EU Internal Market and its Freedoms Lecture 1 VSFS 2016

Internal market – notion and scope Article 3 TEU: The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and stability, a highly competitive social market economy, aiming price at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.

Administering and monitoring of the legal rules of the internal market The European Commission: a central role in managing the rules of the internal market, particularly in regard to their performance, updating existing rules in close cooperation with Member State representatives meeting within committees to work on technical harmonization; publishes an annual report on the application of Community law in the Member States technical harmonization National authorities: central role in monitoring the application of Community legislation on the internal market falls in the first instance; must verify that European directives are correctly applied following their transposition into national law.

Administering and monitoring of the legal rules of the internal market The Commission's monitoring methods are based on complaints lodged by private individuals, businesses or Member States. If the Commission notes an infringement, it begins an infringement procedure If the State in question does not comply with the Commission's recommendations following this procedure, the Commission may being the action before the EU Court of Justice Since 1993 the Court has been able to impose sanctions in the form of penalty payments.

The Foundations of Free Movement 1. The principle of non-discrimination (Art. 18 TFEU): Article 18 prohibits "any discrimination on grounds of nationality“; it is prohibited to treat imported goods differently to domestic goods. Discrimination is understood as meaning different treatment, on the basis of nationality, under the same circumstances The ECJ adapted the principle of non-discrimination to other circumstances: in the context of services - cases of discrimination from the point of view of both nationality and residence; gender equality, another context

The Foundations of Free Movement 2. Mutual recognition (derives from the EU case law) The principle claims that the legislation of another Member State is equivalent in its effects to domestic legislation This principle was laid down by the Court of Justice in the Cassis de Dijon judgment. Although this principle of mutual recognition applies chiefly to products, it has also had an impact on the other freedoms, particularly those involving the performance of services, where it underlies the concept of the recognition of diplomas.

The Foundations of Free Movement 3. Community legislation (in addition to the principle of mutual recognition): Treaty provisions and regulations with direct effect Directives: Article 114 of the TFEU provides for "approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market".

FOUR FREEDOMS 1. Freedom of movement for goods 2. Freedom of movement for persons 3. Freedom of movement for services 4. Freedom of movement for capital

Free Movement of Goods

Free Movement Of Goods within Internal Market Article 14 TEC (inserted in 1986 by SEA): mandates that the EC shall establish an internal market as an area without internal frontiers, in which the free movement of goods, persons, services and capital is ensured in accordance with the Treaty

Free Movement of Goods and its obstacles (TFEU) 1. Custom duties and charges having equivalent effect (Art ): duties on border crossing and any other charges with equivalent effect 2. Discriminatory taxation (Art. 110): taxes to imported goods in excess of tax for similar domestic products 3. Quantitative restrictions on imports and exports (quotas) and all measures with equivalent effect (MEE) (Art. 34, 35): MEE could be any public and private measure, including law, an internal regulation, decisions of a judge or a court, administrative rules and regulations that allow to discriminate exported or imported goods

EU as a Custom Union Internal section - regulation of intra- Community trade: Elimination of custom duties and charges; Elimination of internal borders to facilitate four freedoms Veterinary and plant health legislation External section - regulation of trade with third countries: common custom tariffs; common customs code; common commercial policy.

Fiscal Barriers Creates: an internal free trade area within the Community, where there are no duties imposed on the internal borders a customs union where there is a common external tariff. N.B. Once goods from a third State enters the Community, having paid the appropriate duties, they are then free to circulate within the Community without further duties. Article 29 TFEU Treaty.

Common Customs Tariff Common customs tariff (CCT) – EC Regulation (1978) with annual amendments applies to all goods imported into the European Union single tariff wall tariffs set by European Commission

Quantitative Restrictions and MEE - Articles 34 and 35 TFEU Quantitative restrictions = explicit restrictions such as quotas MEE = implicit restrictions such as a duty to obtain a licence to import or export Procureur du Roi v. Dassonville (case 8/74): seminal case that establishes: - Dassonville formula: All trading rules enacted by MS which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade are to be considered as measures having an effect equivalent to quantitative restrictions [para. 5] - Rule of reason: In the absence of a Community system…if a MS takes measures to prevent unfair practices…it is subject to the condition that these measures should be reasonable… [para. 6]

Limitats to application of the freedom ( Art. 36 TFEU) Are there restrictions on Article 34 & 35 TFEU? Article 36 TFEU “The provisions of Article 34 and 35 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on ground 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 prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.”

