Free movement of goods

The principle of free trade is one of the main pillars on which the economic integration of the EU rests. This legal principle is contained in art 30 of the EC Treaty, which prohibits quantitative restrictions and measures of equivalent effect. It has become one of the key factors in creating the EU's economic area, in which market forces are free to operate without national boundaries. In contrast with its striking brevity, interpretation of art 30 has given it a very large scope of application. This is due to the European Court's sweeping definition of measures of equivalent effect in Procureur du Roi v Dassonville [1974] 2 CMLR 436. This definition looks not only to discrimination, even indirect, but also to the effect on trade within the EU, and not just to actual hindrance, but even to potential indirect hindrance, regardless of the purpose of the measure.
Although in keeping with the aims of free trade and market integration, such broad based definition restricts the scope for member states to regulate their economic life according to their divergent cultural and social characteristics. Member states are allowed to regulate free trade only on the grounds enumerated, exhaustively it seems , in art 36 EC. However, the European Court of Justice in the Cassis de Dijon case (Rewe-Zentrale AG v Bundes-monopolverwaltung f-r Brantwein [1979] 3 CMLR 494) distinguished its position in relation to indistinctly applicable measures, ie measures that apply to domestic and imported products alike whilst imposing greater burdens on imports. In this case, the court stated that the indistinctly applicable measure is justifiable if it 'is necessary in order to satisfy mandatory requirements relating to the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defence of the consumer'.
In subsequent cases, the court added to the ever expanding list of mandatory requirements, the protection of the environment (Commission v Denmark (re disposable beer cans) [1989] 1 CMLR 619), the protection of culture (Cin-th-que SA v Federation Nationale des Cinemas Fran-aises [1986] 1 CMLR 365), and measures designed to protect 'national or regional socio-cultural characteristics' (Torfaen Borough Council v B & Q plc [1990] 1 CMLR 235).
Decisions of the court have not always been clear as to the scope of art 30, as was stated in the High Court in South Pembrokeshire District Council v Wendy Fair Markets Ltd [1993] 1 CMLR 213. The defendant had claimed that an ancient 14th century monopoly right to hold a market in the small Welsh town infringed art 30. This sentiment is echoed by many distinguished legal writers who are campaigning for the re-examination and clarification of the court's case law on the application of art 30. The court's judgments are often unclear and inconsistent, to the point that it has become very difficult for legal practitioners to advise their clients with any degree of certainty.
The Court of Justice declared in its 24 November 1993 judgment in B Keck and D Mithouard, cases C/267 and 268/191, that in the light of criticism and confusion, and 'in view of the increasing tendency of traders to invoke art 30 of the Treaty as a means of challenging any rules whose effect is to limit their commercial freedom, even where such rules are not aimed at products from other member states, the court considers it necessary to re-examine and clarify the case law on this matter'.
The case concerned criminal prosecutions being brought against the defendants alleging reselling unaltered products at prices lower than the actual purchase price (resale at a loss), this form of marketing being prohibited by French law. In their defence, the defendants contended inter alia that the prohibition on resale at a loss is contrary to art 30. The court held that 'contrary to previous judgments, a national provision which restricts or prohibits 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 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 products and of those from other member states'.
