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Introduction to European Union Law

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European Union Law 

Preface: EU and EU law in a few words

-  The European Union (EU) is an economic and political union of 28 member states,established by the Treaty of Maastricht in 1993 upon the foundations of the EuropeanCommunities;  having (now) a legal personality,  the EU is able to conclude treatieswith countries

-  The EU grew and grows not only as an economic, political and social unit, but also as

a legal unit which changes and unifies the laws of its member states; nowadays existsa huge system of EU made laws which are either direct or at least indirect binding forthe national legislation, executive and also courts; many political areas are partly orcompletely transferred from national sovereigns to the EU and were now decided inBrussels instead of the national capital/legislator, and there is hardly an area of law inthe member states which is not at least touched or indirect influenced of the EU law

-  The law of the European Union is seen as an independent legal system, also inacademic teaching; but it is tightly interwoven with the legal systems of the memberstates; has nowadays strong influence on national public and private law, more andmore also on criminal law

-  European Union law (historically called European Community law) is a body oftreaties, law and court judgements which operates alongside the legal systems of theEuropean Union's member states; it has direct effect within the EU's member statesand, where conflict occurs, takes precedence over national law

-  Regulations (direct binding) and directives (to be put into national legislation by eachmember) as most important EU legislation

-  The EU is a unique construction between a union of single states and a federation, itoperates through a hybrid system of supranationalism and intergovernmentalism:  incertain areas, decisions are taken by independent supranational institutions, if thesovereign powers of the member states have been transferred to the EU; while inothers, they are made through negotiation between member states (by internationaltreaties)

-  Digression: Example for a Federation and the hierarchy of normsincluding EU Law –  Federal Republic of Germany

 With the Lisbon Treaty, the former treaties were renamed Treaty On European Union” (replacing the former EU Treaty)

and Treaty On the Functioning of the European Union” (replacing the former EC Treaty).Please see the following Internet-page including a synopsis of the old and new treaties:http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:115:0361:0388:DE:PDF

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Introduction to European Union Law

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German state structure

o  Germany as a federation comprises 16 federal states ( Bundesländer ), which are

further subdivided (into districts and cities and finally municipalities on thelowest level)

o  Characterised by a union of partially self-governing (federal) states united by acentral (federal) government

o  As much power and competence as possible on the respective lower level(decentralisation and participation)

Hierarchy of Norms in Germany as a EU member

1.  Supranational law: EU law*a)   primary legislation (treaties)

 b)  secondary legislation (regulations, directives and others)

2.   National lawa) Federal law ( Bundesrecht )

- federal constitution (Grundgesetz )- federal laws: Acts of (Federal) Parliament ( Bundesgesetze)- federal delegated legislation: ordinance- bye-laws of federal institutions

 b) Law of the Federal States ( Landesrecht )

- constitutions of the federal states ( Länderverfassungen)- laws of the federal states: acts passed by the parliaments ofthe federal states ( Landesgesetze)- delegated legislation of the federal states (ordinance of thefederal states)- bye-laws

c) Customary law

*General view: EU law takes precedence over German law, including the constitution; butspecial competence of the German Federal Constitutional Court regarding the compatibility ofEU law with the Basic Law (Grundgesetz ) and especially the Fundamental Rights (“reserve

 jurisdiction”) 

-  Historical background: after  World War II, moves towards European integration wereseen by many as an escape from the extreme forms of nationalism which haddevastated the continent; one such attempt to unite Europeans was the European Coaland Steel Community which, while having the modest aim of centralised control of the

 previously national coal and steel industries of its member states, was declared to be"a first step in the federation of Europe”; in 1957, six countries signed the  Treaties ofRome,  which extended the earlier cooperation within the European Coal and SteelCommunity and created the European Economic Community (EEC), establishing acustoms union;  a common market was established and a more and more closercooperation not only on the area of economy, but also of politics; finally the EuropeanUnion as an economic, political and social unit with an own legal personality wasestablished

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-  I. Introduction 

1.  EU and EU law

-  The European Union (EU) is an economic and political union of 28 member stateslocated primarily in Europe; committed to regional integration, the EU was established

 by the Treaty of Maastricht in 1993 upon the foundations of the EuropeanCommunities

-  With over 500 million citizens, the EU combined generated an estimated 28% share(US$ 16.5 trillion) of the nominal and about 21% (US$14.8 trillion) of the PPP gross

world product in 2009-  17 member states have adopted a common currency, the euro, constituting the euro

zone

-  Having a legal personality,  the EU is able to conclude treaties with countries. It hasdevised the Common Foreign and Security Policy,  thus developing a limited role inEuropean defence and foreign policy. Permanent diplomatic missions of the EU areestablished around the world and representation at the United Nations, WTO, G8 andG-20 is maintained.

-  The EU operates through a hybrid system of supranationalism andintergovernmentalism:  in certain areas, decisions are taken by independentsupranational institutions, while in others, they are made through negotiation betweenmember states

-  European Union law (historically called European Community law) is a body oftreaties, law and court judgements which operates alongside the legal systems of theEuropean Union's member states; it has direct effect within the EU's member statesand, where conflict occurs, takes precedence over national law

-  The distinction between European Community law (EC law) and European Union law

(EU law) does not exist anymore (as of 1 December 2009), but is used with regard tothe structure before; it is that based on the (former) Treaty structure of the EuropeanUnion: the European Community constituted one of the 'three pillars' of the EuropeanUnion and concerned the social and economic foundations of the single market; thesecond and the third pillars were created by the Treaty on European Union (theMaastricht Treaty) and involved Common Security and Defence Policy and InternalSecurity

-  Since 1 December 2009 there is only the European Union which includes all theformer parts (three “pillars”) of the old model (except the Atomic Community): the

“pillar structure” does not exist any longer  –  EU and EC are united as the EU now(only the Atomic Community remains separately)

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2. Historical Background

The Idea of European Integration and the foundation and development of the European

Communities and later the European Union cannot be understood without a basicknowledge of the European history and especially the two World Wars. The year 1945

 –  the end of World War II  –  is quite a new beginning of the history of Europe whichcan be seen until now by the historical division made by all Europeans: “before

Second World War” and “after Second World War”. 

Although the idea of a politically and economically integrated Europe reaches back asfar as to the Middle Ages, no serious attempts towards European integration were evermade before the end of World War I, which demonstrated all negative impacts ofnationalism in the most dramatic way (with the exception of Napoleon, but underdifferent auspices). But the idea to safeguard peace by creating supranationalorganisations and to boost the national economies through free trade and movement

 policies was by no means a new one. Nevertheless, the idea prompted the FrenchForeign Minister, Aristide Briand, to place the European Union“ on the political

agenda for the first time ever. Yet, before European Leaders were able to put forward aserious initiative, the outbreak of World War II had struck down all attempts toovercome national boundaries in central Europe. It was not until after the end of WorldWar II, that the British Prime Minister, Winston Churchill, took up the torch ofEuropean integration and federation as a means to speed up the recovery of aEuropean economy devastated by two world wars and to overcome the roots offascism.

The situation before 1900: trade as key for war

-  Colonial empires were the product of the European Age of Exploration from the 15thcentury. The initial impulse behind these dispersed maritime empires and those thatfollowed was trade, driven by the new ideas and the capitalism that grew out of theRenaissance. Agreements were also done to divide the world. Portugal began the Ageof Exploration by exploring the Atlantic coast of Africa, establishing trading posts forgold and slaves during the 15th century. Spain joined in the exploration late in thecentury, with Columbus's trans-Atlantic expedition in 1492, which led to

establishment of European colonisation in the Americas. In 1498, a Portugueseexpedition commanded by Vasco da Gama reached India by circumnavigating Africa,and initiated Portuguese trade and colonization in the East. Both the PortugueseEmpire and Spanish Empire quickly grew into the first global political and economicsystems with territories spread around the world. Subsequent major European colonialempires included the French, Dutch,  and British empires. The latter, consolidatedduring the period of British maritime hegemony in the 19th century, became thelargest empire in history because of the improved transportation technologies of thetime. At its height, the British Empire covered a quarter of the Earth's land area andcomprised a quarter of its population.

-  Foundation (1871) and growth of Germany after 1871: Significantly changing the balance of power in Europe. From 1870, the Bismarckian hegemony on Europe putFrance in a critical situation. It slowly rebuilt its relationships, seeking alliances with

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Russia and Britain, to control the growing power of Germany. In this way, twoopposing sides formed in Europe, improving their military forces and alliances year-

 by-year.

-  The Ottoman Empire had declined enough to become a target for the others. Thisinstigated the Crimean War in 1854 and began a tenser period of minor clashes amongthe globe-spanning empires of Europe that set the stage for the First World War. 

World War I (1914 –  1918) and World War II (1939 –  1945)

-  After the relative peace of most of the 19th century, the rivalry between European powers exploded in 1914, when the First World War started. Over 60 millionEuropean soldiers were mobilized from 1914 – 1918. On one side were Germany,Austria-Hungary,  the Ottoman Empire and Bulgaria (the Central Powers/TripleAlliance), while on the other side stood Serbia and the Triple Entente - the loosecoalition of France, the United Kingdom and Russia, which were joined by Italy in1915, Romania in 1916 and by the United States in 1917. Despite the defeat of Russiain 1917 and the collapse of the Eastern Front,  the Entente finally prevailed in theautumn of 1918.

-  In the Treaty of Versailles (1919) the winners imposed relatively hard conditions onGermany and recognized the new states (such as Poland, Czechoslovakia, Hungary,Austria, Yugoslavia, Finland, Estonia, Latvia, Lithuania) created in central Europe out

of the defunct German, Austro-Hungarian and Russian empires, supposedly out ofnational self-determination. Most of those countries engaged in local wars, the largestof them being the Polish-Soviet War (1919 – 1921). In the following decades, fear ofcommunism and the Great Depression of 1929-1933 led to the rise of extremenationalist governments –  sometimes loosely grouped under the category of  fascism –  in Italy (1922), Germany (1933), Spain (after a civil war ending in 1939) and othercountries such as Hungary (1944), Romania (1940) and Slovakia (1939).

-  After allying with Mussolini's Italy in the "Pact of Steel" and signing a non-aggression pact with the Soviet Union, the German dictator  Adolf Hitler started the Second WorldWar on 1 September 1939 attacking Poland and following a military build-up

throughout the late 1930s.

-  Result after German capitulation and end of the war: Horrible situation all overEurope, especially Eastern Europe; destroyed countries, 70 Mio dead people totally.This period was marked also by industrialized and planned genocide. The Nazis beganthe systematic genocide of over 11 million people, including the majority of the Jewsof Europe and Gypsies as well as millions of Polish and Soviet Slavs. The Sovietsystem of forced labour,  expulsions and allegedly engineered famine had a similardeath toll. During and after the war millions of civilians were affected by forced

 population transfers.

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New beginning after World War II: trade as key for peace

-  After World War II, moves towards European integration were seen by many as an

escape from the extreme forms of nationalism, which had devastated the continent.One such attempt to unite Europeans was the European Coal and Steel Communitywhich, while having the modest aim of centralised control of the previously nationalcoal and steel industries of its member states, was declared to be "a first step in thefederation of Europe". The originators and supporters of the Community include JeanMonnet, Robert Schuman. The founding members of the Community were Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. 

-  In the beginning the focus of European integration was on the economic sector and amain motivation was especially to control Germany as the main aggressor in WorldWar II: the former French Foreign Minister Robert Schuman, one of the fathers of theEU, considered the Community as an instrument to limit and control Germany‟s

access to coal and steel as basic raw materials for arms production. (To know thismotivation is very important to understand, why the unification of the coal and steelindustries was the beginning of the European Integration: these industries as keyindustries of that time and for war production as well should be controlled).

-  As a result both in France and Germany the idea of further economic integration inEurope gained more and more attraction, which lead to the establishment of thetreaties of the European Economic Community (EEC) and of the European AtomicEnergy Community (EAEC): In 1957, these six countries signed the Treaties of Rome, 

which extended the earlier cooperation within the European Coal and SteelCommunity and created the European Economic Community (EEC), establishing acustoms union and the European Atomic Energy Community (Euratom) forcooperation in developing nuclear energy. 

-  Although one usually talks about the Community“ as one single organisation, there

are, strictly speaking, three independent treaties that originally established threeindependent communities. Yet, since this construction soon proved to be veryineffective, it was amended: in 1967 the Merger Treaty created a single set ofinstitutions for the three communities, which were collectively referred to as theEuropean Communities (EC), although commonly just as the European Community.

-  In 1973, the Communities enlarged to include Denmark,  Ireland,  and the UnitedKingdom.  Norway had negotiated to join at the same time but Norwegian votersrejected membership in a referendum and so Norway remained outside. Greece joinedin 1981, and Spain and Portugal in 1986.

-  In 1985, the Schengen Agreement led the way toward the creation of open borderswithout passport controls between most member states and some non-member states.

-  In 1986, the European flag  began to be used by the Community and the SingleEuropean Act was signed.

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Introduction to European Union Law

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European and German Reunification after 1990 and the beginning of the EU

-  In 1990, after the fall of the Iron Curtain, the former  East Germany became part of the

Community as part of a newly united Germany. With enlargement towards Easternand Central Europe on the agenda, the Copenhagen criteria for candidate members to

 join the European Union were agreed.

-  The European Union was formally established when the Maastricht Treaty came intoforce on 1 November 1993.

-  In 1995 Austria, Sweden, and Finland joined the newly established EU.

-  In 2002, euro notes and coins replaced national currencies in 12 of the member states.Since then, the euro zone has increased to encompass 17 EU countries.

-  In 2004, the EU saw its biggest enlargement to date when Malta, Cyprus, Slovenia, Estonia,  Latvia,  Lithuania,  Poland,  the Czech Republic,  Slovak Republic,  andHungary joined the Union.

-  On 1 January 2007, Romania and Bulgaria  became EU members. In the same yearSlovenia adopted the euro, followed in 2008 by Cyprus and Malta, and by Slovakia in2009.

-  In July 2009 Iceland formally applied for EU membership. On 1 December 2009, the

Lisbon Treaty entered into force after a protracted and controversial birth. Thisreformed many aspects of the EU.

-  On 1 July 2013, Croatia became the newest EU member (28th).

3.  How to live in the EU?

There are many debates and critics on the EU and especially to much bureaucracy andmany people are afraid of a bureaucratic monster, which gets out of control and will

determine their lives without any chance of personal influence. But it must also beregarded that there is a period of peace, freedom and prosperity of more than 60 yearsnow in central Europe –  never before happened in history for so long time and in suchextend.

Beside of all judicial and economical impacts on the states, there are some veryimportant positive changes in all day live as well, which have a direct influence on allEU citizens and even on foreigners visiting the EU. Just some examples:

-  Common currency:

o  in 17 member states you can pay with the same money, the Euro  –  no morechange, no more complicated calculation of prices and respective change rates,no more problems with remaining money after a visit or holidays

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-  Travelling:

o  in the Schengen area, as a European Citizen you can travel with your ID cardonly, you neither need a visa nor even a passport; visitors from outside EUneed only one visa to enter the Schengen area and can move freely inside afterentrance (no more expensive visas and often complicated visa procedures foreach visited country are necessary)

-  Studying:

o  EU students can freely choose their university inside EU and during studiesthey can also move inside the EU to study in any other country without any

visa or other complicated procedure; the grades are more and more compatible

-  Working:

o  EU citizens can work all over the EU countries

-  The idea of Europe and to be an European:

o  in the younger generations, the idea of attacking neighbour countries by armedforces for occupation or revenge or even dispute settlement is not existinganymore (only as a historical idea long ago); this is a fantastic result ofintegration, because it has to be seen that these ideas of war and rivalry

 between the European countries were very normal and common over centuriesand had been regularly realized still by our grandfather generation; nowadaysit is not even imaginable to fight against our neighbours, even if there areheavy disputes on economical or political fields (e.g. the Iraq war whichdivided Europe politically or the Mad Cow Disease crisis some years ago orregularly disputes about subsidies or economic restrictions like in car

 production or ship building or agriculture): all disputes are settled bynegotiations or decisions of EU organs, never by military or other violentoptions

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II. Establishment and Development of the European Union 

1. The Establishing Treaties of the European Community

There are three treaties, which are named the establishing treaties:

(The Treaty establishing)

- the European Coal and Steel Community (ECSC)- the European Atomic Energy Community (EAEC)

- the European Economic Community (EEC)

The European Coal and Steel Community (ECSC)

The Treaty establishing the European Coal and Steel Community contained provisions oncompetition, prices, free movement of coal and steel workers and subsidies for the coal, ironand steel industry. Its objective was to set up a common market for heavy-industry products.The Treaty was of declining importance, since it proved to be unable to solve the structuralcrisis within the industry. The solution of all problems was finally left to the nationalgovernments themselves. The ECSC Treaty had been concluded for a period of 50 years and

expired at the end of 2002.

The European Atomic Energy Community (EAEC)

The French government promoted the European Atomic Energy Community in order to provide for a common and peaceful utilisation of atomic energy. The Treaty contains detailed provisions on atomic energy research and on the development and the diffusion of atomicenergy technologies. It also provides for subsidies and for the creation of a European AtomicEnergy Commission, whose purpose is to control the acquisition and diffusion of nuclearfuels.

The European Economic Community (EEC)

The Treaty establishing the European Economic Community is the most important Treaty ofall. It was promoted by the Federal Republic of Germany, which considered the establishmentof an internal European market as a perfect instrument to foster its rapidly growing industrialexports. The final objective of the Treaty is to provide for one large and uniform economicregion for all positive impacts such region has on the development and the stability of theeconomy and on the common wealth of its citizens.

