Treaty on the Functioning of the European Union

Article 30 of the Treaty on the Functioning of the European Union (“TFEU”) contains an absolute prohibition on customs duties and measures that have an equivalent effect. This is defined by the European Court of Justice (“ECJ”) as:

“Any 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”. [1]

The ECJ has ruled that this definition includes charges for inspections imposed on imports by Member States. [2] Such a charge will breach Article 30 even if it does not benefit the state and it is not protective or discriminatory. Even if domestic products were subject to similar inspections, this is not relevant unless the charges on the domestic and imported goods were applied according to the same criteria and at the same stage of production. [3] Inspections have been sanctioned if they are necessary to fulfil EU law obligations but there is no evidence of such obligations in this case. [4]

Therefore, the unilateral £50 fee on the import of electrical goods will breach Article 30 TFEU.

In addition, inspections imposed on imports that are not imposed on domestic goods have been found to breach Article 34 TFEU. This prohibits quantitative restrictions on imports or measures having equivalent effect. A measure having equivalent effect has been defined in Dassonville [5] :

“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.”

This has been held by the ECJ to include inspections of imports that are not imposed on domestic goods. [6] The measure is distinctly applicable as it does not apply to domestic goods. Therefore, it can only be justified by use of one of the derogations found in Article 36 TFEU. In this case, none of the derogations are likely to be applicable. The UK may argue that the inspections are to prevent faulty electrical products that may threaten the health of humans. However, given the presumption of equivalence [7] that EU law creates between trading countries, this alone will not be sufficient justification unless the UK can show that the e-reader from France is a specific health hazard.

Therefore, the inspection of imports (regardless of the fee charged) will breach Article 34 if identical inspections are not also placed on domestic products.

Higher Sales Tax

Article 110(1) TFEU prohibits the imposition of internal taxation in excess of that imposed on similar domestic products. In this case, the sales tax on imported e-readers is clearly higher than that on UK e-readers. The ECJ has held such a tax to be directly discriminatory [8] and therefore it is absolutely prohibited. The higher sales tax therefore breaches Article 110 (1).

Government Contribution

There is no suggestion that the government contribution from the scheme is sourced from any taxation on e-readers. Therefore, this measure will not constitute a para-fiscal charge under Article 110. [9]

However, the measure will contravene Article 34 TFEU. The Dassonville formula has been held to include partial government sponsorship of a scheme to encourage consumers to buy national products as such scheme was held to be a reflection of national government policy.The ECJ have effectively held that there must be no government involvement in schemes to promote the purchase of national products otherwise it will breach Article 36. [10]

Art 34 does not prevent a government funded body from drawing attention in its publicity to the specific qualities of a product produced in the member state. However, the body is under a duty not to discourage buying of products from other member states, nor disparage those goods, nor encourage consumers to buy domestic products solely because of their domestic origin. [11] In this case the UK has therefore breached Article 34 as it clearly breaches this duty. The measure is distinctly applicable as it only supports the UK e-reader. Therefore, the UK could only justify the move by reference to one of the derogations in Article 36 TFEU. The only possible derogation that may be used is the public policy of supporting British goods and authors. However, this derogation has been construed extremely narrowly by the ECJ. It has only been invoked successfully once [12] on the basis that that the policy protected one of the state’s fundamental interests (the right to mint coinage). Supporting UK goods is not a fundamental interest and therefore the derogation cannot be invoked.

The traditional rule that distinctly applicable measures can only be justified by an Article 36 derogation has recently been challenged [13] and the doctrine of mandatory requirements has been used for the justification of a distinctly applicable measure. This doctrine allows Article 34 to be breached in order to fulfil a mandatory requirement of the State. If this is the case, then the UK may attempt to justify the inspection on the basis of protection of British literature. To do so, the restriction must be necessary and proportionate. It seems that funding a body promoting the purchase of UK e-readers is not necessary to protect British literature. In any case, the traditional distinction still remains good law. The distinction has only been relaxed in exceptional cases revolving around environmental protection. [14]

Therefore, the government contribution will breach Article 34 TFEU.

