A. Introduction
Since the last survey published in the ICLQFootnote 1 the law governing the free movement of goods has continued to evolve incrementally, troubled little by the constitutional hysteria that has accompanied much of the recent existential debate about the EU. Periodically acclaimed as one of the Union's manifest success stories—and so surely if the Union is to have a flag, better that it display a bottle of blackcurrant liqueur rather than 12 golden stars on a blue backgroundFootnote 2—the internal market has nonetheless largely been taken for granted, a fait accompli.
However, as is true of all markets, there is enduring scope for debate about the appropriate intensity of legal regulation. Accordingly the Commission was lately shrewd in its observation that the single market is ‘constantly evolving’ and that accordingly it will never be ‘finalised’.Footnote 3 This depiction is amply supported by the abundant material that jostles for attention in surveying the last three years of activity. Trivial it may seem when compared with grand constitutional narratives, yet in fact refining—and, one hopes, improving—the law underpinning the EU's internal market is precisely the unglamorous but necessary work that serves to legitimate the EU as an arena in which Member States can act in common more effectively than they can alone. This survey deals with developments in four areas: the definition of a barrier to trade in goods, the possibility to justify an identified trade barrier, the scope and content of the programme of harmonization of laws, and the broader terrain of ‘market management’. It therefore skates from the judicial contribution to the law governing the free movement of goods to the legislative role before reflecting more broadly on the extent to which making the internal market involves extra-legal initiatives—which, moreover, may escape the constitutional and/or material capacity of the EU to provide. It will also, where necessary (which is happily not often), mention the impact of the Treaty of Lisbon, should it enter into force.
B. The Notion of a Trade Barrier
Although it is long established that article 28 EC catches national measures that discriminate against imported goods as well as technical standards that tend to partition the market along national lines as a result of regulatory diversity State by State, the Court famously ruled in Keck and Mithouard that the mere fact that a national measure impedes commercial freedom is inadequate to bring article 28 into play.Footnote 4 So French rules forbidding the re-sale of particular items at a loss were not caught by article 28. In the 16 years since Keck, however, the Court has laboured to try to fix with precision the necessary extra element pertaining to damage to the internal market with which the challenged national measure must be infected for article 28 to bite.
Where a national measure subjects a product to an authorization procedure and imposes a requirement of labelling—as did a German control of image storage mediaFootnote 5—the matter falls within article 28: this is not the type of measure excluded from its reach by Keck. There is a dissuasive impact felt by those contemplating importing such products to Germany from States which apply no such rule. This does not mean the measure is unlawful, but it does mean the national authorities must justify its application to imports. Contrast national rules which affect the way in which a product may be sold, rather than its composition. In A-Punkt Schmuckhandels GmbH v Claudia Schmidt the Court considered Austrian rules banning the selling of jewellery at parties held in the home.Footnote 6 This, the Court accepted, suppressed a commercially attractive technique, but it insisted that that did not suffice to throw the article 28 net around it. That would occur ‘only if the exclusion of the relevant marketing method affects products from other Member States more than it affects domestic products’, which it left for determination by the national court. If it does not prejudice imports in particular, the jurisdictional point is that the national authorities are not called upon to justify their regulatory choice. The matter falls within the sphere of local regulatory autonomy, untouched by article 28 EC. The Court is here visibly anxious to respect the limits of article 28—as well as the limits of its own proper role under the article 234 preliminary reference procedure.
