¹ Case C-55/94 Gebhard [1995] ECR I–4165, para 37.Google Scholar

² Case C-384/93 Alpine Investments [1995] ECR I–1141, para 38Google Scholar and Case C-415/93 Bosman [1995] ECR I–4921, para 103.Google Scholar

³ Case C-60/00 Carpenter [2002] ECR I–6279, para 39.Google Scholar

⁴ Case C-98/01 Commission v United Kingdom [2003] ECR I–4641, para 47.Google Scholar

⁵ Joined Cases C-267–268/91 Keck [1993] ECR I–6097.Google Scholar See on this judgment in particular Joliet, R, ‘The free circulation of goods: the Keck and Mithouard decision and the new directions in the case law’ (1995) 1 Columbia J Eur L 435.Google Scholar

⁶ Case 15/79 Groenveld [1979] ECR 3409.Google Scholar

⁷ See generally on these developments, eg Oliver, P and Roth, W-H, ‘The internal market and the four freedoms’ (2004) 41 CML Rev 407Google Scholar; Snell, J, ‘And then there were two: products and citizens in Community law’ in Tridimas, T and Nebbia, P (eds), European Union Law for the Twentyfirst Century: Rethinking the New Legal Order. Vol II (Hart Publishing, Oxford, 2004)Google Scholar, and Spaventa, E, ‘From Gebhard to Carpenter: towards a (non-)economic European constitution’ (2004) 41 CML Rev 743.Google Scholar

⁸ This runs counter to the Court's traditional position, expressed in Case C-20/92 Hubbard [1993] ECR I–3777, para 19, that ‘the effectiveness of Community law cannot vary according to the various branches of national law which it may affect’.Google Scholar

⁹ Case 24/68 Commission v Italy [1969] ECR 193, para 9.Google Scholar

¹⁰ See also Weiler, JHH, ‘The Constitution of the Common Market Place: Text and Context in the Evolution of the Free Movement of Goods’ in Craig, P and G de, Búrca, The Evolution of EU Law (OUP, Oxford, 1999) 394.Google Scholar

¹¹ Schön, Contra W, ‘Der freie Warenverkehr, die Steuerhoheit der Mitgliedstaaten und der Systemgedanke im europäischen Steuerrecht—Teil I: Die Grundlagen und das Verboot der Zölle und zollgleichen Abgaben’ (2001) 36 EuR 216, 218.Google Scholar

¹² For a discussion of direct and indirect discrimination, see Lenaerts, K, ‘L'égalité de traitement en droit communautaire: un principe unique aux apparences multiples’ (1991) 27 CDE 3, 12–17.Google Scholar

¹³ Known as cellophane fallacy after United States v EI du Pont de Nemours and Co 351 US 377 (1956)Google Scholar where the US Supreme Court held, erroneously, that cellophane was in competition with other flexible packaging materials, despite the fact that the willingness of consumers to switch to inferior substitutes was the result of the already inflated price of cellophane. This is recognized in Commission Notice on the definition of relevant market for the purposes of Community competition law [1997] OJ C372/5, para 19Google Scholar, and discussed, eg, in Whish, R, Competition Law (5th edn, LexisNexis, London, 2003) 30–2.Google Scholar

¹⁴ Case C-163/90 Legros [1992] ECR I–4625.Google Scholar

¹⁵ The same principle can be observed, eg, in Case C-353/89 Commission v Netherlands [1991] ECR I–4069Google Scholar concerning regulatory barriers to free movement of services. The fact that the Dutch Mediawet gave preferential treatment to just one domestic company, at the expense of the other domestic and all foreign companies, did not remove it from the scope of Art 49 EC. See in the context of Art 28 EC Case C-21/88 Du Pont de Nemours [1990] ECR I–889.Google Scholar

¹⁶ Joined Cases C-363 and 407–411/93 Lancry [1994] ECR I–3957.Google ScholarSee also Case C-293/02 Jersey Produce Marketing Organisation [2005] ECR I–9543, paras 65–6 where the Court focused on the possibility of re-exportation.Google Scholar

¹⁷ ibid para 27. For criticism, see AG Poiares Maduro in Case C-72/03 Carbonati Apuani /2004] ECR I–8027, paras 44–9.Google Scholar

¹⁸ See generally on the application of Article 90 EC, eg, Barnard, C, The Substantive Law of the EU: The Four Freedoms (OUP, Oxford, 2004) 45–62Google Scholar or Farmer, P and Lyal, R, EC Tax Law (OUP, Oxford, 1994) 56–76.Google Scholar For an argument that the Court is engaged in a review of a protectionist motive, see Easson, A, ‘Fiscal discrimination: new perspectives on Art 95 of the EEC Treaty’ (1981) 18 CMLRev 521, 546Google Scholar, and Danusso, M and Denton, R, ‘Does the European Court of Justice look for a protectionist motive under Article 95?’ [1990] LIEI 67.Google Scholar

¹⁹ Case C-47/88 Commission v Denmark [1990] ECR I–4509.Google Scholar

²⁰ ibid paras 9–10.

²¹ Case 31/67 Stier [1968] ECR 235.Google Scholar

²² The Court policing tax rates may sound outlandish, but it is not impossible to argue that such scrutiny could have merits, eg, if an exporting State that is the only producer of a type of raw material primarily shipped out of State imposes a heavy tax on it, seeking to exploit its market power. For a general discussion of tax rates and free movement, see Cordewener, A, Europäische Grundfreiheiten und nationales Steuerrecht (Otto Schmidt, Cologne, 2002) 848–56.Google Scholar

²³ Case C-383/01 De Danske Bilimportører [2003] ECR I–6065.Google Scholar

²⁴ ibid para 32.

