the context of the world economy. The fundamental principles, namely, one market, preference for own products and financial solidarity, were to be maintained, but market mechanisms were to be given a greater role. For small farmers, special instruments were envisaged to support their earnings. A distinction between supporting the market and supporting earnings, which were closely linked, was appealed for. The Commission positioned the common agricultural policy in a broader context of policies related to rural development. It defined three basic issues, which ought to be considered in the process of attaining the objectives of the common agricultural policy: social and economic cohesion, unavoidable adjustment of farmers’ activity to market conditions, and protection and preservation of the natural environment. Consequently, the point was to diversify structural support measures, to adjust to regional and local conditions, to achieve a stronger economic integration of agriculture, and to develop a policy related to the quality of agricultural products.

6.5. Modification of the Objectives in Case Law

34

Along with a modification of the original objectives of the common agricultural policy, the Court gradually gave them a new interpretation. The judgment in case Jurcewicz/Popardowski

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68/86 First Hormones58 played a fundamental role. It applied to the Council Directive No. 649/85,59 which prohibited the use in livestock farms of certain substances causing hormonal reactions. The ECJ stated that agricultural policy objectives must be conceived in such a manner as to enable the Community institutions to carry out their duties in the light of developments in agriculture and the economy as a whole. The ECJ presented the opinion that Article 43 TFEU taken in entirety provides the appropriate legal basis (as mentioned above) for legislation relating to the production and trade in agricultural products listed in Annex I, in as much as such legislation contributes to attaining one or more objectives of the common agricultural policy set out in Article 39 TFEU. It also made the unique comment that special rules in the sphere of agriculture superseded the general provisions of the Treaty.60 The Court indicated its understandable reluctance to replace the Council decision concerning the relations between the common agricultural policy and other policies by its own judgment. This may be subject to criticism mainly because it may suggest that the ECJ’s judgment was considerably influenced by the potentially adverse effects that a contrary decision could create for the decision making process of future legislation concerning the common market. However, viewed from today’s perspective, the judgment enabled Community institutions, not only those related to agriculture, to try to define the unique role of the common agricultural policy and its objectives in the SEA more clearly.

6.6. Expansion of Tasks

The ECJ’s emerging approach may be observed in subsequent judgments, where it adopted an expanding (from case to case) interpretation of the objectives of the common agricultural policy resulting from Article 39 of the Treaty. In case C-331/ 88 Second Hormones (Fedesa)61 concerning a new version of the Directive on promoting cattle farming, which was declared void for procedural reasons in the abovementioned First Hormones case, associations of manufacturers and distributors of pharmaceuticals produced from animal ingredients operating throughout Europe and in the US, together with farmers and veterinarians, filed a claim with the British court. Challenging the validity of the 1988 medical legislation (Hormone Growth Promoters, Prohibition of Use), which partly introduced Directive 146/8862 to the extent it was invalid, they argued among others that first the Directive was not 58

Case 68/86, United Kingdom v Council (ECJ 23 February 1988). Council Directive 85/649/EEC prohibiting the use in livestock farming of certain substances having a hormonal action, O.J. L. 382/228 (1985). 60 Case 83/78, Pigs Marketing Board v Raymond Redmond (ECJ 29 November 1978) para 64. 61 Case C-331/88, Fedesa (ECJ 13 November 1990). 62 Council Directive 88/146/EEC prohibiting the use in livestock farming of certain substances having a hormonal action, O.J. L 70/16 (1988). 59

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harmonized with the objectives laid out in Article 39 of the Treaty, and second, its actual purpose was to reduce the production of beef, which is an objective that may be legally achieved only under Article 115 of the Treaty. The ECJ found that on the one hand in regulating the conditions of meat production and trade the Directive belongs to the category of measures adopted by common market organizations and in this way promotes the attainment of the objectives under Article 39 TFEU. On the other, the ECJ found that “although [. . .] the possibility of a reduction in surpluses was indeed taken into consideration during the proceedings leading to the adoption of the directive, it does not follow that such a reduction, which is not cited in the preamble to the directive as one of the objectives pursued, was in fact the exclusive or main purpose of the rules adopted.”63 Continuing, the ECJ quoted a sentence from Article 39 TFEU that refers to stabilizing markets and a wide concept of common agricultural policy objectives adopted in the First Hormones case. Finally, it found that in the light of these conditions reduction of agricultural surpluses cannot be considered alien to the objectives of the common agricultural policy.

7. 36

Construction of Article 39.1 TFEU in Case Law

In case 131/87 Commission v Council (Animal Glands)64 relating to trade in animal glands primarily as raw materials for pharmaceutical companies having their place of residence in the Communities, the ECJ reiterated its previous judgment in case 68/86 First Hormones (➔ para 34) and case 131/86 Battery Hens,65 that Article 43 TFEU is the appropriate legal basis for legislation relating both to agricultural policy as well as other objectives. The main questions concerning the determination of legal basis were “whether or not the products concerned [. . .] fall under Annex I of the Treaty” and “whether [the challenged legal measure] contributes to the achievement of one or more objectives of the common agricultural policy.”66 In the ECJ’s opinion, it follows from both the abovementioned cases that fulfilment of these requirements is sufficient to associate the challenged legislation with the sphere of agriculture, that is with Article 43 TFEU. As such, the ECJ found that the measures adopted under Article 43 TFEU might lead to harmonization of objectives. Consequently, in Case 131/87 the Court accepted that the objectives of the common agricultural policy defined in Article 39 TFEU also include making agricultural products available for non-agricultural industries, including pharmaceuticals. This contributed to ensuring supplies as well as making them available to consumers at reasonable prices. The ECJ found that “supplying the demands of

63

Case C-331/88, Fedesa (ECJ 13 November 1990) para 25. Case 131/87, Commission v Council (ECJ 16 November 1989) para 25. 65 Case 131/86, United Kingdom v Council (ECJ 23 February 1988) para 14–16. 66 Case 131/86, United Kingdom v Council (ECJ 23 February 1988) para 19. 64

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industry should not be excluded from those objectives.”67 There is nothing in Article 39 TFEU to justify such an exclusion and many agricultural products are subject to industrial processing. It would be quite arbitrary to exclude them on that ground from the sphere of the common agricultural policy. This broad interpretation was partly based on the opinion of the Advocate General who referred to the fact that “the Netherlands made the fundamental point [...] that provisions on the agricultural policy were to be broadly construed because they were part of the ‘foundations of the Community’”.68

8.

Integration of the CAP with SEA Objectives

8.1. Overview

An analytical approach to Community institutions may lead to the conclusion that a broad understanding of the language concerning the objectives of the common agricultural policy in the Treaty embodied a legal strategy of stronger integration of this policy with the SEA. This was not necessarily a programme strategy or even an expressly formulated one. It consisted in widening the scope of the common agricultural policy to embrace not only agribusiness (agricultural enterprises) or even the food industry, but also companies from outside the agricultural and food sector that use as their raw material products classified by Community law as agricultural products. For these reasons, the strategy may be considered a “dilution” or “attenuation”, which means that it continues to treat agriculture as a special sector and uses a special legal base for this purpose, but increasingly “dilutes” the definition of common agricultural policy.

37

8.2. Integration Strategy

It seems useful to compare the above strategy with two of its possible alternatives. One is the “integration” strategy, which consists in limiting the scope of agriculture as a special sector of Union economy. This would consist in systematic invoking of Article 115 or 114 TFEU instead of Article 43 TFEU as the legal basis for legislation whenever possible, aiming to include agriculture in the general provisions of the Treaty concerning economic integration. This approach was reflected in case C-300/89 Titanium Dioxide relating to environment protection.69

67

Case 131/87, Commission v Council (ECJ 16 November 1989) para 24. Case 131/87, Commission v Council (Opinion of AG Lenz of 12 July 1989) para 33. 69 Case C-300/89, Commission v Council (ECJ 11 June 1991). 68

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8.3. Strategy of Limiting the Scope of CAP

39

Another strategy would consist in limiting the scope of the common agricultural policy to narrowly defined agricultural producers, for instance, in a way that would exclude agribusiness. Strict adherence to Article 43 TFEU as the legal basis for agricultural legislation would lead to its narrow rather than broad interpretation. This approach was adopted by the Commission in relation to at least one structural policy measure in case 312/85 Villa Banfi,70 albeit rejected by the ECJ. Subsequently, however, the Commission changed the rules, authorizing MS to limit the application of special investment support programmes to farmer families. This case applied to a structural policy about which it was easier to argue that the narrow interpretation of the common agricultural policy was intended, or at least admissible. It would be much more difficult to use this argument in relation to the pricing and market policy.

8.4. The Concept of Agriculture in ECJ Case Law

40

The ECJ’s position in the Animal Glands case was characterized by a very flexible concept of “agriculture”, although it upheld Article 43 TFEU as the legal basis for agricultural regulations.71 This approach was consistent with two essential aspects of the development of the common agricultural policy (and its objectives), particularly its economic context and legal form. On the one hand, by giving the common agricultural policy and its objectives a broad interpretation this position was consistent with the increasing globalization and integration of the agricultural and food economy. On the other, retaining Article 43 TFEU, which is one of its special provisions, as the legal basis for agricultural legislation, corresponds with the original structure of the Treaty. This position may also suggest the establishment of a relatively stable legal framework with the view to adjust to the transformation of economic and social relations.

9.

The Significance of Article 39.2 TFEU

9.1. The Addressees

41

Article 39.2 TFEU contains a set of general guidelines addressed to the Union legislator, which constitute an integral part of the objectives contained in paragraph 1. In view of the general nature of these guidelines, they cannot be challenged by entities before national courts.

70 71

Case 312/89, SpA Villa Banfi v Regione Toscana and others (ECJ 18 December 1986). Case 131/87, Commission v Council (ECJ 16 November 1989) para 11–20.

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9.2. The Relations Between Detailed Policies Implemented by the CAP

The presence of paragraph 2 in relation to paragraph 1 of Article 39 TFEU demonstrates that the market and income policy and structural policy in the agricultural sector ought to be mutually related. Article 39.1 TFEU understood literally provides that the objective of ensuring an appropriate standard of living for agricultural producers has to be attained by structural changes resulting mainly from a rational development of agricultural production.72 This causal relationship was particularly embodied in Sicco Mansholta’s presentation at the already cited conference in Stresa in 1958, but was for many years rarely recalled in debates the concerning common agricultural policy.73

42

9.3. Principles

The references contained in Article 39 TFEU, on the one hand to increasing agricultural productivity and on the other, to the need to consider structural and natural disparities between the various agricultural regions, indicate that the common agricultural policy ought to offer more than just a system of supporting earnings (either by a system of assisting prices or by additional schemes). The importance of Article 39.2 TFEU lies mainly in the fact that it confirms a number of principles underlying the objectives set out in paragraph 1. Article 39.1 (a) TFEU reaffirms that that common agricultural policy also applies to agricultural structures.74 More importantly however, Article 39.1 (b) in relation to Article 39.1 (a) TFEU demonstrates that in the agricultural sector EU institutions enjoy a wide scope of discretion. If agricultural policy requires changes, these institutions have the full power to decide what is “fair” (appropriate), as well as how and to what extent it should be introduced (➔ para 21). In addition, this point confirms that the agricultural provisions of the Treaty do not support the argument that the common agricultural policy should be adjusted to free market conditions.

43

9.4. Diversification and Discrimination

Article 39.2 TFEU requires institutions to consider the unique nature of the agricultural sector. The point stipulates that attainment of paragraph 1 objectives requires equalizing regional differences.75 This requirement indicates that the common agricultural policy cannot be based only on measures of general nature, applicable equally to all, widely differing, farms, in other words, equally applicable 72

See Danielsen (2001), p. 24; Popardowski (2010), p. 32. Case 5/67, W. Beus GmbH & Co. v Hauptzollamt München (ECJ 13 March 1968), para III. 74 See Case 230/78, Eridania (ECJ 27 September 1979). 75 Case C-331/88, Fedesa (ECJ 13 November 1990) para 25–26. 73

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to the entire agricultural sector.76 The existing diversification of agriculture (particularly in the regional aspect) needs to be reflected in special provisions. As such, the ban on discrimination must be interpreted in such a way that each situation is treated in accordance with its circumstances (substantive equality).77 What is equality and what is not obviously depends on the assessment of the situation in agriculture by the EU institutions. This means that equal or different treatment is primarily an issue of proportionality under the conditions of Article 40.2 TFEU (➔ Article 40 TFEU para 57). However, the reference to regional disparities in subparagraph (a) clearly indicates that if the common agricultural policy is to be consistent with the Treaty, it ought to be characterized by a diversity of principles depending on the place, time and conditions. From the legal point of view, this meant that Article 39.2 TFEU was an important argument for a reform of the common agricultural policy dominated by price interventions, which aimed to treat entities equally regardless of the wide diversification of EU agriculture.78 On the background of the Treaty regulations, the observed diversification in terms of agricultural productivity and resulting unequal level of development of the agricultural sector in individual MS was confirmed by the fact that, following the reform of the common agricultural policy, a concept of shared competences between EU and MS was adopted in relation to agriculture.79 This is a result of the assumption that proper attainment of the objectives set before EU agriculture requires, in essence, not only measures operating at the Union law level, but also, basing on the decentralization element, creation of legal instruments by MS to increasingly consider the unique features of every state or region as well as the market situation of various products and the relevant agricultural producers.80

9.5. Structural Policy

9.5.1. 46

Grounds and Concept

Article 39.2 TFEU constitutes the basis for the structural policy (in other words, agricultural structures policy) of the EU and MS in the agricultural sector. If that is 76

Case 179/84, Piercarlo Bozzetti v. Invernizzi SpA i Ministro del tesoro (ECJ 9 July 1985) para 33; Case 203/86, Spain v Council and Commission (ECJ 20 September 1988) para 25–30; Joined Cases C-267/88 to C-285/88, Gustave Wuidart et al. v Laiterie coopérative eupenoise société coopérative, et al. (ECJ 21 February 1990) para 30; case C-22/94, The Irish Farmers Association et al. Minister for Agriculture, Food and Forestry, Ireland and Attorney General (ECJ 15 April 1997) para 34. 77 Case 139/77, Denkavit (ECJ 13 June 1978) para 10-12; Case 36/79, Denkavit (ECJ 15 November 1979) para 16. 78 Danielsen (2013), pp. 24–25; Usher (2001), p. 39. 79 Barents (1994), pp. 39–40. 80 Case C-373/11, Panellinios Syndesmos Viomichanion Metapoiisis Kapnou (ECJ 19 September 2013) para 26–27.

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the case, it is necessary to outline, even in general terms, what it consists of and to what it applies, especially as the mechanisms of the market and incomes policy associated with the provisions of Article 40 TFEU (➔ Article 40 TFEU para 24– 47). Structural policy embraces all measures adopted to cause medium and longterm changes in the structure of production, processing and trade in agricultural products.81 The concept of “structure” is associated with the existing model of production, processing, trade, and consumption of agricultural products. The structure of supply and demand for these products depends specifically on natural conditions (climate, quality of the soil, sloping of the land, water resources or irrigation, etc.), demographic conditions (increase or decrease in the rural population or its stagnation), conditions associated with the factors of agricultural production and agricultural production itself (number and size of farms, productivity, farmers’ qualifications, mechanization, infrastructure), etc.82 Changes in these factors and their effects on supply and demand for agricultural products are usually a result of medium term (1–3 years) or long term (3–5 years or longer) actions. 9.5.2.

Relations Between the Market and Incomes Policy (Short Term) and Structural Policy (Long Term)

The optimum solution would be that short-term management of agricultural markets were a function of long-term perspectives, defining the general framework of objectives and measures addressed to the rural community as a whole. Within this framework, in the context of long-term objectives, the operation of short-term measures applying to economic structures (revenues, productivity, disparity between individual regions), social aspects (employment), environmental issues, etc. would be assessed. However, very often the common agricultural policy operates according to the reverse principle, objectives and measures of agricultural markets management are determined by short term political and economic requirements; consequently, structural policy only has a complementary character. 9.5.3.

Instruments of Structural Policy

Structural policy measures may be widely diversified. They may take the form of principles concerning, for instance, ownership rights (in extreme situations, nationalization of land, collective farming, but also consolidation of farmlands, pension legislation), production (environmental legislation, regulations concerning the quality and trade in animal feed and seeds, sanitary, veterinary and phyto-sanitary legislation), trade (rules related to the quality of products), behavior on the market (rules concerning competition and producer associations), or may take the form of subsidies (for instance, for increasing professional qualifications, modernization of farms, abandoning agricultural activity, conversion or extensification of production, 81 82

47

Popardowski (2010), pp. 49–50. See Lichorowicz (1996), pp. 17–56; Popardowski (2010), pp. 33–47.

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afforestation, infrastructure improvement, etc.). This short list of possible structural policy measures demonstrates that the harmonization of legislation and coordination of national support constitute the main instruments of the common agricultural policy in the agricultural sector.83 9.5.4. 49

Although both “market policy” and “structural policy” are economic terms, the differences between them have important legal significance for the common agricultural policy. The distinction was very clear in the structure of the European Agricultural Guidelines and Guarantee Fund (EAGGF), which applied different rules to expenses covered from the Guidelines Section and the Guarantee Section. The significance of the distinction considerably exceeded the mere organization of agricultural expenditure. As a starting point, it must be stated that in the past a strict division between these two policies reflected the approach to Community (now Union) competences in the sphere of agriculture. Although the Community’s right to regulate agricultural relations by means of short-term investments was not challenged, there was no general agreement as to the Community’s competences on agricultural structures. It was generally maintained that the Treaty did not authorize the Community to take regional policy action. As such, all the Community actions in this respect ought to be indirect in nature and limited to a soft form of coordination. 9.5.5.

50

Distinction Between Market Policy and Structural Policy

Permanent Agricultural Structures Committee

The decision to establish a permanent agricultural structures committee in 1962 was a reflection of this approach. Its preamble laid out the basic rule, whereby structural policy constitutes a part of the common agricultural policy necessary for the development and operation of the common organization for agricultural products. While remaining consistent with the Treaty and the resolution of the Stresa Conference, the decision clearly states that the common agricultural policy contains more than an isolated market and pricing policy.84 Further, the preamble mentions three principles on the basis of which the future agricultural structures policy will be formulated. First, this policy ought to be strictly coordinated with the market and pricing policy (relations between short and long-term policies). The second is that this policy ought to be harmonized with regional policy (agricultural policy as part of the general economic policy). Third, because structural policy usually refers to issues at the regional or local level, the MS are primarily responsible for its implementation (the principle of subsidiarity). These principles indicate that the role of the Union in this regard is mainly limited

83 84

See about structural policy Cardwell (2004), pp. 24–42. Lichorowicz (1996), pp. 17–18.

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to coordinating national policies of the MS, in particular to harmonizing them with the objectives of the common agricultural policy and general EU objectives. Due to the resistance of MS the 1963 proposal of the Commission to establish a separate financial instrument in the form of a European Agricultural Structural Development Fund was rejected, and the Council decided to include structural measures in the Guidelines Section of the general European Agricultural Guidelines and Guarantee Fund mentioned above, which was divided into two parts by Council Regulation 17/64.85 The moderate means of the Guidelines Section (in comparison with the Guarantee Section) granted between 1964 and 1977 for modernization of the structure of production or trade were awarded directly by the Commission (on the basis of Council Regulation 17/64) by approving projects based on a development programme for a given region. These projects were co-financed by the beneficiary (the recipient), the MS and the Guidelines Section. Applications for the subsidy were submitted to the Commission by individual MS after prior approval. At present, two funds have been created on the basis of Council Regulation 1290/2005 on financing the common agricultural policy: the European Agricultural Guarantee Fund (EAGF), designed to finance market expenses, and the European Agricultural Fund for Rural Development (EAFRD)86 (on the funds ➔ Article 40 TFEU para 58–68).

9.6. Priorities of the Common Agricultural Policy in the Context of Article 39.2 TFEU

Accordingly, among others, this “national” approach, the distinction between the two policies also reflects the diverse priorities of the Community legislator. For nearly a decade the common agricultural policy was actually nothing more than a market and pricing policy. Important issues related to agricultural structures, such as the role of producer organizations or coordination of national support, were regulated only on an interim basis by Regulation 26/6287 (➔ Article 42 TFEU para 11 and 15). Only in the 1970-ties did Community structural measures gain some significance. However, even today the common agricultural policy on agricultural structures is still less important, in financial terms, in comparison with short-term interventionist spending. After the creation of a price guarantee system, the Commission could devote more attention to agricultural structures. In 1968, the Commission presented a memorandum “Agriculture 1980”, which is better known as the

85

Council Regulation 17/64/EEC on the conditions for granting aid from the European Agricultural Guidance and Guarantee Fund, O.J. L 34/586 (1964). 86 Council Regulation (EC) 1290/2005 on the financing of the common agricultural policy, O.J. L 209/1 (2005). 87 Council Regulation (EEC) 26/62 applying certain rules of competition to production of and trade in agricultural products, O.J. Series I Volume 1959–1962 pp. 129–130.

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(Second) Mansholt Plan.88 This plan contained proposals of far reaching reforms of Community agriculture over a ten-year perspective. The objectives it outlined, increase in average farm size, reduction of employment in agriculture, would require substantial revision of national legislation on agricultural land and leases, various social (aid) measures, including reforming the social security system, activities aimed at improving the status of producer organizations, etc. A directive was to be the main tool to implement this plan.

9.7. Common Undertakings

52

Controversies regarding the EU’s competence in relation to structural undertakings and the resulting lack of a general concept of long-term development of the agricultural sector are reflected in the provisions of the Council Regulation 729/7089 concerning the Guidelines Section. According to these provisions, financing of this section includes activities that may be considered “common”, which refers to the Council decisions aimed to attain the objectives defined in Article 39.1 TFEU, including structural changes required for the proper operation of the common market. It would appear that the provision is only a narrow interpretation of the structural policy concept. In fact, it seems to contradict the integrity of Article 39.1 TFEU objectives. Any actions affecting the structure of production, trade, and processing also unavoidably affect the availability of supplies, market stability, etc.

9.8. Level of Centralization of Both Policies

53

More importantly, the distinction between the two policies also conveyed to the technique of their legal regulation. For many years the market and pricing policy was a synonym of strongly centralized market regulation, implemented as part of the common market organization for a given product. Unlike the unified and homogenous short-term policy, where the MS only have an executive role, the highly heterogeneous combination of activities known as the “structural policy” was nothing more than a weak form of coordination of national activities undertaken in this regard. The three basic 1972 Directives,90 which for a decade 88 COM(68) 1000, Bulletin CE 1969, no. 1. See also Lichorowicz (1996), pp. 24–47; Popardowski (2010), pp. 33–36. 89 Council Regulation (EEC) 729/70 on the financing of the common agricultural policy, O.J. L 94/ 13 (1970). 90 Council Directive 72/159/EEC the modernization of farms, O.J. L 96/1 (1972); Council Directive 72/160/EEC concerning measures to encourage the cessation of farming and the reallocation of utilized agricultural area for the purposes of structural improvement, O.J. L 96/9 (1972); Council Directive 72/161/EEC concerning the provision of socio-economic guidance for and the acquisition of occupational skills by persons engaged in agriculture, O.J. L 96/15 (1972).

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constituted the “hard core” of the Community’s structural policy, reflected this indirect form of managing the market. Both the legal form of these instruments (directives), as well as their content indicate that the MS were not ready to accept any direct intervention of the Community in this respect. The fragments quoted below, contained in identical wording in the preamble of each of the three directives, clearly demonstrate this approach of the MS: “Whereas, because of the diversity of their causes, nature and gravity, structural problems in agriculture may require solutions which vary according to region and are capable of adjustment over a period of time; whereas such solutions must contribute to the overall economic and social development of each region concerned; whereas the best results can be achieved if, acting on the basis of Community concepts and criteria, Member States implement the common measures individually through their own legislative and administrative procedures, and if, in addition, they themselves determine, on the basis of conditions laid down by the Community, the extent to which such measures should be intensified or concentrated on certain regions.”91

9.9. Legal Instruments

In the past, the difference between market and pricing policy and structural policy was specifically illustrated by the form of legal regulations. The first was mainly the domain of Regulations, while structural policy measures were regulated by means of Directives.92 These entirely different regulatory models reflected the lack of coordination between short and long-term objectives and instruments of common agricultural policy, which was in sharp contradiction with the integrated approach defined in Article 39.1 TFEU.

54

9.10. Agricultural Structures and the Provisions of the Treaty

The provisions of the Treaty concerning agriculture do not provide any arguments supporting the opinion that the distinction between the market and pricing policy and structural policy has any legal significance on Union competences. Article 43 TFEU only mentions the “common agricultural policy” (an indivisible concept), its objective being to achieve a situation in the Union agricultural sector that, according to paragraph 3 (b) of this Article, will resemble the situations existing on the national market (➔ Article 43 TFEU para 53–60). In addition, Article 39.1 TFEU clearly indicates that short-term and long-term measures belong to the same policy.

91

See Council Directive 72/161/EEC concerning the provision of socio-economic guidance for and the acquisition of occupational skills by persons engaged in agriculture, O.J. L 96/15 (1972). 92 Popardowski (2010), pp. 3–8.

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9.11. Agricultural Structures and the General Objectives of the Treaty

56

57

The most important legal argument in favor of the interpretation that the common agricultural policy ought to apply to agricultural structures is based on the system of the provisions of the Treaty relating to agriculture and their relationship with the general objectives of the Community. Since the rationale of the common agricultural policy is ultimately to preserve the unity of the common market, it ought to apply to agricultural structures to consolidate economic and social cohesion of the EU. Within the system of the Treaty’s provisions, the common agricultural policy constitutes an integral part of general EU policy to maintain market unity by improving its structures. The contribution to creating strong economic and social structures, as a necessary condition for long-term market unity, is a function that the common agricultural policy shares with all other Community policies. Before adoption of the TFEU Article 3 (e) reflected this approach, relating this policy to the two main objectives of the Community defined in Article 2, that is establishment of a common market and strict coordination of the policies of MS. At present, it is based on Article 3 TEU and Articles 3–6 (particularly Article 4) TFEU. This status of the common agricultural policy is confirmed expressis verbis by the ECJ’s case law as well as Article 174 TFEU. In practice, this means that based on the regional development plan, funds designed for improving agricultural structures are combined with funds from other sources (such as the European Social Fund, European Regional Development Fund, budget allocations), including national public, quasi-public and private investments, which is frequently referred to as the “integrated” approach.

9.12. EU Competences

58

The fact that the activities of the EU on agricultural structures consist mainly in harmonizing national activities by establishing various Union legal frameworks and co-financing does not support the argument that from the legal point of view the Union’s structural policy cannot take any other form than coordination of the national policies of MS. This interpretation could suggest that on agricultural structures, the MS remain entitled to exercise their own authority and that they are only obliged to coordinate their actions in cooperation with the Community. It seems that in the context of the agricultural provisions of the Treaty, this argument has to be rejected. The objectives and scope of the common agricultural policy, as mentioned above, include all activities needed to organize a common agricultural market, which will ensure its unity both in the short-term as well as long-term perspective. In addition, before adoption of the TFEU, it was maintained that under Article 43 the right to formulate and implement the common agricultural policy was included in the comprehensive competences of the Community (➔ Article 43 TFEU para 26–27). It was thus accepted that it is the EU that decides to what extent the MS remain competent concerning agricultural structures. It was considered that, depending on the selection of actions and measures to adjust agricultural Jurcewicz/Popardowski

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structures to the requirements following from the objectives defined in Article 39 TFEU, the EU may, within the scope of its discretionary powers, either choose the option of actual common policy or decide to merely coordinate the national policies of MS. After the adoption of the TFEU, the situation was clarified. Article 4 TFEU expressly states that agriculture and fisheries belong to the competences shared between the EU and the MS. It may therefore be legitimately claimed that the status of regulations relating to the given agricultural issues is, in essence, a blend of political decisions made at EU level and those of the MS. At the same time, the model of shaping and implementing the common agricultural policy thus adopted gives more emphasis to the decentralization element. Delegation of wider law making competences to the MS allows agricultural policy to be more flexible in the context of the existing diversity of agriculture in the individual MS. The observable disproportions result not only from the different environmental factors that determine the size and type of production, but also from the various levels of structural development of Union agriculture, which became even more visible after the enlargement of the Union by new MS.

List of Cases ECJ 15.07.1963, 34/62, Germany v Commission, ECLI:EU:C:1963:18 [cit. in para 27, 28] ECJ 01.07.1965, 106-107/63, Alfred Toepfer and Getreide-Import Gesellschaft v Commission, ECLI:EU:C:1965:65 [cit. in para 28] ECJ 13.03.1968, 5/67, W. Beus GmbH & Co. v Hauptzollamt München, ECLI:EU: C:1968:13 [cit. in para 16,29, 42] ECJ 18.06.1970, 72/69, Hauptzollamt Bremen-Freihafen v Bremer Handelsgesellschaft, ECLI:EU:C:1970:57 [cit. in para 16] ECJ 17.12.1970, 11/70, Internationale Handelsgesellschaft, ECLI:EU:C:1970:114 [cit. in para 2] ECJ 17.12.1970, 25/70, Einfuhr- und Vorratsstelle für Getreide und Futtermittel v Köster and Berodt & Co, ECLI:EU:C:1970:115 [cit. in para 2, 15] ECJ 13.05.1971, 41-44/70, International Fruit Company, ECLI:EU:C:1971:53 [cit. in para 30] ECJ 06.02.1973, 40/72, Schroeder v Germany, ECLI:EU:C:1973:14 [cit. in para 30] ECJ 22.03.1973, 72/72, Einfuhr- und Vorratsstelle für Getreide und Futtermittel v Baer-Getreide GmbH, ECLI:EU:C:1973:36 [cit. in para 10] ECJ 24.10.1973, 5/73, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof, ECLI:EU:C:1973:109 [cit. in para 16,27, 29] ECJ 13.11.1973, 63-69/72, Wilhelm Werhahn Hansamühle and others v Council, ECLI:EU:C:1973:121 [cit. in para 24,29] ECJ 10.12.1974, 48/74, Charmasson v Minister for Economic Affairs and Finance, ECLI:EU:C:1974:137 [cit. in para 10] ECJ 23.01.1975, 31/74, Filippo Galli, ECLI:EU:C:1975:8 [cit. in para 27] Jurcewicz/Popardowski

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ECJ 11.07.1975, 11/74, Union des minotiers de la Champagne v French Government, ECLI:EU:C:1974:84 [cit. in para 24] ECJ 02.06.1976, 56-61/74, Kurt Kampffmeyer Mühlenvereinigung KG and others v Commission and Council, ECLI:EU:C:1976:78 [cit. in para 24] ECJ 05.07.1977, 114/76, Bela-Mühle Josef Bergmann KG v Grows-Farm GmbH & CO. KG, ECLI:EU:C:1977:116 [cit. in para 20, 30, 31] ECJ 14.07.1976, 3 and 4-6/76, Cornelis Kramer and others, ECLI:EU:C:1976:114 [cit. in para 26] ECJ 05.07.1977, 116/76, Granaria BV v Hoofdproduktschap voor Akkerbouwprodukten, ECLI:EU:C:1977:117 [cit. in para 30] ECJ 20.10.1977, 29/77, SA Roquette Frères v French State - Administration des douanes, ECLI:EU:C:1977:164 [cit. in para 29, 30] ECJ 13.06.1978, 139/77, Denkavit, ECLI:EU:C:1978:126 [cit. in para 44] ECJ 29.11.1978, 83/78, Pigs Marketing Board v Raymond Redmond, ECLI:EU: C:1978:214 [cit. in para 34] ECJ 21.02.1979, 138/78, Hans-Markus Stölting v Hauptzollamt Hamburg-Jonas, ECLI:EU:C:1979:46 [cit. in para 23,30] ECJ 12.07.1979, 166/78, Italy v Council, ECLI:EU:C:1979:195 [cit. in para 26] ECJ 27.09.1979, 230/78, Eridania, ECLI:EU:C:1979:216 [cit. in para 15,43] ECJ 15.11.1979, 36/79, Denkavit, ECLI:EU:C:1979:258 [cit. in para 44] ECJ 29.10.1980, 139/79, Maizena GmbH v Council, ECLI:EU:C:1980:250 [cit. in para 20] ECJ 10.03.1981, 36/80 and 71/80, Irish Creamery Milk Suppliers Association, ECLI:EU:C:1981:62 [cit. in para 17] ECJ 17.12.1981, 197-200/80, Ludwigshafener Walzmühle Erling KG and others v Council and Commission, ECLI:EU:C:1981:311 [cit. in para 24, 29] ECJ 01.04.1982, 141/81 and 143/81, Gerrit Holdijk and others, ECLI:EU: C:1982:122 [cit. in para 26] ECJ 15.09.1982, 106/81 Julius Kind KG v EEC, ECLI:EU:C:1982:291 [cit. in para 24] ECJ 26.10.1983, 297/82, De Samvirkende Danske Landboforeninger v Ministry of Fiscal Affairs, ECLI:EU:C:1983:298 [cit. in para 20] ECJ 07.02.1984, 237/82, Jongeneel Kaas, ECLI:EU:C:1984:44 [cit. in para 3] ECJ 12.07.1984, 49/83, Luxembourg v Commission, ECLI:EU:C:1984:268 [cit. in para 21] ECJ 06.12.1984, 59/83, SA Biovilac NV v EEC, ECLI:EU:C:1984:380 [cit. in para 29] ECJ 09.07.1985, 179/84, Piercarlo Bozzetti v Invernizzi SpA i Ministro del tesoro, ECLI:EU:C:1985:306 [cit. in para 44] ECJ 22.01.1986, 250/84, Eridania v Cassa conguaglio zucchero, ECLI:EU: C:1986:22 [cit. in para 24] ECJ 18.09.1986, 116/82, Commission v Germany, ECLI:EU:C:1986:322 [cit. in para 15] ECJ 14.01.1987, 281/84, Zuckerfabrik Bedburg AG and others v Council and Commission, ECLI:EU:C:1987:3 [cit. in para 20] Jurcewicz/Popardowski

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ECJ 16.06.1987, 46/86, Romkes v Officier van Justitie, ECLI:EU:C:1987:287 [cit. in para 24] ECJ 23.02.1988, 68/86, United Kingdom v Council, ECLI:EU:C:1988:85 [cit. in para 3, 10, 11, 26, 30, 34, 36] ECJ 23.02.1988, 131/86, United Kingdom v Council, ECLI:EU:C:1988:86 [cit. in para 4, 26, 36] ECJ 20.09.1988, 203/86, Spain v Council, ECLI:EU:C:1988:420 [cit. in para 29, 44] ECJ 16.11.1989, 131/87, Commission v Council, ECLI:EU:C:1989:581 [cit. in para 4, 26, 27, 36, 40] ECJ 21.02.1990, 267/88 to 285/88, Gustave Wuidart et al. v Laiterie coopérative eupenoise société coopérative, et al., ECLI:EU:C:1990:79 [cit. in para 44] ECJ 13.11.1990, C-331/88, Fedesa, ECLI:EU:C:1990:391 [cit. in para 22, 31, 35, 44] ECJ 21.02.1991, C-143/88 and C-92/89, Zuckerfabrik Süderdithmarschen AG v Hauptzollamt Itzehoe and Zuckerfabrik Soest GmbH v Hauptzollamt Paderborn, ECLI:EU:C:1991:65 [cit. in para 15] ECJ 11.06.1991, C-300/89, Commission v Council, ECLI:EU:C:1991:244 [cit. in para 38] ECJ 19.03.1992, C-311/90, Josef Hierl v Hauptzollamt Regensburg, ECLI:EU: C:1992:138 [cit. in para 20, 29] ECJ 05.10.1994, C-280/93, Germany v Council, ECLI:EU:C:1994:367 [cit. in para 29] ECJ 15.04.1997, C-22/94, The Irish Farmers Association, ECLI:EU:C:1997:187 [cit. in para 44] ECJ 05.05.998, C-180/96, United Kingdom v Commission, ECLI:EU:C:1998:192 [cit. in para 4, 29] ECJ 12.07.2001, C-189/01, Jippes, ECLI:EU:C:2001:420 [cit. in para 31] ECJ 16.07.2006, C-428/07, Horvath, ECLI:EU:C:2009:458 [cit. in para 10] ECJ 26.03.1998, C-324/96, Odette Nikou Petridi Anonymos Kapnemporiki AE v Athanasia Simou and Others, ECLI:EU:C:1998:138 [cit. in para 29] ECJ 12.07.2012, C-59/11, Association Kokopelli v Graines Baumaux SAS, ECLI: EU:C:2012:447 [cit. in para 19] ECJ 19.09.2013, C-373/11, Panellinios Syndesmos Viomichanion Metapoiisis Kapnou, ECLI:EU:C:2013:567 [cit. in para 22, 45]

References Barents, R. (1994). The agricultural law of the EC. The Hague: Wolters Kluwer International. Cardwell, M. (2004). The European model of agriculture. Oxford: OUP. Constantinides Megret, C. (1991). La politigue agricole commune en question. Paris: A. Pedome. Danielsen, J. H. (2013). EU agricultural law. The Hague: Wolters Kluwer International. Jurcewicz, A. (2004). Ochrona zdrowia publicznego w świetle postanowień TWE dotyczących handlu rolnego. In R. Budzinowski (Ed.), Problemy prawa rolnego i ochrony środowiska.

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Profesorowi Wiktorowi Pawlakowi w dziewięćdziesiątą rocznicę urodzin (pp. 55–68). Wydawnictwo Forum Naukowe: Poznań. Jurcewicz, A. (2010). Zadania wspólnej polityki rolnej. In A. Jurcewicz (Ed.), Prawo i polityka rolna Unii Europejskiej (pp. 14–20). Instytut Wydawniczy EuroPrawo: Warsaw. Korzycka-Iwanow, M. (2007). Prawo żywnościowe. Zarys prawa polskiego i wspólnotowego. Warsaw: Lexis Nexis. Lichorowicz, A. (1996). Problematyka struktur agrarnych w ustawodawstwie Wspólnoty Europejskiej. Kraków: Kantor Wydawniczy Zakamycze. McMahon, J. A. (2007). EU agricultural law. Oxford: OUP. Miąsik, D., Półtorak, N., & Wróbel, A. (Eds.). (2012). Trakat o Funkcjonowaniu Unii Europejskiej. Warsaw: Wolters Kluwer Polska. Popardowski, P. (2010). Ewolucja wspólnej polityki rolnej. In A. Jurcewicz (Ed.), Prawo i polityka rolna Unii Europejskiej (pp. 31–54). Warsaw: Instytut Wydawniczy EuroPrawo. Usher, J. A. (1988). Legal aspects of agriculture in European community. Oxford: OUP. Usher, J. A. (2001). Legal aspects of agriculture in European community. Oxford: OUP.

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Article 40 [Common Organisation of Agricultural Markets] (ex-Article 34 TEC) 1. In order to attain the objectives set out in Article 39, a common organization of agricultural markets shall be established.2, 8–10 This organization shall take one of the following forms, depending on the product concerned:11–14 a) common rules on competition; b) compulsory coordination of the organizations;15–17 c) a European market organization.8–17

various

national

market

2. The common organization established in accordance with paragraph 1 may include all measures required to attain the objectives set out in Article 39,18–23 in particular regulation of prices,25–29 aids for the production and marketing of the various products,38–43 storage and carryover arrangements30–34 and common machinery for stabilizing imports and exports.48–51 The common organization shall be limited to pursuit of the objectives set out in Article 39 and shall exclude any discrimination between producers or consumers within the Union.52–56 Any common price policy shall be based on common criteria and uniform methods of calculation. 3. In order to enable the common organization referred to in paragraph 1 to attain its objectives, one or more agricultural guidance and guarantee funds may be set up.58–68

Contents 1. 2. 3. 4. 5.

6.

#

Significance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Evolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Character . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 System Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 The Concept of Common Organization of Agricultural Markets . . . . . . . . . . . . . . . . . . . . . . . . . 8 5.1. Introductory Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 5.2. Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5.3. The Common Organization of Agricultural Markets in the Light of European Court of Justice Case Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5.4. Legal Forms of the Common Organization of Agricultural Markets . . . . . . . . . . . . 11 5.5. Common Markets Organization and a Market Organization . . . . . . . . . . . . . . . . . . . . . 14 5.6. National Market Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Legal Measures Regulating Agricultural Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 6.1. Preliminary Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 6.2. Choice of Measures for Regulating Agricultural Markets . . . . . . . . . . . . . . . . . . . . . . . 21 6.3. Review by the ECJ of the Measures Adopted Within the Framework of the Common Organization of Agricultural Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Springer Nature Switzerland AG 2021 H.-J. Blanke, S. Mangiameli (eds.), Treaty on the Functioning of the European Union – A Commentary, Springer Commentaries on International and European Law, https://doi.org/10.1007/978-3-030-43511-0_41

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Instruments of Intervention on the Agricultural Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1. The Market and Pricing Policy Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2. Common Agricultural Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3. Intervention Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4. Intervention Buying . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5. Agricultural Products Storage Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6. Currency Exchange Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7. Direct Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8. Direct Subsidies in New Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Legal Measures of Limiting Agricultural Production (Production Quotas) . . . . . . . . . . . . . 9. Legal Measures in Trade with Third Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Role of the Ban on Discrimination of Producers or Consumers . . . . . . . . . . . . . . . . . . . . . . . . 10.1. Introductory Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.2. Subjective Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3. Objective Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. Principle of Proportionality in the Light of Union Agricultural Law . . . . . . . . . . . . . . . . . . . 12. Financing of the Common Agricultural Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.1. European Agriculture Guidance and Guarantee Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2. The Guarantee Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.3. The Guidance Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4. EAGF and EAFRD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.5. Managing the Funds Allocated for the Agricultural Sector . . . . . . . . . . . . . . . . . . . . . . 12.6. Methods of Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.7. Scope of Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.8. Financial Liability of the EU and the Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Cases References

1. 1

24 24 26 29 30 33 35 38 42 44 48 52 52 53 54 57 58 58 62 63 64 65 66 67 68

Significance

Article 40 TFEU has a very general nature. In substance, it reflects a number of important issues related to the establishment and operation of the common agricultural policy. It points to the admissible legal forms of a common organization of agricultural markets (paragraph 1), the means of regulating common agricultural policy (paragraph 2) and outlines the essential mechanism of financing Union agriculture (paragraph 3). The article also embodies the principle of non-discrimination of agricultural producers and consumers in the area of production and trade in agricultural products, which is of key importance from the perspective of formulating Union legislation concerning agriculture (paragraph 2 subparagraph 2). In addition, it reaffirms the application of the principle of proportionality concerning agricultural legislation (paragraph 1 subparagraph 1). The issues raised in Article 40 TFEU and the ways they are formulated confirm the approach that agriculture is of special significance for the Union economy. At the same time, the various instruments concerning the establishment and operation of a common organization of agricultural markets indicated in it grant the Union legislator a wide range of discretionary powers as to the degree and form of integration of Union agriculture and the methods of attaining the objectives of the Jurcewicz/Popardowski

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agricultural policy set out in Article 39 TFEU (➔ Article 39 TFEU para 16–28). This regulatory approach is a consequence of the complexity of agricultural issues and the different levels of development of individual agricultural markets in the MS. Granting the Union legislator a wide spectrum of regulatory instruments enables the adjustment of common agricultural policy to the changing economic conditions that appear in Union agriculture. At the same time, it allows for the adjustment of agricultural policy to the current situation on the markets for agricultural products.1

2.

Evolution

Despite numerous reforms in the common agricultural policy, the wording of Article 40 TFEU (former Article 34 EC) has not changed. Modifications were only introduced on the numbering of its individual clauses. Based on the Amsterdam Treaty, paragraph 1 of Article 40 in its original wording was repealed. This provision stated that MS would gradually develop a common agricultural policy in the course of a transition period and shall establish it not later than by the expiry of this period, that is, by 31 December 1969. Repealing Article 40.1 in its original wording was a consequence of the fact that in view of the establishment of a common organization of agricultural markets before the expiry of the transition period the obligation of the MS in this respect became redundant.

3.

Character

The nature of Article 40 TFEU is that of a general standard. It only defines the general framework related to the establishment and operation of a common markets organization. As such, the provision does not give rise to any direct effects and cannot provide the basis for deriving individual rights or obligations from its contents. Similarly, Article 40 TFEU does not create any obligation to act for the MS. The general language of regulatory assumptions concerning the common markets organization creates the need to introduce more specific standards by means of secondary legislation to enable their implementation. This applies to all the aspects mentioned in Article 40 TFEU, i.e., establishing admissible forms of a common market organization (paragraph 1), defining the legal means of regulating common agricultural policy (paragraph 2) and creating agricultural funds (paragraph 3).

1

2

Thiele, in Mögele and Erlbacher (2011), pp. 24–25.

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System Context

In terms of substance and function, Article 40 TFEU is firmly connected with other provisions of the Treaty related to the common agricultural policy (the provisions of Title III of Part 3 of the Treaty). The system context indicates that there is an inherent relationship between the common agricultural policy and the common market organization indicated in Article 40 TFEU. In the light of the provisions of the Treaty, the common agricultural policy is the basic instrument that regulates the operation of the agricultural products market. This relationship is reaffirmed by Article 40 TFEU when it refers to the existence of a common market organization in relation to the entire agricultural sector (the “agricultural products” sector) (➔ Article 38 TFEU para 12–16). Thus, the operation of a common organization of agricultural markets considers the effects of the principle of unity of the common market. As the regulation contained in Article 40 TFEU concerning the common organization of agricultural markets refers mainly to issues associated with supply and trade in agricultural products, the principle of free movement of goods is of considerable importance for its correct operation. This principle also applies to trade in agricultural products. It means that the free movement of goods, being one of the foundations of the common market, is a factor that permanently affects the operation of the common organization of agricultural markets.2 The common organization of agricultural markets created under Article 40 TFEU is an element of the common market. The existence of a common organization of agricultural markets within the framework of the common market is associated with the need to maintain coherence between the instruments established for this purpose and the principle of free movement of goods. This is also indicated by the ECJ that emphasizes in its case law that the purpose of the free movement of goods reflecting the effort to implement a common market (and in a further time frame also its proper operation) does not contradict the objectives pursued within the framework of the common agricultural policy. As such, no gradation must be looked for in the relationship between the free movement of goods and the common agricultural policy, which would enable a permanent precedence to be given to one over the other. Thus, the principle of free movement of goods and the common agricultural policy ought to be considered in coherence.3 Since Article 40 TFEU addresses the issue of financing agriculture (paragraph 3), the provisions of the Treaty relating to budget income and expenses, adopting and controlling the budget as well as protection of the EU’s financial interests (Article 310–325 TFEU) are of considerable significance for its interpretation. As the regulations concerning protection of the Union’s financial interests are

2 Case C-293/02, Jersey Produce Marketing Organisation (ECJ 8 November 2005) para 17–21; Case 231/78, Commission v United Kingdom (“Potates”) (ECJ 29 March 1979) para 12–18; Case 288/83, Commission v Ireland (ECJ 11 June 1985) para 23. 3 Case 80-81/77, Les fils de Henri Ramel (ECJ 20 April 1978) para 16–17.

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essentially sector oriented, the same applies to financing Union agriculture. As such, the instruments for protecting the EU’s financial interests established in the area of the common agricultural policy, due to their sector orientation, are strictly adjusted to the nature of this policy. The prohibition to discriminate producers and consumers in Union agricultural legislation underlined in Article 40 TFEU is associated with the general principle of equality. On the other hand the principle of proportionality indicated in this provision (paragraph 2 subparagraph 1) corresponds in substance to Article 5.4 TEU (➔ Article 5 TEU para 12–13), which defines the general principle of proportionality concerning all Union policies. Thus, the application of Article 40 TFEU requires considering the effects of the general principles of Union law that, due to their general nature, also apply to agricultural legislation.

5.

7

The Concept of Common Organization of Agricultural Markets

5.1. Introductory Comments

Article 40 TFEU provides for the establishment of a common organization of agricultural markets, the purpose of which is to attain the objectives of the common agricultural policy indicated in Article 39 TFEU. Significantly, having introduced the obligation to establish a common organization of agricultural markets the Union legislator decided not to introduce a legal definition of a “common organization of agricultural markets” in the Treaty.4 The Treaty only defines the meaning of the term indirectly, for instance, by indicating in Article 40 TFEU the instruments of regulating market policy (paragraph 2), rules of financing agriculture (paragraph 3) and the requirement to replace national organizations by a common organization of agricultural markets. (Article 40.2 TFEU).5 As such, the Treaty essentially provides only a framework definition of a common organization of agricultural markets. This is related to the fact that Union institutions enjoy a wide range of discretion in specifying the regulatory assumptions concerning the operation of the common market organization. In the light of the provisions of the Treaty, the issue of legal form within which the common organization of agricultural markets is to operate has not been determined in any way (Article 40.2(2) TFEU). Similarly, despite the clear emphasis in paragraph 2 of the importance of market instruments to be used to attain the objectives of the common agricultural policy, a closed catalogue of measures to attain Article 39 TFEU objectives is not provided. As such, the approach to the common organization of agricultural markets is largely determined by political, economic, and social factors, which become known in relation to the agricultural sector. 4 5

Danielsen (2013), p. 53. Tomkiewicz, in Miąsik et al. (2012), pp. 702–703; Thiele, in Mögele and Erlbacher (2011), p. 26.

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In this context the approach to the common organization of agricultural markets, especially gradation of the importance of the measures it involves for attaining the objectives of the common agricultural policy is not static. Over time, this is evident in the gradual evolution of the importance of market instruments used by the common organization of agricultural markets in relation to instruments of structural nature. From the reforms of the common agricultural policy, a gradual departure is visible from influencing the agricultural sector (the common organization of agricultural markets in the strict sense) by purely market means, in favor of structural/market means (the common organization of agricultural markets in the broad sense).6

5.2. Essence

9

The purpose of establishing a common organization of agricultural markets is to create a single mechanism of influencing the agricultural sector in the EU. The creation of a common organization of agricultural markets was at the same time associated with the liquidation of national markets for agricultural products previously operating in the MS. These markets were characterized by independence in terms of degree and method of influencing agriculture and diversity on the degree and methods of financing agricultural activity. In other words, the common organization of agricultural markets created under Article 40.1 TFEU replaced the national organizations of agricultural markets characterized by various degrees of market interventionism. In this way, the entire agricultural sector in the Union was placed within the framework of a common market organization. This was also associated with applying a single Union policy to this sector (the common agricultural policy).

5.3. The Common Organization of Agricultural Markets in the Light of European Court of Justice Case Law

10

Because of the absence of a legal definition of the “common organization of agricultural markets” and the strictly framework nature of the provisions of the Treaty in this respect, the semantic scope of the term and definition of the nature of the operations of a common organization of agricultural markets are essentially shaped by the case law of the ECJ. The approach of the ECJ reflected in its judicial practice is that the common organization of the agricultural markets is a catalogue of legal instruments established by means of common regulations in influencing a specific sector of the agricultural products market to attain the objectives set out in

6

This context is aptly indicated by Thiele, in Mögele and Erlbacher (2011), pp. 26–29.

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Article 39 TFEU.7 Emphasizing the importance of market instruments adopted within the framework of the common organization of agricultural markets the ECJ indicates that a common organization is primarily oriented at eliminating the negative effects of the free play of the forces of supply and demand on the agricultural products market. The corrective nature of these instruments assumes their direct impact on the supply of agricultural products and the level of farmer earnings. Thus, within the framework of the common organization we observe a unique combination of interventionist instruments and an economic market mechanism.8

5.4. Legal Forms of the Common Organization of Agricultural Markets

Article 40.1 TFEU provides that establishment of a common organization of agricultural markets may take place in one of the following three legal forms: 1) common competition rules (Article 40.1 (a) TFEU); 2) obligatory coordination of various national market organizations (Article 40.1 (b) TFEU); 3) a European market organization (Article 40.1 (c) TFEU).9 Each of these forms is characterized by a different degree of interventionism into the operation of the market mechanism. The forms of common organization of agricultural markets distinguished in Article 40 TFEU do not in any way indicate the legislator’s preference for any one of them (no hierarchy of forms).10 The choice by the Council of one of the possible forms (European market organization) was a political decision. It was associated with determining the scope of public intervention in the agricultural sector and the degree of integration of national agricultural markets. In this respect, Article 40 TFEU only indicates that the choice of the adopted form of common market organization must serve the attainment of the objectives of the common agricultural policy set out in Article 39 TFEU to the extent it is required for their attainment. At the same time, it stipulates that such choice must not result in creating conditions leading to discrimination of agricultural producers or consumers.11

7

See, for example, Case 222/82, Apple and Pear Development Council (ECJ 13 December 1983); Case 218/85, Cerafel v Le Campion (ECJ 25 November 1986); Case 159/73, Hannoversche Zucker AG v Hauptzollamt Hannover (ECJ 30 January 1974); Case C-31/70, Deutsche Getreide- und Futtermittel-Handelsgesellschaft mbH v Hauptzollamt Hamburg-Altona (ECJ 15 December 1970); Case C-83/78, Pigs Marketing Board v Raymond Redmond (ECJ 29 November 1978). 8 Joined Cases 90-91/63, Commission v Luxembourg and Belgium (ECJ 13 November 1964) p. 634. 9 Danielsen (2013), p. 54. 10 Tomkiewicz, in Miąsik et al. (2012), p. 703; Barents (1994), pp. 43–44. 11 Tomkiewicz, in Miąsik et al. (2012), pp. 703–704.

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12

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The forms of common agricultural policy mentioned in Article 40.1 TFEU are characterized by various methods of intervention and degree of integration in the area of Union agriculture. However, it must be noted that the choice of form of operations of a common organization of agricultural markets did not directly translate into adopting a specific model of implementation of the common agricultural policy. The shape of the common agricultural policy and choice of legal and economic instruments for implementing it is essentially determined by current political, social, and economic conditions. Thus, the choice of form of the common organization of agricultural markets does not rule out various types of policies or applying other intervention instruments, which would be adequate for current political, social, and economic conditions.12 Analyzing the options for the common organization of agricultural markets indicated in Article 40.1 TFEU, it must be pointed that the article only indicates the initial legal forms of the created organization of agricultural markets. It sets no preferences on the appropriate form of common organization of agricultural markets. The option whereby the created common organization of agricultural markets would be based on common competition rules was rejected, as in fact it assumed the application of regulatory solutions appropriate for other sectors of the Union economy to the agricultural sector (Articles 101–109 TFEU). This solution would mean that the mechanism of influencing other sectors of the Union economy was also adequate for the implementation of the objectives of the common agricultural policy (Article 39 TFEU).13 Similarly, the concept of basing the common organization of agricultural markets on obligatory coordination of national organizations of agricultural markets was also rejected. In terms of the political decisions leading to a determination of the preferred legal form of the common organization of agricultural markets, it was considered not to guarantee the preferred position of agriculture in the Union economy.14 Ultimately, the option of a European market organization was chosen as the main form of implementing the objectives of the common agricultural policy. This solution was associated with applying the strongest form of integration to Union agriculture. Attainment of the objectives of the common agricultural policy based on the European market organization means that interventionist instruments will be applied to the Union’s agricultural sector as a whole, and not only to the agricultural products markets of individual Member States.

5.5. Common Markets Organization and a Market Organization

14

On the background of Article 40.1 TFEU, the Union legislator uses two concepts, that of “common organization of agricultural markets” (Article 40.1 TFEU in 12

Jurcewicz, in Jurcewicz et al. (1995), pp. 80–81. See McMahon (2007), pp. 25–26. 14 Tomkiewicz, in Miąsik et al. (2012), pp. 703–704. 13

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principio) and “market organization” (Article 40.1 (c) TFEU). The first concept is treated as a general approach to agricultural markets in the entire EU agricultural sector. The second on the other hand is one of the admissible forms of organization of agricultural markets. Due to the closeness of these semantic designates the doctrine emphasizes that the existing terminological distinction in Article 40.1 TFEU between a “common organization of agricultural market” and “market organization” is unequivocal. The reference to the grammatical construction does not allow for a clear distinction between these terms. Therefore, without a more detailed justification, literature points that the concept of common organization of agricultural markets refers to the entire agricultural sector due to the implications resulting from the unity of the common market.15 Consequently, it is accepted that Article 40.1 TFEU does not impose the obligation to establish market organizations for each agricultural product embraced by the common agricultural policy. As such, Article 40.1 TFEU does not indicate an absolute requirement to create sector market organizations, which would apply to individual agricultural products.16

5.6. National Market Organization

Apart from the distinction into “common organization of agricultural markets” and “market organization” in Article 40.1 TFEU, the legislator also refers to national market organizations. These regulate the operations of agricultural markets in individual MS. Before the national organizations were included within the framework of the common agricultural policy, they reflected the existence of a diverse system of influencing agriculture in these states. They were also characterized by diverse approaches to applying interventionist measures to the agricultural sector. The introduction of a common agricultural policy did not ipso iure rule out the existence of national market organizations. Under Article 40.1 TFEU, they were to (essentially) operate until a common organization of agricultural markets was established. The existence of national market organizations was allowed only provided it does not result in trade restrictions between the MS. This required maintaining cohesion between the instruments created by national market organizations and the freedoms of the internal market. Inclusion of agriculture into the framework of the common agricultural policy was at the same time associated with inclusion of the agricultural sector within the framework of the internal market. The same applied to existing national market organizations. As such, in case of absence of a common market organization for a specific agricultural product, the regulatory solutions applied on the grounds of national law cannot exclude or restrict the

15 16

Barents (1994), p. 44. Barents (1994), p. 44; Tomkiewicz, in Miąsik et al. (2012), p. 706.

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freedoms governing the operation of the single market of such products.17 National organizations of agricultural markets related to products not covered by the common organization of agricultural markets are subject to the provisions of the Treaty pertaining to the internal market.18 The concept of “national organization of agricultural markets” was defined in considerably more detail by the ECJ’s case law. By specifying the nature of a national organization of agricultural markets it emphasizes that such organization consists of a set of legal measures subjecting trade in specific agricultural products to review by (national) public authorities to ensure appropriate standards of living for farmers, stabilization of agricultural markets, security of supplies, appropriate prices for consumers as well as to increase productivity. The objectives implemented by national organizations of agricultural markets are therefore identical to those of the common organization of agricultural markets. In both cases, the goal is to attain the objectives of the common agricultural policy (Article 39 TFEU) (➔ Article 39 TFEU para 12–16).

6.

Legal Measures Regulating Agricultural Markets

6.1. Preliminary Comments

18

19

Article 40.2 (1) TFEU mentions the legal measures for regulating market policy. Under Article 40.1 TFEU, application of these measures is only justified to the extent they are required to attain the objectives of the common agricultural policy. The legal instruments of intervention in the field of agriculture mentioned in Article 40.1 TFEU are strictly of market nature. In addition, these instruments do not create a closed catalogue of permitted measures for regulating the agricultural sector.19 Thus, public intervention in agriculture does not have to be limited to market measures if measures of other nature serve to attain the objectives indicated in Article 39 TFEU.20 The fact that Article 40.2 TFEU refers only to instruments related to pricing and income only reflects the assumption made at the time of

17

Case 237/82, Jongeneel Kaas (ECJ 7 February 1984) para 12–16; Case 118/78, Meijer BV v Department of Trade and others (ECJ 29 March 1979) para 1–8; Case 68/76, Commission v France (ECJ 16 March 1977) para 17–23; Case 288/83, Commission v Ireland (ECJ 11 June 1985) para 12; Case 232/78, Commission v France (ECJ 25 September 1979) para 7–10; Case 16/69, Commission v Italy (ECJ 15 October 1969) para 6. See also McMahon (2007), pp. 31–32. 18 Case 293/02, Jersey Produce Marketing Organisation (ECJ 8 November 2005) para 39–40; Case 68/76, Commission v France (ECJ 16 March 1977) para 17–21; Case 231/78, Commission v United Kingdom (ECJ 29 March 1979) para 12–18; Case 288/83, Commission v Ireland (ECJ 11 June 1985) para 23. 19 ECJ case law equivocally emphasizes that the instruments of regulating agricultural markets defined in Article 40.2 TFEU only serve as examples. See, for example, C-280/93, Germany v Council (ECJ 5 October 1994) para 54–57. 20 Tomkiewicz (2000), pp. 21–22.

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formulating the Treaty, that the market ought to be the main area of public activity in attaining the objectives of the common agricultural policy. The following changes in the approach to agriculture and agricultural policy, embodied in successive reforms of the CAP, resulted in including instruments of structural nature within the framework of the common organization of agricultural markets.21

20

6.2. Choice of Measures for Regulating Agricultural Markets

Article 40.2 TFEU does not set any legislator preferences on the choice of measures of influencing the agricultural sector. The outlined market instruments, as mentioned above, only serve as examples. Thus, it is indicated that in the light of Article 40 TFEU the Union authorities are free to choose measures necessary to attain the objectives of the common agricultural policy.22 However, the adopted instruments, being belonging to the general body of Union legislation, must not breach the general principles of EU law. ECJ case law emphasizes the discretionary nature of the competences of Union bodies on the choice of legal measures within the framework of the common organization of agricultural markets. It accentuates that the legislative bodies ought to choose instruments for regulating the given agricultural market that will balance to the greatest possible extent the contradictory political, social, and economic interests, which become known in the sphere of agriculture.23 The wide diversity of interests at play in agriculture justifies the discretionary powers vested with the Union bodies in relation to shaping agricultural policy and choosing legal instruments to implement it. Therefore, for the activities undertaken in this area the legislative bodies only bear political responsibility on the grounds of Article 40 and Article 43 TFEU.24

21

22

6.3. Review by the ECJ of the Measures Adopted Within the Framework of the Common Organization of Agricultural Markets

The discretionary nature of the competences of EU legislative bodies on adopting measures for regulating agricultural markets considerably affects the scope of the 21

Thiele, in Mögele and Erlbacher (2011), p. 29. See about intervention instruments Danielsen (2013), pp. 55–56. 23 Case 57/72, Westzucker GmbH v Einfuhr- und Vorratsstelle für Zucker (ECJ 14 March 1973) para 17; Case 265/87, Schräder v Hauptzollamt Gronau (ECJ 11 July 1989) para 21-24; Joined Cases C-133/93, C-300/93 and C-362/93, Crispoltoni and others v Fattoria Autonoma Tabacchi and others (ECJ 5 October 1994) para 51–52. Tomkiewicz (2000), p. 22. 24 Case 265/87, Schräder v Hauptzollamt Gronau (ECJ 11 July 1989) para 21–23; Joined Cases C133/93, C-300/93 and C-362/93, Crispoltoni and others v Fattoria Autonoma Tabacchi and others (ECJ 5 October 1994) para 42. 22

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ECJ’s review. Since Union bodies enjoy a wide range of discretion in the area of the common agricultural policy, the ECJ’s interference into the adopted measures is only justified if such measures are clearly incommensurate from the point of view of the attainment of Article 39 objectives. This is the only case when a determination that the body exceeded its powers concerning the measures adopted within the framework of the common agricultural policy is justified.

7.

Instruments of Intervention on the Agricultural Markets

7.1. The Market and Pricing Policy Model

24

25

In the initial period of its development, the common agricultural policy was characterized by direct influence over the agricultural product markets. As such, market intervention measures were of essential significance. The adopted measures made it possible to shape the market mechanism mainly by means of effects on supply. This form of intervention affected the level of prices for agricultural products offered on the market. Consequently, prices were maintained at levels ensuring profitability of agricultural production. Article 40.2 TFEU expressly refers to the market and pricing policy model by underlining that attainment of the objectives defined in Article 39 TFEU ought to take place mainly by means of regulating prices, support for the production and marketing of various products and storage and transport systems. It must be noted that the emphasis in Article 40.2 TFEU on market intervention instruments follows from the approach that dominated at the time of formulating the common agricultural policy, that it is necessary to increase the productive potential of the agricultural sector, which was to lead to achieving self-sufficiency in agricultural production. Guaranteed high prices and the system of intervention buying that was set up allowed the prices for agricultural products to be maintained at a relatively high level. It also had an effect on increasing farmer earnings. Because of this policy, agricultural output increased significantly, leading, in the longer timeframe to overproduction. At this point, it must be noted that the assumptions of the prices and income policy concerning the agricultural sector were already implemented in the transition period. Under the now repealed Article 44.2 during the transition period, the MS were entitled to introduce minimum prices, which “should not obstruct the development of natural trade preferences between Member States.” The rule of community preference expressed in this provision ultimately led to privileges for the interests of the former EC.25

25

Jurcewicz, in Jurcewicz et al. (1995), p. 58.

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7.2. Common Agricultural Prices

Common agricultural prices are important instruments that determine agricultural incomes. These prices are regulated. Adoption of a non-market method of shaping prices for agricultural products was to lead to increasing farmer earnings as well as achieving other objectives of the common agricultural policy defined in Article 39 TFEU.26 The fact that common prices were associated with the effort to ensure profitability of agricultural production resulted in prices for agricultural products being set at higher than market levels.27 It must be emphasized that the level of common prices for agricultural products was essentially an effect of a political compromise between the MS, but it also considered the interests of farmer groups represented by transnational organizations (COPA—Comité des Organisations Professionnelles Agricoles de la CE, COGECA—Comité Général de la Cooperation Agricole de la CE).28 Article 40.2 TFEU does not specify the mechanism for determining common prices. In this respect, it only indicates that the prices ought to be determined based on common criteria and a single calculation method. Once it was assumed that the main objective was to ensure sufficient earnings for farmers, in practice the level of common prices for agricultural products was determined without considering the actual costs of agricultural production. The reference point for determining common prices for agricultural products was the estimated cost incurred by farms where such production costs were highest. This mechanism of setting common prices for agricultural products allowed them to be fixed at an equal level for all farms (regardless of the size of production and the income achieved). The assumption underlying this method of setting common prices was that this would lead to unifying the conditions of agricultural activity in all the MS.29 The actual effect of this mechanism of setting common agricultural prices was a significant increase in the differences in earnings between individual farms. The reason was that the mechanism involved the application of equal prices to entities whose production costs and production capacity were not equal.30 Consequently, the agricultural producers whose production costs were relatively low or who had large production potential gained an even greater economic advantage over other producers as a result of common agricultural prices set in this way.31 ECJ case law emphasizes that common agricultural prices also apply to wholesale in agricultural products. Thus, the ability of the MS to unilaterally set the level

26

Case 60/75, Russo v AIMA (ECJ 22 January 1976) para 5–7; Case 297/82, Danske Landboforeninger (ECJ 26 October 1983), para 6–8. See McMahon (2007), pp. 40–41. 27 See Usher (2000), pp. 121–125. 28 Tomkiewicz, in Miąsik et al. (2012), p. 709. 29 Tomkiewicz, in Miąsik et al. (2012), p. 710. 30 Jurcewicz, in Jurcewicz et al. (1995), p. 79. 31 Tomkiewicz, in Miąsik et al. (2012), pp. 710–711.

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27

28

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of prices at the stage of production and wholesale is excluded.32 However, the MS are allowed to set the price levels for agricultural products in retail. Nonetheless, the adoption of instruments for regulating retail prices is only admissible if they do not lead to disruption of the operation of the common organization of agricultural markets.33

7.3. Intervention Prices

29

Intervention prices play a special role among market regulation instruments applied within the framework of the common organization of agricultural markets. The price for a given agricultural product, which reached a certain level (the level of intervention price), became the basis for public intervention on the market for the given agricultural product, or for taking other measures that had a direct impact on the supply and demand mechanism.

7.4. Intervention Buying

30

The assumption was that intervention buying would serve as a special measure of regulating the agricultural products market. It was associated with taking interventionist action in the role of market participants. Thus, intervention buying was to be limited only to extraordinary situations emerging on the agricultural products market. Its objective was to protect the earnings of farmers in circumstances of significant decline in the prices for agricultural products at times of increased supply. Despite these structural assumptions in practice intervention buying became the most important instrument for regulating agricultural markets. This was because of a systematic increase in guaranteed prices intervention buying became the normal method of setting prices on the agricultural products market.34 Consequently, intervention buying occurred essentially every time when the farmer delivered to the buying station agricultural products that fulfilled the parameters enabling the application of this intervention measure.35 For farmers, this intervention mechanism was very interesting since it did not require them to search the market for clients interested in buying the offered goods. The function of client was in fact taken over by the public authorities responsible for carrying out intervention buying. 32

Case 31/74, Filippo Galli (ECJ 23 January 1975) para 10–32. Case 10/79, Gaetano Toffoli and others v Regione Veneto (ECJ 6 November 1979) para 12; Case 65/75, Riccardo Tasca (ECJ 26 February 1976) para 5. 34 Tomkiewicz, in Miąsik et al. (2012), p. 711. 35 Case 49/71, Hagen OGH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (ECJ 1 February 1972) para 9-23; Case 34/70, Syndicat national du commerce extérieur des céréales and others v O.N.I.C. (ECJ 17 December 1970) para 4–18. 33

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The intervention buying mechanism was sometimes used for speculation on the markets for agricultural products subject to intervention. As such, in its case law, the ECJ underlines that it is unlawful for entities that take advantage of imprecise Community regulations concerning intervention buying for the purpose of speculation to invoke the principle of certainty of law.36 From the beginning of the 1990s, the role of intervention buying as an instrument of influencing the agricultural products market is systematically decreasing. This is due to the considerably stricter regime governing its application. The adopted approach is a result of the view that intervention buying significantly modifies the market relationships between agricultural producers and the buyers of agricultural products and requires substantial financial costs. The restrictions apply mainly to storage and the rules of redistributing agricultural products accumulated by national intervention agencies. In this respect, agricultural products may be reintroduced on the common market only if the sale prices do not lead to distorting the institution of the intervention price, that is, they cannot be distributed at a price that is too low in relation to the fixed intervention price.37 Agricultural products accumulated during intervention buying may also be exported to third countries or donated to developing countries in the form of free food aid.38

31

32

7.5. Agricultural Products Storage Subsidies

The use of subsidies for storing agricultural products allows them to be temporarily withdrawn from the market. Because of reduced supply on the market, the instrument indirectly affects the prices of the agricultural products offered on the market. The indirect market effect of agricultural products storage subsidies enabled the budget costs of intervention instruments applied directly on the agricultural markets to be significantly reduced. In terms of structure, the institution of storage subsidies assumed the transfer of funding for storing normatively defined agricultural products in licensed warehouses based on an agreement with an intervention agency, at the cost and risk of such agency.39

36 Case C-2/75, Einfuhr- und Vorratsstelle für Getreide und Futtermittel v C. Mackprang (ECJ 27 May 1975) para 3–4. 37 Case 79/87, OBEA v Établissements Soules & Cie SA (ECJ 23 February 1988) para 9–10. 38 See Case 56/86, SA Société pour l’exportation des sucres v OBEA (ECJ 18 March 1987). More detail Tomkiewicz, in Miąsik et al. (2012), pp. 711–712. 39 Case 117/83, Könecke v Bundesanstalt für landwirtschaftliche Marktordnung (ECJ 25 September 1984) para 21–23; Case 215/88, Casa Fleischhandels-GmbH v Bundesanstalt für landwirtschaftliche Marktordnung (ECJ 13 July 1989) para 18.

Jurcewicz/Popardowski

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34

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7.6. Currency Exchange Rates

35

36

37

This instrument has a historical character. During the period when the ECU clearing unit was used, it enabled favorable conversion, for agricultural producers, of the ECU into national currencies. Single agricultural prices as well as other instruments of financial nature supporting agriculture were denominated in ECU. Thus, the preferential exchange rate of the ECU into national currencies (so-called green money) enabled additional support for agricultural earnings.40 It must be pointed that setting the appropriate rate of the so-called green currency exchange rate was an activity of strictly political nature.41 Because of the so-called green exchange rates, substantial differences in the prices for agricultural products appeared between the MS. It also caused considerable differences in trading agricultural products between the individual MS. The green currency mechanism was associated with an instrument referred to as monetary compensatory amounts. This was an adjustment instrument. It was used to prevent differences between the official national currency exchange rates and the green exchange rates. Use of this mechanism, formally abolished in the early 1990s, was questioned by ECJ case law on many occasions. In the cases it heard, the ECJ emphasized that the adopted conversion mechanism between the socalled green currencies and national currencies is not sufficiently normatively founded.42

7.7. Direct Subsidies

38

39

Direct subsidies, introduced in 1992 are an essential instrument for supporting farmer earnings. Their introduction was a result of CAP reforms that resulted from increasing problems within the EU caused by the operation of the existing model of agricultural policy, based primarily on direct market influence. External factors also had an important, direct effect on the introduction of direct subsidies. This was associated mainly with the concept of liberalizing agricultural policy in view of the pending GATT (later WTO). On the international scene, the EU was increasingly expected to reduce public intervention consisting of influencing the market mechanism and its protectionist activities on trade in agricultural products with third countries. In structural terms, the aim of introducing direct subsidies was to compensate the farmers for the decrease in their earnings resulting from the reduction of prices for 40 Case C-138/78, Stölting v Hauptzollamt Hamburg-Jonas (ECJ 21 February 1979) para 9–11; Case 49/79, Richard Pool v Council (ECJ 4 March 1980) para 2. 41 See about this instrument McMahon (2007), pp. 42–50. 42 Case C-4/79, Société coopérative “Providence agricole de la Champagne” v ONIC (ECJ 15 October 1980) para 38; Case C-94/77, Fratelli Zerbone Snc v Amministrazione delle finanze dello Stato (ECJ 31 January 1978) para 21–32; Case 10/73, Rewe Zentral AG v Hauptzollamt Kehl (ECJ 24 October 1973) para 10–21.

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agricultural products. This method of supporting earnings was to further increase the competitive advantage of Union agriculture in international trade. It must be emphasized that the structure of direct subsidies significantly modified the previous approach to supporting Union agriculture. These payments were directly related to supporting farmer incomes, while the previously dominating interventionist measures affected them only indirectly. They assumed influencing the prices of agricultural products, which indirectly also translated into ensuring adequate farmer earnings. As such, the introduction of direct subsidies caused a clear distinction between support of individual markets for agricultural products and farmer earnings, which had been treated equally in the context of the previously applied measures. In accordance with the reforms of the common agricultural policy, the assumptions of direct payments and the mechanisms for their receipt by farmers were gradually modified. This was reflected among others by replacing several different direct payments by a single farm payment and decoupling the amount of payment received from the level of current agricultural production. The solutions established in this respect resulted from the agricultural arrangements adopted in the course of the GATT/WTO negotiations. During these negotiations, the EU was expected to abandon its interventionist measures applied directly to agricultural production. A change in contemporary approach to the importance agriculture and the rural communities also affected the change of assumptions underlying direct payments. This involved a departure from the view that agriculture was mainly associated with production, i.e., that it was a special sector of Union economy. To an increasing extent, the EU emphasized the importance of agriculture as a multi-functional area where, apart from the production aspect, structural issues, environment protection, and public health play an equally significant role. Thus, because of successive reforms, receipt by a farmer of direct subsidies was associated with fulfilment of certain requirements in the area of environment protection, food safety, veterinary, and phyto-sanitary regulations (cross-compliance). In defining the assumptions concerning the nature of direct payments, the introduction of the mechanism of gradual reduction of the amount of direct payments (modulation) is an important issue, particularly concerning large farms. This is because the costs associated with the direct payments constitute an important component of the funds that the EU budget allocates for implementing the common agricultural policy. Hence, the effort to limit the application of this mechanism on producers whose economic potential, in the light of a rational economic analysis, does not justify Union support for their earnings.

40

41

7.8. Direct Subsidies in New Member States

From the provisions of the Accession Treaty, a simplified system of single area payments with the ability to supplement them from the national budget (the socalled mixed system) was introduced in the new MS. The treaty provides for different levels of payments for existing members and those newly admitted in Jurcewicz/Popardowski

42

896

43

45

Agriculture and Fisheries

2004, as well as for a 10-year transition period for reaching the full level of direct payments, which is effectively tantamount with a considerable diversification of the level of support for agriculture within the enlarged EU. The issue of gradual increase in the level of direct payments (so-called phrasingin) in the new MS was the object of the determination of the ECJ in Poland v Council.43 The claimant challenged the Decision 281/2004 as contradictory to Article 23 of the Accession Treaty, as it authorized the Council to introduce amendments in the laws concerning accession conditions for new states if necessary. Under Council Regulation 1782/2003,44 new direct payments were adopted for producers of nuts, which were to be applied in full in the old MS while in the new MS the amounts were to be reduced and gradually increased. In the claimant’s opinion, this was prohibited discrimination of agricultural producers from the new MS. However, the ECJ shared the Council’s approach and found that gradual increase of direct payments in the new MS was justified, as the situation of agriculture in these countries was not comparable with that in the EU-15 countries.45

8.

44

Title III

Legal Measures of Limiting Agricultural Production (Production Quotas)

The introduction of production quotas was a response to the application of production promoting intervention measures within the framework of the common agricultural policy. This direct influence on the agricultural products market encouraged farmers to increase production, which resulted in surplus agricultural production already in the 1980s. The resulting market situation required the Union legislator to introduce administrative instruments to halt this increase in agricultural production.46 Production quotas are not expressly mentioned in Article 40.2 TFEU. However, because the purpose of this instrument is to ensure proper operation of the agricultural markets, and as such, it helps to attain the objectives set out in Article 39 TFEU, it is accepted that Article 40.2 (1) TFEU is the basis for its adoption.47 This approach is supported by ECJ case law. It emphasizes that structural

43

Case C-273/04, Poland v Council (ECJ 23 October 2007). Council Regulation (EC) 782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, O.J. L 270/1 (2003). 45 Case C-273/04, Poland v Council (ECJ 23 October 2007) para 85–88. See also Popardowski, in Jurcewicz (2006), pp. 128–133. 46 Canfora (1996), p. 57; Barents (1994), p. 143; Tomkiewicz, in Miąsik et al. (2012), p. 715; Germano (1995), pp. 11–12. 47 Tomkiewicz (2000), pp. 70–72. 44

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overproduction in agriculture justifies any legal measures adopted by the legislator that may bring about limitation of such overproduction, and the measures adopted in this respect are necessary for the attainment of this objective.48 It must be emphasized that the system of production quotas is based on a closed market concept, which protects the interests of existing agricultural producers (i. e., those who produced during a given reference year). The essence of production quotas is that an upper limit of agricultural production for sale in a given commercial year is determined by means of an administrative procedure.49 It is further to be noted that limiting agricultural production also involved a variety of legal measures aiming to limit the number of animals, compensations for withdrawing a part fruit and vegetable production from the market, bonuses for abandoning grape growing, etc.

9.

49

47

Legal Measures in Trade with Third Countries

In the operation of the common agricultural policy, the measures protecting the common market for agricultural products in trade with third countries were of particular significance. The instruments established under Article 40.2 TFEU concerning trade in agricultural products with third countries were meant to enhance the competitive advantage of Union products in comparison with cheaper products from third countries. Thus, the measures adopted under Article 40.2 TFEU implemented the principle of European preference. It was associated with protecting the common market against cheaper products (trade protection by means of import duties, import quotas, protective clauses, and compensation fees) with simultaneous support of exports of “domestic” agricultural produce. Furthermore, protective actions in trade relations with third countries were justified by the objectives of the common agricultural policy. In view of the interventionist activities affecting the increase in prices for agricultural products, it was necessary to support the position of Union agriculture in external relations. This was the only way to implement the objectives of the common agricultural policy defined in Article 39 TFEU in a comprehensive manner. A number of various measures aiming to protect the Union agricultural sector in trade relations with third countries were adopted under Article 40.2 TFEU. The basic instruments of protectionist agricultural policy were compensation fees, subsequently, pursuant to the agricultural agreement of the Uruguay Round of GATT signed in Marrakesh, converted into permanent customs duties. It must be emphasized that compensation fees were questioned by the EC’s trade partners on numerous occasions as a distortion of the rules of international agricultural trade. The legality of these fees was challenged because these measures obstruct

48

46

Case 17/67, Neumann v Hauptzollamt Hof/Saale (ECJ 13 December 1967) p. 453 Canfora (1996), p. 57; Barents (1994), pp. 143–144.

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importers’ access to the European market, already being protected by customs tariffs.50 Interestingly, in its case law the ECJ frequently confirmed the legality of this instrument in the light of the Treaty. It indicated that these instruments are strictly associated with the regime of common agricultural prices. Their function is to protect the EC market, particularly against price distortions on international markets.51 The principle of European preference as reflected in trade with third countries allows Union bodies to establish any protective measures in a situation where the mechanisms applied within the framework of the common agricultural policy prove insufficient.52 On the adoption of such measures, these bodies enjoy a wide degree of freedom. The measures may be determined invalid if they breach the principle of proportionality.53 The basic instrument supporting exports of agricultural products outside the EU customs area are export subsidies. Their purpose is to make up for the differences between common agricultural prices and the lower prices on world markets for agricultural products. As such, export subsidies are designed to create better conditions for the exporter. They guarantee that the level of prices received will be comparable with that of the intervention price on the internal market (although not necessarily identical).54 In its case law, the ECJ notes that the amount of export subsidies should not be based on the arithmetic difference between the common prices and the prices for the given product on world markets.55 At the same time, export subsidies must not lead to a situation where the exporter obtains excessive compensation resulting from the difference between Community prices and world prices.56

50

McMahon (2007), pp. 96–97. Case 17/67, Neumann v Hauptzollamt Hof/Saale (ECJ 13 December 1967) p. 453; Case 113/75, Giordano Frecassetti v Amministrazione delle finanze dello Stato (ECJ 15 June 1976) para 5; Case 58/86, Coopérative agricole d’approvisionnement des Avirons v Receveur des douanes (ECJ 26 March 1987) para 6. 52 Case 112/80, Dürbeck v Hauptzollamt Frankfurt am Main-Flughafen (ECJ 5 May 1981) para 18-20; case 52/81, Faust v Commission (ECJ 28 October 1982) para 14-17; case 265/87, Schräder v Hauptzollamt Gronau (ECJ 11 July 1989) para 15. 53 Case 345/82, Wünsche Handelsgesellschaft GmbH & Co. v Germany (ECJ 12 April 1984) para 27–29. 54 Case 57/72, Westzucker GmbH v Einfuhr—und Vorratsstelle für Zucker (ECJ 14 March 1973) para 12; Case C-94/91, Hans-Otto Wagner GmbH v Fonds d’intervention et de Régularisation du Marché du Sucre (ECJ 8 April 1992) para 19. 55 Case 263/87, Denmark v Commission (ECJ 11 May 1989) para 7–20. 56 Case C-167/82, Nordgetreide GmbH & Co. KG v Hauptzollamt Hamburg-Jonas (ECJ 24 March 1983) para 15–16. 51

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Role of the Ban on Discrimination of Producers or Consumers

10.1. Introductory Comments

Article 40.2 (2) TFEU formulates the rule of no discrimination between producers and consumers within the EU. The rule reflects the general principle of equality.57 Characteristically, the rule of no discrimination formulated in Article 40.2 (2) TFEU, unlike the general principle of equality, relates only to the common agricultural policy and the Union legislation adopted within its framework. The highlight on no discrimination between agricultural producers and consumers in Article 40 TFEU is a consequence of the fact that the common agricultural policy was historically the Community’s first comprehensive sector policy.58

52

10.2. Subjective Scope

The subjective scope of application of the ban on discrimination under Article 40.2 (2) TFEU is very broad. It refers to agricultural producers who ought to enjoy guarantees of equal terms and conditions of competition within the common organization of the agricultural market, and separately to consumers. According to the ECJ case law, the ban on discrimination also applies to importers of agricultural products from outside the EU.59 The reference in Article 40.2 (2) TFEU to agricultural producers and consumers indicates that the no discrimination rule must be applied to different groups, frequently having contradictory interests. As such, ECJ case law indicates that the mutual relations between the interests of agricultural producers and consumers must be determined based on Article 39 TFEU.60

53

10.3. Objective Scope

In substantive terms the rule of no discrimination laid out in Article 40.2 (2) TFEU essentially prohibits different treatment of agricultural producers or consumers who find themselves in similar situations, unless objective circumstances justify different treatment in similar situations.61 The legal measures adopted within the framework of the common market organization, especially intervention mechanisms, 57

Joined Cases 117/76 and 16/77, Ruckdeschel and others v Hauptzollamt Hamburg-St. Annen and others (ECJ 19 October 1977) para 7. 58 Jurcewicz (2006), p. 38. 59 See Case 165/84, Krohn v Bundesanstalt für landwirtschaftliche Marktordnung (ECJ 12 December 1985). 60 Case 5/73, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof (ECJ 24 October 1973) para 26. 61 Barents (1986), pp. 641–643.

Jurcewicz/Popardowski

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900

55

56

Agriculture and Fisheries

cannot be differentiated by region unless based on objective criteria, ensuring that the advantages will be equally distributed between the parties concerned. This rule also excludes the application of the same solutions to entities in different situations if there are no justified reasons for such treatment. The no discrimination rule is contextual in nature. As such, a determination that certain conduct is discriminatory requires a comparative assessment. Therefore, it is primarily necessary to establish whether the agricultural producers or products are in a comparable situation, whether they are subject to different treatment, and whether there are objectively justified reasons to treat them differently due to the objective of a legal regulation or specific nature of a given agricultural market. In these situations, the essence of the determination is establishing whether in the specific factual circumstances there are objective criteria that justify unequal treatment of agricultural producers.62 The rule of no discrimination of producers also applies to national regulations adopted within the framework of the common organization of agricultural markets. As the ECJ emphasized in Klensch Kipgen, Article 40.3 of the Treaty embraces all the legal measures for regulating agricultural markets established within the framework of the common agricultural policy, as well as all national regulations issued in this respect.63

11. 57

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Principle of Proportionality in the Light of Union Agricultural Law

In the light of agricultural legislation, the principle of proportionality of agricultural legislation was formulated in Article 40.2 (1) and Article 40.2 (2) TFEU. According to this provision, “the common organization [. . .] may include all measures required to attain the objectives set out in Article 39” (subparagraph 1), and “the common organization shall be limited to pursuit of the objectives set out in Article 39” (subparagraph 2). The principle of proportionality sets the limits for the intervention of the Community and national legislator as well as the public authorities in the area embraced by the scope of operation of the common organization of agricultural markets.64 The application of the principle of proportionality is associated with the need to link legislative activities with the adopted objectives in such a way that the measures adopted based on these activities are required for the pursuit of these objectives (or commensurate with the limitations imposed).65 According to this approach, the principle of proportionality formulated based on agricultural legislation (Article 40.2 TFEU) is of declaratory nature and specifies the general principle of proportionality defined in Article 5.1 and 5.4 TEU (➔ 62

Jurcewicz (2012), p. 101; Tomkiewicz (2009), p. 249. Joined Cases 201-202/85, Marthe Klensch and others v Secrétaire d’État à l’Agriculture et à la Viticulture (ECJ 25 November 1986) para 17–24. 64 Miąsik (2005), p. 208; Tomkiewicz, in Miąsik et al. (2012), p. 736. 65 Wyrozumska (2002), p. 299. 63

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Article 5 TEU para 12–13). Therefore, since the principle of proportionality is at the same time a general principle of Union law, it applies not only to common organizations of agricultural markets but also to all legal measures adopted under Article 43 TFEU.66

12.

Financing of the Common Agricultural Policy

12.1. European Agriculture Guidance and Guarantee Fund

Financing of Union agriculture is based on Article 40.3 TFEU. This article stipulates the creation of one or several guidance and guarantee funds to pursue the common agricultural policy. The article only sets a general norm and does not determine the premises for creating and operation of the fund in any way. In view of the general approach to the issue of financing agriculture, more specific solutions remained within the powers of the Commission. Initially, it proposed an option of basing financing of agriculture on several funds created separately for each agricultural product market. Ultimately, a unified concept was adopted, which assumed that one fund would be created for the implementation of the objectives of the common agricultural policy, the European Agriculture Guidance and Guarantee Fund (EAGGF) (Regulation 25/6267). The fund operates based on the principle of financial solidarity. This principle, derived from the provisions of Regulation 25/62, stipulates that from the moment of creating a single agricultural market, the EU covers the financial costs of its operation.68 In 1964, under Regulation 17/64,69 the fund was divided into two sections, Guarantee and Guidance, having different tasks corresponding to the traditional division of the common agricultural policy into market and income policy and structural policy.

58

59

60

61

12.2. The Guarantee Section

According to the dualistic division, the Guarantee Section financed expenses associated with interventionist activities on the agricultural markets, particularly designed to support common agricultural prices, intervention buying, subsidies for storage of agricultural products, and consumption and export subsidies. For a short

66

Jurcewicz (2009), p. 109; Neri (1981), p. 652. Council Regulation 25 on the financing of the common agricultural policy, O.J. L 30/991 (1962). 68 Jurcewicz, in Jurcewicz et al. (1995), pp. 49–50. 69 Council Regulation 17/64/EEC on the conditions for granting aid from the European Agricultural Guidance and Guarantee Fund, O. J. L 34/586 (1964). 67

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period, the Guarantee Section also financed expenses designed for the development of rural areas, which are essentially of structural nature (Council Regulation 1258/ 9970). The basic instruments of rural policy financed by the Guarantee section included, among others, structural pensions, supporting agriculture in areas with unfavorable conditions, supporting semi-subsistence farms, increasing the level of education in rural areas, supporting undertakings aimed at conserving and protecting natural resources.

12.3. The Guidance Section

63

On the other hand, the Guidance Section financed long-term activities of structural nature, including particularly those aiming to modernize farms and enhance their competitive advantage, improve agricultural structures, providing financial assistance for young farmers, improving processing and marketing of agricultural products, and improving technical structures associated with farming.

12.4. EAGF and EAFRD

64

On 1 January 2007, the provisions of Council Regulation 1290/200571 dissolved the EAGGF and two funds were created: the European Agricultural Guarantee Fund (EAGF), which was to finance market expenses, and the European Agricultural Fund for Rural Development (EAFRD), which was to finance the development of rural areas. The purpose of creating the latter fund at the Union level was to clearly separate the common agricultural policy from the cohesion policy, as well as to simplify from 1 January 2007 the rules of financing the policy of development of rural areas. Until then expenses for supporting sustainable development of rural areas were financed from several sources: from the EAGGF as well as from other structural funds, including the European Regional Development Fund, European Social Fund and the Cohesion Fund. Funding from the newly created fund assigned for the support of developing rural areas continues to be supplementary to national, regional, and local outlays, under the principle of subsidiarity of Article 5.1 and 5.4. TEU (➔ Article 5 TEU para 12–13).

70 Council Regulation (EC) 1258/1999 on the financing of the common agricultural policy, O.J. L 160/103 (1999). 71 Council Regulation (EC) 1290/2005 on the financing of the common agricultural policy, O.J. L 209/1 (2005).

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12.5. Managing the Funds Allocated for the Agricultural Sector

The EU Commission is directly responsible for the EU budget performance. It is also responsible for financing the Union’s agricultural sector based on the agricultural funds. In managing these funds, the Commission is assisted by the Agricultural Funds Committee, which is an advisory and opinion-making body composed of representatives of the MS with a representative of the EU Commission as its chairperson. However, the national authorities are responsible for the on-going administration of financing obtained from the fund and its utilization. They collect the financing on behalf of the EU and through accredited clearing agencies settle all payments associated with the implementation of the common agricultural policy.72 Accreditation of an agency means that only expenses channelled through such an agency according to a prescribed procedure may be eligible for financing from both the agricultural funds.73

65

12.6. Methods of Financing

Funds from the EAGF are transferred through the EU Commission for disposal by the MS in the form of monthly payments based on the expenses incurred by accredited payment agencies during the reference period. Decisions concerning disbursement of these payments are made by the EU Commission after consulting the fund committee. Rural areas development programmes are implemented by means of co-financing the expenses by the EAFRD and individual MS.

66

12.7. Scope of Financing

The agricultural funds cover all the expenses associated with attainment of the objectives of the common agricultural policy incurred in compliance with the applicable regulations of Union agricultural legislation. The Commission is authorized to carry out detailed analyses of applications for financing expenses from the fund, from the point of view of compliance with the objectives of the common agricultural policy and applicable law.74 The Commission may refuse to finance expenses if it finds that such disbursement would be contrary to the provisions of Union law, which could lead to distortion of the conditions of 72 Joined Cases 51-54/71, P.J. van der Hulst’s Zonen v Produktschap voor Siergewassen (ECJ 23 January 1975) para 18-34; Case 93/71, Orsolina Leonesio v Ministero dell’agricoltura e foreste (ECJ 17 May 1972) para 1-24; Case 31/78, Francesco Bussone v Ministro dell’agricoltura e foreste (ECJ 30 November 1978) para 18-21; Case C-48/91, Netherlands v Commission (ECJ 10 November 1993) para 12-16; Case C-5/03, Greece v Commission (ECJ 7 July 2005) para 40. 73 Tomkiewicz, in Miąsik et al. (2012), p. 745. 74 Case 45/82, Netherlands v Commission (ECJ 15 March 1983) para 20.

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67

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competition between MS and discrimination of agricultural producers within the EU.75 The obligation to prove that the incurred expenses were contrary to applicable regulations lies with the Commission.76

12.8. Financial Liability of the EU and the Member States

68

The ECJ pronounced its opinions concerning the division of responsibility of the EU and the MS on many occasions, in cases involving inaccuracies in payment or untimely payments, thereby setting the limits of financial solidarity in judicial practice.77 According to the Court, the financial consequences of delays or incorrect payments must be borne by the EU. This does not apply to inaccuracies attributable to the MS.

List of Cases ECJ 13.11.1964, 90-91/63, Commission v Luxembourg and Belgium, ECLI:EU: C:1964:80 [cit. in para 10] ECJ 13.12.1967, 17/67, Neumann v Hauptzollamt Hof/Saale, ECLI:EU:C:1967:56 [cit. in para 45, 49] ECJ 15.10.1969, 16/69, Commission v Italy, ECLI:EU:C:1969:47 [cit. in para 16] ECJ 15.12.1970, 31/70, Deutsche Getreide- und Futtermittel-Handelsgesellschaft mbH v Hauptzollamt Hamburg-Altona, ECLI:EU:C:1970:108 [cit. in para 10] ECJ 17.12.1970, 34/70, Syndicat national du commerce extérieur des céréales and others v O.N.I.C., ECLI:EU:C:1970:119 [cit. in para 30] ECJ 01.02.1972, 49/71, Hagen OGH v Einfuhr- und Vorratsstelle für Getreide und Futtermittel, ECLI:EU:C:1972:6 [cit. in para 30] ECJ 17.05.1972, 93/71, Orsolina Leonesio v Ministero dell’agricoltura e foreste, ECLI:EU:C:1972:39 [cit. in para 65] ECJ 14.03.1973, 57/72, Westzucker GmbH v Einfuhr- und Vorratsstelle für Zucker, ECLI:EU:C:1973:30 [cit. in para 22, 51] ECJ 24.10.1973, 10/73, Rewe Zentral AG v Hauptzollamt Kehl, ECLI:EU: C:1973:111 [cit. in para 37] ECJ 30.01.1974, 159/73, Hannoversche Zucker v Hauptzollamt Hannover, ECLI: EU:C:1974:9 [cit. in para 10] ECJ 23.01.1975, 31/74, Filippo Galli, ECLI:EU:C:1975:8 [cit. in para 31] 75

See, for example, Case 347/85, United Kingdom v Commission (ECJ 24 March 1988); Case C48/91, Netherlands v Commission (ECJ 10 November 1993). 76 Case C-281/89, Italy v Commission (ECJ 19 February 1991) para 17–24; Case C-55/91, Italy v Commission (ECJ 6 October 1993) para 13; Case C-278/98, Netherlands v Commission (ECJ 6 March 2001) para 41; Case C-147/99, Italy v Commission (ECJ 22 November 2001) para 8–9. 77 Case 11/76, Netherlands v Commission (ECJ 7 February 1979) para 7; Joined cases 15-16/76, France v Commission (ECJ 7 February 1979) para 9.

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905

ECJ 23.01.1975, 51-54/71, P.J. van der Hulst’s Zonen v Produktschap voor Siergewassen, ECLI:EU:C:1971:128 [cit. in para 65] ECJ 27.05.1975, 2/75, Einfuhr- und Vorratsstelle für Getreide und Futtermittel v C. Mackprang, ECLI:EU:C:1975:66 [cit. in para 31] ECJ 22.01.1976, 60/75, Russo v AIMA, ECLI:EU:C:1976:9 [cit. in para 26] ECJ 26.02.1976, 65/75, Riccardo Tasca, ECLI:EU:C:1976:30 [cit. in para 28] ECJ 15.06.1976, 113/75, Giordano Frecassetti v Amministrazione delle finanze dello Stato, ECLI:EU:C:1976:89 [cit. para 49] ECJ 16.03.1977, 68/76, Commission v France, ECLI:EU:C:1977:48 [cit. in para 16] ECJ 19.10.1977, 117/76 and 16/77, Ruckdeschel and others v Hauptzollamt Hamburg-St. Annen and others, ECLI:EU:C:1977:160 [cit. in para 52] ECJ 31.01.1978, 94/77, Fratelli Zerbone Snc v Amministrazione delle finanze dello Stato, ECLI:EU:C:1978:17 [para 37] ECJ 30.11.1978, 31/78, Francesco Bussone v Ministro dell’agricoltura e foreste, ECLI:EU:C:1978:217 [cit. in para 65] ECJ 20.04.1978, 80-81/77, Les fils de Henri Ramel, ECLI:EU:C:1978:87 [cit. in para 5] ECJ 07.02.1979, 11/76, Netherlands v Commission, ECLI:EU:C:1979:28 [cit. in para 68] ECJ 07.02.1979, 15-16/76, France v Commission, ECLI:EU:C:1979:29 [cit. in para 68] ECJ 21.02.1979, 138/78, Stölting v Hauptzollamt Hamburg-Jonas, ECLI:EU: C:1979:46 [cit. in para 35] ECJ 29.03.1979, 118/78, Meijer BV v Department of Trade and others, ECLI:EU: C:1979:97 [cit. in para 16] ECJ 29.03.1979, 231/78, Commission v United Kingdom (“Potatoes”), ECLI:EU: C:1979:101 [cit. para 5, 16] ECJ 25.09.1979, 232/78, Commission v France, ECLI:EU:C:1979:215 [cit. in para 7-10 and 16] ECJ 06.11.1979, 10/79, Gaetano Toffoli and others v Regione Veneto, ECLI:EU: C:1979:247 [cit. in para 28] ECJ 04.03.1980, 49/79, Richard Pool v Council, ECLI:EU:C:1980:64 [cit. in para 35] ECJ 15.10.1980, 4/79, Société coopérative “Providence agricole de la Champagne” v ONIC, ECLI:EU:C:1980:232 [cit. in para 37] ECJ 05.05.1981, 112/80, Dürbeck v Hauptzollamt Frankfurt am Main-Flughafen, ECLI:EU:C:1981:94 [cit. in para 50] ECJ 28.10.1982, 52/81, Faust v Commission, ECLI:EU:C:1982:369 [cit. para 18] ECJ 15.03.1983, 45/82, Netherlands v Commission, ECLI:EU:C:1983:72 [cit. in para 67] ECJ 24.03.1983, 167/82, Nordgetreide GmbH & Co. KG v Hauptzollamt HamburgJonas, ECLI:EU:C:1983:96 [cit. in para 51] ECJ 26.10.1983, 297/82, Danske Landboforeninger, ECLI:EU:C:1983:298 [cit. in para 26] Jurcewicz/Popardowski

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ECJ 13.12.1983, 222/82, Apple and Pear Development Council, ECLI:EU: C:1983:370 [cit. in para 10] ECJ 07.02.1984, 237/82 Jongeneel Kaas, ECLI:EU:C:1984:44 [cit. in para 10] ECJ 12.04.1984, 345/82 Wünsche v Germany, ECLI:EU:C:1984:166 [para 50] ECJ 25.09.1984, 117/83, Könecke v Bundesanstalt für landwirtschaftliche Marktordnung, ECLI:EU:C:1984:288 [cit. in para 34] ECJ 11.06.1985, 288/83, Commission v Ireland, ECLI:EU:C:1985:251 [cit. in 5, 16] ECJ 12.12.1985, 165/84, Krohn v Bundesanstalt für landwirtschaftliche Marktordnung, ECLI:EU:C:1985:507 [cit. in para 53] ECJ 25.11.1986, 201-202/85, Marthe Klensch and others v Secrétaire d’État à l’Agriculture et à la Viticulture, ECLI:EU:C:1986:439 [cit. in para 56] ECJ 25.11.1986, 218/85, Cerafel v Le Campion, ECLI:EU:C:1986:440 [cit. in para 10] ECJ 18.03.1987, 56/86, SA Société pour l’exportation des sucres v OBEA, ECLI: EU:C:1987:146 [cit. in para 32] ECJ 26.03.1987, 58/86, Coopérative agricole d’approvisionnement des Avirons v Receveur des douanes, ECLI:EU:C:1987:164 [cit. in para 49] ECJ 23.02. 1988, 79/87, OBEA v Établissements Soules & Cie SA, ECLI:EU: C:1988:88 [cit. in para 32] ECJ 24.03.1988, 347/85, United Kingdom v Commission, ECLI:EU:C:1988:170 [cit. in para 67] ECJ 11.05.1989, 263/87, Denmark v Commission, ECLI:EU:C:1989:186 [cit. in para 51] ECJ 11.06.1989, 265/87, Schräder v Hauptzollamt Gronau, ECLI:EU:C:1989:303 [cit. in para 22, 50] ECJ 13.07.1989, 215/88, Casa Fleischhandels-GmbH v Bundesanstalt für landwirtschaftliche Marktordnung, ECLI:EU:C:1989:331 [cit. in para 34] ECJ 19.02.1991, C-281/89 Italy v Commission, ECLI:EU:C:1991:59 [cit. in para 17–24] ECJ 08.04.1992, C-94/91, Hans-Otto Wagner GmbH v Fonds d’intervention et de Régularisation du Marché du Sucre, ECLI:EU:C:1992:181 [cit. in para 67] ECJ 06.10.1993, C-55/91, Italy v Commission, ECLI:EU:C:1993:832 [cit. in para 67] ECJ 10.11.1993, C-48/91, Netherlands v Commission, ECLI:EU:C:1993:871 [cit. in para 65, 67] ECJ 05.10.1994, C-133/93, C-300/93 and C-362/93, Crispoltoni and others v Fattoria Autonoma Tabacchi and others, ECLI:EU:C:1994:364 [cit. in para 22] ECJ 05.10.1994, C-280/93, Germany v Council, ECLI:EU:C:1994:367 [cit. in para 19] ECJ 06.03.2001, C-278/98, Netherlands v Commission, ECLI:EU:C:2001:124 [cit. in para 67] ECJ 22.11.2001, C-147/99, Italy v Commission, ECLI:EU:C:2001:624 [cit. in para 67] Jurcewicz/Popardowski

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ECJ 07.07.2005, C-5/03, Greece v Commission, ECLI:EU:C:2005:426 [cit. in para 65] ECJ 08.11.2005, C-293/02, Jersey Produce Marketing Organisation, ECLI:EU: C:2005:664 [cit. para 17-21 and para 5] ECJ 23.10.2007, C-273/04, Poland v Council, ECLI:EU:C:2007:622 [cit. para 43]

References Barents, R. (1986). Recent development in the case law on Article 95. Common Market Law Review, 641–660. Barents, R. (1994). The agricultural law of the EC. The Hague: Wolters Kluwer International. Canfora, I. (1996). La quota latte come bene giuridico. Rivista di Dritto Agrario, 49–61. Danielsen, J. H. (2013). EU agricultural law. The Hague: Wolters Kluwer International. Germano, A. (1995). L’azienda agraria ed i suoi nuovi beni. La quotte di produzione ed il diritto de reimpianto dei vegenti. Il Diritto dell’agricoltura, (1), 10–17. Jurcewicz, A. (2006). Wsparcie rolnictwa w świetle porozumień międzynarodowych. In W. Czapliński (Ed.), Prawo w XXI wieku. Księga pamiątkowa 50-lecia Instytutu Nauk Prawnych Polskiej Akademii Nauk (pp. 153–166). Warsaw: Wydawnictwo Scholar. Jurcewicz, A. (2009). Zasada proporcjonalności we wspólnotowym ustawodawstwie rolnym i orzecznictwie Europejskiego Trybunału Sprawiedliwości. In E. Kremer & Z. Truszkiewicz (Eds.), Rozprawy i studia. Księga pamiątkowa dedykowana Profesorowi Aleksandrowi Lichorowiczowi (pp. 61–77). Kraków: Wydawnictwo Uniwersytetu Jagiellońskiego. Jurcewicz, A. (2012). Traktatowe podstawy unijnego prawa rolnego w świetle orzecznictwa. Zagadnienia wybrane. Warsaw: Wolters Kluwer Polska. Jurcewicz, A., Kozłowska, B., & Tomkiewicz, E. (Eds.). (1995). Polityka rolna Wspólnoty Europejskiej w świetle ustawodawstwa i orzecznictwa. Warsaw: LexisNexis. McMahon, J. A. (2007). EU agricultural law. Oxford: Oxford University Press. Miąsik, D. (2005). Zasada proporcjonalności w prawie wspólnotowym i jej stosowanie przez sądy krajowe. In A. Wróbel (Ed.), Stosowanie prawa Unii Europejskiej przez sądy (pp. 341–468). Kraków: Kantor Wydawniczy Zakamycze. Miąsik, D., Półtorak, N., & Wróbel, A. (Eds.). (2012). Traktat o Funkcjonowaniu Unii Europejskiej. Warsaw: Wolters Kluwer Polska. Mögele, R., & Erlbacher, F. (2011). Single common market organization. Article – by – Article commentary of the legal framework for agricultural markets in the European Union. Munich: C.H. Beck. Neri, S. (1981). Le principe de proportionalite dans la jurisprudence de la Cour relative au droit communautaire agricole. Revue Trimestrielle de Droit Européen, 652–683. Tomkiewicz, E. (2000). Limitowanie produkcji w ustawodawstwie rolnym Wspólnoty Europejskiej. Warsaw: Wydawnictwo Naukowe Scholar. Tomkiewicz, E. (2009). Zasada niedyskryminowania producentów rolnych w świetle orzecznictwa Europejskiego Trybunału Sprawiedliwości. In E. Kremer & Z. Truszkiewicz (Eds.), Studia i rozprawy. Księga pamiątkowa dedykowana Profesorowi Aleksandrowi Lichorowiczowi (pp. 123–145). Kraków: wyd Wydanictwo Uniwersytetu Jagiellońskiego. Usher, J. A. (2000). Common policies and common prices? From units of account to euros in common organisations of agricultural markets. Legal Issues of Economic Integration, 27(2), 119–140. Wyrozumska, A. (2002). Państwa członkowskie a Unia Europejska. In J. Barcz (Ed.), Prawo Unii Europejskiej. Zagadnienia systemowe (pp. 307–335). Warsaw: Wydawnictwo Prawo i Praktyka Gospodarcza.

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Article 41 [Measures Under a Common Agricultural Policy] (ex-Article 35 TEC) To enable the objectives set out in Article 39 to be attained, provision may be made within the Framework of the common agricultural policy for measures such as: a) an effective coordination of efforts in the spheres of vocational training, of research and of the dissemination of agricultural knowledge,5–8 this may include joint financing of projects or institutions;9–11 b) joint measures to promote consumption of certain products.12

Contents 1. General Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Evolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3. Directly Effective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4. Vocational Training, Research, and Dissemination of Agricultural Knowledge (lit. a) . . . . 5 5. Joint Financing of Projects and Institutions (lit. a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 6. Modification of the Structure of Consumption (lit. b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 List of Cases

1.

General Comments

Article 41 TFEU mentions several types of actions that may be undertaken by the EU to attain the objectives defined in Article 39 TFEU (➔ Article 39 TFEU para 12–30). These actions are not comprised by the scope of the measures defined in Article 40.2 and Article 40.3 TFEU (➔ Article 40 TFEU para 16–51 and para 56– 58), but are entirely autonomous measures insofar as they relate to vocational training, research, or dissemination of agricultural knowledge, or only partly so if they relate to the actions referred to in Article 41 (b) TFEU (➔ para 12). The latter, if we refer to measures addressing the demand for certain agricultural products, are included in measures that shape social and structural policy. Thus, the measures referred to in Article 39.1 (a) TFEU effectively address technical development and optimal utilization of the factors of production, while those in Article 39.1 (b) TFEU modify the structure of consumption. As such, the measures referred to in Article 41 TFEU serve as an example. This is indicated by the fact that the structure of the article uses the wording “provision may be made”. The basic objective of Article 41 TFEU is therefore to remove from the very beginning any doubt as to the power of the EU to make decisions and to finance operations of this type.

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Evolution

Directly Effective

Article 41 TFEU is not directly effective.

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5

Agriculture and Fisheries

The wording of Article 41 TFEU did not change since the Treaty of Rome in 1957.

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Title III

Vocational Training, Research, and Dissemination of Agricultural Knowledge (lit. a)

Article 41 (a) TFEU, which refers to vocational training as one of the measures to attain the objectives of the common agricultural policy, is a special provision with regard to Articles 165 and 166 TFEU. It must be accepted that vocational training applies mainly to young farmers, but also to other persons engaged in agriculture. On the other hand, Article 41 TFEU does not provide for a situation of a farmer wishing to change his circumstances by re-qualifying and engaging in another area, for instance in industry or services. Such readjustment may potentially be considered as a measure to attain the objectives of the common agricultural policy under Article 39.1 TFEU because by reducing employment in agriculture it contributes to the optimization of employment as such and thus to increasing agricultural productivity. Consequently, readjustment may be considered one of the measures aimed to achieve the objectives Article 39.1 TFEU point a with regard to its financing by the EAGGF, although incentives to readjust capital are preferred. Research refers mainly to the field of agronomy, embracing all types of scientific investigations aiming to increase agricultural production. Before the effective date of the SEA, many programmes of this type, being Community research, were approved under Article 43 TFEU procedure (➔ Article 43 TFEU para 39–43) in connection with Article 41 (a) TFEU. Later on, Community agronomic research was included in the framework defined in Article 182 TFEU. It must be pointed that the framework programmme is adopted by the Council and European Parliament according to the procedure laid out in Article 182.1 TFEU and is implemented by specific (supplementary) programmes provided in Article 182.4 TFEU. At this point, it is worth adding that because of production surpluses appearing in agriculture for many years, this aspect of scientific research (concentrating on methods of intensifying production) is no longer applicable. Vocational training and agronomic research are mainly of interest to young farmers. Similarly, spreading agricultural knowledge expands the advantages of the vocational plan, expanding the knowledge of already educated farmers, and making it more attractive. Numerous measures directed at these objectives were financed by the EU.

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Article 41. [Measures Under a Common Agricultural Policy]

5.

911

Joint Financing of Projects and Institutions (lit. a)

The provisions introduced into the Treaty by Article 41 TFEU have a dual purpose for the EU. On the one hand, they aim to effectively coordinate the measures undertaken by the MS, on the other, to take joint action, initiate common projects and institutions. These institutions ought to be permanent bodies with public utility objectives and with stable incomes (e.g., schools, scientific centres, research, and advisory institutes, etc.). A project refers to all types of useful initiatives embracing more than just research entrusted by the Commission. Co-financing must be understood as planned Community financing (including the expenditure provided for in the appropriate section of the Community budget or utilization of funds from the appropriate agricultural fund).

6.

9

10 11

Modification of the Structure of Consumption (lit. b)

Article 41 (b) TFEU provides for joint action aiming to increase the level of consumption of certain products. This refers to common measures, that is, those decided by the Union. However, they ought not to be limited to the Union’s internal market. They may be equally effectively taken in third countries concerning products with increasing global demand. Advertising, price reductions, or launching new consumer products may serve as instruments for this purpose. Permanent modifications of demand have a structural nature and contribute to the attainment of the objectives set out in Article 39.1 (b) TFEU. The implementation of these tasks is based, inter alia, on the Regulation No 1144/2014 on information provision and promotion measures concerning agricultural products implemented in the internal market and in third countries.1 In this act assumes an impact on the level of consumption of EU agricultural products by increasing consumers’ awareness of the merits of the Union’s agricultural products and production methods and increasing the awareness and recognition of Union quality schemes. Moreover, this act should increase the competitiveness and consumption of Union agricultural products and raise their profile. Statue measures should also aim to enhance the authenticity of Union products to improve consumers’ awareness of the qualities of genuine products as compared to imitations and counterfeit products. In addition, it should be mentioned that the activity of a number of MS in promoting domestic agricultural (food) products is limited by the rules of the

1 Parliament/Council Regulation (EU) No 1144/2014 on information provision and promotion measures concerning agricultural products implemented in the internal market and in third countries, O.J. L 317/56 (2014).

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Treaty on the free movement of goods.2 Moreover, the state aid given to undertakings to promote domestic agricultural (food) products must be judged in the light of Article 107 TFEU.3

List of Cases ECJ 24.11.1982, 249/81, Commission v Ireland (“Buy Irish”), ECLI:EU: C:1982:402, [cit. in para 14] ECJ 13.12.1983, 222/82, Apple and Pear Development Council v K.J. Lewis Ltd and others, ECLI:EU:C:1983:370, [cit. in para 14] ECJ 5.11.2002, C-325/00, Commission v Germany (“CMA”), ECLI:EU: C:2002:633 [cit. in para 14]

2 See Case 249/81, Commission v Ireland (“Buy Irish”) (ECJ 24 November 1982); Case 222/82, Apple and Pear Development Council v K.J. Lewis Ltd and others (ECJ 13 December 1983); Case C-325/00, Commission v Germany (“CMA”) (ECJ 5 November 2002). 3 Case 249/81, Commission v Ireland (“Buy Irish”) (ECJ 24 November 1982).

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Article 42 [Application of Rules on Competition] (ex-Article 36 TEC) The provisions of the Chapter relating to rules on competition8–10 shall apply to production of and trade in agricultural products9 only to the extent determined by the European Parliament and the Council within the framework of Article 43(2)3 and in accordance with the procedure laid down therein, account being taken of the objectives set out in Article 39.11–34 The Council, on a proposal from the Commission, may authorise the granting of aid:35–41 (a) for the protection of enterprises handicapped by structural or natural conditions; (b) within the framework of economic development programmes.

Contents 1.

2.

3. 4. 5. 6. 7. 8.

#

General Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. Object . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2. Scope of Application of General Rules of Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.3. Derogation Competences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Evolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.1. Treaty Establishing of European Economic Community (EEC Treaty) . . . . . . . . . . . . 4 2.2. Secondary Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Directly Effective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 System Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Competition Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Exclusion of Certain Agricultural Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 State Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Implementation of Article 42: The Evolution of Solutions Regarding the Common Organization of Agricultural Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 8.1. Council Regulation 1234/2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 8.1.1. General Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 8.1.2. Subjective Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 8.1.3. Objective Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 8.1.4. The Application of Article 101 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8.1.5. Temporal Scope of the Exclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.1.6. Objective Scope of the Exclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 8.1.7. Practices Constituting an Integral Part of a National Market Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 8.1.8. Practices Required for the Attainment of the Objectives of the CAP . . . . 18 8.1.9. Principles of Evaluating Necessity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 8.1.10. The German Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 8.1.11. Exclusive Powers of the Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 8.1.12. Non-pricing Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 8.1.13. Farmers and Farmer Associations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Springer Nature Switzerland AG 2021 H.-J. Blanke, S. Mangiameli (eds.), Treaty on the Functioning of the European Union – A Commentary, Springer Commentaries on International and European Law, https://doi.org/10.1007/978-3-030-43511-0_43

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8.2. Council Regulation 1308/2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 8.2.1. General Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 8.2.2. Subjective Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 8.2.3. Objective Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 8.2.4. Competition Rules Applicable Between Undertakings . . . . . . . . . . . . . . . . . . 29 8.2.5. The Application of the Rules on Competition Between Businesses in the Event of Serious Disturbances on the Market of Agricultural Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 8.2.6. Derogation from the Application of Articles 101 TFEU to Recognize Producer Organization (Article 152.1a and 152.1b of the CMO Regulation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Common Agricultural Policy Versus National Aid for Agriculture . . . . . . . . . . . . . . . . . . . . . . 35 9.1. The Effect of National Aid on Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 9.2. Distinctions Between Union and State Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 9.3. Exclusion for Union Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 9.4. Application to State Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 9.5. Coordination of State Aid and Article 42 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.5.1. Rules of Granting Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 9.5.2. Standard Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 9.5.3. Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 List of Cases References

1.

General Comments

1.1. Object

1

Article 42 TFEU provides for the principles and methods of applying competition laid out in Part III of the Treaty in relation to the production and trade of agricultural products.

1.2. Scope of Application of General Rules of Competition

2

Under Article 42.1 TFEU, the rules of competition are applicable to the production and trade in agricultural products only insofar as determined by the EP and the Council in accordance with the ordinary legislative procedure and after consulting with the Economic and Social Committee, considering the objectives laid out in Article 39 TFEU (➔ Article 39 TFEU para 12–30).

1.3. Derogation Competences

3

Article 42.2 TFEU adds a special provision concerning the authority of the Council, on a proposal of the Commission, to grant a derogation concerning two categories of national aid for the agricultural sector. The Council, although it may decide on the application of Articles 107–109 TFEU to agriculture, may at the same Jurcewicz/Popardowski

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time permit national aid for (a) the protection of farms handicapped by structural or natural conditions, and (b) within the framework of economic development programs. The scope of competences granted to the Council by Article 42 TFEU and the schedule of the relevant actions were the object of numerous discussions between commentators to the Treaty. However, the main subject of the discussion was exhausted after the Council made its initial decision in Regulation 26/62,1 in conjunction with the entire set of regulations concerning gradual establishment of common market organizations for important groups of agricultural products, which explained other outstanding issues. All existing base regulations concerning the establishment of common market organizations embracing nearly all products from the Annex I list are based on (and implement) both Article 42 and Article 43 TFEU.2

2.

Evolution

2.1. Treaty Establishing of European Economic Community (EEC Treaty)

Upon entry into force of the Lisbon Treaty, Article 42, which until then existed in its original wording, changed concerning the competences of EU institutions. The Council lost its power to act independently to the extent regulated by Article 42 TFEU because the scope of application of competition rules will now be defined in cooperation with the EP, while consent for granting aid requires a Commission proposal.

4

2.2. Secondary Legislation

In the context of the reference in Article 42 TFEU to the framework of Article 43.2 TFEU and the procedures laid out in it (➔ Article 43 TFEU para 39–43), the Commission opined that a decision concerning the establishment of general rules concerning free competition and applicable to the agricultural sector of the common market ought to constitute a part of a package of regulations, which, according to the Treaty, must be drafted within the first two years of operation of the Community and submitted to the Economic and Social Committee, the EP and the Council for consultation. In the Memorandum of 30 June 1960, it was determined that defining the rules of competition, and in particular, the adjustment, harmonization and gradual reduction of national subsidies, refunds and other types of support for the prices of agricultural products or their market, ought to begin during the preparatory phase; guidelines were also provided to assist in defining the rules of competition. 1

Council Regulation (EEC) 26/62 applying certain rules of competition to production of and trade in agricultural products, O.J. L 39/993 (1962). 2 See Popardowski (2010), pp. 25–26.

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Thus, the Commission was advocating more flexibility in prohibiting anticompetition and dumping practices, and creating grounds for eliminating national aid by extending the application of Article 108.1 TFEU, which would subsequently result in an immediate or gradual elimination of aid considered incompatible with the common market. These proposals were subsequently reflected in the draft regulation submitted to the Council in November 1960 for consultation with the EP. The EP directed that the proposed derogation from Articles 101 and 102 TFEU on the agreements and practices, which form a part of a national market organization or are necessary for the attainment of Article 39 TFEU objectives, be limited to Article 101.1 TFEU. The Commission accepted this approach. After introducing several amendments, the draft became Regulation 26/62, which played an important part until the adoption of the Regulation 1184/2006.3 The essence of the regulation did not change. Changes on the application of competition rules within the common organization of agricultural markets were introduced in Regulation 1308/2013.4 This act replaced the previously effective Regulation 1234/2007.5 On competition rules in the agricultural sector, the Regulation modified and specified the previously applicable solutions.

3. 6

Article 42 is not directly effective.

4. 7

Directly Effective

System Context

Whilst regulating the scope and methods of applying competition to agricultural products and their trade, the wording of Article 42 TFEU explains certain potential doubts in this regard and in the area of the relationship between Articles 38.2, 40.2, and 40.3 TFEU. Article 38.2 TFEU stipulates that the rules of the common market, including competition rules, laid out in Articles 101–109 TFEU, also apply to agricultural products unless the provisions of the Treaty relating to agriculture provide otherwise. On the other hand, Article 40 TFEU permits the establishment of a common market organization for agricultural products imposing restrictions on free competition. As such, the need arose to design special rules to regulate the application of Articles 101–109 TFEU to the agricultural sector of the common 3 Council Regulation (EC) 1184/2006 applying certain rules of competition to the production of, and trade in, agricultural products, O.J. L 214/7 (2006). 4 Parliament/Council Regulation (EU) 1308/2013 establishing a common organisation of the markets in agricultural products, O.J. L 347/671 (2013). 5 Council Regulation (EC) 1234/2007 establishing a common organisation of agricultural markets and on specific provisions for certain agricultural products (Single CMO Regulation), O.J. L 299/ 1 (2007).

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market. The exceptional character of Article 42 TFEU with regard to the system of competition in the agricultural sector results from the unique features of the structure of agricultural production and trade. Without considering some (now ineffective) interim provisions, the only instances of express desistance from the special provisions of the Treaty favoring agricultural products consist in Article 42 and Article 44 TFEU.6 Under Article 42 TFEU, competition rules ought to apply to agricultural products only insofar as determined by the EP and the Council within the framework of the common agricultural policy.7

5.

Competition Rules

Article 42.1 TFEU suspends the application of free competition rules on agricultural production and trade until the EP and the Council determine the scope of their application. The rules of free competition to which this article refers belong to two categories defined in sections 1–2 of Chapter 1, in Part Three of Title VII of the Treaty, i.e., rules applicable to enterprises (Articles 101–106), and rules concerning aid from the national budget (Articles 107–109). In the original version of the Treaty, the repealed Article 91 TEC regulated the rules of procedure on dumping practices in the Community. A particularly important issue was the suspension of rules applying to national aid because the MS possessed many different systems for supporting agriculture, which could not be abolished or harmonized automatically. There was no doubt that this had to be done gradually, synchronizing the process with the transformation of the markets of individual states into one common agricultural market.8

6.

8

Exclusion of Certain Agricultural Products

The special order established by Article 42 TFEU applies only to production and trade in agricultural products from the Annex I list in the version supplemented by Regulation 7a/59. It does not apply to the production and trade in other articles, even if they are manufactured from agricultural products. It must be admitted that in practice, it is frequently difficult to determine whether particular assistance ought to be classified as agricultural aid, or aid for the agricultural and food industry, or for industry that manufactures the means of production for agriculture. However, the practical significance of this distinction is not substantial since Article 107 and Article 109 TFEU are sufficiently flexible in this respect.

6

Gerbrandy and de Vries (2011), pp. 11–12; McMahon (2007), p. 21. Danielsen (2013), p. 163; Popardowski (2010), pp. 25–26. 8 Jurcewicz, in Miąsik et al. (2012), p. 745. 7

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State Aid

Referring to the Council’s power (on a proposal by the Commission) under Article 42.2 TFEU concerning derogation of two categories of national aid to agriculture, namely, the ability to permit national aid (lit. a) to enterprises being in a handicapped position due to structural or natural conditions and (lit. b) within the framework of economic development programmes, it must be noted that in reality, the Council possesses similar powers under Article 107.3 (a), Article 107.3 (d), and Article 109 TFEU. However, there are some technical differences between the powers related to national aid as laid out in Article 42 TFEU and the powers under Article 107–109 TFEU. On industry, the prohibition under Article 107.1 TFEU became automatically effective on the effective date of the Treaty. However, the Council may sanction certain types of national aid by means of regulations or decisions made by a qualified majority of votes under Article 107.3 and Article 109 TFEU. On agriculture, the prohibition under Article 107 TFEU was to come into force only after the Council adopted the relevant regulation or decision. In addition, the Council could decide to limit the application of Article 107 TFEU ab initio to certain categories of aid, excluding certain other types. Indicating two types of national aid, which may remain legal, paragraph 2 in no way prohibits the Council from suspending the application of Article 107.1 TFEU to other types of national aid for agriculture. On the contrary, Article 42 TFEU gives the Council (on a proposal of the Commission) wider powers to decide on the application of Article 107.1 TFEU than only under Article 107.3 and Article 109 TFEU.9

8.

Implementation of Article 42: The Evolution of Solutions Regarding the Common Organization of Agricultural Markets

8.1. Council Regulation 1234/2007

8.1.1. 11

General Overview

Regulation 1234/200710 deals separately with two categories of principles that make up the main body of the general rules of free competition, i.e., principles concerning agreements, decisions and practices of undertakings (Articles 101– 106 TFEU), and principles concerning national aid (Articles 107–109 TFEU).

9

Jurcewicz (2012), pp. 40–41; Popardowski (2010), p. 26. Council Regulation (EC) 1234/2007 establishing a common organisation of agricultural markets and on specific provisions for certain agricultural products (Single CMO Regulation), O.J. L 299/1 (2007). 10

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The previous Regulation 26/6211 also dealt with principles related to dumping. This same legislative conception is realized in Regulation (EU) 1379/2013 on the common organization of the markets in fishery and aquaculture products12 (Articles 40 and 41). 8.1.2.

Subjective Scope

The subjective scope of this regulation embraces mainly agricultural producers and producer organizations. Industrial undertakings are embraced by this provision if they manufacture, purchase, or process Annex I products. If their industrial activity relates to products outside the Annex I list, the provisions of the Regulation do not apply.13 8.1.3.

Objective Scope

The Regulation establishes the main principle for the agricultural sector, namely, that Articles 101–106 TFEU apply to all agreements, decisions, and practices referred to in Article 101.11 and Article 102 TFEU. Only three exceptions were defined to the application of the prohibition laid out in Article 101 TFEU. Consequently, Article 102 TFEU applies in full (27/76 United Brands). Similarly, all legal provisions based on Article 103 TFEU, particularly Regulation 17/62 in the part related to competition procedures, apply without limitations. 8.1.4.

13

The Application of Article 101 TFEU

Article 176 of Regulation 1234/2007 provides that Article 101.11 TFEU “is inapplicable” to three instances defined in the Regulation 1234/2007. As such, if the agreements, decisions, and practices do not fall under the above exceptions, the prohibition laid out in Article 101.1 TFEU applies, provided that, and to the extent that such agreements, decisions, etc., are not subject to the exclusion based on Article 101.3 TFEU (an example was the exception granted to long-term cane sugar supply agreements between former Commonwealth countries and the United Kingdom pursuant to the Commission Decision of 7 December 1979.). 8.1.5.

12

14

Temporal Scope of the Exclusion

Regulation 1234/2007 does not determine (similarly to the former Regulation 26/ 62), whether the exceptions from the prohibitions established by Article 101.1 11 Council Regulation (EEC) 26/62 applying certain rules of competition to production of and trade in agricultural products, O.J. L 30/993 (1962). 12 Parliament/Council Regulation (EU) 1379/2013 on the common organisation of the markets in fishery and aquaculture products, O.J. L 354/1 (2013). 13 Case 123/83, BNIC v Clair (ECJ 30 January 1985) para 14–15.

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TFEU arise automatically upon fulfilment of the relevant conditions or only after the Commission makes a decision on the matter. According to the first interpretation, an EC decision “determining” which agreements, decisions, etc. fulfil the conditions for specific exceptions has a declaratory value. Consequently, the system created based on this regulation would constitute a tool for combating abuse. According to the second interpretation, the prohibition established by Article 101.1 TFEU applies unless the Commission decides that one of the exceptions is applicable. Although the Regulation does not contain an ultimate solution to this problem (which initially expressly indicated the provisional nature of Regulation 26/62), there are strong arguments to support the first of these interpretations. First, the Regulation does not provide for a notification system that would enable a determination whether the individual exceptions apply. In addition, the use of the word “determines” in itself indicates the acceptance of this solution. Moreover, Article 1 of the Regulation provides that Articles 101–106 TFEU “apply”. Similarly, the fourth point of the preamble refers to the positive aspects of the activity of producer organizations “unless such joint action excludes competition or jeopardizes attainment of the objectives of Article 39 of the Treaty.” This wording also indicates that Regulation 1234/2007 is structured based on the system of combating abuse. 8.1.6. 16

The first exception from the prohibitions under Article 101.1 TFEU refers to agreements, decisions, or practices considered an integral part of a national market organization or, the second exception, required for the attainment of the objectives of Article 39 TFEU (Article 176 of Council Regulation 1234/2007). In addition, a special provision concerning derogation was introduced (third exception) in case of agreements, decisions, or practices of farmers, farmer associations, or associations of such associations belonging to a single Member State, which concern the production or sale of agricultural products or the use of joint facilities for the storage, treatment, or processing of agricultural products.14 8.1.7.

17

Objective Scope of the Exclusion

Practices Constituting an Integral Part of a National Market Organization

On the first exception concerning agreements, decisions, and practices constituting an integral part of a national market organization it must be emphasized that it leads to two serious consequences. First, the exception does not apply to sectors embraced by a common market organization because the systems of common market organizations do not permit the existence of a national market organization.15 Second, the 14

See Danielsen (2013), pp. 164–165. Case 71/74, Fruit- en Groentenimporthandel and “Frubo” v Commission (ECJ 15 May 1975) para 8. 15

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requirement that applies to an “integral part” means that these measures must be accepted by the authorities as at least appropriate for the attainment of the objectives of the national system. Such official “acceptance” may be supplemented by permanent consultations between the authorities and representatives of a given sector, financial support, or legal acts, specifically those providing the ability to extend the regime adopted by such agreements to unaffiliated entities. However, since after the expiry of transition periods national market organizations can on no account influence trade between countries, the practical significance of this exception is very limited (the only Decision in this respect was made on 18 December 1987 (New Potatoes) in relation to certain agreements concerning potatoes, the sector not being embraced by a common market organization).16 Interestingly, as an exception, Article 2 of Regulation 26/62 was subject to detailed interpretation, especially on the concept of agricultural products. Thus, the scope of the excluding clause does not embrace the obligation to purchase stomach ferment, which was not included in Annex I to the Treaty although the product is obtained from calf stomachs and is used for the production of cheese, which is included in Annex I.17 Similarly, it did not embrace the agreement fixing the price for cognac and wine from which it is distilled due to the express exclusion of alcoholic beverages from Annex I despite the considerable economic significance of these products for farmers.18 8.1.8.

Practices Required for the Attainment of the Objectives of the CAP

The second exception applies when such agreements, decisions, or practices are required for the attainment of the objectives of the common agricultural policy. Negatively understood, this means that the application of Article 101.1 TFEU could jeopardize the attainment of the objectives of Article 39.1 TFEU. This exception, which embraces both regulated as well as unregulated sectors, applies specifically to farmer associations that, by adopting principles concerning production and trade in agricultural products and extension of such principles to unaffiliated entities, may contribute to the proper functioning of a common market organization. The requirement means not only that it must be proved that such agreements, decisions, etc. have one or more objectives that comply with those laid out in Article 39 TFEU, but such agreements must also constitute the only available method of attaining these objectives (➔ Article 39 TFEU para 12–30). The ECJ accepted this obvious interpretation of the proportionality requirement in Case 71/74 Frubo,19 where the agreement between the Dutch importers’ 16

Commission Decision 88/109/EEC relating to a proceeding under Article 85 of the EEC Treaty (IV/31.735 - New potatoes), O.J. L 59/25 (1988). Jurcewicz (2012), pp. 42–43; McMahon (2007), p. 16. 17 Case 61/80, Coöperatieve Stremsel- en Kleurselfabriek v Commission (ECJ 25 March 1981) para 19–21. 18 Case 123/83, BNIC v Clair (ECJ 30 January 1985) para 14–15. 19 Case 71/74, Fruit- en Groentenimporthandel and “Frubo” v Commission (ECJ 15 May 1975) para 44–46.

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association and wholesalers’ association concerning the organization of auctions for imported fruit was considered non-eligible for the derogation under Article 101 TFEU, which was supported by the Commission. The ECJ decided that the agreement concerning the import of fruit to Holland from outside the Community was not necessary from the point of view of the first two objectives of the common agricultural policy, i.e., increasing agricultural productivity and ensuring a fair standard of living for the agricultural community.20 This is an important issue, as according to the claimants the agreements contributed to the attainment of the three other objectives of the common agricultural policy, while the ECJ and the AG unanimously stated that the objectives of this policy are an inseparable whole. As a juxtaposition, it is worth looking at an opposite approach of the ECJ; when evaluating the effective force of EU legislation in the light of these objectives, it accepted that some objectives may have precedence over others21 and supported legislation serving only one objective.22 8.1.9. 19

Principles of Evaluating Necessity

The issue of what is necessary within the meaning of Article 39.1 TFEU must be considered in the context of the common organization of a given market. Some national measures, which include for instance extending the rules and regimes to unaffiliated entities, may be incompatible with the elementary principles and the system of the base regulation, which means that in the light of Article 101.1 TFEU and Council Regulation 1234/2007 this evaluation is ruled out from the outset.23 The same applies to practices leading to a division of the common market. In case of “strong” market regulation, where competition is considerably limited in any case, there is no need to limit it even further.24 As such, even if the exception is applicable under Regulation 1234/2007, its practical significance ultimately depends on the structure and objectives of a given market system.25

20

See Whish (2011), p. 966. Case 5/73, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof (ECJ 24 October 1973) para 24–27. 22 Case 138/78, Hans-Markus Stölting v Hauptzollamt Hamburg-Jonas (ECJ 21 February 1979) para 4–5. 23 Case 218/85, Cerafel v Le Campion (ECJ 25 November 1986) para 13; Case 212/87, Unilec v Larroche Frères (ECJ 22 September 1988) para 13. 24 See, for example, Joined Cases 40/73 et al., Coöperatieve Vereniging “Suiker Unie” UA and others v Commission (ECJ 16 December 1975); Case 258/78, Nungesser v Commission (ECJ 8 June 1982). 25 See, for example, Commission Decision 78/66/EEC relating to a proceeding under Article 85 of the EEC Treaty (IV/28.948 - Cauliflowers), O.J. L 21/23 (1978); Commission Decision 85/76/EEC relating to a proceeding under Article 85 of the EEC Treaty (IV/28.930 - Milchförderungsfonds), O.J. L 35/35 (1985); Commission Decision 86/596/EEC relating to a proceeding under Article 85 of the EEC Treaty (IV/31.204 - MELDOC), O.J. L 348/50 (1986). 21

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8.1.10.

923

The German Clause

Although according to the original intention, the second exception discussed above must apply to all farmer associations, a special clause was introduced under German pressure, which reflected the legal status of such associations in the legal order of this MS (Article 100.1 of the German Antimonopoly Law of 27 June 1957). In comparison with the language of the exception, the scope of the clause is much narrower because it only refers to the production phase.26 In addition, the exception was formulated negatively: Article 101.1 TFEU does not apply if the Commission does not decide that competition was excluded or that the attainment of the Article 39 TFEU objectives is jeopardized.27 Another issue that Regulation 1234/2007 fails to resolve (similarly to the former Regulation 26/62) is the question whether the clause is a lex specialis on the second exception, or whether it is only an example. Under the second interpretation, it must also be proved that the necessity condition was fulfilled. The words “in particular” may serve as basis for both interpretations. It seems, however, that the Commission adopts the second point of view.28 8.1.11.

Exclusive Powers of the Commission

Regulation 1234/2007 provides that the Commission has exclusive powers, subject to judicial review, to “find” which agreements, decisions, etc. fulfil the conditions for non-application of Article 101.1 TFEU. Thus, if the Commission intends to make a positive decision it has to apply this particular procedure. The Commission makes such decisions either on its own initiative or on request of an MS or the undertaking concerned. If the Commission comes to the conclusion that the conditions for one of the exceptions have not been fulfilled, Article 101.1 TFEU applies ex tunc. 8.1.12.

20

21

Non-pricing Agreements

As indicated above, Regulation 1234/2007, whilst determining the application of Articles 101 and 102 TFEU to the production and trade in agricultural products, contains a special clause whereby Article 101.1 TFEU does not apply to agreements, decisions, and practices of farmers, farmer associations, or associations of such associations in a single Member State, which concern the production or marketing of agricultural products or the use of joint facilities for the storage, 26

Joined Cases 19-22/62, Boucherie en gros v Council (ECJ 14 December 1962) para 3. Jurcewicz (2012), p. 738. 28 See, for example, Commission Decision 85/76/EEC relating to a proceeding under Article 85 of the EEC Treaty (IV/28.930 - Milchförderungsfonds), O.J. L 35/35 (1985); Commission Decision 86/596/EEC relating to a proceeding under Article 85 of the EEC Treaty (IV/31.204 - MELDOC), O.J. L 348/50 (1986); Commission Decision 88/491/EEC relating to a proceeding pursuant to Article 85 of the EEC Treaty (IV/31.379 - Bloemenveilingen Aalsmeer), O.J. L 262/27 (1988). 27

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treatment, or processing of agricultural products, and which do not lead to fixing of prices (including international ones). However, as indicated above, this derogation is not absolute and may be set aside if the Commission finds that it jeopardizes the attainment of objectives under Article 39 TFEU. 8.1.13. 23

Farmers and Farmer Associations

The derogation under Article 176 of Regulation 1234/2007 only applies to agreements, decisions, and practices of farmers and farmer associations. Undertakings involved in trading agricultural products or associations of such undertakings are embraced by the derogation only if their agreements, decisions, or practices are necessary for the attainment of Article 39 TFEU objectives within the meaning of Regulation 1234/2007, or if they can invoke Article 101.3 TFEU, i.e., improvement of production or distribution of products. For common agricultural policy, farmer associations are important for two reasons. These entities may contribute to the attainment of the objectives of the common agricultural policy; their activities help in solving structural problems in the area of product supply, which has been demonstrated by the numerous achievements of cooperatives in the MS of Northern Europe.29 Such organizations may also be entrusted with specific regulatory functions, such as administering aid funds for production or controlling compliance with quality requirements.30 As usual, in case of concentration of specific powers on the market such organizations may become the source of restrictive practices and discrimination. This negative aspect may be reinforced by introducing various measures provided for by public law, in particular by the ability to extend the rules to unaffiliated entities. As such, there is a need to find a compromise between the positive and negative aspects. This unavoidably leads to a special position of producer organizations on the market.

8.2. Council Regulation 1308/2013

8.2.1. 24

General Overview

Council Regulation 1308/201331 replaced Regulation 1234/2007. Like the repealed Act, Regulation 1308/2013 provides solutions for the application of the Treaty competition rules within the framework of the common organization of agricultural markets. In this respect, the Regulation defines the use of Articles 101–106 TFEU (competition rules entrepreneurs) (Articles 206–210 Regulation) in relation 29

Jurcewicz (2012), p. 46. Case 14/74, Norddeutsches Vieh- und Fleischkontor GmbH v Hauptzollamt Hamburg-Jonas – Ausfuhrerstattung (ECJ 1 October 1974) para 11. 31 Parliament/Council Regulation (EU) 1308/2013 establishing a common organisation of the markets in agricultural products, O.J. 347/671 (2013). 30

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to the agricultural sector and sets out mechanisms for state support for agriculture (Articles 211–218). Determined by Regulation 1308/2013, rules on competition in agriculture are based on the modification or clarifying previous solutions in this matter. They consider the same conclusions from the years 2004–2011 evaluation of the functioning of the mechanism of competition to the widely recognized in the agri-food industry and its impact on the prices of agricultural products. Hence, the Regulation on the application of competition rules in agriculture, among others, considers the consequences of the functioning of the sector within the so-called food chain through the strengthening of the market position of agricultural producers’ organizations (Articles 209–210), and provides the ability to exclude the application of Article 101 TFEU in case of serious disturbances on the market for agricultural products. The regulation is also directed to clarify terminology by introducing a legal definition of the relevant market (Article 207) and a dominant position (Article 208). Because of the issue of rules of competition in agriculture, Regulation 1308/ 2013 is based essentially from identical regulatory assumptions that adopted the Regulation 1234/2007, and Regulation 26/62 preserves the achievements to date of the jurisprudence of the Court formed against these acts. 8.2.2.

27

Objective Scope

On the common organization of agricultural markets, the Regulation 1308/2013 establishes the scope of treaty competition rules on the relationship between entrepreneurs (Articles 206–210) and state aid (Articles 211–218). It also introduces special rules concerning the application of the competition rules in the event of serious disturbances on the markets for agricultural products (Article 222) and to the olive oil, beef and veal, and arable crops sectors (Articles 169–171).32 8.2.4.

26

Subjective Scope

Competition rules constituted in the Regulation 1308/2013 relate to of all farmers and organizations of agricultural producers. Also they refer to entrepreneurs which activity applies to trade and processing of agricultural products listed in Annex I. 8.2.3.

25

28

Competition Rules Applicable Between Undertakings

Regulation 1308/2013 confirms in the previous agricultural legislation the principle that Articles 101–106 TFEU apply to all agreements, decisions, and concerted practices that relate to the production and marketing of agricultural products. The Regulation adopted solution posed by the mandatory application of this legislation 32

See Guidelines on the application of the specific rules set out in Articles 169, 170, and 171 of the CMO Regulation for the olive oil, beef and veal, and arable crops sectors (2015/C 431/01).

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specific regulations regarding the competition rules only in relation to agreements, practices, and arrangements as to mean that Article 102 TFEU is used correctly within the framework of the common organization of agricultural markets. On the application of Article 101 TFEU under the common organization of agricultural markets, the Regulation provides for the exclusion of this provision in two cases: (1) the agreements, decisions, and concerted practices are necessary to achieve the objectives of the common agricultural policy set out in Article 39 TFEU (Article 209.1); (2) the agreements, decisions, and concerted practices are concluded by agricultural producers interbranch organizations in relation to targets set for these organizations by the Regulation (Article 210.1)

31

32

Exclusion of application of Article 101.1 TFEU due to the pursuit of the objectives of the common agricultural policy is justified only in relation to such agreements, decisions, and practices that are necessary to achieve the objectives set out in Article 39 TFEU. The Regulation allows excluding the application of Article 101.1 TFEU in relation to agreements, decisions, and concerted practices used by the interbranch organizations,33 agricultural producers, provided they are intended to implement the objectives of the functioning of these organizations. Exclusion of application of Article 101.1 TFEU to such agreements, decisions, and concerted practices requires the notification to the Commission (Article 210.2). Due to the possible occurrence of significant effects on the conclusion of appropriate agreements from the perspective of the functioning of the entire internal market, the Regulation introduces a number of constraints leading to recognizing them as unlawful. Under Article 210.3, incompatible with EU rules are agreements, decisions, and concerted practices that: (1) may lead to the partitioning of the internal market; (2) can affect proper operation of the market organization; (3) can lead to market distortions that are not essential for achieving the objectives of the common agricultural policy pursued by the interbranch organization activity; (4) require the setting of prices or quotas; (5) can lead to discrimination or eliminate competition in respect of a substantial part of agricultural products.

33

Against the background, Regulation 1308/2013 must introduce the specific legal definition of the “relevant market”. The regulation presupposes the designation of the relevant market based on two cumulative conditions: (1) The relevant product market: In terms of product market regulation is determined not only in terms of product proper, but also products considered by the 33

See Zoeteweij-Turhan (2012), pp. 121–132.

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consumer as replacement products or substitutes in view of their price, properties, or may be used. (2) The relevant geographic market: The relevant geographic market assumes, however, designation in the territorial aspect of the supply of the relevant market area of agricultural products. 8.2.5.

The Application of the Rules on Competition Between Businesses in the Event of Serious Disturbances on the Market of Agricultural Products

The Regulation 1308/2013 provides for the application of specific intervention instruments in the situation of occurrence of serious disturbance in the functioning of markets in agricultural products. One of them is the possibility to introduce by the Commission implementing acts allowing to waive the application Article 101.1 TFEU to agreements, decisions and concerted practices of farmers, of producers’ organizations and of interbranch organizations agricultural producers (Article 222). As such, the case of excluding the application of Article 101.1 TFEU is admissible, when it seeks to stabilize the market and does not lead to a distortion of the proper functioning of the internal market. Exclusion by the Commission of the application of Articles. 101.1 TFEU is limited at to a specific object of the agreement, decision, or a concerted practice. It can in fact be applied only to those agreements, decisions, and concerted practices of striving to stabilize the market, which foresee: (1) (2) (3) (4) (5)

the withdrawal of from the market or free distribution of; the conversion or processing; storage of by private operators; the reconciliation of the quality requirements; joint purchases of the means of production needed to combat or inhibit the spread of plagues and of animal diseases or plants; (6) temporary planning of agricultural production taking into account the specific cycle of agricultural production. 8.2.6.

Derogation from the Application of Articles 101 TFEU to Recognize Producer Organization (Article 152.1a and 152.1b of the CMO Regulation)

According to Article 206 of the CMO Regulation, Articles 101 and 102 TFEU apply to agreements, decisions and practices concerning trading in agricultural products ‘save as otherwise provided in this Regulation’. By setting specific rules for agreements, decisions and practices of producers of agricultural products

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by recognize organization under Article 152.1., Articles 152.1a, and 152.1b the CMO Regulation create derogations from the application of Articles 101 TFEU.34

9.

Common Agricultural Policy Versus National Aid for Agriculture

9.1. The Effect of National Aid on Competition

35

The common agricultural policy ought to determine the rules of providing national aid to agriculture for two reasons. The negative reason is that national aid, regardless of its form or purpose, may directly or indirectly distort competition, and as such have a negative effect on market unity guaranteed by common market organizations. The positive reason is that national aid, granted in a coordinated manner, may constitute an important instrument for achieving structural policy objectives.35 This provision, following Article 4 of Regulation 26/62, introduced the obligation of constant review of all types of national aid for agriculture and notifying the Commission about all modification plans or introducing new types of aid. Going back, in 1962, the Commission began to take down an inventory of aid granted to agriculture by the MS and to draft proposals to harmonize or eliminate such aid. In addition, it directed that starting from 1 July 1967, Articles 107 and 109 TFEU must be applied to all types of aid for agriculture and trade in agricultural products regardless whether they are embraced by a common market organization, stating which types of aid shall be considered compatible with the common market under Article 107.3 TFEU. Thereafter, the Commission changed its opinion and proposed that the application of Article 107.2 and 107.3 TFEU be suspended until a common market organization was introduced in various sectors. This is what happened, and at present, all basic regulations concerning common market organizations are based on Articles 42 and 43 TFEU and the application of Articles 107–109 TFEU, unless such regulations provide otherwise. Many of them, as well as secondary legislation to such regulations, provide for aid granted in the entire Community for a given category of farmers or national processors of agricultural products.

9.2. Distinctions Between Union and State Aid

36

Coordination of state aid ought to take place based on Article 42 and/or Article 43 TFEU. Understanding the relatively complex effects of these articles for such coordination calls for a clear distinction between Union and state aid. Thus, in case of any Union programme, the right to obtain Union aid is vested with a commercial entity. Most subsidies offered within the framework of common 34

See also about specific position of producers organizations in application Article 101 TFEU – Case C-671/15 APVE and others (ECJ 14 November 2017). 35 Jurcewicz (2012), pp. 52–53.

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market organizations belong to this category. Implementation may be the responsibility of the MS or the EU. Nearly all Union programmes are implemented by MS because they are obliged to implement union law. The EU itself administers aid only in exceptional cases. Such aid may be financed by the EU from the EAGGF (➔ Article 40 TFEU para 59–68), by MS, or jointly by the EU and the MS. How exactly is such Community aid financed is immaterial from the point of view of its legal nature as Union aid.

9.3. Exclusion for Union Aid

Under Article 42 TFEU, Union aid is not governed, in whole or in part, by Articles 107–109 TFEU.36 The legality of such aid is an issue regulated solely by Article 43 in relation to Articles 39 and 40 TFEU.37

37

9.4. Application to State Aid

On the other hand, state aid is granted based on national law. The European Union may regulate this aid in two ways. Under Article 42, such aid may be subject, in whole or in part, to the general principles of the Treaty concerning national aid (Articles 107–109). In addition, other principles may be applied to national aid based on Article 43. As such, the MS may be obliged to grant national aid, permitted to grant such aid, or prohibited from doing so, both within the framework of a common market organization or outside it. In addition, the common market organization may imply limitation or elimination of national aid. National aid required or approved by the EU must be entirely or partly financed by it.

38

9.5. Coordination of State Aid and Article 42 TFEU

9.5.1.

Rules of Granting Aid

Under Article 211 Regulation 1308/2013, Article 108.1 TFEU (oversight of existing national aid) and Article 108.3 TFEU (obligation to notify new aid and modification of existing aid) apply to the agricultural sector. Articles 107–109 TFEU apply to the production and trade in agricultural products. Further, Article 81 of Regulation 1305/201338 mentions that Articles 107–109 TFEU (state aid 36 Joined Cases 213-215/81, Norddeutsches Vieh- und Fleischkontor (ECJ 13 October 1982) para 21–24. 37 Case 36/79, Denkavit (ECJ 15 November 1979) para 16. 38 Regulation 1305/2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD), O.J. L 347/478 (2013).

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rules) shall apply to support for rural development by MS. The Treaty state aid rules shall not apply to payments made by MS pursuant to, and in conformity with, this Regulation, or to additional national financing referred to in Article 82, within the scope of Article 42 TFEU (Article 81.2 of Regulation 1305/2013). Under Article 13 of Regulation 1307/2013,39 Articles 107–109 TFEU only not apply to payments made by MS in conformity with this Regulation. Similarly, Article 8 of Regulation 508/201440 mentions that Articles 107–109 TFEU shall apply to aid granted by MS to undertakings in the fishery and aquaculture sector. However, Articles 107–109 TFEU shall not apply to payments made by MS pursuant to, and in conformity with, this Regulation falling within the scope of Article 42 TFEU (Article 8.1. Regulation 508/2014). 9.5.2. 40

Standard Clause

All base regulations contain a standard clause that provides that Articles 107–109 TFEU apply to the production and trade in products listed in Article 1, unless this regulation provides otherwise. The scope of this clause embraces all types of aid, direct or indirect, addressed at a specific sector of agricultural products, regardless whether it constitutes direct support for earnings or subsidies on account of specific actions on specific products (e.g., storage, export).41 Consequently, Articles 107–109 TFEU apply even to national aid addressed to products that remain outside the common organization of a given market, but affect the sector.42 The clause also states that a base regulation may provide otherwise, e.g., permit certain types of national aid, which is the case in relation to sugar and milk.43 As such, these rules constitute a lex specialis in relation to Articles 107–109 TFEU.44 A base regulation may also impose more stringent rules on national aid than the general rules of national aid defined in the Treaty. Nonetheless, national aid, even if Article 107 TFEU does not apply to it or even if it complies with this article, is illegal if it is not compatible with the objectives and system of the common organization of the given market.45

39 Regulation 1307/2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy, O.J. L 347/608 (2013). 40 Regulation 508/2014 on the European Maritime and Fisheries Fund, O.J. L 149/1 (2014). 41 Jurcewicz (2012), pp. 49–51. 42 Joined Cases 67-70/85, Kwekerij Gebroeders van der Kooy BV and others v Commission (ECJ 2 February 1988) para 27–30. 43 See Case 105/76, Interzuccheri S.p.A. v Società Rezzano e Cavassa (ECJ 25 May 1977); Case 73/79, Commission v Italy (ECJ 21 May 1980). 44 Case 177/78, Pigs and Bacon Commission v Mc Carren and Company Limited (ECJ 26 June 1979) para 11. 45 Case 83/78, Ditta Angelo Tomadini Snc v Amministrazione delle finanze dello Stato (ECJ 16 May 1979) para 11; Case 72/79, Commission v Italy (ECJ 24 April 1980) para 12–13; Case 169/82, Commission v Italy (ECJ 27 March 1984) para 16.

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Exclusions

Regulation 1308/2013 provides for the exclusion of Articles 107–109 TFEU, the aid measures, which are partially or entirely financed from EU funds. In addition, the Treaty state aid rules also do not apply to enumerated in the regulation of aid programmes; namely: (1) (2) (3) (4) (5)

national payments for reindeer in Sweden and Finland (Article 213); cracked payments for sugar production in Finland (Article 214); national payment for apiculture (Article 215); national payment for the distillation of wine in a crisis situation (Article 216); national payment for the distribution of agricultural products among children (Article 217); (6) national payment for growing nuts (Article 218).

