Ibidem, para. 6.18.Panel Report, European Communities – Measures affecting asbestosand asbestos containing products, WT/DS135/R; Appellate BodyReport, European Communities – Measures affecting asbestos andasbestos containing products, WT/DS135/AB/R.Panel Report, European Communities – Measures affecting asbestosand asbestos containing products, WT/DS135/R, para. 8.155, 8.157and 8.158.See Müller-Graff (2003a), Art. 28 EG, para. 208; ECJ, cases C-1/90and C-179/90, Aragonesa [1991] ECR I-4151, 4183, para. 11.
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products in the sense of article III:4 GATT.62 In previous casesa broad spread of factors had been developed to decide thelikeness question: physical properties, nature of the product,quality, end-use, tariff classification, consumers’ perceptionand conduct (tastes and habits)63 – hence rather stiff and staticcriteria. In the Asbestos Case the central question asked waswhether the potential health risk of asbestos was a factor to betaken into consideration. While the Panel thought that this aspect would be best considered within the exception of articleXX(b) GATT,64 the Appellate Body took a different viewhighlighting the fact that the risk of asbestos being cancerogenic, was not only a characteristic of the product, but mightalso influence the choice of the consumer and hence excludethe likeness of the products compared.65 However, this is veryambiguous reasoning, since it implies the existence of potentialcompetition between the two types of fibres and its restrictionby the ban of asbestos-based fibres. Taking into account thenon-economic interest of health protection for the presumedperception of the consumer, the likeness of the two types ofproducts and hence the violation of article III:4 GATT was denied. While this result is acceptable, it is difficult to considerthe reasoning a convincing legal approach to grasp the problem.
62
63
64
65
Panel Report, European Communities – Measures affecting asbestosand asbestos containing products, WT/DS135/R, para. 8.117 to8.150.Report of the Working Party, Border Tax Adjustments, BISD/18S/97,para. 18; Panel Report, European Communities – Measures affectingasbestos and asbestos containing products, WT/DS135/R, para.8.112; Appellate Body Report, European Communities – Measuresaffectingasbestosandasbestoscontainingproducts,WT/DS135/AB/R, para. 133.Panel Report, European Communities – Measures affecting asbestosand asbestos containing products, WT/DS135/R, para. 8.129, 8.130and 8.132.Appellate Body Report, European Communities – Measures affectingasbestos and asbestos containing products, WT/DS135/AB/R, para.115 and 122.
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IV. The Criteria for Justification of Trade Barriers andImminent Restrictions of the ProhibitionConcerning the criteria for justification of trade barriers, the EC law(A) and WTO law (B) have developed on their respective normative tracks.A. EC LawThe criteria for justification have their basis in article 30 TEC. Inaddition, they have been expanded to the (imminent) restriction ofthe basic prohibition in article 28 TEC by the jurisprudence ofmandatory requirements.661. In line with the doctrine of market law,67 the restriction of theprohibition and the justification of a hindrance as interpretedby the Court of Justice have five conditions in common: first,both can be invoked only for the pursuit of non-economic interests,68 second, in both cases, the concrete measure whichposes an impediment to free trade has to be capable of servingthe relevant non-economic interest,69 third, the measure mustbe necessary to achieve the pursued goal, which means that noless restrictive means must be available for realizing the purpose,70 fourth, the achievement for the non-economic interestmust be proportional in relation to the trade restriction andhence constitute a gain for the overall common good in theCommunity,71 and eventually, fifth, according to article 30 second sentence TEC, such prohibitions and restrictions shall notconstitute a means for arbitrary discrimination or disguised
666768
69
7071
See supra note 29.See Müller-Graff (1984), 280.See, e.g., ECJ, case C-120/95 Decker [1998] ECR I-1831, 1884,para. 39 and ECJ, case 7/61 Commission v Italy [1961] ECR 659,698.See, e.g., ECJ, case C-317/92 Commission v Germany [1994] ECR I2039, 2061, para. 17 and ECJ, case C-39/90 Denkavit [1991] I-3069,3108, para. 23.See, e.g., ECJ, case 261/81 Rau [1982] ECR 3961 and ECJ, case104/75 de Peijper [1976] ECR 613.See, e.g., ECJ, case C-189/95, Franzén [1997] ECR I-5909, 5976,para. 76 and ECJ, case 155/73 Sacchi [1974] ECR 409, 428.
