Type: Definition Essays
Sample donated: Max Kelly
Last updated: April 18, 2019
In the course of 1985 and 1986 the institutions of the European Communities (hereafter ‘Community’) devised and set in motion a programme to complete the Community’s internal market by 31 December 1992. Much has been said about this programme, but its most important stages should nevertheless be very briefly reviewed. The major starting-point was undoubtedly the Commission’s White Paper on the completion of the internal market. White Paper 1985) In this document the Commission presented a thorough study of the various barriers which stood in the way of having a genuinely single market, as was (at least to some extent if not entirely) envisaged by the original EEC Treaty. The most ingenious aspect of the White Paper, however, was that the Commission managed to propose a list of about 300 measures which would enable the Community to complete its internal market, accompanied by a detailed timetable.
The Commission’s approach was endorsed by the European Council, leading to the amendments of the EEC Treaty introduced by the Single European Act.It would go beyond the scope of this introduction to analyse these amendments. Suffice it to say that according to Article 7a, EC Treaty, ‘[t]he internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty’. The same provision also constitutionalized the target date of 31 December 1992.
The internal market programme has been surprisingly successful. The large majority of the measures of which the programme was made up have been adopted in time.Admittedly, there are areas which lag behind (such as free movement of persons). Moreover, it has not always been possible to maintain the rigorous approach originally advocated by the Commission, and a lot remains to be done with regard to implementing the adopted measures at national level. Nevertheless, the essence of the internal market is in place, which finds perhaps its most spectacular expression in the complete abolition of controls at intra-Community borders on the movement of goods. European Internal MarketFrom an economic point of view, the question whether there is an external dimension to the internal market sounds almost ridiculous. How could, an economist would argue, a policy of economic integration that is as encompassing as the internal market programme and that applies to twelve developed countries which play an important role in international trade not affect trade and economic relations with the outside world? However, from the point of view of law-and policy-making the question could be raised in the early stages, as indeed it has been.
One can safely say that until 1988 the attitude of the Community’s institutions towards both the external effects of the internal market programme and the relationship between the programme and the Community’s external policies was one of benign neglect. The Commission’s White Paper contains only a few references to external policies. There is also nothing in the definition of the internal market as laid down in Article 7a, EC Treaty, which provides a link with external relations, and the Single European Act did not amend the EEC Treaty provisions which do deal with this subject (the main ones being those on the Common Commercial Policy).Even the famous Checcini report on the economic effects of 1992 did not take account of the external dimension. (Borner 1992, 17) The latter was only present in one very specific way: the internal market programme was (and is) clearly also aimed at improving the competitiveness of European industries in the face of Japanese and US competition.
But this was only regarded as a strategic motive for the programme, unrelated to its contents, which would merely involve the elimination of barriers in the internal market.It has for example been said that the concept of an internal market, as introduced in Community law by the Single European Act, does not have an external dimension, in contrast with the concept of a common market which includes a Common Customs Tariff and a Common Commercial policy. (Forwood 1986, 365) Although in October 1988 the Commission tried to demonstrate that nothing of the kind was being envisaged, (Press Release 1988, 117) since 1988 the external dimension has figured high on the agenda of both political and academic discussions.A factor which certainly contributes thereto is the (at the time of writing) still ongoing Uruguay Round of multilateral trade negotiations, which covers a number of subjects which are also part of the 1992 programme. Numerous studies of the external dimension of the internal market programme have been published in the last few years.
The internal market programme puts the regulation of transactions in goods and services much on the same footing, as will be demonstrated in the course of this study.The provision of services is no longer looked at as something merely ancillary to the production of goods, and the public service function of a number of important service sectors (such as telecommunications and transport), which in the past served to shelter these sectors from genuine competition, is less and less emphasized. It is indisputable that in the framework of the internal market programme the production and marketing of goods and the provision of services are treated as two equivalent kinds of economic activity.One could approach the subject of the external dimension of the internal market from a Cartesian, top-down perspective. That would imply drawing up a legal definition of the internal market concept and its various components in the fields of goods and services, in order to examine, on the basis of this definition, how the external dimension is being determined. Such an approach is not followed here, basically because it would be very difficult to draw up a ‘universal’ definition of the internal market concept.Notwithstanding the fact that it has been constitutionalized by the Single European Act, the internal market programme remains in the first place a political programme, which has been subject to evolution in the course of its implementation, and the boundaries of which are not always definite. This study therefore examines the concrete policies relating to goods and services which were developed in the course of the programme, in the first place of course those in which the external dimension plays an important role.