List of Cases ECJ 14.12.1962, 19-22/62, Boucherie en gros v Council, ECLI:EU:C:1962:48 [cit. in para 20] ECJ 24.10.1973, 5/73, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof, ECLI:EU:C:1973:109 [cit. in para 18] ECJ 01.10.1974, 14/74, Norddeutsches Vieh- und Fleischkontor GmbH v Hauptzollamt Hamburg-Jonas – Ausfuhrerstattung, ECLI:EU:C:1974:92 [cit. in para 23] ECJ 15.05.1975, 71/74, Fruit- en Groentenimporthandel and "Frubo" v Commission, ECLI:EU:C:1975:61 [cit. in para 17, 18] ECJ 16.12.1975, 40/73 et al., Coöperatieve Vereniging "Suiker Unie" UA and others v Commission, ECLI:EU:C:1975:174 [cit. in para 19] ECJ 25.05.1977, 105/76, Interzuccheri S.p.A. v Società Rezzano e Cavassa, ECLI: EU:C:1977:92 [cit. in para 40] ECJ 14.02.1978, 27/76 United Brands Company and United Brands Continentaal BV v Commission, ECLI:EU:C:1978:22 [cit. in para 13] ECJ 21.02.1979, 138/78, Hans-Markus Stölting v Hauptzollamt Hamburg-Jonas, ECLI:EU:C:1979:46 [cit. in para 18] ECJ 16.05.1979, 83/78, Ditta Angelo Tomadini Snc v Amministrazione delle finanze dello Stato, ECLI:EU:C:1978:214 [cit. in para 11] ECJ 26.06.1979, 177/78, Pigs and Bacon Commission v Mc Carren and Company Limited, ECLI:EU:C:1979:164 [cit. in para 40] ECJ 15.11.1979, 36/79, Denkavit, ECLI:EU:C:1979:258 [cit. in para 37] ECJ 24.04.1980, 72/79, Commission v Italy, ECLI:EU:C:1980:109 [cit. in para 40] ECJ 21.05.1980, 73/79, Commission v Italy, ECLI:EU:C:1980:129 [cit. in para 40] ECJ 25.03.1981, 61/80, Coöperatieve Stremsel- en Kleurselfabriek v Commission, ECLI:EU:C:1981:75 [cit. in para 17]

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ECJ 8.7.1982, 258/78, Nungesser v Commission, ECLI:EU:C:1982:211 [cit. in para 19] ECJ 13.10.1982, 213-215/81, Norddeutsches Vieh- und Fleischkontor, ECLI:EU: C:1982:351 [cit. in para 37] ECJ 27.03.1984, 169/82, Commission v Italy, ECLI:EU:C:1984:126 [cit. in para 40] ECJ 30.01.1985, 123/83 BNIC v Clair, ECLI:EU:C:1985:33 [cit. in para 12] ECJ 25.11.1986, 218/85, Cerafel v Le Campion, ECLI:EU:C:1986:440 [cit. in para 19] ECJ 02.02.1988, 67-70/85, Kwekerij Gebroeders van der Kooy BV and others v Commission, ECLI:EU:C:1988:38 [cit. in para 40] ECJ 22.09.1988, 212/87, Unilec v Larroche Frères, ECLI:EU:C:1988:441 [cit. in para 19] ECJ 14.11.2017, C-671/15 APVE and others, ECLI:EU:C 2018:22 [cit. in para 34]

References Danielsen, J. H. (2013). EU agricultural law. The Hague: Wolters Kluwer International. Gerbrandy, A., & de Vries, S. (2011). Agricultural policy and EU competition law. Possibilities and limits for self-regulation in the dairy sector. The Hague: Eleven International Publishing. McMahon, J. A. (2007). EU agricultural law. Oxford: OUP. Jurcewicz, A. (2012). In D. Miąsik & N. Półtorak (Eds.). Traktat o Funkcjonowaniu Unii Europejskiej. Komentarz. Warsaw: Wolters Kluwer Polska. Popardowski, P. (2010). Prawne podstawy wspólnej polityki rolnej. In A. Jurcewicz (Ed.), Prawo i polityka rolna Unii Europejskiej (pp. 1–30). Warsaw: Instytut Wydawniczy EuroPrawo. Whish, R. (2011). Competition law. Oxford: OUP. Zoeteweij-Turhan, M. (2012). The role of producer organizations on the dairy market. BadenBaden: Nomos.

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Article 43 [Implementing the Common Agricultural Policy] (ex-Article 37 TEC) 1. The Commission shall submit proposals for working out and implementing the common agricultural policy, including the replacement of the national organizations by one of the forms of common organization provided for in Article 40(1), and for measures specified in this Title.5-12 These proposals shall take account of the interdependence of the agricultural matters mentioned in this Title.23-31 2. The European Parliament and the Council, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee,40-44 shall establish the common organization of agricultural markets provided for in Article 40(1) and the other provisions necessary for the pursuit of the objectives of the common agricultural policy and the common fisheries policy.32-34 3. The Council, on a proposal from the Commission, shall adept measures on fixing prices, levies, aid and quantitative limitations and on the fixing and allocation of fishing opportunities.45 4. In accordance with paragraph 2, the national market organizations may be replaced by the common organization provided for in Article 40(1) if: (a) the common organization offers Member States which are opposed to this measure and which have an organization of their own for the production in question equivalent safeguards for the employment and standard of living of the producers concerned, account being taken of the adjustments that will be possible and the specialization that will be needed over the passage of time, (b) such an organization ensures conditions for trade within the Union similar to those existing on the national market.46-55 5. If a common organization for certain raw materials is established before a common organization exists for the corresponding processed products, such raw materials as are used for processed products intended for export to third countries may be imported from outside the Union.64

Contents 1. 2.

3. 4.

General Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Evolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2. Preparatory Phase: Stage I and Stage II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.3. The Determination Phase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Directly Effective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 System Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

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5.

EU Right to Freedom in Working Out and Implementing the Common Agricultural Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Normative Acts of the Common Agricultural Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Secondary Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Relationship Between Paragraphs 2 and 3: Basis for the Law-Making Activity of EU Bodies on the Production and Trade of Agricultural Products . . . . . . . . . . . . . . . . . . . . . . . . . . 10. Replacing National Market Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. The Concept of National Market Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. Imports of Agricultural Products from Third Countries (Article 43.5) . . . . . . . . . . . . . . . . . List of Cases References

1. 1

2

3

4

23 32 35 39 44 45 53 61

General Comments

The Treaty is limited to defining a certain list of objectives and principles, and granting EU institutions the authority to determine, in a highly flexible manner, the necessary directions of the agricultural sector.1 These institutions are also endowed with wide normative powers. Article 43.2 and Article 43.3 TFEU define the procedures of working out and implementing the common agricultural policy and constitutes the legal basis for such common policy. After more than 50 years of operation of the common agricultural policy, the Union legislator, after adopting the Lisbon Treaty, resigned from the provisions of Article 43 TFEU, which were related to creating it from the beginning, and which lost their significance in time. This particularly applies to the wording of paragraphs 1 and 2, which were replaced by modified provisions. Thus, in place of the previous paragraph 1, which provided for the Commission to convene a conference of MS to work out the general directions for the future planned common agricultural policy, the current paragraph 1 authorizes the Commission itself to draft proposals concerning working out and implementing this policy, including replacing national organizations by one of the forms of common organization provided for in Article 40.1 TFEU (➔ Article 40 TFEU para 11–13), and to adopt the measures set out in the title devoted to agriculture. The previous paragraphs 2 and 3 of former Article 37 TEC were replaced by paragraph 2 of Article 43 TFEU, which provides for bodies with a different legislative procedure than before, applicable to all the legal solutions required for the attainment of the objectives of the common agricultural policy and the common fisheries policy, including establishing the common market organization provided for in Article 40.1 TFEU. In addition, Article 43.3 TFEU introduces another, simplified procedure of adopting measures concerning the fixing of prices, levies, aid and quantitative limitations, as well as fixing and allocation of fishing opportunities.

1

Jurcewicz, in Mia˛sik et al. (2012), p. 747.

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Evolution

2.1. Overview

Before commencement of the negotiations concerning the Treaty of Rome, the Spaak report, having identified the problems facing the common agricultural policy, concluded the following: “The appearing problems cannot be solved entirely and at the same time. The aim is therefore to define the scope within which it will be possible to formulate and implement this agricultural policy. It cannot be defined in advance or implemented with regard to all agricultural products. However, the objectives and legal procedures must be established with appropriate flexibility, in order not to exclude any of the instruments which may prove to be necessary.”2 The procedure provided for in Article 43 TEEC included 1) two preparatory phases: a conference of the MS at which national agricultural policies were confronted (this took place in Stresa in July 1958) and a plan proposed by the Commission, which was discussed during the Council meeting in 1960; 2) and a determination phase, which started in 1961 and was not limited in time. This was a phase of legislative activity of the community in the sphere of agriculture, which consisted in the Council adopting the regulations, directives, and decisions proposed by the Commission after consulting with the EP. The objective of Article 43 TEEC was therefore contained in its second paragraph, subparagraph 3, which defined the procedure of adopting legal acts that make up the common agricultural policy, and which constitutes one of the most important normative competences of Community institutions. The other objectives of Article 43 TFEU have essentially already been attained (insofar as the actual rules under Title II Part III of the TFEU are concerned). From the time of adopting the Treaty of Rome until the effective date of the Lisbon Treaty, the provisions of Article 43 TEEC did not change substantially. As the existing wording of this provision played a significant role in the interpretation of the agricultural provisions of the Treaty, it is worthwhile to take a closer look at this Article.

5

6

7

2.2. Preparatory Phase: Stage I and Stage II

Article 43.1 TEEC indicated a conference of the MS as the first act of the procedure, which was to be convened by the Commission after the effective date of the Treaty of Rome. This conference took place in Stresa on 3–12 July 1958 and adopted a resolution containing a consensual declaration of all the participating MS, which defined the basic principles of common agricultural policy laid out in the Treaty of Rome. The objectives of this policy included primarily preservation of the family character of farms and the principle of interdependence between the policy 2

Rapport des chefs de delegation aux Ministres des Affaires Ertrangeres, Brussels, 21 April 1956.

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of agricultural structures and the market and income policy. The purpose was for capital and labor in agriculture to achieve a similar level of productivity as incomes in other sectors of the economy, leading specifically to an increase in the earnings of family farms. Aid was proposed to restructure the farms or regions that had been handicapped so far, and the need to eliminate subsidies contrary to the spirit of the Treaty was emphasized. The tasks to be fulfilled by agricultural prices were also defined. These had two basic functions. On the one hand, they must ensure an appropriate level of earnings in agriculture without causing surplus output of agricultural products. On the other, prices must guarantee that these products were competitive on the international market. The subsequent practice of isolating pricing policy inside the former EEC from international competition brought the opposite results. Another issue was to consider, on the one hand, the requirements of exporting countries, and on the other, those of agricultural importers. Article 43.2 TEEC was interpreted by the Commission and the Council in the following way: the proposals mentioned in paragraph 1 and 2 were not yet meant to introduce regulations in the form of legal acts (regulations, directives, or decisions). These proposals are situated in the previous phase, when the Community must define the general outline of its agricultural policy. The point was therefore to form a general, unified, systematic, and coherent plan, which demonstrated the interdependence of the agricultural problems mentioned in Part III of the EEC Treaty. This plan must be presented by the Commission within 2 years from the effective date of the Treaty and must be consulted within the Council with all the MS in a relatively short period to enable the Commission to present concrete regulatory proposals in the form of regulations, directives, and decisions, considering all the contradictory interests of the MS.

2.3. The Determination Phase

10

The proposals provided for by Articles 43.2 (1) and Article 43.2 (2) TEEC had one general purpose: to work out and implement a common agricultural policy. This is also the purpose of the present Article 43.1 TFEU, except that previously the objective was to create this policy from the beginning, while at present it is to work out and implement the policy. “Working out” could be understood as preparing as opposed to implementing, or as defining the general principles (based on the article) as opposed to creating the appropriate instruments for implementing it. If this latter interpretation is accepted, the implementation of the common agricultural policy consisted and consists in: (1) applying these general principles to individual cases or adopting detailed provisions;3 (2) reviewing whether the EU legislation is complied with; and (3) enforcement. 3

Case 16/88, Commission v Council (ECJ 24 October 1989) para 9–10.

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It is obvious that the abovementioned legislative proposals of the Commission applied to the entire common agricultural policy, and it is less important to strictly define how the Commission’s plans concerning working out and implementing this policy must be distinguished within the framework of such an extensive project at that time. This was further confirmed in the next part of Article 43.2 TEEC (and is confirmed in Article 43.1 TFEU): including the replacement of the national organizations by one of the forms of common organization provided for in Article 40.1 TFEU, and for implementing the measures specified in this Title. The word “including” clearly indicates that this is only a part of the issue defined by the wider concept, that is, working out and implementing a common agricultural policy. In practice, Articles 43.2 (1) and Article 43.2 (2) TEEC were implemented from the discussions about the First Mansholt Plan. In December 1959, the Commission presented the Council with proposals concerning this plan for the first time, and after obtaining the opinion of the Economic and Social Committee and the EP, on 30 June 1960, it finally presented the new text of these proposals. During this period (on 12 May 1960), the Council made a decision to speed up the work on implementing the objectives of the Treaty. This was an important decision from the point of view of formulating the common agricultural policy. Article 5 of the decision stipulated that the Council would discuss the proposals for the common agricultural policy within a short period as well as appoint a Special Committee on Agriculture—CSA. This is significant as the Council gave the mission of this body a special character, not envisaged in the Treaty. The purpose of the Committee was to relieve the Council in formulating the common agricultural policy. In November 1960, the Council adopted relatively insignificant “conclusions” relating to the debate concerning the basic principles of the common agricultural policy, and subsequently a “resolution” concerning activities aimed to create the foundations for a system of regulations for certain groups of agricultural products. Solutions concerning these regulations considered the principles subsequently adopted in the regulations concerning market organizations. The resolution also enabled the completion of the second preparatory stage of the procedure of working out the common agricultural policy.

3.

12

Directly Effective

The provision of Article 43 TFEU is not directly effective.

4.

11

13

System Context

The provisions of paragraphs 2 and 3 of Article 43 TFEU indicate that the article is the sole basis for adopting the common agricultural policy. If that is the case, in effect (as indicated by all the provisions of the Treaty as well as case law) this

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16

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18

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article applies to all measures concerning the products listed in Annex I and aiming to attain the objectives defined in Article 39 TFEU4 (➔ Article 39 TFEU para 12–30). This brings about important consequences for distinguishing Article 43 TFEU from other articles of the Treaty. First, if both the above conditions are fulfilled, a given measure belongs to the common agricultural policy even if it does not refer to “agriculture” in the narrow sense of the word, but may in certain respects be considered as belonging to other spheres of Community policy, e.g., harmonization of legislation, commercial policy, environment protection, etc. An interesting example of the application of both these criteria was the basic regulation on oils and fats.5 Under Article 43 TFEU (and also Article 42 TFEU), the Regulation prohibited the MS from adopting measures to increase the prices of other vegetable oils to increase demand for olive oil. In essence, this prohibition, its purpose being to prevent the use of discriminatory taxes in Italy, was a measure of fiscal harmonization. Referring to agricultural products and constituting a necessary measure for the correct operation of the relevant market, this prohibition of indirect taxation was based on Article 43 and not Article 113 TFEU. Thus, Article 43 TFEU has precedence over Articles 114, 115, 122, and 207 TFEU. If both the abovementioned conditions are met, the Council has no freedom to choose any other legal basis in EU legislation. The distinction between Article 43 TFEU and other articles of the Treaty plays an important role for measures related to food law. If, as indicated above, such measures refer to products from Annex I and contribute to the attainment of the objectives of Article 39 TFEU, they must be based on Article 43 TFEU. If the object of a given measure (regulation) is outside the scope of products listed in Annex I, Article 114 TFEU constitutes the appropriate legal basis. The legal basis for regulating food law measures was the object of a long lasting debate. Initially, these measures were based on Article 43 TFEU only when their main purpose was to relieve the internal market from surpluses. Since “food aid” became a separate instrument of development policy, these measures were based on Article 43 and Article 352 TFEU. Later, the reference to Article 43 TFEU disappeared. Because “food aid” applied to agricultural products and such measures at least partly contribute to the proper operation of “internal market regimes” for the relevant products, the latter practice seems open to doubt. The need to consider these two conditions indicates that common agricultural policy is an indivisible concept. It embraces all measures required to attain the objectives provided for in Article 39 TFEU, such as harmonization of legislation, regulation of the EU internal market (Article 40 TFEU), rules of competition and

4

Case 68/86, United Kingdom v Council (ECJ 23 February 1988) para 14; Case 131/86, United Kingdom v Council (ECJ 23 February 1988) para 13; Case 131/87, Commission v Council (ECJ 16 November 1989) para 10–15. 5 Council Regulation 136/66/EEC the establishment of a common organisation of the market in oils and fats, O.J. L 33/536 (1967).

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principles of national aid (Article 42 TFEU), external relations6 and others, such as social issues and education (Article 41 TFEU). Due to the various voting requirements, the distinction between Article 43 and Article 115 TFEU was a constant source of conflict between the Commission and the Council concerning harmonization of agricultural legislation. Usually, the Council added Article 115 TFEU to the Commission’s motion for harmonization of agricultural legislation based on Article 43 TFEU. This practice was devoid of legal force because the provisions of the Treaty stipulate that measures aiming to achieve the free movement of goods must be treated as measures belonging to the common agricultural policy.7 According to case law, Article 43 TFEU provides for the right to conclude international agreements in the field of agriculture.8 Since this right follows from Article 43 TFEU, all international agreements concerning products listed in Annex I and contributing to the attainment of the objectives set out in Article 39 TFEU must be based on it. This is confirmed by the reference of Article 40.2 TFEU to measures regulating external trade (➔ Article 40 TFEU para 48–51).9 As such, these measures, regardless whether they are autonomous or conventional, ought to be based solely on Article 43 TFEU.10 However, according to established practice, trade agreements in agriculture are concluded based on Article 207 TFEU. Customs duties on the other hand are introduced, suspended, or modified based on Article 31 and Article 207 TFEU. The latter article is also used for conventional reductions of import levies.

5.

20

21

22

EU Right to Freedom in Working Out and Implementing the Common Agricultural Policy

Article 43.2 and 43.3 TFEU only define the principles with which the legal acts and observed procedures must comply. The Treaty does not specify any substantive 6 See Joined Cases 3,4-7/76, Cornelis Kramer and others (ECJ 14 July 1976); Case 131/87, Commission Communities v Council (ECJ 16 November 1989). 7 See Case 34/73, Fratelli Variola S.p.A. v Amministrazione italiana delle Finanze (ECJ 10 October 1973); Case 84/71, SpA Marimex v Ministero delle Finanze (ECJ 7 March 1972), Joined Cases 37 and 38/71, Sociaal Fonds voor de Diamantarbeiders przeciwko NV Indiamex i Feitelijke Vereniging De Belder (ECJ 13 December 1973); Joined Cases 80 and 81/77, Socie´te´ Les Commissionnaires Re´unis SARL przeciwko Receveur des douanes; SARL Les fils de Henri Ramel przeciwko Receveur des douanes (ECJ 20 April 1978), Joined Cases C-46/93 and C-48/93, Brasserie du Peˆcheur SA v Bundesrepublik Deutschland i The Queen przeciwko Secretary of State for Transport, ex parte: Factortame Ltd and others (ECJ 5 March 1996). 8 Joined Cases 3,4-7/76, Cornelis Kramer and others (ECJ 14 July 1976) para 21–25; Case 61/77, Commission v Ireland (ECJ 16 February 1978) para 15–17. 9 Joined Cases 51-54/71, P.J. van der Hulst’s Zonen v Produktschap voor Siergewassen (ECJ 23 January 1975) para 20. 10 Case 131/87, Commission v Council (ECJ 16 November 1989) para 28–29.

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24

25

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criteria apart from the reference to the common agricultural policy. Such a broad definition of powers indicates that the Treaty retains its framework character also concerning this policy. Consequently, implementation of common agricultural policy is discretionary in nature.11 Within the very general limits defined by the TFEU may shape this policy basing on political, economic, social, financial, and other assumptions that it considers important. As such, the authority under Article 43 TFEU is political power.12 It is obvious that this right must be exercised for the general benefit, not only for the benefit of a specific group of entities.13 An important consequence of the discretionary power in making decisions concerning implementation of the common agricultural policy is the fact that the EU may fully consider the opportunities and limitations of the political and economic situation prevailing at a given time. The fact that decisions are either made or not (under political pressure from one or more MS) does not render such actions, or inactions, unlawful. As the ECJ stated: “It is consonant with the very idea of the Community that, within the Framework of the mechanics of collective discussion set up with the view to the implementation of the common agricultural policy, the Member States should emphasize their interests, whilst it falls to the Commission to arbitrate, through the measures taken by it, between possible conflicts of interest from the point of view of the general interest.”14 Thus, Articles 43.2 and 43.3 TFEU clearly indicate that only the EU is empowered to decide how the common agricultural policy is to be implemented. However, this does not mean that the MS have lost all their powers in the field of agriculture.15 Since the Treaty does not clearly define what the common agricultural policy should be, the EU is left to decide what this policy will be and to what extent the MS may exercise their competences. Consequently, the division of powers between the EU and the MS in the field of agriculture depends on the EU’s decision as to what it considers necessary and appropriate in the light of Article 39 TFEU.16 As such, although the MS have some legislative powers in the sphere of agriculture, the provisions of the Treaty pertaining to agricultural matters indicate

11

Case C-83/79, SpA Ferriera Valsabbia and others v Commission (ECJ 18 March 1980) para 63. Case 265/87, Schra¨der v Hauptzollamt Gronau (ECJ 11 July 1989) para 22; Joined Case C-267/ 88 to C-285/88, Wuidart and others v Laiterie coope´rative eupenoise and others (ECJ 21 February 1990) para 14; Case C-8/89, Vincenzo Zardi v Consorzio agrario provinciale di Ferrara (ECJ 26 June 1990) para 1; Case C-311/90, Josef Hierl v Hauptzollamt Regensburg (ECJ 19 March 1992) para 13. 13 Joined Cases 9 and 11/71, Compagnie d’approvisionnement, de transport et de cre´dit v Commission (ECJ 13 June 1972) para 33. 14 Case 57/72, Westzucker GmbH v Einfuhr- und Vorratsstelle fu¨r Zucker (ECJ 14 March 1973) para 17. 15 Case 237/82, Jongeneel Kaas (ECJ 7 February 1984) para 10; Joined Cases 141-143/81, Gerrit Holdijk and others (ECJ 1 April 1982) para 14. 16 Case 111/76, Officier van Justitie v Beert van den Hazel (ECJ 18 May 1977) para 6–8; Case 83/ 78, Pigs Marketing Board v Raymond Redmond (ECJ 29 November 1978) para 51–52. 12

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that these national legislative powers are of residual nature.17 In practice, exercising any national powers unilaterally is ruled out,18 which is mainly a result of the establishment of the common market that excludes any unilateral actions of the MS that may disrupt trade within the EU. In addition, managing the common agricultural market requires a common legal order, the scope and object of which are determined by EU institutions. Consequently, the MS have legislative powers only if such powers are not directly or indirectly excluded by EU legislation. The legality of national measures thus depends upon the exhaustive character of the relevant Community principles. Because in many cases agricultural legislation is not particularly clear, the assessment of these opportunities is frequently a matter of interpretation.19 It seems therefore that the operative power of Article 43 TFEU on working out and implementing agricultural policy is not exclusive, in the sense that no national measure in the sphere of agriculture is a priori excluded. If the term “exclusive” is used, it seems that it is to be understood as “preemptive” (having precedence) or “exhaustive”.20 However, from the practical point of view, EU competence in the area of short-term market regulation may be considered “exclusive” because one of the main features of the common market organizations is the fact that they rule out almost all unilateral measures undertaken by the MS. Only on structural policy in the development of rural areas is the situation different, as in this case Union policy consists mainly, as indicated above, in coordinating the policies of MS. On practical implementation of the common agricultural policy, it may be implemented by the EU itself through the Council and Parliament and/or the Commission (if the Council delegates its powers to it), and/or through the MS. Implementation of the common agricultural policy by the MS takes place based on detailed Union regulations or under the general obligation established by Article 4.3 TEU (➔ Article 4 TEU para 1–4) concerning exercising Community law. Regardless whether this is performed by the EU or by the MS under Article 40 TFEU, implementation of the common agricultural policy must be effective, which means that all the necessary and appropriate measures must be taken to attain its objectives (➔ Article 40 TFEU para 57). As the Council and the Parliament are not executive bodies, their role is generally limited to adopting framework legislation, which is then exercised by the Commission and the MS. Depending on the subject matter and the Council’s ability to agree on a decision (frequently of political nature), these provisions may contain detailed instructions or grant general authority, they may be orders or provisions that leave the executive bodies a certain degree of discretionary

17

Case 48/85, Commission v Germany (ECJ 18 September 1986) para 12. Case 68/76, Commission v France (ECJ 16 March 1977) para 22–23. 19 See Case 218/85, Cerafel v Le Campion (ECJ 25 November 1986); Case 111/76, Officier van Justitie v Beert van den Hazel (ECJ 18 May 1977) para 6–8; Case 83/78, Pigs Marketing Board v Raymond Redmond (ECJ 29 November 1978) para 51–52. 20 Case 77/76, Cucchi v Avez (ECJ 25 May 1977) para 34. 18

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28

29

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power. On the MS, implementation takes place by exercising national powers within the limits and according to the conditions defined, directly or indirectly, by the Treaty and Union legislation. Implementation of the common agricultural policy by the MS may also be based on Commission legislation within the limits of this institution’s competence, or those which flow from the relevant Council legislation. The obligation of the MS (Article 4.3 TEU) to take all measures to ensure the effectiveness of Union law refers not only to proper implementation of EU legislation, but also requires adopting all measures to ensure effective supervision and enforcement of such legislation. In addition, the situations and mechanisms being the object of Union regulation may not be treated as less privileged than comparable situations subject to national regulations. If implementation of the common agricultural policy is not regulated by Union law, it takes place pursuant to national law.21 In this case, the MS are entitled to designate appropriate bodies, which will apply the relevant regulations22 and their own procedures.23 Exercising national rights must always consider the correct operation of Union mechanisms.24

6. 32

Title III

Normative Acts of the Common Agricultural Policy

Article 43.2 TFEU provides that the EP and Council, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, establish provisions necessary for the pursuit of the objectives of the common agricultural policy and the common fisheries policy. The language of this provision differs considerably from former Article 37.2(3) EC, which stipulated that the Council, being a qualified majority, on the motion of the Commission and after consulting the Assembly, adopts regulations or directives and makes decisions without prejudice to the recommendations which it may formulate.25 It is quite evident that while previously the legislator indicated specific types of legal acts to be adopted by the competent bodies, it now merely uses the general term “provisions”. It seems that the change is a result of legislative practice formed over the years and the established general outline of agricultural legislation. It also appears that there is no need to point what types of legal acts the legislator ought 21

Case 94/71, Schlu¨ter & Maack v Hauptzollamt Hamburg-Jonas (ECJ 6 June 1972) para 10–11; Joined cases 146, 192-193/81, BayWa AG and others v Bundesanstalt fu¨r landwirtschaftliche Marktordnung (ECJ 6 May 1982) para 15. 22 Joined Cases 51-54/71, International Fruit Company NV and others v Produktschap voor groenten en fruit (ECJ 15 December 1971) para 4. 23 Case 39/70, Norddeutsches Vieh- und Fleischkontor GmbH v Hauptzollamt Hamburg-St. Annen (ECJ 11 February 1971) para 4. 24 Case 36/70, Getreide-Import GmbH v Einfuhr- und Vorratsstelle fu¨r Getreide und Futtermittel (ECJ 16 December 1970) para 81-5. 25 See Danielsen (2013), p. 46.

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to employ. It is further to be emphasized that the procedure of adopting legal acts also changed, which will be the object of a separate sub-section of this commentary (➔ para 39–43). Article 43 TFEU constitutes the legal basis for most legal acts associated with agriculture, that is, providing for all measures required to establish and operate a common market for agricultural products, measures to harmonize legislation and external trade and required to finalize the common market in this sector, as well as on the agricultural structures policy and development of rural areas.

7.

34

Secondary Legislation

On secondary legislation of the common agricultural policy, former Article 37.2 (3) TEC mentioned three types of legislation: regulations, directives, and decisions. The choice between them was, within the meaning of former Article 34.2 TEEC, up to the discretion of the institution. As already mentioned, Article 43.2 TFEU does not indicate any specific types of legal acts, leaving the freedom of choice to the Union legislator. It is obvious that the legislator may choose a form of legal act best suited to achieve the relevant objectives. In practice, wishing to introduce real Community legislation, the legislator showed a preference for regulations. Hence, directives are an instrument that is gradually less often used. Initially, they were used for structural measures, which reflected the fact that Community action in this area was more a matter of coordination of the policies of the MS rather than establishing one order for the entire Community. At present, structural policy as part of the development of rural areas is usually the object of regulations. Directives are still used to harmonize sanitary, veterinary, and phyto-sanitary legislation, although the use of regulations is also increasing in these areas. Although Article 43 TFEU does not mention the sources of agricultural legislation, it is worth to mention the resolutions that are an important source of “soft law”, as they indicate the future execution of EU laws, i.e., legislative programmes, common prices, or reforms. The same applies to numerous Commission policy documents.26 As such, EU secondary legislation, based on Article 43 TFEU, refers specifically to five areas: (1) common market organizations and certain other commercial agreements constituting the core of market and pricing policy in the agricultural sector; approximately half of the Union’s agricultural legislation applies specifically to market regimes; (2) agricultural structures and development of rural areas (production, marketing, processing, statistics, research); 26

Case 92/78, Simmenthal v Commission (ECJ 6 March 1979) para 99. See also Popardowski (2010), p. 8.

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37

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(3) harmonizing legislation (animal feed, animal husbandry and animal health, protection of plants, seeds and saplings); (4) financial issues (agricultural funds); (5) potentially monetary issues.

8. 39

40

41

42

43

Procedures

As mentioned above, according to the previously applicable procedure of adopting legal acts, after consulting the opinion of the EP and the Economic and Social Committee, the Council would pass the Commission’s proposal by a qualified majority. Originally, this was the most difficult decision-making procedure in the Community. The principle of qualified majority was de facto suspended by the 1966 Luxembourg compromise, although the practice has undergone certain changes since the 1990s. An important requirement was obtaining the EP opinion that, if neglected, would render the legal act invalid. At present, legal acts concerning the establishment of common agricultural market organizations under Article 40.1 TFEU and other matters required to attain the objectives of the common industrial policy and common fisheries policy are adopted by means of an ordinary legislative procedure, by the EP and Council after consulting the Economic and Social Committee. The obvious purpose of adopting the ordinary procedure is to make the passing of legal acts more efficient. In its paragraph 3, Article 43 TFEU introduces a new, simplified procedure concerning strictly defined areas of agricultural law. On a proposal from the Commission, the Council adopts measures related to fixing prices, levies, aid, and quantitative limitations as well as the fixing and allocation of fishing opportunities. It may be concluded that while the procedure under paragraph 2 applies to a wide range of relatively stable issues of agricultural legislation in general, paragraph 3 of Article 43 refers to important issues but ones that tend to be liable to frequent changes resulting from changes in the current economic situation in the sector. On agricultural legislation and agricultural policy, the function of COREPER is performed by the already mentioned Special Committee on Agriculture (CSA) , composed of high ranking officials from the MS. According to ECJ case law in the agricultural sector, even the measures applied in emergency cases must be based on Article 43 TFEU, unless the delay associated with the implementation of the procedure may threaten the proper operation of the market organization. In this case, measures may be taken on an interim basis under Article 122 TFEU.27

27

Case 5/73, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof (ECJ 24 October 1973) para 15.

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Relationship Between Paragraphs 2 and 3: Basis for the Law-Making Activity of EU Bodies on the Production and Trade of Agricultural Products

Article 43 TFEU establishes two independent bases of law-making activity for the EU bodies on production and trade in agricultural products, at the same time defining separate procedures in adopting the relevant measures (paragraph 2 and 3 of Article 43). The competence of the Council and Parliament that flows from Article 43.2 TFEU provides the basis for every measure required for the attainment of the objectives of the common agricultural policy, while the effect of law-making activity undertaken on this legal basis is the assumption by these bodies of political responsibility evaluated from the perspective of the adequacy of the adopted measure for the attainment of common agricultural policy objectives. The measures adopted by the Council on proposal of the Committee (Article 43.3 TFEU) have a different character. This provision establishes competence of measures (mainly of technical nature) undertaken essentially to execute the acts adopted based on Article 43.2 TFEU.28 At the same time, since Article 43.3 TFEU establishes a special standard of competence concerning the general competences of the Council and Parliament laid out in Article 43.2 TFEU, this provision ought to be strictly construed. Thus, in substance Article 43.3 TFEU lays down the basis for adopting provisions relating exclusively to fixing of prices, levies, aid and quantitative limitations, and on the fixing and allocation of fishing opportunities.

10.

44

Replacing National Market Organizations

Under Article 43.4 TFEU, national market organizations may be replaced by the common market organization provided for in Article 40.1 TFEU on the terms and conditions set out in paragraph 2, provided the guarantees set out in Article 43.4 TFEU are offered to the farmers. These guarantees are defined in Article 43.4 (a) and (b) TFEU. It must be stated that the purpose of this disposition was to extend the ability of the MS to veto the establishment of the common agricultural market created at that time even after the second preparatory stage. Obviously, the veto could not apply to all normative acts concerning common agricultural policy matters, but only those regulations that referred to replacement of national market organizations by the common organizations. Essentially, the issue referred to those Community regulations that put an end to the subsidies provided by the MS to their national organizations. However, the intentions of the signatories of the Treaty in introducing a special procedure of adopting

28

Joined Cases C-103/12 and C-165/12, Parliament and Commission v Council (ECJ 26 November 2014) para 49–50.

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47

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48

49

50

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a legal act, a regulation, whereby a national organization would be replaced by a community one, were to support and not to undermine the position of the MS. Because all common market organizations, even after the end of the second interim phase, were created by acts of Community law adopted with the joint consent of the MS, the provision of Article 43.3 of the Treaty of Rome was not applied. Another point to be noted is the limitation provided for in Article 43.4 TFEU. Because common market organizations were established for nearly all agricultural products and the disposition described above could only govern the replacement of national organizations, there can be no question of modification of common organizations. The conditions indicated in Article 43.4 (a) and (b) TFEU, although not applied in practice, are significant elements in interpreting the dispositions contained in Title III of the Treaty. As stated above, the first condition that a common market organization sets for the MS opposed to its establishment if they possess their own national market organization is the latter offering certain guarantees (safeguards) for the producers of the given products. This disposition was not an advantage for all MS because a national market organization within the meaning of the Treaty cannot be any national regulation, any national system pertaining to a given product. This interpretation follows from the provision whereby a common organization must offer equal employment and standard of living guarantees to the persons concerned in comparison to the former guarantees offered by the national market organization. However, it is believed that Community guarantees must be limited to a certain degree if the speed of the necessary adjustments to the rules of the common market and the required specialization are considered. The requirement that the common organization must ensure similar conditions of trade inside the Community to those on the national market is difficult to fulfil. It means that conditions different from those that exist on the national market, including common trade conditions with third countries, protect the Union’s products against fluctuations on the global market. Although this was not an initial objective of Community regulations, it must be emphasized that it reaffirms the principle of preference for Union agriculture on the EU market.

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The Concept of National Market Organization

The offer for farmers interested in guarantees equivalent to those offered by national market organizations upon their replacement by common organizations was frequently used when the MS were previously opposed to eliminating the former. Generally speaking, they must observe the principles of the Treaty aiming to gradually eliminate import obstacles, especially concerning opening global quotas and their gradual expansion at the speed provided for in the now repealed Article 33. Article 43.4 TFEU thus underscored the interpretation of the former Article 45 TFEU, whereby on agricultural products subject to national Jurcewicz/Popardowski

Article 43. [Implementing the Common Agricultural Policy]

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market organizations, the importing country was released from the obligation to gradually remove such obstacles. However, from the first years of application of the Treaty, to protect agricultural products against the principle of free movement of goods that expressly prohibits any quantitative limitations in the trade between them, the MS established national market organizations, including situations where import quotas were the only disposition of these products. The Commission did not approve this practice. Absent a definition in the Treaty, the problem arose of specifying what a national market organization was. The Commission undertook to formulate a definition of a national market organization based solely on the directions contained in the Treaty. The Commission determined that although no formal definition of a national market organization is included in the Treaty, it does contain certain directions indicating that it refers to the general dispositions related to the sale of agricultural products in a country that guarantees employment and maintaining the current standards of living to the relevant producers. This condition is not fulfilled when the movement of products and stabilization of prices are protected and safeguarded not only against import repercussions, but also against the consequences of the fluctuations of national production or demand. In any case, imposing quotas cannot be a sufficient condition for accepting that a given product is subject to a market organization. From this definition, the Commission determined disputes concerning quota liquidation with the countries of origin of products being at the same time community MS. The controversies abated after establishing common organizations for nearly all agricultural products. Some controversies and disputes arose with new MS during transitional periods or negotiation of accession acts.29 However, the ECJ formulated its own definition which reads as follows: “The national market organization therefore amounts to a totality of legal devices placing the regulation of the market in the products in question under the control of the public authority, with a view to ensuring, by means of an increase in productivity and of optimum utilization of the factors of production, in particular of manpower, a fair standard of living for producers, the stabilization of markets, the assurance of supplies and reasonable prices to the consumers.”30 It is easily noted that the ECJ defined a national market organization as one having the same objectives as those laid out in Article 40 of the Treaty on common organizations, which nonetheless made it impossible for it to coexist with EU organizations on the national level, unless expressly provided for or expressly required. The concept worked out by the Commission resulted in defining a type of national organization having a “defensive” character, focused on high product prices and protection against imports. These features characterized most national

29

See Case 241/88, Commission v Greece (ECJ 25 February 1988). Case 48/74, Charmasson v Minister for Economic Affairs and Finance (ECJ 10 December 1974) para 22.

30

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organizations at the time, for which the guarantees contained in Article 43.3 TFEU seemed somewhat imaginary. Consequently, the Commission established precise criteria enabling the avoidance of application of Article 33 (now repealed) only to situations where the guarantees were certain and already granted to producers in the past. On the other hand, the definition formulated by the Court did not bring the controversies between the MS to an end. This definition caught the essence of the matter by placing market regulation under the control of public authorities, but failed to set practical criteria for determining whether such regulations exist or not. Nonetheless, by introducing it into the framework of all the objectives of the common agricultural policy defined in Article 39 of the Treaty (without additional requirements, but this was understood in itself), the Court enhanced the definition of national market organization by the features defined in Article 40 of the Treaty.

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Imports of Agricultural Products from Third Countries (Article 43.5)

Article 43.5 TFEU refers to sustaining the interests of Community industry oriented towards exporting products by means of imports without obstacles or barriers. It applied to the imports of agricultural products from third countries, which were used as raw materials for production. The provision was most likely the effect of a compromise between protectionist groups aiming to establish Community organizations only for basic products, that is, raw materials, used for producing processed goods. The disposition never played an important part because Community organizations were founded both for basic products (raw materials) as well as processed goods. In exceptional situations industry referred to general principles governing commerce.

List of Cases ECJ 16.12.1970, 36/70, Getreide-Import GmbH v Einfuhr- und Vorratsstelle fu¨r Getreide und Futtermittel, ECLI:EU:C:1970:112 [cit. in para 31] ECJ 11.02.1971, 39/70, Norddeutsches Vieh- und Fleischkontor GmbH v Hauptzollamt Hamburg-St. Annen, ECLI:EU:C:1971:16 [cit. in para 31] ECJ 15.12.1971, 51-54/71, International Fruit Company NV and others v Produktschap voor groenten en fruit, ECLI:EU:C:1971:128 [cit. in para 22, 31] ECJ 06.06.1972, 94/71, Schlu¨ter & Maack v Hauptzollamt Hamburg-Jonas, ECLI: EU:C:1972:45 [cit. in para 31] ECJ 13.06.1972, 9/71 and 11/71, Compagnie d’approvisionnement, de transport et de cre´dit and others v Commission, ECLI:EU:C:1972:52 [cit. in para 13] ECJ 14.03.1973, 57/72, Westzucker GmbH v Einfuhr- und Vorratsstelle fu¨r Zucker, ECLI:EU:C:1973:30 [cit. in para 25]

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ECJ 24.10.1973, 5/73, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof, ECLI:EU:C:1973:109 [cit. in para 43] ECJ 10.12.1974, 48/74, Charmasson v Minister for Economic Affairs and Finance, ECLI:EU:C:1974:137 [cit. in para 57] ECJ 14.07.1976, 3 and 4-7/76, Cornelis Kramer and others, ECLI:EU:C:1976:114 [cit. in para 19, 21] ECJ 16.03.1977, 68/76, Commission v France, ECLI:EU:C:1977:48 [cit. in para 26] ECJ 18.05.1977, 111/76, Officier van Justitie v Beert van den Hazel, ECLI:EU: C:1977:83 [cit. in para 26] ECJ 25.05.1977, 77/76, Cucchi v Avez, ECLI:EU:C:1977:91 [cit. in para 27] ECJ 29.11.1978, 83/78, Pigs Marketing Board v Raymond Redmond, ECLI:EU: C:1978:214 [cit. in para 26] ECJ 06.03.1979, 92/78, Simmenthal, ECLI:EU:C:1979:53 [cit. in para 37] ECJ 18.03.1980, C-83/79, SpA Ferriera Valsabbia and others v Commission, ECLI: EU:C:1980:81 [cit. in para 23] ECJ 01.04.1982, 141-143/81, Gerrit Holdijk and others, ECLI:EU:C:1982:122 [cit. in para 26] ECJ 07.02.1984, 237/82, Jongeneel Kaas, ECLI:EU:C:1984:44 [cit. in para 26] ECJ 06.05.1982, 146/81 and 192-193/81, BayWa AG and others v Bundesanstalt fu¨r landwirtschaftliche Marktordnung, ECLI:EU:C:1982:146 [cit. in para 31] ECJ 18.09.1986, 48/85, Commission v Germany, ECLI:EU:C:1986:326 [cit. in para 26] ECJ 25.11.1986, 218/85, Cerafel v Le Campion, ECLI:EU:C:1986:440 [cit. in para 26] ECJ 23.02.1988, 68/86, United Kingdom v Council, ECLI:EU:C:1988:85 [cit. in para 14] ECJ 23.02.1988, 131/86, United Kingdom v Council, ECLI:EU:C:1988:86 [cit. in para 14] ECJ 11.07.1989, 265/87, Schra¨der v Hauptzollamt Gronau, ECLI:EU:C:1989:303 [cit. in para 24] ECJ 24.10.1989, 16/88, Commission v Council, ECLI:EU:C:1989:397 [cit. in para 10] ECJ 16.11.1989, 131/87, Commission v Council, ECLI:EU:C:1989:581 [cit. in para 14, 19, 22] ECJ 21.02.1990, C-267/88 and C-285/88, Wuidart and others v Laiterie coope´rative eupenoise and others, ECLI:EU:C:1990:79 [cit. in para 23] ECJ 26.06.1990, C-8/89, Vincenzo Zardi v Consorzio agrario provinciale di Ferrara, ECLI:EU:C:1990:260 [cit. in para 24] ECJ 19.03.1992, C-311/90, Josef Hierl v Hauptzollamt Regensburg, ECLI:EU: C:1992:138 [cit. in para 24] ECJ 26.11.2014, C-103/12 and C-165/12, Parliament and Commission v Council, ECLI:EU:C:2014:2400 [cit. in para 44]

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References Danielsen, J. H. (2013). EU agricultural law. The Hague: Wolters Kluwer International. Mia˛sik, D., Po´łtorak, N., & Wro´bel, A. (Eds.). (2012). Traktat o Funkcjonowaniu Unii Europejskiej. Warsaw: Wolters Kluwer Polska. Popardowski, P. (2010). Prawne podstawy wspo´lnej polityki rolnej. In A. Jurcewicz (Ed.), Prawo i polityka rolna Unii Europejskiej (pp. 1–30). Warsaw: Instytut Wydawniczy EuroPrawo.

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Article 44 [Countervailing Charge] (ex-Article 38 TEC) Where in a Member State a product is subject to a national market organisation or to internal rules having equivalent effect which affect the competitive position of similar production in another Member State, a countervailing charge shall be applied by Member States to imports of this product coming from the Member State where such organisation or rules exist, unless that State applies a countervailing charge on export.5–10 The Commission shall fix the amount of these charges at the level required to redress the balance;11,12 it may also authorise other measures, the conditions and details of which it shall determine.13

Contents 1. 2. 3. 4.

General Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Evolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Character . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Conditions for Establishing Charges in Agricultural Trade with Other Member States . . . 5 4.1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 4.2. Transition Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4.3. National Support of Production and Trade in Agricultural Products . . . . . . . . . . . . . . . . . 8 4.4. No Application of Subsidies for Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5. Rules for Establishing the Amounts of Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 6. Other Protective Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 List of Cases Reference

1.

General Comments

Article 44 TFEU allows for the introduction of extraordinary protective measures in trade between MS during the transition period.1 It provides for the possibility of applying protective measures for imports of agricultural products from other MS. The application of such protective measures is limited only to the products for which the exporting country applies its own public support mechanisms (production or export subsidies). In its assumptions, Article 44 TFEU admits the possibility for an importing country to apply countervailing charges in a situation where the object of trade 1

See Case 48/74, Charmasson v Ministre de l’économie et des finances (ECJ 10 December 1974) para 10–11.

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between EU MS consists of subsidized agricultural products. This is because automatic application of subsidy mechanisms in individual MS resulted in distorting the market mechanisms of shaping the competitive position of products within the common market. As such, the purpose of Article 44 TFEU is to countervail the competitive advantage of agricultural products imported from Member States applying their own subsidy system. This it confirmed in ECJ case law. For example, in St. Nikolaus Brennerei und Likörfabrik,2 the ECJ noticed that so long as an agricultural product has not been made subject to a common organization of the market, Article 44 TFEU constitutes for the Commission a useful instrument that allows it to adopt immediate safeguards against distortions of competition created by a MS.

2. 3

The wording of Article 44 TFEU did not change from the entry into force of the EEC Treaty, although its numbering changed. In the original version of the TEC, Article 44 was numbered as 46, and after the changes introduced by the TEU, Article 38 became its equivalent. After the effective date of the Lisbon Treaty, Article 38 was renumbered as Article 44.

3. 4

Evolution

Character

Article 44 TFEU is of general nature and does not grant any rights to individual entities or create any obligation to act on the part of national bodies. As such, it has no direct effect.

4.

Conditions for Establishing Charges in Agricultural Trade with Other Member States

4.1. Overview

5

Article 44 TFEU creates the ability to apply extraordinary measures, which are essentially inappropriate from the perspective of the newly created common market. As such, Article 44 TFEU significantly limits the application of such measures.

2 Case 337/82, St. Nikolaus Brennerei und Likörfabrik, Gustav Kniepf-Melde GmbH v Hauptzollamt Krefeld (ECJ 21 February 1984) para 14–16. See also Case 181/85, France v Commission (ECJ 12 February 1987).

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4.2. Transition Period

Under Article 44 TFEU, the introduction of extraordinary measures in trade between MS was admissible only during the transition period, i.e., until the national markets are embraced by the common market organization (➔ Article 40 TFEU para 11–14).3 The operations of the agricultural products market within the common markets organization eliminates the grounds for applying protective measures in trade relations between the MS because the establishment of a common organization of agricultural markets assumes the application of unified intervention instruments (including subsidy instruments) in all MS. At this point, it must be noted that after the expiry of the transition period, a small number of agricultural products remained outside the scope of the common market organization (at present cotton, ovalbumin, and lactalbumin4), and Article 44 TFEU may still be applied to these products.

6

7

4.3. National Support of Production and Trade in Agricultural Products

Article 44 TFEU applies to imports of agricultural products embraced by the scope of operations of national organizations of agricultural markets. The system of subsidies it involves has a negative effect on the competitive position of the same agricultural products in another MS. Thus, Article 44 TFEU applies to a situation where agricultural products embraced by a national market organization are covered by a subsidy system. This system of national support promoted the exports of agricultural products. Marketing of subsidized agricultural products in another MS resulted in distorting competition on the national market for agricultural products. In the light of Article 44 TFEU, situations where agricultural products exported from a country are not embraced by a common market organization but are “subject to a national market organization or to internal rules having equivalent effect”, which affect the competitive position of similar products in another MS, are sufficient to apply protective measures. The term “internal rules having equivalent effect” used in Article 44 TFEU refers to the terminology used by the 1956 Spaak Report. According to this report, the concept of internal regulations was understood not only as traditional legal measures applied on the internal market (e.g., intervention buying), but also export subsidies currently considered to constitute measures regulating trade with third countries. As such, the legislator applied the term “internal rules having equivalent 3 See Parliament/Council Regulation (EU) No 1308/2013 establishing a common organisation of the markets in agricultural products, O.J. L 347/671 (2013) and Parliament/Council Regulation 1379/2013 on the common organisation of the markets in fishery and aquaculture products, O.J. L 354/1 (2013). 4 Regulation 614/2009 on the common system of trade for ovalbumin and lactalbumin, O.J. L 181/ 8 (2009).

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effect” to all national forms of supporting agricultural exports in the context of their negative effect on trade in the country to which these products are imported.5

4.4. No Application of Subsidies for Exports

10

Article 44 TFEU admits the application of countervailing charges on agricultural products imported from another country only if the country which imposes such charges does not at the same time subsidize its exports. In this case, the permission to apply special protective instruments granted by this article would lead to unjustified advantage for such an MS.

5. 11

12

Article 44.2 TFEU provides that the Commission sets the amounts of countervailing charges on a level required to restore balance. This means that such charges must not necessarily neutralize the effect of subsidies in trade between the MS. Literature emphasizes that the purpose of charges established based on Article 44 TFEU is rather to support agricultural trade between the MS than to obstruct trade,6 and their operation must be considered from the point of view of the interests of EU agriculture as a whole. The Commission establishes protective measures only on request of an MS. Consequently, unilateral application of such charges by an MS outside the procedure required by Article 44 TFEU constitutes a breach of the provisions of the Treaty.7

6. 13

Rules for Establishing the Amounts of Charges

Other Protective Measures

Based on Article 44.2 TFEU, the Commission was authorized to apply other protective measures than countervailing charges on the terms and conditions it considers appropriate.

List of Cases ECJ 14.12.1962, 3/62, Commission v Luxembourg and Belgium, ECLI:EU: C:1962:45 [cit. in para 12] 5

Olmi, Commentaire Megret, p. 66. McMahon (2000), p. 34. 7 See Case 3/62, Commission v Luxembourg and Belgium (ECJ 14 December 1962). 6

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ECJ 10.12.1974, 48/74, Charmasson v Ministre de l’économie et des finances, ECLI:EU:C:1974:137 [cit. in para 1] ECJ 21.2.1984, 337/82, St. Nikolaus Brennerei und Likörfabrik, Gustav KniepfMelde GmbH v Hauptzollamt Krefeld, ECLI:EU:C:1984:69 [cit. in para 1] ECJ 12.2.1987, 181/85 France v Commission, ECLI:EU:C:1987:80 [cit. in para 1]

Reference McMahon, J. A. (2000). EU agricultural law. Oxford: OUP.

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Title IV Free Movement of Persons, Services and Capital Chapter 1 Workers

Article 45 [Free Movement of Workers] (ex-Article 39 TEC) 1. Freedom of movement for workers shall be secured within the Union. 2. Such freedom of movement shall entail the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment.33–39 3. It shall entail the right,26–50 subject to limitations justified on grounds of public policy, public security or public health:67–75 (a) to accept offers of employment actually made; (b) to move freely within the territory of Member States for this purpose;29, 55 (c) to stay in a Member State for the purpose of employment in accordance with the provisions governing the employment of nationals of that State laid down by law, regulation or administrative action;31 (d) to remain in the territory of a Member State after having been employed in that State, subject to conditions which shall be embodied in regulations to be drawn up by the Commission. 4. The provisions of this Article shall not apply to employment in the public service.79–83

Contents 1. 2.

3.

#

The Origins and Genesis of Article 45 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Freedom of Movement for Workers as Protected Under Article 45 TFEU and EU Secondary Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.1. The Current Legal Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.2. The Personal Scope of the Free Movement of Workers Provisions . . . . . . . . . . . . . . . . 21 2.3. The Material Scope of the Free Movement of Workers Provisions . . . . . . . . . . . . . . . . 33 2.3.1 Introductory Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 2.3.2 Primary Rights Stemming from Article 45 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . 35 2.3.3 Secondary Rights Stemming from Article 45 TFEU . . . . . . . . . . . . . . . . . . . . . . . 44 2.3.4 What Amounts to a Restriction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 2.3.5 Filtering Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 2.4. The Territorial Scope of the Free Movement of Workers Provisions . . . . . . . . . . . . . . 77 The Justifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 3.1. Some General Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 3.2. The Treaty Derogations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 3.2.1 Public Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 3.2.2 Public Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 3.2.3 Public Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 3.3. Objective Justifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 3.4. The Public Service Exception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 3.5. The Principle of Proportionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

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4. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 List of Cases References

1. 1

2

The Origins and Genesis of Article 45 TFEU

As is well-known, the first steps towards building what is today the EU were taken back in the 1950s and comprised the establishment of three Communities: the European Coal and Steel Community, which was established by the eponymous Treaty in 1952;1 the European Economic Community, created by the EEC Treaty in 1958; and Euratom, which was the result of the Euratom Treaty that also came into force in 1958. The ECSC had a rather narrow aim—that of establishing a common market in coal and steel; Euratom sought to create a platform for cooperation for the peaceful use of nuclear energy; and the EEC, which became the core of the European integration project, was aiming at the creation of a common market in goods, economic actors, services, and capital. Accordingly, as will be seen below, all three Communities included provisions that sought to safeguard and encourage the free movement of workers between the participating MS, as part of the process of establishing a common market. The origins of the three Communities go back to the Schuman Declaration, which demonstrates that they were a reaction to the Second World War and were created as a means to ensure the achievement of long-term peace in Europe. It was thought that cooperation in the economic and energy fields would make war among the participating States “not merely unthinkable, but materially impossible”,2 whilst ensuring that the participating States would not be required to cede their sovereignty in more contentious fields such as foreign and defence policy. The very first Treaty provision that sought to establish the free movement of workers between MS was Article 69 ECSC, which was situated in Chapter VIII of Title Three of the ECSC Treaty. Given the (limited) focus of that Treaty, Article 69 ECSC only covered workers in the coal and steel industries. Article 69(1) ECSC required MS “to renounce any restriction based on nationality against the employment in the coal and steel industries of workers of proven qualifications for such industries who possess the nationality of one of the Member States” although it was also noted that this commitment would be subject to the limitations imposed “by the fundamental needs of health and public order”; Article 69(2) ECSC provided that in applying this provision, MS were to draw up common definitions of skilled trades and qualifications and were to determine by common accord the limitations provided for in Article 69(1), whilst they would endeavour to work out arrangements on a Community-wide basis for bringing offers of employment into touch

1

The ECSC Treaty expired in 2002 after applying for fifty years under Article 97 thereof. The Schuman Declaration, full text available at http://europa.eu/about-eu/basic-information/ symbols/europe-day/schuman-declaration/index_en.htm. 2

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with applications for employment; Article 69(3) ECSC provided that, as regards workings not covered by paragraph (2) where growth of coal or steel production was hampered by a labour shortage, the MS were to adjust their immigration rules to the extent needed to remedy this, in particular by facilitating the re-employment of coal and steel workers of other MS; and Article 69(4) ECSC prohibited discrimination in remuneration and working conditions “between national workers and immigrant workers”. As explained by J. Handoll, although a number of pieces of secondary legislation had been promulgated to give effect to Article 69 ECSC, these were repealed in 1972, as they were deemed no longer relevant since the MS were fulfilling their obligations under Article 69 ECSC, by complying with Regulation 1612/68,3 which—as we shall see below—elaborated the prohibition of discrimination on the ground of nationality against migrant workers in general (i.e. not just in the coal and steel industries).4 The Euratom Treaty—which is still in force today, as amended by subsequent Treaty revisions—has contained provisions governing the free movement of workers since its birth (Articles 96 and 97 Euratom). Article 96(1) Euratom requires MS to abolish all restrictions based on nationality affecting the right of nationals of any MS to take skilled employment in the field of nuclear energy, these being subject to the limitations resulting from the basic requirements of public policy, public security or public health. Article 96(2) Euratom lays down the procedure under which the Council could issue directives for furthering the aims of Article 96. Article 97 Euratom provides that no restrictions based on nationality may be applied to natural or legal persons where they wish to participate in the construction of nuclear installations of a scientific or industrial nature in the Community. The above provisions of the ECSC and Euratom Treaties, nonetheless, soon became obsolete in practice, when the EEC Treaty came into force in 1958.5 As seen earlier, this Treaty had the broader aim of building a common market and this, from the beginning, also included the aim of building a common market in labour, requiring MS to ensure the free movement of workers between them. Accordingly, since the beginning of the EEC’s existence, there were Treaty provisions governing the free movement of workers between MS. The original provision was Article 48.1 TEEC, which required MS to ensure the free movement of workers not later than on the date of the expiry of the transitional period.6 The remaining of

3 Council Regulation (EEC) No 1612/68 on freedom of movement for workers within the Community, O.J. L 257/2 (1968). 4 Handoll (1995), p. 27. 5 However, it should be noted that the provisions remained formally in force as Article 232.1 TEEC, which provided that the EEC Treaty provisions were not to affect the provisions of the ECSC Treaty, in particular concerning the rights and obligations of MS, the powers of the institutions of the Community and the rules laid down in the ECSC Treaty for the functioning of the common market in coal and steel; and Article 232.2 TEEC provided that the provisions of the EEC Treaty were not to detract from those of the Euratom Treaty. 6 The date of the expiry of the transitional period was 1 January 1970.

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this provision was virtually identical to its versions that followed because of subsequent Treaty revisions. Accordingly, the text in Article 39 TEC (in force between 1 May 1999 and 30 November 2009) and, now, Article 45 TFEU (applicable since 1 December 2009) is the same as the text of the original provision, bar from the reference to the transitional period.7 For ease of reference, the current (post-Lisbon) Treaty numbering will be used throughout the chapter when referring to this provision, unless historical accuracy requires otherwise; accordingly, the analysis will make reference to Article 45 TFEU.8 There have always been economic and social dimensions to the freedom of movement of workers,9 and, as will be seen, this is reflected both in secondary legislation and in the Court’s case law interpreting this freedom.10 Hence, the freedom has not only been viewed as a tool for building an internal market but also as a means through which to grant to MS nationals (who, since 1993, are also Union citizens) the personal right to work in the territory of another MS or—as made clear more recently—in a cross-border context. This is a point that must be kept in mind when reading the secondary legislation applicable in this context and the case law where the provisions governing this freedom were interpreted. Finally, the benefits of labour mobility are well known and they have recently been summarised by the European Commission: “As part of the single market, free movement of workers has positive effects on economies and labour markets. The four fundamental freedoms, which are inextricably linked, create the conditions for more efficient allocation of resources within the EU. Free movement of EU citizens stimulates economic growth by enabling people to travel, study and work across borders and by allowing employers to recruit from a larger talent pool. In view of the significant imbalances in Europe’s labour markets and its declining workingage population, labour mobility contributes to addressing skills and job mismatches.”11

7

However, it should be noted that in each enlargement, there is, usually, a transitional period for the freedom of movement of workers, for some or all of the acceding States. For more on this, see White (2004), pp. 18–19; Mitsilegas (2009). At the moment, there are transitional provisions only for workers from Croatia, since Croatia is the most recent MS to join in 2013. In the current (final) phase of the transitional arrangements for Croatia (from July 2018 until the end of June 2020), MS are only able to impose restrictions on the free movement of Croatian nationals in case of serious disturbances on their labour market or a threat of such disturbances. 8 For a relatively recent article assessing the development of the law governing the free movement of workers, see White (2011). For some comments on the difficulties and dilemmas that the free movement of persons (including the free movement of workers) involves in the current economic and political climate, see Editorial Comments (2014). For an older article dealing with similar issues, see O’Leary (1999). 9 Craig and de Búrca (2015), p. 745. 10 For some comments on this, see O’Leary (2011), pp. 505–508. 11 Commission Communication, Free movement of EU citizens and their families: Five actions to make a difference, COM(2013) 837 final, p. 2.

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Freedom of Movement for Workers as Protected Under Article 45 TFEU and EU Secondary Legislation

2.1. The Current Legal Framework

The Court was early on confronted with the question of the direct effect of Article 45 TFEU and it made it clear that the provision is (vertically) directly effective,12 which means that it can be relied on before national courts against the State, the latter, in this context, being interpreted broadly, to cover all public authorities, including regional and local authorities as well as autonomous public bodies. It was, subsequently also made clear that Article 45 TFEU can be used semihorizontally, against bodies regulating collectively an economic activity.13 As C. Barnard has pointed out, the extension of direct effect to apply in cases involving such bodies is, in fact, an extension of vertical effect only “not because the state is controlling the actions of these bodies but rather because the effect of decisions made by professional regulatory bodies was equivalent to state intervention.”14 In 2000, the Court went even further and held in the Angonese case that Article 45 TFEU can be relied on in a purely horizontal situation—the case was brought by an individual against a private bank—at least in situations that involve a measure that is discriminatory on the ground of nationality.15 This is, in fact, one of the elements that distinguish this freedom from the other free movement of persons provisions, since the latter have never been held to be horizontally directly effective. Although in the majority of cases it will be the worker himself who will be relying on Article 45 TFEU to challenge a measure that impedes the exercise of the rights stemming from that provision,16 the Court has made it clear that the provision can equally be relied on by the employer,17 as well as by a relevant third party, such as a private-sector recruitment agency.18

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This was first acknowledged by the Court in Case 167/73, Commission v France (ECJ 4 April 1974) para 41. 13 Case 36/74, Walrave and Koch (ECJ 12 December 1974) para 17–19; Case C-415/93, Bosman (ECJ 15 December 1995) para 82–84; Case C-411/98, Ferlini (ECJ 3 October 2000) para 50; Case C-438/05, Viking (ECJ 11 December 2007); Case C-94/07, Raccanelli (ECJ 17 July 2008); Case C-325/08, Olympique Lyonnais (ECJ 16 March 2010); Case C-379/09, Maurits Casteels (ECJ 10 March 2011). 14 Barnard (2016), p. 233. 15 Case C-281/98, Angonese (ECJ 6 June 2000). This was also confirmed in Case C-94/07, Raccanelli (ECJ 17 July 2008). 16 See, for instance, Case C-415/93, Bosman (ECJ 15 December 1995); Case C-281/98, Angonese (ECJ 6 June 2000). 17 Case C-350/96, Clean Car (ECJ 7 May 1998) para 20. 18 Case C-208/05, ITC (ECJ 11 January 2007).

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The Treaty provisions governing the free movement of workers had early on been complemented by secondary legislation.19 In addition, there is extensive ECJ case law interpreting the Treaty provisions governing this freedom and—in particular—what is now Article 45 TFEU (and its predecessors), as well as the secondary legislation attached to it. A large part of the chapter will, therefore, be devoted to the analysis of such case law. Accordingly, the sources of the law governing the free movement of workers in the EU are: the Treaty provisions that are found in Chapter 1 (“Workers”) of Title IV TFEU; various pieces of secondary legislation that either govern the free movement of persons in general or the free movement of workers in particular; and ECJ case law. It should be noted that the ECJ has ruled that secondary legislation protects and facilitates the exercise of the rights conferred by the Treaty, instead of creating rights in itself.20 Moreover, as C. Barnard has explained “[o]ften the Court will interpret the Treaty in the light of the secondary legislation. However, in the event of a conflict with the secondary legislation or where the secondary legislation does not apply, the Treaty will, of course, prevail.”21 Moreover, the EU Charter of Fundamental Rights,22 which became binding in 2009 because of the amendments made to the TEU by the Treaty of Lisbon (➔ Article 6 TEU para 19 et seqq.), provides in its Article 15.2 that “Every citizen of the Union has the freedom to seek employment, to work, to exercise the freedom of establishment and to provide services in any Member State”. This does not appear to be adding anything to what is already provided by Article 45 TFEU. However, it is significant from a symbolic perspective, because it confirms that the market freedoms are, now, fundamental (economic) rights granted to Union citizens.23 Before proceeding to see how Article 45 TFEU and the accompanying secondary legislation have been interpreted by the ECJ, the various pieces of secondary legislation that complement this provision will be analysed. The first important piece of legislation that was drafted to accompany what—at the time—was Article 48 TEEC (now Article 45 TFEU), was Regulation 1612/ 68.24 The Regulation was in force until recently, when in 2011 it was replaced by Regulation 492/2011.25 Apart from two provisions of the 1968 Regulation,26

19

For details on early pieces of secondary legislation, which are no longer in force, see Condinanzi et al. (2008), pp. 66–67. 20 Case 118/75, Watson and Belmann (ECJ 7 July 1976). 21 Barnard (2016), p. 244. 22 Charter of Fundamental Rights of the European Union, O.J. C 83/389 (2010). 23 For an analysis of this argument, see Tryfonidou (2016). 24 Council Regulation (EEC) No 1612/68 on freedom of movement for workers within the Community, O.J. L 257/2 (1968). 25 Parliament/Council Regulation (EU) No 492/2011 on freedom of movement for workers within the Union, O.J. L 41/1 (2011). 26 Articles 10 and 11 on family reunification rights.

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which were repealed and replaced in 2006 by Directive 2004/38,27 its remaining provisions were simply copied and pasted to the 2011 Directive and, hence, the case law where the 1968 Regulation was interpreted (and which will be analysed below) is, still, good law. For obvious reasons, it is the provisions of the legislation that is currently in force (i.e. Regulation 492/2011) that will be analysed here. This Regulation—like its predecessor—aims to spell out in more detail the scope of the prohibition of discrimination on the ground of nationality in situations involving migrant workers, in this way complementing the rather abstract prohibition laid down in Article 45.2 TFEU. Its legal basis is Article 46 TFEU. The rationale behind Regulation 492/2011 can be found in its Recital 6: “The right of freedom of movement, in order that it may be exercised, by objective standards, in freedom and dignity, requires that equality of treatment be ensured in fact and in law in respect of all matters relating to the actual pursuit of activities as employed persons and to eligibility for housing, and also that obstacles to the mobility of workers be eliminated, in particular as regards the conditions for the integration of the worker’s family into the host country.” On the structure of Regulation 492/2011, it should be noted that the instrument is divided into four Chapters. Chapter I, which is the most interesting for our purposes, is entitled “Employment, Equal Treatment and Workers’ Families” and contains the substantive provisions of the Regulation. Hence, it prohibits discrimination on the ground of nationality concerning eligibility for, and access to, employment (Section 1), nationality discrimination concerning the actual employment once it is acquired (Section 2), as well as discrimination on the ground of nationality concerning access by the worker’s children who reside in the territory of the host State, to that State’s “general educational, apprenticeship and vocational training courses” (Section 3, Article 10 (ex-Article 12 Regulation 1612/68)). Section 2 of Chapter I includes the all-important Article 7 (2) (which is the same as Article 7 (2) of Regulation 1612/68)—the “most fruitful provision for workers and their families”28—which provides that a worker “shall enjoy the same social and tax advantages as national workers”’. The remaining Chapters are, mainly, concerned with procedural matters: Chapter II is entitled “Clearance of Vacancies and Applications for Employment”, Chapter III lays down the details for the operation of the committees tasked with “ensuring close cooperation between the Member States in matters concerning the freedom of movement of workers and their employment”, whilst Chapter IV contains the final provisions of the instrument.

27 Article 38 of Parliament/Council Directive (EC) No 2004/38 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States, O.J. L 158/77 (2004). 28 Craig and de Búrca (2015), p. 778.

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Directive 2014/5029 is one of two recent Directives adopted for encouraging Union citizens to exercise the rights they derive from the free movement of workers provisions. The Directive lays down minimum requirements for improving the acquisition and preservation of supplementary pension rights. The other Directive recently adopted with the aim of further encouraging the free movement of workers, is Directive 2014/54,30 which provides for new means of redress (such as conciliation and mediation) for workers who are discriminated against on the ground of their nationality, and for the setting-up of defence bodies in each MS with the task of providing independent legal or other assistance to EU workers and acting as a contact point vis-à-vis equivalent contact points in other MS with a view to cooperating and sharing relevant information. As P. Craig and G. de Búrca have pointed out, this is “an enforcement measure intended to facilitate the exercise of the already-existing rights of workers.”31 Directive 2004/38,32 which applies to all Union citizens and their family members who move to, and reside in, the territory of another MS, naturally applies also to “workers”. However, it should be noted that it only covers workers (and their family members) who have moved to another MS,33 and, hence, it does not apply to those who have returned to their MS of origin and seek, there, to rely on EU law. Indeed those workers will still be protected under EU law and, in particular, under Article 45 TFEU, and although the 2004 Directive as such does not directly apply to them, its provisions will apply “by analogy” to determine the rights to which they are entitled under EU law.34 The Directive is analysed in more detail in another part of the book, and, therefore, it will not be analysed here in detail (➔ Article 21 TFEU). The Directive came into force in 2004 and its period of implementation expired in April 2006. Its aim was to bring together into one consolidating instrument all the provisions governing the position of Union citizens who have exercised their right to move and reside in the territory of another MS. Indeed, despite that this is a catch-all instrument, which includes within its scope all Union citizens irrespective of their status (e.g. worker, service-provider, self-employed migrant, economicallyinactive Union citizen, retiree, etc.), it does draw a distinction on the conditions and limitations attached to the rights enjoyed by Union citizens, depending on their status. For instance, MS can limit the exercise of the right of residence by 29

Parliament/Council Directive (EU) No 2014/50 on minimum requirements for enhancing worker mobility between Member States by improving the acquisition and preservation of supplementary pension rights, O.J. L 128/1 (2014). 30 Parliament/Council Directive (EU) No 2014/54 on measures facilitating the exercise of rights conferred on workers in the context of freedom of movement for workers, O.J. L 128/8 (2014). 31 Craig and de Búrca (2015), p. 744. 32 Parliament/Council Directive (EC) No 2004/38 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States, O.J. L 158/77 (2004). 33 Article 3.1 of Parliament/Council Directive (EC) No 2004/38. 34 Case C-456/12, O & B (ECJ 12 March 2014) para 33–43 and 50.

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economically inactive Union citizens who are not economically self-sufficient and impose an unreasonable burden on their social assistance systems.35 Moreover, the Directive contains a prohibition of discrimination on the ground of nationality concerning matters that fall within the scope of the Treaty,36 the application of which is, however, excluded in certain contexts.37 Directive 2004/38 also repealed and replaced a long list of instruments (or parts of instruments) governing the rights of migrant MS nationals. As regards “workers”, the Directive repealed and replaced Directive 68/360,38 which laid down the formalities that must be satisfied by migrant workers and—where applicable—their family members when seeking to move and reside in the territory of another MS (e.g. the documents they must carry with them);39 and it repealed Articles 10 and 11 of Regulation 1612/68, granting certain rights to the worker’s family, such rights now being granted by the 2004 Directive to all migrant Union citizens. Other pieces of secondary legislation that apply to, inter alia, “workers”, are Directive 2005/36 (as modernised by Directive 2013/5540) on the recognition of

35

Articles 7 and 14 of Parliament/Council Directive (EC) No 2004/38. Article 24.1 of Directive 2004/38 provides: “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.” 37 Article 24.2 of Directive 2004/38 provides: “By way of derogation from paragraph 1, 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.” 38 Council Directive (EEC) No 68/360 on the abolition of restrictions on movement and residence within the Community for workers of Member States and their families, O.J. L 257/13 (1968). 39 The same formalities are now applicable to all migrant Union citizens and their family members and are now found in Article 2 and 3 of Directive 2004/38. It should be noted that the rights to move, reside and, work in the host State are not conditional upon initial satisfaction of the formalities laid down in secondary legislation or formalities laid down by the host State (see, inter alia, Case 48/75, Royer (ECJ 8 April 1976)). However, failure to satisfy such formalities can attract (proportionate) penalties provided they are comparable to those for equivalent offences committed by nationals—see Case 157/79, Pieck (ECJ 3 July 1980). Failure to satisfy formalities can under no circumstances be relied on as the basis for expulsion of a national of another MS from the territory of the host State as a deportation, which is based on failure to satisfy formalities is “so disproportionate to the gravity of the infringement that it becomes an obstacle to the free movement of persons”—see Case 118/75, Watson and Belmann (ECJ 7 July 1976) para 21; and, more recently, Case C-215/03, Oulane (ECJ 17 February 2005) para 38 and 40. 40 Parliament/Council Directive (EC) No 2005/36 on the recognition of professional qualifications, O.J. L 255/22 (2005). 36

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professional qualifications,41 Directive 2011/24 on cross-border healthcare,42 Regulation 883/2004 and its implementing Regulation 987/2009 on the coordination of social security schemes;243 and Decision 2003/8 regarding the clearance of vacancies and applications for employment.44 Regulation 883/2004 and its implementing Regulation will be analysed in a subsequent part of the book (➔ Article 48 TFEU paras 9–17).

2.2. The Personal Scope of the Free Movement of Workers Provisions

21

One of the first issues that the Court had to clarify when interpreting the (then) Article 48 TEEC (and the accompanying secondary legislation) was the meaning of the term “worker”. Neither that provision nor any pieces of secondary legislation attached to it provided a definition for the term “worker” and, thus, this remained a matter for judicial interpretation. In Hoekstra,45 the Court claimed a hermeneutic monopoly over the term, noting that it is only that court that can provide guidelines for determining who is a “worker”, and neither national courts, nor national laws, can depart from the definition provided by it; the Court wished to ensure that it would not be possible “for each Member State to modify the meaning of the concept of migrant worker” at will and to “frustrate the objectives of the Treaty”.46 Moreover, the Court has noted that the term must not be interpreted restrictively, as it holds the key to access to one of the fundamental freedoms,47 and, indeed, in its jurisprudence, it clearly demonstrated its commitment “to securing the greatest possible mobility for workers”.48 Nonetheless, the Court has emphasised that the national court must make the final decision as to whether a specific person is a “worker” under Article 45 TFEU, applying, nonetheless, the definition provided by the ECJ.49 41

Parliament/Council Directive (EU) No 2013/55 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 (‘the IMI Regulation’), O.J. L 354/132 (2013). 42 Parliament/Council Directive (EU) No 2011/24 on the application of patients’ rights in crossborder healthcare, O.J. L 88/45 (2011). 43 Parliament/Council Regulation (EC) No 883/2004 on the coordination of social security systems, O.J. L 166/1 (2004); Parliament/Council Regulation (EC) No 987/2009 laying down the procedure for implementing Regulation (EC) No 883/2004 on the coordination of social security systems, O.J. L 284/1 (2009). 44 Commission Decision (EC) No. 2003/8 implementing Council Regulation (EEC) No 1612/68 as regards the clearance of vacancies and applications for employment, O.J. L 005/16 (2002). 45 Case 75/63, Hoekstra (ECJ 19 March 1964). 46 Case 75/63, Hoekstra (ECJ 19 March 1964), p. 184. 47 Case 53/81, Levin (ECJ 23 March 1982) para 13. 48 Johnson and O’Keeffe (1994). 49 Case C-357/89, Raulin (ECJ 26 February 1992). O’Leary has pointed out that this “implies that differences will inevitably emerge between Member States or within a single Member State. A

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Simply put, a “worker” is a person who is employed by someone else—this is, exactly, what distinguishes the personal scope of this freedom from the freedom of establishment and the freedom to provide services, which are both concerned with the rights of self-employed persons. The ECJ has provided various clarifications to the question of who can be a worker. Hence, in the Levin case it noted that the rules governing the freedom of movement of workers “cover only the pursuit of effective and genuine activities, to the exclusion of activities on such a small scale as to be regarded as purely marginal and ancillary.”50 Moreover, in the Ninni-Orasche case, the Court noted that “the fact that the person concerned took up employment as a waitress only several years after her entry into the host Member State, that, shortly after the end of her short term of employment, she obtained a diploma entitling her to enrol at university in that State and that, after that employment had come to an end, she attempted to find a new job, are not linked either to the possibility that the activity [. . .] was ancillary or to the nature of that activity or of the employment relationship.”51 A complete, formal, definition of the term “worker” had been provided in the Lawrie-Blum case, back in the 1980s.52 There the Court noted that the concept of “worker” “must be defined in accordance with objective criteria which distinguish the employment relationship by reference to the rights and duties of the persons concerned. The essential feature of an employment relationship, however, is that for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration.”53 According to White, the Lawrie-Blum test is a formal test that determines whether a person is an employee, whereas the test laid down in Levin is a sufficiency test that “determines whether the nature and quality of the work undertaken is such that a person can be regarded as engaged in effective and genuine work as an employee.”54 Chalmers et al. have criticised the Court’s approach to determining who is a “worker”: “[t]he definition of ‘worker’ which emerges from these cases is unusual in EU law in not taking account of the personal circumstances of the individual, instead imposing a fixed test. That may have the consequence that a disabled person, working as much as they can, will have to cross the same threshold of “genuine and effective activity” as an able-bodied person, and that someone

worker qualified by one national judge as coming within the scope of Article 45 TFEU might not prove so fortunate before the courts of a different Member State or even before a different national judge. This is the inevitable consequence of leaving the factual appreciation of the individual’s situation to the national judge and of the absence of a minimum threshold as regards the number of hours which must be worked or the minimum pay necessary to guarantee qualification as a worker”—O’Leary (2011), pp. 527–528. 50 Case 53/81, Levin (ECJ 23 March 1982) para 17. 51 Case C-413/01, Ninni-Orasche (ECJ 6 November 2003) para 29. 52 Case 66/85, Lawrie-Blum (ECJ 3 July 1986). 53 Case 66/85, Lawrie-Blum (ECJ 3 July 1986) para 17. 54 White (2004), p. 33.

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engaging in informal, but arduous and necessary, care may not be a worker while someone who receives payment for the same work will be.”55 Before analysing the various elements of the above definition, it should first be noted that the Court had made it clear in the Meade case that only persons holding the nationality of a MS can be workers within the meaning of Article 48 TEEC.56 Accordingly, on the facts of the case, a US national who was employed in France did not fall within the personal scope of the provision (and the accompanying secondary legislation) since he did not possess the nationality of a MS. Despite the fact that a number of commentators have questioned the Court’s choice to limit the personal scope of the free movement of workers provisions in this manner,57 especially since the text of Article 45 TFEU—unlike that of the other free movement of persons provisions—does not lay down such a requirement, it is still the case today that it is only MS nationals that can be considered “workers” under EU free movement law. As will be seen in more detail in another part of the book (➔ Article 20 TFEU), the allocation of nationality to individuals is a matter for each Member State to determine,58 and this is reflected in a Declaration appended to the Maastricht Treaty,59 whilst it has also been confirmed by the Court in its case law.60 Before proceeding, the relationship between Article 45 TFEU and the citizenship provisions of the Treaty should be explained. It should be noted that since 1993 and the introduction of the Maastricht Treaty that established the status of Union citizenship, MS nationals are also automatically Union citizens by virtue of—what is now—Article 20 TFEU. Since “workers” must hold the nationality of an MS, it follows that they are necessarily Union citizens and, as such, they fall within the personal scope of the citizenship provisions of the Treaty. However, because Article 45 TFEU constitutes a lex specialis to Article 21 TFEU, “workers” must rely on the former. Yet, the introduction of Union citizenship has had an important impact on the interpretation of the provisions governing the free movement of workers,61 and the Court in its post-Maastricht jurisprudence has acknowledged the need to re-read the market freedoms (including Article 45 TFEU) in the light of Union citizenship.62

55

Chalmers et al. (2014), p. 854. See, also, O’Brien (2009). Case 238/83, Meade (ECJ 5 July 1984) para 7. 57 See, inter alia, Hoogenboom (1992), Iglesias Sánchez (2009), Wiesbrock (2012) and Kochenov and van den Brink (2015). 58 For more on this see Barnard (2016), p. 208. 59 Declaration on Nationality of a Member State, O.J. C 191/98 (1992). 60 See, inter alia, Case C-369/90, Micheletti (ECJ 7 July 1992) para 10; Case C-192/99, R v Secretary of State for the Home Department, ex parte Kaur (ECJ 20 February 2001) para 19; Case C-135/08, Rottmann (ECJ 2 March 2010) para 39. 61 For a more detailed analysis of this see Tryfonidou (2016). 62 See, most prominently, Case C-138/02, Collins (ECJ 23 March 2004) para 63; Joined Cases C482 and 493/01, Orfanopoulos and Oliveri (ECJ 29 April 2004) para 65. 56

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For a MS national to qualify as a “worker”, he must pursue an economic activity in another MS “for a certain period of time”. Indeed, this does not lay down a mathematical formula but, rather, establishes a requirement that the person concerned does spend some time in the position held on which (s)he is relying to claim that (s)he is a “worker”. Hence, this is not a requirement that someone takesup an economic activity with the intention of pursuing it forever, but rather that the person does not intend to be in the post concerned for an overly limited duration. As the Court explained in its judgment in Ninni-Orasche, “in order to assess whether activities pursued as an employed person are effective and genuine, it is [not] necessary to take account of the short term of the employment in relation to the total duration of residence by the person concerned in the host Member State”.63 This means that interns can qualify as “workers” if the other requirements laid down in the Court’s case law are satisfied; the fact that internships usually last only for a period of a few months is not an obstacle to this.64 It should be noted that in accordance with Article 45.3 (d) TFEU, Article 7.3 of Directive 2004/38 provides that in certain instances, persons who qualified as workers but are no longer employed can maintain worker status for some time after they stopped being employed. This is so in four situations:

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a) where (s)he is temporarily unable to work as the result of an illness or accident; b) where (s)he is in duly recorded involuntary unemployment after having been employed for more than one year and has registered as a job seeker with the relevant employment office; c) where (s)he has become involuntarily unemployed after having completed a fixed-term contract of less than one year or after having become involuntarily unemployed during the first twelve months and has registered as a job seeker with the relevant employment office; and d) where (s)he embarks on vocational training (unless the individual is involuntarily unemployed, the retention of the status of worker requires the training to be related to the previous employment). However, it should be noted that the Court’s judgment in Jesse Saint Prix has demonstrated that Article 7.3 of the 2004 Directive does not include an exhaustive list of circumstances in which a migrant worker who is no longer in an employment relationship may continue to benefit from that status, as, on the facts, it was accepted that a pregnant woman who had to give-up her job three months before the birth of her child due to “the physical constraints of the late stages of pregnancy and the immediate aftermath of childbirth” but returned to her position three months after giving birth to her child, did maintain her worker status.65 The requirement laid down in the Lawrie-Blum definition that the person must be performing services for and under the direction of another person is, exactly,

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Case C-413/01, Ninni-Orasche (ECJ 6 November 2003) para 30. Case 66/85, Lawrie-Blum (ECJ 3 July 1986). 65 Case C-507/12, Jesse Saint Prix (ECJ 19 June 2014) para 39–42. 64

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what distinguishes this freedom from the freedom of establishment. As will be seen in another part of the book (➔ Article 49 TFEU) the latter is concerned with the free movement of the self-employed and, in particular, with their freedom to establish a permanent business base in another MS from which they will be able to provide their services. Conversely, for someone to qualify as a “worker”, (s)he must be employed by someone else. The fact that the employee is related by marriage to her employer does not stop her from being a “worker”, provided that there is a genuine economic activity that is pursued in the context of a relationship of subordination.66 Moreover, the Court in a number of cases has made it clear that a MS national is not deprived of his status as “worker” under Article 45 TFEU if his employer is an international organisation.67 Like the other (economic) free movement of persons provisions, Article 45 TFEU requires that the economic activity pursued must be remunerated. This is, nonetheless, not a requirement that has caused any real difficulty to aspiring “workers”, since the Court has interpreted the notion of “remuneration” very broadly. Therefore, remuneration does not need to take the form of money (i.e. a salary) but anything that is money’s worth can qualify. For instance, in the Steymann case,68 the Court held that Mr Steymann (a member of a religious community) was remunerated when in exchange of his plumbing services, the said religious community provided him with accommodation and ensured that his basic material needs were satisfied. In addition, the (low) amount and (irregular) nature of the remuneration do not matter.69 Hence, in Levin, the Court held that a part-time migrant worker that earned less than the minimum legal wage in the Netherlands could qualify as a “worker”;70 and, even more controversially, in Kempf it accepted that a part-time worker that earned less than the minimum legal wage in the host State was still considered a “worker” if he exercised a genuine economic activity that was not purely marginal and ancillary, and this was so even if he needed to supplement his income by having recourse to the social assistance system of the host State.71 Bettray, on the other hand, is an isolated example of a judgment where a rather narrow approach towards the question of who is a “worker” was taken.72 The case involved a former drug-addict that was given a job as part of a drug rehabilitation programme. The job was not subjected to normal competitive forces, it was subsidised by the State, and the productivity of employees was lower than that expected

66

Case C-337/97, Meeusen (ECJ 8 June 1999) para 12–17. Joined Cases C-389 and 390/87, Echternach and Moritz (ECJ 15 March 1989) para 11; Case C233/12, Gardella (ECJ 4 July 2013) para 26. 68 Case 196/87, Steymann (ECJ 5 October 1988). 69 Case 3/87, R v. Ministry of Agriculture, Fisheries and Food, ex p Agegate Ltd (ECJ 14 December 1989). 70 Case 53/81, Levin (ECJ 23 March 1982). 71 Case 139/85, Kempf (ECJ 3 June 1986). 72 Case 344/87, Bettray (ECJ 31 May 1989). 67

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and required in ordinary employment. The Court held that such work “cannot be regarded as an effective and genuine economic activity if it constitutes merely a means of rehabilitation or reintegration for the persons concerned and the purpose of the paid employment, which is adapted to the physical and mental possibilities of each person, is to enable those persons sooner or later to recover their capacity to take up ordinary employment or to lead as normal as possible a life.”73 Similarly, in the Brown case, the Court considered the purpose behind the employment, which was to do preparatory work before beginning a full-time course of university study to rule that not all of the social advantages provided for workers under EU law may be claimed.74 Accordingly, although the general rule is that the motive or purpose for which the employment is undertaken is immaterial in determining whether a person is a “worker”, in some exceptional cases, like in Bettray and Brown, the purpose of employment may be considered in concluding that the activity is not an effective and genuine economic activity (Bettray) or for granting to the person concerned merely a quasi-worker status (Brown). Craig and de Búrca have noted that the judgment in Bettray “is open to criticism, because ensuring the mobility of a well-trained workforce would seem to be an important part of the Treaty’s aims, and reintegration of people into the workforce through sheltered employment is a part of this. Further, if the Bettray ruling were to be applied to the case of sheltered employment for disabled people, this could exclude many disabled people from being workers under EU law.”75 Maybe it is criticisms like these that have led the Court in its subsequent judgment in Trojani to insert a qualification to Bettray by noting that the case had special facts, namely, the applicant had been unable for an indefinite period, because of his drug addiction, to work under normal conditions.76 Accordingly, the position now is that the fact that social reintegration is the main purpose of employment will not in itself suffice for disqualifying that employment from being considered a “genuine economic activity” under Article 45 TFEU.

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2.3. The Material Scope of the Free Movement of Workers Provisions

2.3.1.

Introductory Points

The material scope of a provision determines what is covered by that provision. In case the provision grants rights to persons, it is also comprised of those rights. 73

Case 344/87, Bettray (ECJ 31 May 1989) para 17. Contrast this case with Case C-1/97, Birden (ECJ 26 November 1998). 74 Case 197/86, Brown (ECJ 21 June 1988). Hence, like job seekers (their position will be explained below in the main text), workers who merely undertake work for a temporary period only as a means to qualify for an educational course, hold a quasi-worker status, which precludes them from being entitled to the full gamut of advantages open to fully-fledged workers. 75 Craig and de Búrca (2015), p. 753, 76 Case C-456/02, Trojani (ECJ 7 September 2004) para 19.

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Article 45 TFEU—as is, indeed, the case with the other free movement of persons provisions—is, as its name suggests, often viewed as a provision that grants primarily a free movement right, and all other rights stemming from it are considered secondary rights that merely aim to supplement this—primary—right. Moreover, given the economic focus of this provision, it has traditionally been considered that it is only free movement which has an economic aim, that is sought to be protected by it. However, as will be seen below, through the years, and via the Court’s jurisprudence, it has been established that the right to free movement for an economic purpose appears to be no longer the only, primary, right bestowed by this provision. Before proceeding to analyse separately each of the rights that are granted by Article 45 TFEU, I shall provide an explanation of the primary and secondary rights dichotomy, which forms the basis of my classification of the rights stemming from this provision. Primary rights are those rights that are usually explicitly mentioned in the Treaty text and the breach of which automatically amounts to a breach of the provision, without needing to prove that it also leads to a breach of another (primary) right stemming from that provision. Conversely, secondary rights are rights that are supplementary to the primary rights bestowed by a certain provision and the breach of which amounts to a violation of that provision only if it leads to a breach of one of the primary rights stemming from the relevant provision.77 A breach of the (primary and secondary) rights stemming from Article 45 TFEU can emerge from measures imposed by the home State (“export restrictions”)78 or the host State (“import restrictions”).79 2.3.2.

Primary Rights Stemming from Article 45 TFEU

The Right to Look For, Or Take-Up, Work in Another Member State 35

As noted earlier, it was originally thought that the main—if not the only—primary right stemming from Article 45 TFEU, was the right to move to another MS for an economic purpose. Hence, a case involving a national of MS (A) who sought to move to MS (B) to settle there and work under a permanent contract of employment, was considered the classic scenario covered by this provision. Obviously, this right covers situations where a MS national has already received an offer of employment in another MS and moves to the latter after accepting that offer; after all, Article 45.3 (a) TFEU—as did its predecessors—makes express reference to the right “to accept offers of employment actually made”.

77

See Goudappel (2010), p. 55. See, for instance, Case C-232/01, Van Lent (ECJ 2 October 2003); Case C-109/04, Kranemann (ECJ 17 March 2005). For an analysis of the ‘right to exit’ derived from the EU free movement provisions see Lazowski (2015). 79 See, for instance, Case 41/74, Van Duyn (ECJ 4 December 1974). 78

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However, it has been made clear in case law—and is now also reflected in secondary legislation—that Article 45 TFEU also grants to job seekers the right to move to another MS and to look for a job there;80 accordingly, it is not necessary for a Union citizen to already have an offer of employment in the territory of another MS to be able to rely on Article 45 TFEU. This right can be exercised for a reasonable period, and if at the end of that period, the job seeker can show that (s)he has reasonable prospects of finding a job, this period must be further extended.81 However, if at the end of the reasonable period, it is not possible to point to a genuine chance of being employed, the host MS can, simply, require the job seeker to leave its territory without needing to invoke any justifications. In addition, job seekers have been given only a “quasi-worker” status, this meaning that they are entitled to only some of the rights bestowed on fully-fledged workers.82 In particular, it has been made clear by the Court that, unlike fullyfledged workers, job seekers are not entitled to rely on Article 7.2 of Regulation 492/2011 (and before the coming into force of that instrument, on Article 7.2 of Regulation 1612/68) to claim the same social assistance benefits that the host State grants to its own nationals. However, as explained by the Court in its postMaastricht case law, in the light of Union citizenship, job seekers are able to claim benefits of a financial nature intended to facilitate access to employment, although MS may seek to restrict the availability of such benefits to job seekers that are genuinely linked to the employment market of that State.83 The distinction between “social advantages” and “benefits of a financial nature intended to facilitate access to employment in the labour market of a Member State” is, nonetheless, hard to draw in practice.84 Article 24.2 of Directive 2004/38 provides, inter alia, that the host MS shall not be obliged to confer entitlement to social assistance during the period that a job seeker is allowed, by virtue of Article 14.4 (b) of the Directive, to reside in the host State to look for a job. One can easily point to a possible clash between this provision and the Collins pronouncement that job seekers are entitled to benefits of a financial nature intended to facilitate access to the employment market of the host State. Therefore, in Vatsouras and Koupatantze the Court sought to reconcile the two, by noting that “[b]enefits of a financial nature which, independently of their status under national law, are intended to facilitate access to the labour market cannot be regarded as constituting ‘social assistance’ within the meaning of Article 24.2 of Directive 2004/38”.85 In the 80 In Case 48/75, Royer (ECJ 8 April 1976) para 31, the Court referred to the right “to look for” an occupation. 81 Case C-292/89, Antonissen (ECJ 26 February 1991). This is now consolidated in secondary legislation: see Article 14.4 (b) of Directive 2004/38. 82 Case 316/85, Lebon (ECJ 18 June 1987). 83 Case C-138/02, Collins (ECJ 23 March 2004); Case C-258/04, Ioannidis (ECJ 15 September 2005); Joined Cases C-22 and 23/08, Vatsouras and Koupatantze (ECJ 4 June 2009). 84 Fahey (2009). 85 Joined Cases C-22 and 23/08, Vatsouras and Koupatantze (ECJ 4 June 2009) para 45. For comments, see O’Leary (2011), pp. 516–517.

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Alimanovic case,86 the Court confirmed Vatsouras and Koupatanze and offered some further clarification by noting that there is no need for the national authorities to conduct an individual assessment of the situation before deciding to refuse social benefits to job seekers.87 It was relatively early on made clear by the Court that situations that involve a person who works in her MS of nationality and residence and whose situation does not involve a cross-border element, qualify as purely internal to a MS and, as such, fall outside the material scope of the free movement of workers provisions.88 In the majority of cases, the right to look for a job or to take-up an economic activity in the territory of another MS presupposes the exercise of (physical) movement from one MS to another. Nonetheless, the Court has also made it clear that physical movement between two MS does not need to be exercised for a situation to fall within the material scope of Article 45 TFEU, provided that the situation does involve a cross-border element. In particular, in the Collins case,89 the Court accepted that this provision also covers MS nationals who simply look for a job or take-up an economic activity in an MS other than that of their nationality, although (physical) movement between MS has not taken place. Hence, Mr Collins, a dual Irish-US national, was held to have the right to look for a job in the territory of another MS (the UK), although he had moved directly from the US to the UK and, thus, there was no prior physical movement between MS. On the other hand, the Scholz case demonstrates that Article 45 TFEU is not merely concerned with ensuring that the nationals of one MS can work in the territory of another MS the nationality of which they do not possess (the Collins scenario) but also aims to protect the right of Union citizens to move (physically) between MS for the purpose of taking-up an economic activity. Hence, even if the migrant worker takes-up employment in his or her MS of nationality, (s)he is still covered by Article 45 TFEU, if the taking-up of employment in that MS has occurred after the exercise of free movement rights derived from the Treaty.90 Moreover, originally, it was thought that the free movement of workers provisions only covered movement that has an economic purpose and, thus, the Court in older case law ruled that economically active MS nationals who moved to another MS for the sole purpose of taking-up residence there (and not for an economic purpose) were not covered by the economic free movement provisions.91 Indeed, the (primary) right to free movement for an economic purpose was held to have a right of residence attached to it since, in most instances, it would be practically impossible to move to another MS for the purpose of taking-up

86

Case C-67/14, Alimanovic (ECJ 15 September 2015). Case C-67/14, Alimanovic (ECJ 15 September 2015) para 59–60. 88 Case 175/78, Saunders (ECJ 28 March 1979). 89 Case C-138/02, Collins (ECJ 23 March 2004) 90 Case C-419/92, Scholz (ECJ 23 February 1994). See, also, Case C-370/90, Singh (ECJ 7 July 1992). 91 Case C-112/91, Werner (ECJ 26 January 1993). 87

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permanent employment there, if the worker was not allowed to reside in that State;92 a point that was also recognised by the Treaty drafters, since Article 45.3 (b) TFEU—as did its predecessors—explicitly recognises that the freedom of movement of workers “shall entail the right” “to stay in a Member State for the purpose of employment in accordance with the provisions governing the employment of nationals of that State laid down by law, regulation or administrative action”. Yet, this was traditionally considered merely a secondary right only bestowed by these provisions as a necessary supplement to the right to take-up an economic activity in the territory of another MS. Accordingly, in all instances, what appeared to be important, traditionally, was to establish that there was a change in the economic base of the migrant MS national—whether residence was also changed was immaterial, since the aim of Article 45 TFEU was initially thought to be merely to ensure the free movement of workers between MS for an economic purpose. Hence, the Court and the EU legislature had early on recognised that so-called “frontier workers” do derive rights from Article 45 TFEU. Cases involving such workers are a pure reflection that this provision grants the primary right to take-up an economic activity in the territory of another MS, irrespective of whether someone intends to make the latter State also the State of his permanent residence and to build a life there.93 Frontier workers are MS nationals who take-up an economic activity in the territory of another MS, whilst they maintain their residence in their State of origin.94 This is practically possible in the heart of the Continent, where a usual scenario is, for instance, for Belgian nationals to travel on a daily basis to Luxembourg where their employment is situated or vice-versa, but is more unlikely in more geographically distant MS, such as Cyprus, where being a frontier worker is unheard of.

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The Right to Pursue an Economic Activity in a Cross-Border Context In more recent years, the Court established that it is not only frontier workers who are covered by Article 45 TFEU but also “reverse frontier workers”.95 The latter are persons who have been pursuing—and continue to pursue—an (employed) economic activity in their State of origin, and the movement they exercise has as its aim the transfer of their residence to the territory of another MS. Hence, in such a scenario, the movement that is exercised is not for an economic purpose but, as a result of it, a person resides in one MS whilst (s)he continues to pursue an economic activity in the territory of another; in other words, there is no change in the location of the economic activity. 92

Case C-363/89, Roux (ECJ 5 February 1991) para 9. Case C-385/00, De Groot (ECJ 12 December 2002); Case C-209/01, Schilling and FleckSchilling (ECJ 13 November 2003); Case C-227/03, Van Pommeren-Bourgondiën (ECJ 7 July 2005). 94 For a detailed analysis of the position of frontier workers under EU law, see Golynker (2006). 95 The term has been borrowed from O’Brien (2008). 93

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As seen earlier (➔ para 39), the Court had originally made it clear in the Werner case,96 that such scenarios fall outside the scope of the personal market freedoms,97 since they do not have a sufficient link with the economic aims of the provision. However, the Court has more recently reversed that pronouncement by holding that Article 45 TFEU applies in such situations. In particular, making use of the reasoning employed in its frontier workers case law,98 in the Ritter-Coulais case, which was the first such case involving workers, the Court noted that “any Community national who, irrespective of his place of residence and his nationality, has exercised the right to freedom of movement for workers and who has been employed in a Member State other than that of residence falls within the scope of Article 48 TEC [now Article 45 TFEU].”99 However, it should be noted that Article 45 TFEU only applies in such cases when the migrant is economically active in his or her State of origin; if (s)he is a retiree, (s)he does not fall within the material scope of this provision under the Ritter-Coulais principle.100 Accordingly, Article 45 TFEU appears, now, to be the source of another, primary, right: the right for “workers” to pursue an economic activity in a cross-border context. This right is a primary right in that it is independent of the other—traditionally only—primary right stemming from this provision (the right to take-up or pursue an economic activity in the territory of another MS). Therefore, Article 45 TFEU appears to no longer apply only in situations where an economic actor changes the base of his economic activity and, in particular, the location of his employment, but also where an economic actor changes his residence and, as a consequence, (s)he pursues an economic activity as an employed person in a crossborder context (i.e. (s)he pursues an economic activity in one MS whilst residing in the territory of another). The fact that this—primary—right is not explicitly mentioned in the Treaty text is not—as such—problematic since, as the Court noted in Antonissen, Article 45.3 TFEU “must be interpreted as enumerating, in a nonexhaustive way, certain rights benefiting nationals of Member States in the context of the free movement of workers”.101 As explained elsewhere,102 although a purely economic rationale would be incapable of justifying the extension of the material

96

Case C-112/91, Werner (ECJ 26 January 1993). On the facts, the freedom of establishment was relied on but it is equally clear that the same reasoning would be followed in a case involving employed persons. 98 Case C-385/00, De Groot (ECJ 12 December 2002) para 76; Case C-209/01, Schilling and Fleck-Schilling (ECJ 13 November 2003) para 23; and Case C-227/03, Van Pommeren-Bourgondiën (ECJ 7 July 2005) para 19, 44 and 45. 99 Case C-152/03, Ritter-Coulais (ECJ 21 February 2006) para 31. This was confirmed in, inter alia, Case C-470/04, N (ECJ 7 September 2006); Case C-464/05, Geurts (ECJ 25 October 2007); Case C-527/06, Renneberg (ECJ 16 October 2008); Case C-379/11, Caves Krier (ECJ 13 December 2012). For an analysis of this case law see Tryfonidou (2009c). 100 Case C-520/04 Turpeinen (ECJ 9 November 2006) para 16; Case C-544/07, Rüffler (ECJ 23 April 2009) para 52. 101 Case C-292/89, Antonissen (ECJ 26 February 1991) para 13. 102 Tryfonidou (2016), pp. 109–112. 97

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scope of this provision to encompass such a right, the introduction of Union citizenship and the need to re-read the market freedoms in the light of this development can provide a sufficient justification for this extension. 2.3.3.

Secondary Rights Stemming from Article 45 TFEU

The Right Not to Be Discriminated Against on the Ground of Nationality Another right that stems from Article 45 TFEU is the right not to be discriminated against on the ground of nationality. Article 45.2 TFEU provides that freedom of movement for workers “shall entail the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment”. For EU law, nationals of different MS are almost always regarded as being in comparable situations and, hence, it is expected that they should be treated equally; however—as will be seen below—there are certain areas in which MS are permitted to treat nationals and non-nationals differently, which may be implying that nationals and non-nationals are not considered similarly situated in that context. Despite that this right is explicitly mentioned in Article 45 TFEU and, thus, could easily qualify as a primary right, it still appears to be inherently related—and dependent—on the right to look for or take-up a job in another MS or, more recently, to the right to pursue an economic activity in one MS whilst residing in the territory of another, and is, as such, a secondary right. In other words, it is only instances of discrimination on the ground of nationality that lead to a direct or indirect impediment of the primary rights stemming from Article 45 TFEU that amount to a breach of this provision.103 Accordingly, discrimination on this ground is prohibited by Article 45 TFEU and by the secondary legislation supplementing it, only in areas that fall within the material scope of this freedom because they are matters capable of having an impact on the exercise of the primary rights stemming from this freedom. Secondary legislation supplementing Article 45 TFEU has always included a prohibition of discrimination on the ground of nationality concerning various issues, which—consequently—are considered to fall within the material scope of this provision. Here, we shall focus on Article 7.2 of Regulation 492/2011.104 Article 7.2 of Regulation 492/2011 requires that migrant workers are entitled in the host State to the same social and tax advantages as the nationals of that State are entitled. The Court has interpreted the term “social advantages” very broadly, to cover benefits entirely unrelated to employment,105 and held that the provision 103

White (2004), p. 194. See, also, Tryfonidou (2014). For an analysis of the other main provisions of Regulation 492/2011 (and the Court’s case law interpreting them) see Barnard (2016), pp. 265–268. 105 Initially, in Case 76/72, Michel S (ECJ 11 April 1972), the Court had ruled that Article 7.2 concerned only benefits connected with employment. 104

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applied not just to workers but also to their family members since this provided an indirect advantage to the worker.106 The rationale behind this is that the discriminatory treatment of non-nationals on access to such benefits means that the worker—and, where applicable, his/her family—will find it hard to integrate into the society of the host State.107 Thus, discounts on rail fares for large families,108 interest-free “childbirth loans”,109 the right of the worker to be accompanied in the host State by his or her unmarried partner (provided the host State treats unmarried partners in a stable relationship as spouses),110 and the use of someone’s mother tongue during court proceedings,111 have all been considered to amount to “social advantages” that, as such, must be granted to nationals of other MS under the same terms as they are granted to a State’s own nationals. The Court’s (broad) approach to the meaning of this term has been summarised in the case of Even: “the advantages which this Regulation [i.e. Regulation 1612/68] extends to workers who are nationals of other Member States are all those 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 Community.”112 On “tax advantages”, the Court’s approach has been somewhat more restrictive. Direct taxation remains an area of national competence and, thus, MS are free to decide how they will tax persons who work and/or reside in their territory, provided that when they do so they comply with EU law.113 As C. Barnard has explained, MS remain free to identify the tax unit, the tax base, the tax rate, and how they wish to administer, assess, collect, and recover tax.114 The difficulty in this context is that although—as will be seen below—a difference in treatment on the ground of 106

Case 32/75, Cristini (ECJ 30 September 1975); Case 63/76, Inzirillo (ECJ 16 December 1976); Case 94/84, Deak (ECJ 20 June 1985); Case 152/82, Forcheri (ECJ 13 July 1983); Case 261/83, Castelli (ECJ 12 July 1984); Case 157/84, Frascogna (ECJ 6 June 1985). This is now also enshrined in secondary legislation: Article 24.1 of Directive 2004/38 provides that the benefit of the right to equal treatment “shall be extended to family members who are non-nationals of a Member State and who have the right of residence or permanent residence”. 107 Ellis (2003), p. 648. 108 Case 32/75, Cristini (ECJ 30 September 1975). 109 Case 65/81, Reina (ECJ 14 January 1982). 110 Case C-59/85, Reed (ECJ 17 April 1986). Unmarried partners in a stable relationship now fall within the scope of Article 3.2 (b) of Directive 2004/38 and, thus, the host State must facilitate their admission to its territory; whilst registered partners fall within the Article 2.2 group of family members who are automatically entitled to join the migrant in the host State, provided that the host State treats registered partnerships as equivalent to marriage. 111 Case 137/84, Mutsch (ECJ 11 July 1985). 112 Case 207/78, Even (ECJ 31 May 1979) para 22. For an authoritative article on the interpretation of this provision see O’Keeffe (1985). 113 See, inter alia, Case C-246/89, Commission v UK (ECJ 4 October 1991). 114 Barnard (2016), pp. 399–400.

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residence is considered indirectly discriminatory on the ground of nationality in the context of EU free movement law, under international (and national) tax law, residence is the legitimate ground of differentiation between taxpayers, and the general principle is that residents of a taxing state are taxed on their worldwide profits, while non-residents are taxed only on profits arising from sources located in that taxing state; this is the so-called “principle of territoriality”. Accordingly, instead of considering that the differential treatment of residents and non-residents for taxation purposes amounts to indirect discrimination on the ground of nationality, which would mean that MS would have to constantly justify their tax rules, the ECJ has, instead, preferred to rule that residents and nonresidents are not similarly situated for the purposes of taxation and, therefore, they do not need to be treated in the same way.115 Indeed, if it is shown that on the facts of the case, the situations of resident and non-resident taxpayers can be considered comparable, then they must be treated in the same way,116 otherwise the measure will be found to be (indirectly) discriminatory on the ground of nationality.117 In addition, Article 24.1 of Directive 2004/38 (which applies to all categories of migrant Union citizens, including “workers”) enshrines the basic principle of equal treatment and provides that “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”. This is clearly of great practical importance for migrant Union citizens. However, it is questionable whether it offers anything beyond what is already offered to “workers” by Article 7.2 of Regulation 492/2011. The Court has made it clear in its case law that nationality discrimination prohibited by Article 45 TFEU and the secondary legislation attached to it, can be either direct or indirect discrimination.118 Direct discrimination on the ground of nationality exists when the criterion of differentiation used for determining whether a certain entitlement or benefit should be granted is, explicitly, that of nationality; hence, a French rule limiting the proportion of non-national French merchant navy employees was found to amount to a (directly discriminatory) restriction caught by Article 45 TFEU.119 On indirect discrimination, the Court

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Case C-279/93, Schumacker (ECJ 14 February 1995); Case C-376/03, D (ECJ 5 July 2005); Case C-336/96, Gilly (ECJ 12 May 1998). 116 This was, in fact, the case in Case C-279/93, Schumacker (ECJ 14 February 1995). 117 For a clear explanation of the Court’s approach towards taxation in the context of the free movement of persons provisions see Barnard (2016), pp. 256–260 and 399–409. 118 For a detailed consideration of the distinction between direct and indirect discrimination on the ground of nationality see Case C-73/08, Bressol (Opinion of AG Sharpston of 25 June 2009) para 43–57. 119 Case 167/73, Commission v France (ECJ 4 April 1974). For other examples of direct discrimination on the ground of nationality see, inter alia, Case C-179/90, Merci Convenzionali Porto di Genova (ECJ 10 December 1991); the “3+2 rule” in Case C-415/93, Bosman (ECJ 15 December 1995); Case C-283/99, Commission v Italy (ECJ 31 May 2001).

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has noted 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 be more easily 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”.120 Examples of measures found to be indirectly discriminatory on the ground of nationality are measures that apply residence requirements,121 language requirements,122 or length of service requirements,123 in determining the availability of a certain entitlement, or measures that impose a double burden on workers coming from other MS.124 It is worth noting that, as established in O’Flynn, unlike in the area of sex equality, in this context it is not necessary to prove that the contested measure in practice affects a higher proportion of foreign workers; it, rather, suffices if it is shown that the impugned measure is ‘intrinsically liable’ to affect non-national workers more than national workers.125 Moreover, discrimination will only be found where the two groups of persons that are treated differently are similarly situated for the relevant purpose (e.g. if the difference in treatment concerns taxation, the two categories of persons who are taxed differently must be similarly situated for taxation purposes).126 Finally, it should be noted that apart from discrimination on the ground of nationality, which is explicitly prohibited by Article 45 TFEU and the accompanying secondary legislation, the Court in its case law has made it clear that discrimination on the ground of migration is also prohibited by these provisions.127 This differential treatment is obviously because a person has exercised the rights granted by the Treaty and, consequently, has suffered a disadvantage. In some cases— especially the earlier ones—instead of treating this as discrimination on the ground of migration, the Court had preferred to make use of a “legal fiction” and to assimilate the nationals of a MS with nationals of another MS, in this way being

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Case C-237/94, O’Flynn (ECJ 23 May 1996) para 18. It should be noted that the fact that a measure may also affect nationals of the said MS does not prevent it from being considered indirectly discriminatory, the obvious example of this being Case C-19/92, Kraus (ECJ 31 March 1993). 121 Case C-350/96, Clean Car (ECJ 7 May 1998); Case C-138/02, Collins (ECJ 23 March 2004); Case C-238/15, Verruga (ECJ 14 December 2016). 122 Case 379/87, Groener (ECJ 28 November 1989); Case C-317/14, Commission v Belgium (ECJ 5 February 2015). 123 Case C-15/96, Schöning-Kougebetopoulou (ECJ 15 January 1998). 124 See, for instance, Case C-171/02, Commission v Portugal (ECJ 29 April 2004). 125 Case C-237/94, O’Flynn (ECJ 23 May 1996) para 20. 126 See, for instance, Case C-279/93, Schumacker (ECJ 14 February 1995); Case C-391/97, Gschwind (ECJ 14 September 1999). 127 A case where the Court expressly admitted the prohibition of such discrimination was the citizenship Case C-224/98, D’Hoop (ECJ 11 July 2002). For a free movement of workers case, which involved such discrimination, see Case C-19/92, Kraus (ECJ 31 March 1993).

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able to bring this form of differential treatment within the scope of discrimination on the ground of nationality.128 AG Poiares Maduro, in his Opinion in the Vassilopoulos case, in fact suggested that all the market freedoms should, in effect, be reduced to a prohibition of discrimination on the ground of migration.129 As will be seen subsequently in this chapter (➔ para 68), however, the Court has chosen a broader approach for delimiting the scope of these provisions, prohibiting also nondiscriminatory obstacles to free movement. Family Reunification and Related Rights Article 45 TFEU does not make provision for the families of migrant workers as it, simply, focuses on the rights of the worker as such. However, it was early on recognised that the majority of workers would be impeded from exercising the rights stemming from this provision if they were not guaranteed that when moving to another MS, they would be able to be accompanied there by their close family members. Thus, when the first pieces of secondary legislation supplementing the Treaty provisions governing the rights of workers were drafted, provision was made for the grant of family reunification rights to workers. Originally, family reunification rights were granted by Article 10 Regulation 1612/68, which provided that certain family members of migrant workers should be automatically admitted into the territory of the host State. Family reunification rights are now granted to all migrant Union citizens (i.e. not just migrant workers) by Directive 2004/38. The Directive provides that if a family member falls within the categories laid down in its provisions, (s)he can accompany the migrant Union citizen in the host State, and this is so irrespective of the nationality of the family member; in other words, it is not necessary that the family member is a Union citizen.130 In fact, practically speaking, it is migrant Union citizens with TCN family members who are mostly interested in relying on the family reunification rights granted by EU law, as family members who are Union citizens are themselves entitled to the right to move and reside in the territory of another MS. The family reunification rights that are derived from Article 45 TFEU and the secondary legislation supplementing it are secondary rights since—as made clear in the Court’s case law and in secondary legislation—their existence depends on whether their refusal will lead to a breach of the primary rights stemming from Article 45 TFEU. The family members that must be admitted by the host State together with the migrant Union citizen are: 128

See, for instance, the Court’s approach in Case C-281/98, Angonese (ECJ 6 June 2000). Joined Cases C-158 and 159/04, Vassilopoulos (Opinion of AG Poiares Maduro of 30 March 2006) para 44. 130 See Recital 5 of Directive 2004/38 and a long list of provisions in that Directive (e.g. Article 12.3, Article 17.3; Article 23; Article 28.2), which accompany the words “family member” with the words “irrespective of nationality”. 129

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a) the spouse; b) the partner with whom the Union citizen has contracted a registered partnership, based on the legislation of a MS, if the legislation of the host MS treats registered partnerships as equivalent to marriage and in accordance with the conditions laid down in the relevant legislation of the host MS; c) the direct descendants who are under the age of 21 or are dependants and those of the spouse or partner as defined in point (b); d) the dependent direct relatives in the ascending line and those of the spouse or partner as defined in point (b).131 Apart from those family members who must be automatically admitted to the host State, there are also two other groups for which the host State merely has the responsibility to facilitate their admission into its territory. These are laid down in Article 3.2 of the 2004 Directive and they are a) any other family members who, in the country from which they have come, are dependants or members of the household of the Union citizen having the primary right of residence, or where serious health grounds strictly require the personal care of the family member by the Union citizen and b) the partner with whom the Union citizen has a durable relationship, duly attested. 57

In Reed, the Court made it clear that the term “spouse” refers only to marital relationships and excludes unmarried partners.132 Although same-sex spouses should be recognised as “spouses” under Article 2(2) of the 2004 Directive, some MS that have not opened marriage to same-sex couples refuse to recognise them as such and, thus, refuse to grant migrant Union citizens who are part of such a couple family reunification rights. The ECJ has recently held in the Coman case that such a refusal amounts to a violation of EU law.133 Concerning separated spouses, they are still considered “spouses” and are entitled to family reunification rights until a final divorce order is made.134 Moreover, the fact that they are separated and do not live together does not impede them from being considered “spouses” if, officially, they are still married, since under the legislation there is no requirement for a married couple to live together.135 The divorced spouse of a migrant worker maintains the right—as primary carer—to remain in the host State together with the children of the worker, and this is so even if the latter has left that State.136

131

Article 2.2 of Directive 2004/38. Case C-59/85, Reed (ECJ 17 April 1986). 133 Case C-673/16, Coman (ECJ 5 June 2018). For an analysis of the position of same-sex couples and their ability to move freely between Member States under EU law see Tryfonidou (2015). 134 Case 267/83, Diatta (ECJ 13 February 1985) para 20. 135 Case 267/83, Diatta (ECJ 13 February 1985) para 18. However, there is a requirement that the family member and the Union citizen must reside in the same MS, i.e. the MS to which the Union citizen has moved—Case C-40/11 Iida (ECJ 8 November 2012) para 61–64. 136 Case C-413/99, Baumbast and R (ECJ 17 September 2002) para 58–63 and 68–75. Confirmed in Case C-480/08, Teixeira (ECJ 23 February 2010). 132

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In a number of cases, the Court has also sought to define the term ‘dependent’ that is used for some of the categories of family members. Whether a family member is dependent on the worker is a factual question for the national court, and the Court has noted that “the status of dependent member of a worker’s family is the result of a factual situation. The person having that status is a member of the family who is supported by the worker and there is no need to determine the reasons for recourse to the worker’s support or to raise the question whether the person concerned is able to support himself by taking up paid employment.”137 In Zhu and Chen, the Court underlined the need for the family member to be materially supported by the migrant Union citizen, noting that if the opposite is true (i.e. if it is the family member that supports the migrant Union citizen) the family member is not dependent on the migrant.138 Moreover, in Jia the ECJ stressed the need for material support to “exist in the State of origin of those [dependent] relatives or the State whence they came at the time when they apply to join the Community national.”139 More recently in Reyes,140 the Court provided further clarification by stressing that a Member State cannot require a direct descendant who is 21 years or older to have tried unsuccessfully to obtain employment or to obtain subsistence support from the authorities of his country of origin and/or otherwise to support himself to be recognised as dependent, nor does the fact that a relative—due to personal circumstances such as age, education and health—is deemed to be well placed to obtain employment and intends to start work in the Member State, prevent him/her from being considered a ‘dependent’ if the other requirements laid down in the Court’s case law are satisfied. The grant of family reunification rights in this context unavoidably has an impact on the exercise of national immigration powers. This is because—as already explained—it is mostly third-country national family members who rely on EU law to obtain access to the territory of the host State as a family member of a migrant worker and if, indeed, EU family reunification rights are enjoyed, this exempts third-country national family members from national immigration controls. Hence, in cases where family members fall within the categories established by Directive 2004/38, EU law applies to stop MS from applying their immigration provisions and to require them to accept the family members of migrant Union citizens without imposing any conditions or limitations on their admission. Until recently, it was considered that family reunification rights were only granted under EU law in situations where this was necessary to compensate for a loss of such rights that emerged as a result of the exercise of free movement rights. Hence, it was only if workers were previously lawfully resident with their thirdcountry national family members in their State of origin, and they were

137

Case 316/85, Lebon (ECJ 18 June 1987) para 22. Case C-200/02, Zhu and Chen (ECJ 19 October 2004) para 43–44. 139 Case C-1/05, Jia (ECJ 9 January 2007) para 37. 140 Case C-423/12, Reyes (ECJ 16 January 2014). 138

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subsequently not allowed to be accompanied by them in the host State, that EU law stepped-in to require the host State to admit those family members without applying its immigration laws. This was made especially clear in the Akrich case,141 where the Court imposed a condition of previous lawful residence for family reunification rights to be granted. In more recent case law, however, the Court confined Akrich to its own special facts and abolished the condition of previous lawful residence, whilst ruling that whenever a Union citizen moves to another MS, EU law applies and family reunification rights must be granted in the host State,142 or, in situations where the worker returns to his/her State of origin after having exercised free movement rights in the territory of another MS (i.e. where the worker is a “returnee”), in the State of origin.143 The Court in its case law has explained that the refusal of the host State (or, the State of origin, in the case of “returnees”) to accept within its territory the close family members of a migrant worker is, in itself, liable to lead to an impediment to the exercise of free movement rights and is, as such, a violation of the free movement provisions and, where applicable, of Article 2004/38. In other words, it is no longer necessary to show, in addition, that there is a loss of the right to be with family members from the exercise of free movement rights, but merely that there is an exercise of free movement rights, and that the migrant is prevented from residing in the host State with his/her close family members. The latter—in itself— amounts to an impediment to free movement and, according to the Court’s case law to date, is a breach of the free movement provisions, including of the free movement of workers provisions. Finally, it should be noted that the Court has recently had the opportunity to confirm that the Carpenter reasoning is also applicable to situations involving frontier workers. Carpenter144 is a famous case in relation to the family reunification rights of service-providers and, thus, it is analysed in more detail subsequently in this book (➔ Article 56 TFEU). Suffice it to recall here that the Court in that case held that a service-provider who often travels to other MS to provide services and has a company in his State of nationality from which he provides services abroad, can rely on EU law and, in particular, on Article 56 TFEU to prevent his MS of nationality and establishment from deporting his third-country national wife. The Court’s reasoning was that “the separation of Mr and Mrs Carpenter would be detrimental to their family life and, therefore, to the conditions under which Mr Carpenter exercises a fundamental freedom. That freedom could not be fully effective if Mr Carpenter were to be deterred from exercising it by obstacles raised

141

Case C-109/01, Akrich (ECJ 23 September 2003). Case C-127/08, Metock (ECJ 25 July 2008) para 48–68. For a discussion of the case see, inter alia, Tryfonidou (2009d) and Currie (2009). 143 Case C-370/90, Singh (ECJ 7 July 1992); Case C-291/05, Eind (ECJ 11 December 2007); Case C-456/12 O & B (ECJ 12 March 2014). 144 Case C-60/00, Carpenter (ECJ 11 July 2002). 142

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in his country of origin to the entry and residence of his spouse.”145 In the recent case of S & G, the Court transplanted this reasoning into the context of frontier workers,146 but further highlighted the need for the national court to establish whether the grant of family reunification rights on the particular facts of the case is “necessary to guarantee the citizen’s effective exercise of the fundamental freedom guaranteed by Article 45 TFEU”.147 However, what rights do the family members of workers enjoy once they are admitted into the territory of the host State? As already seen, they can require the host State to grant them the same social advantages as it grants to the family members of national workers, as this contributes to the integration of the worker and his family into the society of the host State; hence, Article 7.2 of Regulation 1612/68 and, now, Article 7.2 of Regulation 492/2011, have always been a source of (derivative) equality rights for the migrant worker’s family members.148 In addition, Article 10 of Regulation 492/2011 (before 2011, Article 12 of Regulation 1612/68) concerns the worker’s children, and provides that “the 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”.149 In this context, the term “children” is interpreted more broadly than in family reunification rights, as in Gaal the ECJ ruled that in this context it covers children who are over 21 and non-dependent.150 The Court has interpreted this provision broadly. Hence, in Michel S,151 it held that a benefit for the disabled should be extended to the children of migrant workers, whereas in Casagrande,152 it was held that this provision does not only apply to measures relating to access to education but also to any “general measures intended to facilitate educational attendance”. The Court went even further and expanded the scope of this provision beyond benefits available in the territory of the host State, to also cover educational grants

145 Case C-60/00, Carpenter (ECJ 11 July 2002) para 39. Carpenter has been one of the most criticised cases of all times—see, inter alia, Acierno (2003), Toner (2003), Tryfonidou (2003) and Editorial Comments (2003). 146 Case C-457/12, S & G (ECJ 12 March 2014) para 40. 147 Case C-457/12, S & G (ECJ 12 March 2014) para 42. 148 See, for instance, Case 32/75, Cristini (ECJ 30 September 1975); Case 63/76, Inzirillo (ECJ 16 December 1976); Case 94/84, Deak (ECJ 20 June 1985); Case 152/82, Forcheri (ECJ 13 July 1983); Case 261/83, Castelli (ECJ 12 July 1984). 149 This is, further, supplemented by Council Directive 77/486 (EEC) on the education of the children of migrant workers, O.J. L 199.32 (1977), which lays down a requirement for the provision by the host State of tuition that includes teaching of the language of the host State, as well as to promote the teaching of the mother tongue and the culture of the MS of origin with a view to facilitating the possible reintegration of the worker’s children into the MS of origin. 150 Case C-7/94, Gaal (ECJ 4 May 1995). 151 Case 76/72, Michel S (ECJ 11 April 1972). 152 Case 9/74, Casagrande (ECJ 3 July 1974).

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available to the children of national workers to study abroad; hence, study abroad grants must be extended to the children of migrant workers, even if the studies are to be undertaken in the MS of the child’s nationality.153 Moreover, Article 10 of the 2011 Regulation can be relied on even if the working parents have returned to their State of nationality,154 but not if the children have returned with them and live, and receive their education, in that country.155 In addition, as seen earlier (➔ para 57) the third-country national parent (who is, obviously, not a “worker” within the meaning of Article 45 TFEU), who is the primary carer of the child derives from this provision (without needing to rely on the family reunification rights now derived from Directive 2004/38) the right to reside in the host State,156 and this is so irrespective of whether the primary carer (and the child) are economically self-sufficient.157 In case the worker is deceased, Article 12 (3) of Directive 2004/38 confirms the right of the children of the worker to remain and complete their education, including the right of their primary carer to stay with them. 2.3.4. 66

67

What Amounts to a Restriction

Having seen the main (primary and secondary) rights that are derived from Article 45 TFEU, we should now proceed to the related question of what amounts to a restriction caught by this provision. For this purpose, a number of issues will be considered: first, the (unclear) distinction between direct and indirect restrictions will be noted; second, it will be examined whether Article 45 TFEU only prohibits discriminatory restrictions, as it was originally thought; third, the limits imposed on the scope of this provision will also be considered, as the increasingly wider scope of this provision has meant that there is a danger of an unwarranted intrusion of EU law into the internal affairs of the MS, the Court in some of its case law has tried to introduce (or further clarify) certain limits to the scope of application of this provision. Starting with the distinction between “direct” and “indirect” restrictions, it is first necessary to note that it is clear that Article 45 TFEU catches both direct and indirect restrictions. However, what is meant by these terms? Despite the fact that the words “direct” and “indirect” restriction/obstacle/impediment have been widely used by both the Court and its AGs, they have never been clearly defined. In my view, the basis of the dichotomy should lie on the distinction between primary and secondary rights that was earlier discussed in this chapter (➔ para 34): direct

153

Case C-308/89, Di Leo (ECJ 13 November 1990). Joined Cases 389 and 390/87, Echternach and Moritz (ECJ 15 March 1989). 155 Case C-33/99, Fahmi (ECJ 20 March 2001). 156 Case C-413/99, Baumbast and R (ECJ 17 September 2002). 157 Case C-480/08, Teixeira (ECJ 23 February 2010); Case C-310/08, Ibrahim (ECJ 23 February 2010). 154

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restrictions should be held to be measures that impede the exercise of the primary rights stemming from Article 45 TFEU, while indirect restrictions are the measures that primarily restrict the exercise of the secondary rights stemming from this provision, which further lead to an obstacle to the exercise of the primary rights granted by it.158 On the question of whether Article 45 TFEU goes beyond discrimination (i.e. whether it catches within its scope also measures that amount to non-discriminatory obstacles to the rights stemming from it), the answer is clearly a “yes”. The paradigmatic case used to support this is Bosman, which was decided back in 1995.159 The case was brought by a Belgian footballer—Jean-Marc Bosman— who used to play for a first division Belgian club and who, on the expiration of his contract, was offered by his team a new contract, which provided for much lower remuneration. Consequently, Bosman looked for work in another team, and was offered a contract by a French club. The problem arose when his original— Belgian—club, refused to release him to the French club, until the latter would pay a large sum of money as a “transfer fee”. At the time, the payment of a transfer fee was required by rules laid down by national and transnational (namely, UEFA) football associations. Considering that the requirement for payment of a transfer fee prevented him from moving between clubs situated in different MS, Bosman brought an action claiming that its imposition amounted to an obstacle to the free movement of workers, contrary to Article 45 TFEU. It was clear that the fee would be imposed on all transfers, whether these were between two teams in two different MS or between two teams in the same MS. Moreover, there was no hint of any discriminatory effect, since it was clear that the deterrent effect would be felt in exactly the same manner, whether a player wished to move to a team in another MS or to a team in the same MS. Despite this, the Court held that the measure amounted to an obstacle to the free movement of workers, contrary to Article 45 TFEU: “although the rules in issue in the main proceedings apply also to transfers between clubs belonging to different national associations within the same Member State and are similar to those governing transfers between clubs belonging to the same national association, they still directly affect players’ access to the employment market in other Member States and are thus capable of impeding freedom of movement for workers”.160 The Court then proceeded to consider whether the measure was justified, and ruled that it was not, thus finding a breach of Article 45 TFEU.

158

For an analysis of this distinction, see Tryfonidou (2016), pp. 22, 180–182, 186. Case C-415/93, Bosman (ECJ 15 December 1995). For subsequent cases that confirmed this, see inter alia, Case C-232/01, Van Lent (ECJ 2 October 2003); Case C-40/05, Lyyski (ECJ 11 January 2007); Case C-325/08, Olympique Lyonnais (ECJ 16 March 2010). 160 Case C-415/93, Bosman (ECJ 15 December 1995) para 103. 159

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Filtering Mechanisms

The final issue that needs to be considered concerns the limits placed by the Court on the material scope of Article 45 TFEU. In particular, it will be seen what filtering mechanisms the Court has established for ensuring that only situations that do, indeed, involve an obstacle to the exercise of the rights stemming from Article 45 TFEU are caught by it in the first place, and the contested measures will, consequently, need to be justified if they are to continue to be applied. The first such filtering mechanism is the purely internal rule, which was mentioned briefly earlier (➔ para 38). The purely internal rule was first applied in the workers case of Saunders,161 where the Court held that the situation fell outside the scope of—what at the time was—Article 48 TEEC, because the situation was purely internal to the UK and did not involve any cross-border element. The case involved a British woman who had come from Northern Ireland to England, where she was convicted of theft. She was bound over by the criminal courts in return for her undertaking not to return to England or Wales for three years. She broke that undertaking and in the ensuing proceedings, she sought to rely on EU law on her defence; in particular, she claimed that the restriction in her movement within the UK was contrary to Article 48 TEEC. The Court found that the situation was purely internal to the UK and, thus, Article 48 TEEC was not applicable. The rule was confirmed in subsequent case law governing this freedom,162 and is applicable when delimiting the scope of all the other market freedoms.163 The rule applies not only to exclude from the scope of the free movement provisions situations that have not already involved a cross-border element, but also situations involving a purely hypothetical prospect of the existence of a cross-border element, such as a purely hypothetical prospect of employment in the territory of another MS.164 The rationale behind the rule is to ensure that situations unrelated to the objectives of the market freedoms, escape their ambit and are left to be regulated at national level: it is a way to ensure that the EU does not unjustifiably interfere with the exercise of national legislative competence and/or the freedom of MS to apply their rules. The rule does not specify how a certain case must be resolved but, rather, simply determines whether EU law is applicable on the facts of the case or not.

161

Case 175/78, Saunders (ECJ 28 March 1979). However, the rule was first established a few months earlier in the establishment Case 115/78, Knoors (ECJ 7 February 1979). 162 See, for instance, Case 180/83, Moser (ECJ 28 June 1984); Case 298/84, Iorio (ECJ 23 January 1986); Joined Cases C-297/88 and 197/89, Dzodzi (ECJ 18 October 1990); Case C-332/90, Steen (ECJ 28 January 1992); Case C-60/91, Morais (ECJ 19 March 1992); Case C-379/92, Peralta (ECJ 14 July 1994). 163 See, for instance, Case 20/87, Gauchard (ECJ 8 December 1987); Joined Cases C-54 and 91/88 and C-14/89, Criminal proceedings against Niño (ECJ 3 October 1990). 164 Case 180/83, Moser (ECJ 28 June 1984); Case C-299/95, Kremzow (ECJ 29 May 1997). For a discussion of the difference between purely hypothetical obstacles to the exercise of free movement, on the one hand, and potential obstacles, on the other, see Tryfonidou (2013), pp. 302, 307–313.

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The application of the purely internal rule sometimes gives rise to reverse discrimination.165 Reverse discrimination is the difference in treatment that emerges in situations that are excluded from the scope of the market freedoms because they are deemed purely internal to an MS. Such situations can continue to be regulated at national level and since national legislation may impose stricter rules or may impose rules in situations that—if governed by EU law—no rules would be applied, it leads to a difference in treatment that, at least prima facie, is detrimental to situations that are purely internal.166 In the context of workers, an early example of reverse discrimination was the Hurd v Jones case,167 where the UK was found not to be in breach of (what are now) Article 18 and 45 TFEU, when it subjected to income tax both the basic salary paid by the UK to British teachers in the European School in Britain and the “European supplement” paid to them by the European School, whilst it did not require nationals of other MS to pay a tax on their “European supplement”. The rationale behind this was that this differential treatment did not lead to an impediment to free movement between MS and, thus, was incapable of impeding the achievement of the aims of the free movement of workers provisions. Accordingly, the Court’s approach to reverse discrimination in the context of all the free movement provisions has always been that it is a form of differential treatment that is permissible under those provisions since it does not impede the achievement of their aim. Nonetheless, the paradigmatic example of reverse discrimination is that encountered in the context of family reunification rights. Since virtually all national immigration laws require third-country nationals to be subjected to an individual assessment to be admitted to a MS for the first time, the application of EU law in cases where the third-country national falls within one of the categories of family members that can accompany or join a mobile Union citizen to the host State means that such an individual assessment cannot be required in the case. Accordingly, third-country nationals who are involved in a situation that is purely internal to a MS cannot benefit from the free movement provisions and are, thus, subjected to national immigration legislation, whereas third-country nationals whose situation falls within the scope of EU law can simply rely on the latter to stop the host MS from applying its immigration legislation. In Morson and Jhanjan,168 two Dutch nationals of Surinam origin were living and working in the Netherlands,

165

For a detailed analysis of reverse discrimination see Tryfonidou (2009a). Although purely internal situations may be subjected to stricter national regulation (or they may be subjected to regulation where they would not have been had EU law been applicable) and, thus, prima facie, they appear to suffer a detriment, it could be that compliance with stricter regulations—or, simply, compliance with regulations—is an advantage in the eyes of consumers, employers, service-recipients, etc. See, for instance, Case 407/85, 3 Glocken (ECJ 14 July 1988) para 27. Accordingly, whether reverse discrimination is, in reality, “discrimination” in the sense that it creates a detriment, depends on the angle from which the impact of a rule is examined—see Tryfonidou (2009b), p. 204. 167 Case 44/84, Hurd v Jones (ECJ 15 January 1986). 168 Joined Cases 35 and 36/82, Morson and Jhanjan (ECJ 27 October 1982). 166

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where they were visited by their Surinamese mothers. The latter applied for residence permits to stay in the Netherlands and, to avoid the application of the Dutch immigration legislation, they sought to rely on Article 10 of Regulation 1612/68, which at the time granted family reunification rights to workers. As a response to a reference for a preliminary ruling, the Court held that the situation was purely internal and, thus, the two Dutch nationals could not derive automatic family reunification rights from EU law. Hence, their mothers would have to comply with the (stricter) Dutch immigration legislation. It should be noted that despite the fact that the Court was given the opportunity to re-assess its approach to reverse discrimination in the light of Union citizenship in the Uecker and Jacquet case,169 it refrained from doing so and, hence, reverse discrimination is still permissible under EU law, although it should be noted that it is increasingly easy to establish a link with EU law and, thus, for a situation to escape the purely internal rule, thus leading to numerically fewer instances of reverse discrimination. The second filtering mechanism, which is employed when determining whether a measure amounts to a restriction caught by Article 45 TFEU, is remoteness. This is—in essence—a question of causation: is the contested measure a proximate cause of an obstacle to the exercise of one of the rights stemming from the free movement of workers provisions? Remoteness was established back in the early 1990s in the Court’s free movement of goods case law,170 but in subsequent years, it was made clear that it is also applicable to the other market freedoms. In particular, concerning workers, the main case where the principle was applied was Graf.171 There, a German national, Mr Graf, was working in Austria for his Austrian employer for four years. When he was offered a job in Germany and, consequently, sought to terminate his contract of employment, he was informed that he would not be entitled to receive any compensation from his Austrian employer, since the termination was sought by him and such compensation was only available to employees who had worked for their employer for three years and did not terminate their contract of employment themselves or were responsible for their dismissal. Mr Graf considered that this amounted to an obstacle contrary to Article 45 TFEU and brought an action to this effect. This led to a reference for a preliminary ruling to the ECJ. The latter held that “Legislation of the kind at issue in the main proceedings is not such as to preclude or deter a worker from ending his contract of employment to take a job with another employer, because the entitlement to compensation on termination of employment is not dependent on the worker’s choosing whether or not to stay with his current employer but on a future and hypothetical event, namely the subsequent termination of his contract without such termination being at his own initiative or attributable to him.”172 The Court then proceeded to point out that “Such an event is too uncertain and indirect a

169

Joined Cases C-64 and 65/96, Uecker and Jacquet (ECJ 5 June 1997). Case C-69/88, Krantz (ECJ 7 March 1990); Case C-44/98, BASF (ECJ 21 September 1999). 171 Case C-190/98, Graf (ECJ 27 January 2000). 172 Case C-190/98, Graf (ECJ 27 January 2000) para 24. 170

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possibility for legislation to be capable of being regarded as liable to hinder freedom of movement for workers where it does not attach to termination of a contract of employment by the worker himself the same consequence as it attaches to termination which was not at his initiative or is not attributable to him.”173 Whilst remoteness requires a qualitative assessment of the impact of the measure, considering whether there is, indeed, a sufficient causal link between the impugned measure and the alleged obstacle to the exercise of the rights stemming from Article 45 TFEU, a de minimis test requires a quantitative assessment. Such a test would examine, in particular, whether a certain minimum number of workers can be affected by the contested measure and only if this minimum threshold is passed would a measure be found to amount to a restriction caught by Article 45 TFEU. However, the Court has rejected the application of such a de minimis test in the context of the market freedoms and, hence, it is not one of the filtering mechanisms employed for delimiting the scope of the free movement of workers provisions.174 Another filtering mechanism that MS have tried to introduce via their submissions in cases is that of “abuse”. In a number of cases, the MS sought to refuse to grant rights as required by EU law, claiming that the migrant was using EU law in an abusive manner in that the main or sole motive of the cross-border movement that was exercised was to activate EU law and, through it, to claim rights that would not have been available in a purely internal situation. The Court has not been sympathetic to such arguments, noting that it is not abusive to allow the legal advantages of a particular location to influence decision-making nor is it abusive to engage in cross-border economic activity simply to benefit from the associated rights.175

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2.4. The Territorial Scope of the Free Movement of Workers Provisions

The territorial scope of Article 45 TFEU is the same as the territorial scope of the Treaties. Article 52.1 TEU notes that the Treaties shall apply to all the MS, whilst Article 52.2 TEU refers to Article 355 TFEU, which provides a more detailed delimitation of the territorial scope of the Treaties. The latter, in particular, sets out the specific arrangements made regarding the application of the Treaties to the overseas countries and territories that have special relations with some MS, as well

173

Case C-190/98, Graf (ECJ 27 January 2000) para 25. Joined Cases 177 and 178/82, Van de Haar (ECJ 5 April 1984) para 13; Case 103/84, Commission v Italy (ECJ 5 June 1986) para 18; Case C-126/91 Yves Rocher (ECJ 18 May 1993) para 21; Case C-420/15 U (ECJ 31 May 2017) para 20. 175 For case law on this issue see, most prominently, Case C-212/97, Centros (ECJ 9 March 1999) para 24–27; Case C-109/01, Akrich (ECJ 23 September 2003) para 55–56. For an analysis of the issue of abuse in EU law, see Engsig Sorensen (2006); Kjellgren (2000); De la Feria (2008); and the essays in De la Feria and Vogenauer (2011). 174

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as the outermost regions of some of the MS.176 The details in relation to these arrangements are not important for this chapter and, therefore, they will not be analysed.177 Accordingly, Article 45 TFEU covers the territory of the MS. In practice, however, the free movement of workers rules apply also to the EEA countries (although it is the EEA agreement that provides for them instead of Article 45 TFEU),178 as well as to certain other non-EU MS that have concluded association agreements with the EU for this purpose.179 In a handful of cases, the Court was confronted with the question of whether Article 45 TFEU applies in situations where the worker works outside the territory of the MS. As noted by R.C.A. White, “[i]t is a condition of the exercise of the freedom of movement of persons that the activity in question takes place in a territory to which the Treaty rules apply.”180 The first such case—Walrave and Koch181—was referred to the ECJ in the 1970s. The case involved professional cyclists that had contracts of employment with sponsors and/or sporting federations, which provided for their participation in international cycling championships. One of the questions referred to the ECJ was whether the prohibition of discrimination on the ground of nationality provided in—what is now—Article 45 TFEU also applied in situations where the cycling competition took place outside the territory of the EU. In response to this the ECJ noted that “[b]y reason of the fact that it is imperative, the rule on nondiscrimination applies in judging all legal relationships in so far as these relationships, by reason either of the place where they are entered into or of the place where they take effect, can be located within the territory of the Community”;182 it then left it to the national judge to decide whether the legal relationships involved on the facts of the case were so located. The Court provided further clarification in the subsequent case of Prodest, where it noted that “activities temporarily carried on outside the territory of the 176

Moreover, in its jurisprudence the Court has made it clear that EU law (including the free movement of workers provisions) apply to the continental shelf adjacent to a Member State, the continental shelf being considered part of the MS in question under the EU law—Case C-347/10, Salemink (ECJ 17 January 2012). For further details, see White (2004), pp. 23–25. 177 For an exhaustive analysis of this issue see Kochenov (2011). 178 These are Iceland, Lichtenstein and Norway. See White (2004), pp. 10–11, 23 and 25–26. 179 See, most prominently, the EU-Switzerland agreement—for more on this see White (2004), p. 11. Note, however, that in recent years, and after a referendum that took place in February 2014 and in which the Swiss voted in favour of, inter alia, imposing a cap on the number of EU nationals moving to Switzerland, it was questionable whether there would continue to be free movement of persons (including workers) between Switzerland and the EU MS (see Carrera et al. 2015). However, the crisis has been resolved, since the Swiss parliament in December 2016 adopted legislation that gives priority to Swiss-based job seekers but avoids quotas on EU citizens and thus respects the basic principles of the free movement of persons. 180 White (2004), p. 26. 181 Case 36/74, Walrave and Koch (ECJ 12 December 1974). 182 Case 36/74, Walrave and Koch (ECJ 12 December 1974) para 28.

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Community are not sufficient to exclude the application of that principle, as long as the employment relationship retains a sufficiently close link with that territory.”183 On the facts of the case, it was found that such a link was maintained when a Belgian national resident in France and employed by a French company was posted temporarily to Nigeria. Later in Boukhalfa, the Court noted that EU rules can have effects outside the territory of the EU,184 and expanded the principle established in its previous case law by holding that the free movement of workers provisions also apply in cases where “there is a sufficiently close link between the employment relationship, on the one hand, and the law of a Member State and thus the relevant rules of Community law, on the other”.185 Hence, on the facts of the case, it was held that the provisions governing the free movement of workers applied to the situation of Ms Boukhalfa who was a Belgian national working (permanently) in the German embassy in Algeria pursuant to a contract that was entered into there, and this was because the employment relationship was governed by German law.

3.

The Justifications

3.1. Some General Points

Once it is found that there is a restriction caught by Article 45 TFEU, the next question is always whether the measure that gives rise to the restriction is, nonetheless, justified by the need to protect a non-economic general interest of the society. It is up to the defendant State or body or individual to prove that one of the derogations justifies the measure that has been found to amount to a restriction contrary to Article 45 TFEU. Precise evidence rather than general assertions must be put forward for establishing the existence of a derogation.186 There are three types of justifications available for measures that amount to restrictions under Article 45 TFEU: the (general) Treaty derogations, which are laid down in Article 45.3 TFEU; the judge-made objective justifications; and the more specific public service exception, which is provided by Article 45.4 TFEU, and which allows MS to exclude certain posts from the scope of the Article 45 TFEU prohibition. Although the justifications are such that it is, mainly, MS that will be able to rely on them, in Bosman,187 it was suggested that a private body may also seek to rely on the limitations laid down in Article 45.3 TFEU when seeking to derogate from Article 45 TFEU. Apart from the public service exception, which is 183

Case 237/83, Prodest (ECJ 12 July 1984) para 6. Confirmed in Case 9/88, Lopes da Veiga (ECJ 27 September 1989) para 15; Case C-60/93, Aldewereld v Staatssec-retaris van Financiën (ECJ 29 June 1994) para 14. 184 Case C-214/94, Boukhalfa (ECJ 30 April 1996) para 14. 185 Case C-214/94, Boukhalfa (ECJ 30 April 1996) para 15. Confirmed more recently in Case C544/11, Petersen (ECJ 28 February 2013) para 40–42. 186 Case C-161/07, Commission v Austria (ECJ 22 December 2008) para 37. 187 Case C-415/93, Bosman (ECJ 15 December 1995) para 86.

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relevant only to very specific cases where MS seek to refuse to non-nationals access to certain (sensitive) posts on the ground that they lack a bond of allegiance with the State, the availability of the other types of derogations depends, simply, on the type of measure that is caught by Article 45 TFEU. In particular, if the measure is directly discriminatory on the ground of nationality, it can only be justified by using the Treaty derogations, whilst if it is either indirectly discriminatory on the ground of nationality or a non-discriminatory restriction, it can be justified using both the Treaty derogations and the objective justifications. Indeed, there have been some cases where the Court has departed from this clear distinction,188 although in principle the above rule still holds good.189 A number of general principles with regards to the justification assessment have been developed through the years. In particular, it has been made clear that it is necessary that the court that considers whether the measure is justified conducts a careful consideration of the individual circumstances of the case before it.190 Moreover, the derogations must be interpreted strictly, since they are derogations from fundamental freedoms, and the Court has noted that because of the introduction of Union citizenship, a particularly restrictive interpretation of the derogations is required.191 As J. Ziller has explained, “Strict interpretation means that the exception or limitation has to be applied in the way which has the most limited effect on the application of the principle.”192 The derogations are subject to the general principles of EU law, in particular the principle of proportionality193 and fundamental human rights.194 They do not apply where EU secondary legislation provides for exhaustive harmonisation of the area in question.195 In the remaining of this section, each type of derogation will be examined, drawing on both the Court’s case law and—where applicable—secondary legislation. This will be followed by an explanation of the notion of proportionality and its application in this context. As the same derogations are applicable to all the free movement of persons provisions (and they are interpreted in the same manner in the context of all those provisions), this chapter will only cover the basics.196

188

The Court has departed from this distinction mostly in its case law on the free movement of goods. See, for instance, Case C-2/90, Commission v Belgium (Walloon Waste) (ECJ 9 July 1992); Case C-379/98, PreussenElektra (ECJ 13 March 2001); Case C-203/96, Dusseldorp (ECJ 25 June 1998). For a case involving the free movement of service recipients where the Court also overlooked this distinction, see Case C-158/96, Kohll (ECJ 28 April 1998). 189 Barnard (2016), p. 450. 190 This is partly reflected in Article 28.1 of Directive 2004/38. 191 Joined Cases C-482 and 493/01, Orfanopoulos and Oliveri (ECJ 29 April 2004) para 53. 192 Ziller (2010), p. 10. 193 Case C-100/01, Olazabal (ECJ 26 November 2002). 194 Case C-260/89 ERT (ECJ 18 June 1991). Confirmed in, inter alia, Case C-60/00 Carpenter [2002] ECR I-6279; Joined Cases C-482 and 493/01 Orfanopoulos [2004] ECR I-5257. 195 Case C-421/98, Commission v Spain (ECJ 23 November 2000). 196 For a detailed analysis of the derogations, see Barnard (2016), Chapter 12.

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3.2. The Treaty Derogations

In the context of the free movement of workers (and the free movement of persons, in general), there are only three grounds of Treaty derogations: public policy, public security, and public health. Article 45.3 TFEU states that the rights that the freedom of movement of workers entails are “subject to limitations justified on grounds of public policy, public security or public health”. These exceptions were, originally, elaborated in Directive 64/221,197 which laid down the details for their interpretation, as well as a number of safeguards and procedural guarantees. However, the 1964 Directive was repealed and replaced in 2004 by Directive 2004/38, which also incorporates the relevant ECJ jurisprudence developed through the years. It should be noted that although the derogations apply to all kinds of measures, the Directive (as did its predecessor) deals principally with cases where the right of residence is denied or with cases of expulsion, and it does not mention other cases in which a State may invoke a Treaty derogation, although it is clear that the principles laid down in it apply in all cases where the Treaty derogations are invoked.198 The content of the Treaty derogations as well as the safeguards and procedural guarantees with which a MS must comply when it seeks to rely upon one of these exceptions, are elaborated in Articles 27–33 of the Directive.199Article 27 of the Directive consolidates the main principles established in the Court’s case law. Hence, Article 27 (2) provides that all measures adopted on grounds of public policy or public security must comply with the principle of proportionality and be based exclusively on the personal conduct of the individual concerned. Article 27 also makes it clear that the Treaty derogations cannot be invoked to serve economic ends, and that past criminal convictions are not in themselves grounds for taking expulsion measures. However, past convictions that provide evidence of a present threat may be relied on as a basis for expulsion.200 Moreover, as established in the Bonsignore case,201 the requirement that the expulsion order must be based on the personal conduct of the individual means that an expulsion order cannot be made merely as a way of preventing similar conduct by others in the future. Article 27.3 of the Directive lays down a time limit after entry into the host MS for the latter to seek, and for the MS of origin to provide, information on an EU national’s police record, and stipulates that such information shall not be sought on a routine basis, 197

Council 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, O.J. L 56/850 (1964). 198 Condinanzi et al. (2008), p. 94. 199 In this chapter, only Article 27–29 will be analysed. For an explanation of the procedural requirements laid down by Articles 30–33 of the Directive see Craig and de Búrca (2015), pp. 790–791. 200 This has also been confirmed by the Court in its case law—see, for instance, Case 30/77, Bouchereau (ECJ 27 October 1977); Case 131/79, Santillo (ECJ 22 May 1980). 201 Case 67/74, Bonsignore (ECJ 26 February 1975).

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whilst Article 27.4 provides that upon expulsion the MS of origin must re-admit the person in question. Moreover, the Directive introduced for the first time three different levels of protection against expulsion: a) the general level of protection for all migrant Union citizens (and their MS) who have moved to another MS; b) an enhanced level of protection, which requires proof of serious grounds of public policy or public security, for Union citizens (and their family members) who have lawfully lived in the host State for at least five years,202 and, consequently, they have acquired the right of permanent residence introduced by the Directive;203 and a super enhanced level of protection for minors or for those Union citizens (and their family members) who have resided in the host State for ten years or more, which requires proof of imperative grounds of public security.204 The same provision that draws these three different levels of protection against expulsion—i.e. Article 28—provides in its first paragraph that before making expulsion decisions on public policy or security grounds, MS must “take account of considerations such as how long the individual concerned has resided on its territory, his/her age, state of health, family and economic situation, social and cultural integration into the host Member State and the extent of his/her links with the country of origin”; this demonstrates that the EU legislature recognised that deportation will have a significant effect on a migrant who is a long-term resident in the host State. It is interesting to note that on expulsions, the Court has ruled that EU law permits MS to treat nationals of other MS differently from their own nationals. This is a necessary consequence of the fact that under international law, States cannot expel (or refuse to admit within their territory) their own nationals. Hence, the fact that EU law accepts that in certain circumstances, MS may be justified in refusing access to their territory—or expelling—nationals of other MS, unavoidably creates a difference in treatment between nationals and non-nationals. However, the Court has sought to limit the extent to which MS can differentiate between nationals and non-nationals in this context. In particular, the Court has held that it is necessary to show that there is some kind of comparability in the treatment of nationals and non-nationals when it comes to conduct that gives rise to nonnationals being expelled or refused admission. Thus, in Adoui and Cornuaille,205 the ECJ held that an MS could not expel nationals of another MS on the ground of prostitution, if the same conduct did not give rise to any repressive measures against its own nationals. More broadly, in Commission v Germany,206 the Court held that behaviour that is not repressed by the State when attributable to one of its own nationals cannot amount to a threat to public order. As M. Condinanzi et al. have explained, “whilst it is not necessary for the behaviour in question to be the subject

202

Article 28.2 of Directive 2004/38. See Article16 of Directive 2004/38. 204 Article 28.3 of Directive 2004/38. 205 Cases 115 and 116/81, Adoui and Cornuaille (ECJ 18 May 1982). 206 Case 249/86, Commission v Germany (ECJ 18 May 1989). 203

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of criminal sanctions imposed by the State, thus preserving the State’s discretion as to the presence and severity of any threat to the fundamental interests of society, it is nevertheless necessary for the national legal system to have expressed a negative assessment of the behaviour under consideration, quite independently of the nationality of the person responsible for it.”207 3.2.1.