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2. The Single European Act and the following Treaties

All following Treaties –  including the SEA, the Maastricht Treaty, The Treaty of Amsterdam,

the Treaty of Nice and the Treaty of Lisbon  –   were all designed to push forward theintegration movement within the European Communities. Each of these treaties, which areusual contracts according to public international law, provides for certain changes to the threeestablishing Treaties. Therefore they cannot be considered separately but always inconjunction and in their timely order.

The Single European Act (SEA)

During the fifties and sixties, several attempts to establish a politically uniform Europe hadfailed. The integration efforts of the seventies finally also came to a standstill. However, onFebruary 28, 1986, the so-called Single European Act was signed with the intention to revivethe process of European integration. In order to reinforce political and economic integration,December 31, 1992 was set as a final deadline for the establishment of an internal Europeanmarket (Art. 14 EC). The most important steps to be taken before that date were to abolish

 border controls, to harmonise trade provisions and to co-ordinate the national tax systems.The legislative competences of the Community organs were extended to enable them to passall legislation necessary to enforce the development. The position of the European Parliamentwithin the legislative process was strengthened. Finally, all members agreed upon a European

 political co-operation in foreign policy matters with the objective to have only one Europeanvoice speaking on international issues.

The Maastricht Treaty

A new stage in the process of European integration was marked by the Maastricht Treaty onEuropean Union. The Treaty was signed February 2, 1992 and entered into force November 1,1993. (Germany‟s ratification was delayed, as Parliament had to wait for the blessing“ of the

German Constitutional Court, which had to cast its judgement on a number of constitutionalclaims concerning that issue.)

The Maastricht Treaty contains the most remarkable changes of the three establishing treaties

since the foundation of the Communities in 1952 and 1957. It set up a three-pillar structurefor the co-operation between Member States, which is referred to as the European Union“.

The notion of a European Union clearly has to be distinguished from that of the EuropeanCommunity. The Treaty aimed at the creation of a Union in the political sense of the word.This was a huge step forward and would require the extension of the co-operation betweenMember States from mainly economic issues to political and social ones. Thereby it was clearthat the rules applying to economic questions like border controls and customs duties couldnot apply to issues like foreign policy or domestic security. That is why the Maastricht Treatycreated the system of the so-called Three Pillars“: 

-  Amending the existing Community Treaties, Title II of the Maastricht Treaty contains

changes of the EEC Treaty (which was afterwards named the EC Treaty); Title III andIV include the respective amendments to the ECSC Treaty and to the EAEC Treaty.Originally all three, and since the expiration of the EAEC the remaining two European

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Community Treaties jointly form the First Pillar of what is called the European Union.Every activity of the Community under the first pillar is of a supranational character.(Supranationality as opposed to intergovernmentalism, which both exist in the hybrid

system of EU.)-  Maastricht introduced provisions on a Common Foreign and Security Policy (CFSP)

(Title V of the Treaty), which forms the Second Pillar. The CFSP pillar is of a purelyintergovernmental nature, which means that it follows the rules of classic publicinternational law. It is dominated by the role of the Council while the Commission hasto be fully associated“ with all activities in this area. 

-  The same applies to the provisions on Co-operation in the fields of Justice and HomeAffairs (Title VI of the Treaty). This Third Pillar is also of an intergovernmentalnature with the Council as the main actor.

These three pillars carry a roof, which is what we call the European Union today. Althoughthe activities within the separate pillars differ in their legal nature and procedural conditionsaccording to their supranational or intergovernmental character, all action is directed towardsan ever closer union between the peoples of Europe“ as it is stated in the preamble of the EC

Treaty.

The widening of the scope of issues dealt with at the European level emphasised the need fora stronger democratic legitimisation of Community action. First of all it became necessary toregulate the allocation of competences between the Member States and the Community. Forthat purpose the Maastricht Treaty introduced the principle of subsidiarity (Art. 5 (2) EC).

Remarkable was also the increase of the European Parliament‟s powers by the MaastrichtTreaty, which was an effort to reduce the often criticised democratic deficit in the EuropeanUnion. According to Art. 214 (2) EC, e.g., the Parliament has to be consulted before thegovernments of the Member States nominate the person they intend to appoint as President ofthe Commission. The new Art. 251 EC provides for the Parliament‟s right to participate

decisively in the legislative process in some substantial policy areas. Furthermore theMaastricht Treaty set out the schedule for the establishment of an economic and monetaryunion (Title I Art. B EU) among Member States.

The Treaty of Amsterdam

The Treaty of Amsterdam, revising the founding Treaties of the European Union, becameeffective on May 1, 1999.

The Treaty changes relating to the fields freedom, security and justice are:

-  Common action on issues such as asylum, visas, immigration and controls at external borders, which was formerly part of the third pillar of the EU (Justice and Home

Affairs“ which was then renamed to Police and Judicial Co- operation in CriminalMatters“), has been moved to the first pillar of the EU.

-  Since the objectives of the Schengen Agreement, which had already established a zoneof free movement of persons among thirteen Member States, coincide with thosecontained in the new EC Treaty, the achievements of Schengen were incorporated into

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the framework of the European Union (exceptions apply to the United Kingdom, Irelandand Denmark).

-  The operational impact of the European Police Office (Europol) was also significantlyincreased.

Furthermore there are new EU policies for the benefit of citizens, e.g. concerning the problemof unemployment:

-  While the competence for employment matters remains essentially with the MemberStates, now the employment issue could also be addressed at the European level,supported by actions of the Member States. The new EC Treaty specifies the promotionof a high employment rate as an objective. It also includes an explicit Treaty basis for aco-ordinated strategy for employment and introduces a co- ordination process onemployment policy at Community level, involving the adoption of guidelines foremployment and annual assessments of national measures with a view to ensuringconsistency. Incentive measures designed to encourage co-operation between MemberStates and to support innovative action in this field may also be adopted.

Other EU policies, which were stressed in the Treaty of Amsterdam, are the abolition ofgender based discrimination, environmental protection, health and consumer protection.

In the field of external policy the Common Foreign and Security Policy (CFSP) has beenimproved in the following ways:

-  Overall consistency will be strengthened by enhancing the role of the European Councilin defining common strategies for the Union‟s foreign policy which will set out theirobjectives, duration and the means to be made available by the Union and the MemberStates.

-  A new post was created, which is called the High Representative for the CFSP, who willassist the Council in CFSP matters.

-  Finally the decision-making procedures were significantly improved.

The Treaty of Amsterdam has introduced a number of important institutional changes:

-  First of all the role of the European Parliament as a genuine co-legislator with theCouncil has been recognised by changing the legislative procedure known as co-decision. The revised Art. 251 EC places the Council and the European Parliament onan equal footing.

-  Secondly the scope of the legislative areas where this procedure applies has beenincreased significantly.

-  There was also an extension of the areas where qualified majority voting (instead of

unanimity) is required for the adoption of acts by the Council, which will facilitatedecision-making.

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and Britain, which have 60 million inhabitants each.

-  The list of about 70 issues to be decided with unanimity has been reduced to a number

of approximately 40. However, the abolition of the national veto in 30 policy areassounds more impressive than it was. Most of these areas are relatively minor. Keyquestions like taxes and social matters, asylum and immigration law, trade andindustrial/commercial property still depended on the veto right of each Councilmember. The Community‟s inability to act in problematic areas has therefore not been

sufficiently removed. In a (at that time future) union of 27 members it was hard to seehow any contentious measure will be able to win unanimous support.

-  Parliament: The composition of the European Parliament was adapted to the (at thattime) future situation of 27 Community members. Only Germany will keep its currentnumber of representatives (99) while the remaining 14 present Member States have tostand aside for delegates from the new Member States. The future European Parliamentwill better mirror the population of the Members States than it has done in the past.

-  Commission: From November 2004 onwards each Member State will send only oneCommissioner, which means that the five biggest countries (Germany, France, UK,Italy and Spain) will renounce their second one. Once the remaining 2 candidatecountries (Bulgaria and Romania) have joined the EU, membership of the EuropeanCommission will be reduced to a yet unspecified number. The Member States will theneach provide their representatives on a rotating basis.

- The position of the President of the European Commission has been strengthened. Hewill now be elected by a qualified majority.

According to the Treaty of Nice the four biggest Member States (Germany, France, Britainand Italy) would have a stronger combined hand in decision-making to re-balance voting

 power when the EU expands eastwards over the next decade. This agreement was found at theexpense of the smaller and less populous states. The reassessment of voting powers was anindispensable reform, because without it, enlargement would have enabled a cluster of smallstates to outvote countries containing a clear majority of the EU‟s population. However, thissolution has already been put in question even before it is supposed to become effective in2005. And the debate on a constitution for the EU, which was opened in 2003, took up the

question of voting powers again.

The Treaty was widely criticised in Europe as a disappointing minimum. After endless talksabout streamlining the EU‟s cumbersome institutions they looked more cumbering than

 before. The European Commission grew fatter, and so the European Parliament with up to740 members. Another criticism has been that certain policy reforms, which are by commonconsent vital to enlargement, have been omitted, such as the common agricultural policy orthe structural and cohesion funds.

The bigger states wanted to leave Nice having agreed on a leaner, more streamlinedCommission. In the end, they were forced to agree to the opposite, since the smaller countries

insisted on retaining one commissioner each. The only sense in which the EU will becomemore flexible as it expands is through enhanced co-operation“ –   groups of states forgingahead on integration projects that not all wish to join. Britain feared this would lead to a two-

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speed Europe, but signed up after winning certain safeguards –  that is, forfeiting the so-calledemergency brake“ or veto on groups of countries embarking on a project in return for an

appeal to the Council of Ministers. Whether in practice enhanced co-operation“ generates

greater harmony or greater discord remains to be seen. The summit amply showed the needfor a thorough overhaul of the EU‟s decision-making machinery. Unfortunately it failed to

 provide one. It can be said that the EU‟s leaders agreed enough in Nice to keep the

reunification of Europe on track, but only just. So the next reform round in 2004 had to try toclarify the powers of Brussels and the EU states.

The European Council Meetings in Laeken and Copenhagen

As the Nice Treaty had not brought about the changes required in order to prepare theEuropean Union for the approaching enlargement, the expectations were now directedtowards the summit of the European heads of state in Laeken in December 2001.

The Laeken summit evolved around one major issue: the future shape of the European Unionand the reforms required in order to progress on the road to an ever closer union between the

 peoples of Europe“. Its main result was the establishment of a Convention, whose task would

 be to prepare the necessary reforms of the future Union. The Convention  –   under thechairmanship of the former French president Valerie Giscard D‟Estaing –  was composed of15 representatives of the heads of the Member States, 30 members of the national parliaments,16 members of the European Parliament, two Commission representatives and representativesfrom the new Member States. It convened for the first time on March 1, 2002 and operated

until June 2003. The following issues were placed on the agenda for the Convention:-  The simplification and reorganisation of the founding Treaties, which is required in

order to achieve more transparency within the EU

-  A new allocation of competences between the Member States and the Community

-  The legal status of the European Charter of Fundamental Rights and its possibleinclusion in the Treaties.

In a nutshell, the Convention was supposed to draft what could be called a constitution for the

future European Union.

The second major topic of the Laeken summit was the fight against terrorism and thedevelopment of a joint European military force. Clearly these issues had been put on theagenda due in large to the events of September 11, 2001 and the global politicaldevelopments.

When the European Council reassembled one year after the Laeken summit in Copenhagen(December 2002), the 15 heads of state decided that ten countries  –   Cyprus, Estonia,Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic, the Czech Republic andSlovenia –  were to join the EU on May 1, 2004, just in time to take part in the new elections

for the European Parliament. The Eastern enlargement process, which had been set out at theLuxembourg Council in 1997, was now approaching its final stage. Bulgaria and Romania,have become members of the Community in 2007

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The Convention on the Future of the European Union

The Convention, operating from March 2002 to June 2003, was in search of solutions for the

Union‟s most urgent questions: 

-  The simplification and consolidation of the existing Treaties which are oftenoverlapping and confusingly complex

-  The (re-) allocation of competences between the European Community and its MemberStates

-  The legal status of the European Charter of Fundamental Rights“ and its inclusion in

the Treaties

-  And last but not least, the institutional changes required to make the EU fit“ for the

Eastern enlargement in 2004.

Soon this body was uniformly called The Constitutional Convention“ and its goal was

clearly to produce a draft constitution for the European Union. The debate within the workinggroups was intense and  –  as expected –  highly controversial, eurosceptic minimalists“ and europhoric federalists“ pulling from the far ends of the rope. However, it resulted in a

 proposal for a Constitution for the European Union which was adopted by all conventionmembers in June 2003.

The draft  –   although nothing more than a proposal without any legislative or politicalauthority –  has been criticised on several grounds. First of all, it does not shed considerablelight on the systematics of the founding Treaties of the European Union in order to make themmore understandable to the Union‟s  citizens. Further the Convention has failed to define aclear division between Community and Member State powers and to assign them to theinstitutions accordingly. The text on this issue is still vague and does not provide sufficientsupport for the essential but yet unenforceable principle of subsidiarity.

The constitution is vague on numerous issues, like a European tax-raising power or a commonforeign policy, and confines itself to anticipating them, hinting at their possible development

in the future. This technique unfortunately serves to further enhance already existinginstabilities and legal uncertainty within the European Union.

On the other hand the draft put forward a number of measures that would strengthen the process of integration and bring the EU closer to its citizens. These proposals included aformal legal personality for the EU, a European foreign minister and an expansion of theCommunity‟s power to adopt legislation by majority vote. 

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The Treaty establishing a Constitution for Europe

In order to enter into force, the draft constitutional treaty required the unanimous agreement

of all heads of state, which was scheduled for a European Council meeting in December 2003.But the intergovernmental conference (IGC) taking place in Brussels failed to find consensuson the draft constitution during the summit, driven apart by national interests.

The most controversial issue brought to attention was the weighting of votes of the EUcountries in the Council of Ministers. The Nice Treaty had established a complex votingsystem benefiting smaller countries. The new draft proposed a simpler double majority“

system. This would require a new piece of legislation to be supported by the majority of the25 Member States representing at least 60% of the Union‟s population, and thereby give the

more populous countries a heavier weight. While the small countries would retain theirinfluence through the simple majority rule, medium-sized countries  –   meaning Spain andPoland –  would clearly be disadvantaged compared to the Nice agreement. Against the strongsupport for the constitution from Germany and France, the stance of Spain and Poland

 precluded an agreement or even a compromise at the summit in Brussels. This left the draft proposal in a vacuum until the following European Council meeting in June 2004.

In the meantime unexpected political developments caused a shift in the European politicallandscape with its apparent divide between Germany and France on the one side and Spainand Poland on the other. Following the terrorist bombing in Madrid on March 11, 2004, theSpanish elections removed the ruling conservative People‟s Party under José Maria Aznar

from power and put the Socialists in their place. The future Prime Minister José Luis

Rodríguez Zapatero has already signalled that Spain will renew its formerly strong ties withGermany and France, which translates into a shifting towards the other side of the Europeandivide. Zapatero has also indicated that he will agree to double majority“, thereby leavingPoland isolated and opening the road to an agreement on the European Constitution in 2004.

 Nevertheless, the failure of the IGC in Brussels has hinted at the problems arising in the process of enlargement. If agreement cannot be achieved among 15 Member States, what arethe perspectives of a Union of 27 and more members? The non-workability of the structures,institutions and decision-making processes was becoming more and more apparent butsolutions were far from being identified or even introduced.

The Treaty establishing a Constitution for Europe has finally been adopted by the heads ofstate and government at their regular summit in Brussels on June 18, 2004. It was formallysigned on October 29, 2004, in Rome, thereby connecting to the Founding Treaties. Being anew treaty, it requires ratification in all member states.

This processed slowly but surely until the referenda in France and the Netherlands in spring2005 produced a surprisingly clear negative vote, leaving European politicians in a kind ofshock, so that the process of adoption has been suspended since.

The new treaty had been ratified by 15 member states (Austria, Belgium, Cyprus, Estonia,Germany, Greece, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, Slovakia, Slovenia

and Spain). Two denied ratification (France and The Netherlands). The others have put their plans for holding referenda (Czech Republic, Denmark, Ireland, Poland, Portugal andSweden) or ratifying the treaty by parliamentary vote (United Kingdom, Finland) on hold.

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The member states held that  –   after the referenda in France and the Netherlands  –   theConstitution for Europe would most likely never be ratified by all. Therefore, the functionalelements were used for a new treaty.

The Treaty of Lisbon

In order to overcome the impasse, the heads of state and government agreed on a new treatywhich was signed in Lisbon in December 2007. Mainly, the treaty merged the EuropeanUnion and the European Community into the new European Union. The treaties wererenamed Treaty On European Union” replacing the EU Treaty and Treaty On the

Functioning of the European Union”, replacing the EC Treaty. The Treaty made amendments

to institutions and procedures alike:

-  The European Community is joined with the European Union, merging all pillars intoone legal entity and also increasing the EU‟s competence to sign treaties.  

-  The Charter of Fundamental Rights is made legally binding.

-  The provision of the Treaty of Nice limiting membership to 27 states is lifted.

-  Withdrawal procedures are included.

-  A European Council President serving a term of 2 1/2 years replaces the former rotating

 presidency.-  There is now only one foreign affairs post (merging the external relations commissioner

and the High Representative for CFSP).

-  The European Council has officially been separated from the Council of Ministers.

-  Legislative meetings are held in public.

-  More decisions will be taken in the European Council and the Council of Ministers bymajority voting from 2014 on, thereby reducing veto powers by individual member

states.

