European Business Law: Understanding the

Fundamentals
WEEK 1: Introduction to EU Law
The history of the EU – A changing Europe
Hello, my name is Julian Nowag. And I'll talk to you about the history of the
European Union. We will first look into the background that led to the
establishment of the European coal and steel community, the root of the European
Union.
This will provide you with a better understanding of the reasons for the creation of
such a system and the relevant expectations and aims.
Second, I'll provide you with a brief overview of the different treaties that created
and shaped the European Union and gave its grand form.
In the third and final part of this lecture I'll highlight some of the important
developments along the way.
But before we start, let me make one thing clear. The different treaties relevant for
you, as a student of EU law, are the TEU, the Treaty on the European Union. And
the TFEU, Treaty on the Functioning of the European Union.
The member states agreed on this current version in the city of Lisbon.
Thus, this version of the legal provision is also referred to as the Lisbon Treaty.
But the current version of the TEU and TFEU still contain very much of the old
original treaty agreed upon in Rome, the so called Rome Treaty.
Let us now examine the background that led to the establishment of the European
coal and steel community.
In the end of a devastating second World War, the focus was on ensuring that a
war like this would never happen again in Europe.
Therefore, it was essential to avoid the problems created by the Treaty of
Versailles, the treaty establishing the European Order after the first World War.
In this way Germany should not be suppressed, but woven into a European
partnership.
Influential in this thinking was the European Union of Federalists established in
1946, an organization that one might call today a think tank.
These ideas also led to the creation of a number of international organizations, like
the UN, the IMF, the GATT. And also particularly important for Europe, the
Council of Europe, and with it, the European Convention on Human Rights.
The establishment of the coal and steel community can be traced back to the
Schuman Plan.
This plan was drawn up by Jean Monet for the French foreign minister Robert
Schuman to make war not only unthinkable but materially impossible. This idea
was to create a regional integration to ensure common oversight of coal and steel.
The main productive factors for heavy industry and therefore for the defense
industry. This led to the creation of the European steel and coal community in
1952. Moving to the second part of this lecture, I'll briefly review the different
treaties that created and shaped the European Union up until today.
Following the Coal and Steel Community, the Treaties of Rome in 1958
established a European Economic Community and a European Atomic Energy
Community. The first revision came in 1987 with a Single European Act. 1993 and
in 1999, revisions were introduced by means of the Treaty of Amsterdam and the
Treaty of Maastricht. And in 2003 the Treaty of Nice. The current version, with the
TEU and a TFEU, were adopted by means of the Treaty of Lisbon in 2009.
Let me now highlight some of the important changes for which these changes
shape the European Union. In 1958, the Treaty of Rome was created. The
European Economic Community, which had the aim to lay a foundation of an ever
closer union among the people of Europe by pooling their resources to preserve
and to strengthen peace and liberty. The Single European Act introduced a number
of changes that were aimed at making the European economic community more
efficient.
For example, more qualified majority voting, an expansion of competences. One of
these new competences was the competence in the field of the environmental
protection. The Treaty of Maastricht in 1999 is important as it changed the name of
the European economic community into the European Union, and it created a euro.
Moreover, it provided competences to the union. The union received some, albeit
limited competences, in the areas of justice and home affairs, and common foreign
security policy. Some of the main changes in the Amsterdam and Nice Treaties
concern voting rights of the different member states, in particular, as new member
states joined the EU and West and East Germany were unified.
The Treaty of Nice in 2003 also saw the adaptation of a non-binding Charter of
Fundamental Rights. After a failed attempt to adopt the EU Constitutional Treaty,
the Lisbon Treaty was adopted in 2009. It established the TEU and a TFEU. While
the TEU mainly contains general principles and rules on the institutions, as well as
external and security policy. To increase the Democratic legitimacy of the EU, the
Lisbon Treaty strengthened the power of the European Parliament.
A final important element of the Lisbon Treaty is that it made the EU's Charter of
Fundamental Rights Legally binding. Now that we have looked into the reasons
that lead to the creation of the predecessors of the European Union and the
different treaties that have shaped the European Union from 1958 up until now.
We should have an overview of the history of the EU. Thank you for listening.

- Background leading to the establishment of the European Coal and Steel

Community (ECSC):
- Post-World War II focus on preventing another devastating war in Europe.
- Desire to avoid issues stemming from the Treaty of Versailles.
- Aimed to integrate Germany into a European partnership.
- Influenced by organizations like the European Union of Federalists and
international bodies such as the UN, IMF, GATT, and Council of Europe.

- Creation of the ECSC:

- Stemmed from the Schuman Plan proposed by Jean Monet and supported by
French Foreign Minister Robert Schuman.
- Aimed to make war materially impossible by integrating coal and steel
industries.
- Established in 1952.

- Evolution of the European Union through treaties:

 - Treaties of Rome (1958) established the European Economic Community (EEC)
and the European Atomic Energy Community (Euratom).
- Single European Act (1987) introduced changes for greater efficiency, such as
qualified majority voting and expanded competences.
- Treaty of Maastricht (1993) renamed the EEC to the European Union (EU),
introduced the euro, and expanded competences in justice, home affairs, and
common foreign and security policy.
- Treaties of Amsterdam (1999) and Nice (2003) addressed issues like voting
rights of member states and adapted the Charter of Fundamental Rights.
- Lisbon Treaty (2009) established the Treaty on European Union (TEU) and
Treaty on the Functioning of the European Union (TFEU), increased powers of
the European Parliament, and made the EU Charter of Fundamental Rights
legally binding.

- Key changes and principles:

- Foundation of an ever closer union among European peoples for peace and
liberty.
- Expansion of competences, including environmental protection, justice, home
affairs, and foreign policy.
- Strengthening democratic legitimacy through increased powers of the European
Parliament.
- Making the EU Charter of Fundamental Rights legally binding.
The Institutions of the EU
Hello. My name is Julian Nowag, and I'll talk to you about the different institutions
of the European Union. In the first part of the lecture, I'll present you with a
number of EU institutions, so you'll get an idea about the variety of EU
institutions. In the second part, I will focus on the most important actors in the
European arena, and on their main tasks. The following institutions of the EU are
identified in Article 13 TEU: the European Parliament, the European Council, the
European Commission, the Council, the Court of Justice of the European Union,
the European Central Bank and finally, the Court of Auditors. Article 13 to Article
19 TEU set out a details with regard to these institutions.
Beyond these institutions, there are others. The European Ombudsman, to which
EU citizens and entities can appeal concerning administered malpractices.
The European External Action Service, which has an important role in the EU's
external relations.
The European Economic and Social Committee and a Committee of the Regions,
which provide advice to the EU on matters that concern economic, social, or
regional matters.
Looking now more closely at the EU's main institutions, the European
Commission, the Parliament, the Council, the Court, and the European Council, we
shall examine their functions. The European Parliament is directly elected and has
parliamentary functions in the EU.
Article 14 TEU addresses the European Parliament.
It is elected by the citizens of the EU. It exercises political control and has
legislative power.
However, it does not have the formal right to initiate legislative process.
This right is reserved for the European Commission. Yet, the European Parliament
elects the President of the European Commission and has budgetary rights. The
European Commission consists of 28 independent members and is covered by
Article 17 TEU. It has one commissioner from each EU member state.
It proposes new legislation and is described as the guardian of the treaties because
it has the power to initiate proceedings or provisions of the EU treaties. In
particular, those of the TFU have been breached. Although the EU as it's a very
generalist institution, or as the Court described it, a new legal order, does not have
a strict separation of powers, the commission has been described as an executive
organ. The Council, also called the Council of the European Union, or the Council
of Ministers, it consists of ministers from each EU country.
Article 16 TEU relates to the Council. It can come together in different layouts. It
can, for example, consist of the ministers of agriculture or the ministers of
environment, or the foreign ministers. It adopts EU laws and a budget, but together
with the Parliament.
These laws can cover a wide range of different fields, like internal market,
agriculture, the environment, and so on.
The Court of Justice of the European Union shall insure that in the interpretation
and application of the treaties, the law is observed, as article 19 explained.
This institution consists of the Court of Justice, the General Court, and Specialized
Courts.
The final institution that is of great relevance in the EU is the European Council.
This institution is addressed in Article 15. Unfortunately, the name can be
confusing because the European Council is not the same as the Council. The
difference is that the European Council consists of Heads of States, or
governments. And sets the general overall guidelines for EU policies. In contrast,
the Council has legislative functions and consists of ministers of different
countries.
After this overview of the different institutions of the EU and their perspective
functions, you should now have an idea about the internal organization of the EU,
and you should be able to navigate in the institutional setting. Thank you for
listening.

- **Main Institutions of the EU (Article 13 TEU):**

1. European Parliament
2. European Council
3. European Commission
4. Council
5. Court of Justice of the European Union
6. European Central Bank
7. Court of Auditors

- **Additional Institutions:**
- European Ombudsman: Handles appeals concerning administrative
malpractices.
- European External Action Service: Plays a vital role in EU's external relations.
 - European Economic and Social Committee: Provides advice on economic and
social matters.
- Committee of the Regions: Advises on regional matters.

- **Functions of Main Institutions:**

1. **European Parliament (Article 14 TEU):**
- Directly elected body with parliamentary and legislative powers.
- Elects the President of the European Commission.
- Holds budgetary rights but cannot formally initiate legislative processes.