Public Policy

There is no clear definition of what amounts to a public policy ground of exception but the Court has noted that “[r]ecourse by a national authority to the concept of public policy presupposes [. . .] the existence [. . .] of a genuine and sufficiently serious threat to the requirements of public policy affecting one of the fundamental interests of society”.208 Through the years, the Court has established via its case law that this ground of justification can cover things such as a refusal of a MS to admit into its territory a worker who is a national of another MS who works for the Church of Scientology, since the latter is considered “socially harmful”;209 a decision to deport workers who are nationals of other MS and who are, allegedly, engaging in prostitution (i.e. they work in a bar “which is suspect from the point of view of morals”);210 an order of expulsion that aims to combat the use of drugs;211 and measures that aim to fight criminal activities.212 Moreover, given that—unlike Article 36 TFEU, which is the provision laying down the Treaty derogations for the free movement of goods—in the context of the free movement of persons the Treaty derogations do not include public morality as one of the grounds that can justify restrictions, in the latter context, where MS wish to rely on the need to protect public morality, they rely on the public policy derogation.213 It should be noted that the Court has recognised that MS retain discretion about this exception since “the particular circumstances justifying recourse to the concept of public policy may vary from one country to another and from one period to another”.214 In Jany, the Court stressed that EU law “does not impose on Member States a uniform scale of values as regard the assessment of conduct which may be considered to be contrary to public policy.”215

207

Condinanzi et al. (2008), p. 97. Case 30/77, Bouchereau (ECJ 27 October 1977) para 18. 209 Case 41/74, Van Duyn (ECJ 4 December 1974). 210 Cases 115 and 116/81, Adoui and Cornuaille (ECJ 18 May 1982). 211 Case C-348/96, Calfa (ECJ 19 January 1999) (this is a services case). 212 Case C-524/06, Huber (ECJ 16 December 2008). 213 Chalmers et al. (2014), p. 934. 214 Case 41/74, Van Duyn (ECJ 4 December 1974) para 18. 215 Case C-268/99, Jany (ECJ 20 November 2001) para 31. 208

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Public Security

Public security has been successfully relied upon in fewer cases than public policy. One would have expected that this ground would require different sorts of actions from those brought under public policy, with public security requiring more severe crimes that endanger the security of the State; obvious examples of the latter are terrorism, espionage, and, generally, activities leading to the destabilisation of the State. After all, the drafters of Directive 2004/38 have drawn a distinction between the two grounds, providing in Article 28.3 of the Directive that persons who have lived in the host State for more than ten years can only be expelled on imperative grounds of public security; i.e. they cannot be expelled on grounds of public policy. Despite this, in its recent case law the Court seems to have treated the grounds of public policy and public security as interchangeable. Hence, in Tsakouridis, which involved a Greek national who had spent virtually all his life in Germany and, thus, could benefit from the Article 28.3 protection, the Court, possibly wishing to allow the said MS to justify the proposed expulsion, held that “trafficking in narcotics as part of an organised group could reach a level of intensity that might directly threaten the calm and physical security of the population as a whole or a large part of it”.216 D. Kostakopoulou-Docheri and N. Ferreira have noted that the ruling “essentially makes the distinction between the second and third paragraphs of Article 28 inexact, notwithstanding the existence of close conceptual links between ‘internal security’ and ‘public policy’. The Court’s ruling underscores the belief that the differentia specifica between Articles 28 (2) and 28 (3) is not the nature of the threat. After all, the meanings of ‘public policy’ and ‘security’ cannot be clearly demarcated and, having varied meanings in the various Member States, they remain national law concepts even if circumscribed by EU law. Instead, attention should be given to the ‘exceptional circumstances’ surrounding the offending conduct and the ‘high degree of seriousness’ it reflects – elements that are captured by the adjective ‘imperative’.”217 This approach has been confirmed more recently in PI, where the Court went as far as to hold that the sexual exploitation of children can be covered by the concept of “imperative grounds of public security”, provided that the manner in which such offences were committed must disclose particularly serious characteristics that the personal conduct of the individual concerned represents a genuine, present, threat affecting one of the fundamental interests of society or of the host MS, and the host MS takes account of considerations such as how long the individual has resided in its territory, his/her age, state of health, family and economic situation, social and cultural integration into that State and the extent of his/her links with the country of origin.218

216

Case C-145/09, Tsakouridis (ECJ 23 November 2010) para 47. Kostakopoulou-Dochery and Ferreira (2013–2014), p. 173. 218 Case C-348/09, PI (ECJ 22 May 2012). 217

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Public Health

Public health can only be used to justify a restriction on the free movement of workers if the danger to public health has emerged within the first three months of a person’s access to the territory of the host State. Article 29 of Directive 2004/38 elucidates the meaning of this ground and specifies that the only diseases that justify measures restricting freedom of movement are diseases with epidemic potential as defined by the relevant instruments of the World Health Organisation (WHO), and other infectious diseases or contagious parasitic diseases if they are the subject of protection provisions applying to nationals of the host MS.

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3.3. Objective Justifications

Objective justifications are the various grounds that the Court has recognised in its case law as valid grounds of justification for measures that amount to obstacles to the free movement of workers and are either indirectly discriminatory on the grounds of nationality or genuinely non-discriminatory. The (unwritten) “list” of these grounds is non-exhaustive and, thus, virtually any non-economic ground that appears reasonably capable of being a national interest worthy of protection and that must—in certain cases—take precedence over the aims of the Treaty, can be added to the list. In Gebhard—a case on the freedom of establishment—the Court elaborated on the conditions that need to be satisfied for the national rule to pass the test of objective justification. These are that the measure must: a) b) c) d)

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be applied in a non-discriminatory manner, be justified by imperative requirements in the general interest, be suitable for securing the attainment of the objective it pursued, not go beyond what is necessary to attain that objective.219

In effect, the process of examining whether a measure is justified is exactly the same, whether the ground relied upon is a Treaty derogation or an objective justification. Examples of grounds accepted as objective justifications in the context of the free movement of persons provisions are worker protection,220 consumer protection,221 conservation of the national historical and artistic heritage,222 avoiding

219

Case C-55/94, Gebhard (ECJ 30 November 1995) para 37. In paragraph 6 of the judgment, it is made clear that these conditions also apply in the context of the other free movement of persons provisions. 220 Case 279/80, Webb (ECJ 17 December 1981); Case C-438/05, Viking (ECJ 11 December 2007). 221 Case 220/83, Commission v France (ECJ 4 December 1986). 222 Case C-180/89, Commission v Italy (ECJ 26 February 1991).

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disturbances on the labour market,223 road and port safety,224 preserving or improving the education system,225 social protection of workers,226 the balanced allocation of the power to impose taxes between the MS,227 and cultural policy.228

3.4. The Public Service Exception

The public service exception is a more specific type of derogation. Article 45.4 TFEU provides that “[t]he provisions of this Article shall not apply to employment in the public service”. The rationale behind this exception is to enable MS to reserve certain posts that require a special relationship of allegiance between the employee and the State, to persons who—by virtue of their holding the nationality of that State—are presumed to have such a relationship.229 As R. C. A. White has noted, the extent to which the MS have reserved particular posts for their own nationals “has varied dramatically”.230 100 The exception has not been relied on too often, but its meaning has been defined through the Court’s case law where it had the opportunity to interpret Article 45.4 TFEU. As this is a limiting clause on a fundamental freedom, the Court has claimed a “hermeneutic monopoly” over its meaning,231 and has taken a restrictive approach to its interpretation. As explained by P. Craig and G. de Búrca, “the Member States cannot deem a particular post to be ‘in the public service’ by the name or designation they give to that post, or by the mere fact that the terms of the post are regulated by public law”.232 Moreover, an institutional approach has been rejected by the Court, since a MS cannot exclude a whole group of posts, simply because they are within a given body/institution, and has, instead, adopted a functional approach, which considers the nature of the tasks undertaken.233 This is for two reasons: “first, a fear that the institutional approach could immunize large sectors of the economy from the reach of free movement, more especially in countries that take an expansive view of ‘state employment’; and, secondly, a desire to break down stereotypes and to encourage Member States to think that 99

223

Case C-445/03, Commission v Luxembourg (ECJ 21 October 2004). Joined Cases C-151 and 152/04, Nadin (ECJ 15 December 2005); Joined Cases C-128 and 129/ 10, Navtiliaki Etairia Thasou (ECJ 17 March 2011). 225 Case C-40/05, Lyyski (ECJ 11 January 2007). 226 Case C-255/04, Commission v France (ECJ 15 June 2006). 227 Case C-446/03, Marks & Spencer (ECJ 13 December 2005). 228 Case C-288/89, Gouda (ECJ 25 July 1991). 229 For more on the exception see Handoll (1988); O’Keeffe (1992); Beenan (2001); White (2004), pp. 79–85; Ziller (2010); Commission Staff Working Document, Free Movement of Workers in the Public Sector, SEC(2010) 1609 final; Minderhoud and Fridriksdottir (2013). 230 White (2004), p. 79. 231 Case 152/73, Sotgiu (ECJ 12 February 1974) para 5. 232 Craig and de Búrca (2015), p. 766. 233 White (2004), p. 79. 224

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employment of a non-national in many public sector jobs should, if that person were best qualified for the position, not be regarded as odd or unnatural.”234 Accordingly, the Court laid down a test for determining whether a certain post 101 falls within the ambit of the public service exception, which is whether the specific post requires the existence of a special relationship of allegiance to the State. The Court explained that what—at the time—was Article 48.4 TEEC, “removes from the ambit of Article 48 (1) to (3) a series of posts which involve direct or indirect participation in the exercise of powers conferred by public law and duties designed to safeguard the general interests of the State or of other public authorities. Such posts in fact presume on the part of those occupying them the existence of a special relationship of allegiance to the State and reciprocity of rights and duties which form the foundation of the bond of nationality.”235 From the Court’s case law, it seems that two cumulative requirements must be satisfied for a post to fall within the scope of this exception: a) it must involve the exercise of power conferred by public law and b) it must involve the safeguarding of the general interests of the state. It is important to highlight that Article 45.4 TFEU cannot be used to justify 102 discriminatory conditions for employment once a national of another MS has been admitted to the public service of the host State. Rather, it can only be used to restrict admission to public service employment in the first place.236 Hence, in Sotgiu the Court held that the German postal service could not rely on this exception to justify its refusal to pay Sotgiu, an Italian national, a separation allowance granted to German workers, on the ground that he was employed in the public service.237 Moreover, MS cannot refuse to consider a migrant worker’s previous periods of comparable employment in the public service of another MS for the purpose of access to its own public service or for matters of seniority within that service.238 This exception reflects the difficult question of whether MS should be permitted 103 in certain areas to maintain a distinction between their nationals and nationals of other MS.239 This question has acquired increasing importance following the

234

Craig and de Búrca (2015), p. 768. Case 149/79, Commission v Belgium (ECJ 17 December 1980) para 10. 236 Case 152/73, Sotgiu (ECJ 12 February 1974) para 4; Joined Cases 389 and 390/87, Echternach and Moritz (ECJ 15 March 1989) para 14; Case C-195/98, Österreicher Gewerkschaftsbund, Gewerkschaft Offentlicher Dienst v Republik Österreich (ECJ 30 November 2000) para 37. 237 Case 152/73, Sotgiu (ECJ 12 February 1974). 238 Case 152/73, Sotgiu (ECJ 12 February 1974); Case C-419/92, Scholz (ECJ 23 February 1994); Case C-195/98, Österreicher Gewerkschaftsbund, Gewerkschaft Offentlicher Dienst v Republik Österreich (ECJ 30 November 2000). 239 Other such examples are the fact that MS can directly discriminate against non-nationals in situations where they can successfully rely on the grounds of public policy, public security or public health; and, as already seen above (➔ para 69), that they can refuse admission to their territory—or they can expel from their territory—nationals of other MS, whereas under 235

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introduction of Union citizenship in 1993,240 which is a status that presupposes equality of treatment between all MS nationals; as AG Jacobs has noted, “[f] reedom from discrimination on grounds of nationality [. . .] must be seen as a basic ingredient of Union citizenship.”241

3.5. The Principle of Proportionality

104 The principle of proportionality is one of the general principles of EU law. Although it permeates all areas of EU law, it is only in some contexts that it is specifically mentioned in the Treaty. For instance, it is found in Article 5.4 TEU, as a principle that must be applied by the EU when exercising its competence, i.e. when the EU determines the exact form that the proposed measure must take. 105 When it comes to the market freedoms, for a measure to be justified, it does not suffice that it aims to protect one of the recognised grounds of justification but it must also be proportionate to the aim sought to be achieved. Whilst in direct actions (i.e. Article 258 TFEU actions) the proportionality assessment is conducted by the ECJ itself, in preliminary references the ECJ usually leaves it to the national Court to conduct this assessment. 106 Although there has not been a very clear delimitation of the actual test that must be used for determining the proportionality of the measure, the following sub-tests are, usually, applied by the Court: a) is the measure suitable for achieving the said aim? b) is the measure necessary for achieving the said aim? The latter question is answered by asking another question: is there a less restrictive alternative? In other words, can the same aim be achieved—even if at a lesser extent—by a measure that is not as restrictive of the rights stemming from the said provision?

4.

Conclusion

107 As the free movement of workers is one of the aspects of the internal market that has remained unchanged since the 1950s, it is unsurprising that the main terms used in the (primary and secondary) legislation regulating this area, and the main principles governing this area of EU law, are, by now, well-settled. Accordingly, apart from a few instances where the Court feels the need to revisit some of the fundamental tenets in this field, this area does not allow much scope for innovation and, thus, has not attracted great scholarly attention in recent years. Nonetheless, and despite this, in practice there are still legal, administrative, and practical obstacles, to exercising the rights stemming from this freedom especially at national level, as can be seen in a international law they are not permitted to do either concerning their own nationals. For further analysis, see Tryfonidou (2016), pp. 197–204. 240 White (2004), pp. 86–87. 241 Case C-274/96, Bickel and Franz (Opinion of AG Jacobs of 19 March 1998) para 24.

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number of studies conducted by—or on behalf of—the EU institutions.242 The challenge, therefore, seems to be to ensure that there is correct implementation and, especially, effective application of this policy area at national level and that all necessary practical steps243 are taken for enabling and facilitating the exercise by Union citizens of the fundamental rights they derive from this freedom.

List of Cases ECJ

ECJ 19.03.1964, 75/63, Hoekstra, ECR 347 [cit. in para 21] ECJ 11.04.1972, 76/72, Michel S, ECR 457 [cit. in para 46; 64] ECJ 12.02.1974, 152/73, Sotgiu, ECR 153 [cit. in para 100; 102] ECJ 04.04.1974, 167/73, Commission v France, ECR 359 [cit. in para 7; 50] ECJ 03.07.1974, 9/74, Casagrande, ECR 773 [cit. in para 64] ECJ 04.12.1974, 41/74, Van Duyn, ECR 1337 [cit. in para 34; 90; 92] ECJ 12.12.1974, 36/74, Walrave and Koch. ECR 1405 [cit. in para 8; 80] ECJ 26.02.1975, 67/74, Bonsignore, ECR 297 [cit. in para 87] ECJ 30.09.1975, 32/75, Cristini, ECR 1085 [cit. in para 46; 63] ECJ 08.04.1976, 48/75, Royer, ECR 497 [cit. in para 19; 36] ECJ 07.07.1976, 118/75, Watson and Belmann, ECR 1185 [cit. in para 10; 19] ECJ 16.12.1976, 63/76, Inzirillo, ECR 2057 [cit. in para 46; 63] ECJ 27.10.1977, 30/77, Bouchereau, ECR 1999 [cit, in para 87; 90] ECJ 07.02.1979, 115/78, Knoors, ECR 399 [cit. in para 71] ECJ 28.03.1979, 175/78, Saunders, ECR 1657 [cit. in para 38; 71] ECJ 31.05.1979, 207/78, Even, ECR 2019 [cit. in para 46] ECJ 22.05.1980, 131/79, Santillo, ECR 1585 [cit. in para 87] ECJ 03.07.1980, 157/79, Pieck, ECR 2171 [cit. in para 19] 242 See, for instance, the recent ‘(Synthesis) Report: Socio-economic inclusion of migrant EU workers in 4 cities’ and the four separate city reports (Leeds, Frankfurt, Milan, Rotterdam) attached to it, drafted by an independent contractor on behalf of the Commission (available at http://ec.europa.eu/social/main.jsp?langId¼en&catId¼457&newsId¼2311&furtherNews¼yes, September 2015); and the Commission Communication, Reaffirming the free movement of workers: rights and major developments, COM(2010)373 final (July 2010), available at http://eur-lex. europa.eu/legal-content/EN/TXT/?uri¼COM:2010:0373:FIN. 243 Examples of such steps would be the provision of language training, setting up one-stop-shops and improving existing institutions for providing information services and for enabling migrant workers to complete the procedures that must be followed when they access the labour market of the host State, facilitate the recognition of professional qualifications, educate officials in local administrations about the requirements of EU law and the rules governing the free movement of workers, identify and address the needs of the different (diverse) categories of migrant workers. Moreover, the EU has, recently reformed the EURES network (the European jobs network) to make it easier for job seekers and employers in different MS to find each other—available at http:// www.consilium.europa.eu/en/policies/labour-mobility/.

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ECJ 17.12.1980, 149/79, Commission v Belgium, ECR 1845 [cit. in para 101] ECJ 17.12.1981, 279/80, Webb, ECR 3305 [cit. in para 98] ECJ 14.01.1982, 65/81, Reina, ECR 33 [cit. in para 46] ECJ 23.03.1982, 53/81, Levin, ECR 1035 [cit. in para 22; 23; 30] ECJ 18.05.1982, 115 and 116/81, Adoui and Cornuaille, ECR 1665 [cit. in para 89; 90] ECJ 27.10.1982, 35 and 36/82, Morson and Jhanjan, ECR 3723 [cit. in para 73] ECJ 13.07.1983, 152/82, Forcheri, ECR 2323 [cit. in para 46; 63] ECJ 05.04.1984, 177 and 178/82, Van de Haar, ECR 1797[cit. in para 75] ECJ 28.06.1984, 180/83, Moser, ECR 2539 [cit. in para 71] ECJ 05.07.1984, 238/83, Meade, ECR 2631 [cit. in para 25] ECJ 12.07.1984, 237/83, Prodest, ECR 3153 [cit. in para 81] ECJ 12.07.1984, 261/83, Castelli ECR 3199 [cit. in para 46; 63] ECJ 13.02.1985, 267/83, Diatta, ECR 567 [cit. in para 57] ECJ 06.06.1985, 157/84, Frascogna, ECR 1739 [cit. in para 46] ECJ 20.06.1985, 94/84, Deak, ECR 1873[cit. in para 46; 63] ECJ 11.07.1985, 137/84, Mutsch, ECR 2681 [cit. in para 46] ECJ 15.01.1986, 44/84, Hurd v Jones, ECR 29 [cit. in para 72] ECJ 23.01.1986, 298/84, Iorio, ECR 247 [cit. in para 71] ECJ 17.04.1986, C-59/85, Reed, ECR 1283 [cit. in para 46; 57] ECJ 03.06.1986, 139/85, Kempf, ECR 1741 [cit. in para 30] ECJ 05.06.1986, 103/84, Commission v Italy, ECR 1759 [cit. in para 75] ECJ 03.07.1986, 66/85, Lawrie-Blum, ECR 2121 [cit. in para 23; 27] ECJ 04.12.1986, 220/83, Commission v France, ECR 3663 [cit. in para 98] ECJ 18.06.1987, 316/85, Lebon, ECR 2811 [cit. in para 37, 58] ECJ 08.12.1987, 20/87, Gauchard, ECR 4879 [cit. in para 71] ECJ 21.06.1988, 197/86, Brown, ECR 3205 [cit. in para 31] ECJ 14.07.1988, 407/85, 3 Glocken, ECR 4233 [cit. in para 72] ECJ 05.10.1988, 196/87, Steymann, ECR 6159 [cit. in para 30] ECJ 15.03.1989, C-389 and 390/87, Echternach and Moritz, ECR 723 [cit. in para 29, 65, 102] ECJ 18.05.1989, 249/86, Commission v Germany, ECR 1263 [cit, in para 89] ECJ 31.05.1989, 344/87, Bettray, ECR 1621 [cit. in para 31, 32] ECJ 27.09.1989, 9/88, Lopes da Veiga, ECR I-2989 [cit. in para 81] ECJ 29.11.1989, 379/87, Groener, ECR 3967 [cit. in para 51] ECJ 14.12.1989, Case 3/87, R v. Ministry of Agriculture, Fisheries and Food, ex parte Agegate Ltd, ECR 4459 [cit. in para 30] ECJ 07.03.1990, C-69/88, Krantz, ECR I-583 [cit. in para 74] ECJ 03.10.1990, C-54 and 91/88 and C-14/89, Criminal proceedings against Niño, ECR I-3537 [cit. in para 71] ECJ 18.10.1990, C-297/88 and 197/89, Dzodzi, ECR I-3763 [cit. in para 71] ECJ 13.11.1990, C-308/89, Di Leo, ECR I-4185 [cit. in para 65] ECJ 05.02.1991, C-363/89, Roux, ECR I-273 [cit. in para 39] ECJ 26.02.1991, C-180/89, Commission v Italy, ECR I-709 [cit, in para 98] ECJ 26.02.1991, C-292/89, Antonissen, ECR I-745 [cit. in para 36; 43] Tryfonidou

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ECJ 18.06.1991, C-260/89 ERT, ECR I-2925 [cit. in para 84] ECJ 25.07.1991, C-288/89, Gouda, ECR I-4007 [cit. in para 98] ECJ 04.10.1991, C-246/89, Commission v UK, ECR I-4584 [cit. in para 47] ECJ 10.12.1991, C-179/90, Merci Convenzionali Porto di Genova, ECR I-5889 [cit. in para 50] ECJ 28.01.1992, C-332/90, Steen, ECR I-341 [cit. in para 71] ECJ 26.02.1992, C-357/89, Raulin, ECR I-1027 [cit. in para 21] ECJ 19.03.1992, C-60/91, Morais, ECR I-2085 [cit. in para 71] ECJ 07.07.1992, C-369/90, Micheletti, ECR I-4239 [cit. para 25] ECJ 07.07.1992, C-370/90, Singh, ECR I-4265 [cit. in para 38; 60] ECJ 09.07.1992, C-2/90, Commission v Belgium (Walloon Waste), ECR I-4431 [cit. in para 83] ECJ 26.01.1993, C-112/91, Werner, ECR I-429 [cit. in para 39; 42] ECJ 31.03.1993, C-19/92, Kraus, ECR I-1663 [cit. in para 50; 52] ECJ 18.05.93, C-126/91 Yves Rocher, ECR I-2361 [cit. in para 75] ECJ 23.02.1994, C-419/92, Scholz, ECR I-505 [cit. in para 38; 102] ECJ 29.06.1994, C-60/93, Aldewereld v Staatssec-retaris van Financiën, ECR I2991 [cit. in para 81] ECJ 14.07.1994, C-379/92, Peralta, ECR I-3453 [cit. in para 71] ECJ 14.02.1995, C-279/93, Schumacker, ECR I-225 [cit. in para 48; 51] ECJ 04.05.1995, C-7/94, Gaal, ECR I-1031 [cit. in para 64] ECJ 30.11.1995, C-55/94, Gebhard, ECR I-4165 [cit, in para 97] ECJ 15.12.1995, C-415/93, Bosman, ECR I-4921 [cit. in para 8; 9; 50; 68; 69; 83] ECJ 30.04.1996, C-214/94, Boukhalfa, ECR I-2253 [cit. in para 81] ECJ 23.05.1996, C-237/94, O’Flynn, ECR I-2617 [cit. in para 51] ECJ 29.05.1997, C-299/95, Kremzow, ECR I-2629 [cit. in para 71] ECJ 05.06.1997, C-64 and 65/96, Uecker and Jacquet, ECR I-3171 [cit. in para 73] ECJ 15.01.1998, C-15/96, Schöning-Kougebetopoulou, ECR I-47 [cit. in para 51] Opinion of AG Jacobs 19.03.1998, C-274/96, Bickel and Franz, ECR I-7639 [cit. in para 103] ECJ 28.04.1998, C-158/96, Kohll, ECR I-1931 [cit. in para 83] ECJ 07.05.1998, C-350/96, Clean Car, ECR I-2521 [cit. in para 9; 51] ECJ 12.05.1998, C-336/96, Gilly, ECR I-2793 [cit. in para 48] ECJ 25.06.1998, C-203/96, Dusseldorp, ECR I-4075 [cit. in para 83] ECJ 26.11.1998, C-1/97, Birden, ECR I-7747 [cit. in para 31] ECJ 19.01.1999, C-348/96, Calfa, ECR I-11 [cit. in para 90] ECJ 09.03.1999, C-212/97, Centros, ECR I-1459 [cit. in para 76] ECJ 08.06.1999, C-337/97, Meeusen, ECR I-3289 [cit. in para 29] ECJ 14.09.1999, C-391/97, Gschwind, ECR I-5451 [cit. in para 51] ECJ 27.01.2000, C-190/98, Graf, ECR I-493 [cit. in para 74] ECJ 06.06.2000, C-281/98, Angonese, ECR I-4139 [cit. in para 9; 52] ECJ 03.10.2000, C-411/98, Ferlini, ECR I-8081 [cit. in para 8] ECJ 23.11.2000, C-421/98, Commission v Spain, ECR I-10375 [cit. in para 84] ECJ 30.11.2000, C-195/98, Österreicher Gewerkschaftsbund, Gewerkschaft Öffentlicher Dienst v Austria, ECR I-10497 [cit. in para 102] Tryfonidou

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ECJ 20.02.2001, C-192/99, R v Secretary of State for the Home Department, ex parte Kaur, ECR I-1237 [cit. in para 25] ECJ 13.03.2001, C-379/98, PreussenElektra, ECR I-2099 [cit. in para 83] ECJ 20.03.2001, C-33/99, Fahmi, ECR I-2415 [cit. in para 65] ECJ 31.05.2001, C-283/99, Commission v Italy, ECR I-4363 [cit. in para 50] ECJ 20.11.2001, C-268/99, Jany, ECR I-8615 [cit. in para 92] ECJ 11.07.2002, C-224/98, D’Hoop, ECR I-6191[cit. in para 52] ECJ 11.07.2002, C-60/00, Carpenter, ECR I-6279 [cit. in para 62; 84] ECJ 17.09.2002, C-413/99, Baumbast and R, ECR I-7091 [cit. in para 57; 65] ECJ 16.11.2002, C-100/01, Olazabal, ECR I-10981 [cit. in para 84] ECJ 12.12.2002, C-385/00, De Groot, ECR I-11819 [cit. in para 40; 42] ECJ 23.09.2003, C-109/01, Akrich, ECR I-9607 [cit. in para 60; 76] ECJ 02.10.2003, C-232/01, Van Lent, ECR I-11525 [cit. in para 34; 68] ECJ 06.11.2003, C-413/01, Ninni-Orasche, ECR I-13187 [cit. in para 22; 27] ECJ 13.11.2003, C-209/01, Schilling and Fleck-Schilling, ECR I-13389 [cit. in para 40; 42] ECJ 23.03.2004, C-138/02, Collins, ECR I-2703 [cit. in para 26; 37; 38; 51] ECJ 29.04.2004, C-482 and 493/01, Orfanopoulos and Oliveri, ECR I- [cit. in para 26; 84] ECJ 29.04.2004, C-171/02, Commission v Portugal, ECR I-5645 [cit. in para 51] ECJ 07.09.2004, C-456/02, Trojani, ECR I-7573 [cit. in para 32] ECJ 19.10.2004, C-200/02, Zhu and Chen, ECR I-9925 [cit. in para 58] ECJ 21.10.2004, C-445/03, Commission v Luxembourg, ECR I-10191 [cit, in para 98] ECJ 17.02.2005, C-215/03, Oulane, ECR I-1215 [cit. in para 19] ECJ 17.03.2005, C-109/04, Kranemann, ECR I-2421 [cit. in para 34] ECJ 05.07.2005, C-376/03, D, ECR I-5821 [cit. in para 48] ECJ 07.07.2005, C-227/03, Van Pommeren-Bourgondiën, ECR I-6101 [cit. in para 40; 42] ECJ 15.09.2005, C-258/04, Ioannidis, ECR I-8275 [cit. in para 37] ECJ 13.12.2005, C-446/03, Marks & Spencer, ECR I-10837 [cit. in para 98] ECJ 15.12.2005, C-151 and 152/04, Nadin, ECR I-11203 [cit. in para 98] ECJ 21.02.2006, C-152/03, Ritter-Coulais, ECR I-1711 [cit. in para 42] Opinion of AG Poiares Maduro 30.03.2006, C-158 and 159/04, Vassilopoulos, ECR I-8137 [cit. in para 52] ECJ 15.06.2006, C-255/04, Commission v France, ECR I-5251 [cit. in para 98] ECJ 07.09.2006, C-470/04, N, ECR I-7409 [cit. in para 42] ECJ 09.11.2006, C-520/04 Turpeinen, ECR I-10685 [cit. in para 42] ECJ 09.01.2007, C-1/05, Jia, ECR I-1 [cit. in para 58] ECJ 11.01.2007, C-40/05, Lyyski, ECR I-99 [cit. in para 68; 98] ECJ 11.01.2007, C-208/05, ITC, ECR I-181 [cit. in para 9] ECJ 25.10.2007, C-464/05, Geurts, ECR I-9325 [cit. in para 42] ECJ 11.12.2007, C-291/05, Eind, ECR I-719 [cit. in para 60] ECJ 11.12.2007, C-438/05, Viking, ECR I-10779 [cit. in para 8; 98] ECJ 17.07.2008, C-94/07, Raccanelli, ECR I-5939 [cit. in para 8] Tryfonidou

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ECJ 25.07.2008, C-127/08, Metock, ECR I-6241 [cit. in para 60] ECJ 16.10.2008, C-524/06, Huber, ECR I-9705 [cit, in para 90] ECJ 16.10.2008, C-527/06, Renneberg, ECR I-7735 [cit. in para 42] ECJ 22.12.2008, C-161/07, Commission v Austria, ECR I-10671 [cit. in para 82] ECJ 23.04.2009, C-544/07, Rüffler, ECR I-3389 [cit. in para 42] ECJ 04.06.2009, C-22 and 23/08, Vatsouras and Koupatantze, ECR I-4585 [cit. in para 37] Opinion of AG Sharspston 25.06.2009, C-73/08, Bressol, ECLI:EU:C:2009:396 [cit. in para 50] ECJ 23.02.2010, C-310/08, Ibrahim, ECR I-1065 [cit. in para 65] ECJ 23.02.2010, C-480/08, Teixeira, ECR I-1107 [cit. in para 57; 65] ECJ 02.03.2010, C-135/08, Rottmann, ECR I-1449 [cit. in para 25] ECJ 16.03.2010, C-325/08, Olympique Lyonnais, ECR I-2177 [cit. in para 8; 68] ECJ 23.11.2010, C-145/09, Tsakouridis, ECR I-11979 [cit. in para 94] ECJ 10.03.2011, C-379/09, Maurits Casteels, ECR I-1379 [cit. in para 8] ECJ 17.03.2011, C-128 and 129/10, Navtiliaki Etairia Thasou, ECR I-1885 [cit. in para 98] ECJ 17.01.2012, C-347/10, Salemink, ECLI:EU:C:2012:17 [cit. in para 77] ECJ 22.05.2012, C-348/09, PI, ECLI:EU:C:2012:300 [cit. in para 94] ECJ 08.11.2012, C-40/11 Iida, ECLI:EU:C:2012:691 [cit. in para 57] ECJ 13.12.2012, C-379/11, Caves Krier, ECLI:EU:C:2012:798 [cit. in para 42] ECJ 04.07.2013, C-233/12, Gardella, ECLI:EU:C:2013:449 [cit. in para 29] ECJ 28.02.2013, C-544/11, Petersen, ECLI:EU:C:2013:124 [cit. in para 81] ECJ 16.01.2014, C-423/12, Reyes, ECLI:EU:C:2014:16 [cit. in para 58] ECJ 12.03.2014, C-456/12, O & B, ECLI:EU:C:2014:135 [cit. in para 17; 60] ECJ 12.03.2014, C-457/12, S & G, ECLI:EU:C:2014:136 [cit. in para 62] ECJ 19.06.2014, C-507/12, Jesse Saint Prix, ECLI:EU:C:2014:2007 [cit. in para 28] ECJ 05.02.2015, C-317/14, Commission v Belgium, ECLI:EU:C:2015:63 [cit. in para 51] ECJ 15.09.2015, C-67/14, Alimanovic, ECLI:EU:C:2015:597 [cit. in para 37] ECJ 14.12.2016, C-238/15, Verruga, ECLI:EU:C:2016:949 [cit. in para. 51] ECJ 31.05.2017, C-420/15, U, ECLI:EU:C:2017:408 [cit. in para 75] ECJ 05.06.2018, C-673/16, Coman, ECLI:EU:C:2018:385 [cit. in para 57]

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Minderhoud, P., & Fridriksdottir, B. (2013). Report on posts in the public sector reserved for nationals – Developments in the 27 Member States in 2009-2012. Prepared for the European Commission by the Network on Free Movement of Workers. Retrieved from http://docplayer. net/1235573-Report-on-posts-in-the-public-sector-reserved-for-nationals-developments-inthe-27-member-states-in-2009-2012.html Mitsilegas, V. (2009). Free movement of workers, citizenship and enlargement: The situation in the UK. Journal of Immigration, Asylum and Nationality Law, 23, 223. O’Brien, C. (2008). Annotation of Hartmann, Geven and Hendrix. Common Market Law Review, 45, 499. O’Brien, C. (2009). Social blind spots and monocular policy making: The ECJ’s migrant worker model. Common Market Law Review, 46, 1107. O’Keeffe, D. (1985). Equal rights for migrants: The concept of social advantages in Article 7(2), Regulation 1612/68. Yearbook of European Law, 5, 91. O’Keeffe, D. (1992). Judicial interpretation of the public service exception to the free movement of workers. In D. Curtin & D. O’Keeffe (Eds.), Constitutional adjudication in European Community and national law. Dublin: Butterworths. O’Leary, S. (1999). The free movement of persons and services. In P. Craig & G. de Búrca (Eds.), The evolution of EU law. Oxford: OUP. O’Leary, S. (2011). Free movement of persons and services. In P. Craig & G. de Búrca (Eds.), The evolution of EU law. Oxford: OUP. Toner, H. (2003). Annotation of Carpenter. European Journal of Migration and Law, 5, 163. Tryfonidou, A. (2003). Mary Carpenter v Secretary of State for the Home Department: The beginning of a new era in the European Union? King’s College Law Journal, 14, 81. Tryfonidou, A. (2009a). Reverse discrimination in EC law. The Hague: Kluwer. Tryfonidou, A. (2009b). The outer limits of Article 28 EC: Purely internal situations and the development of the court’s approach through the years. In C. Barnard & O. Odudu (Eds.), The outer limits of European Union law. Oxford: Hart. Tryfonidou, A. (2009c). In search of the aim of the EC free movement of persons provisions: Has the Court of Justice missed the point? Common Market Law Review, 46, 1591. Tryfonidou, A. (2009d). Family reunification rights of (migrant) union citizens: Towards a more liberal approach. European Law Journal, 15(5), 634. Tryfonidou, A. (2013). (Further) signs of a turn of the tide in the CJEU’s citizenship jurisprudence: Case C-40/11, Iida, Judgment of 8 November 2012. Maastricht Journal of European and Comparative Law, 20, 302. Tryfonidou, A. (2014). The notions of ‘restriction’ and ‘discrimination’ in the context of the free movement of persons provisions: From a relationship of interdependence to one of (almost complete) independence. Yearbook of European Law, 33(1), 385. Tryfonidou, A. (2015). EU free movement law and the legal recognition of same-sex relationships: The case for mutual recognition. The Columbia Journal of European Law, 21(2), 195. Tryfonidou, A. (2016). The impact of union citizenship on the EU’s market freedoms. Oxford: Hart. White, R. C. A. (2004). Workers, establishment, and services in the European Union. Oxford: OUP. White, R. C. A. (2011). Revising free movement of workers. Fordham International Law Journal, 33, 1562. Wiesbrock, A. (2012). Granting citizenship-related rights to third-country nationals: An alternative to the full extension of European Union citizenship. European Journal of Migration and Law, 14, 63. Ziller, J. (2010). Free movement of European Union citizens and employment in the public sector: Current issues and state of play (Part I – General Report). Report for the European Commission. Retrieved from http://ec.europa.eu/social/main.jsp?langId¼en&catId¼89&n ewsId¼956&furtherNews¼yes

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Article 46 [Implementation of the Free Movement of Workers] (ex-Article 40 TEC) The European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure3 and after consulting the Economic and Social Committee,2, 3 issue directives or make regulations3 setting out the measures required to bring about freedom of movement for workers, as defined in Article 45, in particular:4 (a) by ensuring close cooperation between national employment services; (b) by abolishing those administrative procedures and practices and those qualifying periods in respect of eligibility for available employment, whether resulting from national legislation or from agreements previously concluded between Member States, the maintenance of which would form an obstacle to liberalisation of the movement of workers; (c) by abolishing all such qualifying periods and other restrictions provided for either under national legislation or under agreements previously concluded between Member States as imposed on workers of other Member States conditions regarding the free choice of employment other than those imposed on workers of the State concerned; (d) by setting up appropriate machinery to bring offers of employment into touch with applications for employment and to facilitate the achievement of a balance between supply and demand in the employment market in such a way as to avoid serious threats to the standard of living and level of employment in the various regions and industries. Article 46 TFEU gives competence to the EU Parliament and the Council of the EU to adopt secondary legislation to give effect to the rights laid down in Article 45 TFEU; it is, in other words, the legal basis provided by the Treaty for measures that specifically—or mainly—aim at ensuring that the aims of Article 45 TFEU are achieved. Its original version was found in the (founding) EEC Treaty (1958), and was Article 49 TEEC, and, after the Treaty of Maastricht came into force (1993), Article 49 TEC. This was then renumbered as Article 40 TEC, when the Treaty of Amsterdam came into force (1999), and stayed as such, until it was replaced by its current version (Article 46 TFEU) in 2009, when the Treaty of Lisbon came into force. There are a number of differences between the different versions of the provision. One difference between the EC Treaty version of the provision and its current version is that the latter specifies that measures must be promulgated with the use of the “ordinary legislative procedure”, whereas the former did not mention the name of the legislative procedure that should be followed but, rather, referred to Article 251 TEC, which was the provision detailing the co-decision procedure (the predecessor of the ordinary legislative procedure). In addition, when referring to the core provision governing the freedom of movement of workers, Article 46 TFEU, #

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naturally, uses the post-Lisbon numbering (i.e. Article 45 TFEU), whereas Article 40 EC referred to the numbering that was applicable at the time (i.e. Article 39 TEC). More important, however, is the difference between the original version of this provision in the EEC Treaty and its subsequent versions, since in the former, the measure had to be adopted by the Council alone, after consulting the Economic and Social Committee, whereas under the subsequent versions of the provision, the measures must be approved by both the Parliament and the Council as co-legislators (after consulting the Economic and Social Committee).1 In addition, there are two other differences, the first one being that Article 49 TEEC opened by saying “As soon as this Treaty enters into force”—a phrase that was removed in the subsequent versions of the provision—and the second being that the Article provided that the freedom of movement for workers would be brought about “by progressive stages”, whereas such a reference was, again, abolished in the subsequent versions of the provision. Article 46 TFEU makes it clear that the legislative procedure that must be followed is the ordinary legislative procedure.2 This, under Article 289 TFEU, “shall consist in the joint adoption by the European Parliament and the Council” of the relevant instrument “on a proposal from the Commission”. The detailed steps of the procedure are laid down in Article 294 TFEU, and it is worth noting that under this procedure the Commission’s proposal must be approved by both the Parliament and the Council—who are, thus, co-legislators—the former acting by simple majority whilst the latter acting by qualified majority. Moreover, Article 46 TFEU (as did its predecessors) requires the consultation of the Economic and Social Committee and provides that the EU legislature can only act by either issuing directives or making regulations. Both types of instruments have been used. Article 46 TFEU provides a non-exhaustive list of the range of measures that can be adopted for bringing about the free movement of workers, these being measures that concern the cooperation between national employment services, measures that seek to abolish administrative procedures, practices and qualifying periods that limit eligibility for employment, measures that promote the free choice of employment, and measures that seek to achieve a balance between supply and demand in the employment market to avoid serious threats to the standard of living and level of employment in the various regions and industries. A number of pieces of secondary legislation have been adopted having as their legal basis Article 46 TFEU (or its predecessors). The most obvious

1 As explained by Hofmann, while not foreseen in this initial version of the Article, the Council subsequently also consulted the European Parliament on a regular basis. Moreover, the same author explains that the Single European Act introduced the cooperation procedure to Article 49 TEEC and explicitly allowed for qualified majority voting in the Council, whilst subsequently the Maastricht Treaty replaced the cooperation procedure with the co-decision procedure—see Hofmann (2013), p. 203. See, also, Tillotson and Foster (2003), p. 114. 2 For an explanation of the ordinary legislative procedure, see Craig and de Búrca (2015), pp. 126–133.

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examples are Regulation 492/20113 (and its predecessor, Regulation 1612/684) and Directives 68/360 (now repealed),5 2014/506 and 2014/54,7 where Article 46 TFEU (or its previous versions) was used as the sole legal basis of the measure, and Directives 98/5,8 2004/389 and 2005/36,10 where Article 40 TEC was employed as a part legal basis, the other legal bases used being, usually, the specific legal bases found in the freedom of establishment and services chapters, or more general legal bases such as Article 114 TFEU.11 Since most of the above instruments were examined when analysing Article 45 TFEU, they shall not be analysed here.

References Craig, P., & de Búrca, G. (2015). EU law: text, cases and materials. Oxford: OUP. Hofmann, A. (2013). Strategies of the repeat player: The European Commission between courtroom and legislature. Berlin: epubli. Tillotson, J., & Foster, N. (2003). Text, cases and materials on European Union law. London: Cavendish.

3 Parliament/Council Regulation (EU) No 492/2011 on freedom of movement for workers within the Union, O.J. L 41/1 (2011). 4 Council Regulation (EEC) No 1612/68 on freedom of movement for workers within the Community, O.J. L 257/2 (1968). 5 Council Directive (EEC) No 68/360 on the abolition of restrictions on movement and residence within the Community for workers of Member States and their families, O.J. L 257/13 (1968). 6 Parliament/Council Directive (EU) No 2014/50 on minimum requirements for enhancing worker mobility between Member States by improving the acquisition and preservation of supplementary pension rights, O.J. L 128/1 (2014). 7 Parliament/Council Directive (EU) No 2014/54 on measures facilitating the exercise of rights conferred on workers in the context of freedom of movement for workers, O.J. L 128/8 (2014). 8 Parliament/Council Directive (EC) 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 obtained, O.J. L 77/36 (1998). 9 Parliament/Council Directive (EC) No 2004/38 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States, O.J. L 158/77 (2004). 10 Parliament/Council Directive (EC) No 2005/36 on the recognition of professional qualifications, O.J. L 255/22 (2005). 11 The other legal bases used for Directive (EC) No 2004/38 were Articles 12, 18, 44 and 52 EC and the other legal bases used for Directive (EC) No 2005/36 were Articles 47 and 55 EC.

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Article 47 [Exchange of Young Workers] (ex-Article 41 TEC) Member States2 shall, within the framework of a joint programme,3, 4 encourage the exchange of young workers. This provision was introduced into the original version of the EEC Treaty, as Article 50 TEEC. Following the Treaty of Amsterdam renumbering, it became Article 41 TEC and—without its wording being changed at all—it is now Article 47 TFEU. This is the only Treaty provision that targets young workers specifically; however, reference to young persons in general is made in a handful of Treaty provisions.1 Article 47 TFEU is a legal basis that provides competence for the adoption of a joint programme to encourage the exchange of young workers. However, its text does not make it clear on whom the competence is bestowed, i.e. whether it will be the EU or the MS themselves that shall introduce the joint programme, although, to date, joint programmes have been adopted by the Council. It should be noted, however, that the Council, in some of its Decisions establishing these programmes, pointed out that it is the responsibility of the MS to encourage, within the framework of these programmes, the exchange of young workers.2 Moreover, as explained by Copeland and ter Haar, this provision provides (merely) “the legal basis to adopt supporting and supplementing provisions”.3 The first joint programme having this provision as its legal basis was adopted in May 1964,4 and was devoted to encouraging the exchange of “trainees of either sex, mainly between 18 and 30 years of age, who are nationals of a Member State, have already received basic vocational training and who move to another State in order to improve both their vocational training and their knowledge of cultural, linguistic and human affairs by obtaining employment in that country, whatever the level of their remuneration”.5 Traineeships duration would be between 6 and 18 months,6 and to take part in the programme, trainees would have to send their 1

Article 6 TFEU (list of the EU’s supplementing, coordinating or supporting action), Article 165.2 TFEU (youth exchanges and participation of young people in democratic life in Europe), Article 166.2 TFEU (vocational policy), Article 214.5 TFEU (humanitarian aid). 2 See Recital 2 of Council Decision 79/642/EEC establishing a second joint programme to encourage the exchange of young workers within the Community, O.J. L 185/24 (1979) and Recital 2 of Council Decision 84/636/EEC establishing a third joint programme to encourage the exchange of young workers within the Community, O.J. L 331/36 (1984). 3 Copeland and ter Haar (2015), p. 215. 4 Council Decision 64/307/EEC, First Joint Programme to encourage the exchange of young workers within the Community, O.J. L 1226/17 (1964). 5 Article 1 of Council Decision 64/307/EEC. In subsequent programmes, the age group was reduced to the ages between 18 and 28. 6 Article 11 of Council Decision 64/307/EEC. #

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application to the competent authorities of their home State, which would then make the initial selection whilst it would be up to the competent authorities of the host State to decide whether they would accept the applicants and grant them financial assistance.7 Two more joint programmes followed, the second joint programme providing detail and certain clarifications to the provision for trainee exchange made in the first joint programme,8 and the third joint programme,9 extending the exchange programme to young job seekers. It should be noted that each subsequent programme confirmed—and signalled the termination—of the programme that was immediately preceding it and, thus, was, in essence, a newer version of the previous programme.10 Several other programmes directly aimed at young people had been adopted from the 1980s onwards, such as Leonardo da Vinci11 and ERASMUS,12 although these programmes did not have Article 47 TFEU (or its predecessors) as their legal base. As de Witte has pointed out, the joint programmes adopted under Article 47 TFEU had been absorbed by the Leonardo da Vinci programme, firstly introduced in 1994, which was the programme that focused on work-related training.13 The Leonardo da Vinci programme which, until 2013, was a sub-programme of the Lifelong Learning Programme (2007–2013)14 and, before that, of the Socrates

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Article 9 of Council Decision 64/307/EEC. Council Decision 79/642/EEC establishing a second joint programme to encourage the exchange of young workers within the Community, O.J. L 185/24 (1979). 9 Council Decision 84/636/EEC establishing a third joint programme to encourage the exchange of young workers within the Community, O.J. L 331/36 (1984). 10 There are also a number of progress reports on each programme prepared by the Commission, as required by the Decisions establishing the programmes. See, for instance, Report from the Commission to the Council (the 1st Report on the 2nd joint programme) on exchange of young workers programme. COM(82) 376 final (1982); the 2nd Report by the Commission to the Council on the progress of the 2nd joint programme for exchange of young workers. COM(84) 255 final (1984); Second Report by the Commission on the 3rd joint programme for exchange of young workers. COM(90) 377 final (1990); Third Report by the Commission on the 3rd joint programme for exchange of young workers. COM(1992) 512 final (1992). 11 The Leonardo da Vinci programme was established by Council Decision 94/819/EC establishing an action programme for the implementation of a European Community vocational training policy, O.J. L 340/8 (1994). 12 The Erasmus programme was established by Council Decision 87/327/EEC adopting the European Community Action Scheme for the Mobility of University Students (Erasmus), O.J. L166/20 (1987). 13 De Witte (2001), p. 253. 14 The Lifelong Learning Programme (LLP) was established by Parliament/Council Decision 1720/2006/EC on establishing an action programme in the field of lifelong learning, O.J. L 327/ 45 (2006). 8

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programmes,15 has now been replaced by the Erasmus+ programme, which is effective during the period 2014–2020.16 Article 47 TFEU has not only been used as a legal basis for adopting the joint programmes seen above (➔ paras 3 and 4), but it has been mentioned in Regulation 1296/2013,17 which establishes an EU Programme for Employment and Social Innovation that aims to contribute to the implementation of Europe 2020 by providing financial support for the Union’s objectives in terms of promoting a high level of quality and sustainable employment, guaranteeing adequate and decent social protection, combating social exclusion and poverty and improving working conditions. The programme has been running since January 2014 and will be running until the end of 2020. In its Recital 18, the Regulation points out that the scope of EURES (the European network of employment services) should be broadened to include developing and supporting targeted mobility schemes with a view to filling vacancies where labour market shortcomings have been identified. More important for our purposes is the fact that the Recital points out, in particular, that “[i]n accordance with Article 47 TFEU, those schemes should support facilitating voluntary mobility among young workers in the Union. Targeted mobility schemes, such as those based on the preparatory action ‘Your first EURES job’, should make it easier for young people to access employment opportunities and to take up a job in another Member State, and should also encourage employers to create job openings for young mobile workers”. It is, however, also underlined that mobility schemes should not discourage the EU and its MS from helping young people to find a job in their home country. Although Article 47 TFEU was used until the 1980s as a legal basis to make joint programmes specifically aimed at the exchanges of young workers (➔ paras 3 and 4), its importance has declined in recent years, since actions involving such exchanges have now been subsumed into programmes aiming to enhance the mobility of young persons (not just workers) in general, which are adopted using different (broader) legal bases (➔ para 5).

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The Socrates (1995–1999) programme was established by Parliament/Council Decision 819/95/ EC establishing the Community action programme ‘Socrates’, O.J. L 87/10 (1995) and the Socrates II (2000-2006) programme was established by Parliament/Council Decision 253/2000/ EC establishing the second phase of the Community programme in the field of education ‘Socrates’, O.J. L 28/1 (2000). 16 The Erasmus+ programme was established by Parliament/Council Regulation 1288/2013/EU establishing ‘Erasmus+’: the Union programme for education, training, youth and, O.J. L 347/50 (2013). 17 Parliament/Council Regulation 1296/2013/EU on a European Union Programme for Employment and Social Innovation (“EaSI”) and amending Decision No 283/2010/EU establishing a European Progress Microfinance Facility for employment and social inclusion, O.J. L 347/238 (2013).

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References Copeland, P., & ter Haar, B. (2015). The coordinated Governance of EU social security policy. In F. Pennings & G. Vonk (Eds.), Research handbook on European social security law. Cheltenham: Edward Elgar. De Witte, B. (2001). Chameleonic member states: Differentiation by means of partial and parallel international agreements. In B. de Witte, D. Hanf, & E. Vos (Eds.), The many faces of differentiation in EU law. Antwerp: Intersentia.

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Article 48 [Social Security] (ex-Article 42 TEC) The European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure,4 adopt such measures in the field of social security as are necessary to provide freedom of movement for workers;2 to this end, they shall make arrangements to secure for employed and selfemployed migrant workers and their dependants: (a) aggregation,12 for the purpose of acquiring and retaining the right to benefit and of calculating the amount of benefit, of all periods taken into account under the laws of the several countries; (b) payment of benefits to persons resident in the territories of Member States.7 Where a member of the Council declares that a draft legislative act referred to in the first subparagraph would affect important aspects of its social security system, including its scope, cost or financial structure, or would affect the financial balance of that system, it may request that the matter be referred to the European Council. In that case, the ordinary legislative procedure shall be suspended. After discussion, the European Council shall, within four months of this suspension, either: (a) refer the draft back to the Council, which shall terminate the suspension of the ordinary legislative procedure; or (b) take no action or request the Commission to submit a new proposal; in that case, the act originally proposed shall be deemed not to have been adopted.4

Contents 1. Coordination of National Social Security Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Consistency with Union Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3. Coordination Through Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4. Social Security and Social Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 List of Cases References

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Coordination of National Social Security Systems

Social security systems are contributory benefit schemes that are considered to be part of a State’s welfare system. They are insurance-based programmes that require the insured to pay premiums and enable them to claim benefits when the insured risk (e.g. retirement, sickness, involuntary unemployment) materialises. #

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As White has explained, the need to coordinate the social security systems of the MS has emerged from the fact that two principal features of such systems would constitute obstacles to the free movement of persons if such coordination had not taken place. These features are, first, nationality and residence requirements (i.e. for the claimant to be entitled to social security, (s)he must be a national of the State in question and be a resident there), and, second, the territorial nature of many aspects of social security entitlement (e.g. when social security benefits are only payable within the territory of the State in question or when the rules surrounding entitlement to them are tied to a particular territory, e.g. a requirement that the claimant must have been resident and insured under the law of the awarding State for a minimum number of years).1 In situations involving persons that have moved between two or more MS, the divergence in national social security rules is problematic, as the simultaneous existence of—so-called—residence-based systems (i.e. those that require all those resident in the territory of the said MS to pay social security contributions and make social security benefits only available to residents) and activity-based systems (i.e. those that make the requirement to contribute conditional upon working in the said State and, thus, only persons working in that MS can claim social security benefits) may cause problems in certain situations if there are no rules determining which one of the two systems should apply. Two examples will be given here to explain the problems that emerge in such a case. First, where a person works in a MS that has an activity-based social security system whilst (s)he resides in a residence-based system, (s)he will have to pay social security contributions in both MS, this, obviously, making it too expensive for him/her to move. Second, where a person works in a MS that has a residence-based system whilst residing in a MS having an activity-based system, (s)he will not be required to pay social security contributions at all, and will thus fall between the stools of the systems, which will mean that if (s)he falls on hard times, (s)he will not be able to claim social security benefits. The remedy to both of the above situations is to have rules that provide that everyone must be covered by one social security system and that determine which one system should apply in case a person falls within the jurisdiction of two systems. Accordingly, the EEC Treaty drafters realised that if the freedom of movement of workers was to be achieved, the EEC should provide the rules that would determine which social security system should be applied in case a worker had moved between two MS.

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It is for this reason that the Treaty drafters—on the request of Italy—included within the original EEC Treaty,2 what was—at the time—Article 51 TEEC, which gave the Council the power “to adopt measures in the field of social security as are necessary to provide freedom of movement for workers”; the measures would have to be adopted unanimously,3 in this way ensuring that “[a]ccess to public benefits would remain regulated by national law and/or Community rules that all Member States had voluntarily agreed to.”4 This was later renumbered and amended by the Amsterdam Treaty, and, as Article 42 TEC, it provided that the said measures would (still) be adopted by unanimity, but with the use of the co-decision procedure instead. Meaning, both the EU Parliament and the Council would have to agree on a measure to become law.5 With the Treaty of Lisbon changes, the provision took its current form and numbering. Article 48 TFEU provides that measures aiming to co-ordinate the social security systems of the MS shall be taken by using the ordinary legislative procedure and by qualified majority voting. However—and this is a post-Lisbon innovation—the Article provides for a “brake clause”, according to which when a MS declares that a draft legislative act would affect important aspects of its social security system, it can request that the matter be referred to the European Council and, in that case, the ordinary legislative procedure shall be suspended. It will then be up to the European Council, after discussion and within four months of the suspension, to decide whether it will refer the draft back to the Council, which shall terminate the suspension of the ordinary legislative procedure or whether it will take no action or request the Commission to submit a new proposal, in which case the act originally proposed shall be deemed not to have been adopted. White has also pointed out that the expansion of the coverage of the measures made under this provision has often required the EU legislature to use the reserve power in Article 352 TFEU as the legal base of certain measures in this field.6

2 Of course, as White explains, “[r]ecognition of the problems which arise where workers pay contributions in more than one country is not something first identified by the European Community. Co-ordination provisions were a feature of many bilateral trade treaties in order to protect those moving under the treaties”—White (2004), p. 163. 3 Article 51 TEEC provided: “The Council shall, acting unanimously on a proposal from the Commission, adopt such measures in the field of social security as are necessary to provide freedom of movement for workers; to this end, it shall make arrangements to secure for migrant workers and their dependants: (a) aggregation, for the purpose of acquiring and retaining the right to benefit, of all periods taken into account under the laws of the several countries; (b) payment of benefits to persons resident in the territories of Member States.” 4 Van der Mei (2003), p. 11. 5 Article 42 TEC provided: “The Council shall, acting in accordance with the procedure referred to in Article 251, adopt such measures in the field of social security as are necessary to provide freedom of movement for workers; to this end, it shall make arrangements to secure for migrant workers and their dependants: (a) aggregation, for the purpose of acquiring and retaining the right to benefit and of calculating the amount of benefit, of all periods taken into account under the laws of the several countries; (b) payment of benefits to persons resident in the territories of Member States. The Council shall act unanimously throughout the procedure referred to in Article 251.” 6 White (2004), pp. 166–167.

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Consistency with Union Law

Similar to taxation, healthcare, and immigration, social security is a matter that falls within national competence, as it is considered to be central to national sovereignty.7 Accordingly, each MS can have its own social security rules and is free to determine the objectives, means, and content of its welfare policies, and this has led to great differences in the approach to social security and the level of benefits paid across the MS. However, although MS are free to make their own social security regulations, they must ensure that the application of these regulations does not contradict EU law, and, thus, must not lead to obstacles to, inter alia, the free movement of workers. As the Court pointed out in Petroni, “[t]he aim of Articles 48 to 51 would not be attained if, as a consequence of the exercise of their right to freedom of movement, workers were to lose advantages in the field of social security guaranteed to them in any event by the laws of a single Member State”.8 As explained earlier (➔ para 2), the existence of diverse social security rules may give rise to obstacles to the free movement of workers since a person who exercises free movement rights may be found to be in a worse position than he would have been if he had stayed in a single MS. Further, although national social security rules working on their own may be compatible with EU law, the simultaneous application of two or more such systems in a situation may lead to a breach of EU law and in particular, in situations involving workers, to a breach of Article 45 TFEU. Accordingly, the aim of EU legislation made in this context is not to replace national law or to harmonise it by making MS social security systems the same or, at least, similar, but, rather, merely to coordinate it.9 As the Court noted in Pinna, “Article 51 of the Treaty provides for the co-ordination, not the harmonization, of the legislation of the Member States. As a result, Article 51 leaves in being differences between the Member States’ social security systems and, consequently, in the rights of persons working in the Member States. It follows that substantive and procedural differences between the social security systems of individual Member States, and hence in the rights of persons working in the Member States, are unaffected by Article 51 of the Treaty.”10

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For more on welfare policies “as a remaining stronghold of the sovereign nation-state against the influence of EU law and policy” see Martinesen (2013), p. 54. For an explanation of the rationale behind the decision of the Treaty drafters not to include provisions giving competence to the EU to establish a “European welfare state” see Van der Mei (2003), pp. 10–11. 8 Case 24/75, Petroni (ECJ 21 October 1975) para 13. 9 Lipstein (1976), p. 56. 10 Case 41/84, Pinna (ECJ 15 January 1986) para 24–25.

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Coordination Through Regulations

However, what is co-ordination? According to White, co-ordination is “the process by which differences in the various national social security systems are accommodated. Adjustments are made so that the systems can work together, rather than with the objective of making them more similar. It is a process which regulates transnational questions which arise when a person become [sic] subject to more than one social security system.”11 Thus, co-ordinating the social security systems of the MS does not mean that the EU will require a change in the provision or the rules made under those systems and, thus, it will not lead to a raising or a lowering of the standard of social protection in the MS; rather, it means that the various systems can continue to co-exist, but there should be rules regulating this co-existence in cross-border situations by ensuring that the exercise of free movement rights does not lead to a disadvantage for those moving. The first social security Regulation (Regulation 3/58) and its accompanying implementing Regulation (Regulation 4/58) were, respectively, the third and fourth Regulations made by the EEC.12 These original Regulations were replaced by Regulation 1408/71 and its implementing Regulation 574/72.13 The Regulations, which are currently applicable (since 1 May 2010), are Regulation 883/2004 and its implementing Regulation 987/2009,14 which have “substantially reformed” the previous regime.15 It should be noted that each of the above instruments was amended a number of times. The personal scope of the regime has been broadened through the years and for quite some time now it is not confined to “workers”. Whilst in 1982, it was extended to other economically active MS nationals, with the latest Regulation (Regulation 883/2004), it has been extended to all Union citizens (irrespective of whether they are economically active). Accordingly, at present, Regulation 883/2004 covers “nationals of a Member State, stateless persons and refuges residing in a Member State who are or have been subject to the legislation of one or more Member States, as well as to the members of their families and to their survivors” (Article 2 of

11

White (2004), p. 165 (emphasis added). Council Regulation No 1 determining the languages to be used by the European Economic Community, O.J. L 17/385 (1958). 13 Council Regulation 1408/71/EEC on the application of social security schemes to employed persons and their families moving within the Community, O.J. L 149/2 (1971) and Council Regulation 574/72/EEC fixing the procedure for implementing Regulation 1408/71 on the application of social security schemes to employed to employed persons and their families moving within the Community, O.J. L 74/1 (1972). 14 Parliament/Council Regulation 883/2004/EC on the application of social security schemes to employed persons, to self-employed persons, and to members of their families moving within the Community, O.J. L 166/1 (2004) and Parliament/Council Regulation 987/2009 laying down the procedure for implementing Regulation 883/2004 on the coordination of social security systems, O.J. L 284/1 (2009). 15 Martinsen (2005), p. 89. 12

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Regulation 883/2004/EC). Moreover, the rules apply to nationals of Iceland, Liechtenstein and Norway, as well as to Swiss nationals. In addition, Regulation 1231/201016 has extended the application of Regulation 883/2004 and its implementing Regulation to “nationals of third countries who are not already covered by those provisions solely on the ground of their nationality, as well as to members of their families and their survivors, provided they are legally resident in the territory of a Member State and are in a situation which is not confined in all respects within a single Member State.”17 Similarly, the material scope of the more recent Regulation has also been updated and extended, and it now covers: sickness benefits, maternity and equivalent paternity benefits, invalidity benefits, old-age benefits, survivors’ benefits, benefits in respect of accidents at work and occupational diseases, death grants, unemployment benefits, pre-retirement benefits, and family benefits (Article 3 of Regulation 883/2004/EC).18 Moreover, it should be noted that the Regulation only applies in situations where there is a cross-border element. Accordingly, when a person has been subject to the social security legislation of only one MS (namely, that of which (s)he holds the nationality) and in whose territory (s)he has lived and worked, the situation is purely internal to a MS and, thus, the Regulation does not apply.19 The basis of the Regulation (as was that of its predecessors) is that it is the law of only one MS that will apply to a single social security claim, and the Regulation determines both which country has jurisdiction in any given claim and which law is applied (Article 11 of Regulation 883/2004/EC). The ECJ has stressed the mandatory nature of the rules laid down by secondary legislation in this context, for determining which MS is the competent State,20 and has pointed out that the aim of the legislation is to avoid any unnecessary duplication of contributions and liabilities or inadvertent exclusion from social security protection.21 The Regulation addresses the issues that arise because of the existence of different national social security systems by adopting four main principles: the principle of lex loci laboris, the principle of equality of treatment, the principle of aggregation, and the principle of exportability. The Regulation makes the place of work the factor that determines which social security system will apply (lex loci laboris) (Article 11.3 (a) of Regulation 883/ 2004/EC). Hence, if, for instance, a person works in MS (A) and resides in MS (B), it is the rules of MS (A) that will normally apply and it is the authorities of that MS

16 Article 1 of Parliament/Council Regulation 1231/2010/EU extending Regulation 883/2004 and Regulation 987/2009 to nationals of third countries who are not already covered by those provisions solely on the ground of their nationality, O.J. L 344/1 (2010). 17 For more on the personal scope of the Regulation see Pennings (2005), pp. 244–247. 18 For more on the material scope of the Regulation see Pennings (2005), pp. 247–253. 19 Case C-153/91, Petit (ECJ 22 September 92) para 8–10. 20 Case 60/85, Luitjen (ECJ 10 July 1986) para 12–14. 21 Case 50/75, Massonet (ECJ 25 November 1975) para 15.

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that will have jurisdiction.22 In the absence of employment, the State of residence has jurisdiction and the legislation of that State will apply to determine entitlement to social security benefits. There are special rules (for posted workers and for selfemployed persons who work for a period of time not exceeding 24 months in another MS) (Article 12 of Regulation 883/2004/EC),23 and there are also rules applicable to persons who normally pursue an activity in two or more MS (Article 13 of Regulation 883/2004/EC). The Regulation also provides that the principle of equality of treatment also applies in this context and, thus, prohibits national legislation that reserves certain benefits for a State’s own nationals or long-term residents (Article 4 of Regulation 883/2004/EC).24 As in the field of free movement in general, this clearly prohibits both direct and indirect discrimination on the ground of nationality. Moreover, to prevent persons who move between MS from suffering a loss in social security benefits and/or pensions because of the said move, the Regulation provides for aggregation of periods of insurance or residence, which means that social security rights acquired in one State are added to rights earned by working or residing in another State (Article 6 of Regulation 883/2004/EC). As White rightly explains, the objective of this principle is “that the impact of living and working in several participating countries on social security entitlements is minimized”.25 Moreover, to prevent the imposition of an improper burden on the host MS— which would emerge in case it had to pay a benefit based on many years of contributions to the social security scheme of (an)other MS(s)—the principle of proraterisation has been adopted, which provides that participating countries pay long-term benefits in proportion to the respective periods of insurance in each affected country, whilst short-term benefits provision is made for reimbursement of paid benefits (Article 55 of Regulation 883/2004/EC). Finally, the Regulation provides for the principle of exportability, according to which social security benefits must be paid throughout the Union and MS are prohibited from reserving the payment of benefits to persons who reside in their territory. However, this is not an absolute principle, and the availability of benefits in kind can still be limited to national territory without this being considered a breach of EU law.26 The Regulation (and its predecessors) has been interpreted by the Court of Justice in a long line of cases but due to limited space, it is not possible to analyse the Court’s jurisprudence here, as that would require a book on its own.27

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Social Security and Social Assistance

When discussing the core provision governing the free movement of workers (➔ Article 45 TFEU para 46), we saw that secondary legislation requires the host State to grant to nationals of other MS the same social assistance benefits as it grants to its own nationals who are similarly situated. However, the Treaty drafters have considered it necessary to distinguish between social assistance and social security benefits, by having a separate legal basis for measures seeking to coordinate the social security systems of the MS (Article 48 TFEU). It is important, in practice, to be able to distinguish between social security and social assistance benefits because the measures adopted based on (what is now) Article 48 TFEU apply only to social security benefits, and exclude social assistance benefits from their material scope (Article 3.5 of Regulation 883/ 2004/EC). A number of definitions for these two different types of welfare provision have been provided by academics. According to Martinsen, “security from social risks is offered by public schemes through which specific categories of persons are, compulsory [sic] or voluntarily, insured against defined social risks. The schemes are generally financed by collectively paid contributions. The beneficiary of social security schemes is entitled to benefits according to a legally defined position, which mirrors the individual contributions paid. The level of benefits is likewise legally specified and is independent of income.”28 Conversely, “[s]ocial assistance is usually granted on a discretionary basis, within which a means test is likely to play a part” and they are non-contributory but financed by tax revenues.29 Similarly, the ECJ has held that a benefit is a social security benefit “insofar as it is granted, without any individual and discretionary assessment of personal needs, to recipients on the basis of a legally defined position and relates to one of the risks expressly listed in Article 4(1) of Regulation No 1408/71”,30 but it did not provide a definition for social assistance benefits. The distinction between social security and social assistance benefits is not easy to draw in practice and this has been obvious in the Court’s case law. For instance, in the Hughes case,31 although the UK argued that a cash-based means-tested noncontributory weekly benefit designed to top-up the earnings of families in low-paid work was social assistance, the ECJ found that this was a social security benefit falling within the scope of the social security Regulation that was applicable at the time (i.e. Regulation 1408/71). In doing so, the court pointed out that the need to satisfy an individual assessment of needs did not preclude a benefit from being

28

Martinsen (2005), p. 91. See also, Van der Mei (2002), pp. 552–553. Martinsen (2005), p. 92. 30 Case C-215/99, Jauch (ECJ 8 March 2001) para 25. 31 Case C-78/91, Hughes (ECJ 16 July 1992). 29

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social security, since the criteria applied were objective, legally defined criteria which, if met, conferred an entitlement to the benefit.32 White has explained that although the distinction between social security and social assistance used to be more clear-cut some years ago, in the last few decades it has become quite blurred as entitlement to social assistance has now become more of a matter of right rather than discretion, and as a result of the fact that the burden of funding social insurance has resulted in moves to require a test based on means even for some social security benefits.33

List of Cases ECJ

ECJ 01.03.1973, 73/72, Betzinger ECR 283 [cit. in para 10] ECJ 21.10.1975, 24/75, Petroni ECR 1149 [cit. in para 5] ECJ 25.11.1975, 50/75, Massonet ECR 1473 [cit. in para 9] ECJ 15.01.1986, 41/84, Pinna ECR 1 [cit. in para 5] ECJ 10.07.1986, 60/85, Luitjen ECR 2365 [cit. in para 9] ECJ 16.07.1992, C-78/91, Hughes ECR I-4839 [cit. in para 15] ECJ 22.09.1992, C-153/91, Petit ECR I-4973 [cit. in para 8] ECJ 08.03.2001, C-215/99, Jauch ECR I-1901 [cit. in para 14]

References Fuchs, M., & Cornelissen, R. (Eds.). (2015). EU social security law: A commentary on EU regulations 883/2004 and 987/2009. Oxford: Hart. Lipstein, K. (1976). Conflicts of laws in matters of social security under the EEC treaty. In F. G. Jacobs (Ed.), European law and the individual. Amsterdam: North Holland Publishing Company. Martinesen, D. S. (2013). Welfare states and social Europe. In U. Neergaard, E. Szyszczak, J. Willem van de Gronden, & M. Krajewski (Eds.), Social services of general interest in the EU. The Hague: TMC Asser Press Springer. Martinsen, D. S. (2005). Social security regulation in the EU: The de-territorialization of welfare? In G. de Búrca (Ed.), EU law and the welfare state: In search of solidarity. Oxford: OUP. Paju, J. (2017). The European Union and social security law. Oxford: Hart. Pennings, F. (2005). Inclusion and exclusion of persons and benefits in the new co-ordination regulation. In M. Dougan & E. Spaventa (Eds.), Social welfare and EU law: Essay in European law. Oxford: Hart. Pennings, F. (2015). European social security law. Antwerp: Intersentia.

32 For more on the distinction between social security and social assistance, see White (2011), pp. 314–316. 33 White (2004), p. 168. See, also, Van der Mei (2002), p. 553. For comments on the distinction between social security and social assistance, see Martinsen (2005), pp. 91–92.

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Pennings, F., & Vonk, G. (Eds.). (2015). Research handbook on European social security law. Cheltenham: Edward Elgar. Van der Mei, A. P. (2002). Regulation 1408/71 and coordination of special non-contributory benefit schemes. Eur Law Rev, 27(5), 551. Van der Mei, A. P. (2003). Free movement of persons within the European Community: Crossborder access to public benefits. Oxford: Hart. White, R. C. A. (2004). Workers, establishment, and services in the European Union. Oxford: OUP. White, R. C. A. (2011). Social solidarity and social security. In A. Arnull, C. Barnard, M. Dougan, & E. Spaventa (Eds.), A constitutional order of states? Essays in EU law in Honour of Alan Dashwood. Oxford: Hart.

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Chapter 2 Right of Establishment

Article 49 [Freedom of Establishment] (ex-Article 43 TEC) Within the framework of the provisions set out below, restrictions on the freedom of establishment1 of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State. Freedom of establishment shall include the right to take up and pursue activities as self-employed persons20 and to set up and manage undertakings,21 in particular companies26 or firms within the meaning of the second paragraph of Article 54, under the conditions laid down for its own nationals by the law of the country.

Contents 1. 2. 3. 4. 5. 6.

The Concept of “Establishment” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Direct Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Beyond “Discrimination” to “Market Access” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Imperative Requirements in the General Interest: The Notion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Natural Persons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Companies or Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.1. The Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.2. Primary Establishment and Its Transfer in the Case of a Company . . . . . . . . . . . . . . . . 29 6.3. Secondary Establishment for Companies and Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 List of Cases References

1.

The Concept of “Establishment”

Article 49 TFEU is the first Article in Part 3, Title IV, Chapter 2 of the TFEU, in which Article 49–55 TFEU cover “establishment”. The following Chapter, Chapter 3 (Article 56–62 TFEU), covers “services”. The CJEU has sought to keep a strict line between the two Chapters. “Establishment” is about the operator of an activity establishing a “permanent”, in the sense of indefinite or fixed, presence in another MS. According to the CJEU, the essence of Article 49 TFEU is “the actual pursuit of an economic activity through a fixed establishment in another Member State for an indefinite period.”1 1 As held in Case C-221/89, R v Secretary of State for Transport, ex parte Factortame (Factortame II) (ECJ 25 July 1991) para 20. As put in Case C-55/94, Reinhard Gebhard v Consiglio dell’Ordine

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This can be by physically moving from one state to another in case of a natural person. This may be to practice a profession or any other economic activity, and may even be to provide services, but the feature of more or less stable and on-going presence is important, for this is what brings the provisions of Chapter 2 on establishment into play (➔ para 20 et seq.). For a legal person, such as a company, this would mean establishing a presence of a permanent kind through a subsidiary, agency or branch located in an MS other than that in which the company is formed (➔ para 26 et seq.). While the Court of Justice has applied more or less the same principles both to “establishment” and “services”, Article 57 TFEU makes it clear that the freedom to provide services in another MS on a temporary basis is without prejudice to the provision of Chapter 2 on establishment. The two Chapters are in principle mutually exclusive. The dividing line between “temporary” and “permanent” is important because the Court of Justice can take a different view of restrictions depending on the nature and duration of the “presence”. For example, a restriction may be more or less proportionate to its stated objective (and therefore may be held to be in conformity with the Treaty or otherwise not so) depending on whether there is found on the facts to be “establishment”, which can justify stronger restrictions and control, or mere temporary presence, which should not attract the same degree of control and restriction as establishment. The Services Directive (Directive 2006/123)2 defines establishment, for the purposes of its scope and effect, in Article 4.5 as “the actual pursuit of an economic activity [. . .] by the provider for an indefinite period and through a stable infrastructure from where the business of providing services is actually carried out.” In 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 (ECJ 30 January 2018) para 110, the Court of Justice held that the provisions of Chapter III of Directive 2006/123, on freedom of establishment of providers, must be interpreted as meaning that they also apply to a situation where all the relevant elements are confined to a single Member State.

2. 6

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Direct Effect

The provisions following Article 49 TFEU were to be indicative and constructive of a “framework” within which the restrictions were to be prohibited. This was to involve the drafting of a “general programme” as well as a set of Directives aimed degli Avvocati e Procuratori di Milano (ECJ 30 November 1995) para 25 the concept of establishment within the meaning of the Treaty is therefore a very broad one, allowing a Community 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 Community in the sphere of activities as self-employed persons (see, to this effect, Case 2/74, Reyners v Belgium (ECJ 21 June 1974) para 21). 2 O.J. L 376/36 (2006).

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at the establishment of the freedom of establishment. In fact, progress was slow in coming. The Court of Justice felt the need to step in. Article 49 TFEU was held by the Court of Justice to have “direct effect”. Since the Lisbon Treaty, the binding EUCHFR recognises in Article 16 the freedom to conduct a business under the Union law and national laws and practices. In Reyners v Belgium,3 it was argued by the Belgian government that Article 49 TFEU merely laid down a principle yet to be developed through secondary legislation, and that it was not open to the Court to substitute its discretion for that of the European legislator by seeking to give it substantive positive content. This would distort the allocation of powers under the Treaty. Famously, the Court of Justice ruled that “the rule on equal treatment with nationals is one of the fundamental legal provisions of the Community. As a reference to a set of provisions effectively applied by the country of establishment to its own nationals, this rule is, by its essence, capable of being directly invoked by nationals of all the other Member States. In laying down that freedom of establishment shall be attained at the end of the transitional period, Article [49] thus imposes an obligation to attain a precise result, the fulfilment of which had to be made easier by, but not made dependant on, the implementation of a programme of progressive measures. The fact that this progression has not been adhered to leaves the obligation itself intact beyond the end of the transitional period provided for its fulfilment.”4 This meant that the fact that the European legislator had failed to provide by directive for the pursuit of a certain activity (in this case the practice of law) in other MS or the fact that certain of the directives issued had not fully attained the objective of non-discrimination were not obstacles to giving direct effect to Article 49 TFEU. The Court held in particular that “[a]fter the expiry of the transitional period the directives provided for by the Chapter on the right of establishment have become superfluous with regard to implementing the rule on nationality, since this is henceforth sanctioned by the Treaty itself with direct effect.”5 The rule on equal treatment with nationals, as laid down in Article 49.2 TFEU was in this way held to be directly effective, so that an individual was able to enforce a Treaty provision directly through the national court of an MS. Direct effect means that Article 49 can be enforced in the national courts, that is, the courts of the MS, by an individual against an MS or any “emanation of the State”. In other words, while the provision is framed in terms of a prohibition against the making by an MS of restrictions on the freedom of establishment, this was interpreted by the Court of Justice as conferring a freedom and enforceable right (or more accurately a set of rights) on “individuals”, whether these be natural persons or “legal” persons such as companies. This set of rights includes the right to take up and pursue activities in another MS as self-employed persons, to set up agencies, branches or subsidiaries, and to

3

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set up and manage undertakings, in particular companies or firms as defined in Article 54 TFEU. Although the Charter of Fundamental Rights, now binding on the institutions of the Union and on the MS when implementing Union law, also recognises the right in Article 16 in broad terms the extent of the right also depends on the actual terms and conditions as set out in the TFEU and Union measures implementing the exercise of the right as well as on the case law of the Court of Justice. The position, under the current TEU and TFEU, is that the internal market aim of opening the internal borders to the free flow of “persons” (as well as goods, services and capital) has been achieved to a considerable degree, with a significant number of directives put in place. However, it has been pointed out that “differences in fiscal and social laws and conditions are not considered in the Treaty as being distortions of competition. This is because the Treaty enables the EU to adopt common rules on direct taxation and minimum rules on social policy, but without making them necessary conditions for the internal market. Therefore, these common rules are usually subject to unanimity in the Council and they are minimal. As a result, MS retain almost complete freedom in those fields.”6 As Piris observed, this creates something of an imbalance in the internal market, and a tension that shows itself not least in the difficulties that there have been with harmonising the “company” laws of the MS when it comes to seeking to take account of the socalled social responsibility of companies and especially questions of employee involvement in corporate decision-making.7 It has also proved an obstacle in the drive for better corporate governance.

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Beyond “Discrimination” to “Market Access”

The Court of Justice has interpreted Article 49 TFEU as going beyond the prohibition of discrimination, and has regarded all restrictions on the freedom as being suspect. Of course, the element of discrimination and its prohibition has often featured strongly in the case law. Moreover, a national who has obtained a qualification in another MS but wishes to use it in his or her home State can rely on Article 49 TFEU to be permitted to do so by the home state regulators. The Court of Justice has applied an interpretation that actively encourages and supports free movement to also obtain qualifications in other MS that will be of use upon return to one’s home state, overcoming restriction and limitation, as well as discrimination itself. However, the Court has also ruled that there is a right of “access” (to the market in other MS), whether any restrictive rule is applied without discrimination in that it applies equally to nationals of the relevant State as well as to

6 7

Piris (2010), p. 334. Piris (2010), p. 334.

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“incoming” nationals of other MS.8 Under this broader “access to the market” interpretation of the substance and effect of Article 49 TFEU, “national measures liable to hinder or make less attractive the exercise”9 of the fundamental freedom of establishment will be regarded as a violation of the Treaty, unless they are justified by an “imperative requirement” appropriate to achieving the purpose pursued by those rules, proportionate (no more than is necessary) in its manner of achieving that purpose, and applied in a non-discriminatory manner. In sum, any obstacle10 whose restrictive effects on freedom of establishment are not too uncertain and indirect is in principle prohibited in the absence of justification by so–called imperative requirements in the general interest and where these are suitable for purpose and proportionate to achieving that public purpose.11

4.

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Imperative Requirements in the General Interest: The Notion

Article 52 TFEU provides for ‘special treatment for foreign nationals’ on grounds of public policy, public security or public health. Moreover, as we saw above, an MS is permitted to impose a restriction provided this falls within the scope of one or more “imperative requirements imposed in the general interest”. While the Court may well find that a host state rule is, prima facie at least, in violation of the principle (as being “liable” to impede, etc.), it will then go on to ask whether the breach may be justified by reference to some imperative requirement in the public interest advanced by the MS concerned as a proportionate and nondiscriminatory response to a legitimate interest that requires protection. These have been invoked by MS to justify the imposition by them of language requirements, social protection rules, rules aimed at protecting industrial and commercial property, or educational standards. This area of the law is becoming more complex all the time.12 However, the onus of proof is on the MS to show that an imperative requirement as recognised by European law (including the case law of the Court) exists and that 8 See for example, Cases 154–155/87, INASTI v Wolf and others (ECJ 7 July 1988); Case 143/87, Stanton v INASTI (ECJ 7 July 1988); Case C-55/94, Gebhard (ECJ 30 November 1995); Case C53/95, INASTI v Kemmler (ECJ 15 February 1996). 9 See Case C-55/94, Gebhard (ECJ 30 November 1995) para 37; Case C-424/97, Haim (ECJ 4 July 2000) para 57 (language requirement for dentists); Case C-65/05, Commission v. Greece (ECJ 26 October 2006) para 50–52. 10 The Court has sometimes categorically ruled out a de minimis approach while at other times it has seemingly entertained it. See Case C-498/10, X (ECJ 18 October 2012) para 30 for an example of the former approach. See the ‘Sunday trading’ cases, Case C-418/93 et al., Semeraro Casa Uno Srl et al. v. Sindaco del Comune di Erbusco et al. 11 See Case C-55/94, Gebhard (ECJ 30 November 1995) para 37. 12 See, for example, Case C-565/08, Commission v Italy (ECJ 29 March 2011) where the Court of Justice introduced competition notions in deciding whether a national rule constituted a restriction.

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the other elements are also fulfilled (namely, non-discrimination, proportionality). This has not proved an easy task, whether in the context of natural persons or of legal persons. There are many cases where an MS sought to rely on this formula to retain and apply restrictive rules, but failed to satisfy the burden of proof required in the face of a liberalising Court of Justice.13 Nevertheless, the Court of Justice has been prepared to entertain a wide range of possible justifications as brought forward by the MS. These include protection of the effectiveness of fiscal supervision; the protection of creditors, shareholders, employees and others; and the protection of fairness in commercial transactions. The principle of proportionality operates as a safeguard against abusive recourse to such justifications.14 The Court has also shown itself to be willing to apply or allow MS law to apply the notion of “abuse of right”,15 which from the perspective of the EU legal order dictates that a Treaty right may not be “abused”. However, any rule that prevents the very exercise of the right and attacks its very essence will be hard for an MS to justify. It is most likely that such a rule would fail at least on the principle of proportionality.16

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Natural Persons

The prohibition of paragraph 1 of Article 49 TFEU is clearly the key provision applicable to natural persons wishing to take up self-employment in another MS. It offers the basis for a “freedom/right of access approach” to the interpretation and application of the Article, side by side with an “equal treatment/non-discrimination approach”. Then by paragraph 2 of Article 49 TFEU freedom of establishment is stated to 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 (as defined in Article 54 TFEU), under the same conditions as laid down for its own nationals by the law of the country where such establishment is effected (subject to the Treaty provisions regarding capital). Therefore, they have the right to set up and manage undertakings, including companies or firms in any MS of their choice as well as the right to set up agencies or branches in an MS other than that of their original or “primary” establishment, as a “secondary” establishment. As regards self-employment, in the Gebhard case, following the ruling in Reyners v Belgium, the Court of Justice put it like this: “The concept of establishment within the meaning of the Treaty is [. . .] a very broad one, allowing a [Union 13

See generally for example, Hansen (2002), Jarass (2002) and O’Leary and Fernandez-Martin (2002). 14 See Case C-411/03, SEVIC Systems (ECJ 13 December 2005) para 30. 15 See for example, de la Feria and Vogenauer (2011), Cerioni (2010) and de la Feria (2008). 16 See Case C-212/97 Centros (ECJ 9 March 1999).

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Member State] 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 [Union] in the sphere of activities as self-employed persons.”17 The conditions remain those of permanent presence and the carrying on of a genuine economic activity in the place of secondary establishment.18 Breaking the right down into component rights, the composite right of establishment for individuals includes the rights of departure (from the home State),19 entry (into the host State), and residence (in the host State).20 There is the right to access the host State, and then there applies the prohibition against the host State treating the person differently from nationals as to the terms and conditions of self-employment or generally the exercise of the activity. This latter principle of “non-discrimination” is of most use in the context of access to, or the exercise of, the activity concerned. It can be applied to dictate the nonapplicability (at least without justification) of host State rules ranging from residence requirements applicable in law or in fact to non-nationals as well as to nationals of the Member States concerned,21 to rules on name transliteration,22 with increasing reference being made both by AGs of the Court and the Court of Justice itself to fundamental rights, as protected primarily by the EUCFR.23 The Court of Justice has held that the right to equal treatment as nationals extends to the enjoyment of the same “social advantages” (such as access to housing, or rental property),24 although this application of the principle is often the 17

Case C-55/94, Gebhard (ECJ 30 November 1995) para 25. See Case C-196/04, Cadbury Schweppes (ECJ 12 September 2006) para 54, where the Court held: “Having regard to that objective of integration in the host Member State, the concept of establishment within the meaning of the Treaty provisions on freedom of establishment involves the actual pursuit of an economic activity through a fixed establishment in that State for an indefinite period [see Case C-221/89, Factortame and Others (ECJ 25 July 1991) para 20, and Case C-246/89, Commission v United Kingdom (ECJ 4 October 1991) para 21]. Consequently, it presupposes actual establishment of the company concerned in the host Member State and the pursuit of genuine economic activity there.” 19 While there is no effect of change of nationality in the case of natural person, in a company context this can translate into an attempt by a company to change its primary establishment with the effect in particular that the national law applicable to the company changes but without the winding up of the company under the law under which it was formed. See below. 20 See Parliament/Council 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, O.J. L 158/77 (2004), which spells out these rights as inherent in Article 49. 21 Case C-162/99, Commission v Italy (ECJ 18 January 2001); Case C-203/98, Commission v. Belgium (ECJ 8 July 1999). 22 See Case C-168/91, Christos Konstantinidis v Stadt Altensteig (ECJ 30 March 1993), concerning the writing in the Roman alphabet of the (transliterated) Greek name that the case bears. 23 See for example, the approach taken in Case C-168/91, Christos Konstantinidis v Stadt Altensteig (Opinion of AG Jacobs of 9 December 1992) para 46. 24 For example, Case 63/86, Commission v Italy (ECJ 14 January 1988). 18

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subject of criticism by some MS. It25 has been held to extend to tax treatment and in particular to tax “advantages”, while MS sometimes seek to justify restrictive (albeit non-discriminatory) rules on the ground that they are justified by the sovereign right to protect fiscal imperatives.

6.

Companies or Firms

6.1. The Right

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27

28

Article 54 TFEU provides in essence that profit-making companies or firms formed under the law of an MS and having their registered office, central administration or principal place of business within the Union shall be treated in the same way as natural persons who are nationals of MS. Any one of the possible national “connecting factors” (registered office, central administration or principal place of business) suffices to vest a company that is lawfully formed under the law of an MS through such connection with a status “equivalent” or akin to that of nationality for a natural person.26 Any discrimination or impediment later suffered in another MS consequent upon such decision, whether direct or indirect, is prohibited, unless that matter is covered by one of the exceptions set out in Article 52 TFEU (public policy, public security and public health), or the relevant case law on imperative requirements in the general interest, for the principle is that of freedom to choose one’s place of establishment.27 Furthermore, the Court’s “access to the market” analysis28 means that the presence of discrimination is not strictly necessary to establish breach of the Treaty, and in principle all restrictions on access should be suspect unless proven to be justified by the State imposing them. Some MS have resisted this approach, seeking to “protect” areas of activity that they regard as particularly sensitive in terms of consumer protection or for other reasons. This can have significant impact in the services sector. One such is the gambling, game of chance and betting sector.29 25

The Court of Justice can also use the “right of access” approach where the relevant tax rule is liable to operate as an obstacle or hindrance to access to an MS. The whole area of establishment and taxation is fraught with technicality and complexity of analysis by the Court of Justice. For a summary treatment of the case law see, for example, Craig and De Bu´rca (2015), pp. 344–358. 26 Case 270/83, Commission v France (ECJ 28 January 1986) para 18; Case C-81/87, Daily Mail (ECJ 27 September 1988) as confirmed in Case C-212/97, Centros Ltd (ECJ 9 March 1999). 27 See Case C-221/89, Factortame and Others (ECJ 25 July 1991), on the issue of discrimination on grounds of nationality or primary establishment. The case law is large. See, for example, Case 3/88, Commission v Italy (ECJ 5 December 1989); Case C-272/91, Commission v Italy (ECJ 26 April 1994). See Craig and De Bu´rca (2015), p. 343. 28 See Case C-255/97, Pfeiffer (ECJ 11 May 1999). 29 There is a large body of case law of the Court of Justice in this area but yet no satisfactory outcome that would secure the balance between the exercise of the freedom of establishment and to provide services on the one hand and the protection of legitimate interests on the other. For a useful rundown on the roots of the dilemma, see, although there have been many developments since, see Littler (2008). Xuereb

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Here, it appears there is no prima facie right to operate across borders based on a licence granted in the enterprise’s home state.

6.2. Primary Establishment and Its Transfer in the Case of a Company

Primary establishment can be exercised by a company by taking a holding in another company in another MS, in the same way as natural person may. However, it is clear that the issues of departure from the home State and entry into a host State involving the attempted transfer of “primary” establishment with a change of applicable (company) law arise in a different way for companies than for natural persons, raising peculiar considerations and demanding apposite and complex solutions. The Court’s case law is case-specific and for a long time did not offer anything approaching a fully comprehensive or coherent answer to the practical problem for a company that wishes to change its status from being a company formed under the law of one MS to that of one governed by the law of another.30 The Court of Justice itself has struggled with the fact that there are two main approaches taken in the MS to this issue in their national law, which includes rules of private international law, and any attempt to harmonise national laws on the issue has not yet borne fruit. The so-called “place of incorporation” (sie`ge statutaire) States tend to a formalistic view that completion of essential formalities in terms of disclosure and siting of the registered office and registration in the appropriate register result in formation of the company under their laws, while the “real seat” (sie`ge re´el) States require as a condition for the formation of a company (as well, at least until recently, for the recognition of a company) that both the registered office and the central administration of the company be in the same State and forever coincide there. Yet, Article 54 TFEU treats the various connecting factors (factors that connect a company to the law of a State) as alternatives. Hence, for EU law it does not matter whether a company’s registered office and its place of central management or principal business are in the same State or not, as long as any one of these is in the Union and the company is lawfully formed according to the law of any one of the MS. However, the question has been whether the Treaty Article and right is limited to the exercise of the right of secondary establishment, or could stretch to a right to change the primary establishment by “transferring out” of one jurisdiction into another without the need for winding up and dissolving and then recreating a new company under the law of the new “home” State. Clearly, a concept of a free internal market and freedom of establishment would point to the ability to engage in such a change of jurisdiction, but the matter has been one of deep contention.

30

See Johnson (2005) and Baert (2015).

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Some of these questions have been clarified by the Court of Justice in recent years. For the Court, a company which is lawfully formed according to the law of a (any) MS cannot have its existence or legal capacity questioned by another MS simply because it could have been formed in its own jurisdiction (or even, in its view, if it “ought” to have been so formed according to its own rules in application of a “sie´ge re´el approach”, which insists on a company having its real seat—its central administration—in that territory being properly formed in that jurisdiction and thereafter retaining the seat in that territory). The Court of Justice interprets Article 49 combined with Article 54 TFEU as meaning that there is free choice of State for primary establishment (jurisdiction of formation) and a duty of loyalty on MS to recognise this freedom as being of the essence of right (so not in principle an abuse of right). Any restriction on this basic freedom is also a restriction on the freedom of secondary establishment if it is brought up by the authorities of another MS as a reason for non-recognition or denial of the exercise of the right of secondary establishment.31 In the absence of other factors, such should be considered an infringement of Article 54 TFEU and of Article 16 EUCFR.32 Yet, the “real seat” approach was actually taken in those EU measures that are sometimes described as true “European” Company Law, namely, the European Economic Interest Grouping (EEIG) Regulation33 and the Regulation laying down a Statute for the European Company (SE).34 Both measures made it obligatory that the location of the registered office and central administration of an EEIG or SE be the same, so following a “real seat” approach, but they both then laid down a mechanism for “transfer of seat”, including with change of applicable law, on certain conditions. In general, the incorporation/real seat dichotomy is not yet resolved, but the Commission that once appeared to be of the opinion that a Fourteenth Company Law Directive could be agreed, later suspended judgment on this. As to “exit” or departure, the Court of Justice has struggled over the years to find a comprehensive set of principles. Even where two “incorporation States” were involved, the Court had held that the relevant Treaty provisions did not give a right of exit from the state of initial incorporation35 and that, since the company was a

31 See Case C-212/97, Centros (ECJ 9 March 1999); Case C-208/00, U¨berseering (ECJ 5 November 2002). See Deakin (1999) and Siems (2002). 32 See Case C-212/97, Centros (ECJ 9 March 1999); Case C-208/00, U¨berseering (ECJ 5 November 2002); Case C-167/01, Inspire Art (ECJ 30 September 2003); Case C-411/03, SEVIC Systems (ECJ 13 December 2005). 33 Council Regulation (EEC) No 2137/85 on the European Economic Interest Grouping (EEIG), O. J. L 199/1 (1985). 34 Council Regulation (EC) No 2157/2001 on the Statute for a European company (SE), O.J. L 294/1 (2001). 35 Although the company involved was not seeking to do this but only to move its place of central administration, which was not a “connecting factor” for incorporation or registration under either UK or the law of the Netherlands. It boiled down to an attempt to transfer the company’s fiscal residence without affecting the place of incorporation.

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creature of (a particular) national law, that law—and that law alone—determined whether there was the right in the particular circumstances.36 In Cartesio,37 the analogy was drawn with natural persons, whose “nationality” depends on the law of the State of nationality, such that it is that law that determines the possibility for and conditions of any change of nationality. With a company formed under a particular national law, the question of its continued existence as a company governed by that original law was held to depend upon the “law of birth” (to pursue the analogy); so held the Court in Cartesio where a Hungarian company sought to move its operational headquarters to Italy but without changing its state of registration or intending there to be a change of governing law. In other words, the plan was that the company would continue to exist as a Hungarian company. The Court held that whether this was possible depended on Hungarian law itself. If Hungarian law required the central management to be in Hungary as long as the company continued to be registered in Hungary, then those were the terms on which the company had been formed and now existed. However, the Court also indicated that if the intention was to effect a change of law this would amount to a “conversion” of the company so that, taking the facts of Cartesio as an example, if Italian law permitted registration of such a company, and no imperative requirements existed for restricting exit on the Hungarian side, Hungary could not insist on the winding up of the company and the company should in principle be permitted to transfer its seat.38 This was the beginning of a more nuanced answer to the question whether a company can move across to another MS “lock, stock and barrel”, leaving one governing law behind and subjecting itself to a new national law that so permits, while avoiding winding up in the former state and simply continuing to exist, but now as a company governed by the law of the new home State. Clearly, this situation raises not only issues of tax avoidance or evasion but of creditor protection, minority shareholder protection, and changes in employee rights. All are matters that could serve as “imperative requirements” justifying proportionate measures by a State that wishes to protect them, in appropriate circumstances.39 In the more recent cases, and in particular in VALE Epitesi,40 the Court of Justice has been prepared to interpret the Treaty provisions in a manner more favourable to the transfer of “primary” establishment without the need for winding up, and on certain conditions supports a right to de-registration in the original home state and re-registration in the new home state.41 This would be the 36

Case 81/87, Daily Mail (ECJ 27 September 1988). Case C-210/06, Cartesio (ECJ 16 December 2008). 38 Case C-210/06, Cartesio (ECJ 16 December 2008) para 113. 39 As is the case where secondary establishment is the issue. See, for example, Case 81/87, Daily Mail (ECJ 27 September 1988); Case C-212/97, Centros (ECJ 9 March 1999); Case C-208/00, U¨berseering (ECJ 5 November 2002); Case C-167/01, Inspire Art (ECJ 30 September 2003). 40 See Case C-378/10, VALE E´pı´te´si Kft. (ECJ 12 July 2012). 41 It is only during the period of transfer that we can really speak of home state (place of initial formation) and host state (state to which the company is migrating), for what is involved is ‘home 37

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case, it held: if there is a clear intention on the part of the company to bring about a change in the system of national law applicable to the company; if this is permitted by the law of the home (exit) state; and, furthermore, if this is somehow provided for by the law of the new home State (entry state). This could happen by transfer of the real seat or any other “factor” that might have “connected” a company to the law of the place of original formation to another MS without the need for a winding up of the company under the original applicable law. In VALE, an Italian company wished to transfer its primary establishment to Hungary. Italian law allowed this, by prior de-registration in Italy, while Hungarian law allowed for “conversion” of companies within Hungary from one form to another. The Court insisted that Hungarian law treat the Italian company in the same manner as a Hungarian company converting to the Hungarian form of public company, and register it under and subject to that law. This would work in some scenarios but by no means in all, and in the view of many commentators, it remained important for the Commission to resume work on a Fourteenth Company Law Directive (a Transfer of Seat/Registered Office Directive).42 In the recent Polbud Case (25 October 2017), the Court of Justice regarded the combined effect of Article 49 TFEU and Article 54 TFEU as in principle conferring on a company formed under Polish law the right of converting into a company incorporated under the law of Luxembourg by transferring its “sie`ge statutaire” to the latter State while maintaining its “sie`ge re´el” in Poland, provided that the conditions laid down by Luxembourg law were satisfied and, in particular, the test adopted by Luxembourg to determine the connection of a company or firm to its national legal order. The “sie`ge statutaire” appears to be winning out.43

6.3. Secondary Establishment for Companies and Firms

38

In the absence of clear abuse of the freedom of establishment,44 the differences between MS laws can, in the absence of harmonisation, be “exploited” by those forming or managing companies. A company can be formed in any MS, which suits the objectives of the founders. Another MS cannot insist that a primary establishment be also established within its jurisdiction for “the company” to then swap’ where the intention is to change a connecting factor (a factor connecting a company to the law applicable to companies formed in that State) and to accept that the applicable law will change due to the loss of the original connection and the establishment of the new one with the ‘new home’ State. 42 See Johnson (2005) and Baert (2015). See European Added Value Assessment, ‘Directive on the cross-border transfer of a company’s registered office 14th Company Law Directive’ An assessment accompanying the European Parliament’s Legislative own-Initiative Reports (rapporteurs Lehne and Regner, MEP), PE 494.460, EAVA 3/2012. 43 ECJ Case C-106/16, Polbud- Wykonawstwo (ECJ 25 October 2017) ECLI:EU:C:2017:804. 44 The doctrine of “abuse of a Union right” would apply. See Case C-212/97, Centros (ECJ 9 March 1999), where the Court made this clear.

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be permitted to operate there. Nor in principle may an MS set out nationality or residence requirements for the individuals involved in such a manner as to interfere with the freedom of establishment of those individuals or of companies from another MS seeking to operate through such individuals, for such would infringe the rights of primary and secondary establishment of such individuals and companies.45 In Centros, Denmark sought to block secondary establishment through a branch in Denmark of a UK company wishing to operate entirely in Denmark because the UK company had been formed in the UK solely to evade the minimum capital requirements required by Danish law for the formation of a private company in Denmark. The Court of Justice held that in the absence of harmonisation, in the absence of proof by the host MS of abuse of right or proven fraud, or other established imperative requirement, the promoters of the company had done no more than sought to (legitimately) exercise their freedom under the Treaty to opt for a primary establishment in one MS while then operating in another. Such does not amount per se to abuse of right.46 The freedom also gives the right to have the status, legal personality and legal capacity of a company lawfully formed in one MS recognised by all other MS irrespective of their adherence domestically and in their national law to the incorporation theory or the real seat theory.47 However, the Court may apply questions of imperative requirements, permitting such States to justify any restrictions by reference to such in the particular case.48

List of Cases ECJ 21.06.1974, 2/74, Reyners v Belgian State, ECLI:EU:C:1974:68 [cit. in para 7, 22] ECJ 28.01.1986, 270/83, Commission v France, ECLI:EU:C:1986:37 [cit. in para 27] ECJ 14.01.1988, 63/86, Commission v Italy, ECLI:EU:C:1988:9 [cit. in para 27] ECJ 07.07.1988, 143/87, Stanton v INASTI, ECLI:EU:C:1988:378 [cit. in para 14] ECJ 07.07.1988, 154 and 155/87, INASTI v Wolf and others, ECLI:EU:C:1988:379 [cit. in para 14] ECJ 27.09.1988, 81/87, Daily Mail, ECLI:EU:C:1988:456 [cit. in para 27] ECJ 05.12.1989, 3/88, Commission v Italy, ECLI:EU:C:1989:606 [cit. in para 27] ECJ 25.07.1991, C-221/89, The Queen v Secretary of State for Transport, ex parte Factortame (Factortame II), ECLI:EU:C:1991:320 [cit. in para 2, 22 27, 38]

45

Case C-221/89, Factortame and Others (ECJ 25 July 1991). Case C-212/97, Centros Ltd (ECJ 9 March 1999). 47 Case C-208/00, U¨berseering (ECJ 5 November 2002). 48 Case C-208/00, U¨berseering (ECJ 5 November 2002). 46

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ECJ 04.10.1991, C-246/89, Commission v United Kingdom, ECLI:EU:C:1991:375 [cit. in para 22] ECJ 30.03.1993, C-168/91, Christos Konstantinidis v Stadt Altensteig, ECLI:EU: C:1993:115 [cit. in para 24] ECJ 26.04.1994, C-272/91, Commission v Italy, ECLI:EU:C:1994:167 [cit. in para 27] ECJ 30.11.1995, C-55/94, Gebhard, ECLI:EU:C:1995:411 [cit. in para 1, 4, 15, 22] ECJ 15.02.1996, C-53/95, INASTI v Kemmler, ECLI:EU:C:1996:58 [cit. in para 14] ECJ 09.03.1999, C-212/97, Centros Ltd., ECLI:EU:C:1999:126 [cit. in para 19, 32] ECJ 11.05.1999, C-255/97, Pfeiffer, ECLI:EU:C:1999:240 [cit. in para 28] ECJ 08.07.1999, C-203/98, Commission v Belgium, ECLI:EU:C:1999:380 [cit. in para 24] ECJ 04.07.2000, C-424/97, Haim, ECLI:EU:C:2000:357 [cit. in para 14] ECJ 18.01.2001, C-162/99, Commission v Italy, ECLI:EU:C:2001:35 [cit. in para 24] ECJ 05.11.2002, C-208/00, U¨berseering, ECLI:EU:C:2002:632 [cit. in para 32, 36, 39] ECJ 30.09.2003, C-167/01, Inspire Art, ECLI:EU:C:2003:512 [cit. in para 32, 36] ECJ 13.12.2005, C-411/03, SEVIC Systems, ECLI:EU:C:2005:762 [cit. in para 18, 32] ECJ 12.09.2006, C-196/04, Cadbury Schweppes, ECLI:EU:C:2006:544 [cit. in para 22] ECJ 26.10.2006, C-65/05, Commission v Greece, ECLI:EU:C:2006:673 [cit. in para 14] ECJ 16.12.2008, C-210/06, Cartesio, ECLI:EU:C:2008:723 [cit. in para 35] ECJ 29.03.2011, C-565/08, Commission v Italy, ECLI:EU:C:2011:188 [cit. in para 16] ECJ 12.07.2012, C-378/10, VALE E´pı´te´si Kft., ECLI:EU:C:2012:440 [cit. in para 37] ECJ 18.10.2012, C-498/10, X, ECLI:EU:C:2012:635 [cit. in para 15] ECJ 30.01.2018, 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, ECLI:EU:C:2018:44 [cit. in para 5] ECJ 25.10.2017, C-106/16, Polbud- Wykonawstwo, ECLI:EU:C:2017:804 [cit. in para 37]

References Baert, A. (2015). Crossing borders: Exploring the need for a fourteenth EU Company Law Directive on the transfer of the registered office. European Business Law Review, 581–612. Cerioni, L. (2010). The ‘Abuse of Right’ in EU company law and EU tax law: A re-reading of the ECJ case-law and the quest for a unitary notion. European Business Law Review, 21(6), 783–813. Craig, P., & De Bu´rca, G. (2015). EU law – Text, cases and materials (6th ed.). Oxford: OUP.

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de la Feria, R. (2008). Prohibition of abuse of (community) law: The creation of a new general principle of EC law through tax. CMLRev., 45(2), 395–441. de la Feria, R., & Vogenauer, S. (Eds.). (2011). Prohibition of abuse of law: A new general principle of EU law. Oxford: Hart Publishing. Deakin, S. (1999). Two types of regulatory competition: Competitive federalism versus reflexive harmonisation. A law and economics perspective on Centros. Cambridge Yearbook of European Legal Studies, 231–260. Hansen, J. L. (2002). Full circle: Is there a difference between the freedom of establishment and the freedom to provide services? In M. Andenæs & W.-H. Roth (Eds.), Services and free movement in EU law (pp. 197–209). Oxford: OUP. Jarass, H. D. (2002). A unified approach to the fundamental freedoms. In M. Andenæs & W.-H. Roth (Eds.), Services and free movement in EU law (pp. 141–162). Oxford: OUP. Johnson, M. (2005). Does Europe still need a Fourteenth Company Law Directive? Hertfordshire Law Journal, 3(2), 18–44. Littler, A. (2008). Regulatory perspectives on the future of interactive gambling in the internal market. ELRev., 211–229. O’Leary, S., & Fernandez-Martin, J. (2002). Judicially created exceptions to the free provision of services. In M. Andenæs & W.-H. Roth (Eds.), Services and free movement in EU law (pp. 163–195). Oxford: OUP. Piris, J.-C. (2010). The Lisbon Treaty - A legal and political analysis. Cambridge: Cambridge University Press. Siems, M. (2002). Convergence, competition, Centros and conflicts of law: European company law in the twenty-first century. ELRev., 27(1), 47–59.

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Article 50 [Implementation of the Freedom of Establishment] (ex-Article 44 TEC) 1. In order to attain freedom of establishment as regards a particular activity,1 the European Parliament and the Council, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, shall act by means of directives.7,8 2. The European Parliament, the Council and the Commission shall carry out the duties devolving upon them under the preceding provisions, in particular: (a) by according, as a general rule, priority treatment to activities where freedom of establishment makes a particularly valuable contribution to the development of production and trade;11 (b) by ensuring close cooperation between the competent authorities in the Member States in order to ascertain the particular situation within the Union of the various activities concerned;12 (c) by abolishing those administrative procedures and practices, whether resulting from national legislation or from agreements previously concluded between Member States, the maintenance of which would form an obstacle to freedom of establishment;13 (d) by ensuring that workers of one Member State employed in the territory of another Member State may remain in that territory for the purpose of taking up activities therein as self-employed persons, where they satisfy the conditions which they would be required to satisfy if they were entering that State at the time when they intended to take up such activities;14 (e) by enabling a national of one Member State to acquire and use land and buildings situated in the territory of another Member State, in so far as this does not conflict with the principles laid down in Article 39(2);15,16 (f) by effecting the progressive abolition of restrictions on freedom of establishment in every branch of activity under consideration, both as regards the conditions for setting up agencies, branches or subsidiaries in the territory of a Member State and as regards the subsidiaries in the territory of a Member State and as regards the conditions governing the entry of personnel belonging to the main establishment into managerial or supervisory posts in such agencies, branches or subsidiaries;17 (g) by coordinating to the necessary extent the safeguards which, for the protection of the interests of members and others, are required by Member States of companies or firms within the meaning of the second paragraph of Article 54 with a view to making such safeguards equivalent throughout the Union;18–90 (h) by satisfying themselves that the conditions of establishment are not distorted by aids granted by Member States.91

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Springer Nature Switzerland AG 2021 H.-J. Blanke, S. Mangiameli (eds.), Treaty on the Functioning of the European Union – A Commentary, Springer Commentaries on International and European Law, https://doi.org/10.1007/978-3-030-43511-0_51

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Contents 1. 2.

Harmonisation, Establishment and Services: Some Difficult Cases . . . . . . . . . . . . . . . . . . . . . . . 1 Article 50.2: Implementation of Article 50.1 by the Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.1. Priority Treatment to Activities Valuable to Production and Trade (lit. a) . . . . . . . . 11 2.2. Close Cooperation Between the Competent National Authorities (lit. b) . . . . . . . . . . 12 2.3. Abolishing Administrative Obstacles (lit. c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.4. Establishment of Workers (lit. d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2.5. Acquisition and Use of Land or Buildings (lit. e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.6. Progressive Abolition of Restrictions (lit. f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.7. Coordinating National Safeguards (lit. g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.7.1. The Terms of Article (50.2 lit. g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2.7.2. The Main Adopted EU Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.7.3. “Core” Company Law Harmonisation: The Holy Grail . . . . . . . . . . . . . . . . . . . . 27 2.7.4. Analysis of the Measures Adopted: The Vision Offered? . . . . . . . . . . . . . . . . . 34 2.7.5. The Future of Company Law and Corporate Governance as Pursued Through Article 50.2 (g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 2.7.6. The Shareholders. Under a Duty? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 2.8. State Aid (lit. h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 List of Cases References

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Harmonisation, Establishment and Services: Some Difficult Cases

Article 50 TFEU empowers the Commission, Council and Parliament to act, by means of directives, with a view to attaining freedom of establishment as regards a “particular activity”. It is the “activity” that is the focus. Hence, the harmonising directives will treat a particular economic activity, such as professional (e.g. medical or legal or architectural) practice, financial service provision and so on. The activity will come under scrutiny, in relation to matters of quality and quality control, regulation, access to the activity such as the conditions attached to access to it and its practice; for example, as to the qualifications required to be licensed to perform it, or as to the standards and rules as to conduct of business if one is to be allowed to engage in it. Such aspects and others as laid down in a jurisdiction can operate as obstacles to establishment in another MS in so far as they differ from one national jurisdiction to another, and to the extent that one MS seeks to insist on its own conditions being satisfied not only by those licenced or authorised by it to carry on a certain activity but also by those so licensed or authorised by the authorities of other MS. MS will of course themselves have regulated the conduct of any particular activity, by setting out conditions for its conduct, and will continue to seek to control the exercise of economic activity of all kinds in the broad public interest. Considerations such as consumer or client protection will have featured in the design of those rules and in the level of enforcement of such. Related matters will include such matters as sanctions or rules on civil or criminal liability, as well as the conditions for the loss of a

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practitioner’s certificate previously granted or barring from the future exercise for the activity. It is the role of harmonisation of laws, which brings into full play the principle of mutual recognition of qualifications, especially through the adoption of directives, that plays a major role in overcoming the need and, therefore, the justification for a MS to invoke its own domestic rules or requirements in regard to persons from another MS. Article 50 TFEU is in essence about freeing up movement through cooperation in the control of economic activity at European level to eliminate or minimise the need and justification for national level legislation (if not control and enforcement). This has facilitated the exercise of the freedom of establishment. However, there is another side to the story. MS can sometimes block the adoption of directives, while challenging the right of a company established (and authorised) to carry out a particular activity or service in another MS from doing so in or to their territory. They might argue also that the Treaty provisions did not confer such a right to do so or that whatever restriction was put in place was justified because of Article 52 TFEU or otherwise under case law of the Court of Justice. For example, gambling is expressly excluded from the scope of the Services Directive and no harmonising directive as yet covers this activity. The Treaty rules on establishment and services therefore apply. MS that take a rigid view of their sovereignty in such matters might argue in favour of the need for primary establishment in their territory to subject such companies to their own rules. This could be seen as breaching the fundamental principle that safeguards the free choice of place of company formation. It also points to lack of mutual recognition of any authorisations granted by the home state and of any regulation already imposed and exercised on such companies by the home state. It could be seen as the very denial of freedom of establishment and the freedom to provide services. A large body of case law has now emerged in the field of gambling services. Yet the Treaty is clear that there are rights that should be regulated by directives issued under the respective chapters on establishment or freedom to provide services. Otherwise, chapter II of the Services Directive deals with the establishment of service providers in a manner that codified the case law of the Court of Justice at the time. As for professional qualifications, the initial approach was to address the above questions by harmonising national rules profession by profession. Later, and with a view to rationalising and standardising the approach, the Council and Parliament adopted a single directive, Directive 2005/36/EC,1 which repealed all previous directives. Title III of the Directive relates to establishment. The rules are complex and depend upon the circumstances that apply, with one of three possible regimes applying. The fundamental principle in the Directive is that where a person has obtained equivalent education, training or experience to that required by the host state of its own professionals then no further conditions can be imposed by that

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State as conditions for the exercise therein by that person of that same activity. Otherwise, the MS can provide for proportionate “compensation measures”. Similar considerations apply to companies formed under the law of a MS. One State may seek to apply its “company law” rules to companies that have been lawfully and properly formed in another MS, according to the rules of the latter, when such company seeks to operate in the territory of the former. However, the principle of freedom to form a company in the State of one’s choosing is fundamental. It follows that another State may not deny recognition as a company or of its legal capacity to a company lawfully formed according to the rules of the State of formation.2 Many of the above matters therefore form the subject matter of directives (in the sense of Article 288.3 TFEU). Article 50 TFEU insists on the use of the directive as the applicable instrument for harmonisation in this field. Article 114 TFEU, the general provision on approximation of laws, permits the use of other instruments for the approximation of national laws, but Article 50 TFEU is viewed as the lex specialis within the parameters of its own terms, and generally in this particular area of law, and as such will override Article 114 TFEU. This means that as long as the proposed measure is one that can be adopted under Article 50 TFEU, the terms of Article 50 TFEU will apply to it. The institutions would not be able to employ any instrument other than the directive (such as the regulation), for the constitutional “principle of conferral” applies (Article 5.2 TEU). Further, in stipulating the use of directives, the MS clearly intended to entrench the idea that the freedom of establishment is an area of law and policy in which the principle of subsidiarity is taken very seriously that they are not prepared to allow more power to the Union than is necessary. The use of the directive is one means of ensuring a further opportunity for parliamentary scrutiny and involvement at the national level, as well as the opportunity to decide the manner of implementation of Union rules through the process of transposition. This is particularly the case since Article 50 TFEU permits the institutions to act by the ordinary legislative procedure, so the Council participates by making decisions by majority vote according to that procedure, rather than by unanimity. This means that no single MS is in a position to block a majority decision; although it is able to object to a proposal on the ground that the principle of subsidiarity is being breached, by resorting to the mechanism in Protocol No. 2. Furthermore, after the measure has been adopted, a MS might wish to challenge its validity on any other permitted ground (Article 263 TFEU), including the principle of proportionality. The Commission has proposed (and the other institutions have adopted) measures in the form of the regulation where Article 50 TFEU was not the legal basis. For example, Article 50 TFEU could not be used as the legal basis if the object were not that of “coordinating” national company laws, as envisaged by Article 50.2 lit. g) TFEU, but primarily, if not solely, that of establishing new

Case C-212/97, Centros Ltd. (ECJ 9 March 1999); Case C-208/00, Überseering (ECJ 5 November 2002). 2

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“European” entities to be governed generally by a European instrument rather than national law, thereby adding an additional regime of choice to the number of national legal systems. Examples would be the Regulation on the Economic Interest Grouping (EEIG),3 the Statute on the European Company (Societas Europaea),4 and the Regulation on the European Cooperative Society.5 These measures were adopted under what is now Article 352 TFEU. This permits the institutions, by special procedure, to adopt the appropriate measures needed to attain one of the objectives set out in the Treaties where the Treaties have not provided the necessary powers. Besides this, Article 63 TFEU has been used as the legal basis for measures related to the securities market and the entities that operate within it, including listed companies. Much legislation has been adopted in this regard in recent years. Article 114 TFEU can also be joined as a legal basis where harmonisation of laws is involved. The so-called Shareholder Rights Directive6 is an example of this.

2.

Article 50.2: Implementation of Article 50.1 by the Institutions

Article 50.2 TFEU should be interpreted as providing a non-exhaustive list (“in particular”) as to how the EP, the Council and the Commission shall carry out “the duties devolving upon them under the preceding provisions” (i.e. Articles 49 and 50.1 TFEU). This indicates that the duties are to be ascertained by purposive interpretation of those provisions. Article 50.2 TFEU therefore sets out some important tasks, without being exhaustive. It might be argued that if a measure cannot be brought precisely within paragraphs (a) to (h) of Article 50.2 then the Union can only act through Article 352 TFEU, which requires unanimity in the Council and, since Lisbon, the consent of the EP. The argument would be based on the premise that the Treaty does not give express power. However, this would be to read Article 50 TFEU narrowly, and paragraphs (a) to (h) as being exhaustive. In my view, it is still open to the Court to decide otherwise.

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Council Regulation (EEC) No 2137/85 on the European Economic Interest Grouping (EEIG), O. J. L 199/1 (1985). 4 Council Regulation (EC) No 2157/2001 on the Statute for a European company (SE), O.J. L 294/ 1 (2001) and Council Directive 2001/86/EC supplementing the Statute for a European company with regard to the involvement of employees, O.J. L 294/22 (2001). 5 Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society (SCE), O.J. L 207/1 (2003) and Council Directive 2003/72/EC of 22 July 2003 supplementing the Statute for a European Cooperative Society with regard to the involvement of employees, O.J. L 207/25 (203). 6 Parliament/Council Directive 2007/36/EC on the exercise of certain rights of shareholders in listed companies, O.J. L 184/17 (2007).

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2.1. Priority Treatment to Activities Valuable to Production and Trade (lit. a)

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This sets out a rule of priority setting. It can be considered to have been applicable mainly in the initial stages of completion of the internal market. It was about an obligation, of relevance in the early days of the EEC, to act more quickly in those areas considered to be of “particular value” to the development of production and trade. Much of its importance disappeared with the lapsing of the transitional periods and the recognition by the Court of Justice of the direct applicability of Article 49.

2.2. Close Cooperation Between the Competent National Authorities (lit. b)

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This is a fundamental part of the preparatory work that the Commission (in particular) will undertake in formulating its proposals, leading to green and white papers and formal proposals for legislation by the Union legislative authority.

2.3. Abolishing Administrative Obstacles (lit. c)

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Much of the work under this heading needed to be done as a condition for the completion of the internal market. Most of the measures adopted on this legal basis were adopted during the period from the entry into force of the Single European Act, which introduced majority voting in the Council, and leading up to 1993 (see Article 197 TFEU on administrative cooperation).

2.4. Establishment of Workers (lit. d)

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Under Article 50.2 (d) TFEU the Parliament, the Council and the Commission must ensure that workers of one MS employed in the territory of another MS may remain in that territory as self-employed workers, provided that they satisfy certain conditions. In practicing an activity in this sector, national law often requires the possession of a specific qualification or registration in a special register or a bar.7 That is why this article may be considered as having the same aim as Article 53 TFEU (concerning mutual recognition of qualifications). This provision also applies to family members of self-employed citizens.8 It establishes a link between freedom of establishment and the free movement of workers.9 Directive 2004/38/ 7

Generally, see Parliament/Council Directive 2005/36/EC on the recognition of professional qualifications, O.J. L 255/22 (2005). 8 Jung, in Becker et al. (2019), Article 50 AEUV para 8. 9 Truchot, in Pingel (2010), Article 44 CE para 5.

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EC10 on freedom of movement is an example of EU legislation which has been passed to ensure this result.

2.5. Acquisition and Use of Land or Buildings (lit. e)

This rule regards acquisition and use of land and buildings situated in the territory of another MS. The right to acquire, use or dispose of immovable property in the territory of another MS is considered by the ECJ as “the corollary of freedom of establishment”.11 In Commission v Greece,12 AG Jacobs asserted that the right of a Union citizen to own or rent immoveable property in a MS other than that of which he is a national is logically an indispensable adjunct to the freedom of establishment. For the freedom of establishment to have practical effect, the right to use and deal freely with property must be guaranteed. According to some authors, the reference to Article 39.2 TFEU—on the objectives of the common agricultural policy—has become devoid of purpose since the end of the transitional period, given that Article 49 and its intrinsic limits have become directly applicable in that area as well as from that date. No directive has been directly introduced based on Article 50.2 (e). The Mortgage Credit Directive 2014/17/EU—adopted under the ordinary legislative procedure by the Council and the Parliament—mentions the right of establishment as a guiding principle in its preamble.13 The Überseering14 Case exemplifies the type of case where a MS sought to deny the capacity of a company formed in the Netherlands to sue in the German courts in land-related proceedings on the ground that it could not under German law be recognised as having the capacity to litigate, since its registered office and its real seat were not in the same location.

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2.6. Progressive Abolition of Restrictions (lit. f)

This rule aims to abolish obstacles to the setting up of agencies, branches and subsidiaries and for the entering of workers of the headquarters into their

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Parliament/Council 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, O.J. L 158/77 (2004). 11 Case C-302/97, Konle v Austria (ECJ 1 June 1999) para 22. 12 Case 305/87, Commission v Greece (Opinion of AG Jacobs of 30 May 1989) para 8; see also Case C-370/05, Festersen (ECJ 25 January 2007) para 22; Joined Cases C-515/99, C-519/99 to C524/99 and C-526/99 to C-540/99, Reisch and others v Bürgermeister der Landeshauptstadt Salzburg (ECJ 5 March 2002). 13 Recital 2 of Parliament/Council Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property, O.J. L 60/24 (2014). 14 Case C-208/00, Überseering (ECJ 5 November 2002). Xuereb

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managerial and advisory bodies. This article is connected with the free movement of workers as set out in Article 45 TFEU. The personnel should ideally be able to rely also on Article 50.2 (f) TFEU if they are citizens of other MS to work in managerial or supervisory posts in branches or agencies in MS other than that of the main establishment. The rule concerns also the objective of removing tax discrimination15 and the possibility of enjoying social insurance as well.16 This rule can be linked to some directives inspired by the following paragraph 18.17 An example is the Eleventh Council Directive 89/666/EEC concerning disclosure requirements in respect of branches opened in a MS by certain types of company governed by the law of another State. The Directive has been criticised for the lack of a definition of a “branch” in the context of the right of establishment.18 Another is to be found in the Regulation concerning the European Company,19 a public limited-liability company regulated under EU law. The European Company can “move” its legal seat20 across MS.21

2.7. Coordinating National Safeguards (lit. g)

2.7.1. 18

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The Terms of Article (50.2 lit. g)

This paragraph has served as the legal basis for much EU legislation in the company law field. However, agreement on the fundamental concepts and rules which should inform company law and govern companies across the MS has proved difficult.22 In the first place, the provision appeared to be both a starting and endpoint in the status quo in the MS. Power was not expressly given to the Union to actually add to those safeguards. Moreover, it was at least arguable that safeguards that exist in only one or a number of MS but not in all would fall outside the scope of the 15

See Case C-79/85, Segers v Bestuur van de Bedrijfsvereniging voor Bank (ECJ 1 July 1986). Case C-143/87, Stanton v Inasti (ECJ 7 July 1988). 17 See Corapi and De Donno (2006), p. 1027 et seq. 18 Sørensen (2014), p. 95. 19 Council Regulation (EC) No 2157/2001 on the Statute for a European company (SE), O.J. L 294/1 (2001). 20 Contaldi, in Tizzano (2014), Articolo 50 TFUE, p. 729. 21 To clarify further see Draetta and Pocar (2002). 22 See generally, Andenas and Wooldridge (2009) and Dine et al. (2006). For analysis of the harmonisation of laws and the integration process with reference to company law, see inter alia: Deakin (2000), Cremers (2013), Deakin (2006), Andreadakis (2008), Wymeersch (2001) and Shuannge (2013). See also: European Commission, Modernising Company Law and Enhancing Corporate Governance in the European Union – A Plan to move Forward, COM(2003) 284 final; European Company Law Experts, Response to the European Commission’s Consultation on the Future of the European Company Law, May 2012. Available at http://papers.ssrn.com/sol3/papers. cfm?abstract_id¼2075034; Reflection Group, Report of the Reflection Group on the Future of European Company Law, Brussels, 5 April 2011. 16

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provision. Against this was the use of “in particular” in the opening paragraph of Article 50.2 TFEU to enable the Commission to propose for universal adoption what for some States might be a totally new safeguard. This would be more problematic where the proposal came too close to questioning the fundamental basis of core principles, which might have been so different that some safeguards were practically unknown in some MS while actually part of the core in others. The paragraph appears to assume a totally common core, but in truth, we have varieties of capitalism across the MS, and there have been what appeared to be unbridgeable gaps that operated, at least psychologically, as the fundamental obstacle underlying many subsequent failed attempts on the part of the Commission. Second, it only permits “coordination” and this only “to the necessary extent”. These elements are subject to interpretation and involve a large measure of legislative discretion. Third, the element of safeguards “for the protection of the interests of members and others” has proved controversial. In particular, a question can still arise as to which groups or categories of person fall within the phrase “and others”, although it is clear that creditors are included as a subject of protection where this suits the internal market objective. An example is the First Company Law Directive, which took the policy decision of “preferring” the security of transactions for third parties dealing with a company over a policy that would give priority to the agreement between the members that the company should pursue certain specified objects and no others (the doctrine of ultra vires or spécialité statutaire) and required all MS to adapt their laws accordingly as necessary. Article 114 TFEU excludes harmonisation on matters related to the interests of employees. The argument that Article 50.2 (g) TFEU is lex specialis and overrides this to give competence to harmonise the protection of employee interests has not won the day. The Commission has resorted to Article 352 TFEU to propose measures of employee involvement for the European Company, and the relevant Regulation states that the Treaty had otherwise not given the necessary powers.23 Yet for some MS, the concept of “the company” is a multi-constituency concept that would tend to include employee involvement in corporate affairs in the very concept of the undertaking, or “enterprise” (entreprise in French, Unternehmen in German) including where this took the form of a company. A similar issue can arise as to consumers. There is also the issue of the protection of the environment. Such issues feature in the concept of corporate social responsibility as also of good corporate governance. Article 50.2 (g) TFEU seems deficient in this regard, in that its use to advance the cause of wider constituency involvement, or at least the giving by management and shareholders of some degree of attention to this wider range of interests, through Article 50.2 (g) TFEU, appears to be too easily open to objection. Yet the provision is not in terms limited in scope to any particular model of what one would define

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Recital 17 of Council Directive 2001/86/EC supplementing the Statute for a European company with regard to the involvement of employees, O.J. L 294/22 (2001).

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(differently) in MS as “the company”, or “company law” and uses the very general wording of safeguards “required by Member States of companies or firms” irrespective of the branch or sub-branch of law as categorised by any particular national system of law through which this might be done. In addition, one recalls the use of the phrase “in particular” in the opening sentence of the Treaty provision. Fourth, the concept of “equivalence” of safeguards has proved to be malleable, not least on the part of the Commission. The result has been a measure of harmonisation, and not a negligible one, in terms of a series of adopted Directives which have been properly implemented. However, compromise has featured strongly in their drafting. Besides, several Commission proposals have been watered down significantly in the course of the adoption, and the final version of the Directive has in some cases been quite different from the original version as advanced by the Commission, not least in terms of the resulting move from what originally started as one “safeguard” to very different forms of the safeguard claimed by the Commission to have “equivalence”. An example would be the resulting range of options on employee “involvement” proposed in the final Draft Fifth Directive when the original proposal was for employee participation at board level. Accepting that participation could not be achieved at a stroke, the Commission set the target as one of “involvement” and then proceeded to treat the various forms of involvement24 as somehow “equivalent”, i.e. of equal value in effect in establishing that target. This left the “safeguards” in the MS more or less precisely where they were, while introducing some commonality among the different forms but not so much across them. Generally, this has been due to legal and cultural differences between the laws of the MS which are so deeply embedded in different notions of the company, or of the role of company law, that the compromise position has taken the form of agreement to disagree, leaving the proposed provisions out of the measure, with consequent lack of harmonisation, let alone any measure of unification. If the Treaty provision is intended merely to remove obstacles to establishment, as some have argued, and not any more ambitious objective such as the narrowing of the varieties of capitalism in Europe, regarding the mere fact of difference as an obstacle, it still remains the fact, broadly speaking, that there are at least two varieties of capitalism in the sense of company law systems in Europe that take broadly different approaches to the core principles of company law. An argument can therefore be made that this mere fact results in differences that pose an obstacle in and of themselves by requiring adjustment by cross-border companies to different basic legal imperatives.

24 Participation in a supervisory board (under a two-tier system) or management board (under a one-tier system), consultation and information through a body representing employees, or a collectively agreed solution akin to these.

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The Main Adopted EU Measures

The following are the main company law harmonisation measures adopted: Directive 68/151/EEC, O.J. L 65/8 (1968), replaced by Directive 2009/101/EC, O.J. L 258/11 (2009) (First); Directive 77/91/EEC, O.J. L 26/1 (1977), replaced by Directive 2012/30/EU, O.J. L 315/74 (2012) (Second); Directive 78/885/EEC, O.J. L 295/27 (1978), replaced by Directive 2001/35/EU, O. J. L 110/1 (2001) (Third); Directive 78/660/EEC, O.J. L 222/11 (1978), replaced by Directive 2013/34/EU, O. J. L 182/19 (2013) as amended by Directive 2014/95/EU, O.J. L 330/1 (2014) (Fourth); Directive 82/891/EEC, O.J. L 378/47 (19829, amended by Directive 2007/63/EC, O.J. L 300/47 (2007) and Directive 2009/109/EC, O.J. L 259/14 (2009) (Sixth); Directive 83/349/EEC, O.J. L 193/1 (1983), replaced by Directive 2013/34/EU, O. J. L 182/19 (2013) as amended by Directive 2014/95/EU, O.J. L 330/1 (2014) (Seventh); Directive 84/253/EEC, O.J. L 126/20 (1984), replaced by Directive 2006/43/EC, O. J. L 157/87 (2006), as amended by Directive 2014/56/EU, O.J. L 158/196 (2014) (Eighth); Directive 2005/56/EC, O.J. L 310/1 (2005) (Tenth); Directive 89/666/EEC, O.J. L 395/36 (1989) (Eleventh); Directive 89/667/EEC, O.J. L 395/40 (1989), replaced by Directive 2009/102/EC, O.J. L 258/20 (2009) (Twelfth); Regulation No 1606/2002, O.J. L 243/1 (2002) (International Accounting Standards); Directive 2004/25/EC, O.J. L 142/12 (2004) (Thirteenth); Directive 2004/109/EC OJ L 390/38 (2004) as amended by Directive 2013/50/EU, O.J. L 294/13 (2013) (Transparency Directive); Directive 2005/56/EC, O.J. L 310/1 (2005) (cross-border mergers) Directive 2011/35/EU, O.J. L 110/1 (2011) (mergers); Directive 2007/63/EC, O.J. L 300/47 (2007) and Directive 2009/109/EC, O.J. L 259/14 (2009) (mergers or divisions); Directive 2006/43/EC, O.J. L 157/87 (2006) as amended by Directive 2014/56/EU, O.J. L 158/196 (2014) (statutory audits); Council Regulation (EC) No 2157/2001, O.J. L 294/1 (2001) (Statute for a European Company); Directive 2001/86, J.O. L 294/22 (2001) (Employee Involvement in the European Company); Directive 2007/36/EC, O.J. L 184/17 (2007) (Shareholder Rights) as amended by Directive 2017/828, O.J. L 132/1 (2017); Directive 2009/49/EC, O.J. L 164/42 (2009) (Reporting for microenterprises);

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Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 relating to certain aspects of company law, O.J. L 169/46 (2017).25 26

The main point for this commentary is well put by Halbhuber, who said of the Directives that have been adopted that they “do not purport to deal with crucial issues” such as the legal duties of directors, the limits on the exercise of the right to vote in general meeting, the limits on the exercise of majority power or control, and other substantive rules which form the very core of company law.26 It is clear that lack of harmonisation in these areas is an obstacle to free movement for companies and a disincentive for natural persons to invest across borders. While harmonisation on technical matters has progressed, the challenge now is to face head-on the deeper differences in national company laws. 2.7.3.

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“Core” Company Law Harmonisation: The Holy Grail

The purpose of “co-ordination” is not that of unification. Arguably, however, the point has now been reached where the fact of the co-existence in Europe of different approaches to capitalism (the so-called “varieties of capitalism”) calls out for full address. In the view of this commentator this involves seeking more than some broad consensus on such basic core issues as the nature of the company, the duties of the managers (directors), the role of the shareholder and the general meeting of members (with consequent issues as to duty or liability as well as rights), the role of other interest groups and their interests, the treatment by law of the group of companies (including its definition). As long as important differences continue to exist as to the fundamental principles informing these basic issues there can be little real progress in terms of full freedom of movement, and a degree of “regulatory arbitrage” can continue to be expected. Is the resolution of such issues “necessary”, according to the objective and meaning of the provision? For otherwise it is arguable that aiming for deeper harmonisation on the core issues falls well within the objectives of “coordinating the safeguards for the protection of the interests of members and others”, and “equivalence” of result can certainly be imagined if there be agreement as to the values and principles that should apply and the result (in terms of decision-making input at least) that should occur in particular sets of circumstances. The Commission’s proposals, and the measures adopted, sometimes confound the issue not only by leaving key blanks, as noted above, but by taking policy decisions in some areas which beg for this further development of the “common” law. For example, the Second Company Law Directive took a “policy” or “philosophical” decision, albeit also a pragmatic one. It “returned” power to the general meeting on a number of “company” decisions on the premise that too much had been ceded to, or usurped by, company directors/managers and largely due to 25

As to the various phases in the evolution of company law harmonisation, and a summary of these measures see Gorriz (2016), pp. 1–14. 26 Halbhuber (2001).

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arguments that the management had “abused” “their” powers by acting otherwise than in the interests of the members. It is clear from the cases that came before the Court of Justice on the interpretation and effect of the Directive that the latter then confined itself to enforcing the clear rights given by the Directive, in particular in declaring certain provisions of the Directive (Articles 25, 29) to be directly effective and giving full protection to the individual shareholder’s right to insist on the holding of a general meeting (even where the company as such had been saved by the effort of the public authority involved in adopting restructuring increases of capital). In so doing it declared that the core question of the legitimacy of any action then taken by the general meeting was a question of (unharmonised) national law and (seemingly) of no concern to European law27 save on the possible ground of abuse of a right given by EU law.28 It is not clear what underlying assumption, if any, was made by the framers and adopters of the Directive as to how the general meeting would be expected to act in exercising its functions, but in any event—and without really asking this question—it was decided to vest the power to take a number of major decisions in the general meeting.29 There was no attempt at harmonisation of the rules according to which the shareholders in general meeting should exercise their voting rights. Leaving such an area of fundamental importance unclear at European level can lead to dramatically different results in the various MS. This is the kind of situation that makes further work on such key areas “necessary” within the terms of the Treaty provisions on establishment. Until this is done, there can be no equivalence of result as to the management or protection of possibly competing even if potentially congruent interests. At the time, a great disappointment or even “failure” for the Commission was the opposition by the MS, to the point of its abandonment by the Commission, to the Draft Fifth Directive.30 The aim of this Directive was to harmonise the laws relating to the structure and management of the public company across Europe. It would have laid down the result to be achieved in MS law as relates inter alia to the structure of the public company, employee participation (or, more widely, “involvement”), the duties of management and their liability, the exercise of the 27 See Joined Cases C-20/90, Karella and Karellas (ECJ 30 May 1991); Case C-441/93, Pafitis and Others v. TKE and Others (ECJ 12 March 1996); Case C-367/96, Kefalas and Others v. Elliniko Dimosio and Others (ECJ 12 May 1998). 28 Case C-441/93, Pafitis and Others v. TKE and Others (ECJ 12 March 1996); Case C-373/97, Diamantis v Elleniki Dimosio and Others (ECJ 23 March 2000). 29 While in some cases permitting the general meeting to authorise the management to actually take them, as long as this was within certain quantitative parameters set out by the company statutes or by the general meeting itself. 30 The Draft Fifth Directive was originally submitted by the Commission to the Council on 9 October 1972: Proposal for a Fifth Directive on the Structure of the public company, O.J. C 131/49 (1972). An amended proposal for a Fifth Directive was submitted by the Commission to the Council on 12 August 1983: The Structure of Public Limited Companies: Amended Proposal for a Fifth Directive, O.J. C 240 2 (1983). A further draft was produced in 1991, COM(91) 372 final, as amended by O.J. C 7/4 (1991) and O.J. C 321/9 (1991).

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right to vote and the nullity of general meeting resolutions, and the derivative action and minority protection. Some issues that had caused the Commission to give up on this proposal in the early 1990s were later faced in the context of other proposed measures and in some way resolved, albeit in specific contexts. This happened in relation to the Statute for the European Company (employee involvement), the Takeover Directive (the question of the manner of the raising of defences to a take-over bid, and the respective roles of the shareholders and the management in that context). However, whatever the solutions in such specific contexts, the proposal to harmonise shareholder rights (the Shareholder Rights Directive) did not settle the key underlying issue of principle, namely: is a shareholder in any sense under some duty to act in, or at least consider, the “interests of the company” itself, or even other interests, or at least under some limitations that prevent him from harming his own company or the other shareholders and others? The issue remains open at EU level even after the adoption of a revised31 Shareholder Rights Directive. Surely, it may be asked whether a measure of “harmonisation” of shareholder duties, or of the limits otherwise placed by law on the exercise of shareholder voting rights or of majority power, is not to be considered equally “necessary” as the harmonisation of their rights, from the perspective of the internal market. 2.7.4.

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Analysis of the Measures Adopted: The Vision Offered?

Viewing the adopted measures as a whole,32 it is clear that the European Commission has not yet advanced a conceptual vision, and therefore, no final sense of direction on the fundamental law that governs companies. This does not mean that the Commission has not sought to protect members and creditors (a clear theme in the measures adopted) or that it has not sought to bring in the long-term perspective into management and governance,33 or that it has not sought to keep informational measures and disclosure abreast of technological advance, or that it does not consider cross-border cooperation and the pursuit of economies of scale important, as witness the creation of European entities for the last purpose. Aims do exist, and inform key measures. What it means is that the Union institutions have not embraced any one concept of “the company”, of “company law”, of what is or is not the best definition of “the interest of the company”,34 and of what are or should be the core principles of company law relating to directors and shareholders’ 31

See the proposed amendment to the Shareholder Rights Directive, COM(2014) 213, and Directive 2017/828. 32 Reference is made to Gorriz (2016), pp. 1–14 for a comprehensive overview of some main measures adopted. 33 Indeed, it is possible that there will now be too much focus on this aspect. See ➔ para 60 et seq. 34 The Reflection Group of Experts avoided this in its Report of 2011, saying: “It is noted, of course, that ‘interest of the company’ may have a different legal meaning and connotation in the various legal systems and jurisdictions. In this framework of a higher-level review, a legal definition is not envisaged. In the current text the term ‘interest of the company’ is therefore

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responsibilities. There is no single company law vision, because there is no shared vision of the nature of the company itself. The Reflection Group of Experts therefore concluded as follows, for example, on the core issue of board responsibility: “The issue of board responsibility could also be dealt with by way of an amendment of Directive 2006/46/EC. However, in view of the complexity of many of these issues and the differences in national corporate governance structures, the Reflection Group considered that on balance the adoption of detailed binding rules is not necessarily the most desirable or efficient way of achieving the desired aims. Thus, it is proposed that the appropriate regulatory tool to implement the remaining proposals set out in this part of the paper would be a Commission Recommendation. All Member States would be invited to take the steps necessary to introduce at national level a set of provisions based on the principles set out in this Recommendation, to be used by large listed companies either on the basis of the ‘comply or explain’ approach or, upon individual Member States’ choice, pursuant to legislation.”35 In sum, the suggested approach was to take a soft law approach while at the same time still leaving the way open to diverse constructions of fundamental company law concepts. In the initial years, the German model was the model adopted as the basis for most measures (for example, the First Company Law Directive, or the proposals for a Draft Fifth Directive (on public company management), a Draft Ninth Directive (on the law relating to the “group” of companies)36 a Draft Tenth Directive (on cross-border Mergers) and the Statute for a European Company (Societas Europaea). Things began to change with the accession of the United Kingdom to the EEC. Potentially two diametrically different models were now to come up against each other, the German and the UK model. Of course this does not minimise the importance of the fact that many other MS such as France, the Netherlands and Italy, can, on some points such as on the roles and duties of the board of directors and of the general meeting, be drawn upon as a third possible model in those areas, especially through their use of concepts such as the “intérêt social” (France), “interesse sociale” or “interesse collettivo” (Italy), as well as the legal concept of abuse of right (abus de droit, abuso di diritto). However, much polarisation as occurred tended to occur around the conflicting stances of German law and UK law. It did not help that Germany espoused the siège réel doctrine, requiring a real connection for all operators having their seat in Germany, while the UK is an “incorporation theory” State with companies formed by location of registered office and registration irrespective of the location of their head office, place of central management and control or place of principal activity. This fitted the wider picture that casts Germany as an “interventionist” or “regulatory” State when it used and should be understood in a general way.” Reflection Group, Report of the Reflection Group on the Future of European Company Law, Brussels, 5 April 2011, p. 38 fn. 84. 35 Reflection Group, Report of the Reflection Group on the Future of European Company Law, Brussels, 5 April 2011, p. 78. 36 See for example, Bohlhoff and Budde (1984).

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comes to the role of company law, while the United Kingdom approach was a more flexible, facilitative and enabling model that embraced the disclosure philosophy as a prime tool for keeping abuse in check. It followed that all branches of the State, including the Courts, would involve themselves in corporate matters to a lesser degree in the United Kingdom than in several other MS. Both the Commission and the Court of Justice aimed for tolerance of the different models. In so doing, they were guided by the very provisions of the Treaty. For the Court, this meant in particular an emphasis on the liberality of Article 54 TFEU which places on an equal footing the various possible connecting factors of place of registered office (the UK approach), central administration (the German approach) or principal place of business, provided the location was “within the Union.” Whatever the deeper analysis, which includes noting how the various systems have on some issues come or been brought closer together even without the impact of Directives (and the reasons for this), it is a fact that the Second Directive (on the capital of the public company) was significantly influenced also by UK and Irish company law, as were other Directives that followed, including the Fourth and Seventh (on Company Accounts), and the Thirteenth (Take-over) Directive. The various measures were adopted at different periods,37 and some bear the influence of one national “model” while others, adopted at a different stage, display the peculiarities of another “model”. Other Directives, such as the Second Directive drew on more than one national system. Then again, a number of proposals had to be watered down or even eventually abandoned because they had followed one model too closely for other MS to be able to agree to them, and for the main reason that the Commission was unable to broker a compromise position. Of course, in some cases, and albeit after many years, compromises were found, and if only through the giving of a range of options to MS as to how they might comply with the instrument adopted, as in the case of the Fourth, Seventh or Thirteenth (TakeOver) Directive, but arguably this was done at the cost of increased incoherence of so–called “European company law”, both at European and also at national level. 2.7.5.

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The Future of Company Law and Corporate Governance as Pursued Through Article 50.2 (g)

This commentator has stated above his view that it is open to the Commission to interpret Article 50.2 TFEU as permitting it to propose new rules to address the collapse of corporate law and governance that has been witnessed across Europe and all company law systems. According to this interpretation, the list in Article 50.2 TFEU need not be, and is not to be, regarded as exhaustive, nor can each of the paragraphs be regarded as limiting of the general task and power of the institutions to achieve freedom of establishment to the fullest degree required. Following a brief analysis of the causes of the last financial crisis, and a summary review of the 37

See Gorriz (2016), pp. 1–14.

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implications, the author will here propose38 a formula as some contribution to the ongoing debate on future corporate governance and for the future ethical and practical harmonisation of the key underlying issues, namely, the duties of directors and the exercise of voting/majority power by shareholders. Nor is this about harmonisation for its own sake, for the premise of the Treaties and many of their objectives is the proper functioning of companies, and unless these key issues are addressed, greed and short-termism, as well as sheer ambiguity, will militate against such proper functioning and in the end impact on the success of the Union project itself. Introduction In Wall Street Values,39 Santoro and Strauss analyse the causes of the financial crisis and argue two things, namely, that one clear lesson of the financial crisis is the need for more effective laws and regulations to counteract temptation and greed, and second, that law and regulation can accomplish only so much so that effective management of organisation ethics remains indispensable to a sustainable economy. Such analyses serve to emphasise a number of important points. First, declarations and mantras about business ethics are not self-executing, and need some kind of enforcement system: what is required is intelligent design and vigilance in the “regulatory environment”. Second, the system favoured the few players, allowing them to prosper greatly for a long period of time while all the time sowing the seeds of a collapse which would hurt the innocents while leaving the former with their profits. During this time, the entire financial sector gained at the expense of the economy as a whole. Yet recovery of profits or compensation for loss was not possible under the system. It often “paid to be bad”. The clear lesson is the need for more effective laws and regulations to counteract temptation and greed. This points towards law and regulation that is as “full” as is necessary. If this is not capable of being effectively supplied at national level, the Union is authorised to achieve it. It is this aspect that I wish to pursue, as a corporate lawyer and European lawyer. However, in my view the most important thing is for us to be clear what the target is. It is useless to have “regulation”, i.e. oversight, if the overseers are overseeing the wrong thing, and if the overseen are not placed under a clear obligation to do the right thing. Nevertheless, the right thing must be spelled out—for otherwise the overseen will themselves interpret what is the right thing, and Santoro and Strauss have explained that this was a major part of the problem. The difficulty lies with formulating the duty on the overseen, and then the purpose of oversight, in the right way. The law as to how directors and managers should act is contained in the law on directors’ duties. The law on how majority shareholders should act is contained in 38

This commentary must for reasons of space focus on what the author sees as the core issues to be addressed in the near to medium term. 39 Santoro and Strauss (2013).

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the law on general meetings and on the exercise of majority rights/power and in particular the exercise of the right to vote in general meetings of shareholders. It is these rules, primarily, that have called out for review and harmonisation. Apart from differing from State to State, they have very clearly not been clear—even within their own jurisdictions—about what is proper conduct. For that reason, also, there has not been proper supervision of that issue. It is now the key issue to be addressed. Anything other than that misses the target. The working definition of Corporate Governance for our purposes—whether for use or critique, but certainly for seeking to understand the Commission approach—may be taken to be the OECD definition as often used by the Commission itself,40 namely: “Corporate Governance involves a set of relationships between a company management, its board, its shareholders and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interests of the company and its shareholders and should facilitate effective monitoring.” This definition points to the need to review the structure of our companies (especially that of the public company), to clarify the range of interests to be considered, and as and in so far as necessary regulating the actions of the directors and controllers, by incentives, including legal rules and sanctions. This begs some further important questions: Where should the “balance” between the various relevant interests be struck, as a matter of good management and as a matter of law? What relative weight is to be given to company and shareholder interests, and as between these and other interests such as those of the employees? What criterion can assist or be applied in evaluating the legitimacy of the striking of the balance? Is there a formula that will work in all cases to guide proper balancing? And the underlying question: since soft law does not ensure good corporate governance what can be done through binding law? Just how prescriptive is it necessary for the law to be, and how far should we ask the Courts to go in terms of the scope and intensity of review of management decision-making? Furthermore, it is time that the question was asked and answered why these considerations should not be extended to the exercise of power by the shareholders themselves, whether acting in general meeting or otherwise, including in any oversight role they may be given, especially once they have been better “engaged” in the affairs of the company. Bearing in mind what has been said, law on the appropriate lines will,

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See Hopt (2000). See Commission Communication, Action Plan: European Company Law and corporate governance – a modern legal framework for more engaged shareholders and sustainable companies, COM(2012) 740 final; see the Commission’s analysis of the causes of the crisis including failures of corporate governance in and beyond the financial sector, at p. 3 et seq. See also High Level Group of Company Law Experts, A Modern Regulatory Framework for Company Law in Europe: A Consultative Document of the High Level Group of Company Law Experts. Available at https://www.eerstekamer.nl/eu/documenteu/a_modern_regulatory_framework_for/ f¼/vgklizzpd9we.pdf, and see Johnstone (2009).

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a) require that the “interests of the company” (as an ongoing enterprise) feature at the centre of decision-making but that a “balance” between long and short-term interests and goals be struck by the corporate decision-makers; b) equally, require that they act properly by balancing the interests of profit (their shareholders’ and theirs and their company’s) with the interests of other groups and of the general public and the economy as a whole;41 c) From a global European perspective, create a true level moral playing field to operate internally and externally, and to further such values at global level. The “Corporate governance movement” has recently emphasised “oversight” but left unresolved fundamental questions regarding the framing of substantive legal duties of corporate decision-makers. The laws at national level have remained virtually unaltered in many European states although there is evidence of some spontaneous convergence among them. In general, however, we have a classic example, in Europe, of the “varieties of capitalism” reality, where the virtues of long-short balance and due attention to other interests besides those of the shareholders have been absorbed by some legal cultures but not by others, or absorbed and accommodated in different ways and with different emphasis being laid on different aspects. The ever-present danger, as the crisis made clear, is that in an integrated Europe, in an integrated world, contagion will spread from the lowest standard to the highest, sometimes because competition itself levels the field to the lowest ethical levels, challenging the law and the regulator to control and stem the tide away from sense and right, and sometimes because the attractions of bad behaviour and the gains to be made quite simply overcome the forces of restraint. The financial sector presents one sectoral example of the much wider problem. It is all companies that are prone to “bad” or “misdirected” management. The financial sector can be taken as the sharp edge. However, even it would not have got into such trouble if the rest of the economy, the rest of the corporate sector, was imbued with the values, or the sense of direction, of which we speak. It would have been impossible for the banks to act as they did if the companies dealing with them thought them to be an unacceptable risk. They did not, because they themselves were in the main equal subscribers to the same short-term mentality or “culture”. This particular capitalist model has imploded upon itself, as many predicted it would. It draws the opprobrium of those countries and cultures that consider the short-term pursuit of shareholder profit at almost any cost to be not only unjust but also downright immoral and offensive to fundamental tenets of good behaviour. The need is now felt for a new model of capitalism that is (1) socially just–

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According to the Deloitte Millennial Survey (2016), millennials continued to express positive views of business, and their opinions regarding businesses’ motivations and ethics had shown “stark improvement” in this survey. However, much scepticism remains, driven by the majorityheld belief that businesses have no ambition beyond profit. Apparently almost nine in 10 (87 percent) believe that “the success of a business should be measured in terms of more than just its financial performance.” This is a widely held belief.