²⁵ ibid para 40.

²⁶ The issue also surfaced in Joined Cases C-34 and 38/01 Enirisorse [2003] ECR I–4243Google Scholar concerning port charges. The Fifth Chamber of the Court held in para 58 that if the port charges fall within Art 25 or 90 EC, one of those provisions applies and not Art 28 EC. Further, the fact that the charges may be lawful under those provisions does not automatically bring them within Art 28 EC. However, the value of this case for the present purposes is small as the actual amounts levied were relatively low.

²⁷ De Danske Bilimportører (n 23) para 9. Further, the tax base already included 25 per cent VAT and flat-rate mark-up of 9 per cent.

²⁸ See para 12 of the Opinion of AG Mischo in Commission v Denmark (n 19). However, if the products taxed are harmful, eg, to the environment or public health, the tax rates can reach very high levels, as the governments may no longer be concerned with maximizing revenue but may quite rationally be internalizing the external costs created by the products.

²⁹ De Danske Bilimportører (n 23) paras 17 and 41.

³⁰ See Case 249/81 Commission v Ireland [1982] ECR 4005Google Scholar (Buy Irish) in the context of Art 28 EC and Case 168/78 Commission v France [1980] ECR 347Google Scholar (Whisky and Cognac) in the context of Art 90 EC.

³¹ Interestingly, in Case C-387/01 Weigel [2004] ECR I–4981Google Scholar in the field of workers, the Court applied a discrimination analysis to Austrian standard fuel consumption tax. It was argued that the tax, which was imposed on two German migrant workers when they registered their cars in Austria upon the transfer of their residence, contravened Art 39 EC. The Court dismissed the argument, holding in para 55 that ‘the Treaty offers no guarantee to a worker that transferring his activities to a Member State other than the one in which he previously resided will be neutral as regards taxation. Given the disparities in the legislation of the Member States in this area, such a transfer may be to the worker's advantage in terms of indirect taxation or not, according to circumstance. It follows that, in principle, any disadvantage, by comparison with the situation in which the worker pursued his activities prior to the transfer, is not contrary to Article 39 EC if that legisla- tion does not place that worker at a disadvantage as compared with those who were already subject to it’. This formula has been repeated a number of times since. However, Weigel is not fully comparable with the cases discussed above, as the restrictive effect was more remote. The tax was not imposed on the migrating worker as such, but simply applied to any first time car registration in Austria.

³² Art 90 EC does not apply to services. See Case 267/86 Van Eycke [1988] ECR 4769.Google Scholar

³³ Case C-439/97 Sandoz [1999] ECR I–7041.Google Scholar

³⁴ ibid para 19.

³⁵ Case C-17/00 De Coster [2001] ECR I–9445.Google Scholar

³⁶ ibid para 134 of the Opinion.

³⁷ See Chalmers, D, Hadjiemmanuilm, CMonti, G, and Tomkins, A, European Union Law: Text and Materials (CUP, Cambridge, 2006) 771–2 for a criticism of the approach.Google Scholar

³⁸ Case C-134/03 Viacom Outdoor [2005] ECR I–1167.Google ScholarAnother judgment that might be cited as support for the obstacle-based approach is Joined Cases C–430–431/99 Sea-Land Service and Nedlloyd Lijnen [2002] ECR I–5235.Google Scholar The case concerned a Dutch tariff on sea-going vessels longer than 41 metres which was payable for navigation in certain areas. The Sixth Chamber of the Court found that although there was no direct or indirect discrimination on grounds of nationality, the rules did constitute a restriction as they were liable to impede or render less attractive the provision of services. However, as is apparent in particular from para 92 of the Opinion of AG Alber, the vessels bearing the charge were exclusively providing cross-border services and the charge was payable when they actually engaged in this activity. Therefore, the tariff was more akin to a charge of equivalent effect to a customs duty than an internal tax. It should also be noted that the case was decided under Council Regulation (EEC) 4055/86 applying the principle of freedom to provide services to maritime transport between Member States and between Member States and third countries [1986] OJ L378/1.Google Scholar

³⁹ Viacom Outdoor (n 38) para 38.

⁴⁰ Similarly, AG Ruiz-Jarabo Colomer in De Coster (n 35) footnote 166 drew attention to the ‘significant’ amount of the tax.

⁴¹ Joined Cases C-544 and 545/03 Mobistar [2005] ECR I–7723. AG Léger would have disposed of the case on the basis of a directive, and did not consider Art 49 EC.Google Scholar

⁴² Although the tax was not imposed on the service as such, it was comparable to taxes falling under Art 90 EC, such as the tax on carriage of goods by road in Case 20/76 Schöttle [1977] ECR 247.Google Scholar

⁴³ Mobistar (n 41) para 29.

⁴⁴ Mobistar (n 41) para 31.

⁴⁵ Alternatively, it may of course represent a more general reining in of the case law. See Hatzopoulos, V and Do, TU, ‘The case law of the ECJ concerning the free provision of services 2000–2005’ (2006) 43 CMLRev 923, 957–61Google Scholar, and also Meulman, J and de Waele, H, ‘A retreat from Säger? Servicing or fine-tuning the application of Article 49 EC’ (2006) 33 LIEI 207, 226–8.Google Scholar

⁴⁶ It could be argued that the taxes in Viacom Outdoor and Mobistar were different, as in the former they affected the service more directly. However, it is submitted that nothing should hinge on this arbitrary and formalistic distinction.

⁴⁷ Keck (n 5).

⁴⁸ See however on the treatment of double burden, below, section V.