2. **European Commission (Article 17 TEU):**

- Consists of 28 independent members, one from each EU member state.
- Proposes new legislation and ensures compliance with EU treaties.
- Described as the executive organ with the power to initiate proceedings for
treaty breaches.

3. **Council (Article 16 TEU):**

- Also known as the Council of the European Union or the Council of Ministers.
- Comprises ministers from each EU country.
- Adopts EU laws and budgets in collaboration with the European Parliament.
- Can convene in various compositions depending on the issues being
discussed.

4. **Court of Justice of the European Union (Article 19 TEU):**

- Ensures adherence to EU treaties in interpretation and application.
- Comprises the Court of Justice, the General Court, and Specialized Courts.
 5. **European Council (Article 15 TEU):**
- Comprised of Heads of States or Governments.
- Sets general guidelines for EU policies.
- Differentiated from the Council, which has legislative functions and consists
of ministers from member countries.

This overview provides insight into the internal organization and functions of the
EU institutions, enabling understanding and navigation within the institutional
framework of the EU.
The court of Justice of the EU
Hello, my name is Julian Nowag, and I'll talk to you about the Court of Justice of
the European Union.
First, I´ll provide you with some background on the institutional set up, of the
judicial branch of the European Union.
Second, we will look more closely at the workings of the European courts.
Looking at the institutional setting, article 19 explains that the judicial branch is
collectively called the Court of Justice of the European Union or CJEU.
It has a task to ensure that in the interpretation and the application of the treaties,
the law is observed.
The judicial branch is made up of the Court of Justice, the general court and
specialized courts.
An example of a specialized court could be the Civil Service Tribunal which deals
with employment disputes related to employees of the EU. The Court of justice is
the highest court of the European Union. It is just one of the courts of the European
Union.
The Court of Justice may be confused with the Court of Justice of the European
Union, or CJEU, but if one reads Article 19 TEU carefully, it becomes clear that
the court of justice is just one court of the judicial branch of the EU. That is to say,
all the courts of the EU together.
All these courts together Form the judicial branch of the EU and are referred to
collectively as the Court of Justice of the European Union or the CJEU.
The second court in the judicial order of the EU is the General Court or GC.
If we now turn to the second part of this lecture, the working of the courts, the
following picture emerges. The European Court of Justice has 28 judges.
One of each members state. The General Court, in contrast, has at least 28 judges.
That is to say, at least one judge from each member state. The General Court is the
Court of First Instance in the EU. So if you would want to challenge an EU
measure, you would typically first apply it to the General Court.
Previously, it was therefore called the Court of First Instance. The Court of Justice
has a wide range of functions.
One function is to rule on appeals on the General Court. Moreover, it decides on,
for example, an action brought by an institution or a member state.
Such actions would typically be infringement proceedings brought by the
commission, where the commission believes that a member state has breached EU
law.
Additionally, the court of justice rules on preliminary references.
Preliminary references, these are questions on any interpretation of EU law asked
by national courts or tribunals.
Or it rules on the validity of acts adopted by the European institutions.
The court can also decide on matters relating to damages claims against EU
Institutions and can provide an opinion on whether an international agreement
envisaged by the EU is compatible with the EU treaties, as explained in Article
218, paragraph 11. The Court of Justice is assisted by advocates general. The
advocate general is an independent legal expert that provides advice to the court in
form of an opinion.
An advocate general would typically provide its opinion on a matter before the
court of justice decides.
While the Court of Justice is not obliged to follow the opinion of the advocate
general, it does so in the majority of cases. The opinions by the advocate general
provide a valuable source, as the advocate general discusses the case, and the
previous case law, in detail and provides reasons why the court should adopt a
particular decision.
This is in particular important because the course bases its judgments mainly on
previously decided cases. In this respect, the courts method is similar to the
common law method.
As a final point, let me say something about citation of cases. From 1953 until
1988, there was only one court, the European Court of Justice. The numbering of
the cases during this time is made up first of a number, which denotes the number
of the case. A slash, after which the year is recorded. Thus Case 1/73 is the first
case that arrived to the court in the year 1973. After 1988, the General Court, and
in 2005 the Civil Service Tribunal were established.
Now judgments of the court of justice are preceded by a C. So, case C1/89 means
that it is the first case that arrived to the Court of Justice in 1989. Cases before the
General Court have a T before them and cases decided by the Civil Service
Tribunal are proceed by an F. Thus case T 20/97 means that it was the 20th case
that was received by the General Court in 1997. Well, let us summarize. In this
lecture we have looked at the judicial branch of the European Union.
And we have got to know the different EU courts and their working. This
knowledge should provide you with the relevant background for understanding the
interaction between the different courts of the EU. Thank you for listening.

- **Judicial Branch of the EU (Article 19 TEU):**

- Comprises the Court of Justice of the European Union (CJEU).
- Ensures observance of EU law in interpretation and application.

- **Courts within the CJEU:**

1. **Court of Justice (CJEU):**
- Highest court of the EU.
- Composed of 28 judges, one from each member state.
 - Rules on appeals from the General Court and various other matters, including
infringement proceedings and preliminary references.
- Assisted by Advocates General, independent legal experts who provide
opinions on cases.

2. **General Court (GC):**

- Functions as the Court of First Instance in the EU.
- Comprises at least 28 judges, one from each member state.
- Handles challenges to EU measures before they can be appealed to the Court
of Justice.
- Previously known as the Court of First Instance.

- **Functions of the CJEU:**

- Rules on appeals from the General Court and various other matters.
- Decides on infringement proceedings brought by the Commission against
member states for breach of EU law.
- Rules on preliminary references from national courts seeking interpretation of
EU law.
- Determines the validity of acts adopted by EU institutions.
- Adjudicates damages claims against EU institutions and provides opinions on
the compatibility of international agreements with EU treaties.

- **Advocate General:**
- Independent legal expert who provides opinions to the CJEU.
- Opinions serve as valuable sources for the court's decisions, though not
binding.
- Assist the court by discussing cases and previous case law, providing reasons
for particular decisions.
- **Case Citation:**
- Prior to 1988, only one court existed, the European Court of Justice (ECJ), and
cases were numbered with a slash indicating the year (e.g., Case 1/73).
- After 1988, the General Court (GC) was established, and case numbers before
it are preceded by a "T" (e.g., Case T 20/97).
- Cases before the Civil Service Tribunal (F) and Court of Justice are preceded
by "C" (e.g., Case C1/89).
Treaties of the European Union
The European Union today has a population of a sum 500 million people. Even if
not the largest continent, the EU is the largest combined economy in the world. But
more than that, the union collaboration covers many aspects of sustainable
development on a global level. Freedom, democracy and respect for human rights
are essential values to promote peace in the world. In 2012, the Union was the
recipient of the Nobel Peace Prize in consideration of these efforts. In two
subsequent classes, the intention is to give you a broad overview of the EU
collaboration based on the treaty provisions. Several of the elements touched upon
will be further elaborated in subsequent classes. The Treaty of Rome in 1957,
established the European Economic Community the EEC between the original six
member states. This treaty has on several occasions been revised, forging what is
referred to as an ever closer Union. In 2005, the need to revise the treaty and to
establish a constitution was strong. The 2007 Treaty of Lisbon, contained a
fundamental revision of the basic treaties to make the EU more democratic, more
efficient and better able to address the enlargement. Strong objections were
however raised to the use of the F word, Federalists and the use of the term
Constitution. Discussions and compromises watered down the original intention to
two separate agreements both containing fundamental provisions and detailed
arrangements. Now the European Union relies on three primary sets of legislation;
the Treaty of the European Union, the TEU, The Treaty on the functioning of the
European Union TFEU and the charter of fundamental rights referred to as The
Charter. In this class, we will focus on TEU whereas the second class will deal
with the main features of the functioning treaty. Let's look at the structure of the
treaty on the European Union. Here you see the structure of the treaty and I will try
to briefly go through. After the grand declaration in the preamble, the common
provisions in Title One state that the European Union is established as a process to
create an ever closer union between the member states based on common values of
freedom, democracy, equality, the rule of law and respect for human rights. These
values are common to a society in which pluralism, non-discrimination, tolerance,
justice, solidarity and equality between women and men should prevail. The
common provisions underline peace and well-being as the first aim.The Union
shall offer its citizens an area of freedom, security and justice without internal
frontiers. External border controls, rules on asylum and immigration shall agreed
and joint crime prevention ensured. The internal market shall promote a
sustainable development based on balanced economic growth and price stability,
full employment and protection of the environment. The Union shall also respect
its rich cultural and linguistic diversity. In the first chapter on common provision, it
is also in articles 4-8, establish that the union competencies are governed by
principles of solidarity, subsidiarity, and proportionality. It is also in Article 6,
made clear that Charter of Fundamental Rights as well as the Convention of
Human Rights and general principles stemming therefrom form part of the treaties.
We will, as said, deal with most of these principles and the institutional build up in
subsequent lectures. In the following I will try to briefly highlight a few of the
more fundamental provisions. The European Union has always struggled with its
democratic deficit and gradually injected more power to the directly elected
European Parliament and the rights of citizens to participate in the democratic life
of the Union. Citizens can directly elect members of the European parliament, but
otherwise representatives are chosen by their governments. One million citizens
who are nationals of a significant number of member states may invite the
European Commission to submit proposals for the purpose of implementing the
treaties. Article 13 establishes the institutions; the European parliament, the
European Council, the council, the European Commission, the court of justice of
the European Union as well as the European Central Bank and the court of
Auditors. It is sufficient at this stage to say that the council, where the member
states are represented, retains major decision competence in legislative and
budgetary matters, often times shared with a directly elected European Parliament.
The European Commission has the unique competence of providing new
legislative proposals and is also the main supervisory body controlling that
member states and individuals are meeting their obligations under the treaties.
Finally, the court of justice of the European Union, now referred to as the CJEU, is
the interpreter of the treaty and the guardian of the rules of the law in the Union.
Title IV deals with enhanced corporation in one article, Article 20. To some extent
the European collaboration is every now and then meeting deadlock situations
where certain member states want to initiate a new collaboration, whereas others
are reluctant to participate with even block integration if they were forced to
participate. Examples of such blocking situations are the monetary collaboration,
the Eurozone, and the effort to create a common pattern protection in Europe. With
this article 20 and a reduced number of member states may initiate such
collaboration if it furthers the objectives of the union, protects its interest and
reinforces its integration process. Such core operation is open to any time at the
nonparticipating member states. Title V deals with the unions external action in
articles 21- 46. Chapter 1 outlines the Union's foreign policy, based on the same
principle that governs the Union itself. Specific provisions on the common foreign
and security policy are included in Chapter 2. It even deals with military co
operation including mutual defense. Drawing on the member states civilian and
military assets for peacekeeping, conflict prevention and strengthening
international security, the Union thereby has operational capacity. If a member
state is victim of armed aggression on its territory, the other member states shall
under Article 42 have an obligation of assistance. For the first time, France in 2015
required military assistance from the other member states. All others but Finland
adhered to the request. Finland concluded that due to conflicting national law,
military assistance was excluded. And now come to the final provisions in Article
47-55. Article 47 provides that the Union has a legal personality. The significance
of this is that the union may own and dispose of property, that it has capacity to
appear in legal proceedings and that it may become party to international
collaboration. The final provision also address amendments to the treaty provisions
and the rules governing accession of new member states and the withdrawal of
existing member states. As to first accession of a new member state, that state must
accept the fundamental values expressed in Article 2, TEU. The conditions of
admission shall be ratified by all the other contracting states. The 1957 Rome
treaty did not contain provisions for withdrawal from the collaboration. As an
exception, Greenland was entitled to withdraw in 1984. TEU however contains a
provision for such withdrawal now in Article TEU which has for the first time
been activated by the United Kingdom in its Brexit application. The final
provisions further deal with the attached protocols, the geographic application of
the treaty, its unlimited duration, ratification procedure and the different language
versions. European Union law is a system of rules operating within the member
states in parallel with their respective national rules. The European Union is
developed to achieve peace and social justice for its people and the global
community. Based on the treaties, the collaboration represents a new legal order in
the member states. The EU has political institutions, social and economic policies
and even an embryo of a common security policy. As the Court of Justice has said,
the EU is not merely an economic union but intended to ensure social progress and
seek the constant improvement of the living conditions and working conditions of
their people. New European members may join if they agree to the values and
principles covering the collaboration. Old members may leave but exiting the
collaboration is a complex activity. People are entitled to participate in a
representative democracy through the directly elected European Parliament. The
commission has the legislative initiative. The council represents member state
governments and the main decision making power. The court of justice upholds the
rule of law.

