European single market | |
|---|---|
 Non-EU states which participate in the single market via theEEA or are in multilateral, sectoral agreements with the EU (seeintegration of non-EU states) | |
| Policy of | European Union |
| Official languages | Languages of the European Union |
| Demonym | European |
| Type | Single market |
| Member states | 27 EU states 4 (non-EU)EFTA states |
| Establishment | 1 January 1993 |
| Area | |
• Total | 4,986,038 km2 (1,925,120 sq mi) |
• EU | 4,324,782 km2 (1,669,808 sq mi) |
| Population | |
• 2021 estimate | 448,350,000 |
• EU 2021 estimate | 441,350,000 |
| GDP (nominal) | 2020 estimate |
• Total | US$16.3 trillion[1] |
• Per capita | US$39,537 |
| Currency | Euro (EUR) |
TheEuropean single market, also known as theEuropean internal market or theEuropean common market, is thesingle market comprising mainly the 27member states of theEuropean Union (EU). With certain exceptions, it also comprisesIceland,Liechtenstein,Norway (through the Agreement on theEuropean Economic Area), andSwitzerland (throughsectoral treaties). The single market seeks to guarantee the free movement ofgoods,capital,services, andpeople, known collectively as thefour freedoms of the European Union.[2][3][4][5] This is achieved through common rules and standards that all participating states are legally committed to follow.
Anypotential EU accession candidates are required to make association agreements with the EU during the negotiation, which must be implemented prior to accession.[6] In addition, through three individual agreements on aDeep and Comprehensive Free Trade Area (DCFTA) with the EU,Georgia,Moldova, andUkraine have also been granted limited access to the single market in selected sectors.[7]Turkey has access to the free movement of some goods via its membership in theEuropean Union–Turkey Customs Union.[8] The United Kingdom left the European single market on 31 December 2020. Anagreement was reached between the UK Government and European Commission to alignNorthern Ireland on rules for goods with the European single market, tomaintain an open border on the island ofIreland.[9]
The market is intended to increasecompetition,labour specialisation, andeconomies of scale, allowing goods andfactors of production to move to the area where they are most valued, thus improving the efficiency of the allocation of resources. It is also intended to drive economic integration whereby the once separate economies of the member states become integrated within a single EU-wide economy.[10] The creation of the internal market as a seamless, single market – which the Commission consider to be "one of the European Union's most significant achievements"[11] – is also an ongoing process, with the integration of the service industry still containing gaps.[12] According to a 2019 estimate, because of the single market the GDP of member countries is on average 9 percent higher than it would be if tariff and non-tariff restrictions were in place.[13]
One of the core objectives of theEuropean Economic Community (EEC) upon its establishment in 1957 was the development of a common market offering free movement of goods, service, people and capital. Free movement of goods was established in principle through thecustoms union between its then-six member states.
However, the EEC struggled to enforce a single market due to the absence of strong decision-making structures. Because of protectionist attitudes, it was difficult to replaceintangible barriers with mutually recognized standards and common regulations.
In the 1980s, when the economy of the EEC began to lag behind the rest of the developed world,Margaret Thatcher sentLord Cockfield to theDelors Commission to take the initiative to attempt to relaunch the common market. Cockfield wrote and published a White Paper in 1985 identifying 300 measures to be addressed in order to complete a single market.[14][15][16] The White Paper was well received and led to the adoption of theSingle European Act, a treaty which reformed the decision-making mechanisms of the EEC and set a deadline of 31 December 1992 for the completion of a single market. In the end, it was launched on 1 January 1993.[17]
The new approach, pioneered at the Delors Commission, combined positive and negative integration, relying upon minimum rather than exhaustive harmonisation. Negative integration consists of prohibitions imposed on member states banning discriminatory behaviour and other restrictive practices. Positive integration consists of approximating laws and standards. Especially important (and controversial) in this respect is the adoption of harmonising legislation under Article 114 of theTreaty on the Functioning of the European Union (TFEU).
The commission also relied upon theEuropean Court of Justice'sCassis de Dijon[18] jurisprudence, under which member states were obliged to recognise goods which had been legally produced in another member state, unless the member state could justify the restriction by reference to a mandatory requirement. Harmonisation would only be used to overcome barriers created by trade restrictions which survived theCassis mandatory requirements test, and to ensure essential standards where there was a risk of arace to the bottom. Thus, harmonisation was largely used to ensure basic health and safety standards were met.
