Free Movement of Goods

Lecture Two

Lecture Aims

• To examine the EC rules in relation to the exceptions to the free movement of goods

• To understand the circumstances in which a Member State may derogate from Article 28 and thus ‘lawfully’ introduce measures which hinder trade

• To examine the Treaty provisions and case law in relation to this topic

Lecture content

– Article 30 derogations by which a breach of Article 28 is justified

– The development, by the ECJ, of the ‘rule of reason’ in which certain national rules which hinder trade are ‘acceptable’ (Cassis de Dijon)

– The limitation of the Dassonville ruling in relation to certain ‘selling arrangements’ (Keck)

Article 30 (ex 36)

• The provisions of Articles 28-29 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security, the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property. Such prohibition or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.

Article 30 (ex 36)

• Six derogations• Exhaustive list (Commission v Italy Case 95/81)• ECJ placed restrictive (strict) interpretation on these exceptions

to the fundamental freedom of goods– public morality

– public policy

– public security

– protection of health and life of humans, animals or plants

– protection of national treasures

– protection of industrial and commercial property

Public Morality

• Case 34/79 R v Henn & Darby– Ban on import of pornographic material into

UK– Ban was justified under Article 30– “..it is for each Member State to determine in accordance

with its own scale of values …of public morality in its territory”

Public Morality

• Case 121/85 Conegate– UK could not rely on Article 30 public morality

defence because it did not adopt the same sanctions or preventive measures in respect of the same domestically manufactured goods

Public Policy

• Very narrowly construed by ECJ

• Only one example where this has been successfully invoked– R v Thompson Case 7/78– “the need to protect the mint coinage which is traditionally

regarded as involving the fundamental interests of the state”

– Cullet Case 231/83

Public Security

• Case 72/83 Campus Oil• Irish rules justified in order to protect domestic

energy production in order to ensure national security

• Case C-367/89 Richardt• rules relating to transport of certain strategic

goods which could effect public security of the state

Protection of health and life of humans animals or plants

• Most frequently cited defence

• Ranks high as a fundamental interest of all Member States

• ECJ will carefully consider whether– Whether there is a real health risk

(Commission v UK Case 40/82)– Whether there is a seriously considered

health policy

Protection of health and life of humans animals or plants

• Case 4/75 Rewe- Zentralfinanz– German rules requiring inspection of imported

apples– To control spread of pest– Held that the risk of pest spreading was real– The inspection was a MEQR but justified because

inspection was necessary to protect domestic apples

Protection of health and life of humans animals or plants

• Is there a real health risk?

• Commission v UK Case 40/82 (Poultry case)– UK ban on imported poultry– UK attempt to argue public health derogation– Rejected by ECJ-measure not introduced to

address a genuine health risk

– Disguised restriction on trade

Protection of health and life of humans animals or plants

• What if the scientific evidence is uncertain? • Case 174/82 Sandoz

– “in so far as there are uncertainties at the present state of scientific research it is for the Member States, in the absence of harmonization, 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 movements of goods”

Protection of health and life of humans animals or plants

• Case C-192/01 Commission v Denmark – ECJ confirms view in Sandoz– Member States must examine the scientific evidence– if uncertainty remains Member States can rely on the

precautionary principle

– not necessary to wait for conclusive scientific evidence before a Member State addresses a potential risk

Protection of health and life of humans animals or plants

• Not limited to life and health of humans-includes animals and plants– Bluhme Case C-67/97

– measures aimed at preserving the indigenous animal population with distinct characteristics contributed to the maintenance of bio-diversity by ensuring the survival of the species

• Not limited to food and drink products – Toolex Alpha Case ??

– Swedish law banned use of certain chemicals-necessary to protect health

Article 30

• Protection of national treasures - see Case 7/68 Commission v Italy

• Protection of industrial and commercial property-concerned with intellectual property rights (copyright, patents etc)

Article 30

• Such prohibition or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.

• Conegate Ltd Case 121/85• Commission v UK (Poultry case) Case

40/82

ARTICLE 30 ( ex 36)

• De Peijper Case 104/75– “…national rules or practices which do restrict imports…are only

compatible with the Treaty to the extent to which they are necessary…National rules or practices do not fall within the exemptions specified in [Article30] if[their objectives] can as effectively be protected by measures which do not restrict intra-Community trade so much”

– ECJ consistently held that the purpose of Art 30 is to allow certain national rules to derogate from Article 20 only to the extent to which they are ‘justified’

– measures must be ‘justified’-a measure is justified if it does what is necessary to achieve the objective but it does no more than is necessary-principle of proportionality