Accordingly, art 30 did not apply to the French prohibition on 'resale at loss'. The measure itself was not such as to hinder trade between member states within the meaning of Dassonville. The court therefore reaffirmed Dassonville, but nuanced its scope. The Dassonville formula applies to any measure 'which is capable of directly or indirectly, actually or potentially, hindering intra-community trade'. The judgment, however, states that although the purpose of the measure was not to regulate trade between member states, it might have a restrictive effect on sales and hence the volume of imports from other member states. In Keck, French law prevented a potential importer from introducing a new product on the market using an accepted method of sales promotion. Therefore, the fact that the national rule is capable of affecting the trade between member states is not sufficient to bring it within the ambit of art 30.
The court also reaffirmed the Cassis de Dijon principle of equivalence and the rule of reason; that is, national measures which prevent goods that have been lawfully produced and marketed in one member state from being lawfully marketed in another member state fall within art 30, unless the purpose of the measure fulfils a 'mandatory requirement' and its effect is proportionate to the purpose. The court clearly stated that prohibitions which are caught by art 30 are requirements such as form, size, weight, composition, presentation, labelling and packaging.
It was equally important that the provision of the legislation in question did not intend to regulate trade in goods between member states and the fulfilment of the legislative requirements should not prevent access of the good to the market or to impede access any more that it prevents the access of domestic products. The court seemed to refer to national equal burden rules, which fall outside the scope of art 30. Already, in the Sunday trading case of Torfaen, the court concluded that where a rule imposes an equal burden on imports and domestic goods it is outside the scope of art 30, provided it pursues the public interest that overrides the principle of free movement of goods and that it is proportionate to that end. The judgment in that case brought equal-burden rules largely into line with those taken in respect of dual-burden rules, as in Cassis de Dijon. However, there is a substantial difference: the rule in Torfaen restricted the trade simply because it existed, not because it was different from the rule in the state of origin of the goods. The Cassis-type rules have a protective effect; Sunday trading rules have not and are an equal-burden rule.
The effect of Keck must be that the equal-burden rules fall outside of art 30 and are no longer subject to justification by mandatory requirements and rules of proportionality. The Court of Justice seems to have shifted its position from that taken in Sunday trading cases and put equal-burden selling arrangements beyond the reach of EU law. This decision therefore takes outside of the scope of art 30 the Sunday trading cases, notably Torfaen, Stoke City Council and Norwich City Council v B&Q plc [1993] 1 CMLR 426. The Sunday trading case of Wellingborough Council v Payless [1990] 1 CMLR 773 fell outside the scope of art 30 because it did not affect interstate trade and it therefore stayed within national jurisdiction. The same reasoning was offered in Quenntlynn v Southend Borough Council [1990] 3 CMLR 55 and Sheptonhurst v Newham Borough Council [1991] 3 CMLR 463: in the first case in relation to prohibition on the sale of lawful sex articles on unlicensed premises, and in the second the local council's refusal to issue a sex shop licence.
The court acknowledged that some previously decided cases are no longer valid but omitted to state which. What, then, has Keck overruled? The court may have been referring to equal-burden rule cases, such as Sunday trading cases. These cases therefore no longer represent good law. However in V erband Socialer Wettbewert eV v Clinique Laboratoires SNC, case C-315/92, 2 February 1994, the court referred to Buet [1989] ECR 1235, which concerned door-to-door selling, as an example of the consistent application of the proportionality rule in relation to the rule of reason and art 36. This would seem to indicate that judgments which deal with non-discriminatory rules that prevent market penetration are still of value.
