Consideration of the Case of Nubourgs Selling in Europe - Coursework Example

QUESTION 2 Nubourg’s ability to market and sell their Belgian beer in Europe has been impacted by the restrictions imposed by France, Sweden and the United Kingdom. All these measures have significant cost implications for Nubourg in terms of market entry. In evaluating the legality of the measures by these territories, I shall review the Nubourg’s legal position under Articles 28, 30, 34 and 36 of the Treaty of the Functioning of the European Union (TFEU) regulating the free movement of goods. With regard to France’s imposition of a charge on Nubourg for a health inspection, Article 28(1) (ex Article 23 of the TEC) of the TFEU provides that the EU is rooted in a “customs union1” covering all trade in goods and as such, establishes a prohibition between Member States of customs duties on imports and exports and of any other charges having equivalent effect. The consignment of beer is clearly “goods” for the purposes of the Treaty and as the case of SIOT v Ministry of Finance 2asserted; freedom of movement and transit within the Community constitutes a prima facie fundamental of community law. Furthermore, the Article 28 provision is also intended to ensure non-discrimination between domestic and foreign products of Member States3. To this end, Article 30 (ex 25) formally abolishes customs duties and any other charges having equivalent effect and provides that: “Member states shall refrain from introducing between themselves any customs duties on imports and exports or any charges having equivalent effect, and from increasing those which they already apply in their trade with each other4” The fee imposed by France is imposed by French health authorities for the purpose of testing suitability of the consignment for the French market. Although the fee being charged by France is not expressed in terms of being a customs duty, it could still be illegal under Article 30 for being a “measure of equivalent effect”. The definition of measures of equivalent effect was addressed in Re Statistical Levy case, Commission v. Italy 5where it was held that “charges of equivalent effect” were: “any pecuniary charge, however small and whatever its designation and mode of application, which imposed unilaterally on domestic and 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 charge6”. For example in Sociall Fonds voor de Diamantarbeiders v Brachfeld & Chougol Diamond Co7, the Belgian authorities had imposed a duty on diamonds to raise money for Belgian diamond workers. However the ECJ asserted that the purpose of the charge was irrelevant and that customs duties were prohibited independent of any considerations of purpose. Accordingly, the charge was held to be in breach of the prohibition on customs duties. If we apply this reasoning by analogy to the French position, the charge is being imposed as a result of the recent pest infected hop farms in Belgium for the purpose of testing suitability for the French market. However, as the principles discussed above demonstrate, the purpose of the fee is irrelevant to the consideration of infringement. In line with the reasoning of the Re Statistical Levy case, the fee charged by France is prima facie a unilateral charge imposed on Belgium for the sole reason that she is exporting goods to France and is prima facie in breach of Article 30. With regard Sweden, the Swedish customs authorities are imposing a charge requiring Nubourg to make payment as a requirement of “port clearance”. The application of Article 30 has however created confusion in relation to measures of equivalent effect8. For example, in the case of Re Storage Charges Commission v Belgium, 9 the Belgian authorities imposed charges on the goods undergoing customs clearance in a warehouse and it was held that this constituted a measure of equivalent effect as it was imposed solely in connection with the completion of customs formalities. However, in the case of Re Animals Inspection Fees, Commission v Germany10, the charges imposed covered actual costs incurred in maintaining the inspection facilities. The ECJ distinguished this case and stated that provided the fee did not exceed the actual cost of inspection, then the inspection fee would not amount to a prohibited measure of equivalent effect. The rationale for this was that inspections were required by European law and the aim of inspection was in fact to promote the free movement of goods and therefore the imposition of such charges were genuine11. Accordingly, a charge will not be prohibited under EU law if: 1. The charge does not exceed the actual cost of service; 2. The service is required by community legislation; and 3. The services promote the free movement of goods and imposed solely in connection with custom formalities and do not operate as a separate charge12. With regard to Sweden, it is evident that Nubourg had agreed a pre-existing fee with a local port company to pay for the storage to be stored before onward transit. Accordingly, the extra payment for port clearance would appear to go beyond the rationale in case of Re Animals Inspection Fees, Commission v Germany13by going beyond the actual cost of service notwithstanding the charge’s label as being necessary for port clearance. Accordingly, in the absence of Sweden establishing that the fee falls within the exception of complying with a service required by Community law in connection with custom formalities; it