This Part analyses the Union as an institutional “creature”, and it equally considers the creation of European (secondary) law. It starts in Chapter 1 with an overview of the four major Union institutions: the European Parliament, the Council, the Commission, and the European Court. Chapter 2 investigates how these institutions cooperate in the creation of European legislation. The Union cannot legislate in all areas of social life; and Chapters 3 and 4 look at two constitutional limits to Union legislation. Based on the principle of conferral, the Union must act within the scope of competences conferred upon it by the Member States. The scope of these competences – and their nature – will be discussed in Chapter 3. Chapter 4 analyses a second constitutional limit to the exercise of Union competences: European fundamental rights. These rights first emerged as general principles of Union law, but have now been codified in the Union's Charter of Fundamental Rights.

This final Part analyses the substantive heart of European law. When the Union was founded, its central aim was the creation of a “common” or “internal” market between the Member States. Such an internal market was to go well beyond a free trade area or a customs union. Its aim was to create an area without internal frontiers to the free movement of goods, persons, services, and capital. To guarantee these four fundamental freedoms, the EU Treaties pursue a dual strategy: negative and positive integration. Negative integration refers to the removal of illegal national barriers to trade, whereas positive integration means Union legislation that “harmonizes” national laws. Chapters 9 and 10 will explore both strategies in the context of the free movement of goods. Chapter 11 then analyses the free movement of persons. Finally, Chapter 12 wishes to offer an “introduction” to EU competition law. The latter is traditionally seen as a functional complement to the internal market.

Introduction

The creation of governmental institutions is the central task of all constitutions. Each political community needs institutions to govern its society; as each society needs common rules and a method for their making, execution, and adjudication. The European Treaties establish a number of European institutions to make, execute, and adjudicate European law. The Union's institutions and their core tasks are defined in Title III of the Treaty on European Union (TEU). The central provision here is Article 13 TEU:

The provision lists seven governmental institutions of the European Union. They constitute the core “players” in the Union legal order. What strikes the attentive eye first is the number of institutions: unlike a tripartite institutional structure, the Union offers more than twice that number. The two institutions that do not – at first sight – seem to directly correspond to “national” institutions are the (European) Council and the Commission. The name “Council” represents a reminder of the “international” origins of the European Union, but the institution can equally be found in the governmental structure of Federal States. It will be harder to find the name “Commission” among the public institutions of States, where the executive is typically referred to as the “government”. By contrast, central banks and courts of auditors exist in many national legal orders.

Introduction

How could the Union create a “single” market out of “diverse” national markets? To create an internal market, the EU Treaties pursue a dual strategy: negative and positive integration. The Union is first charged to “free” the internal market from national barriers to trade in goods. And in order to do so, the Treaties contain a number of constitutional prohibitions “negating” illegitimate obstacles to intra-Union trade. This strategy of negative integration is complemented by a – second – strategy of positive integration. The Union is here charged to adopt positive legislation to harmonize the diverse national laws. For that purpose, the Treaties confer a number of “harmonization” competences to the Union. The most famous provision here is Article 114, which entitles the Union to adopt harmonization measures that “have as their object the establishment and functioning of the internal market”. This Chapter explores the Union's negative integration tools in the context of the free movement of goods, while the next Chapter investigates the Union harmonization competences.

What is the “negative integration” regime governing goods? In order to create an internal market in goods, the Union legal order insists that illegal barriers to intra-Union trade must be removed. Its constitutional regime is however split over two sites within Part III of the TFEU. It finds its principal place in Title II governing the free movement of goods, and is complemented by a chapter on “Tax Provisions” within Title VII. Within these two sites, we find three constitutional prohibitions. Section 1 examines the prohibition on customs duties. These are fiscal duties charged when goods cross national borders. Section 2 moves to the second type of fiscal charge: discriminatory taxes imposed on foreign goods. Section 3 then investigates the legality of regulatory restrictions to the free movement of goods. Regulatory restrictions are not, unlike fiscal duties, pecuniary charges. They simply “regulate” access to the national market by – for example – establishing product or labelling requirements. Finally, Section 4 will look at possible justifications for regulatory restrictions to trade in goods.