⁴⁹ In an interesting Opinion in Case C-374/04 ACT Group Litigation [2006] ECR I–0000Google Scholar AG Geelhoed argues that the Court needs to distinguish between ‘true restrictions’, which in practice also qualify as directly or indirectly discriminatory measures, and ‘quasi-restrictions’, which inevitably arise out of the co-existence of national tax systems and do not infringe the right of establishment or the free movement of capital. See also his Opinion in Case C-524/04 Thin Cap Group Litigation nyr in particular para 48.

⁵⁰ Case C-250/95 Futura Participations [1997] ECR I–2471.Google Scholar

⁵¹ ibid para 24. However, it should be noted that the Court was not examining a substantive tax rule, but a tax accounting obligation.

⁵² ibid para 26.

⁵³ See, eg, Hatzopoulos, V, ‘Casenote on Futura Participations’ (1998) 35 CMLRev 493, 500–5.Google Scholar

⁵⁴ See, eg, Case C-118/96 Safir [1998] ECR I–1897Google Scholar, in respect of services, and Case C-35/98 Verkooijen [2000] ECR I–4071, in respect of capital.Google Scholar

⁵⁵ Case C-76/90 Säger [1991] ECR I–4221.Google Scholar

⁵⁶ Case C-19/92 Kraus [1993] ECR I–1663.Google Scholar

⁵⁷ Similarly Farmer, P, ‘The Court's case law on taxation: a castle built on shifting sands’ [2003] EC Tax Rev 75, 81Google Scholar and Lyal, R, ‘Non-discrimination and direct tax in Community law’ [2003] EC Tax Rev 68, 74.Google Scholar The ‘restriction’ in Futura Participations could be characterized as discriminatory, as is apparent from the Opinion of AG Lenz in the case. See also Graetz, MJ and Warren, AC, ‘Income tax discrimination and the political and economic integration of Europe’ (2006) 115 The Yale LJ 1186 in particular 1199, who point out that the concept of discrimination employed has been much more robust than that found in international trade and tax law.Google Scholar

⁵⁸ Case C-391/97 Gschwind [1999] ECR I–5451.Google Scholar The Court followed AG Ruiz-Jarabo Colomer.

⁵⁹ Case C-376/03 D [2005] ECR I–5821.Google Scholar

⁶⁰ Again, the allowances would have been granted, had 90 per cent of D's property been situ- ated in the Netherlands.

⁶¹ See S van, Thiel, Free Movement of Persons and Income Tax Law: the European Court in Search of Principles (IBFD, Amsterdam, 2002) 247Google Scholar for an argument that the refusal of the splitting tariff in Gschwind should have been deemed a restriction. For an analysis of D from a restriction perspective, see O'Shea, T, ‘The ECJ, the “D” case, double tax conventions and most- favoured nations: comparability and reciprocity’ [2005] EC Tax Rev 190, 196–200.Google Scholar

⁶² This line of argument can be traced back to Case C-279/93 Schumacker [1995] ECR I–225.Google Scholar See also in the context of free movement of capital Art 58(1)(a) EC.

⁶³ It is interesting to note that in Gschwind the Belgian Government and the Commission argued that the German law did discriminate against non-residents. See Gschwind (n 58) paras 17–19. In D AG Ruiz-Jarabo Colomer found discrimination.

⁶⁴ It has to be noted that Case C-152/03 Ritter-Coulais [2006] ECR I–1711Google Scholar could be seen to be casting some doubt on the approach. Since Schumacker (n 62) para 31, the Court has taken as its starting point in respect of subjective tax elements that ‘[i]n relation to direct taxes, the situations of residents and of non-residents are not, as a rule, comparable.] However, in Ritter-Coulais, a case concerning German income tax rules, the Grand Chamber stated in para 38 that a law treating non-residents less favourably than residents was ‘as a rule, contrary to Article lsqb;39] EC.’ This might be seen as a reversal of the basic assumption. However the Schumacker formula has been repeated post Ritter-Coulais, eg, in Case C-346/04 Conijn [2006] ECR I–6137, para 16Google Scholar and in Case C-520/04 Turpeinen [2006] ECR I–00000, para 26Google Scholar, and there were differences in factual situations, namely between the availability of personal allowances and the recognition, for tax rate purposes, of rental income losses resulting from the own use of a dwelling.

⁶⁵ D (n 59) para 61.

⁶⁶ Case 235/87 Matteucci [1988] ECR 5589.Google Scholar See also Case C-55/00 Gottardo [2002] ECR I–413Google Scholar and, in the tax context, Case C-307/97 Saint-Gobain ZN [1999] ECR I–6161.Google Scholar

⁶⁷ A further difference between Matteucci and D was that the former involved direct discrimination on grounds of nationality, while in the latter residence was the distinguishing criterion. However, this difference was not present in Saint-Gobain, ibid.

⁶⁸ See Thiel, S van, ‘A slip of the European Court in the D case (C-376/03): denial of the most-favoured-nation treatment because of absence of similarity?’ (2005) 33 Intertax 454, 455–7Google Scholar for a forceful critique of this aspect of the ruling. See also Cordewener, A and Reimer, E, ‘The future of most-favoured-nation treatment in EC tax law—Did the ECJ pull the emergency break without real need?—Part 2’ (2006) 46Google Scholar European Taxation 291 for a sophisticated analysis of the issues. The ruling in ACT Group Litigation (n 49) has confirmed the judgment.

⁶⁹ However, see Terra, BJM and Wattel, PJ, European Tax Law (4th edn, Kluwer Law International, The Hague, 2005) 132–3Google Scholar for an argument that cases concerning the ‘correct territorial matching of social security costs and benefits’ such as Case C-224/98 D'Hoop [2002] ECR I–6191 also represent an acceptance of territoriality.Google Scholar

⁷⁰ Futura Participations (n 50). See for recent discussion and application the Opinion of AG Léger in Case C-345/04 CELG nyr paras 32–8.