Free Movement of Persons

In the substantive provisions of the TFEU the free movement of persons meant that to qualify: individuals that are nationals of a Member State – nationality being a matter of the Member State; and Persons engaged in an economic activity as worker self-employed person provider and receiver of services

Free Movement of Persons – Union Citizenship The notion of a Union Citizenship is explained the concept of the rights in Article 21 TFEU: “Every citizen of the Union shall have the right to move and reside freely within the territory of the Member State, subject to the limitations and conditions laid down in this Treaty and by the measures adopted to give it effect.” So it is clear that Union Citizens have a right to move to and live within any of the Member States.

Free Movement of Persons – Workers The principal Treaty provision governing the free movement of workers is Article 45 TFEU. 1. Freedom of movement for workers shall be secured within the Community. 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. 3. It shall entail the following rights (subject to limitations justified on grounds of public policy, public security, or public health):

Free Movement of Persons – Workers a) To accept offers of employment actually made; b) To move freely within the territory or Member States for this purpose; 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; 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 implementing regulations to be drawn up by the Commission.

Free Movement of Persons – Workseekers Work-seeker – can you move to another Member State to find work? Case 58/75 Royer [1976] : “…the right of nationals of a Member State to enter the territory of another Member State and reside there for the purposes intended by the Treaty – in particular to look for or pursue an occupation or activities as employed or self- employed persons…” Intention of the Treaty allows nationals of Member States to move freely within the EU to look for work in any Member State.

Right of establishment Art. 49 TFEU “...restrictions on the freedom of establishment of a national of a MS in the territory of another MS shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any MS established in the territory of any MS. Freedom of establishment shall include the right... to set up and manage undertakings, in particular companies or firms... under the conditions laid down for its own nationals by the law of the country where such establishment is effected...”

Right of establishment Right of primary establishment right to set up and manage undertakings Change of primary establishment Cross-border transfer of company’s real seat (not registered seat) Cross-border merger from the point of view of acquired company, different forms of concentration Problem of direct effect of this right (exist only from the host State point of view)

Right of establishment Right of secondary establishment Setting up branches, subsidiaries or agencies in another MS Cross-border merger from the point of view of the acquiring company Practical irrelevance of place of secondary establishment after Centros

Free Movement of Cross- Border Services

Definition of Services in EU Law Notion (as defined by TFEU) Services – activities (of an industrial or commercial character, of craftsmen or of the professions) that are normally provided for remuneration Cross-border element provider and recipient of the service must be established in different Member States one of them moving across border in order to receive (provide) services services provided across border without provider or recipient moving

Three modes of providing border-crossing services can be distinguished: 1.In the case of the freedom to provide services the provider (e.g. a lawyer or a management consultant) who has established himself in another member state travels to a client resident in another member state, in order to provide the service there. 2.In the case of the freedom to receive services – recognised since the Luisi and Carbone decision in 1984 – the consumer travels to another member state to receive the service (e.g. services offered by hotels, hospitals or a service garage for tourists).

Three cases of border-crossing services can be distinguished: 3. In the case of the freedom of correspondence services – recognised since the Sacchi ruling in 1974 – it is the service itself (not the provider or the recipient of the service) that crosses the border to another member state. Originally, this affected the cross-border broadcasting of radio and television programmes in particular. However, it is increasingly gaining importance due to technological advancements in information and communications technology (internet, call centres etc.).

Temporary nature of providing of cross- border services freedom to provide services differs from freedom of establishment provider does not establish residence in order to provide services temporary nature as to  duration of service provision  regularity (periodicity or continuity) of provision  may have some form of infrastructure (e.g. office) ECJ - Treaty does not afford means of abstract determining of duration or frequency beyond which the supply is no longer provision of services within the meaning of the Treaty

EU Directive on Services Transposed to national laws of all MS by the end of 2009 Horizontal nature large variety of services covered (commerce and retailing, construction and crafts, consultancy services, legal or fiscal advice, estate agents, engineering, tourism, leisure sector, etc. Main pillars: Administrative simplification (“points of single contact”; procedures by electronic means) Freedom of establishment (Can only be maintained if non- discriminatory, justified by an overriding reason of general interest and proportionate) Freedom to provide services Administrative cooperation of Member States

Free Movement of Capital and Payments

Article 63 TFEU: the basic freedom 1. …all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited. 2. …all restrictions on payments between Member States and between Member States and third countries shall be prohibited.

Payments a. Harmonisation of the cost of domestic and cross-border payments Regulation 2560/2001 of 19 December 2001 harmonised the costs of domestic and cross-border payments within the euro zone. b. New Legal framework for Payments The Commission proposed in December 2005 a directive that will bring down existing legal barriers to enable the creation of a Single Payments Area in the EU by 2010 Payment Services Directive, 2007/64/EC ( the aim is to make cross border payments as easy, secure and cheap as national payments.

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