Internal Market (European Union)
Encyclopedia
The European Union
's (EU) Internal Market (sometimes known as the Single Market, formerly the Common Market) seeks to guarantee the free movement of goods, capital
, services, and people
– the EU's four freedoms – within the EU's 27 member states
.
The Internal Market is intended to be conducive to increased competition
, increased specialisation
, larger economies of scale
, allows goods and factors of production
to move to the area where they are most valued, thus improving the efficiency of the allocation of resources.
It is also intended to drive economic integration whereby the once separate economies of the member states become integrated within a single EU wide economy. Half of the trade in goods within the EU is covered by legislation harmonised by the EU.
The creation of the internal market as a seamless, single market
is an ongoing process, with the integration of the service industry still containing gaps. It also has an increasing international element, with the market represented as one in international trade negotiations. Notably, the internal market is open to three non-EU states via the European Economic Area
.
(EEC) were the development of a common market offering free movement of goods, service, people and capital (see below). Free movement of goods was established in principle through the customs union
between its then-six member states
.
However the EEC struggled to enforce a single market due to the absence of strong decision making structures. It was difficult to remove intangible barriers with mutual recognition of standards and common regulations due to protectionist attitudes.
In the 1980s, when the economy of the EEC began to lag behind the rest of the developed world, the Delors Commission
took the initiative to attempt to relaunch the common market, publishing a White Paper in 1985 identifying 300 measures to be addressed in order to complete a single market. The White Paper which was well received and led to the adoption of the Single European Act
, a treaty which reformed the decision making mechanisms of the EEC and set a deadline of 31 December 1992 for the completion of a single market. In the end, it was launched on 1 January 1993.
The new approach, pioneered by the Delors Commission, combined positive and negative integration, relying upon minimum rather than exhaustive harmonisation. Negative integration consists of prohibitions imposed on member states of discriminatory behaviour and other restrictive practices. Positive integration consists in approximation of laws and standards. Especially important (and controversial) in this respect is the adoption of harmonising legislation under Article 114 of the TFEU.
The Commission also relied upon the European Court of Justice's Cassis de Dijon (Case 120/78) jurisprudence, under which member states were obliged to recognise goods which had been legally produced in another member state, unless the member state could justify the restriction by reference to a mandatory requirement. Harmonisation would only be used to overcome barriers created by trade restrictions which survived the Cassis mandatory requirements test, and to ensure essential standards where there was a risk of a race to the bottom
. Thus harmonisation was largely used to ensure basic health and safety standards were met.
By 1992 about 90% of the issues had been resolved and in the same year the Maastricht Treaty
set about to create Economic and Monetary Union
as the next stage of integration. Work on freedom for services did take longer, and was the last freedom to be implemented, mainly through the Posting of Workers Directive
(adopted in 1996) and the Directive on services in the internal market
(adopted in 2006).
In 1997 the Amsterdam Treaty
abolished physical barriers across the internal market by incorporating the Schengen Area
within the competences of the EU. The Schengen Agreement
implements the abolition of border controls between most member states, common rules on visas, and police and judicial cooperation.
Even as the Lisbon Treaty came into force in 2009 however, some areas pertaining parts of the four freedoms (especially in the field of services) had not yet been completely opened. Those, along with further work on the economic and monetary union, would see the EU move further to a European Home Market.
. 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" (Case 27/67 Fink-Frucht).
By agreement between the Union and the states concerned Andorra
, Monaco
, San Marino
and Turkey
also participate in the EU Customs Union.
Neither the purpose of the charge, nor its name in domestic law, is relevant (Case 7/68 Commission v Italy).
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.
defined charge having equivalent effect in Case 24/68 Commission v Italy.
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 (Case 87/75 Bresciani v Amministrazione Italiana delle Finanze).
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 measure having equivalent effect if:
In the ECJ stated:
has over several decades provided detailed case law interpreting Article 34. In a well-known series of cases beginning with case 8/74 Dassonville, continuing with case 120/78 Cassis de Dijon
and culminating in C-267/91 Keck and Mithouard, 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.