We are approaching the unhappy position where, just as in the pre-Keck eraFootnote 7, national courts are understandably baffled as to exactly what is expected of them when faced by speculative claims that national measures infringe article 28. In R (Countryside Alliance) v AG the House of Lords dealt with the argument that the banning of (some types of) hunting in England and Wales violated article 28 because of its damaging effect on trade in horses from Ireland. It concluded with evident lack of confidence that the ban was probably not a trade barrier within the meaning of Article 28 and that, even if it was, it was justified as a legitimate expression of local political and moral choice.Footnote 8 Their Lordships, ill-disposed to accept the invitation to chase such politically sensitive hares, looked forward in the hope that pending litigation on restrictions on the use of products might elucidate the European Court's view of the proper reach of article 28 EC. But thus far they—and many other observers—remain disappointed. In 2003 the Commission initiated proceedings against Italy for prohibiting the use of a motorcycle with a trailer, taking the view that this caused an unlawful barrier to trade in trailers designed to be towed by motorcycles. The composition of the product was not affected by the prohibition: the regularity of its use was. The case was switched from a Chamber of the Court to the Grand Chamber by an order of March 2007, which hinted at the possibility of an important statement of principle, but in February 2009 the Court contented itself with a narrow ruling.Footnote 9 It simply found that the rule suppressed consumer demand for trailers in Italy and, by hindering their importation, fell within the scope of article 28. The analysis went no deeper and, in particular, no attempt was made to analyse Keck.
The Court's ruling is short and narrow—a sure sign that the judges in Luxembourg are in disagreement or, at least, unsure of the way ahead. Given such caution, we may therefore be wise not to expect too much from a similar pending case concerning Swedish rules restricting the waterways on which jet-skis may be used.Footnote 10 The risk is that the readier the Court is to find the necessary effect on trade apt to bring article 28 into play, the shallower the reservoir of national regulatory autonomy—and the greater the potential damage to the legitimacy of EC trade law. Keck may be undone altogether if the Court is too quick to review these types of national measures.Footnote 11
C. Justifiying Trade Barriers
If a measure is counted a barrier to trade, it is not automatically unlawful. It is open to the Member State to seek to justify it, and in its ruling in the case concerning Italian restrictions on the use of trailers the Court conceded a legitimate purpose in improving road safety.
Cassis de Dijon,Footnote 12 though now a 30-year-old vintage, retains its flavour as the Court's first statement of a principle from which it has not materially wavered since, namely that diversity between national technical rules has the effect of impeding inter-State trade in goods and that therefore such rules require justification recognized by EC law if they are to avoid condemnation for violation of article 28 EC. It also set in train the thematically consistent trend whereby most attempts to demonstrate justification are exposed as dismayingly feeble. In Cassis itself the German authorities sought in vain to persuade the Court that banning weak rather than strong alcoholic drink formed part of a coherent scheme of public health protection. Such trivial claims continue to litter the Reports. So France reserved the name ‘shallots’ for shallots reproduced directly from bulbs, depriving seedling vegetables of use of the name ‘shallots’. This restriction was defended as a device to protect the consumer, but the Court concluded that this objective could be met by requiring that shallots be marketed with labels displaying information about their method of production.Footnote 13 Denying use of the name ‘shallot’ to products untypical in France went too far. Portugal prohibited the affixing of tinted film to the windows of motor vehicles. This suppressed importation of film into Portugal and the Court came preciously close to ridiculing the Portuguese claim that the measure facilitated visual checks on the use of seat belts, pointing out inter alia that Portugal allows the marketing of vehicles fitted from the outset with tinted windows.Footnote 14 This was not a coherent policy.
The model is essentially simple—first, is the measure a barrier to trade? If so, then, second, is it justified?—and in such cases it is also perfectly simple to apply. But increasingly the judiciary has worked more strenuously, as more serious attempts to justify national obstacles to trade have been encountered. In A-Punkt Schmuckhandels GmbH v Claudia Schmidt Footnote 15 the issue of justification would only logically arise if the national court concluded that the Austrian ban on home jewellery parties fell within the reach of Article 28. But if it did the European Court accepted that in principle consumer protection may constitute a justification for the prohibition. It showed itself sensitive to the particular regulatory motivations at stake: the national court should:
… take account of the specific features associated with the sale of silver jewellery in private homes, in particular the potentially higher risk of the consumer being cheated due to a lack of information, the impossibility of comparing prices or the provision of insufficient safeguards as regards the authenticity of that jewellery and the greater psychological pressure to buy where the sale is organised in a private setting.
