The Jean Monnet Program

Conclusions

In this chapter we have reviewed part of the free movement jurisprudence of the Court through the lens of a law and economics analysis, with a view to considering how far it discloses a coherent approach to the question of regulatory competition. Viewing the Court’s rulings through an ex post set of analytical classifications might strike some as unusual. The justification for doing so is two fold. Firstly, while regulatory competition may not be the aim of the Court’s interventions, it is certainly one of its most significant effects. Secondly, law and economics analysis of this kind is widely used to understand the workings of market integration rules in other federal or transnational jurisdictions, in particular the United States, where argument has raged over the benefits of the market for legal rules in areas such as corporations law. When these techniques are applied to the free movement case law of the Court, we see a surprising lack of consistency. The Court veers between an approach, in cases such as Centros, which combines a strong substantive market access test, to one, in cases such as Keck, which would limit the Court’s intervention to situations in which formal access is barred or there is clear evidence of discrimination against non home-state nationals. From the point of view of regulatory competition, it is beside the point to argue that one case arises under the law governing establishment and the other is concerned with goods, since the effects are largely the same in both cases. At the very least, we would expect the Court to offer some explanation of the divergence in approach in this and other cases, but none has been forthcoming.

In addition to inconsistency, the Court’s approach risks the worst of both worlds: a race to uniformity, which is also a race to the bottom in the sense of leading to the degradation of standards of market regulation. Because the market access principle is not clearly articulated as such, the importance of this process for the debate over the substance of economic and social policy in the EC is being obscured. The case for a more explicit consideration of these questions is further reinforced by the emergence of clear alternatives to court-led deregulation, in the form of reflexive harmonisation and novel regulatory techniques such as the open method of coordination and, as far as the Court itself is concerned, experimentalism. The need for all parties, including the Court, to articulate more clearly what they are doing and why¹⁰⁷ can only serve to strengthen regulatory competition while at the same time going some way to preserving national autonomy.

1* Trinity College and Peterhouse, Cambridge, UK respectively. We should like to thank Tammy Hervey for her comments as discussant. Addresses for correspondence [e-mail]; [e-mail].

C Barnard, “Fitting the remaining pieces into the goods and persons jigsaw?” (2001) 26 ELRev 35.

2 See, e.g. Article 14 EC.

3 C Tiebout, “A pure theory of local expenditure” (1956) 64/5 Journal of Political Economy 416.

4 For further details, see C Barnard “Social Dumping Revisited: Lessons from Delaware” (2000) 25 ELRev 57 and C Barnard, “Regulating Competitive Federalism, in the European Union? The Case of EU Social Policy” in J Shaw (ed), Social Law and Policy in an Evolving European Union, (Oxford, Hart, 2000).

5 W Cary, “Federalism and Corporate Law: Reflections Upon Delaware” (1974) 83 Yale Law Journal 663, 669.

6 Ibid 666.

7 Cary, supra, n.5, 701.

8 Ibid , 701.

9 C Schmitthoff, “The future of the European company law scene”, in C. Schmitthoff (ed.) The Harmonisation of European Company Law (London: UKNCCL, 1973), 9..

10 Amanda Acquisition Corp. v. Universal Foods Corp. 877 F.2d 496 (1989), per Easterbrook J., cited in D Charny, “Competition among jurisdictions in corporate law rules: an American perspective on the ‘race to the bottom’ in the European Communities”, in S Wheeler (ed.) A Reader on the Law of the Business Enterprise (Oxford, OUP, 1994). See also F Easterbrook and D Fischel, “The corporate contract” (1989) 89 Columbia Law Review 1416.

11 Charny, supra n.5, 371.

12 See, for example, R Winter, “State Law, Shareholder Protection and the Theory of Corporation” (1977) 6 J.Leg.Stud. 251; D Fischel, “The ‘race to the bottom’ revisited: Reflections on recent developments in Delaware’s Corporation Law” (1982) Northwestern University Law Review 913, 916 and 920. See also F Easterbrook “The Economics of Federalism”(1983) 26 Journal of Law and Economics 23, 28 and F Easterbrook and D Fischel, “Voting in Corporate Law” (1983) 26 J.L.&Ec.395.