is highly likely that the imposition of the fee falls within the reasoning of Re Storage Charges, Commission v Belgium14. Therefore, in line with the rationale in the Re Statistical Levy15 case, the charge imposed by the Swedish government appears to fall within the ambit of constituting a measure of equivalent effect and as a result Nubourg will have strong grounds to challenge this as a breach of Article 30. Similarly, with regard to the UK, the levy on Nubourg Gold and Nubourg Alt will also be able to be challenged under Article 30 on the basis that the preferential treatment for UK beers suggests a tax imposed solely on the basis of being a foreign import. Question 4 Article 34 (ex Article 28) emphasises the objective of free movement of goods and imposes the removal of duties, quotas and quantitative restrictions on the free movement of goods in the Community16; and provides that any quantitative restrictions on imports or measures of equivalent effect are prohibited. Furthermore, Article 36 (ex Article 30) provides a defence to such measures on grounds of morality, policy, security, protection of life or health of humans; and therefore Pando’s ability to challenge the validity of the restrictions imposed by the states will depend on the availability of any justification under Article 3617. Additionally, in order for such prohibitions to infringe Article 34, they “must constitute means of arbitrary discrimination or a disguised restriction on trade between member states”. With regard to the case law, the previous authority on Articles 28 and 30 will still be applicable where appropriate and in Geddo v Ente Nazionale Risi18 the concept of quantitative restriction was defined as “measures which amount to a total or partial restraint of, according to the circumstances, imports, exports or goods in transit19”. Accordingly, the concept of quantitative restrictions is not limited to quotas and covers total bans on imports and exports such as those imposed by the various EU states on the imports of Pando’s computer games. In the Import of Lamb case, Commission v France and Import of Potatoes case, Commission v UK20, the ECJ held that the most obvious example of quantitative restriction on imports and exports are complete bans or quotas restricting import or export of a given product by amount or value. If we apply this to the current scenario it is evident that the United Kingdom has imposed a total ban on the recently released Pando game and Poland has banned all of Pando’s games, which is prima facie in breach of Article 34. With regard to Germany and Denmark, whilst they haven’t imposed a total ban on Pando’s products as such, it is arguable that the restrictions on advertising in Denmark, along with Germany and Italy’s pre-conditions for import regarding packaging amount to a “total or partial restraint” of imports to constitute a quantitative restriction in line with the reasoning in the Geddo case21. Alternatively, with regard to Germany, Italy and Denmark, Pando may argue that the national requirements and restrictions are tantamount to a measure of equivalent effect (MEQR). Directive 70/50 [1970] OJL 13/29 Art 2(3) distinguishes between MEQR and QR; dividing measures into distinctly effective measures (which do not apply equally to domestic and imported goods) and indistinctly to effective measures (which apply alike to domestic and imported goods22. The decision in Procurer du roi v. Dassonville23; stated that any trading rule implemented by Member States that had the potential to directly or indirectly impede the free movement of goods and services, could constitute an MEQR. Accordingly, the fundamental factor with MEQRs is to evaluate its “effect24”. Additionally, in Cassis De Dijjon25, a further distinction was made between distinctly and indistinctly applicable measures. In relation to the facts of the case, German law required a minimum alcohol level of 25% for certain spirits and a French liqueur that had alcohol content of 15-25% was refused entry to the German market, which was held to be in breach as a MEQR. Furthermore, in Walter Rau Lebensmittelwerke v. De Smedt PVBA26 it was held that a claimed justification of “consumer protection” would not be sufficient per se to justify an MEQR. In applying these principles to Pando’s position, the German labelling and rules regarding the materials for the product and change in requirements to Pando’s manufacturing process and packaging as a result of this rule, must be considered in terms of its effect on trade in determining whether it is a MEQR27. This will also be the relevant consideration with regard to the measures imposed by Italy and Denmark. Firstly, the German requirements to change the packaging and labelling of Pando’s product and Italy’s requirement of national testing and approval act as a restraint on Pando’s ability to enter the computer games market or alternatively require the incurring of significant reproduction costs. Similarly, Denmark’s advertising restrictions and refusals of Pando’s requests for advertising significantly impacts Pando’s market entry costs due to the advertising launch plans. Furthermore, the Walter Rau reasoning would suggest that a defence of “consumer protection” will be an insufficient justification per se. Therefore the conduct of Denmark, Italy and Germany is prima facie in breach of Article 34 and Article 36. However, the purpose of the MEQR provision is to prevent restriction on free movement