The applicable legal regime is that of the freedom of movement of goods contained in the EC Treaty under Articles 25 and 90, concerned with taxation. Freedom of movement of goods is one of the fundamental freedoms guaranteed by the EC treaty and it is one of the foundations of the Community. The European Court of Justice have therefore interpreted the provisions widely and the exceptions allowed to the member states very restrictively .
The first consideration is as to whether there is any specific EClegislation that covers this scenario (for example, Directive 2004/12on packaging and packaging waste). If so, and this legislation is in conflict with the decision of the UK government, the EC law must prevail and the UK decision will have no effect.
Superstore Ltd may argue that tax falls under Article 25, which prohibits customs duties on imports and exports within the European Union. It also covers charges having equivalent effect, which includes any pecuniary charge unilaterally imposed on goods imported from another member state by reason of the fact that they cross the frontier. Charges of a fiscal nature on imports and exports which at first sight look like taxes but are in reality customs duties or the equivalent are caught by the provisions of the Act. It is this last provision that would seem relevant to this scenario.
Particular consideration needs to be given to the fact that the tax levied is to be channeled into supporting research and development initiatives of UK firms promoting more environmentally responsible alternatives to disposable plastic bags. The UK firms that receive extra funding will clearly have the advantage of being able to develop reusable or environmentally friendly alternative that does not incur tax, more quickly than firms in other member states. Barents explains that where the tax levied is wholly offset by the benefit to national producers, then the matter will fall under Article 25 which expressly forbids customs duties of a fiscal nature. This is because the benefits of the additional funding to UK firms for research balances with the cost of the tax paid by UK firms on disposable bags and therefore the tax only affects those products that are imported.
This proposition is supported by case of Character , in which it was decided that where the resulting revenue from an apparently non-discriminatory tax solely benefited national products so the advantages accruing wholly offset the charge imposed on the products then the charge regarded as a charge having equivalent effect under Article 12 (Now Article 25). If the advantages only partially offset the charges, the charges would be considered discriminatory internal taxation under Article 95 (now Article 90).
Barents summarises the three conditions necessary for a charge to fall under Article 25, rather than Article 90, as follows:-
The charge must be destined exclusively for financing activities which very largely benefit the taxed domestic product.
It would appear in this case that the UK firms will have a very large benefit in that they will receive funding to develop environmentally friendly alternatives that will not fall under the UK tax provisions,and will therefore be cheaper to produce.
There must exist identity between the taxed product and the domestic product benefiting from the charge.
This is clearly satisfied as the product taxed is a disposable carrier bag and the product benefiting from the charge will be an environmentally friendly alternative.
The charges imposed on the domestic product must be completely compensated.
It is not clear from the scenario whether the funding benefits to the UK firms equate to the amount of tax they would have to pay each year for the disposable bags, but if the benefit does not balance with the cost of the tax, the provision will not fall under Article 25. Some consideration should be given to the fact that only UK firms with development initiatives will receive government funding and therefore,not all UK firms will benefit from the funding. For a provision to fall under Article 25, the duty charge is borne specifically by the imported product to the exclusion of similar domestic products .Therefore, if it was shown that benefit does not wholly offset the tax liability for all UK plastic bag providers/sellers, the provision will not fall under Article 25.
If the refund or benefit to UK firms is only partial, the matter will be assessed under Article 90, the rationale being that the partial refund could be a discriminatory tax . Article 90 forbids a member state to impose a tax that discriminates against goods from other member states. As long as it does not discriminate according to nationality, it can impose any domestic tax it sees fit. However,provisions that do not appear prime facie to discriminate but do place greater burden on commodities coming from other member states may also fall within the scope of Article 90.
An example of discriminatory taxing can be found in the case of Hum blot, where a French car tax levied was calculated according to power of car. Although the tax appeared to apply to both domestic and imported products, in practice, the power ratings were assessed so that only imported products were liable to highest rate of tax – no French car fell into this category. The European Court of Justice held that the French system was discriminatory under Article 90EC. Applying the case to this scenario, although the charges appear to be indiscriminate, if there is a partial benefit to UK firms because of the benefits they receive by way of funding for research, then products from other member states will be at a disadvantage as they will be affected more by the tax than those from domestic firms.
