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Comparing EU's Four Freedoms & Market Access in Internal Market Bill, Exams of Art

University of Luxemburg (UL)Art

An analysis of the four freedoms (goods, persons, services, and capital) and market access principles in the European Union (EU) and the Internal Market Bill (IMB) of the United Kingdom. It discusses the key principles, exceptions, and justifications related to the free movement of goods and the mutual recognition and non-discrimination principles. The document also compares the EU single market and the IMB in terms of their market access principles, exceptions, and enforcement mechanisms.

Typology: Exams

2021/2022

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Culture, Tourism, Europe and External Affairs Committee
22nd Meeting 2020 (Session 5), Thursday 24 September 2020
Future Relationship Negotiations: Internal Market
Written Submission from Professor Catherine Barnard
The question
I have been asked to comment on the ‘principles which underpin the EU Single Market
and to compare this with the UK Government proposals for a UK Internal market (and
any subsequent legislation which may be published)’. I have adopted a narrow legal
approach to highlight the particular areas of difference.
Introduction
1. The EU single market is defined in Article 26. It provides:
1. The Union shall adopt measures with the aim of establishing or ensuring the
functioning of the internal market, in accordance with the relevant provisions of
the Treaties.
2. The internal market shall comprise an area without internal frontiers in which
the free movement of goods, persons, services and capital is ensured in
accordance with the provisions of the Treaties.
3. The Council, on a proposal from the Commission, shall determine the
guidelines and conditions necessary to ensure balanced progress in all the
sectors concerned.
2. So at the core of the internal market lie the four freedoms: goods, persons,
services and capital (see box 1)
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Culture, Tourism, Europe and External Affairs Committee 22 nd^ Meeting 2020 (Session 5), Thursday 24 September 2 020 Future Relationship Negotiations: Internal Market Written Submission from Professor Catherine Barnard

The question

I have been asked to comment on the ‘principles which underpin the EU Single Market and to compare this with the UK Government proposals for a UK Internal market (and any subsequent legislation which may be published)’. I have adopted a narrow legal approach to highlight the particular areas of difference.

Introduction

  1. The EU single market is defined in Article 26. It provides: 1. The Union shall adopt measures with the aim of establishing or ensuring the functioning of the internal market, in accordance with the relevant provisions of the Treaties. 2. The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties. 3. The Council, on a proposal from the Commission, shall determine the guidelines and conditions necessary to ensure balanced progress in all the sectors concerned.
  2. So at the core of the internal market lie the four freedoms: goods, persons, services and capital (see box 1)

Box 1: the Four Freedoms

  1. The four freedoms provisions are examples of negative integration ie removing barriers to trade. However, negative integration can only go so far. In some areas, harmonisation (positive integration) is essential. In these circumstances, the Union needs to have the power to act (legal basis). For the EU there are a large number of legal bases but the most important one is Article 114 TFEU on which a large amount of the single market legislation is based.

Free movement of goods in the EU (EEA)

  1. The free movement of goods provisions are regarded as the cornerstone of the Treaties and it is here that some of the key principles have been developed and tested. There are four limbs to the goods provisions: - the establishment of a customs union (Article 28 TFEU) which involves the prohibition between member states of customs duties on imports and exports and of all charges having equivalent effect (Article 30 TFEU); - the adoption of a common customs tariff in their relations with third countries; - the elimination of discriminatory taxation (Article 110 TFEU); and - the removal of quantitative restrictions on trade and all measures having equivalent effect on imports (Article 34 TFEU) and exports (Article 35 TFEU). There are express exceptions in Article 36 TFEU.
  2. All of these treaty provisions are directly effective which means they can be enforced by individuals and companies in national courts. Damages are

Free

movement

of goods

Fiscal restrictions (Arts, 30, 110) Non fiscal restrictions (Arts 34-6)

Free

movement

of persons

Workers (Art. 45) Self- employed/companies (Art. 49) Citizens (Art. 21)

Free

movement

of services

Services provided by natural or legal persons (Art. 56)

Free

movement

of capital

Article 63 TFEU NB applies to third countires

b. Indistinctly applicable measures (broadly indirectly discriminatory measures) also breach Article 34 TFEU but can be saved by Article 36 TFEU and by an additional and open-ended list of ‘mandatory requirements’, now more commonly known as public interest requirements.