By 1992 about 90% of the issues had been resolved[19] and in the same year theMaastricht Treaty set about to create anEconomic and Monetary Union as the next stage of integration. Work on freedom for services took longer, and was the last freedom to be implemented, mainly through thePosting of Workers Directive (adopted in 1996)[20] and theDirective on services in the internal market (adopted in 2006).[21]
In 1997 theAmsterdam Treaty abolished physical barriers across the internal market by incorporating theSchengen Area within the competences of the EU. TheSchengen Agreement implements the abolition of border controls between most member states, common rules on visas, and police and judicial co-operation.[22]
The official goal of theLisbon Treaty was to establish an internal market, which would balance economic growth and price stability, a highly competitivesocial market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment, with also promoting scientific and technological advance.[a] Even as theLisbon Treaty came into force in 2009, however, some areas pertaining to parts of the four freedoms (especially in the field of services) had not yet been completely opened. Those, along with further work on the economic and monetary union, would see the EU move further to aEuropean Home Market.[19]
In 2010,José Manuel Durão Barroso, thenPresident of the European Commission, asked former Italian Prime MinisterMario Monti to draft a report on revitalizing the European Single Market. The resulting document, known as the Monti Report, was presented in May 2010 and identified barriers to the internal market while proposing measures to strengthen economic integration and competitiveness. The report laid the groundwork for the "Single Market Act",[b] a set of initiatives launched by the European Commission to enhance the functioning of the Single Market.[24]
Following the Monti Report, the European Union continued to commission high-level reflections on the future of its economic integration. Priority actions identified by "Single Market Act II" in October 2012 included actions in the fields of transport, citizen and business mobility, thedigital economy and social entrepreneurship.[25]
In April 2024,Enrico Letta, former Italian Prime Minister and President of theJacques Delors Institute, presented the Letta Report,Much More Than a Market, which called for a strategic renewal of the European Single Market to support the green and digital transitions, enhance economic cohesion, and promote a "fifth freedom" focused on knowledge and innovation.[26][27] Around the same time,Mario Draghi was tasked with preparing a report on European competitiveness, addressing long-term structural reforms needed to boost productivity, resilience, and the EU's global economic standing.[28]
The "four freedoms" of the single market are:
The range of "goods" (or "products") covered by the term "free movement of goods" "is as wide as the range of goods in existence".[29] Goods are only covered if they have economic value, i.e. they can be valued in money and are capable of forming the subject of commercial transactions.Works of art,coins which are no longer in circulation and water are noted as examples of "goods".[29] Fish are goods, but aEuropean Court of Justice ruling in 1999 stated thatfishing rights (or fishing permits) are not goods, but a provision of service. The ruling further explains that, both capital and service can be valued in money and are capable of forming the subject of commercial transactions, but they are not goods.[30]
Council Regulation (EC) 2679/98 of 7 December 1998, on the functioning of the internal market in relation to thefree movement of goods among the Member States, was aimed at preventing obstacles to the free movement of goods attributable to "action or inaction" by a Member State. The regulation empowered the Commission to request intervention by a Member State when the actions of private individuals were creating an "obstacle" to free movement of goods. A resolution was adopted by the Council and member state government representatives on the same day, under which the member states agreed to take action where necessary to protect the free movement of goods and other freedoms, and to issue public information where there were disruptions, including their efforts to address obstacles to free movement of goods.[31]
Thecustoms union of the European Union removes customs barriers between member states and operates a common customs policy towards third countries, with the aim "to ensure normal conditions of competition and to remove all restrictions of a fiscal nature capable of hindering the free movement of goods within the Common Market".[32]
Aspects of the EU Customs area extend to a number of non-EU-member states, namelyAndorra,Monaco,San Marino and Turkey, under separately negotiated arrangements. The United Kingdom agreed on a trade deal with the European Union on 24 December 2020, which was signed byPrime MinisterBoris Johnson on 30 December 2020.[33]
Article 30 of the Treaty on the Functioning of the European Union ("TFEU") prohibits border levies between member states on bothEuropean Union Customs Union produce and non-EUCU (third-country) produce. Under Article 29 of the TFEU, customs duty applicable to third country products are levied at the point of entry into EUCU, and once within the EU external border goods may circulate freely between member states.[35]
Under the operation of theSingle European Act, customs border controls between member states have been largely abandoned. Physical inspections on imports and exports have been replaced mainly by audit controls and risk analysis.[citation needed]
Article 30 of the TFEU prohibits not only customs duties but also charges having equivalent effect. TheEuropean Court of Justice defined "charge having equivalent effect" inCommission v Italy.
[A]ny pecuniary charge, however small and whatever its designation and mode of application, which is imposed unilaterally on domestic or foreign goods by reason of the fact that they cross a frontier, and which is not a customs duty in the strict sense, constitutes a charge having an equivalent effect... even if it is not imposed for the benefit of the state, is not discriminatory or protective in effect and if the product on which the charge is imposed is not in competition with any domestic product.[36]
A charge is a customs duty if it is proportionate to the value of the goods; if it is proportionate to the quantity, it is a charge having equivalent effect to a customs duty.[37]
There are three exceptions to the prohibition on charges imposed when goods cross a border, listed in Case 18/87 Commission v Germany. A charge is not a customs duty or charge having equivalent effect if:
Article 110 of the TFEU provides:
No Member State shall impose, directly or indirectly, on the products of other member states any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.
Furthermore, no Member State shall impose on the products of other member states any internal taxation of such a nature as to afford indirect protection to other products.