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therefore, just to the individual, whether as shareholder, employee, investor, lender, saver (2) efficient and effective in producing wealth (3) operated and managed with one eye to the public interest and the common good (4) amenable to control and supervision in protection of these parameters. This will produce stable, sustainable and just economies and others will be more likely to emulate the European modus operandi. Company Law Theory and Corporate Governance 48

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In company law theory, a defining distinction is made between the contractualist (or contractarian) and the institutionalist schools or theories of the company.42 In broad terms, the former see the company as a set or “nexus” of contracts with stakeholders, but traditionally “place” consumers and employees within the realms of consumer law and labour law respectively. Company law is generally seen as being reserved primarily, if not exclusively, for the largely “private” relations between the shareholders and the shareholders and the managers. Yet even here, the managers are not mere agents for the shareholders, for the company is a separate legal person at law. Thus, the directors owe their duties, including that of acting in the best interests of “the company” to the company itself, and there is no way, say, that the employees can qua employees mobilise an alert procedure or an action in defence of the company for they are not accorded rights of participation and are not owed any duty. Indeed, taking such kinds of action is difficult even for the shareholders, for the duties of directors are not owed to them, and a direct action cannot normally or easily be brought by a shareholder on behalf of the company. The underlying rationale or “philosophy” nevertheless was often stated as being that the company “belongs” to the shareholders and that it is the shareholders as a body that should have the ultimate say on many key issues. It is such rule mismatches, coupled with ambiguity over the relevance of the “stakeholder” concept to company law that surely led to the huge gap in corporate law protection even of the shareholder; but even more so of the employee and even more so and on a global scale of the potential investor. The separation of ownership of shares from real day-to-day control of the management of the company and its business was identified for large companies as far back as one hundred years ago by Berle and Means. It gave rise in the first half of the twentieth century to a vivid debate on the question “For Whom are the Managers Trustees?”43 The Anglo Saxon view, predominantly that of the UK, remained—even through recent company law amendments—that indeed the only legal relationship worth governing through company law was that between the company, the shareholders and management, while other interests ( of consumer, employee, potential investor) although “relevant” and to be considered in the former relationships remained the stuff of contract 42

Generally see French (2012), pp. 26–38; Andenas and Wooldridge (2009), Chapter 2; Drury and Xuereb (1991); Cahn and Donald (2010); Charreaux (2004). 43 See generally, French (2012), pp. 29–38.

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or of consumer law (including as an aspect of financial services law), labour law, and securities law as a matter of the “external relations” of the company with third parties. Nevertheless, never did these branches of law in any way seek to alter the company law shareholder/manager model of management. Yet it is in that legal model that we must look for change, or that legal model that we must look to change. On the other side come the “institutionalist” group of theories, which in essence argue that the company is a separate entity (legal and commercial) with its own objectives and identifiable interests.44 To those interests both the management and the members must be loyal, taking an explicit long-term perspective as well as regarding for this purpose as relevant the interests of employees and consumers, and often the public interest also. In this respect, it is often the case that company law is so designed as to reflect this philosophy (as in the case of the supervisory board requirement in Germany), just as such other branches of law— labour law, consumer law—will reflect the institutionalist model, rendering it possible to bring disparate rules from different branches of law together into a cohesive “Enterprise Law” model. This model lends itself well to the stakeholder approach. It must be said that a short-term shareholder-centred approach is far simpler to articulate and apply than the more rigorous and complex long-term stakeholder model. The fundamental difference in theory and in practice between the two approaches is that under the contractualist approach property rights generally vest (if uneasily and rather contradictorily as between majority and minority) in the shareholders, who however have precious little involvement in fact in the affairs of a public company, while on the other hand under the institutionalist approach it is clear that with property rights and power also go responsibilities and liabilities— with duties on the managers and limitations placed on the shareholders, and most often some form of participation and involvement of employees as having a recognised interest in the prosperity of the enterprise as well as a legitimate interest in defending their employer (the company) from incompetent or over-greedy managers and shareholders. The question asked here is how—on the assumption that the corporate governance paradigm has changed45 through changing (new) values—new legal principle can be designed to accommodate this change. It seems to me that there has been such convergence in company law across Europe in the last twenty years that we

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can fruitfully focus on the micro picture as to company law systems, and in that context ask how the best of all might be combined. The institutional dimension has much to offer, as being more long term oriented and less shareholder centred.46 The United Kingdom has been a “leading proponent” of corporate governance in Europe to the point where its orientation, jargon and approach have been highly influential if not dominant also in the Commission. The Commission has done its best to lead the way through concrete measures designed to push practice forward in the new direction. This is not gainsaid. However, at the end of the day, for the lawyer, the question is what the law actually demands and what can be enforced in a court of law. The Commission has been lacking in recent years in the matter of proposals for the formulation of hard law on essential principles. The primary challenge for European company law must now be to continue to seek out a mix of ingredients from the two principal broad schools that best addresses the issues identified above: (1) justice to the legitimate expectations of the individual: shareholder, saver, consumer, employee and other stakeholders (2) efficiency and effectiveness in producing wealth (3) companies being operated and managed with one eye to the public interest and the common good (4) management’s and shareholders’ amenability to control and supervision in protection of these parameters. After all, it is now generally acknowledged that one result of such European company law harmonisation that there has been, against the background of integration and exercise of the four freedoms, is that there has been a certain degree of convergence. This can and should be taken forward in the internal market. It is proposed here to focus on and make proposals regarding the imperatives of a stakeholder approach to corporate organisation and duties with particular reference to (1) multiple interest balancing and (2) the now-more-widely accepted imperative of balancing long and short term in all firms at all levels and suggest a legal model. This would require duty formulation and, equally, proper monitoring, indeed participative monitoring by stakeholders, and effective enforcement mechanisms. UK Law: A Common Law View and an In-house Critique

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The UK concept of “corporate governance” has strongly influenced the EU in the drafting of its Corporate Governance policy. It is of interest to focus on one major recent critique of that system as encapsulating what some see as the “UK problem”. In Bloomfield’s words; “Corporate Governance is multi-dimensional in character – it has procedural, behavioural and structural components that operate inside the firm; a systemic component that links forms and the legal/regulatory structure and operational and temporal/longitudinal components that reinforce all these. Managing this multi-dimensional aspect is the work of the board of directors of the company. . .- a task that is long-distance in nature and much more complex than 46

For a global overview of the application of these concepts in the context of directors’ duties, see Paolini (2014). For a discussion from the Anglo-Saxon perspective, with broader comment on the position in the common law world and in Europe, see also French (2012). See further, Drury and Xuereb (1991) and Andenas and Wooldridge (2009).

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simply setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship.”47 Bloomfield wrote of the UK experience that: “The failure to correctly describe the mechanisms of governance and leave the description at the blunt level of . . .” Corporate governance is the system by which business corporations are directed and controlled. Boards are responsible for the governance of their companies’ has resulted in each successive committee investigation into the workings of corporate governance in the UK – the Greenbury Committee, the Hampel Committee, and the Higgs Committee - producing little of any value or worth. The accretions of recommendations merely brought about the death of lots of trees without any commensurate benefit to the practical operation of corporate governance. The result of this was ‘light touch’ regulation – which in its mildest manifestation was an impotent policy in conception and at worst a positive contributor to poor governance and the consequent crisis in the financial sector, when both regulators and regulated sat back and simply ticked boxes”.48 Again, citing Bloomfield: “The Cadbury-based definition of governance for listed companies – with its implicit acceptance of the primacy of the shareholders’ interests and its failure to recognise the shift in ownership characteristics or the change in the weight of stakeholder influence – has been distorted to support a spurious concept of ‘shareholder value’ by linking misidentified ‘agent’ (the director/manager) and misidentified ‘principal’ into an unthinking dance”, leading to a “worsening problem of the dislocation between the description and the reality of corporate governance.”49 In the past, perhaps fearful of a German-inspired EU measure of the type of the Draft Fifth Company Law Directive—which would have sought to harmonise the company law relating to management of public companies across Europe by adopting a rather different starting point in terms of the definition of the company and its nature—the UK corporate and financial establishment, as well as the regulatory and governmental establishment, adopted a strategy of developing a notion of corporate governance to suit a system that, possibly unbeknown to many of goodwill, was running wild. As Bloomfield points out the notion was flawed, but was it deliberately so? It certainly served the purpose of keeping the legislator and the courts out of, not just company management, but real substantive review and supervision. This is also explicable by reference to the UK’s traditional notion of the company, as being the affair of the members of the company, a “hands off

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Bloomfield (2013), p. 384. Bloomfield (2013), p. 386. 49 Yet, for Bloomfield, not knowing where to stop in identifying the relevant stakeholder interests posed a dilemma. For him, “(I)f companies observe their legal obligations for the development of their business in a sustainable fashion – in other words having appropriate and effective regard to minimising the external costs of their business that are borne by other stakeholders – they have gone as far as they need or should go in discharging any form of social obligation. It is the failure of the conventional definition of corporate governance to underline this ethical obligation that has partly led to the confusion over the fuzzy concept of corporate social responsibility” (p. 385). 48

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management” philosophy and culture, and the bias in favour of disclosure as the tool for control of the worst abuses. The ‘light touch’ regulation that followed the various Committee recommendations, and in particular, the insufficient scope of the “rules”, and the voluntary nature of the “obligations” thereby recommended, came nowhere near addressing the essence of the mounting problem. Yet things were changing. Mass participation in the market for investments was now a reality, with savers and investors numbering millions of ordinary working people. The expectations of the public had changed: more openness and accountability was required, but so was responsible management being assumed or presumed. The investing public wanted more information and were able to process that information if it was given; it rarely was. The investor rarely knew exactly what risk was attached to the recommended investment. While the rhetoric, even of the corporate governance “movement”,50 gave the impression of ever-rising standards of required ethical behaviour and competence—and every corporate or financial scandal led to a new flurry of corporate governance “reform”—the reality was that the insufficient scope of the concept never brought the necessary reform. The need is for law that exhorts the board and managers to properly balance different interests, including those of the shareholders but not exclusively so; and to balance short and long term but never to compromise the long term viability of the company by maximising the interests of the current body of shareholders to a degree that compromises the successful future of the enterprise. These are the new criteria that now have to inform management and governance—both internal governance by the board(s) and external governance (supervision and regulation) by regulatory authorities—and arguably need to be transported into the law, because even to the extent that it may be argued that they were already reflected in the law the law was not interpreted coherently as doing so, showing that they were either absent or imperfectly and only partially so enshrined. The UK Companies Act of 2006 introduced brand new provisions on the duties of directors, notably Section 172,51 but it is not so clear that it has radically changed matters in that jurisdiction.52 It is questionable whether the corporate governance initiatives have evolved to ensure such concepts in practice. In Section 172, the law

50 Sir Alan Cadbury himself would later say that Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. . .the aim is to align as nearly as possible the interests of individuals, corporations and society (Cadbury 1999). 51 Section 172 (1) of the UK Companies Act 2006 provides that: A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to— (a) the likely consequences of any decision in the long term, (b) the interests of the company’s employees, (c) the need to foster the company’s business relationships with suppliers, customers and others, (d) the impact of the company’s operations on the community and the environment, (e) the desirability of the company maintaining a reputation for high standards of business conduct, and (f) the need to act fairly as between members of the company. 52 See generally Hill (2014), pp. 33–43.

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provided for the first time for a statutory definition of the main fiduciary duty of the directors. Thus, this was defined in more inclusive terms than before as well as with at least one eye—and some argue two—to the long term. However, it still emphasised the interests of the shareholders, albeit introducing the strong concept of “(the success of) the company” as an enterprise (or business). Section 172 of the Act is itself capable of a restrictive and rather traditional interpretation. On the other hand, at least some commentators would also read into it an over-riding bias towards the long-term over the short-term in all situations.53 In any case, even after 2006, shareholder suits to enforce this duty are rare, and it is still the case that no other interest group has the power of suit if directors breach their duty. Thus, even assuming that the law is capable of a broader, rounder, interpretation to consider “new” culture and represent its prescriptions, other questions need to be asked as relate to new values in this sphere. Does the law provide for adequate duties in clear enough terms? Does the law ensure fair treatment of the minority shareholder(s)? Does it provide adequate protection to the enterprise itself? Directly linked to these questions about directors’ duties and Section 172 are other questions about the role of the shareholders, for these have been given an increasing say in corporate matters even by virtue of EU harmonisation measures such as the Second and Thirteenth Directive. Should we not clarify what, if any, is the responsibility of the shareholder and especially that of the majority shareholder when exercising majority power in general meeting? In takeover situations, does the law adequately address the question of the legitimacy of the taking of takeover defences or the refusal to utilise them (supplementing any self-regulation in the matter)? Does the law adequately ensure proper consideration by the directors of the interests of employees—which are most often directly linked to the interests of the enterprise itself—via some appropriate mechanism to ensure that this takes place (supervisory board, or alert procedure54); does the law provide for suitable “alert procedures” that gross mismanagement, risk taking and so on can be the occasion for some form of preventive control by those with a direct interest in invoking such. The answer to most of these questions is a clear negative. Some will object that prescribing “proper” management criteria “too closely” as a matter of law is problematic because it is not the role of the Courts to secondguess the “wisdom” of management decisions, this being the common sense behind the “business judgment” rule. They would argue that what is or is not a good management decision is best left to the professionals, the directors and managers themselves. However, the contrary is not what is being suggested here. What is submitted is that it is the role of the law to (1) set out the interests that directors must consider, (2) set out the framework to guide the directors in the essential order of priorities among these and (3) ensure, by review, that the directors have acted with these interests properly in mind and sought honestly to strike the right balance among them according to best corporate practice and (4) provide some form of alert

53 54

French (2012), p. 484 et seq. As mooted in the proposal for a revised Shareholder Rights Directive.

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mechanism whereby those with a direct interest are able to alert the authorities, supervisory and judicial, to a manifest failure to follow the law. So what are the proper interests? And what is the proper framework that could be laid down by law within which the directors can then be obliged to set the relevant priorities and aim for the proper balance at any moment in time? The author cannot attempt to set out full answers here, but this can be done by drawing from many European jurisdictions. Historically, the “varieties of capitalism” in Europe have made the answer elusive. However, as the UK reform shows, some ‘passive’ harmonisation is already occurring. Some convergence among MS laws has somehow occurred over the last twenty or so years, even without formal harmonisation of laws. The company laws systems of Europe have changed since the time of the ill-fated proposal for a Fifth Directive and we can now move on from this new starting point. The need now is to take the current position as a starting point and, working on the assumption of common changed values as set out above, go beyond remaining differences to further points of convergence to set out general rules that can then form a basal part of future harmonisation proposals. It is argued here that unless this exercise is undertaken, the next stages of harmonisation, and establishment, will not succeed. On the other hand, agreement can free up the transfer of primary establishment (by lessening the impact of change of applicable law upon transfer), lead to a common law of groups of companies and bring about general harmonisation of company law in a manner that will serve to sustain a European economy in search of stability through good governance, as well as achieving substantive justice and fairness. These are ends well worth pursuing. Criteria for the Exercise of Power: Standards

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The component elements of any future formulation of duty would appear to be: 1. The management of a company does not impact, positively or negatively, only on the shareholders. Others have a stake in it also, especially the employees. Other interests besides those of the shareholders are directly relevant. 2. In addition, it is a matter of public interest and Community interest how companies are run. It follows that as a matter of public interest enterprises should themselves receive protection from the law. 3. In virtue of the public interest, notably economic stability, it makes sense to give priority—if that were necessary—(at least residually) over all short-term interests to the long-term viability and prosperity of the company itself viewed as a going concern (my definition of the enterprise). 4. The previous criterion embodies also the taking into full account of the interests of the employees and the Community as well as the economy as a whole. 5. The directors may not fail to take account of any of the individual group interests, for they all go to make up the composite picture of interests—along the axis of short and long-term interests that must be satisfied (and only with justification be left unsatisfied) in the course of the conduct of the company’s affairs. Xuereb

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6. In this way they must “balance” all interests, arguably seeking to satisfy (some argue ‘satisfice’) all such legitimate interests in the short-term while however never compromising the long-term success of the company. 7. Any breach of the rules should be preventable by each of those interest groups themselves, through some mechanism that can be brought into play by a minority (if not by any individual member) in each group. 8. Any serious breach should lead to redress and compensation to any of those groups. 9. The role of the Courts is to test not merits, but legitimacy of decision-making, and therefore (merely) to ensure that the board has taken due account of the interests and acted honestly in accordance with the rules from an objective/ reasonable standpoint. The Court is not to be asked to rule on the respective merits of different possible and credible courses of action, but is to be asked to intervene robustly on process and primary motive by reference to the reasonably competent director test. Might a reasonably competent director/board have so prioritised matters having taken due account of all relevant considerations? While some argue for a “satisficing” policy concerning the current interests of the various stakeholders, which makes the long-term interests of the enterprise proportionately more “supreme”,55 one might equally advance (for the sake of full argument, and because I tend towards it) an alternative formula rooted in initial bias towards “maximising” the present interests of the present players, as a formulation that places strong weight on their legitimate expectations. Under this formula, the task of managers and of the board in particular would be to seek to maximise these interests unless the immediate or long-term interests of the company/enterprise reasonably required that this maximisation be sacrificed in favour of merely satisficing or even denying their satisfaction. As the counterweight, the principle of proportionality would demand that such was “reasonably required”. I repeat for emphasis that the law or the courts must not be asked to prescribe what a board should do, or ought to have done, out of a number of choices (the courts should not seek to rule on “the merits” of two or more possible and legitimate commercial courses of action or acts or omissions), but the law and the Courts must surely declare what interests the directors are both entitled and obliged to consider and indicate that they may, even must (in light also of the long-term view) at least consider giving priority to one interest over another in case of real conflict between those interests. The identified interests (interest groups) can legitimately expect to be fully considered, but they cannot possibly legitimately expect to be preferred to all other interests to the point of denial of those other interests without very good reason, and still less to the prejudicing of the longerterm prosperity of the company; and in any case, preference can only be temporary, and generally “proportionate”. The Court is not to second-guess any assessment but it should be empowered to scrutinise the process to ascertain that the process was properly conducted. 55

See for example, Keay (2008), p. 698.

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The other aspect is that European law should continue to intervene (but in a principled and coherent manner) and decide what is to be left to directors and what to take out of their hands. Certainly to prioritise their own posts, salaries or perks falls right outside the formula, for the general interest there is to allow the market to establish their worth—hence their remuneration must be placed in the hands of truly independent directors and/or be subject to the approval of the members. In short, the law on corporate organisation and powers must make clear those issues that the directors are not competent to decide, for clear reasons of conflict of interest. Moreover, a default rule should apply so any power falling to be exercised in circumstance of conflict of interest should, if granted to the board, revert or be channelled to some other body for decision. At the same time and equally importantly, the law should intervene to prescribe proper criteria for the decision-making of that other body, whether it be a supervisory board or the general meeting itself. Otherwise, rules at the lower level mean little. The Position of the European Commission

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There has been long consultation and discussion in Europe over many years over all Commission proposals to harmonise the company laws of Europe against the backdrop of the need to fully implement the internal market. The general result, as we have seen, is that since the 1960s a number of measures were adopted by the Council and then by Council and Parliament (➔ para 25). However, success has so far eluded the Commission in all outright attempts to lay down commonly agreed fundamental principles. To be fair, the UK approach to business generally began to commend itself across Europe, the City of London serving as something of an object of envy for all other Member States, with its success being attributed largely to its rather liberal and hands-off approach in terms of incorporation and then corporate regulation, except for an emphasis, especially for listed companies, on public disclosure of company information. The disclosure philosophy came to prevail over the elaboration of detailed substantive rules. This disclosure philosophy has been a motif of a large number of the EU measures in the field of company law and securities regulation as well as financial services law. However, dissatisfaction with some ongoing differences in national laws, as well as general dissatisfaction with the general failure of the law to prevent or punish corporate failure and wrongdoing, have in recent years led to much further consultation and discussion in general terms about key issues in company law and management.56 56 See for example, the Report of the Reflection Group on the Future of EU Company Law (Brussels 5 April 2011. Available at https://papers.ssrn.com/sol3/papers.cfm? abstract_id¼1851654); the Commission Green Paper on The EU Corporate Governance Framework, COM(2011) 164 final (available at https://op.europa.eu/en/publication-detail/-/publication/ 3eed7997-d40b-4984-8080-31d7c4e91fb2/language-en); the Commission Consultation on the Future of European Company Law (20 February 2012. Available at https://ec.europa.eu/growth/ content/consultation-future-european-company-law_en).

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Having withdrawn for many years from the field, starting with its surrender over the proposed Draft Fifth Directive in the early 1990s, the Commission began a process in 2002 of consultation and discussion around the theme of “modernising company law”. A High Level Group of Experts made recommendations. Private initiatives and conferences were also organised to discuss the future shape of company law in Europe, including a possible “European Model Company Act”.57 On 10/11 September 2015, at the annual conference of the European Company and Financial Law Review at WU University in Vienna, the “European Model Company Act” (“EMCA”) was introduced by its drafters, as the latest initiative in this area. The document was produced by an independent group of academics and practitioners upon the initiative of Professors Paul Krüger Andersen from Denmark and Theodor Baums from Germany. The EMCA was presented as a model statute regulating corporations, somehow akin to the American Model Business Corporation Act. After a methodological introduction, the EMCA is divided in 12 chapters dedicated, respectively, to general principles, formation of companies, registration, transformation and re-registration, shares, financial structure, capital, governance and management, directors’ duties and liabilities, shareholders’ meeting and protection of minorities, financial statements and auditing, restructuring, dissolution and liquidation, groups of companies, and branches of foreign companies. The stated intention of the drafters is to offer a coherent and comprehensive Model Act that might serve as a basis for further European harmonisation (as they say, EU corporate law directives and regulations have often been criticised for being incomplete and not tackling some important issues), or used by current and future MS as a blueprint for their legislation, bypassing the political compromises and bureaucratic hurdles of European legislation. The Project requires careful consideration. It is hoped that this present commentary contributes to the broader debate that this Project will undoubtedly engender on the aspects highlighted in this commentary. A relatively recent development is the Commission’s Communication titled an “Action Plan: European company law and corporate governance – a modern legal framework for more engaged shareholders and sustainable companies”.58 It has been billed as “comprehensive”, and as being contributory to increased efficiency and transparency in the running of companies. In 2003, at the beginning of the exercise that led to this document, internal market Commissioner Fritz Bolkestein had put the Commission’s ambitions as follows: “Company law and corporate governance are right at the heart of the political agenda, on both sides of the Atlantic. That is because economies only work if companies are run efficiently and transparently. We have seen vividly what happens if they are not: investment and jobs will be lost; and in the worst cases, of which there are too many,

57 See Baums and Kruger Anderson (2008). See the webpage of the Aarhus University Department of Law. Available at http://law.au.dk/en/research/projects/european-model-company-act-emca/. See Kruger Andersen (2018). 58 COM(2012) 740 final. See generally, Geens and Hopt (2010).

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shareholders, employees, creditors and the public are ripped off. Prompt action is needed to ensure sustainable public confidence in financial markets. The Action Plan provides a clear and considered framework combining new law where necessary with other solutions. It will help deliver the integrated and modern company law and corporate governance framework that businesses, markets and the public are calling for. The Commission is shouldering its responsibilities: Corporate Europe must shape up and do the same. Working in partnership, we have a unique opportunity to strengthen European corporate governance and to be a model for the rest of the world.”59 Suffice it to outline its main proposals and ask the question: how close to the core of company law did the Commission get with this latest plan, and did it get as close as needed? One should recall first that the main reason for Union involvement has historically been the single market, intervening only as needed for that purpose (even if not sufficiently for that purpose), but second that the citizen has come to expect good behaviour from all companies.60 If the Union fails in some way to safeguard the “new values” this will be seen as a failure by the citizen (and by our partners). If values are always relevant,61 there can be no controversy about the Commission making proposals for internal market integration based on such. Whether this means a new attempt at introducing proposals covering matters such as directors’ duties, shareholder obligations, minority protection and other substantive issues—some of which had been canvassed (somewhat clumsily) in the old Draft Fifth Directive—is a main question, but, whatever looking back throws up that is of interest, it is forward that we must look. Note that the document is called, and is, an “Action Plan”. No comprehensive vision is there set out, although there is much evidence that such a vision is slowly evolving. This means that no definitions of “the company”, “the role (rights and duties) of the shareholder”, and no prescriptions regarding the “exercise of the power to vote”, or the duties of directors are to be found therein. The document itself recalls that the European Union “corporate governance” rules only apply to listed companies, leaving the vast majority of companies out of their reach. Therefore, the Action Plan hardly points to any milestone evolution of general company law, and is not an attempt to fasten on agreed fundamental principle. Various mechanisms that respond to some of the key lessons drawn from the financial crisis of 2008 are proposed, and their importance is not to be minimised in any way. They are in line with much that was recommended by the Company Law Reflection Group in their 2011 Report. The main emphasis is once again on disclosure of information. Its main points as summarised by the Harvard Law School Forum on Corporate Governance and Financial Regulation62 are:

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International Finance Group, The EU Approach to Corporate Governance, 2008, p. 3. Deloitte Millennial Survey (2016). 61 And they are. See for example, Craig and De Burca (2015), pp. 632–635. 62 Available at corpgov.law.harvard.edu/2013/01/26/eu-commission-proposes-action-plan-forcorporate-governance/. 60

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1. Measures aimed at increasing transparency in EU companies: – A proposal (possibly through an amendment to the Accounts Directive) to strengthen disclosure requirements with respect to companies’ board diversity policies and risk management strategies; – A recommendation to improve the quality of companies’ corporate governance reports, in particular the quality of explanations provided under the “comply or explain” principle; – An initiative to improve the visibility of shareholdings in Europe (as part of the Commission’s legislative work programme in the field of securities law); and – An initiative (possibly through an amendment to the Shareholders’ Rights Directive63) on disclosure of voting and engagement policies and voting records by institutional investors. 2. Engaging Shareholders. The Commission intended to focus on the following Initiatives to improve shareholder engagement in EU companies: – An initiative (possibly through an amendment to the Shareholders’ Rights Directive) to improve transparency on director remuneration policies and individual remuneration of directors, and to grant shareholders the right to vote on companies’ remuneration policies and disclosure; – An initiative (possibly through an amendment to the Shareholders’ Rights Directive) aimed at improving shareholders’ control over related-party transactions; – An initiative (possibly through an amendment of the Shareholders’ Rights Directive) to improve the transparency and conflict-of-interest frameworks applicable to proxy investors, based on the responses to ESMA’s 2012 discussion paper on proxy advisors; – Working closely with ESMA and competent national authorities to develop guidance regarding the relationship between investor cooperation for corporate governance purposes and the rules on “acting in concert” under the Takeover Bids Directive and the Transparency Directive; and – Encouraging the development of transnational employee share ownership schemes in Europe. 3. Cross-Border Operations. The Commission planned to take the following actions to encourage and facilitate cross-border operations of EU companies and to improve EU company law in general: – Conduct consultations to assess the need for an initiative on the cross-border transfer of companies’ registered offices (in the absence of EU rules enabling companies to transfer their registered seat within the EU while preserving their legal personality);

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– Report on a current study on the application of the Cross-Border Mergers Directive and assess the need to revise the rules on cross-border mergers, given the complexity of and the uncertainty surrounding a number of (mainly procedural) issues (e.g. a lack of harmonisation of valuation methods for assets, the duration of the protection period for creditors’ rights and the consequences for creditors’ rights on completion of the merger); – Consider an initiative to provide a framework for cross-border divisions (possibly through an amendment of the Cross-Border Mergers Directive); – Continue to explore ways to improve the administrative and regulatory framework applicable to SMEs to enhance their cross-border operations and to follow-up on the proposal to create a European private limited company; – Launch an information campaign to encourage the use of the European Company and European Cooperative statutes; and – Improve the information available on groups of companies and on the recognition of the “group interest” concept.64 4. Codification. The Commission planned to merge and restate a number of major EU company law Directives, including Directives covering mergers and divisions, the formation of public limited companies and the alteration and maintenance of their capital, single-member private limited companies, foreign branches and certain rules on disclosure, validity and nullity. The merged Directive would also include the changes introduced by the recent Directive on the interconnection of business registers.” 78

Disclosure and more disclosure is a recurrent theme. No comprehensive conceptual view of the legal obligations of the shareholder in the listed or unlisted public company (or in the private company) is taken; there is no talk of limits on the exercise of power; but there are elements of a “return of power” to the shareholders in general meeting, much as the Second Company Law Directive returned power to the general meeting by re-vesting in it powers that had been ascribed to the directors/managers themselves, mainly to prevent conflicts of interest and ensure that such decisions were taken by those with the most direct interest in the success of the company—namely, the members. Therefore, the shareholders are seen as having the pre-eminently relevant direct interest, and employees are to be encouraged to become shareholders, a move that is calculated to lead to the taking of a longer-term view by all shareholders.

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It is argued in this commentary that the concept of the ‘group interest’, and rules that secure it, must be accompanied by the proper articulation—and a common view of—the functions and duties of directors and shareholders in order that it may work effectively and fairly to direct group management down the appropriate path. In its Action Plan, the Commission reported that its consultation exercise had revealed that “the idea of a comprehensive legal EU framework covering groups of companies was met with caution.” COM(2012) 740 final, p. 15. Yet it remains unclear how one can hope to define the “group interest” without working on the scope and content of board and shareholder powers and duties.

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While some of the proposed rules may turn out to be a step in the development of something new in terms of principle, it is not clear that they are that, for they can be justified on “old” theories of the company and company law as a response to a primary need to restore faith in the markets (in securities and financial services). They cannot be seen as a direct and comprehensive response to the perceived need for law underpinning a balanced long/short-term approach or an inclusive stance, or for the kind of reform that will re-direct with full force the management of all companies in Europe for the benefit of European society as a whole. Yet, the Action Plan did envisage some innovative proposals, at least one of which from the old draft fifth Directive proposal, namely, the giving of a choice between a onetier and a two-tier board structure. One key strand in the Commission’s thinking is that if corporate governance can place focus on the long term then the ills of the short-term syndrome will not recur. The clear analysis is that short-termism led to the crisis. The remedy therefore, it is thought by some, must be to shift diametrically to long-termism, to be achieved mainly through disclosure.65 However, the suggested remedies arguably fall short of what is required for they do not extend to clarifying the duties of directors and others. Where does this leave the future of company law in Europe on the two main issues that are conspicuous by their avoidance, namely: the duties of directors, and the limits on the exercise by the shareholder(s) of the right to vote, especially the exercise of voting power by the majority in general meeting? Together they go to the heart of corporate management and governance—the responsibilities of the decision-makers and the role of law in enforcing these. This author has in the past argued for a formula that ensures the balancing between the short term and the long term and between interests, and that sees the “enterprise” itself as worthy of protection and as a focal point of convergence, at

65 The Explanatory Memorandum in the Proposal for a revision of the Shareholder Rights Directive (COM(2014) 213 final) reads as follows: “The financial crisis has revealed that shareholders in many cases supported managers’ excessive short-term risk taking. Moreover, there is clear evidence that the current level of ‘monitoring’ of investee companies and engagement by institutional investors and asset managers is sub-optimal. Institutional investors and their asset managers do not sufficiently focus on the real (long-term) performance of companies, but often on share-price movements and the structure of capital market indexes, which leads to suboptimal return for the end beneficiaries of institutional investors and puts short-term pressure on companies. Short-termism appears to be rooted in a misalignment of interests between asset owners and asset managers. Even though large asset owners tend to have long-term interests as their liabilities are long-term, for the selection and evaluation of asset managers they often rely on benchmarks, such as market indexes. Moreover, the performance of the asset manager is often evaluated on a quarterly basis. As a result, many asset managers’ main concern has become their short term performance relative to a benchmark or to other asset managers. Short-term incentives turn focus and resources away from making investments based on the fundamentals (strategy, performance and governance) and longer term perspectives, from evaluating the real value and longer-term value creative capacity of companies and increasing the value of the equity investments through shareholder engagement.”

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least long-term, for often conflicting interests.66 Directors should be exhorted by law to perform this “balancing” act. The UK Companies Act of 2006 reflects this idea, at least in principle. The long term must be taken into account, as must other listed considerations. One interpretation of the Section is that long term and short term need to be “balanced”, but without any clear indication of “relative weight”, so that one can interpret the intention as being that of “maximising short-term without however prejudicing the long term”. This version of the balancing act would mean that short-term considerations remain the dominant considerations (due no doubt to current demands and market pressures operating on the minds of directors and managers)—but that the response must be to temper the pursuit of short-term goals by “appreciation” of the long-term perspective. This would “moderate” shortterm management ambitions as well as demands from shareholders and other stakeholders.67 This commentator had proposed that directors should indeed be regarded as having a duty to current constituencies to act in their interests, or at least to the company to act in such interests, unless a long-term perspective required (reasonable necessity and proportionality) that those interests be deferred to those of the long term (as discerned from those of the “enterprise”). This latter necessity would also provide a criterion for preferring one set of short-term interests over another. Thus, while the rule would be that directors should balance all the various interests by seeking to satisfy all, there might be occasions where the long term good of all required that one set of interests (those of one group) be preferred short term to those of another which might lead to the mere satisficing or even denial pro tempore of that other.68 On this view, the directors would be obliged, by law, to balance the present and the future, the short term and the long term, never compromising the long term and indeed seeking to ensure—even maximise—the long-term prosperity of the company while, however, at the same time seeking to fully satisfy the short-term needs of the company/enterprise and the interests of the present constituencies, and doing both, unless (a) the long term required that all short-term interests be either pro tempore denied or merely satisficed or (b) the present and/or long-term interests of the enterprise required that one or other short-term interest of one or other constituency be either denied or merely satisficed—even if this appeared to be ‘preferring’ one constituency over another.

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Xuereb (1988a). It is said that this is also the approach of the Commission. See Harvard Law School Forum on Corporate Governance, Martin Lipton, European Commission Proposes to Moderate Shorttermism and Reduce Activist Attacks posted on Monday, April 14, 2014. Available at http:// corpgov.law.harvard.edu/tag/european-commission/. Another interpretation of the Commission’s position is that it puts the long-term interests of the company first and foremost but the Commission declared in its paper that “(T)he initiatives in the area of corporate governance do not aim at altering the current approach, but ensure, by encouraging proper interaction between companies, their shareholders and other stakeholders, that this approach becomes more efficient.”. It would be a mistake, then, to read too much into what the Commission has proposed. 68 See especially, Xuereb (1988a). 67

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Many will ask not only whether this is the correct formula but also whether this should be set down in law, and the Courts be called in to judge directorial action against this formula as embedded in harmonised company law, or whether matters should be “left to the market”, and to lesser corporate governance mechanisms such as a voluntary Code. In the UK, the new statutory formulation of the main duty of the directors can still not be enforced by non-shareholder interest groups. In disclosure-philosophy style, it is often said that regular reporting is more likely to sensitise central management to the impact of its decisions on non-shareholder groups, in any case. The Commission appears to have pinned its hopes on this latter approach. It is submitted here that this is a needed but incomplete approach to allaying in the future the devastating effects of unchecked short-termism. At the same time, short-term interests are a major driver of the system. A balance needs to be struck, and there is still a need for an open debate about where it should be struck. The Commission Communication did not expressly address these key issues as part of a formulation of legal duties proposal. In any event, its proposals do not cover all public or private companies. Surely, the need is to supply rules for all companies and certainly for all public companies. The crisis may be pushing Commission thinking away from the old pure short-termism outlook or culture as hitherto permitted by many national laws towards the other extreme, and one that may yet prove to be beside the point. It can be interpreted to be asking of directors (and their monitors) that they act always primarily in the long term, although what this might mean is not clear. Of course, any company and its constituents have short-term interests also. A possible interpretation of Commission thinking appears in effect to be as follows: the directors must act in the long-term interest of the company (the “enterprise”) while considering (and no more) the short-term interests of the company and its constituents. If this is right, the concept is not elaborated upon. Yet clarity on this most vital issue is needed for all companies as a matter of company law in Europe. The last major financial crisis therefore was in some danger of taking us from West to East without any possibility of a stop at the half-way point– where we might find greater balance and comfort. Going from extreme emphasis on the short-term to one on the long-term perspective may not be the full answer in the end. In any event, in the author’s view, this is exactly the debate that is still needed. Even so, with this new emphasis on the long-term, can it be said that the “institutionalists” can claim some victory over the “contractualists”, for the institutionalists generally prioritised the “enterprise”, giving the latter diverse meanings but essentially using the idea of the enterprise to express the priority of long-term interests over short-term ones—the short term being typified by the interests of the majority of the current body of members. Clearly several assumptions underlay the various positions. What is now clear is that citizens expect that the law demand something better and less disingenuous from corporate managers and from corporations, and indeed from their legislators. At the very least, the European citizen now demands from company directors the ability and commitment to balance short-term and long-term Xuereb

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interests, and increasingly requires (even as an investor and shareholder) that other interests besides those of the shareholders qua shareholders be considered. That the law was failing is quite clear. The ambiguity still surrounding the interpretation of Section 172 of the UK Companies Act 2006 underscores the point. Nor are positions fully clearly established in the other Member States and shifting doctrine can soon generate a new shift. Hence, the need for a common formula for the primary duty of directors under the law that reflects the complexity or multi-dimensional nature of this rather difficult ‘new values’ task. That is why the timing is right for such an exercise to be undertaken at this stage of company law harmonisation and European integration. 2.7.6. 89

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The duties of directors are only one part of the equation. It is equally important that the law be consistent in requiring the same “responsible” orientation wherever original or residual power resides in and is exercised by the shareholders. For to leave this parallel issue unaddressed in their regard would likely serve to nullify any gains made through harmonising the duties of the directors in the way suggested.69 Here the context, in the sense of the scope and nature of the decision that shareholders are called upon to make (they are not managers of the enterprise) may not involve considerations related directly to consumers or the environment and so on, in the manner in which they should occupy directors, but it is crucial for Europe to take a stand on the main question: Can the shareholders, especially the majority shareholder(s), have their decisions reviewed for manifest lack of consonance with the interests of the enterprise or manifest attention to their own personal interests to the detriment of those of the minority or even of the enterprise? Can shareholders be permitted to act in their own selfish, even “outside”, interests or should some reference need to be made to the interests of the company itself, as well as of the minority of shareholders? And how can this best be formulated and enforced? Europe needs to face the issue of limiting, or rather properly directing, the exercise of majority shareholder power. This cannot be avoided any longer. For example, it is impossible to conceive of work on the harmonisation of the national laws on the group of companies, which would involve agreeing on a common concept of the “group enterprise” and the “group interest” as well as rules for decision-making employing such concepts, without addressing these fundamental matters of principle—both in relation to the duties of the board and also to the exercise of power in general meeting. These are key elements in the regulation of the working of the group of companies. Speaking more generally about the entire framework of company law in an integrated Europe, it is only when this circle is completed that Fritz Bolkestein’s dream can come true. On the horizon loom some of the greatest challenges for

69

See Strine (2010, 2014) and Xuereb (1985, 1986, 1987, 1988b, 1991).

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company law harmonisation and for the discipline of comparative company law, and these challenges can no longer be avoided.

2.8. State Aid (lit. h)

Other Treaty provisions regulate the giving of aid by a MS. This provision requires the Council and the Parliament to satisfy themselves that the conditions of establishment are not distorted by aid. This calls into play the possible application of Articles 107 and 108 of the TFEU.

List of Cases ECJ 01.07.1986, C-79/85, Segers v Bestuur van de Bedrijfsvereninging voor Bank, ECLI:EU:C:1986:308 [cit. in para 18] ECJ 07.07.1988, C-143/87, Stanton v Inasti, ECLI:EU:C:1988:378 [cit. in para 18] ECJ 30.05.1989, C-305/87, Commission v Greece, ECLI:EU:C:1989:146 [cit. in para 15] ECJ 30.05.1991, C-19/90 to C-20/90, Karella and Karellas, ECLI:EU:C:1991:229 [cit. in 29] ECJ 12.03.1996, C-441/93, Panagis Pafitis and Others v Trapeza Kentrikis Ellados A.E. and Others, ECLI:EU:C:1996:9 [cit. in para 29] ECJ 12.05.1998, C-367/96, Alexandros Kefalas and Others v Elliniko Dimosio (Greek State) and Organismos Oikonomikis Anasygkrotisis Epicheiriseon AE (OAE), ECLI:EU:C:1998:222 [cit. in para 29] ECJ 01.06.1999, C-302/97, Konle v Austria, ECLI:EU:C:1999:271 [cit. in para 15] ECJ 23.03.2000, C-373/97, Dionysios Diamantis v Elliniko Dimosio (Greek State) and Organismos Ikonomikis Anasygkrotisis Epicheiriseon AE (OAE), EU: C:2000:150 [cit. para 29] ECJ 05.03.2002, C-515/99, C-519/99 to C-524/99 and C-526/99 to C-540/99, Reisch and others v Bürgermeister der Landeshauptstadt Salzburg, ECLI:EU: C:2002:135 [cit. in para 13] ECJ 25.01.2007, C-370/05, Festersen, ECLI:EU:C:2007:59; [cit. in para 15]

References70 Andenas, M., & Wooldridge, F. (2009). European comparative company law. Cambridge: CUP. Andreadakis, S. (2008). Regulatory competition vs. harmonisation: Is there a third way? International and Comparative Corporate Law Journal, 41–57. Baums, T., & Kruger Anderson, P. (2008). The European Model Company Act Project. Working Paper Series No 78, Institute for Law and Finance, Johann-Wolfgang Goethe-Universität. 70

All cited internet sources in this comment have been accessed on 9 December 2019.

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Becker, U., et al. (Eds.). (2019). Schwarze. EU-Kommentar. (4th ed.). Baden-Baden: Nomos. Bloomfield, S. (2013). Theory and practice of corporate governance – An integrated approach. Cambridge: CUP. Bohlhoff, K., & Budde, J. (1984). Company groups – The EEC proposal for a Ninth Directive in the light of the legal situation in the Federal Republic of Germany. Journal of Comparative Business and Capital Market Law, 163–197. Cadbury, A. (1999). Corporate governance overview, World Bank report. Washington D.C.: World Bank. Cahn, A., & Donald, D. C. (2010). Comparative company law – Text and cases on the laws governing corporations in Germany, the UK and the USA. Cambridge: CUP. Charreaux, G. J. (2004). Corporate governance theories: From micro theories to national systems theories. Universite de Bourgogne LEG/FARGO Working Paper No. 1040101. Retrieved from http://papers.ssrn.com/sol3/papers.cfm?abstract_id¼486522 Corapi, & De Donno, B. (2006). “Le Societa: le societa in generale”. Imprese e Diritto Comunitario. Craig, P., & De Burca, G. (2015). EU law – Text, cases and materials (6th ed.). Oxford: OUP. Cremers, J. (2013). From harmonisation to regulatory competition. In S. Vitols & J. Heuschmid (Eds.), European company law and the sustainable company: A stakeholder approach (Vol. II, Chapter 4). Brussels: ETUI. Deakin, S. (2000). Regulatory competition versus harmonisation in European company law. ESRC Centre for Business Research, University of Cambridge, Working Paper No.163. Deakin, S. (2006). Legal diversity and regulatory competition: Which model for Europe? European Law Journal, 440–485. Deloitte Millennial Survey. (2016). Retrieved from https://www2.deloitte.com/content/dam/ Deloitte/global/Documents/About-Deloitte/gx-millenial-survey-2016-exec-summary.pdf Dine, J., Koutsias, M., & Blecher, M. (2006). Company law in the new Europe – The EU Acquis, comparative methodology and model. Cheltenham: Edward Elgar. Draetta, U., & Pocar, F. (2002). La società europea: problemi di diritto societario e comunitario. Diritto e prassi degli scambi internazionali / Istituto per la diffusione dell’arbitrato e del diritto del commercio internazionale. ISDACI; 14. Milano: EGEA. Drury, R. R., & Xuereb, P. G. (Eds.). (1991). European company laws - A comparative approach. Aldershot: Dartmouth. European Company Law Experts. (2012). Response to the European Commission’s Consultation on the Future of the European Company Law, May 2012. French, D. (2012). Mayson, French and Ryan on company law (29th ed.). Oxford: OUP. Geens, K., & Hopt, J. (Eds.). (2010). The European company law action plan revisited: Reassessment of the 2003 priorities of the European Commission (pp. 9–23). Leuven: Leuven University Press. Gorriz, C. (2016). Evolution of the European company law. Retrieved from https://www.academia.edu/17865705/The_evolution_of_the_EU_Company_Law and https://www.researchgate. net/publication/283727651-the-evolution-of-EU-company-Law Halbhuber, H. (2001). National doctrinal structures and European company law. The Hague: Kluwer Law International. High Level Group of Company Law experts, ‘A Modern Regulatory Framework for Company Law in Europe: A Consultative Document of the High Level Group of Company Law Experts’. Retrieved from http://ec.europa.eu/internal_market/company/docs/modern/consult_en.pdf Hill, J. G. (2014). Evolving directors’ duties in the common law world. In A. Paolini (Ed.), Research handbook on directors’ duties (pp. 3–43). Cheltenham: Edward Elgar. Hopt, K. J. (2000). Modern company law problems: A European perspective keynote speech. Retrieved from http://www.oecd.org/daf/ca/corporategovernanceprinciples/1857275.pdf International finance group, The EU approach to Corporate Governance, 2008. Retrieved from http://www.eneiset.gr/files/sel/2008.02%20IFC_EUApproach_Final.pdf Johnstone, A. (2009). EC regulation of corporate governance. Cambridge: CUP.

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Keay, A. (2008). Ascertaining the corporate objective: An entity maximisation and sustainability model. The Modern Law Review, 71, 663–698. Kruger Andersen, P. (2018). The European Model Company Act (EMCA) – a tool for European integration. ERA Forum, 19, 77–85. Paolini, A. (Ed.). (2014). Research handbook on directors’ duties. Cheltenham: Edward Elgar. Pingel, I. (Ed.). (2010). De Rome à Lisbonne, Commentaire article par article des traités UE et CE (2nd ed.). Bâle: Helbing & Lichtenhahn. Santoro, M. A., & Strauss, R. J. (2013). Wall street values –Business ethics and the global financial crisis. Cambridge: CUP. Shuannge, W. (2013). Less is more – A critical view of further EU action towards a harmonised corporate governance framework in the wake of the crisis. Washington University Global Studies Law Review, 41–93. Sørensen, K. E. (2014). Branches of companies in the EU: Balancing the eleventh company law directive, national company law and the right of establishment. European Company and Financial Law Review, 11(1), 53–96. Strine, L. E., Jr. (2010). One fundamental corporate governance question we face: Can corporations be managed for the long term unless their powerful electorates also act and think long term? Business Lawyer, 66(1), 1–81. Strine, L. E., Jr. (2014). Can we do better by ordinary investors? A pragmatic reaction to the dueling ideological mythologists of corporate law. Columbia Law Review, 449–502. Tizzano, A. (Ed.). (2014). Trattati dell’Unione Europea. Le Fonti del Diritto Italiano (2nd ed.). Milan: Giuffrè. Wymeersch, E. (2001). Company law in Europe and European company law. WP 2001/06, Financial Law Institute, University of Gent. Xuereb, P. G. (1985). The limits on the exercise of majority power in general meeting. The Company Lawyer, 119–208. Xuereb, P. G. (1986). Remedies for abuse of majority power. The Company Lawyer, 53–57. Xuereb, P. G. (1987). The right to vote in general meeting – A comparative review. The Company Lawyer, 16–27. Xuereb, P. G. (1988a). The juridification of industrial relations through company law reform. Modern Law Review, 156–172. Xuereb, P. G. (1988b). Corporate management and the statutory right of pre-emption: A comparative analysis. International and Comparative Law Quarterly, 397–411. Xuereb, P. G. (1991). Shareholder rights, the interests of the company and reasonable necessity – A comparative review of English, French and Italian company law. In R. R. Drury & P. G. Xuereb (Eds.), European company laws – A comparative approach (pp. 141–175). Aldershot: Dartmouth.

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Article 51 [Exemptions in the Exercise of Official Authority] (ex-Article 45 TEC) The provisions of this Chapter 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.1–3 The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may rule that the provisions of this Chapter shall not apply to certain activities.4–6

Contents 1. Exercise of Official Authority (Paragraph 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Exemptions Made by Secondary Law (Paragraph 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 List of Cases References

1.

Exercise of Official Authority (Paragraph 1)

Article 51 TFEU excludes the application of Chapter 2 on the right of establishment, so far as any given MS is concerned, to activities that in that State are connected, even occasionally, with the exercise of official authority. It provides further that the EP and the Council, acting by the ordinary legislative procedure, may rule that the provisions of the chapter shall not apply to certain activities. This provision can be read in the light also of Article 45.4 TFEU, which excludes employment in public service from the application of the free movement of workers and the relevant case law of the Court of Justice. In Reyners, AG Mayras defined “official authority” as that which arises from the sovereignty and majesty of the State; for him who exercises it, it implies the power of enjoying prerogatives outside the general law, privileges of official power and powers of coercion over citizens”.1 The exclusion will be interpreted and applied strictly by the Court of Justice, to include only activities that are directly and specifically connected to the exercise of official authority. Thus, attempts on the part of MS to bring lawyers, auditors,

1

Case 2/74, Reyners v Belgium (ECJ 21 June 1974).

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traffic accident experts, the operator of a national lottery computer system, and security staff within the ambit of the exclusion have failed.2

2. 4

5

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Exemptions Made by Secondary Law (Paragraph 2)

The new Article 51 TFEU is very similar to ex-Article 45 EC. The Treaty of Lisbon introduced a fundamental change concerning the law-making process: the new rule now is the ordinary legislative procedure.3 Article 51.2 TFEU provides that the EP and the Council, acting in accordance with the ordinary legislative procedure, may rule that certain provisions regarding the right of establishment (a real cornerstone of European law) do not apply to certain activities. The provision does not list or otherwise restrict the activities that may be taken outside the scope of the rules governing the freedom of establishment. The meaning of the word “certain” (referring to “activities” that can be exempted from the right of establishment) is rather indefinite. According to some authors,4 the legislator’s discretion under this paragraph is limited by the first paragraph’s reference to activities “connected, even occasionally” with the exercise of official authority. This provision has not yet been used,5 and the CJEU has not had an opportunity to consider its possible limits. This paragraph would, in all probability, be interpreted restrictively6 by the Court, in light of case law7 on the first paragraph of Article 51 TFEU. Article 62 TFEU underlines that Article 51 TFEU will also apply to services.

List of Cases ECJ 21.06.1974, 2/74, Reyners v Belgium, ECLI:EU:C:1974:68 [cit. in para 1, 2] ECJ 10.12.1991, C-306/89, Commission v Greece, ECLI:EU:C:1991:463 [cit. in para 1] ECJ 13.07.1993, C-42/92, Thijssen v Controldienst voor de Verzekeringen, ECLI: EU:C:1993:304 [cit. in para 1] 2 See Case C-306/89, Commission v Greece (ECJ 10 December 1991); Case C-42/92, Thijssen v. Controldienst voor de Verzekeringen (ECJ 13 July 1993); Case C-272/91, Commission v Italy (ECJ 26 April 1994); Case C-114/97, Commission v Spain (ECJ 29 October 1998); Case C-335/98, Commission v Belgium (ECJ 21 May 2000); Case C-263/99, Commission v Italy (ECJ 29 May 2001). 3 Kotzur, in Geiger et al. (2017), Article 51 AEUV para 5. 4 Wyatt et al. (2011), p. 571. 5 Korte, in Calliess and Ruffert (2016), Article 51 AEUV para 17; Wyatt et al. (2011), p. 571; Truchot, in Pingel (2010), Article 45 CE para 17; Pocar, in Cian and Trabucchi (2001), p. 46. 6 Korte, in Calliess and Ruffert (2016), Article 51 AEUV para 17. 7 Case 2/74, Reyners v Belgium (ECJ 21 June 1974) para 43; Case C-438/08, Commission v Portugal (ECJ 22 October 2009) para 35; Case 54/08, Commission v United Kingdom (ECJ 24 May 2011) para 41.

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ECJ 26.04.1994, C-272/91, Commission v Italy, ECLI:EU:C:1994:167 [cit. in para 1] ECJ 29.10.1998, C-114/97, Commission v Spain, ECLI:EU:C:1998:519 [cit. in para 1] ECJ 21.05.1999, C- 335/98, Commission v Italy, ECLI:EU:C:1999:267 [cit. in para 3] ECJ 29.05.2001, C-263/99, Commission v Italy, ECLI:EU:C:2001:293 [cit. in para 1] ECJ 22.10.2009, C-438/08, Commission v Portugal, ECLI:EU:C:2009:651 [cit. in para 2] ECJ 24.05.2011, C-54/08, Commission v United Kingdom, ECLI:EU:C:2011:339 [cit. in para 2]

References Calliess, C., & Ruffert, M. (Eds.). (2016). EUV/AEUV (5th ed.). Munich: C.H. Beck. Cian, G., & Trabucchi, A. (Eds.). (2001). Commentario breve ai Trattati della Comunità e dell’Unione Europea, Breviaria Iuris. Padua: CEDAM. Geiger, R., Khan, D. E., & Kotzur, M. (2017). European Union Treaties (6th ed.). Munich/Oxford: Beck/Hart. Pingel, I. (Ed.). (2010). De Rome à Lisbonne: commentaire article par article des traités UE et CE (2nd ed.). Bâle: Helbing & Lichtenhahn. Wyatt, D., Dashwood, A., Dougan, M., Rodger, B., & Spaventa, E. (2011). Wyatt and Dashwood’s European Union law (6th ed.). Oxford: Hart.

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Article 52 [Special Provision on Public Policy, Public Security, or Public Health] (ex-Article 46 TEC) 1. The provisions of this Chapter and measures taken in pursuance thereof5 shall not prejudice the applicability of provisions laid down by law, regulation or administrative action11 providing for special treatment12 for foreign nationals8 on grounds of public policy,27 public security32 or public health.35 2. The European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure, issue directives for the coordination of the abovementioned provisions.47 Contents 1. 2.

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.1. Direct Applicability and Secondary Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.2. Freedom of Establishment and Free Movement of Services . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.3. Personal Scope of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.3.1. Natural Persons and Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.3.2. The Addressee of the Rule of Justification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.4. The Type of Interference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.4.1. Distinctly and Indistinctly Applicable Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.4.2. Restrictions Beyond Entry and Residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3. Grounds of Justification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.1. General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.2. Public Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 3.3. Public Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 3.4. Public Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 4. Limits of Justification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.2. Proportionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 5. Legal Basis for Secondary Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 List of Cases References

1.

Overview

Article 52 TFEU (originally Article 56 TEEC 1957, renumbered Article 46 TECAmsterdam) provides a public policy exception or “ordre public-reservation”1 to the freedom of establishment. Unlike Article 51 TFEU, it does not exempt any 1

E.g. Kotzur, in Geiger et al. (2015), Article 52 AEUV para 2. The term “ordre public”, in this context, merely serves as a generic term for public , public and public health. It is not identical to the broader ordre public-concept of private international law.

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activities from the scope of application of the freedom of establishment. Rather, it is a rule of justification for interferences based on the legitimate grounds listed in paragraph 1. More precisely, under Article 52.1 TFEU, measures discriminating against foreign nationals can be justified by reasons of public , public or public . In systematic terms and according to its wording, Article 52 TFEU specifically applies to interferences with the freedom of establishment under Article 49 TFEU. However, as far as this right is concerned, Article 52 TFEU as lex specialis also derogates from the general prohibition of discrimination on grounds of nationality (Article 18 TFEU) and the free movement of Union citizens (Article 21 TFEU).2 Article 52 TFEU corresponds to the ordre public-derogations from the other fundamental freedoms, notably Article 45.3 TFEU on the free movement of workers. They all follow the same pattern and are interpreted by the ECJ essentially in the same way.3 In particular, the case law on the free movement of workers serves as a point of reference for the Court’s interpretation of Article 52 TFEU.4 As all derogation clauses, Article 52 TFEU establishes an exception to the rule and, therefore, must be interpreted strictly.5 It permits limitations on the exercise of the right of establishment in individual cases. However, it does not empower MS generally to impose higher standards than those established by EU law.6 Successful invocations of Article 52 TFEU have rather been the exception. Article 52.2 TFEU adds a legal basis for secondary EU legislation coordinating the domestic ordre public-derogations. Unlike para 1, the wording of para 2 has been amended by the Treaties of Maastricht, Amsterdam, and Lisbon, adapting the decision-making procedure to the respective changes of the general treaty rules.

2

Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 4; Dashwood et al. (2011), p. 482 et seq.; Khan and Eisenhut, in Vedder and Heintschel von Heinegg (2018), Article 52 AEUV para 2. 3 For cross-references to Article 36 TFEU see e.g. Case C-367/89, Richardt and Les Accessoires Scientifiques (ECJ 4 October 1991) para 22; Case C-83/94, Leifer and others (ECJ 17 October 1995) para 26; Case C-158/96, Kohll v Union des caisses de maladie (ECJ 28 April 1998) para 51; Case C-54/99, Association Eglise de scientologie de Paris and Scientology International Reserves Trust v The Prime Minister (ECJ 14 March 2000) para 17; Case C-145/09, Land Baden-Württemberg v Tsakouridis (ECJ 23 November 2010) para 44. 4 Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 4; Schlag, in Schwarze (2019), Article 52 AEUV para 6; Dashwood et al. (2011), p. 571. 5 Case 41/74, van Duyn v Home Office (ECJ 4 December 1974) para 18 et seq; Case 67/74, Bonsignore v Oberstadtdirektor der Stadt Köln (ECJ 26 February 1975), para 6; Case 36/75, Rutili v Ministre de l’intérieur (ECJ 28 October 1975) para 26 et seq.; Case C-363/89, Roux v Belgian State (ECJ 5 February 1991); Case C-260/89, ERT and others v Pliroforissis and others (ECJ 18 June 1991) para 24; Case C-348/96, Calfa (ECJ 19 January 1999) para 23; Case C-355/98, Commission v Belgium (ECJ 9 March 2000) para 28; Joined Cases C-482 and C-493/01, Orfanopoulos and others (C-482/01) and Oliveri (C-493/01) v Land Baden-Württemberg (ECJ 29 April 2004) para 64, 79; Case C-161/07, Commission v Austria (ECJ 22 December 2008) para 35. See also Korte, in Calliess and Ruffert (2016), Article 52 AEUV para 2; Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 21; Tiedje, in: von der Groeben et al. (2015), Article 52 AEUV para 15; White (2004), p. 89. 6 Case C-363/89, Roux v Belgium (ECJ 5 February 1991) para 30; Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 21.

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Applicability

2.1. Direct Applicability and Secondary Legislation

Article 52.1 TFEU is directly applicable.7 Therefore, domestic courts are entitled to apply this treaty rule without any further act of implementation when they are to evaluate the legality of national measures interfering with the freedom of establishment. Unlike the ordre public-reservations to the other fundamental freedoms, Article 52.1 TFEU does not merely refer to interferences with the primary law guarantee of the freedom of establishment but also explicitly covers “measures taken in pursuance [of this Chapter]”. This wording implies that under Article 52 TFEU, MS are also justified in deviating from secondary legislation adopted on the basis of Article 49 TFEU et seq.8 On the other hand, it cannot be assumed that Article 52 TFEU is intended to compromise the binding force of secondary legislation by a general ordre public-reservation. This would neither be consistent with the law on the free movement of workers or goods, nor would it take into account the structural difference between primary law and the much more detailed secondary law. Therefore, the reference in Article 52.1 TFEU must be understood as a clarification that the ordre public-reservation generally includes deviations from secondary law unless secondary law provides otherwise. Consequently, exhaustive secondary law harmonisation bars the application of Article 52 TFEU,9 or more precisely: Article 52.1 TFEU is not applicable to deviations from exhaustive secondary law regimes. Such deviations are possible only to the extent provided for by secondary law itself.10 An important secondary law regime of this kind is the Services Directive 123/2006,11 which, within its scope of application, precludes falling back on Article 52 TFEU.12 This conclusion primarily refers to secondary law regimes addressing public , security, or health issues by setting adequate substantive standards or procedures on

7 Müller-Graff, in Streinz (2018), Article 52 AEUV para 1, 21; Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 33; Korte, in Calliess and Ruffert (2016), Article 52 AEUV para 4. 8 Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 37. 9 Case C-158/96, Kohll v Union des caisses de maladie (ECJ 28 April 1998) para 47 et seq.; Korte, in Calliess and Ruffert (2016), Article 52 AEUV para 4; Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 17 et seq.; Müller-Graff, in Streinz (2018), Article 52 AEUV para 6. Cf. also Barnard (2019), p. 477. 10 Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 37. 11 Parliament/Council Directive 2006/123/EC on services in the internal market, O.J. L 376/36 (2006). 12 Case C-593/13, Presidenza del Consiglio dei Ministri and others v Rina Services SpA and others (ECJ 16 June 2015) para 40; Korte, in Calliess and Ruffert (2016), Article 52 AEUV para 4, 18; Müller-Graff, in Streinz (2018), Article 49 para 6, Article 5 para 44; Cornils, in Schlachter and Ohler (2008), Article 9 para 28; Siekemeyer and Wendland, in Müller-Graff (2015), para 83.

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a European level. Directive 2004/3813 is a special case because it specifically governs the measures available under Article 52 TFEU with regard to the rights of entry and . This Directive is not, strictly speaking, exhaustive because it does not deal with all relevant aspects. Therefore, the Directive does not completely supersede but rather complements Article 52.1 TFEU.14 Nevertheless, as a specification of Article 52 TFEU, the Directive is fully binding and cannot be bypassed by way of a direct application of Article 52 TFEU. Therefore, Directive 2004/38 imposes important limits15 without rendering Article 52 TFEU inapplicable.

2.2. Freedom of Establishment and Free Movement of Services

7

Article 52 TFEU is a rule of justification for interferences with the freedom of establishment. Moreover, according to Article 62, it also applies to the free movement of services. In this context, Article 52 TFEU is relevant for both limitations of the free movement of persons (providers and recipients of services) and of the free movement of the product itself. For example, Article 52.1 TFEU can justify certain limits to the reimbursement of costs for health services received in another MS (➔ para 38).

2.3. Personal Scope of Application

2.3.1. 8

9

Natural Persons and Companies

Article 52 TFEU is primarily tailored to legitimise certain restrictions on the free movement of natural persons. While under public international law states are under a strict obligation to grant entry and to their own nationals,16 Article 52 TFEU clarifies that the EU principle of non-discrimination does not require MS to fully expand this far-reaching privilege to all EU.17 Moreover, pursuant to Article 54 TFEU, Article 52 TFEU equally applies to.18 However, the actual meaning and relevance of Article 52 TFEU with regard to 13 Parliament/Council 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, O.J. L 158/77 (2004), Article 27 et seq. 14 Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 33. 15 Müller-Graff, in Streinz (2018), Article 52 AEUV para 6. 16 Cf. Article 3 Protocol No. 4 to the ECHR. 17 Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 2. 18 Case 79/85, D. H. M. Segers v Bestuur van de Bedrijfsvereniging voor Bank (ECJ 10 July 1986) para 17; Case 352/85, Bond van Adverteerders and others v Netherlands (ECJ 26 April 1988) para 31 et seq.; Case C-484/93, Svensson and Gustavsson v Ministre du Logement et de l’Urbanisme (ECJ 14 November 1995) para 15 et seq.; Case C-264/96, ICI v Kenneth Hall Colmer (ECJ 16 July 1998) para 24 et seq; Case C-114/97, Commission v Spain (ECJ 29 October 1998) para 40–43;

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remains rather unclear.19 Being legal persons, do not have a natural right of residence in the first place. Their legal status depends on domestic company law. Accordingly, under Article 54 TFEU, freedom of establishment is granted to “ or firms formed in accordance with the law of a Member State”. The first limit on the free movement of , therefore, is constituted by the respective requirements of domestic company law. Only when a company is legally recognised and capable of acting under the domestic company law of the respective MS that the additional question arises whether the activities of this company can be restricted under Article 52 TFEU on the ground of public , public or public . Hence, it is necessary to distinguish domestic restrictions falling under Article 54 TFEU from those falling under Article 52 TFEU—in particular in view of the ECJ case law on Article 54 TFEU limiting the MS’ right to apply their own domestic company law in cases of cross-border transferrals of company seats.20 The general conflict rules and links determining the applicable company law have to be tested against Article 54 TFEU. In these cases, the ECJ has not seriously contemplated Article 52 TFEU as an additional option to justify the host state in applying its own company law to a company from another MS.21 By contrast, Article 52 TFEU governs national restrictions relating to specific industries or activities.22 So far, however, it appears that the ECJ has never considered the requirements of Article 52 TFEU to be fulfilled with regard to restrictions imposed on.23 2.3.2.

The Addressee of the Rule of Justification

According to its clear wording, Article 52 TFEU is designed to justify interferences by MS. As far as the freedom of establishment has horizontal effect, interferences by private parties are not open to justification under Article 52 TFEU. Instead, the ECJ has resorted to unwritten mandatory requirements or

Case C-299/02, Commission v Netherlands (ECJ 14 October 2004) para 17 et seq.; Case C-161/07, Commission v Austria (ECJ 22 December 2008) para 35; Case C-546/07, Commission v Germany (ECJ 21 January 2010) para 47 et seq; Case 64/08, Engelmann (ECJ 9 September 2010) para 34; implicitly Case C-212/97, Centros Ltd v Erhvervs (ECJ 9 March 1999) para 32, 34. See also Müller-Graff, in Streinz (2018), Article 52 AEUV para 3. 19 Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 18; Forsthoff (2001), p. 62. 20 Case C-212/97, Centros Ltd v Erhvervs (ECJ 9 March 1999) para 14 et seq.; Case C-208/00, Überseering BV v NCC (ECJ 5 November 2002) para 56 et seq. 21 Cf. Case C-212/97, Centros Ltd v Erhvervs (ECJ 9 March 1999) para 34 with the simple statement that the reasons put forward to justify an application of domestic company law according to the real seat theory do not fall within the ambit of Article 52. 22 Case C-212/97, Centros Ltd v Erhvervs (ECJ 9 March 1999) para 26: “rules concerning the carrying on of certain trades, professions or businesses.”; Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 5 et seq.; similarly: Behrens (2000), p. 135. 23 Khan and Eisenhut, in Vedder and Heintschel von Heinegg (2018), Article 52 AEUV para 3.

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“overriding reasons of public that can justify private restrictions on freedom of establishment.24

2.4. The Type of Interference

11

With regard to the type of interference, Article 52 TFEU covers the whole range of state activities from statutory law to administrative regulations and individual decisions.25 However, there remain some doubts as to the precise range of restrictions open to justification. 2.4.1.

12

13

14

Distinctly and Indistinctly Applicable Measures

Article 52 TFEU is a rule of justification of direct discrimination on grounds of nationality, i.e. for distinctly applicable measures taken by MS in deviation from the national treatment rule. In the context of the free movement of services, Article 52 TFEU also applies to national measures that distinguish according to the place of establishment of the service provider or the place of residence of the recipient26— the main thrust of the general prohibition of discrimination under Article 56 TFEU. By contrast, for cases of or other indistinctly applicable , the ECJ has developed unwritten “”, “overriding reasons”, or “objective considerations” of public interest as limitations of the freedom of establishment or services.27 The precise doctrinal meaning and the relationship of these unwritten limitations to Article 52 TFEU, however, are not entirely clear. On the whole, the ECJ does not always consistently distinguish between these two mechanisms. Essentially there are three questions at issue. Firstly, it is uncertain whether are the exclusive terrain of unwritten overriding or whether they also fall under Article 52 TFEU as an additional or even preferential tool of justification. In some cases, the ECJ has indeed applied Article 52 TFEU28 or both tools in combination.29 The main argument for this position is that a rule that can justify even cases of direct 24

Case C-438/05, International Transport Workers’ Federation and Finnish Seamen’s Union v Viking (ECJ 11 December 2007) para 75; Tietje, in Ehlers (2014), para 62. With regard to trade unions see Barnard (2019), p. 229 fn. 238. 25 Müller-Graff, in Streinz (2018), Article 52 AEUV para 3; Barnard (2019), p. 484 et seq. 26 Case C-484/93, Svensson and Gustavsson v Ministre du Logement et de l’Urbanisme (ECJ 14 November 1995) para 15; Case C-224/97, Ciola v Land Vorarlberg (ECJ 29 April 1999) para 16; Dashwood et al. (2011), p. 572. 27 Case C-55/94, Gebhard v Consiglio dell’Ordine degli Avvocati e Procuratori di Milano (ECJ 30 November 1995) para 37. 28 Case C-405/98, Konsumentombudsmannen v GIP (ECJ 8 March 2001) para 40 et seq. 29 Joined Cases C-151/04 and C-152/04, Nadin, Nadin-Lux SA (C-151/04) and Durré (C-152/04) (ECJ 15 December 2005) para 39; Case C-169/07, Hartlauer Handelsgesellschaft mbH v Wiener Landesregierung and Oberösterreichische Landesregierung (ECJ 10 March 2009) para 46 et seq.; Case C-384/08, Attanasio Group Srl v Comune di Carbognano (ECJ 10 March 2010) para 46; Case C-509/12, IPTM v Navileme and Nautizende (ECJ 6 February 2014) para 20. In some cases, the

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discrimination should a fortiori also legitimise non-discriminatory restrictions.30 Normally, however, the Court sticks to the unwritten overriding reasons in cases of non-discriminatory restrictions. Numerous commentators conclude that Article 52 TFEU is inapplicable in such cases because the overriding requirements must be understood as immanent limitations to the very substance of the freedom of establishment (or services). Accordingly, indistinctly applicable measures based on overriding reasons do not constitute an interference with the freedom of establishment in the first place and therefore do not trigger the justification mechanism under Article 52 TFEU.31 The practical relevance of this controversy is limited. At any rate, it is clear that the unwritten overriding reasons include the legitimate grounds mentioned in Article 52 TFEU, which, therefore, can be invoked regardless of the theoretical applicability of Article 52 TFEU.32 Moreover, the test of overriding reasons is usually less strict than under Article 52 TFEU and leaves to MS a broader margin of appreciation.33 Secondly, it is sometimes disputed that cases of indirect discrimination (as opposed to indistinctly applicable measures strictu sensu) are open to justification beyond Article 52 TFEU.34 In the case law of the ECJ, it is generally acknowledged that indirectly discriminating measures can be justified on the basis of unwritten objective considerations—a parallel concept to overriding in the public interest.35 However, occasionally the Court has concentrated on Article 52 TFEU with its

Court left open whether it applied Article 52 or unwritten imperative requirements, e.g. Case C137/09, Josemans v Burgemeester van Maastricht (ECJ 16 December 2010) para 61 et seq. 30 Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 3; Hobe (2017), para 851; Enchelmaier (2011), p. 636; Ludwigs, in Dauses/Ludwigs (2019), para 103; Siekemeyer and Wendland, in Müller-Graff (2015), para 84. 31 Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 14, 37; Schlag, in Schwarze (2019), Article 52 AEUV para 3; Müller-Graff, in Streinz (2018), Article 52 AEUV para 4; Schneider (1998), p. 37. 32 Case C-108/96, Mac Quen and others (ECJ 1 February 2001) para 28; Joined Cases C-430/99 and C-431/99, Inspecteur van de Belastingdienst Douane, district Rotterdam v Sea-Land Service Inc. and Nedlloyd Lijnen BV (ECJ 13 June 2002) para 41; Case C-294/00, Deutsche Paracelsus Schulen für Naturheilverfahren GmbH v Gräbner (ECJ 11 July 2002) para 57; Case C-500/06, Corporación Dermoestética SA v To Me Group Advertising Media (ECJ 17 July 2008) para 37; Joined Cases C-171/07 and C-172/07, Apothekerkammer des Saarlandes and others v Saarland (ECJ 19 May 2009) para 27; Case C-539/11, Ottica New Line di Accardi Vincenzo v Comune di Campobello di Mazara (ECJ 26 September 2013) para 33 et seq.; Joined Cases C-159/12 – 161/12, Venturini v ASL Varese and others (ECJ 5 December 2013) para 41. See also Korte, in Calliess and Ruffert (2016), Article 52 AEUV para 5; Schlag, in Schwarze (2019), Article 52 AEUV para 3; Müller-Graff, in Streinz (2018), Article 52 AEUV para 4. 33 Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 14. 34 Cf. the argument put forward by the Commission in Case C-137/09, Josemans v Burgemeester van Maastricht (ECJ 16 December 2010) para 62. Moreover, Dashwood et al. (2011), p. 574 consider that also national rules having the effect of prohibiting cross-border activities or transactions, even if non-discriminatory, should be capable of justification only on the basis of Article 52. 35 Dashwood et al. (2011), p. 574; Siekemeyer and Wendland, in Müller-Graff (2015), para 93.

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strict requirements without considering broader reasons for justification on the basis of unwritten grounds.36 Finally, it is not entirely clear if the justification by way of unwritten overriding reasons is strictly limited to indistinctly applicable measures or if it is available in cases of direct discrimination as well. A number of ECJ decisions seem to indicate the latter.37 Occasionally, this has been welcomed as a general shift in the case law towards a broader concept of justification, e.g. with a view to environmental protection.38 However, such an open concept of justification would be difficult to bring in line with the clear wording of Article 52 TFEU and is widely rejected.39 Also, the Court itself has repeatedly made clear that any direct discrimination on grounds of nationality is compatible with EU law only if the measure is covered by an express derogating provision, such as Article 52.40 This apparent contradiction within the case law of the ECJ might partly stem from the difficulties in applying the concept of discrimination on grounds of nationality to.41 Moreover, most of the above-mentioned rulings resorting to unwritten grounds of justification42 deal with a specific kind of restriction of the free movement of services, namely discrimination on grounds of the place of establishment (Article 56 TFEU).43 Arguably, this kind of discrimination is more open to justification than discrimination on grounds of nationality. At any rate, this line of case law should not be generalised.

36

Case C-509/12, IPTM v Navileme and Nautizende (ECJ 6 February 2014) para 20. E.g. Case C-42/02, Lindmann (ECJ 13 November 2003) para 34, 25; in the context of the free movement of goods Case C-379/98, Preussen Elektra AG v Schleswag AG (ECJ 13 March 2001) para 72 et seq. See also Schroeder (2019), p. 283 et seq.; Will (2013), p. 328. 38 Trstenjak and Beysen (2013), pp. 300 et seq. 39 Craig and de Búrca (2015), p. 807; Dashwood et al. (2011), p. 573; Barnard and Snell, in Barnard and Peers (2017), p. 422 et seq; Enchelmaier (2011), pp. 637 et seq.; Siekemeyer and Wendland, in Müller-Graff (2015), para 92. 40 Case C-388/01, Commission v Italy (ECJ 16 January 2003), para 19; Case C-311/97, Royal Bank of Scotland v Greece (ECJ 29 April 1999), para 32; Case C-451/03, Servizi Ausiliari Dottori Commercialisti v Calafiori (ECJ 30 March 2006), para 36; Case C-153/08, Commission v Spain (ECJ 6 October 2009), para 36 et seq.; Case C-375/14, Laezza (ECJ 28 January 2016), para 26. 41 E.g. Case C-411/03, SEVIC (ECJ 13 December 2005), para 23; Papadopoulos (2011), pp. 79 et seq. 42 Case C-204/90, Bachmann v Belgium (ECJ 28 January 1992), para 32; Case C-250/95, Futura Participations SA v Administration des contributions (ECJ 15 May 1997), para 26; Case C-254/97, Baxter and others v Premier Ministre and others (ECJ 8 July 1999) para 18. 43 Barnard (2019), p. 434 et seq.; Dashwood et al. (2011), p. 579. Even with regard to this group of cases the case law is inconsistent. Other rulings on discrimination on grounds of the place of establishment of the service provider explicitly refer to Article 52 as the only option of justification, e.g. Case C-211/91, Commission v Belgium (ECJ 16 December 1992), para 11; Case C-375/ 14, Laezza (ECJ 28 January 2016), para 26. 37

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2.4.2.

1101

Restrictions Beyond Entry and Residence

With regard to the subject matter of justifiable measures, it is sometimes suggested that the scope of application of Article 52 TFEU be limited to the field of the law regarding aliens. According to this view, Article 52 TFEU can justify only restrictions of the but not of the terms and conditions under which economic activities are carried on.44 The main argument is that the legitimisation of direct discrimination on grounds of nationality is only appropriate where nationality is of real significance for the subject matter, which is typically the case with regard to the but hardly imaginable with regard to the regulation of certain professions or occupational activities. Indeed, the ECJ has repeatedly remarked that Article 52 TFEU (and Article 45.3 TFEU) is primarily designed to permit MS to refuse access to their territory or residence there to aliens whose access or residence would in itself constitute a danger, although no such restrictions are permissible with regard to their own nationals.45 Nevertheless, although this is the primary function of Article 52 TFEU, there is no indication in the wording that its scope of application is strictly limited to such matters. Neither is the law regarding aliens a sufficiently clear legal category of its own, nor is it prima facie impossible that nationality can be of normative significance beyond the . Therefore, as a matter of applicability, Article 52 TFEU is not limited to restrictions of entry and residence but is capable of justifying all kinds of interferences with the freedom of establishment, including industrial regulations46—provided that there is a sufficient threat for public order, public or public.47

44 Dashwood et al. (2011), p. 571 et seq.; Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 2, 5, 7 et seq.; Forsthoff (2001), pp. 59 et seq.; Everling, in Schön (1997), p. 619; Khan and Eisenhut, in Vedder and Heintschel von Heinegg (2018), Article 52 AEUV para 4; Tietje, in Ehlers (2014), para 59. 45 Case 41/74, van Duyn v Home Office (ECJ 4 December 1974) para 22; Joined Cases 115 and 116/81, Adoui (115/81) & Cornuaille v Belgium (116/81) (ECJ 18 May 1982), para 7; Case 131/85, Gül v Regierungspräsident Düsseldorf (ECJ 7 May 1986), para 17; Joined Cases C-65/95 and C111/95, Shingara (C-65/95) and Radiom (C111/95) v The Queen (ECJ 17 June 1997), para 28; Case C-416/96, El-Yassini v Secretary of State for the Home Department (ECJ 2 March 1999), para 45; Case C-114/97, Commission v Spain (ECJ 29 October 1998) para 42; Case C-355/98, Commission v Belgium (ECJ 9 March 2000) para 29; Case C-63/99, The Queen v Gloszczuk (ECJ 27 September 2001), para 78; Case C-100/01, Ministre de l’Intérieur v Olazabal (ECJ 26 November 2002), para 40. 46 Behrens (2000), p. 135. 47 Siekemeyer and Wendland, in Müller-Graff (2015), para 85; Korte, in Calliess and Ruffert (2016), Article 52 AEUV para 3; Schlag, in Schwarze (2019), Article 52 AEUV para 3; MüllerGraff, in Streinz (2018), Article 52 AEUV para 3; Ludwigs, in Dauses/Ludwigs (2019), para 100; Schneider (1998), p. 36. Interestingly, authors arguing for a general limitation of the scope of applicability recognise certain exceptions to this rule, c.f. Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 16, 19.

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Grounds of Justification

3.1. General Remarks

20

21

22

The three grounds of justification listed in Article 52 TFEU are identical to those mentioned in Article 45.3 TFEU in the context of the free movement of workers. Many decisions of the ECJ on the scope and meaning of these grounds of justification deal with the free movement of workers but may be equally understood as a point of reference for the Court’s interpretation of Article 52 TFEU (➔ para 2).48 This parallelism becomes also apparent from the Court’s occasional habit of dealing with a case without specifying the applicable fundamental freedom.49 The trias of grounds of justification in Article 52 TFEU is exhaustive.50 In particular, it is not possible to fall back on the additional grounds mentioned in Article 36 or 65 TFEU for the free movement of goods or capital.51 As a derogation from the free movement of persons rather than goods, Article 52 TFEU has deliberately been more strictly designed.52 The grounds of justification listed in Article 52 TFEU—public , public and public —are usually regarded as autonomous terms and concepts of EU law.53 Nevertheless, the ECJ recognises that the specific circumstances that may justify recourse to these grounds may vary from one country to another and also change in the course of time. Therefore, MS are allowed a margin of discretion in the specification of these “framework-terms”, albeit only within the limits imposed by the Treaty.54 Thus, although MS are, in a first step, free to determine the 48

Fischer, in Lenz and Borchardt (2012), Article 52 AEUV para 1. Schlag, in Schwarze (2019), Article 52 AEUV para 2. 50 Barnard (2019), p. 477; Foster (2018), para 12.5.2; Siekemeyer and Wendland, in Müller-Graff (2015), para 86. 51 Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 17. 52 Müller-Graff, in Streinz (2018), Article 52 AEUV para 7. 53 Korte, in Calliess and Ruffert (2016), Article 52 AEUV para 6; Schlag, in Schwarze (2019), Article 52 para 7; Müller-Graff, in Streinz (2018), Article 52 AEUV para 7; Khan and Eisenhut, in Vedder and Heintschel von Heinegg (2018), Article 52 AEUV para 5; Oppermann et al. (2018), p. 493; Ludwigs, in Dauses/Ludwigs (2019), para 100; Schneider (1998), p. 78. 54 Case 41/74, van Duyn v Home Office (ECJ 4 December 1974) para 18; Case 30/77, Regina v Bouchereau (ECJ 27 October 1977), para 34; Joined Cases 115 and 116/81, Adoui (115/81) & Cornuaille v Belgium (116/81) (ECJ 18 May 1982), para 8; Case C-54/99, Association Eglise de scientologie de Paris and Scientology International Reserves Trust v The Prime Minister (ECJ 14 March 2000) para 17; Case C-268/99, Jany and others v Staatssecretaris van Justitie (ECJ 20 November 2001), para 60; Case C-36/02, Omega Spielhallen- und Automatenaufstellungs-GmbH v Stadt Bonn (ECJ 14 October 2004), para 31; Case C-33/07, Ministerul Administraţiei şi Internelor v Jipa (ECJ 10 July 2008), para 23; Case C-430/10, Gaydarov v Direktor na Glavna direktsia ‘Ohranitelna politsia’ pri Ministerstvo na vatreshnite raboti (ECJ 17 November 2011), para 32; Case C-434/10, Aladzhov v Zamestnik direktor na Stolichna direktsia na vatreshnite raboti kam Ministerstvo na vatreshnite raboti (ECJ 17 November 2011), para 34. Similarly, in the context of the free movement of capital Case C-483/99, Commission v France (ECJ 4 June 2002), para 48; Case C-503/99, Commission v Belgium (ECJ 4 June 2002), para 47; Case C-171/08, Commission v 49

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requirements in the light of their national needs, the ECJ retains the ultimate control over the interpretation of Article 52 TFEU. With good reasons, it has been doubted whether this kind of control is adequately described by the conventional assumption that public , public and public health are autonomous terms and concepts of EU law. Rather, it appears that they are accepted by the ECJ as domestic law concepts in the first place, subject to outer limits determined by EU law.55 Indeed, the ECJ has not developed anything close to a comprehensive definition of public , public or public health. Neither are the limits established in the case law primarily concerned with the content of the protected values but rather with the quality and intensity of the threat.56 At any rate, the guidance given by the Court has remained relatively vague so far. In essence, there must be a genuine, current, and sufficiently serious threat affecting one of the fundamental interests of society.57 A purely abstract or hypothetical threat is not sufficient. The existence of such a genuine threat must be established by the MS.58 Moreover, there has to be a direct link between that threat and the measure adopted to deal with it.59

Portugal (ECJ 8 July 2010), para 73. See also Barnard (2019), p. 477 et seq.; Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 3, 25; Schlag, in Schwarze (2019), Article 52 AEUV para 7; White (2004), p. 89. 55 Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 23 et seq. 56 Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 26. Forsthoff’s assertion, however, that there are no content-related limits at all is not entirely correct as the ECJ requires a threat to a fundamental interest of society (➔ para 23). 57 Case 36/75, Rutili v Ministre de l’intérieur (ECJ 28 October 1975) para 26, 28; Case Regina v Bouchereau (ECJ 27 October 1977), para 35; Case 249/86, Commission v Germany (ECJ 18 May 1989), para 17; Case C-348/96, Donatella Calfa (ECJ 19 January 1999) para 21; Case C-350/96, Clean Car v Landeshauptmann von Wien (ECJ 7 May 1998), para 40; Case C-114/97, Commission v Spain (ECJ 29 October 1998) para 20/46; Case C-355/98, Commission v Belgium (ECJ 9 March 2000) para 28; Case C-476/98, Commission v Germany (ECJ 5 November 2002), para 157; Case C-54/99, Association Eglise de scientologie de Paris and Scientology International Reserves Trust v The Prime Minister (ECJ 14 March 2000) para 17; Case C-100/01, Ministre de l’Intérieur v Olazabal (ECJ 26 November 2002), para 39; Joined Cases C-482 and 493/01, Orfanopoulos and others (C-482/01) and Oliveri (C-493/01) v Land Baden-Württemberg (ECJ 29 April 2004) para 66; Case C-33/07, Ministerul Administraţiei şi Internelor v Jipa (ECJ 10 July 2008), para 23; Case C-161/07, Commission v Austria (ECJ 22 December 2008) para 35; Case C-207/07, Commission v Spain (ECJ 17 July 2008), para 47; Case C-326/07, Commission v Italy (ECJ 26 March 2009), para 70; Case C-430/10, Gaydarov v Direktor na Glavna direktsia ‘Ohranitelna politsia’ pri Ministerstvo na vatreshnite raboti (ECJ 17 November 2011), para 33; Case C-434/10, Aladzhov v Zamestnik direktor na Stolichna direktsia na vatreshnite raboti kam Ministerstvo na vatreshnite raboti (ECJ 17 November 2011), para 37. For a general survey see Tiedje, in von der Groeben et al. (2015), Article 52 para 18, 21, 24 et seq. The requirements discussed here are usually regarded as immanent limitations to the very grounds of justification; occasionally, however, they are seen as specific expressions of the principle of proportionality, e.g. Ludwigs, in Dauses/Ludwigs (2019), para 103. 58 Case C-161/07, Commission v Austria (ECJ 22 December 2008) para 36; Müller-Graff, in Streinz (2018), Article 52 AEUV para 17. 59 Case C-476/98, Commission v Germany (ECJ 5 November 2002), para 157 and 159.

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As regards the content of the grounds of justification, the additional requirement of a fundamental interest of society serves as a qualification for the grounds of public and public in order to ensure a strict interpretation of these rather unspecific blanket clauses. Accordingly, the Court has regularly emphasized that Article 52 TFEU may not be invoked in order to pursue objectives of a solely economic nature.60 Likewise, Article 52 TFEU does not allow the general exclusion of economic sectors,61 such as the social security sector,62 from the free movement of persons and services. Generally, MS are required to pursue a consistent policy to protect the public good, which they invoke under Article 52 TFEU, without any arbitrary distinction to the detriment of the nationals of other MS. Therefore, under the case law of the ECJ, conduct that an MS accepts on the part of its own nationals cannot be regarded as constituting a genuine threat to a fundamental interest of society in the context of Article 52 TFEU.63 While this is convincing as a general rule, it should not be applied in an overly rigid manner as there may be good reasons for tolerating a certain conduct as a matter of domestic law but not as an incentive for migration.64 The trias of grounds of justification is repeated in Article 27.1 of Directive 2004/38/EC on the free movement of EU citizens. This Directive does not attempt to lay down comprehensive definitions, but it establishes certain substantive and

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Case C-353/89, Commission v Netherlands (ECJ 25 July 1991), para 15; Case C-434/10, Aladzhov v Zamestnik direktor na Stolichna direktsia na vatreshnite raboti kam Ministerstvo na vatreshnite raboti (ECJ 17 November 2011), para 40. Codified in Directive 2004/38/EC of the European Parliament and of the Council on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States, O.J. L 158/77 (2004), Article 27.1. For the broader context of this fundamental doctrine see Oliver (2016), pp. 147 et seq. 61 Case C-114/97, Commission v Spain (ECJ 29 October 1998) para 42; Case C-421/98, Commission v Spain (ECJ 23 November 2000), para 41; Case C-514/03, Commission v Spain (ECJ 26 January 2006), para 28; Case C-355/98, Commission v Belgium (ECJ 9 March 2000) para 29. 62 Case C-158/96, Raymond Kohll v Union des caisses de maladie (ECJ 28 April 1998) para 46. 63 Joined Cases 115 and 116/81, Adoui (115/81) & Cornuaille v Belgium (116/81) (ECJ 18 May 1982), para 7 et seq.; Case C-268/99, Jany and others v Staatssecretaris van Justitie (ECJ 20 November 2001) para 59 et seq. See also Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 27; Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 35; Schlag, in Schwarze (2019), Article 52 AEUV para 8; Müller-Graff, in Streinz (2018), Article 52 AEUV para 9; Korte, in Calliess and Ruffert (2016), Article 52 AEUV para 8; Dashwood et al. (2011), p. 484. The converse position in Case 41/74, Yvonne van Duyn v Home Office (ECJ 4 December 1974) para 23, has been overruled by these later decisions, cf. White (2004), pp. 89 et seq.; Foster (2018), para 12.5.2. 64 Cf. with regard to prostitution the critical comments on Case C-268/99, Jany and others v Staatssecretaris van Justitie (ECJ 20 November 2001), by Kotzur, in Geiger et al. (2015), Article 52 AEUV para 2; Lenze (2002), p. 109.

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procedural standards specifying the requirements of Article 52 TFEU65 and often codifying previous case law of the ECJ.66

3.2. Public Policy

Public is the broadest of the three grounds of justification. In the absence of a comprehensive definition in the case law of the ECJ, the precise meaning and scope of the public derogation remains uncertain. However, it is clear that it is a wide concept covering an unspecified range of subject matter and policy fields. Against this background, public might be described as the basic rules and principles of the ethical, political, and economic order of the state.67 This includes both written and unwritten rules68 and may vary between the MS.69 Ultimately, it is for the domestic courts to identify the rules and interests forming the public reservoir of the respective MS. However, not every violation of domestic law or even criminal law triggers the public derogation of Article 52 TFEU.70 In a second step, as a matter of EU law, the potentially broad national concept of public is narrowed down to fundamental interests of society (➔ para 23).71 These include, in particular, the existence, foundations, institutions, and fundamental interests of state and society, as well as life, liberty, and property of individuals.72 Moreover, the MS must demonstrate that there is a genuine and sufficiently serious threat to the fundamental interest at stake.73 In particular, measures taken against individuals on grounds of public (or public ) must be based exclusively on the personal conduct of this individual.74 These requirements cannot be bypassed by the more far-reaching

65

Kotzur, in Geiger et al. (2015), Article 52 AEUV para 3; Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 20; Tietje, in Ehlers (2014), para 60. 66 Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 32; Hailbronner (2004), pp. 299 et seq.; Weiss and Wooldridge (2007), pp. 153 et seq. 67 Smit and Herzog (1998), Article 56 TFEU para 56.05. 68 Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 19. 69 White (2004), p. 89. 70 Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 34. With regard to previous criminal convictions also Article 27.2 (1) Directive 2004/38/EC; Case C-430/10, Gaydarov v Direktor na Glavna direktsia ‘Ohranitelna politsia’ pri Ministerstvo na vatreshnite raboti (ECJ 17 November 2011), para 36 et seq. 71 Müller-Graff, in Streinz (2018), Article 52 AEUV para 7. 72 Ludwigs, in Dauses/Ludwigs (2019), para 102. Frenz (2012), para 2574 argues that only rights and interests based on EU law can constitute public -goods. However, the very purpose of Article 52 is to protect the national odre public of the MS in conflict with EU law, Schneider (1998), p. 72. 73 Also Article 27.2 (2) Directive 2004/38/EC. 74 Case C-348/96, Calfa (ECJ 19 January 1999) para 22; Joined Cases C-482 and 493/01, Orfanopoulos and others (C-482/01) and Oliveri (C-493/01) v Land Baden-Württemberg (ECJ 29 April 2004) para 67; Case C-430/10, Gaydarov v Direktor na Glavna direktsia ‘Ohranitelna

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mechanisms of the Schengen Implementation Agreement,75 which, therefore, do not justify restrictions on the freedom of establishment beyond Article 52 TFEU.76 Examples from the case law of rules and interests constituting grounds of public policy are measures against the use or trafficking of narcotic drugs77 or drug tourism,78 the protection of and respect for fundamental rights and human dignity,79 and the interest in retaining the right to revoke or control operating authorisations of certain airlines in international agreements.80 By contrast, the ECJ has rejected as public, in particular, purely fiscal interests81 or economic ends.82 However, economic considerations remain permissible as long as they are only collateral aspects.83 Further examples rejected by the Court have been the objective of protecting creditors,84 cultural

politsia’ pri Ministerstvo na vatreshnite raboti (ECJ 17 November 2011), para 34. Also Article 27.2 (1) Directive 2004/38/EC. For a detailed discussion see Barnard (2019), p. 478 et seq. 75 CISA (O.J. L 239/19 (2000)), signed on 19 June 1990. 76 Case C-503/03, Commission v. Spain (ECJ 31 January 2006), para 48 et seq; Case C-430/10, Gaydarov v Direktor na Glavna direktsia ‘Ohranitelna politsia’ pri Ministerstvo na vatreshnite raboti (ECJ 17 November 2011), para 35. 77 Case C-348/96, Calfa (ECJ 19 January 1999) para 22; Joined Cases C-482 and 493/01, Orfanopoulos and others (C-482/01) and Oliveri (C-493/01) v Land Baden-Württemberg (ECJ 29 April 2004) para 67; Case C-145/09, Land Baden Württemberg v Tsakouridis (ECJ 23 November 2010), para 54; Case C-430/10, Gaydarov v Direktor na Glavna direktsia ‘Ohranitelna politsia’ pri Ministerstvo na vatreshnite raboti (ECJ 17 November 2011), para 42. 78 Case C-137/09, Josemans v Burgemeester van Maastricht (ECJ 16 December 2010) para 65. 79 Case C-36/02, Omega Spielhallen- und Automatenaufstellungs-GmbH v Stadt Bonn (ECJ 14 October 2004), para 34 et seq. 80 Case C-476/98, Commission v Germany (ECJ 5 November 2002), para 157 et seq. Nevertheless, the ECJ rejected the invocation of Article 52 because it saw no direct link between the supposed threat to this interest and the contested Treaty clause discriminating against airlines from other MS. 81 Case 79/85, D. H. M. Segers v Bestuur van de Bedrijfsvereniging voor Bank (ECJ 10 July 1986); Case 352/85, Bond van Adverteerders and others v The Netherlands State (ECJ 26 April 1988) para 34; Case C-288/89, Stichting Collectieve Antennevoorziening Gouda and others v Commissariaat voor de Media (ECJ 25 July 1991), para 11; Case C-17/92, Cinematograficos v Spain (ECJ 4 May 1993), para 16; Case C-484/93, Svensson and Gustavsson v Ministre du Logement et de l’Urbanisme (ECJ 14 November 1995) para 15; Case C-264/96, ICI v Kenneth Hall Colmer (ECJ 16 July 1998) para 28; Case C-436/00, X,Y v Riksskatteverket (ECJ 21 November 2002), para 50; Case C-168/01, Bosal Holding v Staatssecretaris van Financiën (ECJ 18 September 2003), para 42; Case C-243/01, Gambelli and others (ECJ 6 November 2003), para 61; Case C-319/02, Manninen (ECJ 7 September 2004), para 49; Case C-446/03, Marks & Spencer v David Halsey (ECJ 13 December 2005), para 44. See also Dashwood et al. (2011), p. 590. 82 White (2004), pp. 87 et seq. 83 Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 35. 84 Case C-249/11, Byankov v Glaven sekretar na Ministerstvo na vatreshnite raboti (ECJ 4 October 2012), para 37 et seq. (prohibition on leaving the territory); Case C-212/97, Centros Ltd v Erhvervs (ECJ 9 March 1999) para 32 et seq. (requirement of a minimum share capital for private limited companies).

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policy,85 the development of data-processing systems for the public authorities,86 and the abstract danger of circumvention by supposed “bogus self-employed persons” of transitional rules governing the freedom of movement for workers coming from new MS.87 The ECJ has also repeatedly ruled that the failure of an individual to comply with legal formalities pertaining to aliens’ access, movement, and residence in the host state does not by itself constitute a threat to public policy.88 Nevertheless, such legal formalities should not be regarded as being completely outside the public derogation. The ECJ has explicitly recognised that MS have the right to provide appropriate sanctions for breaches of legal formalities concerning the control of aliens.89 Thus, the Court does not render the public derogation entirely inapplicable. Rather, it argues that the failure to comply with such formalities cannot justify measures like expulsion or detention, which impair the very substance of the right of free movement and, therefore, are manifestly disproportionate.90 The same applies in cases of non-compliance with domestic social security provisions like the failure of bogus self-employed persons to register in a social security scheme.91

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3.3. Public Security

Usually, the ECJ does not neatly distinguish between the grounds of public and public , nor does Directive 2004/38/EC on the free movement of EU citizens. While under Article 52 TFEU the distinction is not of great practical relevance, Article 28.3 of Directive 2004/38/EC requires imperative grounds of public for the expulsion of specifically protected Union citizens. At any rate, public is a narrower

85 Case C-211/91, Commission v Belgium (ECJ 16 December 1992), para 10; Case C-17/92, Cinematograficos v Spain (ECJ 4 May 1993), para 20. However, the apodictic language of these judgments might be misleading. Ultimately, the Court has dismissed the invocation of grounds of cultural policy because of the inconsistency and scope of the national restrictions under review. 86 Case C-3/88, Commission v Italy (ECJ 5 December 1989), para 14 et seq. 87 Case C-161/07, Commission v Austria (ECJ 22 December 2008) para 37. 88 Case 48/75, Royer (ECJ 8 April 1976), para 39/47; Case C-215/03, Oulane v Minister voor Vreemdelingenzaken en Integratie (ECJ 17 February 2005), para 42; similarly, Case 118/75, Watson (ECJ 7 July 1976), para 17 et seq.; Case 249/86, Commission v Germany (ECJ 18 May 1989), para 20; Case C-459/99, MRAX v Belgium (ECJ 25 July 2002), para 79. See also Frenz (2012), para 2579; Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 34. 89 Case 48/75, Royer (ECJ 8 April 1976), para 42; Case 118/75, Watson (ECJ 7 July 1976), para 21; Case C-215/03, Oulane v Minister voor Vreemdelingenzaken en Integratie (ECJ 17 February 2005), para 38. Now Article 5.5, 8.2, 9.3, 20.2 and 26 Directive 2004/38/EC. 90 Cf., in particular, Case C-215/03, Oulane v Minister voor Vreemdelingenzaken en Integratie (ECJ 17 February 2005), para 40. See also Barnard (2019), p. 486. 91 Case C-363/89, Roux v Belgian State (ECJ 5 February 1991) para 29 et seq.

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concept than public , sometimes even regarded as a more specific subcategory.92 It centres around the protection of state and society against physical force,93 as well as on the essential functions and conditions for the functioning of the state.94 In this sense, public covers both an MS’s internal and external security.95 Without providing a comprehensive definition, the ECJ has described public as the country’s existence, the functioning of the institutions and essential public services, and the survival of the population, as well as the absence of risks of a serious disturbance to foreign relations or to peaceful coexistence of nations or of a risk to military interests.96 More generally, the Court has also referred to the calm and physical security of the population as a whole or a large part of it.97 Beyond this characterisation of the concept of public the ECJ requires, in the same way as for the public derogation, a genuine and sufficiently serious threat to a fundamental interest of society. While the above-mentioned goods can be easily qualified as fundamental interests, MS often fail to demonstrate the necessary quality and intensity of threat. Important aspects recognised in the case law as falling under the public derogation belong to the military sphere: the organisation of the armed forces,98 property situated in areas of military importance,99 or weapons and dual-use products capable of being used for military purposes.100 Another group of cases relates to the objective of safeguarding the supply of the population with energy, electricity, and other important services or infrastructure in the field of telecommunications, 92 White (2004), p. 92; see also Barnard (2019), p. 477 et seq. Disapproving (two distinct grounds of justification) Schneider (1998), p. 37. 93 Müller-Graff, in Streinz (2018), Article 52 AEUV para 10. 94 Slightly broader Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 19, drawing on the German concept of “öffentliche Sicherheit” by including individual rights in general. 95 Case C-367/89, Richardt and Les Accessoires Scientifiques (ECJ 4 October 1991) para 22; Case C-83/94 Leifer and others (ECJ 17 October 1995), para 26; Case C-273/97, Sirdar v The Army Board und Secretary of State for Defence (ECJ 26 October 1999), para 17; Case C-285/98, Kreil v Germany (ECJ 11 January 2000), para 17; Case C-423/98, Albore (ECJ 13 July 2000), para 18; Case C-186/01, Dory v Germany (ECJ 11 March 2003), para 32; Case C-145/09, Land Baden Württemberg v Tsakouridis (ECJ 23 November 2010),para 43 et seq. 96 In particular Case C-145/09, Land Baden Württemberg v Tsakouridis (ECJ 23 November 2010), para 44. Similarly, Case 72/83, Campus Oil and others v Minister for Industry and Energy and others (ECJ 10 July 1984), para 34 et seq.; Case C-83/94, Leifer and others (ECJ 17 October 1995) para 28; Case C-70/94, Werner v Germany (ECJ 17 October 1995), para 27; Case C-423/98, Albore (ECJ 13 July 2000), para 22. 97 Case C-145/09, Land Baden Württemberg v Tsakouridis (ECJ 23 November 2010), para 47. 98 Case C-273/97, Sirdar v The Army Board und Secretary of State for Defence (ECJ 26 October 1999), para 15; Case C-285/98, Kreil v Germany (ECJ 11 January 2000), para 15; Case C-186/01, Dory v Germany (ECJ 11 March 2003), para 36. 99 Case C-423/98, Albore (ECJ 13 July 2000), para 18. However, the mere reference to the requirements of defence is not sufficient, ibid., para 21. 100 Case C-367/89, Richardt and Les Accessoires Scientifiques (ECJ 4 October 1991) para 22; Case C-83/94, Leifer and others (ECJ 17 October 1995) para 29; Case C-70/94, Werner v Germany (ECJ 17 October 1995), para 28.

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etc.,101 e.g. by maintaining a stock of petroleum products102 or by golden share rules securing public control over undertakings in the relevant sectors.103 Finally, the prevention and combating of organised crime and terrorism is recognised as constituting a matter of public.104 Remarkably, the maintenance of safe and smooth shipping traffic in coastal waters and ports by the provision of certain technical services has also been justified on grounds of public.105 By contrast, the regulation of private security firms is not covered by the public derogation.106

3.4. Public Health

Within the trias of grounds of justification, public is the only one that by its very designation is limited to a specific subject matter and therefore much narrower than the other two. Arguably, it can be regarded as another subcategory of public . In any event, its interpretation follows the same pattern. Consequently, although the Court does not use this formula in the context of public health,107 there must be a genuine, current, and sufficiently serious threat affecting one of the fundamental interests of society.108

101

Cf. Ludwigs, in Dauses/Ludwigs (2019), para 102. Case 72/83, Campus Oil and others v Minister for Industry and Energy and others (ECJ 10 July 1984), para 35; C-398/98, Commission v. Greece (ECJ 25 October 2001), para 29. 103 Case C-483/99, Commission v France (ECJ 4 June 2002), para 47; Case C-503/99, Commission v Belgium (ECJ 4 June 2002), para 46; Case C-463/00, Commission v Spain (ECJ 13 May 2003), para 71; Case C-174/04, Commission v Italy (ECJ 2 June 2005), para 40; Case C-207/07, Commission v Spain (ECJ 17 July 2008), para 46; Case C-326/07, Commission v Italy (ECJ 26 March 2009), para 69; Case C-171/08, Commission v Portugal (ECJ 8 July 2010), para 72; Case C543/08, Commission v Portugal (ECJ 11 November 2010), para 84. However, in most of these cases justification of the golden share rules failed for other reasons. 104 Case C-100/01, Ministre de l’Intérieur v Olazabal (ECJ 26 November 2002), para 35 (armed groups threatening public order); Case C-145/09, Land Baden Württemberg v Tsakouridis (ECJ 23 November 2010), para 47 (organised trafficking in narcotic drugs); other instances are money laundering and terrorist financing, cf. Case C-212/11, Jyske Bank Gibraltar v Administración del Estado (ECJ 25 April 2013), para 62 (with regard to non-discriminating restrictions). See also Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 20. 105 Case C-266/96 Corsica Ferries France v Gruppo Antichi Ormeggiatori del porto di Genova and others (ECJ 18 June 1998), para 60; Joined Cases C-430/99 and C-431/99, Inspecteur van de Belastingdienst Douane, district Rotterdam v Sea-Land Service Inc. and Nedlloyd Lijnen BV (ECJ 13 June 2002) 41 et seq. 106 Case C-114/97, Commission v Spain (ECJ 29 October 1998) para 45 et seq.; Case C-355/98, Commission v Belgium (ECJ 9 March 2000) para 28; Case C-514/03, Commission v Spain (ECJ 26 January 2006), para 28. 107 Possibly because public health is much less of a blanket clause than public or public and therefore does not call for such a clarification. 108 Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 36; Korte, in Calliess and Ruffert (2016), Article 52 AEUV para 8. 102

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This fundamental interest is to be found in the standard of health and health care. As the EU has only limited competences in regard to public , it is ultimately for each MS to decide on the level of this standard in its territory and the means to achieve this.109 This margin of discretion is limited by the requirement of a genuine threat to public health or the health . However, where there is uncertainty as to the existence or extent of risks to human health, an MS is permitted to take protective measures without having to wait until the reality of those risks becomes fully apparent, provided that the risk assessment is not based on purely hypothetical considerations.110 The most obvious case for the are measures taken against epidemic diseases, in particular restrictions of free movement from or to regions affected by an epidemic.111 This aspect is more specifically governed by Article 29 of Directive 2004/ 38/EC.112 In practice, however, the public derogation has proved particularly relevant for measures in the context of the health care system. Although it does not permit the MS to exclude the public health sector as such from the application of free movement,113 the ECJ has, in principle, recognised public health as a valid ground of justification for certain restrictions in this field—mainly rules limiting or requiring prior authorisation for the reimbursement of the costs of treatment provided in another MS.114 In this respect, case law essentially builds on two objectives that are covered by the public health derogation in so far as they contribute to achieving a high level of protection of health:115 on the one hand, the objective of maintaining

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Joined Cases C-171/07 and C-172/07, Apothekerkammer des Saarlandes and others (v Saarland (ECJ 19 May 2009) para 19; Müller-Graff, in Streinz (2018), Article 52 AEUV para 11 and 16. For the free movement of goods: Case C-141/07, Commission v Germany (ECJ 11 September 2008), para 51. See also Barnard (2019), p. 492 et seq. 110 Case C-41/02, Commission v Netherlands (ECJ 2 December 2004), para 52; Case C-531/06, Commission v Italy (ECJ 19 May 2009), para 54; Joined Cases C-171/07 and C-172/07, Apothekerkammer des Saarlandes and others v Saarland (ECJ 19 May 2009) para 30. 111 Dashwood et al. (2011), p. 486. 112 This Article has replaced Article 4 and Annex of Directive 64/221/EEC. Article 29 is not exhaustive in the sense that it does not preclude the public health derogation in other contexts beyond epidemic diseases, cf. Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 24. 113 Case C-158/96, Kohll v Union des caisses de maladie (ECJ 28 April 1998) para 46. 114 Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 10 et seq. Now the matter is largely regulated by Directive 2011/24/EU on the application of patients’ rights in cross-border healthcare. 115 Case C-158/96, Kohll v Union des caisses de maladie (ECJ 28 April 1998) para 46 et seq.; Case C-368/98, Vanbraekel and others v ANMC (ECJ 12 July 2001), para 47 et seq.; Case C-157/99, Smits und Peerbooms (ECJ 12 July 2001), para 72 et seq; Case C-385/99, Müller-Fauré and van Riet (ECJ 13 May 2003), para 67, 73 and 80; Case C-372/04, Watts v Bedford Primary Care Trust and Secretary of State for Health (ECJ 16 May 2006), para 103 et seq.; Case C-169/07, Hartlauer Handelsgesellschaft mbH v Wiener Landesregierung and Oberösterreichische Landesregierung (ECJ 10 March 2009) para 46; Case C-89/09, Commission v France (ECJ 16 December 2010), para 53; Case C-490/09, Commission v Luxemburg (ECJ 27 January 2011), para 43. See also Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 40 et seq.; Müller-Graff, in Streinz (2018), Article 52 AEUV para 12.

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a balanced high-quality medical or hospital service open to all, in particular the maintenance of treatment capacity or medical competence on national territory in so far as it is essential for public health and, on the other hand, the control of costs and the objective of preventing the risk of serious harm to the financial balance of the social security system, in particular by way of planning the infrastructure for medical services.116 However, notwithstanding the legitimacy of these objectives, in most cases the national rules at issue did not pass the proportionality . Another objective recognised in the case law of the ECJ is the aim of ensuring that the provision of medicinal products or services to the public is reliable and of good quality.117 Equally, the Court has regarded a national rule restricting doctors the right to carry out medical diagnoses and prescribe treatments as being covered by the general objective of safeguarding public health.118 Combating addiction to gambling has also been considered by the Court as potentially falling under the if the MS produces evidence that, in fact, such an addiction amounts to a danger to public health.119 Measures against air or drinking water pollution also fall under the public health derogation.120

4.

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Limits of Justification

4.1. Overview

Even if MS pursue one of the legitimate objectives mentioned in Article 52 TFEU, they are not free in their choice of means. In analogy to Article 36 and Article 65.3 TFEU, prohibitions or restrictions shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement between MS.121 More generally, any application of Article 52 TFEU must be made in

116

In this respect, the ECJ goes quite far in accepting economic reasons as grounds of justification, see Oliver (2016), pp. 153 et seq. 117 Case C-108/96, Mac Quen and others (ECJ 1 February 2001) para 28 et seq.; Case C-496/01, Commission v France (ECJ 11 March 2004), para 66 et seq.; Case C-531/06, Commission v Italy (ECJ 19 May 2009), para 52; Joined Cases C-171/07 and C-172/07, Apothekerkammer des Saarlandes and others v Saarland (ECJ 19 May 2009) para 28; Joined Cases C-570/07 and 571/ 07, Perez and Chao Gomez v Consejería de Salud y Servicios Sanitarios ( (ECJ 1 June 2010), para 64; Joined Cases C-159/12-161/12, Alessandra Venturini v ASL Varese and others (ECJ 5 December 2013) para 42. 118 Case C-294/00, Deutsche Paracelsus Schulen für Naturheilverfahren GmbH v Kurt Gräbner (ECJ 11 July 2002) para 43. 119 Case C-153/08, Commission v Spain (ECJ 6 October 2009), para 40. 120 Korte, in Calliess and Ruffert (2016), Article 52 AEUV para 14. 121 Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 16; Smit and Herzog (1998), Article 56 TFEU para 56.05.

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compliance with the general principles of EU law.122 Primarily, this refers to the principle of proportionality, which, due to its scope and general character, ultimately absorbs the above-mentioned treaty-based bar in Article 36 and Article 65.3 TFEU. Further rights recognised as limits to justification under Article 52 TFEU are fundamental rights of EU law, in particular the protection of the family.123 Admittedly, this requirement to balance the grounds of justification under Article 52 TFEU with fundamental rights is also an inherent aspect of the principle of . The separate recourse to fundamental rights, therefore, is of little practical relevance.124 Another general principle limiting justification under Article 52 TFEU is the rule of law, guaranteeing transparency, legal certainty, and procedural safeguards.125 It also follows from this principle that a person to whom a restrictive measure is applied must have an effective judicial remedy, permitting a review of the legality of the decision at issue as regards matters of both fact and law in the light of European Union law.126 The effectiveness of the remedy must not be undermined by early enforcement. Therefore, a decision ordering expulsion must not be executed until judicial review is completed, save in cases of urgency.127

4.2. Proportionality

42

In general terms, the principle of requires that the measures adopted be suitable for the protection of the interests that they are intended to guarantee and do not go beyond what is necessary for that purpose (suitability and necessity).128 As a third 122

Joined Cases C-482 and 493/01, Orfanopoulos and others (C-482/01) and Oliveri (C-493/01) v Land Baden-Württemberg (ECJ 29 April 2004) para 95; Case C-441/02, Commission v Germany (ECJ 27 April 2006), para 107. 123 Joined Cases C-482 and 493/01, Orfanopoulos and others (C-482/01) and Oliveri (C-493/01) v Land Baden-Württemberg (ECJ 29 April 2004) para 97; Case C-441/02, Commission v Germany (ECJ 27 April 2006), para 107 et seq. See also Schneider (1998), pp. 185 et seq.; Barnard (2019), p. 488 et seq. 124 Müller-Graff, in Streinz (2018), Article 52 AEUV para 20. 125 Case C-54/99, Association Eglise de scientologie de Paris and Scientology International Reserves Trust v The Prime Minister (ECJ 14 March 2000) para 21 et seq.; Directive 2004/38/ EU, Article 30. 126 Case C-54/99, Association Eglise de scientologie de Paris and Scientology International Reserves Trust v The Prime Minister (ECJ 14 March 2000) para 17; Case C-430/10, Gaydarov v Direktor na Glavna direktsia ‘Ohranitelna politsia’ pri Ministerstvo na vatreshnite raboti (ECJ 17 November 2011), para 41; Directive 2004/38/EU, Article 31. See also Barnard (2019), p. 489 et seq. and 494 et seq. 127 Case 48/75, Royer (ECJ 8 April 1976), para 62; now Directive 2004/38/EU, Article 31.2. 128 Joined Cases C-163/94, C-165/94 and C-250/94, Sanz de Lera and others (ECJ 14 December 1995), para 23; Case C-503/99, Commission v Belgium (ECJ 4 June 2002), para 45; Case C-54/99, Association Eglise de scientologie de Paris and Scientology International Reserves Trust v The Prime Minister (ECJ 14 March 2000) para 18; Joined Cases C-151/04 and C-152/04, Nadin, Nadin-Lux SA (C-151/04) and Durré (C-152/04) (ECJ 15 December 2005) para 39; Case C-33/07,

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step, the principle of also comprises the appropriateness or proportionality strictu sensu of the restrictive measure, balancing the interference against its effect on fundamental freedom.129 However, most cases are decided on the level of necessity, the main focus of the ECJ being to test whether the objectives pursued by the MS cannot be achieved by less restrictive means.130 An important aspect of this question is the country of origin principle, allocating the main responsibility for controlling service providers to the MS of the place of establishment.131 In the context of indistinctly measures, it is an established case law that such restrictions are appropriate only if their objective is pursued in a consistent and systematic manner.132 Therefore, national measures interfering with free movement will not be accepted as a suitable and appropriate means if the MS’s policy dealing with the perceived threat is fundamentally inconsistent. In cases of direct discrimination, the ECJ even tends to conclude that an inconsistent policy does not fall under the ground of public , public or public health in the first place (➔ para 25). Beyond these fundamental requirements, the impact of the principle of proportionality depends on the individual circumstances of the specific case.133 On the whole, the proportionality is handled by the ECJ in a rather strict manner, rendering it a crucial tool for reducing Article 52 TFEU to a genuine exception. Nevertheless, MS enjoy a certain margin of appreciation, notably with regard to the protection of public (➔ para 36).134 A national measure does not go beyond what is necessary merely because other MS have taken a less restrictive approach.135 While MS have to demonstrate that their measures are appropriate Ministerul Administraţiei şi Internelor v Jipa (ECJ 10 July 2008), para 29; Case C-509/12, IPTM v Navileme and Nautizende (ECJ 6 February 2014) para 18. 129 Frenz (2012), para 2572. See, e.g., Case C-161/07, Commission v Austria (ECJ 22 December 2008) para 36; Case C-509/12, IPTM v Navileme and Nautizende (ECJ 6 February 2014) para 21; Case C-215/03, Oulane v Minister voor Vreemdelingenzaken en Integratie (ECJ 17 February 2005), para 40. 130 Frenz (2012), para 2685. 131 Frenz (2012), para 2666; Siekemeyer and Wendland, in Müller-Graff (2015), para 79. 132 Case C-243/01, Gambelli and others (ECJ 6 November 2003), para 67; Joined Cases C-338/04, C-359/04 and C-360/04, Placania and others (ECJ 6 March 2007), para 53; Case C-500/06, Corporación Dermoestética SA v To Me Group Advertising Media (ECJ 17 July 2008) para 39 et seq; Case C-169/07, Hartlauer Handelsgesellschaft mbH v Wiener Landesregierung and Oberösterreichische Landesregierung (ECJ 10 March 2009) para 55; Case C-316/07, Stoß v Wetteraukreis (ECJ 8 September 2010), para 83. See also Enchelmaier (2011), p. 642; Frenz (2012), para 2662 et seq.; Siekemeyer and Wendland, in Müller-Graff (2015), para 96. 133 White (2004), p. 87. 134 Joined Cases C-171/07 and C-172/07, Apothekerkammer des Saarlandes and others (v Saarland (ECJ 19 May 2009) para 19 and 54; Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 26; Dashwood et al. (2011), p. 576; Enchelmaier (2011), p. 645. 135 Case C-108/96, Mac Quen and others (ECJ 1 February 2001) para 33 et seq.; Case C-294/00, Deutsche Paracelsus Schulen für Naturheilverfahren GmbH v Gräbner (ECJ 11 July 2002) para 46; Case C-514/03, Commission v Spain (ECJ 26 January 2006), para 49. For the free movement of goods: Case C-141/07, Commission v Germany (ECJ 11 September 2008), para 51.

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and necessary to attain the legitimate objective pursued, they do not have to prove that no other conceivable measure could have the same effect.136 Generally, scrutiny is less rigid in cases of or indistinctly applicable restrictions.137 The most sensitive issues are restrictions of the right of entry and residence. Here, in particular, the principle of is applied in a strict manner and severely limits the options of MS to take such measures, although some recent judgments indicate a slightly more generous stance of the ECJ.138 A number of minimum requirements established by the ECJ have been codified in Directive 2004/38/EU. In particular, restrictions of the shall be based exclusively on the personal conduct of the individual concerned. This conduct must represent a genuine, present, and sufficiently serious threat affecting one of the fundamental interests of society.139 In this context, the individual’s present—though not past—association with an organisation, which reflects participation in the activities of the organisation and identification with its aims, may be considered as part of his personal conduct.140 Mere considerations of general prevention, however, are not sufficient.141 Equally, it is disproportionate to expel an individual for non-compliance with formalities pertaining to the or with domestic social security provisions (➔ para 31). In Olazabal, the ECJ has accepted, as a matter of primary law and of secondary law at the time, that the right of residence can be limited to a part of the national territory of the host state.142 In line with the principle of such a measure could be regarded as a less rigid and therefore preferable alternative to expulsion.143 However, following earlier case law, Directive 38/2004/EU sticks to the principle of national treatment and permits such limitations only where the same restrictions apply to the MS’s own nationals.144

136

Case C-400/08, Commission v Spain (ECJ 24 March 2011) para 75. Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 19. 138 Dashwood et al. (2011), p. 483, referring to Case C-33/07, Ministerul Administraţiei şi Internelor v Jipa (ECJ 10 July 2008), para 30; Case C-145/09, Land Baden Württemberg v Tsakouridis (ECJ 23 November 2010), para 56; Case C-137/09, Josemans v Burgemeester van Maastricht (ECJ 16 December 2010) para 69 et seq. 139 Directive 2004/38/EU, Article 27.2; Case 67/74, Bonsignore v Oberstadtdirektor der Stadt Köln (ECJ 26 February 1975), para 6; Case 30/77, Regina v Bouchereau (ECJ 27 October 1977), para 28; Case C-348/96, Donatella Calfa (ECJ 19 January 1999) para 24; Case C-340/97, Nazli v Stadt Nürnberg (ECJ 10 February 2000), para 58; Case C-482 and 493/01, Orfanopoulos and others (C-482/01) and Oliveri (C-493/01) v Land Baden-Württemberg (ECJ 29 April 2004) para 67; Case C-441/02, Commission v Germany (ECJ 27 April 2006), para 70 and 93; Case C-503/03, Commission v. Spain (ECJ 31 January 2006), para 44/46; Case C-33/07, Ministerul Administraţiei şi Internelor v Jipa (ECJ 10 July 2008), para 24. See also White (2004), pp. 91 et seq. 140 Case 41/74, van Duyn v Home Office (ECJ 4 December 1974) para 17. 141 Directive 2004/38/EU, Article 27.2. 142 Case C-100/01, Ministre de l’Intérieur v Olazabal (ECJ 26 November 2002), para 45. 143 Tiedje, in von der Groeben et al. (2015), Article 52 AEUV para 34; White (2004), p. 90; Korte, in Calliess and Ruffert (2016), Article 52 AEUV para 17; Barnard (2019), p. 487 et seq. 144 Directive 2004/38/EU, Article 22 following Case 36/75, Rutili v Ministre de l’intérieur (ECJ 28 October 1975) para 50. Likewise Forsthoff, in Grabitz et al. (2019), Article 52 AEUV para 27. 137

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Legal Basis for Secondary Legislation

Article 52.2 TFEU provides a legal basis for secondary EU legislation. The applicable law-making procedure has been modified several times. In the original Treaty version of 1957, the Council had to decide unanimously. The Treaty of Maastricht introduced the co-decision procedure. Since the Treaty of Lisbon, Article 52.2 TFEU has referred to the ordinary legislative procedure governed by Article 294 TFEU. Article 52.2 TFEU is a specific legal basis for directives coordinating restrictive measures protecting national interests of public , public or public health. Thus, it allows for the harmonisation or coordination of such measures that the MS are competent to adopt under Article 52.1 TFEU.145 By contrast, it does not provide a general legal basis for measures of liberalisation. Moreover, it covers only legislation with regard to the treatment of Union citizens and does not include treatment of the MS’ own citizens or of nationals from third states.146 Legal acts adopted on this basis were Directives 64/221147 and 75/35.148 They have been replaced by Directive 2004/38, in particular Article 27 et seq.149

List of Cases ECJ 04.12.1974, 41/74, Yvonne van Duyn v Home Office [cit. in paras 2, 18, 22, 25, 45] ECJ 26.02.1975, 67/74, Carmelo Angelo Bonsignore v Oberstadtdirektor der Stadt Köln [cit. in paras 2, 45] ECJ 28.10.1975, 36/75, Roland Rutili v Ministre de l’intérieur [cit. in paras 2, 23, 46] ECJ 08.04.1976, 48/75, Royer [cit. in paras 31, 41] ECJ 07.07.1976, 118/75, Watson [cit. in para 31] ECJ 27.10.1977, 30/77, Regina v Bouchereau [cit. in paras 22, 45] ECJ 18.05.1982, 115, 116/81, Adoui & Cornuaille v Belgium [cit. in paras 18, 22, 25] ECJ 10.07.1984, 72/83, Campus Oil and Others v Minister for Industry and Energy and Others [cit. in paras 32, 34] 145

Bröhmer, in Calliess and Ruffert (2011), Article 52 AEUV para 5. Müller-Graff, in Streinz (2018), Article 52 AEUV para 22. 147 Council Directive 64/221/EEC on special measures justified on grounds of public policy, public security or public health, O.J. 56/850 (1964). 148 Council Directive 75/35/EEC extending the scope of Directive No 64/221/EEC, O.J. L 14/14 (1975). 149 Directive 2004/38/EC of the European Parliament and of the Council on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States, O.J. L 158/77 (2004). Interestingly, the Directive itself does not mention Article 52 (at the time: Article 46) among its legal bases although Article 27 et seq. clearly fall under this provision. 146

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ECJ 07.05.1986, 131/85, Gül v Regierungspräsident Düsseldorf [cit. in para 18] ECJ 10.07.1986, 79/85, D. H. M. Segers v Bestuur van de Bedrijfsvereniging voor Bank [cit in paras 9, 30] ECJ 26.04.1988, 352/85, Bond van Adverteerders and Others v The Netherlands State [cit. in paras 9, 30] ECJ 18.05.1989, 249/86, Commission v Germany [cit. in paras 23, 31] ECJ 05.12.1989, C-3/88, Commission v Italy [cit. in para 30] ECJ 05.02.1991, C-363/89, Danielle Roux v Belgian State [cit. in paras 2, 31] ECJ 18.06.1991, C-260/89, ERT AE and Panellinia Omospondia Syllogon Prossopikou v Dimotiki Etairia Pliroforissis and Sotirios Kouvelas and Nicolaos Avdellas and Others [cit. in para 2] ECJ 25.07.1991, C-288/89, Stichting Collectieve Antennevoorziening Gouda and Others v Commissariaat voor de Media [cit. in para 30] ECJ 25 July 1991, C-353/89, Commission v Netherlands [cit. in para 24] ECJ 04.10.1991, C-367/89, Richardt and Les Accessoires Scientifiques [cit. in paras 2, 32, 34] ECJ 28.01.1992, C-204/90, Bachmann v Belgium [cit. in para 16] ECJ 16.12.1992, C-211/91, Commission v Belgium [cit. in paras 16, 30] ECJ 04.05.1993, C-17/92, Cinematograficos v Spain [cit. in para 30] ECJ 17.10.1995, C-83/94, Leifer and Others [cit. in paras 2, 32, 34] ECJ 17.10.1995, C-70/94, Werner v Germany [cit. in paras 32, 34] ECJ 14.11.1995, C-484/93, Peter Svensson and Lena Gustavsson v Ministre du Logement et de l’Urbanisme [cit. in paras 9, 12, 30] ECJ 30.11.1995, C-55/94, Reinhard Gebhard v Consiglio dell’Ordine degli Avvocati e Procuratori di Milano [cit. in para 13] ECJ 14.12.1995, C-163/94, C-165/94, and C-250/94, Sanz de Lera and Others [cit. in para 42] ECJ 15.05.1997, C-250/95, Futura Participations SA v Administration des contributions [cit. in para 16] ECJ 17.06.1997, C-65/95, C-111/95, Shingara and Radiom v The Queen [cit. in para 18] ECJ 28.04.1998, C-158/96, Raymond Kohll v Union des caisses de maladie [cit. in paras 2, 9, 24, 38, 45] ECJ 07.05.1998, C-350/96, Clean Car v Landeshauptmann von Wien [cit. in para 23] ECJ 18.06.1998, C-266/96 Corsica Ferries France v Gruppo Antichi Ormeggiatori del porto di Genova and Others [cit. in para 34] ECJ 16.07.1998, C-264/96, ICI v Kenneth Hall Colmer (Her Majesty’s Inspector of Taxes) [cit. in paras 9, 30] ECJ 29.10.1998, C-114/97, Commission v Spain [cit. in paras 9, 18, 23, 24, 34] ECJ 19.01.1999, C-348/96, Donatella Calfa [cit. in paras 2, 23, 28, 29] ECJ 02.03.1999, C-416/96, El-Yassini v Secretary of State for the Home Department [cit. in para 18] ECJ 09.03.1999, C-212/97, Centros Ltd v Erhvervs [cit. in paras 9, 30] ECJ 29.04.1999, C-224/97, Erich Ciola v Land Vorarlberg [cit. in para 12] Graf Kielmansegg

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ECJ 29.04.1999, C-311/97, Royal Bank of Scotland v Elliniko Dimosio (Greek State) [cit. in para 16] ECJ 08.07.1999, C-254/97, Baxter and Others v Premier Ministre and Others [cit. in para 16] ECJ 26.10.1999, C-273/97, Sirdar v The Army Board and Secretary of State for Defence [cit. in paras 32, 34] ECJ 11.01.2000, C-285/98, Kreil v Germany [cit. in paras 32, 34] ECJ 10.02.2000, C-340/97, Nazli v Stadt Nürnberg [cit. in para 45] ECJ 09.03.2000, C-355/98, Commission v Belgium [cit. in paras 2, 18, 23, 24, 34] ECJ 14.03.2000, C-54/99, Association Eglise de scientologie de Paris and Scientology International Reserves Trust v The Prime Minister [cit. in paras 2, 22, 23, 41, 42] ECJ 13.07.2000, C-423/98, Albore [cit. in paras 32, 34] ECJ 23.11.2000, C-421/98, Commission v Spain [cit. in para 24] ECJ 01.02.2001, C-108/96, Dennis Mac Quen and Others [cit. in paras 14, 39, 44] ECJ 13.03.2001, C-379/98, PreussenElektra AG v Schleswag AG [cit. in para 16] ECJ 08.03.2001, C-405/98, Konsumentombudsmannen v GIP [cit. in para 14] ECJ 12.07.2001, C-157/99, Smits and Peerbooms [cit. in para 38] ECJ 12.07.2001, C-368/98, Vanbraekel and Others v ANMC [cit. in para 38] ECJ 27.09.2001, C-63/99, The Queen v Gloszczuk [cit. in para 18] ECJ 25.10.2001, C-398/98, Commission v. Greece [cit. in para 34] ECJ 20.11.2001, C-268/99, Jany and Others v Staatssecretaris van Justitie [cit. in paras 22, 25] ECJ 04.06.2002, C-503/99, Commission v Belgium [cit. in paras 22, 34, 42] ECJ 04.06.2002, C-483/99, Commission v France [cit. in paras 22, 34] ECJ 13.06.2002, C-430/99, C-431/99, Inspecteur van de Belastingdienst Douane, District Rotterdam v Sea-Land Service Inc. and Nedlloyd Lijnen BV [cit. in paras 14, 34] ECJ 11.07.2002, C-294/00, Deutsche Paracelsus Schulen für Naturheilverfahren GmbH v Kurt Gräbner [cit. in paras 14, 39, 44] ECJ 25.07.2002, C-459/99, MRAX v Belgium [cit. in para 31] ECJ 05.11.2002, C-208/00, Überseering BV v NCC [cit. in para 9] ECJ 05.11.2002, C-476/98, Commission v Germany [cit. in paras 23, 29] ECJ 21.11.2002, C-436/00, X and Y v Riksskatteverket [cit. in para 30] ECJ 26.11.2002, C-100/01, Ministre de l’Intérieur v Olazabal [cit. in paras 18, 23, 34, 46] ECJ 16.01.2003, C-388/01 Commission v Italy [cit. in para 16] ECJ 11.03.2003, C-186/01, Dory v Germany [cit. in paras 32, 34] ECJ 13.05.2003, C-385/99, Müller-Fauré & van Riet [cit. in para 38] ECJ 13.05.2003, C-463/00, Commission v Spain [cit. in para 34] ECJ 18.09.2003, C-168/01, Bosal Holding v Staatssecretaris van Financiën [cit. in para 30] ECJ 06.11.2003, C-243/01, Gambelli and Others [cit. in paras 30, 43] ECJ 13.11.2003, C-42/02, Lindmann [cit. in para 16] ECJ 11.03.2004, C-496/01, Commission v France [cit. in para 39] Graf Kielmansegg

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ECJ 29.04.2004, C-482, C-493/01, Georgios Orfanopoulos and Others and Raffaele Oliveri v Land Baden-Württemberg [cit. in paras 2, 23, 28, 29, 40, 45] ECJ 07.09.2004, C-319/02, Manninen [cit. in para 30] ECJ 14.10.2004, C-299/02, Commission v Netherlands [cit. in para 9] ECJ 14.10.2004, C-36/02, Omega Spielhallen- und Automatenaufstellungs-GmbH v Oberbürgermeisterin der Bundesstadt Bonn [cit. in paras 22, 29] ECJ 17.02.2005, C-215/03, Oulane v Minister voor Vreemdelingenzaken en Integratie [cit. in paras 31, 42] ECJ 02.06.2005, C-174/04, Commission v Italy [cit. in para 34] ECJ 13.12.2005, C-411/03, SEVIC [cit. in para 16] ECJ 13.12.2005, C-446/03, Marks & Spencer v David Halsey (Her Majesty’s Inspector of Taxes) [cit. in para 30] ECJ 15.12.2005, Joined Cases C-151/04, C-152/04, Claude Nadin, Nadin-Lux SA and Jean-Pascal Durré [cit. in paras 14, 42] ECJ 26.01.2006, C-514/03, Commission v Spain [cit. in paras 24, 34, 44] ECJ 31.01.2006, C-503/03, Commission v. Spain [cit. in paras 28, 45] ECJ 30.03.2006, C-451/03, Servizi Ausiliari Dottori Commercialisti v Giuseppe Calafiori [cit. in para 16] ECJ 27.04.2006, C-441/02, Commission v Germany [cit. in paras 40, 45] ECJ 16.05.2006, C-372/04, Watts v Bedford Primary Care Trust and Secretary of State for Health [cit. in para 38] ECJ 06.03.2007, C-338/04, C-359/04, C-360/04, Placania and Others [cit. in para 43] ECJ 11.12.2007, C-438/05, International Transport Workers’ Federation and Finnish Seamen’s Union v Viking [cit. in para 10] ECJ 10.07.2008, C-33/07, Ministerul Administraţiei şi Internelor – Direcţia Generală de Paşapoarte Bucureşti v Gheorghe Jipa [cit. in paras 22, 23, 42, 45] ECJ 17.07.2008, C-500/06, Corporación Dermoestética SA v To Me Group Advertising Media [cit. in paras 14, 43] ECJ 17.07.2008, C-207/07, Commission v Spain [cit. in paras 23, 34] ECJ 11.09.2008, C-141/07, Commission v Germany [cit. in paras 36, 44] ECJ 22.12.2008, C-161/07, Commission v Austria [cit. in paras 2, 9, 23, 30, 42] ECJ 10.03.2009, C-169/07, Hartlauer Handelsgesellschaft mbH v Wiener Landesregierung and Oberösterreichische Landesregierung [cit. in paras 14, 38, 43] ECJ 26.03.2009, C-326/07, Commission v Italy [cit. in paras 23, 34] ECJ 19.05.2009, C-171/07, C-172/07, Apothekerkammer des Saarlandes and Others and Helga Neumann-Seiwert v Saarland and Ministerium für Justiz, Gesundheit und Soziales [cit. in paras 14, 36, 39, 44] ECJ 19.05.2009, C-531/06, Commission v Italy [cit. in paras 36, 39] ECJ 06.10.2009, C-153/08, Commission v Spain [cit. in paras 16, 39] ECJ 21.01.2010, C-546/07, Commission v Germany [cit. in para 9] ECJ 10.03.2010, C-384/08, Attanasio Group Srl v Comune di Carbognano [cit. in para 14] ECJ 01.06.2010, C-570/07, 571/07, Blanco Perez and Chao Gomez v Consejería de Salud y Servicios Sanitarios and Principado de Asturias [cit. in para 39] Graf Kielmansegg

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ECJ 08.07.2010, C-171/08, Commission v Portugal [cit. in paras 22, 34] ECJ 08.09.2010, C-316/07, Stoß v Wetteraukreis [cit. in para 43] ECJ 09.09.2010, 64/08, Ernst Engelmann [cit. in para 9] ECJ 11.11.2010, C-543/08, Commission v Portugal [cit. in para 34] ECJ 23.11.2010, C-145/09, Land Baden-Württemberg v Panagiotis Tsakouridis [cit. in paras 2, 29, 32, 34, 45] ECJ 16.12.2010, C-137/09, Marc Michel Josemans v Burgemeester van Maastricht [cit. in paras 14, 15, 29, 45] ECJ 16.12.2010, C-89/09, Commission v France [cit. in para 38] ECJ 27.01.2011, C-490/09, Commission v Luxemburg [cit. in para 38] ECJ 24.03.2011, C-400/08, Commission v Spain [cit. in para 44] ECJ 17.11.2011, C-434/10, Aladzhov v Zamestnik direktor na Stolichna direktsia na vatreshnite raboti kam Ministerstvo na vatreshnite raboti [cit. in paras 22, 23, 24] ECJ 17.11.2011, C-430/10, Gaydarov v Direktor na Glavna direktsia “Ohranitelna politsia” pri Ministerstvo na vatreshnite raboti [cit. in paras 22, 23, 28, 29, 41] ECJ 25.04.2013, C-212/11, Jyske Bank Gibraltar v Administración del Estado [cit. in para 34] ECJ 26.09.2013, C-539/11, Ottica New Line di Accardi Vincenzo v Comune di Campobello di Mazara [cit. in para 14] ECJ 05.12.2013, C-159/12, Alessandra Venturini v ASL Varese and Others Maria Rosa Gramegna v ASL Lodi and Others and Anna Muzzio v ASL Pavia and Others [cit. in paras 14, 39] ECJ 06.02.2014, C-509/12, IPTM v Navileme – Consultadoria Náutica Lda and Nautizende – Consultadoria Náutica Lda [cit. in paras 14, 15, 42] ECJ 16.06.2015, C-593/13, Presidenza del Consiglio dei Ministri and Others v Rina Services SpA and Others [cit. in para 5]

References Barnard, C. (2019). The substantive law of the EU. The four freedoms (6th ed.). Oxford: OUP. Barnard, C., & Snell, J. (2017). Free movement of legal persons and the provision of service. In C. Barnard & S. Peers (Eds.), European Union law (2nd ed., pp. 409–446). Oxford: OUP. Behrens, P. (2000). International company law in view of the Centros decision of the ECJ. European Business Organization Law Review, 1(1), 125–146. Calliess, C., & Ruffert, M. (Eds.). (2011). EUV/AEUV, Das Verfassungsrecht der Europäischen Union mit Europäischer Grundrechtecharta (4th ed.). Munich: Beck. Calliess, C., & Ruffert, M. (Eds.). (2016). EUV/AEUV, Das Verfassungsrecht der Europäischen Union mit Europäischer Grundrechtecharta (5th ed.). Munich: Beck. Craig, P. P., & de Búrca, G. (2015). EU law, text, cases, and materials (6th ed.). Oxford: OUP. Dashwood, A., Dougan, M., Rodger, B., Spaventa, E., & Wyatt, D. (2011). Wyatt and Dashwood’s European Union law (6th ed.). Oxford: Hart. Enchelmaier, S. (2011). Always at your service (within limits): The ECJ’s case law on Article 56 TFEU (2006-11). European Law Review, 36(5), 615–651.

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Everling, U. (1997). Das Niederlassungsrecht in der EG als Beschränkungsverbot, Tragweite und Grenzen. In W. Schön (Ed.), Gedächtnisschrift für Brigitte Knobbe-Keuk (pp. 607–625). Cologne: Schmidt. Forsthoff, U. (2001). Die Tragweite des Rechtfertigungsgrundes aus Art. 46 Abs. 1 EG für die Niederlassungsfreiheit, die Dienstleistungsfreiheit und für Gesellschaften. Europäisches Wirtschafts- und Steuerrecht, 12(2), 59–65. Foster, N. (2018). EU law (6th ed.). Oxford: OUP. Frenz, W. (2012). Handbuch Europarecht (Vol. 1, 2nd ed.). Heidelberg: Springer. Geiger, R., Khan, D. E., & Kotzur, M. (Eds.). (2015). European Union Treaties. Munich: Beck. Grabitz, E., Hilf, M., & Nettesheim, M. (Eds.). (2019). Das Recht der Europäischen Union (looseleaf collection). Munich: Beck. Hailbronner, K. (2004). Die Unionsbürgerrichtlinie und der ordre public. Zeitschrift für Ausländerrecht und Ausländerpolitik, 24(9), 299–305. Hobe, S. (2017). Europarecht (9th ed.). Munich: Vahlen. Lenz, C. O., & Borchardt, K.-D. (Eds.). (2012). EU-Verträge Kommentar (6th ed.). Cologne: Bundesanzeiger. Lenze, A. (2002). Europäische Niederlassungsfreiheit und Prostitution: Anmerkung zur EuGHRechtsprechung. Europäische Grundrechte-Zeitschrift, 29(5–8), 106–111. Ludwigs, M. (2019). E. Niederlassungs- und Dienstleistungsfreiheit, E.I. Grundregeln. In M. Dauses & M. Ludwigs (Eds.), EU-Wirtschaftsrecht (loose-leaf collection). Beck: Munich. Oliver, P. (2016). When, if ever, can restrictions on fee movement be justified on economic grounds? European Law Review, 41(2), 147–175. Oppermann, T., Classen, C. D., & Nettesheim, M. (2018). Europarecht (8th ed.). Munich: Beck. Papadopoulos, T. (2011). EU regulatory approaches to cross-border mergers: Exercising the right of establishment. European Law Review, 36(1), 71–98. Schlachter, M., & Ohler, C. (Eds.). (2008). Europäische Dienstleistungsrichtlinie, Handkommentar. Baden-Baden: Nomos. Schneider, H. (1998). Die öffentliche Ordnung als Schranke der Grundfreiheiten im EG-Vertrag. Baden-Baden: Nomos. Schroeder, W. (2019). Grundkurs Europarecht (6th ed.). Munich: Beck. Schwarze, J. (Ed.). (2019). EU-Kommentar (4th ed.). Baden-Baden: Nomos. Siekemeyer, A.-K., & Wendland, H. M. (2015). Die binnenmarktliche Niederlassungsfreiheit der Selbständigen. In P.-C. Müller-Graff (Ed.), Europäisches Wirtschaftsordnungsrecht (pp. 159– 208). Baden-Baden: Nomos. Smit, H., & Herzog, P. E. (1998). The law of the European Economic Community, a commentary on the EEC Treaty. New York: Matthew Bender. Streinz, R. (Ed.). (2018). EUV/AEUV, Vertrag über die Europäische Union und Vertrag über die Arbeitsweise der Europäischen Union (3rd ed.). Munich: Beck. Tietje, C. (2014). Niederlassungsfreiheit. In D. Ehlers (Ed.), Europäische Grundrechte und Grundfreiheiten (pp. 383–416). Berlin: de Gruyter. Trstenjak, V., & Beysen, E. (2013). The growing overlap of fundamental freedoms and fundamental rights in the case law of the CJEU. European Law Review, 38(3), 293–315. Vedder, C., & Heintschel von Heinegg, W. (Eds.). (2018). Europäisches Unionsrecht, EUV, AEUV, Grundrechte-Charta (2nd ed.). Baden-Baden: Nomos. von der Groeben, H., Schwarze, J., & Hatje, A. (Eds.). (2015). Europäisches Unionsrecht. Commentary. Baden-Baden: Nomos. Weiss, F., & Wooldridge, F. (2007). Free movement of persons within the European Community (2nd ed.). Alphen aan den Rijn: Kluwer Law International. White, R. C. A. (2004). Workers, establishment, and services in the European Union. Oxford: Oxford University Press. Will, M. (2013). Europarecht. Munich: Beck.

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Article 53 [Mutual Recognition of Diplomas] (ex-Article 47 TEC) 1. In order to make it easier for persons to take up and pursue activities as selfemployed persons, the European Parliament and 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 qualifications4–9 and for the coordination10 of the provisions laid down by law, regulation or administrative action in Member States concerning the taking-up and pursuit of activities as self-employed persons.1–3 2. In the case of the medical and allied and pharmaceutical professions, the progressive abolition of restrictions shall be dependent upon coordination of the conditions for their exercise in the various Member States.8 Contents 1. 2.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Mutual Recognition of Diplomas, Certificates, and Qualifications . . . . . . . . . . . . . . . . . . . . . . . 4 2.1. Sectoral Harmonisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.2. From Sectoral to General Harmonisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.3. The Professional Qualifications Directive (Directive 2005/36/EC) . . . . . . . . . . . . . . . . . 6 3. Facilitating Practice of the Profession of Lawyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4. Harmonisation of Other Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5. Article 53 TFEU and Competence Problems in the Context of Harmonisation . . . . . . . . . . 11 6. Services Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 7. The Significance of Article 49 TFEU for Cases Not Covered by the Harmonisation of Professional Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 List of Cases References

1.

Introduction

Article 53 TFEU constitutes the legal basis for the harmonisation of the mutual recognition of diplomas of qualification and of the coordination of national provisions for the exercise of activities by persons as self-employed. Article 53 TFEU states clearly that its objective is to facilitate the exercise of freedom of establishment of self-employed persons (“In order to make it easier for persons. . .”). More specifically, this article aims at attaining freedom of establishment of natural persons through the adoption of directives that target the

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mutual recognition of diplomas and the coordination of the relevant national legislation.1 In the absence of this article, the free movement of persons would be incomplete. Positive harmonisation is essential in this part of the internal market, where negative harmonisation cannot provide comprehensive and coordinated solutions. The importance of harmonisation and, as a matter of fact, of this legal basis was stressed by the ECJ in Hocsman: “The function of directives which lay down common rules and criteria for mutual recognition of diplomas is thus to introduce a system in which Member States are obliged to accept the equivalence of certain diplomas and cannot require the persons concerned to comply with requirements other than those laid down by the relevant directives.”2 National rules on the recognition of diplomas and other qualification requirements might constitute indistinctly applicable rules infringing the freedom of establishment. Harmonisation seeks to combat these obstacles and to facilitate the exercise of the freedom of establishment by self-employed persons. Article 53 TFEU constitutes the legal basis for the adoption of directives that aim at the harmonisation of national qualification requirements or the evaluation of the equality and compatibility of national qualification requirements or the mutual recognition of diplomas.3 Hence, harmonised rules for the recognition of professional qualifications seek to facilitate persons interested in taking up and pursuing activities as self-employed persons in other MS. Ex-Article 47 TEC is the predecessor of Article 53 TFEU. The first paragraph of Article 53 TFEU adopts the new ordinary legislative procedure (Article 294 TFEU) in place of the old co-decision procedure of ex-Article 251 TEC.4 The scope of the first paragraph of Article 53 TFEU is also wider in comparison with its predecessor. The first paragraph of Article 53 TFEU allows the harmonisation of the mutual recognition of certificates of qualifications and of the coordination of national rules. Both competences (recognition and coordination) are now included, for systematical reasons, in the first paragraph of Article 53 TFEU. Hence, the second paragraph of ex-Article 47 TEC referring to coordination is now obsolete. The third paragraph of ex-Article 47 TEC is substituted by the second paragraph of Article 53 TFEU; the old and the new provisions are identical in their wordings.5

1 It is worth mentioning that Article 50.2 lit. g) TFEU constitutes the legal basis for the harmonisation of company law; it seeks to attain the freedom of establishment of legal persons within the meaning of Article 54 TFEU. 2 Case C-238/98, Hocsman (ECJ 14 September 2000) para 3; see also Kotzur, in Geiger et al. (2015), Article 53 AEUV para 1; Papadopoulos and Ortino, in Smit et al. (2013), Article 53 TFEU para 3–4; Malamataris, in Christianos (2012), Article 53 AEUV para 1. 3 Kotzur, in Geiger et al. (2015), Article 53 AEUV para 2. 4 Kotzur, in Geiger et al. (2015), Article 53 AEUV para 1. 5 Kotzur, in Geiger et al. (2015), Article 53 AEUV para 1.

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2.1. Sectoral Harmonisation

In the 1970s and 1980s, EU adopted a sectoral (vertical) harmonisation programme for various specific professions.6 Various directives harmonising the minimum standard of training and education for each specific profession were adopted. This approach led the EU legislature to adopt directives for the mutual recognition of diplomas of doctors, nurses responsible for general care, dental practitioners, veterinary surgeons, midwives, hairdressers, architects, and pharmacists.7 In the case of professions not covered by these directives, mutual recognition of diplomas was recognised by the ECJ.8

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2.2. From Sectoral to General Harmonisation

In 1989, sectoral (vertical) harmonisation was substituted by a general (horizontal) system of harmonisation of diplomas. This general approach applied to a wider spectrum of sectors, in comparison with the old sectoral approach. This general harmonisation consisted of three directives: Council Directive 89/48/EEC on a general system for the recognition of higher education diplomas awarded on the completion of professional education and training of at least three years’ duration,9 Council Directive 92/51 covering education and training other than the three-year higher education requirement of Directive 89/48,10 and Council Directive 99/42 expanding the scope of the horizontal system by covering a broad range of industrial and professional sectors, such as textiles, clothing, leather, and wood.11 6

In 1961, a General Programme for the abolition of restrictions on establishment was adopted, in accordance with Article 50 TFEU. 7 Directives 75/362/EEC, 75/363/EEC, 77/452/EEC, 78/686/EEC, 78/1026/EEC, 78/1027/EEC, 80/154/EEC and 80/155/EEC (later amended by Council Directive 82/76/EEC, O.J. L 43/21 (1982) and Council Directive 89/594/EEC, O.J. L 341/19 (1989)), Directives 82/489, 85/384 and 85/432. See Donohoe (2008), pp. 437–475. Papadopoulos and Ortino, in Smit et al. (2013), Article 53 TFEU para 4. 8 For the profession of advocate/lawyer, see: Case 71/76, Thieffry (ECJ 28 April 1977) and Case C340/89, Vlassopoulou (ECJ 7 May 1991). Malamataris, in Christianos (2012), Article 53 TFEU para 3. 9 Council 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, O.J. L 19/16 (1989). 10 Council Directive 92/51/EEC on a second general system for the recognition of professional education and training to supplement Directive 89/48/EEC, O.J. L 209/25 (1992). 11 Parliament/Council Directive 1999/42/EC establishing a mechanism for the recognition of qualifications in respect of the professional activities covered by the Directives on liberalisation and transitional measures and supplementing the general systems for the recognition of qualifications, O.J. L 201/77 (1999).

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2.3. The Professional Qualifications Directive (Directive 2005/36/EC)

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The previous sectoral and horizontal system of harmonisation required reorganisation and rationalisation by standardising the principles applicable. The Professional Qualifications Directive12 replaced 15 directives in total13 and constitutes now the basic consolidated instrument harmonising the recognition of certificates and professional qualifications acquired in another MS. The purpose of this directive is to establish rules according to which a MS that makes access to or pursuit of a regulated profession14 in its territory contingent upon the possession of specific professional qualifications (host MS) shall recognise professional qualifications obtained in one or more other MS (home MS) and which allow the holder of the said qualifications to pursue the same profession there, for access to and pursuit of that profession.15 The Professional Qualifications Directive was modernised in 2013.16 The Directive regulates the establishment and provision of services. According to Article 2(1), this directive shall apply to all nationals of a MS wishing to pursue a regulated profession in a MS, including those belonging to the liberal professions, other than that in which they obtained their professional qualifications, on either a self-employed or employed basis. The Professional Qualifications Directive contains three different systems of recognition deriving from the divergent methods of recognition of the previous directives.17 Firstly, the principle of automatic recognition of qualification applies to certain professions (doctors, nurses, dental practitioners, veterinary surgeons, pharmacists, and architects). This automatic recognition of diplomas is based on the harmonisation of minimum qualifications among MS (Chapter III). 12

Parliament/Council Directive 2005/36/EC on the recognition of professional qualifications, O.J. L 255/22 (2005). 13 It replaced Council Directives 89/48/EEC and 92/51/EEC as well as Directive 1999/42/EC, and Council Directives 77/452/EEC, 77/453/EEC, 78/686/EEC, 78/687/EEC, 78/1026/EEC, 78/1027/ EEC, 80/154/EEC, 80/155/EEC, 85/384/EEC, 85/432/EEC, 85/433/EEC and 93/16/EEC concerning the professions of nurse responsible for general care, dental practitioner, veterinary surgeon, midwife, architect, pharmacist and doctor. See Directive 2005/36/EC, Recital 9. 14 In Aranitis, the ECJ examined the notion of regulated profession and stated that “a profession cannot be described as regulated when there are in the host Member State no laws, regulations or administrative provisions governing the taking up or pursuit of that profession or of one of its modes of pursuit, even though the only education and training leading to it consists of at least four and a half years of higher-education studies on completion of which a diploma is awarded and, consequently, only persons possessing that higher-education diploma as a rule seek employment in, and pursue, that profession.” Case C-164/94, Georgios Aranitis v Land Berlin (ECJ 1 February 1996) para 33. 15 Article 1 of Directive 2005/36/EC. See also Parliament/Council Decision No 2241/2004/EC on a single Community framework for the transparency of qualifications and competences (Europass), O.J. L 390/6 (2004). This Decision regulates Europass, which constitutes a portfolio of certain standardised documents facilitating presentation of qualifications and skills. 16 Parliament/Council Directive 2013/55/EU, O.J. L 354/132 (2013). 17 Weiss and Kaupa (2014), pp. 236–237.

