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«July 2013 Review of the Balance of Competences between the United Kingdom and the European Union The Single Market © Crown copyright 2013 You may ...»

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2.12 In other words, Member States are bound not just by the legislation but by the Treaty and the general principles of the CJEU’s jurisprudence. Indeed, even if all EU legislation relevant to the Single Market were repealed overnight, the Single Market would continue to exist because Member States would still be bound by the Treaty provisions.

2.13 So why legislate at all? Legislation is needed because it clarifies the detail of broad Treaty provisions and jurisprudence in a way that is useful to economic operators, allows policy choices that would otherwise have to be left to the courts2, and ensures, in theory at least, similarity of application across Member States. Without legislation, it would be much more difficult in practice for people and companies to enforce their rights, because their scope would be less clear and because any breaches by a Member State would need to be settled ultimately in court, which is more expensive, time-consuming, and uncertain. In practice Member States would be able to get away with more discrimination and protectionism.

2.14 But, in legislating, choices have to be made: administrative systems have to be established that may be more familiar to some Member States than others; the level of administrative and compliance burden has to be defined and some Member States may be more comfortable with it than others; and decisions may in practice impose economic costs more on some Member States than others. These trade-offs underlie much of the political debate around EU legislation and explain why measures designed to improve the collective European good can sometimes become bogged down in arguments about the detail between Member States. Added to this there can also be pressure to ensure that no Member State loses out, which means that the most expensive or burdensome existing national provisions can become the baseline for legislation, and costs ratchet up.

2.15 Where there is no EU legislation, Member States can continue themselves to legislate, but they must do so in a way which is consistent with the Treaty and the jurisprudence.

Member States need to reflect before legislating to ensure what they are doing is in fact consistent. If it seems not to be, Member States can be challenged, ultimately in court, by individuals, other Member States, or the Commission, to prove that their action can be justified.

2.16 The Treaty principles can also apply to a broad range of situations involving cross-border economic relationships, going well beyond the Four Freedoms narrowly defined3, such as cross-border higher education or health care, areas where there is very limited or no formal EU competence. For example, it is these Treaty rules that require the UK to charge EU citizens the same university fees as UK citizens, and not the higher rates applying to non-EU citizens.

The British Chambers of Commerce argues, however, that Directives can often be so vague that significant 2 elements still have to be interpreted in the courts (BCC, p3) Dougan, p1 3 22 Review of the Balance of Competences between the United Kingdom and the European Union: The Single Market 2.17 Overall the effect is to constrain Member States’ actions and to limit the range of economic and regulatory policy choices to those which are consistent with the goals of building the Single Market and of economic integration.

The Four Freedoms 2.18 The following sections set out the nature of the EU’s competence in each of the Four Freedoms.

Goods 2.19 The Treaty provisions are at Articles 28 – 44 and 110 of the TFEU.

2.20 Articles 28 – 33 establish the EU as a Customs Union, i.e. an economic area with an external tariff and no customs barriers internally, and deal with some of its consequences, notably that all Member States must have the same external tariff, that this must be set collectively, and therefore that the EU must have a single trade policy with regard to other countries.

2.21 Article 30 stops Member States imposing on each other customs duties or any charges which are equivalent in practice, for example, charges for storage of imported goods unless this reflects real underlying costs. Article 110 prevents any Member State taxing other Member States’ products more heavily than their own.

2.22 Articles 34 – 36, and the jurisprudence based on them, have been fundamental to establishing the Single Market. They forbid any quantitative restrictions on imports or exports, i.e. quotas or similar, or any “measures having equivalent effect”. Article 34 in particular has been used by the CJEU over the years to rule illegal a wide range of Member States’ measures that potentially have an impact on trade between Member States. In a series of noteworthy cases4, the CJEU has established that the Treaty provisions apply to all national rules that might hinder trade and that any product legally produced in one Member State can be sold in all (the famous “Cassis de Dijon” case), subject to certain limited exceptions, and that national legislation having the effect of preventing this was unlawful.

2.23 The effect of these rules is that:

• With certain limited exceptions, any national rules which hinder the access of goods from one Member State to another’s market are unlawful unless they can be justified.

This is true whether another Member State’s goods are directly discriminated against (“distinctly”); discriminated against because rules in practice make it harder for that Member State’s goods to comply (“indistinctly”); or because a Member State’s national measures simply in practice hinder others’ access to the home market.





• Direct discrimination can be justified only by using one of the exemptions in Article 36, ie “public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures; …or the protection of industrial and commercial property.” This is a closed list and its exemptions have been vigorously policed by the Court;

“Dassonville” [Case 8-74, Procureur du Roi v Benoît and Gustave Dassonville], “Cassis de Dijon” [Case 120/78, 4

–  –  –

• Other forms of discrimination or barriers can be justified on grounds known as “mandatory requirements” set out by the CJEU (notably fiscal supervision, public health, fairness in commercial transactions, and consumer protection, though the CJEU has not closed the list).

2.24 This jurisprudence has driven far-reaching integration in free movement of goods. Member States can ultimately be expected to demonstrate that national rules are in accordance with the Treaty or in compliance with any specific provisions in EU legislation in this area.

