European Union law

European Union law is a system of rules operating within the member states of the European Union. Since the founding of the Coal and Steel Community after World War II, the EU has developed the aim to "promote peace, its values and the well-being of its peoples".^[2] The EU has political institutions, social and economic policies, which transcend nation-states for the purpose of cooperation and human development.^[3] According to its Court of Justice the EU represents "a new legal order of international law".^[4] The EU's legal foundations are the Treaty on European Union and the Treaty on the Functioning of the European Union, unanimously agreed by the governments of 28 member states. New members may join, if they agree to play by the rules of the organisation, and old members may leave according to their "own constitutional requirements".^[5] People are entitled to participate through the Parliament, and their national governments in shaping the legislation the EU makes. The Commission has the initiative for legislation, the Council of the European Union represents member state governments, the Parliament is elected by European citizens, while the Court of Justice is meant to uphold the rule of law and human rights.^[6] As the Court of Justice has said, the EU is "not merely an economic union" but is intended to "ensure social progress and seek the constant improvement of the living and working conditions of their peoples".^[7]

History

Democratic ideals of integration for international and European nations are as old as the modern nation-state.^[9] Ancient concepts of European unity were generally undemocratic, and founded on domination, like the Empire of Alexander the Great, the Roman Empire, or the Catholic Church controlled by the Pope in Rome. In the Renaissance, medieval trade flourished in organisations like the Hanseatic League, stretching from English towns like Boston and London, to Frankfurt, Stockholm and Riga. These traders developed the lex mercatoria, spreading basic norms of good faith and fair dealing through their business. In 1517, the Protestant Reformation triggered a hundred years of crisis and instability. Martin Luther nailed a list of demands to the church door of Wittenberg, King Henry VIII declared a unilateral split from Rome with the Act of Supremacy 1534, and conflicts flared across the Holy Roman Empire until the Peace of Augsburg 1555 guaranteed each principality the right to its chosen religion (cuius regio, eius religio). This unstable settlement unravelled in the Thirty Years' War (1618–1648), killing around a quarter of the population in central Europe. The Treaty of Westphalia 1648, which brought peace according to a system of international law inspired by Hugo Grotius, is generally acknowledged as the beginning of the nation-state system. Even then, the English Civil War broke out and only ended with the Glorious Revolution of 1688, by Parliament inviting William and Mary from Hannover to the throne, and passing the Bill of Rights 1689. In 1693 William Penn, a Quaker from London who founded Pennsylvania in North America, argued that to prevent ongoing wars in Europe a "European dyet, or parliament" was needed.^[10] The French diplomat, Charles-Irénée Castel de Saint-Pierre, who worked negotiating the Treaty of Utrecht at the end of the War of Spanish Succession proposed, through "Perpetual Union", "an everlasting peace in Europe",^[11] a project taken up by Jean-Jacques Rousseau,^[12] and Immanuel Kant after him.^[13] After the Napoleonic Wars and the Revolutions of 1848 in the 19th century, Victor Hugo at the International Peace Congress in 1849 envisioned a day when there would be a "United States of America and the United States of Europe face to face, reaching out for each other across the seas".^[14] World War One devastated Europe's society and economy, and the Versailles Treaty failed to establish a workable international system in the League of Nations, any European integration, and imposed punishing terms of reparation payments for the losing countries.^[15] After another economic collapse and the rise of fascism led to a Second World War, European civil society was determined to create a lasting union to guarantee world peace through economic, social and political integration.

To "save succeeding generations from the scourge of war, which twice.. brought untold sorrow to mankind",^[16] the United Nations Charter was passed in 1945, and the Bretton Woods conference set up a new system of integrated world banking, finance and trade. Also, the Council of Europe, formed by the Treaty of London 1949, adopted a European Convention on Human Rights, overseen by a new transnational court in Strasbourg in 1950. Already in 1946 Winston Churchill, who had been recently defeated as UK Prime Minister in 1945, had called for a "United States of Europe", though this did not mean the UK would sever its ties to the Commonwealth. In 1950, the French Foreign Minister Robert Schuman proposed that, beginning with integration of French and German coal and steel production, there should be "an organisation open to the participation of the other countries of Europe", where "solidarity in production" would make war "not merely unthinkable, but materially impossible".^[17] The Treaty of Paris 1951 created the first European Coal and Steel Community, signed by France, West Germany, Belgium, the Netherlands, Luxembourg and Italy, with Jean Monnet as its President. Its theory was simply that war would be impossibly costly if ownership and production of every country's economy was mixed together. It established an Assembly (now the European Parliament) to represent the people, a Council of Ministers for the member states, a Commission as the executive, and a Court of Justice to interpret the law. In the East, the Soviet Union had installed dictatorial governments, controlling East Germany, and the rest of Eastern Europe. Although Stalin died in 1953 and the new general secretary Nikita Khrushchev had denounced him in 1956,^[18] Soviet tanks crushed a democratic Hungarian Revolution of 1956, and repressed every other attempt of its people to win democracy and human rights.

In the West, the decision was made through Treaty of Rome 1957 to launch the first European Economic Community. It shared the Assembly and Court with the Coal and Steel Community, but set up parallel bodies for the Council and Commission. Based on the Spaak Report of 1956, it sought to break down all barriers to trade in a common market for goods, services, labour and capital, and prevent distortion of competition and regulate areas of common interest like agriculture, energy and transport.^[20] A separate treaty was signed for a European Atomic Energy Community to manage nuclear production. In 1961 the United Kingdom, Denmark, Ireland and Norway applied for membership only to be vetoed in 1963 by France's Charles de Gaulle. Spain also applied and was rejected as it was still led by the Franco dictatorship. The same year, the Court of Justice proclaimed that the Community constituted a "new legal order of international law".^[4] The Merger Treaty 1965 finally placed the ECSC and Euratom within the EEC. Shortly after, de Gaulle boycotted the Commission, which he believed was pressing supranationalism too far. The Luxembourg compromise in 1966 agreed that France (or other countries) could veto issues of "very important national interest", particularly relating to the Common Agricultural Policy, instead of making decisions by "qualified majority". But after the May 1968 events in France and de Gaulle's resignation, the way was free for the United Kingdom, Ireland and Denmark to join in 1973. Norway had rejected joining in a 1972 referendum, while the UK confirmed its membership in a 1975 referendum.^[21] Aside from the European Economic Community itself, the European continent underwent a profound transition towards democracy. The dictators of Greece and Portugal were deposed in 1974, and Spain's dictator died in 1975, enabling their accession in 1981 and 1986. In 1979, the European Parliament had its first direct elections, reflecting a growing consensus that the EEC should be less a union of member states, and more a union of peoples. The Single European Act 1986 increased the number of treaty issues in which qualified majority voting (rather than consensus) would be used to legislate, as a way to accelerate trade integration. The Schengen Agreement of 1985 (not initially signed by Italy, the UK, Ireland, Denmark or Greece) allowed movement of people without any border checks. Meanwhile, in 1987, the Soviet Union's Mikhail Gorbachev announced policies of "transparency" and "restructuring" (glasnost and perestroika). This revealed the depths of corruption and waste. In April 1989, the People's Republic of Poland legalised the Solidarity organisation, which captured 99% of available parliamentary seats in June elections. These elections, in which anti-communist candidates won a striking victory, inaugurated a series of peaceful anti-communist revolutions in Central and Eastern Europe that eventually culminated in the fall of communism. In November 1989, protestors in Berlin began taking down the Berlin Wall, which became a symbol of the collapse of the Iron Curtain, with most of Eastern Europe declaring independence and moving to hold democratic elections by 1991.

The Treaty of Maastricht 1992 renamed the EEC as the "European Union", and expanded its powers to include a social chapter, set up a European Exchange Rate Mechanism, and limit government spending. The UK initially opted out of the social provisions, and then monetary union after the Black Wednesday crisis where speculators bet against the pound. Sweden, Finland and Austria joined in 1995, but Norway again chose not to after a 1994 referendum, instead remaining part of the European Economic Area, abiding by most EU law, but without any voting rights. At the Treaty of Amsterdam 1997, with a new Labour government, the UK joined the social chapter. A newly confident EU then sought to expand. First, the Treaty of Nice 2001 made voting weight more proportionate to population (two Irish referenda rejected, but then accepted this). Second, the Euro currency went into circulation in 2002. Third came the accession of Malta, Cyprus, Slovenia, Poland, the Czech Republic, Slovakia, Hungary, Latvia, Estonia, and Lithuania. Fourth, in 2005 a Treaty establishing a Constitution for Europe was proposed. This "Constitution" was largely symbolic, but was rejected by referenda in France and the Netherlands. Most of its technical provisions were inserted into the Treaty of Lisbon 2007, without the emotive symbols of federalism or the word "constitution". Also in 2007, Bulgaria and Romania joined. Over 2007 to 2008, because of the subprime mortgage crisis in the United States, and the developing global financial crisis European banks that had invested in derivatives were put under severe pressure. British, French, German and other governments were forced to nationalise or guarantee their banks' debts. In turn, the Eurozone crisis developed when international investment withdrew and Greece, Spain, Portugal, and Ireland saw international bond markets charge unsustainably high interest rates on government debt. Eurozone governments and staff of the European Central Bank believed that it was necessary to save their banks by taking over Greek debt, and impose "austerity" and "structural adjustment" measures on debtor countries. This exacerbated further contraction in the economies. In 2011 two new treaties, the European Fiscal Compact and European Stability Mechanism were signed among Eurozone countries. In 2013, Croatia entered the EU. However a further crisis was triggered after the UK's Conservative government chose to hold a referendum in 2016, and campaigners for "leave" won 51.89 per cent of votes.^[22]

Constitutional law

Although the European Union does not have a codified constitution,^[26] like every political body it has laws which "constitute" its basic governance structure.^[27] The EU's primary constitutional sources are the Treaty on European Union and the Treaty on the Functioning of the European Union, which have been agreed or adhered to among the governments of all 28 member states. The Treaties establish the EU's institutions, list their powers and responsibilities, and explain the areas in which the EU can legislate with Directives or Regulations. The European Commission has the initiative to propose legislation.^[28] During the ordinary legislative procedure, the Council (which are ministers from member state governments) and the European Parliament (elected by citizens) can make amendments and must give their consent for laws to pass.^[29] The Commission oversees departments and various agencies that execute or enforce EU law. The "European Council" (rather than the Council, made up of different government Ministers) is composed of the Prime Ministers or executive presidents of the member states. It appoints the Commissioners and the board of the European Central Bank. The European Court of Justice is the supreme judicial body which interprets EU law, and develops it through precedent. The Court can review the legality of the EU institutions' actions, in compliance with the Treaties. It can also decide upon claims for breach of EU laws from member states and citizens.