Summary

• Article 28 prohibits QRs and MEQRs• The Dassonville formula for defining MEQRs is so

widely stated that it covers a wide range of measures which have been introduced by Member states in order to serve some important public interest

• No all these ‘public interests’ are provided for by the limited Article 30 derogations

• Therefore many ‘sensible’ measures are prima facie in breach of Article 28 unless they can be justified under Article 30

The Rule of Reason

• Established in the landmark decision in Cassis de Dijon, case 120/78

• Essentially certain national rules, which create obstacles to trade will (despite the fact that they create obstacles to trade) be acceptable provided they satisfy the criteria laid down by the ECJ in this decision

Cassis de Dijon

• Case 120/78 Rewe Zentrale v Bundesmonopolverwaltung für Branntwein –

• Cassis de Dijon• Rewe Zentral-German importers • Seeking to import Cassis de Dijon (French

blackcurrant liqueur with alcohol content of 15-20%)• Unable to import into Germany because of German

laws requiring a minimum alcohol content

The Rule of Reason

“In the absence of common rules relating to the production of alcohol it is for the Member States to regulate all matters relating to the production and marketing of alcohol and alcoholic beverages on their own territory.

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 recognised as being necessary 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”

Cassis de Dijon

• Obstacles to movement within the Community resulting from disparities between national laws must be accepted if the national laws are:

• necessary• to satisfy mandatory requirements• only operates in the absence of

harmonising Community law

MANDATORY REQUIREMENTS

• The effectiveness of fiscal supervision• protection of health• fairness of commercial transactions• defence of the consumer

– NB also known as ‘imperative requirements or overriding requirements in the public interest’

Cassis de Dijon

• Re arguments of German government– Public health-rejects this on the basis that

consumers could in fact buy drinks with lower alcohol levels and they could also dilute the stronger alcohol!

– Consumer protection –ECJ rejects this. The matter can be dealt with by appropriate labelling of the products depicting the alcohol levels

Cassis de Dijon

• It is also necessary for such rules to be proportionate to the aim in view

• If a Member State has a choice between various measures to attain the same objective it should choose the means which least restricts the free movement of goods

Rule of Reason

• Only operates to ‘save’ national rules where the Member States has been able to act because of the absence of any Community harmonising measures

• Where Community has adopted such harmonising measures Member states must comply with the Community norm and are not free to regulate such matters

– “In the absence of common rules relating to the production of alcohol it is for the Member States to regulate all matters relating to the production and marketing of alcohol and alcoholic beverages on their own territory.

Rule of reason

• Only operates in favour of national rules which are indistinctly applicable– Commission v Ireland (Irish Souvenirs) Case 113/80

– Gilli & Andres Case 788/79

• Distinctly applicable rules may be justified under Article 30 but are not acceptable under the rule of reason

Cassis de Dijon

• Principle of mutual recognition-– ”there is therefore no valid reason why,

provided that they [goods] have been lawfully produced and marketed in one of the Member States, alcoholic beverages should not be introduced into any other Member State”

Cassis de Dijon

• Principle of mutual recognition applies• Can be rebutted by a Member State if

MS can prove that its national rules falls within the rule of reason

• And that the national rule is proportionate

• And that the rule is indistinctly applicable

Walter Rau de Smedt

• Case 261/81• Legislation governing shape of margarine packaging• Introduced to ‘aid’ consumers distinguish products • ECJ accepts that the aim of protecting consumers is

justified• BUT the requirement to use only one specified type

of packaging was too restrictive (disproportionate)• ECJ- labelling could achieve the same ends

Commission v Germany (beer purity laws)

• Case 178/84• German legislation prohibiting use of certain products in ‘Bier’

(such as maize and rice)• German argument that German consumer associates ‘Bier’ as a

product without these additives• ECJ- stated that this requirement was disproportionate.

Consumers could still be protected by:– “means which do not prevent the importation of products which

have been lawfully manufactured and marketed in other Member states and, in particular, by the compulsory affixing of suitable labels giving the nature of the product sold”.