⁷⁰ Futura Participations (n 50). See for recent discussion and application the Opinion of AG Lèger in Case C-345/04 CELG nyr paras 32–8.

⁷¹ It should be noted that nowadays the Court seems to treat the principle as a ground of justification, as evidenced, eg, by Case C-471/04 Keller Holding [2006] ECR I–2107, para 44.Google Scholar

⁷² Bently, L and Sherman, B, Intellectual Property Law (2nd edn, OUP, Oxford, 2004) 5.Google Scholar

⁷³ Joined Cases 55 and 57/80 Musik-Vertrieb Membran [1981] ECR 147.Google Scholar

⁷⁴ ibid para 14.

⁷⁵ Case C-336/96 Gilly [1998] ECR I–2793.Google Scholar

⁷⁶ Case C-513/03 Van Hilten-van der Heijden [2006] ECR I–1957.Google Scholar

⁷⁷ For a trenchant criticism, see Weber, D, ‘Community report’ in Xenopoulos, XL (ed), Direct Tax Rules and the EU Fundamental Freedoms: Origin and Scope of the Problem; National and Community Responses and Solutions (FIDE, Nicosia 2006) 482–4.Google Scholar

⁷⁸ Gilly (n 75) para 24. In Van Hilten the Netherlands did award a tax credit corresponding to the foreign inheritance tax, thereby removing double taxation, and this was specifically mentioned by the Court in its actual answer to the referring national court.

⁷⁹ See also van Thiel (n 61) 290–305. See Hosson, FC, ‘On the controversial role of the European Court in corporate tax cases’ (2006) 34 Intertax 294, 302–3Google Scholar for an argument that the Court's treatment of grounds of justification demonstrates its ‘awareness of the special position occupied by taxation’.

⁸⁰ See Farmer, P and Zalasinski, A, ‘General Report’ in Xenopoulos, XL (ed) (n 77)Google Scholar and Terra, and Wattel, (n 69) 65–6 and 162.Google Scholar See also Farmer (n 57) 81, who argues that the ‘analytical untidiness’ of the case law may create difficulties for national courts and accordingly compromise the uniform application of Community law. The Court accepted in Case C-446/04 FII Group Litigation [2006] ECR I–00000, para 215Google Scholar that ‘in a field such as direct taxation, the consequences arising from the freedoms of movement guaranteed by the Treaty have been only gradually made clear’ and advised the referring national court to take this into account when deciding upon the seriousness of a breach of Art 43 EC for State liability purposes. The Commission Communication on ‘Co-ordinating Member States’ direct tax systems in the Internal Market' COM (2006) 823 final highlights the uncertainty at 5.Google Scholar

⁸¹ An additional, more general, source of confusion relates to the availability of justifications in case of discrimination. Compare eg the Opinion of AG Jacobs in Case C-136/00 Danner [2002] ECR I–8147, paras 32–41Google Scholar where he argues that overriding requirements can be invoked even in cases of direct discrimination with the Opinion of AG Tizzano in Case C-433/04 Commission v Belgium [2006] ECR I–00000, para 36Google Scholar where he argues that the Belgian law which appears indistinctly applicable can only be saved by express Treaty derogations as it in reality discriminates. See also AG Léger in Case C-196/04 Cadbury Schweppes [2006] ECR I–00000, para 64.Google Scholar For recent academic discussion in the tax context, see Dahlberg, M, Direct Taxation in Relation to the Freedom of Establishment and the Free Movement of Capital (Kluwer Law International, The Hague, 2005) 119–24.Google Scholar It may be added that the concept of discrimination is itself unclear. See, eg, AG Stix-Hackl in Case C-150/04 Commission v Denmark nyr, paras 42–6.Google Scholar

⁸² Case C-204/90 Bachmann [1992’ ECR I–249.Google Scholar

⁸³ Case C-251/98 Baars [2000] ECR I–2787.Google Scholar

⁸⁴ Verkooijien (n 54).

⁸⁵ See AGs Kokott in Case C-319/02 Manninen [2004] ECR I–7477Google Scholar and Poiares Maduro in Case C-446/03 Marks & Spencer [2005] ECR I-10837.Google Scholar AG Stix-Hackl describes the case law as confusing in Commission v Denmark (n 81) paras 72 and 77. See generally Vanistendael, F, ‘Cohesion: the phoenix rises from his ashes’ [2005] EC Tax Rev 208.Google Scholar

⁸⁶ ACT Group Litigation (n 49) para 3. See also the Opinion of AG Geelhoed in Thin Cap Group Litigation (n 49) where he states in para 68 in the context of an analysis of anti-abuse justification: ‘I find it extremely regrettable that the lack of clarity … has led to a situation where Member States, unclear of the extent to which they may enact prima facie “discriminatory” antiabuse laws, have felt obliged to “play safe” by extending the scope of their rules to purely domestic situations where no possible risk of abuse exists … Such an extension of legislation to situations falling wholly outwith its rationale, for purely formalistic ends and causing considerable extra administrative burden for domestic companies and tax authorities, is quite pointless and indeed counterproductive for economic efficiency. As such, it is anathema to the internal market.’