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restriction on trade between Member States.72 Whether thefifth condition is at all relevant when assessing a concrete restriction in a systematic approach remains an open question.Usually the necessity-test or the proportionality-test will already unveil arbitrary discrimination or disguised restriction.There is a plentitude of detailed jurisprudence on all thesequestions73 which need not be outlined in this context. Onlythe most significant overarching characteristic in dealing withthe conflict of free movement of goods and the protection ofnon-economic interests has to be emphasised. EC law has developed a fine-tuned and dense systematic and doctrinal approach to solving such conflicts, thereby permitting rather reliable predictions for the possible outcome in terms of legalrules.This is slightly less true for the two criteria which distinguishthe (imminent) restriction of the prohibition from the requirements of the justification in the exception clause.Firstly, while the justification clause of article 30 TEC canpertain to indisdictly applicable as well as to discriminatoryprovisions and restrictions, the restriction of article 28 TECwas conceived by the Court of Justice to only apply to measures which are indistinctly74 applicable to domestic and imported goods such as, e.g., purity rules in foodstuff and beverages. However, beginning with the Wallonian-Dump-decision,75 the clear judicial borderline to open discriminatorytreatment has been blurred, though for good reasons, since thestrict interpretation given by the Court of Justice to the explicitinterests of article 30 TEC excluded such objectives as consumer protection or fair trade.76 Hence it seems that the CourtSee, e.g., ECJ, case 27/80 Fietje [1980] ECR 3839, 3855 and art. 30TEC.See, e.g., Müller-Graff (2003a), Art. 28 EG, para. 186 et seq.; Art. 30EG, para. 22 et seq., para. 47 et seq.See, e.g., ECJ, case 113/80 Commission v Ireland [1981] ECR 1625,1639, para. 10.See ECJ, case C-2/90 Commission v Belgium [1992] I-4431, 4480,para. 34, 36; for recent developments see Müller-Graff (2003a), Art.28 EG, para. 197.See, e.g., ECJ, case 177/83 Kohl v Ringelhan [1984] 3651, 3663,para. 19.
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was forced to invent a new legal tool to give way to the compatibility of proportional measures based on such purposeswith internal market law. Thus it is only consequent that theCourt has often contemplated the possibility of restricting theprohibition of article 28 TEC, also for differently applicablemeasures in the interest of mandatory requirements (e.g. of environmental protection77 or the social security system78). Thereverse side of this development is presently a lack of predictability whether the Court will accept a discriminatory measureon the grounds of mandatory requirements.The second distinction between restriction and justification concerns the scope of protectable non-economic interests.While article 30 TEC contains an exhaustive list which enjoys,as mentioned, a strict interpretation by the Court,79 the array ofmandatory requirements as a creation of the Court is neitherlimited nor clearly predictable. However, the manifest tendency to expand or detail the spectrum of protectable non-economic interets is unavoidable in the light of the broad scope ofthe Dassonville-formula.B. WTO LawTurning to WTO law, it has already been illustrated that a distinction between an immanent restriction of a prohibition and a justification is not developed in a way comparable to EC law. However,the justification of non-tariff trade barriers on non-economicgrounds is part of the founding philosophy of the GATT as laiddown in article XX GATT. Compared to the jurisprudence of theEuropean Court on article 30 TEC, it can easily be recognised thatthe scheme of a similar pattern in the interpretation and the application of article XX GATT has developed, although perhaps not always elaborated upon with the same doctrinal rigidity and conciseness as in EC law.
777879
See, e.g., ECJ, case C-389/96 Aher Waggon [1998] ECR I-4473,4488, para. 18, 4490, para. 26.See ECJ, case C-120/95 Decker [1998] ECR I-1831, 1884, para. 39.Rule of strict interpretation; see, e.g., ECJ, case 7/61 Commission vItaly [1961] ECR 695, 720.