The Advocate-General Van Gerven considered that Blesgen [1983] 1 CMLR 431, which concerned the prohibition of stocking and selling for consumption on the premises spirits stronger than permitted under Belgian law, is a case similar to Keck. However, the court decided that in Blesgen interstate trade was not affected and it therefore escaped the prohibition contained in art 30 on that account. This reasoning could easily have been used in Keck, since the products concerned were not imported from other member states. L Gormley, in 'Reasoning renounced? The remarkable judgment in Keck and Mithouard', European Business Law Review, March 1994, feels that the 'Keck and Mithouard judgment is broadly enough stated to justify an assertion that the Oosthoek ([1993] 3 CMLR 428) line of cases concerning selling arrangements, ie offering of free gifts with encyclopaedias, is no longer a good law'.
The judgment in Keck has been followed in Hunermund v Landesapothekerkammer Baden-Wurttenberg, case C-292/92, 15 December 1993. This concerned the compatibility with art 30 of professional rules of Baden-Wurttenberg Lander's Chamber of Pharmacists, which prohibited the pharmacists practising in the Lander from advertising para-pharmaceutical products which they were allowed to offer for sale. The court observed that the rule in question was not concerned with trade in goods between member states. It considered that such a rule was likely to restrict the volume of sales and, consequently, the volume of sales of para-pharmaceutical products from other member states, in so far as deprived the pharmacists concerned of sales promotion for such products. Provided that the rule applied to all traders concerned in that national territory and provided that they are affected in the same way, in law and in practice, the marketing of domestic products and those from other member states, the application from other member states of domestic provisions restricting or prohibiting certain methods of sale was not likely to impede directly or indirectly, actually or potentially, trade between member states.
The court concluded that regulations at issue, which applied without distinction according to the origin of the products in question to all pharmacists covered by the professional chamber, did not affect the marketing or products from other member states differently from that of domestic products, therefore art 30 did not apply to the prohibition on advertising.
In further cases that followed, Tanstation 't Heukske vof and JBE Boermans (case C-401/9 and case C-402/92 of ECJ, 2 June 1994) relating to the requirement of the Netherlands rules concerning the closing of petrol stations, and Punto Casa SpA v Sindaco del Commune di Capena (case C-69/93 and C-258/93 judgment of ECJ, 2 June 1994) relating to the Italian legislation on the closure of retail outlets on Sunday, the Court of Justice repeated the reasoning in Keck and Hunermund and has taken out of the ambit of art 30 EC national rules that regulate the times and places at which the goods may be sold to consumers.
It would seem that the court is taking the rules concerning selling arrang ements out of the scope of the basic principle in Dassonville and seems to have taken a policy decision that it will leave the national non-discriminatory regulation of socio-economic life to national authorities. This is in keeping with the legal and political principle of subsidiarity.
Keck did restrict the scope of art 30 but further litigation will be necessary to establish how great this restriction is. Measures which are not protectionist in nature and are not imposing selling restrictions on importers which are different from those imposed on domestic traders are arguably not of equivalent effect to actual restrictions on imports. Perhaps this is an indication that the court will in future confine art 30 to the areas genuinely capable of impeding the establishment of the common market.
Customs duties and taxation
 European Union Customs Union
The European Union is also a customs union. This means that member states have removed customs barriers between themselves and introduced a common customs policy towards other countries. The overall purpose of the duties is "to ensure normal conditions of competition and to remove all restrictions of a fiscal nature capable of hindering the free movement of goods within the Common Market".[10]