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.
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 (Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein).
the development of the capital provisions had been slow. Post-Maastricht there has been a rapidly developing corpus of ECJ judgements regarding this initially neglected freedom. The free movement of capital is unique insofar as that it is granted equally to non-member states.
Capital within the EU may be transferred in any amount from one country to another. All intra-EU transfers in euro
are considered as domestic payments and bear the corresponding domestic transfer costs. This includes all member States of the EU, even those outside the Eurozone
providing the transactions are carried out in euro. Credit/debit card charging and ATM withdrawals within the Eurozone are also charged as domestic, however paper-based payment orders, like cheques, have not been standardised so these are still domestic-based. The ECB has also set up a clearing system
, TARGET
, for large euro transactions.
persons to move between member states in order to provide services on a temporary or permanent basis. While services account for between sixty and seventy percent of GDP, legislation in the area is not as developed as in other areas. This lacuna has been addressed by the recently passed Directive on services in the internal market
which aims to liberalise the cross border provision of services. According to the Treaty the provision of services is a residual freedom that only applies if no other freedom is being exercised.
The Free Movement of Services is established in Article 56 TFEU, with further guidance in Article 57 – 62 TFEU. Exceptions are found in Articles 51-55 TFEU (common with Freedom of Establishment). The freedom prohibits restrictions on free circulation of services within Member States. Services are defined in the negative, “they are normally provided for remuneration, in so far as they are not governed by the provisions relating to freedom of movement for goods, capital and persons.” (Art. 57 TFEU)
The services are distinguished from freedom of establishment based on their temporary rather than permanent nature and from free movement of workers based on the fact that the freedom affects corporate entities and individuals outside of the relationship of employment. Chapter 3 of Title IV applies to services as long as either the service moves across the border, or the provider moves or the service itself moves (e.g. an internet purchase).
The freedom to provide services is directly effective, meaning that member states must ensure that national laws do not conflict with the provisions. The Court has recognised that the obstacles to freedom to provide services may arise both from discriminatory and indistinctly applicable rules.
Two directives are also of particular relevance - the Posting of Workers Directive, sometimes referred to as the Posted Workers Directive
, and the Directive on services in the internal market
The principle has been broadly interpreted by the European Court of Justice. However, its restrictions have been narrowly and literally interpreted. For example, in the case of Reyners, the European Court of Justice held that "...the exceptions allowed by the first paragraph ... cannot be given a scope which would exceed the objective for which this exemption clause was inserted." (Case 2/74 Reyners v. Belgium at para. 43). The teeth of this principle is that natural persons, who are nationals of a Member State, and Community companies may take up economic activity in any Member State in a stable and continuous way and cannot be discriminated against based on nationality or the mode of incorporation. (See also: Directive 2004/38/EC on the right to move and reside freely
)
can move freely between member states to live, work, study or retire in another country. This required the lowering of administrative formalities and more recognition of professional qualifications of other states. Fostering the free movement of people has been a major goal of European integration since the 1950s.
Broadly defined, this freedom enables citizens of one Member State to travel to another, to reside and to work there (permanently or temporarily). The idea behind EU legislation in this field is that citizens from other member states should be treated equally with domestic ones – they should not be discriminated against.
The main provision of the freedom of movement of persons is Article 45 of the TFEU that prohibits restrictions on the basis of nationality.
, for example, the relevant document is the EEA family permit
.
, the rights of economically active persons to free movement within the EU have been complemented by limited rights for non-economically active citizens to move freely within the EU, under Article 20 (1) of the TFEU and Directive 2004/38/EC on the right to move and reside freely
within the EU.
all EU member state excluding Bulgaria
, Cyprus
, Ireland
, Romania
and the United Kingdom
, and three non-members—Iceland
, Norway
, and Switzerland
—have abolished physical barriers across the single market by eliminating border controls.