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As a clear common basis for justifying a trade barrier, the noneconomic interest has to be invoked.80Second, it is also common ground that the measure can bejustified only if it can be considered to promote the respective noneconomic interest (e.g. Appellate Body in the Shrimp-Turtle Case:import of shrimps and shrimp production in relation to the protection of sea turtles81). The criterion is also touched by the requirement of a reasonable relation between measures to the legitimateend.82Third, the necessity test is well established under article XXGATT (as well as under articles 2 and 5 SPS). Here, however, itseems that at least in one respect, more is required by WTO Lawthan under EC law: namely the requirement of exhausting all options reasonably available through measures consistent with theGATT before taking national legislation, especially serious effortsof negotiations of an international agreement83. In contrast, this isnot required from Member States within article 30 TEC. The GATTrequirement can be understood as a reaction of the necessity-criterion to the lack of any competence of the WTO to overcome justified restriction by way of supranationally harmonizing nationalrules. A second specific feature (in comparison to EC law), is acertain vagueness in the approach to necessity. It is a somewhatsweeping and not a very operationable statement when necessity isconsidered to relate to a range of degrees of necessity (Appellate80
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E.g. the protection of sea turtles in the Shrimp-Turtle Case(WT/DS58/R), the protection of marine mammals, namely dolphins,in the Tuna-Dolphin Case (DS21/R); the protection of human healthin the Cigarettes Case (DS10/R-37S200).Ibidem, WT/DS58/R para. 137 et seq.Ibidem, para. 141.See e.g. Panel Report, United States – Restrictions on imports ofTuna, WT/DS21/R, para. 5.28; Panel Report, United States – Importprohibition of certain shrimp and shrimp products, WT/DS58/R,para. 7.55; Appellate Body Report, United States – Import prohibition of certain shrimp and shrimp products, WT/DS58/AB/R, para.166; Appellate Body Report, United States – Import prohibition ofcertain shrimp and shrimp products, Recourse to Article 21.5 of theDSU by Malaysia, WT/DS58/AB/RW, para. 123 and 134, where theAppellate Body finds, that negotiations are required but not the conclusion of an agreement.
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Body in the Korean Beef case84), thereby hinting that the more vitaland important the interests are at stake the easier it is to accept anenforcement measure as being necessary85. It is already difficult tosee how – beyond the life and health of humans – the vitality ofinterests can be graded on an abstract scale. In any case, it mayraise the barrier for justification by denying the necessity of interests considered to be less vital.The necessity-criterion in the interpretation of article XXGATT also comprises the requirement of proportionality betweenthe extent to which the measure contributes to the realization of theend pursued on one side and the extent to which the measure produces impeding effects on international trade on the other side. It isan open question whether, in this respect, the interpretation of article XX GATT requires more promotion of the non-economic interest than under article 30 TEC.Last a clear parallel exists between article XX GATT and article 30 TEC in so far as both exceptions are subject to the so-calledChapeau-Clause, in other words to the condition that they do notamount to arbitrary discrimination or a disguised restriction on international trade.V. Means of Overcoming Justified RestrictionsA. EC LawA specific characteristic of the approach of EC law in dealing withthe conflict of free trade and the protection of non-economic interests concerns the means for overcoming justified restrictions oftrade. As mentioned already, EC law empowers Community institutions to legislate for the purpose to establish free trade in goods(in particular articles 94 and 95 TEC). Although orientated towardsthe functioning of the common or internal market, these competencies imply the harmonization of national standards for the protection of non-economic interests. As a consequence the Court of Justice has developed the so called ‘preemption rule’ which means that
8485
See Appellate Body Report, Korea – Measures affecting imports offresh, chilled and frozen beef, WT/DS161/AB/R, para. 161.Ibidem.
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Member States, in principle,86 are barred from unilaterally takingmeasures (with restrictive effects on trade) by invoking the protection of non-economic interests by their own standards after theCommunity has issued a binding conclusive standard to the relevantquestion.87B. WTO LawThe lack of a supranational competence of the WTO to overcomejustified non-tariff trade barriers by way of harmonizing nationalstandards demonstrates the limits of the basic GATT-concept. Theobjective of abolishing non-tariff trade barriers faces serious obstacles as long as it is not accompanied by the respect for and the harmonization of the justified protection of non-economic mandatoryrequirements which cause impediments to trade. This is the genuineEuropean experience with the establishment of the internal market.On the WTO level, TRIPS is a good example that the extension offree trade depends upon the implementation of common standardsfor the protection of mandatory requirements (in the case of TRIPS:intellectual property rights) which could be jeopardised by freetrade. Hence border-crossing liberalization and deregulation depends upon the degree of harmonised regulation. The Europeanexperience in this respect can not be ignored on the WTO level iffree trade is to be further expanded in the future at the global scale.
