Article 28 ECT

The brevity of Article 28 ECT

The concise and exact use of words in Article 28 of the European Community Treaty (ECT) has earned its immense significance as an instrument for the creation of a market in which the free circulation of goods is ensured. Article 28 pertains to European Community (EC) Law particularly when discussing the free movement of goods across the European Union (EU). Case law on Article 28 mainly addresses the prohibition of measures equivalent to quantitative restrictions (MEQRs) and upholds the rights of importers to enjoy free movement of goods without having taxes, restrictions and barriers to market entry that do not exist for domestic sellers. Article 28 has made the imposition of administrative burdens such as inspections, licenses and even formalities by a Member State illegal. Requirements such as mandatory origin marking and maximum and minimum selling prices have also been outlawed in order to maintain and uphold the unifying idea set out under Article 14 of the ECT whereby an internal single market is indicative of an area without internal frontiers and the free movement of goods in ensured. The insistent re-evaluation of MEQRs has lead to precedent which has been developed to a standard that a system has been established whereby the courts can rule on national laws on restrictions and national rules that impede the free movement of goods and are contrary to Article 28.

The free movement of goods is an aspect of the European Union which is critical to the success of a market which consists of all member states and is economically advantageous to all members of the trading bloc. In order to illustrate the validity of the statement made by Weatherill, this essay will attempt to outline briefly the development of the Single Market and its prohibition of trade barriers through various Articles other than 28. Special focus will then explain the significance of MEQRs and the application of case law in developing it wide interpretation. Finally the exceptions to Article 28 will be explained in order to illustrate the strictness of Article 28 and the notion that only grave and severe instances will result in the acceptance of restrictions on the free movement of goods.

The importance of free movement of goods across the EU is founded on the establishment of a Single Market under Article 23 and 25 ECT whereby all Member States are required to form a customs union free of new customs duties and forbidding the increase of existing duties. The meaning of goods was given a wide definition in Commission v Italy (Art Treasures) and includes goods and products “which can be valued in money and which are capable, as such, of forming the subject of commercial transactions.” Goods can include merchandise, glue and even waste products.

Article 25 is directly effective and prohibits the Member States to impose customs duties on imports and exports and of charges having an equivalent effect. Member States are also required to adopt a customs tariff enforceable against third parties or non-Member States. Van Gend was also demonstrative of the importance of individuals enforcing trade rights under Article 25 before the national courts and superseding them to the European Court of Justice (ECJ) if necessary. A charge having equivalent effect of a duty which is masqueraded as a tax or levy is also illegal under Article 25 ECT. The case of Sociaal Fonds centred around the enforcement of a levy on imported diamonds by the Belgian government in order that the diamond workers of Belgium could receive social security benefits. The ECJ held that the levy equalled an obstacle to free movement of goods and was thus prohibited regardless of its destination or purpose; however, had the social security scheme been funded by taxing all diamonds without a specific reference to imports it would have been acceptable under Article 25.

Article 90 ECT is another provision encouraging the free movement of goods by prohibiting the use or implementation of discriminatory taxation. Article 90, which is directly effective, states that “no Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation… in excess of that imposed… on similar domestic products” and also forbade the imposition “on products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.” In the UK tax rates on beer and a reduction of tax on wine was implemented after it was held in Commission v UK that a competitive relationship and indirect protection was the result of higher taxes on imported wine in regards to the tax imposed on domestic beer.

Article 28 ECT is significant in the maintenance of the free movement of goods as it requires Member States to eliminate quantitative restrictions on imports and measures having equivalent effect (MEQR) making it the most significant instrument in maintaining free trade. The elimination of quantitative restrictions and MEQRs on exports was outlined under Article 29 ECT and contains equivalent provisions only pertinent to distinctly applicable measures which treat the domestic trade of a Member State and its export differently . The key importance in the elimination of national barriers to the free movement of goods is through the implementation of Article 28, especially as the second part (in regards to MEQRs) is generally interpreted widely increasing its effectiveness. Case law is generally responsible for the shaping of Article 28 into a “formidable and flexible instrument in the legal campaign against national rules that restrict the free circulation of goods in the Community.” Weatherill also notes that the judges of England have been surprised at the ECJ’s “capacity for judicial lawmaking” but also recognises that the primary function of the EU Institutions is to interpret treaties, directives and other legislation into a functional and practically enforceable legal system.

Quantitative restrictions and MEQRs include quotas and setting non-fiscal barriers to imports and exports. A quantitative restriction is generally classified as quotas or outright bans. Specifically a quantitative restriction is any governmental measure which provides that a certain amount of goods, defined either by quantity or value, may be imported or exported during a specific period of time and “covers total [zero quota] or partial restraint of… imports, exports or goods in transit.” In certain cases the result of inaction by Member States may also be considered a breach of Article 28. In Commission v France French police were not present at incidents of protest by French farmers against the importation of Spanish strawberries. This lack of action by French authorities was held to illustrate France’s persistent failure “to adopt all necessary and proportionate measures in order to prevent the free movement… being obstructed by actions by private individuals” and be in violation of Articles 10 and 28.