-  The Commission has been reduced in size to less than one commissioner per memberstate. Rotation will not consider the size of the member state.

-  Co-decision powers of the European Parliament has been extended.

-  National parliaments are engaged by expanding scrutiny-time of legislation andenabling them to jointly compel the Commission to review or withdraw legislation.

-  Citizens can force the commission to consider a petition if it is signed by 1 million

citizens.

-  The road is open to common defence forces when the European Council decides

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unanimously to establish them.

According to Art. 6 EU (Lisbon), the treaties entered into force on December 1, 2009.

Several member states have expressed their opinion that further enlargements of the EuropeanUnion have to be put on hold until the institutions have been reformed and decision-making

 procedures have been streamlined. Therefore, the prospects of Turkey and Croatia joining theEU have been diminished.

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III. The Institutions of the European Union

There are 7 institutions which have specific powers assigned to it by the treaties. These 7institutions of the European Union are

-  the European Council (heads of states or governments),-  the Council (Council of the European Union or Council of Ministers: Ministers

responsible for the respective political question on debate),the two “intergovernmental” institutions

-  the European Commission,-  the European Parliament,-  the Court of Justice of the European Union and the General Court

-  the Court of Auditors and-  the European Central Bank.the “European” institutions 

Only these 7 institutions can “act”, that is take generally binding decisions. 

There also a number of other bodies, e.g. the Economic and Social Committee, the Committeeof the Regions etc. These bodies operate in specific fields and have either a purely advisoryrole or take decisions, which are not generally binding.

Originally, each of the three treaties (ECSC, EAEC and EEC Treaty) provided for separate

organs. Thus, there were three Councils, three Commissions and three Assemblies. Thesituation was changed after 1957 and with the Merger Treaty 1965: The institutions of thethree Communities were finally merged into one common set of organs: one Council, oneCommission, one Parliament, and one Court of Justice, any of which has authority for allTreaties resp. the EU.

The European Council, which was before the Lisbon Treaty not a regular European Union body, but a genuine organ of the European Union, became now a regular organ. It consists ofthe heads of state of the 27 Member States, the President of the European Council and the

 president of the Commission. It is described as the generator of the major political guidelinesalong which the Union develops. Therefore the European Council is the political steering

wheel of the Union; it is a body with extraordinary powers and of great political significance.

NOTE: The European Council has to be strictly distinguished fromthe “Council” (Council of ministers, see below) and also from

the Council of Europe“ in Strasbourg, which is an independent institution, based on

international law, with miscellaneous functions outside the scope of the European Union.

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1. The European Council

-  The European Council gives direction to the EU, and convenes two times within a half-

year (EU summit). It comprises the President of the European Council, the President ofthe European Commission and one representative per  member state; either its head ofstate or  head of government. The European Council has been described by some as theUnion's "supreme political authority". It is actively involved in the negotiation of thetreaty changes and defines the EU's policy agenda and strategies. 

-  The European Council has great political power, but is not a legislative body: thelegislative body is the Council.

-  Former the chairmanship rotated on a six-months-basis according to a firm schedule. Now a European Council President serves a term of 2 1/2 years, replacing the formerrotating presidency. It was changed because the old system caused policy discontinuityand institutional strain. Considering the decision making power of the Council and theinfluence of its president on all EU policies, this change elevates the President of theCouncil to what could become the President of Europe“. 

-  The European Council uses its leadership role to sort out disputes between memberstates and the institutions, and to resolve political crises and disagreements overcontroversial issues and policies. It acts externally as a "collective Head of State" andratifies important documents (e.g. international agreements and treaties).

- On 19 November 2009, Herman Van Rompuy was chosen as the first permanentPresident of the European Council. On 1 December 2009, the Treaty of Lisbon enteredinto force and he assumed office. Ensuring the external representation of the EU,driving consensus and settling divergences among members are tasks for the President

 both during the convocations of the European Council and in the time periods betweenthem.

-  NOTE again: The European Council should not be mistaken for the Council of Europe, an international organisation independent from the EU.

2. The Council (Council of the European Union or Council of Ministers)

-  The Council is the legislative arm of the EU. It is the highest ranking “normal” body ofthe Union with decision-making power. It is composed of representatives of theMember States, which delegate one member of their government. Accordingly, since1995 the Council has been composed of 15 members. From May 2004 onwards, therewere 25 of them, from January 2007 until now 27. The presence in the Council changesaccording to the issues discussed. National governments usually send the ministersresponsible for the particular political field in question: Although legally there just oneCouncil, its composition and name depend on the subject matter of its deliberations, e.g.there is the Agricultural Council, the Home Affairs Council etc.

-  The chairmanship in the Council rotated on a six-months-basis according to a firmschedule.

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-  NOTE: The European Council (the council of heads of state described under no. 1) isnot a “normal” body involved in the day-by-day work of the EU, but gives the

guidelines and decisions of very fundamental importance. The “ordinary” work is done by the other organs, and among these the Council is the decision making and thereforemost powerful body.

-  The competences of the Council as the most important institution of the EuropeanUnion are the following:

o  Legislative Power  The Council as the main decision making body of the Union (in the

regular procedure in cooperation with the EU Parliament) can passregulations or directives and make decisions. These are the three majorlegislative instruments available for the Union. The Council is also themain actor in the amendment procedures of the Treaty.

o  Representation of the European Union  The Council also represents the Union in relation to third countries, for

instance by signing international agreements or association treaties withoverseas countries and territories or the admission of new members tothe Union.

o  Control of the Budget 

The Council has –  together with the EU Parliament –  the final say in all budgetary matters. It passes the budget after it has been discussed withthe other organs of the Union. Because of these competences infinancial matters, the Council has a crucial influence on alldevelopments within the Union.

-  The Council decides on all issues of fundamental significance to the Union. It is thecentral legislative Union organ. Decisions of the Council are subject to varying majorityrequirements, according to the treaties and finally to the importance of the issuediscussed. There is an important change by the Lisbon Treaty: the standard voting shall

 be the qualified majority voting (Art. 16 (3) TFEU); but some of the very important and

vital issues are and will be still subject to unanimous voting, e.g. direct taxation andforeign politics, because members are reluctant to give up unanimity voting rules whichgive them finally a veto right in these matters.

-  Since 2005 and still in use (also continuing after Lisbon), the current majority voting isa complicated procedure based on weighted votes. This procedure was a compromise tosatisfy very different interests of the single member states, which have very different

 populations. According to the Treaty of Nice, since 2005 a qualified majority vote will be subject to three conditions: (1) a positive vote of the majority of the Councilmembers, (2) a minimum number of votes in the Council and (3) on the request of oneof the Council members, the representation of at least 62 % of the EU. This means:

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(1) A simple majority of the voting Member States is reached with 14 (out of27) votes in the Council.

(2) The Treaty of Nice has introduced a revised scheme for the distribution ofvoting weights in a Council of 27 members. The range of votes has been

 broadened, giving 29 votes to the biggest Member States and 3 votes to littleMalta. A qualified majority vote will require 258 out of 345 votes.

(3) The Nice Treaty provided for the possibility of each Council member torequest a check, whether or not the favourably voting countries represent atleast 62 % of the population of the European Union.

-  The current system of weighted votes is to be replaced from November 2014 by a“double majority” system, which means a majority requires 55% of the member states

(now at least 15 member states of 27) and also 65% of the population of the EU. A blocking minority must include at least 4 member states. (This was a compromise toavoid a blocking option for the three biggest countries alone when acting together).Between November 2014 and March 2017, any member state can request that thecurrent weighted voting system be applied instead of the new double majority system.

-  Unanimity is required for issues touching upon the foundations of the Union, like theadmission of new members, the association of third countries and the extension ofcompetences. Before the Single European Act was passed, unanimity was also requiredfor the harmonisation of diverging legal provisions in the respective Member States.

3. The Commission

-  In a nutshell, the Commission is the executive and watchdog of the EU and has the rightto put forward legislative proposals (initiative right). The Commission has a very central

 position in the Union‟s institutional system. Its role is one of an animator,  manager and balancer within the EU. It represents the common interest of the Union as opposed tothe different national interests of its Member States, which are represented in theCouncil. The Commission as such and its president have to be approved by thegovernments of the Member States in consent with the European Parliament.

-  The Commission has 27 commissioners  –  one per member. The envisaged reduction to2/3 of the number of member states, which is included in the amended treaties (but forthe time after November 2014), is suspended because of a unanimous decision of thecouncil to alter this number and to continue with 27 until a new decision.

-  Recent development: until enlargement of the EU (15+), the Commission wascomposed of 20 members. Larger members (Germany, France, UK, Spain and Italy)appointed two commissioners each, while each of the remaining ten appointed one.Between May and November 2004, the number of commissioners has risen up to 30, aseach of the ten new Member States was sending one Commissioner, according to the

old“ system. Since November 2004, when a new Commission took office, eachcountry appoints only one commissioner, so the number of Commission membersdropped back to 25 before reaching 27 again (after the accession of Bulgaria and

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Romania in 2007). Already at the summits in Nice and Laeken the composition of theCommission had been a point of discussion. Problems like lower efficiency andimpracticality are arising while the institution is gaining weight“. The Commission

will lose some of its dynamic and flexibility in the course of its very own enlargement process. The Convention on the Future of the European Union also had this question onits agenda The Lisbon Treaty reduced the number finally, but with the option to suspendthe reduction by unanimous voting. The latter was realized, because the members couldnot find a compromise regarding the reduction and therefore the former system factuallyremains: one state –  one commissioner.

-  Commissioners are appointed for a (renewable) five-year term; they are appointed bythe member states, but once appointed, the members cannot discharge them during theirterm of office: the commissioners have the duty and the right to perform their tasks withcomplete independence in the general interest of the EU; they are forbidden to seek ortake instructions from their own or any other government or body

-  The president of the commission (one of the 27 commissioners) is to be proposed to theEuropean Parliament (EP) by qualified majority vote by the European Council and thecandidate is then elected by the EP by a majority of its component members; the

 president has a special position, much depends on his/her personality

-  The (no specified number of) vice-presidents are appointed by the president fromamong its members, except the High Representative of the Union for Foreign Affairsand Security Policy which is an additional vice-president of the commission and is

appointed by the European Council by qualified majorityNOTE:  The High Representative has a double-hatted function: he represents theCouncil and is also one of the Vice-Presidents of the Commission

-  Each member of the Commission has a personal staff (“cabinet”) which assists him/her;

the Commission as the executive of EU employs a large bureaucracy to fulfil its tasks:about 34.000 permanent staff

-  Legislative Initiativeo  The most important right of the Commission is the (nearly exclusive) right to

initiate legislation and all other kinds of action of the Union. It is theCommission who has to draw up a proposal or to make recommendations tothe Council on steps to be taken according to the Treaty before the Council isallowed to put it in action. Since the Commission is the only body with such aright, one can say that it has got the monopoly of initiative for Union actions.The Council may set aside such recommendations by unanimous vote only.

-  Executive Powero  Furthermore, the Commission has executive competences, founded in several

clauses of the Treaty, in particular the agricultural and antitrust provisions.o  Finally, the Commission executes the budget and administers agricultural,

social, regional and development funds.

-  Guardian of the Treaty

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o  An assignment of particular importance to the Commission is its responsibilityfor the proper application of the EU Treaty. Whenever there are indicationsthat a Member State has failed to fulfil an obligation under the Treaty, the

Commission may invoke procedures against that country on the ground ofTreaty violations.

-  NOTE: Since both the Council and Commission are responsible for drawing up newlegislation and for the execution of Union law, they are often characterised as thedynamic organs“ of the Union. This statement may be truer for the Commission, whichis the guardian of the Treaties“. It controls the observance of Union law and guaranteesthe development and well functioning of the internal market. The Council, on the otherhand, is of course a crucial instrument of European integration and the highest-rankingdecision-making body under the Treaty. Yet, since it is composed of governmentexecutives of the Member States, it is heavily influenced by general politics andnational interests. Government representatives have to give account in their homecountries for every decision taken by the Council. Therefore they will only back updecisions they are able to justify at home later. As a result, decision taking within theCouncil is an extremely difficult procedure.

4. The European Parliament

-  The European Parliament (EP) constitutes the (direct) democratic element within theUnion. Until 1979 the members of the EP were envoys of the national parliaments.

Based on the Elections Act of 1978, they are now elected by general and direct vote ofthe citizens of each Member State for a five year term. Electoral procedures within theMember States have not been harmonised yet.

-  Due to the enlargement of the Union the number of MEP ‟ s in the electoral term 2004-2009 increased from 626 to 785. Now (after EU election 2009) there are 736 members;

 but according to the Lisbon treaty, the EU-Parliament will have 751 MEP‟ s with the

next election (2014).

-  The number of representatives elected in each of the Member States depends on thecountries‟ respective populations. The smallest Member State (Malta) has much less

seats than the most populated Member State (Germany), but even this cannot avoid adisproportionately high presence (mathematically) of the smaller states: e.g., Malta has6 seats (minimum number of seats), Germany 99 seats (maximum number of seats),even if the proportion of populations is much bigger than this 6:99 proportion - theGerman population is 82 million to 0.4 million of Malta. But the mathematical

 proportion cannot be fully regarded, otherwise the smallest countries would berepresented only by one representative which would not be acceptable; and therepresentatives in EP, even if elected by people directly, represent (also) their home

 population as a nation in this EU consisting not of pure EU people but of nations withdifferent traditions, interest etc. which needs a fair chance to be heard.

-  The function of the EP can hardly be compared to that of national parliaments. In particular, the EP does not have the crucial power in the legislative area. Originally itwas given only minor rights to participate in the legislative process. These rights have

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 been strengthened beginning with the Treaties of Amsterdam and Nice. With the Lisbontreaty there is a major boost to the EP‟s powers, getting it involved in important

legislative areas like justice and agriculture.

-  The present structures of the European Union are criticised for their democratic deficit.The European Parliament is still far short of being a Parliament in the proper sense ofthe word. There is no classical separation of powers in the sense of checks and balances.Yet, such separation of powers is indispensable to any efficient democracy, at least to acertain degree. Right now, the Union is based on a natural antagonism between Counciland Commission. Both organs control and limit each other. This balance“ is based on

the fact that the Council primarily represents national interests, while the Commission isfirst of all obliged to foster the interest of the Union as such.

5. The European Court of Justice and the General Court (formerly Court of First Instance)

-  The European Court of Justice (ECJ) and the General Court of European Union (EGC) - both located in Luxembourg - exercise the judicial power in the Union system. It is theirtask to [...] ensure that in the interpretation and application of the Treaty the law is

observed“ (former Art. 220 EC and now Art. 19 I TEU). The EC Treaty sets outdifferent kinds of judicial procedures, comprehensively enumerated, which enable theECJ and the EGC to comply with their duties.

-  The European judicial system, as it exists today, was subject to a major reform by the

Treaty of Nice. In the early days of the Community, the ECJ was the one and only judicial body in the Community system. The former European Court of First Instancewas first established in 1988 with the purpose to support the ECJ, whose growingworkload started to overextend its capacities. The jurisdiction of the EGC was initiallylimited to first instance claims of non-privileged applicants, including competition andanti-dumping cases, and to claims of Community employees (staff cases). The Treaty of

 Nice applied a completely new allocation of competences between the ECJ and EGC.Today the role of the EGC is not merely one of an assistant to the ECJ, but it has beenupgraded to an equal and independent body with a responsibility for the jurisdiction ofUnion cases.

6. Other Union Organs

-  The Court of AuditorsIts task is to scrutinise the finances of the Union and to ensure sound financialmanagement. Examining all accounts and all expenditure of the Union the Court ofAuditors reports to the Parliament and the Council –  who are in control of the budget –  on the legality of all transactions, on the reliability of the accounts and of irregularitieson their occurrence.

-  The Economic and Social Committee

The Economic and Social Committee (ECOSOC) is an advisory body which assiststhe Council and the Parliament. The Committee consists of representatives of thevarious economic and social interest groups all over Europe. Each country has a

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specified number of representatives, who are selected according to a nationallyregulated procedure and finally appointed by the Council. During the legislative

 process or in various other instances ECOSOC must be consulted (by the Council, the

Commission or the Parliament) and given a certain time period for the issuing of itsopinion on the subject matter.

-  The Committee of RegionsThe Committee of Regions (CoR) represents the interests of the numerous regionaland local bodies throughout Europe, like the Länder“ in Germany  or the Swedishcounties. Members of the CoR  –   like those of the ECOSOC  –  must be independentand act in the Union‟s general interest. The Treaty of Nice stipulates that they must

have a mandate, which is based on regional or local elections or they must be politically accountable to an elected assembly. The CoR is also an advisory body. Ithas to be consulted where the Treaties stipulate it, but it can be consulted also on otheroccasions, especially when regional interests are particularly affected by a Unionmeasure.

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IV.  Legal Order and Legislation of the European Union

1. The Nature of European Union Law

-  In order to comprehend the nature of European Union Law, one has to depart from thestandard categories of national law and (public) international law. The Union legalsystem is a system sui generis, an invention of the original signatory states of thefounding Treaties, developed and elaborated by a very progressive and integrating

 jurisdiction of the European Court of Justice.

-  The nature of EU law is pre-determined by the nature and structure of the Union itself.When signing the founding Treaties, the Member States agreed to transfer some of theirsovereign powers in defined and limited areas onto the European Communities, with theconsequence that the contractors were no longer allowed to exercise these powers. Inother words: These states were prepared to limit their own sovereignty  –   the verycharacteristic of state power  –   in favour of the former Community/now Union. Byshifting powers to another  –  common  –   level, the signatories created a supranational(international) organisation, which has got autonomous public power and the right toadopt rules binding on its members. Therefore the European Union is neither merely aninternational organisation nor a super-state. The Union is a creation sui generis.