Treaties

The Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU) are the two main sources of EU law. Representing agreements between all member states, the TEU focuses more on principles of democracy, human rights, and summarises the institutions, while the TFEU expands on all principles and fields of policy in which the EU can legislate. In principle, the EU treaties are like any other international agreement, which will usually be interpreted according to principles codified by the Vienna Convention 1969.^[30] It can be amended by unanimous agreement at any time, but TEU itself, in article 48, sets out an amendment procedure through proposals via the Council and a Convention of national Parliament representatives.^[31] Under TEU article 5(2), the "principle of conferral" says the EU can do nothing except the things which it has express authority to do. The limits of its competence are governed by the Court of Justice, and the courts and Parliaments of member states.^[32]

As the European Union has grown from 6 to 28 member states, a clear procedure for accession to member is set out in TEU article 49. The European Union is only open to a "European" state which respects the principles of "human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities". Countries whose territory is wholly outside the European continent cannot therefore apply.^[33] Nor can any country without fully democratic political institutions which ensure standards of "pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail".^[34] Article 50 says any member state can withdraw in accord "with its own constitutional requirements", by negotiated "arrangements for its withdrawal, taking account of the framework for its future relationship with the Union". This indicates that the EU is not entitled to demand a withdrawal, and that member states should follow constitutional procedures, for example, through Parliament or a codified constitutional document.^[5] Once article 50 is triggered, there is a two-year time limit to complete negotiations, a procedure which would leave a seceding member without any bargaining power in negotiations, because the costs of having no trade treaty would be proportionally greater to the individual state than the remaining EU bloc.^[35] Article 7 allows member states to be suspended for a "clear risk of a serious breach" of values in article 2 (for example, democracy, equality, human rights) with a four-fifths vote of the Council of the European Union, and the consent of the Parliament.^[36] Within the treaties' framework, sub-groups of member states may make further rules that only apply to those member states who want them. For example, the Schengen Agreements of 1985 and 1990 allow people to move without any passport or ID checks anywhere in the EU, but did not apply to the UK or Ireland. More recently, during the Eurozone crisis, the Treaty Establishing the European Stability Mechanism 2012 and the Treaty on Stability, Co-ordination and Governance 2012 (the "Fiscal Compact") were adopted only for member states who had the Euro (i.e. not Denmark, Sweden, the UK, Poland, Czech Republic, Hungary, Croatia, Romania or Bulgaria). This required, among other things, a pledge to balance the government budget and limit structural deficits to 0.5 per cent of GDP, with fines for non-compliance. The jurisdiction for these rules remains with the Court of Justice.^[37]

Executive institutions

The European Commission is the main executive body of the European Union.^[38] Article 17(1) of the Treaty on European Union states the Commission should "promote the general interest of the Union" while Article 17(3) adds that Commissioners should be "completely independent" and not "take instructions from any Government". Under Article 17(2), "Union legislative acts may only be adopted on the basis of a Commission proposal, except where the Treaties provide otherwise". This means that the Commission has a monopoly on initiating the legislative procedure, although the Council or Parliament are the "de facto catalysts of many legislative initiatives".^[39]

The Commission's President (currently an ex-Luxembourg Prime Minister, Jean-Claude Juncker) sets the agenda for its work.^[40] Decisions are taken by a simple majority vote,^[41] often through a "written procedure" of circulating the proposal and adopting it if there are no objections. In response to Ireland's initial rejection of the Treaty of Lisbon 2007, it was agreed to keep the system of one Commissioner from each of the member states, including the President and the High Representative for Foreign and Security Policy (currently Federica Mogherini)^[42] The Commissioner President is elected by the European Parliament by an absolute majority of its members, following the parliametary elections every five years, on the basis of a proposal by the European Council. The latter must take account of the results of the European elections, in which European political parties announce the name of their candidate for this post. Hence, in 2014, Mr Juncker, candidate of the European People's Party which won the most seats in Parliament, was proposed and elected.

The remaining Commissioners are appointed by agreement between the President-elect and each national government, and are then, as a block, subject to a qualified majority vote of the Council to approve, and majority approval of the Parliament.^[43] The Parliament can only approve or reject the whole Commission, not individual Commissioners but conducts public hearings with each of them prior to its vote, which in practice often triggers changes to individual appointments or portfolios. TFEU art 248 says the President may reshuffle Commissioners, though this is uncommon, without member state approval. A proposal that the Commissioners be drawn from the elected Parliament, was not adopted in the Treaty of Lisbon, though in practice several invariable are, relinquishing their seat in order to serve.

Commissioners have various privileges, such as being exempt from member state taxes (but not EU taxes),^[45] and having immunity from prosecution for doing official acts.^[46] Commissioners have sometimes been found to have abused their offices, particularly since the Santer Commission was censured by Parliament in 1999, and it eventually resigned due to corruption allegations. This resulted in one main case, Commission v Edith Cresson^[47] where the European Court of Justice held that a Commissioner giving her dentist a job, for which he was clearly unqualified, did in fact not break any law. By contrast to the ECJ's relaxed approach, a Committee of Independent Experts found that a culture had developed where few Commissioners had 'even the slightest sense of responsibility'.^[48] This led to the creation of the European Anti-fraud Office. In 2012 it investigated the Maltese Commissioner for Health, John Dalli, who quickly resigned after allegations that he received a €60m bribe in connection with a Tobacco Products Directive.^[49]

Beyond the Commission, the European Central Bank has relative executive autonomy in its conduct of monetary policy for the purpose of managing the euro.^[50] It has a six-person board appointed by the European Council, on the Council's recommendation. The President of the Council and a Commissioner can sit in on ECB meetings, but do not have voting rights.

Legislature

The Parliament and the Council of the European Union form the European Union's bi-cameral legislature. While the Commission has a monopoly on initiating (i.e. proposing) legislation, the European Parliament and the Council of the European Union adopt it (or not), including the right to amend it during the legislative process.^[51]

According to the Treaty on European Union articles 9 and 10, the EU observes "the principle of equality of its citizens" and is founded on "representative democracy". Although they cannot normally adopt legislation without a Commission proposal being put to them, both Council and Parliament have the right to request the Commission to draft a proposal for their consideration. In the Council, "qualified majorities" or consensus of the Council are required, depending on the subject matter, to legislate.^[52]

The Parliament is elected every five years by direct universal suffrage, with every Member State using proportional representation. Seats are allocated in function of the size of each country, but with a slight bias towards smaller Member Sates ("degressive proortionality"), therefore not quite according to the "principle of equality of its citizens".^[53]

Under the original Treaty of Rome, the Parliament was given only a consultative role. The justification for this "democratic deficit" is usually thought to be that integration of the European economy and the development of political institutions required the technical coordination of experts, while popular understanding of the EU developed and nationalist sentiments declined post-war. Over time, the Parliament gradually assumed a greater role: from being an unelected assembly, to its first direct elections in 1979, to having increasingly more rights in the legislative process.^[54] Citizens' rights are therefore limited compared to the democratic polities within all European member states: under TEU article 11 citizens and associations have the rights such as publicising their views and submit an initiative that must be considered by the Commission with one million signatures. TFEU article 227 contains a further right for citizens to petition the Parliament on issues which affect them.^[55]

Parliament elections, take place every five years, and votes for Members of the European Parliament in member states must be organised by proportional representation or a single transferable vote.^[56] There are 751 MEPs and their numbers are "degressively proportional" according to member state size.^[57] currently distributed as follows: Germany 96. France 74. UK and Italy 73. Spain 54. Poland 51. Romania 31. Netherlands 26. Belgium, Czech Republic, Greece, Hungary, Portugal 21. Sweden 20. Austria 18. Bulgaria 17. Denmark, Slovakia, Finland 13. Ireland, Croatia, Lithuania 11. Latvia, Slovenia 8. Estonia, Cyprus, Luxembourg, Malta 6.

MEPs divide, as they do in national Parliaments, along political party lines: the centre-right European People's Party and the Party of European Socialists are the two largest. Parties do not receive public funds from the EU for election campaigns, as the Court of Justice held in Parti écologiste "Les Verts" v Parliament that this was entirely an issue to be regulated by the member states.^[58] The Parliament's powers also include adopting the annual budget, calling inquiries into maladministration and appointing an Ombudsman who can investigate pending any court proceedings.^[59] It can require the Commission respond to questions and by a two-thirds majority can censure (dismiss) the whole Commission (as effectively happened to the Santer Commission in 1999).^[60] In some cases, the Parliament has explicit consultation rights, which the Commission must genuinely follow.^[61]

The second main legislative body is the Council, which is composed of different ministers of the member states. The heads of government of member states also convene a "European Council" (a distinct body) that the TEU article 15 defines as providing the 'necessary impetus for its development and shall define the general political directions and priorities'. It meets each six months and its President (currently former Poland Prime Minister Donald Tusk) is meant to 'drive forward its work',^[62] but it does not itself exercise 'legislative functions'.^[63] The Council does this: in effect this is the governments of the member states, but there will be a different minister at each meeting, depending on the topic discussed (e.g. for environmental issues, the member states' environment ministers attend and vote; for foreign affairs, the foreign ministers, etc.). The minister must have the authority to represent and bind the member states in decisions.^[64] When voting takes place, where unanimity is not required, a "qualified majority" (defined as a majority of 55% of the Member States representing 65% of the population of the Union) can approve legislation. This replaces a previous system where votes were weighted according to member state size, (Germany, France, Italy, and UK: 29 votes each. Spain and Poland: 27. Romania: 14. Netherlands: 13. Belgium, Czech Republic, Greece, Hungary, Portugal: 12. Bulgaria, Austria, Sweden: 10. Denmark, Ireland, Croatia, Lithuania, Slovakia, Finland: 7. Estonia, Cyprus, Latvia, Luxembourg, Slovenia: 4. Malta: 3.) This was set by the 2014 Protocol No 36 on Transitional Provisions, art 3(3) amended by art 20 for Croatia Accession Treaty 2011. In total there were 352 votes, but for most acts there must be a qualified majority vote, if not consensus. TEU article 16(4) and TFEU article 238(3) define this to mean at least 55 per cent of the Council members (not votes) representing 65 per cent of the population of the EU: currently this means around 74 per cent, or 260 of the 352 votes. This is critical during the legislative process.^[65]

To make new legislation, TFEU article 294 defines the "ordinary legislative procedure" that applies for most EU acts.^[67] The essence is there are three readings, starting with a Commission proposal, where the Parliament must vote by a simple majority in first reading, but requires a majority of all MEPs (not just those present) in second reading to amend or reject Council's position. On its side, the Council must vote by qualified majority to approve a proposal, but by unanimity to amend the Commission's proposal.^[68] If the Parliament and Council have not adopted an identical text after two readings, a Conciliation committee meets to find a compromise, which must be submitted to a third reading in each for final approval. This means, legislation can be blocked by a majority in Parliament, a minority in the Council: the adoption of EU law thus requires a high threshold, but once adopted it is also harder to change. A similar procedure exists for budgets.^[69]

For "enhanced cooperation" among a sub-set of at least member states, authorisation must be given by the Council.^[70] Member state governments should be informed by the Commission at the outset before any proposals start the legislative procedure.^[71] The EU as a whole can only act within its power set out in the Treaties. TEU articles 4 and 5 state that powers remain with the member states unless they have been conferred, although there is a debate about the Kompetenz-Kompetenz question: who ultimately has the "competence" to define the EU's "competence". As regards the basic treaties, that lies with the Member States, by mutual agreement and ratification. As regards disputes over interpreting those treaties, some member state courts believe they have ultimate authority, other member state Parliaments believe they decide, while in other member states and within the EU, the Court of Justice is considered to have the final say.

Judiciary

The judiciary of the EU has played an important role in the development of EU law. It interprets the treaties, and has accelerated economic and political integration.^[72] Today the Court of Justice of the European Union (CJEU) is the main judicial body, within which there is a higher Court of Justice that deals with cases that contain more public importance, and a General Court that deals with issues of detail but without general importance, and then a separate Court of Auditors. Under the Treaty on European Union article 19(2) there is one judge from each member state in the Court of Justice and General Court (28 on each at present^[73]). Judges should "possess the qualifications required for appointment to the highest judicial offices" (or for the General Court, the "ability required for appointment to high judicial office").^[74] A president is elected by the judges for three years. While TEU article 19(3) says the Court of Justice is the ultimate court to interpret questions of EU law, in practice, most EU law is applied by member state courts (e.g. the English Court of Appeal, the German Bundesgerichtshof, the Belgian Cour du travail, etc.).^[75] Member state courts can refer questions to the CJEU for a preliminary ruling. The CJEU's duty is to "ensure that in the interpretation and application of the Treaties the law is observed", although realistically it has the ability to expand and develop the law according to the principles it develops consistently with democratic values. Examples of landmark, and frequently controversial judgments, include Van Gend en Loos (holding EU law to created a new legal order, and citizens could sue for treaty rights),^[76] Mangold v Helm (establishing equality as a general principle of EU law),^[77] and Kadi v Commission (confirming international law had to conform with basic principles of EU law).^[78] Internally, the European Union Civil Service Tribunal deals with EU staff issues.

The Statute of the Court and TFEU require judges are appointed only if they have no political occupation, with independence "beyond doubt".^[79] They are selected for renewable six-year terms by "common accord" of governments, with the advice of seven EU or member state judges that the Council and Parliament selects.^[80] The Rules of Procedure of the Court of Justice, article 11, says the court is usually organised into chambers of 3 or 5 judges each. A "grand chamber" of 15 more senior judges sit on questions of "difficulty or importance", or those requested by member states.^[81] The court's President and Vice-President are elected by other judges for renewable 3-year terms by secret ballot. Judges can only be dismissed if all other judges and Advocate Generals unanimously agree. Advocate Generals are appointed by the court to give reasoned submissions on cases, especially involving new points of law. Unlike judges on the Court, they write opinions as themselves, rather than collectively, and often with a command of prose and reason, and while not binding are often followed in practice.^[82] In addition, each judge has secretaries or referendaires who research and write. Unlike the UK where judges always write their own opinions, referendaires often assist drafting the judgments in the Court of Justice. The Court's Translation Directorate will translate every final judgment into the 24 official languages of the European Union. The three main kinds of judgments the Court of Justice gives following (1) preliminary rulings, requested by the courts of member states,^[83] (2) enforcement actions, brought by the Commission or Member States, against the EU, a member state, or any other party that is alleged to violate EU law,^[84] and (3) other direct actions, where the EU or member state is involved as a party to the dispute, and gives final rulings.^[85] The Rules of Procedure of the Court of Justice, modelled on the International Court of Justice, begin with submission of written cases to the court, followed by a short oral hearing. In each case a judge is designated to actively manage the hearing (called a rapporteur) and draft the judgment (probably with help from referendaires). The court always deliberates and votes before the final opinion is written and published. Cases in the General Court can be appealed to the Court of Justice on points of law. While there is no formal appeal procedure from the Court of Justice, in practice its actions are subject to scrutiny by both the supreme courts of member states and the European Court of Human Rights, even if the final balance of power is unresolved.