ReferencesAstrid Epiney (2002), Art. 28, in: Christian Calliess / MatthiasRuffert (eds.), EUV/EGV-Kommentar, Neuwied (Luchterhand)22002.Meinhard Hilf (1998), Internationales Wirtschaftsrecht und nationale Gerichte, Bonn (Zentrum für internationales Wirtschaftsrecht) 1998.
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Notwithstanding the exception of article 95 para. 4 and 5 TEC orexceptions in directives which aim at approximating the laws of theMember States.See, e.g., ECJ, case 251/78 Denkavit [1979] ECR 3369, 3388.
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Waldemar Hummer / Friedl Weiss (1997), Vom GATT ’47 zurWTO ’94. Dokumente zur alten und zur neuen Welthandelsordnung, Baden Baden (Nomos) 1997.Willem Molle (1990), The Economics of European Integration (theory, practice, policy), Aldershot (Dartmouth) 1990.Peter-Christian Müller-Graff (1984), Unternehmensinvestitionenund Investitionssteuerung im Marktrecht. Zu Maßstäben undSchranken für die überbetriebliche Steuerung von Produktionsinvestitionen aus dem Recht des wettbewerbsverfaßten Marktes (= Tübinger Rechtswissenschaftliche Abhandlungen, Vol.59), Tübingen (J.C.B. Mohr) 1984.Peter-Christian Müller-Graff (2000), Die Maßstäbe des Übereinkommens über technische Handelshemmnisse (ÜTH) als Bauelemente eines Weltmarktrechts, in: Peter-Christian MüllerGraff (Hrsg.), Die Europäische Gemeinschaft in der Welthandelsorganisation, Baden-Baden (Nomos) 2000, 111-130.Peter-Christian Müller-Graff (2003a), Art. 30 EG, in: Hans von derGroeben (ed.), Vertrag über die Europäische Union und Vertrag zur Gründung der Europäischen Gemeinschaft, BadenBaden (Nomos) 62003.Peter-Christian Müller-Graff (2003b), Umweltschutz und Grundfreiheiten, in: Werner Rengeling (ed.), Handbuch zum europäischen und deutschen Umweltrecht, Vol. 1, Köln (Heymanns)22003, 239-293.Peter-Tobias Scholl / Frank Schorkopf (2002), WTO – Welthandelsorganisation und Welthandelsrecht, Köln (Heymanns)2002.Richard Senti (2000), WTO, Zürich (Schulthess) 2000.Wolfgang Weiß / Christoph Herrmann (2003), Welthandelsrecht,München (Beck) 2003.
Piet Eeckhout*
Trade and Non-Economic Policiesin the EU and in the WTO.A Comment on Peter-Christian Müller-Graff’s Paper‘Protectionism or Reasonable National Regulation?’In this comment I should like to formulate a few reflections on thebroad and multi-dimensional subject of the relationship betweenfree-trade rules and non-economic policies, as it is developing inthe EU and in the WTO. I concentrate on recent case-law, becausethe judiciary is the main vehicle which moves the debate forward. Itgoes without saying that this comment does not permit a full analysis of all the issues.1In EC internal market law the main interface between freemovement and non-economic policies of Member States is thejurisprudential concept of ‘mandatory requirements’,2 or ‘overriding general-interest reasons’.3 Its pedigree need not be exploredhere. It is an open-ended concept enabling the courts to scrutinize,with a lot of deference, the reasons for which Member States obstruct or impede free movement; deference, because mandatoryrequirements include virtually any decent government policy, provided it is ‘non-economic’ in character, i.e. it does not aim to protect a national market. More significantly, however, the ‘mandatoryrequirements’ concept enables the courts to review the actual effectand application of such non-economic policies, by means of thelawyer’s classical balancing act: the principle of proportionality.That principle has become the Court of Justice’s magic wand indifficult internal-market cases. Not only does proportionality have*
12
3
Professor of European Law and Director, Centre of European Law,King’s College LondonVisiting Professor, College of Europe, BrugesSee Ortino (2004).As identified in Cassis de Dijon (Case 120/78 Rewe v Bundesmonopolverwaltung für Branntwein [1979] ECR 649, para 8.See e.g. Case 8/02 Ludwig Leichte v Bundesanstalt für Arbeit, judgment of 18 March 2004, para 43.