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
's (EU) Internal Market (sometimes known as the Single Market, formerly the Common Market) seeks to guarantee the free movement of goods, capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
, services, and people
Freedom of movement for workers
The freedom of movement for workers is a policy chapter of the acquis communautaire of the European Union. It is part of the free movement of persons and one of the four economic freedoms: free movement of goods, services, labour and capital...
– the EU's four freedoms – within the EU's 27 member states
Member State of the European Union
A member state of the European Union is a state that is party to treaties of the European Union and has thereby undertaken the privileges and obligations that EU membership entails. Unlike membership of an international organisation, being an EU member state places a country under binding laws in...
.
The Internal Market is intended to be conducive to increased competition
Competition (economics)
Competition in economics is a term that encompasses the notion of individuals and firms striving for a greater share of a market to sell or buy goods and services...
, increased specialisation
Division of labour
Division of labour is the specialisation of cooperative labour in specific, circumscribed tasks and likeroles. Historically an increasingly complex division of labour is closely associated with the growth of total output and trade, the rise of capitalism, and of the complexity of industrialisation...
, larger economies of scale
Economies of scale
Economies of scale, in microeconomics, refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit...
, allows goods and factors of production
Factors of production
In economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...
to move to the area where they are most valued, thus improving the efficiency of the allocation of resources.
It is also intended to drive economic integration whereby the once separate economies of the member states become integrated within a single EU wide economy. Half of the trade in goods within the EU is covered by legislation harmonised by the EU.
The creation of the internal market as a seamless, single market
Single market
A single market is a type of trade bloc which is composed of a free trade area with common policies on product regulation, and freedom of movement of the factors of production and of enterprise and services. The goal is that the movement of capital, labour, goods, and services between the members...
is an ongoing process, with the integration of the service industry still containing gaps. It also has an increasing international element, with the market represented as one in international trade negotiations. Notably, the internal market is open to three non-EU states via the European Economic Area
European Economic Area
The European Economic Area was established on 1 January 1994 following an agreement between the member states of the European Free Trade Association and the European Community, later the European Union . Specifically, it allows Iceland, Liechtenstein and Norway to participate in the EU's Internal...
.
History
Two of the original core objectives of the European Economic CommunityEuropean Economic Community
The European Economic Community The European Economic Community (EEC) The European Economic Community (EEC) (also known as the Common Market in the English-speaking world, renamed the European Community (EC) in 1993The information in this article primarily covers the EEC's time as an independent...
(EEC) were the development of a common market offering free movement of goods, service, people and capital (see below). Free movement of goods was established in principle through the customs union
European Union Customs Union
The European Union Customs Union is a customs union which consists of all the Member States of the European Union and a number of surrounding countries....
between its then-six member states
Inner Six
The Inner Six, or simply The Six, are the six founding member states of the European Communities. This was in contrast to the outer seven who formed the European Free Trade Association rather than be involved in supranational European integration .-History:The inner six are those who responded to...
.
However the EEC struggled to enforce a single market due to the absence of strong decision making structures. It was difficult to remove intangible barriers with mutual recognition of standards and common regulations due to protectionist attitudes.
In the 1980s, when the economy of the EEC began to lag behind the rest of the developed world, the Delors Commission
Delors Commission
The Delors Commission was the administration of Jacques Delors, the 8th President of the European Commission. Delors presided over the European Commission for three terms The Delors Commission was the administration of Jacques Delors, the 8th President of the European Commission. Delors presided...
took the initiative to attempt to relaunch the common market, publishing a White Paper in 1985 identifying 300 measures to be addressed in order to complete a single market. The White Paper which was well received and led to the adoption of the Single European Act
Single European Act
The Single European Act was the first major revision of the 1957 Treaty of Rome. The Act set the European Community an objective of establishing a Single Market by 31 December 1992, and codified European Political Cooperation, the forerunner of the European Union's Common Foreign and Security Policy...