2.25 Articles 38 – 44 set out the special rules governing trade in agricultural (and fisheries) goods, which are very different from those in the rest of the Single Market. Broadly, the Treaty requires the EU to establish a common agricultural policy with aims that include stabilising prices and increasing farmers’ earnings as well as increasing productivity in agriculture. It does so through a series of “common market organisations”, set out in secondary legislation, and also allows for legislation to create specific exemptions from the ordinary competition rules.

Persons

2.26 This is possibly the most complex area of the Single Market. Although free movement of persons was in the Treaty of Rome right from the start, the most recent substantive developments stem from the creation of the concept of EU citizenship in the Maastricht Treaty. This eventually created a far-reaching set of rights for EU citizens (i.e. all nationals of Member States), and for third-country nationals who are also family members of EU citizens, which went beyond earlier provisions that focused on giving rights mainly to economically active EU nationals, i.e. to workers, companies, and service providers.

2.27 The fundamental underlying principles in this whole are the following:

• There can be no direct discrimination against nationals of other EU Member States on grounds of nationality. Exceptions are only justified if they are for one of the reasons set out in the Treaties, ie public policy, security, or health, which the CJEU interpret strictly;

• There can be no indirect discrimination (i.e. rules which seem to treat everyone equally but in fact have a particular effect on other countries’ nationals) and no broader restrictions which make it unattractive to use free movement rights in practice, unless they can be objectively justified.

EU Citizenship 2.28 EU Citizenship is a catch-all set of rights, ie they apply even to people who do not have rights as workers, service providers, etc. The Treaty provisions are at Articles 20 – 25 TFEU, though only Articles 20 – 21 are relevant in the Single Market context. Article 20, inserted by the Treaty of Maastricht, creates the concept of EU citizenship and provides that anyone who is a national of a Member State is also a citizen of the Union. Article 21 provides that “Every citizen of the Union shall have the right to move and reside freely within the territory of the Member States, subject to the limitations and conditions laid down in the Treaties and by the measures adopted to give them effect.”

2.29 Also significant is Article 18 TFEU, which prohibits any discrimination on grounds of nationality within the field of application of the Treaties. EU citizens can rely on these rights and they are directly applicable, ie individuals can rely on them even if there is no legislation implementing them.

24 Review of the Balance of Competences between the United Kingdom and the European Union: The Single Market

2.30 The most significant secondary legislation in this area is the Citizenship Directive, 2004/38, which sets out the main free movement rights of EU citizens, as well as the limitations on those rights.

2.31 EU citizens have the following main rights:

• The right of residence anywhere in the EU. Broadly, EU citizens and their family members, including third-country nationals, may reside anywhere for up to three months. They may remain for over three months if they are working, if (in most circumstances) they have become unemployed or are in training; if they can support themselves otherwise; or if studying. They gain the permanent right of residence if legally resident in a Member State for five years;

• The right of free movement anywhere in the EU, including not to be deterred from moving to another Member State, and including the coordination of social security entitlements in accordance with the regime in Regulation 883/2004. The jurisprudence suggests that this provision even covers areas where the EU does not otherwise have extensive legislative powers;5 • The right not to be discriminated against in another Member State. Again, this provision even covers areas where the EU does not otherwise have extensive legislative powers.

2.32 In all cases, except direct discrimination, these rights can be restricted if there is “objective justification”, for example to restrict them to those with a sufficient link with the Member State concerned. But controlling costs alone is not sufficient grounds to restrict the rights, and national provisions are examined carefully to ensure they do actually achieve their declared objective and do not go beyond what is necessary to achieve that objective.

Free Movement of Workers

2.33 The Treaty provisions are set out in Articles 45 – 48 TFEU. They cover virtually all permanent employees.

2.34 Article 45 TFEU confers on workers and their families the right to work in any EU Member State; to travel to any EU Member State to seek employment; to live in any Member State;

and to claim some benefits after having been employed. The detail has been laid down in legislation, most recently codified in Regulation 492/2011.

2.35 Article 48 allows the EU to ensure the coordination of national social security systems in ways that are necessary to provide freedom of movement for workers. Legislation is agreed by qualified majority, but, unusually, there is a so-called “emergency brake” allowing the European Council to consider and if necessary halt legislation. The latest provisions in this area are set out in Regulation 883/2004.

The Freedom of Establishment and the Freedom to Provide Services

2.36 The freedom to provide services is different economically from the free movement of goods. Goods, once produced, can circulate in the EU without the producer and consumer being present at the same time. This is not normally true for services: either the recipient moves to receive the service, for example, tourism, or the producer moves to provide it, either temporarily or permanently. The latter case is usually described as the freedom of establishment.

Case C-192/05 Tas-Hagen

Chapter 2: The current state of competence 25

2.37 The Treaty provisions on establishment are in Articles 49 – 55. Article 49 is a parallel right to that of free movement of workers and gives the right to persons to establish themselves permanently in another Member State as self-employed and to companies to establish themselves as a branch or subsidiary. Article 50 allows for EU legislation to facilitate this right: in practice this has been used principally for legislation providing an EU-level framework for company law. Article 53, which also covers services, requires Member States to recognise equivalent qualifications from other Member States, and is the legal basis for the important Mutual Recognition of Professional Qualifications Directive.

2.38 The Treaty provisions on services are set out in Articles 56 – 62. They give nationals or firms of one Member State the right to deliver services in another, on a temporary cross-border basis. (Transport services fall outside these provisions and are dealt with in Article 90 TFEU).

2.39 There is some overlap between the provisions of the two sets of articles.



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