In thetaxation of rum case, the ECJ stated that:
The Court has consistently held that the purpose of Article 90 EC [now Article 110], as a whole, is to ensure the free movement of goods between the member states under normal conditions of competition, by eliminating all forms of protection which might result from the application of discriminatory internal taxation against products from other member states, and to guarantee absolute neutrality of internal taxation as regards competition between domestic and imported products.[41]
Free movement of goods within theEuropean Union is achieved by acustoms union and the principle of non-discrimination.[42] The EU manages imports from non-member states, duties between member states are prohibited, and imports circulate freely.[43] In addition under theTreaty on the Functioning of the European Union article 34, 'Quantitative restrictions on imports and allmeasures having equivalent effect shall be prohibited between Member States'. InProcureur du Roi v Dassonville[44] theCourt of Justice held that this rule meant all "trading rules" that are "enacted by Member States" which could hinder trade "directly or indirectly, actually or potentially" would be caught by article 34.[45] This meant that aBelgian law requiringScotch whisky imports to have a certificate of origin was unlikely to be lawful. It discriminated against parallel importers like Mr Dassonville, who could not get certificates from authorities in France, where they bought theScotch. This "wide test",[46] to determine what could potentially be an unlawful restriction on trade, applies equally to actions by quasi-government bodies, such as the former "Buy Irish" company that had government appointees.[47]
It also means states can be responsible for private actors. For instance, inCommission v France French farmer vigilantes were continually sabotaging shipments of Spanishstrawberries, and even Belgian tomato imports. France was liable for these hindrances to trade because the authorities "manifestly and persistently abstained" from preventing the sabotage.[48] Generally speaking, if a member state has laws or practices that directly discriminate against imports (or exports underTFEU article 35) then it must be justified under article 36, which outlines all of the justifiable instances.[49] The justifications include publicmorality, policy or security, "protection of health and life ofhumans, animals or plants", "national treasures" of "artistic, historic or archaeological value" and "industrial and commercial property". In addition, although not clearly listed, environmental protection can justify restrictions on trade as an over-riding requirement derived fromTFEU article 11.[50] TheEyssen v Netherlands case from 1981 outlined a disagreement between the science community and the Dutch government whether niacin in cheese posed a public risk. As public risk falls under article 36, meaning that a quantitative restriction can be imposed, it justified the import restriction against the Eyssen cheese company by the Dutch government.[51]
More generally, it has been increasingly acknowledged that fundamental human rights should take priority over all trade rules. So, inSchmidberger v Austria[52] theCourt of Justice held thatAustria did not infringe article 34 by failing to ban a protest that blocked heavy traffic passing over the A13,Brenner Autobahn, en route to Italy. Although many companies, including Mr Schmidberger's German undertaking, were prevented from trading, theCourt of Justice reasoned thatfreedom of association is one of the "fundamental pillars of a democratic society", against which the free movement of goods had to be balanced,[53] and was probably subordinate. If a member state does appeal to the article 36 justification, the measures it takes have to be appliedproportionately. This means the rule must be pursue a legitimate aim and (1) besuitable to achieve the aim, (2) be necessary, so that a less restrictive measure could not achieve the same result, and (3) bereasonable in balancing the interests of free trade with interests in article 36.[54]
Often rules apply to all goods neutrally, but may have a greater practical effect on imports than domestic products. For such "indirect" discriminatory (or "indistinctly applicable") measures theCourt of Justice has developed more justifications: either those in article 36, or additional "mandatory" or "overriding" requirements such asconsumer protection, improvinglabour standards,[56] protecting the environment,[57] press diversity,[58] fairness in commerce,[59] and more: the categories are not closed.[60] In the most famous caseRewe-Zentral AG v Bundesmonopol für Branntwein,[61] theCourt of Justice found that a German law requiring all spirits and liqueurs (not just imported ones) to have a minimum alcohol content of 25 per cent was contrary toTFEU article 34, because it had a greater negative effect on imports. German liqueurs were over 25 per cent alcohol, butCassis de Dijon, which Rewe-Zentrale AG wished to import from France, only had 15 to 20 per cent alcohol. The Court of Justice rejected the German government's arguments that the measure proportionately protected public health underTFEU article 36,[c] because stronger beverages were available and adequate labelling would be enough for consumers to understand what they bought.[62] This rule primarily applies to requirements about a product's content or packaging. InWalter Rau Lebensmittelwerke v De Smedt PVBA[63] theCourt of Justice found that a Belgian law requiring allmargarine to be incube shaped packages infringed article 34, and was not justified by the pursuit of consumer protection. The argument that Belgianswould believe it was butter if it was not cube shaped was disproportionate: it would "considerably exceed the requirements of the object in view" and labelling would protect consumers "just as effectively".[64]
In a 2003 case,Commission v Italy,[65] Italian law required that cocoa products that included othervegetable fats could not be labelled as "chocolate". It had to be "chocolate substitute". All Italian chocolate was made fromcocoa butter alone, but British, Danish and Irish manufacturers used other vegetable fats. They claimed the law infringed article 34. TheCourt of Justice held that a low content of vegetable fat did not justify a "chocolate substitute" label. This was derogatory in the consumers' eyes. A "neutral and objective statement" was enough to protect consumers. If member states place considerable obstacles on the use of a product, this can also infringe article 34. So, in a 2009 case,Commission v Italy, theCourt of Justice held that an Italian law prohibiting motorcycles or mopeds from pulling trailers infringed article 34.[66] Again, the law applied neutrally to everyone, but disproportionately affected importers, because Italian companies did not make trailers. This was not a product requirement, but the Court reasoned that the prohibition would deter people from buying it: it would have "a considerable influence on the behaviour of consumers" that "affects theaccess of that product to the market".[67] It would require justification under article 36, or as a mandatory requirement.