Introduction

Classic international law holds that each State can choose the relationship between its “domestic” law and “international” law. Two – constitutional – theories thereby exist: monism and dualism. Monist States make international law part of their domestic legal order. International law will here directly apply as if it were domestic law. By contrast, dualist States consider international law separate from domestic law. International law is viewed as the law between States; national law is the law within a State. While international treaties are thus binding “on” States, they cannot be binding “in” States. International law here needs to be “transposed” or “incorporated” into domestic law and will here only have indirect effects through the medium of national law. The dualist theory is based on a basic division of labour: international institutions apply international law, while national institutions apply national law.

Did the European Union leave the choice between monism and dualism to its Member States? Section 1 examines this question in greater detail, before the remainder of this Chapter explores the doctrine of direct effect for European law. Section 2 starts out with the direct effect of the European Treaties. The European Court indeed confirmed that some Treaty provisions would be self-executing in the national legal orders. Nonetheless, the European Treaties are framework treaties; that is: they primarily envisage the adoption of European secondary law. This secondary law may take various forms. These forms are set out in Article 288 TFEU. The provision defines the Union's legal instruments, and states:

Introduction

The protection of human rights is a central task of many modern constitutions. Fundamental rights are here designed to set protective limits to governmental action(s). This protective task is principally transferred onto the judiciary and involves the judicial review of governmental action. The protection of human rights may be limited to judicial review of the executive. But in its expansive form, it extends to the review of parliamentary legislation.

The European Union follows this wider constitutional tradition. It considers itself to be “founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights”. Human rights are thus given a “foundational” status and constitutionally limit the exercise of all Union competences.

What are the sources of human rights in the Union legal order? While there was no “Bill of Rights” in the original Treaties, three sources for European fundamental rights were subsequently developed. The European Court first began distilling general principles protecting fundamental rights from the constitutional traditions of the Member States. This unwritten bill of rights was inspired and informed by a second bill of rights: the European Convention on Human Rights. This external bill of rights was, decades later, matched by a written bill of rights specifically for the European Union: the Charter of Fundamental Rights. These three sources of European human rights are now expressly referred to – in reverse order – in Article 6 of the Treaty on European Union:

Introduction

British constitutionalism defines (primary) legislation as an act adopted by the Queen-in-Parliament. Behind this “compound” legislator stands a legislative procedure. This legal procedure links the House of Commons, the House of Lords and the monarchy. European constitutionalism also adopts a procedural definition of legislative power. However, unlike British constitutional law, the Treaties distinguish two types of legislative procedures: an ordinary legislative procedure and special legislative procedures. Article 289 TFEU states:

European “legislation” is thus – formally – defined as an act adopted by the bicameral Union legislator. According to the ordinary legislative procedure, the European Parliament and the Council act as co-legislators with symmetric procedural rights. European legislation is therefore seen as the product of a “joint adoption” by both institutions. But the Treaties also recognize special legislative procedures. The defining characteristic of these special procedures is that they abandon the institutional equality between the European Parliament and the Council. Logically, then, Article 289(2) TFEU recognizes two variants. In the first variant, the European Parliament acts as the dominant institution, with the mere “participation” of the Council in the form of “consent”. The second variant inverts this relationship. The Council is here the dominant institution, with the Parliament either participating through its “consent”, or in the form of “consultation”.

Having analysed the various Union institutions in Chapter 1, this Chapter explores their interaction in the creation of European (secondary) law. Sections 1 and 2 respectively discuss the ordinary and special legislative procedures in more detail.

Introduction

When the British Parliament legislates, it need not “justify” its acts. It is traditionally considered to enjoy a competence to do all things. This “omnipotence” is seen as inherent in the idea of a sovereign parliament in a “sovereign state”. The European Union is neither “sovereign” nor a “state”. Its powers are not inherent powers. They must be conferred by its foundational charter: the European Treaties. This constitutional principle is called the “principle of conferral”. The Treaty on European Union defines it as follows:

The Treaties employ the notion of competence in various provisions. Nevertheless, there is no positive definition of the concept. So what is a legislative competence? The best definition is this: a legislative competence is the material field within which an authority is entitled to legislate.