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many guises; the preliminary rulings procedure, which is the mainconduit for internal-market cases, enables the Court of Justice todecide how much of the balancing act it wishes to undertake, andhow much it leaves to the referring court. One could say that national courts are treated as apprentices who do not know in advance(i.e. when referring a case to the Court of Justice) precisely howmuch of the actual feat they will have to perform. That is a peculiarresult of the preliminary-ruling mechanism, which in some casesarguably defeats its whole purpose. Gourmet International is a casein point.4 The case concerned politically sensitive restrictions onalcohol advertising in Sweden, part of Sweden’s broader policy ofcombating alcohol consumption. The Court of Justice decided someimportant issues, such as whether such restrictions constituted discrimination in fact in the meaning of Keck and Mithouard.5 However, the crucial and decisive question was whether the particularrestrictions in issue could be justified and were proportionate inlight of Sweden’s policy. The Court did not give guidance on thisissue, and left this for the referring court to decide.The above may suffice by way of background on EC freemovement law, as the general principles are well-known.6 The caselaw is not however stagnant, and in recent years a couple of newtrends appear to be emerging which are worth highlighting, beforeturning to WTO law.First, one can notice a shift in the scope of the ‘mandatory requirements’ concept. Under traditional doctrine the concept doesnot include ‘economic’ policies. The Court has not reformulatedthis doctrine, but some of the recent case-law reveals that there canbe an economic dimension to a mandatory requirement. There arefor example the cases in the sphere of trade and public health, concerning freedom to undergo treatment abroad, and reimbursementof medical expenses incurred in another Member State, be it forhealth products or services. In such cases the Court now recognisesthat the financial balance of the social-security or health systemmay constitute a mandatory requirement. It expressly accepts that itis a legitimate aim to ensure that there is sufficient and permanent4
5
6
Case C-405/98 Konsumentsombudsmannen v Gourmet International[2001] ECR I-1795.Joined Cases C-267/91 and C-268/91 Keck and Mithouard [1993]ECR I-6097.For further analyses see Barnard / Scott (2002).
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access to a balanced range of high-quality hospital treatment in aMember State,7 and that this aim may override restrictions on thefreedom to receive hospital services in another Member State.These are clearly government aims with a much stronger economicdimension than more traditional mandatory requirements such asconsumer and environmental protection. In fact some of the publichealth cases seem to put the picture on its head: they pit patients,primarily intent on improving their health rather than engaging ineconomic transactions, against governments concerned to maintainthe financial and economic basis for their hospital systems.Another example perhaps of this shift in the economic and thenon-economic, in the context of mandatory requirements, is theCourt’s approach towards environmental protection policies. Theparticular case I am thinking of is PreussenElektra.8 I will return tothis case below, because it primarily concerns the second evolutionI should like to address. PreussenElektra concerned a German government instruction to electricity distributors to purchase part oftheir electricity from ‘green’ suppliers based in Germany. TheCourt did not express any concern about the fact that the policyappeared to be discriminatory towards green electricity suppliers inother Member States. The case forms part of a broader development, but it may be noted that here the Court may have been inclined not to interfere with German efforts to build up a viablegreen electricity industry within national borders. There is clearlyan economic dimension to this approach towards environmentalprotection policies at Member State level, and perhaps rightly so.By discussing this case I have already noted the second trend Ishould like to address, i.e. the relaxation, at least in cases involvingenvironmental protection, of the traditional principle that mandatory requirements cannot be relied upon as justification for discriminatory measures. Unfortunately the Court has not been particularly clear in this regard, declining invitations to state whether itis, or is not, abandoning that traditional principle.9 But there arenow enough judgments where the Court accepts what are arguablydiscriminatory measures to be able to speak of a trend.10 One can7
8910
Case C-157/99 Geraets-Smits and Peerbooms [2001] ECR I-5473,para 78.Case C-379/98 PreussenElektra v Schleswag [2001] ECR I-2099.See the Opinion of Jacobs AG in PreussenElektra at para 229.Ibidem, para 227.