- **Overview of the European Union:**

- Population of approximately 500 million, making it the largest combined
economy in the world.
- Collaboration covers sustainable development, promotion of freedom,
democracy, and human rights for global peace.
- Awarded the Nobel Peace Prize in 2012 for efforts towards peace and
cooperation.

- **Evolution of EU Treaties:**
- Treaty of Rome (1957): Established the European Economic Community (EEC)
among six original member states.
- Subsequent revisions aimed at creating an ever closer Union.
- 2005: Proposed constitution for the EU, leading to the 2007 Treaty of Lisbon,
which made the EU more democratic, efficient, and better able to address
enlargement.

- **Primary Legislation of the EU:**

- Treaty of the European Union (TEU)
 - Treaty on the Functioning of the European Union (TFEU)
- Charter of Fundamental Rights

- **Structure of the TEU:**

- Grand declaration in the preamble emphasizing common values of freedom,
democracy, equality, and respect for human rights.
- Common provisions (Title One) establish an ever closer union based on
common values and aims.
- Principles of solidarity, subsidiarity, and proportionality govern EU
competencies (Articles 4-8).
- Charter of Fundamental Rights and principles of the Convention on Human
Rights are integral to the treaties (Article 6).

- **Key Provisions and Functions:**

- Struggles with democratic deficit addressed by empowering the European
Parliament and citizen participation.
- Institutions include the European Parliament, European Council, Council,
European Commission, Court of Justice of the European Union (CJEU), European
Central Bank, and Court of Auditors.
- Council retains major decision-making competence, often shared with the
European Parliament.
- European Commission proposes legislation and supervises treaty compliance.
- CJEU interprets the treaty and upholds rule of law.

- **Enhanced Cooperation (Article 20):**

- Allows reduced member states to initiate collaboration furthering EU objectives
and integration.
- **Union's External Action (Articles 21-46):**
- Outlines foreign policy, common foreign and security policy, including military
cooperation and mutual defense obligations.

- **Final Provisions (Articles 47-55):**

- EU has legal personality, capacity to own property, appear in legal
proceedings, and engage in international collaboration.
- Address amendments, accession of new member states, withdrawal procedures
(e.g., Brexit), protocols, treaty application, ratification, and language versions.

- **EU Law and its Impact:**

- Operates parallel to national laws within member states.
- Represents a new legal order with political, social, economic, and security
policies.
- Aims for social progress and improved living conditions.
- Membership requires adherence to EU values and principles, with complex
withdrawal procedures.