In contrast to product requirements or other laws that hindermarket access, theCourt of Justice developed a presumption that "selling arrangements" would be presumed to not fall intoTFEU article 34, if they applied equally to all sellers, and affected them in the same manner in fact. InKeck and Mithouard[68] two importers claimed that their prosecution under a Frenchcompetition law, which prevented them from sellingPicon beer under wholesale price, was unlawful. The aim of the law was to preventcut throat competition, not to hinder trade.[69] TheCourt of Justice held, as "in law and in fact" it was an equally applicable "selling arrangement" (not something that alters a product's content[70]) it was outside the scope of article 34, and so did not need to be justified. Selling arrangements can be held to have an unequal effect "in fact" particularly where traders from another member state are seeking to break into the market, but there are restrictions on advertising and marketing. InKonsumentombudsmannen v De Agostini[71] theCourt of Justice reviewedSwedish bans onadvertising to children under age 12, and misleading commercials for skin care products. While the bans have remained (justifiable under article 36 or as a mandatory requirement) the Court emphasised that complete marketing bans could be disproportionate if advertising were "the only effective form of promotion enabling [a trader] to penetrate" the market. InKonsumentombudsmannen v Gourmet AB[72] the Court suggested that a total ban for advertising alcohol on the radio, TV and in magazines could fall within article 34 where advertising was the only way for sellers to overcome consumers' "traditional social practices and to local habits and customs" to buy their products, but again the national courts would decide whether it was justified under article 36 to protect public health. Under theUnfair Commercial Practices Directive, the EU harmonised restrictions on restrictions on marketing and advertising, to forbid conduct that distorts average consumer behaviour, is misleading or aggressive, and sets out a list of examples that count as unfair.[73] Increasingly, states have to givemutual recognition to each other's standards of regulation, while the EU has attempted to harmonise minimum ideals of best practice. The attempt to raise standards is hoped to avoid a regulatory "race to the bottom", while allowing consumers access to goods from around the continent.[citation needed]
Free movement ofcapital was traditionally seen as the fourth freedom, after goods, workers and persons, services and establishment. The originalTreaty of Rome required that restrictions on free capital flows only be removed to the extent necessary for the common market. From theMaastricht Treaty, now inTFEU article 63, "all restrictions on the movement of capital between the Member States and between Member States and third countries shall be prohibited". This meanscapital controls of various kinds are prohibited, including limits on buying currency, limits on buyingcompany shares or financial assets, or government approval requirements forforeign investment. By contrast, taxation of capital, includingcorporate tax,capital gains tax andfinancial transaction tax, are not affected so long as they do not discriminate by nationality. According to theCapital Movement Directive 1988, Annex I, 13 categories of capital which must move free are covered.[74]
InBaars v Inspecteur der Belastingen Particulieren theCourt of Justice held that for investments in companies, the capital rules, rather than freedom of establishment rules, were engaged if an investment did not enable a "definite influence" through shareholder voting or other rights by the investor.[75] That case held a Dutch Wealth Tax Act 1964 unjustifiably exempted Dutch investments, but not Mr Baars' investments in an Irish company, from the tax: the wealth tax, or exemptions, had to be applied equally. On the other hand,TFEU article 65(1) does not prevent taxes that distinguish taxpayers based on their residence or the location of an investment (as taxes commonly focus on a person's actual source of profit) or any measures to preventtax evasion.[76] Apart from tax cases, largely following from the opinions ofAdvocate General Maduro,[77] a series of cases held that government ownedgolden shares were unlawful. InCommission v Germany the Commission claimed the GermanVolkswagen Act 1960 violated article 63, in that §2(1) restricted any party having voting rights exceeding 20% of the company, and §4(3) allowed a minority of 20% of shares held by theLower Saxony government to block any decisions. Although this was not an impediment to the actual purchase of shares, or receipt of dividends by any shareholder, theCourt of Justice's Grand Chamber agreed that it was disproportionate for the government's stated aim of protecting workers or minority shareholders.[78] Similarly, inCommission v Portugal theCourt of Justice held thatPortugal infringed free movement of capital by retaining golden shares inPortugal Telecom that enabled disproportionate voting rights, by creating a "deterrent effect on portfolio investments" and reducing "the attractiveness of an investment".[79] This suggested the Court's preference that a government, if it sought public ownership or control, should nationalise in full the desired proportion of a company in line withTFEU article 345.[80]
Capital within the EU may be transferred in any amount from one country to another (except that Greece currently[when?] hascapital controls restricting outflows, and Cyprus imposed capital controls between 2013 and April 2015). All intra-EU transfers ineuro are considered as domestic payments and bear the corresponding domestic transfer costs.[81] This includes all member States of the EU, even those outside theeurozone providing the transactions are carried out in euro.[82] Credit/debit card charging and ATM withdrawals within the Eurozone are also charged as domestic; however, paper-based payment orders, like cheques, have not been standardised so these are still domestic-based. The ECB has also set up aclearing system,T2 since March 2023, for large euro transactions.[83]
The final stage of completely free movement of capital was thought to require asingle currency andmonetary policy, eliminating thetransaction costs and fluctuations of currency exchange. Following a Report of theDelors Commission in 1988,[84] theMaastricht Treaty madeeconomic and monetary union an objective, first by completing the internal market, second by creating aEuropean System of Central Banks to co-ordinate common monetary policy, and third by locking exchange rates and introducing a single currency, theeuro. Today, 20 member states have adopted theeuro, one is in the process of adopting (Bulgaria), one has determined to opt-out (Denmark) and 5 member states have delayed their accession, particularly since theEurozone crisis. According toTFEU articles 119 and 127, the objective of theEuropean Central Bank and other central banks ought to beprice stability. This has been criticised for apparently being superior to the objective offull employment in theTreaty on European Union article 3.[85]