Clinique & Estée Lauder

• Case C-German legislation prohibiting use of certain misleading terms on cosmetic products

• Estée Lauder had to rename the brand ‘Linique’• Rule challenged by EL in German courts• ECJ held the rules were not necessary as consumers

in other MSs did not get confused by the name and the products were sold in cosmetic shops and not pharmacies– “It is necessary to take into account the presumed

expectations of an average consumer who is reasonably well informed and reasonably observant and circumspect”

Consumer protection

• See also Case C-470/93 Mars

• + 10% flash on the packaging • “reasonably circumspect consumers could be

deemed to know that there was not necessarily a link between the size of the publicity markings relating to an increase in a product’s quantity and the size of that increase”

Consumer protection

• Case Commission v Spain & Italy • Ban on use of the word chocolate for

chocolate products containing chocolate fats• Spain & Italy advance consumer protection

arguments• Rejected by ECJ-the measure was to

restrictive on intra -Community trade• Less restrictive measures would be to have

ingredients labeling

Public health mandatory requirement

• Commission v Germany Case 178/84

• Ban on use of all additives in beer• German government argued ban was necessary because

Germans drank so much beer and long term effects of additives not certain

• ECJ scrutinises such claims very carefully– international scientific research

– World Health Organisation

– Also the additives were permitted in other drinks so German claims inconsistent

Further developments

• In Cassis de Dijon -four mandatory requirements

• These have since been extended in subsequent case law

• The list of mandatory requirements is not exhaustive (unlike Art 30 derogations)

• sometimes referred to as ‘imperative requirements’ or ‘overriding requirements in the public interest’

MANDATORY REQUIREMENTS

• protection of the environment• improvement of working conditions (Case

155/80 Oebel)• protection of cultural and socio-cultural

characteristics• maintenance of press diversity• prevention of fraud• The protection of fundamental rights

The protection of cultural and socio-cultural characteristics

• Cinéthèque Cases 60 & 61/84• French legislation• prohibited selling/hiring of videos within 12

months of release of a film• law challenged by Cinéthèque • Rules prima facie breach Art 28 (MEQR)ECJ

held law was acceptable because necessary to protect the cinema as a means of cultural expression

The protection of the environment

• Added in Commission v Denmark Case 302/86

• Danish bottles case • Measures aimed at protecting Danish

environment• Stringent application of the proportionality test• not all elements of Danish rules satisfy the

proportionality requirement

The diversity of the press

• Familiapress v Bauer Verlag Case C-368/95• preliminary ruling from Austrian court

• Austrian legislation prohibiting inclusion of prize competitions/draws in magazines

• Austrian newspaper sought to prevent a German publisher from selling a magazine (with a cash prize crossword ) into Austria

• The Austrian ‘ban’ was MEQR

• Held that ban was necessary to secure the diversity of the press by helping smaller publishers to ‘survive’

• Link to ECHR-press diversity helps to safeguard freedom of expression

The protection of fundamental rights

• Schmidberger v Austria Case C-112/00– “ Since both the Community and its Member

States are required to respect fundamental rights [including freedom of expression and freedom of assembly, guaranteed by Articles 10 and 11 of the European Convention of Human Rights], the protection of those rights is a legitimate interest which, in principle, justifies a restriction of …the free movement of goods”

Summary-Rule of Reason

• ONLY operates in absence of Community harmonising legislation

• ONLY applies to national rules which are indistinctly applicable

• AND the national rules must be proportionate

• The list of mandatory requirements is not exhaustive

Art 30 and the Rule of Reason

• Art 30• exhaustive• applies to all

measures• narrowly interpreted• proportionality

• Rule of Reason• extension of

mandatory requirements

• applies only to indistinctly applicable measures

• proportionality

Dassonville formula

• So widely stated

• catches ‘all trading rules’ which are capable of hindering trade, actually or potentially, directly or indirectly

• many examples of rules which have fallen within this widely stated formula

• many such rules are not designed to be protectionist

• rules have been classified as

– equal burden rules

– dual burden rules

Equal burden rules and dual burden rules

• Dual burden rules- where goods comply with the standards of the state in which they are made and then have to comply with the standard in the ‘host’ state (in short two sets of rules)

• such dual burden rules are incompatible with Article 28 unless they can be saved by the mandatory requirements (or justified under Article30)

• equal burden rules -rules which apply to all goods irrespective of origin, which regulate trade in some way, but they do not have a protectionist effect (also referred to as market circumstances rules)

• Such rules may have an impact on the overall volume of trade, but the impact is equal as between the sale of domestic goods and imported good

Equal burden rules

– Although such rules restrict the overall volume of trade– they are not designed to protect the domestic market – they do not have the effect of protecting the domestic market– the effect imported goods and domestic goods in the same

way in both law and in fact– Classically market circumstances rules are equal burden

rules- (who,where and when)• Examples

– Prohibition on night time deliveries, ban on Sunday trading, prohibition on door-to-door selling, ban on certain types of advertising

Equal burden rules

• ECJ not consistent• In some cases ECJ held that equal burden rules did

not fall within the scope of Article 28- – (Case 155/80 Oebel -rule prohibiting delivery of

bread during the night)• In other cases the ECK held such rules did fall within

the scope of Article 28 but were justifiable under the rule of reason – (Case 268/81 Oosthoek)

Equal burden rules

• Case 145/88 Torfaen Borough Council v B & P plc (Sunday Trading case)– Rules prohibiting Sunday opening– Rule was equal burden - reduced sales but imported goods

and domestic goods in the same position– ECJ held it was prima facie caught by Article 28– but could be saved by the mandatory requirement of

‘national, regional or socio-cultural characteristics– However ECJ left it to national courts to decide whether the

ban was necessary to achieve its aim– Resulted in different national courts reaching different

conclusions about the same national legislation!