13 L Bebchuck and A Ferrell, “Federalism and takeover law: the race to protect managers from takeovers” (1999) 99 Columbia Law Review 1168.

14 See generally the essays in D Esty and D Geradin (eds.) Regulatory Competition and Economic Integration: Comparative Perspectives (Oxford, OUP, 2001).

15 Case C-405/98 Konsumentombudsmannen (KO) v Gourmet International Products AB (GIP), judgment of 8 March 2001.

16 Case C-113/89 Rush Portuguesa Ltda v. Office Nationale d’Immigration [1990] ECR I-1417.

17 Mutual recognition is considered further in Kenneth Armstrong’s chapter.

18 R Van den Bergh, “The Subsidiarity Principle in European Community Law: Some Insights from Law and Economics” (1994) 1 Maastricht Journal of European and Comparative Law 337.

19 This terminology is explained in detail below in section 3.2.

20 Due to the application of the doctrine of the state of incorporation doctrine.

21 Case 120/78 Rewe Zentrale v. Bundesmonopolverwaltung fur Branntwein (“Cassis de Dijon”) [1979] ECR 649.

22 For a discussion of this problem in respect of food, see O Brouwer, “Free Movement of Foodstuffs and Quality Requirements; Has the Commission got it Wrong?” (1988) 25 CMLRev 237, 248-252.

23 This is the basis for the TV without Frontiers Directive 89/552 OJ [1989] L 298/23 as amended by Directive 97/36 OJ [1997] L202/60. This issue is considered in detail in M Dougan, “Minimum Harmonisation and the Internal Market” (2000) 37 CMLRev 845, 867.

24 See further the chapter by Joanne Scott in this collection.

25 Case C-412/93 Leclerc-Siplec v. TF1 Publicité [1995] ECR I-179.

26 Para.39. See also AG Lenz in Case C-391/92 Commission v. Greece [1995] ECR I-1621, para.14 “Article 30 [new Article 28] goes beyond a mere prohibition of discrimination… The aim of Article 30 continues to be to prohibit such measures in order to establish and maintain an internal market”.

27 Case C-415/93 Bosman v ASBL [1995] ECR I-4921.

28 Case C-384/93 Alpine Investments v Minister van Financien [1995] ECR I-1141.

29 Para.38. It then went on to hold that the national measure could be justified under “imperative reasons of the public interest” such as “maintaining the good reputation of the national financial sector” and that the ban on cold-calling was proportionate.

30 Case C-275/92 Customs & Excise v. Schindler [1994] ECR 1039.

31 Para.53.

32 Centros v. Erhvers- og Selskabsstyrelsen [1999] ECR-I 1459

33 For a consideration of the US literature on this issue, see L Tribe, American Constitutional Law, vol.1, (Foundation Press, New York, 2000), 1052.

34 See section 3.3.

35 For references see Barnard, supra n.1

36 Case 8/74 Procureur du Roi v. Dassonville [1974] ECR 837, para.5.

37 Case 261/81 Walter Rau v. De Smedt [1982] ECR 3961.

38 Para.13.

39 See AG Jacobs in Case C-412/93 Leclerc [1995] ECR I-179, para.44 where he said that where a national measure “prohibits the sale of goods lawfully placed on the market in another Member State (as in Cassis de Dijon), it may be presumed to have a substantial impact on access to the market, since the goods are either denied access altogether or can gain access only after being modified in some way; the need to modify goods is itself a substantial barrier to market access”.

40 See further section 3.3

41 Joined Cases C-34-36/95 Konsumentombudsmannen v De Agostini [1997] ECR I-3843.

42 Para.43.

43 Case C-405/98 Konsumentombudsmannen (KO) v Gourmet International Products AB (GIP), judgment of 8 March 2001.

44 Para.21.

45 See also Case C-254/98 Schutzverband gegen unlauteren Wettbewerb v. TK-Heimdienst Sass GmbH, judgment of 13 January 2000 considered below.

46 See AG Fennelly in Case C-190/98 Graf v. Filzmozer Maschinenbau GmbH [2000] ECR I-000, para.19 “It is legitimate for the Court to develop presumptions about the market effects of different broadly defined categories of rules, provided that, in concrete cases, the validity of the presumption may be tested against the underlying criterion of market access, rather than automatically being taken as being sufficient in itself to dispose of the case.”