However, it also aims at putting these concrete policies (which in many cases are still being shaped today) in perspective.For a subject such as the relationship between the internal market and international trade this perspective can only be twofold. On the one hand, it is the broader context of Community integration, in particular the development of the Community’s external policies. On the other, it is the world trading system in which the Community is an active participant and which, from a legal viewpoint, consists of various sets of rules and disciplines laid down in multilateral and bilateral agreements, the most important being the General Agreement on Tariffs and Trade. The Treaty on European UnionThe new version of Article 115, as amended by the Treaty on European Union, is rather curious.
On the one hand, it grants greater discretion to the Commission for deciding whether protective measures may be taken or not. This results from the amendment of the first paragraph: instead of ‘the Commission shall authorize’, it is provided that ‘the Commission may authorize’. On the other hand, however, the new second paragraph seems to return some powers to the Member States: in cases of urgency, they may take the necessary measures themselves, under the condition of requesting authorization from the Commission.This text is almost a copy of the previous version of the second paragraph, but the latter only applied to the transitional period, which ended on 1 January 1970. At first sight, therefore, this would appear to be a serious setback in terms of eliminating the use of Article 115 as a derogation from the free movement of goods within the internal market.
Essential is the question whether the modified second paragraph grants the Member States any new powers with respect to taking protective measures.It is difficult to give a conclusive answer to this question, because the new text is utterly ambiguous and almost incomprehensible, taking into account the existing practice in the application of Article 115. First, the second paragraph applies ‘in the event of urgency’. But the state of urgency is almost inherent to the application of Article 115. As was mentioned, the Commission has only authorized protective measures in the case of serious economic difficulties–and more and more so in the last few years. In those circumstances there is always some degree of urgency.
As a result, it is not clear in which cases the second paragraph would apply. It would certainly be difficult to argue that the second paragraph covers all applications of Article 115, since the first paragraph has not been eliminated. Secondly, what is meant by the Member States may ‘take the necessary measures themselves? This was exactly the existing practice.
It was never the Commission which took protective measures; it was the Member States which could do so, after having obtained the Commission’s authorization.Perhaps it will be argued that the difference with the first paragraph lies in the power of the Commission to determine the conditions and details of such measures. This power is not mentioned in the second paragraph. However, it is stated that the Commission must give its authorization by way of a decision, and that it may at any time decide that ‘the Member States concerned shall amend or abolish the measures in question’. Does this not imply that the Commission may, already in its decision pursuant to a Member State’s request under the second paragraph, determine the conditions and details of the measures that can be taken?Arguably, if the Commission may at any time amend or abolish the national measures, it may also at any time determine their conditions and details. Reference should also be made to the rule of strict application and interpretation of Article 115, pronounced by the Court in Donckerwolcke.
The Court also emphasized that in this respect a proper authorization by the Commission is essential. Interpreting the modified second paragraph in line with these principles can only lead to the conclusion that it confers no autonomous powers upon the Member States.Actually, the only real innovation would seem to be that, in case of urgency, the Commission must take a decision ‘as soon as possible’. To conclude, a rational interpretation of the new second paragraph, taking into account the system of the Treaty and the existing practice in the application of Article 115, reveals that it changes almost nothing to the system as it operated in the past.
The modification of the first paragraph of Article 115 is probably more significant.The degree of discretion which the Commission has at its disposal in authorizing protective measures has, to my knowledge, never really been analysed, and no Member State has ever brought the Commission before the Court for not granting such an authorization. In practice, therefore, the Commission has always exercised considerable discretion. However, with the modified version there can no longer be any doubt that this discretion is considerable indeed.
The Commission would therefore in the future be entitled to employ an altogether different interpretation of the concept of “economic difficulties’, justifying recourse to protective measures.This concept has always been interpreted on a sectoral basis, but it could be argued that, in view of the exceptional character of Article 115 as a derogation from the free movement of goods within a genuinely single, internal market that is in place, it refers to real crisis situations affecting the economy of a Member State as such, and not just one sector. Such an interpretation would close the door on using Article 115 as an instrument of standard protection of national markets, which it has been in the past, but which is incompatible with a genuine internal market.Did not the Court in Tezi Textiel rule that, when authorizing protective measures, the Commission must keep in mind ‘the general interests of the Community’? And is the unity of the internal market not an overriding interest of the Community, in comparison with claims for sectoral protection at Member State level? The impact of Article 7a Article 7a, EC Treaty, provides that ‘[t]he Community shall adopt measures with the aim of progressively establishing the internal market over a period expiring on 31 December 1992’.Moreover, the internal market comprises ‘an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty’. Article 115, on the other hand, is a derogation from the free movement of goods, and it has been applied by means of controls at the internal frontiers that were to be eliminated. So the question arises whether Article 7a has any bearing, legally speaking, on Article 115. Does Article 7a imply, for example, that from 1 January 1993 Article 115 may no longer be applied?There are various angles to this question.