It should be noted that no derogations under Article 25 are permitted by the Treaty. Under Article 90, the obligation on the state is different. The taxation levels set by the state are not unlawful under the Treaty and therefore the inquiry is as to whether the tax discriminates against the importer under Article 90(1) or has protective effect under Article 90(2). In either case, the government may seek to prove some objective justification for their decision. For example, in Commission v France 196/85  ECR 1597, a French rule taxing sweet wines produced in a traditional manner at a lower rat ethan liqueur wines was held not to be contrary to Article 90. The rationale was to produce some fiscal incentives for production in areas with poor soil and low rainfall. The UK government may likewise argue in this case that their objective of protection to the environment and their channeling of the tax back into some UK firms for research purposes is a fiscal incentive for research into environmental alternatives. In Procurer de la Republic it was said that protection of the environment is “one of the Community’s essential objectives” which may justify certain limitations of the principle of the free movement of goods.
A further case for consideration is Outlook Roy in which it was decided that it is legitimate for member states to tax the same or similar products differentially provided that it was done on the basis of objective criteria, such as the nature of raw materials used or the production process employed. The UK government could argue that this case applies since it concerns the nature of the materials used and whether or not the finished product is environmentally friendly.
Brief consideration should be given to the possibility of challenging the decision under Article 28, which prohibits quantities restrictions or measures having equivalent effect (“MEQR’s”). Measures must be“binding provisions emanating from a public authority” and consideration should be given to whether this is the case, as the scenario states this is a ‘decision’ rather than a law . MEQR’s redefined in Asinine as being all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade. Consideration should be given,under Directive 70/50, as to whether the restrictive effect is out of proportion to its purpose and if the same objective can be attained by other means which are less of a hindrance to trade. Under the Aside Dijon principle , a restriction on freedom of movement of goods maybe permitted if it is necessary to satisfy a mandatory requirement bandit is proportionate to the aim to be achieved. In the present case,the UK Government could argue that protection of the environment is amanda tory requirement, as one of the Community’s essential objectives(Procureur de la Republique) . However, they may have some difficulty arguing that it is proportionate to tax all disposable plastic carrier bags in order to promote more environmentally friendly alternatives –the same aim could be achieved by offering incentives for the use of reusable bags and Superstore Ltd may therefore have more success arguing that the case falls under Article 28.
A final consideration in this scenario is the case of Companied de L’Oust in which it was decided that where a member state levies a tax and chooses to use the money to benefit a particular group, if the money from the tax flows first into the national exchequer and is used for any particular domestic industry then this could be challenged as a State Aid under Articles 87 to 89 (ex Articles92 to 94). If the tax from the plastic bags is channeled directly into the research rather than the packaging industry in general, it will not be regarded as State Aid / .
In conclusion, Superstore Limited may bring action in the national courts on the basis that the decision is a discriminatory internal tax which falls under Article 90 because not all UK firms will benefit from the funding, but the UK government may seek to use cases such absolute Roy and the environmental objective outlined in Procureur Della Republique to justify their decision. If the UK government are unable to justify the decision, as EC Law has supremacy over UK Law the decision will have no effect to the extent of the conflict .
b. UK legislation that prohibits the sale of any products made from hard wood materials unless the retailer is able to prove to the satisfaction of the Department of the Environment that the finished product has been manufactured from trees that have not been felled from endangered tropical rainforests.
The applicable legal regime is that of the freedom of movement of goods contained in the EC Treaty under Articles 28-30.
The first consideration is as to whether there is any EC wide legislation on the matter. If so, and the legislation permitted the sale of hardwood products, the EC law must prevail and the UK law would have no effect.
The law in question appears to be indistinctly applicable as no hardwood products whether imported or domestic can be sold in UK if they have been felled from endangered tropical rainforests. Where national law applies to both domestic and imported products alike and there are no community wide standards relating to the product in question, obstacles to freedom of movement may be accepted provided they are necessary to satisfy mandatory requirements and are proportionate to the aim in view. If a member state has a choice between various measures for achieving the same aim, it should choose the means which least restricts the free movement of goods.
Superstore Ltd may argue that the law falls under Article 28 EC which prohibits quantities restrictions or measures having equivalent effect(“MEQR’s”). A quantities restriction is a “measure which amounts to total or partial restraint of, according to circumstances, imports,exports or goods in transit” (Riseria Luigi Geddo ). Measures redefined as “binding provisions emanating from a public authority” pandas this scenario concerns a law, this condition is satisfied(Commission v Ireland ). Whether the UK law is considered an MEQR can be identified by the Dassionville formula which defines MEQRs as “All trading rules enacted by Member States which are capable of hindering directly or indirectly actually or potentially intra-Community trade”.