47 See K Armstrong, “Regulating the free movement of goods” in J Shaw and G More Dynamics of European Integration, (Oxford, Clarendon, 1996).

48 As the Court said in Joined Cases C-34-36/95 De Agostini [1997] ECR I-3843, “an outright ban”, applying in one Member State, on advertising certain products which are lawfully sold there would fall within Article 30 (new Article 28), if it could be shown to have a “greater impact on products from other Member States” (para.42).

49 See, e.g. Case 145/88 Torfaen BC v B&Q [1989] ECR 765 discussed in C Barnard, “Sunday Trading: A Drama in Five Acts”, (1994) 57 MLR 449.

50 Joined Cases C-267/91 and C-268/91 Keck and Mithouard [1993] ECR I-6097.

51 Case C-190/98 Graf v. Filzmozer Maschinenbau GmbH [2000] ECR I-000.

52 Joined Cases C-267/91 and C-268/91 Keck and Mithouard [1993] ECR I-6097. For comments on this case, see inter alia Roth, “Comment” (1994) 31 CMLRev. 845; CELS Treaty project (1997) 22 ELRev. 447-452; D Chalmers, “Repackaging the internal market the ramifications of the Keck judgment” (1994) 19 ELRev 385; L Gormley, “Reasoning renounced? The remarkable judgment in Keck and Mithouard [1994] EurBusLRev 63; M Poiares Maduro, “Keck: the end? Or just the end of the beginning?” (1994) Irish J of Eur Law 33 and “Reforming the Market or the State? Article 30 and the European Constitution: Economic Freedom and Political Rights” (1997) 3 ELJ 55.

53 Para.16 provides: “However, contrary to what has previously been decided, the application to products from other Member States of national provisions restricting or prohibiting certain selling arrangements is not such as to hinder, directly or indirectly, actually or potentially, trade between Member States within the meaning of the Dassonville judgment (...) provided that those provisions apply to all affected traders operating within the national territory and provided that they affect in the same manner, in law and in fact, the marketing of domestic products and those from other Member States.”

54 Para.17.

55 See Barnard, supra, n.1.

56 Cf Case 34/79 Henn and Darby [1979] ECR 3795 concerned a total ban on the importation (as opposed to the sale) of products (in casu pornographic literature). This was found to be a quantitative restriction on imports within the meaning of Article 30 (new Art.28).

57 See, e.g.Case C-292/92 Hünermund [1993] ECR I-6787; Case C-412/93 Leclerc-Siplec v. TF1 Publicité [1995] ECR I-179.

58 Paras. 24–25. Emphasis added. For another example of case concerning absence of hindrance of market access, or, to be precise where the hindrance to market access is inherent in the structure of the market itself, as in Joined Cases C-51/96 and C-191/97 Deliège v Asbl Ligue Francophone de Judo, judgment of 11 April 2000, para.64 “although selection rules like those at issue in the main proceedings inevitably have the effect of limiting the number of participants in a tournament, such a limitation is inherent in the conduct of an international high-level sports event, which necessarily involves certain selection rules or criteria being adopted. Such rules may not therefore in themselves be regarded as constituting a restriction on the freedom to provide services prohibited by Article 59 [Article 49] of the Treaty.

59 Case C-55/94 Gebhard v Consiglio dell’Ordine degli Avvocati e Procuratori di Milano [1995] ECR I-4165 (establishment of German lawyer in Itlay wishing to use the name avvocato).

60 See AG Tesauro’s opinion in Case C-292/92 Hünermund [1993] ECR I-6787 which seems to have influenced the Court more in Keck than those of AG Van Gerven, the Advocate General in Keck.

