THE INTERNAL MARKET Jeroen Hooijer Internal Market and

THE INTERNAL MARKET Jeroen Hooijer Internal Market and Services DG May 2005 Slide 1

Outline • • What is the Internal Market ? The fundamental freedoms Harmonisation approaches Specific policies Slide 2

Internal Market Area where • • • goods workers self-employed & companies services Capital Can circulate • • Freely and under undistorted competitive conditions Slide 3

What the internal market implies • Abolition of customs duties between MS • Abolition of quantitative restrictions between MS • Abolition of other barriers to trade in goods, services, persons and capital (main task for DG MARKT) • Common rules on competition • Common external trade policy Slide 4

The foundations of free movement Secondary legislation: Harmonization measures EC Treaty: 4 fundamental freedoms + ECJ case-law Slide 5

Fundamental freedoms • Free movement of goods, persons (workers and self-employed), services and capital • Free movement as a general rule: MS shall not take restrictive measures to intra-community trade • Necessity of a cross-border element • Exceptions established through ECTreaty and ECJ case law • Citizens/businesses can rely upon rules before national and European courts Slide 6

Enforcement of Community rules q through national Courts: – – – direct application of EC law interpretation of national law in the light of Community law preliminary ruling procedure (Art. 234 TEC) q through Commission: – Complaint leading to infringement procedure against MS q Alternatives: – – Implementation Scoreboard Out-of-court mechanisms: SOLVIT Slide 7

Examples of free movement cases • MS may not ask posted workers from other MS to get previously a work permit • MS may not restrict the sale of pharmaceuticals via the Internet for nonprescribed medicines • MS can prohibit a type of game for reasons of public order Slide 8

Free movement of goods • Prohibition of quantitative restrictions to imports and measures having equivalent effect - Art. 28 TEC • Broad interpretation (Dassonville) • Principle of mutual recognition (Cassis de Dijon) new approach to harmonisation • Exclusion of non-discriminatory „selling arrangements“ (Keck) Slide 9

Measures having equivalent effect “all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra. Community trade…” “Dassonville” (1974) Slide 10

Examples of measures having equivalent effect – Prior authorization requirements – Buy-national policies – Restrictions on parallel imports – Duplication of tests, inspections, etc. – Requirement to appoint a representative in importing Member State – Recipe laws (foodstuffs) Slide 11

Principle of mutual recognition • MS cannot rely on Treaty exceptions to justify restrictions to free movement, where home state requirements meet the same end • Home state responsible for setting up and monitoring of requirements, while host state responsible to assure free movement • Depends on mutual trust between MS in controls effectuated in home state Slide 12

Limits to Art. 28 TEC • Does not apply to selling arrangements, regulating the way in which a product can be sold rather than the product itself, as long as these are non-discriminatory, both in law and in fact (Keck) • Does not prohibit indistinctly applicable national rules for merely making the marketing of a product more difficult, but requires a double regulatory burden Slide 13

Exceptions to Art. 28 TEC • Explicit Treaty derogations, Art. 30 TEC • • • public morality public policy public security protection of health and life of humans, animals or plants protection of national treasures possessing artistic, historic or archaeological value protection of industrial and commercial property. • „Mandatory requirements“ (Cassis de Dijon) • • • consumer and environmental protection unfair competition others (non-comprehensive list) Slide 14

Principle of proportionality • In any case, national measures can only be justified, if – they are necessary to achieve their objective, and the MS proves he takes the objective seriously (e. g. by having an internal regime serving the same purpose) – they are proportionate, i. e. if is not possible to attain the objective with less restrictive measures Slide 15

Free movement of workers • Art. 39 TEC • gives workers right to seek and assume employment within the Community • prohibits any discrimination of workers based on their nationality, even if not related to their worker status • Several implementing regulations and extensive ECJ case law • Exceptions narrowly construed by ECJ Slide 16

Freedoms of establishment and services – Art. 43 and 49 TEC – Establishment relates to stable and continuous activities, while services relates to activities provided on a temporary basis – No practical relevance of the distinction • Both apply to self-employed persons and companies • Both are limited to activities of an economic character and containing a cross-border element Slide 17

Broad approach given by ECJ case law • „Market access“ approach of the ECJ: all national rules likely to impede the establishment or provision of services by a company or a self-employed person in another MS are restrictions within meaning of Art. 43/ 49 EC and must be objectively justified, even if they are non-discriminatory Slide 18

Exceptions to Art. 43, 49 TEC • Explicit treaty derogations (Art. 45, 46, 55 EC) – – Exercise of official authority public security, public policy or public health • „Objective justifications“ according to ECJ case law – – – Environmental protection Consumer protection Others (non-comprehensive list) • Proportionality principle applies Slide 19

Freedom of capital • Art. 56 EC • Open definition of capital by ECJ • Fuzzy distinction from freedom of establishment, but without practical relevance • „Market access“ approach of ECJ, in line with that in establishment/ services Slide 20

Approaches to harmonization Old approach (before 1985) • • very detailed description of product specifications cumbersome to establish and to implement straightjacket to new developments MS decide on delivery of conformity certificate New Approach (after 1985) • to be seen in light of mutual recognition principle • addressing only essential requirements (capable of justifying derogations to free movement) • technical specifications to be set through European standardisation organisations (CEN, Cenelec, ETSI) • Flexible and technology neutral ( « CE » marking) Slide 21

Harmonisation of legislation (new approach) required if there is a need to • eliminate obstacles to trade (despite mutual recognition principle) due to different levels of protection between MS • assure a minimum degree of protection against important risks (health, environment etc) Slide 22

Specific policies of DG MARKT • Mutual recognition of Professional qualifications • Financial services • Postal services • Public procurement • Company law • IPR’s Slide 23

Internal Market Directives by sector Slide 24

Financial services • 3 major areas for which similar principles apply: banking, investment and securities markets and insurance services. • Aim to ensure financial stability, financial soundness and appropriate protection of consumers/investors/policyholders Slide 25

Financial Services • Extensive legislation develops the Treaty rules • National rules are co-ordinated or harmonised and a set of minimum essential requirements adopted at Community level to render possible mutual recognition among MS Slide 26

Financial Services • The two basic principles in this area are: • - Single passport: The authorisation of a financial sector operator in one country opens the possibility for this operator to establish/provide financial services in the other MS without further authorisation requirements. • - Home country control: The supervision of the activities of any financial operator is the responsibility of the country of origin where this financial operator has been licensed Slide 27

Company law • The EC Treaty guarantees the right of establishment and free provision of services of EU companies. • However, it has been deemed necessary to harmonise national rules in the company law area through secondary legislation. Slide 28

Company law This harmonisation seeks • to prevent distortions due to noneconomic factors, • to ensure appropriate protection of all parties (shareholders, creditors, etc. ) and • to facilitate business throughout the internal market. Slide 29

Examples of Internal Market success • It is less expensive to make a phone-call within a MS (50%) and within the EU (40%) • Air travel becomes more attractive: prices cut down on average by 41% Slide 30