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Secondly, there is a system of automatic recognition of qualifications attested by professional experience (Chapter II). According to Article 16, if, in a MS, access to or pursuit of one of the activities listed in Annex IV of the directive (mainly industrial, manufacturing, and other technical activities) is contingent upon the possession of general, commercial, or professional knowledge and aptitudes, that MS shall recognise previous pursuit of the activity in another MS as sufficient proof of such knowledge and aptitudes. The activity must have been pursued in accordance with Articles 17, 18, and 19, providing the details of the duration and form of professional experience required by Article 16 as sufficient proof.18 Thirdly, the general system for the recognition of professional qualifications is founded on the principle of mutual recognition and applies to all professions that are not covered by Chapters II and III. The national competent authorities must permit access to and pursuit of the profession under the same condition as for nationals.19 Article 13 sets the conditions for recognition, and Articles 14 and 15 refer to compensation measures (adaptation period and/or an aptitude test).20 With regard to the second paragraph of Article 53 TFEU, in case of medical and allied and pharmaceutical professions, the adoption of a directive requires the coordination in advance of all relevant conditions for the exercise of these professions. Now, the previously different secondary EU rules on these professions have been consolidated and integrated into the Professional Qualifications Directive.21

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Facilitating Practice of the Profession of Lawyer

With regard to lawyers, the agreement on the recognition of diplomas and qualifications was delayed significantly, in comparison with other professions. Only in 1998 was the relevant directive adopted.22 Directive 98/5/EC aims at facilitating the practice of the profession of lawyer on a permanent basis in a self-employed or salaried capacity in a MS other than that in which the professional qualification was obtained (Article 1). Any qualified lawyer shall be entitled to practice on a permanent basis in any other MS under his home-country professional title (Article 2). These lawyers must register with the competent authority of the host MS. Apart from certain exceptions, a lawyer practicing under his home-country professional title carries on the same professional activities as a lawyer practicing under the relevant professional title used in the host MS and may, inter alia, give 18

Weiss and Kaupa (2014), pp. 236–237. Weiss and Kaupa (2014), pp. 236–237. See, also Wyatt et al. (2011), pp. 630–639. 20 Case C-149/05, Harold Price (ECJ 7 September 2006) and Case C-330/03, Colegio de Ingenieros (ECJ 19 January 2006). 21 Kotzur, in Geiger et al. (2015), Article 53 AEUV para 5. 22 Parliament/Council 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 obtained, O.J. L 77/36 (1998). 19

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advice on the law of his home MS, on EU law, on international law, and on the law of the host MS. The disciplinary proceedings and the rules of professional conduct of the host MS apply to lawyers practicing under the home-country professional title. Article 10 refers to like treatment as a lawyer of the host MS. It states that a lawyer practicing under his home-country professional title who has effectively and regularly pursued for a period of at least three years an activity in the host MS in the law of that State, including EU law, shall, with a view to gaining admission to the profession of lawyer in the host MS, be exempted from the aptitude test. Those lawyers who have not completed their professional training are not covered by the directives, though they may receive some protection by the case law of the ECJ under Articles 45 and 49 TFEU.23

4. 10

Harmonisation of Other Areas

Except for directives for the mutual recognition of diplomas, certificates, and other evidence of formal qualifications, Article 53 TFEU was also used as a legal basis for the harmonisation of other fields. This harmonisation aims at “the coordination of the provisions laid down by law, regulation or administrative action in Member States concerning the taking-up and pursuit of activities as self-employed persons”. Article 53 TFEU was used jointly with other articles (such as Article 114 TFEU or Article 115 TFEU) as legal bases for the harmonisation of various areas of national law. Banking law,24 insurance law,25 and capital market law26 were 23 Case C-313/01, Christine Morgenbesser (ECJ 13 November 2003). Steiner and Woods (2009), p. 520. For an analysis of the free movement of lawyers in the EU, see also Wyatt et al. (2011), pp. 639–644. Lonbay (2011), pp. 1629–1669; Claessens et al. (2012); Nascimbene and Bergamini (2009). 24 Some of these directives are the following: First Council Directive 77/780/EEC on the coordination of the laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions, O.J. L 322/30 (1977); Second Council Directive 89/ 646/EEC on the co-ordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions, O.J. L 386/1 (1989); Directive 2002/87/ EC on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate, O.J. L 35/1 (2003). 25 Some of these directives are the following: First Council Directive 79/267/EEC on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of direct life assurance, O.J. L 63/1 (1979); Directive 2002/87/EC on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate, O.J. L 35/1 (2003); Council Directive 90/619/EEC on the co-ordination of laws, regulations and administrative provisions relating to direct life assurance, laying down provisions to facilitate the effective exercise of freedom to provide services, O.J. L 330/50 (1990). 26 Some of these directives are the following: Directive 2006/49/EC on the capital adequacy of investment firms and credit institutions (recast), O.J. L 177/201 (2006); Directive 2004/39/EC on markets in financial instruments, O.J. L 145/1 (2006); Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading, O.J. L 345/64 (2003).

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harmonised on the basis of Article 53 TFEU. Article 53 TFEU was also used as a legal basis in the field of cultural policy. Although harmonisation on cultural grounds is excluded according to Article 167 TFEU, EU confronted the various obstacles in this field by invoking Article 53 TFEU allowing the coordination of national measures facilitating the freedom of establishment, together with Article 62 TFEU and Article 114 TFEU.27 Additionally, energy law directives were also adopted on the basis of Article 53 TFEU.28

5.

Article 53 TFEU and Competence Problems in the Context of Harmonisation

In the context of the legal basis of Article 53 TFEU, the ECJ had the chance to examine the EU’s competence to regulate the internal market. Directive 98/43/ EC on tobacco advertising29 was adopted on the basis of Articles 53, 62, and 114 TFEU. In the Tobacco Advertising case, the ECJ found that the principle of conferral (attributed competence) was infringed. It annulled Directive 98/43/EC and held that Article 114 TFEU, as well as Articles 53 and 62 TFEU, seeks to improve the conditions for the establishment and functioning of the internal market. To construe these articles as meaning that they grant to the EU legislature a general power to regulate the internal market would be incompatible with the principle that the powers of the EU are limited to those specifically conferred on it (Article 5 TEU).30

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Services Directive

The Services Directive31 was also adopted on the basis of Article 53 TFEU (jointly with Articles 62 and 114 TFEU). This directive, which was one of the most controversial pieces of secondary EU legislation, seeks to establish an internal market for services. The Services Directive establishes general provisions

27

Craufurd Smith (2011), p. 883. Directive 2009/72/EC concerning common rules for the internal market in electricity, O.J. L 211/55 (2009) and Directive 2009/73/EC concerning common rules for the internal market in natural gas, O.J. L 211/94 (2009). 29 Parliament/Council Directive 98/43/EC on the approximation of the laws, regulations and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products, O.J. L 213/9 (1998). 30 Case C-376/98, Germany v Parliament and Council (ECJ 5 October 2000) para 83–84, 86–88. Malamataris, in Christianos (2012), Article 53 TFEU para 14. See also Wyatt (2009), pp. 93–136; Crosby (2002), pp. 177–193; Weatherill (2003), pp. 93–103; Hillion (2001), pp. 486–489. 31 Parliament/Council Directive 2006/123/EC on services in the internal market, O.J. L 376/36 (2006). 28

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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).32

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13

The Significance of Article 49 TFEU for Cases Not Covered by the Harmonisation of Professional Qualifications

The ECJ interpreted Article 49 TFEU in many cases concerning the mutual recognition of professional qualifications. The findings of the ECJ are still applicable to cases not covered by the harmonisation of professional qualifications. In Hocsman, the ECJ examined a situation not caught by secondary EU law and held that Article 49 TFEU “is to be interpreted as meaning that where, in a situation not regulated by a directive on mutual recognition of diplomas, a Community national applies for authorisation to practise a profession access to which depends, under national law, on the possession of a diploma or professional qualification, or on periods of practical experience, the competent authorities of the Member State concerned must take into consideration all the diplomas, certificates and other evidence of formal qualifications of the person concerned and his relevant experience, by comparing the specialised knowledge and abilities certified by those diplomas and that experience with the knowledge and qualifications required by the national rules”.33 Freedom of establishment (Article 49 TFEU) is directly applicable not only where no relevant harmonisation directives had been adopted but also, after harmonisation, to situations not covered by relevant directives.34

List of Cases ECJ

ECJ 28.04.1977, 71/76, Thieffry, ECLI:EU:C:1977:65 [cit. in para 4] ECJ 07.05.1991, C-340/89, Vlassopoulou, ECLI:EU:C:1991:193 [cit. in para 4] ECJ 09.02.1994, C-319/92, Haim, ECLI:EU:C:1994:47 [cit. in para 13] ECJ 01.02.1996, C-164/94, Georgios Aranitis v Land Berlin, ECLI:EU:C:1996:23 [cit. in para 6] ECJ 14.09.2000, C-238/98, Hocsman, ECLI:EU:C:2000:440 [cit. in para 1 and 13] ECJ 05.10.2000, C-376/98, Germany v Parliament and Council, ECLI:EU: C:2000:544 [cit. in para 11] 32

Barnard (2010), p. 403; Shaw et al. (2007), p. 159; de Witte (2007); Craufurd Smith (2007); Davies (2007), p. 232. 33 Case C-238/98, Hocsman (ECJ 14 September 2000) para 40. 34 See also Case C-319/92, Haim (ECJ 9 February 1994); Wyatt et al. (2011), pp. 626–628.

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ECJ 15.11.2003, C-313/01, Christine Morgenbesser v Consiglio dell’Ordine degli avvocati di Genova, ECLI:EU:C:2003:612 [cit. in para 9] ECJ 19.01.2006, C-330/03, Colegio de Ingenieros de Caminos, Canales y Puertos v Administración del Estado, ECLI:EU:C:2006:45 [cit. in para 7] ECJ 07.09.2006, C-149/05, Harold Price, ECLI:EU:C:2006:532 [cit. in para 7]

References Barnard, C. (2010). The Substantive Law of the EU (3rd ed.). Oxford: OUP. Christianos, V. (Ed.). (2012). TEU-TFEU. Athens: Nomiki Vivliothiki (in Greek). Claessens, S. J. F. J., Van Haeften, M. C. C., Philipsen, N. J., Buiskool, B. J., Schneider, H. E. G. S., Schoenmaekers, S. L. T., & Grijpstra, D. H. (2012). Evaluation of the legal framework for the free movement of lawyers – Final report. Zoetermeer: Study, Panteia, Maastricht University and European Commission, DG Internal Market and Services (MARKT/2011/071/E). Craufurd Smith, R. (2007). Old wine in new bottles? From the ‘country of origin principle’ to ‘freedom to provide services’ in the European Community directive on services in the internal market. Edinburgh Europa Institute Mitchell Working Paper Series 6/2007. Craufurd Smith, R. (2011). The evolution of cultural policy in the European Union. In P. Craig & R. De Burca (Eds.), The Evolution of EU Law (pp. 869–895). Oxford: OUP. Crosby, S. (2002). The new Tobacco Control Directive: an illiberal and illegal disdain for the law. European Law Review, 177–193. Davies, G. (2007). The services directive: extending the country of origin principle, and reforming public administration. European Law Review, 232–245. de Witte, B. (2007). Setting the Scene: How did Services get to Bolkestein and Why? Edinburgh Europa Institute Mitchell Working Paper Series 3/2007. Donohoe, T. (2008). Here . . . Fishy, Fishy, Physician: The Effect of European Union Mandates on Physician Movement in the European Union. Indiana International & Comparative Law Review, 18(2), 437–475. Geiger, R., Khan, D. E., & Kotzur, M. (2015). European Union Treaties. Oxford: Hart. Hillion, C. (2001). Tobacco Advertising: If You Must, You May. The Cambridge Law Journal, 486–489. Lonbay, J. (2011). Assessing the European Market for Legal Services: Developments in the Free Movement of Lawyers in the European Union. Fordham International Law Journal, 33(6), 1629–1669. Nascimbene, B., & Bergamini, E. (2009). The legal profession in the European Union. Alphen aan den Rijn: Kluwer Publications. Shaw, J., et al. (2007). Economic and Social Law of the European Union. Basingstoke: Palgrave Macmillan. Smit, H., Herzog, P., Campbell, C., & Zagel, G. (Eds.). (2013). Smit and Herzog on The Law of the European Union. Vienna: LexisNexis. Steiner, J., & Woods, L. (2009). EU Law (10th ed.). Oxford: OUP. Weatherill, S. (2003). European private law - Is there a future after the Tobacco Advertising decision. In P.-C. Müller-Graff (Ed.), Europäisches Integrationsrecht im Querschnitt (pp. 93– 103). Baden-Baden: Nomos. Weiss, F., & Kaupa, C. (2014). European Union Internal Market Law. Cambridge: CUP. Wyatt, D. A. (2009). Community Competence to Regulate the Internal Market. In M. Dougan & S. Currie (Eds.), 50 years of European Treaties (pp. 93–136). Oxford: Hart Publishing. Wyatt, D. A., et al. (2011). European Union Law (6th ed.). Oxford: Hart Publishing.

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Article 54 [Equality of Treatment of Companies and Firms] (ex-Article 48 TEC) Companies or firms3 formed in accordance with the law of a Member State6-7 and having their registered office, central administration or principal place of business6, 8, 10-11 within the Union shall, for the purposes of this Chapter, be treated in the same way as natural persons2, 5 who are nationals of Member States. “Companies or firms”3 means companies or firms constituted under civil or commercial law, including cooperative societies, and other legal persons governed by public or private law, save for those which are non-profitmaking.4

Contents 1. 2. 3.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 The Meaning of “Companies or Firms” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The Two Conditions for Companies or Firms to Be Entitled to Exercise the Freedom of Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.1. The Two Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.2. The ECJ’s Case Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.3. “Registered Office, Central Administration or Principal Place of Business” . . . . . . 10 4. Exercising Freedom of Establishment for Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.1. Introductory Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 4.2. Primary Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 4.3. Secondary Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 4.4. Efforts to Harmonise Cross-Border Transfer of Registered Office and Cross-Border Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 List of Cases References

1.

Introduction

Article 54 TFEU complements the scope of application ratione personae of Article 49 TFEU by including companies as beneficiaries of freedom of establishment. In modern economy, the economic impact of companies is bigger than that of natural persons.1 Freedom of establishment is conferred not only on natural persons holding EU nationality but also on legal persons. Article 54 TFEU adopts

1

Malamataris, in Christianos (2012), Article 54 TFEU para 1.

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ex-Article 48 TEC without any substantial alterations and sets out the beneficiaries of the right to establishment.2 A company enjoys the freedom of establishment if it has been formed in accordance with the laws of one of the MS and if its registered office, central administration, or principal place of business is within a MS of the EU. On the one hand, the prohibition of discrimination in Article 49 TFEU forbids discrimination against individuals on the basis of nationality. On the other hand, Article 49 TFEU forbids discrimination against companies on the basis of registered office, central administration, or principal place of business.3 Freedom of establishment is the only EU fundamental freedom that entails a special provision for legal persons. The other EU fundamental freedoms (free movement of goods, free movement of services, and free movement of capital) focus not on the natural or legal person that is exercising them but on the object of the movement. Of course, free movement of workers cannot be exercised by legal persons and is granted only to natural persons.4 Freedom of establishment in the first place seems to fit only to natural persons because only natural persons are entitled to freedom of establishment stricto sensu. The clarifying role of Article 54 TFEU is very important in order to encompass legal persons in the scope of freedom of establishment. Article 54 TFEU endorses that legal persons must be treated in the same way as natural persons and that (direct and indirect) discrimination is prohibited.5 G. Marenco discusses the important difference between these grounds of discrimination (i.e. “registered office, central administration or principal place of business”) and that of nationality.6 He argues that there is only a partial equivalence of the nationality condition and that of the company’s registered office in a MS. While nationality uses a purely formal criterion without any concrete content to exclude equality of treatment, the registered office constitutes a concrete criterion for the connection of a company with a State. Hence, G. Marenco argues that nationality discrimination, a situation without concrete content, cannot be justified on economic grounds, which is where freedom of establishment operates. However, “registered office” as a concrete situation might justify a difference in treatment. Thus, “registered office” cannot be equated purely and simply with nationality.7 This argument is underpinned by Commission v France. In this case, the ECJ examined French legislation not granting to the branches and agencies in France of insurance companies whose registered office is in another MS on the same terms as apply to insurance companies whose registered office is in France the benefit of 2

Chalmers et al. (2010), p. 861; Papadopoulos and Ortino, in Smit et al. (2013), Article 54 TFEU para 2–3; Kotzur, in Geiger et al. (2015), Article 54 AEUV para 1. 3 Chalmers et al. (2010), p. 861. For an interesting analysis of how the notion of “restriction” (which constitutes the first stage in examining whether there is a breach of internal market rules) is used in cases involving company law measures, see Sørensen (2014), pp. 178–188. 4 Malamataris, in Christianos (2012), Article 54 TFEU para 2. 5 Kotzur, in Geiger et al. (2015), Article 54 AEUV para 1. 6 Chalmers et al. (2010), p. 861. 7 Marenco (1991), pp. 113–114.

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shareholders’ tax credits in respect of dividends paid to such branches or agencies by French companies.8 Although the ECJ found that the French legislation in question infringes freedom of establishment (Article 49 TFEU), it seems that it took into account the allegation of the French government seeking to demonstrate that the above-mentioned difference of treatment is justified by objective differences between the position of an insurance company whose registered office is in France and that of a branch or agency of an insurance company whose registered office is situated in another Member State.9 The ECJ stated that the possibility cannot altogether be excluded that a distinction based on the location of the registered office of a company or the place of residence of a natural person may, under certain conditions, be justified in an area such as tax law.10 G. Marenco notes that the registered office is thus compared first with the nationality of physical persons and then with their residence. He asserts that this double comparison reveals that the registered office condition plays the role of being at once formal and substantial.11

2.

The Meaning of “Companies or Firms”

The second paragraph of Article 54 TFEU contains a definition for “companies or firms”. “Companies or firms” encompasses companies established under private law and companies established under commercial law, including cooperatives and “other” legal persons established under either private or public law.12 Reference to “other” legal persons implies that legal persons with legal personality could be regarded as beneficiaries of freedom of establishment.13 This definition includes not only companies with legal capacity but also companies without or with limited14 legal capacity. Moreover, “companies or firms” might be interpreted widely and

8

Case 270/83, Commission v France (ECJ 28 January 1986). Case 270/83, Commission v France (ECJ 28 January 1986) para 17. 10 Case 270/83 Commission v France (ECJ 28 January 1986) para 19. This proposition was also discussed in Marks & Spencer. The ECJ stated that in tax law, the taxpayers’ residence may constitute a factor that might justify national rules involving different treatment for resident and non-resident taxpayers. However, residence is not always a proper factor for distinction. In effect, acceptance of the proposition that the Member State in which a company seeks to establish itself may freely apply to it a different treatment solely by reason of the fact that its registered office is situated in another Member State would deprive Article 49 TFEU of all meaning. Case C-446/03, Marks & Spencer plc v David Halsey (Her Majesty’s Inspector of Taxes) (ECJ 13 December 2005) para 37. 11 Marenco (1991), pp. 113–114. 12 Kotzur, in Geiger et al. (2015), Article 54 AEUV para 2. 13 Malamataris, in Christianos (2012), Article 54 TFEU para 4. 14 It was argued that companies without legal personality but with limited legal capacity do not fall within the scope of beneficiaries of freedom of establishment. Malamataris, in Christianos (2012), Article 54 TFEU para 4. 9

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might embrace all legal actors, regardless of their legal personality, that are sufficiently independent and are not legal persons.15 According to Article 54 TFEU, companies governed by public or private law fall within the scope of beneficiaries under Article 49 TFEU. It is not crucial whether a legal person is subjected to private or public law in order to be able to exercise freedom of establishment. Hence, State companies or undertakings to whom special or exclusive rights and prerogatives were granted, in accordance with Article 106 TFEU, might be able to exercise freedom of establishment as long as their activities do not fall within the scope of restrictions of Articles 51 and 52 TFEU.16 The second paragraph of Article 54 excludes explicitly from the scope of freedom of establishment non-profit-making companies.17 The non-profit making exclusion was confirmed in Sodemare; this conclusion is consistent with Article 56 TFEU (free movement of services) where services are normally provided for remuneration.18 Non-profit-making legal persons are not prohibited to pursue economic activities. Hence, non-profit-making legal persons exercising economic activities could be considered beneficiaries of freedom of establishment.19 In other words, non-profit-making economic activities are covered by Article 49 TFEU.20 Legal persons not pursuing an economic purpose are excluded as beneficiaries of freedom of establishment. An objective economic activity pursued by a legal person fulfils the criterion of economic purpose.21 Making profit is not a prerequisite for economic purpose. The notion of economic purpose encompasses objective economic activities, regardless of whether they seek profit. It is worth mentioning here cooperatives falling explicitly within the scope of Article 54 TFEU, which have an economic purpose but which are not profit-making legal persons. Moreover, legal persons with a non-profit purpose taking precedence over their economic purpose still fall within the scope of the definition of Article 54 TFEU. In conclusion, Article 54 TFEU catches legal persons having an economic purpose, despite the absence of a profit-making purpose.22

15

Kotzur, in Geiger et al. (2015), Article 54 AEUV para 2. Malamataris, in Christianos (2012), Article 54 TFEU para 4. 17 Case 182/83, Robert Fearon & Company Limited v Irish Land Commission (ECJ 6 November 1984) para 8. Papadopoulos and Ortino, in Smit et al. (2013) Article 54 para 3. It is worth mentioning here a new corporate type adopted in USA and Canada, the Public Benefit Corporation. A Public Benefit Corporation must have a corporate purpose to create a material positive impact on society and the environment. In case of an adoption of a similar corporate type by an EU jurisdiction, it would be interesting to see its exact position in the framework of the fundamental freedom of establishment. Fomcenco (2014), p. 276. 18 Barnard (2010), p. 296. 19 Malamataris, in Christianos (2012), Article 54 TFEU para 5. 20 Craig and De Burca (2011), p. 780. 21 Kotzur, in Geiger et al. (2015), Article 54 AEUV para 3. 22 Kotzur, in Geiger et al. (2015), Article 54 AEUV para 3. 16

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The ECJ adopted a wide interpretation for legal persons entitled to exercise the freedom of establishment. In Sodemare, the ECJ stated that with regard to Article 54 TFEU, it must be borne in mind that the effect of that provision is to assimilate, for the purpose of giving effect to the chapter relating to the right of establishment, companies or firms formed in accordance with the law of a MS and having their registered office, central administration, or principal place of business within the EU, to natural persons who are nationals of one of the MS, although non-profitmaking companies are excluded from the benefit of that chapter. The ECJ continued and held that since that provision does no more than define the class of persons to whom the provisions on the right of establishment apply, it does not determine the rules that are subject to the requirements of Articles 49 TFEU.23

3.

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The Two Conditions for Companies or Firms to Be Entitled to Exercise the Freedom of Establishment

3.1. The Two Conditions

According to Article 54 TFEU, there are two conditions for companies or firms to be entitled to exercise the freedom of establishment. First, they must have been formed (set up) in accordance with the law of a MS. Second, they must have their registered office, central administration, or principal place of business within the Union. The ECJ discussed, in Centros (➔ para 17), the impact of this provision and held that the immediate consequence of this is that those companies are entitled to carry on their business in another MS through an agency, branch, or subsidiary. The ECJ added that the location of their registered office, central administration, or principal place of business serves as the connecting factor with the legal system of a particular State in the same way as does nationality in the case of a natural person.24 Regarding the first condition on the formation of companies, natural persons can also exercise freedom of establishment by participating in the formation of a company in another MS (Article 49.2 TFEU) within the meaning of Article 54 TFEU. Natural persons could become shareholders or directors25 in a company within the meaning of Article 54 TFEU.26 According to ECJ’s case law, freedom of establishment applies to existing shareholdings or the acquisition of shareholdings 23

Case C-70/95, Sodemare and others v Regione Lombardia (ECJ 17 June 1997) para 25. Wyatt et al. (2011). p. 648. 24 Case C-212/97, Centros (ECJ 9 March 1999) para 20. See also Case 79/85, Segers (ECJ 10 July 1986) para 13, Case 270/83, Commission v France (ECJ 28 January 1986) para 18, Case C-330/91, Commerzbank (ECJ 13 July 1993) para 13, and Case C-264/96, ICI (ECJ 16 July 1998) para 20. 25 Case 182/83, Robert Fearon & Company Limited v Irish Land Commission (ECJ 6 November 1984) para 9, Case C-251/98, Baars (ECJ 13 April 2000) para 22, Case C-212/97, Centros (ECJ 9 March 1999) para 19. 26 Barnard (2010), p. 296.

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by nationals of a MS in the capital of a company established in another MS, giving them the control of this company (definite influence on the company’s decisions and activities).27 Additionally, Article 49 TFEU applies to national rules affecting relations within a group of companies.28 It is not important whether the natural persons controlling a company (e.g. majority shareholders) are nationals of a MS.29 As far as the second condition is concerned, it is necessary to define “registered office, central administration or principal place of business”. “Registered office” could be defined as the formal seat mentioned in the statutes. “Central administration” constitutes the place where the activities of the company’s management bodies mainly take place. The “principal place of business” is the place of the main personal and material resources of the company.30

3.2. The ECJ’s Case Law

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The ECJ had the opportunity to discuss various aspects of these conditions. In Commission v Germany, the ECJ held that an undertaking of one MS that maintains a permanent presence in another MS comes within the scope of the provisions of the treaty on the right of establishment, even if that presence does not take the form of a branch or agency but consists merely of an office managed by the undertaking’s own staff or by a person that is independent but authorised to act on a permanent basis for the undertaking, as would be the case with an agency.31 Moreover, according to Segers, it should be noted that it is the registered office of companies or firms formed in accordance with the law of a MS that serves as the connecting factor with the legal system of a particular State, as does nationality in the case of natural persons. Acceptance of the proposition that the MS in which a company seeks to establish itself may freely apply to it a different treatment solely by reason of the fact that its registered office is situated in another MS would deprive Articles 49 and 54 TFEU of all meaning.32 Some cases on discriminatory tax treatment offer an interesting insight on Article 54 TFEU. Freedom to choose the most suitable legal form was scrutinised in Commission v France. The ECJ held that the fact that companies whose registered office is situated in another MS are at liberty to establish themselves 27

Case C-231/05, Oy AA (ECJ 18 July 2007) para 20, Case C-251/98, Baars (ECJ 13 April 2000) para 21–22, Case C-208/00, Überseering (ECJ 5 November 2002) para 77. Barnard (2010), p. 297. 28 Case C-446/04, Test Claimants in the FII Group Litigation v Commissioners of Inland Revenue (ECJ 12 December 2006) para 118, Case C-231/05, Oy AA (ECJ 18 July 2007) para 23. Barnard (2010), p. 297. 29 Case C-221/89, Factortame (ECJ 25 July 1991), Case C-212/97, Centros (ECJ 9 March 1999). Kotzur, in Geiger et al. (2015), Article 54 AEUV para 9. 30 Kotzur, in Geiger et al. (2015) Article 54 AEUV para 7–8. 31 Case 205/84, Commission v Germany (ECJ 4 December 1986) para 21. Wyatt et al. (2011), p. 648. 32 Case 79/85, Segers (ECJ 10 July 1986) para 13–14. Wyatt et al. (2011), p. 648.

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by setting up a subsidiary in order to have the benefit of the tax credit cannot justify different treatment. The second sentence of the first paragraph of Article 54 TFEU expressly leaves traders freedom to choose the appropriate legal form in which to pursue their activities in another MS, and that freedom of choice must not be limited by discriminatory tax provisions.33 This finding was also confirmed by X Holding,34 Oy AA,35 CLT-UFA,36 and Saint-Gobain.37 It could also be inferred from Sodemare that even indistinctly discriminatory restrictions on the legal form in which a company incorporated in another MS may conduct its operations in the host MS will need justification if they are to be in conformity with the freedom of establishment (Article 49 TFEU).38

3.3. “Registered Office, Central Administration or Principal Place of Business”

According to Commission v France39 and Commerzbank,40 “registered office, central administration or principal place of business” serves as the connecting factor with a specific jurisdiction. Seat for companies has the same function as nationality for natural persons. A company’s seat is the state in which the company or firm formed in accordance with the law of a MS has its registered office, central administration, or principal place of business. Hence, direct discrimination is discrimination based on a company’s seat, and indirect discrimination is discrimination based on conditions that by the application of other criteria of differentiation lead in fact to the same result.41 Reference to “registered office, central administration or principal place of business” is related to the recognition of a company by a MS’s law. There are two main theories on the recognition of a company as having a valid legal personality: the real seat theory and the incorporation theory. The real seat theory requires application to a company of the laws of the MS in which its actual centre of administration is situated. With regard to the incorporation theory, a company is recognised in accordance with the law of the MS where the incorporation took place.42 The ECJ examined these two theories in the context of companies exercising primary or secondary establishment at EU level (➔ para 14). 33

Case 270/83, Commission v France (ECJ 28 January 1986) para 22. Wyatt et al. (2011), p. 648. Case C-337/08, X Holding BV v Staatssecretaris van Financiën (ECJ 25 February 2010). 35 Case C-231/05, Oy AA (ECJ 18 July 2007) para 40. 36 Case C-253/03, CLT-UFA (ECJ 23 February 2006) para 14. 37 Case C-307/97, Compagnie de Saint-Gobain, Zweigniederlassung Deutschland v Finanzamt Aachen-Innenstadt (ECJ 21 September 1999). 38 Wyatt et al. (2011), p. 649. 39 Case 270/83, Commission v France (ECJ 28 January 1986). 40 Case C-330/91, Commerzbank (ECJ 13 July 1993) para 13–14. 41 Barnard (2010), p. 333. 42 Cains (2010), p. 571. 34

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Exercising Freedom of Establishment for Companies

4.1. Introductory Remarks

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Article 49 TFEU promulgates two forms of establishment. The first one is primary establishment: the right to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 54 TFEU.43 The second one is secondary establishment: the right to set up agencies, branches, or subsidiaries by nationals of any MS established in the territory of any MS.44 It should be noted that the creation and the outright ownership by a natural or legal person established in a MS of a permanent establishment not having a separate legal personality situated in another MS falls within the scope of application ratione materiae of Article 49 TFEU.45 In both categories of establishment, as was stressed in Cadbury Schweppes,46 the application of Article 49 TFEU requires concurrently (1) a fixed establishment in the host MS for an indefinite period and (2) the actual pursuit of an economic activity through this establishment. The fact that both conditions must be fulfilled in order for Article 49 TFEU to apply was explained in Stauffer. This case concerned an Italian charitable foundation being the proprietor of commercial premises in Munich. It rented them out, and the services ancillary to the rental of that commercial property were provided by a German property management agent.47 In order for the provisions relating to freedom of establishment to apply, it is generally necessary to have secured a permanent presence in the host MS and, where immovable property is purchased and held, that property should be actively managed. It is clear from the account provided by the national court that the foundation does not have any premises in Germany for the purpose of pursuing its activities and that the services ancillary to the letting of the property are provided by a German property management agent.48 The ECJ emphasised that Article 49 TFEU does not apply because while the first condition was fulfilled (holding immovable property indicated permanent presence), the second condition was not fulfilled (no genuine economic activity because the property was not actively managed). In this case, free movement of capital (Article 63 TFEU) applies instead of freedom of establishment (Article 49 TFEU).49

43

Barnard (2010), p. 296. Barnard (2010), p. 297. 45 Case C-414/06, Lidl Belgium GmbH & Co. KG v Finanzamt Heilbronn (ECJ 15 May 2008) para 15. 46 Case C-196/04, Cadbury Schweppes (ECJ 12 September 2006) para 54. 47 Barnard (2010), p. 297. 48 Case C-386/04, Centro di Musicologia Walter Stauffer v Finanzamt München für Körperschaften (ECJ 14 September 2006) para 19. 49 See also Case C-451/05, ELISA (ECJ 11 October 2007) para 65–67. Barnard (2010), p. 297. 44

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The fact that companies must be treated in the same way as natural persons is important for both primary and secondary establishment, as well as for any other harmonising measure addressed to corporate restructuring.50 This prohibition of discrimination required by the fundamental freedom of establishment for companies plays a major role in the exercise of primary and secondary establishment. The fact that MS, generally speaking, adopt either the real seat theory or the incorporation theory (➔ para 11) constitutes a source of problems for the proper exercise of the primary and secondary establishment of companies. The different approaches that MS follow in recognition of these two theories often create impediments to the freedom of establishment.

14

4.2. Primary Establishment

The ECJ ruled, in Daily Mail,51 that freedom of establishment does not grant to companies an unfettered right to migrate abroad and to move their registered office or their central management and control abroad while they retain an establishment at the home MS.52 The ECJ stated that Articles 49 and 54 TFEU cannot be interpreted as conferring on companies incorporated under the law of a Member State a right to transfer their central management and control and their central administration to another MS while retaining their status as companies incorporated under the legislation of the first MS.53 The ECJ stressed that, unlike natural persons, companies are creatures of the law and, in the present state of EU law, creatures of national law. They exist only by virtue of the varying national legislation that determines their incorporation and functioning.54 The ECJ commented on the issue of connecting factors: the legislation of the MS varies widely in regard to both the factor providing a connection to the national territory required for the incorporation of a company and the question whether a company incorporated under the legislation of a MS may subsequently modify that connecting factor. Certain States require that not merely the registered office but also the real head office, that is to say the central administration of the company, be situated on their territory, and the removal of the central administration from that territory thus presupposes the winding-up of the company with all the consequences that winding-up entails in company law and tax law. Then the ECJ held that seat transfer could be subjected to certain conditions: the legislation of other States permits companies to transfer their central administration to a foreign country, but some of them make that right subject to certain restrictions, and the 50

Kotzur, in Geiger et al. (2015), Article 54 AEUV para 10. See also Grundmann (2012), pp. 587–630. 51 Case 81/87, Daily Mail (27 September 1988). 52 Craig and De Burca (2011), p. 780. 53 Case 81/87, Daily Mail (27 September 1988) para 24. 54 Case 81/87, Daily Mail (27 September 1988) para 19.

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legal consequences of a transfer, particularly in regard to taxation, vary from one MS to another.55 Finally, the ECJ scrutinises Article 54 TFEU and does not distinguish among the connecting factors adopted by Article 54 TFEU (➔ para 10). It states that the TFEU has taken account of that variety in national legislation. In defining, in Article 54 TFEU, the companies that enjoy the right of establishment, the TFEU places on the same footing, as connecting factors, the registered office, central administration, and principal place of business of a company.56 Daily Mail’s aftermath is that MS may retain certain restrictions on the seat transfer of companies without being affected by Article 49 TFEU. While Daily Mail was criticised, the ECJ confirmed the Daily Mail findings in Cartesio.57 In Cartesio,58 the ECJ distinguished between the nationality of a company determined under Article 54 TFEU and the right of a company established in one MS to establish itself in another MS by exercising its freedom of establishment. Cartesio confirmed the approach of ECJ in Daily Mail with regard to a MS’s right to determine the connecting factor between companies formed under its national legislation, regardless of the theory this MS follows (incorporation theory or real seat theory). This is a direct consequence of Article 54 TFEU. A MS has the right to remove the status of a company that was incorporated under the legislation of that MS if that company does not conform any more with the requirements of that MS.59 In Cartesio, the ECJ stated that, in accordance with Article 54 TFEU, in the absence of a uniform EU law definition of the companies that may enjoy the right of establishment on the basis of a single connecting factor determining the national law applicable to a company, the question whether Article 49 TFEU applies to a company that seeks to rely on the fundamental freedom enshrined in that article— like the question whether a natural person is a national of a MS and hence entitled to enjoy that freedom—is a preliminary matter that, as EU law now stands, can only be resolved by the applicable national law. In consequence, the question whether the company is faced with a restriction on the freedom of establishment, within the meaning of Article 49 TFEU, can arise only if it has been established, in the light of

55

Case 81/87, Daily Mail (27 September 1988) para 20. Case 81/87, Daily Mail (27 September 1988) para 21. 57 Steiner and Woods (2009), p. 522. 58 Case C-210/06, Cartesio (ECJ 16 December 2008). For an analysis of this ruling, see Cerioni (2010), pp. 311–337 and Szydło (2009), pp. 703–722. 59 Steiner and Woods (2009), p. 522. More specifically, the ECJ held that a MS has the power to define both the connecting factor required of a company if it is to be regarded as incorporated under the law of that MS and, as such, capable of enjoying the right of establishment, and that required if the company is to be able subsequently to maintain that status. That power includes the possibility for that MS not to permit a company governed by its law to retain that status if the company intends to reorganise itself in another MS by moving its seat to the territory of the latter, thereby breaking the connecting factor required under the national law of the MS of incorporation. Case C-210/06, Cartesio (ECJ 16 December 2008) para 110. 56

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the conditions laid down in Article 54 TFEU, that the company actually has a right to that freedom.60 The ECJ’s findings in Cartesio were confirmed subsequently by Vale.61 In Vale, the ECJ examined the possibility of cross-border conversions62 and held that any obligation, under Articles 49 TFEU and 54 TFEU, to permit a cross-border conversion infringes neither the power of the host MS to define the connecting factor nor that State’s determination of the rules governing the incorporation and functioning of the company resulting from a cross-border conversion. Such a company is necessarily governed solely by the national law of the host MS, which determines the connecting factor required and the rules governing its incorporation and functioning.63 In Polbud, the last case on corporate mobility decided by the CJEU, the CJEU examined the cross-border conversion of a company and the transfer of its registered office without a transfer of its real head office in the light of the freedom of establishment. The CJEU scrutinised the refusal to remove a company wishing to proceed to such cross-border conversion from the commercial register and the national rules whereby removal from commercial register is dependent on the winding-up of a company after a liquidation procedure.64 Firstly, the CJEU held that Articles 49 and 54 TFEU must be interpreted as meaning that the freedom of establishment applies to the transfer of the registered office of a company formed in accordance with the law of one Member State to the territory of another Member State, for the purposes of its conversion, in accordance with the conditions imposed by the legislation of the other Member State, into a company incorporated under the law of the latter Member State, when there is no change in the location of the real head office of that company.65 Secondly, the CJEU concluded that Articles 49 and 54 TFEU must be interpreted to mean as prohibiting the legislation of a Member State that requires that the transfer of the registered office of a company incorporated under the law of one Member State to the territory of another Member State, for the purposes of its conversion into a company incorporated under the law of the latter Member State, in accordance with the conditions imposed by the legislation of that Member State, be subject to the liquidation of the first company.66

60

Case C-210/06, Cartesio (ECJ 16 December 2008) para 109. Case C-378/10, VALE (ECJ 12 July 2012) para 28–29. 62 The ECJ found that Articles 49 TFEU and 54 TFEU must be interpreted as precluding national legislation which enables companies established under national law to convert, but does not allow, in a general manner, companies governed by the law of another MS to convert to companies governed by national law by incorporating such a company. Case C-378/10, VALE (ECJ 12 July 2012) para 41. 63 Case C-378/10, VALE (ECJ 12 July 2012) para 30–31. 64 Case C-106/16, Polbud (ECJ 25 October 2017) para 3–18. 65 Case C-106/16, Polbud (ECJ 25 October 2017) operative part. 66 Case C-106/16, Polbud (ECJ 25 October 2017) operative part. 61

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4.3. Secondary Establishment

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Apart from primary establishment, the ECJ had the chance to examine secondary establishment in various cases. In most of these cases, the ECJ examined the situation where a company incorporated in a MS conducts most of its business in another MS through a secondary establishment. The rationale behind this exercise of secondary establishment is often to avoid strict rules on incorporation in the host MS of secondary establishment. Host MS often see this secondary establishment as an abuse of law. Issues of regulatory competition are also raised here.67 Centros dealt exactly with the situation described above. The ECJ held that it is contrary to Articles 49 and 54 TFEU for a MS to refuse to register a branch of a company formed in accordance with the law of another MS in which it has its registered office but in which it conducts no business where the branch is intended to enable this company to carry on its entire business in the State in which that branch is to be created while avoiding the need to form a company there, thus evading the application of the rules governing the formation of companies, which, in that State, are more restrictive as regards the paying up of a minimum share capital.68 Article 49 TFEU permits a company to benefit from more lenient company law rules relating to its registration in a MS other than the MS where it plans to conduct business.69 In subsequent case law on secondary establishment, the ECJ followed the same approach that it had followed in Centros. Subsequent cases were Inspire Art,70 Überseering,71 and SEVIC.72 The establishment of a branch, agency, or subsidiary in another MS was examined in Marks & Spencer.73 In this case, the ECJ scrutinised the fact that the establishment of a branch, agency, or subsidiary in a host MS may be hindered by the laws and regulations not only of the host MS but also of the home MS of a parent company.74

67

Chalmers et al. (2010), p. 864. Case C-212/97, Centros (ECJ 9 March 1999). For an analysis of this ruling, see Roth (2000), pp. 147–155; Behrens (2000), pp. 125–146; Ebke (2001), pp. 623–660. One topical question raised in Danish company law is whether a host country can legally require a foreign company to think up an independent name for its branch in the host country: Werlauff (2014), pp. 165–171. 69 Kaczorowska (2011), p. 721. 70 Case C-167/01, Inspire Art Ltd (ECJ 30 September 2003). 71 Case C-208/00, Überseering (ECJ 5 November 2002). Roth (2003), pp. 177–208. 72 Case C-411/03, SEVIC (ECJ 13 December 2005). 73 Case C-446/03, Marks & Spencer (ECJ 13 December 2005). 74 Kaczorowska (2011), p. 720. 68

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4.4. Efforts to Harmonise Cross-Border Transfer of Registered Office and Cross-Border Conversions

In December 2007, the European Commission issued an impact assessment on the proposed Directive on the cross-border transfer of registered office. After a careful analysis, the Commission decided not to take any action at EU level on this subject matter. In 2013, the DG Internal Market and Services organised a broad public online consultation on the cross-border transfers of registered offices of companies. In 2019, Directive 2019/2121 amending Directive 2017/1132 as regards cross-border conversions, mergers, and divisions was finally adopted.75 This new Directive aims at harmonising for the first time other methods of cross-border corporate restructuring and business transformation, such as cross-border conversions and divisions.76 Moreover, this Directive introduces amendments to the harmonisation of cross-border mergers at EU level. The European Company (also known by its Latin name Societas Europaea or SE) is a type of public limited-liability company regulated under EU law.77 SE adopts the real seat theory. According to Article 7 of the SE Statute, the registered office of an SE shall be located within the EU, in the same MS as its head office. A MS may, in addition, impose on SEs registered in its territory the obligation of locating their head office and their registered office in the same place. If an SE plans to transfer its head office to another MS, it should also transfer there its registered office. Such a transfer shall not result in the winding up of the SE or in the creation of a new legal person (Article 8).

List of Cases ECJ

ECJ 06.11.1984, 182/83, Robert Fearon & Company Limited v Irish Land Commission, ECLI:EU:C:1984:335 [cit. in para 4, 7] ECJ 28.01.1986, 270/83, Commission v France, ECLI:EU:C:1986:37 [cit. in para 2, 6, 9, and 10] ECJ 10.07.1986, 79/85, Segers, ECLI:EU:C:1986:308 [cit. in para 6–9] ECJ 04.12.1986, 205/84, Commission v Germany, ECLI:EU:C:1986:463 [cit. in para 9] ECJ 27.09.1988, 81/87, Daily Mail, ECLI:EU:C:1988:456 [cit. in para 15–16] ECJ 25.07.1991, C-221/89, Factortame, ECLI:EU:C:1991:320 [cit. in para 7] 75

Directive 2019/2121 of 27 November 2019 as regards cross-border conversions, mergers and divisions O.J. L. 321/44 (2019). Parliament/Council Directive 2017/1132 relating to certain aspects of company law, O.J. L 169/46 (2017). 76 See also: Brasseur and Vermeylen, in Vermeylen and Vande Velde (2012), pp. 80–83. 77 Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (SE), O.J. L 294/1 (2001).

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ECJ 13.07.1993, C-330/91, Commerzbank, ECLI:EU:C:1993:303 [cit. in para 6 and 10] ECJ 17.06.1997, C-70/95, Sodemare and Others v Regione Lombardia, ECLI:EU: C:1997:301 [cit. in para 4, 5, and 9] ECJ 16.07.1998, C-264/96, ICI, ECLI:EU:C:1998:370 [cit. in para 6] ECJ 09.03.1999, C-212/97, Centros, ECLI:EU:C:1999:126 [cit. in para 6, 7, 18, and 19] ECJ 21.09.1999, C-307/97, Compagnie de Saint-Gobain, Zweigniederlassung Deutschland v Finanzamt Aachen-Innenstadt, ECLI:EU:C:1999:438 [cit. in para 9] ECJ 13.04.2000, C-251/98, Baars, ECLI:EU:C:2000:205 [cit. in para 7] ECJ 05.11.2002, C-208/00, Überseering, ECLI:EU:C:2002:632 [cit. in para 7 and 19] ECJ 30.09.2003, C-167/01, Inspire Art Ltd, ECLI:EU:C:2003:512 [cit. in para 19] ECJ 13.12.2005, C-446/03, Marks & Spencer, ECLI:EU:C:2005:763 [cit. in para 2 and 19] ECJ 13.12.2005, C-411/03, SEVIC, ECLI:EU:C:2005:762 [cit. in para 19] ECJ 23.02.2006, C-253/03, CLT-UFA, ECLI:EU:C:2006:129 [cit. in para 9] ECJ 12.09.2006, C-196/04, Cadbury Schweppes, ECLI:EU:C:2006:544 [cit. in para 13] ECJ 14.09.2006, C-386/04, Centro di Musicologia Walter Stauffer v Finanzamt München für Körperschaften, ECLI:EU:C:2006:568 [cit. in para 13] ECJ 12.12.2006, C-446/04, Test Claimants in the FII Group Litigation v Commissioners of Inland Revenue, ECLI:EU:C:2006:774 [cit. in para 7] ECJ 18.07.2007, C-231/05, Oy AA, ECLI:EU:C:2007:439 [cit. in para 7 and 9] ECJ 11.10.2007, C-451/05, Européenne et Luxembourgeoise d’investissements SA (ELISA) v Directeur général des impôts, Ministère public, ECLI:EU:C:2007:594 [cit. in para 13] ECJ 25.05.2008, C-414/06, Lidl Belgium GmbH & Co. KG v Finanzamt Heilbronn, ECLI:EU:C:2008:278 [cit. in para 12] ECJ 16.12.2008, C-210/06, Cartesio, ECLI:EU:C:2008:723 [cit. in para 16 and 17] ECJ 25.02.2010, C-337/08, X Holding BV v Staatssecretaris van Financiën, ECLI: EU:C:2010:89 [cit. in para 9] ECJ 12.07.2012, C-378/10, VALE, ECLI:EU:C:2012:440 [cit. in para 17] ECJ 25.10.2017, C-106/16, Polbud, ECLI:EU:C:2017:804 [cit. in para 17]

References Barnard, C. (2010). The substantive law of the EU (3rd ed.). Oxford: OUP. Behrens, P. (2000). International company law in view of the Centros decision of the ECJ. European Business Organization Law Review, 1, 125–146. Cains, W. (2010). Case Note on Cartesio Decision by the European Court of Justice, Case C-210/ 06, Cartesio Oktató és Szolgáltató. European Review of Private Law, 18(3), 569–578. Cerioni, L. (2010). The cross-border mobility of companies within the European community after the Cartesio ruling of the ECJ. The Journal of Business Law, 4, 311–337.

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Chalmers, D., Davies, G., & Monti, G. (2010). European Union Law (2nd ed.). Cambridge: CUP. Christianos, V. (Ed.). (2012). TEU-TFEU. Athens: Nomiki Vivliothiki (in Greek). Craig, P., & De Burca, G. (2011). EU law: Text, cases and materials (5th ed.). Oxford: OUP. Ebke, W. F. (2001). Centros - Some realities and some mysteries. American Journal of Comparative Law, 48, 623–660. Fomcenco, A. (2014). Rise of a new corporate vehicle: Public benefit corporation. European Company Law Journal, 11(6), 276–280. Geiger, R., Khan, D. E., & Kotzur, M. (2015). European Union treaties. Oxford: Hart. Grundmann, S. (2012). European company law. Organization, finance and capital markets (2nd ed.). Cambridge: Intersentia. Kaczorowska, A. (2011). European Union law (2nd ed.). London-New York: Routledge. Marenco, G. (1991). The notion of restriction on the freedom of establishment and provision of services in the case-law of the court. Yearbook of European Law, 11, 111–150. Roth, W.-H. (2000). Case Note -Case C-212/97 Centros Ltd v Erhvervs- og Selskabsstyrelsen. Common Market Law Review, 37, 147–155. Roth, W.-H. (2003). From Centros to uberseering: Free movement of companies, private international law, and community law. International and Comparative Law Quarterly, 52, 177–208. Smit, H., Herzog, P., Campbell, C., & Zagel, G. (Eds.). (2013). Smit and Herzog on the law of the European Union. Vienna: LexisNexis. Sørensen, K.-E. (2014). Company law as a restriction to free movement: Examination of the notion of ‘restriction’ using company law as the frame of reference. European Company Law, 11(3), 178–188. Steiner, J., & Woods, L. (2009). EU law (10th ed.). Oxford: OUP. Szydło, M. (2009). Case Note-Case C-210/06, CARTESIO Oktató és Szolgáltató bt, Judgment of the Grand Chamber of the Court of Justice of 16 December 2008, not yet reported. Common Market Law Review, 46, 703–722. Vermeylen, J., & Vande Velde, I. (Eds.). (2012). European cross-border mergers and reorganisations. Oxford: OUP. Werlauff, E. (2014). Can national company law require a branch of a foreign company to have an independent name? European Company Law, 11(3), 165–171. Wyatt, D. A., Dashwood, A., Dougan, M., Rodger, B. J., & Spaventa, E. (2011). European Union law (6th ed.). Oxford: Hart Publishing.

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Article 55 [Equal Participation in the Capital of Companies or Firms] (ex-Article 294 TEC) Member States shall accord nationals7 of the other Member States the same treatment6, 10-12 as their own nationals as regards participation in the capital7 of companies or firms within the meaning of Article 54, without prejudice to the application of the other provisions of the Treaties.2

Contents 1. 2.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Critical Assessment of Article 55 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.1. Freedom of Establishment and Article 55 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2. Free Movement of Capital and Article 55 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3. Case Law on Article 55 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 List of Cases References

1.

Introduction

Article 55 TFEU stipulates the principle of non-discrimination declared by Article 18.1 TFEU in the context of equity investment (“participation in the capital of companies or firms”). This would seem to oblige MS to adopt certain rules prohibiting discrimination on grounds of nationality as regards participation in the capital of companies or firms.1 The predecessor of Article 55 TFEU was exArticle 294 EC. Article 55 TFEU adopts the wording of ex-Article 294 EC, but it was systematically rearranged.2 Article 294 TEC was found in Part Six, “General and Final Provisions”. Lisbon Treaty renumbered and moved it to Chapter 2, “Right of Establishment”, of Title IV, “Free Movement of Persons, Services and Capital”. This change was welcomed because it is now closer to the more relative treaty provisions on the freedom of establishment.3 Article 55 TFEU applies to companies or firms defined by Article 54 TFEU. Hence, this article follows the definition of companies or firms on which the freedom of establishment of legal persons is based.

1

Dashwood et al. (2011), p. 672. Kotzur, in Geiger et al. (2015), Article 55 AEUV para 1. 3 Malamataris, in Christianos (2012), Article 55 TFEU para 1. 2

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Although Article 55 TFEU is directly applicable,4 it has limited applicability and practical importance. This limited applicability derives from reference to the priority given to other fundamental freedoms (“without prejudice to the application of the other provisions of the Treaties”). Article 55 TFEU has a subsidiary effect in relation to other treaty provisions; freedom of establishment and free movement of capital prevail over Article 55 TFEU.5 Cross-border acquisition of a shareholding in a company falls within the scope of both freedom of establishment and free movement of capital where the shareholding gives the investor definite influence over the company’s decisions and allows the investor to determine its activities. Where the cross-frontier acquisition of shares does not grant investors such influence, it is known as portfolio investment and constitutes only an exercise of free movement of capital.6 The direct effect of the freedom of establishment and of free movement of capital limits the importance of Article 55 TFEU. The provision of Article 55 TFEU obliging MS to accord investors the same treatment as their own nationals is a consequence of free movement of capital and freedom of establishment.7 Freedom of establishment and free movement of capital are lex specialis in relation to Article 55 TFEU; almost every encroachment of Article 55 TFEU constitutes a breach of freedom of establishment and of free movement of capital.8 One reason behind the infrequent application of Article 55 TFEU by the ECJ was the late completion of the free movement of capital legislative programme. Nationals of an MS could not easily invest in a company in another MS if the money and the necessary capital cannot be freely transferred.9 Free capital movement was the prerequisite for investment in companies and firms in other MS. The earliest capital movement Directives10 were adopted in the 1960s, and the legislative programme was completed in 1988 with the adoption of Directive 88/ 361.11 This delayed liberalisation of capital movements constitutes an important factor behind the sporadic use of Article 55 TFEU in the case law of the ECJ.12 The limited importance of Article 55 TFEU when it is examined jointly with other fundamental freedoms was confirmed by AG Colomer in his Joined 4

Case 81/87, Daily Mail (ECJ 27 September 1988) para 17; Case C-221/89, Factortame (ECJ 25 July 1991) para 31. Usher (2000), p. 113. It was argued that Article 55 TFEU might be horizontally directly effective. This could be based on the same jurisprudential approach followed with regard to Article 157 TFEU. Although MS are the recipients of Article 157 TFEU on equal pay, the ECJ held that it also binds employers. Case C-43/75, Defrenne (ECJ 8 April 1976). Dashwood et al. (2011), p. 672. 5 Van der Hout, in Smit et al. (2013), Article 55 TFEU para 4. 6 Dashwood et al. (2011), p. 838. See also Case C-251/98, Baars (ECJ 13 April 2000) para 21–22. 7 Weber (2005), p. 75. 8 Van der Hout, in Smit et al. (2013), Article 55 TFEU para 5. 9 Usher (2000), p. 13. 10 Council Directives of 11 May 1960, O.J. 921/60, and 63/21, O.J. 62/63. 11 Council Directive 88/361, O.J. L 178/5 (1988). 12 Usher (2000), p. 113.

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Opinion in Commission v Portugal, Commission v France, and Commission v Belgium. AG Colomer argued that there is no need to analyse Article 55 TFEU (ex-Article 294 EC) since it does not add anything significant to the freedom of establishment and free movement of capital, the two fundamental freedoms in the light of which the national provisions in question were scrutinised. Hence, AG Colomer declared that these actions must therefore be considered in relation to the fundamental freedoms of establishment and movement of capital.13 In Commission v Portugal,14 the ECJ did not take into account Article 55 TFEU, on which the European Commission expressly based its action (in addition to EU fundamental freedoms).15 The ECJ also continues to neglect the examination of Article 55 TFEU in more recent cases. In Hervis Sport,16 the question referred for preliminary ruling asked for an examination of the compatibility of the contested national law with the principle of equal treatment as regards financial participation in the capital of companies or firms within the meaning of Article 54 TFEU (Article 55 TFEU). Nevertheless, the ECJ did not discuss Article 55 TFEU.17

2.

Critical Assessment of Article 55 TFEU

2.1. Freedom of Establishment and Article 55 TFEU

The importance of Article 55 TFEU was found during the transitional period.18 After the end of the transitional period, this article retains little significance. Its main aim is to liberalise fast cross-border share capital investments and to abolish any barriers to equity investment.19 The importance of Article 55 TFEU lies in its clarifying role; it clarifies the core obligations deriving from the principle of equal treatment as regards financial participation in the capital of companies or firms within the meaning of Article 54 TFEU.20 Participation in the capital of a company constitutes an exercise of freedom of establishment. Article 55 TFEU strengthens and compliments this exercise of freedom of establishment. The ECJ confirmed this approach in Daily Mail. Except for setting up agencies, branches, or subsidiaries, a company could also exercise its right of establishment by taking part in the incorporation of a company in another 13

Case C-367/98, Commission v Portugal, Case C-483/99, Commission v France, Case C-503/99, Commission v Belgium (Joined opinion of AG Colomer of 3 July 2001) para 21. 14 Case C-367/98, Commission v Portugal (ECJ 4 June 2002) para 1. 15 Van der Hout, in Smit et al. (2013), Article 55 TFEU para 7. 16 Case C-385/12, Hervis Sport- és Divatkereskedelmi Kft. (ECJ 5 February 2014) para 15–16. 17 Van der Hout, in Smit et al. (2013), Article 55 TFEU para 7. 18 The original wording of Article 55 (ex-Article 221 TEC) determined a transitional period of 3 years after the coming into force of the Rome Treaty. Article 55 TFEU became applicable on 1 January 1961. Van der Hout, in Smit et al. (2013), Article 55 TFEU para 3. 19 Kotzur, in Geiger et al. (2015), Article 55 AEUV para 1. 20 Van der Hout, in Smit et al. (2013), Article 55 TFEU para 5.

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MS, and in that regard Article 55 TFEU ensures that it will receive the same treatment as nationals of that MS as regards participation in the capital of the new company.21 Additionally, Article 55 TFEU supports the argument that national legislature could not adopt rules on the “setting up and management” of a branch undertaking, be it a branch or a subsidiary, that specifically places foreigners at a disadvantage. Hence, MS could not include in their company laws discriminatory rules either with respect to access to an organisational form or with respect to the details of a commercial or corporate position.22 Furthermore, it should be stressed that Article 55 TFEU applies to legal persons based in one of the MS within the meaning of Article 54 TFEU, regardless of whether they are owned by nationals of MS or not.23 There are certain differences between Article 55 TFEU and Article 49 TFEU (freedom of establishment). “Setting up and managing companies” proclaimed by the freedom of establishment is narrower than “participating financially in companies” guaranteed by Article 55 TFEU. It could be argued that Article 55 TFEU, as the subsidiary provision, catches every case where no independent activity accompanies financial participation, while freedom of establishment catches situations where financial participation is accompanied by an independent activity.24 Moreover, Article 55 TFEU applies to “nationals” of MS regardless of their residence (whether they are based within or outside of one of the MS). However, freedom of establishment demands individuals to reside within the EU.25 A wide interpretation26 for “participation in the capital of companies or firms”/ “equity investments” should be adopted. “Equity investment” covers not only acquisition of shares (ordinary shares/common stock) but also silent partnerships, sub-participations, stock options, convertible bonds (hybrid securities),

21 Case 81/87, Daily Mail (ECJ 27 September 1988) para 17. However, Article 346.1 lit. b) TFEU operates as an exception to Article 55 TFEU, because it allows unequal treatment of non-nationals who plan to participate in the capital of companies of the defence sector. Van der Hout, in Smit et al. (2013), Article 55 TFEU para 4. 22 Schon (2001), p. 350. 23 Van der Hout, in Smit et al. (2013), Article 55 TFEU para 6. 24 Van der Hout, in Smit et al. (2013), Article 55 TFEU para 5. It was argued that the distinction between Article 55 TFEU and Article 49 TFEU appears to be that to discriminate against a national or company of another MS having acquired a controlling stake in a company in the host MS would breach the right of establishment exercised by the controlling shareholder even if Article 55 TFEU was not in the Treaty, while at the same time discrimination against a foreign shareholder having acquired a low number of shares as an investment would not infringe freedom of establishment but would infringe Article 55 TFEU. Usher (2000), p. 113. 25 Van der Hout, in Smit et al. (2013), Article 55 TFEU para 6. 26 The term “equity investments” is wider than the concept of “direct investments” which falls within the scope of free movement of capital. According to Annex I of Directive 88/361/EEC, a basic condition for “direct investments” is the establishment or maintenance of lasting economic links between the capital investor and the entrepreneur. This condition is not necessary for “equity investments”. Council Directive 88/361/EEC for the implementation of Article 67 of the Treaty, O. J. L 178/18 (1988). Weber (2005), p. 75.

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treasury stock/reacquired stock, preferred shares, and usufruct over a share, also if held in escrow.27 It could be argued that the legislation of respective MS establishes the various means of participation in the capital of companies; the content of this participation is defined by national laws. Additionally, all subsequent rights deriving from participation in the capital of companies fall within the scope of Article 55 TFEU, e.g. dividends, voting rights, proxy voting, representation in court, the right to challenge unlawful decisions before a court, participation in a general meeting and the right to convene a general meeting, the right to receive a detailed report of the accounts, the right to file bankruptcy, the right to participate in liquidation, the right to be elected in various positions, the right to resign from the company, and the right to sell one’s shares or purchase rights.28

2.2. Free Movement of Capital and Article 55 TFEU

Investment through the participation in capital of companies also falls within the scope of free movement of capital (Ò para 2). The direct applicability of Article 55 TFEU was particularly important during the period when free movement of capital was not directly applicable (until 1988).29 After 1988, when free movement of capital became directly applicable, Article 55 lost its importance.30 However, Article 55 TFEU still remains an ancillary provision in relation to Article 63 TFEU (free movement of capital). It plays a supportive role to free movement of capital and facilitates its exercise. For example, in his Joined Opinion in Commission v Portugal, Commission v France, and Commission v Belgium, AG Colomer contended that the restriction introduced by national provisions applies to national entities with mostly foreign capital, a situation that, in so far as it does not fall within the definitions of the exercise of freedom of establishment and free movement of capital, would have to be uniformly evaluated under Article 55 TFEU (equal treatment as regards financial investment in companies).31 The importance of Article 55 TFEU could also be considered in the context of Article 64.1 TFEU. Article 55 TFEU has a special characteristic: it applies to all nationals of the MS, and residence or establishment within the EU is not required.32 Hence, if a national of an MS resides in a third State and has a shareholding in a company or firm within the meaning of Article 54 TFEU, he 27 Kotzur, in Geiger et al. (2015), Article 55 AEUV para 1. Hence, participation in the capital of companies or firms covers both direct (shares, bonds) and indirect participations (certificates, guarantees). Weber 2005, p. 75. 28 Van der Hout, in Smit et al. (2013), Article 55 TFEU para 6. 29 Malamataris, in Christianos (2012), Article 55 TFEU para 4. 30 Malamataris, in Christianos (2012), Article 55 TFEU para 4. 31 Case C-367/98, Commission v Portugal, Case C-483/99, Commission v France, Case C-503/99, Commission v Belgium (Joined opinion of AG Colomer of 3 July 2001) para 28. Malamataris, in Christianos (2012), Article 55 TFEU para 4. 32 Weber (2005), p. 75.

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could invoke Article 55 TFEU.33 This possibility to invoke Article 55 TFEU is quite important in the following case: when an MS national comes into conflict with the restrictions to free movement of capital allowed as an exception under Article 64.1 TFEU. According to a joined interpretation of Article 55 TFEU and Article 64.1 TFEU, it could be inferred that the exceptions to free movement of capital permitted by Article 64.1 TFEU could not apply to a national of an MS who is a resident in a third country and who has participation in a company’s capital within the meaning of Article 54 TFEU.34 This national of an MS residing in a third country could evade the restrictions permitted under Article 64.1 TFEU by invoking Article 55 TFEU. Although Article 55 TFEU applies without prejudice to other treaty freedoms, it takes precedence over Article 64.1 TFEU. This precedence is justified by the fact that Article 55 TFEU is the main rule and has to be interpreted widely, whereas Article 64.1 TFEU is an exception and has to be interpreted narrowly.35 Regarding acquisition of real estate, MS are permitted to preserve specific derogations from the free movement of capital rules if these were prescribed by the relevant Treaty of Accession. In some new MS, transitional periods apply regarding the full implementation of the free movement of capital. Hence, Article 55 TFEU is not fully applicable in those new MS.36 With regard to acquisitions of agricultural real estate, transitional periods were implemented in Bulgaria and Romania until 1 January 2014; in Hungary, Latvia, Lithuania, and Slovakia until 1 May 2014; in Poland until 1 May 2016; and in Croatia until 1 July 2020. Croatia may also request a three-year extension.37

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Case Law on Article 55 TFEU

The ECJ provided a few directions for the interpretation of Article 55 TFEU. The ECJ’s case law on Article 55 TFEU examined cases where nationals were treated by national laws more favourably than non-nationals. These national laws were found to infringe freedom of establishment. In Commission v Belgium, the ECJ examined Belgian legislation reserving 51% of the capital of a non-public television broadcasting company, which serves the entire Flemish Community, to publishers of Dutch-language daily and weekly newspapers whose registered office is situated in the Dutch-speaking region or in the bilingual Brussels region. It held that this legislation was in breach of Article 55

33

Weber (2005), p. 75. Weber (2005), p. 75. 35 Weber (2005), p. 75. 36 Van der Hout, in Smit et al. (2013) Article 55 TFEU para 3. 37 Commission Staff Working Document on the free movement of capital in the EU, SWD (2014) 115 final, p. 12. 34

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TFEU, as well as of Article 49 TFEU.38 This national legislation constituted discrimination regarding the conditions for the subscription of the capital of the non-public television broadcasting company. More specifically, Belgian legislation was restricting the right to set up and manage undertakings, contrary to Article 49 TFEU, and the right to hold shares in the capital of companies, in breach of Article 55 TFEU.39 Three other cases decided by the ECJ concerned encroachments of Article 55 TFEU caused by nationality and seat requirements for the entry in a register of shipping.40 These were Commission v Greece, Commission v France, and Factortame.41 Apart from these cases, in Commission v UK, the ECJ examined the registration of vessels and nationality requirements and held that the contested nationality requirements, in so far as they relate to the control of companies, are contrary to Article 55 TFEU.42 However, the ECJ did not proceed to any further discussion of Article 55 TFEU in this case. In Commission v Greece, the ECJ scrutinised Greek provisions that restrict the right of registration in the Greek shipping registers to vessels more than half the shares in which are owned by Greek nationals or owned by Greek legal persons more than half of whose capital is held by Greek nationals. The ECJ found that the Greek provisions were infringing Article 55 TFEU and Article 49 TFEU.43 In his Opinion, AG Tesauro referred to Article 55 TFEU and contended that “[w]ith reference to legal persons, in particular, the Greek legislation is contrary to [Article

38

The Belgian government conceded this specific complaint. Case C-211/91, Commission v Belgium (ECJ 16 December 1992). 39 In the Report for the Hearing of this case, Judge-Rapporteur G. C. Rodriguez Iglesias stated: “It points out that an investor from another Member State must set up or purchase a Dutch-language daily or weekly established in the Dutch-speaking region or in the Brussels region before being able to subscribe to the reserved part of the capital of the non-public television company which broadcasts to the entire Flemish Community. In the Commission’s opinion, this is tantamount to making the exercise of the rights conferred by [Article 49 TFEU] and [Article 55 TFEU] subject to the condition of prior establishment.” 40 Kotzur, in Geiger et al. (2015), Article 55 AEUV para 2. 41 Some other interesting cases concerning registration of vessels, licenses and nationality requirements, in the context of freedom of establishment, are the following: Case C-151/96, Commission v Ireland (ECJ 12 June 1997), Case C-93/89, Commission v Ireland (ECJ 4 October 1991), Case C246/89 R, Commission v United Kingdom (ECJ 10 October 1989). 42 Case C-246/89, Commission v United Kingdom (ECJ 4 October 1991) para 33. Usher 2000, p. 113. 43 The ECJ held that “as regards vessels used for the pursuit of an economic activity, each Member State must, in exercising its powers for the purpose of defining the conditions for the grant of its ‘nationality’ to a vessel, comply with the prohibition of discrimination against nationals of Member States on grounds of nationality, and that a condition which stipulates that where a vessel is owned or chartered by natural persons they must be of a particular nationality and, in the case of a company, the shareholders and directors must be of that nationality is contrary to [Article 49 TFEU]. A condition relating to registration or management of a vessel in the case of a secondary establishment such as an agency, branch or subsidiary is contrary to [Articles 49 asnd 54 TFEU].” Case C-62/96, Commission v Greece (ECJ 27 November 1997) para 18.

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54 and 55 TFEU] because it requires the legal person owning the ship to be constituted under Greek legislation, and because, by requiring that the capital of the legal person owning the ship be controlled by Greek nationals, it restricts participation by nationals of other Member States in the capital of such companies”.44 In Commission v France, the ECJ had the chance to examine the compatibility of French legislation on the registration of vessels with Article 55 TFEU. More specifically, the ECJ discussed French legislation restricting the right to register a vessel in the French register and to fly the French flag to vessels more than half the shares in which are owned by natural persons of French nationality or requiring that a certain proportion of the capital of certain legal persons owning vessels must be controlled by French nationals or that the actual control or management must be in the hands of French nationals. It held that the condition relating to the control of the capital of certain legal persons owning vessels is also breaching Article 55 TFEU (in addition to Articles 49 and 18 TFEU) since it restricts participation by nationals of other Member States in the capital of such legal persons.45 Article 55 TFEU was also referred in Factortame, concerning the registration of fishing vessels. The ECJ examined a condition stipulating that where a vessel is owned or chartered by natural persons, they must be of a particular nationality and where it is owned or chartered by a company, the shareholders and directors must be of that nationality. This condition was found to infringe Article 49 TFEU. Moreover, the ECJ stated that such a condition is also contrary to Article 55 TFEU, under which MS must accord nationals of other MS the same treatment as their own nationals as regards participation in the capital of companies or firms within the meaning of Article 54 TFEU.46 AG Mischo, in his Opinion, declared that Article 55 TFEU prohibits the application of nationality requirements even where the persons concerned do not intend to establish themselves in the host MS.47

List of Cases ECJ

ECJ 27.09.1988, Case 81/87 Daily Mail, ECLI:EU:C:1988:456 [cit. in para 2 and 6] ECJ 04.10.1991, Case C-93/89 Commission v Ireland, ECLI:EU:C:1991:374 [cit. in para 12] ECJ 25.07.1991, Case C-221/89 Factortame, ECLI:EU:C:1991:320 [cit. in para 2 and 12] 44

Case C-62/96, Commission v Greece (Opinion of AG Tesauro of 25 September 1997) para 18. Case C-334/94, Commission v France (ECJ 7 March 1996) para 17–19. 46 Case C-221/89, Factortame (ECJ 25 July 1991) para 30-31. See also para 50 of the Report for the Hearing of this case. 47 Case C-221/89, Factortame (Opinion of AG Mischo of 13 March 1991) para 34. 45

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ECJ 10.10.1989, Case C-246/89 R Commission v United Kingdom, ECLI:EU: C:1989:368 [cit. in para 12] ECJ 04.10.1991, Case C-246/89 Commission v United Kingdom, ECLI:EU: C:1991:375 [cit. in para 12] ECJ 16.12.1992, Case C-211/91 Commission v Belgium, ECLI:EU:C:1992:526 [cit. in para 11] ECJ 07.03.1996, Case C-334/94 Commission v France, ECLI:EU:C:1996:90 [cit. in para 12] ECJ 25.09.1997, Case C-62/96 Commission v Greece (Opinion of AG Tesauro), ECLI:EU:C:1997:434 [cit. in para 12] ECJ 27.11.1997, Case C-62/96 Commission v Greece, ECLI:EU:C:1997:565 [cit. in para 12] ECJ 12.06.1997, Case C-151/96 Commission v Ireland, ECLI:EU:C:1997:294 [cit. in para 12] ECJ 13.04.2000, Case C-251/98 Baars, ECLI:EU:C:2000:205 [cit. in para 2] ECJ 03.07.2001, Case C-367/98 Commission v Portuguese Republic, Case C-483/ 99 Commission v France, Case C-503/99 Commission v Kingdom of Belgium (Joined Opinion of AG Ruiz-Jarabo Colomer), ECLI:EU:C:2001:369 [cit. in para 4, 9] ECJ 04.06.2002, Case C-367/98 Commission v Portugal, ECLI:EU:C:2002:326 [cit. in para 4] ECJ 05.02.2014, Case C-385/12 Hervis Sport- és Divatkereskedelmi Kft., ECLI: EU:C:2014:47 [cit. in para 4]

References Christianos, V. (Ed.) (2012). TEU-TFEU. Athens: Nomiki Vivliothiki (in Greek). Dashwood, A., Dougan, M., Rodger, B., Spaventa, E., & Wyatt D. (2011). Wyatt and Dashwood’s European Union Law (6th ed.). Oxford: Hart Publishing. Geiger, R., Khan, D. E., & Kotzur, M. (2015). European Union treaties. Oxford: Hart. Schon, W. (2001). The free choice between the right to establish a branch and to set-up a subsidiary - A principle of European business law. European Business Organization Law Review, 2(2), 339–364. Smit, H., Herzog, P., Campbell, C., & Zagel, G. (Eds.). (2013). Smit and Herzog on the law of the European Union. Vienna: LexisNexis. Usher, J. A. (2000). The law of money and financial services in the EC (2nd ed.). Oxford: OUP. Weber, D. (2005). Tax avoidance and the EC treaty freedoms: A study of the limitations under European law for the prevention of tax avoidance. Alphen aan den Rijn: Kluwer Publications.

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Chapter 3 Services

Article 56 [Freedom to Provide Services] (ex-Article 49 TEC) Within the framework of the provisions set out below,9-10 restrictions15-25 on freedom to provide services26-46 within the Union shall be prohibited11-14 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.3-8 The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may extend the provisions of the Chapter to nationals of a third country who provide services and who are established within the Union.3

Contents 1. 2. 3. 4. 5. 6.

General Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Personal Scope and Addressees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Direct Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Discrimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Justifications: Overriding Reasons of Public Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.2. Conditions of Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 6.3. Justification of Non-discriminatory Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 6.4. The Presence of Overriding Reasons of Public Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 6.5. The Absence of Pre-emption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 6.6. The Principle of Proportionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 6.7. The Principle of Mutual Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 List of Cases References

1.

General Overview

Article 56 TFEU prohibits restrictions on the freedom to provide services within the EU. It is true that this freedom did not attract much attention at the beginning when the EC was eager to achieve a common market regarding goods. However, since the late eighties, the ECJ has found itself in a position to affirm the special place that services occupy in modern economies where more than 70% of GNP is based on tertiary activities. Accordingly, the case law regarding services has grown exponentially and has given way to a largely liberalised area on these economic activities.

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Article 56 TFEU is not very clear as to whether it envisages services as activities or as the outcomes of those activities.1 This is a consequence of the difficulty in liberalising services as MS sometimes regulate services themselves and the way they are provided and sometimes regulate service providers. However, what initially was considered as a secondary freedom has been transformed over the years in one of the most far-reaching freedoms within the internal market.

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Personal Scope and Addressees

Firstly, regarding the beneficiaries of the freedom to provide services, Article 56 TFEU envisages the situation of service providers. Thus, in order to exercise the “active” freedom to provide services, also called the “normal case”,2 Article 56 TFEU provides for two conditions. First, this freedom is open to any national of an MS, be it a natural person or a company, having a registered office, central administration, or a principal place of business within the EU (! Article 54 TFEU para 1).3 In the case of natural persons, they must be self-employed; otherwise, the activities would fall within the field of the freedom of movement of workers (! Article 45 TFEU).4 The employees of the services provider are also covered under certain conditions.5 Second, the EU national exercising this freedom must be “established” in an MS other than that of the person for whom the services are intended. According to ECJ case law, the services must also be provided within the EU.6 To be sure, the EU national need not be established in the MS of its nationality; it is sufficient that it is established in another MS. On the contrary, non-EU nationals may not benefit from the free provision of services even if they are established within the Community and an intra-EU provision of services is concerned.7 Indeed, Article 56.2 TFEU has provided for the possibility of extending this freedom to nationals from a third country if they are established

1

Hatzopoulos (2012), p. 21. Kotzur, in Geiger et al. (2015), Article 57 TFEU, para 8. 3 If an undertaking has its registered office or seat situated within the EU but its central administration or principal place of business are outside the EU, according to the 1962 General Programme on Services the requirement regarding establishment would be fulfilled if its activities show ‘a real and continuous link with the economy of a Member State; such link shall not be one of nationality, whether of the members of the company or firm, or of the persons holding managerial or supervisory posts therein, or of the holders of the capital’, General Programme for the abolition of restrictions on freedom to provide services O.J. 2/32 (1962), English special edition, Series II, Volume IX, p. 3 (1974). 4 Case 36/74, Walrave and Koch (ECJ 12 December 1974) para 23 where the CJEU states that activities ‘performed outside the ties of a contract of employment’ are deemed to be selfemployed. 5 Joined Cases C-317/01 and C-369/01, Abatay and Others (ECJ 21 October 2003) para 106. 6 Case C-290/04, FKP Scorpio (ECJ 3 October 2006) para 67. 7 Case C-290/04, FKP Scorpio (ECJ 3 October 2006) para 68. 2

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within the Union. Although there have been proposals in this regard,8 the EU legislature has not passed any such measure, and therefore non-EU nationals do not have the right to invoke this freedom. As from the Treaty of Lisbon, the decision to extend the freedom to provide services to third-country nationals has to be adopted following the ordinary legislative procedure. Secondly, regarding the cross-border element, the CJEU has confirmed that Article 56 TFEU also covers services recipients or, in other words, the “passive” freedom to receive services.9 Directive 73/148 (now superseded) already provided for the elimination of barriers on the free movement of “nationals wishing to go to another Member State as recipients of services” (Article 1 lit. b).10 Accordingly, in Luisi and Carbone,11 the ECJ held that although the possibility for the recipient to go to the State where the provider is established is not expressly covered by the Treaty, it is a “necessary corollary”. Therefore, “the freedom to provide services includes the freedom, for the recipients of services to go to another Member State in order to receive a service”, such as “tourists, persons receiving medical treatment and persons travelling for the purpose of education or business”. This means that the movement of the recipient towards another MS may correspond to a planned provision of services, in other words when the recipient crosses the border looking for a specific service, as in Kohll,12 but the provision of services may also be unplanned as a result of the several services needed within the framework of a business or tourist trip,13 as in Cowan,14 where the Court did not even specify what service the person had received. Additionally, the recipient and the provider need not be established in different MS, as happens in the case of tourist guides offering their services in another MS, where the guide and the tourist may even originate from the same MS.15 Thirdly, there is also the possibility that only the services itself crosses from one MS to another while both the services provider and the recipient remain in the MS where they reside with no movement of persons whatsoever, as in the case of television services16 or services offered by telephone17 or the Internet.18

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Proposal for a Council Directive extending the freedom to provide cross-border services to thirdcountry nationals established within the Community, COM(1999) 3. 9 Kotzur, in Geiger et al. (2015), Article 57 AEUV, para 9. 10 Barnard (2016), p. 293. 11 Joined Cases 286/82 and 26/83, Luisi and Carbone (ECJ 31 January 1984) para 10 and 16. 12 Case C-158/96, Kohll (ECJ 28 April 1998). 13 Truchot, in Pingel (2010), Article 49 CE para 9. 14 Case 186/87, Cowan (ECJ 2 February 1989). 15 Case C-154/89, Commission v France (ECJ 26 February 1991) para 11; Case C-180/89, Commission v Italy (ECJ 26 February 1991) para 10; Case C-198/89 Commission v Greece (ECJ 26 February 1991) para 11. 16 Case 352/85, Bond van Adverteerders and Others (ECJ 26 April 1988) para 14–15. 17 Case C-384/93, Alpine Investments (ECJ 10 May 1995) para 29–31. 18 Case C-243/01, Gambelli and Others (ECJ 6 November 2003) para 53–54.

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Lastly, the only situation not covered by the Treaty is the case where the services provider and the recipient are both established in the same MS, so that there is no cross-border element whatsoever.19 Therefore, purely internal situations are excluded from the scope of this freedom.20 Moreover, regarding the addressees, the freedom to provide services has a direct vertical effect and therefore may be invoked against the host MS, but it may also be invoked against the home MS. Indeed, the obligation to comply with the free provision of services concerns not only the host State, i.e. the State where the provider of the service functions or the service itself is provided, which in turn is the setting envisaged by Article 56 TFEU. It also includes the home State, i.e. the State where the provider is established, as in the case of Alpine Investments,21 where a Dutch law that forbade outright cold-calling (calling customers, wherever they are located, without previous notice) in order to sell financial products that may entail a high risk was deemed contrary to the freedom to provide services. Another important case worth mentioning because it shows the breadth of this freedom’s scope is Carpenter, where a Filipino national married to a British national, Mr. Carpenter, was able to invoke the free provision of services on account of the advertising activities carried out by Mr. Carpenter, which included customers from other MS. The ECJ stated that the freedom to provide services would not “be fully effective if Mr. Carpenter were to be deterred from exercising it by obstacles raised in his country of origin to the entry and residence of his spouse”.22 However, the direct vertical effect has been put into question in cases such as Deliège and Laval. In Deliège, the Court stated that the rules of international sports associations may come under the scope of Article 56 TFEU.23 Similarly, in Laval, the CJEU held that the activities of labour unions may be relevant for the freedom to provide services as they produce “rules which are not public in nature but which are designed to regulate, collectively, the provision of services. The abolition, as between Member States, of obstacles to the freedom to provide services would be compromised if the abolition of State barriers could be neutralised by obstacles resulting from the exercise of their legal autonomy by associations or organisations not governed by public law.”24

19 Joined cases C-29/94, C-30/94, C-31/94, C-32/94, C-33/94, C-34/94 and C-35/94, Aubertin (ECJ 16 February 1995) para 9; Case C-97/98, Jägerskiöld (ECJ 21 October 1999) para 42; Case C-245/09, Omalet (ECJ 22 December 2010) para 12–13. 20 Truchot, in Pingel (2010), Article 49 CE para 8. 21 Case C-384/93, Alpine Investments (ECJ 10 May 1995) para 29–31. 22 Case C-60/00, Carpenter (ECJ 11 July 2002) para 39. 23 Joined Cases C-51/96 and C-191/97, Deliège (ECJ 11 April 2000) para 47. 24 Case C-341/05, Laval (ECJ 18 December 2007), para 98.

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Direct Effect

The original Article 59 TEC (now Article 56 TFEU) provided that “restrictions on freedom to provide services within the Community shall be progressively abolished during the transitional period”. Accordingly, a General Programme was adopted in 1961 for the abolition of restrictions affecting trade in services.25 This General Programme was to be implemented through a series of directives. According to the Court, “these directives were intended to accomplish different functions, the first being to abolish, during the transitional period, restrictions on freedom to provide services, the second being to introduce into the law of Member States a set of provisions intended to facilitate the effective exercise of this freedom, in particular by the mutual recognition of professional qualifications and the coordination of laws with regard to the pursuit of activities as self-employed persons”.26 Pursuant to this Programme, the Council adopted Directive 73/148/EEC27 establishing the right of service providers or recipients to reside in other Member State for a period that equals the period during which the services are provided.28 After the expiration of this transitional period at the end of 1969, the question was whether Article 56 TFEU could be directly invoked by EU individuals before national authorities in order to have their right to freely provide or receive services guaranteed. The Court of Justice held that “the first paragraph of [now Article 56] and the third paragraph of [now Article 57] have direct effect and may therefore be relied on before national courts, at least in so far as they seek to abolish any discrimination against a person providing a service by reason of his nationality or of the fact that he resides in a member state other than that in which the service is to be provided”.29

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Discrimination

The material scope of Article 56 TFEU relates to the kind of national measures that may be contrary to the freedom to provide services. The question is whether Article 56 TFEU includes the notion of discrimination only or whether non-discriminatory national measures, or restrictions more generally, are also considered to fall foul of the scope of this provision. This is an important issue as it serves to set the degree of negative integration within the services sector.30 Although the Court’s case law refers for the most part to the concept of restrictions, as it will be seen below, 25

General Programme for the abolition of restrictions on freedom to provide services O.J. 2/32 (1962), English special edition, Series II, Volume IX, p. 3 (1974). 26 Case 33/74, Van Binsbergen (ECJ 3 December 1974) para 21. 27 O.J. L 172/14 (1973). 28 Article 4.2 of Council Directive 73/148/EEC. 29 Case 33/74, Van Binsbergen (ECJ 3 December 1974) para 27. 30 Schütze (2015), p. 640.

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there is, however, an important literature that has always favoured that the freedom of movement provided in the Treaty is based on the notion of discrimination.31 Moreover, there is criticism regarding the Court’s case law because the distinction between discriminatory and non-discriminatory measures is considered imprecise.32 Of course, there seems to be as many versions of the concept of discrimination as authors writing on the internal market. Direct discrimination is prohibited by Article 56 TFEU not only by reason of nationality but also by reason of residence, as the Court made clear in its initial case law. In Van Binsbergen, the Court already held that “the restrictions to be abolished pursuant to [now Articles 56 and 57] include all requirements imposed on the person providing the service by reason in particular of his nationality or of the fact that he does not habitually reside in the state where the service is provided, which do not apply to persons established within the national territory [. . .] [I]n particular, a requirement that the person providing the service must be habitually resident within the territory of the state where the service is to be provided may, according to the circumstances, have the result of depriving Article [56] of all useful effect, in view of the fact that the precise object of that Article is to abolish restrictions on freedom to provide services imposed on persons who are not established in the state where the service is to be provided.”33 In Gouda, the Court equally stated that Article 56 of the Treaty “entails, in the first place, the abolition of any discrimination against a person providing services on account of his nationality or the fact that he is established in a Member State other than the one in which the service is provided”.34 Therefore, national measures may be understood as directly discriminatory, or distinctly applicable, where they apply on the basis of nationality or residence, thereby introducing a formal distinction that creates a disadvantage to the nondomestic service provider. However, national measures are indirectly discriminatory where, even if not discriminating on first glance on the basis of nationality or residence because they formally apply to nationals and non-nationals alike, they nevertheless create a disadvantage to the non-domestic provider.35 In other words, those national measures are indistinctly applicable but effectively protectionist as the requirements are likely to be met more easily by nationals or residents instead of by free movers.36 Despite the first decision of the CJEU in Van Binsbergen, the initial case law on the freedom to provide services was mostly based on the nondiscrimination criterion.37 Indeed, cases like Walrave, Van Ameyde, Koestler, or

31

Marenco (1991), p. 111; Martin (1998), p. 561; Barnard (2009), p. 575; Snell (2010), p. 437. Craig and De Búrca (2015), p. 795. 33 Case 33/74, Van Binsbergen (ECJ 3 December 1974) para 10 and 11. 34 Case C-288/89, Gouda (ECJ 25 July 1991) para 10. 35 Weiss and Kaupa (2014), p. 252. 36 Hatzopoulos (2012), p. 110. 37 Evering (1984), p. 9; Martin (1998), p. 562. 32

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Debauve38 may be explained as if the Court saw in Article 56 TFEU only a rule prohibiting discrimination. If non-discrimination is a general principle of EU law with horizontal application, as provided in Articles 8, 10, 18, and 19 TFEU, then national measures based on nationality are illegal per se whereas indirectly discriminatory measures are not illegal per se.39 Therefore, as will be seen below, national measures that are directly discriminatory “are compatible with [EU] law only if they can be brought within the scope of an express exemption, such as that contained in Article [62] of the Treaty”.40 By contrast, indirectly discriminatory measures may also be justified under the doctrine of overriding reasons of general interest.

5.

14

Restrictions

The concept of restriction to the freedom to provide services is not perfectly delimited either.41 Initially, there was a debate regarding whether Article 56 TFEU was aimed at including only distinctly applicable measures within its scope. In other words, some literature was of the opinion that the freedom to provide services, as with the other freedoms, only prohibited direct or indirect discrimination and that the Court’s case law may be explained accordingly.42 However, the Court very soon confirmed the line of argument already present in its Van Binsbergen decision regarding the concept of restriction as the criterion provided for in Article 56 TFEU.43 In the latter case, the Court stated that “the restrictions to be abolished pursuant to Articles [56] and [57] include all requirements [. . .] which may prevent or otherwise obstruct the activities of the person providing the service”.44 Indeed, towards the beginning of the 1990s, the Court seemed to feel a clear need to overcome the criterion of national treatment, although this does not mean that the Court had completely abandoned the concept of discrimination, which in turn had fuelled some criticism in the literature, above all in relation to the concept of

38 Case 36/74, Walrave (ECJ 12 December 1974) para 6; Case 90/76, Van Ameyde (ECJ 9 June 1977) para 29; Case 15/78, Koestler (ECJ 24 October 1978) para 5; Case 52/79, Debauve (18 March 1980) para 13. 39 Hatzopoulos (2012), pp. 110–111. 40 Case C-288/89, Gouda (ECJ 25 July 1991) para 11. 41 Enchelmaier (2011), p. 619, who considers the case law on this point as a “bewildering variety of approaches”. 42 Marenco (1991), p. 111; Evering (1984), p. 9; Martin (1998), p. 562. 43 Barnard (2016), p. 307; Weiss and Kaupa (2014), p. 253; Hatzopoulos (2012), p. 103; Segura Serrano (2003), p. 133. 44 Case 33/74, Van Binsbergen (ECJ 3 December 1974) para 10.

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indirect discrimination.45 After some forerunner cases,46 a change in the case law was envisioned with the judgments on “tourist guides”,47 in which the Court stated that national laws, even if they are non-discriminatory, cannot be applied in toto to providers of intra-EU services since in that case, the useful effect of the treaty provisions that regulate this fundamental freedom would be jettisoned. What part of the national legislation can be applied to these service activities, and which part does not? The answer to this question will depend precisely on the concept of overriding reasons of general interest, as will be seen below. The real sea change in the interpretation of the current Article 56 TFEU took place with the already famous judgments of 25 July 1991, in the cases Säger, “Mediawet”, and Gouda.48 In Säger, the Court argued in a way that has been used ever since as the standard criterion49 to determine whether national measures are contrary to Article 56 TFEU: “It should first be pointed out that Article [56] requires not only the elimination of all discrimination against a person providing services on the ground of his nationality but also the abolition of any restriction, even if it applies without distinction to national providers of services and to those of other Member States, when it is liable to prohibit or otherwise impede the activities of a provider of services established in another Member State where he lawfully provides similar services.”50 The indistinctly applicable measures that are usually caught by this reading of Article 56 TFEU may be classified as administrative authorisations, accreditation measures, or licenses, on the one hand, as well as requisites relating to the possession of diplomas or qualifications, on the other hand.51 After these cases, the European Commission adopted an Interpretative Communication in 1993 stating that the notion of restrictions on the free movement of services “involves more than just discrimination. Unjustified or disproportionate restrictions are also prohibited even if they apply without distinction to services provided by nationals of the State in question and to those provided by nonnationals”. Moreover, the Commission has given the utmost importance to the expression “liable to prohibit or otherwise impede” as it “covers any measure which might hinder trade in services between Member States, e.g. those which

45

Huglo (2000), p. 15. Joined Cases 110/78 and 111/78, Van Wesemael (ECJ 18 January 1979); Case 279/80, Webb (ECJ 17 December 1981) para 17; the “insurance” cases: Case 220/83, Commission v France (ECJ 4 December 1986); Case 252/83, Commission v Denmark (ECJ 4 December 1986); Case C-205/84, Commission v Germany (ECJ 4 December 1986); and Case 206/84 Commission v Ireland (ECJ 4 December 1986). 47 Case C-154/89, Commission v France (ECJ 26 February 1991); Case C-180/89, Commission v Italy (ECJ 26 February 1991); Case C-198/89 Commission v Greece (ECJ 26 February 1991). 48 Case C-76/90, Säger (ECJ 25 July 1991); Case C-353/89, Commission v Netherlands (“Mediawet”) (ECJ 25 July 1991); Case C-288/89, Gouda (ECJ 25 July 1991). 49 Barnard (2016), p. 307. 50 Case C-76/90, Säger (ECJ 25 July 1991) para 12. 51 Truchot, in Pingel (2010), Article 49 CE para 14. 46

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affect the ability of the service provider to provide a service, those which increase the cost of the service or discourage its provision, and those which prevent potential customers from having recourse to the services of their choice”.52 The Säger formula, which is almost the same as the one used in Van Binsbergen, introduced the “restriction” approach, also called the market access test, into the case law and has been applied by the Court in most of the ensuing cases in the services field.53 However, the Säger formula has other variants, like where the Court states that national measures may constitute a restriction to the freedom to provide services if they are “liable to make it less attractive, or more difficult”.54 These kinds of measures are contrary to Article 56 TFEU because they “have the effect of making the provision of services between Member States more difficult than the provision of services purely within one Member State”.55 Still, the Court has also held that “measures, the only effect of which is to create additional costs in respect of the service in question and which affect in the same way the provision of services between Member States and that within one Member State, do not fall within the scope of Article [56] of the Treaty”.56 In other words, “rules of a Member State do not constitute a restriction within the meaning of the FEU Treaty solely by virtue of the fact that other Member States apply less strict, or economically more favourable, rules to providers of similar services established in their territory”.57 Another variant of the “restriction” formula is the double burden test, although some literature considers it as a different test.58 Absent harmonisation at EU level, it is to be expected that the service provider will be subject to domestic legislation regulating the provision of services both in the host MS and in the home MS. The existence of a double set of regulations will likely create an obstacle to the service provider, although these obstacles constitute a normal side effect in a federal (not unitary) system like the EU. However, the Court has held that even though MS may set regulatory standards as they see fit, those States are obliged to consider the requisites that the service provider already complies with in its MS. In other words, MS must mutually recognise the standards that service providers already comply with. Only if those standards are not considered equivalent may the host MS impose additional requirements. Therefore, the Court has held that MS must offer enough

52

Commission interpretative communication concerning the free movement of services across frontiers, O.J. C 334/03 (1993), p. 4. 53 Barnard (2016), p. 307. 54 Case C-341/05, Laval (18 December 2007) para 99. 55 Joined Cases C-94/04 and C-202/04, Cipolla (ECJ 5 December 2006) para 57. 56 Joined Cases C-544/03 and C-545/03, Mobistar (ECJ 8 September 2005) para 31. 57 Case C-475/11, Kostas Konstantinides (ECJ 12 September 2013) para 47. 58 Schütze (2015), p. 641; Weiss and Kaupa (2014), p. 255.

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administrative and legal avenues to service providers in order to ensure mutual recognition (! para 44), thus avoiding any double burden.59 The broad interpretation of the scope of Article 56 TFEU flowing from Säger is very similar to the Court’s reading in Dassonville60 within the field of the free movement of goods61 (! Article 28 TFEU). Indeed, according to this case law, national measures may be declared as contrary to the freedom to provide services, even if they are not discriminatory or indistinctly applicable, where they somehow hinder access to the market, although they are neutral in law or in fact. As seen above, to this latter kind of measures belong national measures that either introduce double burdens, as the services providers are already subject to the same requirements in their home country, or simply restrict the economic freedom of all providers operating in the market. Indeed, their mere existence, due to regulatory diversity, may be the origin of an obstacle to the free provision of services. Therefore, as in the field of goods, almost any national measure may be contrary to the freedom to provide services according to this broad reading of Article 56 TFEU.62 Some cases were decided immediately afterwards on the basis of this wide understanding of the market access test. For example, in the Schindler63 case, the Court considered as an obstacle to the freedom to provide services a British regulation prohibiting the holding of lotteries in the territory of the United Kingdom. The judgment in Alpine Investments64 confirmed the incompatibility with EU law of a measure adopted by the Dutch Ministry of Finance prohibiting providers of financial services established in the Netherlands from using the technique called cold calling (unsolicited telephone calls to potential customers), which also affected the services offered by these providers from this country in other Member States. In Reisebüro Broede,65 a German law was condemned that prohibited the claim and collection, by judicial means, of credits from third parties without going through the intermediation of a lawyer. The same can be said about the SETTG66 case, which was raised on the occasion of a Greek regulation that prohibited tourist guides, national or foreign, from exercising their professional activity in Greece under a legal form other than that of an employment contract. In De Agostini,67 the incompatibility with EU law was declared of Swedish legislation on commercial practices that were applied equally to nationals and EU citizens.

59

Case C-62/81, Seco (ECJ 3 February 1982) para 14. Case 8/74, Dassonville (ECJ 11 July 1974). 61 Weiss and Kaupa (2014), p. 254; Lenaerts and van Nuffel (2011), p. 277; Segura Serrano (2003), pp. 135–136. 62 Hatzopoulos (2012), pp. 110–111; Segura Serrano (2003), pp. 136–137. 63 Case C-275/92, Schindler (ECJ 24 March 1994). 64 Case C-384/93, Alpine Investments (ECJ 10 May 1995). 65 Case C-3/95, Reisebüro Broede (ECJ 12 December 1996). 66 Case C-398/95, SETTG (ECJ 5 June 1997). 67 Joined Cases C-34/95, C-35/95 and C-36/95, De Agostini (ECJ 9 July 1997). 60

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However, the Court has never adopted a line of reasoning similar to the Keck68 case law within the free movement of goods in order to limit the ample scope of the market access test. In the Keck case, the Court made a distinction between those measures affecting the product itself, which come under the scope of Article 34 TFEU, and those measures concerning selling arrangements, which do not. However, contrary to the opinion of several MS, the Court did not apply this distinction in Alpine Investments within the service framework, maybe due to the fact that most national measures affect service providers and not the services themselves.69 Although the literature did not fully agree with the different approach taken by the Court in this case, as opposed to the one previously adopted in Keck,70 it is clear that the Court preferred to distinguish the case law regarding the free movement of services from the case law regarding the free movement of goods, not only in terms of the applicability of the criteria that help determine the existence of a restriction but also as regards the actual articulation of the services’ legal regime (the Court has not made the slightest reference to the difference, existing in the field of goods, between import restrictions and export restrictions). The free movement of goods and the free movement of services thus seem to approach each other in the fact that they are the deepest within the internal market, but they differ in their legal evolution, especially as far as judicial interpretation is concerned. Therefore, it is well settled that the limits applicable to the notion of measure having an equivalent effect in the area of free movement of goods cannot be transferred by analogy to the free movement of services, so that the concept of “restriction” included in Article 56 TFEU finds no limits to its application using this line of argument.71 The market access test is not a perfectly delimited formula bearing in mind the difficulties found in its application, from both qualitative and quantitative points of view.72 On the one hand, it is not an easy task to distinguish between measures impeding access to the market and measures amounting to an obstacle to the exercise of a service activity. In the services field, those measures that affect the exercise of an economic activity may in the end work as obstacles to market access as well. On the other hand, it is also uncertain what degree of hindrance is needed for a measure to be considered a restriction. A de minimis approach would solve the issue as only a substantial restriction would be considered to be contrary to Article 56 TFEU. This de minimis criterion seems to be assumed by the Court in its recent case law. Indeed, in the case Commission v Italy (Motor Insurance), the Court held that the national measure under examination amounted to a substantial interference and led to significant additional costs for the undertakings concerned, which would be required to rethink their business policy and strategy,

68

Joined cases C-267/91 and 268/91, Keck and Mithouard (ECJ 24 November 1993) para 16. Weiss and Kaupa (2014), p. 254. 70 Hatzopoulos (1995), p. 1439; Da Cruz Vilaça (1999), p. 811. 71 Segura Serrano (2003), p. 139. 72 Hatzopoulos (2012), pp. 114–119. 69

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inter alia, by considerably expanding the range of services offered.73 Although this de minimis approach is supported by some experts in the field, others, however, have criticised it as subjective or basically intuitive.74 Nevertheless, the Court has not applied this approach in a consistent manner and so normally refers to its established case law on the restriction criterion, as has been stated since Säger.75

6.

Justifications: Overriding Reasons of Public Interest

6.1. Overview

26

27

Where national measures are deemed to be contrary to the freedom to provide services, however, the EU law system has provided for some flexibility, therefore allowing justification for the maintenance of those national measures. There is firstly and secondly, as will be analysed in the commentary to Article 62 TFEU (! Article 62 TFEU), the latter provision makes a referral to the chapter on establishment (Article 49 et seqq. TFEU), whereby two sets of exceptions/exclusions are made applicable to the freedom to provide services so that national measures, even when discriminatory, may be ultimately justified. Under Article 51.1 TFEU, the Treaty sets out an exclusion clause regarding MS’ activities that are based on the exercise of official authority, on the one hand (! Article 51 TFEU para 1), while on the other, Article 52.1 TFEU provides for an exception applicable to the national measures adopted on grounds of public policy, public security, or public health (! Article 52 TFEU para 1). These treaty-based exceptions will be dealt with below (! Article 62 TFEU para 16). Secondly, these treaty-based exceptions have, however, been considered insufficient by the CJEU after the adoption of a wide concept of restriction. Indeed, if the criterion of non-discrimination no longer played a role in determining conformity with EU law of national legislation in the field of services, it was then necessary to adopt another legal construct for the freedom to provide services. Given the importance of an adequate regulation for national economies in this area, MS’ legislation could not be subject to unbearable legal uncertainty due to the continued risk of incompatibility with EU law. In this task, the role assigned to the concept of public or general interest is of capital importance as the entire legal regime currently applicable to the free movement of intra-EU services revolves around this axial concept.76 The doctrine of overriding reasons of public interest thus emerged as a legal-political necessity after the overcoming of the discrimination

73

Case C-518/06, Commission v Italy, “Motor Insurance” (ECJ 28 April 2009) para 66–69. Snell (2010), p. 469. 75 Barnard and Peers (2014), p. 417. 76 Segura Serrano (2003), p. 140. 74

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criterion by the Court.77 Legally speaking, it is difficult to identify a particular basis for this line of argument, although the “rule of reason” has been used as the main explanation for the existence of overriding reasons of general interest within the EU legal order.78 The first time this doctrine emerged in the case law of the CJEU was in Van Binsbergen.79 Indeed, since Van Binsbergen, there has existed in the Court’s case law the seed of what would later be this doctrine on overriding reasons of public interest, even if this doctrine was mostly known because of the Cassis de Dijon case.80 According to the Court, services have, by their own characteristics, a “particular nature” worthy of special consideration in order to preserve national standards that protect the “general good”. This assertion is of capital relevance and constitutes the most important “reservation”81 by the Court of Justice to the setting up of a wide formula for the free movement of services that started with the same case. This same formula by which the general interest is introduced was repeated, even literally, in the subsequent cases Coenen, Van Wesemael, Debauve, and Webb.82 The confirmation of this case law came with the “insurance” cases83 as well as the “tourist guides” cases.84

28

6.2. Conditions of Applicability

The Court has progressively consolidated the conditions of application of the doctrine of general interest. Although they appear from the beginning in its case law, they are more clearly distinguishable in the judgments of 25 July 1991, Säger, Gouda, and “Mediawet”.85 In Säger, the Court stated that the German legislation under examination constituted a restriction because it made the provision of certain services subject to the granting of an administrative authorisation, which in turn 77

Hatzopoulos (1998), p. 194, according to whom the overriding reasons’ doctrine has its origin in a gap attributable to the EU constituents, who were imbued by the functionalist spirit that permeated the Treaty. 78 Gormley (1985), pp. 51–57. 79 Case 33/74, Van Binsbergen (ECJ 3 December 1974) para 12. 80 Case 120/78, Rewe (ECJ 20 February 1979) para 8. 81 Everling (1984), p. 10. 82 Case 39/75, Coenen (ECJ 26 November 1975) para 9; Case 52/79, Debauve (ECJ 18 March 1980) para 12; Case 279/80, Webb (ECJ 17 December 1981) para 17; Joined Cases 110/78 and 111/78, Van Wesemael (ECJ 18 January 1979) para 28. 83 Case 220/83, Commission v France (ECJ 4 December 1986); Case 252/83, Commission v Denmark (ECJ 4 December 1986); Case C-205/84, Commission v Germany (ECJ 4 December 1986); and Case 206/84 Commission v Ireland (ECJ 4 December 1986). 84 Case C-154/89, Commission v France (ECJ 26 February 1991) para 17; Case C-180/89, Commission v Italy (ECJ 26 February 1991) para 20; Case C-198/89 Commission v Greece (ECJ 26 February 1991) para 21. 85 Case C-288/89, Gouda (ECJ 25 July 1991) para 12; Case C-353/89, Commission v Netherlands (“Mediawet”) (ECJ 25 July 1991) para 16.

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was subject to the requirement to possess certain professional qualifications.86 It was therefore an almost usual paradigmatic situation where a non-discriminatory national measure restricts the intra-EU freedom to provide services when subjecting it to compliance with requirements that, in principle, entail an obstacle to the said freedom. But then the Court notes that “[h]aving regard to the particular characteristics of certain provisions of services, specific requirements imposed on the provider, which result from the application of rules governing those types of activities, cannot be regarded as incompatible with the Treaty. However, as a fundamental principle of the Treaty, the freedom to provide services may be limited only by rules which are justified by imperative reasons relating to the public interest and which apply to all persons or undertakings pursuing an activity in the State of destination, in so far as that interest is not protected by the rules to which the person providing the services is subject in the Member State in which he is established. In particular, those requirements must be objectively necessary in order to ensure compliance with professional rules and to guarantee the protection of the recipient of services and they must not exceed what is necessary to attain those objectives.”87 This paragraph explicitly includes almost all the elements that govern the application of the doctrine of overriding reasons of public interest, which, summing up the Court’s statement, are as follows: (a) it must be a case regarding non-discriminatory national measures; in other words, they must be indistinctly applicable measures; (b) these measures must pursue a purpose of general interest recognised by the Court; (c) the mentioned measures must meet the criterion of necessity or adequacy to the objective pursued, and the requirement of proportionality, therefore, must not go beyond what is necessary to achieve the said objective; and (d) the general interest is not already safeguarded by the rules to which the provider is subject in the State where it is established.88 There is a fifth requirement: national measures will be considered legitimate only if the EU law’s pre-emption has not previously occurred.

6.3. Justification of Non-discriminatory Measures

31

The Court has maintained throughout its case law that discriminatory measures cannot be brought into conformity with EU law unless they can benefit from an express provision of the Treaty. Discriminatory measures are contrary to Article 56 TFEU and can only be justified, a posteriori, if any of the grounds explicitly stated in such exclusion (Article 51 TFEU) or exception (Article 52 TFEU) provisions apply. This reasoning is in accordance with the EU’s legal-constitutional

86

Case C-76/90, Säger (ECJ 25 July 1991) para 13. Case C-76/90, Säger (ECJ 25 July 1991) para 15. 88 Case C-55/94, Gebhard (ECJ 30 November 1995) para 37-38. 87

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logic, in particular with Article 18 TFEU, which sets out the general principle of non-discrimination, in addition to the other particular provisions that throughout the Treaty make specific and explicit application of this axial principle of the EU’s legal order. The importance of this principle has led the Court to ensure that, before proceeding to justify national measures on the basis of the doctrine of overriding reasons, it was necessary to confirm the absence of discriminatory effects derived from them. However, the Court’s line of argument regarding the verification of the discriminatory nature of national measures is flexible, similar to what happens in the field of the free movement of goods (! Article 34 TFEU). With regard to goods, the Court has maintained a regular line, arguing that the existence of discriminatory measures excluded the applicability of the mandatory requirements’ doctrine. However, perhaps because, as some maintain, the notion of discrimination is not perfectly defined,89 the Court has enjoyed an important margin of manoeuvre in the application of this doctrine. Some have even criticised that the Court has performed “legal acrobatics”90 in order not to break the rule that only non-discriminatory measures can be justified on the basis of the mandatory requirements’ doctrine, as in the Vallonian waste case.91 Similarly, regarding the free movement of services, the ECJ maintains a uniform line requiring that national measures be non-discriminatory so that they can be justified through overriding reasons of general interest. The Court has repeatedly stated that discriminatory measures are only compatible with the freedom to provide services if they can benefit from an express provision of the Treaty, which provides for an exception.92 However, there is also case law in the field of services that seems to imply a breach of this requirement regarding the nondiscrimination principle. First, there is a group of judgments that seems to admit the possibility that States can adopt justifiable discriminatory fiscal measures, despite everything, on the basis of the doctrine of overriding reasons.93 Also, the requirement of non-discrimination is relaxed when public morality is at stake due to the delicate nature of this general interest reason.94 The same approach may be 89

Lenaerts (1991), p. 3; Marenco (1991), p. 128; Garrone (1994), p. 427. Hatzopoulos (1998), p. 198. 91 Case C-2/90, Commission v Belgium (ECJ 9 July 1992). 92 Case 352/85, Bond van Adverteerders and Others (ECJ 26 April 1988) para 32; Case C-260/89, ERT (ECJ 18 June 1991) para 24; Case C-288/89, Gouda (ECJ 25 July 1991) para 11; Case C-353/ 89, Commission v Netherlands (“Mediawet”) (ECJ 25 July 1991) para 15; Case C-17/92, Fedicine (ECJ 4 May 1993) para 16; Case C-388/01, Commission v Italy (“Museums”) (ECJ 16 January 2003) para 19; Case C-153/08, Commission v Spain (“Gambling Tax”) (ECJ 6 October 2009) para 37; and Case C-347/09, Dickinger (ECJ 15 September 2011) para 79. 93 This case law is known as that on “tax system coherence” and the most emblematic cases were Case C-204/90, Bachmann (ECJ 28 January 1992) and Case C-300/90, Commission v Belgium (ECJ 28 January 1992). See Hinojosa Martínez (1997), p. 511. 94 See the early saga on gambling: Case C-275/92, Schindler (ECJ 24 March 1994) para 47–52; Case C-124/97, Läärä (ECJ 21 September 1999) para 28; and Case C-67/98, Zenatti (ECJ 21 October 1999) para 26. 90

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observed regarding the protection of workers because of the importance of this social value.95 Second, there is case law as well in which the Court has not even decided whether the measure was discriminatory before accepting the overriding reasons of public interest put forward by MS.96 In any case, the rule established by the ECJ prevails throughout its extensive case law and in the latest judgments,97 which implies that only non-discriminatory measures, that is to say measures indistinctly applicable, can benefit from a justification based on the doctrine of overriding reasons.

6.4. The Presence of Overriding Reasons of Public Interest

34

35

National measures that are not discriminatory in character but that entail a restriction on the freedom to provide services can nevertheless be justified. However, it is necessary that those measures are based on a ground linked to the protection of the general interest as accepted by the Court. Still, the recognition by the Court of the various reasons linked to the general interest constitutes an evolutionary process, which has allowed new motives of public interest to be “discovered” in an unordered manner. It should not be forgotten that services, as a sector of economic activity, have recently been subject to unprecedented qualitative and quantitative growth, much higher than that of goods in relative terms, which also affects the number of cases that reach the Court and, consequently, the number of occasions in which the Court finds itself in need of recognising new grounds of general interest.98 Regarding the list of overriding reasons of public interest, the first authoritative list was prepared by the Court itself in the Gouda and Mediawet cases.99 The most recent and authoritative list has been included in Article

95 Case C-222/95, Parodi (ECJ 9 July 1997) para 31; and Case C-493/99, Commission v Germany (ECJ 25 October 1991) para 19. 96 Case C-250/95, Futura (ECJ 15 May 1997); Case C-118/96, Safir (ECJ 28 April 1998); and Case C-158/96, Kohll (ECJ 28 April 1998). 97 Case C-341/05 Laval (ECJ 18 December 2007) para, 117; Case C-219/08, Commission v Belgium (“Posted Workers”) (ECJ 1 October 2009); Case C-153/08, Commission v Spain (“Gambling Tax”) (ECJ 6 October 2009); and Case C-347/09, Dickinger (ECJ 15 September 2011) para 79. 98 Segura Serrano (2003), pp. 145–146. 99 Case C-288/89, Gouda (ECJ 25 July 1991) para 14; and Case C-353/89, Commission v Netherlands (“Mediawet”) (ECJ 25 July 1991) para 18 with reference to previous cases: professional rules intended to protect recipients of the service, protection of intellectual property, the protection of workers, consumer protection, the conservation of the national historic and artistic heritage, turning to account the archaeological, historical and artistic heritage of a country and the widest possible dissemination of knowledge of the artistic and cultural heritage of a country.

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4.8100 of the Services Directive.101 The literature has also extracted from the case law exhaustive lists on overriding reasons.102 One expert in the field has even produced a table with those overriding reasons organised by broad categories and sub-categories, where four main rationales driving MS to invoke these overriding reasons may be identified: protection of services recipients and quality of services, social considerations, cultural reasons, and tax.103 In any case, the enumeration provided in the Services Directive is only indicative and by no means implies that the Court may not identify new overriding reasons.104 The criteria that allow the identification of a new ground of general interest are not defined by the Court. As it is an ongoing process, the recognition of new overriding reasons does not respond to previously determined parameters. This process is the result of an unregulated authority by the ECJ, which is put to the test each time that national measures are identified by economic operators as restrictions, which in turn are necessary to protect certain values or social interests.105 That this is an unregulated authority has a double effect. In the first place, there is one criterion that can be drawn from the case law, i.e. the non-acceptance of those reasons of general interest that have an economic character.106 Indeed, the Court has not accepted those overriding reasons that exclude an entire economic activity from the Treaty rules.107 However, the case law on this point is not steady as there are some cases, specifically in the healthcare area, where the Court has ignored the economic character of the aims pursued or has linked the economic purpose to other general interest grounds.108 In other cases, the CJEU has decided 100

Article 4.8 states: “overriding reasons relating to the public interest” means reasons recognised as such in the case law of the Court of Justice, including the following grounds: public policy; public security; public safety; public health; preserving the financial equilibrium of the social security system; the protection of consumers, recipients of services and workers; fairness of trade transactions; combating fraud; the protection of the environment and the urban environment; the health of animals; intellectual property; the conservation of the national historic and artistic heritage; social policy objectives and cultural policy objectives. 101 Parliament/Council Directive 2006/123/EC on services in the internal market, O.J. L 376/36 (2006). 102 Barnard (2016), p. 483; Segura Serrano (2003), p. 147. 103 Hatzopoulos (2012), p. 153-155. Similarly, Barnard (2016), pp. 484–488 (based on Chalmers) distinguishes between market externalities, civil liberties, socio-cultural practices and public order. 104 Hatzopoulos (2012), p. 152. 105 Segura Serrano (2003), pp. 147–148. 106 Case C-398/95, SETTG (ECJ 5 June 1997) para 23; Joined Cases C-49/98 et al., Finalarte (ECJ 25 October 2001) para 39; Case C-164/99, Portugaia (ECJ 24 January 2002) para 26; Case C-388/ 01, Commission v Italy (ECJ 16 January 2003) para 22. 107 Case C-211/91, Commission v Belgium (“Cable TV”) (ECJ 16 December 1992); Case C-257/ 05, Commission v Austria (“BOILER INSPECTORS”) (ECJ 14 December 2006). 108 Case C-158/96, Kohll (ECJ 28 April 1998) para 41; Case C-157/99, Smits and Peerbooms (ECJ 12 July 2001) para 72; Case C-368/98, Vanbraekel (12 July 2001) para 47; Case C- 385/99, Müller-Fauré and van Riet (13 May 2003) para 73; Case C-419/16, Simma Federspiel (ECJ 20 December 2017) para 46.

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the opposite, ignoring the public interest facet of the overriding reason invoked because of its purely economic nature.109 This line of argument may nevertheless be justified because the Court negates purely economic objectives as against intermediate economic objectives that ultimately pursue genuine general interest goals,110 or, stated differently, the Court accepts macroeconomic measures but not microeconomic ones.111 In the second place, the Court’s freedom to identify new grounds of public interest is more supposed than real since in fact the Court has never rejected an MS’s opportunity to invoke a general interest reason. The true control or supervision by the Court does not occur in relation to the specific grounds or reasons advanced by the States but takes place in relation to the means that they use in order to carry them out. In other words, the Court’s real filter is performed within the rigorous control of proportionality that it implements.112

6.5. The Absence of Pre-emption

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Pre-emption is not purely a principle but a legal rule, a regulatory technique. The absence of pre-emption, understood as the effect of field occupation, is another requisite present in the legal construct that the Court has made regarding the overriding reasons of general interest. It was identified as a requirement under the conditions set forth by the ECJ in the already well-known judgments of 1991.113 For a restrictive national measure to be considered as justified, this measure must aim to preserve an objective of general interest that is not already regulated by EU law, and therefore the pre-emption effect does not occur. In fact, it is the necessity test that leads to the need to check whether there is EU law harmonisation. Thus, it could be argued that all the judicial control carried out within the framework of the doctrine of overriding reasons is based on the broad application of the principle of proportionality. Thus, in a field of shared competence such as the internal market, MS are authorised to exercise that competence when and to the extent that the EU has not exercised its competence, so that national measures based on the general interest are justified only in the absence of EU harmonisation.114 However, the specific intensity of the EU harmonisation on the general interest is an important, if not decisive, element in order to exclude MS’ regulation. This means that shared competence must fall on the EU side only to the extent that this competence is exercised and that the interests pursued by national regulations are

109

Case C-398/95, SETTG (ECJ 5 June 1997) para, 23. Snell (2005), p. 48. 111 Hatzopoulos (2012), p. 158, drawing from the teachings of Paul Demaret. 112 Segura Serrano (2003), p. 148. 113 Case C-76/90, Säger (ECJ 25 July 1991) para 17; Case C-288/89, Gouda (ECJ 25 July 1991) para 27; Case C-353/89, Commission v Netherlands (“Mediawet”) (ECJ 25 July 1991) para 30. 114 Segura Serrano (2003), pp. 148–149. 110

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incorporated by EU legislation at least to the same extent.115 But a first problem is in fact related to the diversity of interests pursued by different national regulations. It may very well be the case that a given EU harmonisation that seeks to replace MS in the protection of the general interest in a specific area of service provision does not expressly include some or all of the social values worthy of protection for a given MS. In this case, pre-emption seems to lead to a legal loophole of difficult practical solution. Indeed, as a result of legal-political voluntarism, sometimes the existence of common values between the different MS is taken for granted, which in turn can lead to a dead end from the point of view of the EU legal system. As Weatherill warned, a rigid rule about pre-emption may not be desirable in an increasingly heterogeneous EU due to its paralysing effect.116 However, secondly, the question of the intensity of EU regulation also arises. When the EU exercises its concurrent competence, the general interest can be protected at EU level but with a significantly lower intensity than that previously regulated at the national level. This is the same problem that already arose in the drafting of the Single European Act of 1986 and that led to the adoption of the current Article 95.4 TFEU, when especially Germany and Denmark were concerned about the possibility that the mechanism of pre-emption could jeopardise its high standards relating to the protection of the environment, consumer rights, etc.117

6.6. The Principle of Proportionality

It is understood that the principle of proportionality requires a reasonable relationship between a specific objective and the legislative or administrative means used to achieve that objective.118 The proportionality test has a tripartite structure, whose elements are suitability, necessity, and proportionality stricto sensu.119 However, there is disagreement concerning whether the proportionality test in the case law of the CJEU in fact comprises the third stage, i.e. proportionality in the strict sense.120 In any case, the national measure has thus to overcome a cumulative examination, and not an alternative one, since for example a measure may be suitable, but not necessary, in the sense that there are other alternative measures that are less restrictive.

115

Segura Serrano (2003), p. 152. Weatherill (1994), p. 19. 117 López Escudero (1991), p. 328; Ehlermann (1987), p. 361. 118 De Búrca (1993), p. 105; Emiliou (1996), p. 6. 119 Craig and De Búrca (2015), p. 551. 120 Craig (2012), chapter 19; Hatzopoulos (2012), p. 173, who considers that the view which finds wider support in the Court’s case law is that proportionality comprises only suitability and necessity. 116

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First, with regard to the suitability test, this element implies, firstly, the outlining of the interest of the affected State and entails, secondly, the evaluation of whether the national measure constitutes a useful, adequate, or effective measure to achieve the objective pursued.121 Thus, this test, which is very close to the opportunity test of administrative actions, determines whether the measure is appropriate to achieve the purpose of general interest set out by the State itself. In other words, there must be a causal link between the State measure and the interest it aims to protect.122 This criterion is not the most frequently used by the ECJ, which shows some reluctance to apply it, unless it is a case where the specific measure is revealed as manifestly inadequate. Although in the field of services there are fewer cases in which this type of filter is exercised, it is nevertheless a control perfectly defined and assumed in case law, as reflected in the Gouda and Mediawet cases.123 Second, regarding the necessity test, it serves to outline the interest affected by the national measure and to evaluate whether there is a means, in order to achieve the same objective, that restricts the freedom to provide services to a lesser extent. This is the well-known test of the least restrictive measure and is the one mostly used by the Court. Although the earlier case law on services did not refer explicitly to any element other than that of necessity, the Court developed this element of the test of the least restrictive measure in the revolutionary judgments of July 1991,124 with statements that have been repeated in subsequent cases.125 However, this reinforcement of the necessity test does not inevitably mean that the Court is going to delve into a thorough analysis of all the possibilities open to the national authorities. Thus, its inquiry will usually involve only whether there are different ways of action, all of them equally effective, although less restrictive, in order to achieve the stated objective. The Court always wants to show enough deference to the States, taking into account that they are usually the best placed to decide the concrete course of action to be followed in each case.126 However, sometimes the test carried out by the ECJ has gone so far as to suggest to the States the

121

Segura Serrano (2003), p. 157. Kapteyn and Verloren van Themaat (1998), p. 656. 123 The Court stated “that there is no necessary connection between such a cultural policy and the conditions” set out by the national measure (italics added), see Case C-288/89, Gouda (ECJ 25 July 1991) para 24; Case C-353/89, Commission v Netherlands (“Mediawet”) (ECJ 25 July 1991) para 42. 124 The Court held that “the application of national provisions to providers of services established in other MS must be such as to guarantee the achievement of the intended aim and must not go beyond that which is necessary in order to achieve that objective. In other words, it must not be possible to obtain the same result by less restrictive rules” (italics added), see Case C-288/89, Gouda (ECJ 25 July 1991) para 15; Case C-353/89, Commission v Netherlands (“Mediawet”) (ECJ 25 July 1991) para 19. 125 Case C-272/94, Guiot (ECJ 28 March 1996) para 13; Joined Cases C-369/96 and C-376/96, Arblade and Leloup (ECJ 23 November 1999) para 39. 126 De Búrca (1993), pp. 127 and 148. 122

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alternative that should be adopted in substitution for the measure discussed.127 On the contrary, a particularly striking example as regards proportionality is found in the Schindler, Läärä, and Zenatti cases and also in Omega, where the Court exercised a minimum control of proportionality, setting aside the test of the least restrictive measure, to justify a total ban on the service activity,128 thus giving leeway to different MS’ values.129 In the former cases, the ECJ accepted that the provision of services in the field of gambling and lotteries involves high risks of crime and fraud,130 while in the latter it was the protection of human dignity that trumped free movement. The third test is proportionality strictu sensu. The ECJ applies this last proportionality stage when, without questioning the suitability of the national measure and without referring to other possible alternatives, it nevertheless considers that the national regulation is excessive and goes too far in the imposition of restrictions on third party interests.131 The Säger case can be quoted as an example, where the Court concluded that, since the risk for the public interest is very limited, the national restriction “must be regarded as disproportionate to the objective pursued”.132 Similarly, in the “tourist guides” cases, the Court considered that “in view of the scale of the restrictions it imposes, the legislation in issue is disproportionate in relation to the objective pursued”.133 The Court has applied a similar strict test in the posted workers’ case law. In Mazzoleni and Portugaia,134 the Court considered the national measures as neither necessary nor proportionate to the objective pursued. More recently, this approach has been confirmed in Schmidberger,135 Viking, and Laval,136 where the Court held that the national interest protected, the 127 Case C-204/90, Bachmann (ECJ 28 January 1992) para 18; Case C-300/90, Commission v Belgium (ECJ 28 January 1992) para 11; Case C-205/99, ANALIR (ECJ 20 February 2001) para 35; Case C-390/99, Canal Satélite Digital (ECJ 22 January 2002) para 39; Case C-17/00, De Coster (ECJ 29 November 2001) para 38. Conversely, the Court has explored other alternatives only to reach the conclusion that the measure at hand was justified, Case C-137/09, Josemans (ECJ 16 December 2010) para 80–81. 128 Case C-67/98, Zenatti (ECJ 21 October 1999) para 33; Case C-124/97, Läärä (21 September 1999), para 35; Case C-275/92, Schindler (ECJ 24 March 1994) para 59; Case C-36/02, Omega (ECJ 14 October 2004) para 38–39. 129 Craig and De Búrca (2015), p. 557. 130 See Huglo (2000), p. 735, who considers that with these cases the Court has avoided imposing a unified “cultural model”. 131 Van Gerven (1999), p. 1636. 132 Case C-76/90, Säger (ECJ 25 July 1991) para 20. 133 Case C-154/89, Commission v France (ECJ 26 February 1991) para 21; Case C-180/89, Commission v Italy (ECJ 26 February 1991) para 24; Case C-198/89 Commission v Greece (ECJ 26 February 1991) para 25. 134 Case C-165/98, Mazzoleni (ECJ 15 March 2001) para 30; Case C-164/99, Portugaia (ECJ 24 January 2002) para 23. 135 Case C-112/00, Schmidberger (ECJ 12 June 2003) para 77, although here the Court did not finally give prevalence to the freedom of movement. 136 Case C-438/05, Viking (ECJ 11 December 2007) para 46; Case C-341/05, Laval (ECJ 18 December 2007) para 94.

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right to industrial action, could not prevail over the “rights protected under the Treaty and in accordance with the principle of proportionality”. However, this test of proportionality stricto sensu or “true” proportionality has been criticised as inappropriate as it balances two interests, the national interest and the EU interest (freedom of services), in a way that is contrary to the vertical distribution of competences in the EU.137 The Court seems to be aware of this issue and has recently made an effort to refocus the test as an internal weighing exercise, holding that “the need for and proportionality of the measures thus adopted having to be assessed solely in relation to the objectives thus pursued and the level of protection which the national authorities concerned seek to ensure” (italics added).138 This is why a different test has been proposed, based on the principles of consistency and coherence,139 as they have emerged from the latest case law. Starting with Gambelli and Placanica140 in the gambling field,141 several judgments have also struck down quite a few national regulations that were inconsistent and, therefore, overly protectionist,142 while other national measures have prevailed because of their coherence.143 Quoting the importance attributed to public health by the Charter of Fundamental Rights, a series of refined rulings in the field of pharmacies have been issued by the Court assuming this version of the proportionality test.144

137

Snell (2002), p. 200. Joined Cases C-316/07 et al., Markus Stoß (ECJ 8 September 2010) para 91; also Case C-46/08, Carmen Media (ECJ 8 September 2010) para 46; Case C-470/11, Garkalns (ECJ 19 July 2012) para 38; Case C-463/13, Stanley International Betting (ECJ 22 January 2015) para 51. 139 See Hatzopoulos (2012), pp. 176–178, who considers that this new test is integrated in the proportionality test as its third stage, and provides more foreseeability; see Mathisen (2010), p. 1021, who adopts a different approach. 140 Case C-243/01, Gambelli (ECJ 6 November 2003) para 67; Joined Cases C-338/04, C-359/04 and C-360/04, Placanica (ECJ 6 March 2007) para 53. 141 See Van den Bogaert and Cuyvers (2011), p. 1204, who consider that the Court tends to be stricter if the national referring courts are themselves critical with the restricting national measures. 142 Case C-500/06, Corporación Dermoestética (ECJ 17 July 2008) para 39–40; Case C-169/07, Hartlauer (ECJ 10 March 2009) para 55; Case C-169/08, Presidente del Consiglio dei Ministri v Regione Sardegna (ECJ 17 November 2009) para 42; Joined Cases C-316/07 et al., Markus Stoß (ECJ 8 September 2010), para 106; Case C-46/08, Carmen Media (ECJ 8 September 2010) para 71; Case C-186/11, Stanleybet International and Others (ECJ 24 January 2013) para 31 et seqq.; and Case C-367/12, Sokoll-Seebacher (ECJ 13 February 2014) para 43. 143 Case C-42/07, Liga Portuguesa de Futebol Profissional (ECJ 8 September 2009) para 61; Case C-470/11, Garkalns (ECJ 19 July 2012) para 46; Case C-156/13, Digibet (ECJ 12 June 2014) para 39; Case C-225/15, Politanò (ECJ 8 September 2016) para 48; Case C-375/17, Stanley International Betting (ECJ 19 December 2018) para 52. 144 Joined Cases C-171/07 and C-172/07, Apothekerkammer des Saarlandes and Others (ECJ 19 May 2009) para 42; Joined Cases C-570/07 and C-571/07, José Manuel Blanco Pérez and María del Pilar Chao Gómez (ECJ 1 June 2010) para 94; Case C-539/11, Ottica New Line (ECJ 26 September 2013) para 56; Joined Cases C-159/12 to C-161/12, Venturini (ECJ 5 December 2013) para 41. 138

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Together with these three stages of proportionality, there are some indicators that the ECJ uses in its case law analysing the proportionality principle. Although these indicators are diverse and depend very much on the specific circumstances of the case, the Court has shown a tendency to take into account the nature of the service, the consequences of a default on the part of the person providing the service, the imposition of disproportionate administrative expenses and unjustified economic costs, and issues of good governance. These indicators have been used to highlight the disproportion of a national measure (such as in Säger and the “tourist guides” cases) or to the contrary.145 However, the Court usually dismisses as disproportionate the restrictive national measures that have a purely administrative nature,146 such as the facilitation of police work and compliance with the duty of vigilance on the part of public authorities,147 as well as those that impose additional burdens and expenses148 or are not legally certain.149 Still, the fact that less stringent rules exist in an MS cannot be used as an indicator in the context of proportionality.150

145

The ECJ understood that the restrictions imposed by the Dutch State on the practice of so-called cold-calling were proportionate, taking into account “the risks inherent in the type of transactions offered”, see Case C-384/93, Alpine Investments (ECJ 10 May 1995) para 46. The Court also justified a national measure because of “the risks arising from incompetence or inexperience on the part of debt-collection agencies”, see Case C-3/95, Reisebüro Broede (ECJ 12 December 1996) para 39. The Court also held that, on the grounds of combating money laundering and terrorist financing, the Spanish requirements on the part of institutions providing financial services to report directly to the Spanish financial intelligence unit on suspicious operations were justified, even if they gave rise to additional expenses and administrative burdens, see Case C-212/11, Jyske Bank Gibraltar (ECJ 25 April 2013) para 81. 146 Case C-205/84, Commission v Germany (“insurance”) (ECJ 4 December 1986) para 54; Case C-18/95, Terhoeve (ECJ 26 January 1999) para 45; Joined Cases C-369/96 and C-376/96, Arblade and Leloup (ECJ 23 November 1999) para 76; Case C-493/99, Commission v Germany (25 October 2001) para 21. 147 Case C-58/98, Corsten (ECJ 3 October 2000) para 42 and 46; Case C-165/98, Mazzoleni (ECJ 15 March 2001) para 36; Joined Cases C-49/98 et al., Finalarte (ECJ 25 October 2001) para 74. Conversely, the Court has been tolerant with “public order” situations so as to uphold “general rules which are easily managed and supervised by the national authorities” Case C-137/09, Josemans (ECJ 16 December 2010) para 82; and Case C-110/05 Commission v Italy (Trailers) (ECJ 10 February 2009) para 67. 148 Case C-58/98, Corsten (ECJ 3 October 2000) para 48; Case C-390/99, Canal Satélite Digital (ECJ 22 January 2002) para 42. 149 The Court has held that “the principle of legal certainty, the corollary of which is the principle of the protection of legitimate expectations, requires, inter alia, that rules of law be clear and precise and predictable in their effect, especially where they may have negative consequences on individuals and undertakings” Case C-98/14, Berlington Hungary and Others (ECJ 11 June 2015) para 77. See also Case C-342/14, X-Steuerberatungsgesellschaft (ECJ 17 December 2015) para 59. 150 Case C-384/93, Alpine Investments (ECJ 10 May 1995) para 51; Case C-3/95, Reisebüro Broede (ECJ 12 December 1996) para 42.

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6.7. The Principle of Mutual Recognition

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In order to justify a national measure on the basis of an overriding reason of general interest, the Court requires it to comply with the principle of mutual recognition.151 This principle subordinates the applicability of the overriding reasons’ doctrine to the fact that the general interest to be protected is not already safeguarded by the home State of the service provider.152 This mutual recognition requirement is often analysed as being part of the proportionality test.153 In fact, mutual recognition is a legal technique that already appeared in the original wording of the Treaty of Rome (Article 57.1 EC). However, it is commonly accepted that the real applicability of the principle of mutual recognition is to be found in the Court’s case law, specifically in Cassis de Dijon.154 Still, the principle of mutual recognition has been applied from the very beginning by the ECJ also within the freedom to provide services, except in the Van Binsbergen case, whose facts prevented the Court from testing it. Since the early case law155 the CJEU has systematically integrated the principle of mutual recognition in the application of the freedom to provide services, specifically in the “tourist guide” cases156 and the Säger saga.157 It flows from this case law that the principle of mutual recognition operates as another requirement of the general interest doctrine: the host State can only maintain restrictive measures as regards free movement when there is an overriding reason, but only if this interest is not sufficiently protected by the legislation to which the provider is subject in its home State. In this way, mutual recognition is inextricably linked to the overriding reasons doctrine as the other side of the coin. The principle of mutual recognition has two versions.158 On the one hand, its wide interpretation would lead to the country of origin principle, which implies that services legally provided in an MS (of origin) can be marketed throughout the EU. Within this latest version, the service is considered in its most objective dimension, capable of being marketed as a commodity, which in turn alters the vertical division of competences between the EU and the MS. On the other hand, its strict interpretation would lead to the country of destination principle,

151

Case C-76/90, Säger (ECJ 25 July 1991) para 15. Segura Serrano (2003), p. 160. 153 Craig and De Búrca (2015), p. 834. 154 Case 120/78, Rewe (ECJ 20 February 1979) para 8 and 14. 155 Case 16/78, Choquet (ECJ 28 November 1978) para 7–8; Joined Cases 110/78 and 111/78, Van Wesemael (ECJ 18 January 1979) para 30; Case 279/80, Webb (ECJ 17 December 1981) para 17; as for the “insurance” cases see Case C-205/84, Commission v Germany (“insurance”) (ECJ 4 December 1986) para 39 and 40. 156 Case C-154/89, Commission v France (ECJ 26 February 1991) para 14; Case C-180/89, Commission v Italy (ECJ 26 February 1991) para 17; Case C-198/89, Commission v Greece (ECJ 26 February 1991) para 18. 157 Case C-76/90, Säger (ECJ 25 July 1991) para 15; Case C-353/89, Commission v Netherlands (“Mediawet”) (ECJ 25 July 1991) para 17; Case C-288/89, Gouda (ECJ 25 July 1991) para 13. 158 Segura Serrano (2003), p. 162. 152

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which means a State must allow in its territory the supply of services offered in accordance with the legislation of the home State, provided that there is equivalence in the degree of protection ensured. Here the host State retains its competence to regulate the conditions of the service supply in its territory. However, the Court’s case law has never gone as far as introducing the country of origin principle.159 If the State of origin’s regulation is considered as not equivalent, recognition does not take place.160 The principle of mutual recognition does not therefore hamper measures required by the host State when these measures are supplementary, do not imply a double control, and provide an improvement in the protection of the general interest pursued.161 This is why mutual recognition is better understood as principle of equivalence as regards the Courts’ case law.162 The essence of the principle of mutual recognition is that it avoids double requirements and that it shifts the burden of proof from the service provider to the host MS.163 In other words, procedurally the host State has to show that it has taken into account the requirements, qualifications, etc. that the service provider has already complied with in its home State.164 Still, there are some striking rulings, as the Court negates in them the normal effect of mutual recognition,165 perhaps because the field affected was gambling and betting.166 It is up to the host State to set out the level of protection of interests, such as public health or protection of service recipients, that the home State’s legislation should meet to be recognised as equivalent. In this regard, the Court has held that it would be contrary to EU law to establish a disproportionate protection, taking into account the objective pursued. However, the Court sets limits not on the level of 159

Barnard and Peers (2014), p. 422, who speaks of a “weak” form of the country of origin principle as the one accepted by the Court in this field. 160 Examples include Case 279/80, Webb (ECJ 17 December 1981) para 19; the “insurance” cases: see Case C-205/84, Commission v Germany (“insurance”) (ECJ 4 December 1986) para 39 and 40. 161 Joined Cases C-369/96 and C-376/96, Arblade and Leloup, (ECJ 23 November 1999) para 52; Joined Cases C-49/98 et al., Finalarte (ECJ 25 October 2001), para 45; Case C-164/99, Portugaia (ECJ 24 January 2002), para 29. 162 Bernel (1996), p. 136. 163 Weiss and Kaupa (2014), pp. 258–260. 164 The Court has recently held that “national authorities must ensure, inter alia, that qualifications obtained in another Member State are accorded their proper value and duly taken into account”, see Case C-342/14, X-Steuerberatungsgesellschaft (ECJ 17 December 2015) para 54. See also Case C-458/08, Commission v Portugal (“Construction”) (ECJ 18 November 2010), para 101; Case C-390/99, Canal Satélite Digital (ECJ 22 January 2002) para 34–42; Case C-234/97, Fernández de Bobadilla (ECJ 8 July 1999) para 31; Case C-340/89, Vlassopoulou (ECJ 7 May 1991) para 15. 165 Case C-42/07, Liga Portuguesa de Futebol Profissional (ECJ 8 September 2009) para 69; Case C-347/09, Dickinger (ECJ 15 September 2011) para 98; Joined Cases C-660/11 and C-8/12, Biasci and Others (ECJ 12 September 2013) para 40. 166 Hatzopoulos (2013), p. 493; See also Hörnle (2011), p. 256, who considers that “the Court has been right in allowing the Member States wide discretion and refusing to liberalize the gambling sector on the basis of a mutual recognition principle”; Cf. Dawes and Struckmann (2010), p. 236.

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protection chosen but on the means chosen to achieve that level, as seen above regarding the principle of proportionality.167

List of Cases ECJ 11.07.1974, 8/74, Dassonville, ECLI:EU:C:1974:82 [cit. in para 21] ECJ 03.12.1974, 33/74, Van Binsbergen, ECLI:EU:C:1974:131 [cit. in para 9, 10, 12, 15, 28] ECJ 12.12.1974, 36/74, Walrave, ECLI:EU:C:1974:140 [cit. in para 3, 13] ECJ 26.11.1975, 39/75, Coenen, ECLI:EU:C:1975:162 [cit. in para 28] ECJ 09.06.1977, 90/76, Van Ameyde, ECLI:EU:C:1977:101 [cit. in para 13] ECJ 24.10.1978, 15/78, Koestler, ECLI:EU:C:1978:184 [cit. in para 13] ECJ 28.11.1978, 16/78, Choquet, ECLI:EU:C:1978:210 [cit. in para 43] ECJ 18.01.1979, 110/78 and 111/78, Van Wesemael, ECLI:EU:C:1979:8 [cit. in para 16, 28, 44] ECJ 20.02.1979, 120/78, Rewe, ECLI:EU:C:1979:42 [cit. in para 28, 44] ECJ 18.03.1980, 52/79, Debauve, ECLI:EU:C:1980:83 [cit. in para 13, 28] ECJ 17.12.1981, 279/80, Webb, ECLI:EU:C:1981:314 [cit. in para 16, 28, 44, 45] ECJ 03.02.1982, C-62/81, Seco, ECLI:EU:C:1982:34 [cit. in para 20] ECJ 31.01.1984, 286/82 and 26/83, Luisi and Carbone, ECLI:EU:C:1984:35 [cit. in para 4] ECJ 04.12.1986, 220/83, Commission v France, ECLI:EU:C:1986:461 [cit. in para 16, 28] ECJ 04.12.1986, 252/83, Commission v Denmark, ECLI:EU:C:1986:462 [cit. in para 16, 28] ECJ 04.12.1986, C-205/84, Commission v Germany, ECLI:EU:C:1986:463 [cit. in para 16, 28, 43, 44, 45] ECJ 04.12.1986, 206/84, Commission v Ireland, ECLI:EU:C:1986:464 [cit. in para 16, 28] ECJ 26.04.1988, 352/85, Bond van Adverteerders and Others, ECLI:EU: C:1988:196 [cit. in para 5, 33] ECJ 02.02.1989, 186/87, Cowan, ECLI:EU:C:1989:47 [cit. in para 4] ECJ 26.02.1991, C-154/89, Commission v France, ECLI:EU:C:1991:76 [cit. in para 4, 16, 28, 42, 44] ECJ 26.02.1991, C-180/89, Commission v Italy, ECLI:EU:C:1991:78 [cit. in para 4, 16, 28, 42, 44] ECJ 26.02.1991, C-198/89, Commission v Greece, ECLI:EU:C:1991:79 [cit. in para 4, 16, 28, 42, 44] ECJ 07.05.1991, C-340/89, Vlassopoulou, ECLI:EU:C:1991:193 [cit. in para 45] ECJ 18.06.1991, C-260/89 ERT, ECLI:EU:C:1991:254 [cit. in para 33] 167

Joined Cases C-316/07 et al., Markus Stoß (ECJ 8 September 2010), para 91; also Case C-46/ 08, Carmen Media (ECJ 8 September 2010) para 46.

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ECJ 25.07.1991, C-288/89, Gouda, ECLI:EU:C:1991:323 [cit. in para 12, 14, 17, 29, 33, 37, 41, 44] ECJ 25.07.1991, C-353/89, Commission v Netherlands (“Mediawet”), ECLI:EU: C:1991:325 [cit. in para 17, 29, 33, 37, 41, 44] ECJ 25.07.1991, C-76/90, Säger, ECLI:EU:C:1991:331 [cit. in para 17, 29, 37, 42, 44] ECJ 25.10.1991, C-493/99, Commission v Germany, ECLI:EU:C:2001:578 [cit. in para 33] ECJ 28.01.1992, C-204/90, Bachmann, ECLI:EU:C:1992:35 [cit. in para 33, 41] ECJ 28.01.1992, C-300/90, Commission v Belgium, ECLI:EU:C:1992:37 [cit. in para 33] ECJ 09.07.1992, C-2/90 Commission v Belgium, ECLI:EU:C:1992:310 [cit. in para 32] ECJ 16.12.1992, C-211/91, Commission v Belgium, (“CABLE TV”), ECLI:EU: C:1992:526 [cit. in para 36] ECJ 04.05.1993, C-17/92, Fedicine, ECLI:EU:C:1993:172 [cit. in para 33] ECJ 24.11.1993, C-267/91 and 268/91, Keck and Mithouard, ECLI:EU:C:1993:905 [cit. in para 23] ECJ 24.03.1994, C-275/92, Schindler, ECLI:EU:C:1994:119 [cit. in para 22, 33, 41] ECJ 16.02.1995, C-29/94, Aubertin et al., ECLI:EU:C:1995:39 [cit. in para 6] ECJ 10.05.1995, C-384/93, Alpine Investments, ECLI:EU:C:1995:126 [cit. in para 5, 6, 22, 43] ECJ 30.11.1995, C-55/94, Gebhard, ECLI:EU:C:1995:411 [cit. in para 30] ECJ 28.03.1996, C-272/94, Guiot, ECLI:EU:C:1996:147 [cit. in para 41] ECJ 12.12.1996, C-3/95, Reisebüro Broede, ECLI:EU:C:1996:487 [cit. in para 22, 43] ECJ 15.05.1997, C-250/95, Futura, ECLI:EU:C:1997:239 [cit. in para 33] ECJ 05.06.1997, C-398/95, SETTG, ECLI:EU:C:1997:282 [cit. in para 22, 36] ECJ 09.07.1997, C-34/95, C-35/95, and C-36/95, De Agostini, ECLI:EU: C:1997:344 [cit. in para 22] ECJ 09.07.1997, C-222/95, Parodi, ECLI:EU:C:1997:345 [cit. in para 33] ECJ 28.04.1998, C-118/96, Safir, ECLI:EU:C:1998:170 [cit. in para 33] ECJ 28.04.1998, C-158/96, Kohll, ECLI:EU:C:1998:171 [cit. in para 4, 33, 36] ECJ 26.01.1999, C-18/95, Terhoeve, ECLI:EU:C:1999:22 [cit. in para 43] ECJ 08.07.1999, C-234/97, Fernández de Bobadilla, ECLI:EU:C:1999:367 [cit. in para 45] ECJ 21.09.1999, C-124/97, Läärä, ECLI:EU:C:1999:435 [cit. in para 33, 41] ECJ 21.10.1999, C-97/98, Jägerskiöld, ECLI:EU:C:1999:515 [cit. in para 6] ECJ 21.10.1999, C-67/98, Zenatti, ECLI:EU:C:1999:514 [cit. in para 33, 41] ECJ 23.11.1999, C-369/96 and C-376/96, Arblade and Leloup, ECLI:EU: C:1999:575 [cit. in para 41, 43, 45] ECJ 11.04.2000, C-51/96 and C-191/97, Deliège, ECLI:EU:C:2000:199 [cit. in para 8] ECJ 03.10.2000, C-58/98, Corsten, ECLI:EU:C:2000:527 [cit. in para 43] Segura Serrano

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ECJ 20.02.2001, C-205/99, ANALIR, ECLI:EU:C:2001:107 [cit. in para 41] ECJ 15.03.2001, C-165/98, Mazzoleni, ECLI:EU:C:2001:162 [cit. in para 42, 43] ECJ 12.07.2001, C-157/99, Smits and Peerbooms, ECLI:EU:C:2001:404 [cit. in para 36] ECJ 12.07.2001, C-368/98, Vanbraekel, ECLI:EU:C:2001:400 [cit. in para 36] ECJ 25.10.2001, C-49/98 et al., Finalarte, ECLI:EU:C:2001:564 [cit. in para 36, 43, 45] ECJ 25.10.2001, C-493/99, Commission v Germany, ECLI:EU:C:2001:578 [cit. in para 43] ECJ 29.11.2001, C-17/00, De Coster, ECLI:EU:C:2001:651 [cit. in para 41] ECJ 22.01.2002, C-390/99, Canal Satélite Digital, ECLI:EU:C:2002:34 [cit. in para 41, 43, 45] ECJ 24.01.2002, C-164/99, Portugaia, ECLI:EU:C:2002:40 [cit. in para 36, 42, 45] ECJ 11.07.2002, C-60/00, Carpenter, ECLI:EU:C:2002:434 [cit. in para 7] ECJ 16.01.2003, C-388/01, Commission v Italy (“MUSEUMS”), ECLI:EU: C:2003:30 [cit. in para 33, 36] ECJ 13.05.2003, C- 385/99, Müller-Fauré and van Riet, ECLI:EU:C:2003:270 [cit. in para 36] ECJ 12.06.2003, C-112/00, Schmidberger, ECLI:EU:C:2003:333 [cit. in para 42] ECJ 21.10.2003, C-317/01 and C-369/01, Abatay and Others, ECLI:EU: C:2003:572 [cit. in para 3] ECJ 06.11.2003, C-243/01, Gambelli and Others, ECLI:EU:C:2003:597 [cit. in para 5, 42] ECJ 14.10.2004, C-36/02, Omega, ECLI:EU:C:2004:614 [cit. in para 41] ECJ 08.09.2005, C-544/03 and C-545/03, Mobistar, ECLI:EU:C:2005:518 [cit. in para 19] ECJ 03.10.2006, C-290/04, FKP Scorpio, ECLI:EU:C:2006:630 [cit. in para 3] ECJ 05.12.2006, C-94/04 and C-202/04, Cipolla, ECLI:EU:C:2006:758 [cit. in para 19] ECJ 14.12.2006, C-257/05, Commission v Austria (“Boiler Inspectors”), ECLI:EU: C:2006:785 [cit. in para 36] ECJ 06.03.2007, Joined Cases C-338/04, C-359/04, and C-360/04, Placanica, ECLI:EU:C:2007:133 [cit. in para 42] ECJ 11.12.2007, C-438/05, Viking, ECLI:EU:C:2007:772 [cit. in para 42] ECJ 18.12.2007, C-341/05, Laval, ECLI:EU:C:2007:809 [cit. in para 8, 19, 33, 42] ECJ 17.07.2008, C-500/06, Corporación Dermoestética, ECLI:EU:C:2008:421 [cit. in para 42] ECJ 10.02.2009, C-110/05, Commission v Italy (“TRAILERS”), ECLI:EU: C:2009:66 [cit. in para 43] ECJ 10.03.2009, C-169/07, Hartlauer, ECLI:EU:C:2009:141 [cit. in para 42] ECJ 28.04.2009, C-518/06, Commission v Italy (“MOTOR INSURANCE”), ECLI: EU:C:2009:270 [cit. in para 25] ECJ 19.05.2009, C-171/07 and C-172/07, Apothekerkammer des Saarlandes and Others, ECLI:EU:C:2009:316 [cit. in para 42]

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ECJ 08.09.2009, C-42/07, Liga Portuguesa de Futebol Profissional, ECLI:EU: C:2009:519 [cit. in para 42, 45] ECJ 01.10.2009, C-219/08, Commission v Belgium (“POSTED WORKERS”), ECLI:EU:C:2009:599 [cit. in para 33] ECJ 06.10.2009, C-153/08, Commission v Spain (“GAMBLING TAX”), ECLI:EU: C:2009:618 [cit. in para 33] ECJ 17.11.2009, C-169/08, Presidente del Consiglio dei Ministri v Regione Sardegna, ECLI:EU:C:2009:709 [cit. in para 42] ECJ 01.06.2010, C-570/07 and C-571/07, José Manuel Blanco Pérez and María del Pilar Chao Gómez, ECLI:EU:C:2010:300 [cit. in para 42] ECJ 08.09.2010, C-316/07 et al., Markus Stoß, ECLI:EU:C:2010:504 [cit. in para 42, 46] ECJ 08.09.2010, C-46/08, Carmen Media, ECLI:EU:C:2010:505 [cit. in para 42, 46] ECJ 18.11.2010, C-458/08, Commission v Portugal (“CONSTRUCTION”), ECLI: EU:C:2010:692 [cit. in para 45] ECJ 16.12.2010, C-137/09, Josemans, ECLI:EU:C:2010:774 [cit. in para 41, 43] ECJ 22.12.2010, C-245/09, Omalet, ECLI:EU:C:2010:808 [cit. in para 6] ECJ 15.09.2011, C-347/09, Dickinger, ECLI:EU:C:2011:582 [cit. in para 33, 45] ECJ 19.07.2012, C-470/11, Garkalns, ECLI:EU:C:2012:505 [cit. in para 42] ECJ 24.01.2013, C-186/11, Stanleybet International and Others, ECLI:EU: C:2013:33 [cit. in para 42] ECJ 25.04.2013, C-212/11, Jyske Bank Gibraltar, ECLI:EU:C:2013:270 [cit. in para 42] ECJ 12.09.2013, C-475/11, Kostas Konstantinides, ECLI:EU:C:2013:542 [cit. in para 19] ECJ 12.09.2013, C-660/11 and C-8/12, Biasci and Others, ECLI:EU:C:2013:550 [cit. in para 45] ECJ 26.09.2013, C-539/11, Ottica New Line, ECLI:EU:C:2013:591 [cit. in para 42] ECJ 05.12.2013, C-159/12 to C-161/12, Venturini, ECLI:EU:C:2013:791 [cit. in para 42] ECJ 13.02.2014, C-367/12, Sokoll-Seebacher, ECLI:EU:C:2014:68 [cit. in para 42] ECJ 12.06.2014, C-156/13, Digibet, ECLI:EU:C:2014:1756 [cit. in para 42] ECJ 22.01.2015, C-463/13, Stanley International Betting, ECLI:EU:C:2015:25 [cit. in para 42] ECJ 11.06.2015, C-98/14, Berlington Hungary and Others, ECLI:EU:C:2015:386 [cit. in para 43] ECJ 17.12.2015, C-342/14, X-Steuerberatungsgesellschaft, ECLI:EU:C:2015:827 [cit. in para 43, 45] ECJ 08.09.2016, C-225/15, Politanò, ECLI:EU:C:2016:645 [cit. in para 42] ECJ 20.12.2017, C-419/16, Simma Federspiel, ECLI:EU:C:2017:997 [cit. in para 36] ECJ 19.12.2018, C-375/17, Stanley International Betting, ECLI:EU:C:2018:1026 [cit. in para 42]

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References Barnard, C. (2009). Restricting restrictions: Lessons for the EU from the US? Cambridge Law Journal, 68, 575–606. Barnard, C. (2016). The substantive law of the EU. The four freedoms. Oxford: OUP. Barnard, C., & Peers, S. (Eds.). (2014). European Union law. Oxford: OUP. Bernel, A. (1996). Le principe d’équivalence ou de «reconnaissance mutuelle» en droit communautaire. Zurich: Schulthess Polygraphischer Verlag. Craig, P. (2012). EU administrative law. Oxford: OUP. Craig, P., & De Búrca, G. (2015). EU law. Texts, cases, and materials. Oxford: OUP. Da Cruz Vilaça, J. L. (1999). An exercise on the application of Keck and Mithouard in the field of free provision of services. In M. Dony & A. de Walsche (Eds.), Mélanges en Hommage à Michel Waelbroeck (Vol. II, p. 811 et seqq.). Brussels: Bruylant. Dawes, A., & Struckmann, K. (2010). Rien ne va plus? Mutual recognition and the free movement of services in the gambling sector after Santa Casa judgment. European Law Review, 35, 236– 262. De Búrca, G. (1993). The principle of proportionality and its application in EC law. Yearbook of European Law, 13, 105 et seqq. Ehlermann, C.-D. (1987). The internal market following the single European act. Common Market Law Review, 24, 361. Emiliou, N. (1996). The principle of proportionality in European law. A comparative study. London: Kluwer. Enchelmaier, S. (2011). Always at your service (within limits): The ECJ’s case law on Article 56 TFEU (2001-11). European Law Review, 36, 615–650. Everling, U. (1984). Sur la jurisprudence récente de la Cour de justice en matière de libre prestation de services rendus dans d’autres États membres. CDE, 20, n 1-2, 3-14. Garrone, P. (1994). La discrimination indirecte en droit communautaire: vers une théorie générale. RTDE, 427. Geiger, R., Khan, D.-E., & Kotzur, M. (2015). European Union treaties. Munich: C. H. Beck. Gormley, L. (1985). Prohibiting restrictions on trade within the EEC. Amsterdam: Elsevier. Hatzopoulos, V. (1995). Case C-384/93, Alpine Investments BV v Minister van Financiën, Judgment of 10 May 1995. Common Market Law Review, 32, 1427–1445. Hatzopoulos, V. (1998). Exigences essentielles, impératives ou impérieuses: une théorie, des théories ou pas de théorie du tout? RTDE, 34, 191–236. Hatzopoulos, V. (2012). Regulating services in the European Union. Oxford: OUP. Hatzopoulos, V. (2013). The Court’s approach to services (2006-2012): From case law to case load? Common Market Law Review, 50, 459–502. Hinojosa Martínez, L. M. (1997). Reflexiones en torno al concepto de discriminación: los obstáculos fiscales a la libre circulación de personas en la CE. Revista de Derecho Comunitario Europeo, 2, 511–545. Hörnle, J. (2011). Online gambling in the European Union: A tug of war without a winner? Yearbook of European Law, 30, 255–297. Huglo, J.-G. (2000). Chroniques. Liberté d’établissement et libre prestation de services. RTDE, 36 (4), 735. Kapteyn, P. J. G., & van Themaat, P. V. (1998). Introduction to the law of the European communities (3rd ed.). London: Kluwer. Lenaerts, K. (1991). L’égalité de traitement en droit communautaire, un principe unique aux apparences multiples. CDE, 27, 3–41. Lenaerts, K., & van Nuffel, P. (2011). European Union law. London: Sweet & Maxwell. López Escudero, M. (1991). Los obstáculos técnicos al comercio en la Comunidad Económica Europea. Granada: Ed. Universidad de Granada. Marenco, G. (1991). The notion of restriction on the freedom of establishment and provision of services in the case-law of the court. Yearbook of European Law, 11, 11–150.