, a treaty which reformed the decision making mechanisms of the EEC and set a deadline of 31 December 1992 for the completion of a single market. In the end, it was launched on 1 January 1993.
The new approach, pioneered by the Delors Commission, combined positive and negative integration, relying upon minimum rather than exhaustive harmonisation. Negative integration consists of prohibitions imposed on member states of discriminatory behaviour and other restrictive practices. Positive integration consists in approximation of laws and standards. Especially important (and controversial) in this respect is the adoption of harmonising legislation under Article 114 of the TFEU.
The Commission also relied upon the European Court of Justice's Cassis de Dijon (Case 120/78) jurisprudence, under which member states were obliged to recognise goods which had been legally produced in another member state, unless the member state could justify the restriction by reference to a mandatory requirement. Harmonisation would only be used to overcome barriers created by trade restrictions which survived the Cassis mandatory requirements test, and to ensure essential standards where there was a risk of a race to the bottom
Race to the bottom
A race to the bottom is a socio-economic concept that is argued to occur between countries as an outcome of regulatory competition, progressive taxation policies and social welfare spending...
. Thus harmonisation was largely used to ensure basic health and safety standards were met.
By 1992 about 90% of the issues had been resolved and in the same year the Maastricht Treaty
Maastricht Treaty
The Maastricht Treaty was signed on 7 February 1992 by the members of the European Community in Maastricht, Netherlands. On 9–10 December 1991, the same city hosted the European Council which drafted the treaty...
set about to create Economic and Monetary Union
Economic and monetary union
An economic and monetary union is a type of trade bloc which is composed of an economic union with a monetary union. It is to be distinguished from a mere monetary union , which does not involve a common market. This is the fifth stage of economic integration...
as the next stage of integration. Work on freedom for services did take longer, and was the last freedom to be implemented, mainly through the Posting of Workers Directive
Posted Workers Directive
The EU Posted Workers Directive is an EU directive concerned with the free movement of workers within the European Union. It makes an exception to the Convention on the Law Applicable to Contractual Obligations 1980, which ordinarily requires that workers are protected by the law of the member...
(adopted in 1996) and the Directive on services in the internal market
Directive on services in the internal market
The Directive on services in the internal market is an EU law aiming at establishing a single market for services within the European Union . Drafted under the leadership of the former European Commissioner for the Internal Market Frits Bolkestein, it has been popularly referred to by his name...
(adopted in 2006).
In 1997 the Amsterdam Treaty
Amsterdam Treaty
The Amsterdam Treaty, officially the Treaty of Amsterdam amending the Treaty of the European Union, the Treaties establishing the European Communities and certain related acts, was signed on 2 October 1997, and entered into force on 1 May 1999; it made substantial changes to the Maastricht Treaty,...
abolished physical barriers across the internal market by incorporating the Schengen Area
Schengen Area
The Schengen Area comprises the territories of twenty-five European countries that have implemented the Schengen Agreement signed in the town of Schengen, Luxembourg, in 1985...
within the competences of the EU. The Schengen Agreement
Schengen Agreement
The Schengen Agreement is a treaty signed on 14 June 1985 near the town of Schengen in Luxembourg, between five of the ten member states of the European Economic Community. It was supplemented by the Convention implementing the Schengen Agreement 5 years later...
implements the abolition of border controls between most member states, common rules on visas, and police and judicial cooperation.
Even as the Lisbon Treaty came into force in 2009 however, some areas pertaining parts of the four freedoms (especially in the field of services) had not yet been completely opened. Those, along with further work on the economic and monetary union, would see the EU move further to a European Home Market.
Customs duties and taxation
The European Union is also a customs unionCustoms union
A customs union is a type of trade bloc which is composed of a free trade area with a common external tariff. The participant countries set up common external trade policy, but in some cases they use different import quotas...
. 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" (Case 27/67 Fink-Frucht).