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only surmise for what reasons the Court may be reluctant expresslyto confirm what is clearly developing into a general approach. Froma perspective of comparison with WTO law, however, it may indeed be interesting to attempt some educated guesswork. One of themain differences, in terms of judicial process, between the WTOdispute settlement organs and the EU judiciary is methods of interpretation.11 The Appellate Body follows the Vienna Convention onthe Law of Treaties, by putting great faith in the ordinary meaningof the words, and relying less on context, and even less on objectand purpose. The Court of Justice, by contrast, often prefers ateleological interpretation – tongue in cheek one could say that object and purpose are at the very core of EC law theology. Yet in thecase of the Court’s reluctance formally to abandon the traditionalprinciple we are discussing here, there may be an element of inhibition to stray too far from the text of the Treaty. After all, the onlyjustifications which the Treaty expressly permits are those in Article 30 EC (and the corresponding exceptions for services, establishment, workers, and capital). The grand bargain of Cassis deDijon12 was to extend the scope of Article 28 EC to ‘indistinctlyapplicable’ measures, but in conditional form. Where such measures could be justified on grounds of mandatory requirements theywere not regarded as constituting prohibited measures havingequivalent effect. This conditional extension enabled the Court tocreate further exceptions, without distorting the Treaty text: mandatory requirements were not in the same category as exceptionsunder Article 30 EC. Crucially, the bargain depends on maintainingthe distinction between ‘measures having equivalent effect’ as such,and ‘indistinctly applicable measures’, which are only a subcategory. The very cornerstone of that distinction is that there may bemeasures having equivalent effect, namely those which are distinctly applicable, which cannot be justified on grounds of mandatory requirements. If the Court removes that cornerstone, the wholedoctrinal edifice of the Court not having rewritten Article 30 EC –artificial though it no doubt is – will collapse.I should like to make a particular comment on this episode. Itis open to argument whether the Court should maintain its Cassis deDijon edifice, or abandon it by admitting that mandatory requirements can be relied upon as justification for distinctly applicable1112
Ehlermann (2002).Above note 2.
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measures. The Court, however, appears unwilling to decide thepoint either way. The fudged approach of decisions such asPreussenElektra is highly unsatisfactory, as the doctrinal hesitationprevents the Court from engaging with the real issues. If it is accepted that, on environmental policy grounds, the German authorities may take measures to promote the production of domesticgreen electricity, what then are the contours and boundaries of thispermissive approach? Up to what point and subject to which conditions is discrimination against foreign suppliers of green electricitypermitted? What kind of distinctly applicable measures does theenvironmental-policy exception permit? What is the role of theproportionality principle? etc. My argument is that the doctrinalhesitation itself may well be the very reason for the Court’s incapacity to engage with the real issues. I make this comment becauseit seems to me that we see a similar phenomenon in the WTO,where the debate about the aims-and-effects doctrine has equalcapacity to detract attention from the real issues; but I turn to thisbelow.The third evolution I should like to note in the case-law on freemovement is the increasing focus on human-rights questions. Therecent decisions in Carpenter and Schmidberger exemplify thisevolution. In Carpenter the Court of Justice decided that a UK national providing services in other Member States could rely on therelevant Treaty provisions as against the decision to deport his wife,who was from the Philippines, and was illegally resident in the UK.The Court relied on the fact that Mrs Carpenter contributed to MrCarpenter’s business by working at home and taking care of thechildren. It expressly referred to the right to family life, as protectedunder the European Convention on Human Rights (which formspart of the general principles of EC law).13 In Schmidberger theCourt had to examine whether the Austrian authorization of ablockade by protesters of the Brenner Autobahn, a blockade constituting a trade restriction, could be justified on grounds of freedom of expression and the right of assembly. The Court decidedthat such basic rights could justify trade restrictions, and that in thecircumstances of the case the restrictions were not disproportionate,and therefore had to be tolerated.14 Whilst I do not wish to analyse13
14
Case C-60/00 Carpenter v Secretary of State for the Home Department [2002] ECR I-6279, para 41.Case C-112/00 Schmidberger v Austria [2003] ECR I-5659.
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this development any further here, it is worth noting, in particularbecause a case in the WTO on the relationship between free tradeand fundamental rights is waiting to happen.The general picture of EC law is one where the judiciary retains considerable freedom in balancing free-trade principles withnon-economic policies. Mandatory