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Martin, D. (1998). “Discriminations”, “entraves” et “raisons impérieuses” dans le Traité CE: trois concepts en quête d’identité. CDE, 34, 561–637. Mathisen, G. (2010). Consistency and Coherence as conditions for justification of member states measures restricting free movement. Common Market Law Review, 47, 1021–1048. Pingel, I. (Ed.) (2010). De Rome à Lisbonne. Commentaire article par article des Traité UE et CE. Basle: Helbing Lichtenhahn. Schütze, R. (2015). European Union law. Cambridge: CUP. Segura Serrano, A. (2003). El interés general y el comercio de servicios. Madrid: Tecnos. Snell, J. (2002). Goods and services in EC law. Oxford: OUP. Snell, J. (2005). Economic aims as justification for restrictions on free movement. In A. Schrauwen (Ed.), Rule of reason: Re-thinking another classic of EC Legal Doctrine (pp. 37–56). Groningen: Europa Law Publishing. Snell, J. (2010). The notion of market access: A concept or a slogan? Common Market Law Review, 47, 437–472. Van den Bogaert, S., & Cuyvers, A. (2011). “Money for nothing”: The case law of the EU Court of Justice on the regulation of gambling. Common Market Law Review, 48, 1175–1213. Van Gerven, W. (1999). Constitutional aspects of the European Court’s case-law on Articles 30 and 36 EC as compared with the U.S. Dormant Commerce Clause. In M. Dony & A. de Walsche (Eds.), Mélanges en Hommage à Michel Waelbroeck (Vol. II, pp. 1629–1644). Bruylant: Brussels. Weatherill, S. (1994). Beyond preemption? Shared competence and constitutional change in the European community. In D. O’Keeffe & P. M. Twomey (Eds.), Legal issues of the Maastricht treaty. London: Chancery Law Publishing. Weiss, F., & Kaupa, C. (Eds.). (2014). European Union internal market law. Cambridge: CUP.

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Article 57 [Notion of Services] (ex-Article 50 TEC) Services shall be considered to be “services” within the meaning of the Treaties where they are normally provided for remuneration,3-6 in so far as they are not governed by the provisions relating to freedom of movement for goods, capital and persons.10-12 “Services” shall in particular include: (a) (b) (c) (d)

activities of an industrial character; activities of a commercial character; activities of craftsmen; activities of the professions.1-2

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.7-9

Contents 1. Definition of Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3. Temporary Nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 4. Relation to Other Freedoms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 List of Cases References

1.

Definition of Services

The distinction between goods and services may be simple at first sight.1 However, from a legal point of view, Article 57.1 TFEU defines services as comprising two elements. First, services must be provided for remuneration. Second, they must be considered to fall within the scope of the freedom to provide services as long as they do not fall within the ambit of another internal market freedom. According to this, services have been traditionally considered as subordinate or secondary. This residual nature of services may be explained if one considers that tertiary activities did not exhibit the same role in MS’ economies in the 1950s as is the case today,2 1 2

Chalmers et al. (2014), p. 802. Hatzopoulos (2012), p. 23.

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and indeed since the late 1980s. As attested by the European Commission, services nowadays account for 70 per cent of GDP and employment within the EU, which in turn shows that modern economies are driven by services.3 Article 57.2 TFEU explicitly includes within the remit of services covered by this provision the activities of an industrial or commercial character, those of craftsmen, and activities of the professions. This rather old assortment of tertiary activities is nowadays superseded by a large collection of service activities, as the increasing CJEU case law shows. Examples range from financial4 or legal5 services to tourism,6 education,7 or sporting activities.8 Indeed, some service activities have attracted much attention and debate within this recent case law due to the moral, social, or economic stakes involved, such as in the case of gambling,9 posted workers,10 or health care,11 respectively.12

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Chapter 3 Services

Remuneration

According to Article 57 TFEU, “services shall be considered to be ‘services’ within the meaning of the Treaties where they are normally provided for remuneration”. The CJEU has held a particularly broad and flexible interpretation of the term “remuneration”.13 Indeed, in Humbel, the Court started with a more formalistic approach and stated that “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”.14 However, the Court has later interpreted “consideration” in a wider way and, as indicated in Jundt, has affirmed that “the decisive factor which brings an activity within the ambit of the Treaty provisions on the freedom to provide services is its economic character, that 3 Commission Communication, The State of the Internal Market for Services, COM(2002) 441, p. 5. 4 Case C-384/93, Alpine Investments (ECJ 10 May 1995) para 29–31. 5 Case 33/74, Van Binsbergen (ECJ 3 December 1974) para 10. 6 Case C-154/89, Commission v France (ECJ 26 February 1991) para 11; Case C-180/89, Commission v Italy (ECJ 26 February 1991) para 10; Case C-198/89, Commission v Greece (ECJ 26 February 1991) para 11. 7 Case C-109/92, Wirth (ECJ 7 December 1993) para 17; Case C-56/09, Zanotti (ECJ 10 May 2010) para 32. 8 Joined Cases C-51/96 and C-191/97, Deliège (ECJ 11 April 2000) para 47. 9 Case C-275/92, Schindler (ECJ 24 March 1994) para 37. 10 Case C-341/05, Laval (ECJ 18 December 2007) para 98. 11 Case C-159/90, Society for the Protection of Unborn Children in Ireland (ECJ 4 October 1991) para 18-21; Case C-157/99, Smits and Peerbooms (ECJ 12 July 2001) para 53. 12 Hatzopoulos (2012), p. 179. 13 Schütze (2015), pp. 636–637; Hatzopoulos (2012), p. 23. 14 Case 263/86, Humbel (ECJ 27 September 1988) para 17; also Joined Cases C-372/09 and C-373/ 09 Peñarroja Fa (ECJ 17 March 2011) para 37.

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is to say, the activity must not be provided for nothing”. In this case, where a German lawyer teaching a course at the University of Strasbourg received a very small amount of money for it (around 500 EUR), the Court also held that “there is no need in that regard for the person providing the service to be seeking to make a profit”.15 This view conforms to the alleged intent of the Treaty to only exclude gratis services from the scope of this freedom.16 Moreover, it is understood that the requirement regarding remuneration has been used by the Court in order to exclude from the scope of the free provision of services those that do not display a direct economic link between the provider and the recipient.17 This happened in SPUC,18 where the handbooks prepared by a student association in Ireland with information about abortion services available in the UK was not distributed on behalf of an economic operator from another MS. However, with regard to the morally contentious side of these services, although “[i]t is not for the Court to substitute its assessment for that of the legislature in those Member States where the activities in question are practised legally”, the CJEU also added “that termination of pregnancy, as lawfully practised in several Member States, is a medical activity which is normally provided for remuneration and may be carried out as part of a professional activity”.19 Similarly, in Jany, the Court also regarded prostitution services as a commercial activity.20 The requirement on remuneration is particularly challenging regarding welfare state services.21 As there is no payment between the provider and the recipient at the moment of supply, the initial intuition would be that those services are out of the Treaty remit. In the case of education, the payment of a fee is not considered as remuneration if the service is basically sustained by the public purse, as the Court held in Humbel.22 The Court equally stated in Schwarz that “by establishing and maintaining such a system of public education, financed as a general rule by the public budget and not by pupils or their parents, the State did not intend to involve itself in remunerated activities, but was carrying out its task in the social, cultural and educational fields towards its population”.23 Conversely, in Wirth, the Court held that “whilst most establishments of higher education are financed in this way, some are nevertheless financed essentially out of private funds, in particular by students or their parents, and which seek to make an economic profit. When courses

15

Case C-281/06, Jundt (ECJ 18 December 2007) para 32–33. Barnard (2016), p. 296. 17 Barnard (2016), p. 296. 18 Case C-159/90, Society for the Protection of Unborn Children in Ireland (ECJ 4 October 1991) para 26. 19 Case C-159/90, Society for the Protection of Unborn Children in Ireland (ECJ 4 October 1991) para 20 and 18. 20 Case 268/99, Jany (ECJ 20 November 2001) para 48. 21 Barnard (2016), p. 301. 22 Case 263/86, Humbel (ECJ 27 September 1988) para 18–19. 23 Case C-76/05, Schwarz (ECJ 11 September 2007) para 39. 16

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are given in such establishments, they become services within the meaning of Article [56].”24 However, the distinction between publicly and privately financed services is not an easy one, and the Court itself has shown more restraint in order to apply the reasoning used in Humbel to the field of health services.25 In GeraetsSmits and Peerbooms the Court held that hospital services received by patients without having to pay for them may display a “special nature”, which in turn “does not remove them from the ambit of the fundamental principle of freedom of movement”.26 Therefore, the payments made by the health insurance funds to the hospitals were “consideration for the hospital services and unquestionably represent remuneration for the hospital which receives them and which is engaged in an activity of an economic character”.27 In other similar cases, the Court has not even considered the issue of remuneration.28 There are other challenging cases regarding remuneration, as initially expressed in Humbel, such as those where the service is not paid for by those for whom it is performed. In Bond van Adverteerders, the Court decided that the remuneration does not have to come from the recipient of the services, as long as the services are ultimately paid by someone.29 In Deliège, the Court held that “sporting activities and, in particular, a high-ranking athlete’s participation in an international competition” may be considered as provision of services for remuneration, even if the payment is made by the sponsors instead of the tournament’s organisers.30 Equally challenging are those cases where remuneration takes place well in advance as the service is to be provided over 30 years later in the form of an old-age pension, like in Danner and Skandia,31 which in turn has prompted criticism as this extremely flexible concept of remuneration may lead to legal uncertainty.32

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Temporary Nature

Article 57.3 TFEU states that the free provision of services may be pursued temporarily in the MS where the service is provided. This way, duration seems to be the criterion used by the Treaty in order to set the distinction between freedom of establishment, where the person is meant to settle in the MS of 24

Case C-109/92, Wirth (ECJ 7 December 1993) para 17. Craig and De Búrca (2015), p. 826. 26 Case C-157/99, Smits and Peerbooms (ECJ 12 July 2001) para 54. 27 Case C-157/99, Smits and Peerbooms (ECJ 12 July 2001) para 58. 28 Case C- 385/99, Müller-Fauré and van Riet (13 May 2003); Case C-372/04, Watts (ECJ 16 May 2006). 29 Case 352/85, Bond van Adverteerders and Others (ECJ 26 April 1988) para 16. 30 Joined Cases C-51/96 and C-191/97, Deliège (ECJ 11 April 2000) para 56–57. 31 Case C-136/00, Danner (ECJ 3 October 2002); Case C-422/01, Skandia (ECJ 26 June 2003). 32 Hatzopoulos and Do (2001), p. 947. 25

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destination on a permanent basis, and freedom to provide services, where the person moves to another MS on a temporary basis with no intention to stay.33 Initially, the Court had stated that where the provider moving to other MS “maintains a permanent presence in the Member State in question”, then the situation falls within the scope of the right of establishment.34 However, in Gebhard, the CJEU held that the existence of a permanent infrastructure was not the decisive factor as the provider may “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”. Nevertheless, an MS may not oblige a service provider to have premises in the host State as this requirement would amount to the very negation of this freedom, as stated in Commission v Italy.35 In order to ascertain the temporary element, account has to be taken “not only of the duration of the provision of the service, but also of its regularity, periodicity or continuity”, as the Court asserted in Gebhard.36 However, some cases are difficult to decide because “[n]o provision of the Treaty affords a means of determining, in an abstract manner, the duration or frequency beyond which the supply of a service or of a certain type of service in another Member State can no longer be regarded as the provision of services within the meaning of the Treaty”.37 Indeed, in Schnitzer, the construction of a building extended over a period of several years, which in turn did not automatically preclude the applicability of the freedom to provide services, according to the Court.38 Therefore, it is argued that according to the latest case law, the rules on services will prevail over establishment unless three elements are met cumulatively: “the service providers should be established in the host State for a long and indeterminate period (factual element), they should have the intention of becoming settled there (intentional element) and they should try to get to the customers of the host State (activity element)”.39 Still, “an activity carried out on a permanent basis, or at least without a foreseeable limit to its duration, does not fall within the [TFEU] provisions concerning the provision of services”, as the Court has stated in Trojani.40 This case law has been criticised as “hardly satisfactory” as

33

Barnard (2016), p. 302. Case C-205/84, Commission v Germany (“Insurance”) (ECJ 4 December 1986) para 21. 35 Case C-134/05 Commission v Italy (“Extra-judicial Debt Recovery”) (ECJ 18 July 2007) para 43; Case C-404/05 Commission v Germany (“Inspection of Organic Production”) (ECJ 29 November 2007) para 34. 36 Case C-55/94, Gebhard (ECJ 30 November 1995) para 27. 37 Case C-215/01 Schnitzer (ECJ 11 December 2003) para 31; Case C-475/12, UPC DTH (ECJ 30 April 2014) para 74. 38 Case C-215/01 Schnitzer (ECJ 11 December 2003) para 30. 39 Hatzopoulos (2013), pp. 464–465. 40 Case C-456/02, Trojani (ECJ 7 September 2004) para 28. 34

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it “seems to suggest that permanent service provision in a Member State without an established professional base comprises neither establishment nor the provision of services”.41 All in all, the right of establishment is applicable where the services are provided on a regular and continuous basis, while the freedom to provide services is applicable where the services are provided occasionally or on an irregular basis, without prejudice to the temporal criterion.42 Still, this only works as a rule of thumb because, as it was seen above, the case law is pointing towards a wider definition of services, which in turn sets aside the temporal criterion.43 Moreover, there are services that are always subjected to the freedom to provide services’ legal regime no matter whether they are provided on a regular basis, and regardless of the temporal criterion, like in the case of television broadcasting, transport, or telecommunications.44

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Relation to Other Freedoms

Article 57.1 TFEU has always been interpreted in the sense that it provides for the residual nature of the freedom to provide services as regards the other freedoms, i.e. goods, capital, and persons, because only activities not falling under these other freedoms may be considered as “services”.45 For instance, as stated above, Article 56 TFEU is applicable as far as the right of establishment (Article 49 TFEU) is not applicable. Indeed, if the service provider operates on a regular basis and carries out its activities within an indefinite time frame, then this economic operator is considered integrated within the economy of the host MS and the right of establishment applies. Inversely, occasional services or services rendered within a given temporal frame would fall within the freedom to provide services and would call for a different legal regime, where the provider is subjected to the home MS rule. However, this reading of Article 57 TFEU and the residual nature of the freedom to provide services should be understood by taking into account that services were mostly overlooked by economic theory at the time when the treaties were drafted. Indeed, as economic reality has nowadays modified the understanding of service activities, the Court has also adopted a modern interpretation of the freedom to provide services’ legal role within the internal market.46 It is stated now that Article 57 TFEU does not set any order of priority between the free provision of services and the other fundamental freedoms, so that “[t]he notion of ‘services’ covers services which are not governed by other freedoms, in order to ensure that all 41

Wyatt, in Dashwood et al. (2011), p. 557. Weiss and Kaupa (2014), p. 251. 43 Schütze (2015), p. 639. 44 Hatzopoulos and Do (2006), p. 944. 45 Lenaerts and Van Nuffel (2011), p. 272. 46 Hatzopoulos (2012), p. 23. 42

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economic activity falls within the scope of the fundamental freedoms”.47 In other words, the Court considers the freedom to provide services as a catch-all category.48 Therefore, where a national measure relates to the freedom to provide services and another freedom at the same time, “it is necessary to consider to what extent the exercise of those fundamental liberties is affected and whether, in the circumstances of the main proceedings, one of those prevails over the other”.49 This means that the Court is using the “centre of gravity” approach in order to determine which freedom applies in a given situation,50 without regard to the alleged priority provided in Article 57.1 TFEU. An analysis of the cases where the applicability of the freedom to provide services, together with other fundamental freedoms, was at stake shows that the Court now prefers the argument of the economic rationale behind the activities over the temporal criterion in order to apply the services freedom alone or in conjunction with other freedoms.51 Therefore, the new case law has somehow turn the Treaty text on its head as the old priority relationship between establishment and services is now clearly favouring the rules on services over those on establishment, which means that the wide definition of services explicitly excludes only situations of primary establishment from the scope of Article 57 TFEU.52

List of Cases ECJ 03.12.1974, 33/74, Van Binsbergen, ECLI:EU:C:1974:131 [cit. in para 2] ECJ 04.12.1986, C-205/84, Commission v Germany (“Insurance”), ECLI:EU: C:1986:463 [cit. in para 7] ECJ 26.04.1988, 352/85, Bond van Adverteerders and Others, ECLI:EU: C:1988:196 [cit. in para 6] ECJ 27.09.1988, 263/86, Humbel, ECLI:EU:C:1988:451 [cit. in para 3, 5] ECJ 26.02.1991, C-154/89, Commission v France, ECLI:EU:C:1991:76 [cit. in para 2] ECJ 26.02.1991, C-180/89, Commission v Italy, ECLI:EU:C:1991:78 [cit. in para 2] ECJ 26.02.1991, C-198/89, Commission v Greece, ECLI:EU:C:1991:79 [cit. in para 2] ECJ 04.10.1991, C-159/90, Society for the Protection of Unborn Children in Ireland, ECLI:EU:C:1991:378 [cit. in para 2, 4] 47

Case C-452/04, Fidium Finanz (ECJ 3 October 2006) para 32; Case C-602/10, SC Volksbank România (ECJ 12 July 2012), para 70–71. 48 Hatzopoulos (2013), p. 465. 49 Case C-452/04, Fidium Finanz (ECJ 3 October 2006) para 32 and 34. 50 Schütze (2015), p. 638. 51 Hatzopoulos (2012), pp. 23–29. 52 Schütze (2015), p. 639; Hatzopoulos (2013), p. 464.

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ECJ 07.12.1993, C-109/92, Wirth, ECLI:EU:C:1993:916 [cit. in para 2, 5] ECJ 24.03.1994, C-275/92, Schindler, ECLI:EU:C:1994:119 [cit. in para 2] ECJ 10.05.1995, C-384/93, Alpine Investments, ECLI:EU:C:1995:126 [cit. in para 2] ECJ 30.11.1995, C-55/94, Gebhard, ECLI:EU:C:1995:411 [cit. in para 8] ECJ 11.04.2000, C-51/96 and C-191/97, Deliège, ECLI:EU:C:2000:199 [cit. in para 2, 6] ECJ 12.07.2001, C-157/99, Smits and Peerbooms, ECLI:EU:C:2001:404 [cit. in para 2, 5] ECJ 20.11.2001, C-268/99, Jany, ECLI:EU:C:2001:616 [cit. in para 4] ECJ 03.10.2002, C-136/00, Danner, ECLI:EU:C:2002:558 [cit. in para 6] ECJ 13.05.2003, C- 385/99, Müller-Fauré and van Riet, ECLI:EU:C:2003:270 [cit. in para 5] ECJ 26.06.2003, C-422/01, Skandia, ECLI:EU:C:2003:380 [cit. in para 6] ECJ 11.12.2003, C-215/01, Schnitzer, ECLI:EU:C:2003:662 [cit. in para 8] ECJ 07.09.2004, C-456/02, Trojani, ECLI:EU:C:2004:488 [cit. in para 8] ECJ 16.05.2006, C-372/04, Watts, ECLI:EU:C:2006:325 [cit. in para 5] ECJ 03.10.2006, C-452/04, Fidium Finanz, ECLI:EU:C:2006:631 [cit. in para 11, 12] ECJ 18.07.2007, C-134/05, Commission v Italy (“Extra-judicial Debt Recovery”), ECLI:EU:C:2007:435 [cit. in para 7] ECJ 11.09.2007, C-76/05, Schwarz, ECLI:EU:C:2007:492 [cit. in para 5] ECJ 29.11.2007, C-404/05 Commission v Germany (“Inspection of Organic Production”), ECLI:EU:C:2007:723 [cit. in para 7] ECJ 18.12.2007, C-341/05, Laval, ECLI:EU:C:2007:809 [cit. in para 2] ECJ 18.12.2007, C-281/06, Jundt, ECLI:EU:C:2007:816 [cit. in para 3] ECJ 10.05.2010, C-56/09, Zanotti, ECLI:EU:C:2010:288 [cit. in para 2] ECJ 17.03.2011, C-372/09 and C-373/09, Peñarroja Fa, ECLI:EU:C:2011:156 [cit. in para 3] ECJ 12.07.2012, C-602/10, SC Volksbank România, ECLI:EU:C:2012:443 [cit. in para 11] ECJ 30.04.2014, C-475/12, UPC DTH, ECLI:EU:C:2014:285 [cit. in para 8]

References Barnard, C. (2016). The substantive law of the EU. The four freedoms. Oxford: OUP. Chalmers, D., Davies, G., & Monti, G. (2014). European Union law. Text and materials. CUP: Cambridge. Craig, P., & De Búrca, G. (2015). EU law. Texts, cases, and materials. Oxford: OUP. Dashwood, A. A., Dougan, M., Rodger, B., Spaventa, E., & Wyatt, D. (2011). Wyatt and Dashwood’s European Union law. Oxford: Hart. Hatzopoulos, V. (2012). Regulating services in the European Union. Oxford: OUP. Hatzopoulos, V. (2013). The court’s approach to services (2006-2012): From case law to case load? Common Market Law Review, 50, 459–502.

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Hatzopoulos, V., & Do, T. U. (2006). The case law of the ECJ concerning the free provision of services: 2000-2006. Common Market Law Review, 43, 923–991. Lenaerts, K., & van Nuffel, P. (2011). European Union law. London: Sweet & Maxwell. Schütze, R. (2015). European Union law. Cambridge: CUP. Weiss, F., & Kaupa, C. (Eds.). (2014). European Union internal market law. Cambridge: CUP.

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Article 58 [Services in Transport, Banking, Insurances] (ex-Article 51 TEC) 1. Freedom to provide services in the field of transport shall be governed by the provisions of the Title relating to transport.3–6 2. The liberalisation of banking and insurance services connected with movements of capital shall be effected in step with the liberalisation of movement of capital.7–9 Contents 1. General Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Transport Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3. Banking and Insurance Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 List of Cases References

1.

General Overview

The Treaty of Lisbon has not introduced any changes whatsoever to this provision, and therefore the current Article 58 TFEU sets out the same regulation as ex-Article 51 TEC did previously. This provision contains two exclusion clauses applicable, firstly, to the freedom to provide services in the field of transport services and, secondly, to banking and insurance services. The distinctive features of these two sectors of the service economy have prompted a special regulation in the form of a common EU policy set up in Title VI as regards transport. Similarly, the liberalisation of banking and insurance services is subject to other accompanying policies.

2.

Hatzopoulos (2012), p. 226.

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Transport Services

Article 58.1 TFEU refers to Title VI, Part III, TFEU on transport. Therefore, Article 58.1 TFEU introduces a clear “hierarchical relationship” between the general rules on services and the specific rules on transport.1 Indeed, transport is one of the fields where there is shared competence between the Union and the MS, according to Article 4.2 (g) TFEU. However, Article 90 TFEU provides for a common transport policy, subjecting the Treaty objectives to the regulation adopted in pursuance of this Title VI. 1

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The transport field is of paramount importance for MS’ economies. Firstly, it is a relevant sector itself within national economies and also plays a key role in the wealth-creating process. Secondly, there are several important objectives to be protected within this sector at the transnational level, like ensuring a level playing field as regards competition, or environmental, and social issues.2 Therefore, the common transport policy seeks to set up the “common rules applicable to international transport” among MS, including “the conditions under which non-resident carriers may operate transport services within a Member State”, according to the current Article 91.1 (a) and (b) TFEU. The harmonisation achieved through the common transport policy necessarily affects the legal regime on the freedom to provide services, as provided by Article 58.1. This was what was stated by the Court very early on the case law. In Parliament v Council,3 the CJEU held that before the expiry of the transitional period, the Council was required to extend freedom to provide services to the transport sector, according to the rules provided in the current Article 91.1 (a) and (b) TFEU. In other words, the purpose of harmonised regulation is to define the conditions for applying the principle of the freedom to provide services in the transport sector.4 Conversely, Article 58.1 TFEU prevents Articles 56 and 57 TFEU from having a direct effect in the field of transport.5 However, the existence of a common transport policy does not imply that the freedom to provide services is not applicable within this sector. On the contrary, the free provision of services provided by the Treaty also extends to transport, although this applicability is subject to the common rules adopted pursuant to the current Article 91.1 TFEU. According to the Court, even if the current Article 56 TFEU “is not applicable as such to transport services, since those services are governed by the provisions of the title relating to transport, the principle of the freedom to provide services is none the less applicable to that sector”.6 Nevertheless, those transport activities that are excluded from the freedom to provide services by way of Article 58.1 TFEU are subject to EU law as long as there are common rules adopted by the EU legislature. If there are no such common rules, the affected services may be regulated by MS’ domestic rules. Indeed, in Asociación Profesional Elite Taxi,7 the Court held that MS are free to decide how to treat Uber8 as the freedom to provide services does not apply to the activities carried out by platforms such as Uber due to the provision set out in Article 58.1 TFEU, and in the absence of common rules adopted on the basis of Article 91.1 TFEU. Moreover, it is to be

2

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noted that there is no similar derogation to the internal market legal regime as regards the right of establishment. This difference may be interpreted in the sense that it is for MS to set up the conditions to which natural and legal persons are subject in order to exercise this transport activity, as long as the freedom of establishment is granted and to the extent that there are no harmonised rules.9

3.

Banking and Insurance Services

Article 58.2 TFEU makes the liberalisation of banking and insurance services connected with movement of capitals subject to the pace at which the latter freedom of movement is completed. The rationale behind Article 58.2 is the fact that liberalisation of capital movements has been delayed within the internal market as regards the rest of the other freedoms. Taking into account this delay, Article 58.2 TFEU provides for a liberalisation of banking and insurance services, which is parallel to the liberalisation of capital movements. According to Article 58.2 TFEU, the Court held that “the only case in which the Treaty provisions on services do not apply to banking services is where there is a restriction on the free movement of capital relating to such transactions which is compatible with [EU] law”.10 As the free movement of capital did not have direct effect at the end of the transitional period,11 the Court had to analyse whether there were common rules through the adoption of directives abolishing restrictions on the free movement of capital.12 Therefore, national restrictions would be permitted to the extent that liberalising directives had not been adopted.13 As from the entry into force of Directive 88/36114 in 1990, the freedom of capital movement has direct effect,15 as it was subsequently set out by Article 63 TFEU, as modified by the Treaty of Maastricht. Accordingly, already in Parodi the Court paid lip service to the current Article 58.2 TFEU. Once capital movements are found to be liberalised, the freedom to provide services is applied in the banking and insurance sectors with no hesitation on the Court’s side.16 Indeed, excepting

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Truchot, in Pingel (2010), Article 51 CE para 2. Case C-222/95, Parodi (ECJ 9 July 1997) para 10. 11 Case 203/80, Casati (ECJ 11 November 1981) para 13. 12 Case C-222/95, Parodi (ECJ 9 July 1997) para 11–16. 13 Case 267/86, Van Eycke (ECJ 21 September 1988) para 22–24, where the Court stated that a national legislation which restricted a tax exemption solely to savings deposits denominated in national currency and held at financial institutions whose registered office was in the MS concerned was not contrary to the freedom to provide services as, according to current Article 58.2 TFEU, those capital movements had still not been liberalized at that time. 14 Council Directive 88/361/EEC for the implementation of Article 67 of the Treaty, O.J. L 178/5 (1988). 15 Joined Cases C-358/93 and C-416/93, Bordessa and others (ECJ 23 February 1995) para. 33. 16 Case C-484/93, Svensson and Gustavsson (ECJ 14 November 1995) para. 11. 10

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those factual situations that may require applying the law extant before 1990, nowadays it will be difficult to find any legal consequence to the current Article 58.2 TFEU.17

List of Cases ECJ 11.11.1981, 203/80, Casati, ECLI:EU:C:1981:261 [cit. in para 8] ECJ 22.05.1985, 13/83, Parliament v Council (“Transport Policy”), ECLI:EU: C:1985:220 [cit. in para 5] ECJ 21.09.1988, 267/86, Van Eycke, ECLI:EU:C:1988:427 [cit. in para 8] ECJ 23.02.1995, C-358/93 and C-416/93, Bordessa and Others, ECLI:EU: C:1995:54 [cit. in para 9] ECJ 14.11.1995, C-484/93, Svensson and Gustavsson, ECLI:EU:C:1995:379 [cit. in para 9] ECJ 09.07.1997, C-222/95, Parodi, ECLI:EU:C:1997:345 [cit. in para 8] ECJ 18.01.2001, C-361/98, Italy v Commission (“Air Traffic”), ECLI:EU: C:2001:29 [cit. in para 5] ECJ 06.02.2003, C-92/01, Stylianakis, ECLI:EU:C:2003:72 [cit. in para 6] ECJ 20.12.2017, C-434/15, Asociación Profesional Elite Taxi (“Uber”), ECLI:EU: C:2017:981 [cit. in para 6]

References Finck, M. (2018). Distinguishing internet platforms from transport services: Elite Taxi v. Uber Spain. Common Market Law Review, 55, 1619–1640. Hatzopoulos, V. (2012). Regulating services in the European Union. Oxford: Oxford University Press. Pingel, I. (Ed.). (2010). De Rome à Lisbonne. Commentaire article par article des Traité UE et CE. Basle: Helbing Lichtenhahn.

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Truchot, in Pingel (2010), Article 51 CE para 3.

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Article 59 [Liberalisation] (ex-Article 52 TEC) 1. In order to achieve the liberalisation of a specific service,1–2 the European Parliament and the Council, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, shall issue directives.3–6 2. As regards the directives referred to in paragraph 1, priority shall as a general rule be given to those services which directly affect production costs or the liberalisation of which helps to promote trade in goods.7–8

Contents 1. General Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Directives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 List of Cases References

1.

General Overview

Article 59 TFEU provides for the issuing of directives with the aim of liberalising specific services. In this regard, Article 59 TFEU plays the same role as that played by Article 50 TFEU in the field of establishment (➔ Article 50 TFEU para 1). Indeed, Article 59 TFEU empowers the EU legislature to adopt sectoral directives in order to accomplish the freedom to provide services within the internal market. Moreover, Article 59 TFEU serves as a lead up to Article 53 TFEU, which is made applicable to the field of services through the referral comprised in Article 62 TFEU. Therefore, in order to make the pursuing of activities by self-employed persons easier, mutual recognition directives, as well as coordination directives, may be adopted according to Article 53 TFEU also in the field of services. In the Treaty’s logic, those directives are to be adopted in addition to the liberalisation effort already undertaken by the sectoral directives provided for in Article 59 TFEU.1

2.

Truchot, in Pingel (2010), Article 52 CE para 1.

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Directives

Similarly to what happens with Article 50 TFEU regarding the right of establishment, the original version of Article 59 TFEU, i.e. Article 63 EEC, provided for the abolition of restrictions on freedom to provide services within the Community in 1

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two stages.2 In the first stage, the Council was to draw up a “General Programme” for the abolition of existing restrictions in the field of services. In the second stage, the Council was to issue directives in order to implement this general programme. The “General Programme” was indeed adopted on 18 December 1961,3 and several directives were subsequently issued.4 Most of them were known as the “transitional Directives” and have been criticised because of their limited effectiveness, having reached the Court on very few occasions.5 In the words of the Court, “[w]ith a view to the progressive abolition during the transitional period of the restrictions referred to in Article 59 [current Article 56 TFEU], Article 63 [current Article 59 TFEU] has provided for the drawing up of a ‘general programme’—laid down by Council Decision of 18 December 1961 (1962, p. 32)—to be implemented by a series of directives. Within the scheme of the chapter relating to the provision of services, these directives are intended to accomplish different functions, the first being to abolish, during the transitional period, restrictions on freedom to provide services, the second being to introduce into the law of Member States a set of provisions intended to facilitate the effective 2

Truchot, in Pingel (2010), Article 52 CE para 2. General Programme for the abolition of restrictions on freedom to provide services O.J. 2/32 (1962), English special edition, Series II, Volume IX, p. 3 (1974). 4 See Council 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 O.J. L 172/14 (1973). See also the so-called “transitional Directives”: Council Directive 64/222/EEC laying down detailed provisions concerning transitional measures in respect of activities in wholesale trade and activities of intermediaries in commerce, industry and small craft industries O.J. L 56/857 (1964), English special edition: Series I Volume 1963– 1964, p. 120; Council Directive 64/427/EEC laying down detailed provisions concerning transitional measures in respect of activities of self-employed persons in manufacturing and processing industries falling within ISIC Major Groups 23-40 (Industry and small craft industries) O.J. 117/ 1863 (1964), English special edition: Series I Volume 1963–1964 p. 148; Council Directive 68/ 364/EEC laying down detailed provisions concerning transitional measures in respect of activities of self-employed persons in retail trade (ISIC ex Group 612), O.J. L 260/6 (1968), English special edition: Series I Volume 1968(II) p. 501; Council Directive 68/366/EEC laying down detailed provisions concerning transitional measures in respect of activities of self-employed persons in the food manufacturing and beverage industries (ISIC Major Groups 20 and 21), O.J. L 260/12 (1968), English special edition: Series I Volume 1968(II) p. 509; Council Directive 70/523/EEC laying down detailed provisions concerning transitional measures in respect of activities of selfemployed persons in the wholesale coal trade and in respect of activities of intermediaries in the coal trade (ISIC ex Group 6112), O.J. L 267/18 (1970), English special edition: Series I Volume 1970(III) p. 835; Council Directive 74/556/EEC laying down detailed provisions concerning transitional measures relating to activities, trade in and distribution of toxic products and activities entailing the professional use of such products including activities of intermediaries, O.J. L 307/1 (1974); Council Directive 75/368/EEC on measures to facilitate the effective exercise of freedom of establishment and freedom to provide services in respect of various activities (ex ISIC Division 01 to 85) and, in particular, transitional measures in respect of those activities, O.J. L 167/22 (1975); Council Directive 75/369/EEC on measures to facilitate the effective exercise of freedom of establishment and freedom to provide services in respect of itinerant activities and, in particular, transitional measures in respect of those activities, O.J. L 167/29 (1975). 5 Hatzopoulos (2012), p. 239. 3

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exercise of this freedom, in particular by the mutual recognition of professional qualifications and the coordination of laws with regard to the pursuit of activities as self-employed persons.”6 Once the Court stated in the Van Binsbergen case in 1974 that the freedom to provide services set out in the Treaty had direct effect after the end of the transitional period,7 this possibility of issuing directives lost part of its importance and the directives already adopted produced since then a merely declaratory effect as far as they concerned the abolition of restrictions. Moreover, the transitional directives were superseded and are no longer in force.8 Indeed, the remaining obstacles created by the existence of divergent national regulations will require an answer in the form of legal harmonisation based on Article 62 TFEU.9 Ex-Article 52 TEC (current Article 59 TFEU) was modified by the Treaty of Amsterdam in order to eliminate reference to the general programme, as also happened with ex-Article 44 TEC (current Article 50 TFEU) in the field of establishment. As a result of the modification brought about by the Treaty of Lisbon, the current Article 59 TFEU has also been changed to introduce the ordinary legislative procedure. However, paragraph 2 of Article 59 maintains the reference to the priority to be given to those strategic services that directly affect production costs or whose liberalisation helps to promote trade in goods. However, this provision mostly seems to be a “historical reminiscence”10 as the importance of trade in services has by far surpassed that of trade in goods in modern economies. Nevertheless, the sectoral directives envisioned by Article 59 TFEU still have some interest as far as they concern the facilitation of the effective exercise of this freedom to provide services.11 Although there are not many directives of this kind, the EU legislature still makes recourse to the current Article 59 TFEU, even if only partially, in order to adopt directives that seek to facilitate the exercise of this freedom.12

6

Case 33/74, Van Binsbergen (ECJ 3 December 1974) para 20–21. Case 33/74, Van Binsbergen (ECJ 3 December 1974) para 27. 8 Superseded by Parliament/Council Directive 1999/42/EC establishing a mechanism for the recognition of qualifications in respect of the professional activities covered by the Directives on liberalisation and transitional measures and supplementing the general systems for the recognition of qualifications, O.J. L 201/77 (1999); which in turn has been repealed by Parliament/Council Directive 2005/36/EC on the recognition of professional qualifications, O.J. L 255/ 22 (2005). 9 Kotzur, in Geiger et al. (2015), Article 59 TFEU, para 1. 10 Kotzur, in Geiger et al. (2015), Article 59 TFEU, para 1. 11 Truchot, in Pingel (2010), Article 52 CE para 3. 12 Parliament/Council 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, O.J. L 158/77 (2004). 7

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List of Cases ECJ 03.12.1974, 33/74, Van Binsbergen, ECLI:EU:C:1974:131 [cit. in para 4, 5]

References Geiger, R., Khan, D.-E., & Kotzur, M. (Eds.). (2015). European Union treaties. Munich: C.H. Beck-Hart. Hatzopoulos, V. (2012). Regulating services in the European Union. Oxford: Oxford University Press. Pingel, I. (Ed.). (2010). De Rome a` Lisbonne. Commentaire article par article des Traite´ UE et CE. Basle: Helbing Lichtenhahn.

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Article 60 [Further Liberalisation] (ex-Article 53 TEC) The Member States shall endeavour to undertake the liberalisation of services beyond the extent required by the directives issued pursuant to Article 59(1), if their general economic situation and the situation of the economic sector concerned so permit.1 To this end, the Commission shall make recommendations to the Member States concerned.2 Article 60 TFEU has been slightly modified as regards ex-Article 53 TEC, thereby incorporating the changes already introduced by draft Article III-148 TCE. Instead of “[t]he Member States declare”, the current Article 60 states “[t]he Member States shall endeavour”. This modification seemingly translates to a more proactive approach on the part of the TFEU,1 which prompts MS to go further than required by the directives issued pursuant to Article 59.1 TFEU, although only to the extent that their general economic situation and the situation of the economic sector concerned so permit. However, it is also evident that, even after the change produced by the Treaty of Lisbon, Article 60 TFEU comprises a declaration of intent, which is devoid of any binding effect.2 However, the programmatic character of Article 60 TFEU has not promoted its effectiveness as it has not been used either before or after the end of the transitional period. To date, the Commission has not issued any recommendation in this regard, even though this power is expressly provided for in paragraph 2 of Article 60 TFEU.

References Geiger, R., Khan, D.-E., & Kotzur, M. (Eds.). (2015). European Union treaties. Munich: C.H. Beck-Hart. Pingel, I. (Ed.). (2010). De Rome à Lisbonne. Commentaire article par article des Traité UE et CE. Basle: Helbing Lichtenhahn.

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Kotzur, in Geiger et al. (2015), Article 60 AEUV, para 1. Truchot, in Pingel (2010), Article 53 CE para 1.

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Article 61 [Transitional Rules] (ex-Article 54 TEC) As long as restrictions on freedom to provide services have not been abolished, each Member State shall apply such restrictions without distinction on grounds of nationality or residence to all persons providing services within the meaning of the first paragraph of Article 56.1–4

Contents 1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2. Legal Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 List of Cases References

1.

Overview

Article 61 TFEU sets out a non-discrimination clause as regards providers of services within the EU, implying that existing restrictions on freedom to provide services may only apply without distinction on grounds of nationality or residence. However, this provision presents some difficulties regarding its legal interpretation.

2.

Legal Effect

The starting reference stating “[a]s long as restrictions on freedom to provide services have not been abolished” is troubling nowadays as it clearly shows its transitional character.1 Indeed, most of the restrictions to the freedom to provide services were to be abolished during the transitional period. But after the end of the transitional period, the Court declared the direct effect of the current Article 56 TFEU in the Van Binsbergen case.2 Therefore, since then, all subsisting restrictions to the freedom to provide services have been contrary to EU law and illegal per se. This may entail that Article 61 has become obsolete, legally speaking, after the end of the transitional period and “should have been deleted.”3

1

Truchot, in Pingel (2010), Article 54 CE para 1. Case 33/74, Van Binsbergen (ECJ 3 December 1974) para 27. 3 Kotzur, in Geiger et al. (2015), Article 61 TFEU para 2. 2

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Interpretation

A link has been made between current Article 61 TFEU and the provision stated in Title IV of the General Programme for the abolition of restrictions on freedom to provide services.4 This Title IV requires that subsisting restrictions are to be applied, “without distinction on grounds of nationality or residence”, to providers of services on the basis of the most-favoured-nation standard, including those practices and bilateral or multilateral agreements applied by the corresponding MS. The only logical interpretation of this latter provision is that, during the transitional period, MS could maintain their restrictions, pending their abolition, on the freedom to provide services (that is, measures that distinguished between their own nationals and nationals from other MS) but subject to the most-favoured-nation standard, i.e. extending to Community nationals the least restrictive treatment eventually applied to foreign residents. As the freedom to provide services has had direct effect since the end of the transitional period, as mentioned before, Article 61 TFEU is difficult to justify from a logical-systematic point of view. Today, Article 61 TFEU may be interpreted as only applicable to permitted restrictions,5 i.e. those based on the exercise of official authority or on grounds of public policy, public security, or public health. In this way, Article 61 TFEU would still comprise a form of most-favoured-nation clause. Alternatively, Article 61 TFEU may be interpreted as only encompassing the national treatment rule, which is already included in Articles 56 and 57 TFEU.6 If this were true, then Article 61 TFEU would be at least reiterative if not utterly useless.

List of Cases ECJ 03.12.1974, 33/74, Van Binsbergen, ECLI:EU:C:1974:131 [cit. in para 2]

References Geiger, R., Khan, D.-E., & Kotzur, M. (Eds.). (2015). European Union treaties. Munich: C.H. Beck-Hart. Pingel, I. (Ed.). (2010). De Rome à Lisbonne. Commentaire article par article des Traité UE et CE. Basle: Helbing Lichtenhahn.

4 General Programme for the abolition of restrictions on freedom to provide services O.J. 2/32 (1962), English special edition, Series II, Volume IX, p. 4 (1974) which stated, “Until restrictions have been abolished, each Member State shall apply them in such a way as to accord to all beneficiaries falling within Title I, without distinction on grounds of nationality or residence, the most favourable treatment accorded under existing practices and bilateral or multilateral agreements, other than those establishing regional unions between Belgium, Luxembourg and the Netherlands.” 5 Kotzur, in Geiger et al. (2015), Article 61 TFEU para 2. 6 Truchot, in Pingel (2010), Article 54 CE para 2.

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Article 62 [Application of the Rules on the Right of Establishment] (ex-Article 55 TEC) The provisions of Articles 51 to 54 shall apply to the matters covered by this Chapter.

Contents 1. 2.

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Official Authority Exclusion (Article 51 TFEU) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.1. The Concept of Official Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2. Conditions of Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3. Exceptions on Public Policy, Public Security, and Public Health (Article 52 TFEU) . . . 16 3.1. General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.2. Legal Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.3. Definition of Public Policy, Public Security, and Public Health . . . . . . . . . . . . . . . . . . . 22 3.4. Conditions to Invoke the Treaty Derogations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 3.5. The Non-discrimination Principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 4. The Services Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.2. Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 4.3. Negative Liberalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 4.3.1. Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 4.3.2. Provision of Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4.4. Administrative Simplification and Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 List of Cases References

1.

Overview

Article 62 TFEU makes a referral to Articles 51 to 54 TFEU, located within the chapter on the right of establishment. Therefore, there are no changes with respect to ex-Article 55 TEC, or even with respect to the Treaty of Rome, which already included this provision (Article 66 TEEC). The similar structure of these two fundamental freedoms, the right of establishment and the freedom to provide services, justifies the extension to the latter of the legal regime applicable to the former as the beneficiaries and the activities carried out, from a material point of view, are the same. As indicated before (➔ Article 56 TFEU para 26), the legal regime applicable to the freedom to provide services finds two types of exceptions expressly set out in primary law, which correspond to a balance between the EU requirements for free movement and the general interests of MS. These interests are identified in the exclusion of activities that are connected to the exercise of official authority, according to Article 51.1 TFEU (➔ para 3), and in the

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exceptions to the application of EU law in those cases justified for reasons of public policy, public security, or public health, according to Article 52.1 TFEU (➔ para 16), both applicable due to the referral made by Article 62 TFEU, giving rise to a regime of exclusion and exception, respectively. Article 53 TFEU deals with the harmonisation process by the EU legislature in order to make not only the right of establishment easier but also the freedom to provide services through the issuing of mutual recognition and coordination directives (➔ Article 53 TFEU para 4). The harmonisation effort based on Article 53 TFEU has affected many services areas, including financial services (banking and insurance) and network industries, i.e. from television broadcasting to electricity or gas distribution.1 However, Article 53 TFEU has also been the basis of several harmonisation directives for the mutual recognition of professional qualifications. Directive 2005/362 has consolidated the long series of sectoral and general directives on the matter. The Services Directive is also based on Article 53 TFEU, together with Article 62 TFEU, and will be dealt with below (➔ para 30). Finally, Article 54 TFEU serves not only to define the legal persons benefiting from these two freedoms but also to set up a common regime applicable to natural and legal persons alike (➔ Article 54 TFEU para 1).

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Official Authority Exclusion (Article 51 TFEU)

Article 51 TFEU sets out a clause related to the exercise of official authority that has certain parallelism with another one included in the scope of the free movement of workers in Article 45.4 TFEU (➔ Article 45 TFEU para 79) that refers to public service employment. While for some authors this clause does not have real practical consequences for the free provision of services,3 others maintain that it is not possible to make the comparison between official authority and public service since, although the reasoning behind the two provisions is analogous, they have a different scope of application, more limited in the case of Article 51 TFEU.4 However, it seems coherent to accept a certain parallelism between both ways of excluding the scope of application of these two fundamental freedoms since in both cases, the same rationale is comprised of excluding from EU liberalisation the exercise of the activities covered by official or State authority.5 Although the ECJ 1

Hatzopoulos (2012), p. 222 et seqq. Parliament/Council Directive 2005/36/EC on the recognition of professional qualifications, O.J. L 255/22 (2005). 3 Huglo (2000), p. 7, who considers that, to the extent that prerogatives of official authority are present, there would be no provision of services, which in our opinion implies a reduction in the concept of service provision that is not supported by any case law. 4 This is the position stated by AG Mayras in several cases, see Case 152/73, Sotgiu (Opinion of AG Mayras of 5 December 1973) para 170. See also Lenz (1989), pp. 106–107. 5 Barnard (2016), p. 473; Craig and De Bu´rca (2015), p. 799; Kapteyn and Verloren van Themaat (1998), p. 739. 2

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has not expressly affirmed this parallelism between the two provisions,6 the Commission has made explicit an early position in this regard.7

2.1. The Concept of Official Authority

Article 51 TFEU does not offer any definition of official authority. Nor does it make any reference to secondary law or domestic law in order to complete this legal gap. This imperfect formulation of the exclusion clause, obviously deliberate, seems to respond to the attempt to combine “two conflicting poles and in constant tension”: thus, the realisation of the freedom to provide services should not impede the legitimate exercise of sovereignty by MS in terms of their political and administrative organisation, but on the other hand, the full free movement of services is essential within an integrated common market.8 Although the European Parliament adopted a Resolution on this issue,9 it was of little help because of its ambiguity.10 In addition, the possibility provided in Article 51.2 TFEU in order to adopt secondary legislation has not been used. This provision allows the EU legislature to explicitly exclude certain activities from the scope of application of this chapter. Incidentally, Article 51.2 TFEU has been modified to include the ordinary legislative procedure according to the changes brought about by the Treaty of Lisbon. Given the lack of definition and development of the concept of public power, the question arises as to what is the relevant legal order in the interpretation of this notion. There is consensus in the sense that the comparative method that would consist of extracting a common national notion from the laws of the MS cannot be accepted since it is impossible in the face of the great differences existing among the several domestic laws.11 It is generally admitted that we are dealing with a concept that, starting from the national law where the activity is to be carried out (in the case of services, it would normally be the State where the recipient is located), it must be negatively limited and legally integrated by EU law,12 although there are authors who have granted a more substantial weight to national law.13 As a result, it is understood that an EU concept of official authority should be built up from domestic law, as the CJEU’s case law on Article 51 TFEU (as in the 6

Cf. Case C-283/99, Commission v Italy (ECJ 31 May 2001) para 25. Case 149/79, Commission v Belgium (ECJ 17 December 1980) p. 3890. 8 Martı´n y Pe´rez de Nanclares (1999), pp. 113–114. 9 European Parliament, Re´solution sur la de´finition des notions d’administration publique et d’autorite´ publique dans les E´tats membres et sur les conse´quences de cette de´finition pour l’application des articles 48 paragraphe 4 et 55 du traite´ instituant la CEE, O.J. C 10/4 (1972). 10 Milla´n Moro (1988), p. 181. 11 Lenz (1989), pp. 89–90; Handoll (1988), p. 226. 12 Barnard (2016), p. 470, who speaks of a “Union definition”. 13 Lyon-Caen (1984), p. 288. 7

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case of its parallel Article 45.4 TFEU) has repeatedly stated since Reyners.14 After this case and others in the field of workers, although academia does not agree on the nature of this concept,15 there is nevertheless a more or less common consensus on the scope and conditions of application of this Treaty exception.

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The case law of the Court has underlined in the first place the restrictive interpretation that should guide the application of this exception,16 which is simply a consequence of the effect utile principle that permeates the functional conception of the European construct. The parallelism alluded to before between the official authority clause and that relating to public service will serve to explain the legal analysis on the applicability issue. In the area of free movement of workers, in order to clarify the interpretation of Article 45.4 TFEU, a doctrine has been developed that distinguishes between the institutional approach and the functional approach, a doctrine that seems applicable to Article 51 TFEU and the notion of official authority. On the one hand, MS initially claimed an institutional or organic approach to the concept of public service, which was based on the public character consideration or otherwise of the institution in which the activity in question was to be carried out. That is to say, it must be understood that public service existed when the institution in which work or services were to be performed was of a public nature. On the other hand, EU institutions have endorsed a functional approach that takes into account the nature of the activities to be carried out by the beneficiary of free movement.17 The institutional approach was criticised because it would imply an unrestrained referral to the domestic laws of MS, which would thus unilaterally determine the scope of a fundamental freedom of the Treaty and make it impossible to maintain a minimum uniformity and unity in the application of EU law.18 In addition, an institutional approach is difficult to maintain within the framework of Article 51 TFEU because the activity to be included within the right of establishment and the freedom to 14

Case 2/74, Reyners (ECJ 21 June 1974) para 48. While Lenz (1989), pp. 91–92, considers that this way of integrating the concept of official authority and public service makes them “mixed” notions, Handoll (1988), p. 232, is sceptical about the latter interpretation. 16 Case 2/74, Reyners (ECJ 21 June 1974) para 43; Case 149/79, Commission v Belgium (ECJ 17 December 1980) para 19; Case C-348/96, Calfa (ECJ 19 January 1999) para 23; Case C-355/98, Commission v Belgium (ECJ 9 March 2000) para 28; Case C-157/09, Commission v Netherlands (ECJ 1 December 2011) para 56. 17 Case C-151/14, Commission v Latvia (ECJ 10 September 2015) para 73, where the Court states that “it is by reference to the nature of the relevant activities themselves, not by reference to [the] status [of notaries] as such, that it must be ascertained whether those activities fall within the exception in the first paragraph of Article 51 TFEU”. See also Druesne (1981), p. 289. 18 Case 149/79, Commission v Belgium (ECJ 17 December 1980) para 19. 15

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provide services is never an activity of a salaried person but that of someone who is self-employed.19 The functional approach, which favours a restrictive interpretation, was confirmed by the ECJ in the Commission v Belgium case of 1980. The Court has adopted two criteria so that from this approach an activity can be excluded from the freedom’s scope of application, namely that it concerns “posts which involve direct or indirect participation in the exercise of powers conferred by public law [and] duties designed to safeguard the general interests of the State or of other public authorities” (emphasis added). In fact, the first of the two conditions had already been asserted as regards Article 51 TFEU in Reyners, even in a more restrictive way.20 This in turn exhibits the explicit relationship between the two exclusion provisions.21 As regards the second, it was introduced for the first time in Commission v Belgium, and both requirements have been systematically applied ever since, with the Court denying the benefit of the exclusion in most cases in the field of free movement of workers22 and in the field of establishment/services.23 The issue is, on the one hand, how to interpret these two requirements and, on the other hand, to elucidate whether their cumulative or alternative application is required. Most authors believe that it is a case of cumulative conditions.24 Choosing one or the opposite interpretation has an obvious result. In the case of alternative requirements, the exception would have a much wider scope of application, so that provided the existence of a general interest is in a given activity, it would be covered by the exception. The cumulative interpretation, which again favours the restrictive interpretation of the Treaty exclusion, has been fostered by the Commission,25 by AG Lenz26 and Mancini,27 and by the Court itself, which, after the ambiguous case Commission v Italy of 1987, seems to continue in that line with 19

Lenz (1989), p. 95. Case 2/74, Reyners (ECJ 21 June 1974) para 45, where the Court required “a direct and specific connexion with the exercise of official authority.” 21 Barnard (2016), p. 473, who considers that the functional approach is even clearer in the case of Article 51 TFEU. 22 Case 307/84, Commission v France (ECJ 3 June 1986) para 12, as regards a state nurse; Case 66/ 85, Lawrie-Blum (ECJ 3 July 1986) para 27, as regards a teacher; Case 225/85, Commission v Italy (ECJ 16 June 1987) para 27, as regards a researcher; Case 33/88, Allue´ and others (ECJ 30 May 1989) para 7, as regards a foreign-language assistant in a university. 23 Case C-3/88, Commission v Italy (ECJ 5 December 1989) para 13, as regards a job on design, programming and operation of data-processing systems; Case C-306/89, Commission v Greece (ECJ 10 December 1991) para 7, as regards a road traffic accident expert; Case C-438/08, Commission v Portugal (ECJ 22 October 2009) as regards a vehicle inspector. 24 Barnard (2016), p. 471; Segura Serrano (2003), p. 116. 25 Case 66/85, Lawrie-Blum (ECJ 3 July 1986), p. 2134. 26 Case 66/85, Lawrie-Blum (Opinion of AG Lenz 29 April 1986) p. 2135; Case 225/85, Commission v Italy (Opinion of AG Lenz 27 January 1987) para 25; Case 33/88, Allue´ and others (Opinion of AG Lenz 14 February 1989) para 12. 27 Case 307/84, Commission v France (Opinion of AG Mancini 15 April 1986) p. 1730, where the AG literally states “and (not ‘or’—both requirements must be satisfied).” 20

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other cases such as Allue´ and Others. The main problem that arises despite this accumulative interpretation is to determine to what extent the first requirement must prevail over the second, if it should prevail.28 Regarding the interpretation of the first condition, that is, direct participation in the exercise of official authority, it only encompasses those activities that imply “the powers of coercion” of the State, in the words of the AG Mayras,29 an opinion shared by AG Mancini.30 In this regard, there is extensive case law on the activities of security guards31 and notaries,32 both of them considered by the Court as not covered by the exclusion. An opposing view also considers that the areas involved in what is known as the welfare state would be included in the exercise of official authority. These welfare areas comprise activities whose exercise may affect the legal position of individuals (for example, a decision that may influence the granting of a social security benefit), so it is understood that they must be included in this Treaty exclusion.33 However, it is far from clear that the Court would ever accept this proposal since its interpretation seems to go in the opposite direction.34 On the other hand, it is difficult to embrace independent or non-salaried activities within the social area of a State, although current deregulation implies that many activities that have normally been carried out by the State itself are now delegated in favour of private persons, which could then exercise official authority in this area.35 With regard to the criterion of indirect participation in the exercise of official authority, it could be argued that any individual who works with any person directly exercising public power can be considered as an indirect participant in it. It is evident that the Court will not agree to enlarge the Treaty exclusion through

28

Handoll (1988), p. 234. Case 2/74, Reyners (Opinion of AG Mayras 28 May 1974) p. 664. 30 Case 307/84, Commission v France (Opinion of AG Mancini 15 April 1986) p. 1732, who, from a stricter approach, considers that “[t]hose who occupy the post must don full battle dress”. 31 Case C-114/97, Commission v Spain (ECJ 29 October 1998) para 37; Case C-355/98, Commission v Belgium (ECJ 9 March 2000) para 26; Case C-283/99, Commission v Italy (ECJ 31 May 2001) para 20; Case C-465/05, Commission v Italy (ECJ 13 December 2007) para 40, where the Court stated that merely making a contribution to the maintenance of public security, which any individual may be called upon to do, does not constitute exercise of official authority. 32 Case C-392/15, Commission v Czech Republic (ECJ 1 February 2017) para 139; Case C-151/14, Commission v Latvia (ECJ 10 September 2015) para 73; Case C-61/08, Commission v Greece (ECJ 24 May 2011) para 106; Case C-54/08, Commission v Germany (ECJ 24 May 2011) para 110; Case C-53/08, Commission v Austria (ECJ 24 May 2011) para 112; Case C-51/08, Commission v Luxembourg (ECJ 24 May 2011) para 116; Case C-50/08, Commission v France (ECJ 24 May 2011) para 99; Case C-47/08, Commission v Belgium (ECJ 24 May 2011) para 117, where the Court stated that notaries practise their profession in conditions of competition, which is not characteristic of the exercise of official authority. 33 Handoll (1988), pp. 234–235. 34 Case 66/85, Lawrie-Blum (ECJ 3 July 1986) para 28, where the Court refers to the “very strict” conditions of this exclusion, this being a case on a field of social character such as education. 35 Hatzopoulos (2012), p. 147; Segura Serrano (2003), p. 117. 29

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this “back door” and that it would have to demand some kind of more consistent functional link. However, this problem does not often arise in the context of Article 51 TFEU.36 Indeed, departing from the case law on the free movement of workers, the ECJ had asserted that a “direct and specific connexion with the exercise of official authority” was needed.37 The case law is consistent with this line of reasoning,38 and therefore activities that are merely ancillary and preparatory are excluded from the definition of official authority. In addition, the extension of this exclusion to an entire profession is not acceptable when the official authority activities are detachable.39 As a result, only activities within a given profession that involve direct participation in the exercise of this official authority can be excluded. Moreover, this is the criterion not only to be inferred from the wording of the Treaty itself but also that is retained by the Council when adopting a series of sectoral directives of the 1960s and 1970s.40 In addition to the legal profession, other examples are veterinarians, doctors, etc., where certain, but not all, of their activities involve the exercise of official authority, and the former can be separated from the latter (think, for example, of a veterinarian who orders a quarantine period in the face of the emergence of a contagious animal disease). Recent case law in this field is the Anker and the Colegio de Oficiales de la Marina Mercante Espan˜ola cases,41 followed by other similar cases initiated by the Commission,42 where the post of master of a fishing/ merchant vessel was considered only occasionally connected to the exercise of public power and therefore not included in the scope of Article 45.4 TFEU. Allegedly, the outcome of this case law would have been different if the case had been brought under Article 51 TFEU as it excludes the exercise of official authority even occasionally.43 36

Segura Serrano (2003), p. 117. Case 2/74, Reyners (ECJ 21 June 1974) para 45. 38 Case C-42/92, Thijssen (ECJ 13 July 1993) para 22; Case C-404/05, Commission v Germany (“inspection of organic production”) (ECJ 29 November 2007) para 38; Case C-438/08 Commission v Portugal (“road inspection”) (ECJ 22 October 2009) para 37; Case C-168/14, Grupo Itevelesa and Others (ECJ 15 October 2015) para 60. 39 Case 2/74, Reyners (ECJ 21 June 1974) para 47. 40 Council Directive 64/224/EEC concerning the attainment of freedom of establishment and freedom to provide services in respect of activities of intermediaries in commerce, industry and small craft industries, O.J. 56/869 (1964), English special edition: Series I Volume 1963–1964 p. 126; Council Directive 73/183/EEC on the abolition of restrictions on freedom of establishment and freedom to provide services in respect of self- employed activities of banks and other financial institutions, O.J. L 194/1 (1973). Furthermore, this is the method that had been recommended by the Parliamentary Assembly of the EEC in its draft opinion on the General Programme for the suppression of restrictions on the freedom to provide services, O.J. P 24/558, p. 560; see Schmidt (1996), p. 21. 41 Case C-47/02, Anker and others (ECJ 30 September 2003) para 63; Case C-405/01, Colegio de Oficiales de la Marina Mercante Espan˜ola (ECJ 30 September 2003) para 45. 42 Case C-89/07, Commission v France (ECJ 11 March 2008); Case C-447/07, Commission v Italy (ECJ 11 September 2008); Case C-94/08, Commission v Spain (ECJ 20 November 2008). 43 Wyatt, in Dashwood et al. (2011), p. 571. 37

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With regard to the second condition, which concerns those duties that have the purpose of safeguarding the general interests of the State, there is a complete lack of definition. On the one hand, it is stated that these interests exceed the traditional ones regarding defence, internal security and tax, due to the allegedly generous interpretation made by the ECJ in the case Commission v Italy in 1987.44 On the other hand, it is understood that, in this specific area, the general interests of the State are halfway between national interests, including security and defence, and public interests, which include the general welfare and citizen’s quality of life, but not all kinds of social interests.45 Still, it is difficult to define what is meant by these general interests of the State and whether there could be any relationship with other general interests set out in the Treaty itself under other exceptions, e.g. the protection of health and life of animals or plants, or with the overriding reasons of public interest applied by the CJEU. In any case, the Court has not ruled on this point, still less within the scope of Article 51 TFEU, and it has merely stated this requirement together with the previous one in order to verify the applicability of the exclusion. This approach seems to reinforce the cumulative interpretation of the two conditions and perhaps also the privileged application of the former with respect to the latter. By way of conclusion, the case law analysed still has grey areas regarding this Treaty exclusion.46 As an alternative, AG Mayras suggested solving this ambiguity through secondary legislation,47 although there is no unanimity on this point.48 The European Commission itself does not seem willing to issue any legislative proposal in this regard and has limited itself to publishing a Communication in which it distinguishes between sectors to which the exclusion applies and sectors against which it intended to act,49 even tightening its approach more

44

Case 225/85, Commission v Italy (ECJ 16 June 1987); see Handoll (1988), p. 235. In this regard, Lenz (1989), p. 104, recognises that the welfare area, that is, the provision of public services, would be partially included in the general interest thus understood, especially in those States that are welfare States by constitutional imperative, such as Germany (Article 20 of the Basic Law). The same could apply to Spain, whose Constitution of 1978 provides in Article 1.1, “Spain is hereby established as a social and democratic State.” 46 Druesne (1981), p. 295. 47 Case 149/79, Commission v Belgium (Opinion of AG Mayras of 24 September 1980) p. 3911. 48 Mancini (1993), p. 815. 49 Commission Communication Freedom of movement of workers and access to employment in the public service of the Member States — Commission action in respect of the application of Article 48 (4) of the EEC Treaty, O.J. C 72/2 (1988). This Communication defined in the first place the limits to the exclusion based on the case law, adopting a functional criterion (public service posts are those carried out within the armed forces, the police, etc.). On the other hand, the Commission described those sectors in which it intended to bring about enforcement proceedings for not being covered by the exclusion (among which the management of services of a commercial nature, from public transport to telecommunications, but also the public health area, etc.). See Case C-290/94, Commission v Greece (ECJ 2 July 1996) as regards many different kind of posts; Case C-473/93, Commission v Luxembourg (ECJ 2 July 1996) para 35, as regards teachers. 45

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recently.50 The Communication, limited to the exception contained in the current Article 45 TFEU, may serve as an indication of the activities that may or may not be considered by the Commission as an exercise of official authority within the scope of Article 51 TFEU.

3.

Exceptions on Public Policy, Public Security, and Public Health (Article 52 TFEU)

3.1. General Remarks

Article 52.1 TFEU contains three exceptions regarding public policy, public security, and public health for the right of establishment and the freedom to provide services that correspond with those provided for the free movement of workers (Article 45.3 TFEU). From this point of view, the regime of these latter three freedoms is unified against the one applicable to the free movement of goods, where Article 36 TFEU provides for other grounds of derogation.51 Article 52 TFEU’s wording is extremely strict, which clearly corresponds to the Treaty drafters’ functionalist spirit. In order to build up an economic space without borders, it was important for the fundamental freedoms of the Treaty not to lose their effet utile. Therefore, MS may not resort to derogations other than these three mentioned to justify restrictive measures contrary to the freedom to provide services. The existence of other social interests worthy of protection in this area has not been considered by the founding fathers and is therefore not covered by any other exception in the Treaty. The Treaty derogations apply equally to exclusion/expulsion measures and to measures relating to access to and exercise of the activities that are covered by the freedoms of movement, the latter being the kind of measures that are more often applied in the field of services. Moreover, the burden of proof lies on the Member State adopting the restricting measure. In this regard, general invocations are not considered enough and precise evidence must be shown.52

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3.2. Legal Basis

As regards the legal nature of these exceptions, there is a settled position that considers them as a reservation of sovereignty protecting MS’ ordre public, although with limits derived from the EU legal order. This view seems to be 50

Commission Communication Free movement of workers - achieving the full benefits and potential, COM(2002) 694. 51 In fact, the Court has argued sometimes as if the exceptions to freedom of movement formed a unitary whole, see e.g. Case C-348/96, Calfa (ECJ 19 January 1999) para 18–20; Case C-273/97, Sirdar (ECJ 26 October 1999) para 17; Case C-423/98, Albore (ECJ 13 July 2000) para 18. 52 Case C-161/07, Commission v Austria (ECJ 22 December 2008) para 37.

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based on the assertions made by the ECJ in the Van Duyn case, in which it ruled on the public order clause, although in the area of free movement of workers, and where the term “reserve” was used (e.g. French version).53 However, this reservation does not give way to exclusive national competence but only allows its exercise to the extent that there is no EU legislation on the matter. To confirm this idea, the explicit derogations to the free movement of goods will be taken into account too.54 In fact, there is identity between the different grounds for invoking the express exceptions to the free movement of goods, on the one hand, and to the workers/establishment/services’ freedoms, on the other. Indeed, Article 36 TFEU’s broader scope does not play against the comparability of exceptions but simply implies a greater definition of the exceptions in the field of goods. In other words, the logic underlying the construction of the internal market (which is a shared competence according to Article 4.2 TFEU) leads us to understand that all public policy exceptions have the same legal nature and produce the same functional legal effects: legitimising State action in violation of any of the freedoms of movement.55 This coherence or parallelism among the different express exceptions has consequences on the vertical delimitation of competences between the EU and the MS, which is thus also homogeneous. If there is a key argument to distinguishing between the exceptions to the freedom of movement of persons, on the one hand, and the freedom of goods on the other, it is the absence of a provision similar to Article 52.2 TFEU in the field of goods. Article 52.2 implies the express concurrence of competences between the EU and the MS with regard to the adoption of measures that affect public policy, public security, and public health for the freedoms of establishment/services. However, the ECJ has stated56 for a long time that there is this same concurrence of competences in the field of free movement of goods.57 Thus, recourse to express derogations is pre-empted when there is exhaustive EU regulatory action (e.g. by way of Articles 114 and 115 TFEU) that occupies the ground.58 Similarly, with regard to the freedom to provide services, by way of Article 62 TFEU, Article 52.1 TFEU is a sovereignty reservation clause that, however, does

53

Case 41/74, Van Duyn (ECJ 4 December 1974) para 7 and 21. Segura Serrano (2003), p. 120; cf. Hatzopoulos (1999), pp. 283–285. 55 Case C-145/09, Tsakouridis (ECJ 23 November 2010) para 43–44, where the Court resorted to the case law on the free movement of goods in order to define public security to be applied in the field of free movement of persons. 56 As may be derived from the Simmenthal ruling and the corresponding case law: Case 35/76, Simmenthal (ECJ 10 November 1976) para 24; Case 5/77, Tedeschi (ECJ 15 September 1977) para 34; Case 148/78, Ratti (ECJ 5 April 1979) para 36. 57 Masclet (1997), p. 4, who, following a teleological interpretation, argued that in the area of free movement of goods, current Article 36 TFEU does not establish a reservation of exclusive and definitive jurisdiction for the benefit of MS. 58 See e.g. Case 148/78, Ratti (ECJ 5 April 1979) para 36; Case 251/78, Denkavit (ECJ 8 November 1979) para 14. See Masclet (1997), p. 5; Kapteyn and Verloren van Themaat (1998), p. 652; Mattera (1991), p. 279 et seqq.; Lenaerts (1988), p. 502. 54

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not shield MS’ powers since EU harmonisation is foreseen by Article 52.2 TFEU. This harmonisation occurred in fact very early, through Directive 64/221,59 now superseded by Directive 2004/38,60 although it did not mean the total pre-emption of State competence since it did not give rise to exhaustive regulation. For this reason, MS’ recourse to public policy, public security, and public health exemptions is justified today, as demonstrated by the ECJ case law in the gambling61 and public health62 sagas, except where there is EU exhaustive harmonisation.63

3.3. Definition of Public Policy, Public Security, and Public Health

There is a lack of legal definition in the Treaty of what is to be understood by public policy, public security, and public health. This is due to the fact that the Treaty derogations work as justifications for national restrictive measures. In other words, they are functional rather than material concepts.64 However, a negative approach on what is to be understood by public policy, public security, and public health may be attained,65 even if this is not properly an EU concept of ordre public.66 As mentioned, Directive 64/221, which was adopted on the basis of 59 Council 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, O.J. 56/850 (1964). 60 Parliament/Council 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, O.J. L 158/77 (2004). 61 Case C-375/17, Stanley International Betting (ECJ 19 December 2018) para 41; Case C-375/14, Laezza (ECJ 28 January 2016) para 31; Case C-463/13, Stanley International Betting (ECJ 22 January 2015) para 47; Case C-156/13, Digibet (ECJ 12 June 2014) para 22; Case C-470/11, Garkalns (ECJ 19 July 2012) para 35; Case C-42/07, Liga Portuguesa de Futebol Profissional (ECJ 8 September 2009) para 55; Case C-67/98, Zenatti (ECJ 21 October 1999) para 29; Case C124/97, La¨a¨ra¨ (21 September 1999), para 35. 62 Case C-158/96, Kohll (ECJ 28 April 1998) para 50–51; Case C-157/99, Smits and Peerbooms (ECJ 12 July 2001) para 73–74; Case C-368/98, Vanbraekel (12 July 2001) para 48–49; Case C385/99, Mu¨ller-Faure´ and van Riet (13 May 2003) para 67; Case C-262/02, Commission v France (“alcohol tv advertising”) (ECJ 13 July 2004) para 23; Case C-500/06, Corporacio´n Dermoeste´tica (ECJ 17 July 2008) para 37 (although in most of this case law the Court referred to overriding reasons together with Article 52.1 TFEU). 63 Case C-421/98, Commission v Spain (“architects”) (ECJ 23 November 2000) para 41–42, where the Court held: “So far as application of Article [52] of the Treaty to the present situation is concerned, it should be borne in mind that that provision is not designed to reserve certain matters to the exclusive jurisdiction of Member States but permits national laws to derogate from the principle of free movement to the extent to which such derogation is and continues to be justified for the attainment of the objectives referred to in that article [. . .] Where [EU] directives provide for harmonisation of the measures necessary to ensure the protection of a specific objective, recourse to Article [52] of the Treaty is no longer justified”. 64 Segura Serrano (2003), p. 122. 65 Cerexhe, in Constantinesco et al. (1992), Article 56, p. 296. 66 Cf. Lirola Delgado (1994), pp. 163–164.

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Article 52.2 TFEU, now superseded by Directive 2004/38, helped to interpret these concepts. This secondary legislation provides some substantive criteria, together with procedural guarantees, which form the common administrative regime applicable to the freedom of movement of persons in general as interpreted by case law. However, I think it is needed in order to show that neither the treaty nor secondary legislation define the notions of public policy, public security, and public health. Still, Directive 2004/38 states that these derogations may not be invoked to serve economic ends (Article 27.1), which is important in order to prevent MS from rejecting EU nationals in times of economic recession.67 It also provides that public policy or public security measures must be based exclusively on the personal conduct of the individual concerned, in the understanding that the mere existence of criminal convictions does not in itself constitute grounds for the adoption of such measures (Article 27.2). Leaving aside the procedural safeguards provided by Directive 2004/38 (Articles 30–33),68 it seems relevant to try to shed more light on the material content of these derogations. As regards public health, although it is not defined by the Directive, practical problems do not usually arise in its application because there is more certainty with respect to the diseases justifying derogations.69 Moreover, the Court stated that the public health sector cannot be excluded as a sector of economic activity.70 However, although in a different setting (entry or residence of natural persons was not at stake), the ECJ has accepted that Article 52 TFEU may be resorted to justify a derogation of the free provision of services by the public health system. Specifically, in a series of cases relating to restrictions in the form of prior authorisations in order to receive non-emergency medical treatment in other MS, the so-called tourism of patients, the ECJ has accepted that the public health ground can justify refusal to reimburse medical expenses incurred in another MS.71 Therefore, Article 52 TFEU justifies those restrictions that are necessary for public health72 on the basis that they help ensure “a balanced medical hospital service open to all”, as well as the “maintenance of treatment capacity or medical competence on national territory”.73 This deference with MS health care system can also

67

Kapteyn and Verloren van Themaat (1998), p. 710. Barnard (2016), p. 467. 69 An Annex to Directive 64/221 stated the diseases that may justify its invocation (infectious or contagious diseases, according to the World Health Organisation’s corresponding Regulation). Section A.4 of the said Annex would allow States to invoke other diseases, on the basis of the nondiscrimination treatment. Article 29 of Directive 2004/38 now states that diseases included are those with epidemic potential as defined by the relevant instruments of the World Health Organization, but also other diseases, on the basis of the non-discrimination treatment. 70 Case 131/85, Gu¨l (ECJ 7 May 1986) para 17. 71 Segura Serrano (2002), p. 561. 72 Cf. Hatzopoulos (2012), p. 725. 73 See Case C-158/96, Kohll (ECJ 28 April 1998) para 50–51; Case C-157/99, Smits and Peerbooms (ECJ 12 July 2001) para 73–74; Case C-368/98, Vanbraekel (12 July 2001) para 48–49; Case C-385/99, Mu¨ller-Faure´ and van Riet (ECJ 13 May 2003) para 67; Case C-372/04, Watts 68

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be seen in other cases like Mac Quen,74 where Belgian law allowed only ophthalmologists to perform eye examinations, excluding opticians; Apothekerkammer des Saarlandes,75 where the restricting measure consisted of the exclusion of nonpharmacists from running pharmacies; and Blanco Pe´rez, where the Court added that “[t]he importance of that objective is confirmed by Article 168(1) TFEU and Article 35 of the Charter of Fundamental Rights of the European Union, under which, inter alia, a high level of protection for human health is to be ensured in the definition and implementation of all policies and activities of the European Union”.76 Regarding public policy and public security, there is more room for legal uncertainty about their definition. Although diseases or disabilities that may prompt national measures based on public policy and public security were also included in the Annex to Directive 64/221,77 they are no longer mentioned in Directive 2004/38, now in force. The European Commission has interpreted the concept of public policy linking it with preventing disturbance of social order.78 However, the Court’s case law has brought about some certainty to these concepts. Thus, the CJEU has retained a wide concept of public security as it has accepted the relevance of MS’ internal and external security, but also a threat to the functioning of the institutions and essential public services and the survival of the population, as well as the risk of a serious disturbance to foreign relations or to peaceful coexistence of nations or a risk to military interests, may affect public security.79 Another specific application of the public security justification in the field of services took place with the Corsica Ferries France and Sea-Land cases.80 The Court has even apparently overcome the difference between paras 2 and 3 of

(ECJ 16 May 2006) para 104; Case C-169/07, Hartlauer (ECJ 10 March 2009) para 46; Case C173/09, Elchinov (ECJ 5 October 2010) para 42; Case C-490/09, Commission v Luxembourg (ECJ 27 January 2011) para 43. This field has been regulated by Parliament/Council Directive 2011/24/ EU on the application of patients’ rights in cross-border healthcare, O.J. L 88/45 (2011). 74 Case C-108/96, Mac Quen (ECJ 1 February 2001) para 28–30. 75 Joined Cases C-171/07 and C-172/07, Apothekerkammer des Saarlandes (ECJ 19 May 2009) para 30–32. 76 Case C-570/07, Blanco Pe´rez and Chao Go´mez (ECJ 1 June 2010) para 65. See also Joined Cases C-159/12 to C-161/12, Venturini (ECJ 5 December 2013) para 41. 77 Section B of Annex to Directive 64/221 set out: “Diseases and disabilities which might threaten public policy or public security: 1. Drug addiction; 2. Profound mental disturbance; manifest conditions of psychotic disturbance with agitation, delirium, hallucinations or confusion.” 78 Commission Communication on guidance for better transposition and application of 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, COM (2009) 313 final, para 3.1. 79 Case 72/83, Campus Oil and Others (ECJ 10 July 1984) para 34 and 35; Case 222/84, Johnston (ECJ 15 May 1986) para 26; Case C-367/89, Richardt (ECJ 4 October 1991) para 22; Case C-83/ 94, Leifer (ECJ 17 October 1995) para 26; Case C-273/97, Sirdar (ECJ 26 October 1999) para 17; Case C-423/98, Albore (ECJ 13 July 2000) para 18 and 22. 80 Case C-266/96, Corsica Ferries France (ECJ 18 June 1998) para 60; Joined Cases C-430/99 and C-431/99, Sea-Land Service (ECJ 13 June 2002) para 41–42.

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Article 27 of Directive 2004/3881 as it held that trafficking in narcotics or sexual exploitation of children may very well be considered as “imperative grounds of public security”.82 In sum, the case law operates on an ad hoc basis, but assuming that these concepts are to remain national law notions. In other words, exhaustive harmonisation in this area has not occurred, and pre-emption has only operated in a very partial way.83 As a result, and according to case law,84 two remarks may be highlighted. First, as regards the definition of public policy, public security and public health, resort still has to be made to Member States’ domestic laws. Indeed, harmonisation has not been, and could not be, complete in this field as they are functional concepts. Article 28.3 of Directive 2004/38 so provides.85 Second, the concept of public policy (also public security and public health) is not uniform, not even within Member States’ domestic laws. In other words, these notions have a relative meaning and are non-static but may vary overtime.86 Moreover, the Court highlighted in Jany that EU law “does not impose on Member States a uniform scale of values as regards the assessment of conduct which may be considered to be contrary to public policy”.87 However, Member States may not decide unilaterally the extent to which these justification grounds may derogate from the freedom to provide services. On the contrary, as asserted by the Court,88 MS’ margin of appreciation must comply with the requirements set out by EU law.

3.4. Conditions to Invoke the Treaty Derogations

26

The Court has consistently asserted that Treaty derogations are subject to a restrictive interpretation,89 with two consequences. First, each of the grounds for exception expressly set out in Article 52 TFEU must be interpreted restrictively. 81

Kostakopoulou-Dochery and Ferreira (2013–2014), p. 173. Case C-145/09, Tsakouridis (ECJ 23 November 2010) para 47; Case C-348/09, P.I. (ECJ 22 May 2012) para 28. 83 Segura Serrano (2003), p. 124. 84 Case 41/74, Van Duyn (ECJ 4 December 1974) para 18; Case 30/77, Bouchereau (ECJ 27 October 1977) para 34. 85 Case C-348/09, P.I. (ECJ 22 May 2012) para 22. 86 Case 41/74, Van Duyn (ECJ 4 December 1974) para 18, where the Court states that “the particular circumstances justifying recourse to the concept of public policy may vary from one country to another and from one period to another.” 87 Case C-268/99, Jany (ECJ 20 November 2001) para 60. 88 Case 41/74, Van Duyn (ECJ 4 December 1974) para 18; Case 36/75, Rutili (ECJ 28 October 1975) para 27; Case 30/77, Bouchereau (ECJ 27 October 1977) para 33; Case C-33/07 Jipa (ECJ 10 July 2008) para 23; Case C-430/10 Gaydarov (ECJ 17 November 2011) para 32; Case C-434/10 Aladzhov (ECJ 17 November 2011) para 34; and Case C-348/09, P.I. (ECJ 22 May 2012) para 23. 89 Cf. Wyatt, in Dashwood et al. (2011), p. 483, who considers that in more recent years the Court has been more open to accept the pleadings of MS. 82

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Second, the Treaty derogations stated in Article 52 conform to an exhaustive list, so other derogations may not be added. The Bond van Adverteerders case90 may be cited as an example in the field of services, and there are others in the field of workers and establishment.91 Of course, the grounds of public policy, public security, and public health must be regarded not as a condition precedent to the acquisition of the right of entry and residence.92 According to Article 27.1 and 27.2 of Directive 2004/38, the ECJ has clearly stated that exceptions can never serve to justify motivations of an economic nature,93 nor can economic sectors be left out of the freedom of movement.94 Also, national measures must be based exclusively on the personal conduct of the individual concerned, while previous criminal convictions do not constitute grounds for such measures,95 nor can a criminal conviction be substituted by a public policy measure.96 Moreover, the exceptions cannot be used for general prevention purposes or to de´courager les autres,97 as is now provided in Article 27.2 of Directive 2004/38.98 In addition, the case law has also affirmed the requirements of necessity and proportionality99 (➔ Article 56 TFEU para 39), as is now stated in Article 27.1 of Directive 2004/38. Moreover, the Court affirmed that in order to apply Article 52 TFEU, there should be “a genuine and sufficiently serious threat to public policy”,100 a threat 90

Case 352/85, Bond van Adverteerders (ECJ 26 April 1988) para 34. Case 41/74, Van Duyn (ECJ 4 December 1974) para 18; Case 36/75, Rutili (ECJ 28 October 1975) para 27; Case 30/77, Bouchereau (ECJ 27 October 1977) para 33. 92 Case 157/79, Pieck (ECJ 3 July 1980) para 8–9; Case 321/87, Commission v Belgium (ECJ 27 April 1989) para 10; Case C-363/89, Roux (ECJ 5 February 1991) para 31. 93 Case 352/85, Bond van Adverteerders (ECJ 26 April 1988) para 34; Case C-288/89, Gouda (ECJ 25 July 1991) para 11; Case C-353/89, Commission v The Netherlands (“Mediawet”) (ECJ 25 July 1991) para 15; Case C-17/92, Fedicine (ECJ 4 May 1993) para 16; Case C-224/97, Ciola (ECJ 29 April 1999) para 16; Case C-384/08, Attanasio Group (ECJ 11 March 2010) para 55. 94 Case 131/85, Gu¨l (ECJ 7 May 1986) para 17; Case C-158/96, Kohll (ECJ 28 April 1998) para 46; Case C-114/97, Commission v Spain (ECJ 29 October 1998) para 42; Case C-355/98, Commission v Belgium (ECJ 9 March 2000) para 29. 95 Case 30/77, Bouchereau (ECJ 27 October 1977) para 28; Case C-430/10 Gaydarov (ECJ 17 November 2011) para 38. 96 Case C-67/74, Bonsignore (ECJ 26 May 1975) para 7. 97 Case C-67/74, Bonsignore (ECJ 26 May 1975) para 7; Case C-249/86, Commission v Germany (ECJ 18 May 1989) para 18. 98 Cf. Mancini (1993), p. 812, who considers that it is not easy to justify the danger of a behaviour in purely individual terms when, as is almost always the case, the danger for which one wants to punish lies in the ability of that behaviour to express socially disapproved collective tendencies or in the possibility for them being imitated by other individuals. 99 Case 352/85, Bond van Adverteerders (ECJ 26 April 1988) para 36; See Case C-100/01, Oteiza Olaza´bal (ECJ 26 November 2002) para 41, where the ECJ justified a less severe measure such as a partial restriction of the right of residence. 100 Case 36/75, Rutili (ECJ 28 October 1975) para 28. In a case where the free movement of capital was being violated, the Court, once again demonstrating its unitary approach to the exceptions to the freedoms of movement, understood that the public security ground can only be accepted if there are “real, specific and serious risks”, see Case C-423/98, Albore (ECJ 13 July 2000) para 22. 91

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that must go beyond “the perturbation of the social order which any infringement of the law involves”.101 Also, a fundamental interest of the society should be affected,102 as is now stated in Article 27.2 of Directive 2004/38. In this regard, the Court has also affirmed that in the interpretation of the exceptions, insofar as the freedom of movement is fundamental within the EU legal order, the ECHR should be taken into account. Although this Convention does not include freedoms of movement similar to those of the EU, it does set out several requirements that operate as conditions for limiting the fundamental rights contained therein. The ECJ thus links the TFEU derogations with a more general principle enshrined in Articles 8, 9, 10, and 11 ECHR and in Article 2 of Protocol 4 to the Convention.103 In this way, the Court added a new requirement in order to invoke the derogations, thereby limiting further MS’ margin of appreciation in a way that goes beyond the criteria provided in the Convention itself.104 In other words, by limiting the use of public policy to situations in which there is a real and sufficiently serious threat that also affects a fundamental interest of society, the ECJ is using a more restrictive criterion of the powers that can be exercised by States than those comprised by the ECHR, which refers to the measures necessary in a democratic society.105 Finally, in the ERT case,106 the Court started to set a direct link between Article 52 TFEU derogations invoked by MS and the protection of fundamental rights. Later on, other cases like Carpenter107 and Orfanopoulos108 have confirmed this new requirement regarding compatibility with human rights. Conversely, in Omega,109 the Court accepted that the protection of human rights, i.e. human dignity, essentially was the ground on which to apply the public policy derogation. Omega was a company running a laserdrome, where it was possible to play at killing human beings, an activity banned by the Bonn Police because it was contrary to human dignity, a value enshrined in the German constitution.

101

Case C-33/07, Jipa (ECJ 10 July 2008) para 23. Case 30/77, Bouchereau (ECJ 27 October 1977) para 35. 103 Case 36/75, Rutili (ECJ 28 October 1975) para 32, where the Court states that those provisions “provide, in identical terms, that no restrictions in the interests of national security or public safety shall be placed on the rights secured by the above-quoted articles other than such as are necessary for the protection of those interests ‘in a democratic society’.” 104 Hall (1991), pp. 485 and 488. 105 Segura Serrano (2003), p. 127. 106 Case C-260/89, ERT (ECJ 18 June 1991) para 43. 107 Case C-60/00, Carpenter (ECJ 11 July 2002) para 43. In this case, in which Ms Carpenter’s expulsion order for reasons of public policy and public safety was considered, Mr Carpenter being a provider of intra-EU services from the United Kingdom, the Court held that that expulsion order amounted to interference with Mr. Carpenter’s right to respect for family life, within the meaning of Article 8 ECHR, which in turn “does not strike a fair balance between the competing interests”. 108 Joined Cases C-482/01 and C-493/01, Orfanopoulos (ECJ 29 April 2004) para 97–98. 109 Case C-36/02, Omega (ECJ 14 October 2004) para 33–34, and 36. 102

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3.5. The Non-discrimination Principle

Respect for the non-discrimination principle while applying the Treaty derogations has given rise to one of the most difficult issues in this field. The initial case law was confusing. Indeed, in the Van Duyn case,110 access of a Dutch national to British territory was not allowed on the basis of the social danger of the activity to be carried out by this national, i.e. working for the Church of Scientology, whose activities were not forbidden in Britain. The Court justified this restriction, and therefore discrimination, essentially on the basis of the principle of international law that precludes a State from denying its own nationals the right of access and permanence in its territory. This ruling was harshly criticised111 since it could not be understood that the same activities were classified as dangerous and not dangerous at the same time, depending on whether they were exercised by nationals or non-nationals. However, in the subsequent Adoui and Cornuaille case, public policy was resorted to by Belgium in order to justify the decision of the Lie`ge authorities to refuse a residence permit and to expel two French nationals on the ground of prostitution while this activity was not prohibited in Belgium. The Court stated that Treaty derogations may not be invoked “by reason of conduct which, when attributable to the [. . .] State’s own nationals, does not give rise to repressive measures”.112 Thus, the ECJ definitively embraced the principle of non-discrimination in the interpretation of the Treaty derogations. Still, there is some legal incoherence in trying to subject Treaty derogations to the non-discrimination principle while those derogations are meant to justify discriminatory measures in the first place.113 This legal imbroglio may be solved if resort is made to Article 36 TFEU (also Article 65.3 TFEU), which was taken from Article XX GATT. The second sentence of Article 36 TFEU excludes those derogations that “constitute a means of arbitrary discrimination or a disguised restriction”. Indeed, the Court’s case law114 has confirmed that the nondiscrimination principle in this field entails that the values protected by national measures justified by Article 52 TFEU are to be required on the basis of national treatment. In other words, regarding public policy measures, the difference in treatment between nationals and non-nationals must be limited to the “nature” of the measures that can be adopted.115 110

Case 41/74, Van Duyn (ECJ 4 December 1974). Barav (1977), pp. 731–732. 112 Joined Cases 115 and 116/81, Adoui and Cornuaille (ECJ 18 May 1982) para 9. 113 Demaret and Ernst de la Graete (1983), pp. 293–294, who speak of squaring the circle. 114 Joined Cases 115 and 116/81, Adoui and Cornuaille (ECJ 18 May 1982) para 7; Joined Cases C-65/95 and C-111/95, Shingara and Radiom (ECJ 17 June 1997) para 28. 115 See e.g. Case C-348/96, Calfa (ECJ 19 January 1999) para 20, where the Court states that Article 52 TFEU “permits Member States to adopt, with respect to nationals of other Member States, and in particular on the grounds of public policy, measures which they cannot apply to their own nationals, inasmuch as they have no authority to expel the latter from the territory or to deny them access thereto”. 111

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4.

Chapter 3 Services

The Services Directive

4.1. Overview

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The Services Directive116 first came up as a proposal presented by Commissioner Bolkestein117 and was soon known as a draft that intended to introduce regulatory change in the services area through the country of origin principle (CoOP).118 This was a highly ambitious draft as it pursued the application of the home country control principle on a horizontal basis, and it would apply not only to the authorisation of services activities but also to their day-to-day supervision.119 Therefore, the Services Directive draft entailed a sea change for service providers as they would no longer be obliged to comply with the requirements of the host State but would only be subject to the home State rule. However, this latter element was felt as not necessary as it created regulatory competition, which represented a substantive shift regarding the ECJ’s case law, which was mainly based on the applicability of the mutual recognition principle and the subsequent prohibition of double burdens. Therefore, the Bolkestein draft paved the way for a virulent opposition on the part of trade unions and mass media, amidst fears of “social dumping” based on the “Polish plumber”, which in turn may have had an influence on the French “no” vote in the referendum on the Constitutional Treaty in 2005.120 This overreaction provoked a “painful retreat” in the revised version of 2006.121 Accordingly, some experts have criticised the result achieved with the Services Directive. First, the Services Directive is considered as a “patchy, complicated and legally rather unsatisfactory outcome”.122 Second, with the abandonment of the CoOP, the Services Directive will hardly have any practical effect. Moreover, the amount of derogations, exclusions, and exceptions introduced in the final version of the Services Directive will run counter to its intended horizontal character.123 On the contrary, there are those who consider that the Services Directive is better than no directive at all.124 Indeed, it may very well be that in the end, the final version of the Services Directive is different from the initial version more in rhetoric than in

116

Parliament/Council Directive 2006/123/EC on services in the internal market, O.J. L 376/36 (2006). 117 Commission, Proposal for a Directive of the European Parliament and of the Council on services in the internal market, COM(2004) 2 final/3. 118 Weatherill (2007), p. 5, who highlights that the Commission draft did not embrace a truly pure country-of-origin principle. 119 Hatzopoulos (2012), p. 257. 120 Barnard (2008), pp. 329–330. 121 de Witte (2007), p. 8. 122 Craig and De Bu´rca (2015), p. 850. 123 Hatzopoulos (2012), p. 258. 124 Barnard (2008), p. 325.

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substance.125 Finally, part of the success of the Services Directive depends on the willingness of MS to comply with the screening obligations provided for by this Directive, whose deadline was 28 December 2009 (Article 39).126

4.2. Scope

Article 2.1 Services Directive states that it covers the “services supplied by providers established in a Member State”. The concept of “service” is defined by Article 4.1 as “any self-employed economic activity, normally provided for remuneration, as referred to in Article [57] of the Treaty”. Recital 33 has incorporated a renewed list of services that complete the one originally inserted in Article 57 TFEU. Moreover, according to Recital 9, the Directive applies to any requirement affecting access to or the exercise of a service activity, the concept of requirement being widely defined by Article 4.7, which comprises any condition provided for in the laws or practices of the MS, including those of private bodies (although excluding collective agreements). On the other hand, Recital 9 excludes those requirements that are applicable to individuals acting in their private capacity, or the “rules of the game”.127 However, there are so many exclusions and limitations to this scope of application that it is “almost easier to think about what the Directive does apply to”.128 First, Article 2.2 excludes non-economic services of general interest, financial services, electronic communication services,129 transport services,130 temporary work agencies, healthcare services, audiovisual services, gambling, social services,131 private security services, and services provided by notaries. Moreover, Article 2.3 excludes taxation. However, these services have to comply with the Treaty rules, i.e. Articles 49 and 56 TFEU.132 Moreover, Article 1.2–7 sets out the limitations, meaning that the Directive will not deal with subject matters such as services of general economic interest, cultural or linguistic diversity, and, most

125

Chalmers et al. (2014), p. 842. Commission Communication, Towards a better functioning Single Market for services – building on the results of the mutual evaluation process of the Services Directive, COM(2011) 20 final; Stelkens et al. (2012). 127 Barnard (2016), p. 429. 128 Chalmers et al. (2014), p. 842. 129 Joined Cases C-360/15 and C-31/16, X (ECJ 30 January 2018) para 82. 130 Case C-434/15, Asociacio´n Profesional Elite Taxi (ECJ 20 December 2017) para 43; also Case C-320/16, Uber France (ECJ 10 April 2018), where the Court has stated that services like those offered by Uber are out of the Directive’s scope. See Adamski (2018), p. 745, who considers that the Court’s line of argument is wrong, as it does not take into account the different legal outcome deriving from the applicability of the right of establishment. 131 Case C-57/12, Femarbel (ECJ 11 July 2013) para 43–44. 132 European Commission (2007), p. 10. 126

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importantly, labour law,133 social security, and fundamental rights, which in turn were included in order to comfort trade unions after the Viking and Laval cases.134 Finally, the Directive is also residual according to Article 3.1, which states that in case of conflict with other provisions of EU law, i.e. in the case of posted workers, social security, television broadcasting, or professional qualifications, the latter will prevail. However, Chapter III on Establishment is considered applicable to internal situations as well.135

4.3. Negative Liberalisation

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The Services Directive addresses the liberalisation of services activities from the classic perspective, which roughly takes into account whether national measures restricting the EU freedom of movement arise as measures limiting access to, or the exercise of, those activities.136 Therefore, Chapter III on Establishment and Chapter IV on Free Movement of Services comprise, respectively, the two different regulatory areas used to implement the freedom of movement in this area. This difference seems justified according to the distinct roles that those two freedoms have within the internal market. Indeed, the host State’s rule is applicable to those exercising the freedom of establishment, without discrimination, as a consequence of their choice to be economically inserted in that State. However, those exercising the freedom to provide services should be subjected only to the home State’s regulation, unless the host State’s legislation is exceptionally justified.137 Nevertheless, as it will be seen, the regulatory approach taken by the Services Directive, as a result of the abandonment of the CoOP, roughly reiterates the negative approach reflected in the Treaty rules, which seems inappropriate in the case of harmonising secondary legislation such as this Directive.138 4.3.1.

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Establishment

There is agreement in that the Services Directive has served to codify the case law applicable to service activities,139 addressing three types of national measures. First, Article 9.1 deals with authorisation schemes, which according to the case law are not allowed unless they are non-discriminatory, justified on the basis of an Case C-33/17, Cˇepelnik (ECJ 13 November 2018), para 31, where the Court states that the Directive “defines ‘labour law’ broadly”. 134 Case C-438/05, Viking (ECJ 11 December 2007); Case C-341/05, Laval (ECJ 18 December 2007). 135 Wyatt (2011), in Dashwood et al., p. 602; Cf. Van Rijn (2017), p. 211, who considers that case law is needed in order to avoid legal uncertainty regarding this issue. 136 Hatzopoulos (2012), p. 264. 137 Chalmers et al. (2014), p. 890. 138 Wiberg (2014), p. 284. 139 Hatzopoulos (2012), p. 264; Barnard (2016), p. 433; Chalmers et al. (2014), p. 890. 133

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overriding reason relating to public interest (➔ Article 56 TFEU para 26), and the goal pursued cannot be achieved by a less restrictive measure. Also, the conditions for the granting of authorisation of Article 10, together with the mentioned criteria, i.e. being non-discriminatory, justified by an overriding and proportionate reason,140 embrace also the good governance principle. Overriding reasons relating to public interest are defined in Article 4.8, which encompasses a long and nonexhaustive list of reasons.141 This list is even longer in Recital 40, which in turn grants a large competence to the host State.142 Second, Article 14 sets out the absolutely prohibited requirements, which are largely based on the case law. These requirements include discriminatory measures grounded on nationality or residence,143 restrictions on secondary establishment,144 or restrictions based on economic needs.145 There are no overriding reasons or other derogations available to MS regarding these requirements, nor may the Treaty rules be used to undermine the ad hoc harmonisation intended by the Directive.146 Third, Article 15.2 comprises those requirements to be evaluated. These are eight requirements, including quantitative or territorial restrictions that have a specific legal form147 or limits on employee numbers148 or tariffs.149 These requirements are “suspect” and need to be justified by the criteria provided for in Article 15.3, that is non-discrimination, necessity (here understood as the presence of an overriding reason), and respect for a particularly strict version of proportionality (the three-prong test (➔ Article 56 TFEU para 39). Recently, the Court has ruled on the infringement of Article 15.3.150 Moreover, Article 15.7 has set out a notification requirement for newly adopted national measures, which resembles the one applicable to the free movement of goods.151

140 Case C-293/14, Hiebler (ECJ 23 December 2015) para 70. On this ruling, see Damjanovic (2017), p. 1535. 141 Joined Cases C-340/14 and C-341/14, Trijber (ECJ 1 October 2015) para 68, where the Court has stated that public order is an overriding reason within the meaning of Article 10.2.b that includes “preventing criminal offences being committed against prostitutes, in particular human trafficking, forced prostitution and child prostitution”. 142 Barnard (2016), p. 434. 143 Case C-2/74, Reyners (ECJ 21 June 1974). 144 Specifically regarding the Services Directive: Case C-179/14, Commission v Hungary (ECJ 23 February 2016) para 44; See generally Case C-162/99, Commission v Italy (ECJ 18 January 2001). 145 Case C-255/04, Commission v France (ECJ 15 June 2006). 146 Case C-593/13, Rina Services and Others (ECJ 16 June 2015) para 37. 147 Case C-171/02, Commission v Portugal (ECJ 29 April 2004). 148 Case C-514/03, Commission v Spain (ECJ 26 January 2006). 149 Joined Cases C-94/04 and C-202/04, Cipolla (ECJ 5 December 2006). 150 Case C-171/17, Commission v Hungary (ECJ 7 November 2018) para 83; Case C-179/14, Commission v Hungary (ECJ 23 February 2016) para 69 and 90. 151 Parliament/Council Directive 98/34/EC laying down a procedure for the provision of information in the field of technical standards and regulations, O.J. L 204/37 (1998), now replaced by Parliament/Council Directive (EU) 2015/1535 laying down a procedure for the provision of

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4.3.2. 40

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Provision of Services

Article 16.1 provides for the freedom to provide services as a substitute for the CoOP initially proposed by the Bolkestein draft, which would have entailed the implementation of the home country rule; that is, service activities would be covered by the home State’s regulation regarding access to and exercise of those activities.152 However, the version finally retained by the Directive in the form of “freedom to provide services” principle is still one of the cornerstones of the Services Directive.153 According to case law, this freedom to provide services prohibits MS from imposing their national requirementsnational requirements that do not comply with the three principles set out in the third sentence of Article 16.1, i.e. non-discrimination, necessity (understood as justified for reasons of public policy, public security, public health or the protection of the environment), and proportionality. These four reasons are also restated in Article 16.3, which in turn makes this provision one of the most difficult to interpret. On the other hand, Article 16.2 contains a list of “suspect” national requirements, meaning that they cannot in principle be imposed by MS unless justified by one of the four reasons stated in Article 16.1 and 16.3. Those requirements include the obligation to have an establishment in the host country,154 the obligation to obtain an authorisation or registration,155 or a ban on setting up an infrastructure.156 There is disagreement regarding whether there is any difference between the current and the initial versions of Article 16. On the one hand, it is argued that the difference is based on emphasis rather than substance. Even if the original version stressed the law that could be applied (home State rule) as opposed to the law that cannot be applied (host State rule), retained in the current version, in any case services providers will equally have to investigate the rules applicable in the host country.157 On the other hand, it is stated that the Services Directive has indeed introduced a strong CoOP as the list of overriding reasons covered by Article 16.1.b is very short (only four reasons), which in turn modifies the previous case law on the matter and implies a deregulatory shift.158 However, some authors disagree159 and have argued that the Court may resort to other reasons related to

information in the field of technical regulations and of rules on Information Society services, O.J. L 241/1 (2015). 152 Barnard (2008), p. 361. 153 European Commission (2007), p. 36. 154 Specifically regarding the Services Directive: Case C-179/14, Commission v Hungary (ECJ 23 February 2016) para 102; See generally Case C-439/99, Commission v Italy (ECJ 15 January 2002). 155 Case C-390/99, Canal Sate´lite Digital (ECJ 22 January 2002). 156 Case C-55/94, Gebhard (ECJ 30 November 1995). 157 Barnard (2016), p. 440. 158 Chalmers et al. (2014), p. 845; de Witte (2007), p. 11; European Commission (2007), p. 37. 159 Klamert (2010), p. 117, who considers that Article 16 represents the host State rule.

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public interest in order to justify national restrictions, as it previously did regarding Article 52 TFEU,160 or even adopt a more flexible interpretation of the public policy concept.161 Some indication has already been offered by the Court162 in the sense that it will interpret Article 16 closely in line with Article 56 TFEU.163 Finally, Chapter IV of the Services Directive embraces two different sets of derogations. Article 17 contains additional derogations to the four reasons comprised in Article 16.1 and 16.3. Therefore, services of general economic interest, such as the postal, electricity, gas, and water distribution sectors, together with the activity of judicial recovery of debts, are excluded from the freedom to provide services. Other matters covered by secondary legislation, such as posted workers or professional qualifications,164 are also excluded. On the other hand, Article 18 deals with case-by-case derogations. However, according to this provision, Article 16 may be derogated only “in exceptional circumstances” and in order to take “measures relating to the safety of services”. Moreover, these case-by-case derogations must comply with some formal and substantial requirements; that is, the mutual assistance procedure of Article 35 must be used, there must be no EU harmonisation in the field, the measure must provide for a higher level of protection vis a vis the home legislation, the home State must not have taken any measures or must have taken measures insufficient as regards those referred to in Article 35.2, and the measures must be proportionate. Taking into account these cumulative conditions, it will be easier for an MS to invoke the overriding reasons provided for in Article 16.165 Moreover, the Services Directive has introduced some innovation and harmonisation in this field. On the one hand, Chapter IV has innovated through the inclusion of Section 2 on “rights of recipients”. While Article 19 prohibits national restrictions in general and, in particular, authorisations, declarations, and limits on the grant of financial assistance, Article 20 is focused on outright discriminatory measures. Article 21 is directed to the home State, which shall assist the recipients of services through the provision of information. On the other hand, the Directive has been harmonised through Chapter V, devoted to the “quality of services”. However, this harmonisation is far from establishing detailed rules on the quality of services. As argued, extensive harmonisation is not possible regarding this field, with more than 80 sectors involved.166 Instead, Chapter V is focused on ensuring that clear and accurate information is available in the service market. Therefore, 160

Davies (2007), p. 235; Hatzopoulos (2007), p. 245; Wyatt, in Dashwood et al. (2011), p. 623; Wiberg (2014), p. 133. Also, Craig and De Bu´rca (2015), p. 849, fn. 316, who consider that Recital 40 together with the argument of coherence vis a vis the other freedoms will point towards a wider and non-exhaustive list of justifications in the services field. 161 van de Gronden and de Waele (2010), p. 414. 162 Case C-458/08, Commission v Portugal (ECJ 18 November 2010) para 88. 163 Schu¨tze (2015), p. 645. 164 Case C-342/14, X-Steuerberatungsgesellschaft (ECJ 17 December 2015) para 37. 165 Barnard (2016), p. 442. 166 Barnard (2016), p. 444.

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Article 22.1 requires MS to ensure that service providers supply information about themselves, as well as their services. In order to strengthen this goal, Article 24 requires States to remove prohibitions on commercial communications. Article 26 squarely addresses the issue of quality of services, but on a voluntary basis.

4.4. Administrative Simplification and Cooperation

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The procedural provisions of the Services Directive are considered the most powerful innovation of this piece of secondary legislation, entailing a de facto harmonisation.167 Moreover, this chapter does not distinguish between domestic and foreign providers.168 Regarding administrative simplification, Article 5.1 requires MS to examine the procedures and formalities applicable to access to, and the exercise of, a service activity. If they are not sufficiently simple, MS will have to simplify them. This obliges MS to carry out a “real effort” of administrative simplification,169 although the absence of external evaluation mechanisms may suggest that Article 5.1 is no more than a “political self-containment”.170 However, the establishment of “points of single contact”, as provided by Article 6, may be of more practical relevance. These points must not only provide for the information set out in Article 7, but they must also complete “all procedures and formalities needed for access to his service activities”. Even if this innovation is a leap forward that will help avoid traditional administrative burdens experienced by service providers, only the setting up of a monitoring system will ensure the effective functioning of the single contact points.171 Finally, as regards administrative cooperation set out in Chapter VI, its importance has been diminished with the abandonment of the CoOP, although Article 5.3 of the Services Directive still includes the principle of mutual recognition of equivalent documents. The general obligation on mutual assistance provided in Article 28.1 has its practical counterpart on the duty to create “liaison points” provided for in Article 28.2. Moreover, Article 32 has given way to the creation of a European network of Member States’ authorities in order to manage an alert mechanism if a service activity may be at the origin of a “serious damage to the health or safety of persons or to the environment”. Moreover, Article 34 provides for the establishment of an electronic internal market information system (IMI), operational since December 2009, whose success remains to be seen.172

167

Hatzopoulos (2012), p. 260. European Commission (2007), p. 16. 169 European Commission (2007), p. 17. 170 Hatzopoulos (2012), p. 261. 171 Hatzopoulos (2012), p. 261, fn. 209. 172 Wyatt (2011), in Dashwood et al., pp. 615–616. 168

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List of Cases ECJ 21.06.1974, 2/74, Reyners, ECLI:EU:C:1974:68 [cit. in para 6, 7, 9, 12, 13, 38] ECJ 04.12.1974, 41/74, Van Duyn, ECLI:EU:C:1974:133 [cit. in para 19, 25, 26, 28] ECJ 26.05.1975, C-67/74, Bonsignore, ECLI:EU:C:1975:34 [cit. in para 26] ECJ 28.10.1975, 36/75, Rutili, ECLI:EU:C:1975:137 [cit. in para 25, 26, 27] ECJ 10.11.1976, 35/76, Simmenthal, ECLI:EU:C:1976:180 [cit. in para 20] ECJ 15.09.1977, 5/77, Tedeschi, ECLI:EU:C:1977:144 [cit. in para 20] ECJ 27.10.1977, 30/77, Bouchereau, ECLI:EU:C:1977:172 [cit. in para 25, 26, 27] ECJ 05.04.1979, 148/78, Ratti, ECLI:EU:C:1979:110 [cit. in para 20] ECJ 08.11.1979, 251/78, Denkavit, ECLI:EU:C:1979:252 [cit. in para 20] ECJ 03.07.1980, 157/79, Pieck, ECLI:EU:C:1980:179 [cit. in para 26] ECJ 17.12.1980, 149/79, Commission v Belgium, ECLI:EU:C:1982:195 [cit. in para 4, 7, 8] ECJ 18.05.1982, 115 and 116/81, Adoui and Cornuaille, ECLI:EU:C:1982:183 [cit. in para 28, 29] ECJ 10.07.1984, 72/83, Campus Oil and Others, ECLI:EU:C:1984:256 [cit. in para 24] ECJ 07.05.1986, 131/85, Gu¨l, ECLI:EU:C:1986:200 [cit. in para 23, 26] ECJ 15.05.1986, 222/84, Johnston, ECLI:EU:C:1986:206 [cit. in para 24] ECJ 03.06.1986, 307/84, Commission v France, ECLI:EU:C:1986:222 [cit. in para 9] ECJ 03.07.1986, 66/85, Lawrie-Blum, ECLI:EU:C:1986:284 [cit. in para 9, 10, 11] ECJ 16.06.1987, 225/85, Commission v Italy, ECLI:EU:C:1987:284 [cit. in para 9, 14] ECJ 26.04.1988, 352/85, Bond van Adverteerders, ECLI:EU:C:1988:196 [cit. in para 26] ECJ 27.04.1989, 321/87, Commission v Belgium, ECLI:EU:C:1989:176 [cit. in para 26] ECJ 18.05.1989, C-249/86, Commission v Germany, ECLI:EU:C:1989:204 [cit. in para 26] ECJ 30.05.1989, 33/88, Allue´ and Others, ECLI:EU:C:1989:222 [cit. in para 9] ECJ 05.12.1989, C-3/88, Commission v Italy, ECLI:EU:C:1989:606 [cit. in para 9] ECJ 05.02.1991, C-363/89, Roux, ECLI:EU:C:1991:41 [cit. in para 26] ECJ 18.06.1991, C-260/89, ERT, ECLI:EU:C:1991:254 [cit. in para 27] ECJ 25.07.1991, C-288/89, Gouda, ECLI:EU:C:1991:323 [cit. in para 26] ECJ 25.07.1991, C-353/89, Commission v The Netherlands (“Mediawet”), ECLI: EU:C:1991:325 [cit. in para 26] ECJ 04.10.1991, C-367/89, Richardt, ECLI:EU:C:1991:376 [cit. in para 24] ECJ 10.12.1991, C-306/89, Commission v Greece, ECLI:EU:C:1991:463 [cit. in para 9] ECJ 04.05.1993, C-17/92, Fedicine, ECLI:EU:C:1993:172 [cit. in para 26] ECJ 13.07.1993, C-42/92, Thijssen, ECLI:EU:C:1993:304 [cit. in para 12]

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ECJ 17.10.1995, C-83/94, Leifer, ECLI:EU:C:1995:329 [cit. in para 24] ECJ 30.11.1995, C-55/94, Gebhard, ECLI:EU:C:1995:411 [cit. in para 40] ECJ 02.07.1996, C-290/94, Commission v Greece, ECLI:EU:C:1996:265 [cit. in para 15] ECJ 02.07.1996, C-473/93, Commission v Luxembourg, ECLI:EU:C:1996:263 [cit. in para 15] ECJ 17.06.1997, C-65/95 and C-111/95, Shingara and Radiom, ECLI:EU: C:1997:300 [cit. in para 28] ECJ 28.04.1998, C-158/96, Kohll, ECLI:EU:C:1998:171 [cit. in para 21, 23, 26] ECJ 18.06.1998, C-266/96, Corsica Ferries France, ECLI:EU:C:1998:306 [cit. in para 24] ECJ 29.10.1998, C-114/97, Commission v Spain, ECLI:EU:C:1998:519 [cit. in para 11, 26] ECJ 19.01.1999, C-348/96, Calfa, ECLI:EU:C:1999:6 [cit. in para 7, 16, 29] ECJ 29.04.1999, C-224/97, Ciola, ECLI:EU:C:1999:212 [cit. in para 26] ECJ 21.09.1999, C-124/97, La¨a¨ra¨, ECLI:EU:C:1999:435 [cit. in para 21] ECJ 26.10.1999, C-273/97, Sirdar, ECLI:EU:C:1999:523 [cit. in para 16, 24] ECJ 21.11.1999, C-67/98, Zenatti, ECLI:EU:C:1999:514 [cit. in para 21] ECJ 09.03.2000, C-355/98, Commission v Belgium, ECLI:EU:C:2000:113 [cit. in para 7, 11, 26] ECJ 13.07.2000, C-423/98, Albore, ECLI:EU:C:2000:401 [cit. in para 16, 24, 27] ECJ 23.11.2000, C-421/98, Commission v Spain (“architects”), ECLI:EU: C:2000:646 [cit. in para 21] ECJ 18.01.2001, C-162/99, Commission v Italy, ECLI:EU:C:2001:35 [cit. in para 38] ECJ 01.02.2001, C-108/96, Mac Quen, ECLI:EU:C:2001:67 [cit. in para 23] ECJ 31.05.2001, C-283/99 Commission v Italy, ECLI:EU:C:2001:307 [cit. in para 4, 11] ECJ 12.07.2001, C-157/99, Smits and Peerbooms, ECLI:EU:C:2001:404 [cit. in para 21, 23] ECJ 12.07.2001, C-368/98, Vanbraekel, ECLI:EU:C:2001:400 [cit. in para 21 23] ECJ 20.11.2001, C-268/99, Jany, ECLI:EU:C:2001:616 [cit. in para 25] ECJ 15.01.2002, C-439/99, Commission v Italy, ECLI:EU:C:2002:14 [cit. in para 40] ECJ 22.01.2002, C-390/99, Canal Sate´lite Digital, ECLI:EU:C:2002:34 [cit. in para 40] ECJ 13.06.2002, C-430/99 and C-431/99, Sea-Land Service, ECLI:EU:C:2002:364 [cit. in para 24] ECJ 11.07.2002, C-60/00, Carpenter, ECLI:EU:C:2002:434 [cit. in para 27] ECJ 26.11.2002, C-100/01, Oteiza Olaza´bal, ECLI:EU:C:2002:712 [cit. in para 26] ECJ 13.05.2003, C- 385/99, Mu¨ller-Faure´ and van Riet, ECLI:EU:C:2003:270 [cit. in para 21, 23] ECJ 30.09.2003, 47/02, Anker and Others, ECLI:EU:C:2003:516 [cit. in para 13] ECJ 30.09.2003, C-405/01, Colegio de Oficiales de la Marina Mercante Espan˜ola, ECLI:EU:C:2003:515 [cit. in para 13] Segura Serrano

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ECJ 29.04.2004, C-482/01 and C-493/01, Orfanopoulos, ECLI:EU:C:2004:262 [cit. in para 27] ECJ 29.04.2004, C-171/02, Commission v Portugal, ECLI:EU:C:2004:270 [cit. in para 39] ECJ 13.07.2004, C-262/02, Commission v France (“alcohol tv advertising”), ECLI:EU:C:2004:431 [cit. in para 21] ECJ 14.10.2004, C-36/02, Omega, ECLI:EU:C:2004:614 [cit. in para 27] ECJ 26.01.2006, C-514/03, Commission v Spain, ECLI:EU:C:2006:63 [cit. in para 39] ECJ 16.05.2006, C-372/04, Watts, ECLI:EU:C:2006:325 [cit. in para 23] ECJ 15.06.2006, C-255/04, Commission v France, ECLI:EU:C:2006:401 [cit. in para 38] ECJ 05.12.2006, C-94/04 and C-202/04, Cipolla, ECLI:EU:C:2006:758 [cit. in para 39] ECJ 29.11.2007, C-404/05, Commission v Germany (“inspection of organic production”), ECLI:EU:C:2007:723 [cit. in para 12] ECJ 11.12.2007, C-438/05, Viking, ECLI:EU:C:2007:772 [cit. in para 34] ECJ 13.12.2007, C-465/05, Commission v Italy, ECLI:EU:C:2007:781 [cit. in para 11] ECJ 18.12.2007, C-341/05, Laval, ECLI:EU:C:2007:809 [cit. in para 34] ECJ 11.03.2008, C-89/07, Commission v France, ECLI:EU:C:2008:154 [cit. in para 13] ECJ 17.07.2008, C-500/06, Corporacio´n Dermoeste´tica, ECLI:EU:C:2008:421 [cit. in para 21] ECJ 10.09.2008, C-33/07, Jipa, ECLI:EU:C:2008:396 [cit. in para 25, 27] ECJ 11.09.2008, C-447/07, Commission v Italy, ECLI:EU:C:2008:502 [cit. in para 13] ECJ 07.11.2008, C-171/17, Commission v Hungary, ECLI:EU:C:2018:881 [cit. in para 39] ECJ 20.11.2008, C-94/08, Commission v Spain, ECLI:EU:C:2008:648 [cit. in para 13] ECJ 22.12.2008, C-161/07, Commission v Austria, ECLI:EU:C:2008:759 [cit. in para 18] ECJ 19.05.2009, C-171/07 and C-172/07, Apothekerkammer des Saarlandes, ECLI: EU:C:2009:316 [cit. in para 23] ECJ 10.03.2009, C-169/07, Hartlauer, ECLI:EU:C:2009:141 [cit. in para 23] ECJ 08.09.2009, C-42/07, Liga Portuguesa de Futebol Profissional, ECLI:EU: C:2009:519 [cit. in para 21] ECJ 22.10.2009, C-438/08, Commission v Portugal (“road inspection”), ECLI:EU: C:2009:651 [cit. in para 9, 12] ECJ 11.03.2010, C-384/08, Attanasio Group, ECLI:EU:C:2010:133 [cit. in para 26] ECJ 01.06.2010, C-570/07, Blanco Pe´rez and Chao Go´mez, ECLI:EU:C:2010:300 [cit. in para 23] ECJ 05.10.2010, C-173/09, Elchinov, ECLI:EU:C:2010:581 [cit. in para 23] Segura Serrano

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ECJ 23.10.2010, C-145/09, Tsakouridis, ECLI:EU:C:2010:708 [cit. in para 24] ECJ 18.11.2010, C-458/08, Commission v Portugal, ECLI:EU:C:2010:692 [cit. in para 41] ECJ 23.11.2010, C-145/09, Tsakouridis, ECLI:EU:C:2010:708 [cit. in para 20] ECJ 27.01.2011, C-490/09, Commission v Luxembourg, ECLI:EU:C:2011:34 [cit. in para 23] ECJ 24.05.2011, C-61/08, Commission v Greece, ECLI:EU:C:2011:340 [cit. in para 11] ECJ 24.05.2011, C-54/08, Commission v Germany, ECLI:EU:C:2011:339 [cit. in para 11] ECJ 24.05.2011, C-53/08, Commission v Austria, ECLI:EU:C:2011:338 [cit. in para 11] ECJ 24.05.2011, C-51/08, Commission v Luxembourg, ECLI:EU:C:2011:336 [cit. in para 11] ECJ 24.05.2011, C-50/08, Commission v France, ECLI:EU:C:2011:335 [cit. in para 11] ECJ 24.05.2011, C-47/08, Commission v Belgium, ECLI:EU:C:2011:334 [cit. in para 11] ECJ 17.11.2011, C-430/10, Gaydarov, ECLI:EU:C:2011:749 [cit. in para 25, 26] ECJ 17.11.2011, C-434/10, Aladzhov, ECLI:EU:C:2011:750 [cit. in para 25] ECJ 01.12.2011, C-157/09, Commission v Netherlands, ECLI:EU:C:2011:794 [cit. in para 7] ECJ 22.05.2012, C-348/09, P.I., ECLI:EU:C:2012:300 [cit. in para 24, 25] ECJ 19.07.2012, C-470/11, Garkalns, ECLI:EU:C:2012:505 [cit. in para 21] ECJ 11.07.2013, C-57/12, Femarbel, ECLI:EU:C:2013:517 [cit. in para 34] ECJ 05.12.2013, C-159/12 to C-161/12, Venturini, ECLI:EU:C:2013:791 [cit. in para 23] ECJ 12.06.2014, C-156/13, Digibet, ECLI:EU:C:2014:1756 [cit. in para 21] ECJ 22.01.2015, C-463/13, Stanley International Betting, ECLI:EU:C:2015:25 [cit. in para 21] ECJ 16.06.2015, C-593/13, Rina Services and Others, ECLI:EU:C:2015:399 [cit. in para 38] ECJ 10.09.2015, C-151/14, Commission v Latvia, ECLI:EU:C:2015:577 [cit. in para 8, 11] ECJ 01.10.2015, C-340/14 and C-341/14, Trijber, ECLI:EU:C:2015:641 [cit. in para 37] ECJ 15.10.2015, C-168/14, Grupo Itevelesa and Others, ECLI:EU:C:2015:685 [cit. in para 12] ECJ 17.12.2015, C-342/14, X-Steuerberatungsgesellschaft, ECLI:EU:C:2015:827 [cit. in para 42] ECJ 23.12.2015, C-293/14, Hiebler, ECLI:EU:C:2015:843 [cit. in para 37] ECJ 28.01.2016, C-375/14, Laezza, ECLI:EU:C:2016:60 [cit. in para 21] ECJ 23.02.2016, C-179/14, Commission v Hungary, ECLI:EU:C:2016:108 [cit. in para 38, 39, 40]

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ECJ 01.02.2017, C-392/15, Commission v Czech Republic, ECLI:EU:C:2017:73 [cit. in para 11] ECJ 20.12.2017, C-434/15, Asociacio´n Profesional Elite Taxi, ECLI:EU: C:2017:981 [cit. in para 34] ECJ, 30.01.2018, C-360/15 and C-31/16, X, ECLI:EU:C:2018:44 [cit. in para 34] ECJ 10.04.2018, C-320/16, Uber France, ECLI:EU:C:2018:221 [cit. in para 34] ECJ 13.11.2018, C-33/17, Cˇepelnik, ECLI:EU:C:2018:1022 [cit. in para 34] ECJ 19.12.2018, C-375/17, Stanley International Betting, ECLI:EU:C:2018:1026 [cit. in para 21] Opinion 05.12.1973, 152/73, Sotgiu, ECLI:EU:C:1973:148 [cit. in para 3] Opinion 28.05.1974, 2/74, Reyners, ECLI:EU:C:1974:59 [cit. in para 11] Opinion 24.09.1980, 149/79, Commission v Belgium, ECLI:EU:C:1982:153 [cit. in para 15] Opinion 15.04.1986, 307/84, Commission v France, ECLI:EU:C:1986:150 [cit. in para 11] Opinion 29.04.1986, 66/85, Lawrie-Blum, ECLI:EU:C:1986:179 [cit. in para 10] Opinion 27.01.1987, 225/85, Commission v Italy, ECLI:EU:C:1987:36 [cit. in para 10] Opinion 14.02.1989, 33/88, Allue´ and Others, ECLI:EU:C:1989:62 [cit. in para 10]

References Adamski, D. (2018). Lost on the digital platform: Europe’s legal travails with the digital single market. Common Market Law Review, 55, 719–752. Barav, A. (1977). La libre circulation des travailleurs, l’ordre public et le pouvoir de sanctions des E´tats membres. Revue trimestrielle de droit europe´en, 13, 721–735. Barnard, C. (2008). Unravelling the services Directive. Common Market Law Review, 45, 323– 394. Barnard, C. (2016). The substantive law of the EU. The four freedoms. Oxford: OUP. Chalmers, D., Davies, G., & Monti, G. (2014). European Union law. Text and materials. Cambridge: CUP. Constantinesco, V., et al. (Eds.). (1992). Traite´ instituant la CEE, Commentaire article par article. Paris: Economica. Craig, P., & De Bu´rca, G. (2015). EU law. Texts, cases, and materials. Oxford: OUP. Damjanovic, D. (2017). Territorial restrictions in the chimney sweep business under the Services Directive. Common Market Law Review, 54, 1535–1554. Dashwood, A., Dougan, M., Rodger, B., Spaventa, E., Wyatt, D. (2011). Wyatt and Dashwood’s European Union law. Oxford: Hart. Davies, G. (2007). The Services Directive: Extending the country of origin principle and reforming public administration. European Law Review, 32, 232–245. de Witte, B. (2007). Setting the scene: How did services get to Bolkestein and why? EUI Working Papers, 20. Demaret, P., & Ernst de la Graete, B. (1983). Mesures nationales d’ordre public et circulation des personnes entre Etats membres. Cahiers de Droit Europe´en, 19, 255–303. Druesne, G. (1981). La liberte´ de circulation des personnes dans la CEE et les «emplois dans l’administration publique», sur une arreˆt du 17 de´cembre 1980 de la Cour de justice des Communaute´s europe´ennes. Revue trimestrielle de droit europe´en, 17, 286–300.

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European Commission. (2007). Handbook on implementation of the Services Directive. Luxembourg: Office for Official Publications of the European Communities. Hall, S. (1991). The European Convention on Human Rights and public policy exceptions to the free movement of workers under the EEC Treaty. European Law Review, 16, 466–488. Handoll, J. (1988). Article 48(4) EEC and non-national access to public employment. European Law Review, 13, 223–241. Hatzopoulos, V. (1999). Killing national health and insurance systems but healing patients? The European market for health care services after the judgments of the ECJ in Vanbraekel and Peerbooms. Common Market Law Review, 36, 683–729. Hatzopoulos, V. (2007). Assessing the Services Directive (2006/123/EC). Cambridge Yearbook of European Legal Studies, 10, 215–261. Hatzopoulos, V. (2012). Regulating services in the European Union. Oxford: OUP. Huglo, J.-G. (2000). Droit d’e´tablissement et libre prestation de services, Juris-Classeur Europe, fasc. 710. Kapteyn, P. J. G., & Verloren van Themaat, P. (1998). Introduction to the law of the European Communities (3rd ed.). London: Kluwer. Klamert, M. (2010). Of empty glasses and double burdens: Approaches to regulating the services market a` propos the implementation of the Services Directive. Legal Issues of Economic Integration, 37, 111–132. Kostakopoulou-Dochery, D., & Ferreira, N. (2013–2014). Testing liberal norms: The public policy and public security derogations and the cracks in European Union citizenship. Columbia Journal of European Law, 20(2), 167–191. Lenaerts, K. (1988). Le juge et la Constitution aux E´tats-Unis d’Amerique et dans l’ordre juridique europe´en. Brussels: Bruylant. Lenz, B. (1989). The public service in Article 48 (4) EEC with special reference to the law in England and in the Federal Republic of Germany. Legal Issues of European Integration, 75– 122. Lirola Delgado, M. I. (1994). Libre circulacio´n de personas y Unio´n Europea. Madrid: Civitas. Lyon-Caen, G. (1984). Un arreˆt d’une interpre´tation difficile: l’arreˆt de la Cour de Justice dans l’affaire des «chemins de fer belges» confronte´ au droit franc¸ais. In P. Manin et al. (Eds.), E´tudes de Droit des Communaute´s Europe´ennes, Me´langes offerts a` Pierre-Henri Teitgen. Paris: Pedone. Mancini, F. G. (1993). La circulacio´n de los trabajadores por cuenta ajena en la jurisprudencia comunitaria. In G. C. Rodrı´guez Iglesias & D. J. Lin˜a´n Nogueras (Eds.), El Derecho comunitario europeo y su aplicacio´n judicial (pp. 805–817). Madrid: Civitas. Martı´n y Pe´rez de Nanclares, J. (1999). El derecho de establecimiento. In M. Lo´pez Escudero & J. Martı´n y Pe´rez de Nanclares (Eds.), Derecho comunitario material (pp. 123–136). Madrid: McGraw-Hill. Masclet, J.-C. (1997). Libre circulation des marchandises. Juris-Classeur Europe, fasc. 551. Mattera, A. (1991). El mercado u´nico europeo, sus reglas, su funcionamiento. Madrid: Civitas. Milla´n Moro, L. (1988). Algunas limitaciones a la libre circulacio´n de personas en el Tratado CEE. Gaceta Jurı´dica de la CEE, D-9, 135–188. Schmidt, M.-F. (1996). Liberte´ d’e´tablissement et libre prestation de services. Joly Communautaire, 2. Schu¨tze, R. (2015). European Union Law. Cambridge: CUP. Segura Serrano, A. (2002). Improvements in cross-border access to health services within the European Union. Harvard International Law Journal, 43(2), 553–567. Segura Serrano, A. (2003). El intere´s general y el comercio de servicios. Madrid: Tecnos. Stelkens, U., Weiß, W., & Mirschberger, M. (Eds.). (2012). The implementation of the EU Services Directive. Transposition, problems and strategies. The Hague: TMC Asser Press. van de Gronden, J., & de Waele, H. (2010). All’s Well That Bends Well? The constitutional dimension to the Services Directive. European Constitutional Law Review, 6, 397–429.

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Van Rijn, T. (2017). Les situations juridiques internes sont-elles couvertes par la directive services? Cahiers de Droit Europe´en, 1, 193–211. Weatherill, S. (2007). Promoting the consumer interest in an integrated services market. Mitchell Working Paper Series, 1, 5. Wiberg, M. (2014). The EU Services Directive: Law or simply policy? The Hague: TMC Asser Press.

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Chapter 4 Capital and Payments

Article 63 [Free Movement of Capital and Payment] (ex-Article 56 TEC) 1. Within the framework of the provisions set out in this Chapter, all restrictions40–42 on the movement of capital47–98 between Member States and between Member States and third countries43–46 shall be prohibited. 2. Within the framework of the provisions set out in this Chapter, all restrictions on payments between Member States and between Member States and third countries shall be prohibited.104–140 Contents 1. 2.

3. 4. 5.

6.

#

Scope of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Genesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.1. Rome Treaty and the First Capital Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.2. Capital Directive 88/361/EEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.3. Treaty of Maastricht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2.3.1 The Case of Sanz de Lera . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.3.2 Legal Status of Directive 88/361 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Duty to Abolish Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Notion of “Third Country” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Notion of “Capital” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 5.1. Pre-Sanz de Lera . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 5.1.1 Thompson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 5.1.2 Luisi and Carbone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 5.1.3 Lambert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 5.2. Post-Sanz de Lera . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 5.2.1 André Ambry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 5.2.2 Klaus Konle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 5.2.3 Trummer and Mayer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 5.2.4 Commission v Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 5.2.5 Église de Scientologie de Paris v Prime Minister . . . . . . . . . . . . . . . . . . . . . . . . . . 74 5.3. Golden Shares Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 5.3.1 Commission v Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 5.3.2 Commission v Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 5.3.3 Commission v United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 5.3.4 Commission v Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 5.3.5 Commission v France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 5.3.6 Commission v Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 5.3.7 Federconsumatori and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 5.4. Concluding Remarks on ECJ Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Free Movement of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 6.1. Overview and Genesis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 6.2. Legislative Packages on Payment Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 6.2.1 Payment Services Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 6.2.2 Cross-Border Payments in Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 6.3. Payment Services Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 6.3.1 List of Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

Springer Nature Switzerland AG 2021 H.-J. Blanke, S. Mangiameli (eds.), Treaty on the Functioning of the European Union – A Commentary, Springer Commentaries on International and European Law, https://doi.org/10.1007/978-3-030-43511-0_64

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6.3.2 Payment Institution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.3 Tied Agents and Branches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.4 Competent Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.5 Payment Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4. Single Euro Payment Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Impact of Brexit on the Free Movement of Capital and Payments . . . . . . . . . . . . . . . . . . . . . 7.1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2. Trade and Cooperation Agreement Between the EU and UK . . . . . . . . . . . . . . . . . . . . 7.3. Brexit and Free Movement of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4. Brexit and the Unity of the Single Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5. Brexit and Article 63 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Cases References

1. 1

2

3

122 128 131 132 139 141 141 143 145 148 149

Scope of Application

The free movement of goods, persons, services, establishment, and capital collectively constitutes the EU single market. Even though the four economic freedoms formed the foundation of the single market, the degree and level of their liberalisation were not the same. It was only after the Maastricht Treaty (1993) that all these economic freedoms acquired the same legal standing in the single market. Until then, the free movement of capital had not been free as the other economic freedoms.1 Article 63.1 TFEU forms the key treaty provision regulating the free movement of capital. The ability to freely move capital is an essential precondition for the exercise of the other economic freedoms. The free movement of goods means not only the right to sell the products in the other MS without the payment of customs duties but also the seller’s right to accept payment and to repatriate the proceeds to the country of origin of the goods. The Treaty guarantees the right of Union residents to freely move into another MS and to accept employment (Article 45 TFEU). The right to provide services embraces the right to provide financial services such as banking and insurance across the Union (Article 58.2 TFEU). All these activities will be nullified if there is no corresponding freedom to move capital from one MS to another. In the well-known case of Casati, the ECJ made it plainly clear that “freedom to move certain types of capital is in practice, a precondition for the effective exercise of other freedoms guaranteed by the Treaty, in particular the right of establishment”.2 Every amendment introduced to the Treaty of Rome, including the Lisbon Treaty, had an impact on the legal formulation of the free movement of capital. The changes introduced by these amendments to the rules on the free movement of goods, persons, and services and the right of establishment were trivial compared to the radical changes introduced to the rules on the free movement of capital. 1 2

Seyad (1999). Case 203/80, Casati (ECJ 11 November 1980) para 8.

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The free movement of capital was subject to periodical liberalisation based on the primary and secondary laws. The major contribution to the development of the law on the free movement of capital was by the judicial branch of the Union.3 The determination of the nature and speed of the free movement of capital and the gradual dismantling of the barriers to its free movement was largely a product of judicial intervention.4 The commentary on the various attributes of the free movement of capital will thus be largely supported by the case law of the ECJ.

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4

Genesis

2.1. Rome Treaty and the First Capital Directive

In the Treaty of Rome 1957/1958, the rules on the free movement of capital were set out in Articles 67–73 TEEC. The key legal provision was Article 67 TEEC, which declared that the free movement of capital shall be liberalised between the MS but with a caveat “to the extent necessary for the proper functioning of the common market”. The corresponding treaty provisions on the free movement of goods, persons, services and establishment did not contain an inherent limitation as found in Article 67 TEEC. As Article 69 TEEC provided, the intervention of the Council by means of directives was a mandatory requirement for the implementation of Article 67 TEEC. It acted unanimously during the first two stages and thereafter by qualified majority voting. Articles 70 and 72 TEEC formed the legal basis for regulating the circulation of capital towards third counties. Article 71 TEEC was a self-regulatory legal provision calling upon the MS to avoid introducing within the Community any new exchange restrictions on the movement of capital and current payments connected with such movements. It also requests the MS to endeavour not to make existing rules more restrictive. Article 73 TEEC enabled MS upon authorisation by the Commission to take protective measures if capital movements cause any disturbance to the proper functioning of the common market. The aim of Article 67 TEEC is to set free the movement of capital, and the means adopted to realise it are the directives prescribed in Article 69 TEEC. The First Capital Directive for the implementation of Article 67 TEEC was adopted in 1960,5 which was amended in 1962.6 The Directive set out four categories of capital movements subject to varying degrees of liberalisation. It gives priority to the deregulation of capital transactions, which are associated with the exercise of the other economic freedoms such as short-term and medium-term credits in respect of commercial transactions, investments, personal 3

Seyad (1996a). On the belated judicial activism in the field of free movement of capital, see Flynn (2002). 5 O.J. (1959–1962), English Special Edition p. 49. 6 O.J. (1963–1964), English Special Edition p. 5. 4

Seyad

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6

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8

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capital movements, and trade in quoted securities. Most of the capital movements associated with these transactions were largely liberalised. As far as financial transactions relating to the issuing of bonds and long-term credits are concerned, they were subject to conditional liberalisation. The MS were required to liberalise such transactions, but they also reserved the right to withdraw such liberalisation. The financial transactions relating to short-term capital movements, opening of bank accounts across the borders, and other transactions associated with currency speculation were not liberalised at all. The legal status of Article 67 TEEC and the First Capital Directive was subject to judicial review for the first time in the case of Casati.7 The case involved an Italian national attempting to take with him a sum of money to Germany in breach of the Italian exchange control legislation, which required prior administrative authorisation. The criminal trial judge referred to the ECJ to ascertain whether Article 67 TEEC has direct effect and, if so, whether it renders the disputed Italian legislation restricting both inward and outward flows of capital invalid. The ECJ declared that the phrase “to the extent necessary” in Article 67 TEEC makes imprecise and ambiguous the obligations imposed on the MS to liberalise the capital freedom. The ECJ further examined the First Capital Directive and found that competence to regulate import and export of physical banknotes were left intact with the MS. In view of this inherent limitation, the ECJ declared Article 67 TEEC to have no direct effect. The essence of this judgment is that it left intact the competence of MS to control the movements of capital. The overall effect of this judgment was that capital freedom was not elevated to the status of the other economic freedoms, which had been already liberalised. As a result, until the early 1990s, the free movement of capital was consigned to the slow track of the European single market.

2.2. Capital Directive 88/361/EEC

10

Since the ECJ declared Article 67 TEEC to have no direct effect, there was hardly any progress made in the field of financial integration until the Treaty of Rome was amended by the Single European Act (SEA 1986). An important objective of this treaty amendment was to facilitate and expedite the process of financial integration by means of simplifying the law-making procedure in this sector. The SEA facilitated the adoption of several secondary legal measures in the financial sector. Apart from facilitating to launch the internal market on 1 January 1993, the SEA also provided a sound legal foundation to liberalise the free movement of capital and to realise the objective of creating a single market in financial services.

7

Case 203/80, Casati (ECJ 11 November 1981). See on the case Louis (1982).

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The problem left behind by Casati was to some extent rectified by the adoption of Capital Directive 88/361.8 The aim of adopting this legal act was to completely liberalise the free movement of capital between the MS by repealing the previous directive. Even though the supreme law governing the free movement of capital is Article 63 TFEU, this treaty provision continues the preceding practice of not defining what constitutes capital movements. Furthermore, after Sanz de Lera, the ECJ has very often referred to this legal instrument to ascertain whether a particular transaction constitutes capital or not. As such, even though Directive 88/361 is not a legally binding document, it is still invoked and relied upon by the ECJ as a guideline to ascertain what constitutes capital. Article 1 of Directive 88/361 was carefully formulated to ensure its direct effect, which unambiguously imposes an obligation on all MS to remove the restrictions on cross-border movements of capital. It does not attach any qualifying and ambiguous phrases as found in Article 67 TEEC. It commands that “Member States shall abolish restrictions on movements of capital taking place between residents in Member States”. The structure and form of this Directive makes it abundantly clear that liberalisation is the general rule and the right of derogation is the exception. Article 6.2 lays down transitional arrangements for four MS authorising them to continue the application of certain restrictions to the newly liberalised operations until the end of 1992.9 In the absence of a definition of capital movements, this Directive continues the traditional method of listing different categories of capital movements. But unlike the preceding directive, Directive 88/361 does not subject capital movements to different degrees of authorisation. Consequently, the principle of unconditional liberalisation applies to all capital transactions, whether short term or long term. Article 3 lays down the safeguard clauses in the form of “protective measures” in the event that short-term capital movements of exceptional magnitude impose severe strains on foreign exchange markets and lead to serious disturbances for an MS’s monetary and exchange rate policies. Those articles are intended to apply particularly in the event of any balance of payment difficulties. In order to benefit from Article 3, certain stringent conditions have to be satisfied. In an emergency situation, the concerned MS itself is authorised to adopt the necessary safeguard measures (Article 3.2). These protective measures cannot be maintained for more than six months, and the Council is empowered to revoke or amend it by a qualified majority. Article 4 of the Directive authorises MS to take all requisite measures to prevent infringements of their laws and regulations, particularly in the fields of taxation, and to lay down procedures for the declaration of capital movements for

8

Council Directive 88/361/EEC for the implementation of Article 67 of the Treaty, O.J. L 178/5 (1988). 9 Namely Spain, Greece, Ireland and Portugal.

Seyad

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purposes of administrative or statistical information.10 However, these measures should not impede the movements of capital that are consistent with EU laws. The financial institutions are no longer required to check the nature and genuineness of the transactions carried out through their banks. The most an MS could do is to request a financial institution to maintain a record of transactions between residents and non-residents for administrative and statistical purposes. Article 7 deals with movements of capital with third countries. The obligation of the MS with regard to movement of capital with third countries is expressed in a legally non-binding manner as they shall merely “endeavour to attain the same degree of liberalization as that which applies to operations with residents of other Member States”. The effect of the wording of this article seems to be that it is not intended to have direct effect. This cautious approach of the Community in relation to third countries may be justified so long as it does not receive similar reciprocal treatment. This is the only article that is of direct concern to third countries, but its scope seems to be rather limited. It contemplates some kind of a reciprocal agreement being reached to ensure a free flow of capital with third countries. According to this article, reciprocal conditions concerning operations related to establishment, provisions of financial services, and the admission of securities to capital markets can be required by domestic rules or EU law (Article 7.1 (2)). After the major legislative and constitutional amendments introduced to the free movement of capital, the ECJ had the opportunity to pronounce upon their legal status on three occasions within 12 months. The reason for not integrating all the cases may perhaps be due to the fact that the legal issues to be resolved were based on different legal instruments.11 The facts giving rise to Aldo Bordessa arose before the new chapter on capital and payments in the Maastricht Treaty came into force. The law applicable at the relevant time was Directive 88/361; understandably, the national court requested the ECJ for a preliminary ruling on the compatibility of the relevant Spanish legislation12 with the Directive and not Article 73b EC. The case involved the arrest of certain Spanish and Italian nationals who allegedly attempted to smuggle out of Spain certain sum of money in excess of the authorised limit imposed by the national exchange laws. Export of over one million pesetas had to be declared to the relevant authorities, and if the amount exceeded five million pesetas, its export was subject to prior authorisation by administrative officers. The specific legal issue raised was whether the national law requiring prior authorisation of export of currency was compatible with Article 4 of the Directive. This provision authorises

10

A similar provision is found in Article 5.1 of the first Directive. Joined Cases C-358/93 and C-416/93, Aldo Bordessa (ECJ 23 February 1995) involved the interpretation of Directive 88/361; Case C-484/93, Svensson and Gustavsson (ECJ 14 November 1995) concerned Articles 67 and 71; Joined Cases C-163/94, C-165/94 and C-250/94, Sanz de Lera (ECJ 14 December 12.1995) dealt with Articles 73b, 73c (1) and 73d (1) (b) EC respectively. 12 Article 4(1) of Royal Decree 1819 of 20 December 1991 on Foreign Economic Transactions. 11

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MS, inter alia, to lay down procedures for requiring the declaration of capital movements for administrative or statistical purposes. Article 1 of Directive 88/361 imposes an obligation on MS to prohibit all restrictions on the free movement of capital on or before 1 July 1990. Article 6.2 authorised certain MS13 such as Spain further time to comply with its provisions, particularly the right to retain control over physical import and export of financial assets.14 Even though the alleged infringement of the foreign exchange law happened before Directive 88/361 came into force in Spain, this issue was not seriously canvassed as an objection in the legal proceedings. First and foremost, the ECJ ascertained that due to its clear and unconditional wording, Article 1 of the Directive had direct effect.15 In order to resolve the more specific issue of legality of prior authorisation, the ECJ drew a distinction between the right of MS to require a declaration and the right to require a prior administrative authorisation. The ECJ held that the right of MS to require persons crossing their borders to declare their financial assets is in compliance with EU law on capital movements. However, since the requirement of prior administrative authorisation seriously limits the freedom to move capital, the ECJ declared that it exceeded the purpose that it seeks to prevent and thereby offends the principle of proportionality.16 The judgment of the ECJ in relation to the free movement of capital goes in opposite direction in these cases. In Casati, the ECJ found that the key treaty provision on free movement of capital has no direct effect, whereas in Aldo Bordessa, it declared that the relevant provision in the implementing secondary law dealing with capital movements has direct effect. These divergent judicial trends on free movement of capital created legal uncertainty and brought into focus the hierarchy of legal norms.

20

21

22

2.3. Treaty of Maastricht

It was partly to remove the legal uncertainty created by the judgments in Casati and Aldo Bordessa that Articles 67–73 TEEC were repealed and replaced by a new set of rules effective from 1 January 1994. The Maastricht Treaty completely repealed Articles 67–73 TEEC and replaced them with Articles 73b through 73h TEC (¼Articles 56–60 TEC-Amsterdam ¼ Articles 63–66 and 75 TFEU, respectively). There is no change in substance or in the wording of the key treaty provision on the free movement of capital since the changes introduced by the Maastricht Treaty (except Article 64(3) TFEU). 13

Greece, Ireland and Portugal were also authorised to continue to apply certain restrictions until the end of 1992. 14 Annex IV, List IV of the Directive. 15 Joined Cases C-358/93 and C-416/93, Aldo Bordessa (ECJ 23 February 1995) para 3. 16 Joined Cases C-358/93 and C-416/93, Aldo Bordessa (ECJ 23 February 1995) para 2.

Seyad

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24

Apart from removing the legal contradiction between the primary and secondary laws, the new legal provisions on free movement of capital also created a clear legal framework for the deepening of the single market, establishment of the economic and monetary union (EMU), and further strengthening of the legal foundation on financial integration. 2.3.1.

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The Case of Sanz de Lera

In the Joined Case Sanz de Lera,17 the ECJ was called upon for the first time not only to decide on the scope of application of Article 63 (ex-Article 73b TEC) within the single market but also to determine the extent to which the Union is obliged to open its capital market to the outside world.18 This case involved the arrest of certain individuals who allegedly attempted to smuggle out of Spain a certain sum of money in excess of the authorised limit imposed by the national exchange laws. The destination of the capital was to third countries, namely Turkey and Switzerland. The Court followed the precedent set in Aldo Bordessa and declared that national laws prohibiting the export of currency without prior authorisation are contrary to EU law. It qualified the broad application of this judicial dictum by recognising the competence of MS to require the declaration of financial assets prior to their being carried out of the country. The outcome of this case extending constitutional protection to capital freedom obviously had been expected since the judgment in Aldo Bordessa but not to the extent of giving similar guarantees to movements of capital to third countries. In Sanz de Lera, the ECJ not only endorsed the general principle of the free movement of capital within the Union but also extended the benefits of the freedom to third countries.19 The free movement of goods, persons, and services are confined to the geographical limits of the Union, and as such they are classified as Community or Union freedoms. Unlike the free movement of goods, persons, and services, the territorial scope of the free movement of capital is not confined to the MS of the Union, but its benefits also extend to third countries. As such, it may be labelled as a global freedom as compared to a Union freedom. This judgment provides an impetus towards liberalisation of international capital movements. It is in conformity with certain international legal instruments having a similar objective, such as the General Agreement of Trade and Services (GATS),20 a forum for multilateral negotiations to regulate international trade in

17

Joined Cases C-163/94, C-165/94 and C-250/94, Sanz de Lera (ECJ 14 December 1995). Seyad (2001). 19 Seyad (1996b). 20 After the Uruguay Round negotiations in December 1993, the financial services sector was kept as an integral part of the GATS. 18

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services, and the twin OECD Code of Liberalisation of Capital Movements.21 Sanz de Lera set a precedent for the signatory states of these instruments to follow suit and remove most of the barriers to their capital markets. The combined effect of Article 63 TFEU and the Sanz de Lera judgment provides an impetus to accelerate the international movement of capital. Apart from facilitating international trade in services, the liberalisation of the capital flows beyond the EU territory contributes to developing the single currency, the euro, as a competitive international currency. The scope of the Sanz de Lera judgment should, however, be confined to the facts of the case. The essence of the judgment was to remove exchange controls in relation to banknotes and not to abolish all forms of capital controls. This proposition could be justified by reference to Article 64.2 and 64.3 TFEU [exArticle 73c (2) TEC]. This article provides for a differentiated decision-making process in the form of qualified majority in the Council for further liberalisation, and unanimous voting is required for any measures that constitute a step back in EU law in matters relating to direct investment to or from third countries, which includes the right of establishment, provision of financial services, and the listing and offering of securities to capital markets. The effect of this qualifying provision is to keep intact all such restrictions on capital movements in the field of establishment and services, thereby limiting the scope of the objectives sought to be achieved in terms of Article 63 TFEU in relation to third countries. If the Union wishes to extend the freedom to move capital other than banknotes to third countries, it should adopt specific measures as prescribed in Article 64 TFEU. The Council should adopt specific measures on a proposal from the Commission if capital freedom linked to the right of establishment and freedom to provide financial services are to be extended to third countries. The obligations flowing from the international instruments and the EU law to liberalise international capital movements are not the same. In the former context, the duty to liberalise capital movements are not a strictly binding obligation, and there is no effective and credible legal mechanism for its enforcement as found in the EU legal system. On the other hand, obligations arising from EU law are legally binding on all the MS unless there is a specific exception. There is also an effective and reliable judicial mechanism to ensure its compliance. All MS are legally bound to adhere to the general principle of non-discrimination, and this principle applies to capital movements as well. A similar provision does exist under the Code of Liberalisation of Capital Movements, but there is no effective legal mechanism to enforce as under EU law. There is no need for reciprocity within an integrated financial market as all MS are bound by the same set of rules and regulations.

21

The OECD Code of Liberalisation of Capital Movements and of Current Invisible OperationsUsers Guide 2007 published by the OECD Secretariat.