Conflict of laws

Since its founding, the EU has operated among an increasing plurality of national and globalising legal systems.^[86] This has meant both the European Court of Justice and the highest national courts have had to develop principles to resolve conflicts of laws between different systems. Within the EU itself, the Court of Justice's view is that if EU law conflicts with a provision of national law, then EU law has primacy. In the first major case in 1964, Costa v ENEL, a Milanese lawyer, and former shareholder of an energy company, named Mr Costa refused to pay his electricity bill to Enel, as a protest against the nationalisation of the Italian energy corporations.^[87] He claimed the Italian nationalisation law conflicted with the Treaty of Rome,^[88] and requested a reference be made to both the Italian Constitutional Court and the Court of Justice under TFEU article 267.^[89] The Italian Constitutional Court gave an opinion that because the nationalisation law was from 1962, and the treaty was in force from 1958, Costa had no claim. By contrast, the Court of Justice held that ultimately the Treaty of Rome in no way prevented energy nationalisation, and in any case under the Treaty provisions only the Commission could have brought a claim, not Mr Costa. However, in principle, Mr Costa was entitled to plead that the Treaty conflicted with national law, and the court would have a duty to consider his claim to make a reference if there would be no appeal against its decision. The Court of Justice, repeating its view in Van Gend en Loos,^[90] said member states "have limited their sovereign rights, albeit within limited fields, and have thus created a body of law which binds both their nationals and themselves"^[91] on the "basis of reciprocity".^[91] EU law would not "be overridden by domestic legal provisions, however framed... without the legal basis of the community itself being called into question". This meant any "subsequent unilateral act" of the member state inapplicable.^[92] Similarly, in Amministrazione delle Finanze v Simmenthal SpA, a company, Simmenthal SpA, claimed that a public health inspection fee under an Italian law of 1970 for importing beef from France to Italy was contrary to two Regulations from 1964 and 1968. In "accordance with the principle of the precedence of Community law", said the Court of Justice, the "directly applicable measures of the institutions" (such as the Regulations in the case) "render automatically inapplicable any conflicting provision of current national law". This was necessary to prevent a "corresponding denial" of Treaty "obligations undertaken unconditionally and irrevocably by member states", that could "imperil the very foundations of the" EU.^[93] But despite the views of the Court of Justice, the national courts of member states have not accepted the same analysis.

Generally speaking, while all member states recognise that EU law takes primacy over national law where this agreed in the Treaties, they do not accept that the Court of Justice has the final say on foundational constitutional questions affecting democracy and human rights. In the United Kingdom, the basic principle is that Parliament, as the sovereign expression of democratic legitimacy, can decide whether it wishes to expressly legislate against EU law.^[96] This, however, would only happen in the case of an express wish of the people to withdraw from the EU. It was held in R (Factortame Ltd) v Secretary of State for Transport that "whatever limitation of its sovereignty Parliament accepted when it enacted the European Communities Act 1972 was entirely voluntary" and so "it has always been clear" that UK courts have a duty "to override any rule of national law found to be in conflict with any directly enforceable rule of Community law".^[97] More recently the UK Supreme Court noted that in R (HS2 Action Alliance Ltd) v Secretary of State for Transport,^[98] although the UK constitution is uncodified, there could be "fundamental principles" of common law, and Parliament "did not either contemplate or authorise the abrogation" of those principles when it enacted the European Communities Act 1972. The view of the German Constitutional Court from the Solange I and Solange II decisions is that if the EU does not comply with its basic constitutional rights and principles (particularly democracy, the rule of law and the social state principles^[99]) then it cannot override German law.^[100] However, as the nicknames of the judgments go, "so long as" the EU works towards the democratisation of its institutions, and has a framework that protects fundamental human rights, it would not review EU legislation for compatibility with German constitutional principles.^[101] Most other member states have expressed similar reservations. This suggests the EU's legitimacy rests on the ultimate authority of member states, its factual commitment to human rights, and the democratic will of the people.

As opposed to the member states, the relation of EU law and international law is debated, particularly relating to the European Convention on Human Rights and the United Nations. All EU member states are party to both organisations through international treaties. The Treaty on European Union article 6(2) required the EU to accede to the ECHR, but would "not affect the Union's competences as defined in the Treaties". This was thought necessary before the Treaty of Lisbon 2007 to ensure that the EU gave adequate protection to human rights, overseen by the external European Court of Human Rights in Strasbourg. However, in Opinion 2/13, after a request by the Commission to review their plan to accede, the Court of Justice (in Luxembourg) produced a five main reasons why it felt that the accession agreement as it stood was incompatible with the treaties.^[103] The reasoning was regarded by a majority of commentators as thinly veiled attempt of the Court of Justice to clutch onto its own power,^[104] but it has meant the Commission is redrafting a new accession agreement. Under TEU articles 3(5), 21, 34 and 42, the EU must also respect the principles of the United Nations Charter. After the September 11 attacks on the World Trade Center in New York City, the UN Security Council adopted a resolution to freeze the assets of suspected terrorists, linked to Osama Bin Laden. This included a Saudi national, Mr Kadi. Sweden froze his assets pursuant to an EU Regulation, which gave effect to the UN Security Council resolution. In Kadi v Commission, Mr Kadi claimed there was no evidence that he was connected to terrorism, and he had not had a fair trial: a fundamental human right.^[105] The opinion of AG Maduro recalled Aharon Barak, of the Supreme Court of Israel, that it "is when the cannons roar that we especially need the laws". The Court of Justice held that even UN member cannot contravene 'the principles that form part of the very community legal order'.^[106] In effect the EU has developed a rule that within the boundaries of certain jus cogens principles, other courts may take primacy. The content of those core principles remains open to ongoing judicial dialogue among the senior courts in Europe.

Administrative law

While constitutional law concerns the European Union's governance structure, administrative law binds EU institutions and member states to follow the law. Both member states and the Commission have a general legal right or "standing" (locus standi) to bring claims against EU institutions and other member states for breach of the treaties. From the EU's foundation, the Court of Justice also held that the Treaties allowed citizens or corporations to bring claims against EU and member state institutions for violation of the Treaties and Regulations, if they were properly interpreted as creating rights and obligations. However, under Directives, citizens or corporations were said in 1986 to not be allowed to bring claims against other non-state parties.^[109] This meant courts of member states were not bound to apply an EU law where a national rule conflicted, even though the member state government could be sued, if it would impose an obligation on another citizen or corporation. These rules on "direct effect" limit the extent to which member state courts are bound to administer EU law. All actions by EU institutions can be subject to judicial review, and judged by standards of proportionality, particularly where general principles of law, or fundamental rights are engaged. The remedy for a claimant where there has been a breach of the law is often monetary damages, but courts can also require specific performance or will grant an injunction, in order to ensure the law is effective as possible.

Direct effect

Although it is generally accepted that EU law has primacy, not all EU laws give citizens standing to bring claims: that is, not all EU laws have "direct effect".^[110] In Van Gend en Loos v Nederlandse Administratie der Belastingen^[111] it was held that the provisions of the Treaties (and EU Regulations) are directly effective, if they are (1) clear and unambiguous (2) unconditional, and (3) did not require EU or national authorities to take further action to implement them. Van Gend en Loos, a postal company, claimed that what is now TFEU article 30 prevented the Dutch Customs Authorities charging tariffs,^[112] when it imported urea-formaldehyde plastics from Germany to the Netherlands. After a Dutch court made a reference, the Court of Justice held that even though the Treaties did not "expressly" confer a right on citizens or companies to bring claims, they could do so. Historically, international treaties had only allowed states to have legal claims for their enforcement, but the Court of Justice proclaimed "the Community constitutes a new legal order of international law". Because article 30 clearly, unconditionally and immediately stated that no quantitative restrictions could be placed on trade, without a good justification, Van Gend en Loos could recover the money it paid for the tariff. EU Regulations are the same as Treaty provisions in this sense, because as TFEU article 288 states, they are 'directly applicable in all Member States'. Member states come under a duty not to replicate Regulations in their own law, in order to prevent confusion. For instance, in Commission v Italy the Court of Justice held that Italy had breached a duty under the Treaties, both by failing to operate a scheme to pay farmers a premium to slaughter cows (to reduce dairy overproduction), and by reproducing the rules in a decree with various additions. "Regulations", held the Court of Justice, "come into force solely by virtue of their publication" and implementation could have the effect of "jeopardizing their simultaneous and uniform application in the whole of the Union".^[113] On the other hand, some Regulations may themselves expressly require implementing measures, in which case those specific rules should be followed.^[114]

While the Treaties and Regulations will have direct effect (if clear, unconditional and immediate), Directives do not generally give citizens (as opposed to the member state) standing to sue other citizens. In theory, this is because TFEU article 288 says Directives are addressed to the member states and usually "leave to the national authorities the choice of form and methods" to implement. In part this reflects that directives often create minimum standards,^[116] leaving member states to apply higher standards. For example, the Working Time Directive requires that every worker has at least 4 weeks paid holidays each year, but most member states require more than 28 days in national law.^[117] However, on the current position adopted by the Court of Justice, citizens have standing to make claims based on national laws that implement Directives, but not from Directives themselves.^[118] Directives do not have so called "horizontal" direct effect (i.e. between non-state parties).^[119] This view was instantly controversial, and in the early 1990s three Advocate Generals persuasively argued that Directives should create rights and duties for all citizens.^[120] The Court of Justice refused, but there are five large exceptions.

First, if a Directive's deadline for implementation is not met, the member state cannot enforce conflicting laws, and a citizen may rely on the Directive in such an action (so called "vertical" direct effect). So, in Pubblico Ministero v Ratti because the Italian government had failed to implement a Directive 73/173/EEC on packaging and labelling solvents by the deadline, it was estopped from enforcing a conflicting national law from 1963 against Mr Ratti's solvent and varnish business.^[121] A member state could "not rely, as against individuals, on its own failure to perform the obligations which the Directive entails".^[122] Second, a citizen or company can also invoke a Directive as a defence in a dispute with another citizen or company (not just a public authority) which is attempting to enforce a national law that conflicts with a Directive. So, in CIA Security v Signalson and Securitel the Court of Justice held that a business called CIA Security could defend itself from allegations by competitors that it had not complied with a Belgian decree from 1991 about alarm systems, on the basis that it had not been notified to the Commission as a Directive required.^[123] Third, if a Directive gives expression to a "general principle" of EU law, it can be invoked between private non-state parties before its deadline for implementation. This follows from Kücükdeveci v Swedex GmbH & Co KG where the German Civil Code §622 stated that the years people worked under the age of 25 would not count towards the increasing statutory notice before dismissal. Ms Kücükdeveci worked for 10 years, from age 18 to 28, for Swedex GmbH & Co KG before her dismissal. She claimed that the law not counting her years under age 25 was unlawful age discrimination under the Employment Equality Framework Directive. The Court of Justice held that the Directive could be relied on by her because equality was also a general principle of EU law.^[124] Fourth, if the defendant is an emanation of the state, even if not central government, it can still be bound by Directives. In Foster v British Gas plc the Court of Justice held that Mrs Foster was entitled to bring a sex discrimination claim against her employer, British Gas plc, which made women retire at age 60 and men at 65, if (1) pursuant to a state measure, (2) it provided a public service, and (3) had special powers.^[125] This could also be true if the enterprise is privatised, as it was held with a water company that was responsible for basic water provision.^[126]

Fifth, national courts have a duty to interpret domestic law "as far as possible in the light of the wording and purpose of the directive".^[127] Textbooks (though not the Court itself) often called this "indirect effect". In Marleasing SA v La Comercial SA the Court of Justice held that a Spanish Court had to interpret its general Civil Code provisions, on contracts lacking cause or defrauding creditors, to conform with the First Company Law Directive article 11,^[128] that required incorporations would only be nullified for a fixed list of reasons.^[129] The Court of Justice quickly acknowledged that the duty of interpretation cannot contradict plain words in a national statute. But, if a member state has failed to implement a Directive, a citizen may not be able to bring claims against other non-state parties. It must instead sue the member state itself for failure to implement the law.^[130] In sum, the Court of Justice's position on direct effect means that governments and taxpayers must bear the cost of private parties, mostly corporations, for refusing to follow the law.