Intergovernmentalism vs. Supranationality

-  While the prefix inter“ indicates that intergovernmental acts are acts between

governments, or rather between states, which confront each other on the same level (co-ordination), the prefix supra“ hints at a relation of subordination between the Unionand the Member States. A supranational organisation overlooks its members, it existsabove them and not merely between them. But at the same time the notion ofsubordination must be handled with great caution, as the Member States are and remainthe „Masters of the Treaties“. It was for the autonomous decision of each MemberState that they subordinated themselves voluntarily to the legislative power of theUnion. At any point in time a Member State can decide to resign its participation in theEuropean Union and to withdraw (elude) from its contractual obligations at the

European level. Although this power could in the past not be found in any of thefounding Treaties, it always existed as a factual right. The Lisbon Treaty now containsthe first formal statement of the right to leave the EU. The only  –   and probablyunenforceable –  condition is a two years‟ notice. 

-  Some parallels can be drawn between supranationality and federalism, although theassociation of the European Union with the notion of federalism is probably adangerous one in the view of many European leaders. In a federalist state, e.g.Germany, the sovereign power is divided up between different levels of power  –   inGermany between the Bund“ (the federation) and the Länder“   (federal states).Similarly in the European Union the power to legislate or to act in the different policy

fields is divided up in Union competences and competences remaining at the nationallevel. In both cases problems arise when it comes to the definition and clear allocationof competences.

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-  NOTE: The use of “federalism” to explain the structure is only to use a known model

for better understanding of the supranational side/structure of EU. The EU as a whole is

far away from being a federation in the classical sense, e.g. the Federal Republic ofGermany. Latter is a federal state, but the Union is not a state like building.

Transfer of Authoritative Powers to the Union

-  The Treaties as described above have been designed to convey authoritative –  originallynational sovereign  –   powers from the Member States to the Union bodies. Once amember state has transferred competences to a supranational organisation like theEuropean Union, this organisation has the right to pass legislation being immediatelyeffective within the territory of the member. The member, e.g., has transferred its

 powers to regulate the field of agricultural subsidies to the European Union by means ofthe Treaty. Consequently the agricultural sector may no longer be subsidised by nationalauthorities. All regulative steps within this sector now have to originate in Brussels.

The Doctrine of Direct Effect

-  The most prominent feature of EU law is the so-called direct effect of provisionsadopted at the Union level. The jurisdiction of the European Court of Justice has playedan essential role in the development of the concept of direct effect. In a number of very

early and bold judgements, inspired by the political and legal order the foundingTreaties intended to establish, the ECJ ruled that not only the Member States themselvescan be subject to legal acts of the Community/Union, but also individuals can deriverights and obligations directly from Union provisions and can therefore  –  under certaincircumstances –  invoke Union rules in front of a national court.

-  The significance of this legal invention of the ECJ as a major step in the history ofinternational law should not be underestimated. The direct effect doctrine is the verycharacteristic that differentiates EU law from the classic law of nations. Treatiesaccording to international law bind the contracting parties (states) only, and usuallyhave to be implemented by the national parliaments in order to create applicable rules

for private individuals under domestic law. As opposed to this two-step system Union provisions can affect a single person in a Member State immediately when they enterinto force, and give him or her the opportunity to enforce a Union rule before adomestic judge.

-  NOTE: Do not confuse (the general idea of) direct effect with (only) direct applicabilityof regulations, laid down in the treaties; direct effect means also an applicability of allother law within the EU law system including the treaties itself (i.e. intergovernmentalresp. international law agreements) under certain conditions, see below

2. Sources of EU law

-  The law of the European Union can be divided into two major bodies. The so-called

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 primary law consists ofo  the establishing Treaties of the Communities and the EU Treaty, including

amendments and supplementary provisions thereto;o  customary law ando  the general principles of Union law.

Primary law may be characterised as some kind of constitutional law, which determinesthe basic structures of the European Union.

-  On the other hand, the so-called secondary Union law comprises all legal acts passed byinstitutions of the Union. All secondary legal acts, among them are

o  regulations,o  directives,o  decisions ando  legal acts sui generis,

are based on primary Union law. Secondary law forms the more voluminous set of rulesand has major effects on the European citizens‟ rights and duties. 

Primary Law

-  The (amended) founding Treaties  –   especially the EC_Treaty and later EU-Treaty  –  regulate mainly the institutional system of the European Union. They spell out thegeneral aims and basic principles of the Union; furthermore they establish rights and

obligations of the Member States and the Union bodies.-  The least recognised source, but also part of primary law, are the general principles of

EU law. As pointed out by the ECJ, the general principles of the Community/Union arean autonomous source of law, not merely borrowed from the Member States.

 Nevertheless, the legal systems of the Member States are more than just an inspirationfor the development of general principles of Union law.

-  Based on a very broad definition, general principles of European Law embracefundamental rights, the four economic freedoms, rules of administrative justice and

 political rights.

-  The Principle of Proportionalityo  The principle of proportional action is the most significant legal principle,

which underlies all activities - legislative or administrative - of the EU bodies.It is explicitly mentioned. Essentially it requires four conditions to be fulfilled:

  (1) The public authority must pursue a legitimate goal with its action.  (2) The action chosen must be suitable to achieve the aforementioned

goal.  (3) It must also be necessary to that end, which means it has to be the

least incriminating on the individual of all available measures.  (4) Last but not least, the action taken has to be proportional in the

sense of just, taking into consideration the circumstances of the specificcase at hand.

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-  The Right to a Hearingo  Any person who will be aversely affected by a measure of a European public

authority is entitled to be given the opportunity to explain himself and to give

his opinion on the situation. His arguments have to be taken into account whenthe public authority finally decides which measure to take.

-  Further principles recognised and elaborated by the ECJ areo  the guarantee of legal proceedings,o  the principle of legitimate expectations ando  the principle of legal certainty.

-  NOTE: Primary Law can have Direct Effecto  In exceptional cases primary legal provisions can be directly effective and

comprise prerogatives for natural or legal persons in the Member States. Thefirst and most important judgement of the ECJ concerning the direct effect ofCommunity law was the case VAN GEND & LOOS (26/62 [1963] ECR 3)dealing with the direct effect of a provision of the EC Treaty. The ECJ heldthat a Treaty provision, even if - according to its wording - it is addressed tothe Member States, can have direct effect, if the following criteria are met:

  The provision must be sufficiently clear and precise in order to enableits direct application.

  It has to be unconditional, which means it must not be qualified  byany reservation on the part of the (Member) states, which would make

its implementation conditional upon a ... (national) legislativemeasure...“ 

o  It should be noted, that the directly applicable Treaty provision can only beinvoked in a vertical“ litigation between an individual and a Member State.As a basic rule there is no horizontal“ direct effect between two private

individuals.

Secondary Law

-  The institutions of the European Union mayo   pass regulations,o  issue directives,o  make decisions,o  give recommendations oro  deliver opinions.

Among these instruments, regulations, directives and decisions are legally binding.

-  Regulations:o  Generally and directly applicable throughout the Union. They are of a binding

nature and become immediately effective in all Member States instantly when

they are adopted. A regulation bears all characteristics of a statute; its provisions take effect in all Member States without any further requirements,especially without any legislative transposition act of each Member State.

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o  Regulations have Direct Effect: a regulation carries direct effect by its verynature.

-  Directives:o  Addressed to the governments of the Member States but not to individuals.

They are legally binding only upon the Member States. Therefore they can basically not have direct effect. A directive is an assignment to or obligationfor the Member States to enact national measures which are required toimplement the directive‟s content into national law. It is binding as to its

contents but leaves to the particular state to choose means and modes for thematerialisation of the directive‟s stipulations.

o  Most of the directives until Lisbon were based on Art. 95 EC, according towhich the Council can pass directives to harmonise the national bodies of law.This technique enables every member of the Union to decide individually,which way to head in order to adapt its legal system to the Union standard.

o  In the 1990s several directives in the area of consumer protection were passedin order to install a uniform protection standard in Europe (e.g. Directive85/577/EEC on consumer protection in respect of contracts negotiated awayfrom business premises, Directive 87/102/EEC concerning consumer credit[amended by Directive 90/88/EEC] and Directive 97/7/EC on the protection ofconsumers in respect of distance contracts). The directives obliged everyMember State to take the appropriate steps according to and adjusting therespective national law, if it did not already comply with the standards set up

 by the directive.o 

This example demonstrates how the growing body of European lawincreasingly limits the freedom of national legislatures. After a directive has been transformed into national law, the legislature of the Member State nolonger has any jurisdiction in the particular field. Accordingly, any MemberState will have to modify its national body of law to a large extent, as required

 by the directives.o  Directives can have Direct Effect only under exceptional circumstances: The

ECJ has developed three essential criteria for the direct applicability of adirective:

  The time limit for the implementation of the directive must haveexpired without (sufficient) transposition into national law.

  The provision in question must be sufficiently precise andunconditional.  Sufficiently precise is a self-executing provision - when its

wording is clear and its meaning so obvious, that it can beapplied by national administrative bodies or courts without anylegislative intervention.

  Unconditional means that there must be no condition orreservation which would require a substantiating, discretionarynational measure.

  Originally the ECJ established as a third criterion that the directive hasto confer a right upon the individual. Recently the Court has elaborated

on this requirement and is now slowly changing its jurisdiction. Insteadof establishing rights for individuals, the provision must have somekind of objective effect“. This could mean that a directive is not

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required to aim at the protection of individuals but should intend toestablish an obligation for the national public authorities.

The Direct Effect can be better understood with the following example:As part of its social program under Art. 141 EC, the Council of Ministers adopted twodirectives on January 1, 1993. The first one states that „Member States shall take suchsteps as they consider appropriate to encourage employers to adopt the same pensionarrangements for men and women doing the same kind of work.‟ The second one

 provides that „Member States shall ensure that employers do not discriminate againstmen or women doing the same kind of work in respect of holiday entitlement.‟ The

Member States were given a time frame of two years for the implementation of bothdirectives. In February 1995 France had not yet taken any steps to implement eitherdirective. In December 1993 EDF, a French company, engaged Mrs. X and Mr. Y asclerks. Their work is the same and they are paid the same. However, Mr. Y‟s contractof employment provides that he is entitled to four weeks annual holidays and isincluded in the company‟s own pension scheme, whereas Mrs. X‟s contract ofemployment provides that she is entitled to three weeks annual holidays and isexcluded from the company‟s pension scheme. In January 1995 EDF engaged   afurther clerk, Mrs. Z, who is employed on the same terms as Mrs. X. Mrs. X and Mrs.Z are unhappy with their contracts of employment. Mrs. X made a claim in December1994, and Mrs. Z claimed in February 1995. Are there any provisions of EC Law,which they could rely on bringing an action before a French court or tribunal?

Mrs. X and Mrs. Z can rely directly on the European directives to give them rightsenforceable in the national courts if the following requirements are fulfilled:

(a) The directive is not implemented by the time the implementation period expires.(b) The provisions of the directive are sufficiently clear and unconditional.(c) The provisions of the directive confer rights on individuals or have an objectiveeffect.

- ad (a): France should have implemented the directive by January 1, 1995. WhenMrs. X‟s claim was put forward the time limit had not yet expired and so thedirectives could not have given rise to directly effective individual rights at that time.So, for the present, Mrs. X will stay unhappy. Mrs. Z‟s claim was put forward inFebruary 1995, when the time limit had expired. So we can move on and considerwhether the remaining requirements for direct applicability are fulfilled.

- ad (b): What might not be clear enough is the meaning of the words „Member Statesshall take such steps as they consider appropriate to encourage...‟ Due to theseuncertainties concerning the wording of the first directive, it cannot have direct effectand also cannot be relied upon before the French national courts. The seconddirective, however, is clear and precise. It also imposes an unconditional obligation onthe Member States to ensure that employers do not discriminate against men andwomen doing the same kind of work in respect of holiday entitlement.

- ad (c): The provisions do not merely impose a duty on the public authorities(objective effect) but intend to confer the right to equal holiday entitlement for menand women to any individual in France. The provision therefore meets therequirements for direct effect, and can be relied on before a national court by Mrs. Z.

o  The ECJ pointed out, that directives - which are binding only upon the memberStates - could not impose obligations on individuals and therefore could not be

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invoked in litigation between two individuals. In other words: a directive cannot have horizontal“ effect. According a directive horizontal effect would blur

completely the distinction of this legal instrument from that of a regulation,

which is opposed to the clear wording of the treaties.

o  Other Effects of Directives  The ECJ established the principle of Member State liability for the

failure to implement a directive in due time. If an individual suffersloss as a result of the failure of proper implementation, a Member Statecan be held liable for the damages incurred by the individual, on thecondition that the directive itself defined and conferred a right onindividuals, the content of which was clear from the wording of theconcerned directive.

-  Decisionso  Decisions are immediately binding in their entirety to all of their addressees.

Unlike regulations, decisions are addressed towards one or several particularlegal entities or towards a determinable number of those. The addressee may

 be a Member State, an individual private or legal person. Other than adirective, a decision is binding in its completeness.

o  Decisions have Direct Effect on their addressees.

-  Recommendations and Statementso  Have no legally binding force. They are directed towards an undetermined

group of addressees and are not of direct effect. Recommendations andstatements usually bear the character of declarations of intent and, as such, arefirst of all of political impact.

-  Other legal actso  Besides the types of action listed above, the institutions of the European Union

dispose of further instruments of acting as provided for and specified byspecial clauses of the law. These clauses primarily deal with the administrationand organisation of the Union and with the conclusion of treaties by the Union.The Union can enter into international agreements. The ECJ held that

 provisions of these agreements can in certain circumstances be directly

effective and therefore be invoked by private persons.

3. Legislative Power

The Principle of Limited Singular Authorisation“ 

-  The Treaties do not generally authorise the Union institutions to pass legislation in anyrandom policy field. The area of regulative Union competences is dominated by thedoctrine of limited singular authorisation“. According to this doctrine, any legal act

 passed by Union institutions requires a particular authorisation, which has to be found

within the EU Treaty. When such authorisation is granted, Union organs are usually atthe same time bound to a certain form of action.

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-  NOTE:  All residual powers are left with the member states, because they are “The

Masters of the Treaties”; there is generally no “competence-competence” of the EU or

their organs (to create own new competences), but all powers of the EU (which enable

the EU organs to pass secondary legislation, supranationalist sphere) have to be granted by the members before, i.e. by an agreement of all in form of an international law treaty(primary legislation, intergovernmental sphere); once transferred to the EU, this special

 power enables the EU organs to act as a legislator in this field and there is no chance forthe members to refuse or legislate by themselves anymore.

-  The powers are in the newly amended treaty (Lisbon) much more fully described in Art.3 to 6 TFEU (following the model of the German Constitution where this model existsin terms of the federal state structure describing the competence of Federation, FederalStates and the mixed resp. shared ones): exclusive competence (only EU organs) andshared competence (EU organs, but member states, as long as EU organs do not takeaction in this field or do not take action anymore) as well as competence to carry outactions to support, coordinate or supplement actions of the member states (acompetence of the EU to take action when the member states cannot or not effectiverealize something alone and a certain support, coordination or guidance is necessary;but: not a competence of the EU to take any actions itself  –  only supportive when themembers do it)

-  However, the empowering provisions of the treaty are interpreted widely, in part on the basis of the theory of “implied powers”: there is and was always a debate on when

interpretation ends and competence creation starts; the ECJ –  once again trying to push

forward the integration movement  –   does not strictly adhere to the wording of theTreaty and interprets provisions dealing with competences rather generously in favourof the Union. According to the implied powers“ doctrine developed by the ECJ, the

Union has got the complementing competences, which are necessary for the effectiveand reasonable performance of expressly given legislative powers (effét utile“). The

implied-powers doctrine is, e.g. applied in the field of external relations: In all policyfields covered by its internal competences (internal power) the Union is empowered toconclude international agreements with third countries (external power). Further theECJ made rather extensive use of former Art. 308 and 94 EC (now 352 and 115 TFEU)in order to broaden the competences of the EU.

-  In order to provide for a fast and effective reaction to new situations, the Treatiesdispose of so called loophole-clauses“ (308 EC/352 TFEU). According to that provision, the Council, acting on an initiative of the Commission and having consultedthe Parliament, may take the appropriate measures in order to attain action by theUnion, whenever such action should prove necessary to achieve of the objectives of theUnion, while the Treaty does not explicitly provide the necessary powers. As Art. 352TFEU (308 EC) can only be invoked, when there is no explicit authorisation givenwithin the Treaty, it is a subsidiary competence. Important is the requirement of aunanimous Council decision. Yet, the loophole-power of Art. 352 TFEU (308 EC) iseffective only within the competences of the Union, as transferred by its members.

-  NOTE again: Thus, the Union may never extend its powers through independent acts.Its actions always have to be based on authoritative powers transferred upon it by theMember States. The Union does not hold the power to define its own competences; it is

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lacking the so-called competence-competence“, which is a genuine characteristic of a

sovereign state. In fields for which the Member States have not passed any competencesto the EU yet, they must not be acquired via Art. 352 TFEU.

4. The Relation between Union and National Law

-  The relation between European Union law and the law of the Member States is predetermined by the structure of the Union system. Three types of relations (in everymember state) have to be distinguished:

o  First of all there is the relation of two purely national provisions (in terms ofhierarchy), which is not a question of European but of national law.

o  Secondly there is the relation between national and (public) international law.o  Finally there is the relation between the national (German, French or English)

legal system and the Union law system.