61 Case C-190/98 Graf [2000} ECR I-000, Opinion, at para 32.

62 Para.8. In addition the Court has recognised the following mandatory requirements: Case 155/80 Oebel [1981] ECR 3409 (protection of the working environment); Case 60/84 Cinethèque [1985] ECR 2605 (cinema as form of cultural expression); Case 145/88 Torfaen Borough Council v. B & Q [1989] ECR 3851 (protection of national or regional socio-cultural characteristics); Case C-368/95 Vereinigte Familiapress Zeitungsverlags- und vertriebs GmbH (“Familiapress”) v Heinrich Bauer Verlag [1997] ECR I-3689 (maintenance of the plurality of the press); Case 302/86 Commission v. Denmark [1988] ECR 4607 and Case C-389/96 Aher-Waggon GmbH v. Germany [1998] ECR I-4473 ; Case C-120/95 Decker v Caisse de Maladie des Employés Privés [1998] ECR I-1831 (preventing the risk of seriously undermining the financial balance of the social security system).

63 Case C-288/89 Stichting Collectieve Antennevoorziening Gouda v Commissariaat voor de Media [1991] ECR I-4007.

64 Paras.12-13.

65 See e.g., Case C-288/89 Gouda [1991] ECR I-4007 citing professional rules intended to protect the recipients of a service - Cases 110/78 and 111/78 Van Wesemael [1979] ECR 35; protection of intellectual property - Case 62/79 Coditel [1980] ECR 881; protection of workers - Case 279/80 Webb [1981] ECR 3305; consumer protection - Case C-180/89 Commission v Italy (Tourist Guides) [1991] ECR I-709 Joined Cases C-34/95, C-35/95 and C-36/95 De Agostini [1997] ECR I-I-3843; conservation of the national historic and artistic heritage - Case C-180/89 Commision v Italy; turning to account the archaeological, historical and artistic heritage of a country and the widest possible dissemination of knowledge of the artistic and cultural heritage of a country - Case C-154/89 Commission v France [1991] ECR I-659, Case C-198/89 Commission v Greece [1991] ECR I-727, Case C-23/93 TV10 [1994] ECR I-4795. In addition, the Court has recognised the need to safeguard the reputation of the Netherlands financial markets and to protect the investing public Case C-384/93 Alpine Investments [1995] ECR I-1141; preventing gambling and avoiding the lottery from becoming the source of private profit - Case C-275/92 Schindler [1994] ECR 1039; avoiding the risk of crime or fraud - Case C-275/92 Schindler [1994] ECR 1039; avoiding the risk of incitement to spend, with damaging individual and social consequences - Case C-275/92 Schindler [1994] ECR 1039; requirements of road safety – Case C-55/93 Van Schaik [1994] ECR I-4837; the social protection of workers in the construction industry – Case C-272/94 Guiot [1996] ECR I-1905 and Joined Case C-369/96; and the protection of creditors of a company against the risk of insolvency – Case C-212/97 Centros v. Erhvers- og Selskabsstyrelsen [1999] ECR-I 1459, at para.34. See also Hatzopoulos, “Recent Developments of the Case Law of the ECJ in the Field of Services” (2000) 37 CMLRev 43, 77.

66 Case 120/78 Rewe Zentrale v. Bundesmonopolverwaltung fur Branntwein (“Cassis de Dijon”) [1979] ECR 649.

67 See C Hilson, “Discrimination in Community free movement law” (1999) 24 ELRev 445, 461.

68 Case C-275/92 Schindler [1994] ECR I-1039, para.61.

69 See, eg, para.51.

70 In Case C-124/97 Läärä [1999] ECR I-6067, para.36 the Court added that “the mere fact that a Member State has opted for a system of protection which differs from that adopted by another Member State cannot affect the assessment of the need for, and proportionality of, the provisions enacted to that end. Those provisions must be assessed solely by reference to the objectives pursued by the national authorities of the Member State concerned and the level of protection which they are intended to provide”. This is a departure from the “majoritarianism” identified by M Poiares Maduro, We, the Court (Oxford, Hart, 1998), 72 which has characterised many of the decisions on goods.

71 Generally labelling is the most proportionate solution: e.g Case 286/86 Minstère Public v Deserbais [1988] ECR 4907; Case C-358/95 Tommaso Morellato v Unità sanitaria locale (USL) n. 11 di Pordenone [1997] ECR I-1431.

72 Case C-254/98 Schutzverband gegen unlauteren Wettbewerb v. TK-Heimdienst Sass GmbH, judgment of 13 January 2000.

73 Para.[54]. Emphasis added.

74 Para.218.

75 Centros, para. 32.

76 Ibid., para. 35.

77 For criticism of this aspect of the Court’s reasoning in Centros, see S Deakin, “Two types of regulatory competition: competitive federalism versus reflexive harmonisation. A law and economics perspective on Centros” (1999) 2 Cambridge Yearbook of European Legal Studies 231.