Staff certification requirement

The requirement that only staff with certified competence can sell electronic devices is not prima facie a quantitative restriction on imports or a measure having equivalent effect. However, it can be categorised as a certain selling arrangement using the Keck [15] formula. Whilst it was originally thought that all certain selling arrangements fall outside Article 34, it has now been held that such arrangements only fall outside Article 34 TFEU provided that the requirement applies to all UK traders and to domestic and imported products alike. [16] Therefore, unless it is easier for sellers to become certified to sell UK readers than foreign readers (i.e. there is a different burden in fact on the foreign product), there will be no discrimination and Article 34 will not be breached.

There has been some suggestion from commentators such as Weatherill [17] and Barnard [18] that analogy with the field of free movement of persons and the decision in Commission v Italy (trailers) [19] that a market access approach should now be used and any measure restricting access of imports to the market regardless of whether they are discriminatory must be justified under a mandatory requirement. However, this view has not been adopted in by the ECJ of the majority of commentators. Therefore, Norman SA would be unable to bring an action under this approach at present.

Therefore, the UK will not be in breach of Article 34 TFEU.

Banning of adult magazine downloads

This measure does not prima facie breach Article 34 as it applies to the download of adult magazines onto all e-readers. However, if the measure does not affect UK e-readers as they do not make adult magazines available on their products, then the measure will be indistinctly applicable and classified as a measure with equivalent effect to a quantitative restriction. [20] This is because it would place a higher burden in fact on imported products than domestic products. The measure will therefore breach Article 34 and must be justified by an Article 36 derogation or the doctrine of mandatory requirements. In addition, after Commission v Italy (trailers) [21] , a restriction on use is classified as a breach of Article 34 and must be justified by a derogation or a mandatory requirement. The measure could also be seen as a partial restriction on use.

The UK is most likely to attempt to justify any breach of Article 34 on the grounds of the Article 36 derogation of protection of public morality. Henn and Darby [22] has held that the UK must have the restraint of indecent publications as their primary objective but that it is for each Member State to determine the requirements of public morality in its territory in accordance with its own values and form. However, as noted in Conegate v. HM Customs and Excise [23] , the fact that the UK readily allows access to such material in print and online format suggests that the restraint of indecent publications is not the primary objective and suggests that a total ban is not a proportionate response. Therefore, the UK will not be able to invoke this derogation.

In the absence of any other appropriate justification, the UK would therefore be in breach of Article 34 TFEU.

Remedies available

Article 30, 34 and 110 TFEU all have direct effect. This means Norman SA can bring a claim in the UK courts against the UK to set aside any measures in breach of these articles provided that the provisions are:

Sufficiently clear and precise;

Unconditional; and

Their operation is not be dependent on further action being taken by the Community or by national authorities

These provisions have been held to meet these criteria on a regular basis. [24] If the decision on whether the measures breach the TFEU is referred to the ECJ, the UK court has a duty to grant interim relief and suspend the measures pending a ruling to safeguard potential EU rights of individuals.

A restitutionary claim will also be available to reclaim any charges paid under measures in breach of Articles 30 and 110. [25] In addition, the ECJ has provided for specific appropriate remedies for a breach of Article 110. There must be repayment of any unlawful charges [26] and elimination of the discrimination in the case of Article 110(1) by equalising the taxes imposed on the domestic and imported goods. [27]

Norman SA could also bring a claim in the UK courts for damages under the Francovich principle of state liability. [28] The criteria for such a claim are that:

(a) The rule of law infringed must be intended to confer rights on individuals;

(b) The breach of EC law must be sufficiently serious; and

(c) There should be a causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties.

The ECJ has held that any directly effective provision of the TFEU is prima facie intended to confer rights on individuals. [29] To be sufficiently serious, the UK must have manifestly and gravely ignored any limits of its discretion. On the facts of this case, it seems there was extremely limited discretion on the UK as the rules were very clear and precise. This is certainly the case for the inspections, sales tax and support of the campaign to encourage sales of domestic products. The UK may be able to argue that the prohibition on adult magazine downloads was not a manifest and grave dismissal of the limits on its discretion. Norman SA will be able to obtain damages for any breaches that do fulfil these criteria.