-  Although they are completely autonomous systems, yet, national law and the legal orderof the European Union are by no means unrelated to each other. They are interacting inmiscellaneous ways. The links that exist between the two bodies of law become obviousin particular when European law is executed. Except for the European rules concerningcompetition, the execution of Union law is the responsibility of the administrativeauthorities of the Member States. In the absence of appropriate European rules - this isusually the case - or if those rules are insufficient, national authorities apply their ownrules of procedure when administering EU law.

-  Obviously the Union legal system, which provides for two legislators (the MemberStates and the Union) in every country within EU borders, holds a considerable conflict

 potential. The question, whether or not Union law has to be given priority over nationallaw, has occupied many judges and has filled many pages of legal textbooks in the past.

Conflict Situation (Collision)

-  First of all one has to consider, in which constellations European Union law affects theapplication or validity of the law of the Member States. The question of priority arisesonly in situations of collision of Union law and national law, in other words: when legal

rules for one specific area exist on both levels - the European and the national one.

(1) Are there two legal rules enacted on two different levels dealing with thevery same issue?

-  If that is the case one needs to ask whether the Union rule is valid according to Unionlaw itself and whether it is applicable within the Member State in question. The latterquestion can only be answered according to the respective national constitutional law.

(2) Is the provision of Union law valid and applicable in the MemberState in question?

-  But it is not sufficient that the provision of Union law is generally applicable in theconcerned Member State, it has to be directly applicable in order to have an effect on

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the rights of the Member States‟ individuals. Here a distinction needs to be drawn

 between directly applicable measures of Union law (like regulations and decisions) andmeasures addressed to the Member States only, which require transposition into

national law in order to take (direct) effect within the national boundaries. The lattercategory of regulating instruments is called directives. Due to their lacking directapplicability, directives can  –  as a basic rule  –  normally never cause a clash betweenCommunity and national law. A provision, which is not applicable, simply cannotcollide with the (national) provision in application. (There are exceptions to that rule inthe case of a directly effective directive, as described above.)

(3) Is the provision of Union law directly applicable in the Member State?

-  Finally one needs to analyse whether these two legal norms provide for a differentregulation of the concerned issue.

-  Solution is the “Principle (or Doctrine) of Supremacy”, developed by the ECJ: As far asthe two provisions collide with each other, the conflict must be resolved in favour ofCommunity/Union law.

-  The European Court of Justice held that the very nature of European Community (nowUnion) law demands that it has to gain priority over all national legislation. If it was

 possible for the Member States to simply overrule a provision of Community law with anational legal act, the idea of common rules for a legal Community would becontradicted and the essence of the Community idea itself would be put in question. The

supremacy of Union law over national law is now stated in a declaration attached to theLisbon Treaty.

-  Note:  The concept of supremacy of Community/Union law was not specifically laiddown in the (founding) treaties but was developed by the ECJ (as, e.g., direct effect aswell) through interpretation of the treaties and their character and was seen affirmed byformer Art. 249 EC, which states that regulations are legally binding and directlyapplicable in all Member States. This Treaty provision would be meaningless if theMember States had the power to remove its effect unilaterally. The implementation inthe treaty by the declaration of the Lisbon treaty has a more clarifying function becausethis doctrine was acknowledged even before.

5. The Principle of State Liability for Breach of EU Law

-  NOTE:  Most of the EU rules are enforced through national legal systems (nationaladministration and courts as well as legislators), because there are no EUadministrations or EU court branches in every member state; all 27 member states havetheir autonomous systems which have to realize the EU law rules by their own;therefore also remedies for breach of Union law can be obtained primarily throughnational courts by using their own procedure and available remedies (procedure andremedies are not harmonised by EU law); but: there must be a state liability (as a kind

of uniform Union remedy) for serious breach of contract in which an individual suffersloss which at least includes damages and interim relief (injunctions)

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-  As in all major areas of European law concerning the enforcement of rights conferredupon European citizens by the Treaties, the ECJ has also played a major role in thedevelopment of the principle of state liability for breaches of Community/Union law.

General Principles

-  According to the ECJ the principle of state liability for damages caused by a violation ofCommunity law is inherent in the Community/Union law system. The Court emphasisesthat the Treaties have created a system sui generis, with rules imposing obligations onindividuals but also conferring rights upon them. Former Art. 10 EC (wording nowincluded in Art 4(3) TEU) establishes  –  among others  –   the obligation of all nationalcourts to apply the rules of Community/Union law, to give full effect and protect therights which they confer on individuals. These rights would be significantly weakened ifan individual could not claim compensation for damages caused by their infringement.

Conditions for Liability

-  In the absence of a Treaty provision, the ECJ defined the conditions under which anindividual is entitled to reparation as follows:

(1) The violation of a provision of Community law which is intended to confer a rightupon an individual, the content of which must be sufficiently clear and precise

(2) A direct causal link between the breach of this rule of law and the harm sustained by

the individual(3) The qualification of that violation as sufficiently serious

-  The ECJ has provided some guidance for the interpretation and application, especiallyconcerning the third condition. It suggests a number of criteria to evaluate theseriousness of a breach of Community law, as follows:

o  The level of clarity and precision of the violated rule of lawo  The margin of discretion left by the norm to the national administrative or

legislative bodieso  Whether it was an intentional or negligent/involuntary breach

o  The (non-) justifiability of an error of lawo  The likelihood that the conduct of a Community institution has contributed

to the action taken by the national body

-  Fault –  unlike in many liability systems of the Member States  –  is not a requirement fordamage claims based on the breach of European law. But the concept of fault is takeninto consideration when the seriousness of a breach of law is tested.

-  In addition to the three basic conditions, the success of a claim for damages depends onthe specific type of violation of Union law. Three different types of violations can bedistinguished: legislative, administrative and judicial infringements of EU law.

o  Violations by a legislative body:Concerning legislative acts one must take into account that the legislator

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disposes of a considerable amount of discretionary power when implementingCommunity policies. Also, the work of the Member States‟ legislative organs

shall not be impeded by the permanent concern about innumerable, potential

individual claims for damages. Therefore a legislative act can be considered asa sufficiently serious breach of Union law only if the legislative bodymanifestly and gravely disregarded the limits on its discretion.

o  Violations by national administrative bodiesThe breach of EU law by administrative bodies is more common and thetypical case for damage claims. It may often occur when national officialsmisinterpret Union rules, misapply them or ignore the applicability of a EUdirective.

o  Violations by national courtsThe principle of state liability applies also to decisions of Member State courts,which are in breach of Union law, if the decision in question was taken by anational court of last instance. But special consideration has to be given to the

 particular function of judges within the national legal system as well as in thesystem of European Union law. The decision of a court adjudicating at lastinstance becomes irrevocable and definitive after all rights of appeal have beenexhausted, regardless of its unlawfulness. Therefore the disadvantagedindividual must at least be offered the possibility to hold the Member Stateliable for such a violation of his or her rights. Furthermore the national courts

 play a significant role in the application of Union law provisions and the

enforcement of rights conferred by them upon individuals. The effectiveness ofthese provisions would be significantly hampered if the courts were excludedfrom the principle of state liability. However, the state incurs liability for faultydecisions of its courts only in the exceptional case that the breach of EU lawwas obvious. For the definition of the term obvious“ the ECJ refered again tothe criteria used for the establishment of a sufficiently serious breach of law,

 but adds a couple of additional aspects. So it should be considered if the courthas ignored its obligation to make a reference to the ECJ (under former Art.234 EC) or if the national court‟s decision is clearly opposed to the relevant

 jurisdiction of the ECJ.

Procedural Enforcement

-  Originally the ECJ had declared that the EC Treaty does not require the national courtsto introduce new“ remedies for breach of Community  law but could apply theirexisting procedural rules and conditions. These conditions were subject only to the

 principles of equivalence and practical possibility. Equivalence or non-discriminationmeans that the remedies and procedures available for a claim under national law must

 be comparable or basically the same as those for a claim based on a breach ofCommunity law. The principle of practical impossibility states simply that theconditions must not be designed in a way as to render a claim for damages based on

Community law practically impossible.

-  In addition the Court stressed a number of legal principles that national remedies (or

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rather their procedural conditions) have to comply with, namely the principle of proportionality (e.g. national penalties imposed must not be disproportionate to thesignificance of the rule infringed), the principle of adequacy (e.g. of a compensation in

relation to the damage sustained) and the principle of effectiveness of a penalty for breach of Union law. All of these additional requirements seem to be concerned withthe material justice achieved by the national system of remedies. The Court obviouslytries to rule out or to prevent efforts by the Member States to circumvent their liabilitythrough procedural restrictions.

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V.  The Enforcement of Union law by the Court of Justice of the

European Union and the European General Court

-  The Court of Justice of the European Union (the Court) was before Lisbon named theEuropean Court of Justice (EJC) and the European General Court was former the Courtof First Instance

-  According to Art. 19 TEU (former Art. 220 EC) the Court of Justice and the GeneralCourt shall ensure “that in the interpretation and application of the Treaty the law isobserved”.

-  The Court cannot be compared to any type of a national court. Whenever the Courtexamines a violation of the establishing Treaties by a Member State or a preliminaryquestion, it does so in the function of a constitutional court. If it holds that decisions ofEU institutions are null and void, it acts as a court of administrative jurisdiction andfinally it acts as a civil court, when it decides on claims for damages.

1.  The Procedure in Cases of Failure to Fulfil Obligations under the EU

(Art. 258 and 259 TFEU, ex 226 and 227 EC) 

-  Art. 258 TFEU (ex 226 EC) is the main instrument for the Commission to fulfil its roleas the guardian of the treaties and to force members to follow the EU law and thetreaties: as a watchdog, the Commission cannot only recognise and maybe inform themember states about failure in realizing EU agreements (thus it would not be more thana paper tiger); it needs a formalised procedure to force the members if they are reluctantor in delay

-  Art. 259 TFEU (ex 227 EC) largely tracks Art. 258 TFEU and gives each member statethe possibility to take enforcement action against another member state which does notfulfil an EU obligation

-  NOTE: Art. 259 TFEU actions are extremely rare in practice, for political reasons;member states are very reluctant to tackle each other directly (to keep good politicalrelations with their member states and neighbours) and better rely on the Commission totake action under Art. 258 (and to do the dirty job and get the anger instead of the resp.member itself)

-  The action for failure to comply with EU Treaty obligations has the purpose to induce aMember State, who has infringed the Treaty, to remove the situation of non-compliance. Two separate phases of the procedure have to be distinguished: A first„administrative‟ phase, which serves the mutual information and consultation. The

subsequent official or court phase - action before the Court - is entered into only if asolution could not be found during negotiations.

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1. The preliminary/administrative phase

o  If the Commission considers a Member State having failed to fulfil anobligation under the Treaty, it will issue a „Formal Letter of Notice‟ to the

concerned Member State, which describes the suspected Treaty violation andinvites the concerned state to give its opinion on the allegations. Furthermorethe letter will set a certain time limit for the Member State to submit itsobservations, which also implies the opportunity to take the action required inorder to comply with its obligations

o  There are various possibilities of Treaty infringements. It could consist inincorrect or non- application of EU regulations, directives or decisions; in non-transposition of a directive into national law or in non-compliance with Court(European Court) judgements.

o  Art. 259 TFEU (action by another member state): The alleging Member Statewill first of all inform and engage the Commission with its concerns in relationto the Member State infringing the EU Treaty. The Commission will againenter into a preliminary procedure, giving both involved Member States theopportunity to submit their observations. The administrative stage is concluded

 by a reasoned opinion of the Commission. If the Commission does not issue areasoned opinion within three month, the member state may still proceed witha legal action before the Court.

2. Intermediary phase

o  If the matter cannot be resolved during this negotiating stage, the Commissionmay proceed to the next stage - which is bridging the administrative and thecourt stage - issuing a „reasoned opinion‟. The reasoned opinion clearly states

the legal grounds of the Treaty violation and thereby justifies thecommencement of legal proceedings. Again the concerned Member State isgiven a certain time period to rectify the situation.

3. The court phase

o  If the Member State does not comply with the opinion of the Commission, thelatter may refer the issue to the Court. If the Court finds that there is in fact afailure to fulfil Treaty obligations, its judgement will state that such a Treatyviolation exists and that the state is required to take the measures demanded bythe Commission. The judgement does not imply any penalty; it is of purelydeclarative nature.

o  However, if the Member State fails to take the necessary measures in order tocomply with the Court‟s judgement within a time-limit laid down by the

Commission, the latter may bring the case before the Court again according toArt. 260 TFEU (ex 228 EC). If the Court finds that the Member State hasfailed to comply with the judgement it will impose a lump sum or penalty

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 payment on it. The amount to be paid will be based on a suggestion of theCommission according to what it considers to be appropriate in thecircumstances (Art. 260 (2) TFEU). But the Court is neither bound to the

Commission‟s recommendation, nor is there an upper limit to the pecuniary penalty.

o  In addition there is the possibility for the concerned individuals to claimcompensation from their Member States provided the requirements forMember State liability are fulfilled. Such damage claims could amount to or beconsidered as a sanction.

2. Review of the Legality / Action for Annulment (Art. 263 TFEU, ex 230 EC)

-  Any legal system, which adheres to the rule of law, will offer a mechanism to reviewthe legality of measures taken by its governors. Within the EU system the central Treaty

 provision dealing with this issue is Art. 263 TFEU (ex 230 EC), which assigns theresponsibility for the review of Union measures and of claims by Member States or EUorgans to the Court. The Court has the power to scrutinise acts of the EU institutionsother than recommendations or opinions.

-  Basically four requirements have to be met in order to challenge an act in Court:- the act must be open to a challenge,- the applicant must have the standing (locus standi) for the particular challenge,

- the ground of the challenge must be one of those listed in Art. 263 TFEU,- the time limit provided for in Art. 263 TFEU must be observed.

Acts open for review

-  Art. 263 TFEU clearly states that only measures other than recommendations andopinions are open to review. That implies that the remaining measures listed in thetreaties  –   regulations, directives and decisions, which are the ones having a legally

 binding effect –  can be challenged. Other kinds of acts can be reviewed if they are of alegally binding nature.

Locus standi of the applicant

-  Regarding the institution or person bringing an action under Art. 263 (2) TFEU, privileged and non-privileged applicants have to be distinguished:

-  Privileged applicants are the European Council, the Council, the Commission, theEuropean Parliament, the European Central Bank and the Member States, who havelocus standi to challenge all kinds of (legally binding) Union measures. (The Court ofAuditors or the European Central Bank can bring an action when their own(participatory or procedural) rights were affected by the disputed measure; since theTreaty of Nice entered into force February 01, 2003, the European Parliament belongs

to the group of privileged applicants, who are granted locus standi without having to prove a special interest or affection by the contested measure.)

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-  Individuals (natural or legal persons) are so-called non-privileged applicants. A non- privileged applicant could bring an action only for the review of a decision (or adisguised decision in the form of a regulation) which is either addressed to him/her, or

which is of direct and individual concern to him/her.o  Direct concern means that the decision must have an immediate impact on the

legal position of the applicant. Usually the measure is not of direct concern if ameasure of the national authorities is required in order to implement the Unionmeasure.

o  Individual concern is given if the decision affects the applicants by reason of

certain attributes which are peculiar to them or by reasons of circumstances inwhich they are differentiated from all other persons and by virtue of thesefactors distinguishes them individually just as in the case of the personaddressed.” 

o  With Lisbon the wording was widened, Art. 263 (4) TFEU: no longer just adecision, but “an act” (a regulatory act which needs no further

implementation), which includes also other acts than merely decisions

Grounds of challenge

-  The four possible grounds for a challenge are specified in Art. 263 TFEU: The procedural shortcomings of an EU measure can consist in the lack of competence of theacting institution or the infringement of an essential procedural requirement (like theduty to provide reasons or to consult). As substantive reasons for illegality the applicantcan claim the infringement of the Treaty or of any rule of law relation to its application

or the abuse of power.Time limit (Art. 263 (5) TFEU)

-  The possibility to claim the illegality of a Union measure is restricted by a time limit oftwo months after the publication of the measure in question. As far as decisions areconcerned, the time period starts with notification to the addressee or the day theapplicant can in fact take notice of the decision‟s content. 

-  If the Court believes that the particular institution has acted outside its competences orhas violated essential rules of procedure or material rights of the plaintiff, the act will be

declared null and void.

o  Example: If the Council passes a regulation according, which provides for awarning to be printed on all products containing chemicals that mightintoxicate the environment, with nine to three votes, any producer of such

 product within the internal market may call for a review of the regulation, because it was not passed unanimously as required. If he fulfils the conditionsof direct and individual concern and observes the time limit, the regulation will

 be declared null and void by the Court.o 

3. The Procedures of Failure to Act (Art. 265 TFEU, ex 232 EC)

-  According to Art. 265 TFEU, the Member States or the other institutions of the Union

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may bring an action before the Court of Justice, if the European Parliament, theCouncil or the Commission infringe the Treaty by failing to act. Also natural and legal

 persons can put forward such a claim. This action is structured parallel to the action

under Art. 263 TFEU. The question of applicability of the claim therefore needs toaddress the four conditions mentioned above:

o  Which omissions are revisable? - Only those omissions, where the applicantcan show that there was an obligation to act.

o  Who can bring an action for failure to act? - Privileged and non-privilegedapplicants have to be distinguished, while the latter must be directly concerned

 by the wrongful failure to act.o  The grounds such a claim can be based on the simple failure to take an action

which is required under the Treaty.o  Is there a time limit for filing a claim? - No time limitation seems to be

indicated by the Treaty, which simply states that the applicant first has to callupon the responsible institution to act before he can put forward his claim. TheECJ has developed the rule that if the institution has not defined its positionwithin two months of being so called upon, the action may be brought to courtonly within a further period of two months.