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Legal Status of Directive 88/361

The original legal framework governing capital movements was characterised by a contradiction between Article 67.1 TEEC, which the ECJ declared not to be directly effective, and Directive 88/361, which seeks to completely liberalise this freedom. The apparent contradiction between the judicial and legislative treatment of this freedom brought about a cloud of uncertainty in this branch of Union law. The Lisbon Treaty converged the objectives of the primary and secondary laws on capital movements, but certain doubts arise regarding the legal status of the Capital Directive. It owes its legal basis to Articles 69 and 70.1 TEEC, both of which ceased to have the force of law by virtue of operation of Article 73a TEC. This change of legal environment raises an important and interesting legal issue; namely, if the primary law loses its legal validity, could the secondary laws made thereunder legally survive? According to one shade of opinion, all legal measures adopted under the replaced treaty provisions on capital movements shall cease to have the force of law.22 According to this view, the effect of Article 73a TEC is not merely to replace the original treaty provisions on capital movements but also to invalidate all secondary legislation adopted thereunder. The deficiency in this line of thinking is that it does not address the problems relating to the implementation of Article 63 TFEU. This follows the pattern of its preceding article, which merely lays down the general principle of liberalisation without defining what constitutes capital movements. The new chapter on capital does not incorporate a provision similar to Article 69 TEEC to issue directives for the implementation of Article 63 TFEU. Since the Council is deprived of its powers to issue directives, the burden will shift to the ECJ to determine which transaction should fall within the scope of Article 63 TFEU. The function of enumerating different transactions as capital movements belonged to the legislative branch of the Community. As such, the ECJ would be less inclined to transgress into this area as it declared in Casati that it is for the Council to determine which transactions are to be treated as liberalised capital movements.23 The practical advantages of retaining this Directive would outweigh its complete elimination. The Capital Directive established a nomenclature for the various capital movements, and Annex 1 declares that it is not an exhaustive list. Since a directive could be easily amended, it could accommodate even other categories of capital movements not specifically included in the annex. In FII Group Litigation, the ECJ declared: “the nomenclature of capital movements annexed [to Directive 88/361] has indicative value, for the purposes of defining the term ‘movement of

22 23

Torre (1995) and Bond (1999). Case 203/80, Casati (ECJ 11 November 1981) para 11.

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capital’ [. . .] subject to the qualification, contained in the introduction to the nomenclature, that the list set out therein is not exhaustive”.24 Such categorisation was introduced merely to simplify the implementation of this freedom. In the absence of a definition of what constitutes capital movements in the amending treaty, the retention of this Directive should form a useful source of illustration of the principle of the free movement of capital.25 It is also noteworthy that the ECJ in Sanz de Lera did not directly or indirectly declare the Directive to be void in view of the emergence of the new rules on capital movements. On the other hand, the ECJ made generous reference to the Directive in order to illustrate the legal structure and scope of Article 73c TEC.

3.

38

39

Duty to Abolish Restrictions

Article 63 TFEU envisages the abolition of all restrictions on the movement of capital between the MS and towards third countries. The Treaty is silent as to the meaning or the scope of the restrictions that it seeks to abolish. It will cover the abolition of all exchange restrictions in favour of the beneficiary’s resident in MS or third countries, as confirmed in Aldo Bordessa and Sanz de Lera. The first two Directives issued for the implementation of Article 67 TEEC deal primarily with the abolition of restrictions on exchange controls to the extent necessary to exercise the other economic freedoms. The obligation imposed on the MS to eliminate all restrictions affecting movements of capital supports the view that it should receive a liberal interpretation. In so far as the other three freedoms are concerned, the word restriction has been given the widest possible meanings by the ECJ.26 Since Article 63 TFEU is declared as having direct effect and brought on par with the other economic freedoms, a similar generous interpretation is justified. It was not the case with Article 67 TEEC as the ECJ in Casati held that it “is, first and foremost, a matter for the Council, in accordance with the procedure provided for by Article 69”.27 Restrictions that have to be abolished are those that can hinder the free movement of capital within the Union and towards third countries. Thus, it can cover laws and regulations that are specifically related to capital movement; furthermore, the ECJ in Brugnoni and Ruffinengo laid down the principle that to achieve the fullest possible liberalisation of movement of capital, administrative obstacles too should be eliminated.28 24

Case C-446/04, FII Group Litigation (ECJ 12 December 2006) para 179. Usher (1992). 26 Case 8/74, Dassonville (ECJ 11 July 1974) in relation to “restrictions” on the movement of goods. 27 Case 203/80, Casati (ECJ 11 November 1981) para 11. 28 Case 157/85, Brugnoni and Ruffinengo v Cassa di risparmio di Genova e Imperia (ECJ 24 June 1986) para 22. 25

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44

45

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Chapter 4 Capital and Payments

Notion of “Third Country”

Even though Article 63 TFEU extends the benefit of the free movement of capital to third countries, it does not define or provide any guidelines to ascertain what constitutes third countries. A literal meaning of Article 63 TFEU would suggest that any countries that are not members of the EU should be treated as third countries. There had been some doubts regarding the application of Article 63 TFEU to the British, Danish, Dutch, and French Overseas Countries and Territories (OCTs) as they are not part of the internal market but are still associated with the Union through some of its MS. The legal uncertainly was resolved in X and TBG,29 where the ECJ declared that Article 63 TFEU does not apply to OCTs. The ECJ declared that the special association regime set out in Part IV of the TFEU, Articles 198–204 TFEU, applies to OCTs, and they are not part of the internal market. The EU has entered into an economic agreement with the countries of the European Free Trade Agreement (EFTA), known as the European Economic Area (EEA).30 Under this agreement, all benefits flowing from the single market of the EU is also extended to EFTA countries. Since the free movement of capital is an integral part of the single market, the member countries belonging to the EFTA countries also enjoy this freedom on par with their EU counterparts. It is thus possible to narrow down the meaning of third countries in Article 63 TFEU as excluding member countries of the EFTA. In the case of Ospelt,31 a resident of Liechtenstein (EFTA member) owned farmland in Austria (EU member). The dispute in this case arose as Ospelt was not allowed to transfer her property to a foundation established in Austria. According to Article 64 TFEU, MS reserve the right to restrict movements of capital to third countries, such as the acquisition of shares or securities on capital markets, which are in force on 31 December 1993. The ECJ declared that MS of the EU cannot invoke Article 64 TFEU against member countries of the EFTA. According to this judgment, it is evident that EFTA countries, namely Liechtenstein, Iceland, and Norway, are not treated as third countries at least for purposes such as the disputed transaction.

29

Joined Cases C-24/12 and C-27/12, X and TBG (ECJ 5 June 2014). The Agreement on the European Economic Area, which entered into force on 1 January 1994, brings together the EU Member States and three of the four EFTA States (Iceland, Norway, Liechtenstein, but not Switzerland) in a single market, referred to as the “Internal Market”. 31 Case C-452/01, Margarethe Ospelt and Schlössle Weissenberg Familienstiftung (ECJ 23 September 2003). 30

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Notion of “Capital”

The Treaty of Rome or its amending treaties do not define what constitutes capital or movements of capital. Even Capital Directive 88/361/EEC does not provide a definition except that it set out a series of illustration of capital transactions. This legal vacuum to some extent had been filled by case law on capital movements providing some useful guidelines to ascertain what constitutes capital. It is possible to draw a clear distinction of the judicial guidelines before and after Sanz de Lera to ascertain what constitutes capital.

47

5.1. Pre-Sanz de Lera

A cross section of case law before the full liberalisation of the free movement of capital indicates that since the ECJ could not depart from its judicial standpoint in Casati, it often seeks to apply the rules on the free movement of goods or services as a means to offer relief to various parties. Even in disputes that should fall within the chapter on capital movements, the ECJ sought to apply the rules on goods or services rather than the capital rules. The reason for this judicial approach was that it was only after Sanz de Lera that the free movement of capital acquired its status as a constitutionally protected economic freedom within the single market. In the process, the ECJ provided certain guidelines to distinguish between what constitutes free movement of capital and other economic freedoms. 5.1.1.

Thompson

One of the earliest cases to come up before the ECJ in the interpretation of the term “capital” was Thompson.32 This case came up before the ECJ by way of preliminary reference under Article 177 TEEC to determine whether certain coins, namely gold kruggerands, silver coins and silver alloy coins are “capital” within the meaning of Article 67.1 TEEC or “goods” within the meaning of Articles 30 to 37 TEEC. If falling under the chapter on capital, Thompson would have been found guilty by the national court for violating the exchange control law and sentenced to a term of imprisonment; otherwise, Thompson would be acquitted by the national court. The ECJ made a distinction between two kinds of coins. It declared that kruggerands and silver coins should be regarded as means of payments and therefore subject to the rules governing monetary transfer. As far as silver alloy coins are concerned, the ECJ took the view that since they are no longer legal tender, they should be treated as “goods”. In its judgment, the ECJ declared that capital within the meaning of Community law must also be taken to mean gold and silver coins, which are legal tender or means of payment of all kinds. 32

48

Case 7/78, Thompson (ECJ 23 November 1978).

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5.1.2. 51

52

53

Luisi and Carbone

Another case revolving around the concept of capital is Luisi and Carbone.33 This case involves the exportation of foreign currencies in contravention of the Italian exchange control laws. In this case, the Court drew a distinction regarding the ambit of scope of Article 67 TEEC and Article 106 TEEC and held that the current payments covered by Article 106 are transfers of foreign exchange, which constitute the consideration within the context of an underlying transaction, while the movements of capital covered by Article 67 TEEC are financial operations essentially concerned with the investment of funds in question rather than remuneration for a service. In the light of this judgment, it is clear that even a pure physical transfer of banknotes may not be treated as an aspect of movement of capital if the transfer in question was made to satisfy an obligation arising from a transaction involving the movement of goods or services. The definition of capital provided by the ECJ in this case has to be viewed from the facts and the particular circumstances of the case rather than treating it as comprehensive and conclusive. This definition cannot hold good if the fear expressed by the Italian government becomes a reality. It suggested in its submissions that when a traveller crosses the frontier, the ultimate use of such means of payment is still undecided. In the absence of documentary proof, such as the production of hotel bills or doctor receipts for providing their services, it is not easy to verify the nature and reality of the payments. 5.1.3.

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Chapter 4 Capital and Payments

Lambert

Another judgment of the ECJ that had a bearing on the interpretation of the phrase movement of capital was in Lambert.34 This case arose over the question of legality of receipt of payments in foreign currency by a cattle dealer resident in Luxembourg. According to the foreign exchange laws of Luxembourg, such payments in foreign currencies must be received in the form of a bank transfer or a cheque and be exchanged in the regulated market. The ECJ held that “it is permissible for Member States which maintains a two tier exchange market to adopt the measures necessary to ensure that current payments are made exclusively on the regulated market and that the free market is reserved for capital movements”.35 From this passage of the judgment, it may be inferred that transfer of money through a regulated market gives rise to a presumption of current payments and transfer through the free market as evidence of a movement of capital.

33

Joined Cases 286/82 and 26/83, Luisi and Carbone (ECJ 31 January 1984). Case 308/86, Lambert (ECJ 14 July 1988). 35 Case 308/86, Lambert (ECJ 14 July 1988) para 15. 34

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5.2. Post-Sanz de Lera

A judicial departure in the treatment of the free movement of capital has been evident since the declaration of Article 63 TFEU as having direct effect. Article 63 TFEU supported by the judicial declaration of its direct effect in Sanz de Lera created a level playing field for free movement of capital on par with the other economic freedoms. Since the judgment in Sanz de Lera, the ECJ had been adopting a more aggressive and integrative approach in the interpretation and application of the rules on the free movement of capital. There is an increasing judicial tendency to resolve disputes by reference to Article 63 TFEU even if that issue could have been resolved by reference to the treaty provisions on the right of establishment or services. This is a reverse situation where the ECJ before its judgment in Sanz de Lera sought to resolve disputes involving capital transactions by reference to the rules on free movement of goods or services. The cases briefly highlighted and discussed below illustrate the judicial activism in dismantling the remaining barriers to the free movement of capital. These cases also highlight the close proximity of the free movement of capital with the other economic freedoms. Sometimes the dividing line between the free movement of capital, services, and establishment is almost indistinguishable, and the ECJ tends to resolve such disputes by reference to the provisions on capital, services, establishment, or a combination of them. 5.2.1.

55

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André Ambry

The dispute in André Ambry relates to a manager of a travel agency charged for providing touristic services without a license.36 According to the relevant French law,37 a license issued by the competent authority is necessary to provide travel services. In order to secure a license, the applicant should provide financial security from a credit institution or an insurance company based in France. If it is situated in another MS, an agreement to that effect should be concluded between that body and a credit institution or insurance company situated in France. The application made by Ambry for a travel agency license was refused as the financial security was provided by an Italian finance company that had not concluded an agreement with a credit institution or insurance company established in France. According to the ECJ, the national measure discouraged financial institutions established in an MS to provide services in France as the national law prevents them from offering financial security required directly to the travel organiser on the same basis as a guarantor situated in France. The ECJ declared that French law is not compatible

36

Case C 410/96, Andre Ambry (ECJ 1 December 1998). Article 4 of French Law No 92/645 of 13 July 1992 laying down the conditions for the exercise of activities relating to the organisation and sale of travel or holidays (JORF p. 9457). 37

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with Article 49 EC. As such, the ECJ did not want to proceed further to examine the compatibility of the disputed French law with Article 56 EC. 5.2.2. 59

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Klaus Konle

In Konle, the ECJ had to examine the compatibility of a national law requiring prior authorisation of acquisition of real estate by residents of other MS with the right of establishment and the free movement of capital.38 The national law in dispute provided that the acquisition of the ownership of building land shall be subject to authorisation by the authority responsible for land transactions and that authorisation shall be refused if the acquirer fails to show that the planned acquisition will not be used to establish a secondary residence. An exception to this rule is that authorisation is not required if the acquirer makes a written declaration that he has Austrian nationality and the acquisition will not be used to establish a secondary residence. The Lienz District Administration rejected Konle’s application for authorisation, although he stated that he intended to transfer his principal residence to Austria. The ECJ declared that Directive 88/361 covers the disputed transaction. Since the disputed law exempts only Austrian nationals from having to obtain authorisation, the ECJ conceded that the procedure of prior authorisation entails a restriction on the free movement of capital. The ECJ had made a judicial dictum to the effect that the requirement of prior authorisation may be compatible with Article 63 TFEU if certain conditions are fulfilled. An example is where an MS can justify its requirement of prior authorisation by relying on a town and country planning objective such as maintaining, in the general interest, a permanent population and an economic activity independent of the tourist sector in certain regions. Such restrictive measures can be accepted only if it is not applied in a discriminatory manner and if the same result cannot be achieved by other less restrictive procedures. Another issue raised in Konle, which is, however, not directly related to capital movements, was the state’s liability for breach of EC law. There is abundance of case law on this issue that confirms that it is for the national courts to apply the criteria to establish the liability of MS for damage caused to individuals by breaches of EU law.39 The national courts have to assess whether a breach of EU law is sufficiently serious for an MS to incur non-contractual liability vis-à-vis an individual.40 The ECJ further declared that an MS could not plead the distribution of powers and responsibilities between the bodies (e.g. in federal states), which exist in its national legal order in order to free itself from liability.

38

Case C-302/97, Konle (ECJ 1 June 1999). See Joined Cases C-46/93 and C-48/93, Brasserie du Pêcheur and Factortame (ECJ 5 March 1996); Case C-392/93, The Queen v H.M. Treasury, ex parte British Telecommunications (ECJ 26 March 1996); Joined Cases C-178/94 et al., Dillenkofer and Others v Germany (ECJ 8 October 1996); Joined Cases C-283/94 et al., Denkavit Internationaal (ECJ 17 October 1996). 40 Case C-302/97, Konle (ECJ 1 June 1999) para 59. 39

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5.2.3.

1263

Trummer and Mayer

Certain uncertainties created by the lack of definition of capital in EU law were cleared to some extent in Trummer and Mayer.41 This case originated in Austria in consequence of certain legal difficulties encountered by the parties to register a mortgage of an immovable property situated in Austria. Mayer, residing in Germany, sold to Trummer, residing in Austria, a share in the ownership of a property situated in Austria. The parties agreed that the purchase price should be denominated in German marks. They further agreed to waive the provision of a value guarantee and the payment of interest on the condition that a mortgage is created to secure the payment of the purchase price. The relevant Austrian law42 provides that mortgages could be created only in Austrian shillings, failing which in such a way that the sum to be paid for the property is determined by reference to the price of fine gold. Due to non-compliance with the relevant Austrian law, the District Court refused to register the mortgage in the land register. The first issue in this case was whether the purported transaction constitutes capital movements within the meaning of EU law. The ECJ referred to Annex 1 of Directive 88/361/EEC, which sets out a long list of capital transactions. It deals with investments in real estate and is broadly defined to cover both investments on national territory by non-residents and investments in real estate abroad by residents. The ECJ declared that the disputed transaction is covered by the rules on free movement of capital. The ECJ further declared that an obligation to have recourse to the national currency for purposes of creating mortgage is a restriction on the movement of capital within the meaning of Article 63 TFEU.43 It justified the decision on the basis that the disputed rules would dissuade the parties concerned from denominating a debt in the currency of another MS, thereby depriving them of a right, which constitutes a component element of the free movement of capital and payments. There are certain distinct features in this judgment that could further enhance the scope of application of Article 63 TFEU. The ECJ gave a broad interpretation as to what constitutes movement of capital, declaring that money realised by the liquidation of an investment in real estate constitutes movement of capital. This was contrary to the interpretation given by the national court, which came to the finding that the disputed transaction does not constitute capital movements.44 Another distinctive portion of the judgment is the broad interpretation that the ECJ gave to the range of currencies of the EU, which should be accepted as legal tender. The effect of this piece of judgment is to give equal status to all the

41

Case C-222/97, Trummer and Mayer (ECJ 16 March 1999). Section 3(1) of the Decree on fixed-value rights of 16 November 1940, as amended by Section 4 of the Law on the Austrian schilling. 43 Seyad (1999), p. 110. 44 Case C-222/97, Trummer and Mayer (ECJ 16 March 1999) para 6–8. 42

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currencies of its MS. The ECJ seems to have interpreted the rules to keep pace with the monetary developments taking place in the Union. Even though this judgment will not have much relevance to the euro states, it will have relevance to countries, like Sweden, that still remain outside the eurozone. On the basis of this judgment, it is possible, for example, to mortgage a property situated in Sweden and raise a loan in another EU currency such as the euro, Danish krone, etc. 5.2.4. 67

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69

Commission v Belgium

The Belgian Minister of Finance issued a Decree to raise a loan of DEM 1000 million on the Eurobond market.45 The Decree states that the Finance Minister is authorised to contract a public loan at a fixed rate for DEM 1000 million with two German banks based in Frankfurt. A particular characteristic of Eurobond loans is that interest is paid gross without deductions. A disputed element of the Decree was that it waived withholding tax on interest payable on the loan. It furthermore excludes Belgian residents to subscribe to this loan, thereby denying them the benefit from the waiver of payment of withholding tax on interest payable in the loans. The Commission considers that the exclusion of Belgian residents to invest in the securities market in another MS is a barrier to the cross-border movements of capital. The Commission therefore, in terms of Article 258 TFEU, initiated infringement proceedings against Belgium for a declaration that by prohibiting the acquisition by persons resident in Belgium of securities of a loan issued abroad, Belgium had failed to fulfil its obligations under Article 63 TFEU. A series of issues was raised in this case, which all had a bearing on the nature and scope of application of Articles 63 and 65 TFEU. The first issue was whether the prohibition on Belgian residents subscribing to a loan issued abroad constituted a barrier to the free movement of capital. There is ample case law that declares that measures taken by an MS that are liable to dissuade its residents from obtaining loans or making investments in other MS constitute a restriction on movements of capital, as do measures that make a direct foreign investment subject to prior authorisation.46 In Svensson and Gustavsson,47 a Luxembourg Regulation provides that an interest rate subsidy on loan could be granted to persons residing in Luxembourg in respect of construction, acquisition, or improvement of dwellings. A condition to benefit from this subsidy is that the loan should have been obtained from a bank approved in Luxembourg, which includes foreign agencies or branches based in Luxembourg. A Swedish couple resident in Luxembourg who had raised a 45

Royal Decree of 4 October 1994. Case C-222/97, Trummer and Mayer (ECJ 16 March 1999) para 26, and Case C-439/97, Sandoz (ECJ 14 October 1999) para 19; as to measures which make a direct foreign investment subject to prior authorization, see Joined Cases C-163/94, C-165/94 and C-250/94, Sanz de Lera (ECJ 14 December 1995) para 24–25, and Case C-54/99, Église de Scientologie (ECJ 14 March 2000) para 14. 47 Case C-484/93, Svensson and Gustavsson (ECJ 14 November 1995). 46

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housing loan from a bank established in Belgium was refused the subsidy as the loan was not taken from a bank based in Luxembourg. The ECJ declared that the national law is incompatible with EU law as it constitutes an obstacle to movements of capital, such as bank loans. The next issue is whether the Decree could be saved by reference to the exception to Article 63 TFEU set out in Article 65 TFEU. The latter article provides for the possibility of differential tax treatment of residents and non-residents. The Belgian government sought to justify the exclusionary rule on the ground that by denying natural persons resident in Belgium the opportunity to subscribe to the public loan issued in German marks, the measure in question made it possible to prevent those persons from evading tax in Belgium by not declaring the interest received. It is possible for an MS to invoke Article 65 TFEU to restrict the free movement of capital in order to ensure compliance with fiscal provisions by taxpayers residing in Belgium. The disputed rule concerned not merely differential tax treatment but a ban on the acquisition by natural persons resident in Belgium of securities of a loan issued abroad. National measures should be proportionate to the aim pursued. If not, the result would be that any movement of capital, which might involve risks of tax evasion, could be prohibited. The outright prohibition of the acquisition by Belgian residents of securities of a loan on the Eurobond market is not proportionate to its aim to prevent tax evasion, thereby impairing the free movement of capital.48 If the Decree cannot be justified by reference to Article 65 TFEU, it is necessary to examine whether it can be accommodated on the ground of the need to preserve the coherence of the tax system. The principle of tax coherence was developed in Bachmann v Belgian State.49 The decision in this case was influenced by the socalled Cassis de Dijon50 principle, where the ECJ upheld a national measure, which had the effect of impeding the free movement of goods, as an overriding requirement of general interest. The Belgian government argued that the exemption from withholding tax is an essential condition for the state to be able to raise funds on the Eurobond market and that the state must be entitled to prevent that exemption from becoming a source of tax evasion. In rejecting this argument, the ECJ declared that in Bachmann, there was a direct link between the deductibility of contributions and the liability to tax of the sums payable by insurers under pension and life assurance contracts, and it was necessary to preserve that link in order to ensure the coherence of the tax system in question.

48 Case C-28/95, A. Leur-Bloem v Inspecteur der Belastingdienst/Ondernemingen Amsterdam, (ECJ 17 July 1997) para 44, the ECJ declared that a general presumption of tax evasion or tax fraud could not justify a fiscal measure, which compromises the objectives of a directive. 49 Case C-204/90, Bachmann v Belgian State (ECJ 28 January 1992). See also Case C-250/95, Futura Participations SA and Singer v Administration des contributions (ECJ 15 May 1997) where the ECJ accepted as an overriding requirement of general interest, the prohibition based on national law which was justified by the need to ensure the effectiveness of fiscal supervision. 50 Case 120/78, Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein (ECJ 20 February 1979).

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In the case under review, the ECJ said that there is no direct link between any fiscal advantage and a corresponding disadvantage, which ought to be preserved in order to ensure fiscal coherence. The scope of the judgment in Bachmann has been narrowed down in subsequent cases dealing with similar issues.51 5.2.5. 74

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Église de Scientologie de Paris v Prime Minister

The dispute in the Scientology case52 involved the compatibility of the national law requirement of prior authorisation with Articles 63 and 65 TFEU. The general premise of the disputed French law53 is that all financial relations shall be free with the exception, inter alia, that the government can provide that certain investments in France be subject to a declaration or prior authorisation in order to ensure the defence of national interests. The dispute in this case arose when the applicants’ request to the Prime Minister of France to repeal certain legislative provisions laying down a system of prior authorisation for direct foreign investments was refused. In support of their claim, the applicants submitted that there had been a failure to comply with the rules of EU law governing the free movement of capital. The case law supports the view that it is for the MS to determine the requirements of public policy and public security (Article 65 TFEU) in the light of their national needs.54 However, according to the ECJ, the disputed legislation does not satisfy the judicial guidelines to accommodate the requirement of prior authorisation within the meaning of Article 65 TFEU to limit the scope of application of Article 63 TFEU. The disputed national measure does not state in clear and precise terms the circumstances in which prior authorisation will be required in relation to direct foreign investments in France. It does not state the kind of direct foreign investments that could represent a threat to the public policy and public security of France. In the absence of a clear indication giving investors the specific circumstances in which prior authorisation is required, there is a danger that prior authorisation may be required for every direct foreign investment in France.55 This lack of precision does not enable individuals to be apprised of the extent of their rights and obligations deriving from Article 63 TFEU. The ECJ therefore declared that the national law is incompatible with Article 63 TFEU and cannot benefit under the exceptions in Article 65 TFEU as it does not satisfy the principle of legal certainty.

51

Case C-279/93, Roland Schumacker (ECJ 14 February 1995) where the ECJ said MS cannot deny tax benefits to ensure the coherent application of its tax laws. 52 Case C-54/99, Église de Scientologie (ECJ 14 March 2000). 53 The Law on Financial Relations with Foreign Countries in Regard to Foreign Investments in France (Law No 66-1008 of 28 December 1966 as amended by Law No 96-109 of 14 February 1996). 54 Case 41/74, Yvonne Van Duyn v Home Office (ECJ 4 December 1974). 55 Case C-54/99, Église de Scientologie (ECJ 14 March 2000) para 21. Seyad

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5.3. Golden Shares Cases

There are different forms of barriers an MS may erect to prevent or disrupt the free movement of capital. A new form of barrier was erected by certain MS in the process of privatisation of state enterprises. The privatisation of state-controlled enterprises is a trend common to most of the MS. There are different reasons adduced to privatise state enterprises. Certain state enterprises are lagging behind their competitors from the private sector. They are sometimes in the brink of bankruptcy or running at an enormous loss, but the MS try to keep them alive by injecting public funds. EC competition rules, particularly those relating to state aids, limit the right of MS to intervene to keep alive a sinking enterprise. The MS are therefore compelled to privatise such insolvent or loss-making enterprises. Another reason for the mass-scale privatisation may be viewed from the perspective of EMU. In order to join the EMU, MS are required to fulfil certain convergence rules.56 The fiscal rule requiring the MS to keep their debts and deficit below a fixed target was the most difficult to fulfil. In order to bring the deficit below 3% of their gross domestic product and debts below 60% of the gross domestic product, some MS decided to privatise some state properties, such as energy, oil, gas, petroleum, telecommunication, etc. Some of the MS created a legal framework to privatise state enterprises in a manner that they could continue to retain their influence over such proposed privatised companies. They want to retain control without majority stake in such companies. Some MS want to keep a strong grip on the privatised firms with ability to interfere with key decisions such as appointment of the members of the Board of Directors. There were others that retained the power to block any foreign takeover bids of such privatised companies and develop and protect national champions in some segments of the economy, such as the banking sector. This has given rise to a series of case law known as the golden shares cases.57 The European Commission as the guardian of EU law instituted an action against several MS for retaining control over privatised property by holding minority shares. The cause of action was based on a mixture of legal arguments, such as state control in disproportion to their actual ownership, which forms a serious obstacle to the free movement of capital. The Commission argued that the MS, by retaining management control by holding minority shares, are discouraging foreign investors to participate in such enterprises and thereby form a barrier to the cross-border right of establishment.

56 57

Seyad (1997). Putek (2004) and Rutabanzibwa (1996).

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Commission v Spain

In Commission v Spain,58 the case involved the compatibility of the Spanish privatisation law. The state enterprises covered by this law range from banking, tobacco, and telecommunications to petroleum, energy, and electricity. The relevant law requires prior authorisation from the state if the privatised entity is to make any major corporate decisions such as winding up, merger, or the disposal of assets or shareholdings in undertakings. This privatisation law was challenged before the ECJ by the European Commission on the ground that it forms an obstacle to the free flow of capital between the MS. It argued that cross-border investments in the form of participation in such companies constitute free movement of capital. The ECJ agreed with the submission of the Commission. It declared that some provisions of the Spanish privatisation law do not comply with the principle of proportionality. It also held that the relevant law confers the administration broad discretion and the exercise of such powers was not subject to any condition. It further declared and confirmed its previous judicial standpoint that the requirement of prior authorisation as found in the Spanish law is a contravention of Article 63 TFEU. The ECJ also held that in appropriate cases, it is prepared to review its position in Sanz de Lera and recognise prior authorisation procedures even if it forms an obstacle to Article 63 TFEU. The ECJ laid down certain guidelines to enable an MS to retain control over privatised enterprises. The restrictions, such as the requirement of a prior authorisation, should apply without distinction to nationals of all MS. The retention of such power should be justified by overriding requirements of general interest and in harmony with the principle of proportionality. In short, the national rules should fully comply with the general principles of law if they are to be treated as compatible with the objectives of the single market (➔ para 59 et seqq.). 5.3.2.

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Commission v Germany

In order to protect the Volkswagen (which literally means people’s car) company from any hostile takeover, a special law was passed in 1960, known as the Volkswagen law. It was an arrangement that gives extraordinary powers to the federal state and the Land of Lower Saxony. Another objective of this law is for the state to continue to have a say in any politically sensitive decisions, such as job losses. There are over 400,000 people employed by this company. The Union also has a seat in the Board, which is against any kind of takeover of the company. The Board has very wide powers in terms of the relevant law. It sets out various restrictions regarding any relocation of production facilities and also places various limits to investment decisions by the Board. The Volkswagen law reserved special rights on shareholders. The law was structured in a manner to ensure that the 58

Case C-463/00, Commission v Spain (ECJ 13 May 2003).

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federal and state government shall have special blocking minority rights in the company. The supervisory board of the company consist of 20 members, and the company’s employee council holds half the seats on the board. Four out of ten members represent shareholders and are appointed by public authorities. The central and regional government had mandatory representation in the Board. According to the relevant law, they shall have two seats on the Board irrespective of the number of shares they hold. Any shareholder holding more than 20% of voting shares may only cast a maximum of 20% of the votes in a shareholders’ meeting. This is in derogation of the German company law, which for decisions to be taken at the shareholders’ meetings require a three-fourths majority, whereas the Volkswagen law requires four-fifths majority. The defence put forward by Germany was that the Volkswagen law is unique as it derives from the company’s unusual history after the Second World War. The company was rebuilt after the war and was based on an agreement balancing the interests of employees, the national and regional government, and other stakeholders. The ECJ59 first and foremost declared that in imposing the restrictions, the state was acting in its capacity as a public authority rather than as a result of the normal operation of company law. As to the limitations imposed by the 20% voting cap, the ECJ declared that such measures are liable to dissuade potential investors from other MS. The capping of the votes enables the federal state to exert considerable influence of the company beyond that which they could exert under general company law. On the question of mandatory representation on the Board, the ECJ declared that it is liable to dissuade investors in other MS from acquiring shares and investments. The right to appoint two directors to the Board by the federal state, according to the ECJ, exceeds their level of investment. It enables the federal state to exert more influence than their actual level of shareholding. The ECJ therefore declared that the restrictions placed on shareholder rights is contrary to Article 63 TFEU and also offends the right of establishment as enunciated in Article 49 TFEU. 5.3.3.

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Commission v United Kingdom

The government of the United Kingdom sold some of the airports to a Spanish company, Ferrovial, for a sum of £ 10 billion in June 2006.60 In doing so, the government also decided to reserve certain rights in the privatised company. Some of the conditions attached to the sale were that the government must give its consent to certain operations by the privatised company, for example if it decides to wind up or dispose an airport. The European Commission brought an action on the ground that some of the terms and conditions of the privatisation law is not in compliance with Union law, especially in relation to the right of establishment and free movement of capital. In 59

86

Case C-112/05, Commission v Germany (ECJ 23 October 2007). See Sander (2008). Some of these airports include Heathrow, Gatwick, Stansted, Edinburgh, Glasgow, etc.

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defence, the UK government submitted that the relevant rule does not restrict the free movement of capital nor does it form a barrier to market access. It further submitted that the disputed rule does not discriminate any parties to the dispute on grounds of nationality. The ECJ declared that the prohibition in Article 63 TFEU goes beyond mere elimination of unequal treatment on grounds of nationality as between operators on the financial market and held that the relevant UK rules are contrary to Article 63 TFEU.61 5.3.4. 90

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Commission v Belgium

The Belgian government issued a Regulation to privatise two state-owned enterprises, Societé Nationale de Transport par Canalisation and Distrigaz. At the same time, the Regulation reserved special powers in favour of the state in relation to these privatised enterprises. One of the conditions of the privatisation law is that the Minister may object to a transaction if these entities decide to invest 5% or more of the capital in another enterprise. Such powers can be exercised only if the Minister considers that such transactions will adversely affect domestic interests in the energy sector. The Regulation requires that all such transactions should be notified to the relevant Minister. The Minister shall have 21 days to object to such notification, and if he fails to do so, it is presumed that the transaction is complete. The ECJ62 declared that even though the measures set out in the Regulation restrict investment, they were justified. The ECJ declared that safeguarding the continuity of energy supplies in the event of a crisis is a legitimate public interest. There are also other factors that influenced the ECJ to uphold the disputed national measure. In terms of the Regulation, public officials are obliged to adhere to strict time limits. The Minister can only intervene where there is a threat that national energy policy may be compromised. Such intervention should be supported by a statement of reasons and is subject to judicial review. Any affected parties to such a decision have the right to appeal, as provided in the Decree. It is also significant to note that the Decree does not require prior authorisation from the Minister for the company to make any decisions. The disputed regime is one of opposition. It appears from this judgment that the ECJ views the opposition system more favourably than the prior authorisation system. This is one of the few cases where the ECJ allowed an MS to retain a restrictive measure on the free movement of capital.

61 62

Case C-98/01, Commission v United Kingdom (ECJ 13 May 2003). Case C 503/99 Commission v Belgium (ECJ 4 June 2002).

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Commission v France

This case deals with the compatibility of a national law requiring prior authorisation from the state for various transactions of an energy company.63 The relevant law requires that any investment in Societé Nationale Elf exceeding certain thresholds of the capital or of voting rights shall be authorised in advance by the Minister for Economic Affairs. According to this law, a deal is deemed approved if the Minister does not object within one month after notification by the privatised company. An argument put forward by the government of France in support of the disputed legislation was that safeguarding petroleum supplies in the event of a crisis falls within public interest. The ECJ declared that the restrictions in the form of prior authorisation went beyond what is necessary for the purpose, i.e. for ensuring a minimum supply of petroleum products. The ECJ also found that the exercise of the Minister’s right was not qualified by any conditions. The disputed law does not provide any guideline to investors setting out the specific circumstances in which authorisation will be granted or refused. The ECJ thus declared that the national rule is contrary to Article 63 TFEU and that, furthermore, due to lack of precision, it is contrary to the principle of legal certainty. 5.3.6.

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Commission v Portugal

The disputed Portuguese law imposes restrictions on the acquisition of shares by foreign investors within the framework of privatisation.64 It limits the access of foreign holdings in banks (5%) and insurance companies (40%). In all other companies, the threshold shall not be more than 25%. It also provides that the acquisition of shares exceeding 10% of the voting capital of privatised companies shall be subject to prior authorisation by the Minister of Finance, regardless of the nationality of the acquirer. In order to justify the disputed discriminatory restrictions, Portugal declared that it does not normally use its power to intervene where foreign investors are nationals of the Union. The ECJ rejected this argument declaring that such administrative practices are by nature liable to change and therefore not a proper fulfilment of the treaty obligation flowing from Article 63 TFEU. The defence of general financial interests and economic grounds raised by Portugal was also rejected by the ECJ, stating that it is not an adequate justification for restrictions on investment from other MS. The ECJ concluded that requiring investors to obtain prior authorisation for the acquisition of a holding in privatised firms in excess of a specified level constituted restriction on free movement of capital.

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Case C-483/99, Commission v France (ECJ 4 June 2002). Case C-367/98, Commission v Portugal (ECJ 4 June 2002).

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Federconsumatori and Others

The City of Milan set up a limited company to distribute gas and electricity. It was listed on the stock exchange, and the city held 51% of its capital, which it later reduced to 33.4%. The city reserved in the association of agreement the right to appoint up to one fourth of the directors, even though it holds only a relative majority of its capital. Such a privileged position was based on Article 2449 of the Italian Civil Code, which provides that a limited company may confer on a public shareholder the right to appoint one or more directors. The associations of consumers and small shareholders challenged that privileged position in the Italian courts.65 Their cause of action was that it discourages potential investors from purchasing shares and thus reduces the value of their holdings in the corporation. Since the matter involved EU law, the national court referred it to the ECJ to ascertain whether Article 2449 of the Civil Code amounted to a restriction on the free movement of capital. The ECJ declared that Article 63 TFEU precluded a provision such as Article 2449 of the Civil Code by giving public shareholders an instrument to restrict the possibility of the other shareholders participating in the management of the company. It held that the Italian legislation is liable to deter direct investors from other MS.

5.4. Concluding Remarks on ECJ Judgments

At the initial stages of the development of case law, the ECJ was relying solely on the principle of non-discrimination to set aside national laws to remove the barriers to the free movement of capital. Since Article 67 TEEC did not have a direct effect, the ECJ accommodated even purely capital transactions within the chapter on goods, services, or establishment as a means to provide relief to aggrieved parties. 100 Since the Maastricht Treaty elevated capital movement to a constitutional status, the ECJ has generally given a broad interpretation to the material scope of Article 63 TFEU. Conversely, it provides a narrow interpretation to the derogations, which may be relied on by MS under Article 65 TFEU. Since Sanz de Lera, the ECJ has departed from an approach based on nationality and has developed new terminologies such as “obstacles”, “conduct liable to dissuade”,66 or “deter individuals or companies” from engaging in cross-border capital transactions, including real estate and share transactions.67 101 The ECJ vigorously extended the scope of the meaning of capital to cover transactions such as cross-border investments in real estate, the provision of crossborder financial guarantees, the right of cross-border investments in securities 99

65

Case C-463/04, Federconsumatori and Others (ECJ 6 December 2007); Case C-174/04, Commission v Italy (ECJ 2 June 2005). 66 Case C-370/05, Festersen (ECJ 25 January 2007). 67 Seyad (2008a).

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market, etc. These are transactions that are specifically covered by the treaty provisions on services and establishment, but the ECJ often dispensed them by reference to the provisions on free movement of capital. In general, the ECJ does not view with favour any undue restrictions imposed by 102 the MS to the free movement of capital. The rich jurisprudence on golden shares makes it abundantly clear the ECJ does not depend only on a discriminatory effect to set aside a national rule. It is sufficient that even if the national regulations directly or indirectly discourage investors from other MS from acquiring shares, which the ECJ have treated as a restriction on the free movement of capital. In the context of golden share cases, the ECJ does not deny the MS the right to 103 intervene and participate in the privatised companies so long as they will respect the EU rules on the free movement of capital, the right of establishment, and other general principles of EU law.

6.

Free Movement of Payments

6.1. Overview and Genesis

Until the Maastricht Treaty came into force, free movement of capital and 104 payments were subject to differentiated legal treatment. In the original Treaty of Rome, free movement of payments was set out in Article 106 TEEC. In terms of this legal provision, MS agreed to authorise payments connected with the movement of goods, services, or capital to the extent that such freedoms have been liberalised. It further declared that if the exercise of these freedoms is limited only by restrictions on payments connected therewith, such restrictions shall be progressively abolished by applying the provisions relating to the abolition of quantitative restrictions, the liberalisation of services, and the free movement of capital. Article 106 TEEC was drafted in a manner that the ECJ had no difficulty to 105 declare it as having direct effect if it relates to the free movement of goods and services. Even when the free movement of capital was not liberalised, the ECJ had declared that the free movement of payments shall be treated as having direct effect. After the liberalisation of the free movement of capital by legislative interven- 106 tion, this freedom was integrated with free movement of payments. Until then, the distinction between capital and payments was rather thin and artificial, but for legal purposes, it had far-reaching consequences. Even where the disputed transaction involved physical export of banknotes, the ECJ treated such transaction as free movement of payments. In Luisi and Carbone,68 the ECJ treated the export of banknotes as a payment transaction by reference to Article 106 TEEC. It reached this conclusion due to the fact that at the time of the dispute, free movement of capital was not liberalised. If the ECJ had treated the transaction as free movement

68

Joined Cases 286/82 and 26/83, Luisi and Carbone (ECJ 31 January 1984).

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of capital, Luisi and Carbone may have been convicted by the Italian magistrate for violation of the strict exchange control regulations. 107 Any internal or cross-border transaction in goods or services would attract a corresponding payment. An efficient, competitive, and reliable payment system is thus an essential requirement to generate and enhance cross-border trading in goods and services. In the context of the European single market, the free movement of goods, persons, services, and capital was liberalised in 1993. There was, however, no corresponding legal measures adopted to develop and modernise its payment system until the free movement of capital was fully liberalised.69 108 After the launching of the single market, certain legal instruments were adopted to facilitate cross-border payments to allow consumers to buy goods and services across the borders. These legal instruments, however, proved to be insufficient to establish a dynamic and fully fledged payment system. The payment system operates inefficiently, is fragmented at national level, and lacks credibility and security. The payment system thus imposes a huge cost on the European economy.70

6.2. Legislative Packages on Payment Systems

109 Even though cross-border payments were liberalised by the ECJ, there was still a need to legislate in this branch of EU law. There are a handful of legal instruments adopted to regulate this vital segment of the financial industry. Some of these legal instruments are now integrated into a single legal instrument. 110 The relevant legal instruments are Commission Recommendation 97/489 concerning transactions by electronic payment instruments, Directive 97/5/EC on cross-border credit transfers, and Regulation (EC) No 2560/2001 on cross-border payments in euro. 111 The traditional method of payments by cash or cheques for the sale of goods or the provision of services was gradually replaced by more sophisticated and costefficient means such as the electronic payment instruments. In recognition of this development, the European Commission adopted Recommendation 97/48971 to facilitate the use of electronic payment system in the single market. 69

A parallel could be drawn with the adoption on 1 July 1990 of Directive 88/361/EEC to liberalise the free movement of capital without simultaneously putting in place adequate measures to deal with related problems such as tax evasion and money laundering. 70 The potential savings linked to the use of efficient payment services would have been enormous. According to the European Commission statistics, there are some EUR 231 billion annual cash and non-cash transactions in the Community with a total value of EUR 52 trillion. The annual cost of making payments between the various national systems amounts to 2–3% of gross domestic product. 71 Commission Recommendation 97/489/EC concerning transactions by electronic payment instruments and in particular the relationship between issuer and holder, O.J. L 208/52 (1997). It has substantially revised and extended Commission Recommendation 87/598/EEC on a European Code of Conduct relating to electronic payment, O.J. L 365/72 (1987).

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The aim of adopting Directive 97/5/EC is to make cross-border credit transfers 112 rapid, reliable, and inexpensive between the MS.72 Its scope of application is limited to cross-border credit transfers. Other forms of payments are excluded. An upper limit of EUR 50,000 is fixed for cross-border transactions, beyond which the national rules will continue to apply. The kind of currencies covered is limited to those denominated in one of the MS of the EU or the euro. The principle of transparency forms the basis of the Directive. The credit 113 institutions are obliged to provide the relevant information to customers before and after executing a credit transfer. A cross-border credit transfer should be executed within a period of six working days. If the deadline is not met, the credit institution will be exposed to pay compensation up to EUR 12,500 (Article 8 of the Directive). 6.2.1.

Payment Services Directive

The first Payment Services Directive 2007/64 (PSD 1)73 repealed Directive 97/5/ 114 EC and revised and incorporated Commission Recommendation 97/489. Regulation 2560/2001 on cross-border payments in the euro was repealed and replaced by Regulation 924/2009.74 With effect from 13 January 2018, PSD 1 was repealed by the second Payment Services Directive 2015/2366 (PSD 2),75 but it only amends some other relevant legal instruments: Directives 2002/65, 2009/110, and 2013/36 and Regulation 1093/2010. 6.2.2.

Cross-Border Payments in Euro

The Regulation on cross-border payments in euro76 applies specifically to the 115 euro area but does not prohibit MS from using other currencies to adopt its provisions (recital 15). Sweden had exercised this option.77 The main aim of this Regulation is to harmonise the charges for both internal and cross-border payments in euros, thereby removing price discrimination within the Euroland. In furtherance of this objective, the Regulation expressly prohibits applying different charges for internal and cross-border payments in euro (Article 3). 72

Parliament/Council Directive 97/5/EC on cross-border credit transfers, O.J. L 43/25 (1997). Parliament/Council Directive 2007/64/EC on payment services in the internal market, O.J. L 319/1 (2007). 74 Parliament/Council Regulation (EC) No 924/2009 on cross-border payments in the Community, O.J. L 266/11 (2009). 75 Parliament/Council Directive (EU) 2015/2366 on payment services in the internal market, O.J. L 337/35 (2015). 76 Parliament/Council Regulation (EC) No 2560/2001 on cross-border payments in euro, O.J. L 344/1 (2001). 77 Commission Communication pursuant to Article 9 of Regulation (EC) 2560/2001, O.J. C 165 (2002). On 28 June 2002 the Commission received notification of the Swedish authorities’ decision to extend the application of the Regulation to the Swedish Crown. 73

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The Regulation follows the pattern in the Directive to cover cross-border transactions up to EUR 50,000. The bank customers are required to provide their International Bank Account Numbers (IBAN) and the Bank Identifier Codes (BIC) of the beneficiary’s institution if cross-border credit transfers are to be executed expeditiously. If this information is not furnished, the transaction will be executed manually and the charges for cross-border transfer would become excessive.

6.3. Payment Services Directive

117 The three legal instruments (Commission Recommendation 97/489, Directive 97/5 and Regulation 2560/2001) are based on a mixture of hard and soft law acts preceding the adoption of PSD 1. They were only a step forward towards developing a single market in payment services. These legal instruments had several shortcomings and limitations and therefore were replaced by PSD 1. The PSD 1 contributed enormously to remove some of the barriers to cross-border payments and facilitated the development of a single market in payment services within the Union. In order to keep pace with the dynamic changes in the payment industry, PSD 1 was replaced by PSD 2. However, a bulk of the legal provisions contained in PSD 1 are simply inherited by PSD 2. 118 The aim of PSD 2 is to ensure a safe and efficient payment system as a means to complete the construction of the single market.78 The overall objective of the new legal regime is to minimise risks and increase reliability and efficiency. The card payments and credit transfers are made easier, cheaper, and safer between MS. The PSD 2 harmonises market access rule to make easy access to the payment market for a wider range of service providers. It eases market entry requirements to facilitate the entry of new rivals to compete with the established providers of payment services. The aim of opening up the market to competition is to create a level playing field for market operators. It should thereby generate greater competition in providing both wider choice and competitive price to users. 119 PSD 2 addresses current developments in the payment industry, such as the rapidly growing Internet and mobile payment market. In relation to consumer rights, PSD 2 further strengthened the existing rights such as by reducing liability for non-authorised payments from the previous EUR 150 to EUR 50, providing unconditional refund rights for direct debits in euro, and removing all forms of surcharges for the use of a consumer credit or debit card. 120 The role of the European Banking Authority (EBA) is also enhanced by PSD 2, such as authorising EBA to develop a publicly accessible central register of authorised payment institutions, to assist in resolving disputes between national authorities, to develop regulatory technical standards on strong customer

78

Seyad (2008b).

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authentication, and to facilitate the exchange of information between national supervisory authorities. 6.3.1.

List of Activities

A list of activities that could be provided by a payment institution is found in Annex 121 I to the Directive.79 They are mostly specialised and restricted in nature. At least one of the payment service providers should be located within the Union. It does not fix an upper limit for payment transactions. The consumer protection rules relating to information requirements, rights, and obligations in relation to the provision of payment services, however, apply only to payments below EUR 50,000 (Article 2.1). There are certain kinds of transactions that are specifically excluded from the scope of the Directive (Article 3).80 The reason for the exclusion is that those services cannot be processed efficiently as electronic payments. 6.3.2.

Payment Institution

Apart from including the traditional payment service providers such as the banks, a 122 new entity known as payment institution is created to provide payment services (Article 1).81 A payment institution could either acquire a European passport to provide its services in other Member States or limit its operations to its home state.82 A distinct feature in this legal instrument is that it prescribes a flexible procedure 123 for the authorisation and supervision of a payment institution. The justification for the prescription of a lighter regime is based on the premise that risks associated with a payment institution are narrower and easier to monitor and control (recital 9). There is, for example, no minimum capital requirement to incorporate a payment institution. The authorisation procedure is based purely on simple disclosure requirements 124 (Articles 5–14). A formal written application should be submitted to the competent authority of home MS setting out the applicant’s legal status and address where relevant documents may be obtained. It should set out the program of operations, a 79

Article 4.3 reads together with the Annex. It sets out an exhaustive list of payment services ranging from cash deposits and withdrawals, execution of payments transactions including transfer of funds, issuing of payment cards which allow user to transfer funds, transfer of funds where electronic money is issued by provider, remittance services where cash, e-money is accepted by provider from user, execution of payment transactions by any means at a distance such as mobile telephones, other digital or IT devices, etc. 80 It excludes pure cash transfer from payer to payee, change of foreign to local currency-vice versa-i.e. cash to cash operations, where funds are not held as cash deposit on payment account, paper cheques, traveler’s cheque, paper-based vouchers and promissory notes. 81 They are credit institutions and post office giro institutions licensed in terms of Article 2.3 of Directive 2000/12/EC; electronic money institutions licensed in terms of Directive 2000/46/EC; payment institutions in terms of Article 6 of the Directive. 82 Title 11 of the Directive deals exclusively with payment institutions.

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business plan, the budget calculation for the first three financial years, administrative and accounting procedures, internal control mechanisms such as money laundering measures, and the identity of persons holding qualifying holdings. 125 A legal or natural person could be a founder of a payment institution. If the founder is a legal person, the registered and head office should be located in the place of registration. It should also disclose the identity of the natural persons who are its legal representatives. This requirement is a clear departure from Directive 2000/12/EC, which does not require a credit institution to make such disclosure.83 If the applicant is other than a legal person, its head office should be located in the MS in which it actually carries on its business. 126 If the majority shareholders also act as directors, the applicant must adduce evidence that they are of good repute and knowledge and have the ability to perform payment services. The identity of the lead manager should also be disclosed, and he or she must fulfil the requirement of good repute and knowledge. The competent authorities within three months of receipt of an application should inform the applicant of its decision. If the decision is negative, the competent authority is obliged to give reasons for such a refusal. 127 Even a more simplified procedure is prescribed for a legal or natural person to establish a payment institution provided certain additional conditions are fulfilled (Articles 21–23). The applicant must ensure that the turnover is below EUR 5 million on a monthly average but does not exceed EUR 6 million at any point of time. The licensing authority should be satisfied that such registration is in the public interest providing access to payment services for underprivileged social groups. A limitation is that such a payment institution could provide payment services only in the country of its incorporation. The aim of the relaxation of the authorisation requirements may be to provide an incentive to certain kinds of money remitters to switch over from unofficial to official economy. 6.3.3.

Tied Agents and Branches

128 Since a payment institution is entitled to a European passport, it could provide its services in other MS directly or by way of a secondary establishment (Article 20). It could establish a branch, tied agent, or subsidiary for this purpose (Articles 11–12). A payment institution could even outsource some or all of its operations. 129 Another interesting feature in the new payment law is that it imposes liability on the payment institutions for the acts and omissions of its subsidiaries (Article 12.2). A subsidiary is a legal entity that should normally assume liability for its own acts and omissions. The duty imposed on the payment institution to assume such liability is a clear departure from the normal legal practice. 130 A payment institution is liable for the acts of not only its subsidiaries but also its managers, employees, and tied agents. It is not precisely clear whether a payment 83

Parliament/Council Directive 2000/12/EC relating to the taking up and pursuit of the business of credit institutions, O.J. L 126/1 (2000).

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institution is also liable for the acts or omissions of its branches. Since a branch is closely connected to its parent company, the payment institution would probably accept liability on its behalf. 6.3.4.

Competent Authorities

An MS shall designate a competent authority to supervise the payment institu- 131 tions (Article 22). They should be independent from economic actors in order to avoid conflicts of interest. A payment or credit institution or an electronic or giro institution will thus be disqualified to act as a competent authority. It is possible for an MS to establish even more than one competent authority. This is a clear departure from the other financial service Directives, which merely provide for a single supervisory authority. If an MS exercises this option, it should inform the Commission accordingly. A competent authority could carry out onsite inspections of their tied agents and subsidiaries; issue recommendations, guidelines, and warnings; and even impose penalties on payment institutions (Article 23 lit. b). 6.3.5.

Payment Contracts

The Payment Directive is more comprehensive in setting out the contractual 132 obligations of the parties than the preceding legal instruments relating to payment services. A distinction is drawn between a single payment transaction and framework contracts covering multiple payment transactions. Single Payment Transaction In contracts relating to a single payment transaction, there are certain obligations 133 that the provider of payment services should comply before and after the execution of a payment transaction (Articles 38–42). It includes a wide range of information requirements, such as the execution time of a payment order, safekeeping requirements of a payment verification instrument and the risks if not taken, liability for the non-execution of payment transactions, charges payable by the user, exchange rate applied to the law applicable to the contract, redress and complaint procedures, etc. Upon acceptance of a payment order, the provider should furnish information 134 such as a reference to enable the user to identify the payment transaction, the executed amount of the payment transaction, commission fees and the charges applied, and, if the transaction involves two different currencies, the exchange rate used for conversion. The terms and conditions should be furnished in a clear and readable form in the official language of the MS where the service is offered or in any other language agreed by the parties. The payee or the beneficiary of a payment transaction is also entitled to receive 135 certain information from his or her service provider. It includes a reference of the payer, the full amount of the payment transaction transferred, the commission fees and charges applied, the exact exchange rate used (Article 45-information and Seyad

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conditions). The information that a payee is entitled to receive is the same in both single payment and framework contracts. Framework Contract 136 A framework contract is an agreement that commits a provider to execute in the future payment services on behalf of the payer (Articles 29–38). It could cover successive or individual payment transactions. There is some additional information that the provider should furnish to the user after entry into force of a framework contract. 137 The rights and duties under EU law and national law relating to the execution of specific payment transactions, such as reporting obligations, declarations, and tax issues, should be performed by the service provider. If there are any changes in the contractual conditions, servcie provider shall communicate to the user at least one month before the date of its proposed application. It shall not apply in the case of changes in the interest rates. The right of the user to terminate an initial payment service agreement should be clearly spelt out in the framework contract. If a framework contract is concluded for a period of more than 12 months or an indefinite period, it could be terminated by the user free of charge. The aim of including this option may be to facilitate customer mobility. Common Rules 138 There are certain conditions that are common to both single payment and framework contracts (Articles 39–40). The provider should communicate to the user the terms and conditions on paper or on another durable medium. The parties should agree on the means of communication for the transmission of terms and conditions, and in the context of a framework contract, the conditions communicated should also include provisions relating to the technical requirements with respect to the users’ communication equipment authorised for use and the way in which it can be used.

6.4. Single Euro Payment Area

139 The aim of the Payment Directive is to remove the legal and regulatory barriers to creating a single payment market. The European Payments Council (EPC), which was established by the European banking industry, took the initiative to dismantle the commercial and technical barriers by launching the Single Euro Payments Area (SEPA).84 It currently consists of all EU members, EFTA, and Monaco and San Marino. 84 The EPC was launched in June 2002 by 38 banks and banking associations, the three European Credit Sector Associations and the Euro Banking Association with the support of the Commission and the ECB.

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The aim of SEPA is to integrate the payment market, enhance competition, 140 lower the cost of retail payments, and remove the distinction between cross-border and national payments within the Euroland. It will enhance efficiency in relation to cross-border payments in euro. SEPA should facilitate consumers and businesses to make cashless payments throughout the Euroland from a single payment account. It will thus become easier to use a single set of payment instruments to make crossborder payments easily, efficiently, and safely as domestic payments. The clearance system of SEPA is based on the IBAN bank-account identification and the SWIFT-BIC bank identifier. All domestic transactions are carried out via IBAN. It is thus possible for the businesses and banks operating across the national borders to consolidate their payment processing on common platforms across the eurozone.

7.

Impact of Brexit on the Free Movement of Capital and Payments

7.1. Overview

The UK was initially due to leave the EU on March 29, 2019, two years after Article 141 50 TEU was invoked, triggering the exit process. Since the British Parliament failed to pass the Withdrawal Bill due to lack of sufficient political backing in the House of Commons, the EU had to grant three further extensions to the UK: April 12, 2019; October 31, 2019; and January 31, 2020. On January 9, 2020, the British Parliament passed the third and final reading of 142 the European Union (Withdrawal) (No 2) Act 2019, which was subsequently approved by the House of Lords and received the formal Assent of the Queen. The long-awaited Brexit day thus happened on January 31, 2020 (➔ Article 26 para 67 et seqq.). The EU withdrawal law covers, inter alia, divorce bill payments to the EU; repeals the European Communities Act; prohibits any extension to the transition period beyond the end of 2020; etc. Even though the Brexit began on January 31, 2020, it only marks the end of the first stage of a very complicated and arduous Brexit process. From this date onwards, UK will not take part in any of the EU decision-making institutions or agencies. The UK, however, continued to follow the 40 years of common legislation even after leaving the EU, at least until December 31, 2020. It remained in the single market and the customs union and followed the rules on the free movement of capital.

7.2. Trade and Cooperation Agreement Between the EU and UK

Since Brexit day, the UK is free to negotiate and sign new trade deals. This 143 competence under EU law is conferred on the EU institutions to negotiate and enter into international trade agreements on behalf of all its Member States. The parties have agreed on a transition period, which lasted until 31 December 2020 (➔

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Article 26 para 68). During this period, they have negotiated a free trade deal to ensure that goods flowing both ways are not subject to tariffs and other trade barriers. After a period of provisional application, the Trade and Cooperation Agreement (TCA) entered into force on 1 May 2021 (➔ Article 26 para 87 et seqq.). 144 If both parties had failed to agree on a trade deal, the UK as a third country would have been limited to the World Trade Organization (WTO) rules to trade with the Member States of the EU.

7.3. Brexit and Free Movement of Capital

145 An obvious outcome of the Brexit is that it inevitably led to the detangling of the integrated UK and EU capital markets. This process of disentanglement will no doubt be time-consuming, and the direct and indirect cost of the financial market divorce between the parties will be enormous on both sides. 146 In post-Brexit, it is possible for both parties to legally introduce capital controls in the form of currency and exchange restrictions. On the one hand, the EU will have competence to withdraw the benefits of Article 63 TFEU to third countries. On the other, the UK can also unilaterally decide to restrict or curtail the flow of sterling pounds in and outside of the country for economic, policy, or any other considerations. 147 Article VIII, Section 2, of the Articles of Agreement of the International Monetary Fund (IMF) allows the UK to introduce capital controls towards the Member States of the EU. The exercise of this power is, however, subject to the condition that such measures should not affect current transactions unless it secures prior approval to do so from the Fund. For example, in 2013, when Cyprus, a Member State of the EU, was confronted with a serious banking crisis, the IMF granted permission to impose capital controls, which had an impact on current transactions.

7.4. Brexit and the Unity of the Single Market

148 The expression single market implies unity and indivisibility of the four economic freedoms, namely the free movement of goods, persons, services, and capital. In other words, the economic freedoms within the single market of the EU are inseparable. However, compared to other economic freedoms, the rules on free movement of capital are relatively generous towards third countries. After the end of the transitional period, the UK has fallen into the class of a third country for the purposes of the free movement of capital (➔ Article 26 para 77 et seqq.). The TCA does not contain any decision on “equivalence” (➔ Article 56 para 45), which would allow British firms to sell services to the single market. Therefore, the two

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sides have to try to agree in the near future on a memorandum of understanding on regulatory cooperation in financial services.

7.5. Brexit and Article 63 TFEU

An extensive interpretation of Article 63 TFEU would imply that it prohibits 149 Member States of the EU to restrict the free movement of capital to or from the UK. On the other hand, a similar obligation may not apply to the UK. However, the other provisions in the chapter on the free movement of capital reserve some competences for the EU to curtail its generosity towards third countries (➔ para 26 et seq.; ➔ Article 64 para 8 et seq.). Presumably, the EU may use this legal position as a bargaining tool in its negotiations on the post-Brexit trade relations with the UK (➔ Article 64 para 24–25). Without reaching full understanding on this point, the EU shall have the competence to withdraw the potential benefits accruing to the UK from Article 63 TFEU. Such a conclusion is justifiable as Article 63 TFEU or any other provisions on the free movement of capital do not define what constitutes third countries. Since a third country is undefined, it is for the EU to decide the extent to which it should open, close, or withdraw its capital market to any third country.

List of Cases ECJ 11.07.1974, 8/74, Dassonville, ECLI:EU:C:1974:82 [cit. in para 38] ECJ 04.12.1974, 41/74, Yvonne van Duyn v Home Office, ECLI:EU:C:1974:133 [cit. in para 65] ECJ 23.11.1978, 7/78, Thompson, ECLI:EU:C:1978:209 [cit. in para 46] ECJ 20.02.1979, 120/78, Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein, ECLI:EU:C:1979:42 [cit. in para 63] ECJ 11.11.1981, 203/80, Casati, ECLI:EU:C:1981:261 [cit. in para 8] ECJ 31.01.1984, 286/82 and 26/83, Luisi and Carbone, ECLI:EU:C:1984:35 [cit. in para 47–48] ECJ 24.06.1986, 157/85, Brugnoni and Ruffinengo v Cassa di risparmio di Genova e Imperia, ECLI:EU:C:1986:258 [cit. in para 39] ECJ 14.07.1988, 308/86, Lambert, ECLI:EU:C:1988:405 [cit. in para 49] ECJ 28.01.1992, C-204/90, Bachmann v Belgian State, ECLI:EU:C:1992:35 [cit. in para 39] ECJ 14.02.1995, C-279/93, Roland Schumacker, ECLI:EU:C:1995:31 [cit. in para 63] ECJ 23.02.1995, C-358/93 and C-416/93, Aldo Bordessa et.al., ECLI:EU: C:1995:54 [cit. in para 17–21] ECJ 14.11.1995, C-484/93, Svensson and Gustavsson, ECLI:EU:C:1995:379 [cit. in para 61] Seyad

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ECJ 14.12.1995, C-163/94 et al., Sanz de Lera, ECLI:EU:C:1995:451 cit. in para 23–26] ECJ 05.03.1996, C-46/93 and C-48/93, Brasserie du Pêcheur and Factortame, ECLI:EU:C:1996:79 [cit. in para 55] ECJ 26.03.1996, C-392/93, The Queen v H.M. Treasury, ex parte British Telecommunications, ECLI:EU:C:1996:131 [cit. in para 55] ECJ 08.10.1996, C-178/94 et al., Dillenkofer and Others v Germany, ECLI:EU: C:1996:375 [cit. in para 55] ECJ 17.10.1996, C-283/94 et al., Denkavit Internationaal and Others v Bundesamt für Finanzen, ECLI:EU:C:1996:387 [cit. in para 55] ECJ 15.05.1997, C-250/95, Futura Participations SA and Singer v Administration des Contributions, ECLI:EU:C:1997:239 [cit. in para 63] ECJ 17.07.1997, C-28/95, A. Leur-Bloem v Inspecteur der Belastingdienst/Ondernemingen Amsterdam, ECLI:EU:C:1997:369 [cit. in para 62] ECJ 01.12.1998, C-410/96, Ambry, ECLI:EU:C:1998:578 [cit. in para 52] ECJ 16.03.1999, C-222/97, Trummer and Mayer, ECLI:EU:C:1999:143 [cit. in para 56–59] ECJ 01.06.1999, C-302/97, Konle, ECLI:EU:C:1999:271 [cit. in para 53–55] ECJ 14.10.1999, C-439/97, Sandoz, ECLI:EU:C:1999:499 [cit. in para 61] ECJ 14.03.2000, C-54/99, Église de Scientologie, ECLI:EU:C:2000:124 [cit. in para 61] ECJ 04.06.2002, C-367/98, Commission v Portugal, ECLI:EU:C:2002:326 [cit. in para 83–84] ECJ 04.06.2002, C-483/99, Commission v France, ECLI:EU:C:2002:327 [cit. in para 81–82] ECJ 04.06.2002, C-503/99, Commission v Belgium, ECLI:EU:C:2002:328 [cit. in para 60–63] ECJ 13.05. 2003, C-463/00, Commission v Spain, ECLI:EU:C:2003:272 [cit. in para 70–72] ECJ 13.05.2003, C-98/01, Commission v United Kingdom, ECLI:EU:C:2003:273 [cit. in para 76–77] ECJ 23.09. 2003, C-452/01, Margarethe Ospelt and Schlössle Weissenberg Familienstiftung, ECLI:EU:C:2003:493 [cit. in para 43] ECJ 02.06.2005, C-174/04, Commission v Italy, ECLI:EU:C:2005:350 [cit. in para 85] ECJ 12.12.2006, C-446/04, FII Group Litigation, ECLI:EU:C:2006:774 [cit. in para 33] ECJ 25.01.2007, C-370/05, Festersen, ECLI:EU:C:2007:59 [cit. in para 88] ECJ 23.10.2007, C-112/05, Commission v Germany, ECLI:EU:C:2007:623 [cit. in para 73–75] ECJ 06.12.2007, C-463/04, Federconsumatori and Others, ECLI:EU:C:2007:752 [cit. in para 85–86] ECJ 05.06.2014, C-24/12 and C-72/12, X and TBG, ECLI:EU:C:2014:1385 [cit. in para 41]

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References Bond, C. (1999). Commentary on the law of the E.E.C. Matthew Bender & Co. Flynn, L. (2002). Coming of age: The free movement of capital case law (1993–2002). Common Market Law Review, 773–805. Louis, J.-V. (1982). Free movement of capital in the community: The Casati Judgment. Common Market Law Review, 19(3), 443–454. Putek, C. (2004). Limited but not lost: A comment on the ECJ’s golden share decisions. Fordham Law Review, 1–69. Rutabanzibwa, P. (1996). What is golden in the golden share? Company law implications of privatization. The Company Lawyer, 17(2), 40. Sander, F. (2008). The Volkswagen Case and Art. 56 56 EC – A proper result, yet also a missed opportunity? Columbia Journal of European Law, (14), 359–370. Seyad, S. (1996a). Legal and judicial developments in the field of capital movements. European Business Law Review, 273–279. Seyad, S. (1996b). EC court sanctions international capital movements. International Trade Law and Regulation, 96–102. Seyad, S. (1997). A critical interpretation of the EMU convergence rules. Legal Issues of European Integration, 24(1), 1–16. Seyad, S. (1999). European law on the free movement of capital and EMU. The Hague: Kluwer Law International. Seyad, S. (2001). Recent case law in the field of free movement of capital. Journal of International Banking Law and Regulation, 178–191. Seyad, S. (2008a). Contribution of general principles to EC financial market integration. In U. Bernitz & J. Nergelius (Eds.), General principles of EC law in a process of development (pp. 177–190). The Hague: Kluwer Law International. Seyad, S. (2008b). A critical assessment of the Payment Services Directive. JIBLR, 218–230. Torre, F. (1995). Case note on Bordessa. Common Market Law Review, 32(4), 1025–1027. Usher, J. A. (1992). Capital and the Treaty on European Union. Yearbook of the European Law, 35–57.

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Article 64 [Restrictions on Third Countries] (ex-Article 57 TEC) 1. The provisions of Article 63 shall be without prejudice to the application to third countries of any restrictions which exist on 31 December 1993 under national or Union law adopted in respect of the movement of capital to or from third countries involving direct investment5-6 — including in real estate — establishment, the provision of financial services or the admission of securities to capital markets.7 In respect of restrictions existing under national law in Bulgaria, Estonia and Hungary, the relevant date shall be 31 December 1999. In respect of restrictions existing under national law in Croatia, the relevant date shall be 31 December 2002.1 2. Whilst endeavoring to achieve the objective of free movement of capital between Member States and third countries to the greatest extent possible and without prejudice to the other Chapters of the Treaties, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure,22 shall adopt the measures on the movement of capital to or from third countries involving direct investment — including investment in real estate — establishment, the provision of financial services or the admission of securities to capital markets. 3. Notwithstanding paragraph 2, only the Council, acting in accordance with a special legislative procedure, may unanimously, and after consulting the European Parliament,22 adopt measures which constitute a step backwards in Union law as regards the liberalization of the movement of capital to or from third countries. Contents 1.

Scope of Article 64 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. Time Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.2. Notion of “Direct Investment” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 1.3. Real Estate, Financial Services, and Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.4. Limitation of Cash Transfer to Third Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.5. Declaration of Capital Movements to Third Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2. Procedural Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3. Fiscal Bridge Between Articles 64 and 65 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4. Bilateral Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 5. Litigation Based on Article 64 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 6. Brexit and Article 64 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 6.1. UK-Based Financial Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 6.2. EU-Based Financial Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 6.3. Withdrawal of Access to EU Financial Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 List of Cases

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Springer Nature Switzerland AG 2021 H.-J. Blanke, S. Mangiameli (eds.), Treaty on the Functioning of the European Union – A Commentary, Springer Commentaries on International and European Law, https://doi.org/10.1007/978-3-030-43511-0_65

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Scope of Article 64 TFEU

Article 63 TFEU is broadly formulated to liberalise the free movement of capital between the MS and between the Union and third countries. Every rule has an exception, and Article 63 TFEU is not an exception. The exception to the free movement of capital between the MS is much narrower and more restrictive than that provided for the capital flows towards third countries. Articles 64–66 TFEU are exceptions to the general rule on free movement of capital towards third countries. The exceptions contained in Article 65 TFEU apply to both internal and external movements of capital.

1.1. Time Limit

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The aim of Article 64 TFEU is to enable MS to preserve certain rules limiting the free movement of capital to third countries. Such rules may have been adopted at the national or Union level. An MS may maintain such restrictions to the free movement of capital based on national law or adopted at the EU level. There is a certain limitation imposed on the time framework for the application of restrictive measures to third countries. The majority of the MS may retain any restrictions to the movement of capital towards third countries, which was in effect on or before 31 December 1993. In the case of three MS, Bulgaria, Estonia, and Hungary, these countries can maintain the rules restricting the free movement of capital to third countries adopted on or before 31 December 1999. With regard to Croatia, this deadline is 31 December 2002.2

1.2. Notion of “Direct Investment”

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Apart from the limitation based on the time framework, this legal provision also sets another condition to apply the restrictive rules applicable to third countries. Article 64 TFEU does not authorise the MS to apply such restrictions to all kinds of capital movements towards third countries. It only authorises MS to retain restrictions on capital movements relating to direct investment. Article 64 TFEU does not define what constitutes direct investments. It only gives some illustrations of direct investments, to include real estate; establishment; the provision of financial services; or the admission of securities to capital markets. These are only examples of what constitutes direct investment. It is not an exhaustive list, as evidenced by the use of the word “including” in Article 64 TFEU in setting out certain transactions falling within the ambit of direct investment.

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Added by Article 12 of the Act of Accession of Croatia, O.J. L 112/21 (2012).

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1.3. Real Estate, Financial Services, and Capital Markets

Article 63 TFEU read together with Directive 88/361 and supported by case law confirms that capital transactions relating to cross-border investments in real estate, financial services, and capital market are all covered by the treaty provisions on the free movement of capital. After the judgment in Sanz de Lera, MS cannot maintain or reintroduce any restrictions to such cross-border investments within the Union. However, such a generous interpretation cannot be extended to Article 63 TFEU in relation to movements of capital towards third countries. Such limitation has to be imposed in view of the objectives of Article 64 TFEU, which is to limit some of the beneficial effects of Article 63 TFEU to third countries. A closer reading of Article 63 TFEU read together with Sanz de Lera points to the conclusion that this judgment is not as generous towards third countries as it is towards fellow MS. The liberal attitude of the EU towards third countries should be limited to the physical movement of banknotes or transfer by a regulated financial market. In Sanz de Lera, for example, in order to come to the finding that the disputed Spanish law is not compatible with Article 63 TFEU, the ECJ declared that the “rules such as those at issue apply to exports of coins, banknotes or bearer cheques”.3 All liberalising legal measures relating to real estate, financial services, and capital market have to be activated by the intervention of EU institutions, as prescribed in Article 64.2 TFEU.

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1.4. Limitation of Cash Transfer to Third Countries

At the time the Sanz de Lera judgment was delivered, there was no EU legislation controlling the import and export of cash or its equivalent to third countries. It is one of the factors that facilitated the ECJ to generously extend the free movement of money to third countries. In order to liberalise the free movement of banknotes between the Union and third countries, the ECJ seeks to justify that approach by reference to Article 64 TFEU. In Sanz de Lera, the ECJ declared “that the exports of banknotes at issue do not represent payments for trade in goods or services. Consequently, those transfers cannot be regarded as payments within the meaning of Article 73b (2)”.4 The ECJ was distinguishing the provisions of Article 63 TFEU with transactions relating to payments and services by reference to Article 64 TFEU. Conversely, the ECJ could have provided even a more elastic interpretation to Article 64 TFEU read together with Article 65 TFEU to deny the freedom to move banknotes to third countries. The MS supported by the Union institutions are relatively better placed to combat financial crimes such as money laundering and terrorism associated 3 4

Joined Cases C 163/94 et al., Sanz de Lera (ECJ 14 December 1995) para 31. Joined Cases C 163/94 et al., Sanz de Lera (ECJ 14 December 1995) para 17.

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with the free movement of capital within the Union. The Union has adopted specific laws to deal with financial crimes such as money laundering.5 The ECJ acknowledged such a threat to the free movement of capital in Sanz de Lera, declaring that Article 4(1) of Directive 88/361 is “designed to ensure effective fiscal supervision and to prevent illegal activities such as tax evasion, money laundering, drug trafficking or terrorism, are also covered by Article 73d (1) (b)”.6

1.5. Declaration of Capital Movements to Third Countries

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The generous judicial extension of the free movement of banknotes to third countries was followed by legislative intervention to ensure that such a liberal legal regime is not subject to abuse. After Sanz de Lera, the transfer of money between the Union and third countries was thus subject to limitations imposed by secondary legislation.7 According to Regulation 1889/2005, any transfer of financial capital exceeding EUR 10.000 from the Union to third countries is subject to mandatory declaration. It defines capital in the broadest sense to cover not just banknotes but also bearer negotiable instruments such as traveller’s cheques, cheques, promissory notes, and money orders. If such financial resources are to be exported or imported in person, there is a legal obligation to declare them. A wide range of information should be disclosed, such as the name, date and place of birth, and nationality of the person who wishes to export the money; name of the real owner of the cash; intended recipient; amount and nature of cash; intended use of the cash; transport route; and means of transport. Such comprehensive information should be provided in writing, orally or electronically. Apart from authorising MS to require a declaration of capital movements towards third countries exceeding EUR 10.000, Regulation 1889/2005 also requires MS to impose penalties for its breach, which shall be effective, dissuasive, and at the same time proportionate to the specific infringement. In the case of Chmielewski,8 there is no evidence to indicate that the conduct of the accused involved any possible fraudulent or unlawful activities but merely a breach of the obligation to declare the movement of capital towards third countries. The ECJ highlighted that the overall objective of the Regulation is to ensure the effective control of movements of cash entering or leaving the EU as a means to prevent the introduction of the proceeds of unlawful activities in the financial system whilst respecting the principles recognised by the EU Charter on 5 Parliament/Council Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, O.J. L 309/15 (2005). 6 Joined Cases C 163/94 et al., Sanz de Lera (ECJ 14 December 1995) para 22. 7 Parliament/Council Regulation (EC) No 1889/2005 on controls of cash entering or leaving the Community, O.J. L 309/9 (2005). 8 Case C-255/14, Chmielewski (ECJ 16 July 2015).

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Fundamental Rights. On the basis of the facts of the case, the ECJ concluded that the national law imposing a fine equivalent to 60% of the amount of undeclared cash goes beyond what is necessary in order to ensure compliance with the overall objectives of the Regulation. Even a movement of capital from a third country to another third country with a transit within the territory of the EU is a transaction covered by Regulation 1889/ 2005. In El Dakkak, the Court decided that the scope of application of the Regulation includes the international transit zones of airports located within the Union.9 The Regulation is activated not only in relation to the non-declaration of the movement of capital exceeding EUR 10.000, but even incorrect or incomplete declaration is treated as non-declaration (Article 3.1).

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Procedural Rules

The procedural rules to activate the limitations to external movements of capital were amended by Article 64 TFEU. There are two distinct procedures prescribed in Article 64 TFEU for its activation. This legal provision makes a distinction between liberalisation and withdrawal of such liberalisation of free movement of capital between the Union and third countries. The competence to adopt measures to liberalise movement of capital to or from third countries was previously vested exclusively on the Council of Ministers. After Lisbon, the competence to adopt a legal act to liberalise free movement of capital towards third countries relating to direct investments (including real estate), the provision of financial services or capital market to third countries, is shared between the Council and the EP. It provides for the ordinary legislative procedure to adopt such legal measures. The Council is required to adopt such measures by qualified majority voting. The manner in which this duty is imposed on these institutions suggests that Article 64(2) TFEU is not a potential candidate for direct effect. Such a conclusion could be drawn on the basis of the style of language employed in this article. It merely declares that MS may endeavor to liberalise the free movement of capital towards third countries to the greatest extent possible and further qualifies it by stipulating that such intervention should be without prejudice to the other chapters of the treaties. The requirement for the intervention of an institution of the EU to enforce a treaty provision is another ground to deny direct effect to Article 64 TFEU. A different procedure is prescribed if the Union decides to withdraw the benefits of free movement of capital already conferred on third countries. In this context, the Council has the exclusive competence to adopt any legal measures if it constitutes a step back as regards capital movements towards third countries. Such measures should be adopted by the Council unanimously and by means of a 9

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Case C-17/16, El Dakkak and Intercontinental SARL (ECJ 4 May 2017).

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special legislative procedure after consulting the EP. It only prescribes a consultation procedure for the Council to withdraw the benefits of capital liberalisation towards third countries. The procedure prescribed to withdraw any benefits accorded to third countries may attract criticism as the EP has only a limited role in this process. Since the EP has to be fully involved to liberalise the movement of capital towards third countries, it should also be given the same status as a co-legislator to withdraw such liberalisation.

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A distinct feature in the Lisbon Treaty is that it establishes a direct link between the operation of Articles 64 and 65 TFEU, respectively. The aim of this amendment is to further enhance the tax competence of MS in relation to third countries. A new paragraph 4 is added to Article 65 TFEU, which provides that if no measures are adopted in terms of Article 64.3 TFEU or in the event that the Commission does not act within three months on a request from an MS, the Council may decide unanimously that restrictive tax measures adopted by such an MS against any third countries are justified and compatible with the internal market.

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Fiscal Bridge Between Articles 64 and 65 TFEU

Bilateral Trade Agreements

The only economic freedom within the single market that a third country could benefit directly is the free movement of capital, but it was also subject to certain restrictions. All the other economic freedoms of the single market are reserved for the MS of the EU. Whenever the Union decides to extend the benefits of any of these economic freedoms, it has to be done by way of legislative intervention. If the Union wants to extend the benefits of any elements of its customs union to a third country, it does so by means of entering into a bilateral trade agreement, as provided in the Treaty (Article 218 TFEU). There are several such bilateral and multilateral agreements that the Union had entered into with different countries and regional bodies.10 In most of these trade agreements, the Union grants tariff-free access to many products from third countries or regional bodies.11 However, the level of such liberalisation is not comprehensive as it is within the single market.

10 European Commission, 1 August 2013, “The EU’s bilateral trade and investment agreements – where are we?”. Available at https://ec.europa.eu/commission/presscorner/detail/en/MEMO_13_734. 11 On the legal status of GATT under EU law, see Joined Cases 21 and 25/72, International Fruit Company NV and others v Produktschap voor Groenten en Fruit (ECJ 12 December 1972); on a dispute relating to interpretation of the Convention between EEC and African countries, see Case 87/75, Bresciani v Amministrazione Italiana delle Finanze (ECJ 5 May 1976).

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The Polydor case may serve as an illustration. Before Portugal joined the EU, both parties had entered into a free trade agreement involving a parallel import of gramophone records. The agreement contained certain clauses that were identical with the provisions in the Treaty of Rome. For example, certain treaty provisions on the free movement of goods, such as Article 30 TFEU, were merely reproduced in the free trade agreement. The ECJ interpreted various provisions in the free trade agreement and declared that the same interpretation need not be given in the context of trade with non-MS. It further declared that there is no intention to create a single market under the free trade agreement.12 In the context of the free movement of capital, the ECJ reached a similar conclusion and declared that “because of the degree of legal integration that exists between Member States of the European Union, in particular by reason of the presence of Community legislation which seeks to ensure cooperation between national tax authorities, such as Directive 77/799, the taxation by a Member State of economic activities having cross-border aspects which take place within the Community is not always comparable to that of economic activities involving relations between Member States and third countries”.13

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Litigation Based on Article 64 TFEU

The restriction on capital movements that had attracted the most litigation relates to Article 64.1 TFEU. It is useful to refer to two of the judgments of the ECJ to highlight the legality of the restrictive measures that MS could maintain in relation to the free movement of capital with third countries. One such dispute is in Holböck,14 where the plaintiff, an Austrian resident, was an aggrieved taxpayer. He was the manager of an Austrian resident company whose main line of business is in the field of cosmetic products. The sole shareholder of this company was a Switzerland subsidiary in which the plaintiff held two thirds of the share capital. The disputed Austrian national tax legislation had been in force prior to 1993. It granted a lower rate of taxation in respect of dividends received from domestic limited companies. On the other hand, the dividends received from foreign limited liability companies were subject to a higher rate of taxation. The plaintiff was affected by the differentiated level of taxation imposed by this law. He challenged the imposition of the full rate of tax to dividends received from the Swiss subsidiary. His cause of action was that it forms a barrier to the free movement of capital, as guaranteed by Article 63 TFEU. 12 Case 270/80, Polydor v Harlequin (ECJ 9 February 1982). See for a similar legal issues, Case C312/91, Metalsa (ECJ 1 July 1993); Opinion 1/91, European Economic Area (ECJ 14 December 1991). 13 Case C-101/05, Skatteverket v A. (ECJ 18 December 2007) para 37 (emphasis added). 14 Case C-157/05, Holböck (ECJ 24 May 2007).

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The ECJ declared that even assuming the disputed Austrian legislation was in breach of Article 63 TFEU, the taxpayer cannot get any relief as the relevant legislation had been in force before 1993. In its judgment, the ECJ referred to Article 65 TFEU, which allows the MS the right to maintain any restrictions to the free movement of capital that had been in force on or before 1993. The ECJ therefore declared that the Austrian legislation must be regarded as having existed on 31 December 1993 for the purposes of Article 65 TFEU. The effect of the judgment was that the disputed Austrian tax legislation is not incompatible with Union law. Another case in which Article 64.1 TFEU was the subject of litigation is the case involving the Swedish Tax Authority, the Skatteverket.15 The dispute relates to a national tax legislation enacted in 1992 but repealed in 1994 and reintroduced in 1995. The relevant law grants taxpayers living in Sweden an exemption from tax in respect of dividends distributed in the form of shares in a subsidiary by a limited liability company established in Sweden or in another State within the EEA. It refuses to grant them that exemption where such a distribution is made by a company established in a third country outside the EEA unless that country has concluded a convention providing for the exchange of information with Sweden. The plaintiff submitted that the effect of the Swedish legislation is to discourage taxpayers residing in Sweden from investing their capital in companies established outside the EEA. Since the dividends that such companies pay to Swedish residents receive less favourable tax treatment than dividends distributed by a company established in an EEA Member State, he claimed that the shares of such companies are less attractive to investors residing in Sweden than shares in companies established in such a State. The ECJ held that the disputed Swedish legislation entails a restriction of the movement of capital between MS and third countries. However, the ECJ declared that since the restriction imposed by the national legislation existed prior to 1993, in terms of Article 64 TFEU, Sweden can maintain the disputed tax legislation.

6.

Brexit and Article 64 TFEU

6.1. UK-Based Financial Entities

35

36

Brexit, in the absence of any agreement to the contrary (➔ Article 63 para 148), will have an impact on the legal status of the single passport of financial institutions domiciled in the UK. The legal consequence of Brexit is that the providers of financial services domiciled in the UK will be deprived of their EU passport. Licensed service providers such as banks, investment firms, insurance companies, and fund managers normally carry out the transmission of capital, etc. Unless an understanding is reached between the EU and the UK, such service providers 15

Case C-101/05, Skatteverket v A. (ECJ 18 December 2007).

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domiciled in the UK and holding a European passport will lose their license to move capital in and out of EU as a consequence of Brexit. Not long after the Brexit referendum, several financial institutions of third countries domiciled in the UK moved partly or in full their operations to the continental Europe in fear of losing their EU passport.

37

6.2. EU-Based Financial Entities

Any EU-domiciled financial entities that operate in the UK will also lose their license to provide financial services for their clients involving the movement of capital.

38

6.3. Withdrawal of Access to EU Financial Market

Since the UK as a former Member State has been enjoying a long period of full access to the EU financial market, withdrawal of such inherited benefits postBrexit may have to be done in accordance with Article 64.3 TFEU, which requires the adoption of secondary legislation by means of a special legislative procedure. A contrary and more credible argument may be adduced on the basis that by unilaterally and successfully invoking the exit clause in Article 50 TEU, UK is liable to lose even its inherited right of access to the EU financial market

List of Cases ECJ 12.12.1972, 21 and 25/72, International Fruit Company NV and Others v Produktschap voor Groenten en Fruit, ECLI:EU:C:1972:115 [cit. in para 25] ECJ 05.02.1976, 87/75, Bresciani v Amministrazione Italiana delle Finanze, EECLI:EU:C:1976:18 [cit. in para 25] ECJ 09.02.1982, 270/80, Polydor v Harlequin, ECLI:EU:C:1982:43 [cit. in para 26] ECJ 14.12.1991, Opinion 1/91, European Economic Area, ECLI:EU:C:1991:490 [cit. in para 26] ECJ 01.07.1993, C-312/91, Metalsa, ECLI:EU:C:1993:279 [cit. in para 26] ECJ 14.12.1995, C-163/94 et al., Sanz de Lera, ECLI:EU:C:1995:451 [cit. in para 9] ECJ 24.05.2007, C-157/05, Holböck, ECLI:EU:C:2007:297 [cit. in para 29–30] ECJ 18.12.2007, C-101/05, Skatteverket v A., ECLI:EU:C:2007:804 [cit. in para 31–32] ECJ 16.07.2015, C-255/14, Chmielewski, ECLI:EU:C:2015:475 [cit. in para 16] ECJ 04.05.2017, C-17/16, El Dakkak and Intercontinental, ECLI:EU:C:2017:341 [cit. in para 17]

Seyad

39

Article 65 [Restrictions by Member States] (ex-Article 58 TEC) 1. The provisions of Article 63 shall be without prejudice to the right of Member States: (a) to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested;8–13 (b) to take all requisite measures to prevent infringements of national law and regulations, in particular in the field of taxation14–17 and the prudential supervision of financial institutions,19–51 or to lay down procedures for the declaration of capital movements52–58 for purposes of administrative or statistical information,59–60 or to take measures which are justified on grounds of public policy or public security.61–70 2. The provisions of this Chapter shall be without prejudice to the applicability of restrictions on the right of establishment71–73 which are compatible with the Treaties. 3. The measures and procedures referred to in paragraphs 1 and 2 shall not constitute a means of arbitrary discrimination or a disguised restriction74–80 on the free movement of capital and payments as defined in Article 63. 4. In the absence of measures pursuant to Article 64(3), the Commission or, in the absence of a Commission decision within three months from the request of the Member State concerned, the Council, may adopt a decision stating that restrictive tax measures adopted by a Member State concerning one or more third countries are to be considered compatible with the Treaties in so far as they are justified by one of the objectives of the Union and compatible with the proper functioning of the internal market. The Council shall act unanimously on application by a Member State.18

Contents 1. 2.

3. 4.

#

Scope of the Exception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . National Tax Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1. Criterion of Residence and the Place of Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2. Declaration Added to Article 65 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3. Discriminatory Tax Measures on Non-residents and Foreign Investments . . . . . . . . 2.4. Infringement of Tax Laws and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5. Strengthening National Tax Competence Towards Third Countries . . . . . . . . . . . . . . Prudential Supervision of Financial Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Restriction on Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1. Gradual Erosion of National Supervisory Competence . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2. Global Financial Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Springer Nature Switzerland AG 2021 H.-J. Blanke, S. Mangiameli (eds.), Treaty on the Functioning of the European Union – A Commentary, Springer Commentaries on International and European Law, https://doi.org/10.1007/978-3-030-43511-0_66

1 3 4 5 8 14 18 19 29 34 36

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4.3. Establishment of Financial Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4. Supervisory Reforms After the 2011 Fiscal Crisis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Declaration of Capital Movements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1. Declaration Based on National Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2. Declaration Based on Secondary Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3. Declaration vs Prior Authorisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.4. Administrative or Statistical Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Public Policy Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Right of Establishment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Unwritten Exceptions to Free Movement of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Prohibition of Arbitrary Discrimination or a Disguised Restriction . . . . . . . . . . . . . . . . . . . . 10. Uneven Application of Article 65 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11. Duration of the Exceptions in Article 65 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. Brexit and Article 65 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . List of Cases References

1. 1

2

Scope of the Exception

Article 65 TFEU does not explicitly state whether it applies only to MS, third countries, or both. The opening sentence of Article 65 TFEU declares that the provisions of Article 63 TFEU shall be without prejudice to the right of MS to apply various restrictions to the free movement of capital. Since Article 63 TFEU applies to both internal and external movements of capital, the exceptions in Article 65 TFEU should therefore apply both internally and externally.1 Article 65 TFEU contains a long list of exceptions authorising MS to derogate from their obligations if freedom of capital movements comes into conflict with policy issues relating to taxation, prudential supervision, and public policy. The MS may retain these wide competences so long as such policy areas are not subject to harmonisation at the Union level.

2. 3

38 43 51 52 55 56 58 60 72 75 76 83 86 90

National Tax Competence

Article 65 TFEU empowers MS to restrict the operation of the capital freedom if it is inconsistent with their national tax laws.2 The supremacy of national tax laws over the duty of MS to set free the circulation of capital to fellow MS was recognised by the Second Capital Directive.3 Article 65 TFEU elevates this 1 This line of interpretation was confirmed in Sanz de Lera where the ECJ declared that the expression “within the framework of the provisions set out in this Chapter” in Article 73b relates to the whole chapter in which it appears. See Joined Cases C-163/94 et al., Sanz de Lera (ECJ 14 December 1995) para 42. 2 Seyad (1995a, b). 3 Article 4 of the Second Capital Directive authorises MS to take all requisite measures to prevent infringements of their laws and regulations, inter alia, in the field of taxation.

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Article 65. [Restrictions by Member States]

1299

exception to a higher legal hierarchy in the EU’s legal order. In order to justify granting precedence to national tax laws over the duty to liberalise capital movements, it has been aptly suggested that “if capital movements cannot be checked by restrictions, it is important that tax rules, not just in theory but in actual practice, function so as not to stimulate an undesirable flow of capital”.4

2.1. Criterion of Residence and the Place of Investment

The wording of Article 65 TFEU is quite complex. It authorises MS to discriminate between taxpayers on the basis of the criterion of residence and the place of investment. The absence of any definition of what constitutes “place of residence” for the purposes of Article 65 TFEU and its wide scope of application encompassing the liberalisation of capital movement between MS and between Union and third countries may justify the allocation of such competence to the MS.

4

2.2. Declaration Added to Article 65 TFEU

The addition of a Declaration to Article 65 TFEU added more confusion and uncertainty as to its legal scope.5 According to this Declaration, the right to differentiate between taxpayers applies only to those measures that were in force at the end of 1993 and only to operations concerning residents of other MS. As a consequence, Article 65 TFEU read together with the Declaration gives rise to a wide range of plausible interpretations.6 One may construe the combined effect of Article 65 TFEU and related Declarations to mean that it imposes a duty on all MS not to adopt tax measures that treat residents of other MS more favourably than their own local residents after the expiry date on 31 January 1993. This line of interpretation may find support among those MS having stringent tax laws. They can invoke such competence to prevent or discourage another MS to retain or introduce liberal tax laws as a means to attract capital from other MS. Another line of interpretation of Article 65 TFEU is that it justifies discriminatory treatment of non-residents of the EU for tax purposes. On the basis of this interpretation, the MS may seek to treat residents of third countries less favourably with regard to tax matters than nationals or residents of other MS.

4

Muten (1994). It is referred to in the Annex to the Treaty as Declaration (No 7) on Article 73(d) TEC. 6 Dassesse (1992). 5

Seyad

5

6

7

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2.3. Discriminatory Tax Measures on Non-residents and Foreign Investments

8

9

10

11

12

13

The MS are authorised by Article 65 TFEU to distinguish between residents and non-residents in a non-discriminatory manner. This treaty provision poses the question as to whether it gives MS the right to legitimately adopt discriminatory tax measures on non-residents and foreign investments to the exclusion of residents and local investments. Before the complete liberalisation of capital movements, the issue of discriminatory tax treatment was raised in Pascal Van Eycke.7 At the time of the dispute, the opening of savings account in another MS was not liberalised as the First Capital Directive was still in force.8 The ECJ declared that the Belgian measure limiting tax exemptions on such accounts to deposits in local currency at credit institutions having their head office in Belgium is not incompatible with the treaty provisions on the freedom to provide services. It would have been reasonable to expect that with the adoption of Directive 88/ 361,9 the obligation that it imposes on MS to remove all restrictions on capital movements should also be construed as the elimination of discriminatory tax rules. However, contrary to this expectation, what the Maastricht Treaty, as inherited by Lisbon Treaty, opted is to confer constitutional recognition to the right of MS to apply their national tax laws even if they come into conflict with their obligation to set free capital movements. The ambit of this restriction raises the question whether the legalisation of such discriminatory behaviour is a constitutional coup to invalidate the principle of nondiscrimination developed by the judicial branch of the Union. In Commission v France,10 for example, the ECJ declared that no form of discrimination shall be tolerated on the ground that the tax laws of the MS have not yet been harmonised. Such a fear, however, may prove to be ill-founded if we are to scrutinise the judicial interpretation of the principle of non-discrimination in tax cases. Even after Maastricht, there is no marked difference in the judicial approach in its treatment of the concept of discrimination between residents and non-residents. According to case law, MS are authorised to distinguish between residents and non-residents for tax purposes in relation to the movement of capital when such distinction is based on legitimate considerations of general interests, such as the preservation of the coherence of a tax system, provided it is non-discriminatory. There are many cases in the post-Maastricht era where the ECJ continues the practice of setting aside national tax measures if they constitute a restriction to the free movement of capital. For example, in CLT-UFA SA, the ECJ declared that the refusal to apply the reduced tax rate to branches “renders the possibility, for

7

Case 267/86, Pascal Van Eycke v ASPA NV (ECJ 21 September 1988). List D of Annex 1 to the Council Capital Directive of 11 May 1960. 9 Council Directive 88/361/EEC for the implementation of Article 67 of the Treaty (Second Capital Directive), O.J. L 178/5 (1998). 10 Case 270/83, Commission v France (ECJ 28 January 1986). 8

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Article 65. [Restrictions by Member States]

1301

companies having their seat in another Member State, of exercising the right to freedom of establishment through a branch less attractive”.11

2.4. Infringement of Tax Laws and Regulations

Article 65 TFEU gives precedence not only to national tax laws but also to tax regulations over the duty to remove the restrictions on capital movements. It is not clear what is meant by the tax regulations to which MS shall give priority over the treaty obligation to free capital movements. In view of this legal uncertainty, it is possible to view the scope of this article in both an extensive and a restrictive manner. A broad interpretation of this concept may be justified on the basis that the tax laws of a country are not found in one piece of legislation. They are found in several subsidiary legislative measures adopted by various executive and administrative bodies and authorities. According to this line of interpretation, implementation of all such tax measures shall be given priority over the duty to liberalise capital movements. A narrower interpretation of the concept of tax regulations may also be justified on the ground that if it is given a wide interpretation, the treaty objective to ensure the complete liberalisation of movements of capital will be thwarted by those MS that would seek cover behind mere trivial declarations or communiques to derogate from their duty to ensure this freedom. Since the right to introduce restrictions on capital movements should be treated as an exception, a narrower interpretation may be appropriate. Since the judiciary is less receptive to allow MS to apply restrictive measures to any of the fundamental economic freedoms, the ECJ may not hesitate to strike down such trivial executive or administrative measures as inconsistent with the fundamental treaty objective to create a single market in capital.12

14

15

16

17

2.5. Strengthening National Tax Competence Towards Third Countries

The Lisbon Treaty introduced a significant amendment to Article 65 TFEU to further limit the scope of the free movement of capital towards third countries. It added a new paragraph to Article 65 TFEU. The aim of this amendment is to widen the scope of application of Article 65 TFEU and thereby further strengthen the competence of MS in relation to tax matters. In terms of this amendment, if the 11 Case C-253/03, CLT-UFA SA (ECJ 23 February 2006) para 17; see also Case T-168/01, GlaxoSmithKline Services Unlimited v Commission (CFI 27 September 2006); Case C-311/97, Royal Bank of Scotland plc v Elliniko Dimosio (ECJ 29 April 1999); Case C-200/98, X AB and Y AB v Riksskatteverket (ECJ 18 November 1999); Case C-513/03, van Hilten-van der Heijden (ECJ 23 February 2006); Case C-512/03, Blanckaert (ECJ 8 September 2005). 12 Hojnik (2013).

Seyad

18

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European Commission fails to take tax measures towards third countries as envisaged in Article 65.4 TFEU, an MS may be authorised to adopt restrictive tax measures towards one or more third countries.

3. 19

20

21

22

Prudential Supervision of Financial Institutions

The objective of Article 63 TFEU to liberalise the free movement of capital was realised by the abolition of exchange and investment control measures in the MS. It is an indispensable requirement to achieve the treaty objective to establish a single market in financial services. There are several legal acts adopted to liberalise and integrate the single market in traditional financial sectors, banking, and insurance and securities services, respectively. In adopting such liberalising measures, the Union also had to take into account the requirements of Article 65 TFEU, which is to preserve the right of MS to derogate from such obligations if it is inconsistent with their national interests in the field of prudential supervision of financial institutions. Until the adoption of the Second Banking Directive in 1993,13 which is now replaced by a Directive14 and a Regulation,15 the issue of prudential supervision at the Union level did not arise as the MS retained almost total competence over their financial market. A similar combined legislative approach of liberalisation of the market and preservation of MS’ competence on prudential supervision is evident in the insurance16 and securities market.17 With the successive adoption of legal measures to liberalise the different segments of the financial market, there was also correspondingly the erosion of national competence in these respective sectors. The underlying objective of the Banking Directive is to dismantle the barriers to the establishment of a single market in banking services. The national banks that complied with the registration requirements of the Directive are given a single passport to provide their services across the borders by way of a secondary establishment. The bulk of the supervisory powers were, however, kept almost

13 Second Council Directive 89/646/EEC on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions, O.J. L 386/1 (1989). 14 Parliament/Council Directive 2013/36/EU on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, O.J. L 176/338 (2013). 15 Parliament/Council Regulation (EU) No 575/2013 o on prudential requirements for credit institutions and investment firms, O.J. L 176/337 (2013). 16 See for example Parliament/Council Directive 2002/83/EC concerning life assurance and Council Directive 92/49/EEC on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance (third non-life insurance Directive), O. J. L 345/1 (2002). 17 Parliament/Council Directive 2004/39/EC on markets in financial instruments, O.J. L 145/1 (2004).

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Article 65. [Restrictions by Member States]

1303

intact with the home country regulators with very limited competence to their counterparts in the host country. The aim of Article 65 TFEU giving precedence to prudential supervision over capital movements is to further strengthen the competence enjoyed by the national regulators.18 In the financial sector, particularly banking and investment services, the host MS are empowered to apply their prudential rules on both local and foreign financial institutions. The allocation of competence to host supervisory agencies to regulate banks and investment firms in the interest of the general good is a broad legal device that could be used to limit any undesirable flows of capital through the financial intermediaries. The treaty provisions on the free movement of capital and the freedom to provide services, including the right of establishment, form the essential pillars of the common market in financial services. Article 57 TFEU defines services to include professions whose services are provided for remuneration (➔ Article 57 TFEU para 1–2), and therefore financial services too should fit into this definition. The link between capital movements and the free provision of financial services is made abundantly clear in Article 58.2 TFEU, which states that the liberalisation of banking and insurance services connected with movements of capital shall be effected in step with the progressive liberalisation of movement of capital (➔ Article 58 TFEU para 7–9).19 The link between these two financial activities was confirmed in the case of Van Eycke,20 where the ECJ declared that trans-border savings deposits constituted movements of capital. Since such movements relating to savings deposits had not yet been liberalised under the First Capital Directive, the ECJ further declared that the provisions on the free movement of banking services are not infringed. Even after the major treaty amendments, it is significant to note that the legal structure of Article 58.2 TFEU continues to remain in its original form. The gradual legislative process of liberalisation of capital movements, however, proportionately diminished the utility value of this article. It is reasonable to assume that the complete liberalisation of the movement of capital should render it inoperative, but this view has to be qualified in the light of Article 65 TFEU, which seeks to downgrade the capital freedom to MS’ right of prudential supervision of financial institutions. Article 49 TFEU enables a credit institution established in an MS to provide banking services in another MS by means of establishing a primary or secondary form of establishment (➔ Article 49 TFEU para 29 et seqq.). It provides for the abolition of all restrictions on the freedom of establishment of nationals of an MS in another MS, but such obligation is subject to the provisions of the chapter relating to capital. The restrictions on the freedom to move capital for purposes of direct

18

Seyad and Bernitz (1996). This link was reiterated for example in Recital 2 of Directive 73/183, O.J. L 194/1 (1973) and Recital 18 of the Second Banking Directive 89/646/EEC, O.J. L 386/1 (1989). 20 Case 267/86, Pascal Van Eycke v ASPA NV (ECJ 21 September 1988). 19

Seyad

23

24

25

26

27

28

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investments was abolished at the formative stages of the common market by the First Capital Directive.21 The ECJ also recognised the link between capital movements and establishment in Casati, where it declared that the freedom to move certain types of capital is a precondition for the effective exercise of the right of establishment.22

4. 29

30

31

32

33

Restriction on Financial Services

Article 65 TFEU does not make any specific reference to restrictions on capital movements based on national rules, whereas Article 64.1 TFEU refers to both national and EU laws. This has created legal uncertainty with regard to the precise scope of the duration of the restrictions spelt out in Article 64 TFEU. Since this article does not refer to the existing restrictions based on national law, it has to be assumed that it is only the restrictions based on EU law that will cease to be in force after the deadline. The MS that maintained restrictions on the basis of their national laws could retain them even beyond the deadline. Article 63 TFEU may therefore be interpreted as prohibiting only the imposition of new restrictions based on EU and national laws but does not require the elimination of national restrictions legitimately adopted before 1994. The wording of Article 64 TFEU is also drafted in a qualified manner. The nature of the obligation prescribed is almost identical to most of the rules under the previous legal regime. The obligation imposed on the Council is merely “to endeavour to achieve the objective of free movement of capital between Member States and third countries”. The discretionary element is quite wide as liberalisation should not in any way offend the rules not only in the chapter on capital and payments but also other “chapters of this Treaty”. The limitations in this legal provision may indicate that the free movement of capital to third countries is not an absolute right. The fact that the ECJ declared Article 63 TFEU to be directly effective does not, however, mean that this exception is rendered void. The ECJ did not make any reference directly or impliedly to that effect. A legal position similar to what existed under the previous rules on capital movements is recreated here. While declaring Article 67.1 TEEC as not directly effective, the ECJ in Casati held that the liberalisation of various categories of capital movements is a matter for the discretion of the Council. It is implied in the judgment that if the Council fails to declare a certain item of capital movements that is necessary for the proper functioning of the common market, the ECJ will intervene to declare the Council’s inaction as a breach of EU law.23 The ECJ in Sanz de Lera was more specific on this issue. It declared that the application of restrictions in Article 73 (c) TEC should be subject to judicial review. 21

List A of the Directive. Case 203/80, Criminal proceedings against Guerrino Casati (ECJ 11 November 1981). 23 Oliver (1984). 22

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Article 65. [Restrictions by Member States]

1305

The judgment therefore does not have the effect of removing the restrictions contained in this article. Such competence lies with the Council, which on a proposal from the Commission could adopt measures to remove such restrictions. The judgment should therefore be interpreted to mean that if there is a legitimate need to extend to third countries capital movements linked to financial services and the Council fails to act in terms of this article, then the ECJ will intervene to make an appropriate order.

4.1. Gradual Erosion of National Supervisory Competence

Since the adoption of the Banking Directive, some of the supervisory competence had to be shared between the home and host state authorities.24 The MS retained the overall supervisory competence over their banks operating across the borders in order to ensure that they fully comply with the conditions subject to which they were issued the European banking passport. The host state was given certain powers to regulate and supervise the foreign banks operating within their jurisdictions. They are empowered to check whether such banks have sufficient liquidity to carry on their business. The host state can also require statistical information from foreign banks essentially for administrative purposes. They are also specifically authorised to monitor foreign banks, whether they have in place sound administrative and accounting procedures to ensure their compliance with non-harmonised rules. They are also required to ensure that foreign banks have adequate internal control mechanisms, for example to prevent money laundering and other financial crimes.

34

35

4.2. Global Financial Crisis

One of the objectives of the Banking Directive was to create a level playing field for the credit institutions of the MS to operate across the borders. It, however, failed to put in place a credible mechanism for the effective supervision of such banks when operating across the borders. The deficiencies in the supervision of the financial market were identified as one of the factors that contributed to the global financial crisis in 2008. The single market in banking services was launched by means of harmonisation of rules relating to authorisation, such as the requirements to secure a European banking licence, including its withdrawal. In the context of supervision, such powers were kept with the national authorities. During the financial crisis, it was found that neither home state nor host state supervisory authorities had sufficient control over their banks when they operated outside their jurisdiction. It created a

24

Seyad (1997).

Seyad

36

37

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kind of no-man land scenario when it comes to the supervision of banks operating outside their home state.

4.3. Establishment of Financial Authorities

38

39

40

41

The financial crisis exposed many shortcomings in the field of financial supervision. In order to modernise its legal arsenal in the field of supervision, the EU created several authorities, such as the European Banking Authority (EBA),25 the European Securities and Markets Authority (ESMA),26 the European Insurance and Occupational Pensions Authority (EIOPA),27 and the European System of Risk Board (ESRB).28 The aim of the supervisory reforms was to restore confidence and guard against future crises and to tackle problems connected with the supervision of firms providing cross-border services. The financial crisis confirmed that the system of financial supervision failed to keep track with market integration. It was neither sufficiently responsive nor appropriate for a single financial service market. There are several objectives for establishing the EBA. The overall objective is to enhance and facilitate the cooperation between the supervisory authorities of the MS. The EBA will intervene to settle disagreements that may arise between national supervisors. However, the most important task assigned to the EBA is that it should contribute to fostering supervisory convergence among the national supervisory authorities. It should facilitate to create a single rule book for financial services in the EU by way of issuing guidelines and recommendations to the financial industry. The EBA will not interfere with the day-to-day supervision of the banking market, which is the responsibility of the national regulators. It will only intervene in situations where there will be clear added value, such as the development of technical standards, which will apply throughout the EU. The pan-EU financial watchdogs were established to monitor banks, insurance companies, and trading on markets in a bid to strengthen financial supervision after the worst recession in a generation. They deal with supervision of individual financial institutions and will address their decisions directly to financial institutions. The regulations creating the financial supervisory authorities do not, however, grant any direct supervisory powers over any institutions. It should not be

25

Parliament/Council Regulation (EU) No 1093/2010 establishing a European Supervisory Authority (European Banking Authority), O.J. L 331/12 (2010). 26 Parliament/Council Regulation (EU) No 1095/2010 establishing a European Supervisory Authority (European Securities and Markets Authority), O.J. L 331/84 (2010). 27 Parliament/Council Regulation (EU) No 1094/2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority), O.J. L 331/48 (2010). 28 Parliament/Council Regulation (EU) No 1092/2010 on European Union macro-prudential oversight of the financial system and establishing a European Systemic Risk Board, O.J. L 331/1 (2010).

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viewed as Europeanisation of financial supervision. The domestic financial institutions will continue to be supervised by national supervisors. The establishment of these supervisory authorities, to some extent, erodes the exclusive supervisory competence traditionally enjoyed by the national supervisory authorities. As a result, the scope of competence that Article 65 TFEU conferred on the MS to derogate from their obligations flowing from Article 63 TFEU on grounds of prudential supervision will be proportionately curtailed.

42

4.4. Supervisory Reforms After the 2011 Fiscal Crisis

Apart from the financial crisis, the inadequacies in the supervisory regime of the financial market are also identified as one of the factors that had contributed to the debt crisis within the eurozone. If the national regulators had effectively supervised the financial institutions, especially in relation to their lending practices, the debt crisis may have been averted or at least its adverse effects could have been minimised. Some of the banks had become almost insolvent due to excessive lending without securing sufficient collaterals. In order to rescue them, some MS had to borrow from the financial market by issuing sovereign bonds to rescue such banks in trouble. Some governments could not repay the loans, and they themselves were on the verge of insolvency. This was briefly and precisely the background to the 2011 fiscal crisis within the eurozone created or at least aggravated by the inadequacies in financial supervision. In order to repair the damage caused to the credibility and stability of the eurozone, the EU adopted a series of emergency remedial measures to combat, contain, and also prevent the emergence of another round of fiscal crisis. It had almost become a trend that with the explosion of such a crisis, the EU tends to acquire more competence at the expense of its MS. The combined effect of the global financial crisis and the fiscal crisis of the eurozone had an adverse impact on the proper functioning of the EU’s financial market. These crises disrupted not only the harmonious and proper functioning of the European financial market but also the stability and integrity of the euro, the single currency of the majority of the MS of the EU. The crises also clearly exposed not only the shortcomings and inadequacies inherent in the legal instruments adopted to establish a single market in banking services and the EMU but also the inadequacies in the institutional structure to effectively and efficiently manage a large financial market and a single currency area. In the post-fiscal crisis, the EU decided to expedite the reform of the single market in banking services by launching the Banking Union.29 The first step in the construction of the Banking Union was to centralise and strengthen the supervision of the financial market, especially within the eurozone. In order to achieve this 29

Seyad (2013).

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49

50

objective, the competence on prudential supervision was conferred to the ECB. With effect from 1 January 2013, the ECB assumed competence relating to the prudential supervision of much of the credit institutions within the eurozone.30 The first pillar of the Banking Union is the establishment of a Single Supervisory Mechanism (SSM) for the purposes of prudential supervision of the credit institutions within the eurozone. The aim of establishing the SSM is to centralise the prudential supervision of the eurozone banks. The distinction between home and host control of credit institutions is removed. The ECB is the sole supervisor for all banks within the eurozone. Even though the main emphasis is to confer prudential supervision of credit institutions on the ECB, it goes far beyond matters relating to pure financial supervision. The ECB is conferred with wide powers and functions such as the issuing and withdrawal of banking authorisation, ensuring compliance with own fund requirements, large exposure limits, etc. The tasks that are not specifically conferred on ECB shall remain with national supervisors. They will retain some competences in the field of consumer protection, combating money laundering, supervision of third country credit institutions, etc. Since financial supervision is now elevated to the EU level, the competence on prudential supervision enjoyed by virtue of Article 65 TFEU will significantly diminish as far as MS within the eurozone are concerned. Even MS outside the eurozone can opt in to the single supervisory mechanism, and if they do so, their banking system too will be subject to prudential supervision by the ECB. Such MS too will thus lose some of their competences reserved in Article 65 TFEU.

5. 51

Chapter 4 Capital and Payments

Declaration of Capital Movements

The right of MS to require the declaration of inflow and outflow of capital is preserved in Article 65 TEU. It is not clear from the wording of this legal provision whether such declaration is voluntary or mandatory. The aim of formulating this legal provision in such general terms may be to respect the principle of subsidiarity whereby MS may decide to retain or not such capital control mechanism. If an MS wishes to maintain such control mechanism, it could also determine whether such declaration is voluntary or mandatory.

5.1. Declaration Based on National Law

52

There are a few judgments from the ECJ dealing with the compatibility of national rules requiring a declaration with EU law. In Aldo Bordessa and Sanz de 30 Parliament/Council Regulation (EU) No 1024/2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions, O.J. L 287/63 (2013).

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Lera, the dispute relates to the compatibility of national capital controls such as declaration and prior authorisation with EU law. The ECJ declared that MS could maintain the control mechanism requiring the declaration of capital exports on the ground that it will not unduly restrict the free movement of capital.31 Since MS retain the competence to decide whether or not to maintain the control mechanism based on declaration, the scope of such rules and the nature of punishment for its breach are also left to be decided at the national level. The MS may determine the ceiling above which capital movements should be subject to declaration. In Sweden, for example, export of physical banknotes exceeding SEK 150,000 should be declared before leaving the country.32 If it is to be transferred through the bank, the latter has a legal obligation to report it to the relevant national authorities. The nature of punishment for non-declaration may range from an administrative penalty to forfeiture of money to harsher punishment such as a fine or even a term of imprisonment, which again will be determined by the respective MS.

53

54

5.2. Declaration Based on Secondary Law

The right of an MS to require a declaration of free movement of capital in derogation of Article 63 TFEU is not only based on national law. In order to combat money laundering and the war on terror, the EU adopted a Regulation33 that complements the Directive on money laundering.34 According to the relevant Regulation, the export of money exceeding EUR 10,000 or its equivalent in other currencies from an MS to a third country shall be subject to mandatory declaration. This regulation does not apply to movement of capital between the MS.

55

5.3. Declaration vs Prior Authorisation

According to Article 65 TFEU, the competence of MS to require a declaration of capital movement is restrictive, and the ECJ has interpreted this rule even more restrictively. In Aldo Bordessa and Sanz de Lera, one of the legal issues raised was whether the right of MS to require a declaration of capital movements should also include the right to demand prior authorisation. The ECJ held consistently that

31

Joined Cases C-358/93 and C-416/93, Aldo Bordessa (ECJ 23 February 1995) para 27; Joined Cases C-163/94 et al., Sanz de Lera (ECJ 14 December 1995) para 27 et seq. 32 Deloitte (2014). 33 Parliament/Council Regulation (EC) No 1889/2005 on controls of cash entering or leaving the Community, O.J.L 309/9 (2005). 34 Parliament/Council Directive 2018/843 amending 2005/60/EC on the prevention of the use of the financial systems for the purpose of money laundering and terrorist financing, O.J. L 156/49 (2018).

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Article 65 TFEU authorises MS only the right to require a declaration and does not extend to prior authorisation. The requirement of prior authorisation, according to the ECJ, is not compatible with the principle of proportionality. It further declared that such control mechanism will unduly restrict the free movement of capital, a fundamental freedom of the single market.35 The distinction between declaration and authorisation was raised not only in relation to the transfer of pure cash, as in Aldo Bordessa and Sanz de Lera, but also in the context of the right of establishment linked to the free movement of capital. In the so-called golden shares cases, there are several of them where MS privatised state property but by retaining minority shares or voting rights sought to manage and control such privatised entities (➔ Article 63 para 77 et seqq., 81 et seqq.).36 One of the mechanisms they adopted to retain such competence is to require the management of the company to seek prior approval from state authorities before making any major corporate decisions such as selling or merging with another company. The dispute in these cases often revolves around the legality of such measures. The ECJ has consistently held that such authorisation requirement forms a serious obstacle to the exercise of the free movement of capital, as enunciated in Article 63 TFEU, and may also breach the right of establishment, as enshrined in Article 49 TFEU.37

5.4. Administrative or Statistical Information

58

59

The objective of conferring the right on MS to require a declaration of the movement of capital is for purposes of administrative or statistical information. It is not precisely clear what constitutes administrative or statistical information for the purposes of Article 65 TFEU. This precondition to demand a declaration of capital movement should be viewed in the broadest sense. Capital is the most mobile and dynamic of all the economic freedoms within the single market. The inflow or outflow of a large volume of capital may have a positive or negative impact on the national economy. The authorities, such as the central bank or tax authorities, should have sufficient information on such flows of capital in order to carry out their mandates. The ECB in the context of the eurozone or any national central bank that is not part of the monetary zone needs to have the statistical information on the volume of capital in circulation to pursue its monetary policies. Access to such information will also be of immense value to the tax authorities that may facilitate them to prevent and combat tax evasion.

35

Joined Cases C-358/93 and C-416/93, Aldo Bordessa (ECJ 23 February 1995) para 16 et seqq.; Joined Cases C-163/94 et al., Sanz de Lera (ECJ 14 December 1995) para 22 et seqq. 36 Ringe (2008). 37 See, for example, C-112/05, Commission v Germany (ECJ 23 October 2007).

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1311

Public Policy Considerations

The exceptions contained in Article 65 TFEU were inspired by Article 4 of the Second Capital Directive 88/361.38 The secondary legal act, however, does not specifically include public policy and security as an exception to capital freedoms. However, it is not entirely justifiable to assert that the question of public policy was not relevant to the capital freedom until the incorporation of Article 65 TFEU. Their link had been impliedly recognised by the judiciary even before the ratification of the Maastricht Treaty. Thompson39 is a good example on this point, where the ECJ declared that the MS have the exclusive right to mint their own coinage and to protect it from destruction and upheld the UK rule prohibiting the melting down of national coins on grounds of public policy under Article 36 EC. In Aldo Bordessa,40 concerning the compatibility with the Capital Directive of the Spanish law on foreign exchange, the AG expressed the Opinion that certain control measures on money movements based on public policy considerations was not unknown under the Rome Treaty. Article 65 TFEU extends to MS the right of derogation from their obligation to liberalise capital movements if it becomes necessary to “take measures which are justified on grounds of public policy or public security”. Such allocation of powers to the MS to invoke the defence of public policy or security is not limited to the free movement of capital. A similar limitation to the exercise of the economic freedoms is also found in relation to the free movement of goods (Article 36 TFEU), persons (Article 45.3 TFEU), right of establishment (Article 52 TFEU), and services (Article 62 TFEU). In Campus Oil, in the context of the application of the exception in Article 36 TEEC to the free movement of goods, the ECJ declared that “the aim of ensuring a minimum supply of petroleum products at all times is to be regarded as transcending purely economic considerations and thus as capable of constituting an objective covered by the concept of public security”.41 The aim of reserving such rights for the MS is to ensure that these economic freedoms are not subject to abuse by criminals. The freedom to move capital could also facilitate the free movement of economic crimes.42 A financial crime that is closely linked to capital freedom is money laundering, which is associated with sale of drugs, illegal arms dealings, tax evasions, etc. The concept of public policy and public security is closely interwoven with criminal law. By the incorporation of this exception into the chapter on capital, the Lisbon Treaty recognises the application of criminal law to matters relating to any kind of abuse of this freedom. 38

O.J. L 178/5 (1998). Case 7/78, Thompson (ECJ 23 November 1978). 40 Joined Cases C-358/93 and C-416/93, Aldo Bordessa (ECJ 23 February 1995). 41 Case C-72/83, Campus Oil Limited and others v Minister for Industry and Energy and others, (ECJ 10 July 1984). 42 Seyad (1995a, b). 39

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61

62

63

64

65

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66

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Chapter 4 Capital and Payments

The Treaty does not provide any definition of the concept of public policy. It thus leaves to the MS a large measure of discretion to classify various capital movements as offending national public interests. The MS may invoke the concept of public policy to forbid various behaviours and transactions, but in the final analysis, it is for the national courts to determine the nature and scope of such measures adopted to protect public interest.43 The traditional judicial practice in the EU is to provide a restrictive interpretation of treaty provisions forming an exception to a fundamental freedom. A similar judicial tendency is also ascertainable in relation to the concept of public policy. The first case in which the ECJ was called upon to consider the meaning of the concept of public policy was in Van Duyn,44 where the ECJ held that to invoke this concept, an alleged conduct need not necessarily be illegal but would be sufficient if it is socially undesirable. It also conceded that the concept of public policy may vary from state to state,45 and they should have an area of discretion within the limits defined by the Treaty. The case law following Van Duyn seeks to give a more restrictive interpretation to the concept of public policy. In Rutili, involving a French government order limiting the right of movement of an Italian to certain parts of France, the ECJ declared that the movements of a European citizen cannot be restricted unless his presence constitutes “a genuine and sufficiently serious threat to public policy”.46 The judicial dictum of Van Duyn was further narrowed down in Bouchereau, where the ECJ declared that the public policy sought to be protected was something that was socially harmful, sufficient “to pose a genuine and sufficiently serious threat to the requirements of public policy affecting one of the fundamental interests of society”.47 Judicial activism is unmistakable in this area of Union law, although decisions such as Van Duyn demonstrate some sense of restraint. However, much has depended on the accidents of litigation. Van Duyn was the first test case to come up before the ECJ to consider the meaning of the public policy exception and the first preliminary reference from the United Kingdom after her accession to the EU.48 Since the capital freedom has acquired the status of constitutional right since the Maastricht Treaty, its derogatory provisions must be construed strictly. Though these general principles would provide certain guidelines to ascertain the limits of its application, it does not provide sufficient guidelines to enumerate the nature of activities that should be treated as offending the concept of public policy.

43

Case 52/79, Procureur du Roi v Debauve (Opinion of AG Warner of 13 December 1979) p. 878. Case 41-74, Yvonne van Duyn v Home Office, (ECJ 4 December 1974). 45 Joined Cases 115 and 116/81, Rezguia Adoui v Belgian State and City of Liège (ECJ 18 May 1982). 46 Case 36/75, Rutili (ECJ 28 October 1975) para 28. 47 Case 30/77, Régina v Pierre Bouchereau (ECJ 27 October 1977) para 35 – emphasis is mine. 48 Wooldridge (1977). 44

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An opportunity to ascertain whether national capital control measures could be accommodated within the concept of public policy or security arose when Cyprus introduced such measures but did not reach the ECJ. In order to prevent a run on its banks, the Cyprus government imposed capital controls between March 2013 and April 2015. Significantly, it was the first capital control measure to be imposed in the eurozone since its launch in 1999. Since the financial crisis at that point of time was of an exceptionally serious nature, which not only threatened to ignite both financial and civil disorder in the country and even the potential collapse of the eurozone, it was not unsurprising that the European Commission, the guardian of the European law, not only did not object to it but even held such precautionary measures as legal. According to the European Commission, the stability of financial markets and the banking system in Cyprus constitutes a matter of overriding public interest and public policy justifying the imposition of temporary restrictions on capital movements.49 However, it needs to be stressed that it is the ECJ that is the final authority to decide on the legality of such protective measures.

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71

Right of Establishment

The free movement of capital is closely associated with the right of establishment and the freedom to provide services. One of the objectives of Article 65 TFEU is to give priority to the treaty limitations on the right of establishment over the duty to liberalise the free movement of capital based on Article 63 TFEU. In the context of free movement of services, the Treaty is more explicit as it declares in Article 58(2) TFEU that the liberalisation of that banking and insurance services connected with movements of capital shall be effected in step with the liberalisation of movement of capital. Before the ECJ declared the rules on free movement of capital as directly effective, it resolved disputes arising out of a pure capital transaction by reference to the rules on establishment or services. For example, in Luisi and Carbone,50 which involved export of banknotes from Italy to Germany and France to receive medical services and to pay for purposes of tourism, the ECJ resolved the dispute by reference to the rules on services rather than capital. This judicial attitude changed after the ECJ declared free movement of capital as a directly effective freedom. Since then, even disputes where the transaction appears to be more connected to establishment and services rather than to capital had been resolved by invoking the rules on free movement of capital.51

49 European Commission, Press Release, Brussels, 28 March 2013, Statement by the European Commission on the capital controls imposed by the Republic of Cyprus. 50 Joined Cases 286/82 and 26/83, Luisi and Carbone (ECJ 31 January 1984). 51 Case C-222/97, Manfred Trummer and Peter Mayer (ECJ 16 March 1999); Case C-410/96, Andre Ambry, (ECJ 1 December 1998); see Seyad (1999).

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8. 75

77

78

Unwritten Exceptions to Free Movement of Capital

It is also possible to detect in the case law of the ECJ certain unwritten exceptions to the free movement of capital. In Aldo Bordessa,52 the ECJ held that Article 4 of Directive 88/361/EEC is to be understood as permitting other measures “in so far as they are designed to prevent illegal activities of comparable seriousness”. In Veronica,53 the ECJ declared that “cultural-policy objectives are objectives relating to the public interest which a Member State may legitimately pursue by formulating the statutes of its own broadcasting organizations in an appropriate manner”. In Konle,54 the ECJ declared that “Member State can justify its requirement of prior authorisation by relying on a town and country planning objective such as maintaining, in the general interest, a permanent population and an economic activity independent of the tourist sector in certain regions, the restrictive measure inherent in such a requirement can be accepted only if it is not applied in a discriminatory manner and if the same result cannot be achieved by other less restrictive procedures”.

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Chapter 4 Capital and Payments

Prohibition of Arbitrary Discrimination or a Disguised Restriction

It may appear at a glance that Article 65 TFEU extends to MS a wide scope of discretion to invoke this exception on grounds of national tax consideration, public policy matters, prudential supervision of financial institutions, and the right of establishment. However, Article 65.3 TFEU seems to dispel such an assumption as it provides that restrictions permitted under this article must not constitute an “arbitrary discrimination or a disguised restriction” on the free movement of capital and payments. This is a safety valve devised to ensure that the safeguard measures that may be introduced by the MS to protect their national interests are not disproportionate to the mischief sought to be prevented. The exceptions enumerated in Article 65 TFEU closely resemble its counterpart on the free movement of goods found in Article 36 TFEU. The latter article is also subject to a similar limitation, namely that prohibitions or restrictions shall not constitute a means of arbitrary discrimination or a disguised restriction on trade between MS (➔ Article 36 TFEU para 18). Since Article 36 TFEU has been subject to extensive judicial review, the principles developed in this context would be useful to ascertain the scope of Article 65 TFEU. The ECJ has consistently maintained that MS cannot escape from their treaty obligations by pleading economic difficulties that may have been caused by the dismantling of barriers to intra-Community trade.55 Applying a similar judicial 52

Joined Cases C-358/93 and C-416/93, Aldo Bordessa (ECJ 23 February 1995). Case C-148/91, Veronica (ECJ 3 February 1993). 54 Case C-302/97, Konle (ECJ 1 June 1999). 55 Case 7/61, Commission v Italy (ECJ 19 December 1961). 53

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yardstick, it might well be that the control measures envisaged in Article 65 TFEU should be strictly confined to the effective administration and enforcement of the tax system and the effective supervision of financial institutions rather than to matters of economic policy.56 Another judicial innovation relevant in this context is that national measures authorised under a treaty exception cannot be invoked on matters that are sufficiently dealt with by EU law.57 The application of this principle to capital movements is more distinct. The periodical liberalisation of capital movements by means of Council Directives58 reduced proportionately the right of MS to apply national laws to those categories of capital movements that have been completely liberalised. An MS that seeks to invoke an exception in order to derogate from a treaty obligation must ensure that it does not adopt any national measures that may amount to arbitrary discrimination.59 Applying the same philosophy to Article 65 TFEU, MS will be required to show that effective measures are taken internally to deal with tax laws, the prudential supervision of financial institutions, or other perceived problems contained in Article 65 TFEU. Any measures adopted in terms of Article 65 TFEU may still be deemed to be a disguised restriction if such measures exceed the need to protect a particular national interest. Article 65 TFEU will not protect an MS that adopts measures in pursuance of this treaty provision if the same objective could be achieved by other means less restrictive than inter-Community trade.60 These judicial principles should form a rich source of guidelines to interpret and apply the restrictions in Article 65 TFEU and should help ease the burden imposed on the free circulation of capital.

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Uneven Application of Article 65 TFEU

The question arises as to whether a similar interpretation should be applied to invoke the exceptions to both internal and external movements of capital. For policy reasons, it is justified to make a distinction in the application of these exceptions. The class of exceptions in Article 65 TFEU may be applied more rigidly than its application within the Union. Most of the contemplated situations, such as prudential supervision of financial institutions, tax evasion, and public policy considerations such as money laundering, could be more effectively monitored within the Union owing to its relatively integrated legal system. It has also a 56

Usher (1994), p. 36. Case 28/84, Commission v Germany (ECJ 3 October 1985). 58 First Council Directive of 11 May 1960 as amended in 1962 and Directive 86/566/EEC, O.J. L 332/22 (1986). 59 Case 4/75, Rewe-Zentralfinanz eGmbH v Landwirtschaftskammer (ECJ 8 July 1975). 60 Case 25/88, Bouchara (ECJ 11 May 1989). 57

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common judicial body with jurisdiction over all MS to ensure the observance and application of EU law. A similar legal and judicial competence does not exist in relation to capital movements with third countries. In applying the exceptions based on Article 65 TFEU, MS are required to comply with the principle of non-discrimination (ex-Article 73 (d)(3) TEC). In the context of capital movements towards third countries, this principle need not be interpreted in the same way as in the context of internal movements of capital. It may be interpreted more flexibly to make it possible to broaden the scope of application of these restrictions. Such a wide interpretation should help create a level playing field for both the Union and third countries. This line of approach is not unprecedented in the EU’s legal order. A comparison could be drawn by reference to the non-discrimination proviso to Article 36 TFEU and the similar principle enunciated in Article 65 TFEU. While Articles 30 to 36 TFEU apply only to trade between MS, the same proviso has been incorporated into various trade agreements between the Union and non-MS. In Polydor,61 in the context of a free trade agreement with Portugal before its full accession to the EEC, it was held that the same interpretation need not be given in the context of trade with a non-MS since there was no intention to create a single market under the free trade agreement. On the basis of this judgment, it is submitted that the objective of Article 63 TFEU is not to create a single market in capital with nonMS, and therefore the principle of non-discrimination need not be applied in an even-handed manner.62

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Duration of the Exceptions in Article 65 TFEU

A critical review of the nature of the exceptions in Article 65 TFEU indicates that they are of a transitional character and MS would lose most of their derogatory powers as the common financial market and EMU becomes fully operational. As far as the national taxation is concerned,63 there is only a limited progress towards harmonisation of direct taxation.64 Even the Lisbon Treaty preserves national competence requiring unanimity voting to adopt measures in this sphere. In the field of direct taxation, with effect from 1 January 2016 all Member States moved towards mandatory exchange of information system. The right of MS to apply their national rules on the prudential supervision of financial institutions is not a permanent exception. According to Article 127.6 TFEU, such supervisory powers of MS, with the exception of insurance business, 61

Case 270/80, Polydor v Harlequin (ECJ 9 February 1982). Usher (1994), p. 183. 63 Seyad (1995a, b). 64 Council Directive 2003/48/EC on taxation of savings income in the form of interest payments, O. J. L 157/38 (2003). Also see Seyad (2002). Council Directive 2003/48/EC was repealed by Directive 2015/2060. The current applicable law is Directive 2014/107/EU on automatic exchange of information between tax administrations of the Member States, effective from 1 January 2016. 62

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may devolve on the ECB. In accordance with this legal provision, the regulation on the SSM was adopted, thereby depriving the right of MS of the eurozone in the field of prudential supervision. The only exception to the capital freedom that may be of a permanent character is in relation to the right of MS to derogate from this obligation on grounds of public policy.65 This statement is also not absolute. The scope of this competence will diminish in proportion to the powers devolved on the Union. The adoption of the Directive on money laundering66 curtailed the power of MS to deal unilaterally with the problems connected with the use of financial institutions for money laundering. The Directive provides for a Community standard to combat the crimes associated with the free movement of capital. After Lisbon Treaty law making in the field of criminal law is moved to ordinary legislative procedure. It is possible to predict legislative activism in this branch of EU law, and with more Union intervention, MS will have less competence to invoke their national rules on grounds of public policy.

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Brexit and Article 65 TFEU

The EU may activate this provision against the UK in the event of the latter adopting any unfair tax measures to attract capital from the Member States of the EU. If a Member State of the EU satisfies certain procedural requirements laid down in Article 65.4 TFEU, it may unilaterally adopt restrictive tax measures towards the UK. After Brexit, the UK will be treated as a third country for the purposes of Regulation 1889/2005 on controls of cash entering or leaving the Community. According to this legislation, any natural person travelling between the EU and the UK carrying cash or similar financial assets worth more than EUR 10,000 or its equivalent in any other currency will be required to declare it to the competent authorities of the relevant Member State.

List of Cases ECJ

ECJ 19.12.1961, 7/61, Commission v Italy, ECLI:EU:C:1961:31 [cit. in para 77] ECJ 04.12.1974, 41/74, Yvonne van Duyn v Home Office, ECLI:EU:C:1974:133 [cit. in para 67] 65

Seyad (1995a, b). First Council Directive 91/308/EEC on prevention of the use of the financial system for the purpose of money laundering, O.J. L 166/77 (1991). [The current applicable law is Fifth Council Directive 2018/843/EU, O.J.L 156/42 (2018).] 66

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ECJ 8.07. 1975, 4/75, Rewe-Zentralfinanz eGmbH v Landwirtschaftskammer, ECLI:EU:C:1975:98 [cit. in para 79] ECJ 28.10.1975, 36/75, Rutili, ECLI:EU:C:1975:137 [cit. in para 68] ECJ 27.10.1977, 30/77, Bouchereau, ECLI:EU:C:1977:172 [cit. in para 68] ECJ 23.11.1978, 7/78, Thompson, ECLI:EU:C:1978:209 [cit. in para 62] ECJ 13.12.1979, 52/79, Opinion of AG Warner, Procureur du Roi v Debauve, ECLI:EU:C:1979:291 [cit. in para 66] ECJ 11.11.1981, 203/80, Casati, ECLI:EU:C:1981:261 [cit. in para 28] ECJ 09.02.1982, 270/80, Polydor v Harlequin, ECLI:EU:C:1982:43 [cit. in para 84] ECJ 18.05.1982, 115 and 116/81, Rezguia Adoui v Belgian State and City of Liège, ECLI:EU:C:1982:183 [cit. in para 67] ECJ 31.01.1984, 286/82 and 26/83, Luisi and Carbone, ECLI:EU:C:1984:35 [cit. in para 51] ECJ 10.07.1984, C 72/83, Campus Oil Limited and Others v Minister for Industry and Energy and Others, ECLI:EU:C:1984:256 [cit. in para 64] ECJ 03.10.1985, 28/84, Commission v Germany, ECLI:EU:C:1985:386 [cit. in para 78] ECJ 28.01.1986, 270/83, Commission v France, ECLI:EU:C:1986:37 [cit. in para 11] ECJ 21.09.1988, 267/86, Pascal Van Eycke, ECLI:EU:C:1988:427 [cit. in para 9] ECJ 11.05.1989, 25/88, Bouchara, ECLI:EU:C:1989:187 [cit. in para 80] ECJ 03.02 1993, C-148/91, Veronica, ECLI:EU:C:1993:45 [cit. in para 75] ECJ 23.02 1995, C-358/93, Aldo Bordessa, ECLI:EU:C:1995:54 [cit. in para 75] ECJ 14.12.1995, C-163/94 et al., Sanz de Lera, ECLI:EU:C:1995:451 [cit. in para 1] ECJ 01.12.1998, C-410/96, Ambry, ECLI:EU:C:1998:578 [cit. in para 74] ECJ 16.03.1999, C-222/97, Manfred Trummer and Peter Mayer, ECLI:EU: C:1999:143 [cit. in para 74] ECJ 29.04.1999, C-311/97, Royal Bank of Scotland plc v Elliniko Dimosio, ECLI: EU:C:1999:216 [cit. in para 13] ECJ 01.06.1999, C-302/97, Konle, ECLI:EU:C:1999:271 [cit. in para 75] ECJ 18.11.1999, C-200/98, X AB and Y AB v Riksskatteverket, ECLI:EU: C:1999:566 [cit. in para 13] ECJ 08.09.2005, C-512/03, Blanckaert, ECLI:EU:C:2005:516 [cit. in para 13] ECJ 23.02.2006, C-513/03, van Hilten-van der Heijden, ECLI:EU:C:2006:131 [cit. in para 13] ECJ 23.10.2007, C-112/05, Commission v. Germany, ECLI:EU:C:2007:623 [cit. in para 58]

CFI

CFI 27.09.2006, T-168/01, GlaxoSmithKline Services Unlimited v Commission, ECLI:EU:T:2006:265 [cit. in para 13] Seyad

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References Dassesse, M. (1992). The treaty on European Union: Implications for the free movement of capital. Journal of International Business and Law, 6, 238–248. Deloitte. (2014). Taxation and investment in Sweden. London: Deloitte Touche Tohmatsu Limited. Hojnik, J. (2013). De minimis rule within the EU internal market freedoms: Towards a more mature and legitimate market? European Journal of Legal Studies, 6(1), 25–45. Muten, L. (1994). International experience of how taxes influence the movement of private capital. Tax Notes International, 8, 743–746. Oliver, P. (1984). Free movement of capital between member states: Article 67(1) EEC and the implementing directives. European Law Review, 9, 401–420. Ringe, W.-G. (2008). The Volkswagen case and the European Court of justice. Common Market Law Review, 45, 537–544. Seyad, S. (1995a). National tax laws reign supreme over capital freedom in the European Union. European Financial Services Law Review, 2, 180–185. Seyad, S. (1995b). Public policy limits capital movement in the European common market. European Business Law Review, 6, 262–269. Seyad, S. (1997). Limitations to free movement of banking services. Journal of International Banking Law, 12(12), 67–73. Seyad, S. (1999). A critical assessment of the ECJ judgment in Trummer and Mayer. Journal of International Banking and Financial Law, 14, 396–401. Seyad, S. (2002). A critical assessment of the proposed EU savings income directive. Educational Communication and Technology Journal, 6, 45–68. Seyad, S. (2013). The impact of the proposed Banking Union on the unity and integrity of the EU’s single market. Journal of International Banking Law and Regulation, 28, 49–58. Seyad, S., & Bernitz, U. (1996). Prudential rules override capital freedom. Journal of International Banking Law, 6, 235–238. Usher, J. A. (1994). The law of money and financial services in the European community. Oxford: Oxford University Press. Wooldridge, F. (1977). Free movement of EEC nationals: The limitation based on public policy and public security. European Law Review, 2(2), 190–207.

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Article 66 [Short-Term Protection Measures] (ex-Article 59 TEC) Where, in exceptional circumstances,17 movements of capital to or from third countries4 cause, or threaten to cause, serious difficulties for the operation of economic and monetary union,18 the Council, on a proposal from the Commission and after consulting the European Central Bank,13–15 may take safeguard measures with regard to third countries7 for a period not exceeding six months12, 20 if such measures are strictly necessary.

Contents 1.

Scope of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. Uncertainties of the Scope of Application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.2. Quasi-Membership of Monetary Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2. Capital Movements and Monetary Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3. Safeguard Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.1. General Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.2. Procedure to Adopt Safeguard Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.3. Exceptional Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.4. Time Framework of Safeguard Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 4. Brexit and Article 66 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Reference

1.

Scope of Application

The objective of creating an economic and monetary union had been in existence since the publication of the Werner Report in 1970.1 The Single European Act 1985 recognises the creation of a monetary union as an objective of the Union but did not lay down the necessary legal framework to reach this goal. It was only after the Maastricht Treaty 1993 that the objective of EMU was constitutionally recognised, and also a comprehensive set of rules to launch it on or before 1 January 1999 was incorporated. The Maastricht Treaty set out detailed rules to attain this objective, such as prescribing the convergence requirements, which an MS should fulfil as a precondition for joining the third stage of monetary union. In addition, it also laid down specific rules to ensure its stability. The inclusion of Article 66 TFEU in the chapter on capital should be viewed against this background.

1

O.J. C 136/17 (1970).

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According to Article 66 TFEU, if the movement of capital causes serious difficulties for the operation of the EMU, then the Council may intervene to take necessary protective measures. The underlying objective of this provision is to protect domestic industries from sudden economic and monetary disturbances ignited by a large and uncontrolled flow of capital from third countries.

1.1. Uncertainties of the Scope of Application

4

One of the uncertainties regarding the scope of application of Article 66 TFEU is in relation to its target group. Since not all MS have joined the “EMU”,2 there had been an element of doubt as to whether it applies only to the Euroland or the Union as a whole. An integrative interpretation of Article 66 TFEU may exclude its scope of application to MS outside the eurozone. If they are to be treated as third countries for the purposes of Article 66 TFEU, it may seriously damage the unitary structure of the single market. It is not possible for any MS of the EU to indefinitely derogate from the obligations flowing from the single market. The free movement of capital is at the heart of the single market, and the logical consequence of its complete liberalisation was the birth of the single currency, the euro.

1.2. Quasi-Membership of Monetary Union

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6

7

Member States that have not adopted the euro as their single currency cannot be treated as complete outsiders to the monetary union. The monetary union was constructed on three distinct stages. In terms of Madrid Council Decision 1989, the first stage of monetary union was the liberalisation of the free movement of capital.3 This is a legal obligation that applies to all MS of the EU without any exception. The legal bond between MS inside and outside the eurozone is further strengthened by Article 142 TFEU, which mandates MS with a derogation to treat its exchange rate policy as a matter of common concern. They are required to take account of the experience gained within the framework of the exchange rate mechanism. During the second stage of the construction of monetary union, it is an entry requirement to link the national currencies to the exchange rate mechanism. It would thus not be an exaggeration to suggest that even countries that have not adopted the euro should be treated as having secured quasi-membership in the monetary union. The scope of application of Article 66 TFEU should therefore be strictly confined in relation to movement of capital with countries outside the EU. 2 3

In April 2021: 19 out of 27; latest country to join the Eurosystem was Lithuania in 2015. The European Council, Madrid, 26/27 June 1989, Bull. EC, No. 6/1989, Brussels, 23 June 1989.

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Capital Movements and Monetary Union

After the Maastricht treaty, the relevance of the free movement of capital has shifted from its traditional link to the single market to the establishment of EMU. The creation of the monetary union is a well-entrenched treaty objective that was achieved in three stages.4 The majority of the MS of the EU have joined the monetary union at different intervals, and other MS, except Denmark, should follow suit once they fulfil the entry requirements.5

3.

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Safeguard Measures

3.1. General Comments

With the complete liberalisation of capital movement, the scope of MS’ right to derogate from the treaty obligation has been correspondingly narrowed down. Even under the Treaty of Rome, ex-Article 73 TEEC authorised MS to take protective measures if movements of capital lead to disturbances in the functioning of the common market. The corresponding provision in the Lisbon Treaty, Article 66 TFEU, provides for taking safeguard measures in the event of any speculative movements of capital that threaten the operation of EMU. The main difference between ex-Article 73 TEEC and Article 66 TFEU is that under the new legal regime, protective measures may be taken only by the institutions of the EU. In order to activate the exception, there must be evidence to indicate that capital movements with a particular third country may threaten the stability of the EMU. Unlike ex-Article 73 TEEC, Article 66 TFEU cannot be invoked by an MS. Before the introduction of the euro, there had been several monetary turbulences within the Union caused largely by external factors, but it did not have any legal instrument at its disposal to deal with such a crisis. This legal vacuum was filled by Article 66 TFEU, which forms one of the exceptions to Article 63 TFEU. Any legal measures under Article 66 TFEU could be taken only against third countries. The provision does not apply to capital movements between the MS. Furthermore, it stipulates a time limit of a maximum of six months for the operation of such safeguard measures. The Treaty does not provide any specific grounds on which such safeguard measures may be invoked. It is more than likely that such measures may be invoked, for example if it involves purely speculative movements of capital destabilising the euro.

4 5

Seyad (1995). Protocols No. 15 and 22, respectively.

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3.2. Procedure to Adopt Safeguard Measures

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14

15

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The initiative to adopt safeguard measures should originate from the European Commission. It is the Council that should ultimately adopt such measures after consulting the ECB. A distinct feature in the Lisbon Treaty is that it further democratises the decision-making procedure in several policy areas. There had been several policy areas where laws are made without the participation of the only elected body of the Union, the EP, but were rectified after Lisbon. It is, however, unfortunate that in adopting safeguard measures under Article 66 TFEU, it excludes a role for the EP as a co-legislator. There is no provision that at least the EP should be consulted before adopting any safeguard measures. There are three procedures prescribed in the Lisbon Treaty for decision-making in the Council. It may decide in very exceptional cases by a simple majority. After Lisbon, the requirement of unanimity in the Council had been reduced to the barest minimum. It is the qualified majority voting in the Council that has become the standard practice after the Lisbon Treaty (Article 16.3 TEU). Article 66 TFEU is quite specific that it is only the Council that will be involved in adopting the safeguard measures, but it is silent as to the nature of voting. Therefore, the default voting procedure applies. Since such safeguard measures are to be adopted as emergency measures and as a measure of last resort, it is desirable that a qualified majority is invoked. If the unanimity voting were prescribed, there would be great risk as even a single MS could exercise its veto and thereby cause irreparable damage to the proper functioning of the monetary union. Since Article 66 TFEU concerns purely the monetary union and not the single market, another uncertainty arises as to whether MS outside the eurozone should have voting rights when adopting the safeguard measures. Articles 136–138 TFEU apply exclusively to MS whose currency is the euro, and these legal provisions give no indication that safeguard measures in Article 66 TFEU shall be adopted only by the euro states. The provision is not included in Article 139.2 TFEU. Consequently, there is no restriction of voting rights to eurozone countries.

3.3. Exceptional Circumstances

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18

The legal formulation of Article 66 TFEU clearly indicates that it could only be invoked as a measure of last resort. There must be sufficient evidence to show that the disturbance to the operations of the EMU was caused by movements of capital to or from third countries. In order to invoke this provision, there are various conditions that need to be fulfilled. The mere flow of capital from third countries to the monetary zone is not a sufficient ground to adopt safeguard measures. There must be credible evidence to indicate that such flow of capital may pose a serious risk to the proper functioning of the monetary union. Such flow of capital should cause or threaten to cause serious difficulties for the operation of the monetary union. The existence of Seyad

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these conditions should be satisfied in an objective manner before the invocation of safeguard measures. In view of the rigid nature of the requirements prescribed to invoke these protective measures, it might well be advisable for MS to resort to Articles 143 and 144 TFEU to achieve a similar objective. These articles could be invoked if MS experience severe balance of payment problems. In terms of the former article, the Commission should recommend that the Council authorises an MS to take appropriate measures to overcome its balance of payment difficulties. If there is a sudden crisis in its balance of payments, Article 144 TFEU authorises MS with a derogation (i.e. those whose currency is not the euro) to take protective measures even before the Commission makes its recommendations for a similar purpose. The MS that have joined the eurozone will, however, be deprived of their right to invoke these protective measures.

19

3.4. Time Framework of Safeguard Measures

Even assuming that Article 66 TFEU is activated, such safeguard measures cannot be maintained indefinitely. Since the safeguard measures could be invoked only in exceptional circumstances, such measures can only be maintained for a limited period of time. As it implies, exceptional circumstances have to be of temporal nature, and the time framework for operation of any measures adopted to counter such a crisis should be for a specific duration. Article 66 TFEU thus stipulates a clear time framework for the operation of such safeguard measures with a maximum time limit set at six months.

4.

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Brexit and Article 66 TFEU

Article 66 TFEU confers competence on the EU to adopt safeguard measures, including capital controls, if movement of capital between the EU and the UK would disrupt the proper functioning of the EMU. The EU can limit or block the free movement of capital into the Union from the UK in the event of speculative flows of sterling pounds, thereby destabilising the euro.

Reference Seyad, M. S. (1995). Sweden and the European economic and Monetary Union. European Financial Services Law, 2, 289–295.

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Title V Area of Freedom, Security and Justice Chapter 1 General Provisions

Article 67 [Establishing the AFSJ] (ex-Article 29 TEU, ex-Article 61 TEC) 1. The Union shall constitute an area of freedom, security and justice12-18 with respect for fundamental rights19-22 and the different legal systems and traditions of the Member States.23 2. It shall ensure the absence of internal border controls for persons24 and shall frame a common policy on asylum, immigration and external border control, based on solidarity between Member States, which is fair towards third-country nationals.25 For the purpose of this Title, stateless persons shall be treated as third-country nationals.26 3. The Union shall endeavour to ensure a high level of security27 through measures to prevent and combat crime, racism and xenophobia,28 and through measures for coordination and cooperation between police and judicial authorities and other competent authorities,29 as well as through the mutual recognition of judgments in criminal matters30-33 and, if necessary, through the approximation of criminal laws.34 4. The Union shall facilitate access to justice, in particular through the principle of mutual recognition of judicial and extrajudicial decisions in civil matters.35

Contents 1. 2. 3.

4. 5.

6.

Historical Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Positioning of Article 67 TFEU Within the Treaty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 General Provision (Paragraph 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.1. Concept of AFSJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 3.1.1. Linguistic Versions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3.1.2. Legal Concept? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3.1.3. Balanced Tripod . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.1.4. Link Between AFSJ and Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 3.1.5. AFSJ: A Constitutional Concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.2. With Respect for Fundamental Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 3.3. Respect for the Different Legal Systems and Traditions of the Member States . . . 24 Area of Freedom (Paragraph 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Area of Security (Paragraph 3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 5.1. Notion of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 5.2. Mutual Recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 5.3. Mutual Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 5.4. European Arrest Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 5.5. Ne Bis in Idem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 5.6. Approximation of Criminal Laws, if Necessary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Area of Justice (Paragraph 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

With the contribution of Julia Burchett, research assistant.

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7. Area à la Carte . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 8. External Aspects of the AFSJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 9. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 List of Cases References

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2

3

Historical Background

To understand the emergence of an intergovernmental cooperation regarding justice and home affairs (JHA) within the EU, it is necessary to lead off from the problem of free movement of persons. It is indeed the perspective of the free movement of persons that raised the consciousness of European states on the necessity to cooperate in the fight against cross-border crime and illegal immigration. The Rome Treaty only planned for free movement of workers in an economic perspective and did not initially imply the generalised free movement of persons because that freedom was considered only in connection with an economic activity. Article 220 of the Rome Treaty already foresaw that MS should, so far as is necessary, enter into negotiations with each other with a view to securing for the benefit of their nationals the simplification of formalities governing the reciprocal recognition and enforcement of judgments of courts or tribunals and of arbitration awards, which led to the adoption of the Brussels Agreement of 1978. The Single European Act gave free movement of persons its political connotation by fixing a deadline (31 December 1992) for the realisation of the internal market. If as regards free movement of services and capital the objective was largely reached by that time, this was not the case for the free movement of persons. This objective could not be reached in the Community framework because of different conceptions regarding free movement of persons. The United Kingdom considered that free movement of persons had to benefit only Community nationals. But as soon as border controls are eliminated, free movement of persons has to benefit nationals of third states also. Either borders are opened for everybody, or they remain closed. Because of the difficulty of promoting free movement of persons and cooperation regarding justice and home affairs within the EC framework, France, Germany, and the Benelux countries signed an agreement on 14 June 14 1985 in Schengen, completed by an agreement of application in 1990. The objectives of these agreements consisted in facilitating the suppression of internal border controls while developing external border controls as well as police and judicial cooperation. The second incitement to cooperate in the field of JHA is the increasing phenomenon of transnational and international criminality, which required adaptation from traditional police and justice systems. Since the 1970s, European states have set up intergovernmental forums in order to develop police and judicial cooperation. From 1975 onwards, an intergovernmental cooperation was set up outside of the legal framework of the European Communities in the areas of immigration, asylum, and police and judicial cooperation. This was initially an Chevallier-Govers

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informal cooperation aiming not only at exchanging expertise and information but also at building networks between MS. Indeed, working groups have been created such as the TREVI group, which initially dealt with terrorism and internal security but then extended its field of action to illegal immigration and organised crime.1 By the time the negotiation of the Treaty of Maastricht began, multiple intergovernmental cooperation circles had already emerged aiming at realising the objective of free movement of persons, which was initially an EC objective. To ensure more efficiency as well as better democratic control, it seemed necessary to integrate the different working groups into a global structure within the EU legal framework. The Maastricht Treaty, signed on 7 February 1992, communitised the visa policy but did not plan for the abolition of internal border controls. It identified new issues to be considered as questions of common interest, such as problems of justice and home affairs. But these questions were not integrated into the Community domain because of the potential infringement to state sovereignty. This is what justified the emergence of the three-pillar structure of the EU: the Community pillar and both intergovernmental pillars. A new objective of the EU is set in Article B of the TEU. Under the Maastricht Treaty, Article K1 TEU contained a list of nine matters of common interest “for the purposes of achieving the objectives of the Union, in particular the free movement of persons”: 1. Asylum policy 2. Rules governing the crossing by persons of the external borders of the Member States and the exercise of controls thereon 3. Immigration policy and policy regarding nationals of third countries (a) Conditions of entry and movement by nationals of third countries on the territory of Member States (b) Conditions of residence by nationals of third countries on the territory of Member States, including family reunion and access to employment (c) Combatting unauthorised immigration, residence, and work by nationals of third countries on the territory of Member States 4. Combating drug addiction in so far as this is not covered by 7 to 9 5. Combating fraud on an international scale in so far as this is not covered by 7 to 9 6. Judicial cooperation in civil matters 7. Judicial cooperation in criminal matters 8. Customs cooperation 9. Police cooperation for the purposes of preventing and combating terrorism, unlawful drug trafficking, and other serious forms of international crime, including, if necessary, certain aspects of customs cooperation, in connection with the organisation of a Union-wide system for exchanging information within a European Police Office (Europol) 1

Baker-Beall (2014), p. 212.

