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

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

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

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

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

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

6. 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

7. 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 MS • Alternatives: • Implementation Scoreboard • Out-of-court mechanisms: SOLVIT

8. 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

9. 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)

10. 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)

11. 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)

12. 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

13. 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

14. 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)

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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 essentialrequirements (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)

22. 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)

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

24. Internal Market Directives by sector

25. 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

26. 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

27. 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

28. 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.

29. 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.

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%