The Free Movement of Goods in The EU: Developments and Future Prospects

Abstract

This article examines the free movement of goods under EU law, focusing on the complementary Treaty rules that dismantle fiscal and non-fiscal barriers within the internal market. It analyses the absolute prohibition of customs duties and charges having equivalent effect under Articles 28–30 TFEU, the ban on discriminatory internal taxation in Article 110 TFEU, and the prohibition of quantitative restrictions and measures having equivalent effect under Articles 34–36 TFEU. Drawing extensively on the case law of the Court of Justice, the article traces the development from the broad Dassonville formula through the mutual-recognition principle and mandatory requirements established in Cassis de Dijon, to the selling-arrangements distinction introduced in Keck and Mithouard and its subsequent qualifications. An analytical section evaluates the strengths and tensions in this jurisprudence, particularly the effects-based approach, the dual system of justification, and the continuing relevance of market access. The article concludes by considering future pressures on the free-movement regime arising from sustainability and climate policy, digitalisation, geopolitical developments, and the balance between negative integration and legitimate public-interest regulation.

The free movement of goods is an essential part of the internal market of the European Union. Article 26 TFEU asserts that the internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured. Likewise, the TEU requires the European Union to establish an internal market. The Treaty is working toward this goal by means of several sets of complementary rules. Fiscal barriers are dealt with by the prohibition of Customs duties and charges having an equivalent effect under Articles 28 – 30 TFEU and by the ban on discriminatory internal taxation under Article 110 TFEU. The prohibition of quantitative restrictions and measures having equivalent effect under Articles 34–36 TFEU deals with non-fiscal barriers. The purpose of these provisions taken together is to ensure that goods lawfully produced and marketed in one Member State may circulate freely and compete on an equal footing throughout the Union. This article considers the principal Treaty provisions and the leading case law which has developed their interpretation. It draws conclusions from that jurisprudence and examines the future direction of the free movement regime.

Fiscal Barriers: Customs Duties, Charges Having Equivalent Effect and Discriminatory Taxation

Articles 28 and 29 TFEU establish the customs union and the free movement of goods in the Union after they have entered the Union. Article 30 TFEU prohibits customs duties on imports and exports and all charges having equivalent effect. The Court of Justice has interpreted this prohibition broadly, in functional terms. In Commission v Italy (Case 7/68) the Court held that a charge imposed on the export of artistic, historical and archaeological items was a charge having equivalent effect even if it was said to have been imposed for purposes of cultural protection. The case law established that any pecuniary charge imposed by reason of the fact that goods cross a frontier is prohibited, regardless of its size, purpose or the destination of the revenue (Sociaal Fonds voor de Diamantarbeiders Joined Cases 2 and 3/69; Commission v Italy Case 24/68). The prohibition doesn’t apply to two narrow categories of charges: those that constitute genuine consideration for a specific service actually rendered to the individual trader, and those that cover the cost of inspections required by EU law.

The rules on frontier charges are supplemented by Article 110 TFEU, which prohibits Member States from achieving a similar protective effect by imposing internal taxation. The first paragraph prohibits discrimination against imported products. The second paragraph prohibits taxation affording indirect protection to competing domestic products. The Court has applied these provisions in a rigorous way. In Humblot (Case 112/84), an annual tax on cars by France which increased sharply above a certain power rating was held to contravene Article 110 because it systematically favoured domestically produced vehicles. In Commission v United Kingdom (Case 170/78) the Court examined the relative tax burdens on beer and wine and found that the United Kingdom’s system protected domestic beer production. The two sets of fiscal provisions are mutually exclusive: Articles 28–30 capture charges imposed by reason of the crossing of a frontier and Article 110 covers internal systems of taxation once goods have entered the Member State (Cucchi Case 77/76).

Non-Fiscal Barriers: Quantitative Restrictions and Measures Having Equivalent Effect

Quantitative restrictions on imports and all measures having equivalent effect are prohibited by Article 34 TFEU. Article 35 TFEU includes a parallel prohibition on exports. Quantitative restrictions are relatively straightforward – they are bans or quotas. The real difficulty and the bulk of the case law is in regard to measures having equivalent effect (MEQRs). The classic example was given in Procureur du Roi v Dassonville (Case 8/74). Belgian law required a certificate of origin for Scotch whisky. Dassonville had bought whisky already in free circulation in France, and was not able to get the certificate readily. The Court stated:

“All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade are to be considered as measures having an effect equivalent to quantitative restrictions.”