By agreement between the Union and the states concerned Andorra
Andorra
Andorra , officially the Principality of Andorra , also called the Principality of the Valleys of Andorra, , is a small landlocked country in southwestern Europe, located in the eastern Pyrenees mountains and bordered by Spain and France. It is the sixth smallest nation in Europe having an area of...
, Monaco
Monaco
Monaco , officially the Principality of Monaco , is a sovereign city state on the French Riviera. It is bordered on three sides by its neighbour, France, and its centre is about from Italy. Its area is with a population of 35,986 as of 2011 and is the most densely populated country in the...
, San Marino
San Marino
San Marino, officially the Republic of San Marino , is a state situated on the Italian Peninsula on the eastern side of the Apennine Mountains. It is an enclave surrounded by Italy. Its size is just over with an estimated population of over 30,000. Its capital is the City of San Marino...
and Turkey
Turkey
Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
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 (Case 7/68 Commission v Italy).
Since the Single European Act
Single European Act
The Single European Act was the first major revision of the 1957 Treaty of Rome. The Act set the European Community an objective of establishing a Single Market by 31 December 1992, and codified European Political Cooperation, the forerunner of the European Union's Common Foreign and Security Policy...
, 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 JusticeEuropean Court of Justice
The Court can sit in plenary session, as a Grand Chamber of 13 judges, or in chambers of three or five judges. Plenary sitting are now very rare, and the court mostly sits in chambers of three or five judges...
defined charge having equivalent effect in Case 24/68 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. (Case 24/68 Commission v Italy)
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 (Case 87/75 Bresciani v Amministrazione Italiana delle Finanze).
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 measure 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 (Case 132/78 Denkavit v France),
- if it constitutes payment for a service in fact rendered to the economic operator of a sum in proportion to the service (Case 158/82 Commission v Denmark), or
- subject to certain conditions, if it attaches to inspections carried out to fulfil obligations imposed by Community law (Case 46/76 Bauhuis v Netherlands).
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 ECJ stated:
- 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 (see the judgment of 9 July 1987 in ).
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 JusticeEuropean Court of Justice
The Court can sit in plenary session, as a Grand Chamber of 13 judges, or in chambers of three or five judges. Plenary sitting are now very rare, and the court mostly sits in chambers of three or five judges...
has over several decades provided detailed case law interpreting Article 34. In a well-known series of cases beginning with case 8/74 Dassonville, continuing with case 120/78 Cassis de Dijon
Cassis de Dijon (court case)
Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein , also known as the Cassis de Dijon case is a decision of the European Court of Justice , in which a regulation applying both to imports and to domestic goods that produces an effect equivalent to a quantitative import restriction was held...
and culminating in C-267/91 Keck and Mithouard, 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 meatMeat
Meat is animal flesh that is used as food. Most often, this means the skeletal muscle and associated fat and other tissues, but it may also describe other edible tissues such as organs and offal...
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
Cassis de Dijon (court case)
Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein , also known as the Cassis de Dijon case is a decision of the European Court of Justice , in which a regulation applying both to imports and to domestic goods that produces an effect equivalent to a quantitative import restriction was held...
case (Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein).
Free movement of capital
Free movement of capital is intended to permit movement of investments such as property purchases and buying of shares between countries. Until the drive towards Economic and Monetary UnionEconomic and monetary union
An economic and monetary union is a type of trade bloc which is composed of an economic union with a monetary union. It is to be distinguished from a mere monetary union , which does not involve a common market. This is the fifth stage of economic integration...
the development of the capital provisions had been slow. Post-Maastricht there has been a rapidly developing corpus of ECJ judgements regarding this initially neglected freedom. The free movement of capital is unique insofar as that it is granted equally to non-member states.
