Misleading Analogies and Conceptual Ambiguities

As already mentioned, a small but influential body of elite opinion sees not only economic, but also political integration as steps towards the ultimate goal of a ‘Social Europe’ – just as the national market and the liberal state of the nineteenth century are thought to have prepared the ground for the modern welfare state. Only a strong social dimension, it is held, can legitimate the process of European integration, and at the same time rescue the national welfare state threatened by globalization. The addition of an enveloping social dimension to the integration process, the champions of Social Europe assert, would enjoy widespread popular support. After the rejection of the Constitutional Treaty, for example, Belgian prime minister Guy Verhofstadt claimed that the French and Dutch voters had opposed the treaty, not because it was too ambitious, but rather because it was not sufficiently ambitious: it did not go far enough in the direction of a supranational welfare state. Members of the intelligentsia such as Juergen Habermas explained the failure of the draft Constitution primarily as an indication of the opposition of the voters to the neo-liberal bias of the document, and an expression of popular demand for a more welfare-orientated Union (see chapter 3). Habermas wrote: ‘If something can be deduced with certainty from the [French and Dutch] vote, it is this: that not all western nations are willing to accept the social and cultural costs of welfare inequality, costs which the neo-liberals would like to impose on them in the name of accelerated economic growth’ (2005: 3).

Community law, that is, the law of the supranational organisation European Community, consists of so-called primary and secondary law. The concept of primary law relates to law made by the Member States via their international law treatymaking powers. Therefore, it comprises the initial 1957 Treaty of Rome plus various treaty amendments, such as the SEA, the Maastricht, Amsterdam and Nice Treaties, as well as the accession treaties. Secondary law, on the other hand, refers to law made by the Community's institutions based on the authorisation contained in the Treaties (the primary law), such as regulations, directives and decisions, as well as soft-law instruments such as recommendations and opinions.

Article 249 TEC briefly characterises the legal quality of these legislative instruments:

The organisational structure of the EU/EC may, with all its complexity, seem Byzantine to outsiders. However, once the basic outline and the fundamental difference between the intergovernmental EU and the supranational EC are understood, it will become easier to find one's way. In particular, with regard to the EC, one will recognise an interesting mix between the traditional traits of an international organisation and those of a state-like entity with typical separation-of-powers issues.

According to Article 7 of the Treaty Establishing the European Community (TEC), the EC possesses five ‘principal institutions’: the Council; the Commission; the European Parliament; the Court of Auditors; and the European Court of Justice. In addition, a number of other advisory institutions, such as the European Economic and Social Committee or the Committee of the Regions, serve the ‘organisation’ EC. While the ‘institutional triangle’, consisting of the Council, Commission and Parliament and largely responsible for the Community's legislation, will be described in some detail in this chapter, the Community courts, the European Court of Justice, the Court of First Instance as well as the new Civil Service Tribunal, will be explained in chapter 5 (Judicial Control within the Community).

This section aims at explaining the composition and internal decision making of the Community institutions, while their interaction in the context of European legislation will be analysed in chapter 3 (The Making of Community Law).

In a technical sense, EC competition policy covers what is known in many countries as cartel law or, as in the United States, ‘anti-trust law’. The latter term was adopted because in the late nineteenth century, when anti-trust law was ‘invented’, most American cartels were established in the form of trusts. EC competition law rests on the triad of a cartel ban contained in Article 81 TEC, a prohibition on market abuse in Article 82 TEC and merger control legislation. All three branches of EC competition law are handled by DG IV, now DG Competition, as the Directorate-General for Competition supporting the responsible Commissioner for Competition is known.

In a broader sense, other Community law also contributes to the overall aim of creating conditions for fair competition within the Common Market, these include:

1. (1) treaty provisions on free movement as a framework prohibiting mainly public restrictions on the free circulation of goods and services, such as duties and quantitative restrictions and their equivalent counterparts;

2. (2) special competition rules for public undertakings in Article 86 TEC; and

3. (3) the identification and justification or elimination of subsidies provided for in the state aid provisions of Articles 87–89 TEC.

What are the economic rationales for the EC's emphasis on competition policy?

As the American debate about the wisdom of anti-trust policies demonstrates, there is still controversy over the need to intervene in the free play of market forces in order to maintain fair competition.

One of the main achievements of the 2004 Draft Constitution Treaty in its endeavour to simplify European law and, thus, to make it more accessible to EU citizens, would have been the abolition of the three pillars under the common EU roof. Instead, one single EU would have replaced the existing supranational EC. The Union would have pursued both the supranational Community policies as well as the inter-governmental areas of cooperation, such as the CFSP. Also on the international plane, it would have simplified matters because one EU, endowed with international legal personality in Article I-7 CT, would have been able to enter into international agreements with third countries and international organisations. Alas, as things stand now, the adoption of both the Constitution Treaty and the Lisbon Reform Treaty remains unlikely and we have to live with the current complicated structures of an EC, acting on the international level mainly in the field of external trade and concluding various treaties touching upon Community powers, as well as an EU, trying to keep the Member States within the framework of the commonly agreed upon CFSP and within very limited powers of its own.

This final chapter tries to provide a brief overview of the different aspects of the activities of the EC/EU on the international plane.