Article 28 is not a charter of remorseless deregulation: there is scope for national authorities to engage seriously with the possibility to justify their control of commercial practices.
In Lodewijk Gysbrechts, a rare case dealing with an impediment to exports of goods and therefore dealt with under Article 29, not Article 28,Footnote 16 the Court considered a Belgian law which forbids the taking of a deposit or any other kind of payment from a consumer during the seven-day ‘cooling off’ period after a contract has been agreed within which the consumer may choose to withdraw. This deprives sellers of protection against the risk of non-payment, a risk that is especially serious in connection with sales in other Member States where costs of pursuing defaulting consumers are higher than at home. Hence the barrier to export trade. But, given the shelter afforded against the rogue trader, the rule was treated as a justified measure of consumer protection. Nor, under Belgian law, could the trader demand the consumer's credit card details during this period. This, by contrast, was treated by the Court as unjustified, for it duplicated the basic prohibition against taking payment within the cooling off period.
In Dynamic Medien Footnote 17 the Court accepted that German controls over image storage media could be justified as measures to protect children from harmful content. In placing child protection within the sphere of legitimate justification recognized by EC law, it relied on the EU Charter of Fundamental Rights as well as ‘a number of Community-law instruments, such as Directive 2000/31’. And it observed that since regulatory choices may vary on the basis of moral or cultural views, ‘Member States must be recognised as having a definite margin of discretion’. In Nationale Raad van Dierenkwekers en Liefhebbers Footnote 18, concerning Belgian rules forbidding trade in particular mammals, it similarly embraced animal welfare as a permissible reason in principle for limiting cross-border trade in goods. The law of free movement is evidently not only about free movement, and the Court, in mapping the space left to the regulating State to justify its rules, is prepared to draw not only on Articles 28–30 EC, but also on other acts within the EC legal order, both binding and ‘soft’, and on occasion on international instruments to which the EC and the Member States are party.Footnote 19
The more sensitive the national interest that is threatened by Article 28, the more cautious the Court. The pattern of litigation has increasingly obliged the Court to accept that the free movement of goods, which in Cassis de Dijon itself it described as ‘one of the fundamental rules of the Community’, may collide with State measures protecting fundamental social and political rights. The reference to a national ‘margin of discretion’, found in decisions including Dynamic Medien and Commission v Italy (restrictions on use of trailers), conforms to the approach taken and the language used by the Court in finding that Austrian reluctance to suppress a protest by environmental campaigners was compatible with article 28 even where in consequence the Brenner Pass was for a short period closed to traders in goods. This decision, Schmidberger, was covered in the last survey for the ICLQFootnote 20 and in the intervening period case law pitting fundamental economic rights against other fundamental interests has increased, but deals with obstacles to the right of establishment and the provision of services, not goods. Nevertheless, on the point of justification, the Treaty articles on free movement run largely in common, and it is therefore illuminating to appreciate that in these decisions the Court has been consistently careful to avoid any rhetorical claim that economic rights and freedoms enjoy any priority over other rights and interests. Viking Line and Laval pitted plans to ‘reflag’ vessels in search of reduced regulatory costs against collective action taken by workers aimed at restraining such cross-border migration.Footnote 21 The Court accepts that collective action ‘may, in principle, be justified by an overriding reason of public interest, such as the protection of workers, provided that it is established that the restriction is suitable for ensuring the attainment of the legitimate objective pursued and does not go beyond what is necessary to achieve that objective’; and it went so far as to state that articles 2 and 3 EC show that ‘the Community has thus not only an economic but also a social purpose’. These decisions involve such sensitive balancing of (arguably incommensurable) values that they have (probably inevitably) generated anxieties that ultimately the nature and purpose of EC law, and the Court's limited mandate under the Treaty, tends to push economic motivations to the fore, to the detriment of national preferences.Footnote 22 Plainly free movement law has become a lot spicier than blackcurrant liqueur.