References and remedies

Litigation often begins and is resolved by member state courts. They interpret and apply EU law, and award remedies of compensation and restitution (remedying loss or stripping gains), injunctions and specific performance (making somebody stop or do something). If, however, the position in EU law appears unclear, member state courts can refer questions to the Court of Justice for a "preliminary ruling" on EU law's proper interpretation. TFEU article 267 says court "may" refer "if it considers" this "is necessary to enable it to give judgment", and "shall bring the matter before the Court" if there is no possibility for further appeal and remedy. Any "court or tribunal of a Member State" can refer. This is widely interpreted. It obviously includes bodies like the UK Supreme Court, a High Court, or an Employment Tribunal. In Vaassen v Beambtenfonds Mijnbedrijf^[131] the Court of Justice also held that a mining worker pension arbitration tribunal could make a reference. By contrast, and oddly, in Miles v European Schools^[132] the Court of Justice held that a Complaints Board of European Schools, set up under the international agreement, the European Schools Convention, could not refer because though it was a court, it was not "of a member state" (even though all member states had signed that Convention).

On the other side, courts and tribunals are theoretically under a duty to refer questions. In the UK, for example, Lord Denning MR considered it appropriate to refer if the outcome of a case depended on a correct answer,^[134] and the Civil Procedure Rules entitle the High Court to refer at any stage of proceedings.^[135] The view of the Court of Justice in the leading case, CILFIT v Ministry of Health is that a national court has no duty to refer if the law is acte clair (a clear rule), or "so obvious as to leave no scope for any reasonable doubt as to the manner in which the question raised is to be resolved".^[136] In Kenny Roland Lyckeskog the Court of Justice held that the duty to refer existed for the Swedish Court of Appeal, the hovrätt, since Sweden's Supreme Court (Högsta domstol) had to give permission for appeals to continue.^[137] The practical difficulty is that judges differ on their views of whether or not the law is clear. In a significant case, Three Rivers DC v Governor of the Bank of England^[138] the UK House of Lords felt confident that it was clear under the First Banking Directive that depositors did not have direct rights to sue the Bank of England for alleged failure to carry out adequate prudential regulation. Their Lordships highlighted that while some uncertainty might exist, the costs of delay in making a reference outweighed the benefits from total certainty. By contrast, in ParkingEye Ltd v Beavis, a majority of the Supreme Court apparently felt able to declare that the law under Unfair Terms in Consumer Contracts Directive was acte clair, and decline to make a reference, even though a senior Law Lord delivered a powerfully reasoned dissent.^[139] However, in addition to a reluctance to make references, a general scepticism has grown among senior member state judiciaries of the mode of reasoning used by the Court of Justice. The UK Supreme Court in R (HS2 Action Alliance Ltd) v Secretary of State for Transport devoted large parts of its judgment to criticism, in its view, an unpredictable 'teleological' mode of reasoning which, could decrease confidence in maintaining a dialogue within a plural and transnational judicial system.^[98] It added that it might not interpret the European Communities Act 1972 to abridge basic principles and understanding of constitutional functioning – in effect implying that it might decline to follow unreasonable Court of Justice judgments on important issues. Similarly, the German Constitutional Court in the Outright Monetary Transactions case referred a question for preliminary ruling on whether the European Central Bank's plan to buy Greek and other government bonds on secondary markets, despite the Treaty prohibition on buying them directly, was unlawful.^[140] In a highly unusual move, the two most senior judges dissented that the ECB's plan could be lawful, while the majority closely guided the Court of Justice on the appropriate mode of reasoning.

If references are made, the Court of Justice will give a preliminary ruling, in order for the member state court to conclude the case and award a remedy. The right to an effective remedy is a general principle of EU law, enshrined in the Charter of Fundamental Rights article 47. Most of the time Regulations and Directives will set out the relevant remedies to be awarded, or they will be construed from the legislation according to the practices of the member state.^[141] It could also be that the government is responsible for failure to properly implement a Directive or Regulation, and must therefore pay damages. In Francovich v Italy, the Italian government had failed to set up an insurance fund for employees to claim unpaid wages if their employers had gone insolvent, as the Insolvency Protection Directive required.^[142] Francovich, the former employee of a bankrupt Venetian firm, was therefore allowed to claim 6 million Lira from the Italian government in damages for his loss. The Court of Justice held that if a Directive would confer identifiable rights on individuals, and there is a causal link between a member state's violation of EU and a claimant's loss, damages must be paid. The fact that the incompatible law is an Act of Parliament is no defence.^[143] So, in Factortame it was irrelevant that Parliament had legislated to require a quota of British ownership of fishing vessels in primary legislation. Similarly, in was Brasserie du Pêcheur v Germany the German government was liable to a French beer company for damages from prohibiting its imports, which did not comply with the fabled beer purity law. It was not decisive that the German Parliament had not acted willfully or negligently.^[144] It was merely necessary that there was (1) a rule intended to confer rights, (2) that a breach was sufficiently serious, and (3) there was a causal link between the breach and damage. The Court of Justice advised a breach is to be regarded as 'sufficiently serious' by weighing a range of factors, such as whether it was voluntary, or persistent.^[145] In Köbler v Republik Österreich the Court of Justice added that member state liability could also flow from judges failing to adequately implement the law.^[146] On the other hand, it is also clear that EU institutions, such as the Commission, may be liable according to the same principles for failure to follow the law.^[147] The only institution whose decisions appear incapable of generating a damages claim is the Court of Justice itself.

Judicial review

As well as preliminary rulings on the proper interpretation of EU law, an essential function of the Court of Justice is judicial review of the acts of the EU itself. Under TFEU article 263(1) the Court can review the legality of any EU legislative of other "act" against the Treaties or general principles, such as those in the Charter of Fundamental Rights of the European Union. This includes legislation, and most other acts that have legal consequences for people. For example, in Société anonyme Cimenteries CBR Cementsbedrijven NV v Commission^[148] the Commission made a decision to withdraw an assurance to a Dutch cement company that it would be immune from competition law fines, for vertical agreements. The cement company challenged the decision, and the Commission argued this was not really an "act", and so could not be challenged. The Court of Justice held a challenge could be made, and it was an act, because it "deprived [the cement company] of the advantages of a legal situation... and exposed them to a grave financial risk".^[149] Similarly in Deutsche Post v Commission the Commission demanded information on state aid given by Germany to Deutsche Post within 20 days. When both challenged this, the Commission argued that the demand for information could not be an act as there was no sanction. The Court of Justice disagreed, and held judicial review could proceed because the request produced "binding legal effects" since the information supplied or not could be relied upon as evidence in a final decision.^[150] By contrast, in IBM v Commission^[151] the Court of Justice held that a letter from the Commission to IBM that it would sue IBM for abusing a dominant position contrary to competition was not a reviewable act, but just a preliminary statement of intent to act. In any case, if a reviewable act of an EU institution is not found compatible with the law, under article 264, it will be declared void.

However, only a limited number of people can bring claims for judicial review. Under TFEU article 263(2), a member state, the Parliament, Council or Commission have automatic rights to seek judicial review. But under article 263(4) a "natural or legal person" must have a "direct and individual concern" about the regulatory act. "Direct" concern means that someone is affected by an EU act without "the interposition of an autonomous will between the decision and its effect", for instance by a national government body.^[153] In Piraiki-Patraiki v Commission, a group of Greek textile businesses, who exported cotton products to France, challenged a Commission decision allow France to limit exports. The Commission argued that the exporters were not directly concerned, because France might decide not to limit exports, but the Court of Justice held this possibility was "entirely theoretical".^[154] A challenge could be brought. By contrast in Municipality of Differdange v Commission^[155] a municipality wanted to challenge the Commissions decision to aid steel firms which reduced production: this would probably reduce its tax collections. But the Court of Justice held that because Luxembourg had discretion, and its decision to reduce capacity was not inevitable, the municipality had no "direct" concern (its complaint was with the Luxembourg government instead). "Individual" concern requires that someone is affected specifically, not as a member of a group. In Plaumann & Co v Commission^[152] the Court of Justice held that a clementine importer was not individually concerned when the Commission refused permission to Germany to stop import custom duties. This kept it more expensive for Mr Plaumann to import clementines, but it was equally expensive for everyone else. This decision heavily restricted the number of people who could claim for judicial review. In Unión de Pequeños Agricultores, Advocate General Jacobs propose a broader test of allowing anyone to claim if there was a "substantial adverse effect" on the claimant's interests.^[156] Here, a group of Spanish olive oil producers challenged Council Regulation No 1638/98, which withdrew subsidies. Because Regulations are not implemented in national law, but have direct effect, they argued the requirement for individual concern would deny them effective judicial protection. The Court of Justice held that direct actions were still not allowed: if this was unsatisfactory the member states would have to change the treaties.^[157] Individual concern is not needed, however under article 263(4), if an act is not legislation, but just a "regulatory act". In Inuit Tapiriit Kanatami v Parliament and Council the Court of Justice affirmed that a Regulation does not count as a "regulatory act" within the Treaty's meaning: it is only meant for acts of lesser importance. Here, a Canadian group representing the Inuit people wished to challenge a Regulation on seal products, but were not allowed. They would have to show both direct and individual concern as normal.^[158] Thus, without a treaty change, EU administrative law remains one of the most restrictive in Europe.^[159]

Human rights and principles

Although access to judicial review is restricted for ordinary questions of law, the Court of Justice has gradually developed a more open approach to standing for human rights. Human rights have also become essential in the proper interpretation and construction of all EU law. If there are two or more plausible interpretations of a rule, the one which is most consistent with human rights should be chosen. The Treaty of Lisbon 2007 made rights underpin the Court of Justice's competence, and required the EU's accession to the European Convention on Human Rights, overseen by the external Strasbourg Court.^[160] Initially, reflecting its primitive economic nature, the treaties made no reference to rights. However, in 1969 particularly after concern from Germany, the Court of Justice declared in Stauder v City of Ulm that 'fundamental human rights' were 'enshrined in the general principles of Community law'. This meant that Mr Stauder, who received subsidised butter under an EU welfare scheme only by showing a coupon with his name and address, was entitled to claim that this violated his dignity: he was entitled not to have to go through the humiliation of proving his identity to get food. While those 'general principles' were not written down in EU law, and simply declared to exist by the court, it accords with a majority philosophical view that 'black letter' rules, or positive law, necessarily exist for reasons that the society which made them wants: these give rise to principles, which inform the law's purpose.^[161] Moreover, the Court of Justice has clarified that its recognition of rights was 'inspired' by member states' own 'constitutional traditions',^[162] and international treaties.^[163] These include rights found in member state constitutions, bills of rights, foundational Acts of Parliament, landmark court cases, the European Convention on Human Rights, the European Social Charter 1961, the Universal Declaration of Human Rights 1948, or the International Labour Organization's Conventions. The EU itself must accede to the ECHR, although in '’Opinion 2/13'’ the Court of Justice delayed, because of perceived difficulties in retaining an appropriate balance of competences.^[164]

Many of the most important rights were codified in the Charter of Fundamental Rights of the European Union in 2000. While the UK has opted out of direct application of the Charter, this has little practical relevance since the Charter merely reflected pre-existing principles and the Court of Justice uses the Charter to interpret all EU law. For example, in Test-Achats ASBL v Conseil des ministres, the Court of Justice held that Equal Treatment in Goods and Services Directive 2004 article 5(2), which purported to allow a derogation from equal treatment, so men and women could be charged different car insurance rates, was unlawful.^[166] It contravened the principle of equality in CFREU 2000 articles 21 and 23, and had to be regarded as ineffective after a transition period. By contrast, in Deutsches Weintor eG v Land Rheinland-Pfalz wine producers claimed that a direction to stop marketing their brands as 'easily digestible' (bekömmlich) by the state food regulator (acting under EU law^[167]) contravened their right to occupational and business freedom under CFREU 2000 articles 15 and 16.^[168] The Court of Justice held that in fact, the right to health for consumers in article 35 has also to be taken into account, and was to be given greater weight, particularly given the health effects of alcohol. Some rights in the Charter, however, are not expressed with sufficient clarity to be regarded as directly binding. In AMS v Union locale des syndicats CGT a French trade union claimed that the French Labour Code should not exclude casual workers from counting toward the right to set up a work council that an employing entity must inform and consult.^[169] They said this contravened the Information and Consultation of Employees Directive and also CFREU article 27. The Court of Justice agreed that the French Labour Code was incompatible with the Directive, but held that article 27 was expressed too generally to create direct rights. On this view, legislation was necessary to make abstract human rights principles concrete, and legally enforceable.