The definition is intentionally broad. Actual discrimination or even an actual effect on trade need not be proved; a potential and indirect hindrance is enough. The Belgian certificate requirement was therefore a MEQR. Dassonville did leave open the possibility of justification for some non-discriminatory rules. In Rewe-Zentrale AG v Bundesmonopolverwaltung für Branntwein (Case 120/78), known as the famous Cassis de Dijon case, this possibility was developed. Fruit liqueurs had to have at least 25 per cent alcohol under German law. Cassis de Dijon, a product legally made and sold in France at a lower alcohol content, couldn’t be sold in Germany. In the absence of common rules, the Court held that obstacles arising from disparities between state laws may only be accepted to the extent to which they are necessary to satisfy mandatory requirements relating, in particular, to the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defence of the consumer. The minimum-alcohol rule in Germany was not justified: public-health concerns were not decisive, and consumer protection could be achieved by less restrictive means, such as labelling. Cassis thus introduced the principle of mutual recognition (goods lawfully produced and marketed in one Member State should, in principle, be marketable in another) and an open-ended list of mandatory requirements that can justify indistinctly applicable measures.

Discriminatory measures, by contrast, may only be justified on the closed list of grounds in Article 36 TFEU (public morality, public policy, public security, the protection of health and life of humans, animals or plants, the protection of state treasures and the protection of industrial and commercial property) and must satisfy the principle of proportionality. Cases such as Henn and Darby (Case 34/79) (public morality), Campus Oil (Case 72/83) (public security in relation to petroleum supplies) and R v Thompson (Case 7/78) (public policy concerning coinage) exemplify the use of these grounds. Eventually, the breadth of the Dassonville formula caused problems. Measures regulating the conditions under which goods were sold, rather than the goods themselves, began to be challenged. In a series of Sunday-trading cases, the Court struggled to find a consistent limit. The answer was given in the criminal proceedings against Keck and Mithouard (Joined Cases C-267/91 and C-268/91). The legislation forbade selling at a loss for both internal and imported products. The Court ruled that certain selling arrangements, applicable to all relevant traders working in the state territory and affecting in the same way, in law and in fact, the marketing of domestic products and of those coming from other Member States, do not fall within the scope of Article 34. The free-movement rules, the Court explained, are to remove barriers to trade, not to regulate the conditions of retail sale as such.

Later cases have qualified Keck. Rules that require a change to the product itself, its packaging or labelling remain product rules and fall under Article 34 (Mars Case C-470/93; Commission v Spain Case C-12/00). These also cover selling arrangements which in practice impede market access for imported goods more than for domestic goods. In DocMorris (Case C-322/01), a ban by Germany on the mail-order selling of medicinal products was found to affect pharmacies established in other Member States more than pharmacies in Germany and hence fall within Article 34. Similar reasoning can be found when considering advertising restrictions and use restrictions (Gourmet Case C-405/98; Commission v Italy Case C-110/05). Thus, the case law continues to focus on the actual or potential effects on access to the market.

Analysis

There are a few observations to be drawn from this body of jurisprudence. First, the Court has consistently favoured an effects-based approach over a formalistic one. Dassonville is concerned with the possibility of restricting trade; Cassis is concerned with the practical barriers to trade created by differences in regulations; post-Keck jurisprudence is concerned with the differing impact on access to the market. This functional orientation has enabled the free-movement rules to adapt to new forms of restriction, but it has also created uncertainty as to the precise boundary of Article 34. Secondly, the dual system of justification – closed list under Article 36 for discriminatory measures, open-ended mandatory requirements for indistinctly applicable measures – creates a formal distinction that is not always easy to apply in practice. For instance, environmental protection is mentioned in the case law on mandatory requirements, but not in Article 36. There has been pragmatism on the part of the Court, but the dual structure continues to be a doctrinal challenge. Thirdly, the Keck product-rule/selling-arrangement distinction has proved both useful and fragile. It freed state courts from the need to examine each retail regulation against Article 34. However, subsequent case laws show that this is not always a clear-cut distinction. Measures that seem to regulate selling conditions can, in fact, substantially compel product adaptation or have a differential impact on imports. The result is an unending flow of litigation testing the boundary.