This overview encapsulates the structure, principles, and functions of the

European Union as outlined in the Treaty of the European Union (TEU).
The Treaty on the Functioning of the European Union
In prior class, we discussed the TEU and it's more principle approach to
fundamental values. In this class, we shall move to focus to the Treaty on the
Functioning of the European Union, that's TFEU. A quick glance at the table of
contents of the TFEU indicates a complex agreement. It contains seven parts, each
divided into separate titles, chapters, and sections in all together 358 articles. If the
Treaty of the European Union was supposed to be the constitution, the functional
treaty is more operative outlining detailed provisions and especially focusing on
the process of developing the European collaboration. The preamble is focused on
practical aspects in an ever closer union among the peoples of Europe. It clarifies
the need to ensure economic and social progress by common actions and calls for
the removal of existing barriers. Concerted actions shall guarantee a common
commercial policy, steady expansion, balanced trade and fair competition. Part 1
and 2 deals with the principles in Articles 1-25. The fundamental principles have
already been referred to in the prior class regarding the Treaty of the European
Union. The functional treaty addresses categories under areas of Union
competence, as well as general aims, including equality between men and women,
a high level of employment, adequate social protection, education, training, and
human health. Environmental and consumer protection shall be integrated into all
Union policies and activities. Likewise, the fundamental principle of non-
discrimination, referred to in Article 18, has also been addressed in our prior class.
Part 2 also makes every person holding the nationality of a member state a citizen
of the Union in addition to their national citizenship.
Part 3 on the Union policies and international actions is by far the longest and most
detailed section in the functional treaty. It contains, as you can see, 24 subtitles,
several of them divided into a number of chapters. In total, it covers 171 articles.
Articles 26-197. In the following, I will try to cover basic provisions relating to EU
business law, anticipating the more detailed upcoming lectures that are covered in
our courses 1, 2 and 3. The internal market is defined as an area without internal
frontiers with free movement of goods, persons, services, and capital. Restrictions
may only be imposed on such grounds as public morality, public policy, public
security, the protection of health and life, industrial and commercial property, or
for the exercise of official authority. Such restrictions must not, however,
constitute a means of arbitrary discrimination or a disguised restriction on trade
between the member states.
Let me go through the different freedoms. First with respect to goods. Customs on
third country goods are established by unfolded Union and collected by the
member states. Custom duties or quantitative restrictions on internal trade and
charges or measures having equivalent effect are prohibited. Articles 38-44 extend
the internal market to agriculture and fishery, thereby creating a balance between
more industrial lowest and farming areas.
Article 45 secures free movement of persons and abolition of any discrimination
based on nationality. Workers are entitled to accept offers of employment and to
move freely within the territory of the member states. Similarly, restrictions on the
free movement of establishment is prohibited. Both individuals and companies are
free to set up agencies, branches, and subsidiaries. They shall be treated in the
same way as nationals of the relevant member state. Article 56 provides that the
restrictions on freedom to provide services for remuneration shall be prohibited of
nationals of other member states. According to Article 63, all restrictions on the
movement of capital are prohibited. The member states may prevent infringements
of national law in the field of taxation and the supervision of financial institutions.
Title 5, Article 67-89, deals with an area of freedom, security, and justice which
includes policies on border checks, asylum and immigration, judicial cooperation
in civil matters, and police cooperation. Of special interest for this course on
European business law are the rules on judicial cooperation. The Union shall
develop cooperation in civil matters having cross-border implications based on the
principle of mutual recognition.
If the four freedoms in the internal market shall be secured and especially the free
flow of goods, the means must be secured through a common transport policy. In
Articles 90-100, with common rules and measures to improve transport safety.
Discrimination in the form of state subsidies or carriers charging differentiated
non-reasonable, non-competitive rates, and imposing different conditions are
prohibited. Special rules apply for sea and air transport. We are still within the
third part of the treaty and I will now refer to the common rules on competition in
Articles 101-109. Extraordinary importance for the industry and commerce are the
rules on competition imposed in Article 101. They have direct effect and are
strictly enforced sometimes with severe penalties for individual companies. Article
101 prohibits all agreements between undertakings which may affect trade between
member states and distorts competition. It covers, for example, the fixing of prices,
the limiting of production and technical development, market sharing,
discrimination, and tying activities. In addition to being prohibited and sanctions,
such agreements are also null and void. On certain conditions, unlawful
agreements may be exempted individually or in group. Article 102 prohibits any
abuse of a dominant position, insofar as it may affect trade between member states.
The examples of abuse are similar to the enumeration in Article 101. There are no
exception possibilities for abusive behavior. On the contrary, the dominant
company has a special responsibility to compete on the merits.
The commission in close collaboration with National Competition Agency is the
primary guardian of the competitive climate. An extensive regulatory and case law
development have provided more concrete examples of unlawful activities. Under
Article 106, the competition rules are also applied to public undertakings. The
application must not obstruct the performance of the particular task assigned to
these public undertakings. Articles 107-109 deal with state aid which must not
distort or threaten to distort competition by favoring certain undertakings, unless
there are primarily non-economic reasons for such aid. Tax and harmonization of
laws are dealt with under the Articles 110-113. It is primarily a national matter.
However, certain common rules are required to avoid that taxation is used to
distort trade and discriminate non-nationals. The union furthermore has
competence to its use secondary legislation in areas defined by the treaties. Article
114 stipulates that the commission in its proposals for approximation of legislation
must base new proposals on a high level of health, safety, environment and
consumer protection. Furthermore, according to article 115, the council shall issue
directives for harmonization of national laws if they affect the functioning of the
internal market. The juice of detailed directors have become a preferred way to
promote further integration. A directive which has not been implemented on the
national level, may after the implementation time has elapsed create rights for
individuals. The new Article 118 fills a lacuna in the treaties by referring to
intellectual property rights and the need for common rules and organizations. That
TFEU also contains an elaborated chapter Article 119-144 on the common
economic and monetary policy, ensuring that economic activities including
budgetary discipline, and depreciation of currency will not distort the conditions in
the union. It includes stipulations about the Euro, and defines exchange rate policy
with the primary objective to maintain price stability and to support an open
market economy with free competition. Stable prices shall be complemented which
sound public finances, and monetary conditions, and a suitable balance of
payment. The rules on employment, social policy, the social fund, and education
complements the rules of free movement of persons. Because union shall
contribute to a high level of employment by encouraging cooperation between
member-states and by supporting their actions. According to Article 145, the party
shall develop a coordinated strategy for employment. This includes under Article
153, the working environment and protection of work's health and safety, the
working conditions, social protection, collective defense of interest. The chapter
also promotes equality between men and women with regard to labor market
opportunities, and treatment at work. In addition, Article 157 stipulates equal pay
for male and female workers for equal work or work of equal value. In order to
demonstrate that EU collaboration is more than a mere economic collaboration, a
number of provisioned wells on other issues of specific importance are perhaps the
rules on public health and consumer protection. According to Article 168, a high
level of human health protection shall be ensured in all union policies. Likewise, in
order to promote the interests of consumers and to ensure a high level of consumer
protection, Article 169 protects the health and safety and economic interests of
consumers. According to Article 12 of the functional treaty, consumer protection
shall be taking into account in defining and implementing other union policies. It
was clear to the treaty drafters that the new inventions are driving economic and
social change. In its long-range plans, the union constantly suggests that the union
shall be more competitive in disrespect than any other region. Article 179 therefore
requires that the union must strengthen its scientific and technological basis. A
European research area is created in which researchers, scientific knowledge and
technology may circulate freely.
The union environments to the policy Articles 191-193, contribute to protecting
and improving the quality of the environment, protecting human health, and
prudent and rational utilization of natural resources. It addresses global
environmental problems and especially combating climate change. The
environmental policy aims at a high level of protection based on a couple of very
important principles. First of all, the precautionary principle. The principle of
preventive action, and that environmental damage should be rectified at the source,
and finally, that the polluter pays. As established by Article 11 of the functional
treaty, environmental requirements must be integrated into all union policies and
activities with a view to promoting sustainable development. Now, please allow
me a coffee break, and I will shortly continue with the next part.
I'm back, and will now continue with Part 5 of the functional treaty which deals
with the common commercial policy and cooperation with the third countries. A
common commercial policy shall, according to Article 207, be based on the
conclusion of trade agreements regarding trading goods and services, commercial
aspects of intellectual property, and foreign direct investments. Union development
policy shall according to Article 208 have as its primary objective the reduction
and the eradication of poverty in accordance with the United Nations objectives.
Humanitarian aid shall provide ad hoc assistance for people in third countries or
victims of natural or man-made disasters in compliance with the principles of
international law and with the principles of impartiality, neutrality and non-
discrimination. International agreements involving reciprocal rights and
obligations, common actions, and special procedure, concluded with third
countries or international organizations are binding upon the institutions of the
union and on its member states. Article 222 contains a solidarity clause, according
to which the union and its member states shall act jointly in a spirit of solidarity if
a member state is the object of a terrorist attack or the victim of a natural or man-
made disaster. The union shall mobilize all instruments at its disposal including
military resources made available by the member states to prevent the terrorist
threats or natural or man-made disaster in any a member state, and protect
democratic institutions and the civilian population from any terrorist attack. I now
move into Part 6, Institutional and financial provisions. Title I of Part 6 deals with
the institutional provisions. We have already enumerated the different institutions
and their main functions in the prior lecture on the Treaty of the European Union.
64 articles in the functional treaty now compliments with detailed provisions
regarding their composition and competences in Articles 223 to 287. There is no
reason to further dwell on the institutions as they will be presented by Julian
Nowag in the next lecture.
The EU legal acts are specified in Article 288, and as you may already know, it
contains regulations, directives, decisions, and recommendations and opinions. A
regulation shall have general application. It shall be binding in its entirety and
directly applicable in all member states. A directive on the other hand shall be
binding on each member state as to the result to be achieved but shall leave to the
national authorities the choice of forum and methods. A decision shall be binding
in its entirety. A decision which specifies those to whom it is addressed shall be
binding only on them. Finally, recommendations and opinions shall have no
binding force.
Let me say a few words about the legislative procedure in Articles 293 to 299.
The ordinary legislative procedure producing legal acts is defined in Article 294.
The Commission proposes the new Act. The European parliament adopts its
position at first reading and communicates it to the council. If the council approves
proposed changes, the act is adopted. If not, the council adopts its possession and
communicates it back to the European Parliament. If within three months the
European Parliament either approves or does not take action, the act is adopted as
proposed by the Council. If it is rejected, the act falls. If the European Parliament
however again proposes amendments, the new text reverts back to the council. The
council either approves the amendments or calls for a conciliation meeting.
If the conciliation procedure is successful and the parties agree, it is followed by a
third reading to finally adopt the act. Adopted legislative acts are published in the
official journal of the European Union. They enter into force on the date specified
or on the 20th day following publication. In Article 310 to 325, the financing of
union activities are established. Based on its own resources as well as contributions
from the member states the Council and the European Parliament shall jointly
establish the budget and supervise its implementation by the commission. The final
provisions in Article 335 to 358 provides general stipulations regarding such
matters as, the unions legal capacity, responsibility for damages, staff
confidentiality provisions, measures contrary to the essential interests of the
member states security, and a general force majeure provision. In summary, the
Treaty on the European Union focuses on fundamental principles. In contrast, the
functional treaty is more operational. This does however not mean that the
functional treaty does not contain important principles which complement those of
the Treaty of the European Union. But it is in the details on how the European
collaboration shall function which comes to the forefront. What does open internal
market actually mean? What policy shall apply on this market in respect of, for
example, the four freedoms: transportation, taxes, competition, state aid, and public
procurement, to name a few? Institutions are presented and competences
distinguished. Likewise, the applicable decision-making procedures are outlined.
The functional treaty clarifies the uniqueness of EU law and underlines that the
European Union has its own legal order. The application of the rule of law
eventually is controlled by its judicial organization. The functional treaty rules are
often creating rights and obligation for states, companies, and individuals. When
conflicts appear, this legal order even takes precedence over national legislation.
It's all makes the EU legal order quite unique among international agreements.
With these two lectures, I'm trying to put things in an overview context, and now
wish you a solid learning experience when you continue with your studies in
European business law.

In the second class, we focused on the Treaty on the Functioning of the European
Union (TFEU), which provides detailed provisions for the functioning of the
European collaboration. Here's a summary of the key points covered:

- **Structure of the TFEU:**

- Comprises seven parts with 358 articles, detailing various aspects of EU
collaboration.
 - Focuses on practical aspects of fostering an ever closer union among the
peoples of Europe.

- **Fundamental Principles and Union Policies:**

- Part 1 and 2 address fundamental principles, including equality, social
protection, education, health, and environmental and consumer protection.
- Part 3 covers Union policies and international actions, elaborating on 24
subtitles and 171 articles.