Beyond human rights, the Court of Justice has recognised at least five further 'general principles' of EU law. First, legal certainty requires that judgments should be prospective, open and clear. Second, when reviewing any discretionary act of a government or powerful body, decision-making must be "proportionate" toward a legitimate aim. For example, if a government wishes to change an employment law in a neutral way, yet this could have disproportionate negative impact on women rather than men, the government must show a legitimate aim, and that its measures are (1) appropriate or suitable for achieving it, (2) do no more than necessary, and (3) reasonable in balancing the conflicting rights of different parties.^[170] Third, equality is regarded as a fundamental principle: this matters particularly for labour rights, political rights, and access to public or private services.^[171] Fourth, the right to a fair hearing was declared a general principle, though admittedly this is amply reflected in most human rights instruments. Fifth, there is a general principle of professional privilege between lawyers and clients. The categories of general principle are not closed, and may develop according to the social expectations of people living in Europe.

Free movement and trade

While the "social market economy" concept was only put into EU law in 2007,^[173] free movement and trade were central to European development since the Treaty of Rome 1957.^[174] The standard theory of comparative advantage says two countries can both benefit from trade even if one of them has a less productive economy in all respects.^[175] Like the North American Free Trade Association, or the World Trade Organisation, EU law breaks down barriers to trade, by creating rights to free movement of goods, services, labour and capital. This is meant to reduce consumer prices and raise living standards. Early theorists argued a free trade area would give way to a customs union, which led to a common market, then monetary union, then union of monetary and fiscal policy, and eventually a full union characteristic of a federal state.^[176] But in Europe those stages were mixed, and it is unclear whether the "endgame" should be the same as a state. Free trade, without rights to ensure fair trade, can benefit some groups within countries (particularly big business) more than others, and disadvantages people who lack bargaining power in an expanding market, particularly workers, consumers, small business, developing industries, and communities.^[177] For this reason, the European has become "not merely an economic union", but creates binding social rights for people to "ensure social progress and seek the constant improvement of the living and working conditions of their peoples".^[178] The Treaty on the Functioning of the European Union articles 28 to 37 establish the principle of free movement of goods in the EU, while articles 45 to 66 require free movement of persons, services and capital. These "four freedoms" were thought to be inhibited by physical barriers (e.g. customs), technical barriers (e.g. differing laws on safety, consumer or environmental standards) and fiscal barriers (e.g. different Value Added Tax rates).^[179] Free movement and trade is not meant to be a licence for unrestricted commercial profit.^[180] Increasingly, the Treaties and the Court of Justice aim to ensure free trade serves higher values such as public health, consumer protection, labour rights, fair competition, and environmental improvement.

Goods

Free movement of goods within the European Union is achieved by a customs union, and the principle of non-discrimination.^[181] The EU manages imports from non-member states, duties between member states are prohibited, and imports circulate freely.^[182] In addition under the Treaty on the Functioning of the European Union article 34, 'Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States'. In Procureur du Roi v Dassonville^[183] the Court of Justice held that this rule meant all "trading rules" that are "enacted by Member States" which could hinder trade "directly or indirectly, actually or potentially" would be caught by article 34.^[184] This meant that a Belgian law requiring Scotch whisky imports to have a certificate of origin was unlikely to be lawful. It discriminated against parallel importers like Mr Dassonville, who could not get certificates from authorities in France, where they bought the Scotch. This "wide test",^[185] to determine what could potentially be an unlawful restriction on trade, applies equally to actions by quasi-government bodies, such as the former "Buy Irish" company that had government appointees.^[186] It also means states can be responsible for private actors. For instance, in Commission v France French farmer vigilantes were continually sabotaging shipments of Spanish strawberries, and even Belgian tomato imports. France was liable for these hindrances to trade because the authorities 'manifestly and persistently abstained' from preventing the sabotage.^[187] Generally speaking, if a member state has laws or practices that directly discriminate against imports (or exports under TFEU article 35) then it must be justified under article 36. The justifications include public morality, policy or security, "protection of health and life of humans, animals or plants", "national treasures" of "artistic, historic or archaeological value" and "industrial and commercial property." In addition, although not clearly listed, environmental protection can justify restrictions on trade as an overriding requirement derived from TFEU article 11.^[188] More generally, it has been increasingly acknowledged that fundamental human rights should take priority over all trade rules. So, in Schmidberger v Austria^[189] the Court of Justice held that Austria did not infringe article 34 by failing to ban a protest that blocked heavy traffic passing over the A13, Brenner Autobahn, en route to Italy. Although many companies, including Mr Schmidberger's German undertaking, were prevented from trading, the Court of Justice reasoned that freedom of association is one of the 'fundamental pillars of a democratic society', against which the free movement of goods had to be balanced,^[190] and was probably subordinate. If a member state does appeal to the article 36 justification, the measures it takes have to be applied proportionately. This means the rule must be pursue a legitimate aim and (1) be suitable to achieve the aim, (2) be necessary, so that a less restrictive measure could not achieve the same result, and (3) be reasonable in balancing the interests of free trade with interests in article 36.^[191]

Often rules apply to all goods neutrally, but may have a greater practical effect on imports than domestic products. For such "indirect" discriminatory (or "indistinctly applicable") measures the Court of Justice has developed more justifications: either those in article 36, or additional "mandatory" or "overriding" requirements such as consumer protection, improving labour standards,^[193] protecting the environment,^[194] press diversity,^[195] fairness in commerce,^[196] and more: the categories are not closed.^[197] In the most famous case Rewe-Zentral AG v Bundesmonopol für Branntwein,^[198] the Court of Justice found that a German law requiring all spirits and liqueurs (not just imported ones) to have a minimum alcohol content of 25 per cent was contrary to TFEU article 34, because it had a greater negative effect on imports. German liqueurs were over 25 per cent alcohol, but Cassis de Dijon, which Rewe-Zentrale AG wished to import from France, only had 15 to 20 per cent alcohol. The Court of Justice rejected the German government's arguments that the measure proportionately protected public health under TFEU article 36,^[199] because stronger beverages were available and adequate labelling would be enough for consumers to understand what they bought.^[200] This rule primarily applies to requirements about a product's content or packaging. In Walter Rau Lebensmittelwerke v De Smedt PVBA^[201] the Court of Justice found that a Belgian law requiring all margarine to be in cube shaped packages infringed article 34, and was not justified by the pursuit of consumer protection. The argument that Belgians would believe it was butter if it was not cube shaped was disproportionate: it would "considerably exceed the requirements of the object in view" and labelling would protect consumers "just as effectively".^[202] In a 2003 case, Commission v Italy^[203] Italian law required that cocoa products that included other vegetable fats could not be labelled as "chocolate". It had to be "chocolate substitute". All Italian chocolate was made from cocoa butter alone, but British, Danish and Irish manufacturers used other vegetable fats. They claimed the law infringed article 34. The Court of Justice held that a low content of vegetable fat did not justify a "chocolate substitute" label. This was derogatory in the consumers' eyes. A 'neutral and objective statement' was enough to protect consumers. If member states place considerable obstacles on the use of a product, this can also infringe article 34. So, in a 2009 case, Commission v Italy, the Court of Justice held that an Italian law prohibiting motorcycles or mopeds pulling trailers infringed article 34.^[204] Again, the law applied neutrally to everyone, but disproportionately affected importers, because Italian companies did not make trailers. This was not a product requirement, but the Court reasoned that the prohibition would deter people from buying it: it would have "a considerable influence on the behaviour of consumers" that "affects the access of that product to the market".^[205] It would require justification under article 36, or as a mandatory requirement.

In contrast to product requirements or other laws that hinder market access, the Court of Justice developed a presumption that "selling arrangements" would be presumed to not fall into TFEU article 34, if they applied equally to all sellers, and affected them in the same manner in fact. In Keck and Mithouard^[206] two importers claimed that their prosecution under a French competition law, which prevented them selling Picon beer under wholesale price, was unlawful. The aim of the law was to prevent cut throat competition, not to hinder trade.^[207] The Court of Justice held, as "in law and in fact" it was an equally applicable "selling arrangement" (not something that alters a product's content^[208]) it was outside the scope of article 34, and so did not need to be justified. Selling arrangements can be held to have an unequal effect "in fact" particularly where traders from another member state are seeking to break into the market, but there are restrictions on advertising and marketing. In Konsumentombudsmannen v De Agostini^[209] the Court of Justice reviewed Swedish bans on advertising to children under age 12, and misleading commercials for skin care products. While the bans have remained (justifiable under article 36 or as a mandatory requirement) the Court emphasised that complete marketing bans could be disproportionate if advertising were "the only effective form of promotion enabling [a trader] to penetrate" the market. In Konsumentombudsmannen v Gourmet AB^[210] the Court suggested that a total ban for advertising alcohol on the radio, TV and in magazines could fall within article 34 where advertising was the only way for sellers to overcome consumers' "traditional social practices and to local habits and customs" to buy their products, but again the national courts would decide whether it was justified under article 36 to protect public health. Under the Unfair Commercial Practices Directive, the EU harmonised restrictions on restrictions on marketing and advertising, to forbid conduct that distorts average consumer behaviour, is misleading or aggressive, and sets out a list of examples that count as unfair.^[211] Increasingly, states have to give mutual recognition to each other's standards of regulation, while the EU has attempted to harmonise minimum ideals of best practice. The attempt to raise standards is hoped to avoid a regulatory "race to the bottom", while allowing consumers access to goods from around the continent.

Workers

Since its foundation, the Treaties sought to enable people to pursue their life goals in any country through free movement.^[212] Reflecting the economic nature of the project, the European Community originally focused upon free movement of workers: as a "factor of production".^[213] However, from the 1970s, this focus shifted towards developing a more "social" Europe.^[7] Free movement was increasingly based on "citizenship", so that people had rights to empower them to become economically and socially active, rather than economic activity being a precondition for rights. This means the basic "worker" rights in TFEU article 45 function as a specific expression of the general rights of citizens in TFEU articles 18 to 21. According to the Court of Justice, a "worker" is anybody who is economically active, which includes everyone in an employment relationship, "under the direction of another person" for "remuneration".^[214] A job, however, need not be paid in money for someone to be protected as a worker. For example, in Steymann v Staatssecretaris van Justitie, a German man claimed the right to residence in the Netherlands, while he volunteered plumbing and household duties in the Bhagwan community, which provided for everyone's material needs irrespective of their contributions.^[215] The Court of Justice held that Mr Steymann was entitled to stay, so long as there was at least an "indirect quid pro quo" for the work he did. Having "worker" status means protection against all forms of discrimination by governments, and employers, in access to employment, tax, and social security rights. By contrast a citizen, who is "any person having the nationality of a Member State" (TFEU article 20(1)), has rights to seek work, vote in local and European elections, but more restricted rights to claim social security.^[216] In practice, free movement has become politically contentious as nationalist political parties have manipulated fears about immigrants taking away people's jobs and benefits (paradoxically at the same time). Nevertheless, practically "all available research finds little impact" of "labour mobility on wages and employment of local workers".^[217]

The Free Movement of Workers Regulation articles 1 to 7 set out the main provisions on equal treatment of workers. First, articles 1 to 4 generally require that workers can take up employment, conclude contracts, and not suffer discrimination compared to nationals of the member state.^[219] In a famous case, the Belgian Football Association v Bosman, a Belgian footballer named Jean-Marc Bosman claimed that he should be able to transfer from R.F.C. de Liège to USL Dunkerque when his contract finished, regardless of whether Dunkerque could afford to pay Liège the habitual transfer fees.^[220] The Court of Justice held "the transfer rules constitute[d] an obstacle to free movement" and were unlawful unless they could be justified in the public interest, but this was unlikely. In Groener v Minister for Education^[221] the Court of Justice accepted that a requirement to speak Gaelic to teach in a Dublin design college could be justified as part of the public policy of promoting the Irish language, but only if the measure was not disproportionate. By contrast in Angonese v Cassa di Risparmio di Bolzano SpA^[222] a bank in Bolzano, Italy, was not allowed to require Mr Angonese to have a bilingual certificate that could only be obtained in Bolzano. The Court of Justice, giving "horizontal" direct effect to TFEU article 45, reasoned that people from other countries would have little chance of acquiring the certificate, and because it was "impossible to submit proof of the required linguistic knowledge by any other means", the measure was disproportionate. Second, article 7(2) requires equal treatment in respect of tax. In Finanzamt Köln Altstadt v Schumacker^[223] the Court of Justice held that it contravened TFEU art 45 to deny tax benefits (e.g. for married couples, and social insurance expense deductions) to a man who worked in Germany, but was resident in Belgium when other German residents got the benefits. By contrast in Weigel v Finanzlandesdirektion für Vorarlberg the Court of Justice rejected Mr Weigel's claim that a re-registration charge upon bringing his car to Austria violated his right to free movement. Although the tax was "likely to have a negative bearing on the decision of migrant workers to exercise their right to freedom of movement", because the charge applied equally to Austrians, in absence of EU legislation on the matter it had to be regarded as justified.^[224] Third, people must receive equal treatment regarding "social advantages", although the Court has approved residential qualifying periods. In Hendrix v Employee Insurance Institute the Court of Justice held that a Dutch national was not entitled to continue receiving incapacity benefits when he moved to Belgium, because the benefit was "closely linked to the socio-economic situation" of the Netherlands.^[225] Conversely, in Geven v Land Nordrhein-Westfalen the Court of Justice held that a Dutch woman living in the Netherlands, but working between 3 and 14 hours a week in Germany, did not have a right to receive German child benefits,^[226] even though the wife of a man who worked full-time in Germany but was resident in Austria could.^[227] The general justifications for limiting free movement in TFEU article 45(3) are "public policy, public security or public health",^[228] and there is also a general exception in article 45(4) for "employment in the public service".