78 Even where the Court accepts that there is a public interest at stake the Court will apply the principle of mutual recognition. Thus, in Case 272/80 Frans-Nederlandse Maatschappij voor Biolgishche Producten [1981] ECR 3277. See also Case C-292/94 Criminal Proceedings against Brandsma [1996] ECR I-2159 the Court said that while the host state is entitled to require the product to undergo a fresh examination (a system of double checks), the host state authorities are not entitled unnecessarily to require technical or chemical analyses or laboratory tests where those analyses or tests have already been carried out in another Member State and their results are available to the host state authorities. The Court also applies this approach to the freedom to provide services. As we have seen from the words emphasised above in Gouda, the host state can only impose additional requirements on the migrant service provider where the host state’s national interest is not already protected from the state of establishment.

79 See M Streit and W Mussler “The Economic Constitution of the European Community: from ‘Rome’ to ‘Maastricht’” (1995) ELJ 5.

80 S Deakin and F Wilkinson, “Rights versus Efficiency? The Economic Case for Transnational Labour Standards” (1994) 23 ILJ 289.

81 See S. Deakin, “Regulatory Competition versus Harmonisation in European Company Law” in D Esty and D Geradin (eds.) Regulatory Competition and Economic Integration: Comparative Perspectives (Oxford: OUP, 2000).

82 See S Deakin, ibid.; S Deakin and C Barnard, “In Search of Coherence: Social Policy, the Single Market and Fundamental Rights” (2000) 31 Industrial Relations Journal 331.

83 D Charny, “Competition among jurisdictions in corporate law rules: an American perspective on the ‘race to the bottom’ in the European Communities”, in S Wheeler (ed.) A Reader on the Law of the Business Enterprise (Oxford: Oxford University Press, 1994) 365-402.

84 See generally Barnard, supra, n.4 and Deakin and Wilkinson, supra, n.80.

85 Ibid.

86 See generally, G Teubner, Law as an Autopoietic System (Oxford: Blackwell, 1993); R Rogowski and T Wilthagen (eds.) Reflexive Labour Law (Deventer: Kluwer, 1994).

87 See Deakin and Wilkinson, supra n.80.

88 See J Black, Rules and Regulators (Oxford: Clarendon Press, 1998).

89 Presidency Conclusions, Lisbon European Council, 23 and 24 March 2000, para.37.

90 Presidency Conclusions, Lisbon European Council, 23 and 24 March 2000, para.30. It also envisages that the number of women in employment be increased from an average of 51% today to more than 60% by 2010).

91 Ibid, para.29.

92 Ibid, paras.31 and 33.

93 Commission Communication on an open method of coordination for the community immigration policy COM(2001) 387 final.

94 Ibid, 6.

95 Ibid.

96 M Dorf and C Sabel, “A Constitution of Democratic Experimentalism” (!998) 98 Colum.L.Rev 267.

97 388.

98 389.

99 400.

100 Ibid.

101 401.

102 Ibid.

103 Ibid.

104 See section 3.3.

105 See, e.g. G De Burca, “The Principle of Proportionality and its Application in EC Law”, (1993) 13 YBEL 105, 111. Schwarze calls proportionality “an extremely variable principle of review” (J Schwarze, European Administrative Law (Sweet & Maxwell, London, 1992), 864. But see FG Jacobs: “Recent Developments in the Principle of Proportionality in EC Law” in E Ellis (ed), The Principle of Proportionality in the Laws of Europe, (Hart Publishing, Oxford 1999) and “Public Law – the Impact of Europe” [1999] PL 232.

106 Dorf and Sabel, supra, n.96.

107 See also the emphasis on dialogue and participation in the Commission’s Governance White Paper COM(2001)428, esp. 15: “Civil society increasingly sees Europe as offering a good platform to change policy orientations and society. This offers a real potential to broaden the debate on Europe’s role. It is a chance to get citizens more actively involved in achieving the Union’s objectives and to offer them a structured channel for feedback, criticism and protest.”