Chapter 6 EU Law Flashcards
6.2 Origins and aims of the EU
EU created by the treaty on the European Coal and Steel Community 1951, then two more treaties were signed in 1957, the Treaty establishing the European Economic Community and the one establishing the European Atomic Energy Committee. At the time there were just 6 member states. These treaties merged as a result of the 1967 Merger Treaty. The Maastricht Treaty 1993 created the EU.
The treaty of Lisbon 2007 amended the EU so it provides a reference to the EU’s charter of fundamental rights, making the latter document legally binding and amended the treaty establishing the EU (original treaty of Rome) so it because the Treaty on the Functioning of the EU. The treaty also streamlines rules when the EU had fewer members, changed the way in which responsibilities are divided between the EU and member states and amended the role of national parliaments within the EU.
The charter of fundamental rights has the same legal status of the Treaty on EU. The text is mainly in harmony with the European Convention on Human Rights. The charter contains sections on six fundamental rights: dignity, freedoms, equality, solidarity, citizens’ rights and justice. A protocol to the Lisbon treaty states the charter of fundamental rights does not extend the ability of any court and cannot strike down UK law.
6.3 Policy areas of the EU
Policy area is categorized into three areas:
Exclusive competence – EU has exclusive competence to make directive in these areas. There areas are competition rules for the internal market, customs union, monetary policy for the Euro, common fishing policy and common commercial policy.
Shared competence – the right to legislate in the area is shared between the EU and member states. These include the internal market, consumer protection, the environment and energy.
Supporting competence – the EU is allowed to carry out actions to support, coordinate or supplement the actions of the member states.
6.4 Membership and institutions of the EU - Parliament, council of EU, European Commission and European Council
There are 28 member states of the EU. 5 countries have met the conditions for membership but have not yet acceded.
There are seven main institutions of the EU: European Parliament, European Council, Council of the EU, European Commission, Court of Justice of the EU, European Central Bank and the European Court of Auditors.
European Parliament – 751 members who are directly elected in each member state. They serve 5-year terms and sit in political not national blocks. Each member states have at least 6 MEPs, proportionate to size of the country. They have ordinary legislate power or co-decision power with the Council of the EU in many areas. It can accept, amend or reject the content of the EU legislation, but cannot initiate legislation.
European Council – heads of the member states meet together to establish basic policies of the EU. It became an institution following the Treaty of Lisbon.
The Council of the European Union – deals with more detailed issues and decision making. Member states are represented by a politician of ministerial level. It adopts almost all EU legislation subject to consultation with European Parliament.
The European Commission – responsible for proposing draft legislation (right of initiative). They can also enact legislation. They ensure all the treaty provisions and measures adopted under them by the institutions are properly implemented. If they find cases of infringement, they have the power to intervene and refer the matter to the European Court of Justice. One commissioner is elected President for a five-year term. The commissioners should be independent and are organized into Directives General covering areas of policy and external relations
6.4 Membership and institutions of the EU - Lisbon treaty, court of justice of EU
The Lisbon treaty increased the power of European Parliament, so they have equal powers on areas of co-decision to the Council of the EU, creating a bi-cameral legislature. In some areas special legislative procedures apply, for example the consultation procedure, whereby the council of the European Union must consult with the European Parliament before voting on the commission proposal. They are not bound to Parliaments position however.
Court of Justice of the European Union – final authority on the interpretation of EU law. Split into the full European Court of Justice and the General Court. The full court has one judge per member states and 11 advocates general who are appointed on renewable 6-year terms, their role is to present reasoned submissions on cases before the court of justice to assist the court.
The court hears:
• Actions against member states or EU institutions for failure to fulfil obligations
• Actions for annulment of a measure or for failure brought by a member states against the community institutions
• Preliminary references from national courts
• Appeals from the general court
Judges in the national courts are also judges of EU law. Preliminary rulings from the court are then applied by domestic courts.
The general court created in 1988 aims to reduce the workload of the full court, it has 56 judges. The general court has jurisdiction to hear in the first instance actions brought by natural or legal persons:
• Actions for annulment of acts of EU institutions or failure to act on the institutions
• Actions seeking compensation for damage caused by the EU institutions or their staff
• Actions based on contracts made by the EU which give jurisdiction to the general court.