  1. The category of indistinctly applicable measures concern so called ‘product requirements’: ‘where they are the consequence of applying rules that lay down requirements to be met by such goods (such as requirements as to designation, form, size, weight, composition, presentation, labelling, packaging) to goods from other Member States”. Therefore, it covers rules on packaging, such as cigarette packaging, composition e.g. additives etc.
  2. Due to the principle of mutual recognition, established in the Case 120/78 Rewe Zentrale v. Bundesmonopolverwaltung fur Branntwein (“Cassis de Dijon”) [1979] ECR 649 decision, there is a strong presumption that such product requirements are unlawful: There is therefore no valid reason why, provided that they have been lawfully produced and marketed in one of the Member States, alcoholic beverages should not be introduced into any other Member State” (presumption of equivalence or mutual recognition) (para.14).
  3. However, product requirements can be justified if the host state can show the existence of a mandatory or public interest requirement: ‘Obstacles to movement in the [Union] 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 in order 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.” Steps taken by the host state to protect those interests must be proportionate.
  4. Subsequent case law has significantly expanded these public interest requirements to cover important matters such as environmental protection, worker protection, and protection of children.
  5. The aim behind the public interest requirements is to stop the mutual recognition principle becoming a tool of deregulation. Host states are allowed to maintain regulatory diversity if they have good reasons for their rules and the steps taken are proportionate. The application of the public interest requirements/proportionality converts the mutual recognition principle into a conditional mutual recognition.
  1. In Case C-110/05 Commission v. Italy (trailers) [2009] ECR I- 519 the Court of Justice added an additional category of measure that is caught by Article 34 TFEU: ‘‘ Any other measure which hinders access of products originating in other Member States to the market of a Member State’. This is known as the market access approach. Where such a measure has ‘considerable influence on the behaviour of consumers, which, in its turn, affects the access of that product to the market of that Member State’ in casu an Italian ban on motorbikes towing trailers, the measure breaches Article 34 TFEU unless it can be justified by reference to the public interest requirements.
  2. So, in summary, Article 34 TFEU prohibits border measures (QRs), any other measure which affects the import or production of goods (which may be discriminatory), and any other non-discriminatory rule which nevertheless hinders market access (see fig 1). Fig 1 Article 34 TFEU summary
  3. There is a final category of measure that the Court has struggled with: ‘certain selling arrangements’ (CSAs). These CSAs concern measures which affect retailers rather than importers and concern mainly rules on the manner and place goods are sold. These rules are generally non-discriminatory (eg a ban on shops opening on Sundays). Although there is much uncertainty about the scope of this category, rules considered to be CSAs are not caught by Article 34 TFEU. National measure QRs Breach Art. 34 Art. 36 derogations + proportionality MEEs Distinctly applicable Breach Art. 34 Indistinctly applicable Breach Art. 34 unless justified by mandatory requirements or Art. 36 derogations + proportionality Any other measure which substantially hinders market access Breach Art. 34 unless justified by mandatory requirements or Art. 36 derogations + proportionality

(a) have been produced in, or imported into, one part of the United Kingdom (“the originating part”), and (b) can lawfully be sold there, because the goods comply with the relevant requirements that would apply to their sale (or there are no such requirements), should be able to be sold in any other part of the United Kingdom, free from any relevant requirements that would otherwise apply to the sale.