Citizens

Beyond the right of free movement to work, the EU has increasingly sought to guarantee rights of citizens, and rights simply be being a human being.^[229] But although the Court of Justice stated that 'Citizenship is destined to be the fundamental status of nationals of the Member States',^[230] political debate remains on who should have access to public services and welfare systems funded by taxation.^[231] In 2008, just 8 million people from 500 million EU citizens (1.7 per cent) had in fact exercised rights of free movement, the vast majority workers.^[232] According to TFEU article 20, citizenship of the EU derives from nationality of a member state. Article 21 confers general rights to free movement in the EU and to reside freely within limits set by legislation. This applies for citizens and their immediate family members.^[233] This triggers four main groups of rights: (1) to enter, depart and return, without undue restrictions, (2) to reside, without becoming an unreasonable burden on social assistance, (3) to vote in local and European elections, and (4) the right to equal treatment with nationals of the host state, but for social assistance only after 3 months of residence.

First, the Citizens Rights Directive 2004 article 4 says every citizen has the right to depart a member state with a valid passport. This has historical importance for central and eastern Europe, when the Soviet Union and the Berlin Wall denied its citizens the freedom to leave.^[234] Article 5 gives every citizen a right of entry, subject to national border controls. Schengen Area countries (not the UK and Ireland) abolished the need to show documents, and police searches at borders, altogether. These reflect the general principle of free movement in TFEU article 21. Second, article 6 allows every citizen to stay three months in another member state, whether economically active or not. Article 7 allows stays over three months with evidence of "sufficient resources... not to become a burden on the social assistance system". Articles 16 and 17 give a right to permanent residence after 5 years without conditions. Third, TEU article 10(3) requires the right to vote in the local constituencies for the European Parliament wherever a citizen lives.

Fourth, and more debated, article 24 requires that the longer an EU citizen stays in a host state, the more rights they have to access public and welfare services, on the basis of equal treatment. This reflects general principles of equal treatment and citizenship in TFEU articles 18 and 20. In a simple case, in Sala v Freistaat Bayern the Court of Justice held that a Spanish lady who had lived in Germany for 25 years and had a baby was entitled to child support, without the need for a residence permit, because Germans did not need one.^[235] In Trojani v Centre public d'aide sociale de Bruxelles, a French man who lived in Belgium for two years was entitled to the "minimex" allowance from the state for a minimum living wage.^[236] In Grzelczyk v Centre Public d'Aide Sociale d'Ottignes-Louvain-la-Neuve^[237] a French student, who had lived in Belgium for three years, was entitled to receive the "minimex" income support for his fourth year of study. Similarly, in R (Bidar) v London Borough of Ealing the Court of Justice held that it was lawful to require a French UCL economics student lived in the UK for three years before receiving a student loan, but not that he had to have additional "settled status".^[238] Similarly, in Commission v Austria, Austria was not entitled to restrict its university places to Austrian students to avoid "structural, staffing and financial problems" if (mainly German) foreign students applied, unless it proved there was an actual problem.^[239] However, in Dano v Jobcenter Leipzig, the Court of Justice held that the German government was entitled to deny child support to a Romanian mother who had lived in Germany for 3 years, but had never worked. Because she lived in Germany for over 3 months, but under 5 years, she had to show evidence of "sufficient resources", since the Court reasoned the right to equal treatment in article 24 within that time depended on lawful residence under article 7.^[240]

Establishment and services

As well as creating rights for "workers" who generally lack bargaining power in the market,^[241] the Treaty on the Functioning of the European Union also protects the "freedom of establishment" in article 49, and "freedom to provide services" in article 56.^[242] In Gebhard v Consiglio dell’Ordine degli Avvocati e Procuratori di Milano^[243] the Court of Justice held that to be "established" means to participate in economic life "on a stable and continuous basis", while providing "services" meant pursuing activity more "on a temporary basis". This meant that a lawyer from Stuttgart, who had set up chambers in Milan and was censured by the Milan Bar Council for not having registered, should claim for breach of establishment freedom, rather than service freedom. However, the requirements to be registered in Milan before being able to practice would be allowed if they were non-discriminatory, "justified by imperative requirements in the general interest" and proportionately applied.^[244] All people or entities that engage in economic activity, particularly the self-employed, or "undertakings" such as companies or firms, have a right to set up an enterprise without unjustified restrictions.^[245] The Court of Justice has held that both a member state government and a private party can hinder freedom of establishment,^[246] so article 49 has both "vertical" and "horizontal" direct effect. In Reyners v Belgium^[247] the Court of Justice held that a refusal to admit a lawyer to the Belgian bar because he lacked Belgian nationality was unjustified. TFEU article 49 says states are exempt from infringing others' freedom of establishment when they exercise "official authority", but this did an advocate's work (as opposed to a court's) was not official.^[248] By contrast in Commission v Italy the Court of Justice held that a requirement for lawyers in Italy to comply with maximum tariffs unless there was an agreement with a client was not a restriction.^[249] The Grand Chamber of the Court of Justice held the Commission had not proven that this had any object or effect of limiting practitioners from entering the market.^[250] Therefore, there was no prima facie infringement freedom of establishment that needed to be justified.

In regard to companies, the Court of Justice held in R (Daily Mail and General Trust plc) v HM Treasury that member states could restrict a company moving its seat of business, without infringing TFEU article 49.^[253] This meant the Daily Mail newspaper's parent company could not evade tax by shifting its residence to the Netherlands without first settling its tax bills in the UK. The UK did not need to justify its action, as rules on company seats were not yet harmonised. By contrast, in Centros Ltd v Erhversus-og Selkabssyrelsen the Court of Justice found that a UK limited company operating in Denmark could not be required to comply with Denmark's minimum share capital rules. UK law only required £1 of capital to start a company, while Denmark's legislature took the view companies should only be started up if they had 200,000 Danish krone (around €27,000) to protect creditors if the company failed and went insolvent. The Court of Justice held that Denmark's minimum capital law infringed Centros Ltd's freedom of establishment and could not be justified, because a company in the UK could admittedly provide services in Denmark without being established there, and there were less restrictive means of achieving the aim of creditor protection.^[254] This approach was criticised as potentially opening the EU to unjustified regulatory competition, and a race to the bottom in standards, like in the U.S.A. where the state of Delaware attracts most companies and is often argued to have the worst standards of accountability of boards, and low corporate taxes as a result.^[255] Similarly in Überseering BV v Nordic Construction GmbH the Court of Justice held that a German court could not deny a Dutch building company the right to enforce a contract in Germany on the basis that it was not validly incorporated in Germany. Although restrictions on freedom of establishment could be justified by creditor protection, labour rights to participate in work, or the public interest in collecting taxes, denial of capacity went too far: it was an "outright negation" of the right of establishment.^[256] However, in Cartesio Oktató és Szolgáltató bt the Court of Justice affirmed again that because corporations are created by law, they are in principle subject to any rules for formation that a state of incorporation wishes to impose. This meant that the Hungarian authorities could prevent a company from shifting its central administration to Italy while it still operated and was incorporated in Hungary.^[257] Thus, the court draws a distinction between the right of establishment for foreign companies (where restrictions must be justified), and the right of the state to determine conditions for companies incorporated in its territory,^[258] although it is not entirely clear why.^[259]

The "freedom to provide services" under TFEU article 56 applies to people who give services "for remuneration", especially commercial or professional activity.^[260] For example, in Van Binsbergen v Bestuur van de Bedrijfvereniging voor de Metaalnijverheid a Dutch lawyer moved to Belgium while advising a client in a social security case, and was told he could not continue because Dutch law said only people established in the Netherlands could give legal advice.^[261] The Court of Justice held that the freedom to provide services applied, it was directly effective, and the rule was probably unjustified: having an address in the member state would be enough to pursue the legitimate aim of good administration of justice.^[262] The Court of Justice has held that secondary education falls outside the scope of article 56,^[263] because usually the state funds it, though higher education does not.^[264] Health care generally counts as a service. In Geraets-Smits v Stichting Ziekenfonds^[265] Mrs Geraets-Smits claimed she should be reimbursed by Dutch social insurance for costs of receiving treatment in Germany. The Dutch health authorities regarded the treatment unnecessary, so she argued this restricted the freedom (of the German health clinic) to provide services. Several governments submitted that hospital services should not be regarded as economic, and should not fall within article 56. But the Court of Justice held health was a "service" even though the government (rather than the service recipient) paid for the service.^[266] National authorities could be justified in refusing to reimburse patients for medical services abroad if the health care received at home was without undue delay, and it followed "international medical science" on which treatments counted as normal and necessary.^[267] The Court requires that the individual circumstances of a patient justify waiting lists, and this is also true in the context of the UK's National Health Service.^[268] Aside from public services, another sensitive field of services are those classified as illegal. Josemans v Burgemeester van Maastricht held that the Netherlands' regulation of cannabis consumption, including the prohibitions by some municipalities on tourists (but not Dutch nationals) going to coffee shops,^[269] fell outside article 56 altogether. The Court of Justice reasoned that narcotic drugs were controlled in all member states, and so this differed from other cases where prostitution or other quasi-legal activity was subject to restriction.

If an activity does fall within article 56, a restriction can be justified under article 52 or overriding requirements developed by the Court of Justice. In Alpine Investments BV v Minister van Financiën^[270] a business that sold commodities futures (with Merrill Lynch and another banking firms) attempted to challenge a Dutch law that prohibiting cold calling customers. The Court of Justice held the Dutch prohibition pursued a legitimate aim to prevent "undesirable developments in securities trading" including protecting the consumer from aggressive sales tactics, thus maintaining confidence in the Dutch markets. In Omega Spielhallen GmbH v Bonn^[271] a "laserdrome" business was banned by the Bonn council. It bought fake laser gun services from a UK firm called Pulsar Ltd, but residents had protested against "playing at killing" entertainment. The Court of Justice held that the German constitutional value of human dignity, which underpinned the ban, did count as a justified restriction on freedom to provide services. In Liga Portuguesa de Futebol v Santa Casa da Misericórdia de Lisboa the Court of Justice also held that the state monopoly on gambling, and a penalty for a Gibraltar firm that had sold internet gambling services, was justified to prevent fraud and gambling where people's views were highly divergent.^[272] The ban was proportionate as this was an appropriate and necessary way to tackle the serious problems of fraud that arise over the internet. In the Services Directive^[273] a group of justifications were codified in article 16 that the case law has developed.