There is, to begin with, the Declaration on Article 7a annexed to the Final Act of the Single European Act, which introduced the article into the EC Treaty. This Declaration provides, among other things, that ‘[s]etting the date of 31 December 1992 does not create an automatic legal effect’. That has been interpreted by most commentators as expressing the intention of the drafters to avoid what happened at the end of the first transitional period, laid down in Article 7 of the Treaty, and related to the common market.As is well known, the Court found that a number of provisions of the Treaty acquired direct effect at the end of this period, even in the absence of implementing measures that should have been taken. (Maresceau 1978, 1-22) Leaving aside for one moment the issue of what kind of provisions would be apt for becoming directly effective on 1 January 1993, the first question is whether the Declaration itself creates any legal effect. Toth has dealt with this question in great detail, mainly from the point of view of international law.
Toth 1986, 803-12) It is submitted, however, that that is not the proper perspective. In so far as the problem is the legal effect of the Declaration on the EC Treaty and its implementation, it is a question of Community law, and not of international law. (Schermers 1991, 275-6) Nevertheless, the author has pointed to some elements that are able to supply an appropriate answer. Article 236 of the EEC Treaty (now Article N of the Union Treaty) stipulates that amendments to the Treaty shall enter into force after being ratified by all the Member States.In the case of the Single European Act it was only the Act itself, in accordance with its Article 33, that was subject to ratification, and not the Final Act of the Conference, containing the various Declarations. Moreover, one can draw a comparison with the Declarations that were attached to the EEC Treaty itself and to the three Acts of Accession. In these four treaties, it was provided that the Annexes and Protocols ‘form an integral part thereof’, not mentioning the Declarations, which, a contrario, do not form part of these treaties. Toth 1956, 194) There is no reason, as Toth rightly states, why the same should not be true with respect to the Declarations annexed to the Single European Act.
Lastly, there is Article 31 of the Act, providing that the Court has no jurisdiction over the provisions of the Act except those of Title II (the modifications to the EEC Treaty) and Article 32.Thus, the Court has no jurisdiction over the Declaration on Article 7a, but only over the article itself. As a result, Toth’s conclusion that this Declaration ‘cannot in any way restrict, exclude, qualify or amend the clear provisions’ of Article 7a has to be considered to be correct. Hilf 1990, 92) Therefore, in examining the impact of Article 7a on the application of Article 115, the wording of the Declaration has no role to play. On the other hand, it cannot be maintained that the effect of Article 7a is to preclude any further application of Article 115 from 1 January 1993. Neither the Single European Act nor the Treaty on European Union has abolished Article 115. Moreover, Article 7a provides that the internal market shall be established ‘without prejudice to the other provisions of this Treaty’, including Article 115, which therefore remains intact.To argue differently would come down to advancing the thesis that on 1 January 1993 all the Treaty provisions allowing derogations from the free movement of goods, persons, services, and capital have become obsolete.
That would include, among others, Articles 36, 48 (3), and 56. There is no basis whatsoever for such a thesis which, by the way, if it were correct would render completely pointless large segments of the internal market programme, aimed at suppressing recourse to these articles, through harmonizing national legislation.Does this mean that Article 7a has no impact at all on Article 115? That is not the correct conclusion. The fact that, as a matter of principle, recourse to Article 115 remains available after 1 January 1993 does not preclude imposing a number of constraints on the way in which the article is put into effect. One of these would be that, since the internal market should have been established by the said date, applying Article 115 has to become much more exceptional, in line perhaps with the views on the concept of ‘economic difficulties’ defended above.Another constraint relates to the way in which Article 115 functions. Until now, this has always been the case through controls at intra-Community borders.
However, the internal market is ‘an area without internal frontiers’ and eliminating the various controls that took place at intra-Community borders has been one of the major aims of the internal market programme. Undoubtedly, therefore, the Community’s institutions as well as the Member States are under a duty to eliminate such border controls, a view which is also defended by the Commission.As regards Article 115, one can indeed envisage other ways of applying the provision, no longer necessitating border controls. (Mattera 1990, 585-600) Consequently, it is submitted that the Commission may no longer, by virtue of Article 7a, authorize protective measures that operate through a licensing system which requires controls at the Community’s ‘internal frontiers’. If Article 115 is further applied, other methods should be sought.