It is critical to the argument presented by Weatherill to understand the meaning and disapproval of MEQRs by the EC as they are seen as a great hindrance to the freely flowing movement of goods across a free market. Attention to MEQRs is necessary because often times they operate unnoticed or in a subtle or disguised way with the purpose of protecting domestic products and manufacturers. Divergent to the idea of free market, MEQRs segregate national markets which results in the increased costs to producers and consumers. Thus, Article 28’s prohibition on MEQRs is vital to upholding the argument made by Weatherill and is reinforced by two main sources of guidance on these restrictions.

Although no specific definition of MEQR is given in the ECT itself, Directive 70/50 has provided clarification and guidance, however, is merely regarded as persuasive as it was only formally applicable during a transitional period of the EC. Directive 70/50 covers distinctly and indistinctly applicable measures other than those applicable equally to domestic or imported goods, which hinder imports which would move freely otherwise and includes measures which make importation more difficult or costly. The Directive continues by listing certain things which constitute MEQRs and includes: minimum or maximum prices specified for imported goods as compared with domestic products; less favourable prices for imported products; lowering the value of the import by reducing its intrinsic value of increasing its costs; different payment conditions for imports; different conditions for imports in regards to packaging, composition, identification, size, weight etc…; preference to the purchase of domestic goods or otherwise hindering the purchase of imports; limiting publicity of imports; imposing stocking requirements different, or more difficult to maintain, to domestic goods on imports; and lastly making it a requirement that importers have an importing agent within the domestic realm.

The ECJ also proffered a definition of MEQR in the critical case of Dassonville where the defendants were being prosecuted for importing Scotch Whiskey into Belgium from France without processing the necessary British certificate of authenticity required by Belgian Law. The defendants argued that the Belgian law was in breach of Article 28, as it was making trade very impossible due to the requirement to obtain the certificate, especially as the importer was not importing directly from Britain. The ECJ held that Member States had an obligation to prevent unfair practices provided they are reasonable and do not hinder inter-Member trade placing “firmer emphasis on the vigour of Article 28 as a means to dismantling restrictive national rules” . As it was more difficult for a trader importing goods in circulation in another Member State to obtain the certificate than for an importer to do so when importing of the goods directly from the state of production, it was held that the requirement to obtain the certificate of authenticity was illegal under Article 28 in Dassonville. What is commonly referred to as the Dassonville Formula prescribes a definition of an MEQR simply as a “all trading rules enacted by Member States 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.”

Upon further dissection of this formula meant to uphold and pay tribute to the brevity of the wording of Article 28, one must note that Article 28 applies to State measures that have been enforced and are genuinely restrictive by declaring them illegal MEQRs if it is potentially damaging to free movement of imports. State measures include any promotion of national product where this involves discrimination against imports. Commission v Ireland is also known as the ‘Buy Irish’ Campaign as it focuses on the illegality of the state scheme to promote the sales of Irish (domestic) goods. Goods that were produced in Ireland were labelled as such and information could be obtained on goods through an information service. Although, the Irish Government claimed that sales of imports actually rose during the campaign and that it was merely trying to persuade buyers in one direction not impose a State measure, the Commission still brought an action against the government claiming its scheme was in direct contravention of Article 28. It was held that actual hindrance of free movement was not necessary and that a MEQR does not have to have an immediate or substantial effect on intra-Community trade. Also, that regardless of the degree of actual State responsibility in enforcement, any potential discrimination against imports is illegal this can include national strategies to protect the environment. Lastly, any measure relating to selling arrangements will only be lawful if they are genuinely non-discriminatory against imports and it is dependent on the demonstration of a special impact on imports.

Although immensely powerful in “eliminating a host of national rules that have an effect on trade,” Article 28 is limited; in certain circumstances it does not apply and Member States are allowed to maintain their national barriers to the free movement of goods. The exceptions do not “constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States,” thus maintaining the use of Article 28 as a significant instrument in the creation and preservation of a single market. Therefore, a brief explanation of the exemptions and derogations from Article 28 must be undertaken in order that the completeness of the ideology of free movement of goods can be understood and the benefits derived from placing some restrictions on the Article can be seen as advantageous to the upkeep of a successful single market and eventually lead to an increase in harmonisation.