Within the building on the Investment Plan for Europe, for a closer integration of capital markets, in 2015, the Commission adopted the Action Plan on Building aCapital Markets Union (CMU) setting out a list of key measures to achieve a true single market for capital in Europe, which deepens the existing Banking Union, because this revolves around disintermediated, market-based forms of financing, which should represent an alternative to the traditionally predominant (in Europe) bank-based financing channel.[86] The EU's political and economic context call for strong and competitive capital markets to finance the EU economy.[87] The CMU project is a political signal to strengthen the single market as a project of all 28 Member States,[88] instead of just the Eurozone countries, and sent a strong signal to the UK to remain an active part of the EU, before Brexit.[89]
As well as creating rights for "workers" who generallylack bargaining power in the market,[90] theTreaty on the Functioning of the European Union or TFEU also protects the "freedom of establishment" in article 49, and "freedom to provide services" in article 56.[91]
InGebhard v Consiglio dell’Ordine degli Avvocati e Procuratori di Milano[92] theCourt of Justice held that to be "established" means to participate in economic life "on a stable and continuous basis", while providing "services" meant pursuing activity more "on a temporary basis". This meant that a lawyer fromStuttgart, who had set up chambers inMilan and was censured by the Milan Bar Council for not having registered, should claim for breach of establishment freedom, rather than service freedom. However, the requirements to be registered in Milan before being able to practice would be allowed if they were non-discriminatory, "justified by imperative requirements in the general interest" and proportionately applied.[93] All people or entities that engage in economic activity, particularly the self-employed, or "undertakings" such as companies or firms, have a right to set up an enterprise without unjustified restrictions.[94] TheCourt of Justice has held that both a member state government and a private party can hinder freedom of establishment,[95] so article 49 has both "vertical" and "horizontal" direct effect. InReyners v Belgium[96] the Court of Justice held that a refusal to admit a lawyer to the Belgian bar because he lackedBelgian nationality was unjustified.TFEU article 49 says states are exempt from infringing others' freedom of establishment when they exercise "official authority", but this did an advocate's work[clarification needed] (as opposed to a court's) was not official.[97] By contrast inCommission v Italy the Court of Justice held that a requirement for lawyers in Italy to comply with maximum tariffs unless there was an agreement with a client was not a restriction.[98] TheGrand Chamber of the Court of Justice held the commission had not proven that this had any object or effect of limiting practitioners from entering the market.[99] Therefore, there was noprima facie infringement freedom of establishment that needed to be justified.[citation needed]
In regard to companies, theCourt of Justice held inR (Daily Mail and General Trust plc) v HM Treasury that member states could restrict a company moving its seat of business, without infringingTFEU article 49.[102] This meant theDaily Mail newspaper'sparent company could notavoid tax by shifting its residence to theNetherlands without first settling its tax bills in the UK. The UK did not need to justify its action, as rules on company seats were not yet harmonised. By contrast, inCentros Ltd v Erhvervs- og Selkabssyrelsen the Court of Justice found that a UKlimited company operating inDenmark could not be required to comply with Denmark'sminimum share capital rules. UK law only required £1 of capital to start a company, while Denmark's legislature took the view companies should only be started up if they had 200,000Danish krone (around €27,000) to protectcreditors if the company failed and wentinsolvent. TheCourt of Justice held that Denmark's minimum capital law infringed Centros Ltd's freedom of establishment and could not be justified, because a company in the UK could admittedly provide services in Denmark without being established there, and there were less restrictive means of achieving the aim of creditor protection.[103] This approach was criticised as potentially opening the EU to unjustifiedregulatory competition, and arace to the bottom in standards, like in the US where the state ofDelaware attracts most companies and is often argued to have the worst standards of accountability of boards, and low corporate taxes as a result.[104] Similarly inÜberseering BV v Nordic Construction GmbH the Court of Justice held that a German court could not deny a Dutch building company the right to enforce a contract in Germany on the basis that it was not validly incorporated in Germany. Although restrictions on freedom of establishment could be justified by creditor protection, labour rights to participate in work, or the public interest in collecting taxes, denial of capacity went too far: it was an "outright negation" of the right of establishment.[105] However, inCartesio Oktató és Szolgáltató bt the Court of Justice affirmed again that because corporations are created by law, they are in principle subject to any rules for formation that a state of incorporation wishes to impose. This meant that the Hungarian authorities could prevent a company from shifting its central administration to Italy while it still operated and was incorporated in Hungary.[106] Thus, the court draws a distinction between the right of establishment for foreign companies (where restrictions must be justified), and the right of the state to determine conditions for companies incorporated in its territory,[107] although it is not entirely clear why.[108]
The "freedom to provide services" underTFEU article 56 applies to people who provide services "for remuneration", especially in commercial or professional activity.[109] For example, inVan Binsbergen v Bestuur van de Bedrijfvereniging voor de Metaalnijverheid a Dutch lawyer moved to Belgium while advising a client in asocial security case, and was told he could not continue because Dutch law said only people established in the Netherlands could give legal advice.[110] TheCourt of Justice held that the freedom to provide services applied, it was directly effective, and the rule was probably unjustified: having an address in the member state would be enough to pursue the legitimate aim of good administration of justice.[111]