-  The Court will establish an infringement of the Treaty, if the institution was obliged toact under the Treaty or under secondary Union law. The institution whose failure to acthas been declared to be contrary to the Treaty shall be required to take the necessarymeasures to comply with the judgement.

4. Action for Damages caused by Institutions or Servants of the European Union

(Arts. 268 and 340 TFEU, ex 235 and 288 (2) EC)

-  The Courts also have jurisdiction on certain cases on non-contractual liability. If aninstitution or a servant of the Union damages a natural or legal person by acting or byfailing to act, this person may sue for compensation of damages. One can also think ofsituations where a member State suffered loss due to an illegal Union act and wants totake action for damages against the EU.

-  The suit may be filed against the European Union directly, without the requirement to

 bring an action for review of legality or of failure to act first. As the actions under Art.263 TFEU and Art. 340 (2) TFEU pursue completely different legal goals  –  annulmentof an act on the one side and recovery of losses on the other  –  the action for damageshas to be considered as an independent or autonomous procedural instrument.

-  But it should be noted that the possibility to bring an action for annulment might restrictthe admissibility of a claim for damages. If the applicant would have been able to

 proceed according to Art. 263 TFEU against the Union act causing the damages, butsimply failed to keep the time limit (two months) set out in Art. 263, he is precludedfrom taking an action under Art. 340 TFEU. The reason for this limitation is the factthat the damages claimed by the applicant could have been avoided if he had taken an

action for annulment in due time.

-  Since European law does not dispose of any special set of rules on state liability, the

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legal basis for such claims has to be derived from national law. According to Art. 340TFEU the conditions for a successful claim have to be established in conformity withthe general principles of state liability common to the laws of the Member States. The

conditions found by the Court were laid down in the case AKTIEN-ZUCKERFABRIKSCHÖPPENSTEDT (5/71 [1971] ECR 975).

o  A Community (Union) organ or an official of the EC (EU) must have acted inits/his official function. One needs to distinguish between legislative andadministrative acts and omissions.

o  The alleged act must be unlawful; it must be a flagrant violation of a superior

rule of law for the protection of the individual“.   Considering legislative acts, a qualified infringement needs to be

established: not just an unlawful act, but a manifest and grave violationor a sufficiently serious breach of the law must have occurred.

  Administrative acts simply need to be in breach of a (superior rule of)law which protects individual rights.

o  The applicant must have suffered substantial losses or financial damages.o  There must be a direct causal link between the unlawful act and the incurred

damages.

-  The definitions elaborated by the Court in its judgements on the principle of stateliability, especially BRASSERIE DU PÊCHEUR and FACTORTAME (C-46, 48/93[1996] ECR I-1029) apply also in the area of Community (Union) liability. In these

 judgements the Court for example specified the factors indicating a sufficiently serious

 breach of law.

5. Preliminary Rulings (Art. 267 TFEU, ex 234 EC)

-  According to Art. 267 TFEU, the European Court shall have jurisdiction to give preliminary rulings concerning the interpretation of the Treaty, the validity andinterpretation of acts of the institutions of the EU and of the European Central Bank.When one of these questions is raised before any court or tribunal of a Member State,that court or tribunal may request the (European) Court to give a ruling thereon, if itconsiders that a decision on the question is necessary to enable it to give a judgement.

The ruling of the Court can only give abstract and general answers to the questionsreferred to it. It will link its ruling to the specific questions of the case at hand, but the(European) Court cannot decide on the facts of the case itself, as this is and remains theresponsibility of the national court.

-  Its purpose is to guarantee a uniform application of the law and not to leave it to thevarious national courts to decide on how to interpret the Treaty. Art. 267 does notgenerally oblige national courts to obtain a decision from the European Court of Justice.Such an obligation exists only in two situations:

o  When a question is raised in a case before a court of a Member State againstwhose decisions there is no judicial remedy under national law (a court of last

instance in the material sense);o  When the domestic court does not merely doubt the correct interpretation of a

Union rule but its validity.

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-  NOTE:  It is important to make a clear distinction between the interpretation of theTreaty or of acts of EU organs on the one hand and the validity of Union acts on the

other. While a court is free to decide whether or not to make a reference to the Court onthe interpretation of Union law, it is obliged to refer questions of validity to the Court. Itis the European Court who has the final say on the interpretation and validity of EU law.Thus, any national court or tribunal within the Union has got either the opportunity orthe duty to refer disputes concerning the interpretation or validity of particular clausesof EU law to the Court, whenever such an issue becomes crucial for the decision of acase in litigation.

o  Example: If a French accountant wants to establish an office in the Federal Republicof Germany and the German Association of Registered Accountants denies to grant alicense, he has to bring a suit before the German fiscal courts, according to § 33 (1)

no. 3 of the Act on Fiscal Procedure (Abgabenordnung), in order to attain a decisionon whether this denial of license violates the freedom of services under the EU Treaty.The court then has the opportunity to request the European Court to give a ruling onthat issue. The German Federal Fiscal Court (as court of last instance), however,would be obliged to file a request.

-  However, there is no need to initiate preliminary proceedings if the question of EU lawis irrelevant, has been decided before by the Court or if there cannot be any reasonabledoubt as to the correct application of the provision neither for the Court nor the courtsof the Member States (so-called acte claire“). Moreover Art. 267 TFEU must not beabused. The admissibility of a preliminary ruling therefore requires the existence of a

genuine legal dispute and will be denied if only hypothetical questions are referred tothe Court. The Court rejects questions if they are irrelevant for the facts of the case athand or if the facts are so unclear that there is no evidence that they could be relevant.

-  As seen above, a preliminary ruling will be admissible if three conditions are fulfilled:o  A national court or tribunal is the applicant for a preliminary ruling by the

Court.o  The applicant refers one or several questions to the Court, concerning either

the interpretation of primary or secondary law, or the validity of legal acts ofthe Union organs. A distinction can be made between the right of the nationalcourt or tribunal to initiate a preliminary proceedings and its obligation to do

so.o  The questions raised by the applying court are crucial for the decision of the

case before the national court or tribunal.

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VI. The European Fundamental Rights and General Principles of Law

-  Originally the body of European law did not dispose of any set of fundamental rightscomparable to that of the German Basic Law or the French Constitution, which refers tothe French Declaration of Human- and Civil Rights of 1789 and the Preamble of aformer French Constitution - both documents containing a catalogue of fundamentalrights. However, this does not mean that there were no fundamental rights on theEuropean level. The situation could be compared to that in the United Kingdom, wherean efficient protection of fundamental rights is granted despite the absence of anywritten catalogue.

-  During the last 30 years, the European Court of Justice has in numerous decisionsdeveloped a system of fundamental rights comparable to the catalogue contained in theGerman Basic Law. One might even say that it was for the German FederalConstitutional Court and other Member States, who initially rejected the supremacy ofCommunity law for the lacking acknowledgement and protection of fundamental rightsat the European level that the Court turned to the question of the existence of Europeanfundamental rights. The first document for the protection of fundamental rights withinthe European Community is the STAUDER-decision (29/69 [1969] ECR 419), in whichthe Court mentioned that it felt obliged to protect the fundamental rights of individuals.

-  However, in the course of time provisions have been included in the Treaties, whichexplicitly address the fundamental rights issue, the introduction of which can be seen asa reaction of the European political bodies to the jurisdiction of the Court. Former Art. 6(2) TEU states that the European Union shall respect the fundamental rights asguaranteed by the European Convention on the Protection of Fundamental Rights(ECHR) and as they are common to the different constitutions of the Member States.According to former Art. 6 (1) TEU - which was introduced by the Treaty ofAmsterdam in 1998 and goes even further - the Union is founded (amongst other

 principles) on the respect for human rights and fundamental freedoms.

-  The culmination of this development was the proclamation of the European Charter of

Fundamental Rights at the IGC in Nice, 2000. It had been included in the draftconstitution and was intended to acquire legal  –   or rather constitutional  –   statuswhenever the constitution enters into force (which failed finally). But the charter is nowincluded in the Treaty after Lisbon and is legally binding for all institutions and memberstates, Art. 6 (1) TEU. (The charter is not technically implemented in the text of thetreaty but referred to in Art. 6 as “which shall have the same legal value as the Treaty”,

Art. 6 (1) TEU).

1. The Legal Basis for the Protection of Fundamental Rights by Community/Union

Law

With the Lisbon Treaty the Charter of Fundamental Rights is now legally binding. Butalso before existed a protection, which was developed and advanced by the ECJ. In the

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following the different sources and the development of this jurisdiction shall beexplained.

Enacted Law

-  Although the (former) EC Treaty did not dispose of a catalogue of fundamental rights ina strict sense before the Lisbon Treaty, it contained clauses which could be employed asa basis to derive a protection of such rights (which was done by interpretation).

-  The first to be mentioned among those are the so-called anti-discrimination clauses (seee.g. Art. 12, 13, 34 (3) and 141 EC), which guaranteed equal protection in particularfields of the law. Furthermore, the four fundamental freedoms laid down in the ECTreaty are of importance in that context. Although they were no fundamental rights inthe strict sense, these economic freedoms state obligations for the Member States, andtherefore guarantee the individual citizen rights and freedoms against authoritativeaction. The main difference between fundamental rights and the four fundamentalfreedoms consists in the nature of their protection: While fundamental rights contain anegative protection  –   prohibiting the interference of public authorities with anindividual‟s sphere of freedom –  the four fundamental freedoms are positive guarantees.They open up additional space for individual (economic) activity.

General Principles of Law

- In the (former) absence of Art. 6 TEU the ECJ in its earlier decisions on the protectionof fundamental rights under Community law had to look for possible sources for theestablishment of European fundamental rights. Its first instrument was a reference to thegeneral principles of the law. This method, which is frequently used in French law,enabled the ECJ to make use of legal systems not only within but also outside theCommunity. Later the constitutional traditions of the Member States and internationaltreaties on the protection of fundamental rights, signed by all Member States, prevailedas major sources for European fundamental rights.

The Constitutions of the Member States

-  The method of recourse to the constitutions of the Member States is closely related tothe method described above. In its NOLD-decision (4/73 [1974] ECR 491), the Courtheld that it was not going to accept any act that clearly violated the fundamental rightsacknowledged and protected by the constitutions of the Member States. Consequently,in later decisions, the Court used a comparative method to delineate the degree of

 protection granted by the constitutional orders of the Member States. However, theexpectation that the Court would try to transfer the maximum protection possible undernational constitutions to the European platform was disappointed.

The European Convention for the Protection of Human Rights and Fundamental

Freedoms

-  Since all European States have ratified the European Convention on Human Rights and

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Fundamental Freedoms, this set of rules has also been employed by the European Courtof Justice as a source of protection of fundamental rights within the Community/Union,although it is not part of Union law in the strict sense. The Convention on Human

Rights had a particular influence on the jurisdiction of the Court on the protection of property (see Art. 1 of the First Supplementary Agreement to the Convention).

The Declaration on Fundamental Rights

-  Another source of European fundamental rights is found in a number of declarations ofCommunity/Union institutions on that issue. The Court has several times referred to theDeclaration of the European Parliament, the Council and the Commission on theProtection of Fundamental Rights within the Community of April 4, 1977. By thisdeclaration, the institutions acknowledged the importance of fundamental rights and

 promised to regard them in the execution of their duties. On December 4, 1989, theEuropean Parliament passed a Declaration on Fundamental Rights and Freedoms, whichfor the first time ever contains a thorough catalogue of fundamental rights. Since 1993the European Parliament issues annual reports on the respect for human rights withinCommunity/Union.

Charter of Fundamental Rights of the European Union

-  On December 8, 2000 the European Parliament, Commission and Council proclaimed jointly the Charter of Fundamental Rights of the European Union“, including the

economic and social rights of European citizens. The Charter is a summary of the

level of protection of fundamental rights achieved throughout the EU at the beginningof the new millennium and is based inter alia on the jurisdiction of the Court. It isaddressed to the citizens of the Member States.

-  However, the Charter was still a purely political declaration without any legalenforceability; nevertheless, Commission, Council and European Parliament boundthemselves to observe the Charter by means of the proclamation.

-  The Constitutional Convention suggested the insertion of the Charter in its draftconstitution for the European Union, thereby giving it a legally binding status. TheTreaty of Lisbon referenced the Charter in Art. 6 and also allowed the European Union

to accede to the European Convention on Human Rights.

2. The Protection of Particular Fundamental Rights by the Court

The Right to Property

-  In several cases, the Court has held that the law of the European Community guaranteesthe right to property (44/79 HAUER [1979] ECR 3727, 3745 ff.). The character andlimits of this guarantee are similar to that of, e.g., Art. 14 of the German Basic Law(which has a strong protection of property rights). The parallels are due to the fact that

the German Federal Constitutional Court had to decide on miscellaneous property cases,and therefore had the opportunity to intensively analyse this field of law. The ECJ basedits own judgements on the results found by the German judges. The guarantee of the

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right to property on the European level extends to all rights of property value. Based onthe European Convention on Human Rights, the ECJ also distinguishes betweenexpropriation and the social limits of property rights, as the German Constitutional

Court does.

Freedom of Profession

-  The freedom of profession in general has not yet been of decisive importance within theEuropean Union. However, the Court, by citing the constitutions of several MemberStates, has held that this right is also guaranteed by EC law (234/85 KELLER [1986]ECR 2897). In order to determine whether a limitation of the freedom of profession byauthorities is permitted, the Court distinguishes between different degrees of burden and

 between rules of access and rules of professional practice, similar to the jurisdiction ofthe German Federal Constitutional Court on Art. 12 of the Basic Law. The doctrine of

 proportionality is also of major significance in that field.

-  Particular aspects of the freedom of profession were covered by the fundamentalfreedoms, explicitly provided for in the former EC, e.g. the free movement of workers(Art. 39 EC), the freedom of establishment (Art. 43 EC) and the freedom to provideservices (Art. 49 EC).

Protection against Seizures

- This fundamental right is an example for the differences between the protection granted by some national constitutions, e.g. by the Basic Law of the Federal Republic ofGermany, and by European law. While both do protect the privacy of one‟s home, the

attitude towards commercial premises was different. In its Hoechst“-decision (46/87 &227/88 [1989] ECR 2859), the European Court of Justice held that the protection doesnot apply to such premises, while, according to the German Constitutional Court,

 business premises are also within the sphere of protection of the home granted by Art.13 of the Basic Law. According to the ECJ, this difference is founded in the differentattitudes the constitutions of the European states take towards that issue.

Equality / Non-discrimination

-  The European Court of Justice has acknowledged the right to equal protection as afundamental principle of law, far beyond the scope of the particular anti-discriminationclauses of the Treaty. In Its Wagner“ decision (8/82 [1983] ECR 371, 387), the Court

even cites the German Constitutional Court when holding that discrimination is unfairand, thus, illegal, whenever equal cases are arbitrarily treated unequally or unequalcases are arbitrarily treated equally.

Other Fundamental Guarantees

-  Additional fundamental rights established by the Court were the freedom of expression

(43 & 63/82 FLÄMISCHE BÜCHER [1984] ECR 19, 62; [1989] ECR 4304); freedomof assembly and association (175/73, GEWERKSCHAFTSBUND [1974] ECR 917,924), freedom of religion (130/75 PRAIS [1976] ECR 1589, 1599) and so on. Beyond

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the classical“ fundamental rights, the ECJ has recognised the protection of several

rules of quasi-fundamental character. The first to mention among these is the doctrine of proportional action. According to this doctrine, European institutions may not act in a

way which is unsuitable or not necessary with regard to the pursued objective. Anotherfundamental principle is the protection of legitimate expectations. The ECJ guaranteesthe protection of any legitimate confidence in the maintenance of a particular factualsituation or a particular rule of law. However, the withdrawal of an administrativeaction or a retroactive legal provision does not always infringe upon vested rights. It is

 permitted if (1) the public interest outweighs the legitimate expectations of anindividual that a particular present status is preserved, (2) if it is necessary and (3)suitable in order to reach the (legitimate) goal pursued. Besides the question of

 justification of infringements of fundamental rights, this is another example for theimportance of the doctrine of proportionality.

-  The principles of proportionality and legitimate expectations are not only quasi-fundamental rights themselves, but at the same time limitations for potential restrictionsof fundamental rights by European public bodies.

-  Further general principles granted by European law are the doctrine of legality ofadministrative action, the right of due process and the rule that no one may be punishedfor the same act more than once (ne bis in idem).

-  Note again: The charter, now legally binding, was not the beginning of fundamentalrights in EU law but a codification of the (aforementioned) rights already existing and

developed (mainly) by the Court.

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VII. Fundamental Principles of the Commercial Law of the EU

1. The Economic Constitution of Europe

Note: The EU combines elements of a customs union, an internal market, commoneconomic policies and provisions for economic and monetary union for all memberstates, including the operational rules for the euro and the euro area. The premiseof all these rules is that the EU strives towards economic integration.

Objectives

-  The foundations and objectives of the European Union are summarised in the

Preamble of the TFEU and Art 3 TEU. They are led by the determination to „lay thefoundations of an ever closer union among the peoples of Europe“. 

-  The general objectives with an economic background listed in the Preamble are:o  to ensure the economic and social progress of the Member States;o  to constantly improve the living and working conditions of their peoples;o  to harmonise their national economies;o  to contribute to the progressive abolition of restrictions on international

trade.