⁸⁷ See, eg, Wouters, J, ‘The case-law of the European Court of Justice on direct taxes: variations upon a theme’ (1994) 1 MJ 179, 183.Google Scholar

⁸⁸ See Bobbitt, P, The Shield of Achilles: War, Peace and the Course of History (Penguin, London, 2002) eg at 96 for a discussion of the relationship between the development of a modern state and the need to finance war.Google Scholar

⁸⁹ Wathelet, M, ‘The Influence of Free Movement of Persons, Services and Capital on National Direct Taxation: Trends in the Case Law of the Court of Justice’ (2001) 20 YEL 1.Google Scholar

⁹⁰ Guha, K, Newman, C, and Parker, G, ‘Hain referendum slip puts Downing Street in a spin’, Financial Times (London, 28 05 2003) 1.Google Scholar The other pillars were foreign and defence policy. See also Tikka, KS, ‘Tuloverosuvereniteetin kaventuminen lainsäätäjän haasteena’ (2003) 101 Lakimies 1184 who calls parliaments' tax powers one of the cornerstones of democracy.Google Scholar

⁹¹ It should also be noted that according to Declaration on Art 73d of the Treaty establishing the European Community Art 58(1)(a) EC applies ‘only with respect to the relevant provisions which exist at the end of 1993’ in the case of intra-Community capital movements and payments.

⁹² The Court invariably recognizes that direct taxation falls within the competence of the Member States, but adds a rider that this competence must be exercised in accordance with Community law. See, eg, Case C-80/94 Wielockx [1995] ECR I–2493, para 16.Google Scholar However, it does the same in other fields. Already in Cassis de Dijon or Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein [1979] ECR 649, para 8Google Scholar the Court accepted that in the absence of common rules it was for the Member States to regulate the production and marketing of alcohol, but continued that if disparities between national laws create an obstacle, the law must be disapplied unless a justification can be demonstrated.

⁹³ In the context of healthcare, the Court stated in Case C-372/04 Watts [2006] ECR I–4325, para 121Google Scholar that ‘although Community law does not detract from the power of the Member States to organise their social security systems and decide the level of resources to be allocated to their operation, the achievement of the fundamental freedoms guaranteed by the Treaty nevertheless inevitably requires Member States to make adjustments to those systems. It does not follow that this undermines their sovereign powers in the field’. The same formula of words might well be used also in the fiscal context.

⁹⁴ This is an application of an argument advanced in Majone, G, ‘Europe's “democratic deficit”: the question of standards’ (1998) 4 ELJ 5, 28Google Scholar and in Majone, G, Dilemmas of European Integration: The Ambiguities and Pitfalls of Integration by Stealth (OUP, Oxford, 2005) in particular 189–91.CrossRefGoogle Scholar

⁹⁵ It is an axiom of law and economics that legal rules should focus on efficiency and redistribution should be a matter for the system of taxes and benefits. See, eg, Kaplow, L and Shavell, S, ‘Why the legal system is less efficient than the income tax in distributing income’ (1994) 23 Journal of Legal Studies 667.CrossRefGoogle Scholar

⁹⁶ See, however, Roxan, I, ‘Assuring real freedom of movement in EU direct taxation’ (2000) 63 MLR 831Google Scholar for an attempt to distinguish lawful ‘disincentives to migration’ from unlawful ‘costs of migration’.

⁹⁷ See, eg, Case C-190/98 Graf [2000] ECR I–493, para 25.Google Scholar

⁹⁸ See also generally de Almeida, JC Moitinho, ‘Le droit fiscal national, la libre circulation des travailleurs, le droit d'établissement et la libre prestation de services’ in Dony, M and De Walsche, A (eds), Mélanges en Homage à Michel Waelbroeck: Volume II (Bruylant, Brussels, 1999) 1347Google Scholar and van Thiel, (n 61) 305.Google Scholar

⁹⁹ As established, eg, in Case C-264/96 ICI v Colmer [1998] ECR I–4695Google Scholar and Case C-168/01 Bosal Holding [2003] ECR I–9409.Google Scholar For discussion, see the Opinion of AG Poiares Maduro in Case C-347/04 Rewe Zentralfinanz nyr, paras 52–9 and Snell, J, ‘Economic aims as justification for restrictions on free movement’ in Schrauwen, A, Rule of Reason: Rethinking another Classic of European Legal Doctrine (Europa Law Publishing, Groningen, 2005) 37–47.Google Scholar

¹⁰⁰ As noted in W Schön, ‘Der freie Warenverkehr, die Steuerhoheit der Mitgliedstaaten und der Systemgedanke im europäischen Steuerrecht—Teil II: Das Verbot diskriminierenden und protektionistischer Abgaben und das Problem der Belastung “exotischer” Waren' (2001) 36 EuR 341, 359Google Scholar, the same problem is not encountered with those taxes that are imposed on eg environmental or health grounds.

¹⁰¹ A comparison can be made with the treatment of national price controls under Art 28 EC, where the Court showed leniency even prior to Keck (n 5). One reason may have been the difficulty of finding non-economic justifications. See Snell, J, ‘Free movement of pharmaceutical products: an overdose of cheap drugs?’ (2003) 14 EBLR 507, 509–10.Google Scholar

¹⁰² See Cordewener (n 22) 857–88 for an insightful discussion. See Vanistendael, F, ‘The ECJ at the crossroads: balancing tax sovereignty against the imperatives of the single market’ [2006] European Taxation 413, 418–19Google Scholar and Van Thiel, (n 61) 310–15Google Scholar for the view that double taxation contravenes the Treaty. Farmer and Zalasinski (n 80) argue at 403 that both Member States involved ‘should bear collective and several responsibility’ for eliminating double taxation.