Case law states that the treaty provisions relating to the freedom to provide services do not apply in situations where the service, service provider and other relevant facts are confined within a single member state.[112] An early Council Directive from 26 July 1971 included works contracts within the scope of services, and provided for the abolition of restrictions on the freedom to provide services in respect of public works contracts.[113]
The Court of Justice has held thatsecondary education falls outside the scope of article 56,[114] because usually the state funds it, though higher education does not.[115] Health care generally counts as a service. InGeraets-Smits v Stichting Ziekenfonds[116] Mrs Geraets-Smits claimed she should be reimbursed by Dutch social insurance for the costs of receiving treatment in Germany. The Dutch health authorities regarded the treatment as unnecessary, so she argued this restricted the freedom (of the German health clinic) to provide services. Several governments submitted that hospital services should not be regarded as economic, and should not fall within article 56. But theCourt of Justice held that health care was a "service" even though the government (rather than the service recipient) paid for the service.[117] National authorities could be justified in refusing to reimburse patients for medical services abroad if the health care received at home was without undue delay, and it followed "international medical science" on which treatments counted as normal and necessary.[118] The Court requires that the individual circumstances of a patient justify waiting lists, and this is also true in the context of the UK'sNational Health Service.[119] Aside from public services, another sensitive field of services are those classified as illegal.Josemans v Burgemeester van Maastricht held that the Netherlands' regulation ofcannabis consumption, including the prohibitions by some municipalities on tourists (but not Dutch nationals) going tocoffee shops,[120] fell outside article 56 altogether. TheCourt of Justice reasoned that narcotic drugs were controlled in all member states, and so this differed from other cases where prostitution or other quasi-legal activity was subject to restriction.
If an activity does fall within article 56, a restriction can be justified under article 52 or over-riding requirements developed by the Court of Justice. InAlpine Investments BV v Minister van Financiën[121] a business that soldcommoditiesfutures (withMerrill Lynch and another banking firm) attempted to challenge a Dutch law prohibitingcold calling customers. The Court of Justice held the Dutch prohibition pursued a legitimate aim to prevent "undesirable developments in securities trading" including protecting the consumer from aggressive sales tactics, thus maintaining confidence in the Dutch markets. InOmega Spielhallen GmbH v Bonn,[122] a "laserdrome" business was banned by theBonn council. It bought fake laser gun services from a UK firm called Pulsar Ltd, but residents had protested against "playing at killing" entertainment. The Court of Justice held that the German constitutional value ofhuman dignity, which underpinned the ban, did count as a justified restriction on the freedom to provide services. InLiga Portuguesa de Futebol v Santa Casa da Misericórdia de Lisboa the Court of Justice also held that the state monopoly on gambling, and a penalty for aGibraltar firm that had sold internet gambling services, was justified to prevent fraud and gambling where people's views were highly divergent.[123] The ban was proportionate as this was an appropriate and necessary way to tackle the serious problems of fraud that arise over the internet. In theServices Directive[124] a group of justifications were codified in article 16 that the case law has developed.
In May 2015 theJuncker Commission[125] announced a plan to reverse the fragmentation of internet shopping and other online services by establishing a Single Digital Market that would cover digital services and goods from e-commerce to parcel delivery rates, uniform telecoms and copyright rules.[126]
The free movement of people meansEU citizens can move freely between member states for whatever reason (or without any reason) and may reside in any member state they choose if they are not an undue burden on the social welfare system or public safety in their chosen member state.[127] This required reduction of administrative formalities and greater recognition of professional qualifications of other states.[128] Fostering the free movement of people has been a major goal of European integration since the 1950s.[129]
Broadly defined, this freedom enables citizens of one Member State to travel to another, to reside and to work there (permanently or temporarily). The idea behind EU legislation in this field is that citizens from other member states should be treated equally to domestic citizens and should not be discriminated against.[citation needed]
The main provision on the freedom of movement of persons is Article 45 of the TFEU, which prohibits restrictions on the basis of nationality.[citation needed]
Since its foundation, the Treaties sought to enable people to pursue their life goals in any country through free movement.[130] Reflecting the economic nature of the project, theEuropean Community originally focused upon free movement of workers: as a "factor of production".[131] However, from the 1970s, this focus shifted towards developing a more "social" Europe.[132] Free movement was increasingly based on "citizenship", so that people had rights to empower them to become economically and socially active, rather than economic activity being a precondition for rights. This means the basic "worker" rights inTFEU article 45 function as a specific expression of the general rights of citizens inTFEU articles 18 to 21. According to theCourt of Justice, a "worker" is anybody who is economically active, which includes everyone in an employment relationship, "under the direction of another person" for "remuneration".[133] A job, however, need not be paid in money for someone to be protected as a worker. For example, inSteymann v Staatssecretaris van Justitie, a German man claimed the right to residence in the Netherlands, while he volunteered plumbing and household duties in theBhagwan community, which provided for everyone's material needs irrespective of their contributions.[134] TheCourt of Justice held that Mr Steymann was entitled to stay, so long as there was at least an "indirect quid pro quo" for the work he did. Having "worker" status means protection against all forms of discrimination by governments, and employers, in access to employment, tax, andsocial security rights. By contrast a citizen, who is "any person having the nationality of a Member State" (TFEU article 20(1)), has rights to seek work, vote in local and European elections, but more restricted rights to claimsocial security.[135] In practice, free movement has become politically contentious as nationalist political parties appear to have utilised concerns about immigrants taking jobs and benefits.