-  Further specifications can be found in Art 3 TEU: establishing a common market

and an economic and monetary union, harmonious, balanced and sustainabledevelopment of economic activities, a high level of employment and of socialprotection, equality between men and women, sustainable and non-inflationarygrowth, a high degree of competitiveness and convergence of economicperformance, a high level of protection and improvement of the quality of theenvironment, the raising of the standard of living and quality of life, andeconomic and social cohesion and solidarity among the Member States

-  In order to achieve these objectives, Art. 3 to 6 TFEU give several specificcompetences in the economic field, e.g.:

o  to eliminate customs duties and quantitative restrictions on the importand

export of goods as well as all other measures having equivalent effectbetween the Member States;

o  to adopt a common policy in the sphere of agriculture and transport;o  to establish a uniform system of commercial law and to abolish all

obstaclesto the freedom of movement for persons, services and capital;

o  to co-ordinate the employment policies of the Member States;o  to approximate the legal systems of the Member States.

-  There is a general consensus that these objectives are not merely a program. Theyhave to be understood as legally binding obligations of the Union institutions. In

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order to achieve these goals the institutions basically dispose of two different butcomplementing instruments: First, the establishment of an internal or commonmarket and the safeguarding of its proper functioning. Yet, as such an internal

market alone is not sufficient to reach the high goals set out by the Treaties,especially taking into account the immense economic and social differences amongthe Member States, the co-ordination of economic policies of the Member Statesbecomes an indispensable second instrument. When the European EconomicCommunity was founded, the particular means required to achieve these goalscould not be foreseen. Therefore the (original) treaty regulations should not beunderstood as a final enumeration, but rather as an indication for what wasdeemed necessary in 1957 to „lay the foundations of an ever closer union among

the peoples of Europe“. 

- 

During the following years day to day policy proved that it would be extremelydifficult to reach the goals expressly mentioned in former Art. 2 and 3 EC. After theintegration movement had come to a standstill in the 1970s, the Single EuropeanAct (SEA) was passed in February 1986. It provided for particular actionspromoting the internal market.

-  The Treaty Establishing the European Economic Community (EEC) was amendedby inserting Art. 14 EC (now 26 TFEU), which obliged the Community to establishthe internal market progressively until December 31, 1992. The „internal market“is defined as an area without internal frontiers in which the free movement ofgoods, persons, services and capital is ensured in accordance with the provisions

of the Treaty. The most important steps within this development were and will bethe assimilation of the national laws or at least their mutual recognition, thecreation of uniform technical standards and the abolition of national policies ontariffs and trade, i.e., the obligation to speak with one voice on tariffs and tradepolicy to third countries. Furthermore, a harmonisation of indirect taxes, inparticular of the Value Added Tax, is an indispensable prerequisite for theestablishment of an internal market, like the liberalisation of the assignment ofpublic contracts, the free movement of workers and the freedom of establishment,of services and of the movement of capital. Many of these aims have already beenachieved.

Basic Structures

-  The basic structure of the European economic order may be characterised asfollows: All trading and commercial activity is free as a matter of principle, andmay not be interfered with by governmental measures. This freedom can belimited either by Union law (regulations) or by national legislation, if suchrestrictions are necessary in order to protect higher ranking values like publichealth, public security etc. The Treaty provisions and jurisprudence of the Courtdealing with the fundamental economic freedoms have the difficult task to draw a

line between necessary limitations of the fundamental freedoms and acts ofprotectionism. Apart from provisions on the free movement of goods, workers,services and capital, the EU contains specific rules on agriculture and transport.

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The Treaty also specifies the common competition policy to be developed, theeconomic policy, the commercial and social policy and the harmonisation of laws.

-  One could ask whether the EU Treaty provides for a particular economic system,some kind of „economic constitution“ for the EU. The conclusion that can be drawnfrom the entirety of the relevant Treaty provisions is that the EU does not permitone of the extreme positions: neither Manchester-Liberalism at the one end of thescale, nor pure Socialism at the other. The latter is definitely excluded by the firmposition the Treaty takes on the issue of fundamental economic freedoms, the freemovement of production-factors, anti- discrimination and by the position the Courthas taken on the protection of fundamental rights. On the other hand, theEuropean Union has to raise the living standard of its citizens, improve the labourmarket, finance a European Social Fund and harmonise national social policies.

This excludes a too liberal approach, too. The result is the Treaty’s permission tooperate within the scope given to achieve the goals of the European Union and torespect the fundamental freedoms granted by the Treaty. This „soft“ interpretationof the Treaty is supported by two arguments: First, it improves the adaptability ofthe Union to new developments, permitting very flexible reactions. Second, itleaves enough room to the Member States to develop their own ideas abouteconomic policy. (Note:  There are 27 members now, with many differences anddifferent traditions; plurality is seen also as a competitive element as in a federalstructure: the best solution can be found by trial and error of the members)

2. The Fundamental Freedoms

-  The four fundamental freedoms are

o  the free movement of goodso  the free movement of workers (including the freedom

of establishment)o  the freedom to provide serviceso  the free movement of capital and payments.

-  They can be described as the „Foundations of the Community/Union“. Theirsignificance must not be underestimated. The economic freedoms are the essentialinstruments forming the internal market which Art. 3 TEU calls for, above all thefree movement of goods (Art. 28-37 TFEU), which is ensured in particular by theestablishment of a customs union (Art. 30 ff TFEU).

-  The fundamental freedoms are to some extent comparable to fundamental rights.They constitute individual rights, which every citizen of the EU can invoke againstnational and European authorities, but not against other private parties. Given thatall freedoms are directly effective rules of law in the Member States, every citizenof the EU can, for example, argue that a provision of national law applicable to his

or her case infringes one of the fundamental freedoms. If the competent courtagrees with him or her, the provision of national law must not be applied.

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-  The main provision of the fundamental economic freedoms is their inherentobligation of the Member States to treat goods, workers, services and capital fromother Union members exactly like they treat their domestic goods, workers and so

on. The fundamental freedoms demand non-discrimination between domestic andforeign economic factors of production with the aim to create equal marketconditions and fair, undisturbed competition within and between all MemberStates. Thereby they specify the general prohibition of discrimination on groundsof nationality contained in Art. 18 TFEU, which is of subsidiary application.Regarding discriminatory barriers to trade, which can be set up by a state, directand indirect discrimination have to be distinguished:

o  Direct discrimination occurs where a state distinguishes explicitlybetween its own and foreign nationals or goods, overtly treating their

domestic ones more favourably than those from other Member States.

o  In other situations national laws are indifferent towards nationality ororigin at first glance. Nevertheless a legal provision or administrativepractice can have a discriminatory effect on imported goods or onworkers from other Member States. These kind of measures applyindistinctly to nationals and foreigners but nevertheless amount toindirect discrimination.

-  The Court has made extensive use of the concept of free movement of goods tostrike down national legislation contrary to the free trade principle. Employing

means of interpretation and the „spirit of the Treaty“ the Court broadened thecontent of the fundamental freedoms from the prohibition of discrimination to ageneral prohibition of national measures which restrain or hinder intra-Community trade, even if those measures uniformly apply to domestic andimported goods, to the state’s own and foreign nationals (C-55/94 GEBHARD[1995] ECR I-4165).

-  In this context it is important to note that all the fundamental freedoms of the EUonly operate in cases concerning cross-border traffic within the Union. Only ifgoods, services or workers cross the border between two Member States thefundamental freedoms can be invoked. If a provision of national law infringesUnion law - e.g. one of the fundamental freedoms - this does not mean that thewhole provision is invalid: Union law applies only to cross-border situations andcan render a contravening national provision of law inapplicable in such a case.But at the same time the national provision remains in force and continues toregulate purely national situations. This means: A court of a Member State cannotdeclare this national provision generally invalid if its decision is based only on therequirements of EU law. In cases lacking a cross-border dimension, the nationalprovision, which was contested under Union law, remains applicable. In individualcases this can result in a less favourable treatment of a Member State’s own

nationals in comparison to citizens of other Member States („reverse

discrimination“). 

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In the following the freedom of free movement of goods as the most important freedom

(the “corner -stone” of the European economic order) shall be explained more detailed to

 get an idea of the structure and functioning of the freedoms.

Free Movement of Goods

-  Articles 30 and 34 et seq. TFEU are addressed to the Member States, obliging themto refrain from hindering the attainment of the Treaty objectives by unjustifiablerestrictions on trade. The provisions are exclusively directed against measures ofthe Member States related to the movement of goods across country borderswithin the Union. This means that Art. 34 TFEU is a measure of national statutes,laws, administrative or other legal acts by public authorities.

-  The concept of free movement of goods is determined by the structure given inArticles 30 and 34 et seq. TFEU. The starting point are two basic rules - theabolition of customs duties (Art. 30 TFEU) and the prohibition of quantitativerestrictions (Art. 34 TFEU) - which grant freedom to the individual, simultaneouslyprohibiting or restricting state action. Secondly, since some exceptions to theprinciple of free movement are reasonable with regard to higher ranking nationalinterests, there is the possibility for the Member States to derogate from theserules under the circumstances prescribed in Art. 36 TFEU. But such a unilateralderogation is permitted only if the pursuit of the aims mentioned in Art. 36 TFEU isnot simply used as a „formal excuse“ for national acts of protectionism. If a

supposedly justified measure de facto constitutes a disguised support of thenational economy, it is not covered by Art. 36 TFEU.

Area of Applicability

When talking about the principle of free movement of goods as the corner-stoneof the European economic order, one first comes across the question what constitutes agood“ in the sense of the TFEU. As the Court  specified in the KUNSTSCHÄTZE-case(7/68 [1968] ECR 623, 632) goods are products which can be valued in money and

which are capable, as such, of forming the subject of commercial transactions“. A good

is called a Union good either if it was produced within the Member States or if it stemsfrom a third country, but has been lawfully imported and marketed in the Union(Articles 28, 29 TFEU).

Customs Duties and Charges Having Equivalent Effect

-  According to Art. 30 TFEU customs duties and charges having equivalent effect(CHEE) are prohibited. Customs duties are pecuniary dues, which are levied solelyon the ground that a good wants to cross the border between two Member States.

A broad definition of a CHEE was given by the Court in the DIAMANDARBEIDERS-case (2, 3/69 [1969] ECR 211), according to which „Any pecuniary charge,however small and whatever its designation and mode of application, which is

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imposed unilaterally on domestic or foreign goods by reason of the fact that theycross a frontier, and which is not a customs duty in the strict sense, constitutes acharge having equivalent effect within the meaning of Articles 9 and 12 EC (later

Art. 25 EC, now –  after Lisbon –  Art. 30 TFEU) of the Treaty, even if it is notimposed for the benefit of the state, is not discriminatory or protective in effect orif the product on which the charge is imposed is not in competition with anydomestic product.“. However, three situations can occur when a pecuniary chargeis not considered as a customs duty or CHEE:

o  Charges which constitute a proportionate remuneration for servicesrendered

(if the service is in the interest of the importer/exporter and is offeredon a

voluntary basis), (87/75 BRESCIANI [1976] ECR 129);o  Charges in accordance with a general domestic tax system (Art. 110

TFEU);o  Charges which are explicitly allowed or even required under Community

law (46/76 BAUHUIS [1977] ECR 5).

Quantitative restrictions and Measures Having Equivalent Effect

-  Similar to the structure of Art. 30 TFEU, Art. 34 and 35 TFEU state that not onlyquantitative restrictions on trade, but also all measures having equivalent effect

(MHEE) are prohibited. A quantitative restriction is a national measure which, byimposing quotas, fully or partially restricts the import or export of a given productby amount or value. This includes a total ban on the import or export of a product.The interpretation of the notion „measures having equivalent effect“ is moredifficult. According to the case law of the Court this concept includes all tradingrules enacted by the Member States which are capable of hindering, directly orindirectly, actually or potentially intra-Union (former: intra-Community) trade(8/74 DASSONVILLE [1974] ECR 837, 852).

-  If, for example, a Frenchman wants to import goods into Germany and is preventedfrom doing so by a German statute, the German law violates Art. 34 TFEU andtherefore must not be applied in that case. Noteworthy is the wording of theCourt ’s definition of a MHEE, which requires the potential of the measure to hinderintra-Community trade, but not the factual existence or proof of such an effect.

o  Examples: imposition of prior administrative authorisations onimports/exports; requirement of certificates, licenses, visas; health andphytosanitary inspections; compulsory declaration of origin.

-  In its remarkable „Cassis de Dijon“ decision (120/78 REWE-ZENTRALE AG VS.BUNDESMONOPOLVERWALTUNG FÜR BRANNTWEIN [1979] ECR 649) the Court

stated that indistinctively applicable measures – those which apply equally to thestate’s own nationals and other EU citizens – can also constitute measures havingequivalent effect in the sense of Art. 34 TFEU. Merely the fact that a measure is

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non-discriminatory is not sufficient for its compliance with Art. 34 TFEU. Thus theCourt has considerably enlarged the area covered by this Treaty provision fromthe demand of non-discrimination to a general prohibition of restrictions on trade.

Any national law or administrative practice which is applied equally to domesticand imported goods but automatically puts a heavier burden or incurs higher costson the importer or exporter of a good as compared to a domestic trader, is apotential violation of Art. 34 et seq. TFEU.

o  Examples: marketing regulations; compulsory process of production;restrictions on the shape, size, weight, composition, labelling andpackaging of certain products; regulations on advertising and promotion.

-  More than two decades after widening the scope of the concept of the free

movement of goods in the „Cassis de Dijon“ - case, having witnessed a fast increaseof the number of cases referred to the Court in that field, the Court made an effortin the case KECK (C-267, 268/91 [1993] ECR I-6097) to restrict its jurisdiction onthe concept of MHEEs. It held that certain indistinctively applicable provisions,which constitute mere selling arrangements, are not considered to be a hindranceto trade in the sense of Art. 34 TFEU, provided tha t they „apply to all relevanttraders operating within the national territory and so ... they affect in the samemanner, in law and in fact, the marketing of domestic products and of those fromother Member States“. It is the purpose of the measure which determines if it is aselling arrangement or an obstacle to intra-Union trade. Product-related measuresfall in the range of Art. 34 TFEU prohibitions, while provisions determining the

way, time and place a certain product can or has to be sold, applying both todomestic and imported goods, are mere selling arrangements, even if they canaffect the volume of trade between two Member States.

Grounds of Justification

-  Union law offers two different ways to justify a national trade-restricting measure.One way is offered by the Treaty (TFEU) itself, the other one has been developed inthe jurisprudence of the Court. Both alternatives are open for a Member Statetrying to legitimise a measure in favour of its national economy. However, theirconditions must be clearly distinguished and not be mixed up.

Derogation under Art. 36 TFEU

-  If a measure falls within the scope of Art. 34 or 35 TFEU, it has to be questionedwhether or not it can be justified under Art. 36 TFEU. The exemptions grantedunder Art. 36 TFEU are subject to very tight conditions, but both distinctivelyapplicable (i.e. discriminatory) measures as well as indistinctively applicable onesare justifiable under Art. 36 TFEU. The article offers exclusively extra-economic

grounds of justification (72/83 CAMPUS OIL [1983] ECR 2727); therefore it is not asafeguard-clause. Besides public morality, public policy and public security, it alsolists the protection of health and life of humans, animals or plants, national

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treasures and industrial and commercial property. The power of the MemberStates to derogate from Art. 34 and 35 TFEU is an exceptional one and leaves themonly with a limited discretion, which is subject to judicial control.

o  The list of reasons, which can be invoked by a Member State, is exhaustiveand underlies narrow interpretation;

o  A reference to Art. 36 TFEU can only be made if the Treaty itself does notoffer sufficient protection for the endangered national interest;

o  The derogating measure has to be necessary to achieve the desired result;no

less restrictive means must be available;o  There must be a direct causal link between the measure and the desired

result.

-  In short: the measure must be proportionate to the aim pursued and must notcontain an arbitrary discrimination of imported goods.

 Alternative Justification: „Cassis de Dijon“  

-  The Court – again developing and forming unwritten „inherent“ Union  law – hasgone beyond this system and created with its so-called „Cassis de Dijon“ formula asecond path for the Member States to legitimise a questionable national measure.According to the Court’s decision in the CASSIS DE DIJON case (120/78 [1979] ECR

649, 662) a measure can not only be justified by reasons given in Art. 36 TFEU, but

also if it is „necessary in order to satisfy mandatory requirements relating inparticular to the effectiveness of fiscal supervision, the protection of public health,the fairness of commercial transactions and the protection of the consumer“. The

measure must pursue an objective of general interest and non-economic characterand must be proportionate to that aim. The „Cassis de Dijon“ formula can only beinvoked to justify indistinctively applicable measures

-  The classification of these „mandatory requirements“ stipulated by the Court   isunclear. As opposed to the Court ’s restrict ive interpretation of Art. 36 TFEU, theCourt creates the notion of „mandatory requirements“ with an open, expandablelist of justifying national interests. Taking this contradiction into consideration,„mandatory requirements“ can be categorised as a teleological reduction (i.e. a rule

of exemption taking the purpose of the original measure into account) of Art. 34TFEU. It is important to recognise the systematic difference between Art. 36 TFEUand the „Cassis de Dijon“ formula. Art. 36 TFEU  offers grounds of justification formeasures that are clearly in breach of Art. 34 TFEU. Whenever a measure can bedefended under the „Cassis de Dijon“ formula, it is considered not to be in breachof Art. 34 TFEU in the first place. Therefore the second approach can also be calleda justification, but systematically it is an exemption to the principle of freemovement of goods and therefore does not even fall in the scope of application ofArt. 34 TFEU.