Keck & Mithouard• Joined Cases C-267 & 268/91• K & M sold goods at a loss• French law banned the selling of goods at a loss so K & M prosecuted• K & M argued (by way of defence) that the French law breached Art 28 by

because it restricted the volume of sales of imported goods (preliminary ruling sought)

• ECJ disagreed • ECK stated that the French law was not intended to regulate trade in

goods, even though the legislation could result in a drop in the volume of sales (of all goods)

• ECJ also expressed concern about the way traders kept using Art 28 to challenge any rules which limited their commercial freedom

• Therefore ECK said it was necessary to “re-examine and clarify its case law

on this matter”.

Keck

• ‘Product requirements’

• “those relating to designation, form, size, weight, composition, presentation, labelling, packaging”

• such rules constitute MEQRS but may be justified under Article 30 or acceptable under rule of reason

• ‘Certain selling arrangements’

• Developed a ‘new set of rules’

KECK

• “contrary to what has already been decided the application to products from other Member States of national provisions restricting or prohibiting certain selling arrangements is not such as to hinder trade directly or indirectly, actually or potentially, trade between Member States within the meaning of the Dassonville judgment…provided those provisions apply to all affected traders operating within the national territory and provided that they affect in the same manner, in law and in fact, the marketing of domestic goods and those from other Member States”.

Keck-conditions

• Certain selling arrangements will not fall within the Dassonville formula if they affect all relevant traders operating within the national territory in the same manner– same manner both in law and in fact (equal burden rules)– where such conditions are fulfilled such rules do not

prevent/impede access of imported goods– such rules do not breach Article 28 – In short certain selling arrangements do not fall within the

Dassonville formula

Certain selling arrangements?

• Cases C-401/& 402/92 Tankstation ’t Heukste vof & J.B>E. Boermans(rules requiring retail outlets to close during night)

• Case C-391/92 Commission v Greece (baby milk only to be sold in pharmacists’ shops)

• Cases C-69 & 258/93 Punto Casa (Sunday trading rules)

Post Keck (Advertising)

• Case C-292/92 Hünnermund

• Case C-412/93 Leclerc-Siplec

Post Keck (Advertising)

• Case C34-36/95 De Agostini & TV Shop– “Consequently an outright ban on advertising aimed at children less than 12

years of age...is not covered by Article 28 of the Treaty, unless it is shown that that the ban does not affect in the same way, in fact and in law, the marketing of national products and of products from other Member States.”

• Case C-405/98 Gourmet International Products– “if national provisions restricting or prohibiting certain selling arrangements

are to avoid being caught by Article 28...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.”

– “it cannot be excluded that an outright prohibition applying in one Member State, of a type of promotion for a product which is lawfully sold there might have a greater impact o products from other Member States”

If the rule does not fulfil Keck conditions

• If the ‘selling arrangement’ does not fulfil the Keck criteria (if it affects imported products in a different manner)

• then the rule will fall within the scope of Art 28 (it will be a MEQR)

• the selling arrangement rule may be justified under Art 30 or satisfy requirements of rule of reason

Dealing with problem questions...

• Is the measure a Selling Arrangement?• Yes-then apply the conditions in Keck• (does the measure apply equally in law and in fact?)• If the measure fulfills the Keck conditions then the

measure does not breach Article 28 • If the measure does not fulfill the Keck conditions

then it will be a MEQR

Dealing with problem questions...

• Is the measure a MEQR? (Dassonville formula)• Yes-then prima facie in breach of Article 28• Is the rule distinctly applicable?• If yes then it can only ever be justified by reference to

Article 30• Is the rule indistinctly applicable?• If yes then rule may be justified under either Article 30 or

under the rule of reason • If rule is justified under Article 30 or acceptable under the

rule of reason it does not breach Article 28 (proportionality test)

Conclusion

• There are limits to the free movement of goods• Certain national rules may breach Article 28 but such

breaches may be justified under Article 30 or the national rules may satisfy the requirements of the rule of reason

• Certain rules are classified as selling arrangements and provided they meet the equal burden test laid down in Keck, such rules will not fall within the scope

of article 28.