Gradually establishing the free movement of goods, one of the four freedoms of the internal market, was one of the centre-pieces of early market integration in the EEC. This was pursued by internal and external measures. Article 9(1) of the original 1957 EEC Treaty (now Article 23(1) TEC) provided for the gradual establishment of a customs union between the Member States and a common customs tariff vis-à-vis third countries.

Internally, a customs union requires the elimination of customs duties and ‘charges having equivalent effect’ (Article 25 TEC) as well as of discriminatory or protectionist internal taxes (Article 90 TEC), plus the elimination of quantitative restrictions on imports and exports and ‘measures having equivalent effect’ (Articles 28 and 29 TEC).

Externally, the Common Customs Tariff is fixed by EC legislation in the form of Council regulations, which have been regularly updated since 1968. The Common Customs Tariff forms part of the Community's exclusive powers in the field of the Common Commercial Policy.

However, the establishment of a true internal market for goods freely circulating within the entire area of the EU was not only a ‘legislative’ task, pursued by rule-making through treaty norms as well as secondary legislation in the form of harmonisation directives and regulations. To a large extent, the common market is the ‘product’ of the ECJ.

The initial European Economic Community was largely about the creation of a Common Market, comprising a customs union and providing for the unhampered free movement of goods, persons, services and capital. Over the years, Community competences have been considerably extended into other fields, called policies in EC jargon. This chapter will briefly address those Community policies which have gained significantly in importance, such as the Common Agricultural Policy (CAP), environmental and social policy, with particular regard to non-discrimination issues. All were hardly visible in the original TEC and grew only as a consequence of judge-made law, Community legislation and Treaty amendments.

What are the objectives of the CAP?

According to Article 33(1) TEC the aims of CAP are:

1. (a) to increase productivity;

2. (b) to ensure a fair standard of living for the agricultural community;

3. (c) to stabilise markets;

4. (d) to ensure the availability of supplies; and

5. (e) to ensure reasonable prices for consumers.

Under the so-called lex specialis principle, which provides that specialised rules prevail over more general ones, CAP rules take precedence over other Treaty rules, such as those on the free movement of goods. According to Article 32(1) TEC, the CAP applies to agricultural products defined as ‘products of the soil, of stock farming and of fisheries and products of first-stage processing directly related to these products’.

To a considerable degree EC law has been shaped by the European Court of Justice (ECJ). The Court has rightly been called a ‘motor of integration’ because, in the years of Euroscepticism and political standstill on the question of ‘deepening’ the Community, it has largely created the ‘acquis communautaire’. Its case law, in particular in the field of the four freedoms, has made a significant contribution to the harmonisation and mutual recognition of national standards which, in turn, was essential for the creation of a true internal market.

The Court was able to attain this crucial role as a ‘quasi-lawmaker’ because of its broad jurisdictional powers. In fact, the ECJ acts as ‘constitutional court’ of the EU exercising ‘judicial review’ over both the EU/EC and its Member States. According to the ECJ's own reasoning in Case 294/83 Les Verts v. Parliament [1986] ECR 1356, the Community is:

For centuries, the history of the small continent, or quasi-continent, of Europe has been a history of war and peace, where rival political entities, predominantly in the form of nation-states, have tried to dominate each other. The terrible twentieth-century experience of two World Wars, fought mainly on European territory, provided the necessary impetus to seek alternative ways of political survival, co-existence, or even cooperation. In its historic context, European integration must be understood as an attempt primarily motivated by the desire to secure peace and stability through establishing appropriate institutions. The institutions created in post-war Europe were based on ideas, partly dating back to the Middle Ages. However, it was the situation after 1945 which made it possible to think about actually setting up new structures which would make war in Europe, if not impossible, then at least less likely. The creation of a European Coal and Steel Community (ECSC) in 1951, by which two strategically important industry sectors of rival nations like France and Germany were pooled, was such an important and highly pragmatic first step. It was soon followed by the establishment of two further organisations, the European Economic Community (EEC) and the European Atomic Energy Community (EURATOM) in 1957, which were designed as open regional organisations with a long-term goal of a yet undefined European unity.

In addition to the effective implementation of the free movement of goods, characteristic of a customs union, the Community has always aimed at guaranteeing the free movement of persons in order to create a true internal market. This ‘internal market’ is defined in Article 14(2) TEC as ‘an area without internal borders in which the free movement of goods, persons, services and capital is ensured’. The history of the EC/EU is the history of the gradual implementation of these so-called four freedoms which follows a similar regulatory pattern, that is, ensuring non-discrimination and eliminating intra-Community restrictions by Member States.

This chapter will provide an overview on the Community rules on the free movement of natural and legal persons, that is, individuals and companies. They originate in three sets of Treaty provisions: the free movement of ‘workers’; the freedom of establishment; and the freedom to provide services. The resulting, rather narrow economic rights have been broadened through the case law of the ECJ and secondary Community legislation, which has almost led to a general right of free movement. The Luxembourg Court did so by broadly interpreting the entitlements contained in Treaty provisions and by gradually restricting the powers of Member States to limit these rights.

Is there a general right to free movement for all EU citizens?

The Maastricht Treaty introduced the concept of Community citizenship which, according to Article 17 TEC, derives from and complements the nationality of the Member States.