6.5 Source of EU Law
Primary source of EU law is the Treaty on the Functioning of the European Union, formerly the treaty of Rome. Secondary legislation made by the council of the EU or the European Commission takes five forms:
• Regulations – binding and directly applicable in all member states. Direct applicability means that a regulation automatically becomes part of national law.
• Directives – binding in terms of the result, member states decide how to implement them. In the UK this takes the form of Acts of Parliament or statutory instruments.
• Decisions – binding on whom they are addressed to
• Recommendations – no binding force but are persuasive
• Opinions – express the point of view of an EU institution and are not binding.
In EU law the four freedoms are reference to the free movement of goods, services and freedom of establishment, persons and capital.
6.6 Direct Effect of EU Law
Direct effect is not direct applicability, it gives rise to rights or obligations which individuals and businesses may enforce before national courts. Vertical direct effect is where an individual or business can invoke a provision against a member state. Horizontal direct effect is where a provision may be invoked by one individual or business against another.
The criteria which a provision must satisfy for it to have direct effect are:
• The wording must be capable of giving rights and be clear and precise
• The provision must be unconditional
• The operation must not be dependent on further action being taken by the EU or national authorities or leave them any discretion.
Specific treaty provisions can have both vertical and horizontal direct effect. Provisions of a directive can have vertical direct effects but not horizontal direct effects. Vertical effect of a provision can only take place where the directive has not been implemented and the date for implementation has passed or it has been implemented incorrectly. The CJEU came up with two ways of getting around the problems created by a lack of horizontal direct effect for directives:
• Indirect effect is an interpretative tool that asks national courts to consider domestic legislation in the light of EU legislation in order to interpret the former to correspond with the latter
• If this fails then individuals can sue their national governments under member state liability if four conditions are satisfied.
6.7 Procedure for adopting legislative proposals in the EU
The European commission drafts legislative proposals and then the Council of the EU and European Parliament are involved in the enactment under the ordinary legislative procedure or one of the special legislative procedures are laid down. The ordinary or co-decision procedure works as follows:
• European commission sends it proposal to European parliament and the council of the EU
• Parliament considers the proposals can make amendments and sends them to the council of the EU
• If the council of the EU agrees, it adopts the amended legislation. If they don’t agree they adopt a common position and sends it back to Parliament
• Parliament either approves the common position and the legislation is adopted or rejects it and suggests alterations
• Rejected proposals go back to the council of the EU and they either adopt the proposal or refers the matter to the Conciliation committee
• If the conciliation committee approves a joint text, this is referred to both institutions for approval. If there is no approved text, the proposal fails and is not adopted.
The special legislative procedure depends on which article of the TFEU is used as the legal base for approval:
• Consultation procedure – commission forwards the text to the Council of the EU which consults with Parliament, both deliver an opinion. The council has not duty to follow Parliaments recommendations.
• Consent procedure – Parliament can reject or approve the proposal without amendments. The Council of the EU cannot overrule Parliaments opinion, but has the power of veto. This procedure is rarely used now.
6.8 Damages for breach of EU law
CJEU has developed the concept of member state liability to compensate individuals to whom damage was caused by a breach of EU law. In order for damages to be payable the following four conditions must be met:
• Rule of law was infringed and intended to confer rights on individuals
• Content of rights can be identified from the provisions of the rule of law infringed
• There is a direct link between the breach or misapplication and the damage
• The breach of misapplication was sufficiently serious
Intentional fault or negligence is not an essential precondition to member state liability. The breach can consist of an omission to act or in the commission of an act.
6.9 Supremacy of EU law
EU law has priority over any conflicting national provision. This means treaty provisions and directly applicable measures automatically render any conflicting provision of national law inapplicable. The national court is also required to set aside conflicting provisions without having to wait for the legislature to repeal or amend the measure.