TheFree Movement of Workers Regulation articles 1 to 7 set out the main provisions on equal treatment of workers. First, articles 1 to 4 generally require that workers can take up employment, conclude contracts, and not suffer discrimination compared to nationals of the member state.[137] In a famous case, theBelgian Football Association v Bosman, a Belgian footballer namedJean-Marc Bosman claimed that he should be able to transfer fromR.F.C. de Liège toUSL Dunkerque when his contract finished, regardless of whether Dunkerque could afford to pay Liège the habitual transfer fees.[138] The Court of Justice held "the transfer rules constitute[d] an obstacle to free movement" and were unlawful unless they could be justified in the public interest, but this was unlikely. InGroener v Minister for Education[139] the Court of Justice accepted that a requirement to speakGaelic to teach in aDublin design college could be justified as part of the public policy of promoting the Irish language, but only if the measure was not disproportionate. By contrast inAngonese v Cassa di Risparmio di Bolzano SpA[140] a bank inBolzano, Italy, was not allowed to require Mr Angonese to have a bilingual certificate that could only be obtained in Bolzano. The Court of Justice, giving "horizontal" direct effect toTFEU article 45, reasoned that people from other countries would have little chance of acquiring the certificate, and because it was "impossible to submit proof of the required linguistic knowledge by any other means", the measure was disproportionate. Second, article 7(2) requires equal treatment in respect of tax. InFinanzamt Köln Altstadt v Schumacker[141] the Court of Justice held that it contravenedTFEU art 45 to deny tax benefits (e.g. for married couples, and social insurance expense deductions) to a man who worked in Germany, but was resident in Belgium when other German residents got the benefits. By contrast inWeigel v Finanzlandesdirektion für Vorarlberg the Court of Justice rejected Mr Weigel's claim that a re-registration charge upon bringing his car to Austria violated his right to free movement. Although the tax was "likely to have a negative bearing on the decision of migrant workers to exercise their right to freedom of movement", because the charge applied equally to Austrians, in absence of EU legislation on the matter it had to be regarded as justified.[142] Third, people must receive equal treatment regarding "social advantages", although the Court has approved residential qualifying periods. InHendrix v Employee Insurance Institute the Court of Justice held that a Dutch national was not entitled to continue receiving incapacity benefits when he moved to Belgium, because the benefit was "closely linked to the socio-economic situation" of the Netherlands.[143] Conversely, inGeven v Land Nordrhein-Westfalen the Court of Justice held that a Dutch woman living in the Netherlands, but working between 3 and 14 hours a week in Germany, did not have a right to receive German child benefits,[144] even though the wife of a man who worked full-time in Germany but was resident in Austria could.[145] The general justifications for limiting free movement inTFEU article 45(3) are "public policy, public security or public health",[146] and there is also a general exception in article 45(4) for "employment in the public service".
For workers not citizens of the union but employed in one member state with a work permit, there is not the same freedom of movement within the Union. They need to apply for a new work permit if wanting to work in a different state. A facilitation mechanism for this process is theVan Der Elst visa which gives easier rules should a non-EU worker already in one EU state need to be sent to another, for the same employer, because of a service contract that the employer made with a customer in that other state.[citation needed]
Beyond the right of free movement to work, the EU has increasingly sought to guarantee rights of citizens, and rights simply by being ahuman being.[147] But although theCourt of Justice stated that 'Citizenship is destined to be the fundamental status of nationals of the Member States',[148] political debate remains on who should have access to public services and welfare systems funded by taxation.[149] In 2008, just 8 million people from 500 million EU citizens (1.7 per cent) had in fact exercised rights of free movement, the vast majority of them workers.[150] According toTFEU article 20, citizenship of the EU derives from nationality of a member state. Article 21 confers general rights to free movement in the EU and to reside freely within limits set by legislation. This applies for citizens and their immediate family members.[151] This triggers four main groups of rights: (1) to enter, depart and return, without undue restrictions, (2) to reside, without becoming an unreasonable burden on social assistance, (3) to vote in local and European elections, and (4) the right to equal treatment with nationals of the host state, but for social assistance only after 3 months of residence.
First, article 4 of theCitizens Rights Directive 2004 says every citizen has the right to depart a member state with a validpassport ornational identity card. Article 5 gives every citizen a right of entry, subject to national border controls.Schengen Area countries (of which Ireland is not included) have abolished the need to show travel documents, and police searches at borders, altogether. These reflect the general principle of free movement inTFEU article 21. Second, article 6 allows every citizen to stay three months in another member state, whether economically active or not. Article 7 allows stays over three months with evidence of "sufficient resources... not to become a burden on the social assistance system". Articles 16 and 17 give a right to permanent residence after 5 years without conditions. Third,TEU article 10(3) requires the right to vote in the local constituencies for theEuropean Parliament wherever a citizen lives.