What are these material fields in which the Union is entitled to legislate? The Treaties do not enumerate the Union's “competences” in a single list. Instead, the Treaties pursue a different technique: they attribute legal competence for each and every Union activity in the respective Treaty title. Each policy area contains a provision – sometimes more than one – on which Union legislation can be based. The various “Union policies and internal actions” of the Union are set out in Part III of the Treaty on the Functioning of the European Union (Table 3.1).

The Treaties thus present a picture of thematically limited competences in distinct policy areas. This picture is however – partly – misleading. Three legal developments have posed serious threats to the principle of conferral. First, the rise of teleological interpretation that will be discussed in Section 1 below. The Union's competences are interpreted in such a way that they potentially “spill over” into other policy areas.

Introduction

The gradual integration of national markets into a “common” or “internal” market can be achieved by two complementary mechanisms. First, the Treaties may themselves “negate” certain national barriers to intra-European trade. For the free movement of goods, this form of negative integration was discussed in the previous Chapter. A second constitutional technique is “positive integration”. The Union here adopts positive legislation to – partly or exhaustively – remove the diversity of national laws. The idea of integration through legislation stands behind Article 26 TFEU. It states:

Legislative competences for positive integration are often found within the specific policy areas of the Union. However, the Treaties also contain a number of horizontal harmonization competences that allow the Union to create an “internal market”. These “internal market” competences can be found in Chapter 3 of Title VII of the TFEU. They have been the bedrock of the Union's positive integration programme. Articles 114 and 115 here provide the Union with a harmonization competence “for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market”.

These two general harmonization competences apply to all four fundamental freedoms. They are complemented by more “specific” harmonization competences. With regard to fiscal measures, Article 113 allows the Union to harmonize legislation on “forms of indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and functioning of the internal market and to avoid distortions of competition”. By contrast, Article 116 specifically targets distortions of competition, while Article 118 empowers the Union “[i]n the context of the establishment and functioning of the internal market” to “establish measures for the creation of European intellectual property rights”.

All EU cases are traditionally identified by a number/year figure that is followed by the names of the parties. Cases before the Court of Justice are preceded by a C-, while cases decided before the General Court are preceded by a T- (for the French ‘Tribunal’). The Civil Service Tribunal prefixes its cases with an F- (for the French ‘Fonction publique’).

In the past, all judgments of all EU Courts were published in paper form in the purple-bound ‘European Court Reports’ (ECR). Cases decided by the Court of Justice were published in the ECR-I series; cases decided by the General Court were published in the ECR-II series, while cases decided by the Civil Service Tribunal were published in the ECR-SC series. However, as of 2012, the entire Court of Justice of the European Union has decided to go “paperless” and now publishes its judgments only electronically. The two principal websites here are the Court's own curia-website (http://curia.europa.eu/jcms/jcms/j_6/), and the Union's general EU lexwebsite (http://eur-lex.europa.eu/homepage.html). For judgments referred to in the main text of this book, the easiest way is however to go to www.schutze.eu, which contains the ‘Lisbon’ version of all classic EU Court judgments mentioned in this text.

Once upon a time, judgments issued by the European Court of Justice were – to paraphrase Hobbes – “nasty, brutish and short”. Their shortness was partly due to a structural division the Court made between the “Issues of Fact and of Law” (or later: “Report for the Hearing”) – which set out the facts, procedure and the arguments of the parties – and the “Grounds of Judgment”. Only the latter constituted the judgment sensu stricto and was often very short indeed. The Court originally also tried to adopt the “French” judicial ideal of trying to put the entire judgment into a single “sentence”! A judgment like Van Gend en Loos contains about 2,000 words – not more than an undergraduate essay.