Referring back to the differentiation between distinctly and indistinctly applicable measures outlines in Directive 70/50, it is important to distinguish the difference between the two. Distinctly applicable measures are those which do not apply equally to domestic and imported goods whereby, indistinctly applicable measures apply to both domestic and imported goods equally and without distinction. Generally, distinctly applicable measures are permissible if there is a valid justification for implementation using specific exemptions set out in Article 30 ECT. Indistinctly applicable measures are also permissible should a valid exemption in Article 30 be held to exist or it is justifiable under the rule set out in the ECJ’s judgment in Cassis de Dijon. Briefly, The Principle of Mutual Recognition states that “there is no valid reason why goods which have been lawfully produced and marketed in one Member State should not be introduced into any other Member State.” Provisions which are necessary in order to satisfy mandatory requirements relating to “fiscal supervision, public health, fairness of commercial transactions and the defence of the consumer” will be considered in any exception application. Following on from this principle and limits placed by the case of Keck distinctions have been made between measures which pertain to selling arrangements and measures pertaining to characteristics of a product. The distinctions are important as they “apply to all affected traders operating within the national territory … affected in the same manner in law and fact” in the marketing of their goods.

The ECJ has made it clear that the exceptions to Article 28 are to be strictly construed and that the list in Article 30 is exhaustive. However, each case must be assessed on its own merits to decide if the actual or potential effect exists in relation to Article 28 including any national legislation in force. Six justifications exist and establish grounds for derogation from Article 28, the first is public morality. Precedent for this exception focuses primarily on two UK cases concerning pornography. The court held that the seizure of Dutch pornographic material and the distributors’ subsequent prosecution were in violation of Article 28 however, the Member State had a right “to determine the standards of public morality which prevailed in its territory.” Although legislation was in force that prohibited the importation of explicit or obscene materials the ECJ held that the outright ban on importation of such materials was not a disguised restriction on trade or a means of arbitrary discrimination, instead when considered in its entirety equated to a restraint on the manufacture and marketing of pornographic material and the ECJ “concluded that there was no lawful trade in such goods within the UK.” However, should a lawful trade be found to exist, as was the case in Conegate Ltd whereby inflatable dolls were being imported, the restriction will be in breach of Article 28 and in this case found to be discriminatory on grounds of nationality.

Public policy can never be invoked for purely economic reasons; however, economic measures may exceptionally be justified by reasons of national security as examined below. R v Thompson is a successful demonstration of this exemption however, public policy does not cover consumer protection nor can it be referred to by a Member State to include any domestic, social or economic issue about which it is apprehensive. Public security may justify the restrictions on imports or exports; however, this exception has rarely been invoked mainly because it is an issue which is often dealt with politically of diplomatically rather than in the discussions regarding free movement of goods. However, Campus Oil is a case concerning both public policy and public security, which involved the legislative imposition on importers of petrol to buy a certain percentage of their requirements from their sole state-owned oil refinery at fixed prices. It was held that in regards to public security the exception would be held to exist and maintenance of Ireland’s oil refinery enabled Ireland to enter into long-term contracts with oil producers who would ensure continued oil supplies during a time of crisis or shortages.

Protection of the health and life of humans, animals and plants and the protection of national treasures possessing artistic, historic or archaeological value are the subsequent two exceptions outlined under Article 30. The former will only be upheld if there is a proven health risk and forms part of a seriously considered health policy and EC Institutions may take protective measures without waiting for the illegality or seriousness of the risk to become fully apparent. The latter exception is devoid of definitive case law however, guidance is sought from Regulation 3911/92 which seeks to compel unvarying standards on exportation of protected arts and cultural goods within a licensing scheme for art treasures. It is also assumed that each Member State would be allowed to determine what equated to a national treasure and why the item possesses importance or origin from that State. Harsh investigation into the claim of a treasure will also be undertaken to ensure that the item is not being retained merely because it is scarce in that particular Member State.
Lastly, restrictions on imports and exports may be justified on grounds of the protection of industrial and commercial property. This often includes copyrights, patents, trademarks and other rights which are limited geographically by their granting authority. However, this exception often is invoked in discussions regarding competition law.

This it is apparent that the case law for exceptions and derogations from Article 28 is not limitless and the exhaustiveness of the list and close scrutiny of prohibitions for hidden restrictions hindering trade make it difficult for a Member State to impair the free movement of goods. The availability of Article 30 justifications merely reassures Member States that it is still able to resist the impulsion of a free market and protect national interests without sacrificing its legitimacy within the Union.

Article 28 is “striking for its brevity” and significantly eliminates barriers which obstruct or restrict the free movement of goods across the Single Market outlined in Article 14 ECT 1992. It is widely acknowledged that Article 28 is fundamental to the development of an economic area in which national boundaries are eliminated in order to afford market forces to operate freely however; “tariffs against imports from sources outside of the area” may remain in force. These tariffs were permissible because it provided an immediate benefit to the development of the single market and would help Europe combat the “stagnation of intra-EC trade and reduction of EC world market shares in manufactured goods.” Article 28 specifically ensures that competition between goods from another Member State is not prevented or distorted by any government provisions equivalent to quotas, tariffs or any other measure equivalent to a quantitative restriction affording Article 28 its immense significance as an instrument for the creation of a market in which the free circulation of goods is ensured.

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