Fourth, the principle of mutual recognition enshrined in Cassis remains one of the most powerful instruments of negative integration. It reduces the need for full harmonisation and puts the onus on the host Member State to justify its more restrictive rules. The concept of mutual recognition, however, requires a certain amount of trust between the Member States and can be strained where there are deep divergences in regulatory philosophies. Finally, enforcement is largely dependent upon the preliminary reference procedure and on private litigation. The direct effect of Articles 30, 34 and 110 allows individuals and undertakings to challenge state measures before domestic courts, and thus decentralises the control of the internal market. Enforcement under Articles 258–260 TFEU is still important, but the case law has been dynamically developed mainly by references from state courts.

The Future of Free Movement of Goods

Several developments are likely to challenge and reshape the existing framework going forward. Sustainability and climate policy will put more and more pressure. State and Union measures to reduce carbon emissions, promote circular-economy requirements or restrict certain materials often take the form of product standards or use restrictions. Such measures may be challenged as MEQRs. The Court will have to rule on the extent of the environmental mandatory requirements and whether the proportionality analysis should give more weight to the Union’s own environmental objectives under Articles 3 TEU and 191 TFEU. This may exacerbate the tension between free movement and legitimate environmental protection already latent in the case law. The second challenge is digitalisation. E-commerce, online platforms and digital advertising erect barriers that don’t fit neatly into the traditional product / selling-arrangement dichotomy. Restrictions on cross-border online sales, vestigial practices of geo-blocking, or state rules on digital labelling and information duties will force the Court either to adapt the Keck framework or to give still more explicit weight to market-access effects. The reasoning in DocMorris already goes in that direction. And then there are geopolitical and supply chain issues. Measures taken in the name of strategic autonomy, security of the supply of energy or critical raw materials, or responses to external shocks may be formally non-discriminatory but have significant effects on intra-Union trade. The Court may have to weigh these claims against the core nature of the free movement, possibly by recalibrating the level of proportionality review or clarifying the link between Article 36 and more recent Treaty objectives.

Legislative activity will also affect the practical scope of the free-movement rules. More harmonisation in areas like product safety, environmental standards and digital services can reduce reliance on mutual recognition and thus the volume of Article 34-related litigation. By contrast, incomplete or minimum harmonisation will keep the free-movement provisions at the centre. The Commission’s ongoing Single Market initiatives may therefore have an effect on the frequency with which traders and courts still have to resort to the classic Treaty toolkit. Institutional factors can’t be ignored, either. The continuous pressure on the rule of law in some Member States raises doubts about the uniform application of free movement judgements. The Court’s own institutional position, caught between integrationist impulses and respect for state regulatory autonomy, could determine whether the case law moves toward a clearer, more explicit market-access test, or continues to be rooted in the Dassonville–Cassis–Keck framework.

Conclusion

The framework governing the free movement of goods has seemed to be substantially durable. For decades, the internal market has rested on an absolute ban on frontier charges, a strong anti-discrimination principle in taxation, and the flexible MEQR doctrine developed in Dassonville, Cassis de Dijon and Keck. These case laws continue to emphasise trade effects and market access, while accommodating legitimate public interest regulation; yet, the framework isn’t fixed. Sustainability imperatives, digital transformation and geopolitical pressures will require both the Court and EU legislature to adjust the balance between market integration and other Treaty objectives. The analytical tools developed in the classical cases remain essential. How they are applied in the next few years will decide if free movement of goods remains a dynamic engine of the internal market, or becomes a more limited residual principle, functioning in an increasingly complex regulatory environment.

References

Articles

Cases

Author

Tadgh Quill-Manley

Tadgh Quill-Manley is a law student at the King’s Inns, Ireland.

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