Capital

Free movement of capital was traditionally seen as the fourth freedom, after goods, workers and persons, services and establishment. The original Treaty of Rome required that restrictions on free capital flows only be removed to the extent necessary for the common market. From the Treaty of Maastricht, now in TFEU article 63, "all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited". This means capital controls of various kinds are prohibited, including limits on buying currency, limits on buying company shares or financial assets, or government approval requirements for foreign investment. By contrast, taxation of capital, including corporate tax, capital gains tax and Financial transaction tax are not affected so long as they do not discriminate by nationality. According to the Capital Movement Directive 1988, Annex I, 13 categories of capital which must move free are covered.^[275] In Baars v Inspecteur der Belastingen Particulieren the Court of Justice held that for investments in companies, the capital rules, rather than freedom of establishment rules, were engaged if an investment did not enable a "definite influence" through shareholder voting or other rights by the investor.^[276] That case held a Dutch Wealth Tax Act 1964 unjustifiably exempted Dutch investments, but not Mr Baars' investments in an Irish company, from the tax: the wealth tax, or exemptions, had to be applied equally. On the other hand, TFEU article 65(1) does not prevent taxes that distinguish taxpayers based on their residence or the location of an investment (as taxes commonly focus on a person's actual source of profit) or any measures to prevent tax evasion.^[277] Apart from tax cases, largely following from the opinions of Advocate General Maduro,^[278] a series of cases held that government owned golden shares were unlawful. In Commission v Germany the Commission claimed the German Volkswagen Act 1960 violated article 63, in that §2(1) restricted any party having voting rights exceeding 20% of the company, and §4(3) allowed a minority of 20% of shares held by the Lower Saxony government to block any decisions. Although this was not an impediment to actual purchase of shares, or receipt of dividends by any shareholder, the Court of Justice's Grand Chamber agreed that it was disproportionate for the government's stated aim of protecting workers or minority shareholders.^[279] Similarly, in Commission v Portugal the Court of Justice held that Portugal infringed free movement of capital by retaining golden shares in Portugal Telecom that enabled disproportionate voting rights, by creating a "deterrent effect on portfolio investments" and reduing "the attractiveness of an investment".^[280] This suggested the Court's preference that a government, if it sought public ownership or control, should nationalise in full the desired proportion of a company in line with TFEU article 345.^[281]

The final stage of completely free movement of capital was thought to require a single currency and monetary policy, eliminating the transaction costs and fluctuations of currency exchange. Following a Report of the Delors Commission in 1988,^[282] the Treaty of Maastricht made economic and monetary union an objective, first by completing the internal market, second by creating a European System of Central Banks to coordinate common monetary policy, and third by locking exchange rates and introducing a single currency, the euro. Today, 19 member states have adopted the euro, while 9 member states have either determined to opt-out or their accession has been delayed, particularly since the Eurozone crisis. According to TFEU articles 119 and 127, the objective of the European Central Bank and other central banks ought to be price stability. This has been criticised for apparently being superior to the objective of full employment in the Treaty on European Union article 3.^[283]

Social and market regulations

While the European Economic Community originally focused on free movement, and dismantling barriers to trade, more EU law today concerns regulation of the "social market economy".^[286] In 1976 the Court of Justice said in Defrenne v Sabena the goal was "not merely an economic union", but to "ensure social progress and seek the constant improvement of the living and working conditions of their peoples".^[287] On this view, stakeholders in each member state might not have the capacity to take advantage of expanding trade in a globalising economy. Groups with greater bargaining power can exploit weaker legal rights in other member states. For example, a corporation could shift production to member states with a lower minimum wage, to increase shareholder profit, even if production costs more and workers are paid less. This would mean an aggregate loss of social wealth, and a "race to the bottom" in human development. To make globalisation fair, the EU establishes a minimum floor of rights for the stakeholders in enterprise: for consumers, workers, investors, shareholders, creditors, and the public. Each field of law is vast, so EU law is designed to be subsidiary to comprehensive rules in each member state. Member states go beyond the harmonised minimum, acting as "laboratories of democracy".^[288] EU law makes basic standards of "exit" (where markets operate), rights (enforceable in court), and "voice" (especially through votes) in enterprise.^[289] Rules of competition law balance the interests of different groups, generally to favour consumers, for the larger purpose in the Treaty on European Union article 3(3) of a "highly competitive social market economy".^[290] The EU is bound by the Treaty on the Functioning of the European Union article 345 to "in no way prejudice the rules in Member States governing the system of property ownership".^[281] This means the EU is bound to be neutral to member state's choice to take enterprises into public ownership, or to privatise them. While there have been academic proposals for a European Civil Code, and projects to frame non-binding principles of contract and tort, harmonisation has only occurred for conflict of laws and intellectual property.

Consumer protection

Protection of European consumers has been a central part of developing the EU internal market. The Treaty on the Functioning of the European Union article 169 enables the EU to follow the ordinary legislative procedure to protect consumers "health, safety and economic interests" and promote rights to "information, education and to organise themselves in order to safeguard their interests".^[291] All member states may grant higher protection, and a "high level of consumer protection" is regarded as a fundamental right.^[292] Beyond these general principles, and outside specific sectors, there are four main Directives: the Product Liability Directive 1985, Unfair Terms in Consumer Contracts Directive 1993, Unfair Commercial Practices Directive 2005 and the Consumer Rights Directive 2011, requiring information and cancellation rights for consumers. As a whole, the law is designed to ensure that consumers in the EU are entitled to the same minimum rights wherever they shop, and largely follows inspiration from theories of consumer protection developed in California and the Consumer Bill of Rights proclaimed by John F. Kennedy in 1962. The Court of Justice has continually affirmed that the need for more consumer rights (than in commercial contracts) both because consumers tend to lack information, and they have less bargaining power.^[293]

The Product Liability Directive 1985 was the first consumer protection measure. It creates strict enterprise liability for all producers and retailers for any harm to consumers from products, as a way to promote basic standards of health and safety.^[294] Any producer, or supplier if the ultimate producer is insolvent, of a product is strictly liable to compensate a consumer for any damage caused by a defective product.^[295] A "defect" is anything which falls below what a consumer is entitled to expect, and this essentially means that products should be safe for their purpose. A narrow defensive is available if a producer can show that a defect could not be known by any scientific method, thought this has never been successfully invoked, because it is generally thought a profit making enterprise should not be able to externalise the risks of its activities.

The Unfair Terms in Consumer Contracts Directive 1993 was the second main measure.^[296] Under article 3(1) a term is unfair, and not binding, if it is not "individually negotiated| and "if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer". The Court of Justice has continually affirmed that the Directive, as recital 16 states, "is based on the idea that the consumer is in a weak position vis-à-vis the seller or supplier, as regards both his bargaining power and his level of knowledge".^[297] Terms which are very skewed, are to be conclusively regarded as contrary to "good faith" and therefore unfair.^[298] For example, in RWE AG v Verbraucherzentrale NRW eV clauses in gas supply contracts enabling corporation, RWE, to unilaterally vary prices were advised by the Court of Justice to be not sufficiently transparent, and therefore unfair.^[299] In Brusse v Jahani BV^[300] the Court of Justice advised that clauses in a tenancy contract requiring tenants pay €25 per day were likely unfair, and would have to be entirely void without replacement, if they were not substituted with more precise mandatory terms in national legislation. In Aziz v Caixa d'Estalvis de Catalunya, following the global financial crisis, the Court of Justice advised that even terms regarding repossession of homes in Spain had to be assessed for fairness by national courts.^[301] In Kušionová v SMART Capital a.s., the Court of Justice held that consumer law was to be interpreted in the light of fundamental rights, including the right to housing, in the event that a home could be repossessed.^[302] Because consumer law operates through Directives, national courts have the final say on applying the general principles set out by the Court of Justice's case law.

• Unfair Commercial Practices Directive 2005/29/EC
• Consumer Rights Directive 2011/83/EU
• Payment Services Directive 2007/64/EC
• Late Payments Directive 2011/7/EU

Labour rights

While free movement of workers was central to the first European Economic Community agreement, the development of European labour law has been a gradual process. Originally, the Ohlin Report of 1956 recommended that labour standards did not need to be harmonised, although a general principle of anti-discrimination between men and women was included in the early Treaties. Increasingly, the absence of labour rights was seen as inadequate given the capacity for a "race to the bottom" in international trade if corporations can shift jobs and production to countries with low wages. Today, the EU is required under TFEU article 147 to contribute to a "high level of employment by encouraging cooperation between Member States".^[303] This has not resulted in legislation, which usually requires taxation and fiscal stimulus for significant change, while the European Central Bank's monetary policy has been acutely controversial during the Eurozone crisis. Under article 153(1), the EU is able to use the ordinary legislation procedure on a list of labour law fields. This notably excludes wage regulation and collective bargaining.^[304] Generally, four main fields of EU regulation of labour rights touch (1) individual labour rights, (2) anti-discrimination regulations, (3) rights to information, consultation, and participation at work, and (4) rights to job security. In virtually all cases, the EU follows the principle that member states can always create rights more beneficial to workers. This is because the fundamental principle of labour law is that employees' unequal bargaining power justifies substitution of rules in property and contract with positive social rights so that people may earn a living to fully participate in a democratic society.^[305] The EU's competences generally follow principles codified in the Community Charter of the Fundamental Social Rights of Workers 1989,^[306] introduced in the "social chapter" of the Treaty of Maastricht. Initially the UK had opted-out, because of opposition by the Conservative Party, but was acceded to when the Labour Party won the 1997 general election in the Treaty of Amsterdam.

The first group of Directives create a range of individual rights in EU employment relationships. The Employment Information Directive 1991 requires that every employee (however defined by member state law) has the right to a written statement of their employment contract. While there is no wage regulation, the Institutions for Occupational Retirement Provision Directive 2003 requires that pension benefits are protected through a national insurance fund, that information is provided to beneficiaries, and minimum standards of governance are observed.^[310] Most member states go far beyond these requirements, particularly by requiring a vote for employees in who manages their money.^[311] Reflecting basic standards in the Universal Declaration of Human Rights and ILO Conventions,^[312] the Working Time Directive 2003 requires a minimum of 4 weeks (totalling 28 days) paid holidays each year,^[313] a minimum of 20-minute paid rest breaks for 6-hour work shifts, limits on night work or time spent on dangerous work,^[314] and a maximum 48-hour working week unless a worker individually consents.^[315] The Parental Leave Directive 2010 creates a bare minimum of 4 months of unpaid leave for parents (mothers, fathers, or legal guardians) to care for children before they turn 8 years old, and the Pregnant Workers Directive 1992 creates a right for mothers to a minimum of 14 weeks' paid leave to care for children.^[316] Finally, the Safety and Health at Work Directive 1989 requires basic requirements to prevent and insure against workplace risks, with employee consultation and participation,^[317] and this is complemented by specialised Directives, ranging from work equipment to dangerous industries.^[318] In almost all cases, all member states go significantly beyond this minimum. The objective of transnational regulation is therefore to progressively raise the minimum floor in line with economic development. Second, equality was affirmed by the Court of Justice in Kücükdeveci v Swedex GmbH & Co KG^[319] to be a general principle of EU law. Further to this, the Part-time Work Directive 1997, Fixed-term Work Directive 1999 and Temporary Agency Work Directive 2008 generally require that people who do not have ordinary full-time, permanent contracts are treated no less favourably than their colleagues. However, the scope of the protected worker is left to member state law, and the TAWD 2008 only applies to "basic working conditions" (mostly pay, working hours and participation rights) and enabled member states to have a qualifying period. The Race Equality Directive 2000, Equality Framework Directive 2000 and Equal Treatment Directive 2006 prohibit discrimination based on sexual orientation, disability, religion or belief, age, race and gender. As well as "direct discrimination", there is a prohibition on "indirect discrimination" where employers apply a neutral rule to everybody, but this has a disproportionate impact on the protected group. The rules are not consolidated, and on gender pay potentially limited in not enabling a hypothetical comparator, or comparators in outsourced business. Equality rules do not yet apply to child care rights, which only give women substantial time off, and consequently hinder equality in men and women caring for children after birth, and pursuing their careers.