  1. The definition is of course resonant of the Cassis de Dijon definition. The definition of a statutory requirement falling with the scope of the mutual recognition principle is also reminiscent of the list of products requirements (Clause 3(4)): (4) A statutory requirement is within the scope of the mutual recognition principle if it relates to any one or more of the following— (a) characteristics of the goods themselves (such as their nature, composition, age, quality or performance); (b) any matter connected with the presentation of the goods (such as the name or description applied to them or their packaging, labelling, lot- marking or date-stamping); (c) any matter connected with the production of the goods or anything from which they are made or is involved in their production, including the place at which, or the circumstances in which, production or any step in production took place; (d) any matter relating to the identification or tracing of an animal (such as marking, tagging or micro-chipping or the keeping of particular records); (e) the inspection, assessment, registration, certification, approval or, authorisation of the goods or any other similar dealing with them; (f) documentation or information that must be produced or recorded, kept, accompany the goods or be submitted to an authority; (g) anything not falling within paragraphs (a) to (f) which must (or must not) be done to, or in relation to, the goods before they are allowed to be sold.
  2. The list in Clause 3(4) can be amended.
  1. Clause 4 excludes pre-existing statutory requirements. In other words it applies only to new requirements.
  2. Schedule 1, paras 1-4 provide details on the exception to the mutual recognition principle. The key issue to note is the limited nature of the exceptions – ‘Threats to human, animal or plant health’ only.
  3. Schedule 1 para. 1 provides (emphasis added): 1(1) The mutual recognition principle for goods does not apply to (and section 2(3) does not affect the operation of) legislation so far as it satisfies the conditions set out in this paragraph. (2) The first condition is that the aim of the legislation is to prevent or reduce the movement of a pest or disease into the part of the United Kingdom in which the legislation applies (“the restricting part”) from another part of the United Kingdom (“the affected part”). (3) The second condition is that it is reasonable to believe that the pest or disease—(a) is present in the affected part, and(b) is not present, or is significantly less prevalent, in the restricting part. (4) The third condition is that the potential movement of that pest or disease into the restricting part from the affected part poses (or would in the absence of the legislation pose) a serious threat to the health of humans, animals or plants in the restricting part. (5) The fourth condition is that the responsible administration has provided to the other administrations an assessment of the available evidence in relation to—(a)the threat referred to in sub-paragraph (4), and(b)the likely effectiveness of the legislation in addressing that threat. (6) The fifth condition is that the legislation can reasonably be justified as necessary in order to address the threat referred to in sub-paragraph (4). (7) In this paragraph “pest or disease” includes any organism or agent that is liable to cause a disease or other harm to the health of humans, animals or plants.
  4. Thus, mutual recognition in the UK Bill is quasi absolute. Essentially, the only limitation is ‘to prevent or reduce the movement of a pest or disease’. This is a far cry from the open ended list of justifications found in the EU’s mandatory requirements. This quasi absolute principle of mutual recognition does more damage to regulatory choice by the devolved administrations than under EU law.
  1. This is a classic definition of direct discrimination. A directly discriminatory measures can be saved only in the case of a public health emergency (Schedule 1, para. 5). This is much narrower than EU law, which allows a wider range of justifications under Article36 TFEU.
  2. Clause 8(1) defines indirect discrimination, again in a fairly standard way: A relevant requirement indirectly discriminates against incoming goods if— (a) it does not directly discriminate against the goods, (b) it applies to, or in relation to, the incoming goods in a way that puts them at a disadvantage, (c) it has an adverse market effect, and (d) it cannot reasonably be considered a necessary means of achieving a legitimate aim.
  3. The legitimate aim is further defined as one, or a combination, of the following aims—(a) the protection of the life or health of humans, animals or plants; (b) the protection of public safety or security. (Clause 8(6)). Unlike the open-ended justifications under EU law, this is a much narrower and closed list of justifications (although there are Ministerial powers to expand the list). Again, this limits the devolved government’s ability to justify diverse regulatory matters.
  4. What is noticeable in the case of justification under indirect discrimination and the exclusions for mutual recognition is that there is no justification for key areas protected under EU law such as environmental protection, protection of children, consumer protection.

Fig 2: Internal Market Bill: market access principle and exceptions/justifications

Enforcement

  1. The main avenue of enforcement, The Competition and Markets Authority (CMA), and a new office within it, the Office for the Internal Market (OIM) is given powers to cover monitoring of the ‘health of the market’, as well as the reporting and advice on the economic impact of proposals and regulations on the UK internal market, including its impact on intra-UK trade, investment, and competition. These functions will provide all administrations, legislatures, and external stakeholders with published reporting on developments in the UK internal market. The existing information gathering powers are provided for under section 174 of the Enterprise Act 2 002 (Part 4 of the Act).
  2. The OIM’s reports are not binding on the government. Disputes are to be resolved through existing intergovernmental mechanisms. As the House of Commons library puts it, ‘The Government’s response to the White Paper stated that the Government intended to set out a “consensual approach” and that the CMA’s reports are intended to “support intergovernmental collaboration and coordination”. The Government stated in the press release accompanying the Bill that it would be for the respective legislatures and administrations to resolve disputes.’
  3. These powers are weak in comparison to those available under EU law. There is no direct effect of the internal market provisions enabling individuals to challenge the rules. There is no obligation on the nations to pre-notify draft technical standards (cf Directive 2015/1535), although the OIM does have national measure mutual recognition Schedule 1, Paras. 1- 4 exception (human, animal or plant health) and clause 2 non-discrimination direct discrimination Schedule 1, Para 5 public health emergency indirect discrimination Limited jutifications in Clause 8(6) non-discriminatory rule lawful