Capital within the EU may be transferred in any amount from one country to another. All intra-EU transfers in euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
are considered as domestic payments and bear the corresponding domestic transfer costs. This includes all member States of the EU, even those outside the Eurozone
Eurozone
The eurozone , officially called the euro area, is an economic and monetary union of seventeen European Union member states that have adopted the euro as their common currency and sole legal tender...
providing the transactions are carried out in euro. Credit/debit card charging and ATM withdrawals within the Eurozone are also charged as domestic, however paper-based payment orders, like cheques, have not been standardised so these are still domestic-based. The ECB has also set up a clearing system
Clearing (finance)
In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. Clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction....
, TARGET
TARGET
TARGET was an interbank payment system for the real-time processing of cross-border transfers throughout the European Union. It included 16 national real-time gross settlement systems and the ECB payment mechanism...
, for large euro transactions.
Free movement of services
The free movement of services and of establishment allows self-employedSelf-employment
Self-employment is working for one's self.Self-employed people can also be referred to as a person who works for himself/herself instead of an employer, but drawing income from a trade or business that they operate personally....
persons to move between member states in order to provide services on a temporary or permanent basis. While services account for between sixty and seventy percent of GDP, legislation in the area is not as developed as in other areas. This lacuna has been addressed by the recently passed Directive on services in the internal market
Directive on services in the internal market
The Directive on services in the internal market is an EU law aiming at establishing a single market for services within the European Union . Drafted under the leadership of the former European Commissioner for the Internal Market Frits Bolkestein, it has been popularly referred to by his name...
which aims to liberalise the cross border provision of services. According to the Treaty the provision of services is a residual freedom that only applies if no other freedom is being exercised.
The Free Movement of Services is established in Article 56 TFEU, with further guidance in Article 57 – 62 TFEU. Exceptions are found in Articles 51-55 TFEU (common with Freedom of Establishment). The freedom prohibits restrictions on free circulation of services within Member States. Services are defined in the negative, “they are normally provided for remuneration, in so far as they are not governed by the provisions relating to freedom of movement for goods, capital and persons.” (Art. 57 TFEU)
The services are distinguished from freedom of establishment based on their temporary rather than permanent nature and from free movement of workers based on the fact that the freedom affects corporate entities and individuals outside of the relationship of employment. Chapter 3 of Title IV applies to services as long as either the service moves across the border, or the provider moves or the service itself moves (e.g. an internet purchase).
The freedom to provide services is directly effective, meaning that member states must ensure that national laws do not conflict with the provisions. The Court has recognised that the obstacles to freedom to provide services may arise both from discriminatory and indistinctly applicable rules.
Two directives are also of particular relevance - the Posting of Workers Directive, sometimes referred to as the Posted Workers Directive
Posted Workers Directive
The EU Posted Workers Directive is an EU directive concerned with the free movement of workers within the European Union. It makes an exception to the Convention on the Law Applicable to Contractual Obligations 1980, which ordinarily requires that workers are protected by the law of the member...
, and the Directive on services in the internal market
Directive on services in the internal market
The Directive on services in the internal market is an EU law aiming at establishing a single market for services within the European Union . Drafted under the leadership of the former European Commissioner for the Internal Market Frits Bolkestein, it has been popularly referred to by his name...
Freedom of establishment
The principle of the freedom of establishment has a basis in Articles 49-55 of the TFEU. To better understand the freedom of establishment, Article 49 and Article 54 tend to be read together. According to Article 49 "...restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited.... Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 54..." This second paragraph defines 'companies or firms' as "...companies or firms constituted under civil or commercial law, including cooperative societies, and other legal persons governed by public or private law, save for those which are non-profit-making." The right of establishment, therefore, is granted both to natural and legal persons. (Case C-70/95 Sodemare at para. 26).The principle has been broadly interpreted by the European Court of Justice. However, its restrictions have been narrowly and literally interpreted. For example, in the case of Reyners, the European Court of Justice held that "...the exceptions allowed by the first paragraph ... cannot be given a scope which would exceed the objective for which this exemption clause was inserted." (Case 2/74 Reyners v. Belgium at para. 43). The teeth of this principle is that natural persons, who are nationals of a Member State, and Community companies may take up economic activity in any Member State in a stable and continuous way and cannot be discriminated against based on nationality or the mode of incorporation. (See also: Directive 2004/38/EC on the right to move and reside freely
Directive 2004/38/EC on the right to move and reside freely
The Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States...