Third, the EU is formally not enabled to legislate on collective bargaining, although the EU, with all member states, is bound by the jurisprudence of the European Court of Human Rights on freedom of association.^[320] In Wilson and Palmer v United Kingdom^[321] the Court held that any detriment for membership of a trade union was incompatible with article 11, and in Demir and Baykara v Turkey^[322] the Court held "the right to bargain collectively with the employer has, in principle, become one of the essential elements" of article 11.^[323] This approach, which includes affirmation of the fundamental right to strike in all democratic member states,^[324] has been seen as lying in tension with some of the Court of Justice's previous case law, notably ITWF v Viking Line ABP^[325] and Laval Un Partneri Ltd v Svenska Byggnadsarbetareforbundet.^[326] These controversial decisions, quickly disapproved by legislative measures,^[327] suggested the fundamental right of workers to take collective action was subordinate to business freedom to establish and provide services. More positively, the Information and Consultation Directive 2002 requires that workplaces with over 20 or 50 staff have the right to set up elected work councils with a range of binding rights, the European Works Council Directive 2009 enables work councils transnationally, and the Employee Involvement Directive 2001 requires representation of workers on company boards in some European Companies. If a company transforms from a member state corporation to incorporate under the European Company Regulation 2001, employees are entitled to no less favourable representation than under the member state's existing board participation laws. This is practically important as a majority of EU member states require employee representation on company boards. Fourth, minimum job security rights are provided by three Directives. The Collective Redundancies Directive 1998 specifies that minimum periods of notice and consultation occur if more than a set number of jobs in a workplace are at risk. The Transfers of Undertakings Directive 2001 require that staff retain all contractual rights, unless there is an independent economic, technical or organisational reason, if their workplace is sold from one company to another. Last, the Insolvency Protection Directive 2008 requires that employees' wage claims are protected in the event that their employer falls insolvent. This last Directive gave rise to Francovich v Italy, where the Court of Justice affirmed that member states which fail to implement the minimum standards in EU Directives are liable to pay compensation to employees who should have rights under them.^[328]

Companies and investment

Like labour regulation, European corporate law is not a complete system and there is no such thing as a self-standing European corporation. Instead, a series of Directives require minimum standards, usually protecting investors, to be implemented in national corporate laws. The largest in Europe remain member state incorporations, such as the UK "plc", the German "AG" or the French "SA". There is however, a "European Company" (or Societas Europaea, abbreviated to "SE") created by the Statute for a European Company Regulation 2001.^[329] This sets out basic provisions on the method of registration (e.g. by merger or reincorporation of an existing company) but then states that wherever the SE has its registered office, the law of that member state supplements the rules of the Statute.^[330] The Employee Involvement Directive 2001 also adds that, when an SE is incorporated, employees have the default right to retain all existing representation on the board of directors that they have, unless the negotiate by collective agreement a different or better plan than is provided for in existing member state law.^[331] Other than this, most important standards in a typical company law are left to member state law, so long as they comply with further minimum requirements in the company law directives. Duties owed by the board of directors to the company and its stakeholders,^[332] or the right to bring derivative claims to vindicate constitutional rights, are not generally regulated by EU law. Nor are rights of pre-emption to buy shares, nor rights of any party regarding claims by tort, contract or piercing the corporate veil to hold directors and shareholders accountable.^[333] However, Directives do require minimum rights on company formation, capital maintenance, accounting and audit, market regulation, board neutrality in a takeover bid,^[334] rules on mergers, and management of cross-border insolvency.^[335] The omission of minimum standards is important since the Court of Justice held in Centros that freedom of establishment requires companies operate in any member state they choose.^[336] This has been argued to risk a "race to the bottom" in standards, although the Court of Justice soon affirmed in Inspire Art that companies must still comply with proportionate requirements that are in the "public interest".^[337]

Among the most important governance standards are rights vote for who is on the board of directors for investors of labour and capital. A Draft Fifth Company Law Directive proposed in 1972, which would have required EU-wide rights for employees to vote for boards stalled mainly because it attempted to require two-tier board structures,^[339] although most EU member states have codetermination today with unified boards. The Shareholder Rights Directive 2007 requires shareholders be able to make proposals, ask questions at meetings, vote by proxy and vote through intermediaries. This has become increasingly important as most company shares are held by institutional investors (primarily asset managers or banks, depending on the member state) who are holding "other people's money".^[338] A large proportion of this money comes from employees and other people saving for retirement, but who do not have an effective voice. Unlike Switzerland after a 2013 people's initiative, or the U.S. Dodd-Frank Act 2010 in relation to brokers,^[340] the EU has not yet prevented intermediaries casting votes without express instructions of beneficiaries. This concentrates power into a small number of financial institutions, and creates the potential for conflicts of interest where financial institutions sell retirement, banking or products to companies in which they cast votes with other people's money. A series of rights for ultimate investors exist in the Institutions for Occupational Retirement Provision Directive 2003. This requires duties of disclosure in how a retirement fund is run, funding and insurance to guard against insolvency,^[341] but not yet that voting rights are only cast on the instructions of investors. By contrast, the Undertakings for Collective Investment in Transferable Securities Directive 2009 does suggest that investors in a mutual fund or ("collective investment scheme") should control the voting rights.^[342] The UCITS Directive 2009 is primarily concerned with creating a "passport". If a firm complies with rules on authorisation, and governance of the management and investment companies in an overall fund structure, it can sell its shares in a collective investment scheme across the EU. This forms a broader package of Directives on securities and financial market regulation, much of which has been shaped by experience in the banking crisis of 2007–08.^[343] Additional rules on remuneration practices, separating depositary bodies in firms from management and investment companies, and more penalties for violations were inserted in 2014.^[344] These measures are meant to decrease the risk to investors that an investment goes insolvent. The Markets in Financial Instruments Directive 2004 applies to other businesses selling financial instruments. It requires similar authorisation procedures to have a "passport" to sell in any EU country, and transparency of financial contracts through duties to disclose material information about products being sold, including disclosure of potential conflicts of interest with clients.^[345] The Alternative Investment Fund Managers Directive 2011 applies to firms with massive quantities of capital, over €100 million, essentially hedge funds and private equity firms.^[346] Similarly, it requires authorisation to sell products EU wide, and then basic transparency requirements on products being sold, requirements in remuneration policies for fund managers that are perceived to reduce "risk" or make pay "performance" related. They do not, however, require limits to pay. There are general prohibitions on conflicts of interest, and specialised prohibitions on asset stripping.^[347] The Solvency II Directive 2009 is directed particularly at insurance firms, requiring minimum capital and best practices in valuation of assets, again to avoid insolvency.^[348] The Capital Requirements Directives contain analogous rules, with a similar goals, for banks. To administer the new rules, the European System of Financial Supervision was established in 2011, and consists of three main branches: the European Securities and Markets Authority in Paris, the European Banking Authority in London and the European Insurance and Occupational Pensions Authority in Frankfurt.

Competition law

Competition law has been perceived as an essential part of the "social market economy" since the Treaty of Rome. Its main aims are to prevent monopolies abusing a dominant position, by prohibiting exploitative practices and potentially by breaking them up, to prevent anti-competitive mergers and takeovers occurring, and to criminalise cartels or collusive practices by independent firms. According to the Court of Justice, and the dominant view, the law aims to protect "an effective competition structure" to enhance consumer and social welfare, "aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment".^[349] The scope of European competition law is limited in three main ways: first, by ensuring that only "undertakings" are regulated. This will include any profit-making business, but the Court of Justice suggests it is limited to entities "engaged in an economic activity".^[350] The "economic" criterion suggests that, in general, organisations based on a principle of solidarity and not for profit will be exempt from competition law.^[351] Employees and trade unions are completely outside the scope of competition law,^[352] on a long-standing consensus view, because labour is not a commodity and the sellers of labour have inherently unequal bargaining power compared to business and employers.^[353] Second, trade between member states must be affected to at least an "appreciable" degree.^[354] Third, the law promotes fair competition, rather than unfair "cut-throat" competition. For example, in Meca Medina and Majcen v Commission the Court of Justice held that rules of the International Olympic Committee and the International Swimming Federation which prohibited drugs were outside the scope of competition law altogether. Although drugs could increase competitiveness, the "integrity and objectivity of competitive sport" was more important.^[355] In this way, the central task of competition law is to regulate the unequal bargaining power of private, profit-making businesses,^[356] rather than to affect the delivery of public services, collective action by social groups, or sound regulation of the economy.

The Treaty on the Functioning of the European Union article 102 contains the prohibition on monopolies abusing a dominant position. As well as a general ban, it prohibits specific practices including price discrimination and exclusive dealing. It enables legislation to be adopted on mergers between firms (the current regulation is the Regulation 139/2004/EC).^[357] The general test is whether a concentration (i.e. merger or acquisition) with a community dimension (i.e. affects a number of EU member states) might significantly impede effective competition.

The Treaty of Lisbon prohibits anti-competitive agreements in Article 101(1), including price fixing. According to Article 101(2) any such agreements are automatically void. Article 101(3) establishes exemptions, if the collusion is for distributional or technological innovation, gives consumers a "fair share" of the benefit and does not include unreasonable restraints that risk eliminating competition anywhere (or compliant with the general principle of European Union law of proportionality).

Articles 106 and 107 provide that member state's right to deliver public services may not be obstructed, but that otherwise public enterprises must adhere to the same competition principles as companies. Article 107 lays down a general rule that the state may not aid or subsidise private parties in distortion of free competition and provides exemptions for charities, regional development objectives and in the event of a natural disaster.

Public services

• TFEU article 106(1) no special or exclusive rights for undertakings that distort competition (2) competition law applies to services of general economic interest, unless it obstructs their tasks in law or fact (e.g. in providing public services).
• Procurement Directive 2014/24/EU, on government procurement in the EU
• TFEU art 107(1) no state aid that distorts competition, but (2) aid allowed for individual consumers, without discrimination, and (3) for economic development, particularly to tackle underemployment
• Specific sector regulation:
  • (1) Health, affected by freedom to provide services
  • (2) Education, affected by free movement
  • (3) Banks, Capital Requirements Directives
  • (4) Renewable Energy Directive 2009/28/EC
  • (5) Electricity Market Directive 2003/54/EC
  • (6) First Railway Directive 91/440/EC, Second Railway Package 2004, Third railway package, proposed Fourth Railway Package
  • (7) Telecoms Package and Universal Service Directive 2002/22/EC
  • (8) Postal Services Directive 97/67/EC

Obligations and property

Generally, there is no EU regulation of private law, rather than a collection of various initiatives. The main exception is in intellectual property rights.

• Rome I Regulation
• Rome II Regulation
• Principles of European Contract Law
• Principles of European Tort Law
• Copyright Directive
• Copyright Duration Directive
• Copyright Term directive
• European Union patent
• Trade Marks Directive

Public regulation

Fiscal and monetary policy

• Treaty Establishing the European Stability Mechanism
• TFEU art 119–133
• Pringle v Government of Ireland (2012) C‑370/12
• Gauweiler v Deutsche Bundestag (2015) C-62/14

Taxation

• European Union value added tax
• European Union withholding tax
• European Union financial transaction tax (proposal)

Environmental law

• Energy policy of the European Union
• Environmental policy of the European Union
• Environmental Liability Directive 2004

Natural resource management

• Common Agricultural Policy
• Common Fisheries Policy

Data and information

• Data Retention Directive
• Database Directive
• Directive on Privacy and Electronic Communications
• Directive on the re-use of public sector information
• Electronic Commerce Directive

Foreign policy

Criminal law

In 2006, a toxic waste spill off the coast of Côte d'Ivoire, from a European ship, prompted the Commission to look into legislation against toxic waste. Environment Commissioner Stavros Dimas stated that "Such highly toxic waste should never have left the European Union". With countries such as Spain not even having a crime against shipping toxic waste, Franco Frattini, the Justice, Freedom and Security Commissioner, proposed with Dimas to create criminal sentences for "ecological crimes". The competence for the Union to do this was contested in 2005 at the Court of Justice resulting in a victory for the Commission.^[358] That ruling set a precedent that the Commission, on a supranational basis, may legislate in criminal law – something never done before. So far, the only other proposal has been the draft intellectual property rights directive.^[359] Motions were tabled in the European Parliament against that legislation on the basis that criminal law should not be an EU competence, but was rejected at vote.^[360] However, in October 2007, the Court of Justice ruled that the Commission could not propose what the criminal sanctions could be, only that there must be some.^[361]

See also

Notes

References

Books

• C Barnard, The Substantive Law of the EU: The Four Freedoms (4th edn 2013)
• G Beck, The Legal Reasoning of the Court of Justice of the EU (Hart 2013)
• P Craig and G de Búrca, EU Law: Text, Cases, and Materials (6th edn 2015)
• T Hartley, The Foundations of European Union Law (2014)
• A O'Neill, EU Law for UK Lawyers (Hart 2011)
• C Tobler and J Beglinger, Essential EU Law in Charts (3rd edn 2014)

Articles

• JHH Weiler, 'The Transformation of Europe' (1991) 100(8) Yale Law Journal 2403, EU architecture only found in federal states.

External links

• EUR-Lex – online access to existing and proposed European Union legislation
• Treaties
• Summaries of EU legislation
• Evolution of European Union legislation