- **Internal Market and Freedoms:**

- Defines the internal market as an area without internal frontiers, ensuring free
movement of goods, persons, services, and capital.
- Prohibits restrictions on internal trade, customs duties, and quantitative
restrictions.
- Ensures free movement of persons, establishment, services, and capital (Articles
45-63).

- **Area of Freedom, Security, and Justice:**

- Covers border checks, asylum and immigration, judicial cooperation, and
police cooperation.
- Emphasizes mutual recognition in civil matters for cross-border cooperation.

- **Common Transport Policy and Competition Rules:**

- Establishes common rules for transport safety and prohibits discrimination in
state subsidies or carrier charges (Articles 90-109).
- Competition rules (Articles 101-109) prohibit agreements affecting trade
between member states and abuse of dominant positions.
- **State Aid and Taxation:**
- Ensures state aid does not distort competition (Articles 107-109) and
harmonizes taxation laws (Articles 110-113).
- Commission oversees competition rules and public undertakings (Article 106).

- **Legislative Procedure and Legal Acts:**

- Outlines legislative procedures, including proposals, adoption, and publication
of regulations, directives, decisions, recommendations, and opinions (Articles 288-
299).

- **Institutional and Financial Provisions:**

- Details institutions' composition and competences (Articles 223-287) and
financing of Union activities (Articles 310-325).
- Establishes budget supervision and joint establishment by the Council and
European Parliament.

- **General Provisions and Legal Capacity:**

- Concludes with general stipulations on the Union's legal capacity,
responsibility for damages, staff confidentiality, security measures, and force
majeure (Articles 335-358).

- **Unique Nature of EU Law:**

- Highlights the unique legal order of the EU, where EU law takes precedence
over national legislation.
- Emphasizes the role of the judicial organization in ensuring the application of
the rule of law.

Overall, the TFEU provides operational details for the functioning of the EU,
clarifying policies, procedures, and legal principles governing EU collaboration.
It complements the principles outlined in the Treaty of the European Union,
shaping the EU's legal framework and its unique position in international
agreements.

Week 2: Sources and Method

Introduction to EU Law sources
Welcome to this lecture. I'm going to give you an introduction to EU Law Sources.
We will look at the most important publications and also where to find the main
online resources and databases available for free. You will find the link that I'm
going to talk about in the reference material. Most of the EU publications are
available for free online today. The Official Journal of the European Union (OJ) is
the official companion of EU legislation and other official documents of the EU
institutions, bodies and agencies. It is published every day from Tuesday to
Saturday in the official languages of EU and is available in different formats. The
L series contains mainly secondary legislation, such as regulations, directives,
decisions, and recommendations. When you refer to the journal, you're writing in a
certain way. Looking at an example, you see the abbreviation, OJ followed by
series of numbers, date, and pages. You can find out more about how to write a cite
in the institutional style guide published in the publication office. The C series
contains information from the main institutions like notices, guidelines,
announcements, resolutions, opinions, joint declarations, preparatory acts, and
summaries of judgments.
A reference looks the same. This is a notice from the commission about definition
relevant to market. The cases are published in European Court Reports,
abbreviated to ECR, this is the official version of the cases.
The report was published in print until 2012. After that, the report is only
published in a digital version.
The official name is Report of cases before the Court of Justice and the General
Court. It contains judgments from the Court of Justice, General Court, and Civil
Service Tribunal. It also contains opinions and orders. For a long time, it has been
recommended to refer to a case by giving the reference to the report of cases like
this. Since 2014, the recommendation is to refer to a case with a combination of the
usual name of the case, the number in the register, case number, and the Eckley
number and a paragraph.
All documents are easy to find in the legal database of EUR-Lex. It is a database
free online available in all official languages. The database is updated everyday. In
EUR-Lex you find official journal. Note that since the first of July 2013, the
electronic edition of the Official Journal in EUR-Lex is the authentic one. EU,
including consolidated legislation, preparatory acts, and legislative history, EU
case law, ECR in pdf
From 1970 international agreements and other official documents. EUR-Lex
entrance page gives you access to search by document number here, or quick
search box which is often enough to be able to find what you need.
If necessary, you can get much more options. This could be useful when you get
too many results. More possibilities to limit your search and be more specific.
The latest news are published every day.
Doing a search you will receive the result in the middle of the page. They are often
quite of lot of matches, and they refine search query Is helpful. You're gonna find
domain, sub-domain, year, type of procedure, author or type of act.
Another database that is useful, you find on the webpage of the Court of Justice of
the European Union. It is available for free in every official language. It contains
the case from, the Court of Justice to General court and the Civil service Tribunal,
the opinions from the Advocate General, notes from the Academic Writings, and
press releases about new cases. On the entrance page of the data base, you find the
search fields for case number, parties, and dates. There is also an option to use
advanced search, which you will find behind the button. The press releases are
over here.
Finally there is a huge website of the European Union, where you can find very
many relevant documents. The European Union has a tradition of publishing nearly
everything online. Their website is translated into every official language. All the
institutions have their own homepages. Those are mainly in English, German or
French. One important part of the Europa website is the news room. In the press
release database you can search for news and some commission decisions and you
will find in this database. The database is in our link list. All the news has a
number which look in a certain way. If you have a reference that looks like this, it
is a press release from the commission.
Another way of entering the webpages is to enter by topic. This is the way to find
information from all EU institutions within a specific topic. Go, for example, to the
single market and look at the commission web page. It's an important web page
with a lot of relevant information. Searching the web page is both time consuming
and confusing. Many times the pages are and the structure is not always easy to
understand. It could be much more useful to use a search engine like for example,
Bing, Google, or Safari and write the site you want to search and then words
describing your search. I suggest you try any of those examples. Thanks for your
attention and good luck with your searches.

Official Journal of the European Union (OJ):

Published daily from Tuesday to Saturday in all official languages of the EU.
Contains primary and secondary EU legislation, official documents, notices,
guidelines, announcements, etc.
Referencing style includes the abbreviation "OJ" followed by series of numbers,
date, and pages.
European Court Reports (ECR):

Official version of cases from the European Court of Justice, General Court, and
Civil Service Tribunal.
Published digitally since 2012.
Recommended referencing style includes the usual name of the case, register
number, case number, Eckley number, and paragraph.
EUR-Lex Database:

Free online database available in all official EU languages.

Contains consolidated legislation, preparatory acts, legislative history, EU case
law, international agreements, and more.
Updated daily, with the electronic edition of the Official Journal being the
authentic one since July 2013.
Court of Justice of the European Union Database:

Free online database available in all official EU languages.

Contains cases, opinions from the Advocate General, academic writings, and press
releases.
Offers search fields for case number, parties, dates, and advanced search options.
European Union Website:

Offers a vast repository of relevant documents, translated into all official

languages.
Each EU institution has its own homepage, often in English, German, or French.
Includes a newsroom with press releases and a press release database searchable
by topic.
Accessing Information:

Can access EU webpages directly or through search engines like Bing, Google, or
Safari.
Search engines can help navigate the sometimes complex and extensive EU
website structure
Treaties and Legislation
In this section, I'm going to talk about European Union Treaties. I will answer the
questions what are the treaties, and where do I find them?
Your teacher might ask you to read Article 36 TFEU. Then you need to know what
is TFEU, how do I find it? EU legislation takes the form of treaties and EU
regulations, directives, and decisions. A treaty is a binding agreement between EU
member countries. It sets out EU objectives, rules for EU institutions, how
decisions are made and the relationship between the EU and its member countries.
TFEU is the Treaty of the Functioning of the European Union. There is also TEU,
the Treaty of European Union. On this page, you can find both in a consolidated
version.
Let's click on the TFEU, in this page, you'll find access to treaty in every European
union member language. You can choose whether you prefer to access document
in HTML or PDF format. You will have the text as it is published in the official
journal or in a plain text. I click on the PDF symbol, this is the first page of the
consolidated version of the TFEU.
On the top of the page, you find the date, the title Official Journal of the European
Union, the series is C, number of the issue and page. The document is divided into
many different parts where number 1 is the start. Usually, the last one is the tables
of equivalence, where you find old and new numbering of the articles. Going down
in the document, we can find the article we are looking for, number 36, in records,
we can read the old number of this article, number 30. In the previous, this treaty,
TEC treaty establishing the European community which was the old name of
TFEU. How did I find this page? You can find this page in the European union
legal document database, EUR-Lex. You find information about the treaties
looking at the third tab, EU law and related documents, treaties. Those are the
ways of having access to the treaty. If you prefer to have the treaty as an e-book
that you can download to your phone or tablet, you can find a nice version in the
EU Bookshop. In the webpage of EU Bookshop, you can find a list of titles from
the Bookshop about EU treaties. Here you can find the title, consolidated versions
of the treaty on European Union and the treaty on the functioning of the European
Union.
You can easily download the book to a tablet or to your mobile phone. Another
book that could be useful is, How the European Union Works, Your Guide to EU
Institutions. On page four, you can for example, read about the history of the
treaties.
Today, we will look at secondary legislation and the legal acts. Where to I find it?
How do I get the right version? And how do I read it? There are different kinds of
legal acts, regulations, directives, decisions. Regulation is a binding legislative act,
it must be applied in entirety across the EU. Directives is a legal act that sets up the
goal that all EU countries must achieve, it shall be implemented into national law
within a certain time. It is up to the individual countries to decide how. Decisions
is binding on those to whom it is addressed and it is directly applicable. I will use
Council Regulation (EC) No. 1/2003 as an example, as I know that you will be
reading this regulation during the courses. Where do I find it? A regulation number
is built up in a certain way.
First comes the institution behind the regulation, then you find the letters EC,
which stands for European Community. This was changed to EU when the Lisbon
Treaty came into force. The first digits are the numbers of the act, the last part is
the year, when the act was accepted. Let's go tot the home page of EUR-Lex, fill in
the number and year and document type, searching with a unique number, it will
give you only a few matches. The title begins with a number. This is a number that
every legal document within European Union gets beginning with a digit 3, it
means that it is legislation.
This is a reference to the official journal where all legislation is published. It
includes name, serial number, date and pages linked to the document text and to
more information. This is a direct link to the text or if you prefer, to the PDF. This
is the original version of the directive. If there is any changes, they are not
included. To see them, you need to look at the consolidated version.
You can find a lot of information about the directive all divided under different
tabs. They are in the text and different options of formats, for example, about this
document, procedure, and linked documents. Under about this document, you can
find information like validity. Under linked documents, you find consolidated
versions, national implementation, links to everything that is based on this
document or all documents mentioning this document.
Further down, you can also find the consolidated versions of the regulation. Make
sure if the consolidated version is something that you need or if it only concerns a
certain country. On the front page of EUR-Lex, you can find a title legislative
drafting guide. Open this link and you will get guidelines for how to read
legislation. The title comprises all the information in the heading of the act which
serves to identify it.
Preamble means everything between the title and the enacting terms of the act,
namely the citations, the recitals, and the solemn forms which precede and follow
them. The enacting terms are the legislative part of the act. They are composed of
articles which may be grouped in titles, chapters, and sections and may be
accompanied by annexes. I hope you will find the legislation you need for the
courses now. Why don't you try to find some of them right now? Good luck and
thanks for your attention.
It appears you're providing guidance on accessing and understanding EU
legislation, particularly focusing on treaties, regulations, directives, and decisions.
Here's a summary of the key points:

- **Treaties:**
- Binding agreements between EU member countries, outlining EU objectives,
rules for institutions, and decision-making processes.
- Available in consolidated versions online, accessible through platforms like
EUR-Lex and the EU Bookshop.

- **Accessing Treaties:**
- Can be found on platforms like EUR-Lex, where users can select their preferred
language and format (HTML or PDF).
- Searchable by document number or title, with options to download as an e-book
for easy access.

- **Secondary Legislation (Regulations, Directives, Decisions):**

- Regulations: Binding legislative acts applied across the EU.
- Directives: Set goals for EU countries to achieve, to be implemented into
national law within a specified timeframe.
- Decisions: Binding on recipients and directly applicable.

- **Finding and Understanding Legal Acts:**

- Use platforms like EUR-Lex to search for specific legal acts using their unique
numbers and years.
- Legal acts are published in the Official Journal, with references providing
access to the text and additional information.
- Understanding legislation involves reading the title, preamble, and enacting
terms, which comprise articles grouped into titles, chapters, sections, and annexes.
- **Additional Resources:**
- Legislative drafting guides on EUR-Lex offer guidelines for interpreting
legislation.
- Consolidated versions of legal acts provide updated information and national
implementations.

Overall, the guidance aims to assist users in navigating EU legal documents

effectively, ensuring they can access, understand, and utilize the legislation for
their studies or professional needs.
Case Law
Welcome back. In this lecture we're going to look at European Union case law. I
will show you how to search for the cases, explain the numbers of the cases, and
how to search within the document. Let's look at a case that you will read in one of
the courses. C-341/05, the Laval case. Let me start by explaining the case number.
The letter tells us it's a case from the Court of Justice, the number 341 is the serial
number and finally we have the year. The number is given when it comes to the
court so the year is when the case started.
If you find a T or an F in front of the number, it is a case from either the General
court or the Civil Service Tribunal.
Quite recently a new system to cite and to number the cases has been introduced.
ECLI is the new European Case Law Identifier. The ECLI number is a number that
will include both European and national courts, and it is supposed to improve
search facilities for case law.
The Laval case has the following number, ECLI EU:C:2007:809. First comes the
country code, then code of the court that rendered the judgment, the year of the
decision, and finally, the sequential number.
The sequential number is in a format that is decided upon each member state. It
could consist of up to 25 alphanumeric characters. So let's search for the case. I
suggest you use the database that you find on the website for the Court of Justice
of European Union.
I enter the case number in the first field. You can see written beside the field in
what way you should write.
You will receive the matches in a list of results by case. You could also sort the
matches by documents if you prefer.
First of all, you can see that it is a Judgment of the Court sitting as the Grand
Chamber the 18th of December 2007. Below you find the parties. Then comes a
short description of the case, with keywords and relevant directives and articles.
The judgments and opinions used to be published in the Reports of Cases. You can
see that this case was published in Reports of Cases in 2007, part I, page 11,767.
Since 2012, the printed version of Reports of Cases has been replaced by an
electronic version.
It has been the tradition to refer to the Reports of Cases, and I'm sure you will meet
many references from the reports. But today the recommendation is another. The
new way to refer to a case is through a combination of the usual name of the case,
the number in the register, case number, ECLI number and the paragraph.
You will, of course, find the judgments here. And you will also find the opinion
from the Advocate General. This is a document where you can find a legal analysis
of the case which has been presented to the court independently by the Advocate
General before the judgment.
Many times, you can find much more information in the opinion than in the
judgment. This could be useful information if the court decides to follow the
opinion.
If you would like, you can access more information by clicking on the small
symbol.
A lot of information is collected here.
Further down you can find citations of case-law or legislation, dates of importance,
references like notes on academic writings. As this case has been discussed a lot,
there are a lot of references to the case.
Finally, you find procedural analysis information, like the names of the judges, etc.
As you can see, there is a lot of information about a judgment. Many times you
only want to get access to the case, so let's end up with looking at how you find the
different parts in the case.
Depending on where you take the case, the document will look differently. In the
Report of Cases, which is the official version, it starts with the presentation of the
case, parties, dates and peoples involved. Then comes the grounds consisting of the
judgment, legal context, the dispute in the main proceedings and questions
referred.
In the end you find the costs but also the operative part. The sections in the
grounds are numbered referred to as paragraphs. The operative parts are also
numbered starting again on number one. In EUR-Lex you will find an added
summary of judgment in the beginning of the document. I suggest you go and
search yourself for the Laval case right now. Start with the database Curia, website
for the Court of Justice of the European Union. You'll find the database in the link
list. Thanks for listening, and see you later.

The explanation provided offers guidance on accessing and understanding a

specific EU court case, the Laval case (C-341/05), using the European Case Law
Identifier (ECLI) system. Here's a summary of the key points:

- **Case Numbering and ECLI:**

- The case number format indicates the court, serial number, and year. ECLI
numbers include country code, court code, year, and sequential number.
- ECLI is a new system aimed at improving search facilities for case law across
European and national courts.

- **Searching for the Case:**

- Access the database on the website of the Court of Justice of the European
Union and enter the case number.
- Results provide details such as the court's judgment date, parties involved, case
description, and relevant directives/articles.

- **Reports of Cases and ECLI Numbers:**

 - Traditionally, court judgments were published in Reports of Cases, but since
2012, an electronic version has replaced printed versions.
- New referencing method includes case name, register number, case number,
ECLI number, and paragraph.

- **Accessing Case Information:**

- The database provides access to judgments, opinions from the Advocate
General, legal analyses, citations, academic writings, and procedural details.
- Case documents may vary depending on the source, with sections including
case presentation, legal context, dispute, questions referred, costs, and operative
parts.

- **Finding Specific Case Parts:**

- Reports of Cases start with case presentation, followed by legal grounds and
operative parts, all numbered for reference.
- EUR-Lex may include a summary of judgment at the beginning of the document.

- **Recommendation for Search:**

- Encourages listeners to search for the Laval case on the Curia database for the
Court of Justice of the European Union.