It is here not inconceivable that the Treaty of Lisbon might, if ratified by all the Member States, adjust the balance of this debate. The text of the key Treaty provisions on the free movement of goods will not alter. But whereas the current article 3(l)(g) EC provides that the activities of the EC shall include ‘a system ensuring that competition in the internal market is not distorted’, post-Lisbon what would become Article 2 EU will provide inter alia merely that ‘The Union shall establish an internal market’. The commitment to undistorted competition would be shifted to a Protocol on the Internal Market and Competition attached to both the EU Treaty and the TFEU. A Protocol is legally binding. But it is not inconceivable that it will be argued that re-locating the reference to undistorted competition from the Treaty ‘proper’ and into a Protocol adjusts the constitutional balance in favour of socially-motivated public regulation at the expense of market competition. This is especially relevant to the interpretation of competition law and control of state aids but it could also influence the debate about the application of the free movement rules to sensitive national practices.
D. The Scope of the Harmonization Programme
Where national measures justifiably restrict inter-State trade in goods, the classic response to persisting fragmentation of the internal market is to proceed to harmonize those laws pursuant to Article 95 EC. The result is a common set of rules for doing business, set at EC level. Article 95 is a mandate for harmonizing national rules in the service of market integration, not a basis for attacking inter-State legislative diversity per se, a point that was spectacularly confirmed by the Court's famous Tobacco Advertising ruling—more properly, Germany v Parliament and Council Footnote 23—in which it annulled a Directive establishing a wide-ranging ban on the advertising of tobacco products for want of adequate demonstrated contribution to the market making process. Since that momentous ruling the Court has taken several opportunities to clarify its position,Footnote 24 perhaps most notably in the period under review in a second Tobacco Advertising case. The Directive annulled in Tobacco Advertising was re-made on a narrower basis, more carefully tied to the imperative of market-making. And it survived a subsequent challenge to its validity before the Court.Footnote 25 The threshold that must be crossed for valid reliance on article 95 as a basis for the legislative harmonisation of laws by the EC was stated in the following terms:
[W]hen there are obstacles to trade, or it is likely that such obstacles will emerge in the future, because the Member States have taken, or are about to take, divergent measures with respect to a product or a class of products, which bring about different levels of protection and thereby prevent the product or products concerned from moving freely within the Community, Article 95 EC authorises the Community legislature to intervene by adopting appropriate measures … (para 41).
So even preventive harmonization is included within the scope of Article 95, though quite how one can reliably monitor whether the crucial threshold of ‘likely’ emergence of obstacles has been crossed is far from clear. The competence to harmonization is not unlimited, but this formula confirms that it is strikingly broad. Consequently, the impression, almost ten years on, is that the first Tobacco Advertising decision will remain exceptional. That ruling acts as a persisting reminder to the legislature that attention must be paid to the market-making capacity of any initiative envisaged as apt for adoption pursuant to article 95. So, for example, the Commission's recent series of communications on the way forward for European contract law have been studiously underpinned by the argument that the absence of harmonized contract law exerts at least some prejudicial effect on the development of the internal market.Footnote 26 The unavoidable shadow of Tobacco Advertising remains visible. However, the Court allows the legislature a significant breadth of discretion in finding ways to bring its plans within the scope of article 95—a breadth which, one should appreciate, is ultimately rooted in the loosely drafted terms of articles 14 and 95 themselves. The Court's tolerance of very broad measures of harmonized regulation will be tested further when it decides pending challenges to the ‘roaming regulation’, Regulation 717/2007, which is based on article 95 EC, but which in effect fixes harmonized prices not because national rules vary but rather because the structure of the market robs pricing of a transparent character, to the detriment of the consumer.Footnote 27
E. Market Management
The vexing waste of resources allocated to dealing with trivial litigation was mentioned above. The Court should not be dealing with French rules on shallots or absurd road safety measures introduced by Portugal.Footnote 28 Such rules should be set aside at national level; better still, they should never be implemented in the first place.