¹⁰³ See on the difficulties facing the Court Georgopoulos, T, ‘Le rôle creatif du juge communautaire en matière de fiscalité directe’ (2005) 41 RTD 61, 73–9.Google Scholar

¹⁰⁴ Case C-513/04 Kerckhaert and Morris [2006] ECR I–00000.Google Scholar

¹⁰⁵ To be more precise, AG Geelhoed had argued in paras 25–6 of his Opinion that the tax should stand as on the facts, taking into account the French imputation tax credit, there was no less favourable treatment. However, in his additional remarks in paras 27–36 he argued that in principle international double taxation was not contrary to the Treaty. The Court followed these additional remarks.

¹⁰⁶ Manninen (n 85).

¹⁰⁷ Kerckhaert and Morris (n 104) para 19.

¹⁰⁸ The best-known example is Cassis de Dijon (n 92). The same applies inter alia to social security contributions. See, eg, Joined Cases 62 and 63/81 Seco [1982] ECR 223.Google Scholar

¹⁰⁹ For discussion, see Weatherill, S, ‘Pre-emption, harmonisation and the distribution of competence to regulate the internal market’ in Barnard, C and Scott, J, The Law of the Single European Market (Hart Publishing, Oxford, 2002) 42–51.Google Scholar

¹¹⁰ The spokesman for Commissioner László Kovács is reported as saying that in Kerckhaert the Court fails to ‘take into account the internal market issue’ in Houlder, V and Parker, G, ‘Investors hit as court backs Belgian double taxation’ Financial Times (London, 15 11 2006) 8.Google Scholar The Commission has in its Communication on ‘Co-ordinating Member States' direct tax systems in the Internal Market’ (n 80) 8 promised that it will come forward with a general initiative designed to eliminate international double taxation within the EU.

¹¹¹ Art I, s 8.

¹¹² Western Live Stock v Bureau of Revenue 303 US 250 (1938) 255–6.Google Scholar

¹¹³ ibid 256.

¹¹⁴ Complete Auto Transit, Inc v Brady 430 US 274 (1977).Google Scholar

¹¹⁵ Mobil Oil Corporation v Commissioner of Taxes of Vermont 445 US 425 (1980) 443.Google Scholar

¹¹⁶ See, eg, Hellerstein, W, ‘State Taxation and the Supreme Court[1989]. The Supreme Court Rev 223, 234Google Scholar and Tribe, LH, American Constitutional Law, Vol I (3rd edn, Foundation Press, New York, 2000) 1132–3.Google Scholar

¹¹⁷ See, eg, American Trucking Associations, Inc v Scheiner 483 US 266 (1987).Google Scholar

¹¹⁸ Marks & Spencer (n 85). For criticism, see AG Geelhoed in ACT Group Litigation (n 49) para 65. His Opinion was followed by the Grand Chamber of the Court. For annotation, see Cordewener, A and Dörr, I, ‘Casenote on Marks & Spencer’ (2006) 43 CMLRev 855.Google Scholar

¹¹⁹ Conversely, in Case C-403/03 Schempp [2005] ECR I–6421Google Scholar the Court upheld a German rule which made the availability of a deduction dependant on taxability, whether in Germany or in another Member State.

¹²⁰ The same issue, but from the perspective of the host State, arises in Schumacker (n 62), where the host State needs to take into account the non-availability of personal allowances in the home State. See generally van Thiel, (n 61) 300–2.Google Scholar

¹²¹ Manninen (n 85). Conversely, the interaction between two national systems, as organized by double taxation treaties, could conceivably rescue a national tax rule that in isolation looked restrictive. See, eg, Geelhoed, AG in Case C-170/05 Denkavit International and Denkavit France [2006] ECR I–0000, para 44.Google Scholar

¹²² See also the discussion in Vanistendael (n 85) 217–22. It should be noted that Manninen concerned the obligations of the home State and according to ACT Group Litigation (n 49) the same does not apply to the source State.

¹²³ On a formal level Kerkhaert does differ from the previous judgments. The UK system in Marks & Spencer that provided group relief in the case of resident subsidiaries but denied it if the subsidiaries were established in other Member States could easily be characterized as a restriction, just like the Finnish system in Manninen where a tax credit was granted if the dividends originated in Finland, but not if they originated in Sweden. There was a difference in treatment depending on whether the situation was internal or cross-border. By contrast, in the case of multiple taxation, the State treats both internal and cross-border situations in the same way.

¹²⁴ On the various meanings that can be attached to the notion of discrimination, and the ‘labyrinth of impossibility’ that an overly broad concept can create, see Graetz, and Warren, (n 57) 1215–23Google Scholar, and more generally Davies, G, Nationality Discrimination in the European Internal Market (Kluwer Law International, The Hague, 2003).Google Scholar See also Douma, S, ‘The three Ds of direct tax jurisdiction: disparity, discrimination and double taxation’ (2006) 46 Eur Taxation 522, 532–3Google Scholar on the concepts of dislocation and discrimination.

¹²⁵ Case 13/63 Commission v Italy [1963] ECR 165 and Schumacker (n 62) para 30. Further, Art 58(1)(a) EC seems to depart from the premise that the place where capital is invested may render otherwise identical situations different.Google Scholar

¹²⁶ Case 15/81 Gaston Schul [1982] ECR 1409.Google Scholar

¹²⁷ See American Trucking Associations, Inc v Scheiner (n 117).

¹²⁸ Because of this, any distinction between (unlawful) discrimination caused by a single juris- diction and (lawful) difficulties arising out of the existence of different legal system may be logi- cally difficult to maintain. It can be argued that a State is at fault for failing to consider the effects of the rules of another State.

