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European Law Blog #7 – Van Gend en Loos Revisted

European Law Blog #7 – Van Gend en Loos Revisted

This week’s blog will focus on the case of Van Gend en Loos which every student must know when studying EU law. ELB will take you through the facts, Advocate-General Roemer’s Opinion and the judgment itself. All the hard work will be done for you!

From humble beginnings as a preliminary reference from the Netherlands, Van Gend established the direct effect of EU law to individuals in Member States, therefore conferring rights upon them that the Member States must uphold. Van Gend paved the way for the ECJ to declare the primacy of EU law (Costa v ENEL) and allowed Member States to be liable for their failure to implement an EU law rule that conferred a right to the individual (Francovich).

In other news, there is a update on the Cyprus bailout that ELB discussed last week, with the Eurozone agreeing to a new deal on Monday. Enjoy!

C-26/62 – NV Algemene Transport- en Expeditie Onderneming van Gend en Loos v Nederlandse administratie der belastingen

The facts: it began with a customs tariff
  • It started as a preliminary reference from the Netherlands Administrative court, the Tariefcommissie.
  • The original action concerned the annulment of a decision by the Netherlands Inland Revenue Administration (NIRA), the Nederlandse administratie der belastingen in 1961.
  • The decision by NIRA was to apply a particular customs duty to the import of the chemical urea-formaldehyde from Germany, pursuant to a new Netherlands customs tariff.
  • It was argued that the amendment of the old tariff to the new customs tariff contravened Article 12 of EEC Treaty (the spirit of which is now in Article 37(2), though the wording has been amended), which states:

    Member States shall refrain from introducing, as between themselves, any new customs duties on importation or exportation or charges with equivalent effect and from increasing such duties or charges as they apply in their commercial relations with each other.

The Netherlands Flag Image courtesy of tuppus on Flickr under the Creative Commons Licence

The Netherlands Flag
Image courtesy of tuppus on Flickr under a Creative Commons Licence

  • The relevant question asked by the Tariefcommissie was whether Article [37(2) TFEU] had direct application to the claimant (Van Gend) so they could rely on it to challenge the decision of the NIRA.
The man: Advocate General Roemer’s opinion

After the Advocate-General critcised the wording of the question from the court as ‘not happily phrased’ (ouch), his opinion was that Article [37(2) TFEU] had no direct application to the claimant due to, inter alia, the wording of the Treaty in question. He reasoned that due to the consistent use of ‘obligation’ it can be inferred that the wording of the Treaty, and its material content, show that these provisions are only concerned with Member States.

The judgment: historical ECJ decision

Obviously, the Court did not agree with Advocate-General Roemer. They took into account other, wider, considerations than the wording and the content of the Treaty:

[The Common Market] implies that this Treaty is ‘more than an agreement which merely creates mutual obligations…’

  • The Court considered ‘the spirit, the general scheme and the wording of those provisions’, including the objective of the EEC Treaty, which was to establish the Common Market.
  • The Common Market was of direct concern to the interested parties, meaning that it is ‘more than an agreement which merely creates mutual obligations’.
  • This is confirmed by the establishment of EU institutions with sovereign rights which affect the Member States and their citizens.
  • As Member States have agreed to Article [267 TFEU] (preliminary reference procedure), which has its objective in the uniform application of Union law, States had also acknowledged that Union law had an authority which can be invoked by their nationals before those courts (involved in the reference procedure).
  • Thus, in conclusion:

    The [Union] constitutes a new legal order of international law for the benefit of which the states have limited their sovereign rights, albeit in limited fields*, and the subjects of which comprise not only Member States but also their nationals…[Union] law therefore not only imposes obligations on individuals but is also intended to confer upon them rights which become part of their legal heritage.

In a few short paragraphs, direct effect was born! In short, the reasoning was the wording, spirit and objectives of the Treaty and, in particular, the authority given to the Court through the preliminary reference procedure.

*In Opinion 1/91 given in 1994, the Court changed the wording of Van Gend from ‘limited fields’ to ‘ever wider fields’ to reflect the continued expansion of the EU into other areas.

A short guide to the the Cyprus bailout

As ELB explained last week, the Eurozone’s proposed bailout of the floundering Cyprus economy was rejected by their Parliament, receiving no votes in favour of the deal. This week saw the frantic debate over what to do next. On Monday evening, the Cypriot government and the Eurozone leaders agreed to a bailout deal that will see the largest lenders in Cyprus divided into ‘bad’ banks and ‘good’ banks.

‘…they’ve destroyed our banking sector.’
Nicholas Papadopolous, Chairman of the Cypriot parliament’s finance committee

  • The deal continues to be worth €10bn and is between the Cypriot government and the EU/International Monetary Fund.
  • Their banks will be restructured significantly.
  • The second largest lender, Laiki Bank, will be closed and deposits of €100,000 euros moved to a so-called ‘bad bank’.
  • The deposits of under €100,000 will be moved to the restructed Bank of Cyprus and will be fully guarateed.
  • Within the Bank of Cyprus, existing deposits of €100,000 will be frozen so they cannot be accessed until the money is raised.
  • Between the two banks, deposits of over €100,000 will be used in order to raised €5.8bn. The exact figure of how much will be used is unknown at present but is reportedly about 30 per cent.
  • The €100,000+ deposits will be used to contribute towards the payback of the debts of Laiki Bank and to recapitalise the Bank of Cyprus.
  • The money taken from €100,000+ deposits will be eventually converted into shares in the banks.
  • BBC’s business legend Robert Peston described what the future of the Cypriot economy is: ‘An economy that will be starved of credit, and will therefore shrink rapidly and very painfully for citizens’.