-  As a methodological consequence the first test is always whether or not Art. 34TFEU is applicable to the contested national measure, because it hinders cross-

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border trade. Secondly it has to be established if the explicit measure can bejustified on the explicit grounds of Art. 36 TFEU. As a third step it must be askedwhether a teleological reduction of Art. 34 TFEU is necessary, because „mandatory

requirements“ of general interest require that national measure to restrict trade. 

-  Following three examples are listed:

ECJ 120/78 [1979] ECR 649, „CASSIS DE DIJON“  Company R wants to sell French „Cassis de Dijon“ in Germany which has an alcohol

content of 15-20%. However, Article 100 (3) of the German Branntweinmonopolgesetz(Law on the Spirits Monopoly) permits only liqueurs that have a minimum alcohol contentof 25% to be marketed in Germany. This provision therefore prohibits the import ofFrench „Cassis de Dijon“ into Germany. 

Since a French product shall be imported into Germany, cross-border trade is affected andArt. 34 TFEU (former Art. 28 EC) applies. Art.100 of the Branntweinmonopolgesetz doesnot contain a quantitative restriction. However, since it practically prohibits the import ofCassis de Dijon, it is a restriction on trade and therefore a measure having equivalenteffect in the sense of former Art. 28 EC/now 34 TFEU. Doubts about the applicability ofArt. 28 EC/34 TFEU could stem from the fact that not only foreigners are prohibited fromimporting Cassis de Dijon, but the sale of the liqueur - regardless if by German nationals orby foreigners - is prohibited in general in Germany. But since the „Cassis de Dijon“-decision the Court has consistently held that indistinctive applicability is irrelevant for thecompliance of a provision with Art. 28 EC/34 TFEU. The decisive question is whether theprovision has the (potential) effect of restricting trade, which is the case here.

As Art. 100 of the Branntweinmonopolgesetz does not comply with Art. 28 EC/34 TFEU,one might consider whether the rule can be justified with reference to Art. 30 EC/36TFEU. Justification would be possible, if the law had been adopted with the objective toprotect the public health. The German government argued that the prohibition of the saleof beverages with an alcohol content of more than 15% does protect human health.However, that argument did not make sense, as the Branntweinmonopolgesetznevertheless permits the sale of beverages with an alcohol content of more than 25%.There is no reason why beverages with an alcohol content of between 15 and 25% shouldbe particularly harmful. Justification under Art. 30 EC/36 TFEU is therefore not possible.

Limiting its decision to this reasoning, the Court could have ruled that Art. 100 (3) of the

Branntweinmonopolgesetz is inapplicable in cases of cross-border trade. Instead, theCourt invented the „Cassis de Dijon“ formula - without a particular occasion in this case -and even incorporated the protection of public health as one possible mandatoryrequirement into the formula, although this is one of the items listed in Art. 30 EC/36TFEU. However, the formula should be applied only in relation to objects of legalprotection, which are not mentioned in Art. 30 EC/36 TFEU, such as consumer protectionor the protection of the environment.

In its more recent case law the European Court locates the protection of healthmethodologically correct within the scope of Art. 30 EC/36 TFEU. According to the Court itis not sufficient for a Member State to invoke that article or the „Cassis de Dijon“ formula,

simply paying lip service to honourable policy goals. Reference to the possible grounds ofjustification must not lead to the promotion of arbitrary discrimination or a disguisedrestriction on trade between the Member States. Searching for the true intention behind ameasure is a difficult and politically sensitive task. One tool is extremely helpful in this

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respect: the proportionality test. If, for example, a national measure restricting the freemovement of goods has been adopted allegedly on grounds of the protection of publichealth, the question whether this measure really serves this purpose or in reality

constitutes a disguised restriction on trade, can be answered by applying the principle ofproportionality. Disproportionality is a strong indication for the Member State ’s wish to

create a disguised restriction on trade by adopting a provision under the label of healthprotection. In that case the provision would be declared inapplicable (only) to cross-border trade. It would remain in force for all purely domestic trade cases.

The Branntweinmonopolgesetz could not be exempted from Art. 28 EC/34 TFEU based onthe mandatory requirement of public health in Germany, as the prohibition contained inArt.100 (3) was not necessary in order to secure public health and therefore notproportionate to the general interest pursued with it.

ECJ 362/88 [1990] ECR I-667, „GB-INNO-BM“  A Belgian company operates supermarkets on Belgian territory. After it has distributedadvertising leaflets in Belgium as well as in Luxembourg, a consumers’ association applies

for an injunction, claiming that the leaflets infringed Luxembourg competition law bymaking reduced-price offers, stating the duration of the offer and referring to previousprices. The court in Luxembourg referred the question to the Court whether thosecompetition rules are compatible with the EU law.

According to the Court such a case concerns the free movement of goods. That principlerequires, particularly in areas along national frontiers, that consumers residing in oneMember State may travel freely to the territory of another Member State to shop under the

same conditions as the local population does there. That freedom for consumers would becompromised if they were deprived of access to advertisements available in the countrywhere purchases are made. Consequently rules regulating the advertising of goods mustalso be examined in the light of Art. 34 TFEU. The Court went on to deal with the questionwhether –  in accordance with the „Cassis de Dijon“ formula –   the relevant prohibitionscould be justified on the grounds of mandatory requirements relating to consumerprotection. However, the Court has repeatedly stated that it can hardly be justified asbeing in the interests of consumer protection if the consumer is prevented from havingaccess to information. Under these circumstances the measure is disproportionate andviolates the principle of free movement of goods. The Luxembourgian provision istherefore inapplicable to cross-border trade.

ECJ 178/84 [1987] ECR 1227 „REINHEITSGEBOT (Purity requirement for beer)“  -  Art. 9 (1) of the German Biersteuergesetz (Law on Beer Duty) provides that bottom-

fermented beers may be manufactured only from malted barley, hops, yeast and water.Imports of foreign beers containing other substances face an absolute marketingprohibition. Does this legislation infringe Art. 34 TFEU?

Art. 9 et seq. of the Biersteuergesetz establish restrictions on trade in the sense of Art. 34TFEU, because they hinder trade between the Member States. A beer brewer outsideGermany using substances other than those four allowed in the Biersteuergesetz andwanting to import that product into Germany is confronted with a marketing prohibition(Art. 11 (1), (2) of the Law on Food and other Consumer Goods). The purity requirement

of the Biersteuergesetz therefore constitutes a restriction on trade and a measure havingequivalent effect to a quantitative restriction within the meaning of Art. 34 TFEU. It isquestionable if the provisions of the Biersteuergesetz can be justified under the „Cassis de

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Dijon“ formula because they serve the mandatory requirement of consumer protection.For a German consumer, the designation „Bier“ is linked to a beverage manufactured in

accordance with the purity requirement of the Biersteuergesetz. If the beer contains other

substances, he is misled as to the nature of the beverage. Consequently theBiersteuergesetz serves the protection of the consumer. However, the provisions can bejustified under the „Cassis de Dijon“ formula only if they do not constitute a disguised

restriction on trade. This must be judged with reference to the principle of proportionality.To avoid any deception of consumers, it would be sufficient to use a label clearly showingwhich substances the product contains. Since there is a less drastic measure available,which would serve the goal of consumer protection to the same extent as the purityrequirement itself, the marketing prohibition is disproportionate. It is not justifiable andtherefore, according to Art. 34 TFEU, illegal as far as cross-border trade is concerned.Consequently foreign producers may import and market beer that does not satisfy thepurity requirement in Germany, whereas German producers still have to observe theBiersteuergesetz. This is a case of so-called „reverse discrimination“. 

(In relation to the purity requirement in force since 1994, see the amendment to theBiersteuergesetz as adopted in the course of the harmonisation of EU-excise duties, BGBl I1992, 2158 et seq., and the Provisional Beer law („Vorläufiges Biergesetz“), BGBl I 1993,

1399 et seq.)

-  In practical terms Art. 34 and 36 TFEU are among the most important provisions ofthe EC Treaty. This situation has not changed with the completion of the singlemarket. Crucial for the debate on Art. 24 TFEU is the question whether, and to whatextent, Member States have retained a sovereign, national discretion in relation tothe protection of the environment, consumers and technical standards, e.g. for theprotection of workers. For example in a case of uncertainty about the noxiousnessof substances or the dangerous nature of certain goods, the decision whether ornot the goods may enter and be marketed in a Member State is in principle left upto the importing country. With regard to the import of foodstuffs, the usual dietand the state of health of the population in question can be taken into account.However, the Court holds the view that it is in any case entitled to check if there isa disguised restriction on trade.

Free Movement of Persons (Arts. 45-48, 49-55 TFEU)

-  The concept of free movement of persons contains two elements:o  the free movement of workers (Art. 45-48 TFEU)o  the freedom of establishment (Art. 49-55 TFEU).

Free Movement of Workers (Art. 45-48 TFEU)

-  Art. 45 TFEU is concerned both with the boost of labour mobility and theprotection of (social) rights of individuals. The Court as well as the European

legislature have developed the scope of rights conferred upon the migrant worker,which has led to an extensive and detailed range of benefits. The essentialprovisions of Art. 45 TFEU are first of all the right to move freely between Member

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States in order to take up employment, and secondly to enjoy non-discriminatoryconditions of employment and access to social protection once installed in the hostMember State.

-  Although the Treaty provisions on the free movement of workers have directeffect, important secondary legislation has been adopted, which substantiates andelaborates upon the basic Treaty articles and which confers complementing rightsupon the family members of the worker (see Regulation 1612/68). Major acts ofsecondary law comprise Directive 68/360 (entry and residence rights), Regulation1612/68 (employment access and conditions) and Regulation 1251/70 (right toremain).

Freedom of Establishment (Art. 49-55 TFEU)

-  Art. 49 TFEU grants every citizen of an EU Member State the freedom to establishand run a business as a self-employed person anywhere within the EU on the sameterms as nationals of the host state. It also provides the freedom for enterprises tomove their main seat from one to another Member State or to set up branches andagencies in a country other than the one of establishment. In that sense Art. 49TFEU is a non-discrimination clause, specifying (subordinate) Art. 18 TFEU. Theunderlying objective of the elimination of discrimination is the promotion ofmarket integration.

Freedom to Provide Services (Art. 56-62 TFEU)

-  The structure of Art. 56 et seq. TFEU is similar to the structure of the freedom ofestablishment. It guarantees the freedom of the person providing a service topursue his or her activity temporarily in another Member State, according to theprinciple of equal treatment with that state’s own nationals. 

Free Movement of Capital and Payments

-  In an internal market goods and services must not only be freely negotiable as wellas workers and self-employed persons must be able to choose their place ofactivity, but the flow of capital must also be liberalised as far as possible. When thisis achieved, one can speak of unlimited mobility of the means of production andproducts.

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VIII. The Competition Policy

-  Distortions of the internal market can result not only from restrictions on importsand exports or measures having equivalent effect, but also from two other sources.One is the conduct of private undertakings and the other one are state aids forsingle undertakings or certain economic sectors, both of which have an impact oneconomic competition within the Community. The competition policy is one of thefurthest developed EU common policies and is an essential complement to thefundamental freedoms of the Treaty, designed to create and ensure the properfunctioning of the internal market. It takes a high-ranking position among thenumerous EU policies, which is reflected in the extraordinary size of the DGCompetition (Directorate General Competition) in the Commission. Its objectives

are the following:

o  Maximising consumer welfare and achieving the optimal allocation ofresources

o  Protecting consumers and smaller firms from large aggregations ofeconomic power

o  Facilitating the creation and maintenance of a single European market

-  The Unions’s competition law system consists of two pillars:o  the regulation of the competitive conduct of undertakings within the

Union (Art. 101, 102 TFEU) ando  the monitoring and prohibition of state aids (Art. 107 – 109 TFEU).

-  Both pillars aim at preventing any interference with or disturbance of the freecompetition within the internal market. While the former concerns private legalentities, the latter is directed towards the governments of the Member States. Theprohibition of state aids appears to be the connecting piece between the majorityof Treaty provisions, which are addressed to governmental bodies (like thefundamental freedoms, which prohibit any free movement restriction effectuatedby a public authority within the Member States) and those addressed to privatepersons, which are rare and exceptional in the EU.

The Prohibition of State Aids

-  Governments can have various motives to influence their national economies or tosteer the conduct of the market players. For the achievement of their policy goalsthey have several instruments and measures at their disposition. A state can takelegislative action with the effect of limiting the free movement of goods andproduction factors. This conduct is regulated by the EU provisions concerning thefundamental freedoms, as described before. But it can also take administrativeaction, like granting aid to a single national undertaking or to whole economic

sectors. States can be very creative trying to boost or protect their nationaleconomy, which requires the European competition policy to be similarly„flexible“. 

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-  The reasoning behind the state aid rules is the fact that subsidised goods can besold at a lower price (or better conditions) than comparable goods from abroad,

which do not benefit from governmental support. Therefore subsidies must beconsidered as (potential) market distortions.

-  Nevertheless the internal market does not allow the immediate elimination of allstate aids. Social and regional characteristics must be taken into account and it hasto be ensured that the decline of particular sectors of the economy does notendanger the economy as a whole. Arts. 107 –  109 TFEU try to reconcile theseconflicting aims.

-  Definition of a State Aid: The Treaty does not provide a definition of what a state

aid is or in which forms it can occur, but generally speaking a state aid can beunderstood as any financial advantage provided voluntarily by a state, which isspecifically designed to favour or support a certain company or business sector.Neither the rationale nor the form of a measure, but its substance is the crucialcriterion. The definition refers not only to direct payments from the government toan enterprise, but also to indirect advantages granted, e.g. the renunciation ofpayments of a particular company to the government (like a tax waiver). Furtherexamples are preferential interest rates or the provision of land, buildings onspecial terms.

 Art. 101 TFEU - Restrictive Agreements (Cartels)

-  Art. 101 (1) TFEU prohibits any co-operative anti-competitive behaviour of privateundertakings, seeking to distort the internal market by building cartels. Thewording of the provision lists four essential elements of an infringement:

o  an agreement between undertakings, a decision by an association ofundertakings or a concerted practice,

o  which may affect trade between Member States,o  with the objective or effect to prevent, restrict or distort the competition

within the internal market ando  affecting competition to a noticeable extent

-  According to Art. 101 (3) TFEU, the prohibition of Art. 101 (1) TFEU can beinapplicable to agreements or decisions under certain circumstances. Art. 102 (3)TFEU lists two positive and two negative conditions for such an exemption:

o  The agreement must contribute to the improvement of the production ordistribution of goods or to the promotion of technical or economic

progress.o  Meanwhile it must allow consumers a fair share of the resulting benefit.o  It must not impose restrictions on the undertakings concerned, which are

notindispensable to the attainment of these objectives.

o  The relevant undertakings must not be afforded the possibility of

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eliminatingcompetition in respect of a substantial part of the products in question.

-  In order to establish whether or not a certain conduct of a private undertaking isillegal or a certain agreement is void because it infringes Art. 101 TFEU, thefollowing five questions must be answered:

o  Is there any agreement, decision or concerted practice?o  Does it affect trade between Member States?o  Does it prevent, restrict or distort competition?o  Is the agreement one of minor importance?o  Can it be exempted under Art. 103 (3)?

 Art. 102 TFEU - Abuse of a Dominant Position

-  Art. 102 TFEU prohibits the abusive exercise of a dominant position on the internalmarket by one undertaking. In contrast to Art. 101 TFEU, which requires the co-operation of two or more companies in the form of agreements, decisions orconcerted practices, Art. 102 TFEU regulates the unilateral conduct of a company.Similar to the provision on cartels, the prohibition contained in Art. 102 TFEUapplies only where intra-Union trade is (potentially) concerned. The provisioncontains three elements which indicate that an abuse of a dominant market

position has occurred:

o  a dominant position of the undertaking in the relevant product market,o  the relevant market covers either the internal market as such or a

substantialpart of it,

o  abusive conduct.

Enforcement of Art. 101 and 102 TFEU

-  In the past the Commission played the central role in the enforcement proceduresof Art. 101 and 102 TFEU. Under the mounting workload and with the EUenlargement approaching, the Commission found itself unable to bear theresponsibility alone. The new Regulation 01/2003 shifts the responsibility for theapplication and execution of Art. 101 and 102 TFEU from the Commission to thenational competition authorities and courts. The Commission will have lessexecutive but more supervising and co-ordinating tasks, guarding the coherence ofthe application of those provisions by the Member States. It is responsible for

o  the formulation of the Union competition policy,

o  the co-ordination of the network of national cartel authorities,o  the decision of individual cases of particular significance, like e.g. the

Microsoft case.

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-  In order to fulfil its tasks the Commission enjoys substantial powers and has eventhe right to impose fines for breaches of Art. 101 and 102 101 and 102 TFEU and

even for procedural violations. More in detail the Commission disposes of:

o  Investigative powers: The Commission may conduct inquiries into wholesectors of the economy, obtain all necessary information from MemberStates and companies and undertake all necessary on-the-spot-investigations (Regulation 01/2003, Articles 18-21).

o  To ensure the coherence of the application of Art. 101 and 102 TFEU, theCommission can take the initiative to issue opinions to national courtsdealing with European competition cases (Reg. 01/2003, Art. 15). In turnthe Member State courts are obliged to take into consideration ongoing

procedures of the Commission and if necessary even suspend their ownprocedures (Reg. 01/2003, Art. 16).o  Fines and penalties: The Commission has power to impose fines for

breaches of Art. 101 and 102 TFEU of up to 1 Mio Euro on an undertaking,or 10 % of its turnover, whichever is greater. For violations of theinvestigation procedure the Commission can impose a fine of up to 5 % ofthe company’s average daily turnover (Reg. 01/2003 Art. 24).