¹²⁹ See Wattel, PJ, ‘Corporate tax jurisdiction in the EU with respect to branches and subsidiaries; dislocation distinguished from discrimination and disparity; a plea for territoriality’ [2003] EC Tax Rev 194, 199Google Scholar for an argument that double taxation cannot be policed under free movement rules as it is impossible to determine which country has the responsibility to end the practice. Englisch, Contra J, ‘The European Treaties'; implications for direct taxes’ (2005) 33 Intertax 310, 324–5Google Scholar who argues that the Court should allocate tax powers in accordance with general principles of international tax law, which the Court could discover by analysing bilateral tax conventions.

¹³⁰ Case 2/74 Reyners [1974] ECR 631.Google Scholar

¹³¹ Case C-208/00 Überseering [2002] ECR I–9919.Google Scholar

¹³² ibid para 55.

¹³³ Gilly (n 75) para 16.

¹³⁴ Keck (n 5).

¹³⁵ Groenveld (n 6).

¹³⁶ Alpine Investments (n 2).

¹³⁷ See Bernard, N, ‘La libre circulation des merchandises, des personnes et des services dans la Traité CE sous l'angle de la compétence’ (1998) 34 CDE 11, 33–5Google Scholar, and Snell, J and Andenas, M, ‘Exploring the outer limits: restrictions on the free movement of goods and services’ (1999) 10 EBLR 252, 264–7.Google Scholar

¹³⁸ Terra and Wattel (n 69) 62–3 and 80–3 propose holding both the home and the host State responsible and requiring both countries to apply worldwide taxation. However, as they note, this would run counter to a number of previous judgments.

¹³⁹ Tribe, (n 116) 1136.Google Scholar

¹⁴⁰ See Moorman Manufacturing Co v Bair 437 US 267 (1978) 277–81.Google Scholar However, the ECJ has always held in the European context that restrictions are prohibited even if of limited scope or minor importance. See, eg, Case C-9/02 De Lasteyrie du Saillant [2004] ECR I–2409, para 43.Google Scholar But see FII Group Litigation (n 80) para 53 where the Court accepted the imposition of additional administrative burdens in the case of foreign-sourced dividends, as they ‘are an intrinsic part of the operation of a tax credit system’ and also para 56 of the same judgment where the referring national court was tasked to investigate the frequency of discrimination.

¹⁴¹ See in particular Marks & Spencer (n 85), Case C-470/04 N v Inspecteur van de Belastingdienst Oost/kantoor Almelo [2006] ECR I–0000Google Scholar, and AG Kokott in Case C-231/05 Oy AA nyr, paras 46–71.

¹⁴² A close reading also reveals that the reference in Mobistar (n 41) para 34 to ‘cumulative effect of the local taxes’ (emphasis added) is to the overall impact of the Belgian local taxes in issue, not to the impact of local and foreign taxes.

¹⁴³ Case 142/77 Larsen and Kjerulff [1978] ECR 1543.Google Scholar

¹⁴⁴ ibid paras 33–4. As far as the harmonized common system of VAT system is concerned, double taxation may be policed under Art 90 EC. See Gaston Schul (n 126).

¹⁴⁵ Case C-72/92 Scharbatke [1993] ECR I–5509, para 15.Google Scholar

¹⁴⁶ Case C-234/99 Nygård [2002] ECR I-3657, para 38.Google Scholar See also AG Jacobs in Case C-213/96 Outokumpu [1998] ECR I–1777, paras 44–5Google Scholar and AG Stix-Hackl in Case C-517/04 Koornstra [2006] ECR I–5015, para 50.Google Scholar

¹⁴⁷ Cassis de Dijon (n 92).

¹⁴⁸ See Cordewener, (n 22) 847.Google Scholar Of course it could be argued that purely economic interests can never override free movement rights, as established in the case law of the Court cited at (n 99), but this formal legal argument does not undermine the contention that there is a significant differ- ence between double regulatory and tax burdens.

¹⁴⁹ ACT Group Litigation (n 49).

¹⁵⁰ Formally the ruling is in line with Manninen (n 85) which involved the obligations of a home State, while ACT Group Litigation concerned a source State. However, the Court's basic approach appears rather different and the way the cases are distinguished is not particularly convincing. The statement in para 59 that if the source State had to extend the relief to non-residents, it would be obliged to abandon its right to tax profits generated in its territory, can be countered with the observation that the State would be free to adopt a neutral method by, for example, not granting relief to anyone. Further, the same line of reasoning, mutatis mutandis, could have been adopted in Manninen, but the Court declined to do so. Finally, it is not clear what the relevance of the abil- ity to pay argument in para 60 is in the present context.

¹⁵¹ De Danske Bilimportører (n 23).

¹⁵² Mobistar (n 41).

¹⁵³ Sandoz (n 33).

¹⁵⁴ Gebhard (n 1).

¹⁵⁵ The US Supreme Court has similarly encountered problems when applying the Dormant Commerce Clause to state taxation, describing the case law as a ‘quagmire’ in Northwestern States Portland Cement Co v State of Minnesota 358 US 450 (1959) 458.Google Scholar More recently, Hellerstein, W, McIntyre, MJ, and Pomp, RD, ‘Commerce Clause restraints on state taxation after Jefferson Lines’ (1995–1996) 51 Tax L Rev 47, 50Google Scholar, write that the ‘analysis of state taxes under the dormant Commerce Clause’ has been ‘historically unstable’, Choper, JH and Yin, T, ‘State taxa- tion and the Dormant Commerce Clause: the object—measure approach’ [1998]Google Scholar The Supreme Court Rev 193, 205, argue that the current ‘Complete Auto test has evolved into a collection of disparate requirements, some redundant, some toothless, others rather opaque’, and Justice, Scalia (concurring) in American Trucking Associations, Inc v Michigan Public Service Commission 545 US 429 (2005) refers scathingly to ‘various tests from our wardrobe of ever-changing negative Commerce Clause fashions’.Google Scholar

¹⁵⁶ Kerckhaert (n 104).

