While one of the critical components of the EU is the free movement of goods within the EU, some restrictions still exist to complete freedom of movement of goods.
Article 34 of the TFEU (Treaty of the Functioning of the European Union). The article prohibits quantitative restrictions (where the state limits the quantity of the products that may be imported) where the approach is to protect domestic industries. Additionally, measures having an equivalent effect are also covered by Article 34 and therefore prohibited.
These restrictions are reviewed based on the substance or practical effect rather than the form of the measure that is restricting trade. In the Buy Irish case (C-249/81), the Irish state’s involvement in the program created enough of a nexus to be considered a state action and thus covered by Article 34 TFEU. Private actions are not covered.
However, if the state fails to enforce the treaty in the face of private actions, it may also violate Article 34. In the Spanish Strawberry case (C-265/95), France failed to enforce the private use of trading routes. The court ruled that the member states are responsible for affirmatively enforcing “…all trading rules which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade.”
There are justifiable exceptions, however, that allow the Member States to restrict trade within the Community. These are covered under Article 36 TFEU. These exceptions include the following:
* Public Policy
* Protection of Life and Health of People, Animals, or Plants
* Protection of National Treasures
* Protection of Industrial or Commercial Property
The ECJ uses a balancing test to assess what is allowed and not allowed. This balancing test was first developed in the Cassis de Dijon case (C-120/78). The case revolved around a German legal requirement that any liquor contains at least 25% alcohol. The French liquor did not have a high enough alcohol content. There was no difference in the standard between foreign and domestic products. The courts, seeking to harmonize standards across the EU, introduced the principle of mutual recognition – where the presumption is that if a product is legal in one member state, it will be presumed legal in all member states, absent a proven legitimate exception under Article 36 TFEU. The burden of overcoming the presumption is on the state imposing the restriction. The ECJ also stressed to Cassis that the restrictions must be proportionate and choose the least restrictive method to achieve the policy aims.
Against this background, the ECJ developed a laundry list of goods to identify legitimate restrictions and approaches that complement and, in some cases, add to the restrictions under Article 36 TFEU.
In other cases, such as the Restrictions on Sunday Trading (C-145/88), the ECJ found that the restriction against opening for trading on Sunday in the UK was permissible in light of legitimate social goals. The challenge raised in this case and the Keck cases (C-267/91 and C-268/91) was how to avoid constant and repeated testing in the courts for these types of restrictions. The scope of Article 34 TFEU was carved out for “certain selling arrangements” that allowed for acceptance as long as all products were treated equally, regardless of origin.
Ultimately, the ECJ and case law has moved to create a free market within the EU – where the restrictions on trade within the Union are limited and focused on non-economic measures. Even in those cases, the application of trade restrictions must be proportional and the least restrictive means for achieving the policy aim.