By agreement between the Union and the states concerned Andorra, Monaco, San Marino and Turkey also participate in the EU Customs Union.

Customs duties

Article 30 TFEU prohibits member states from levying any duties on goods crossing a border, both goods produced within the EU and those produced outside. Once a good has been imported into the EU from a third country and the appropriate customs duty paid, Article 29 TFEU dictates that it shall then be considered to be in free circulation between the member states.

Neither the purpose of the charge, nor its name in domestic law, is relevant.[11]

Since the Single European Act, there can be no systematic customs controls at the borders of member states. The emphasis is on post-import audit controls and risk analysis. Physical controls of imports and exports now occur at traders' premises, rather than at the territorial borders.

Charges having equivalent effect to customs duties

Article 30 of the TFEU prohibits not only customs duties but also charges having equivalent effect. The European Court of Justice defined charge having equivalent effect in Commission v Italy.

[A]ny 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.[12]
A charge is a customs duty if it is proportionate to the value of the goods; if it is proportionate to the quantity, it is a charge having equivalent effect to a customs duty.[13]

There are three exceptions to the prohibition on charges imposed when goods cross a border, listed in Case 18/87 Commission v Germany. A charge is not a customs duty or charge having equivalent effect if:

it relates to a general system of internal dues applied systematically and in accordance with the same criteria to domestic products and imported products alike,[14]
if it constitutes payment for a service in fact rendered to the economic operator of a sum in proportion to the service,[15] or
subject to certain conditions, if it attaches to inspections carried out to fulfil obligations imposed by Union law.[16]
Taxation

Article 110 of the TFEU provides:

No Member State shall impose, directly or indirectly, on the products of other member states any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.
Furthermore, no Member State shall impose on the products of other member states any internal taxation of such a nature as to afford indirect protection to other products.
In the taxation of rum case, the ECJ stated that:

The Court has consistently held that the purpose of Article 90 EC [now Article 110], as a whole, is to ensure the free movement of goods between the member states under normal conditions of competition, by eliminating all forms of protection which might result from the application of discriminatory internal taxation against products from other member states, and to guarantee absolute neutrality of internal taxation as regards competition between domestic and imported products."[17]
Quantitative restrictions and measures having equivalent effect

In addition to prohibiting customs duties and discriminatory taxes, the TFEU, in Article 34, prohibits quotas and “measures having equivalent effect”. But what are measures having equivalent effect and how do they affect trade between member states? The Treaty does not answer these questions and European Court of Justice has over several decades provided detailed case law interpreting Article 34. In a well-known series of cases beginning with Dassonville,[18] continuing with Cassis de Dijon[19] and culminating in Keck and Mithouard,[20] the Court has said that discriminatory and non-discriminatory rules of member states (therefore not actions of private corporations or individuals) that hinder trade shall be illegal.

Directly discriminatory rules

Directly discriminatory rules distinguish between national and imported goods in law and in fact. A prohibition of imports imposed by state A on goods from state B is directly discriminatory but restrictions do not have to take the shape of prohibitions or quotas. A Member State can lead advertising and promoting campaigns that favours domestic products, or it can impose higher prices or more stringent conditions (such as health inspections) on imported goods. The key to discrimination is that domestic products are not subject to the added difficulties, and are therefore put at an advantage.

Indirectly discriminatory rules

Indirectly discriminatory rules that hinder trade do not distinguish in law but do so in fact. They impose a higher burden on the importer due to additional work it has to complete to make the product marketable. Although in law the rules apply equally to domestic producers and importers, in reality the burden is born by importers, the domestic producers already complying with the rules. If, in addition, the product is marketed in a number of member states, the exporter from state A might be subject to as many different regimes as there are countries into which he is hoping to import.

For example, a (fictitious) law in state A is that alcoholic drinks of a particular kind must not contain more than 20% alcohol. Producer from state B makes and regularly exports drinks which contain 25% alcohol. Law in state A applies to all those who wish to market the alcoholic drinks in question – whether they are domestic in origin or foreign. In that respect, in law, they do not discriminate. On the other hand, as a result of their presence, a legally marketed drink from state B either has to be modified and its alcohol contents reduced to only 20% or must be absent from the market of state A altogether. EU law, under the circumstances mentioned in the previous paragraph, prohibits this kind of distinction: although the law appears to treat all parties equally, in fact domestic producers are favoured.

Product requirements and certain selling arrangements

Naturally, allegations can be made against any rule that inconveniences the trader, and this includes a very large number of rules. Therefore, in the last of the mentioned cases, Keck, and those that followed it, the Court decided that only rules relating to product requirements (shape, size, colour, etc.) should be illegal, while those relating to selling arrangements (opening hours, staff training requirements, etc.) will mostly not be. The division was an attempt to limit the number of cases to only those situations where, in the absence of discrimination, there is real danger of importer suffering the presence of dual burden.

Justification

Under certain circumstances, member states whose rules have been disapplied may defend them. For rules that discriminate, a defence will be possible under Article 36 which mentions, among other things, public health or public morality. For example, a restriction of import of meat from certain countries will be legal if it has clear medical grounds. A restriction of importation of pornographic material may be justified if such material is normally not available in the said Member State. Non-discriminatory rules may be justified not only by reference to Article 36 but also to a Court-made list of exceptions which were first set out in the Cassis de Dijon case.[21]