The Commission's strategy for the management of the internal market rests on achieving enhanced administrative co-operation both horizontally—between Member State authorities—and vertically—between itself and national authorities. This includes the advance notification of draft technical standards pursuant to Directive 98/34Footnote 29, a favourite of previous Surveys in the Quarterly.Footnote 30 This mechanism is designed to secure a greater degree of ex ante supervision of potential trade barriers in supplement to ex post facto intervention when, by definition, damage has already occurred. Statistics reveal regular use of the notification procedure.Footnote 31 It was supplemented by Decision 3052/95, which dealt which more specific national measures that impede the free circulation of goods in particular cases, but with effect from 13 May 2009 this has been repealed by Regulation 764/2008 laying down procedures relating to the application of certain national technical rules to products lawfully marketed in another Member State.Footnote 32 The new Regulation's Preamble dismisses Decision 3052/95 as ‘largely unsuccessful’. The new measure institutes a more intensively managed procedure where national authorities choose not to recognise divergent standards, including provision for improved administrative co-operation and problem-solving in such circumstances. The broad intention is to make it harder for national authorities not to recognise divergent standards.
Chapter 3 of Regulation 764/2008 requires the establishment of Product Contact Points within each Member State. This is where economic operators and competent authorities in other Member States shall turn when they need information on local technical rules and their implementation. This offers a good example of the thematic concern for practical management of the internal market. Comparable techniques are found in the high-profile ‘Services Directive’,Footnote 33 which requires the establishment of ‘points of single contact’ in the Member States while also obliging national authorities to ‘screen’ their national rulebook for potentially unlawful obstacles to trade. There is great virtue in the ambition to embed anxiety to achieve practical compliance with the objectives of market integration in national administrative cultures, with a view to relegating litigation aimed at removing obstacles to trade in goods to a last and infrequent resort. However the plain reality is that the establishment of a smooth and reliable network of vertical and horizontal administrative co-operation across the whole territory of the European Union apt to guarantee fidelity to the rules of the internal market game is unattainable. In particular, it is not achievable by a blizzard of ‘top-down’ EC lawmaking. Networks of this nature may be encouraged, but they will grow slowly and unevenly, hampered by inter alia language variation and administrative heterogeneity as well as resource constraints.
The Commission's strategy for managing the internal market is best kept cautious. In 2006 the Commission announced a review. After the (nowadays obligatory) consultation of ‘stakeholders’ results were released in September 2006 in a Commission Staff Working Document.Footnote 34 This emphasised the need for better regulation (especially at EC level); and better implementation (especially at national level). This, it is important to appreciate, is not conceived as simply a technical exercise but rather getting results is treated as an indispensable element in generating legitimacy for the whole EU project.Footnote 35 In November 2007 the Commission published its Communication entitled A single market for 21 stEurope.Footnote 36 This was accompanied by several supporting documents, in particular a Review of Achievements, and a paper on Instruments for a modernised single market policy.Footnote 37A single market for 21 stEurope calls for ‘new working methods and the use of a diverse set of instruments’; implementation and enforcement of the rules will be prioritised, in line with the broader agenda of ‘Better Regulation’ in the EU (p 4). This ‘requires a commitment well beyond “Brussels”’. Moreover the Review ‘does not include a classic legislative action programme. Its aim is rather to foster flexibility and adaptability while maintaining the legal and regulatory certainty to preserve a well-functioning single market’ (p 4). Similarly page 5 of the paper on Instruments for a modernised single market policy asserts the need to move beyond ‘integration though law’. This is as intriguing as it is vague. Much of this strategy is well-intentioned.Footnote 38 But managing the internal market is a long-term exercise and the Commission is constrained both materially and constitutionally in forcing the pace.