Fourth, and more debated, article 24 requires that the longer an EU citizen stays in a host state, the more rights they have to access public and welfare services, on the basis ofequal treatment. This reflects general principles of equal treatment and citizenship inTFEU articles 18 and 20. In a simple case, inSala v Freistaat Bayern theCourt of Justice held that a Spanish woman who had lived in (Germany) for 25 years and had a baby was entitled tochild support, without the need for a residence permit, because Germans did not need one.[152] InTrojani v Centre public d’aide sociale de Bruxelles, a French man who lived in Belgium for two years was entitled to the "minimex" allowance from the state for a minimum living wage.[153] InGrzelczyk v Centre Public d’Aide Sociale d’Ottignes-Louvain-la-Neuve[154] a French student, who had lived in Belgium for three years, was entitled to receive the "minimex" income support for his fourth year of study. Similarly, inR (Bidar) v London Borough of Ealing theCourt of Justice held that it was lawful to require a FrenchUCL economics student to have lived in the UK for three years before receiving a student loan, but not that he had to have additional "settled status".[155] Similarly, inCommission v Austria, Austria was not entitled to restrict its university places to Austrian students to avoid "structural, staffing and financial problems" if (mainly German) foreign students applied, unless it proved there was an actual problem.[156] However, inDano v Jobcenter Leipzig, the Court of Justice held that the German government was entitled to denychild support to a Romanian mother who had lived in Germany for 3 years, but had never worked. Because she lived in Germany for over 3 months, but under 5 years, she had to show evidence of "sufficient resources", since the Court reasoned the right to equal treatment in article 24 within that time depended on lawful residence under article 7.[157]
Within theSchengen Area, 25 of the 27 EU member states (excludingCyprus, andIreland) and the fourEFTA members (Iceland,Liechtenstein,Norway, andSwitzerland) have abolished physical barriers across the single market by eliminating border controls. In 2015, limited controls were temporarily re-imposed at some internal borders in response to themigrant crisis.
Public procurement legislation[158] and guidance based on "a set of basic standards for the award of public contracts which are derived directly from the rules and principles of the EC Treaty",[159] relating to the four freedoms, require equal treatment, non-discrimination, mutual recognition, proportionality and transparency to be maintained when purchasing goods and services for EU public sector bodies.
Only the EU member states are fully part of the European single market, while several other countries and territories have been granted various degrees of participation. The single market has been extended, with exceptions, toIceland,Liechtenstein, andNorway through the agreement on theEuropean Economic Area (EEA) and toSwitzerland through sectoralbilateral and multilateral agreements. The exceptions, where these EFTA states are not bound by EU law, are:[160]
Switzerland, a member of EFTA but not of the EEA, participates in the single market with a number of exceptions, as defined by theSwitzerland–European Union relations.[citation needed]
Stabilisation and Association Agreement states have a "comprehensive framework in place to move closer to the EU and to prepare for [their] future participation in the Single Market".[161]
Turkey has participated in theEuropean Union–Turkey Customs Union since 1995, which enables it to participate in the free movement of goods (but not of agriculture or services, nor people) with the EU.[8]
Through the agreement of theDeep and Comprehensive Free Trade Area (DCFTA), the three post-Soviet countries ofGeorgia,Moldova, andUkraine were given access to the "four freedoms" of the EU single market: free movement of goods, services, capital, and people. Movement of people however, is in form of visa free regime for short stay travel, while movement of workers remains within the remit of theEU Member States.[7] The DCFTA is an "example of the integration of a Non-EEA-Member into the EU Single Market".[162]
TheUnited Kingdom of Great Britain and Northern Ireland left the European Union at the end of January 2020 and left the single market in December 2020.[163] Under the terms of theNorthern Ireland Protocol of theBrexit withdrawal agreement,Northern Ireland remains aligned to the European single market in a limited way to maintain an open border on the island of Ireland. This includes legislation onsanitary and phytosanitary standards for veterinary controls, rules on agricultural production/marketing, VAT and excise in respect of goods, and state aid rules.[164][165] It alsointroduces some controls on the flow of goods to Northern Ireland fromGreat Britain.
Under the terms of the Protocol, theNorthern Ireland Assembly has the power by a simple majority to continue or terminate the protocol arrangements. In the event that consent to continue is not given, the arrangements would cease to apply after two years. The Joint Committee would make alternative proposals to the UK and EU to avoid a hard border on the island of Ireland.[166]
Akrotiri and Dhekelia, the BritishSovereign Base Areas, located on the island ofCyprus, are integral parts of the EU Customs Union, allowing goods to move freely.[167]
Since 2015, the European Commission has been aiming to build single markets forenergy[168] and for the defence industry.[169]
On 2 May 2017, the European Commission announced a package of measures intended to enhance the functioning of the single market within the EU:[170]
The New Hanseatic League is a political grouping of economically like-minded northern European states, established in February 2018, that is pushing for a more developed European single market, particularly in theservices sector.[173]
3. The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.
— Treaty of Lisbon Article 3, point 3
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