¹⁵⁷ The discussion here draws from Kapteyn, PJG and van Themaat, P VerLoren, Introduction to the Law of the European Communities (3rd edn, Kluwer, London, 1998) 123.Google Scholar See also Gormley, LW, ‘Competition and free movement: is the internal market the same as a common market’ (2002) 13 EBLR 517, 517–18.Google Scholar

¹⁵⁸ Tiebout, CM, ‘A pure theory of local expenditures’ (1956) 64 Journal of Political Economy 416.CrossRefGoogle Scholar For recent European discussion in the tax context, see, eg, Bratton, WW and McCahery, JA, ‘Tax coordination and tax competition in the European Union: evaluating the Code of Conduct on Business Taxation’ (2001) 38 CMLRev 677Google Scholar, in particular at 690–702 and Schön, W, ‘Playing different games? Regulatory competition in tax and company law compared’ (2005) 42 CMLRev 331.Google Scholar See also Kumm, M, ‘Constitutionalising subsidiarity in integrated markets: the case of tobacco regulation in the European Union’ (2006) 12 ELJ 503, 508–18.Google Scholar

¹⁵⁹ See Snell, J, ‘Who's got the power? Free movement and allocation of competences in EC law’ (2003) 22 YEL 323, 325–37Google Scholar and Spaventa, (n 7) 764–6.Google Scholar See also Kingreene, T, ‘Fundamental freedoms’ in von Bogdandy, A and Bast, J (eds), Principles of European Constitutional Law (Hart Publishing, Oxford, 2006) 570–2.Google Scholar

¹⁶⁰ The Court is aware of this. See Skouris, V, lsquo;Fundamental rights and fundamental freedoms: the challenge of striking a delicate balance’ (2006) 17 EBLR 225, 229.Google Scholar For example, in Case C- 292/04 Meilicke, Weyde, and Stöffler v Finanzamt Bonn-Innenstadt nyr, the German Government argued that the result of the case could be a shortfall in tax revenue amounting to €5 billion. In their respective Opinions, AG Tizzano and AG Stix-Hackl adopted different views on the limita- tion of the temporal effects of the ruling. See generally on the temporal effects of judgments and budgetary consequences Vording, H and Lubbers, A, ‘The ECJ, retrospectivity and the Member States' tax revenues’ [2006] British Tax Rev 91.Google Scholar

¹⁶¹ See in particular the recent rulings in Kerckhaert (n 104) and ACT Group Litigation (n 49), and also the nuanced result in FII Group Litigation (n 80), all of which were decided by the Grand Chamber and to a very large extent follow the Opinions of AG Geelhoed. See also Vanistendael, (n 102) 413 and 417.Google Scholar

¹⁶² See also Vanistendael, F, ‘Memorandum on the taxing powers of the European Union’ [2002] EC Tax Rev 120, in particular 121–2 and 126–7.Google Scholar

¹⁶³ However, there is the possibility of resorting to ‘enhanced cooperation’ between some, but not all, Member States. In the tax context, see, eg, Commission Communication, ‘Towards an Internal Market without tax obstacles’ COM(2001) 582 final, 17.Google Scholar

¹⁶⁴ See Guerrera, F and Guha, K, ‘Milk dispute sours EU savings tax deal’, Financial Times (London, 22 03 2003) 9.Google Scholar

¹⁶⁵ See Wattel, PJ, ‘Red herrings in direct tax cases before the ECJ’ (2004) 31 LIEI 81, 82.Google Scholar See ibid and Wattel, PJ, ‘Köbler, CILFIT and Welthgrove: we can't go on meeting like this’ (2004) 41 CMLRev 177, 179 and 184–5Google Scholar for fierce criticism of some of the Court's rulings. See also O'Brien, M, ‘Company taxation, state aid and fundamental freedoms: is the next step enhanced co- operation?’ (2005) 30 ELRev 209, 217Google Scholar, and more generally on the difficulties the Court is facing as a result of the wide variety of technical areas of law it needs to come to grips with Snell, J, ‘European courts and intellectual property: a tale of Hercules, Zeus, and Cyclops’ (2004) 29 ELRev 178, 183–6.Google Scholar

¹⁶⁶ ACT Group Litigation (n 49) para 39.

¹⁶⁷ The Commission has put forward ambitious ideas on home State taxation and common tax base. See, eg, Commission Communication, ‘Tackling the corporation tax obstacles of small and medium-sized enterprises in the Internal Market—outline of a possible Home State Taxation pilot scheme’ COM(2005) 702Google Scholar final and Commission Communication, ‘Implementing the Community Lisbon Programme: Progress to date and next steps towards a Common Consolidated Corporate Tax Base (CCCTB)’ COM(2006) 157 final.Google Scholar See also the discussion of various coordination initiatives in Commission Communication on ‘Co-ordinating Member States' direct tax systems in the Internal Market’ (n 80). Contrast however on the common tax base McCreevy, C, ‘Tax harmonisation—no thanks’ Speech/05/679, where the European Commissioner for Internal Market and Services declares himself opposed to tax harmonization ‘through the back door’.Google Scholar

¹⁶⁸ For a strong criticism of the US Supreme Court's case law on state taxation and the Commerce Clause see Zelinsky, EA, ‘Restoring politics to the Commerce Clause: the case for abandoning the dormant Commerce Clause prohibition on discriminatory taxation’ (2002) 29 Ohio Northern U L Rev 29Google Scholar, where the author argues for shifting tax controversies from the courts to Congress.