)
Freedom of movement of people
The free movement of people means EU citizensCitizenship of the European Union
Citizenship of the European Union was introduced by the Maastricht Treaty . European citizenship is supplementary to national citizenship and affords rights such as the right to vote in European elections, the right to free movement and the right to consular protection from other EU states'...
can move freely between member states to live, work, study or retire in another country. This required the lowering of administrative formalities and more recognition of professional qualifications of other states. Fostering the free movement of people has been a major goal of European integration since the 1950s.
Broadly defined, this freedom enables citizens of one Member State to travel to another, to reside and to work there (permanently or temporarily). The idea behind EU legislation in this field is that citizens from other member states should be treated equally with domestic ones – they should not be discriminated against.
The main provision of the freedom of movement of persons is Article 45 of the TFEU that prohibits restrictions on the basis of nationality.
Free movement of workers
Workers have the right to move to a different Member State, to look for work and be employed under the same conditions as nationals of that State (subject to a number of reserved areas greatly varying according to country: this means in many instances nationals of country A exercising a profession in country B the equivalent of which a national of country B would not be authorised to exercise in country A), number and benefit from the same social and tax advantages. This right has been extended by the Court of Justice to family members that accompany the worker, although they derive their rights from the main holder. Family members from non-EU states also have these rights. To claim these rights, family members must complete specific paperwork. In the United KingdomUnited Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, for example, the relevant document is the EEA family permit
EEA family permit
A European Economic Area Family Permit is an immigration document that permits the holder to enter the United Kingdom as the dependent of a citizen of the European Economic Area...
.
Free movement for the non-economically active
Following the Maastricht TreatyMaastricht Treaty
The Maastricht Treaty was signed on 7 February 1992 by the members of the European Community in Maastricht, Netherlands. On 9–10 December 1991, the same city hosted the European Council which drafted the treaty...
, the rights of economically active persons to free movement within the EU have been complemented by limited rights for non-economically active citizens to move freely within the EU, under Article 20 (1) of the TFEU and Directive 2004/38/EC on the right to move and reside freely
Directive 2004/38/EC on the right to move and reside freely
The Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States...
within the EU.
The Schengen Area
Through the Schengen AreaSchengen Area
The Schengen Area comprises the territories of twenty-five European countries that have implemented the Schengen Agreement signed in the town of Schengen, Luxembourg, in 1985...
all EU member state excluding Bulgaria
Bulgaria
Bulgaria , officially the Republic of Bulgaria , is a parliamentary democracy within a unitary constitutional republic in Southeast Europe. The country borders Romania to the north, Serbia and Macedonia to the west, Greece and Turkey to the south, as well as the Black Sea to the east...
, Cyprus
Cyprus
Cyprus , officially the Republic of Cyprus , is a Eurasian island country, member of the European Union, in the Eastern Mediterranean, east of Greece, south of Turkey, west of Syria and north of Egypt. It is the third largest island in the Mediterranean Sea.The earliest known human activity on the...
, Ireland
Ireland
Ireland is an island to the northwest of continental Europe. It is the third-largest island in Europe and the twentieth-largest island on Earth...
, Romania
Romania
Romania is a country located at the crossroads of Central and Southeastern Europe, on the Lower Danube, within and outside the Carpathian arch, bordering on the Black Sea...
and the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, and three non-members—Iceland
Iceland
Iceland , described as the Republic of Iceland, is a Nordic and European island country in the North Atlantic Ocean, on the Mid-Atlantic Ridge. Iceland also refers to the main island of the country, which contains almost all the population and almost all the land area. The country has a population...
, Norway
Norway
Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...
, and Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
—have abolished physical barriers across the single market by eliminating border controls.