6.10 Impact and interpretation of EU law
Interpretation requires a contextual approach, which means setting the relevant provision in the current overall context. Sometimes referred to as the deductive system:
• Start with the general laws
• Look to more detailed provisions in the relevant chapter, then
• Look at relevant secondary legislation, then
• Look to any case law on the interpretation and application of the provisions
Secondary legislation always commences with a preamble explaining their intention, this is used in the interpretation of the operative part of the text. European measures must therefore be read as a whole and be constructed to give effect to their purpose and intent.
Provisions of EU law must be interpreted in the light of many general principals of European law. These include:
• Proportionality – institutions involvement must be limited to what is necessary to achieve the objective of treaty
• Legitimate expectation and legal certainty
• Equality and non-discrimination on the grounds of nationality
• The right to a fair hearing
• The principle of equivalence – members state procedural rights for safeguarding EU rights must be no less favorable than those governing domestic actions
• The principle of effectiveness – procedural rules of member states safeguarding EU rights must not render virtually impossible or difficult the exercise of rights conferred by EU law.
6.11 EU law and taxation
Tax measures of the EU aim to prevent the portioning of markets on national grounds through use of the tax system. There are:
• Free movement provisions aimed at preventing the distortion of competition between imported and exported goods
• Provisions on tax discrimination and fiscal barriers. Member states must not use the national tax regime to discriminate against goods coming in from other member states. Any refund of internal taxes when products are exported must not exceed the level of internal taxation imposed on them.
• Provisions on harmonization of direct and indirect taxes. The three main principles here are the non-discrimination principle (a measure id discriminatory if non-nationals are subject to higher tax or they burden a levy for more tax), the tax cohesion principle (where there is a link between a tax benefit and a tax cost, the member state can apply the relevant domestic law even if it results in discrimination) and the principle of non-restriction in tax cases. If a tax measure has a negative effect on the non-discrimination principle it may qualify as being justified under the tax cohesion principle.
• Principles of EU have successfully relied on courts to challenge national tax measures
• The state aid rules
6.12 Introduction to Harmonization of Indirect taxation
Each member state retains its own tax system but must operate a non-discrimination policy as to the origin of goods. The European Commission has concentrated on VAT and exercise duties.
There is a common system of VAT and duties in some areas such as alcohol with minimum and maximum tax rates. In 2006 a VAT directive codified VAT law in the EU without changing existing legislation. Its objectives were to simply current rules and ensure uniform application of current rules.
6.13 Introduction to EU impact on direct taxation
EU do not have exclusive legislative powers in this area, member states have direct competence in the area of direct taxes. Article 115 TFEU provides for the harmonization in this area, this provision may act as a legal basis to harmonize direct tax, but the article requires the unanimous agreement of member states to adopt a measure. #
The EU has adopted limited directive in the area. There is a directive on the common system of tax applicable to mergers, divisions, transfer of assets and exchanges of shares concerning companies of different member states (merger directive).
The EU has begun introducing measures to ensure fair taxation on profits, the commission recently introduced directives for a common consolidated corporate tax base and proposed two directives to the taxation of the digital economy.
Member states are obliged to ensure the functioning of the four freedoms of the internal market is secured for the harmonization to proceed. The code of conduct for business taxation is a non-binding legal instrument by which member states have undertaken at a political level to avoid introducing new measures that create harmful tax competition and to eliminate existing tax measures that are considered harmful under the code.
6.14 EU state aid rules in the field of taxation
Any aid granted by a member state in any form which distorts or threatens to distort competition by favoring certain undertakings or the production of certain goods shall be incompatible with the internal market. The following principles apply to state aid rules:
• They cover only measures involving a transfer of state resources, which includes a state exempting or lowering the level of tax in any form whatsoever, as there is a loss of tax revenue
• The aid should constitute an economic advantage that the business would not have otherwise received.
• The aid must be selective and affect the balance between certain businesses and their competitors. Selectivity is what differentiates state aid from general measures. A scheme is selective if it is aimed at a certain product or business or applies within a geographical region which is only part of a member state, or if the authorities administering the scheme enjoy a degree of discretionary power.
• The aid must have a potential effect on competition and affect trade between member states.