of goods and not to guarantee profit in any particular EU territory28. For example, Keck and Mithouard29 emphasised that selling arrangements which applied to all affected traders in the territory of the Member State in the same manner in law, were outside the scope of Article 28. Accordingly, on the presumption that the Italian, Danish and German requirements apply to everyone whether domestic or foreign; the legal requirement applies indistinctly and it may therefore be difficult for Pando to successfully argue that this is an MEQR. Pando would have to establish that the national provision in practice effectively operates as a “means of arbitrary discrimination or a disguised restriction on trade between member states” under Article 34. However, the decision in Commission v Italy and Mickelsson and Roos30 has watered down the impact of the Keck decision and the relevant factor is to determine the impact of the state restriction on consumer behaviour and market access, which would in turn favour Pando’s position to challenge the measures under Article 34. Nevertheless, the territorial restrictions impacting Pando may be justifiable by the relevant states on the basis of the specific grounds in Article 36. For example, Denmark’s restrictions are not specifically geared towards Pando’s product but rather the protection of advertising dangerous and violent computer games to a young audience. Similarly, the United Kingdom and Poland’s ban on the product is due to concerns regarding influence on young people and the games being too violent. As such, these requirements may be justified on health and public safety grounds. For example, in the Cassis case, whilst extending the Dassonville formula for defining an MEQR, the ECJ further asserted that certain measures will not breach Article 34 if they are a necessary requirement to satisfy mandatory requirements relating to public policy and public interest, which is referred to as the “rule of reason31”. Under the Cassis reasoning, the list of mandatory requirements is non-exhaustive32. Conversely, Article 36 provides a defence to Member States to justify restrictions on grounds of security or health. Unlike the Cassis provision, Article 36 is exhaustive33. However it is important to note that the Cassis derogations are only applicable to indistinctly applicable measures whereas Article 36 applies to both indistinctly and distinctly applicable measures34. With regard to the current scenario, the basis of the restrictions imposed by the United Kingdom, Poland and Denmark Greece are rooted in health and social concerns regarding the influence of violence in the games in young people and therefore these states will potentially have a defence under both Article 36 and Cassis as the mandatory requirements are indistinctly applicable. With regard to Italy, Germany and Denmark’s restrictions on advertising, the measures appear to apply to indiscriminately as a trading rule and these states will have a defence if they can establish that this is justifiable on health or medical grounds. Alternatively, the decision in Commission v Italy and Mickelsson and Roos35 has significantly watered down the Keck principle. As a result, if Pando can establish that the effect of the rules in Spain, Germany and Denmark significantly impacts her entry to market, along with the consumer impact test; they may still have grounds to challenge the restriction under Article 34. . BIBLIOGRAPHY Chambers, D., Davies, G., & G. Monti (2010). European Union Law: Cases and Materials, 2nd Edition. Cambridge: Cambridge University Press. Craig, P. & de Burca, G. (2007). EU Law: Text, Cases and Materials. 4thEdition. Oxford: Oxford University Press. Davies, K. (2009). Understanding European Union Law. 3rd Edition. London: Routledge Horspool, M. & Humphreys, M. (2010). European Union Law. 6th Edition. Oxford: Oxford University Press Kaczorowska, A. (2008). European Union Law. 1 Edition. London: Routledge-Cavendish Steiner, J. & Woods, L. (2009). EU Law. 10th Edition. Oxford: Oxford University Press. Turner, C & Storey, T. (2008). Unlocking EU Law. London: Hodder Arnold Weatherill, S. (2010). Law of the European Union. 9th Edition. Oxford: Oxford University Press. Wyatt, D. & Dashwood, A. Dougan, M., Arnull, A., Ross, M & Spaventa, E. (2006). Wyatt and Dashwood: European Union Law. 5th Revised Edition. London: Sweet & Maxwell. CASES Cassis De Dijjon [1979] ECR Case 120/78 Commission v Italy and Mickelsson and Roos Case C-142/05 (2005) ECR Geddo v Ente Nazionale Risi Case 2/73 ECR 865 [1974] CMLR Import of Lamb case, Commission v France and Import of Potatoes case, Commission v UK [1979] ECR 2729 Keck and Mithouard [1993] ECR 1-6097 Procurer du roi v. Dassonville Case 8/74 [1974] ECR 837 Re Animals Inspection Fees, Commission v Germany Case 18/87 (1987) ECR Re Statistical Levy case, Commission v. Italy C-24/68 [1969] ECR. Re Storage Charges Commission v Belgium Case 132/82 (1982) ECR R v. Henn and Darby 34/79 [1980] ECR SIOT v Ministry of Finance (1983) Case Number 61981J0266 Sociall Fonds voor de Diamantarbeiders v Brachfeld & Chougol Diamond Co 3/69 [1969] ECR 211 Walter Rau Lebensmittelwerke v. De Smedt PVBA [1982] ECR 3961 Legislation & Websites Directive 75/117 EEC available at www.eur-lex.europa.eu accessed March 2011 The Treaty on the Functioning of the European Union (2008) at www.consilium.europa.eu accessed March 2011 www.eur-lex.europa.eu www.opsi.gov.uk All accessed March 2011 Read More