MOVING ON: Recent legal news

Image courtesy of Alan Dean on Flickr under the Creative Commons Licence

Image courtesy of Alan Dean on Flickr under a Creative Commons Licence

Free movement of workers: David Cameron announced plans on Monday to prevent EU nationals (including those from the European Economic Area) from claiming unemployment benefit whilst they look for work for the first six months of their time in the UK. This is to show that there is ‘no absolute right to unemployment benefit’ for EU nationals. The proposals plan to allow benefits only where the EU national is ‘continuously actively seeking work and have a realistic imminent prospect of finding a job’ – which sounds like the criteria for getting jobseeker’s allowance in the first place, no? Under the free movement of workers regime, EU nationals may only receive benefits according to the same criteria as nationals (pursuant to the principle of non-discrimination), so they must go through the same application process as UK nationals, i.e. signing on at the Jobcentre and adhering to their requirements. Not that one wishes to accuse David Cameron of not being in possession of all the facts…

Progressonline has written an article summing up the flaws in the proposals, which can be read here.

Free movement of goods: As the Chancellor George Osbourne announced his plans to cut the price of beer by a staggering 1p, the good people at Open Europe questioned whether the plans were legal under EU law as he was not also cutting the price of wine. It could be argued that, considering the UK produces very little wine of its own, that it is discriminating against products (wine) from other Member States in favour of its own (beer), thus affording an indirect protection of beer prohibited under internal market provisions. They point out that the case of Commission v United Kingdom in 1983 held that a levy exercised by the UK at a higher rate on wine than beer was contrary to the Article 95 EEC (now Article 114 TFEU).

Continental Mostly French news round-up

It was all about France and money this week as three prominent French politicians are the subject of criminal investigation. Former President Nicholas Sarkozy is under formal investigation after allegation were made that he received illegal donations to his election campaign in 2007 from the richest woman in France, the heiress of L’Oreal Liliane Bettencourt.

Haiku Herman Corner

Readers last week may recall that the European Council President is a haiku fiend, so ELB thinks there should be a permanent haiku Herman corner.

The night has fallen
The bare branches can be seen
Even more lonely.

Moving.

The head of the IMF and important person Christine Lagarde’s flat in Paris was raided by police in connection with an investigation into her role in awarding businessman Bernard Tapie in 2008. When she was finance minister she intervened in his case and referred it to an arbitration court that subsequently awarded him €400m.

The current French budget minister, Jérôme Cahuzac, a man in charge of tax evasion investigations, has resigned after it was alleged that he evaded paying taxes himself by utlising a secret Swiss bank account. All accused in all cases deny the allegations made against them.

Talks in Italy continue about forming a working government
. President Giorgio Napolitano has urged Centre-left bloc leader Bersani to continue talks with possible coalition partners. Meanwhile, Beppe Grillo is stepping up opposition to Italy’s membership of the euro with a guarantee of a referedum on the subject in his Five Star Movement’s official party policy.

EU tweet of the week

This week’s tweet comes from the EUObserver correspondent Valentina Pop (@ValentinaPop), who totally has a go at Germany:

Someone please tell German politicians how arrogant the term “homework” is when used for budget cuts, taxes and so in other countries…

Burrrn.

Absol-EU-tely must read article of the week

This week’s choice is for you if you’re interested in the effect British euro-sceptcism has on our society’s opinion of the European Union. Let’s face it, WHO ISN’T?

‘It tends to be connected to corruption, or dystopian visions of the future in which a United States of Europe has superseded nation states.’

Who?! Profile on the President of the European Central Bank

The EBC is the central bank for the euro and one of the seven institutions of the EU.

Mario Draghi (left) Image courtesy of Convergència Democràtica de Catalunya on Flickr under the Creative Commons Licence

Mario Draghi (left)
Image courtesy of Convergència Democràtica de Catalunya on Flickr under a Creative Commons Licence

Name: Mario Draghi
Nationality: Italian
Occupation: President of the ECB since November 2011
Previous Occupation: Governor of the Bank of Italy
Education: Degree in Economics from Sapienza University of Rome, PhD from M.I.T. in the US
Lists: The Financial Times‘ Person of the Year 2012, 8th in the Forbes’ list of the most powerful people in the world
Defining moment: In summer 2012 as the euro was crashing and hope was at a low, Mario Draghi gave a speech at the Global Investment Conference in London which the FT labels as a turning point:

[T]he ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.

Apparently there was an unrehearsed pause during this sentence that made it amazing.
Fun fact: His turn at the Bank of Italy earned him the nickname ‘Super Mario’

The ELB is written by Associate Editor of TSL, Natalie Hearn. Law Graduate from the University of Birmingham, prospective EU Law Masters student, currently teaching English in Japan. Follow her on Twitter: @ninjahearn

ELB is taking a break next week but will be back with her regular column on 10 April.

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