Overall, the guidance aims to assist users in effectively accessing and

understanding EU court cases using modern systems like ECLI and authoritative
databases provided by the EU institutions.
Commission Documents
Welcome to this lecture. This lecture we are going to look at different documents
from the commission. Do you know how to find proposals for new legislation?
Notices or guidelines from the Commission regarding competition. For example, in
the field of mergers, notices or guidelines play an important part of the
interpretation of the merger regulation.
Implementation reports regarding legislation. For example, regarding the
implementation of the service's directive, and directives in the area of working
conditions
The documents are published in different ways. The proposals for new legislation
is published in the COM document series, where official documents from the
commission are published.
Other important documents like notices for example, are only published in official
journal. Some documents are only published at the commission webpage. How do
you find a COM document? If we look at a document COM (2011) 651 proposal
for a regulation of the European Parliament and the council on insider dealing and
market manipulation market abuse. COM is the commission document symbol for
the official document from the commission. 2011 is the year the document is
published, and 651 is the number and final means that it is the final version. The
COM documents are available in EUR-Lex. You can search for the document on
the entrance page where you will fill in year, number, and type.
One of the reasons for using EUR-Lex is that you can ensure that you get the right
document and not a working document, or an incorrect version.
When you click on the title it takes you to the text and other formats that you might
prefer.
The type of procedure that you find about document in EUR-Lex leads you to the
legislative institution procedure, where you can get links to preparatory acts.
When you come to the state aid section of the course, you will hear of this
communication. Go to EUR-Lex and test if it is the exact title. Use the search box,
paste the title, and press Search. If that doesn't work, you can pick words from the
title and paste it in the search box. The search result is ranked like in Google. The
first record in the list is the one we are looking for. Note that you have the text
available directly. The notice is published in the official journal, C series.
If you want more information, just click in the title as usual. If you don't have the
title, but the official journal number, you can use this to find the document.
Looking at the number, OJ is official journal, C, that's for C series, and 372 is the
serial number. And date, year, and finally page. To find a text then you have this
kind of reference use EUR-Lex Advanced Search and fill in the number. And you
will get only one match, which takes you to the document.
The Commission also produced documents like implementation reports. They are
not always published in the same way. If we like to look for the latest
implementation report regarding the service directive, I suggest you to start by
using a search engine such like Google, Bing or Yahoo among others. When you
have done your search, look at the matches and check the address to validate the
source where you picked the document. Ec.europa.eu is the official homepage of
the Commission. The first match takes you to the European Commission
homepage for the EU single market, and a page about implementation report, the
service package. Further down on the page you will find the actual report. Click on
the link and you will end up in EUR-Lex and you can see that the communication
is also published as a common document. Looking for documents from the
Commission, you can find the the COM documents series, Official journal, or in
the Commission webpage. Good luck with your searches, and remember to make
sure you have the right document.

The provided explanation offers guidance on finding various documents related to

EU legislation and Commission publications. Here's a summary of the key points:

- **Notices and Guidelines from the Commission:**

- Notices and guidelines play a significant role in interpreting regulations, such
as in the field of mergers or regarding the implementation of directives.
- These documents may be published in different ways, including in the Official
Journal, on the Commission's webpage, or in other official channels.

- **Finding COM Documents:**

- COM documents are official documents from the Commission, identified by the
symbol COM followed by the publication year and number.
- These documents can be found in EUR-Lex by searching with the publication
year, number, and type.
- EUR-Lex ensures access to the correct version of the document, avoiding
working drafts or incorrect versions.
- **Searching for Specific Documents:**
- To find specific documents, such as a communication or implementation report,
users can use search engines like Google or Bing and validate the source by
checking the URL.
- Official Commission documents are often found on the ec.europa.eu website,
ensuring reliability and authenticity.

- **Using References to Find Documents:**

- References, such as those from the Official Journal (OJ), can be used in EUR-
Lex Advanced Search to locate the exact document.

- **Accessing Documents:**
- Clicking on the document title in search results takes users directly to the text
and other preferred formats.
- Additional information and related documents can often be found by exploring
links and tabs in EUR-Lex.

Overall, the guidance emphasizes the importance of verifying sources, utilizing

official channels like EUR-Lex and Commission webpages, and ensuring access to
the correct and up-to-date versions of EU documents.

Week 3: Fundamental Principles

EU Competences: The Principles of Conferral and Subsidiarity
Hello. My name is Annegret Engel and I welcome you to today's lecture. We will
start the section on fundamental principles by talking about the different principles
that determine what the EU can do. In other words, what are the competencies that
the European Union has. The key principles here are the principle of conferred
powers or the principle of conferral, the principle of subsidiarity, and the principle
of proportionality. I will deal with the first two principles in this lecture, there will
then be a separate lecture on the principle of proportionality later on within this
section. So first, let's talk about the principle of conferred powers which is set out
in Article 5 TEU. Under this principle, the EU can only act within the limits of the
powers conferred on it by the member states. This means that the member states
originally had to limit their sovereign rights in certain areas by transferring some of
these powers onto the union. Without that, the EU would have no competence to
act in those areas. These transferred powers have been incorporated in the treaties
in the form of legal basis. A legal base usually gives us some basic information
about who has the competence to act, so is it the union institutions' or the member
states, when would they be competent to act. So under which conditions and how,
meaning what are the correct procedures that would apply. For a long time, the
different types of competencies, so the delimitation between the powers of the
union and the member states, had not been formally defined in the treaties. This
was left for the courts to interpret the relevant treaty provisions on a case-by-case
basis. The Treaty of Lisbon for the first time codify the different types of
competencies that the union can have; exclusive, shared, or other supplementary
competencies. The union's exclusive competence includes only some areas which
can be found in Article 3 TFEU, as for example, the customs union. In these areas,
only the EU can legislate and adopt legally binding acts. Member states remain
largely competent in areas where the union has only supplementary competencies,
such as culture or tourism. These can be found in Articles 5 and 6 of the TFEU.
Here the union cannot legislate to harmonize the laws of the member states, but it
can act in order to support, coordinate, or complement their actions. But the vast
majority of policy areas which are relevant for the topics of this course, such as the
internal market, the environment, consumer protection, and social policy fall under
the shared competences of the union and they're listed in Article 4 of the TFEU.
Shared does not mean that the union and the member states can both legislate at the
same time, member states can only use their competences to legislate to the extent
that the union has not yet exercised its own competence. As soon as the union
exercises its competencies and legislates in a particular area, member states no
longer have competence to do so. This is called preemption of member states'
competences. Only those competences not conferred on the union by the treaties
remain fully within the sovereign rights of member states. While this may seem
clear cut, we need to remember that not all competencies refer to one specific
policy area, such as agriculture or the environment. Some competences of the EU
as set out in very broad and general terms, they are so-called horizontal
competences. The best example of such a horizontal competence is Article 114 of
the TFEU, under which the union has the power to regulate the internal market. As
one can imagine, the internal market can be construed broadly and therefore may
touch upon a variety of other policy areas which makes it more difficult to keep
those competences apart. Let's have a look at an example. The EU introduced a
measure prohibiting the sale of oral tobacco products such as Swedish snus. A
manufacturer of snus challenged the legality of this measure on the grounds that
this concerned the field of public health rather than the internal market, so the
union would have no competence to regulate. At the time, there were already some
countries that had introduced national laws regulating the sale of snus, and other
member states were considering such measures. In effect, this would lead to
differences between national tobacco markets and such differences could
potentially create barriers in the internal market. So to remove the risk of such
barriers, it was necessary to introduce common rules ensuring the functioning of
the internal market for tobacco products in general. In its judgment, the European
Court of Justice held that the objective of this measure was not public health, but
the establishment of the functioning of the internal market, so the union could
indeed use Article 114 of the TFEU as a legal base. As you can see, this measure
clearly affected the area of public health despite being introduced under the
horizontal competence of the internal market. In general, this type of reasoning has
been used to justify many of the most controversial measures adopted by the EU.
So the principle of conferral may appear to grant the union a very clear set of
competencies, but it is in fact a very open-ended and ambiguous principle. This is
where the principle of subsidiarity plays a role. Here the question is not whether
there is a competence available to take action in a particular area, this has already
been answered in the previous step, but rather at which level such action would be
most efficient. The principle of subsidiarity provides that the union should not be
taking any action when the objectives of a proposed measure would otherwise be
better achieved by the member states or even at regional level. So the default actors
here are indeed the member states, unless there are reasons why the union should
be stepping in. In practice however, it seems that the European courts have been
rather reluctant to restrict any action taken at EU level based on the principle of
subsidiarity when there was a competence available in the treaties. As we've seen
above with the example of Swedish snus, there are often multiple competencies
available that could serve as a legal base for a proposed measure. The choice of
one legal basis over another then depends on the specific objectives defined in the
measure in question. So if the objective is defined as protecting public health, then
perhaps the member states or justice will place as the Union to achieve this
objective. If on the other hand we define the objective as facilitating the
functioning of the internal market, then this can only be done at union level,
because it entails harmonizing the laws of all the member states. So individuals
and member states wanting to challenge a union measure on the grounds that it
breaches the principle of conferral or the principle of subsidiarity, almost never
succeed as the union's powers are indeed very broad. What is often more
successful then is challenging the choice of legal basis for a particular measure
rather than claiming a complete lack of competencies. From the perspective of this
course, the principles of conferral and subsidiarity, only deal with what the union
can do, not with how it should do it. This is where the principles of proportionality,
non-discrimination, legality, and respect for fundamental rights come in, and they
will be the subject of the next lectures.

1. **Principle of Conferral:**
- Under Article 5 TEU, the EU can only act within the limits of powers conferred
by member states.
- Member states transfer certain powers to the EU, which are incorporated into
treaties as legal bases.
- The Treaty of Lisbon codified different types of competencies: exclusive,
shared, and supplementary.

2. **Types of Competencies:**
- Exclusive competence: Only the EU can legislate in certain areas, such as the
customs union.
- Shared competence: Both the EU and member states can legislate, but member
states cannot legislate once the EU has acted.
- Supplementary competence: The EU can support, coordinate, or complement
actions of member states.

3. **Horizontal Competences:**
- Some competences are broad and general, such as regulating the internal
market under Article 114 TFEU.
4. **Example and Judicial Interpretation:**
- The case of Swedish snus illustrates how measures under the internal market
competence can impact public health.
- The European Court of Justice held that the measure aimed at the functioning
of the internal market, justifying its legality under Article 114 TFEU.

5. **Principle of Subsidiarity:**
- Determines at which level action should be taken for efficiency.
- EU should not act if member states or regional levels can achieve objectives
better.