The law does not appear to be a selling arrangement as it relates to content of goods themselves. The case of Keck and Mithouard clarifies that Article 28 does not apply to national laws on selling arrangements. Where the law applies to all traders operating in the national territory and the law affects the marketing of domestic products and imports from other member states in the same way, the UK government will not be able to argue that the law is a selling arrangement rather than an MEQR and therefore not covered by Article 28.
As the law applies to the content of the goods, the principles laid down in the Cassis de Dejon case will apply. The UK government will be able to justify the law if they can show that it is necessary to satisfy a mandatory requirement. There are examples of mandatory requirements cited in the case which is not exhaustive. In this case,the objective of the UK government is to prevent the sale of hardwood products from non-sustainable sources, which is an environmental objective. The case of Procureur de la Republique demonstrates that protection of the environment is “one of the Community’s essential objectives” which may justify certain limitations of the principle of the free movement of goods.
The UK Government will also need to show, under the Cassis de Dijon principle, that the measures taken are proportionate to the aim to be achieved. They must have sought to ensure that the same objective could not be attained by other means that are less of a hindrance to trade. In this scenario, it should be considered that it is extremely difficult to ascertain whether the statements about the origin of tropical wood are accurate, partly because the countries of origin are far away and also because the products have often been manufactured somewhere else than in the country where the wood was harvested .Providing satisfactory proof for the Department of the Environment could prove very costly, if not impossible. This would make it difficult for other member states to sell their products in the UK. Simple alternative would be to insist that only products are sold that have been approved by the FSC (Forest Stewardship Council), an international organisation which provides a reliable guarantee that the tropical wood has been produced in an environmentally appropriate way. Even so, a foreign producer may incur substantial additional cost shaving to change his suppliers in order to enter the UK market.
The second Cassis de Dijon principle is that where a product is lawfully saleable in one member state, it should be saleable in all member states. Superstore Ltd could challenge the law on the grounds that other member states allow the sale of hardwood products and they should therefore be allowed in the UK.
Unless the UK government is able to raise a convincing argument to justify their law under Cassis de Dijon, the law is a breach of Article28 and Superstore Ltd can take action.
Although the government do have the option of trying to justify the law under Cassis de Dejon, they can also seek to derogate from Article 28using Article 30, bearing in mind that the ECJ takes a very strict approach on any attempt to get around a major treaty freedom using this article. A derogation could be sought under Article 30 on the basis of the protection of “health and life of humans, animals or plants”.However, the UK government would need to show again that the measures taken were proportionate, did not discriminate without justification against products from other member states, and were not simply trading restriction in disguise. The government may have difficulty on the proportionality requirement because the proof required for the Department of the Environment could prove costly and possibly unnecessary, given that hardwood is available that has already been properly certified. This reasoning is supported by the case of Commission v Denmark in which the government sought to introduce legislation to ensure manufacturers market beer and soft drinks only in reusable containers which must be approved by the National Agency for the protection of the Environment. It was held that although member states can justify derogations from Article 28 on the grounds of environmental concerns, they will not be permitted where the objective could be achieved by some other method which was less restrictive on trade.
In conclusion, Superstore Ltd may be able to challenge the law under Article 28 in the national courts. If the UK government are unable to justify the law under Article 30 or the Cassis de Dijon principle, as EC Law has supremacy over UK Law the national law will have no effect to the extent of the conflict .
1. Craig, P & Burca, G (2002) EU Law: Text, Cases and Materials (Third Edition), Oxford University Press, London
2. Foster, N, (2005) EC Legislation (Blackstone’s Statute Books), Blackstones, London
3. Foster, N (2004) EC Law (Blackstone’s Law Q & A S.), Blackstones, London
4. Longshaw, A & Hughes, M (2004) Understanding Law: TheRelationship of European Community Law and National Law, Milton Keynes
5. Weatherill, S (2000) Cases and Materials on EC Law, 5th Ed., Blackstones, London
6. http://www.wwf.fi/wwf/www/uploads/pdf/tropical_wood_guide.pdf – WWF Tropical Wood Guide
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