Slide 1

THE INTERNAL MARKET

Jeroen Hooijer

Internal Market and Services DG

May 2005

Slide 2

Outline

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

Slide 3

Internal Market

Area where• goods• workers• self-employed &

companies• services• Capital

Can circulate• Freely

and• under undistorted

competitive conditions

Slide 4

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 5

The foundations of free movement

Secondary legislation: Harmonization measures

EC Treaty: 4 fundamental freedoms

+ ECJ case-law

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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

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Enforcement of Community rules

through national Courts:– direct application of EC law– interpretation of national law in the light of

Community law– preliminary ruling procedure (Art. 234 TEC)

through Commission:– Complaint leading to infringement procedure

against MSAlternatives:

– Implementation Scoreboard– Out-of-court mechanisms: SOLVIT

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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 non-prescribed medicines

• MS can prohibit a type of game for reasons of public order

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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)

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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)

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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)

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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

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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

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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)

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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

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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

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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

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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

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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

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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

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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)

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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 23

Specific policies of DG MARKT

• Mutual recognition of Professional qualifications

• Financial services• Postal services • Public procurement • Company law• IPR’s

Slide 24

Internal Market Directives by sector

141 DG MARKT directives - Breakdown by sector

4

12

12

21

37

55

0 10 20 30 40 50 60

Others

IPR

Public procurement

Company law and others

Qualif ications

Financial Services

Number

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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

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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

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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

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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.

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Company law

This harmonisation seeks • to prevent distortions due to non-

economic factors, • to ensure appropriate protection of all

parties (shareholders, creditors, etc.) and• to facilitate business throughout the

internal market.

Slide 30

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%