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These matters were governed by a pure intergovernmental procedure: decisions were taken unanimously within the Council (Article K.4) except for implementation measures (Article K.3), and there was no mention of the Court of Justice. The Commission was supposed to be fully associated (Article K.4) with decisionmaking, and the EP was only informed (Article K.6). Within the list of Article K.1, there was already a distinction: no. 1 to 6 matters could be subject to communitisation procedure foreseen in Article K9. These subjects were already considered as closely linked to free movement of persons as a goal of the EC and were supposed to be transferred as soon as possible to the first pillar. Article K.9 foresaw that the Council, acting unanimously on the initiative of the Commission or an MS, had the possibility to apply Article 100c of the EC Treaty to action in areas referred to in Article K.1 (1) to (6). The communitisation procedure of Article K.9 has not been used since a formal revision of the Treaty took place very shortly after the Maastricht Treaty. It was at the occasion of the Amsterdam Treaty revision that these six subjects were communitised. It was the first passerelle clause that existed in the Treaty but was not used. According to P. Craig, “A major criticism of the Maastricht treaty was that [. . .] the Third Pillar involved subjects such as immigration, asylum, border controls, and constraints in movement, which touched on fundamental rights, and raised issues similar to those arising under the free movement provision of the EC Treaty. It was agreed therefore that the need for openness and accountability in this policy field was much greater, requiring a full role for the EP and review jurisdiction for the ECJ.”2 The real boost happened with the Treaty of Amsterdam, signed on 2 October 1997 and came into effect on 1 May 1999. The Amsterdam Treaty kept the structure in three pillars but communitised all problems connected to free movement of persons. It separated matters of common interest into two: most aspects were moved to the first pillar, and only two aspects remained in the third pillar—judicial cooperation in criminal matters and police cooperation. Even customs cooperation, which was not mentioned in the K.9 procedure, was communitised on the occasion of the formal Amsterdam revision. This transfer to the first pillar was accompanied by the introduction of a five-year transitional regime, which ended on 1 May 2004: as well as the Commission, MS could exercise a right of initiative; the EP could only exercise a right to deliver an opinion, whereas the jurisdiction of the Court concerning preliminary rulings was a limited one. The Amsterdam Treaty also introduced the concept of AFSJ, which became one of the main objectives of the EU, as asserted in Article 2.4 (4) TEU: “to maintain and develop the Union as an area of freedom, security and justice, in which the free movement of persons is assured in conjunction with appropriate measures with respect to external border controls, asylum, immigration and the prevention and combating of crime”. There was no mention of AFSJ in ex-Article 3 TEC of the objectives of the EC.

2

Craig (2010), p. 335.

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This concept of AFSJ was also referred to in Article 29 TEU, head article of Title VI (Provisions on police and judicial cooperation in criminal matters): “Without prejudice to the powers of the European Community, the Union’s objective shall be to provide citizens with a high level of safety within an area of freedom, security and justice by developing common action among the Member States in the fields of police and judicial cooperation in criminal matters and by preventing and combating racism and xenophobia.” Moreover, the Amsterdam Treaty centred the third pillar on police and judicial cooperation in criminal matters. The common action within the framework of the third pillar was limited to police and judicial cooperation in criminal matters. This cooperation had to be undertaken with the prospect of achieving an objective common to three pillars: the preservation and the development of an area of freedom, security, and justice. More supranational characteristics were introduced in the third-pillar cooperation: a shared right of initiative of the Commission, the right for the EP to deliver an opinion, as well as a limited competence of the Court of Justice, mostly in the preliminary ruling procedure.3 The Treaty of Amsterdam brought about a conceptual and operational revolution by prescribing a new objective for the European Union: to become an AFSJ in five years. TEU’s Article 29 determined the general objectives of the new third pillar, which was “to offer to the citizens a high level of protection in a space of freedom, security and justice”. The verb “provide” has been translated to offrir in the French version and bietet in the German version. This has been interpreted as a “Christmas tree provision”, according to Labayle.4 According to Article 29 TEU-Amsterdam, “That objective shall be achieved by preventing and combating crime, organised or otherwise, in particular terrorism, trafficking in persons and offences against children, illicit drug trafficking and illicit arms trafficking, corruption and fraud”. This objective can only be reached by narrower police cooperation, strengthened judicial cooperation, and approximation of some aspects of criminal law.5 Thus, the expression “questions of common interest” was replaced by “common action”, which was a positive evolution. Then Article 30 TEU-Amsterdam enumerated the exact content of common action by MS in the field of police cooperation and Article 31 TEU-Amsterdam, common action in the field of judicial cooperation in criminal matters. This new writing of the objectives and the methods of cooperation constituted, indeed, an improvement with regard to measures of the TEU, which by no means planned the methods of cooperation and simply enumerated domains to be considered as “common interests”. The implementation of the measures of the Treaty of Amsterdam was all easier as legal instruments were also improved.

3

De Zwaan (2011), p. 281. Labayle, in Burgorgue-Larsen and Levade (2007), Article I-42 para 7. 5 Garcia-Jourdan (2005), p. 87. 4

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6

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Another fulfilment of the Amsterdam Treaty is having transferred all aspects of the free movement of persons to the Community’s framework by integrating Schengen within the EU framework. The integration of Schengen within the Union implied a distribution of the compensatory measures between the first (such as the suppression of border controls) and third pillars (such as police cooperation). Nevertheless, the United Kingdom and Ireland were not part of the Schengen agreements; therefore, they were granted derogations. In the first pillar, ex-Article 61 TEC, head article of Title IV (ex-Title IIIa) on visas, asylum, immigration, and other policies related to the free movement of persons, also referred to the AFSJ. It states that “In order to establish progressively an area of freedom, security and justice, the Council shall adopt” different measures explained in the following articles of this Title IV (Articles 61 to 69 EC). According to I. Pingel, both elements of this policy, “high level of protection” and “the AFSJ” are destined to be balanced.6 This protection makes sense only if it takes place within an area, the EU, rooted in a democratic framework, the AFSJ. The concept of AFSJ is the result of French diplomacy during the negotiations of the Amsterdam Treaty. It was introduced in Article 2 TEU-Amsterdam and refers to democratic values, which are common European heritage. The heads of state or government gathered in Vienna on 11 December 1998 and approved an action plan that defined the “AFSJ”. This conceptualisation and the formalisation of the concept were followed by the European Council of Tampere, which gave a real political boost to the idea of the AFSJ. On the initiative of the Spanish head of government, J.-M. Aznar, and the president of the Commission, J. Santer, the heads of state or government met in Tampere in Finland on 15/16 October 1999 to discuss the implementation of the AFSJ. In the conclusions adopted, they indicated a whole series of orientations and political priorities. They wanted to deliver at the same time a strong political message to ensure the achievement of this new area. The European Council outlined a number of objectives to achieve, such as the creation of Eurojust as a unit of judicial cooperation, the application of the principle of mutual recognition of court orders, the abolition of the procedure of extradition, and the strengthening of the powers of Europol. Following the European Council of Tampere, for the first time, a European Commissioner was specifically in charge of JHA questions: Antonio Vitorino. The Treaty of Nice, signed on 26 February 2001 with effect on 1 February 2003, inserted a legal basis for the creation of Eurojust. The attacks of New York (in September 2001), of Madrid (in March 2004), and of London (in July 2005) disrupted the political schedule and showed that Europe was not shielded from terrorist threat. On 21 September 2001, the European Council adopted an action plan to fight against terrorism. On 3 October 2001, the European Commission proposed that MS freeze all funds belonging to 27 organisations and individuals suspected of financing terrorist activities. In June 2002, two framework decisions of great importance were adopted by the Council of Ministers.

6

Pingel (2010).

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The first one created a European Arrest Warrant, while the second one gave a common definition of terrorism that all the MS had to implement in their legal orders. The plan to fight terrorism was strengthened after the Madrid events on 11 March 2004. In the aborted Constitutional Treaty, the AFSJ was mentioned in each of the three parts. In the first part, Article I-3.2 related to the objectives of the EU states that “The Union shall offer its citizens an area of freedom, security and justice without internal frontiers, and an internal market where competition is free and undistorted”. This has been analysed as being a “Christmas tree provision” by H. Labayle.7 It claims to reserve this area to EU citizens, therefore linked to EU citizenship. Article I-42 contained “Specific provisions relating to the area of freedom, security and justice”. It was actually quite surprising to have a specific article on the AFSJ in this first part as the aim of the Constitutional Treaty was to suppress the pillars and then the intergovernmental specificities of the previous AFSJ. This article in the first part is to be analysed as a guarantee given to states concerning their sovereignty.8 Then in Part II, the Preamble of the CFR asserted that “Conscious of its spiritual and moral heritage, the Union is founded on the indivisible, universal values of human dignity, freedom, equality and solidarity; it is based on the principles of democracy and the rule of law. It places the individual at the heart of its activities, by establishing the citizenship of the Union and by creating an area of freedom, security and justice.” So creating the AFSJ is considered as a policy dedicated to the individual. And finally, in Part III, Chapter IV was fully dedicated to the area of freedom, security, and justice. The general provision was Article III-257, which is identical to Article 67 TFEU. The innovations of the Constitutional Treaty in the field of the AFSJ were maintained by the Treaty of Lisbon.9 The Treaty of Lisbon, signed on 13 December 2007 and which finally came into effect on 9 December 2009, reorganises all the institutional structure of the AFSJ by deleting in particular the distinction between pillars and by extending the Community method to the former third pillar. Title V of the TFEU, composed of five chapters, is fully dedicated to the AFSJ (Articles 67–89 TFEU). But the fact of having a single institutional framework does not mean that procedures are applied in the same way. In certain domains, in criminal matters, some specificity is maintained. Although a declaration attached to the Treaty of Lisbon and the Stockholm Programme both invited the EU institutions to amend pre-Lisbon third-pillar measures before the end of the transitional period, in practice there have been few such amendments.10 During the Amsterdam era, 34 framework decisions were adopted, of which 21 are still in force today, and 57 decisions, of which 42 are still in force today. Previously, there had been many legal base issues about the

7

Labayle, in Burgorgue-Larsen and Levade (2007), Article I-42 para 7. Labayle, in Burgorgue-Larsen and Levade (2007), Article I-42 para 1. 9 Kaddous and Dony (2010), p. 221. 10 Peers (2014), p. 21. 8

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boundary between the JTA title and the other provisions of the EU Treaty.11 With the Lisbon Treaty, such legal base issues have disappeared, but there still has been one on whether the rules on the Schengen evaluation can be amended pursuant to Article 70 TFEU (which provides for a non-legislative procedure on which the EP is only consulted) or Article 77 TFEU (ordinary legislative procedure). The EP has threatened to bring an action for annulment against these proposals because of the use of Article 70 TFEU as a legal basis. The Council therefore associated the EP throughout the negotiations, and the Schengen package was finally adopted on 7 October 2013.12 Other specificities of the AFSJ are the adjustment of the subsidiarity control by national parliaments (Article 69 TFEU), emergency brake procedures (Article 82.3 TFEU and Article 83.3 TFEU), and unanimity maintained in Articles 77.3, 81.3, 86.1, 87.3, and 89 TFEU. In each case, the EP is consulted except in Article 86.1 TFEU, concerning the European Public Prosecutor, where it has the power of consent. Even when QMV is foreseen, it is interesting to note that states have constantly sought to reach a consensus. The Spanish Council presidency attempted in 2010 to push ahead despite the opposition of a number of MS overcoming a blocking minority by removing the UK’s participation in the measure. Subsequent presidencies sought a solution that all MS could support. Perhaps this striving for consensus explains why no MS has threatened to take an emergency brake as regards criminal law proposals.13 Lastly, the specificity (Article 70 TFEU) of the shared initiative between the Commission and one fourth of the MS in the field of police cooperation and judicial cooperation in criminal matters does not seem to be really used. Indeed, after a short transition, it looks as if the power of the MS to make proposals in the area of policing and criminal law has indeed become a “dead letter”, as some had predicted.14 Lisbon and Stockholm created a momentum; they

11 See, for example, Case C-43/12, Commission v Parliament and Council (ECJ 6 May 2014) concerning Directive 2011/82. 12 In contrast to the previous system, whereby the Commission used to participate only as an observer, the compromise text states that Member States and the Commission shall be jointly responsible for the implementation of the evaluation and monitoring mechanism. The Commission is responsible for establishing multiannual and annual evaluation programmes which include announced and unannounced on-site visits. The annual evaluation programmes have to take into account recommendations made in an annual risk analysis drafted by the European border management agency (Frontex). Announced on-site visits to a member state have to be preceded by a questionnaire. Evaluation teams draft evaluation reports which are adopted by the Commission. The Council adopts any necessary recommendations for remedial action. The member state concerned is required to submit an action plan to remedy any deficiencies. The Commission continuously monitors and reports on the action plan until it is fully implemented. Such monitoring and reporting may include announced or unannounced follow-up visits. The Commission presents a yearly summary report to the European Parliament and the Council on the evaluations carried out. 13 Peers (2014), p. 17. 14 Peers (2014); see also Ladenburger (2008), p. 20.

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acted as catalysts in a policy field that is still young compared to other EU policies.15 Article 67 TFEU is an introductory article to Title IV (AFSJ). According to J. de Zwaan, the new approach is characterised by a coherent structure of the different subject matters of the AFSJ, which has become one of the most prominent policy domains of the EU.16 The unity of this policy is not reflected within the institutions’ functioning; indeed, there has never been a Commissioner in charge of the AFSJ as a whole.17 In the Juncker Commission (2014–2019), there is no visibility of the AFSJ as there are two Commissioners in charge of different aspects of the AFSJ: Dimitris Avramopoulos (Greece)—Migration, Home Affairs, and Citizenship (Freedom and Security)—and Vĕra Jourová (Czech Republic)—Justice, Consumers, and Gender Equality (Justice). Within the EP, the Committee on Civil Liberties, Justice and Home Affairs (LIBE) is responsible for the vast majority of the legislation and democratic oversight of JHA policies. While doing so, it ensures the full respect of the Charter of Fundamental Rights within the EU and the European Convention on Human Rights and the strengthening of European citizenship.

2.

10

Positioning of Article 67 TFEU Within the Treaty

Article 67 TFEU as a head article highlights the coherence of this policy, which is submitted to the supranational procedure with, nevertheless, some adaptations (state initiative, emergency brakes, competence of the ECJ, role of national parliaments) due to the fact that JHA has so close an association with sovereign power. Because of the de-pillarisation, the provisions concerning the AFSJ are no longer divided and are grouped together in Title V of Part 3 of the TFEU. Title V is located after those dealing with the internal market, free movement of goods, agriculture and fisheries, and free movement of persons, services, and capital. It is indeed a “Head article” of the first chapter of Title V, which is, according to H. Herneld, a “programmatic framework intended”.18 It is not destined to find immediate application and does not benefit from direct effect. Article 67 TFEU does not constitute a legal basis for secondary law, and its prescriptions are relayed by specific articles on each and every domain mentioned. C. Vedder refers to it as a chapter headline containing guiding principles.19 15

Wolff (2011). De Zwaan (2011). 17 Commission Santer (1995–1999): Immigration Justice and Home Affairs Anita Gradin (Sweden); Commission Prodi (2000–2004): first commissioner for JHA Antonio Vitorino (Portugal); Commission Baroso I (2004–2009): VP Justice, Freedom and Security Franco Frattini (Italy) then Jacques Barrot (France); Commission Baroso II (2009–2014):VP Justice, Fundamental rights and citizenship Viviane Reding (Luxembourg) and Internal Affairs Cecilia Malmström (Sweden). 18 Hernfeld, in Schwarze (2012), Article 67 AEUV para 16. 19 Rosenau and Petrus in Vedder and Heintschel von Heinegg (2012), Article 67 AEUV para 1. 16

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This first chapter, named “General provisions”, contains ten articles, which are common to the three branches of the AFSJ and which manifest the specificity of this policy. Article 68 TFEU on the peculiar role of the European Council is a newly inserted article, as is Article 69 TFEU on the specific implementation of the principle of subsidiarity.20 National parliaments are thus given a “watchdog role” as criminal and police sectors are cornerstones of state sovereignty.21 Article 70 TFEU, also newly incorporated into the Treaty, provides for an impartial evaluation of the implementation of the Union policies through a peer review procedure.22 Article 71 TFEU specifies the role of the newly created Standing Committee on Operational Cooperation on Internal Security (COSI). Article 72 TFEU contains a reservation provision according to which Title V shall not affect the exercise of the responsibilities incumbent upon MS with regard to the maintenance of law and order and the safeguarding of internal security. This principle is not new as it already existed in earlier texts, such as Article 33 TEU as well as Article 64 TEC. After the abolishment of the third pillar, this safeguard clause provided for a new, positively drafted, domain to be invoked by MS as a reflex of remaining national sovereignty. The newly created Article 73 TFEU foresees a possible intergovernmental cooperation. According to Kotzur, the “cooperative Constitutional State” can be seen as an indispensable prerequisite for an effective European integration.23 Article 74 TFEU constitutes an assignment to ensure cooperation between national authorities and the Commission. Article 75 TFEU foresees administrative cooperation concerning free movement of capital and payment. It replaces Article 60 EC, which included the chapter dealing with free movement of capital. Article 75 TFEU is designed to address the legal problems that arose in the Kadi litigation, as to the legal base for EU action. It lays down a two-stage process at primary law level. First, the Council has to create the rule of law-oriented basis. Upon proposal of the Commission, the Council has to initiate concrete measures. Declaration No. 25 on Articles 75 and 215 TFEU states that respect for the fundamental rights and freedoms requires the safeguarding of judicial protection of the individual person or affected entity. According to Declaration No. 65, the UK will take part in the adoption of all proposals made under Article 75 TFEU. Article 76 TFEU creates a shared initiative between one quarter of MS and the Commission in the field of judicial cooperation in criminal matters and police cooperation. The eagerness of MS to use the provisions of Article 76 lit. b) TFEU became obvious when, just two months

20

van Keulen (2014), pp. 12–28. Kotzur in Geiger et al. (2015), Article 69 AEUV para 1. 22 According to Andersen (2014), the key characteristics of peer review procedures established on the basis of Article 70 TFEU are: (1) They are multilateral. (2) They involved States but also other stakeholders (such as Frontex). (3) Resolution is non-binding. (4) There is no resort to judicial review. (5) The procedures involve interpretation and behavioural assessment. (6) They enable compliance evaluation. (7) EP and national parliaments shall be informed of the content and results of the evaluation. (8) Review takes place on a regular basis. (9) The Commission plays a central role. 23 Kotzur in Geiger et al. (2015), Article 73 AEUV para 1. 21

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after the entry into force of the Treaty of Lisbon, the initiative of Belgium, Bulgaria, Estonia, Spain, France, Italy, Hungary, Poland, Portugal, Romania, Finland, and Sweden to establish a European Protection Order (EPO) was launched.24 Three provisions outside of Title V have direct links with the AFSJ and should therefore be mentioned: Article 16.2 TFEU on data protection, Article 19 TFEU on the prohibition of discrimination, and Article 21 TFEU on citizenship.25

3.

General Provision (Paragraph 1)

3.1. Concept of AFSJ

The concept of AFSJ appears in different parts of the treaties, notably in the Preamble of the TEU (recital 12) with these words: “Resolved to facilitate the free movement of persons, while ensuring the safety and security of their peoples, by establishing an area of freedom, security and justice, in accordance with the provisions of this Treaty and of the Treaty on the Functioning of the European Union”. Then Article 3.2 TEU, related to the objectives of the EU, asserts as the second objective that “The Union shall 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”. The “gift provision” is maintained as the EU is supposed to offer this AFSJ to its citizens, but what is offered is no longer a high level of protection but the AFSJ itself. The AFSJ is also mentioned in Article 4.2 lit. j) TFEU in the list of the shared competences of the EU and in Article 12 lit. c) TEU regarding the role of national parliaments, which are supposed to take part, “within the framework of the area of freedom, security and justice, in the evaluation mechanisms for the implementation of the Union policies in that area, in accordance with Article 70 TFEU, and through being involved in the political monitoring of Europol and the evaluation of Eurojust’s activities in accordance with articles 88 and 85 of that Treaty”. The concept of AFSJ appears also in Article 68 TFEU on the specificity of the role of the European

24 According to Lambermont (2012), p. 22, “the Presidency plays a pivotal role. The Member States’ Initiative is driven by the political desire of the Presidency. It also shows that the innovation of the Treaty of Lisbon to make sure that the Member States’ Initiative is supported by a quarter of the Member States appears to be lowered as the submission of an initiative will most likely need the support of the whole trio. This support is needed not only to ensure a good cooperation between the Trio Presidency but also because an Initiative might last longer than one Presidency period. As a result, it can be seen that to initiate the right of initiative for the Member States the formula is rather the Trio Presidency plus four other Member States. So it appears that the threshold is low enough to make the Member States’ Initiative a feasible instrument”. 25 Hernfeld, in Schwarze (2012), Article 67 AEUV para 2.

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Council and in Article 276 TFEU concerning the role of the ECJ. The AFSJ also appears at multiple occasions in the protocols and declarations.26 3.1.1. 13

What is striking is the choice of the word “area” in English compared to the other linguistic versions of the Treaty. In most of the versions, it is the Latin root that has been chosen: espace in French, spazio in Italian, espacio in Spanish. In German, there is no equivalent of the Latin expression, but the equivalent of “area” (Areal) could have been used (instead of Raum). The concept of “space” is linked to geography, and “area” has a material connotation, such as domaine in French. Indeed, “area” is used very often in the Treaty to refer to areas of competence of the Union. “Space” is only used regarding the space policy. Already in 1989, President Delors proposed the creation of a European Economic Space, which was later renamed the European Economic Area, as it is known today. The analysis of the linguistic versions indicates also another specificity of the English version, which uses the future “shall constitute”, while the other versions use the present tense constitue or bildet. 3.1.2.

14

Linguistic Versions

Legal Concept?

The concept of “Area” introduced by the Amsterdam Treaty is a legal concept and not a decorative one. It can even be considered as a constitutional concept: area is to territory what citizenship is to nationality. Beyond nationality, EU citizens benefit from specific rights inherent in EU citizenship. Similarly, the concept of area comes in addition to the concept of territory. The emergence of the area of freedom, security and justice requires a renewal of the approach to territory. For example, this implies an extension of the ne bis in idem principle to the entire area of the EU. Area is no longer based on the paradigm “abolition of internal borders checks/compensatory measures”, which led to Article 14 TEC and the Schengen Agreement. It also goes beyond dealing with “common issues”, as was the case under Maastricht. The AFSJ’s aim in the Amsterdam Treaty was to give citizens a safety perimeter, as clearly stated in Article 29 TEU-Amsterdam: “the objective of the Union is to provide citizens with a high level of protection in AFSJ”. Article 2 of the TEU-Amsterdam recognised the citizens’ right to safety, a right achieved through the three pillars. In the Lisbon Treaty, this right to safety is not affirmed as such except in the Preamble, which states that the EU is “Resolved to facilitate the free movement of persons, while ensuring the safety and security of their 26

In Article 7.2 (1) of Protocol No. 2 on subsidiarity (reasoned opinions); in Article 23a of Protocol No. 3 on the statute of the CJEU (expedited or accelerated procedure and an urgent procedure for AFSJ matters); in Protocol No. 21 on the position of the United Kingdom and Ireland in respect of the Area of Freedom, security and justice; in Declaration No. 36 on Article 218 TFEU concerning the negotiation and conclusion of international agreements by MS relating to the AFSJ; in Declaration No. 56 by Ireland on Article 3 of the Protocol No. 21.

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peoples, by establishing an area of freedom, security and justice”. The aim of the area is now implied by its constitutional nature. One could think of the rise of an EU legal space. According to H. Labayle, this spatial approach, linked to the territory of MS, can revolutionise the methods and content of these policies, which are at the heart of national sovereignty.27 Article 77.4 TFEU insists on the fact that the suppression of border checks shall not affect the competence of the MS concerning the geographical demarcation of their borders, in accordance with international law. The geographical boundaries of the AFSJ are not very clear. We see a gap appearing within the AFSJ. Indeed, the Schengen area in the heart of the AFSJ is now more opaque as some EU states are not part of the Schengen area (the UK and Ireland, for example), while four non-EU members (Norway, Iceland, Switzerland, and Lichtenstein) are part of the Schengen area. A fragmentation of this area can already be perceived as one of its specificities is to be “an Area à la carte” (➔ para 37). 3.1.3.

15

Balanced Tripod

This area should be balanced between its three branches because, as pointed out by the former European Commissioner for Justice and Home Affairs, A. Vitorino, it is making the Union an area of freedom, an expression that is meaningless without the daily security to enjoy it, and that security, in turn, is meaningless if it is not the result of a fair trial.28 M. Kotzur analyses the area as a “triad of freedom as the very basis of European integration, security as indispensable precondition of freedom and justice as the overall ideal of any legal order and thus any legal community”.29 The Commission, in its Communication “Towards an Area of Freedom, Security and Justice”, asserted already in 1998: “The common values underlining the objective of an area of freedom, security and justice are indeed longstanding principles of the modern democracies of the European Union. The challenge set out by the Amsterdam Treaty is not to reinvent democracy and the rule of law but to allow citizens to enjoy their long-standing democracies in common. The three notions of freedom, security and justice are closely interlinked. Freedom loses much of its meaning if it cannot be enjoyed in a secure environment and with the full backing of a system of justice in which all Union citizens and residents can have confidence. These three inseparable concepts have one common denominator— people—and one cannot be achieved in full without the other two. Maintaining the right balance between them must be the guiding thread for Union action.”30 The

27

Labayle, in Burgorgue-Larsen and Levade (2007), Article I-42 para 9. The Charter of Fundamental Rights as a foundation for the Area of Freedom, Security and Justice speech at the General Assembly of the Association Amnesty International, Lisbon, 13 May 2000, available at http://europa.eu/rapid/press-release_SPEECH-00-180_en.htm. 29 Kotzur in Geiger et al. (2015), Article 67 AEUV para 1. 30 Commission Communication, Towards an area of freedom, security and justice, COM(1998) 459 final. 28

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Wien action plan, the working group of the Convention,31 and also the Stockholm Programme insist on the fact that there should be a balance between freedom, security, and justice.32 Since September 11, the security aspect has nevertheless been much more developed compared to free movement. The United States of America has been exerting a strong pressure on the EU to ensure that the EU becomes a security area and in a way a security perimeter for the United States. 3.1.4. 17

Link Between AFSJ and Citizenship

In the Stockholm Programme, the European Council considered that the priority for the coming years will be to focus on the interests and needs of citizens. All actions taken in the future should be centred on the citizen of the Union and other persons for whom the Union has a responsibility. It also considered that “The right to free movement of citizens and their family members within the Union is one of the fundamental principles on which the Union is based and of European citizenship”. But as M. Kotzur explains it, “an area is also territorially limited: it is defined by the dichotomy of inclusion and exclusion. [. . .] A legal community is always a community of those who belong to it and belongingness itself has integrative and disintegrative effects”. Non-EU citizens are largely excluded from the benefit of the area. As an illustration, the case P.I. v. Oberbürgermeisterin der Stadt Remscheid33 can be mentioned as the Court considered that Article 28.3 lit. a) of Directive 2004/38 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States must be interpreted as meaning that it is open for MS to regard criminal offences such as those referred to in the second subparagraph of Article 83.1 TFEU as constituting 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 “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 it is a matter for the referring court to determine on the basis of an individual examination of the specific case before it. The expulsion from an MS amounts to a limited territorial restriction on their rights of residence within a common territory. According to L. Azoulai and S. Coutts, “Therefore territory and the right to territory remains one of the key distinctions between nationals and non-nationals both symbolically and literally”.34 According to C. Barnard, “if EU citizenship is special, to what extent can the familiar indices of citizenship at state level be used to judge EU citizenship? These questions go to the heart of the debate about constitutionalism and the EU: if it has a 31

CONV 426/02 of 2 December 2002, p. 2. Hernfeld, in Schwarze (2012), Article 67 AEUV para 7. 33 Case C-348/09, P.I. v. Oberbürgermeisterin der Stadt Remscheid (ECJ 22 May 2012) para 33. 34 Azoulai and Couts (2013), p. 553. 32

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body of citizens, does this mean that the EU is emerging as some sort of federal state. . . ?”35 3.1.5.

AFSJ: A Constitutional Concept

The AFSJ is based on a certain number of principles of constitutional values. According to E. Herlin-Karnell, the EU constitutional principles play an important role in shaping the European space of the AFSJ. The EU promises to deliver an area of freedom and security built on the concept of justice, indicating the demand for a balance to be stuck between these sometimes conflicting values. The constitutional principles in the AFSJ are intimately connected to the values that the EU seeks to protect, and therefore there is a relationship between the EU’s objectives and normative values pertaining to the AFSJ.36 Rule of law (Articles 2 and 21 TEU) encompasses the broader notion of justice as the basic constitutional principle on which other principles are based. Mutual trust and mutual recognition are also raised as a quasi-constitutional axiom by Article 82 TFEU and by the Court, notably in the Gözütok or NS case (➔ para 31). Moreover, the effectiveness principle seems to rise as a structural principle in ECJ case law. In the case Commission v Council on environmental crimes, the ECJ concluded that criminal law could fall within the EC sphere of competence if it was necessary for the full effectiveness of EC law.37 In the Da Silva case, the effectiveness of the EAW was also mentioned. Another important principle is the proportionality principle regarding limitations to fundamental rights (foreseen in Article 52 EUCFR). For instance, in the decision of the High Court of Ireland of 8 February 2012, in which the court ruled that the EAW in question issued by Polish authorities against a Pole residing in Ireland in relation to the possession of a very small quantity of marijuana did not meet the proportionality test.38 Other principles can also be identified as particularly important for the AFSJ, such as subsidiarity, solidarity, and universality. Freedom, security, and justice are indeed more than simple objectives; they are values that have to be shared by MS and can therefore be considered as values of the EU. According to S. Wolff, “Being intimately linked to the rule of law and fundamental rights, the AFSJ is therefore transforming the nature of the EU governance and its underlying constitutional elements”.39 Indeed, the AFSJ is based and shaped by human rights guarantees. Even though the Reform Treaty of Lisbon abandoned the challenging ambition of becoming a constitutional treaty for the Union, the area organised in this way remains nevertheless a constitutional area based on liberty

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Barnard (2012), p. 507. Herlin-Karnell (2013), p. 38. 37 Case C-176/03, Commission v Council (ECJ 13 September 2005) para 48. 38 MJLR v. Ostrowski judgment of 8 February 2012, [2013] IESC 24 (Ire), especially judgment of MacMenamin J.; See generally Peers, S. EU Justice (n 4), 705–709. 39 Wolff (2011), p. 281. 36

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guided by the rule of law, deducing security from freedom (and not vice versa) and aiming positive law towards justice. According to J. Monar,40 JHA’s domain is a major testing stone for the role of EU institutions because this domain can be regarded as one of the most dynamic policy-making area in the history of the European construction, also because the very dynamism of the domain has provided specific opportunities and challenges for the EU institutions. For instance, the operational issues arising from the AFSJ have led to the development of agencies. EU institutions have an impact on the development of the AFSJ: the first impact is the role of the institutions in identifying common challenges; the second is political leadership (the European Council and Commission), as it is a serious problem for the EU institutions to ensure the implementation of both the agreed objectives at the European level and the agreed measures at the national level. EU institutions have been able to generate, at least to some extent, “order out of chaos”. EU institutions clearly matter, and the AFSJ would not have reached its current stage of development and would probably not exist without them.

3.2. With Respect for Fundamental Rights

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This provision is new and in a way redundant with Article 6 TEU. Nevertheless, as measures taken in the field of the AFSJ are likely to infringe fundamental rights, it has been considered as important to assert it. Two institutions have played a key role in insuring the respect of fundamental freedoms within the AFSJ: the EP and the ECJ. Before the Lisbon Treaty, they were largely marginalised by the intergovernmental nature of police and justice cooperation in criminal matters. Already with the coming into force of the Amsterdam Treaty and the communitisation of all aspects related to free movement of persons, the EP and ECJ have been exerting pressure on the Council to take into account human rights considerations, for instance regarding asylum or immigration policies. The ECJ has become the defendant of civil liberties, notably concerning migration; it advocates a migrant-friendly position and is in favour of an improved domestic refugee protection standard. For instance, in the case Elgafaji, regarding the interpretation of Article 15 of the Qualification Directive, the court took into account Article 3 ECHR.41 In 2003, the EP applied for an annulment of Directive 2003/86/EC, which determines the conditions for the exercise of the right to family reunification by third-country nationals residing lawfully in the territory of the MS. 40

Monar (2015), pp. 3–10. Case C-465/07, Meki Elgafaji and Noor Elgafaji v Staatssecretaris van Justitie (ECJ 17 February 2009). An applicant for subsidiarity protection does not necessarily have to prove that he is specially targeted in his country of origin by reason of factors particular to his circumstance. The degree of indiscriminate violence in the applicant’s country of origin can exceptionally suffice for the competent authorities to decide that a civilian, if returned to his country of origin, would face a real risk of being subject to serious and individual threat.

41

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In particular, it provides that a third-country national lawfully living in the EC is in principle entitled to be joined by his or her children by way of family reunification. The Directive allows MS to introduce certain derogations. Parliament applied for the annulment of three derogations from that principle as being contrary to fundamental rights, in particular the right to family life and the right to nondiscrimination. The Court in the case Parliament v Council dismissed the action, considering that the Community legislature did not exceed the limits imposed by fundamental rights in permitting MS that had, or wished to adopt, specific legislation to adjust certain aspects of the right to reunification.42 With the Lisbon Treaty and the extension of the jurisdiction of the court and the extension of co-decision, the ECJ and EP have even more asserted their role as fundamental rights defendants in this policy. The EP has used with conviction its new power attributed by the Lisbon Treaty to give its consent to agreements signed by the Council regarding the PNR and SWIFT agreements.43 Many cases before the ECJ are related to data protection with the use of always more powerful information systems. On 8 April 2014, the ECJ annulled the newly adopted Data Retention Directive.44 This Directive required telephone and Internet operators to collect and store information on telephone, mobile phones, and Internet messages within the EU so that it could be available for law enforcement purposes. Two MS, Ireland and Slovakia, asked the ECJ in 2006 to annul it on the ground that there was a fundamental error regarding the legal basis. The Court of Justice declared the Data Retention Directive invalid as it entails a wide-ranging and particularly serious interference with the fundamental rights to respect for private life and to the protection of personal data, without that interference being limited to what is strictly necessary. A few constitutional courts have also had difficulties with this Directive, such as the Romanian Supreme Court and the German Constitutional Court. In both cases, it was the relationship of the intrusive nature of the legislation to the individual’s rights to privacy that was central to the decisions.45 Another major case concerning data protection dealt with Internet search referencing. In 2010, a Spanish citizen lodged a complaint against a Spanish newspaper with the 42

Case C-540/03, Parliament v Council (ECJ 27 June 2006) para 102. The U.S. Air Transportation Safety Act of 2002 legally mandates that PNR data be made available to U.S. authorities in advance of planes arriving from abroad. Formal agreement was reached between EU and American authorities in 2004. Soon after this agreement was reached, the European Parliament formally lodged a case with the European Court of Justice, and in May 2006 the agreement was annulled on a technicality. A second interim agreement was provisionally reached, and in July 2007, the EU and the U.S. formally settled a new seven-year deal. To address Parliament’s concerns, the U.S. reduced the pieces of shareable information it requested from 34 to 19. Although this new agreement has provisionally been in force since 2007—and working successfully—the European Parliament has not given its formal consent, which is required for the accord to be formally enforced. In May 2010, the Parliament again declined an approval vote on the deal. 44 Joined Cases C-293/12 and C-594/12, Digital Rights Ireland and Seitlinger and Others (ECJ 8 April 2014) para 31 et seq. 45 Guild (2011), p. 195. 43

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national Data Protection Agency and against Google Spain and Google Inc.46 The citizen complained that an auction notice of his repossessed home on Google’s search results infringed his privacy rights because the proceedings concerning him had been fully resolved for a number of years and hence reference to these was entirely irrelevant. He requested, first, that the newspaper be required either to remove or alter the pages in question so that the data relating to him no longer appeared and, second, that Google Spain or Google Inc. be required to remove the data relating to him so that it no longer appeared in the search results. The Spanish court referred the case to the ECJ, asking three preliminary questions. On the territoriality of EU rules, the court stated that even if the physical server of a company processing data is located outside Europe, EU rules apply to search engine operators if they have a branch or a subsidiary in an MS that promotes the selling of advertising space offered by the search engine. Search engines are controllers of personal data. Google can therefore not escape its responsibilities before European law when handling personal data by saying that it is a search engine. EU data protection law applies, and so does the right to be forgotten. Individuals have the right—under certain conditions—to ask search engines to remove links with personal information about them. In recognising that the right to be forgotten exists, the ECJ established a general principle, which is clarified in the draft Data Protection Regulation.47 The relationship between mutual recognition and human rights has been at the centre of many cases of the ECJ. In the Mantello case, the court demonstrated that the concept of mutual recognition is not an absolute precept of justice and home affairs but rather a presumption subject to rebuttal if necessary for the adequate protection of human rights (➔ para 33). However, most instruments based on mutual recognition do not mention expressly the duty to respect human rights. The FD on EAW and the FD on freezing mention that they shall not have the effect of modifying the obligation to respect fundamental legal principles as enshrined in Article 6 TEU, but none of them provide for an explicit ground for refusal based on eventual violation of human rights.48 Only one FD on mutual recognition, the FD on the financial penalties of February 2005, provides for an explicit ground for refusal based on human rights.49 Indeed, according to its Article 20.3, “Each Member state may, where the Certificate referred to in Article 4 gives rise to an

46

Case C-131/12, Google Spain SL and Google Inc. v Agencia Española de proteccion de Datos (ECJ 13 May 2014). 47 Proposal for a Parliament/Council Regulation on the protection of individuals with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation), COM(2012) 11 final. 48 Some transposition laws of the EAW do not contain an explicit ground for refusal in case of Human rights violations (Spain or Luxembourg) others expressly provide for a binding ground for refusal in case of human rights infringement (Belgium, UK, Greece or Italy) contrary to the FD. An infringement procedure could be led by the Commission against these States since the end of the transitional period (December 2014). Weyembergh (2013), p. 945. 49 Council Framework Decision 2005/214/JHA on the financial penalties, O.J. L76/16 (2005).

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issue that fundamental rights or fundamental legal principles as enshrined in Article 6 may have been infringed, oppose the recognition and the execution of decisions”. This is also the case of the Directive on the European Investigation Order. Indeed, the European Union Agency for Fundamental Rights had given an opinion regarding this Directive, which has been followed, stating that “a fundamental rightsbased refusal ground could act as an adequate tool to prevent fundamental rights violations occurring during cross border investigation”.50 The EP has also made such a suggestion concerning EAW.51 According to W. Bruggeman and M. den Boer, “The EU is in the position to consolidate a security model, based on the principles and values of the Union: respect for human rights and fundamental freedoms, the rule of law, democracy, dialogue, tolerance, transparency and solidarity, in short: good governance”.52

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3.3. Respect for the Different Legal Systems and Traditions of the Member States

MS have very diverse legal systems, especially concerning criminal law. There is a gap between the common law and the civil law systems, between accusatorial and investigatory criminal systems, and between different philosophies of crime and punishment. Indeed, criminal law is emblematic of national sovereignty and has a strong connection to traditions and values of the individual nations. As stated in the Preamble of the EUCFR (recital 3), “The Union contributes to the preservation and to the development of these common values while respecting the diversity of the cultures and traditions of the peoples of Europe as well as the national identities of the Member States and the organisation of their public authorities at national, regional and local levels”. As the AFSJ deals with sovereignty aspects that are quite sensitive, emergency brakes have been inserted in sensitive domains. National traditions are also referred to in Article 4.2 TEU on sincere cooperation and in Article 72 TFEU, which clearly says that “This Title shall not affect the exercise of the responsibilities incumbent upon Member States with regard to the maintenance of law and order and the safeguarding of internal security”. Article 73 TFEU is also a manifestation of the will to protect the specificity of criminal justice systems. Article 82.2 TFEU on the approximation of procedural criminal law insists on the fact that “Such rules shall take into account the differences between the legal traditions and systems of the Member States”.

50 Opinion of the European Union Agency for Fundamental Rights in the draft directive regarding the European Investigation Order, 14 February 2011. 51 European Parliament resolution of 27 February 2014 with recommendations to the Commission on the review of the European Arrest Warrant (2013/2109(INL)). 52 Bruggeman and den Boer (2011), p. 135.

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Area of Freedom (Paragraph 2)

Today, the Schengen area covers an area with 42,673 km of sea and 7721 km of external land borders. On 1 May 2004, when the ten new MS accessed to the EU, they did not at that time join the Schengen area. Border controls between the MS of the Schengen zone and the new MS were maintained during a transitional period that allowed them to set up the administrative authorities capable of ensuring a better control of the outside borders of the EU. On 21 December 2007, the Schengen area widened to nine of the new MS: the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. Thus, today, four of the new MS are still not part of Schengen: Cyprus, Bulgaria, Romania, and Croatia. This space is all the more opaque as certain states of the EU are not part of the Schengen area (the United Kingdom and Ireland, for example), while three non-EU members (Norway, Iceland, Switzerland, and Liechtenstein) are part of the Schengen area. The Schengen acquis relating to the suppression of border controls on persons has been integrated in a Regulation called Schengen Borders Code of 15 March 2006.53 The Arab Spring upset the geostrategic situation in the South of the Mediterranean Basin, engendering the massive arrival of migrants. A reform of the Schengen Borders Code was adopted in October 2013 in order to restore mutual trust. The Schengen governance has been modified in two ways: firstly, restoration of border controls has been facilitated, and secondly, the mechanism of mutual evaluation of external border control has been strengthened. In the case Melki and Abdeli, C-188/10 and C-189/10, the ECJ had the opportunity to appreciate the compatibility with Article 67.2 TFEU of a French law that permitted police authorities to check the identity of anyone, irrespective of his behaviour and of specific circumstances, within an area of 20 km from the land border of a Member State with states that are party to the CISA. Mr Melki and Mr Abdeli were of the opinion that Articles 67 TFEU and 77 TFEU provide, purely and simply, that there should be no internal border controls and that the Treaty of Lisbon, on that basis, made freedom of movement for persons absolute, irrespective of the nationality of the persons concerned. Accordingly, that freedom of movement precludes a restriction, such as that provided for in Article 78-2, fourth paragraph, of the Code of Criminal Procedure, which authorises the national authorities to carry out systematic identity checks in border areas. According to the Court, such checks were not border checks as they did not depend on movement across the border by the person checked and were not carried out at the precise time when the border was crossed. It does not have an equivalent effect to border control. But the French law does not contain enough safeguards to make sure that the practical exercise of that power would not lead to controls that have an equivalent

53

Council Regulation (EC) No 562/2006 establishing a Community Code on the rules governing the movement of persons across borders, O.J. L 105/1 (2006).

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effect to a border control.54 The answer given by the Court is that Article 67.2 TFEU and Articles 20 and 21 of Regulation No 562/2006 preclude national legislation that grants to the police authorities of the Member State in question the power to check, solely within an area of 20 km from the land border of that state with states party to the CISA, the identity of any person, irrespective of his behaviour and of specific circumstances giving rise to a risk of breach of public order, in order to ascertain whether the obligations laid down by law to hold, carry, and produce papers and documents are fulfilled, where that legislation does not provide the necessary framework for that power to guarantee that its practical exercise cannot have an effect equivalent to border checks.55 Article 67.2 TFEU is referred to with Articles 20 and 21 of the Regulation, so this case does not imply a direct effect of Article 67.2 TFEU.56 Article 67.2 TFEU also imposes on states to found their common asylum, immigration, and external border policies on solidarity and fairness towards thirdcountry nationals. States with external frontiers have a specific responsibility; this is the reason why solidarity is necessary.57 Solidarity is a value of the EU that appears in many provisions of the Treaty, for instance in the Preamble of the EUCFR (recital 2): “Conscious of its spiritual and moral heritage, the Union is founded on the indivisible, universal values of human dignity, freedom, equality and solidarity (. . .).” Article 2 TEU also refers to solidarity as a common value. Article 3.3 (2) TEU refers to solidarity between generations, and Article 3.5 TEU obliges the Union in its relations with the wider world to contribute to, among others, solidarity and mutual respect among people. With regard to the AFSJ, Article 80 TFEU foresees that policies on border checks, asylum, and immigration and their implementation shall be governed by the principle of solidarity and fair sharing of responsibility, including its financial implications, between the MS. One can also refer to, in the solidarity clause, Article 222 TFEU, according to which the Union and its Member States shall act jointly in a spirit of solidarity if an MS is the object of a terrorist attack or the victim of a natural or man-made disaster. According to M. Kotzur, the principle of solidarity has the same effect for the relationship between the MS and the Union: it aims at facilitating cooperation by mutual consideration, especially by an equal and fair distribution of burdens within the Union. The Union is to be qualified as a “solidarity group” committed to the spirit of “sincere cooperation” (as in Article 4.3 sentence 1 TEU). The demanded solidarity in Article 80 TFEU presents a constitutional building block concerning the European integration structure in both articles.58 The abstract obligation for

54

Cornelisse (2014), p. 761. Joined Cases C- 188/10 and C-189/10, Aziz Melki and Sélim Abdeli (ECJ 22 June 2010) para 75. 56 Hernfeld, in Schwarze (2012), Article 67 AEUV para 15. 57 Rosenau and Petrus in Vedder and Heintschel von Heinegg (2012), Article 67 AEUV para 9. 58 Hernfeld, in Schwarze (2012), Article 67 AEUV para 14. 55

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mutual solidarity of the MS finds its way into written primary law via Article 80 TFEU. Even if there may be doubts about legislative effectiveness because of the relative openness, it has any way the character of an appeal. The area of freedom benefits not only EU citizens but also third-country citizens and stateless persons. EU policies also have to be fair to stateless persons.59 Only for the purpose of this title, stateless persons shall be treated as third-country nationals. It refers to the Geneva Convention of 28 July 1951, which also provides asylum protection to stateless persons. Indeed, Article 1 foresees that should be considered as a refugee a person who fears being persecuted for reasons of race, religion, nationality, membership in a particular social group, or political opinion who is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country or who, not having a nationality and being outside the country of his former habitual residence as a result of such events, is unable or, owing to such fear, is unwilling to return to it. However, there is a clear boundary between EU citizens, who benefit from many rights, and third-country nationals, including stateless persons, who should only be treated fairly. Solidarity applies in the relationship between MS but not towards third-state nationals. According to C. Murphy and D. Acosta Arcarazo, “there has long been something of symbiotic between the development of citizenship law and human rights in the EU. Yet citizenship, which seeks to draw boundaries on political community, and human rights which transcend boundaries in favour of common humanity, are in tension as much as they are in harmony. Although the citizen is the focus of the Stockholm Programme it may that it is fundamental rights that seize the moment.”60 For the elaboration of the common policy on asylum, the ordinary legislative procedure applies except if one or more MS is confronted by an emergency situation characterised by a sudden inflow of nationals of thirds countries, in which case provisional measures may be adopted by the Council after consulting the European Parliament for the benefit of the MS concerned. On 13 May 2015, the Commission adopted a Communication entitled European Agenda on Migration, in which it proposes to use Article 78.3 TFEU to impose a temporary distribution scheme for persons in clear need of international protection in order to ensure a fair and balanced participation of all MS to this common effort.61

59

Rosenau and Petrus, in Vedder and Heintschel von Heinegg (2012), Article 67 AEUV para 8. Murphy and Acosta Arcarazo (2014), p. 14. 61 Commission Communication, A European agenda on migration, COM(2015) 240 final, p. 4. 60

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Area of Security (Paragraph 3)

5.1. Notion of Security

In Article 29 TEU-Amsterdam, when the concept of AFSJ was created, it was foreseen that “the Union’s objective shall be to provide citizens with a high level of safety within an area of freedom, security and justice”. A right to safety was thus recognised to EU citizens. In the Lisbon Treaty, there is no mention any more of a right to safety except in the Preamble (recital 12), where safety and security are linked to the AFSJ: “Resolved to facilitate the free movement of persons, while ensuring the safety and security of their peoples, by establishing an area of freedom, security and justice.” In Article 67 TFEU, the objective is “to ensure a high level of security” and not safety. There is indeed a difference between safety and security. Safety measures are created to protect people and property from injury or loss by circumstance, accident, or negligence. Security measures are created to protect people and property from injury or loss by deliberate actions taken by people; the security concept is therefore more appropriate regarding the AFSJ.62 Security is apprehended in a holistic way, including internal and also external aspects (➔ para 38). According to H.H. Hernfeld, the three aspects of the AFSJ are inseparable. In order to reach the goal of a high level of security, the treaty refers to measures concerning judicial and also police cooperation. Article 67.3 TFEU cannot be considered as a legal basis and refers to other provisions (Articles 82 to 89 TFEU). Nevertheless, concerning the fight against racism and xenophobia, none of these provisions refer to it, and one can consider that this objective can be implemented through Article 19 TFEU (prohibition of discrimination).63 The EU has to take measures to prevent and combat crime. The AFSJ is supposed to have a repressive dimension, which was developed initially, and also a preventive dimension, which is relatively new. There is a specific article on crime prevention (Article 84 TFEU) that is new in the Lisbon Treaty, which excludes harmonisation in this domain. Fight against crime is based on the principle of subsidiarity; the EU should take measures only concerning serious cross-border crimes. The mention of racism and xenophobia is new and reveals the importance of defending common values within the AFSJ. A joint action to combat racism and xenophobia had been adopted on 15 July 199664 and also a Council Regulation65 on the establishment of a European monitoring centre for racism and xenophobia (based on ex-Article 284 TEC, now Article 337 TFEU, and ex-Article 308 TEC,

62

Byres and Cusimano (2010). Hernfeld, in Schwarze (2012), Article 67 AEUV para 16. 64 Council Joint Action (96/443/JHA) concerning action to combat racism and xenophobia, O.J.L 185/5 (1996). 65 Council Regulation (EC) No 1035/97 establishing a European Monitoring Centre on Racism and Xenophobia, O.J. L 151/1 (1997). 63

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now Article 352 TFEU). Racism and xenophobia are not enumerated as a crime that is supposed to be harmonised according to Article 83 TFEU. But this article foresees that this list can be extended to other kinds of crimes: “criminal offences and sanctions in the areas of particularly serious crime with a cross-border dimension resulting from the nature or impact of such offences or from a special need to combat them on a common basis”. According to H.H. Hernfeld, it could therefore become an Annexkompetenz.66 The Tampere Programme reinforced the institutionalisation of police cooperation. The Hague Programme distinguished four general orientations regarding policing: strengthened coordination of operational police cooperation; improvement of exchange of information, in particular by applying the principle of availability; investment in practical cooperation; and, finally, intensification of foreign policy. The Stockholm Programme insisted on the improvement of operational police cooperation through the Prüm Convention or the so-called Swedish Framework Decision,67 which aimed at simplifying the exchange of information and intelligence (➔ para 37). According to W. Bruggeman and M. den Boer, “The instruments are now so numerous that many police officers are no longer able to see the wood for the trees and need manuals in order to find their way. Even the updating of the manual on cross-border operations is insufficient to solve their problem.”68

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The constitutionalisation of mutual trust and mutual recognition is fundamental. The Treaty, however, draws a perceptible limit, subsidiarity, which underlies the whole construction. Even though mutual recognition is rightly presented as a political objective, in fact it allows to by-pass the obstacle of approximation. However, it also expresses implicitly the refusal to develop normative integration.69 The principle of mutual recognition (Article 82 TFEU) has priority over approximation (rapprochement des législations) of law: only if necessary. Approximation is admissible only as long as it is limited to the necessary minimum (principle of proportionality) as it has very important consequences on national sovereignty. The principle of mutual recognition is implemented in Article 82 TFEU. Article 67.3 TFEU mentions only mutual recognition of judgments in criminal matters, but Article 82 TFEU applies not only to judgments but also to judicial decisions (in French, jugements et décisions judiciaires).70 Mutual recognition in criminal 66

Hernfeld, in Schwarze (2012), Article 67 AEUV para 16. Council Framework Decision 2006/960/JHA on simplifying the exchange of information and intelligence between law enforcement authorities of the Member States of the European Union, O. J. L 386/89 (2006). 68 Bruggeman and den Boer (2011), p. 136. 69 Labayle, in Burgorgue-Larsen and Levade (2007), Article I-42 para 15. 70 Hernfeld, in Schwarze (2012), Article 67 AEUV para 17. 67

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matters consists of MS considering that the main part is said by national law. This approach hides the reality of things: mutual recognition and approximation are complementary and not alternative processes. Doubtlessly, it is this ambiguity that urged partisans and opponents of a progress in repressive mutual aid to agree on the text and on the promotion of mutual recognition. In its Communication of 26 July 2000 on mutual recognition of final decision in criminal matters, the Commission gives a definition according to which mutual recognition is “a principle that is widely understood as being based on the thought that while another state may not deal with a certain matter in the same or even a similar way as one’s own state, the results will be such that they are accepted as equivalent to decisions by one’s own state. Mutual trust is an important element, not only trust in the adequacy of one’s partners’ rules, but also trust that these rules are correctly applied.”71 According to I. Anagnostopoulos,72 “the reign of mutual recognition in the criminal justice area has minimized the defense rights of suspects and of accused person”. The magic device for this almost revolutionary development was the principle of mutual recognition of criminal judgments and decisions. Mutual recognition of criminal judgments was presented by the British in 1998 at the EU Presidency’s meeting in Cardiff as a utilitarian method to overcome the hurdle of approximation of national legal systems and create a single common judicial “market” in which criminal decisions and judgments would freely circulate and be enforced in all other MS, just like any other “goods” produced in the EU. In 1999, mutual recognition was proclaimed as a cornerstone of judicial cooperation. The first and still the most powerful instrument that has marked the new area of criminal justice cooperation in the EU is the European Arrest Warrant. It has minimised the protection of individuals, who when subjected to the new simplified procedures have found themselves in a much weaker position compared to that under the old system. In the decade following Tampere, all efforts of the EU institutions have been devoted to granting more freedom to policemen and prosecutors with a view to maximising the efficiency of prosecution of alleged criminal offences with no national borders. Such emphasis on prosecution has attracted sharp criticism. The saga of the European Commission’s proposal for a Framework Decision on certain procedural rights (2004), which was finally abandoned three years after its launch due to vehement opposition of some MS disputing its legal basis as well as the need for such an instrument, has been a troubling example of political unwillingness to promote and enhance individual rights in criminal proceedings. With the Stockholm Programme, the EU criminal justice agenda has been redefined, and a new era with the citizen at the heart of crime policy has been officially launched. An extract of the Stockholm Programme (2.4) states that “the protection of the rights of the suspected and accused persons is a fundamental value

71

Commission Communication, Mutual recognition of Final Decisions in criminal matters, COM (2000) 495 final, para 3.1 72 Anagnostopoulos (2014), p. 10.

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of the Union, which is essential in order to maintain mutual trust between the MS and public confidence in the Union”. Since the entry into force of the Treaty of Lisbon, the principle of mutual recognition has gained an explicit legal basis, namely Article 82.1 TFEU. Notwithstanding this clarification, it is helpful to keep in mind the other general principle to which the principle of mutual recognition is closely related and that may help clarify its scope and meaning, namely the principle of proportionality, subsidiarity, sincere cooperation, and mutual trust. According to C. Janssens, there is a strong trend to refer to the principle of mutual recognition, seemingly avoiding any reference to the principle of equivalence.73 The main characteristics of the principle of mutual recognition are that it is flexible, non-automatic, teleological, and versatile. The main applications of mutual recognition are the EAW created by the Framework Decision suppressing dual criminality for 32 offences,74 enumerated in Article 2.2 and which provoked criticism (BVerfGE 113,273); FD on the recognition of freezing orders;75 FD on the mutual recognition of fines;76 FD on the application of mutual recognition of confiscation orders;77 FD on taking account of convictions in Member States of the EU in the course of a new criminal proceeding;78 FD on the application of the principle of mutual recognition to judgments and probation decisions with a view to the supervision of probation measures and alternative sanctions;79 FD on the European Evidence Warrant;80 FD on the application between Member States of the European Union of the principle of mutual recognition to the decisions on supervision measures as an alternative to provisional detention.81

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Janssens (2013), p. 251. Council Framework Decision 2002/584/JHA on the European arrest warrant and the surrender procedures between Member States, O.J.L 190/1 (2002). 75 Council Framework Decision 2003/577/JHA on the execution in the European Union of orders freezing property or evidence, O.J.L 196/45 (2003). 76 Council Framework Decision 2005/214/JHA on the application of the principle of mutual recognition to financial penalties, O.J.L 76/16 (2005). 77 Council Framework Decision 2006/783/JHA on the application of the principle of mutual recognition to confiscation orders, O.J.L 328/59 (2006). 78 Council Framework Decision 2008/675/JHA on taking account of convictions in the Member States of the European Union in the course of new criminal proceedings, O.J.L 220/32 (2008). 79 Council Framework Decision 2008/947/JHA on the application of the principle of mutual recognition to judgments and probation decisions with a view to the supervision of probation measures and alternative sanctions, O.J.L 337/102 (2008). 80 Council Framework Decision 2008/978/JHA on the European evidence warrant for the purpose of obtaining objects, documents and data for use in proceedings in criminal matters, O.J.L 350/72 (2008). 81 Council Framework Decision 2009/829/JHA on the application between Member States of the European Union of the principle of mutual recognition to the decisions on supervision measures as alternative to provisional detention, O.J.L 294/20 (2009). 74

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5.3. Mutual Trust

With the Constitutional Treaty, mutual confidence had been raised at the constitutional level in Article I-42, entitled “Specific provisions relating to the area of freedom, security and justice”. It stated that the Union shall constitute an area of freedom, security, and justice by, inter alia, “promoting mutual confidence between the competent authorities of the Member States, in particular on the basis of mutual recognition of judicial and extrajudicial decisions”. Mutual recognition was only a means to achieve the general aim of mutual trust.82 Already in the Gözütok case in 2003, the ECJ stated that “In those circumstances, whether the ne bis in idem principle enshrined in Article 54 of the CISA is applied to procedures whereby further prosecution is barred (regardless of whether a court is involved) or to judicial decisions, there is a necessary implication that the Member States have mutual trust in their criminal justice systems and that each of them recognises the criminal law in force in the other Member States even when the outcome would be different if its own national law were applied”.83 In the Lisbon Treaty, only mutual recognition is mentioned in Article 82.1 TFEU. But mutual recognition implies mutual trust. Mutual trust finds its roots in the principle of loyalty. In the case Pupino, the German Federal Constitutional Court had questioned the loyalty obligation within the former third pillar. The ECJ had the opportunity to state that the loyalty obligation applied also in the third pillar.84 With the MSS and NS cases,85 there is a sudden stop to the mutual trust between MS. In the NS case, the ECJ stated that although the Common European Asylum System is based on mutual confidence and the presumption of compliance by other MS with Union law and, in particular, the fundamental rights, such a presumption is not conclusive. It developed the concept of systemic flaw according to which “if there are substantial grounds for believing that there are systemic flaws in the asylum procedure and reception conditions for asylum applicants in the Member State responsible, resulting in inhuman or degrading treatment, within the meaning of Article 4 of the Charter, of asylum seekers transferred to the territory of that Member State, the transfer would be incompatible with that provision”.86 Systemic flaw can therefore be an exception to mutual confidence. This position has been confirmed in the Abdullahi v Bundesasylamt judgment, which concerns the interpretation of the Dublin Regulation and which rights asylum seekers derive from this Regulation. The Court stated that “the only way in which the applicant for asylum

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Vernimmen-Van Tiggelen et al. (2009), p. 10. Joined Cases C-187/01 and C-385/01, Gözütok and Brügge, (ECJ 11 February 2003) para 33. Thwaites (2003). 84 Case C-105/03, Pupino (ECJ 16 June 2005) para 42 and Opinion of AG Kokott of 11 November 2004, para 26. 85 Joined Cases C-411/10 and C-493/10, N. S. (ECJ 21 December 2011) para 86. 86 Labayle (2014), p. 719. 83

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can call into question the choice of that criterion is by pleading systematic deficiencies in the asylum procedure” or pleading system deficiencies in the conditions for the reception.87 In a recent case, Tarakhel v Switzerland, the ECtHR goes even further by stating that even if there is no systemic flaw, the state can refuse the transfer.88 According to the Court, “the possibility that a significant number of asylum seekers may be left without accommodation or accommodated in overcrowded facilities without any privacy, or even in insalubrious or violent conditions, cannot be dismissed as unfounded”. Switzerland should have obtained assurance and individual guarantees from the Italian authorities that the applicants “will be received in facilities and in conditions adapted to the age of the children, and that the family will be kept together”. This decision diminishes the purpose of the Dublin Regulation and weakens the assumption that all contracting states observe fundamental human rights. Mutual trust is also referred to in the Opinion of the Court concerning the accession of the EU to the ECHR:89 “the principle of mutual trust between the Member States is of fundamental importance in EU law, given that it allows an area without internal borders to be created and maintained. That principle requires, particularly with regard to the area of freedom, security and justice, each of those States, save in exceptional circumstances, to consider all the other Member States to be complying with EU law and particularly with the fundamental rights recognised by EU law.”90 According to the Court, “EU law imposes an obligation of mutual trust between those Member States”.91 It is only in exceptional cases that this presumption can be reversed. There is no reference anymore to “systemic failure”; the exception is possible in exceptional cases, which implies an individual appreciation of the situation. According to R. Tinière, in the Opinion, the ECJ refused to apply the Tarakhel solution.92 This has been confirmed in CK, HF, AS v. Slovenia of 16 February 2017, in which the Court considered that it is not only in the case of systemic or generalised flaws in the asylum system of a responsible MS that a transfer may be prevented. Specific and individual considerations of asylum seekers must be taken into account in order to assess whether he or she could suffer treatment incompatible with Article 4 of the Charter because of his/her transfer.93 The same solution was adopted by the UK courts in the case R. v. Secretary of State for the Home Department concerning the transfer of an asylum seeker to Italy. The court questioned the use of systemic failure: “Before examining what CJEU

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Case C-394/12, Abdullahi v Bundesasylamt (ECJ 10 December 2013) para 60. Appl. No. 29217/12, Tarakhel v Switzerland (ECtHR 4 November 2014) para 115, pp. 120–122. 89 Opinion No 2/13, Accession to the ECHR, (ECJ 18 December 2014) para 191–194; see also Allegrezza (2013). 90 Opinion No 2/13, Accession to the ECHR, (ECJ 18 December 2014) para 191. 91 Opinion No 2/13, Accession to the ECHR, (ECJ 18 December 2014) para 194. 92 Tinière (2015). 93 Case C-578/16 PPU, CK, HF, AS v Slovenia (ECJ 16 February 2017). 88

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said on this issue, it can be observed that an exclusionary rule based only on systemic failures would be arbitrary both in conception and in practice. There is nothing intrinsically significant about a systemic failure which marks it out as one where the violation of fundamental rights is more grievous or more deserving of protection. And, as a matter of practical experience, gross violations of Article 3 rights can occur without there being any systemic failure whatsoever.”94 Mutual trust was again questioned in a case concerning EAW. The Westminster Magistrates’ Court gave a judgment on 1 May 2014, The High Court Guadeloupe (France) – v – Kurtis Norbert Richards, which dealt with the case of a man who was facing extradition to the French Overseas territories of Guadeloupe and Martinique under a European Arrest Warrant.95 The court ordered the discharge of Kurtis Richards after hearing evidence that conditions in the prisons in Guadeloupe and Martinique breached Article 3 of the Human Rights Act, which prohibits torture or inhuman or degrading treatment or punishment. Guadeloupe and Martinique are administratively part of France and are subject to French law, including the European Convention on Human Rights. The Crown Prosecution Service, who was instructed by the French judicial authority, had seven days from the judgment to appeal, and no appeal has been lodged. The EAW has been transposed to UK law by the 2003 Extradition Act, which Article 21 foresees: “If the judge is required to proceed under this section (by virtue of section 11 or 20) he must decide whether the person’s extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998.” It adds a supplementary reason of refusal that is not in concordance with the 2002 Framework Decision. This trust must not lead to erosions of the rule of law or fundamental rights. It is about nothing less than the “principle of practical concordance” between the interests in effective law enforcement and the protection of individual rights of the parties. The establishment of comparable high legal standards in all Member States that are subjected to constant control and that are made mandatory for membership is essential. But according to him and also to H. Labayle, there should not be a blind trust among MS.96 V. Lobier suggests applying a control by the national court of the adequate protection of human rights in other MS concerning the EAW.97 This kind of control has been called the horizontal Solange test by I. Canor:98 “it implies that the common denominator of core values of the European judicial space cannot be derogated from by the MS even when they exercise their own sovereign rights. […] Indeed, horizontal Solange is designed for rare use. What really matters is to

94 The UK Supreme Court, UKSC 12, R. v. Secretary of State for the Home Department UK Supreme Court (19 February 2014) para 48. 95 City of Westminster Magistrates Court, The High Court Guadeloupe (France) v Kurtis Norbert Richards (judgment of 1 May 2014). 96 Labayle (2015). 97 Lobier (2015). 98 Canor (2013).

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allocate a reserved control mechanism for MS, instead of allowing them blind mutual confidence”.

5.4. European Arrest Warrant

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The principle of mutual recognition lies at the heart of the mechanism behind the European Arrest Warrant. The EAW scheme differs sharply from the traditional extradition procedure. In the first instance, EAW is a judicial procedure that dispenses with involvement of political authorities in the extradition process. Second, EAW dispenses with the traditional requirement of dual criminality, which meant that the offence must be recognised in both requesting and receiving country; instead, there is a list of 32 offences for which dual criminality is no longer required. It is axiomatic that this legislation raises constitutional questions. For instance, in Germany, the Constitutional Court ruled that national authorities had failed to implement the Framework Decision properly.99 It was held that the national legislation was incompatible with rights protected under German Basic Law because there was no possibility for an individual to challenge the judicial decision that grants execution. The Constitutional Court refused to follow the ECJ judgment in Pupino, which enables domestic courts to interpret national measures in the light of the wording of a framework decision. The failure to adhere to the Pupino ruling asserts the importance of a domestic legal scrutiny over the constitutionality of measures concerning the AFSJ. The EAW Framework Decision has attracted more references for preliminary ruling from national courts to the ECJ than any other EU criminal law measures, equal to the number of references regarding Schengen Convention provisions concerning the principle of ne bis in idem.100 The EAW Framework Decision raises a number of issues of interpretation, mainly on five aspects: dual criminality, ne bis in idem, non-surrender of nationals or residents (case against France), rule of specialty (the principle that a surrendered person can only be prosecuted for the specific crimes referred to in the EAW), and transitional rules.101 In the Advocatten voor de Werreld case, the Belgian Constitutional Court asked the ECJ whether the partial abolition of dual criminality was valid on the ground that it breached the principle of legality of criminal principle and the principle of 99

German Federal Constitutional Court, 2 BvR 2236/04 (judgment of 18 July 2005). As of 2012: C-303/05, Advocatten voor de Werreld (ECJ 3 May 2007), C-66/08, Koslowski (ECJ 17 July 2008), C-296/08 PPU, Santesteban Goicoechea (ECJ 12 August 2008), C-388/08 PPU, Leymann and Pustovarov (ECJ 1 December 2008), C-123/08, Wolzenburg (2009), C-306/09, I.B. (ECJ 21 October 2011), C-261/09, Mantello (ECJ 16 November 2010), C-42/11, Loppez da Silva (ECJ 5 September 2012), C-399/11, Stefano Melloni v Ministero Fiscal (ECJ 26 February 2013), C-105/10 PPU, Gatave (ECJ 3 April 2010), C-264/10, Kita (ECJ 19 October 2010), C-404/ 15 and C-659/15 PPU, Pál Aranyosi and Robert Căldăraru v Generalstaatsanwaltschaft Bremen (ECJ 5 April 2016). 101 Peers (2012). 100

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non-discrimination. According to the Court, the principle of legality was not infringed because it was only necessary for the issuing MS to comply with that principle when that MS defined the offences that it sought to punish or prosecute by means of issuing an EAW. There is no breach of principle of non-discrimination because of the gravity of the 32 crimes. The Da Silva Jorge case dealt with a Portuguese national residing in France who was given a five-year prison sentence for offences committed in 2002.102 In 2006, the Portuguese national court issued an EAW against Da Silva Jorge. He opposed his surrendering to Portugal, claiming that the execution of the EAW would infringe his right to family life and non-discrimination principle (Article 18 TFEU) as French law allowed for the possibility of non-execution only for French nationals. According to the Court, the EAW must be interpreted in the light of Article 18 TFEU and of the axiom of non-discrimination. An MS implementing the optional non-surrendering provision cannot reserve this possibility to its own nationals; rather, the law in question must be extended to nationals of other MS staying or residing in its territory. According to E. Herlin-Karnell, “the message sent by the judgment Da Silva Jorge indicates that the EAW is now fully ‘Lisbonised’ through the Court’s insistence that the basic rights granted by the treaty should also applies to the EAW”.103 In the Radu case, the Court ruled that the grounds for refusal are those stated expressly in the Framework Decision and that there is no room to expand these grounds by accepting that human rights violations are grounds to reject the execution of the EAW.104 The conclusions of AG Sharpston were not followed, as she argued that a refusal to execute an EAW on the basis of human rights violations should be open to the courts of the requested state in order to address exceptional cases, in which it would be reasonable to assume that fundamental rights of the requested person have been or will be seriously breached in the issuing MS.105 The wording of the Framework Decision in Article 1 (3) states that respect for fundamental rights enshrined in the ECHR as interpreted by the ECtHR is proclaimed. This position has been confirmed by the Melloni case, in which the Court held that principles enshrined in the Constitution of an MS cannot be the basis for refusing the execution of an EAW issued in another MS on grounds other than those expressly provided for in the Framework Decision because such an approach would be incompatible with the superiority of EU law over national law.106 According to I. Anagnostopoulos, in a number of MS, domestic legislation on extradition and judicial cooperation in criminal matters includes human rights or “ordre public” grounds to refuse the execution of a request.107 In a recent decision

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Case C-42/11, Da Silva Jorge (ECJ 5 September 2012) para 40. Herlin-Karnell (2013), p. 38. 104 Case C-396/11, Vasile Radu (ECJ 29 January 2013) para 38. 105 Case C-396/11, Vasile Radu (ECJ 29 January 2013) para 36. 106 Case C-399/11, Stefano Melloni v Ministero Fiscal (ECJ 26 February 2013) para 58 et seq. 107 Anagnostopoulos (2014), p. 10. 103

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regarding the execution of a Bulgarian EAW, the Superior Regional Court Munich ruled: “States must not lend a willing hand to evident human rights violations by other states [. . .] and certainly mutual recognition must not be a cloak to mutually recognize human rights violations.”108 The overly narrow approach of the CJEU in Radu and Melloni has been widened in the case Aranyosi-Caldararu of 5 April 2016.109 The CJEU introduced a two-step test, which the executing authority must conduct when it is in the possession of evidence of a “real risk” of inhuman and degrading treatment of detainees in the issuing MS. In a way, this case reconciles the protection of fundamental rights with the principles of mutual trust and recognition. If Article 1(3) and the Preamble of the EAW FD already refer to the respect of fundamental rights, the insertion of clear fundamental rights and proportionality clauses could provide better legal security. Such a provision exists in the FD relating to the European investigation order (EIO).110 Recital 12 of the Directive on the EIO in criminal matters explains: “When issuing an EIO the issuing authority should pay particular attention to ensuring full respect for the rights as enshrined in Article 48 of the Charter of Fundamental Rights of the European Union (the Charter). The presumption of innocence and the rights of defence in criminal proceedings are a cornerstone of the fundamental rights recognised in the Charter within the area of criminal justice. Any limitation of such rights by an investigative measure ordered in accordance with this Directive should fully conform to the requirements established in Article 52 of the Charter with regard to the necessity, proportionality and objectives that it should pursue, in particular the protection of the rights and freedoms of others.” Article 11 on grounds for non-execution includes a ground founded on the violation of human rights: an EIO may be refused in the executing state where (f) “there are substantial grounds to believe that the execution of the investigative measure indicated in the EIO would be incompatible with the executing State’s obligations in accordance with Article 6 TEU and the Charter”. Such an admissibility test will dissuade police and prosecuting authorities from shopping for the easiest jurisdiction in relation to the gathering of evidence and seek for jurisdiction with the lowest standards regarding participation and protection of individuals. According to AG Mengozzi in the Da Silva Jorge case, a common European AFSJ must be distinguished by its superior fairness standards and its deep respect for fundamental rights.111

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Order of 15 May 2013, reported by Vogel, EuCLR 2013, p. 387 et seq. Joined Cases C-404/15 and C-659/15 PPU, Pál Aranyosi and Robert Căldăraru v Generalstaatsanwaltschaft Bremen (ECJ 5 April 2016). 110 Parliament/Council Directive 2014/41/EU regarding the European Investigation Order in criminal matters, O.J. L 130/1 (2014). 111 Case C-42/11, Da Silva Jorge (Opinion of AG Mengozzi of 20 March 2012) para 28. 109

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5.5. Ne Bis in Idem

Ne bis in idem has also raised many preliminary rulings to the ECJ. First, an internal principle, ne bis in idem has been Europeanised. The principle of ne bis in idem in the internal order is proclaimed in Article 14.7 ICCPR and Article 4.1 of Protocol No. 7 to the ECHR. Then the CISA in Article 54 extended its scope of application to the Schengen area with, nevertheless, a few limitations.112 Today, the principle of ne bis in idem can be considered as a European constitutional norm since its integration in Article 50 CFR. The ECJ has given some precious detail on the implementation of this principle among MS. If an MS considers an internal decision as final, another MS must accept and trust the assessment on the merits of the case made in another EU country. In Gözütok and Brugge,113 an out-of-court settlement was considered to be a final decision. The case of Van Straaten114 was concerned with an acquittal due to lack of evidence. Gasparini115 was related to the statute of limitations. In Bourquain,116 the Court dealt with a conviction in absentia. In the case Criminal Proceedings Against M,117 the CJEU answered that even a decision of “non lieu” is a decision on the merits of the case and bars further prosecution in another MS. In other words, it is a final decision according to the EU legal framework on ne bis in idem, namely Article 54 CISA. The CJEU, however, also observed that the case might actually be reopened if there is new evidence. In the Mantello case, the ECJ examined the provision on the ne bis in idem contained in the Framework Decision on the EAW. In this case, the Court considered that the expression “same acts” must have an “autonomous and uniform interpretation” throughout the EU since the Framework Decision does not refer to national law on this point. Same acts must be interpreted the same way as the phrase appearing in the ne bis in idem rule set out in the Schengen Convention. “Finally judged” should also be interpreted in the same way as in the Schengen Convention.118 But there is a difference between the two sets of rules: the Schengen Convention rules apply only to cross-border situations, while the EAW also applies where a single MS is arguably seeking to prosecute the person concerned twice in relation to the same act.

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“A person whose trial has been finally disposed of in one Contracting Party may not be prosecuted in another Contracting Party for the same acts provided that, if a penalty has been imposed, it has been enforced, is actually in the process of being enforced or can no longer be enforced under the laws of the sentencing Contracting Party”. 113 Case C-187/01 and C-385/01, Gözütok and Brugge (ECJ 13 February 2003). 114 Case C-150/05, Van Straaten (ECJ 28 September 2006). 115 Case C-467/04, Gasparini (ECJ 28 September 2006). 116 Case C-297/07, Bourquain (ECJ 11 December 2008). 117 Case C-398/12, Criminal proceedings v M. (ECJ 5 June 2014) para 30 et seq. 118 Case C- 261/09, Gaetano Mantello (ECJ 16 November 2010) para 33 et seq.

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In order to give an extensive interpretation of this principle, the Court resorted to the principle of mutual trust.119 When the financial interests of the EU are at stake, the Court seems more prone to adopt an interpretation slightly more restrictive of this principle. Indeed, the Court had to take position on the criminal nature of the administrative penalties and asserted that an individual’s right not be prosecuted or punished twice for the same offence can be outweighed by the need to protect the EU’s financial interests (Garlsson Real Estate SA, en liquidation and Others v Commissione Nazionale per le Società e la Borsa (Consob).120 Today, this principle is mainly governed by case law on Article 54 CISA121 as the proposal for a framework decision on ne bis in idem made by the Greek presidency in 2003 was not adopted and the Commission Green Paper On Conflicts of Jurisdiction and the Principle of ne bis in idem in Criminal Proceedings in 2005 did not have any following.122 Then there has been a second proposal for a framework decision on the prevention and settlement of conflicts of jurisdiction in 2009, but it did not succeed in being adopted.123

5.6. Approximation of Criminal Laws, if Necessary

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Already the Tampere European Council acknowledged that mutual recognition cannot entirely replace approximation of law but that the two should go hand in hand. This principle has first been developed within the common market (Cassis de Dijon, 1979). But there is also the minimum requirement of approximation and need for secondary law as, for instance, regarding mutual recognition of driving licenses (Article 2 of Regulation 2006/126/EC).124 Approximation is the condition for mutual trust, as explained by the Communication of the Commission on Mutual Recognition of Final Decisions in Criminal Matters125 and also by the ECJ in Gözütok and Brügge.126 Article 82.2 TFEU foresees approximation of some aspects of procedural criminal law but only to the extent necessary to facilitate mutual recognition of judgments and judicial decisions and police and judicial cooperation in criminal matters 119

Cf. also Case C-436/04, van Esbroeck (Opinion of AG Colomer of 20 October 2005) para 23 and Case C-297/07, Bourquain (Opinion of AG Colomer of 8 April 2008) para 45. 120 Case C-537/16, Garlsson Real Estate SA, en liquidation and Others v Consob (ECJ 20 March 2018). 121 As of July 2015, there has been 52 cases brought to the ECJ on the Ne bis in idem principle. 122 Commission Green Paper, On Conflicts of Jurisdiction and the Principle of ne bis in idem in Criminal Proceedings, COM(2005) 696 final. 123 Council Framework Decision 2009/948/JHA on prevention and settlement of conflicts of exercise of jurisdiction in criminal proceedings, O.J. L 328/42 (2009). 124 Hernfeld, in Schwarze (2012), Article 67 AEUV para 23. 125 Commission Communication concerning Mutual recognition of Final decisions in criminal matters, COM(2000) 495. 126 Case C-187/01 and C-385/01, Gözütok and Brugge (ECJ 13 February 2003).

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having a cross-border dimension.127 Article 83.1 TFEU is the legal basis for the approximation of material criminal law as it authorises harmonisation of particularly serious forms of crime enumerated in an exhaustive list: terrorism,128 trafficking in human beings and sexual exploitation of women and children,129 illicit drug trafficking,130 illicit arms trafficking, money laundering, corruption, counterfeiting of means of payment, computer crime, and organised crime. On the basis of Article 83.1 (3) TFEU, the Council may unanimously adopt a decision after obtaining the consent of the EP identifying other areas of crime that meet the criteria specified in this paragraph.131 The German Constitutional Court considered in its Decision of 30 June 2009 that this amounts to a passerelle-type treaty amendment and must be positively and specifically legitimised.132 These crimes could be qualified as “federal crimes” while the EU is marching towards an inevitable federal unity.133 According to Martin, Wade, and Muñoz de Morales, “European criminal law is in reality half-way between international criminal cooperation and a federal criminal legal system”.134 At least a European system of criminal justice135 is emerging as a first nucleus of European criminal law. Additional approximation is foreseen in Article 83.2 TFEU for policy areas already harmonised. It is the constitutionalisation of the case Commission v Council,136 in which the Commission, supported by the EP, had asked the ECJ to annul

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Tell (2014), pp. 364–369. Framework Decision 2002/475/JHA, O.J. L 164/3 (2002), modified by the Framework Decision 2008/919/JHA, O.J. L 330/21 (2008). 129 Framework Decision 2008/68/JHA, replaced by the Directive 2011/92, O.J. L 335 (2011). 130 Framework Decision 2004/757/JHA laying down minimum provisions on the constituent elements of criminal acts and penalties in the field of illicit drug trafficking, O.J. L 335/8 (2004). 131 Latest directives: Directive 2014/57/EU on criminal sanctions for market abuse, O.J. L 173/ 179 (2014), requires all MS to provide for harmonised criminal offences of insider dealing and market manipulation, and to impose maximum criminal penalties of not less than 4 and 2 years’ imprisonment for the most serious market abuse offences. MS will have to make sure that such behaviour, including the manipulation of benchmarks, is a criminal offence, punishable with effective sanctions everywhere in Europe. Directive 2014/62/EU on the criminal protection of Euro, O.J. L 151/1 (2014), which replaces the Framework Decision 2000/383/JHA. 132 Gudicelli-Delage and Lazerges (2012), Jessberger and Kretschmer (2010), Haenel (2009). 133 Murphy and Acosta Arcarazo (2014). 134 Nieto Martin et al. (2013), Chap. 21. Federal criminal law can be categorized into four broad models. The first model will be called the ‘totally unitary’ in which procedural and material criminal legislation is identical, or substantially identical (Belgium, Germany, Switzerland, Canada); the second model is ‘partially unitary’, in which substantive criminal law is the same, but there is a different procedural legislation (Argentina), the third model can be called the ‘dual model’: federal criminal lax, both procedural as well as material is independent of state criminal law which has its own catalogue of offences and its own procedural rules (United States of America, Mexico). The fourth is a ‘plural’ model where each state entity has its own system, in the absence of federal law (United Kingdom). 135 Flore (2014). 136 Case C-176/03, Commission v Council (ECJ 13 September 2005). 128

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Council Framework Decision 2003/80/JHA on the protection of the environment through criminal law. Although the Community legislature may use criminal law to achieve its objectives, it may do so only if two conditions—necessity and consistency—are met. In a recent case, Commission v Council and Parliament,137 the ECJ has restricted the scope of application of the concept of criminal matter. The Commission sought the annulment of Directive 2011/82/EU facilitating the crossborder exchange of information on road-safety-related traffic offences. The ECJ decided indeed that the main aim of Directive 2011/82 is to improve road safety, which is a prime objective of the EU’s transport policy; therefore, Directive 2011/ 82 could not validly be adopted on the basis of Article 87.2 TFEU and must be annulled.138 Sign of subsidiarity, only directives can be used for approximation, a sign of subsidiarity. For the creation of the European prosecutor, Article 86 TFEU foresees the adoption of a regulation. In the proposal for a regulation on the establishment of a European Public Prosecutor’s Office (EPPO), the Commission empowers the EPPO to choose the appropriate jurisdiction to try the case on the basis of the criteria referred to in Article 27(4): the place where the alleged offence has been committed or the place where the defendant or the victim has his/her habitual residence or the place where the evidence is located. Since there is no hierarchy among these criteria, the EPPO will enjoy a large margin of appreciation in choosing the forum state.139 According to R. Sicurella, the EPPO constitutes the building up of a first nucleus of European criminal law.

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Cooperation in the field of civil matters has existed for more than 40 years and started with the adoption of the Brussels Convention in 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters adopted on the basis of ex-Article 220 TEC. This convention and following have been integrated in the EU, such as the Brussels Regulation adopted in 2000.140 The Lisbon Treaty goes beyond cooperation, and Article 67.4 TFEU recognises a right to access to justice, which 137

Case C-43/12, Commission v Parliament and Council (ECJ 6 May 2014) para 42 et seq. Manacorda (2015). 139 Sicurella (2013), p. 870: “Despite the absence in the Treaty of Lisbon of the unequivocal legal basis for the adoption of a corpus of common provisions establishing European criminal offences, the efficient functioning of the EPPO, when it will be established, will nevertheless convince European and national authorities on the need for adopting such provisions, and because of the pushing for an amendment of the Treaty in order to explicitly empower the EU to introduce criminal provisions: it is the very essence, the rationale of such a new organ itself to logically impose that the establishment of an EPPO is to be joined with the adoption of a corpus of common criminal law provisions to be applied all over the European territory and directly applicable to individuals.” 140 Council Regulation (EC) No 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, O.J. L 12/1 (2001). 138

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is new as it did not appear in ex-Article 61c TEC. Access to justice can be analysed as being a programmatic objective, as Hernfeld explains it (programmatisches Ziel).141 It is wider than the right to an effective remedy and to a fair trial proclaimed in Article 47 EUCFR. This area of justice in civil matters is implemented through Article 81 TFEU (access to justice is mentioned more specifically in Article 81.2 (e) TFEU). The Union shall develop judicial cooperation in civil matters having cross-border implications, based on the principle of mutual recognition of judgments and of decisions in extrajudicial cases. Such cooperation may include the adoption of measures for the approximation of the laws and regulations of the MS. Measures necessary for the proper functioning of the internal market are adopted with the ordinary legislative procedure as measures concerning family law with cross-border implications shall be established by the Council, acting unanimously after consultation with the EP. This means that the exequatur procedure has to be suppressed among MS and a European public order should emerge. There is therefore an analogy with free movement of goods in the internal market, the goal being free movement of judgments within the AFSJ. The same problem appears concerning the potential clash between mutual recognition (based on mutual trust) and the protection of human rights. In the case Joseba Andoni Aguirre Zarraga v Simone Pelz,142 the ECJ proclaimed that the court with jurisdiction in the MS of enforcement cannot oppose the enforcement of a certified judgment ordering the return of a child who had been wrongfully removed on the ground that the court of the MS of origin, which handed down that judgment, may have infringed Article 42 of Council Regulation (EC) No 2201/ 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility, interpreted in accordance with Article 24 EUCFR, since the assessment of whether there is such an infringement falls exclusively within the jurisdiction of the courts of the MS of origin.

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Area à la Carte

The AFSJ is an area “à la carte” that is characterised by its fragmentation.143 When the Schengen acquis was inserted into the EU legal framework by the Amsterdam Treaty, the United Kingdom and Ireland were allowed to remain outside the Schengen cooperation, but provision was made for selective participation. According to Article 4 of the Protocol on the integration of Schengen, the UK could “at any time request to take part in some or all of the provisions of the Schengen acquis”, 141

Hernfeld, in Schwarze (2012), Article 67 AEUV para 29. Case C-491/10 PPU, Joseba Andoni Aguirre Zarraga v Simone Pelz (ECJ 22 December 2010) para 69 et seq. 143 Peers (2011), pp. 661–662; Labayle and Bergé (2012). 142

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and the Council would decide unanimously on such request. There has been litigation because of the refusal of the Council to let the UK participate in regulations that were considered as a development of Schengen acquis (for instance the regulations on Frontex).144 In the Lisbon Treaty, a few provisions are related to this specific dimension of the AFSJ (Protocol No. 19 on Schengen acquis, Protocol No. 20 on border control, and Protocol No. 21 dedicated to the AFSJ). According to Protocol No. 21, the Lisbon Treaty has maintained and extended the UK and Ireland’s opt out such that it applies now to the entire AFSJ. The UK and Ireland are not bound by measures adopted under the AFSJ title, including those on crime and police cooperation. This constitutes an extension of the previous protocol as under Amsterdam. It extends the UK and Irish opt out by providing that it applies to amendments to measures in relation to which those states have previously opted in. The UK and Ireland are not bound by rules laid down on the basis of Article 16 TFEU that relate to the processing of personal data by the MS when carrying out activities that fall within the scope of Chapter 4 or Chapter 5 of Title V, and they are not bound by the rules governing the forms of judicial cooperation in criminal matters or police cooperation that require compliance with the provisions laid down on the basis of Article 16. According to C. Murphy and D. Acosta Arcarazo, the position of the UK in the Lisbon Treaty poses a critical, perhaps fatal, challenge to cooperation in this field. It is akin to taking a mallet to the still-drying frieze of Europe’s criminal justice mosaic.145 In practice, the UK and Ireland initially opted in most post-Lisbon criminal law and policing measures,146 although the UK has subsequently become more reluctant to opt in to proposals.147 Making use of the specific provisions of Article 10 of Protocol No. 36 attached to the Treaty, the United Kingdom on 24 July 2013 decided to use its right to exercise a block “opt-out”,148 as of 1 December 2014, from all EU acts adopted under the former third pillar (the so-called ex-third pillar measures), which had not been amended since the entry into force of the Lisbon Treaty. The United Kingdom notified the Council that it did not accept the said powers of the Commission and of the Court of Justice, with the consequence that the relevant acts in the field of police cooperation and judicial cooperation in criminal matters would cease to apply to the United Kingdom on 1 December 2014. On 20 November 2014, the UK notified its wish to opt back in to 35 of these instruments. Six of these concerns the Schengen acquis. They include the chapters of the Schengen Convention on police 144

Case C-77/05, United Kingdom v Council (ECJ 18 December 2007) para 21. Murphy and Acosta Arcarazo (2014). 146 Directive 2011/82/EU on facilitating the cross-border exchange of information on road safety related to traffic offences, O.J. L 288/1 (2011). The UK initially opted out the Directive on trafficking in persons but opted in later. It opted out the proposals on market abuse and freezing orders. Ireland opted out of the initiative for the investigation order and from the Directive 2011/99 establishing the Protection order. 147 Peers (2014). 148 Labayle (2013). 145

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and judicial cooperation in criminal matters and the Schengen Information System (SIS II, which is the police/justice part of the Schengen database). The remaining 29 non-Schengen measures include the European Arrest Warrant, Europol, and Eurojust. In practice, that means that the Council, acting unanimously, decides on the reparticipation of the UK in ex-third pillar measures related to the Schengen acquis, while the Commission decides on the UK’s re-participation in the non-Schengen ex-third pillar acts.149 The UK participates as an observer in Frontex operations and also financially; for instance, in 2010 it contributed up to 570,000 euros to the cost of joint Frontex operations.150 On 13 April 2015, the Schengen Information System (SIS) became operational in the UK. The integration of the UK could only be accomplished thanks to intensive preparatory work by all participating states and EU-LISA, the EU agency responsible for the operational management of the SIS.151 This means that the SIS is now in operation in 29 countries, including 25 EU MS and four associated countries. The SIS is a cornerstone of law enforcement cooperation and has proven to be an effective and efficient tool for exchanging information on wanted or missing persons and objects. The UK is not part of the Schengen area and will therefore only use the SIS within the context of police and judicial cooperation and not in relation to external border policy. With the Brexit, the territorial scope of the AFSJ will be clarified but the UK will most probably negotiate international agreements to ease cooperation in security matters notably concerning information sharing. The situation of Denmark is different from the UK and Ireland situations as Denmark is part to the CISA but was opposed to the communitisation of the AFSJ. The exemption from supranational policy/decision-making in the AFSJ can only be abolished by another referendum. Thus, as long as it is not sufficiently clear that public opinion will approve full Danish participation in the AFSJ, Denmark will have to deal with the consequences of the opt out from supranational cooperation.152 For instance, when the new Europol Regulation has been adopted replacing the precious third pillar decision, Denmark decided not to take part as it is an integrated legal instrument.153 In June 2003 Otto Schilly, then German Minister of Interior, proposed closer cooperation in JHA to France, Belgium, and Luxembourg. Austria and Spain later joined this circle of EU MS.154 The background to this initiative was that the rules of the Schengen acquis and the third pillar were regarded as insufficient to deal with

149 Council Decision No 2014/857/EU and Commission Decision 2014/858/EU of 1 December 2014, O.J. L 345 (2014). 150 Bickerton et al. (2015), p. 156. 151 Kaunert et al. (2013), p. 147. 152 Tekin (2012), p. 207. 153 Parliament/Council Regulation (EU) 2016/794 on the European Union Agency for Law Enforcement Cooperation (Europol), O.J. L 135/53 (2016). 154 Luif and Traumer (2014), p. 101.

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increasing transnational crime. On May 2005, the Treaty was signed by representatives of seven EU MS in the German town of Prüm, followed by an Administrative and Technical Implementing Agreement to the Prüm Convention, signed in Brussels on 5 December 2006. The process for enhanced cooperation within the treaty framework was regarded as too cumbersome, and the minimum number of MS (eight) was not reached. Participation is left open to all other MS of the EU. The most important innovation of the Prüm Treaty is the availability of national DNA files and fingerprinting data for the other parties to the Treaty. The partner country will only be able to search DNA profiles established from the non-coding part of the DNA/fingerprint data. Each of the records will have a reference. These reference data must not contain any data from which the data subject can be directly identified. Reference data not traceable to any individual must be recognisable (Article 2(2)). In order to implement the principle of availability, each of the contracting parties has to establish a national contact point. These points can conduct directly automated searches and comparisons in the databases of the partner countries, running DNA profiles/fingerprinting data through the “matching machine” of the computer in the partner country. This search is done by the requesting country without the intervention of an official of the requested country. The requesting official of the national contact point receives “hit/no hit” information. Then the official sends a request to his counterpart in the partner country to obtain the relevant data on the person. The requested official decides if he can legally provide such information. According to W. Bruggeman and M. den Boer,155 the Prüm Convention encourages the “horizontalisation” of cooperation between police agencies and may bring cross-border police cooperation closer to police agencies that are in direct contact with communities. The Prüm Treaty was analysed as a risk of fragmentation of the AFSJ. But it was finally integrated within the EU framework by a Decision of 23 June 2008.156 A compromise had to be found, and some very integrated measures were not included, such as Article 18 on cross-border cooperation without prior consent of the other state in the event of imminent danger. However, with each increase in integration comes a new reservation of power by Member States, leading to greater complexity and, perhaps, the fragmentation of the Union’s legal supranationalism.157

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External Aspects of the AFSJ

According to F. Longo, the external dimension of JHA policy leads to a new security concept based on indivisibility of the domestic and external aspect of security, and it is bringing about the notion of “holistic security”. The interdependence of internal and external security is one of the key concepts of the EU’s 155

Bruggeman and den Boer (2011). Council Decision No. 2008/616/JHA, O.J. L210/12 (2008). 157 Acosta Arcarazo and Murphy (2014). 156

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security strategy.158 The Tampere conclusions claimed for the establishment of a “stronger action” in the AFSJ and provided a connection between internal and external security: “external relations must be used in an integrated and consistent way to build the area of FSJ”. Then Seville Council 2002 on combatting terrorism set apart an annex for the contribution of CFSP and ESDP in the fight against terrorism and stressed the need to use military and civilian crisis management capabilities for combating terrorism. In 2004, The Hague Programme confirmed the relevance of the freedom, security, and justice policies for the external relations of the EU: “in the field of security, the coordination and coherence between the internal and external dimension has been growing in importance and needs to continue to be vigorously pursued”. The Programme gave the Commission the mandate to develop a specific strategy covering all external aspects of the Union policy on freedom, security, and justice. The Communication of the Commission, Strategy on the External Dimension of the AFSJ, adopted on 12 October 2005, was the first official document on the external aspect of the AFSJ.159 In December 2005, the European Council adopted such a strategy named “Strategy for external dimension of justice, freedom and security”. The Stockholm Programme is to be considered as the starting point for the definition of the security concept at the EU level: “the external dimension of JLS is crucial to the successful implementation of the objectives of this programme and should in particular be taken into account in and be fully coherent with all other aspects of the AFSJ in a facet of the EU foreign policy. . ., internal and external security are inseparable”. This approach is confirmed by the European Council when it adopted the Internal Security Strategy on 25–26 March 2010 and the ISS in action, which describe the new paradigm of the EU’s security: “the concept of internal security must be understood as a wide and comprehensive concept which straddles multiple sectors in order to address these major threats and others which have a direct impact on the lives, safety, and wellbeing of citizens, including natural and man-made disaster such as forest fires, earthquakes, floods or storms”.160 A new Communication was adopted by the Commission on 28 April 2015, called the European Agenda on Security for 2015–2020, in order to reach an EU area of internal security where individuals are protected in full compliance with fundamental rights. The agenda priorities terrorism, organised crime, and cybercrime as an interlinked area with a strong cross-border dimension, where EU action can make a real difference.161 Following the Paris terrorist attacks, the European Counter Terrorism Centre (EU ECTC) within Europol was launched on 1 January 2016. 158

Longo (2013). Commission Communication, A Strategy on the External Dimension of the AFSJ, COM(2005) 491 final. 160 European Union Internal Security Strategy (ISS) was adopted by the European Council of 25– 26 March 2010; Commission Communication, The EU Internal Security Strategy in Action: Five steps towards a more secure Europe, COM(2010) 673 final. 161 Commission Communication, The European Agenda on Security, COM(2015) 185 final. 159

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According to W. Bruggeman and M. den Boer, such a strategy was already included in former programmes for the development of the AFSJ, but an integrated programme had not gained ground.162 The ISS aims not at creating new competencies but at integrating existing strategies and conceptual approaches and at acknowledging the framework of the Stockholm Programme. Hence, this strategy is a response to the need for a more coherent and integrated policy programme. Within the context of the EU, the concept of internal strategy can be defined as a wide and comprehensive concept that links multiple sectors in order to address the major threats that have a direct impact on the lives, safety, and well-being of citizens. There is also an external aspect of judicial cooperation in civil matters, as the ECJ explained in its Opinion No. 1/2003, according to which the EU has an external competence to realise an internal objective.163 The area of justice, freedom, and security is a striking illustration of the positive cross-fertilisation between internal and external policies.164 Even though the external action of the EU as asserted in Article 21 TEU does not include the AFSJ,165 Article 21.3 TEU aimed at facilitating integration between CSDP and JHA: “the Union shall ensure consistency between the different areas of its external action and between these and its other policies”. Within Title V on the AFSJ, there is no explicit external competence in the AFSJ except concerning readmission agreements (in Article 79.3 TFEU) and in Article 78.2 lit. g) TFEU, according to which as part of the establishment of a “common European asylum system”, the EP and the Council, acting in accordance with the ordinary legislative procedure, shall adopt measures comprising “partnership and cooperation with third countries for the purpose of managing inflows of people applying for asylum or subsidiary or temporary protection”. Security is a common objective of the AFSJ and CFSP.166 According to F. Longo, “The process of externalization of the AFSJ and JHA and their inclusion in the list of the relevant tasks of the EU external action is one of the main and newer argument of the CFSP because it seems to be the perfect instrument for applying the concept of holistic security”.167 In Parliament v Council, relating to the question of the use of Article 215.2 (CFSP) or Article 75 (AFSJ),168 the ECJ asserted that “While admittedly the combating of terrorism and its financing may well be among the objectives of the area of freedom, security and justice, as they appear in Article 3.2 TEU, the objective of combating international terrorism and its financing in order to preserve international peace and security corresponds, nevertheless, to the objectives

162

Bruggeman and den Boer (2011). Van Vooren (2001), p. 434. 164 Progress report on the implementation of the strategy for the External Dimension of JHA: Global Freedom, Security and Justice SEC (2006) 1498. 165 Neframi (2013). 166 Rapoport (2013). 167 Longo (2013), p. 46. 168 Case C-130/10, Parliament v Council (ECJ 19 July 2012) para 61. 163

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of the Treaty provisions on external action by the European Union, as laid down in Article 21.2(c) TEU. The object of actions undertaken by the Union in the sphere of the CFSP, and the measures taken in order to give effect to that policy in the Union’s external actions, in particular, restrictive measures for the purpose of Article 215.2 TFEU, can accordingly be to combat terrorism. It follows that Article 215.2 TFEU constitutes the proper legal basis for Regulation No 1286/2009.” There is therefore a risk of growing incursion of the CFSP in the security aspects of the AFSJ. The EP brought an action for the annulment of the Council Decision 2011/640/ CFSP on the signing and conclusion of the Agreement between the EU and Mauritius on the condition of transfer of suspected pirates and associated seized property from the EU-led naval force to Mauritius and on the conditions of suspected pirates after transfer. The ECJ decided on 24 June 2014 that the obligation to inform the Parliament immediately and fully imposed by Article 218.6 TFEU has been violated. The ECJ has not examined the argument of the Commission according to which the Agreement should have been concluded on the basis of Articles 82 and 87 TFEU.169 A similar case was examined by the ECJ concerning the Agreement between the EU and Tanzania on the condition of transfer of suspected pirates and associated seized property from the EU-led naval force to Tanzania.170 The EP requested to annul the Council Decision because it does not relate exclusively to CFSP, as expressly provided for in Article 218.6 (2) TFEU. The EP considered that the Agreement between the EU and Tanzania also relates to judicial cooperation in criminal matters and police cooperation, thus covering fields to which the ordinary legislative procedure applies. Therefore, this Agreement should have been concluded under the substantive legal bases of Articles 37 TEU and 82 and 87 TFEU after obtaining the consent of the EP under Article 218.6 lit. a) TFEU. The ECJ decided that the Agreement could only be based on Article 37 TEU but the EP had to be immediately and fully at all stages of the procedure of negotiation and conclusion of the Agreement according to Article 218.10 TFEU, which was not the case. The EP plays a central role in the negotiation of international agreements because of its enhanced position in the conclusion of international agreements compared to the previous Articles 24/38 procedure (EC/EU Agreement). In February 2010, the EP withdrew its consent to the SWIFT Agreement, which envisaged that financial message data and related data stored in the territory of the EU by designated providers (such as SWIFT) be made available upon requests to the US administration in order to counter terrorism. According to S. Poli, “the first generation of policy instruments was often concluded with the view to strengthen internal security (be it from terrorism or from migration pressure) and to secure a stable and friendly neighbourhood more

169 170

Case C-658/11, Parliament v Council (ECJ 24 June 2014) para 71–78. Case C-263/14, Parliament v Council (ECJ 14 June 2016).

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than to promote prosperity, democracy and human rights. This was clearly a reflection of the fact that the AFSJ was developed as a compensatory measure for the safeguarding of internal security after the abolition of internal borders in the Union. Security concerns in the EU’s external actions still dominate and infiltrate in all domains of cooperation, including, most recently, custom and administrative agreements. [. . .] Yet, an increased sensibility to diversify these values by paying greater attention to HR and to project more forcefully the EU’s own values outside has progressively gained access to the agenda of the selected institutions.”171 Already the Stockholm Programme states that the external aspect of the AFSJ helps to promote EU values in compliance with international HR obligations. Through the external aspect of the AFSJ, the EU tends to universalise the EU values of the AFJS.172

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Conclusion

H. Gibbs speaks of “reasoned balance in Europe’s AFSJ”.173 The symbolism evoked by creating an area of common values is a metaphor that inhibits reasoned reflection with regard to pursuing a constitutional balance. The EU has progressed from intergovernmental cooperation to a distinctive constitutional form. This constitutional character rests upon the representation that the AFSJ is a place of common goods.

List of Cases ECJ

ECJ 11.02.2003, C-187/01, C-385/01, Gözütok and Brügge, ECR I-01345 [cit. in para 18, 35, 49, 51] ECJ 11.02.2003, C-105/03, Criminal Proceedings v Pupino, ECR I-05285 [cit. in para 36, 41] ECJ 13.09.2005, C-176/03, Commission v Council, ECR I-07879 [cit. in para 18, 53] ECJ 27.06.2006, C-540/03, Parliament v Council, ECR I-05769 [cit. in para 20] ECJ 18.12.2007, C-77/05, United Kingdom v Council, ECR I-11459 [cit. in para 58]

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Poli (2011). Fournier (2013). 173 Gibbs (2011). 172

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ECJ 22.06.2010, C-188/10, C-189/10, Aziz Melki and Sélim Abdeli, ECR I-05667 [cit. in para 25] ECJ 16.11.2010, C-261/09, Gaetano Mantello, ECR I-11477 [cit. in para 22, 50] ECJ 22.12.2010, C-491/10 PPU, Joseba Andoni Aguirre Zarraga v Simone Pelz, ECR I-14247 [cit. in para 57] ECJ 21.12.2011, C-411/10, C-493/10, N. S., ECR I-13905 [cit. in para 13, 37] ECJ 22.05.2012, C-348/09, P.I. v. Oberbürgermeisterin der Stadt Remscheid, ECLI:EU:C:2012:300 [cit. in para 17] ECJ 19.07.2012, C-130/10, Parliament v Council, ECLI:EU:C:2012:472 [cit. in para 66] ECJ 05.09.2012, C-42/11, Da Silva Jorge, ECLI:EU:C:2012:517 [cit. in para 44, 47] ECJ 29.01.2013, C-396/11, Vasile Radu, ECLI:EU:C:2013:39 [cit. in para 45, 46] ECJ 26.02.2013, C-399/11, Stefano Melloni v Ministero Fiscal, ECLI:EU: C:2013:107 [cit. in para 42, 45, 46] ECJ 10.12.2013, C-394/12, Abdullahi v Bundesasylamt, ECLI:EU:C:2013:813 [cit. in para 37] ECJ 08.04.2014, C-293/12, C-594/12, Digital Rights Ireland and Seitlinger and Others, ECLIEU:C:2014:238 [cit. in para 21] ECJ 06.05.2014, C-43/12, Commission v Parliament and Council, ECLIEU: C:2014:298 [cit. in para 9, 53] ECJ 13.05.2014, C-131/12, Google Spain SL and Google Inc. v Agencia Española de proteccion de Datos, ECLIEU:C:2014:317 [cit. in para 21] ECJ 05.06.2014, C-398/12, Criminal Proceedings v M., ECLIEU:C:2014:1057 [cit. in para 49] ECJ 24.06.2014, C-658/11, Parliament v Council, ECLIEU:C:2014:2025 [cit. in para 67] ECJ 5.04.2016, C-404/15 and C-659/15 PPU, Pál Aranyosi and Robert Căldăraru v Generalstaatsanwaltschaft Bremen, ECLI :EU:C:2016:198 [cit. in para 46] ECJ 14.06.2016, C-263/14, Parliament v Council, EU:C:2016:435 [cit. in para 67] ECJ 16.02.2017, C-578/16 PPU, CK, HF, AS v. Slovenia, ECLI:EU:C:2017:127 [cit. in para 38] ECJ 23/03.2018, C-537/16, Garlsson Real Estate SA, en liquidation and Others v Commissione Nazionale per le Società e la Borsa (Consob), ECLI:EU:C:2 8:193 [cit. in para 49]

ECtHR

ECtHR 04.11.2014, 29217/12, Tarakhel v Switzerland [cit. in para 37, 38]

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References174 Acosta Arcarazo, D., & Murphy, C. C. (Eds.). (2014). EU security and justice law: after Lisbon and Stockholm. Oxford: Hart. Allegrezza, S. (2013). The interaction between the ECJ and the ECtHR with respect to the protection of procedural safeguards after Lisbon: the accession of the EU to the ECHR. In K. Ligeti (Ed.), Toward a prosecutor for the European Union (Vol. 1, pp. 781–802). Oxford: Hart. Anagnostopoulos, I. (2014). Criminal justice cooperation in the European Union after the few “steps”: a defence view. ERA Forum, 15(1), 9–24. Andersen, S. (2014). Non-binding peer evaluation within an area of freedom, security and justice. In R. L. Holzhacker & P. Luif (Eds.), Freedom, security and justice in the European Union: Internal and external dimensions of increased cooperation after the Lisbon treaty. New York: Springer. Azoulai, L., & Couts, S. (2013). Restricting Union citizens’ residence rights on grounds of public safety. Where Union citizenship and the AFSJ meet: P.I. Common Market Law Review, 50(2), 553–570. Baker-Beall, C. (2014). The evolution of the European Union’s fight against terrorism’ discourse: Constructing the terrorist ‘other’. Cooperation and Conflict, 49(2), 212–238. Barnard, C. (2012). Citizenship of the Union and the area of Justice: (Almost) The Court’s Moment of Glory. In A. Rosas, E. Levits, & Y. Bot (Eds.), The Court of Justice and the construction of Europe: Analyses and perspectives on sixty years of case law (pp. 505–522). The Hague: Asser Press. Bickerton, C., Hodson, D., & Pueter, U. (2015). The new intergovernmentalism: States and supranational actors in the Post-Maastricht Era. Oxford: OUP. Bruggeman, W., & den Boer, M. (2011). Policing and internal security in the Post-Lisbon Era: New challenges ahead. In S. Wolff, F. Goudappel, & J. de Zwaan (Eds.), Freedom, security and justice after Lisbon and Stockholm (pp. 135–154). The Hague: Asser. Burgorgue-Larsen, L., & Levade, F. P. (Eds.). (2005-2007). Traité établissant une Constitution pour l’Europe: commentaire article par article. Bruxelles: Bruylant. Byres, E.J., Cusimano, J. (2010, April). Safety and Security: Two Sides of the Same Coin. ControlGlobal. Canor, I. (2013). My brother’s keeper? Horizontal Solange: “an ever closer distrust among the peoples of Europe”. Common Market Law Review, 50(2), 383–422. Cornelisse, G. (2014). What’s wrong with Schengen? Border disputes and the nature of integration in the area without internal borders? Common Market Law Review, 51(3), 741–770. Craig, P. (2010). The Lisbon treaty: Law, politics, and treaty reform. Oxford: OUP. Flore, D. (2014). Droit pénal européen- Les enjeux d’une justice pénale européenne (2nd ed.). Larcier. Fournier, G. (2013). Coopération judiciaire de l’Union européenne en matière pénale: quelle contribution à un universalisme pénal? In C. Flaesh-Mougin & L. S. Rossi (Eds.), La dimension extérieure de l’espace de liberté, de sécurité et de justice après le Traité de Lisbonne (pp. 457– 488). Bruxelles: Larcier. Garcia-Jourdan, S. (2005). L’émergence d’un espace européen de liberté, de sécurité et de justice. Brussels: Bruylant. Geiger, R., Khan, D.-E., & Kotzur, M. (Eds.). (2015). European Union treaties. Treaty on European Union. Treaty on the functioning of the European Union. München: C. H. Beck. Gibbs, A. H. (2011). Reasoned ‘balance’ in Europe’s area of freedom, Security and justice. European Law Journal, 17(1), 121–137.

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Gudicelli-Delage, G., & Lazerges, C. (Eds.). (2012). Le droit pénal de l’Union européenne au lendemain du traité de Lisbonne, Société de Législation comparée. Paris: Société de législation comparée. Guild, E. (2011). The Lisbon treaty, the Stockholm programme and data transfers in the New AFSJ: Where are the limits? In S. Wolff, F. Goudappel, & J. de Zwaan (Eds.), Freedom, security and justice after Lisbon and Stockholm (pp. 195–212). The Hague: Asser. Haenel, H. (2009). Rapport d’information fait au nom de la Commission des affaires européennes du Sénat sur l’arrêt rendu le 30 juin 2009 par la Cour constitutionnelle fédérale allemande (Cour de Karlsruhe) au sujet de la loi d’approbation du Traité de Lisbonne, Sénat, Session ordinaire de 2009-2010, n 119. Herlin-Karnell, E. (2013). From mutual trust to the full effectiveness of EU law: 10 years of the European arrest warrant. European Law Journal, 38(1), 79–91. Janssens, C. (2013). The principle of mutual recognition in EU law. Oxford: OUP. Jessberger, F., & Kretschmer, K. (2010). L’arrêt de la Cour constitutionnelle allemande du 30 juin 2009. Les implications du Traité de Lisbonne sur le droit pénal européen. RSC, 1, 111–117. Kaddous, C., & Dony, M. (2010). D’Amsterdam à Lisbonne: 10 ans d’espace de liberté, sécurité et justice. Brussels: Bruylant. Kaunert, C., Leonard, S., & Occhipindi, J. D. (2013). Agency governance in the European Union’s area of freedom, security and justice. Perspectives on European Politics and Society, 14(3), 273–284. Labayle, H. (2013, February). Within you, without you: l’opt-out britannique en matière d’entraide repressive. Revue Europe, 50(3), 7–11. Labayle, H. (2014). Droit d’asile et confiance mutuelle: regard critique sur la jurisprudence européenne. Cahiers de droit européen, 501–534. Labayle, H. (2015). Quand la confiance mutuelle se fait aveugle, www.gdr-elsj.eu Labayle, H., & Bergé, J.-S. (2012). La fragmentation de l’Espace de liberté, sécurité et justiceQuestion de géographie, question de géométrie. RTDeur, 4, 827–827. Ladenburger, C. (2008). Police and criminal law in the treaty of Lisbon: A new dimension for the community method. European Constitutional Law Review, 4(1), 20–40. Lambermont, F. (2012). The Member States’ initiatives: An inter-institutional Turf War after the treaty of Lisbon. Eipascope, 1, 19–23. Lobier, V. (2015). Les Cours constitutionnelles et l’enchevêtrement des systèmes de protection des droits fondamentaux. L’exemple du mandat d’arrêt européen- 2eme partie, RDLF, chron. n 4. Longo, F. (2013). Justice and home affairs as a new dimension of the European security concept. European Foreign Affairs Review, 18(1), 29–46. Luif, P., & Traumer, F. (2014). The Prüm process: The effects of enhanced cooperation within Europe and with the United States of America. In R. L. Holzhacker & P. Luif (Eds.), Freedom, security and justice in the European Union: Internal and external dimensions of increased cooperation after the Lisbon treaty (pp. 101–117). New York: Springer. Manacorda, S. (2015). Retour aux sources? La place du droit pénal économique dans l’action de l’Union européenne. Revue de sciences criminelles et de droit pénal comparé, 2, 187–202. Monar, J. (2015). Setting the context: Why institutions matter in justice and home affairs. In F. Trauner & A. Ripoll Servent (Eds.), Policy change in the area of freedom, security and justice: How EU institutions matter. London: Routledge. Murphy, C., & Acosta Arcarazo, D. (2014). Rethinking Europe’s freedom, security and justice. In D. Acosta Arcarazo & C. C. Murphy (Eds.), EU security and justice law: After Lisbon and Stockholm (pp. 1–16). Oxford: Hart Publishing. Neframi, E. (2013). L’aspect externe de l’Espace de liberté, de sécurité et de justice: quel respect des principes et des objectifs de l’action extérieure de l’Union? In C. Flaesh-Mougin & L. S. Rossi (Eds.), La dimension extérieure de l’espace de liberté, de sécurité et de justice après le Traité de Lisbonne (pp. 510–532). Bruxelles: Larcier. Nieto Martin, A., Wade, M., & Muñoz de Morales, M. (2013). Federal criminal law and the European Public Prosecutor’s Office. In K. Ligeti (Ed.), Toward a Prosecutor for the European Union (Vol. 1, pp. 781–802). Oxford: Hart Publishing.

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Peers, S. (2011). Mission accomplished? EU justice and home affairs law after the treaty of Lisbon. Common Market Law Review, 48(3), 661–693. Peers, S. (2012). The European arrest warrant: The Dilemmas of mutual recognition, human rights and EU Citizenship. In A. Rosas, E. Levits, & Y. Bot (Eds.), The Court of Justice and the construction of Europe: Analyses and perspectives on sixty years of case law (pp. 523–538). The Hague: Asser Press. Peers, S. (2014). Justice and home affairs law since the treaty of Lisbon: A fairy-tale ending? In D. Acosta Arcarazo & C. C. Murphy (Eds.), EU security and justice law: After Lisbon and Stockholm (pp. 17–37). Oxford: Hart Publishing. Pingel, I. (Ed.). (2010). Commentaire article par article des traités UE et CE. Bâle: Helbing & Lichtenhahn. Poli, S. (2011). The institutional setting and the legal toolkit. In M. Cremona, J. Monar, & S. Poli (Eds.), The external dimension of the EU’s area of freedom, security and justice (pp. 25–77). Brussels: Lang. Rapoport, C. (2013). La Cour de Justice de l’Union européenne et les mesures restrictives dans le cadre de la lutte contre le terrorisme. Quelles évolutions après Lisbonne. In C. Flaesh-Mougin & L. S. Rossi (Eds.), La dimension extérieure de l’espace de liberté, de sécurité et de justice après le Traité de Lisbonne (pp. 131–170). Bruxelles: Larcier. Schwarze, J., et al. (2012). EU-Kommentar. Baden-Baden: Nomos. Sicurella, R. (2013). Setting up a European criminal policy for the protection of EU financial interests: Guidelines for a Coherent definition of the material scope of the European Public Prosecutor’s Office. In K. Ligeti (Ed.), Toward a prosecutor for the European Union (Vol. 1, pp. 870–904). Oxford: Hart Publishing. Tekin, F. (2012). Differentiated integration at work: The institutionalization and implementation of the opt-outs from European integration in the Area of Freedom, Security and Justice. BadenBaden: Nomos. Tell, O. (2014). Les directives relatives à la procédure pénale: quelle protection du droit des personnes? Revue de l’Union européenne, 579, 364–369. Thwaites, N. (2003). Mutual trust in criminal matters: The European Court of Justice gives a first interpretation of a provision of the Convention implementing the Schengen Agreement. German Law Journal, 4(3), 254–262. Tinière, R. (2015). Confiance mutuelle et droits fondamentaux dans l’Union européenne. In N. Kada (Ed.), Mélanges en l’honneur de Henri Oberborff (pp. 71–83). Paris: Lextenso. van Keulen, M. (2014). New parliamentary practices in justice and home affairs. In R. L. Holzhacker & P. Luif (Eds.), Freedom, security and justice in the European Union: Internal and external dimensions of increased cooperation after the Lisbon treaty. New York: Springer. Van Vooren, B. (2001). The principle of pre-emption after opinion 1/03 and coherence in EU in readmission policy. In M. Cremona, J. Monar, & S. Poli (Eds.), The external dimension of the EU’s area of freedom, security and justice (pp. 163–188). Brussels: Lang. Vedder, C., & Heintschel von Heinegg, W. (Eds.). (2012). Europäisches Unionsrecht. BadenBaden: Nomos. Vernimmen-Van Tiggelen, G., Surano, L., & Weyembergh, A. (Eds.). (2009). L’avenir de la reconnaissance mutuelle en matière pénale dans l’Union européenne. Université de Bruxelles. Weyembergh, A. (2013). Transverse report on judicial control in cooperation in criminal matters: The evolution from traditional judicial cooperation to mutual recognition. In K. Ligeti (Ed.), Toward a Prosecutor for the European Union (Vol. 1, pp. 945–985). Oxford: Hart Publishing. Wolff, S. (2011). The area of freedom, security and justice after the Lisbon treaty and the Stockholm programme: From myth to reality. In S. Wolff, F. Goudappel, & J. de Zwaan (Eds.), Freedom, security and justice after Lisbon and Stockholm (pp. 1–6). The Hague: Asser. Zwaan, D. (2011). The new governance of justice and home affairs: Towards further supranationalism. In S. Wolff, F. Goudappel, & J. de Zwaan (Eds.), Freedom, security and justice after Lisbon and Stockholm (pp. 7–26). The Hague: Asser.

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Article 68 [Strategic Guidelines] The European Council shall define the strategic guidelines1–8 for legislative and operational planning14–17 within the area of freedom, security and justice.

Contents 1.

The Codification of a Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1. The Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2. The Codification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2. A Practice That Has Become Superfluous? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 3. The Remaining Added Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 3.1. Operational Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 3.2. Internal and External Aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 3.3. Political Impetus Still Needed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 List of Cases References

1.

The Codification of a Practice

Article 68 TFEU is a new provision, but one that catches up with reality since the European Council has been performing this function for decades. The Lisbon Treaty codifies the practice whereby the European Council has been setting out broad guidelines concerning the AFSJ. One can ask therefore if this article is superfluous today in the new institutional framework resulting from the Lisbon Treaty or if there is still added value to it.

1.1. The Practice

Since the adoption of the Amsterdam Treaty, the European Council has sought to set a road map leading to the establishment of the AFSJ. Already during the Cardiff European Council on 15/16 June 1998, it adopted in its conclusions a chapter on justice and home affairs,1 in which it called on the Council and the Commission to present an Action Plan on “how best to implement the provisions of the Treaty of Amsterdam on an area of freedom, security and justice”. In Vienna on 11 December 1998, the heads of state or government approved an Action Plan, adopted by the

With the contribution of Julia Burchett, research assistant. 1

Presidency Conclusions—Cardiff European Council, 15 and 16 June 1998, SN 150/1/98 REV 1 EN 15 (1998), para 37–43. #

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Council on 3 December, that defined what the Union understood by “AFSJ”.2 The Commission made an initial contribution in its Communication of 14 July 1998,3 which dealt with the concepts of freedom, security, and justice and outlined the approaches to be followed. The Action Plan gives substance to these concepts by defining priority objectives for the next 5 years and setting out a timetable of measures necessary for achieving the area of freedom, security, and justice envisaged by the Treaty of Amsterdam. This conceptualisation and formalisation led to the European Council of Tampere, which gave a real political boost to the realisation of the AFSJ. On the initiative of the Spanish head of government, J.-M. Aznar, and of the president of the Commission, J. Santer, the European Council held a special thematic meeting on 15/16 October 1999 in Tampere in Finland on the implementation of the AFSJ. According to J. Monar, it was only the second time in the history of the Union that an entire European Council was devoted to a single policy issue (the first one was the extraordinary European Council meeting on employment in November 1997).4 The heads of state and government wanted to send a strong political message to reaffirm the importance of this objective and agreed on a number of policy orientations and priorities that were supposed to speedily make this area a reality. In the Tampere conclusions,5 it is stated that “the European Council will place and maintain this objective at the very top of the political agenda. It will keep under constant review progress made towards implementing the necessary measures and meeting the deadlines set by the Treaty of Amsterdam, the Vienna Action Plan and the present conclusions. The Commission is invited to make a proposal for an appropriate scoreboard to that end. The European Council underlines the importance of ensuring the necessary transparency and of keeping the EP regularly informed. It will hold a full debate assessing progress at its December meeting in 2001.” The Tampere Programme identified four priorities to address: – – – –

The establishment of a common European asylum and migration policy The creation of a genuine European area of justice The prevention of and fight against crime and criminal organisations The development of a stronger external role so as to be recognised as an important partner in the international arena

The Tampere conclusions consisted of a very detailed multi-annual programme, setting some major priorities that were achieved later on: to conclude readmission agreements with third countries, to transform mutual recognition into the

2 Council and Commission Action Plan of 3 December 1998 on how best to implement the provisions of the Treaty of Amsterdam on the creation of an area of freedom, security and justice, O.J. C 19 (1999). 3 COM(1998) 459 final. 4 Monar (2010), p. 70. 5 Presidency Conclusions—Tampere European Council, 15 and 16 October 1999.

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cornerstone of judicial cooperation, to create joint investigation teams, to establish the European Police Chief Operational Task Force, and to create Eurojust. A scoreboard was created as a new instrument to maintain the dynamics generated by the European Council of Tampere. Indeed, the European Council invited the Commission to elaborate such a scoreboard and was supposed to update it once a presidency started. The scoreboard identified the already reached objectives and those still to be realised. This tool allowed an adaptation of the priorities, without losing sight of the calendar planned by the treaty and the conclusions of the European Council of Tampere. In spring 2004, the European Commission drew up a mitigated balance sheet of the multi-annual Action Plan defined in Tampere.6 According to C. Murphy and D. Acosta Arcarazo, “these priorities would prove to be too ambitious for the rudimentary post-Amsterdam legislative instruments and too sensitive for Member states governments for much to be done before 9/11. The attacks have had a profound effect on EU law and policy”.7 On 5 November 2004, the European Council adopted The Hague Programme 2004–2009 called “Strengthening freedom, security and justice in the European Union”. It stated that the objective of The Hague Programme is: – To improve the common capability of the Union and its MS to guarantee fundamental rights, minimum procedural safeguards, and access to justice and to provide protection in accordance with the Geneva Convention on Refugees and other international treaties to persons in need – To regulate migration flows and to control the external borders of the Union, to fight organised cross-border crime and repress the threat of terrorism, to realise the potential of Europol and Eurojust, to carry further the mutual recognition of judicial decisions and certificates in both civil and criminal matters, and to eliminate legal and judicial obstacles in litigation in civil and family matters with cross-border implications.8 The Hague Programme reflected the ambitions of the Constitutional Treaty as the Programme was written from the perspective of the Constitutional Treaty and the hope of its implementation: “The Treaty establishing a Constitution of Europe (hereinafter ‘the Constitutional Treaty’) served as a guideline for the level of ambition, but the existing Treaties provide the legal basis for Council action until such time as the Constitutional Treaty takes effect. Accordingly, the various policy areas have been examined to determine whether preparatory work or studies could

6 Commission Communication, Area of Freedom, Security and Justice: Assessment of the Tampere Programme and future orientations, COM(2004) 4002 final; See also Monar (2010), p. 70. The lack of cooperation of the JHA Council has led to mixed results regarding the implementation of the Programme. The probable reason for this might be the sensitive nature of the ambitious objectives set at the Tampere European Council. In any case, the Justice and Home Affairs ministers took a much more active part in the preparations of the subsequent Hague programme. 7 Murphy and Acosta Arcarazo (2014), p. 211. 8 Council Doc. 16054/04, The Hague Programme: Strengthening freedom, security and justice in the European Union, Introduction para 6, JAI 559.

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already commence, so that measures provided for in the Constitutional Treaty can be taken as soon as it enters into force.”9 The Hague Programme contained a timetable for the adoption and implementation of all the actions enumerated, intended to concretise the objectives and the priorities of The Hague Programme (Scoreboard More). Generally, as regards the exchange of information in criminal matters, The Hague Programme foresaw the establishment by 2008 of the principle of “availability”. This is a revolutionary principle that means that, in the EU, every agent of the law enforcement services of an MS who needs specific information in the exercise of his/her duties can obtain it from another MS. The European Council invited the Commission to present to the Council an Action Plan containing a timetable for the adoption and implementation of all these actions.10 Subsequently, the Commission was invited to present to the Council a yearly report on the implementation of The Hague Programme (Scoreboard).11 The first implementation of Article 68 TFEU took place with the adoption of the 2010–2014 multi-annual programme, the Stockholm Programme,12 under Swedish presidency during the European Council of December 2009, called “An open and secure Europe serving and protecting citizens”. This identified the new priorities for the EU in the field of the AFSJ, all leading towards a “citizens’ Europe in the AFSJ”: 1) Promoting citizenship and fundamental rights, in particular data protection and the accession of the EU to the ECHR; a Europe of right (law) and justice: creation of the portal (gate) e-justice 2) Making people’s lives easier: a Europe of law and justice 3) A Europe that protects 4) Access to Europe in a globalised world 5) A Europe of responsibility, solidarity, and partnership in migration and asylum matters 6) Europe in a globalised world—the external dimension of freedom, security, and justice. Many interesting measures were suggested by the European Council, such as the adoption by the Committee on Internal Security of a strategy of internal security, besides an accent to be put on the prevention of criminality. The training of police staff was made a priority with the proposal to create an “Erasmus for policemen”. The Hague Programme indicated the importance of the role provided by agencies as integral to the delivery, coordination, and propagation of key policies. While the entry into force of the Treaty of Lisbon was imminent, the European Council’s 9

Council Doc. 16054/04, The Hague Programme, p. 5. Council and Commission, Action Plan implementing The Hague Programme on strengthening freedom, security and justice in the European Union, O.J. C 198/01 (2005). 11 Balzacq and Carrera (2006), p. 6. 12 Council Doc. 5731/10, The Stockholm Programme : An open and secure Europe serving and protecting citizens, Brussels, 3 March 2010 (82 pages compared to the 14 pages of the Hague Programme). 10

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Stockholm Programme still took a JHA Council dominant focus. The European Council invited the Commission to present an Action Plan to be adopted by the Council that would translate the aims and priorities of the Stockholm Programme into concrete actions with a clear timetable for adoption and implementation. It should include a proposal for a timetable for the transformation of instruments with a new legal basis.13 According to C. Murphy and D. Acosta Arcarazo, “the Hague Programme addressed the same priorities as the Tampere programme but with a stronger emphasis on security, it is a product of the war on terror. Then the Stockholm programme belongs in the post-‘war on terror’ world. It gives prevalence to fundamental rights and the role of the EU citizen and largely discards the security rhetoric of its predecessor. . . . The Stockholm programme represents a form of maturation in some respects. The Tampere programme was too ambitious and The Hague programme was reactionary. The Stockholm programme adopted a more considered approach. Instead of an all-over nothing approach to legislation, the Council has thus taken an ‘incrementalist’ approach, which may yield better results.”14

1.2. The Codification

The codification of this practice was initially foreseen by Article III-258 TCE in the same wording as Article 68 TFEU.15 This article completes the general provision on the role of the European Council Article 15.1 TEU, according to which the European Council is supposed to provide the EU with the necessary impetus for its development and define the general political directions and priorities. The European Council indeed exercises a leading agenda-setting power in the Union. In the AFSJ, the European Council is attributed a more specific role, which is to define guidelines for planning. It is not a general political impetus that is expected from the European Council but a more precise planning, which refers indirectly to the multi-annual programmes adopted by the Tampere, The Hague, and the Stockholm European Councils. The emerging practice that the Lisbon Treaty codified consisted of the European Council defining a 5-year programme that was implemented in a scoreboard/action plan elaborated by the Commission. The measures foreseen were not only legislative acts to be adopted or implemented but also necessary operational actions, for instance in the field of police cooperation. The Tampere Programme was indeed at the origin of the creation of the Police Chiefs’ Task Force. In the Hague Programme, the European Council invited the Council to encourage the exchange 13

Commission Communication, Delivering an area of freedom, security and justice for Europe’s citizens—Action Plan Implementing the Stockholm Programme, COM(2010) 171 final. 14 Murphy and Acosta Arcarazo (2014), p. 211. 15 Kornobis-Romanowska (2005).

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of best practice on investigative techniques and to organise a joint meeting every 6 months between the chairpersons of the Strategic Committee on Immigration, Frontiers and Asylum (SCIFA) and the Article 36 Committee (CATS) and the representatives of the Commission, Europol, Eurojust, the EBA, the Police Chiefs’ Task Force, and the SitCEN. The Stockholm Programme asked the Commission to consider the feasibility of setting up an Internal Security Fund to promote the implementation of the Internal Security Strategy so that it could become an operational reality. It also invited the Council to examine how operational police cooperation could be stepped up, for example as regards incompatibility of communication systems and other equipment and the use of undercover agents. It also suggested the development of ad hoc law enforcement cooperation at sporting events or large public gatherings. The specificity of the European Council planning regarding the AFSJ lies in its twofold aspects: legislative and operational planning. Legislative planning is reserved mainly for the Commission, which exercises the power of initiative in collaboration with MS. Operation planning is allocated to the Council and more specifically to the COSI. Indeed, the opposition between legislative and operational planning is the same opposition that appears in Article 71 TFEU concerning the role of the Council. This article provides for a standing committee to be set up within the Council, the COSI (Committee on Internal Security), in order to ensure that operational cooperation on internal security is promoted and strengthened. The COSI is therefore supposed to facilitate the coordination of operational actions between MS and is not supposed to prepare legislative acts.16 The central aspect of operational cooperation in the AFSJ had been highlighted in former Article I-42 TCE, which listed the types of Union action in this field, i.e. legislation and operational cooperation. The term “strategic guidelines” used in the English version of Article 68 TFEU is translated in French to orientations stratégiques and in German to die strategischen Leitlinien. Strategic guidelines means guidance or instruction and reveals a kind of authority exercised by the European Council. Nevertheless, the conclusions of the European Council are non-binding, and this institution usually does not take legally binding decisions. Thus, in the domain of the AFSJ, the European Council is recognised as having some decision-making power and is also allocated some appeal powers with referral procedures, namely concerning the emergency brake procedure (Articles 82.3, 83.3, and 87.3(2) TFEU), the creation of the European prosecutor (Article 86.1(2) TFEU), or the extension of his competence (Article 86.4 TFEU).17 Multi-annual programmes are atypical instruments that are annexed to the conclusions of the European Council. This sui generis instrument has a horizontal character as it addresses both internal and external aspects of the AFSJ (➔ para 16).

16 17

Craig (2013), p. 529. Herrnfeld, in Schwarze (2012), Article 68 AEUV para 1.

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The expression “strategic guidelines” also appears in Article 16.6 TEU, which states that the Foreign Affairs Council shall elaborate the Union’s external action on the basis of strategic guidelines laid down by the European Council and ensure that the Union’s action is consistent (in French, les lignes stratégiques; in German, strategische Vorgaben). The operational planning carried out by the European Council is horizontal and includes internal and external operational cooperation. Indeed, operational cooperation refers to both the internal and the external aspects of the EU agencies’ powers. According to S. Poli, Article 68 TFEU may be considered a declination of the European Council’s general power to identify the strategic interests and objectives of the Union in the field of the Union’s external action (Article 16.6 TEU and Article 22.1 TEU). It is the best placed institution to ensure consistency between the AFSJ and EU external relations.18 As noted by S. Poli, Article 68 TFEU refers to guidelines and does not limit the European Council’s power to adopt multi-annual programmes. The treaty drafters intended to reserve for this institution a wide margin of discretion on the choice of the most appropriate instrument to act within the AFSJ, although this institution does not exercise legislative functions (Article 15.1 TEU).19 The existence of this practice was previously justified by the inter-institutional framework relating to the AFSJ before the suppression of the pillars by the Lisbon Treaty. As the Commission could not exercise its initiative power in the ex-third pillar, a political impetus to put legislative proposals on the agenda was needed. Apart from the initiative aspect, the backing of the AFSJ on two different pillars (the first and the third pillars) resulted in a need for political drive. And finally, the fact that the AFSJ deals with issues sensitive to state sovereignty implied an involvement of heads of state and government. Therefore, the constitutionalisation of the role of the European Council can be interpreted as a way to give the AFSJ a more intergovernmental character.20

2.

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A Practice That Has Become Superfluous?

The restructuring of the EU AFSJ institutional and actor foundations has had an influence on the impact of the European Council multi-annual programme. According to S. Carrera and E. Guild, the European Commission did not strictly follow the European Council policy and legislative programming in the Stockholm Programme. Instead, it pursued its own vision and agenda.21 While the Council officially called to attention and reminded the Commission to follow what had been prescribed in the Stockholm Programme as “the sole framework of reference for

18

Poli (2011), p. 27. Poli (2011), p. 27. 20 Monar (2008), p. 82. 21 Carrera and Guild (2014). 19

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operational policy and legislative planning”,22 the Commission insisted on its right of legislative initiative and did not carry out an exhaustive ex post evaluation of the Stockholm Programme implementation. In contrast to the previous Commission’s Action Plans implementing the Tampere and the Hague Programmes, the Stockholm Plan was qualified by several Council representatives as an act of provocation and even a shameful practice as it was seen to go far beyond the wording and set of policy priorities envisaged by the Council’s Stockholm Programme. Indeed, as S. Carrera and E. Guild explained, it became the source of heated debates in various EU institutional arenas, with positions divided between the European Commission and the Council as to “who” should define the contours of the EU’s policy and legislative agenda for the AFSJ. The last controversy emerged relating to the lack of fulfilment by the Commission of the commitment to provide a mid-term evaluation of the Stockholm Programme’s implementation by mid-2012, as requested by both the Council and the European Parliament.23 On 26/27 June 2014, the European Council defined the strategic orientations of the multi-annual legislative and operational programming in the AFSJ in application of Article 68 TFEU for the period 2015–2020.24 The conclusions of the European Council, entitled “Strategic agenda for the Union in times of change”,25 comprise the strategic guidelines for legislative and operational planning of AFSJ policies for the coming 5-year period. Very succinctly, in only three pages, three very imprecise priorities are identified: the necessary links between the internal and outside politics of the EU, cooperation with third countries, the fight against terrorism, and the strengthening of the fight against irregular immigration in particular. EU leaders did not present any new groundbreaking policy initiatives, and the general approach underlying the guidelines is rather pragmatic, underlining the need to “consistently transpose” and to “effectively implement and consolidate” the legal instruments and policy measures already in place. What is significant regarding the mindset of the heads of state and government is that the conclusions of the Brussels European Council do not exclusively deal with the AFSJ. Since the Tampere European Council, the Council had developed a practice of thematic European Councils dealing only with the AFSJ. The European Council of June 2014 was a normal European Council with conclusions on different aspects of the agenda: AFSJ; growth, competitiveness, and jobs; and the next institutional cycle. These guidelines have already aroused 22

Council Doc. 9935/10, Draft Council Conclusions on the Commission Communication “Delivering an area of freedom, security and justice for Europe’s citizens-Action Plan implementing the Stockholm Programme” (COM(2010) 171 final), Brussels, 19 May 2010. The JHA Council reminded the Commission “that the Stockholm Programme is the only guiding frame of reference for the political and operational agenda of the European Union in the Area of Justice, Security and Freedom”. 23 Carrera and Guild (2012), p. 3. 24 Howorth (2014). 25 European Council Conclusions, 26/27 June 2014, EUCO 79/14 (2014).

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negative reactions. According to S. Carrera and E. Guild, “the Guidelines have failed to meet most expectations. They have revealed a pre-Lisbon Treaty or old EU Third Pillar mindset among EU Member States and the Council actors. They are primarily driven by the interests and agendas of national Ministries of Interior and Justice and sideline the European Union Charter of Fundamental Rights and rule of law in the wider EU AFSJ policy landscape. A comparative assessment between the agenda put forward by the European Council guidelines and those anticipated by the European Commission and EP’s contributions to the post-Stockholm reflection reveals that fundamental rights and rule of law-related initiatives are marginalised or even omitted by the Guidelines.”26 For J. Howorth, the European Council’s “Strategic Agenda”, which may be an agenda but is not strategic, has been widely unnoticed by the public and the media. With the adoption of the strategic legislative and operational guidelines, at a time when the Barroso II Commission is in an “outgoing mode” and the new EP was just elected, the European Council has demonstrated its willingness to put its footprint on the respective policy fields. The provisions regarding the AFSJ included in the Strategic Agenda will frame the actions of the next Commission, which will still have enough leeway to develop and initiate concrete policy proposals. The positive aspect of these new guidelines is first the link between internal and external aspects of the AFSJ.27 The guidelines pay special attention to addressing the “root causes of irregular migration” by intensifying cooperation with third countries. They formally recall that one of the EU fundamental freedoms, the right of EU citizens to move freely and reside and work in other MS, needs to be protected. They call for a European asylum policy “based on solidarity and fair sharing of responsibility”, the reinforcement of operational assistance through Frontex to MS facing strong pressures, or the implementation of actions identified by the so-called Task Force Mediterranean. One important aspect of the guidelines is the call to review and update the internal security strategy by mid-2015. The initial Internal Security Strategy adopted by the European Council on 25/ 26 March 2010 identified a list of seven common threats to the Union: terrorism, serious and organised crime, cybercrime, cross-border crime, violence itself, natural and man-made disasters, and other common phenomena (e.g. road traffic accidents).28 It completed the internal aspect of the European Security Strategy adopted in 2003, which looked at the external aspect of Europe’s security. The aim of the Internal Security Strategy is not to create any new competencies but to integrate existing strategies and conceptual approaches and to acknowledge the framework of the Stockholm Programme. It demonstrates a firm commitment to

26

Carrera and Guild (2014). In para 2 Sentence 2 of the EC Conclusions “The answer to many of the challenges in the area of freedom, security and justice lies in relations with third countries, which calls for improving the link between the EU’s internal and external policies.” 28 Internal Security Strategy for the European Union-Towards a European security model. 27

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continuing to make progress in the AFSJ through a European security model that faces challenges: protecting rights and freedoms, improving cooperation and solidarity between MS, addressing the causes of insecurity and not just its effects, and prioritising prevention. The Internal Security Strategy was adopted for the period 2010–2014 and must therefore be renewed according to the new Brussels strategic guidelines. Since the Lisbon Treaty came into force, there has not been a single and uniform EU policy agenda on AFSJ policies following and consistently implementing the 2009 Stockholm Programme. Rather, there is a wide range of EU AFSJ policy strategies or frameworks of reference. Indeed, a plurality of policy agendas, strategies, and road maps on a wide array of AFSJ policies has proliferated.29 Examples are Commission Communications such as “An Open and Secure Europe: Making it Happen”,30 “The EU Justice Agenda for 2020 –Strengthening Trust, Mobility and Growth Within the Union”,31 or “A New EU Framework to Strengthen Rule of Law”32 and also EP resolutions such as the Report on the Mid-Term Review of the Stockholm Programme33 or planning from the Council such as the Multi-annual European e-Justice Action Plan 2014–2018—Expert Group on e-Codex Related Issues?34 There is indeed competition among different actors aiming also at planning EU action regarding the AFSJ, which could even lead to conflicting priorities. The problem arising from this multiplication of multiannual planning is the absence of transparency. In a way, one can wonder whether Article 68 TFEU is still necessary since the entry into force of the Lisbon Treaty. The impetus given by the European Council conclusions in the AFSJ was previously central because of the limited initiative power of the Commission. The states’ initiative was needed to be reinforced by the priority setting of the European Council. The Commission is now fully using its initiative power, and the states’ initiative, which remains in Article 76 TFEU, seems not to be used. Therefore, the impulse given by the European Council’s guidelines sees its impact decrease. For S. Poli, the European Council has performed a “gapfilling function” as far as the treaty provisions of the AFSJ are concerned. Since neither the Amsterdam Treaty nor the Nice Treaty carved out explicit aims for the AFSJ, it became crucial to identify the specific aim of EU action. The European Council has defined the objective of achieving a common EU policy in the field of immigration and a European common asylum policy in the Tampere conclusions.

29

Carrera and Guild (2014). Commission Communication, An open and secure Europe: making it happen, COM (2014) 154. 31 Commission Communication, The EU Justice Agenda for 2020 – Strengthening Trust, Mobility, and Growth within the Union, O.J. C 451/104 (2014). 32 Commission Communication, A new EU Framework to strengthen the Rule of Law, COM (2014) 158. 33 EP Report on the Mid-Term Review of the Stockholm Programme, 2013/2024(INI), 4.3.2014, Rapporteurs: Luigi Berlinguer, Juan Fernando Lopez Aguilar, Carlo Casini. 34 Multiannual European e-Justice Action Plan, O.J. C 182/2 (2014), p. 2. 30

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These aims are now incorporated notably in Article 67 TFEU, and the Lisbon Treaty has firmly incorporated the AFSJ within the EU external relations. According to M. Kotzur, the guideline competency of the European Council does not fit very easily into the framework of Union acts and neither into the so-called institutional balance. The political competence for initiative, planning, and design is primarily vested in the Commission and not in the Council. As the guideline competency does not provide for parliamentary involvement, a danger of democratic deficit would exist if the guidelines were fully binding.35 Criticism is even harsher from S. Carrera S. and E. Guild, who consider that “The European Council Guidelines appear to have been written and designed with the aim of limiting this increasingly multi-strategy and multi-actor programming setting at EU level, and constraining the autonomy assigned to the newly appointed European Commission by the Treaties and the EP’s position as co-legislator in these domains”.36 They argue that “the formulation process has remained largely undemocratic and nontransparent. In this way, the European Council has ignored the repeated calls by the Parliament to ensure better inter-institutional coordination and the need for an inter-institutional agreement in the next AFSJ multi-annual programming, as stipulated in Article 17.1 TEU.37 Paradoxically, therefore, while the need for the adoption of the Guidelines is enshrined in the Lisbon Treaty (Article 68 TFEU), they can be seen as a strategy to ‘de-Lisbonise’ the AFSJ field.”38

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3.1. Operational Planning

Article 68 TFEU insists that the strategic guidelines should deal with not only legislative planning but also operational planning, which is a specificity of the role of the heads of state and government concerning the AFSJ. Article 68 TFEU differs from the prior role of the European Council in that there is an explicit reference to operational cooperation, but according to S. Peers, the European Council would not expect to play a major role in, for instance, the planning of operations by the relevant EU agencies (Europol, Eurojust, and Frontex, the EU border agency) since EU leaders obviously lack the specialist knowledge for this, and their involvement could compromise the agencies’ operations.39 35

Kotzur, in Geiger et al. (2015), Article 68 AEUV para 3. Carrera and Guild (2014). 37 EP Report on the Mid-Term Review of the Stockholm Programme (2013/2024(INI), 4 March 2014, Rapporteurs: Luigi Berlinguer, Juan Fernando Lopez Aguilar, Carlo Casini. In para 114, the Report stated that the EP “Believes that the multiannual programming should be based on an interinstitutional agreement, as provided for in Article 17(1) TEU; expects the Commission, therefore, to submit a proposal on this basis”. 38 Carrera and Guild (2014). 39 Peers (2006), p. 51; Peers (2008). 36

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The European Council plays a strategic role concerning the external dimension of the AFSJ.40 Indeed, the European Council’s power to set guidelines as far as operational cooperation is concerned refers to the internal and the external aspects of the EU agencies’ powers. Already a report presented by the Commission and the Council on 6 June 2000 stressed “the need for the Union to integrate JHA matters fully in the Union’s external policy so that a comprehensive, integrated, cross-pillar action is carried out by the Union as whole”. As noted in this report, “developing the JHA external dimension is not an objective in itself”. Its primary purpose is to contribute to the establishment of an area of freedom, security, and justice. The aim is certainly not to develop a “foreign policy” specific to JHA. The JHA dimension should form part of the Union’s overall strategy. It should be incorporated into the Union’s external policy on the basis of a “cross-pillar approach” and “cross-pillar measures.”41 Then the Santa Maria da Feira conclusions of 19/20 June 2000 pointed out that JHA external priorities should be incorporated into the Union’s overall external strategy as a contribution towards the establishment of the AFSJ.42 According to S. Poli, the European Council’s prerogative may be considered a declination of this institution’s general power to identify the strategic interests and objectives of the Union in the field of the Union’s external action (Articles 16.6 and 22.1 TEU). The Stockholm Programme reserves the role of ensuring coherence between internal and the traditional external policy instruments to the new double-hatted High Representative and the European External Action Service (EEAS) (point 7.1: “they ensure better coherence between traditional external policy instruments and internal instruments with significant external dimensions, such as FSJ”). This aspect was highlighted again in the Brussels strategic guidelines for the multi-annual legislative and operational programming of June 2014 (➔ para 11). As stated by the European Council in its conclusions of 26/27 June 2014, “The answer to many of the challenges in the area of freedom, security and justice lies in relations with third countries, which calls for improving the link between the EU’s internal and external policies. . . Migration policies must become a much stronger integral part of the Union’s external and development policies. . .At the same time an effective EU counter terrorism policy is needed, whereby all relevant actors work closely together, integrating the internal and external aspects of the fight against terrorism.”43

40

Poli (2011), p. 27. Doc. N 7653/2000 of 6 June 2000. 42 Presidency conclusions—Santa Maria Da Feira European Council, 19 and 20 June 2000, para 51. 43 European Council conclusions, EUCO 79/14, Brussels, 26 and 27 June 2014, p. 1. 41

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3.3. Political Impetus Still Needed

In the field of AFSJ, European Councils have played a central role in addition to the strategic multi-annual planning. European Councils have adopted many very important conclusions at different occasions, notably in time of crisis. For instance, after the traumatising crisis of 9/11, the extraordinary European Council met on 21 September 2001 in order to analyse the international situation following the terrorist attacks in the United States and to impart the necessary impetus to the actions of the EU. It proposed the adoption of the Framework Decision creating the European Arrest Warrant44 and the Framework Decision defining terrorism,45 which are both masterpieces of the AFSJ. Other European Councils have had a particular impact outside of a crisis situation, such as the Seville summit in 2002 concerning asylum and immigration. More recently, after the Charlie Hebdo attack on 7 January 2015, the European Council adopted on 12 February 2015 a statement on the fight against terrorism.46 According to the heads of state and government, the terrorist attacks in Paris targeted the fundamental values and human rights that are at the heart of the EU—solidarity; freedom, including freedom of expression; pluralism; democracy; tolerance; and human dignity. All citizens have the right to live free from fear, whatever their opinions or beliefs are. We will safeguard our common values and protect all from violence based on ethnic or religious motivations and racism. This also means fighting the enemies of our values. The European Council agreed to three priorities to guide their work over the coming months: ensuring the security of citizens, preventing radicalisation, and cooperating with the EU’s international partners. More specifically, the European Council insisted on the necessity to adopt the European Passenger Name Record Directive, to amend the Schengen Borders Code, to step up interfaith dialogue, and to address crises and conflicts in the Southern Neighbourhood. Again, after the November Paris attacks, the European Council gathered on 17/18 December 2015 reiterated the need to conclude the European PNR negotiations and also to implement systematic and coordinated checks at external borders, including on individuals enjoying the right of free movement. It welcomed the new Europol Counter Terrorism Centre created in January 2016 as a reaction to the January Paris attacks. On 23 April 2015, a special meeting of the European Council was called in reaction to the tragic events involving migrants in the Mediterranean. In their statement, EU leaders agreed to four priority areas of action to stop further loss of life at sea: strengthening our presence at sea, preventing illegal migration flows, fighting traffickers in accordance with international law, and reinforcing internal solidarity and responsibility.

44 Council Framework Decision 2002/584/JHA on the European arrest warrant and the surrender procedures between Member States, O.J. L 190 (2002). 45 Council Framework Decision 2002/475/JHA on combating terrorism, O.J. L 164 (2002). 46 EC, Informal meeting of the Heads of States or Government Brussels, 12 February 2015— Statement by the members of the European Council, 56/15 JHA (2015).

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This shows that the planning power of the European Council does not only consist in adopting multi-annual programmes. The European Council indeed plays a political role as it does in its general missions assigned by Article 15 TEU. While direct decision-making in the AFSJ by the heads of state or government is rather exceptional, their regular political interventions carry considerable political weight and serve as an impetus for further development.47 Peer pressure exerted by the European Council should not be minimised. According to D. Thym, “Under their regime, the Commission (or the Member States in so far as they have a complementary right of initiative) retains the full legal control over the nitty-gritty details of individual legislative proposals, which are often more important than the grand political outline set by the European Council”. Peer pressure from the European Council may even have the positive side effect of hastening decisionmaking in the Council, where the national interior and justice ministers would possibly not have agreed on a number of legal acts building the area of freedom, security, and justice in recent years, if the heads of state or government had not “urged” its minister to adopt certain instruments and “speed-up” legislation.48 The ECJ has, nevertheless, contained the legal effect of this peer pressure. Indeed, during the asylum crisis in 2015, the conclusions of the European Council of 25 and 26 June 2015 stated that the MS should agree “by consensus” on a distribution “reflecting the specific situations of Member States”. That mechanism for the relocation of 40,000 persons formed the subject matter of Decision 2015/ 1523, which was contested by the Slovak Republic and Hungary. They alleged a breach of Article 68 TFEU, as well as Article 13.2 TEU and the principle of institutional balance. The Council, by adopting the contested decision, exceeded the previous guideline of the European Council. According to them, the Council should, at the time of the adoption of the contested decision, have followed the guidelines deriving from those conclusions. In the case Slovak Republic and Hungary v Council of 6 September 2017, the ECJ decided that this was not a ground for annulment as Article 78.3 TFEU does not make the Commission’s power of initiative conditional upon the European Council’s having previously defined guidelines under Article 68 TFEU.49 Furthermore, Article 78.3 TFEU allows the Council to adopt measures by a qualified majority, as it did when it adopted the contested decision. The principle of institutional balance prevents the European Council from altering that voting rule by imposing on the Council, by means of conclusions adopted pursuant to Article 68 TFEU, a rule requiring a unanimous vote. According to R. Holzhacker and P. Luif, the AFSJ has been one of the most dynamic policy-making domains of the EU. Some political leaders have compared

47

Monar (2010), p. 7. Thym (2004). 49 C-643/15 and C-647/15, Slovak Republic and Hungary