6. **Judicial Interpretation of Subsidiarity:**

- Courts have been reluctant to restrict EU action based on subsidiarity if
competencies are available.
- Choice of legal basis depends on specific objectives defined in the measure.

7. **Challenges and Application:**

- Challenges to EU measures based on conferral or subsidiarity principles are
rarely successful due to broad EU powers.
- Challenges often focus on the choice of legal basis for a measure.

8. **Next Steps:**
- Other principles such as proportionality, non-discrimination, legality, and
respect for fundamental rights will be covered in subsequent lectures.
The effects of EU Law
Welcome to this lecture on the effects of EU law. In the previous lecture, Eduardo
told you what competences the EU has. Essentially looking at the question, what
can the EU do?
As the title of this lecture suggests, I will focus on the effects of EU law. That is
what happens when the EU does act, when the EU does use its competences.
However, before we can take a closer look at the actual mechanisms that give
effect to EU law,
I want to make sure that we're on the same page about what EU law even is.
EU law can be viewed as something distinct from national law. A different legal
order which can interact with the national one.
Just as the national legal order contains a hierarchy of norms. With, for example, a
constitution, laws, administrative decisions, etc. The EU legal order also contains
different legal instruments.
In terms of EU law, one often speaks of Primary law and Secondary law.
Primary law has a higher normative value and consists of the treaties. You might
have heard of the TEU, the treaty on European Union. And the TFEU, the treaty on
the functioning of the European Union.
The EU charter fundamental rights, which Magnus will talk to you about in your
next lecture, also forms part of what we can call Primary law.
Primary EU law essentially comes about through agreements between sovereign
member states.
Secondary law, on the other hand, is produced by the EU institutions themselves.
It's worth mentioning here, that the main institutions in this regard are the Council,
the European parliament, and the commission. In general terms, Secondary law
thus produced, can take the form of a regulation, a directive, or a decision.
Now that we have a better idea of what EU law is, now we can ask ourselves, what
difference does it make? What are the mechanisms that makes EU Law relevant?
Relevant to you, relevant to me, to the company you're advising? Or to the member
state this company would like to provide services in.
What makes EU law matter to us?
Well, the three simple answers to this are: direct applicability, direct effect, and
primacy. I will now do my best to briefly explain these three key concepts in turn.
And I would advise you to listen carefully, as you can be sure that there will be a
quiz question on how these concepts function and interact.
In relation to direct applicability of EU law, the first thing I would like you to do is
take a good look at article 288 TFEU.
As you can see, all three forms of secondary law that I mentioned earlier are
binding.
Even if directives are only binding as the result. However, it is only regulations
that are said to be directly applicable.
Well, what does this mean that regulations are directly applicable?
The insistence on direct applicability can be explained by the traditional view of
EU law, as being part of international law. And hence something very different
from national law.
Traditionally, the question of whether international law becomes applicable law
within the legal orders of a sovereign state. It's a question left to the state at hand.
That is, it's up to each state to decide if and how international law should apply in
their territory.
Following this logic, it would have been up to the member state to decide when EU
law should overlap with national law. And be applicable within the national
context.
It should be noted that states have traditionally treated international law in very
different ways.
Some states embracing international law as directly applicable on their territory,
and some states requiring all international law to first be transposed into national
law, before it can be applicable.
Therefore, it was very important for the founders of the EU to set out that some EU
law would actually be directly applicable.
Hence it flows from EU Primary law that regulations need not, and indeed should
not, be transposed into national law. They are by their very nature directly
applicable in the member states.
From what was said about direct applicability, you might now have the impression
that regulations are the only form of EU law that really matters in a national
context.
Well, early on in the history of the European Union, its Court of Justice, most
commonly known as the ECJ, established that a much wider range of EU law was
destined to have direct legal effects in the member states.
In the classic judgment of Van Gend & Loos, which you can find in the resources
connected to this lecture, the ECJ introduced for the very first time, and without
any clear legal basis in the treaties, the principle of Direct Effect.
Together with Primacy, this principle has become the very foundation for giving
concrete effects to EU law in the national context.
In fact, as far as definitions go, direct effect can be defined as the capacity of EU
law to give rise to rights and obligations directly, without the need for further
implementation.
In practical terms, it means that you should be able to invoke and enforce
provisions of EU law with direct effect in your national context. Whether it be
before Spanish court, or a Swedish administrative body, in a contract dispute, or as
a defense against criminal prosecution. This definition before you might sound like
direct applicability. But direct applicability is not in itself a prerequisite for direct
effect.
A particular provision of EU law can be deemed to produce direct effect even
though the legal instruments where we find the provision is not a regulation.
Instead of connecting direct effect to direct applicability, the ECJ chose to expound
three concrete conditions that all have to be fulfilled for a specific EU provision to
have direct effect.
Firstly, the provision has to be clear and precise. There should be no ambiguity
about what the EU law in question actually requires.
Secondly, the provision has to contain an unconditional right or obligation. If the
first condition is concerned with the clarity of language. The second condition
concerns the clarity of the writer obligation itself.
Thirdly, and lastly, the provisions should not be dependent on implementing
measures. This last condition would seem to exclude the possibility of provisions
in directives ever producing direct effect. Granted, directives are a bit particular
when it comes to direct effect. Since they're addressed to the member states, and
only the end, not the means, are said to be binding. The ECJ has consistently held
that directives cannot produce direct effect, at least not between private parties.
To this effect, it is often stated that there can be no horizontal direct effect flowing
from directives.
However, when it comes to relationships between the state and a private party,
directives can produce vertical direct effect.
At least when the EU provision is invoked by the private party as against the state.
The ECJ has ruled that the member state, and thereby any public administration or
undertaking, should be precluded from benefiting from the fact that a member state
itself has neglected to implement a directive correctly. This kind of reasoning
stems from the so called Estoppel principle. Which prescribes that no one should
be able to benefit from their own misconduct.
As I stated earlier, direct effect and primacy works together to ensure an effective
EU law. Shortly after the introduction of direct effect in Van Gend & Loos the ECJ
went on to introduce the principle of primacy of EU law. In its Costa vs Enel
judgment, which you'll also find in the resources. This principle basically requires
that EU law has a higher normative value.
And that it has to be given effect. Even in the presence of a contrary national norm.
I would like you to think about what this means and try to answer the following
question.
So, as you see, the combination of direct effect on the one hand, and primacy on
the other can be quite a force to be reckoned with. However, as a very last note on
primacy, I would like to add that even if the EU provision at hand, for one reason
or another, does not fulfill the criteria for having direct effect.
Primacy can still come into play. The primacy of EU law gives rise to an
obligation of EU conform interpretation, which was most known to be laid down in
the ECJ Marleasing judgment.
This obligation implies that all national rules must be interpreted in light of EU
law.
And should as far as possible be given an interpretation which is in conformity
with EU law. And here I mean all EU law, not just the one which has direct effect.
I'll let those be my final words for this session. I hope it has been helpful, and
thank you for your time.

1. **Primary and Secondary Law:**

- Primary law consists of treaties like the TEU, TFEU, and the EU Charter of
Fundamental Rights.
- Secondary law is produced by EU institutions and includes regulations,
directives, and decisions.

2. **Direct Applicability:**
- Regulations are directly applicable in member states without the need for
national transposition.
- This ensures uniform application of EU law across member states.

3. **Direct Effect:**
- Direct effect allows EU law to create rights and obligations that individuals
can invoke in national courts.
- Conditions for direct effect include clarity, unconditional nature, and
independence from national implementation.

4. **Direct Effect of Directives:**

- Directives typically cannot create horizontal direct effect between private
parties but can create vertical direct effect against member states.

5. **Principle of Primacy:**
- Primacy establishes that EU law takes precedence over conflicting national
law.
 - Even if EU law doesn't have direct effect, national courts must interpret
domestic law in line with EU law.

6. **Obligation of EU-Conform Interpretation:**

- National courts must interpret domestic law in a manner consistent with EU
law, regardless of whether EU law has direct effect.

The combination of direct effect and primacy ensures the effectiveness of EU law
in member states, promoting uniformity and consistency in its application.
The Principle of Fundamental Rights
Welcome. In this lecture, I will talk about the protection of fundamental rights in
the European Union. In order to follow this lecture, I suggest that you have access
to Article 6 and 19 of the Treaty of the European Union. And the charter of
fundamental rights.
Originally conceived as a general principle of EU law in the 1970s, the protection
of fundamental rights has become a keystone in the creation of the internal market.
The first German commissioner to the EU, Walter Hallstein, noted already in the
1950's that the then European economic community was a Rechtsgemeinschaft, or
a community of the law.
I will focus on two provisions of the treaty of the European Union.
Article 19 TEU is considered to establish the rule of law in the European Union.
According to this provision, the Court of Justice of the European Union shall
ensure that in the interpretation and application of the treaties, the law is observed.
Member states shall provide remedies sufficient to ensure effective legal protection
in the fields covered by union law.
The framework for the protection of fundamental rights in the EU is laid down in
Article 6 TEU. There are four levels of protection. First, according to Article 61
TEU, there is the charter of fundamental rights. The charter contains the
fundamental rights catalog, and has the same value as the treaties. Second,
according to Article 62 TEU, there is the future accession of the EU to the
convention of human rights. Third, according to Article 6.3 TEU, there is also the
protection of fundamental rights through general principles of EU law. Finally,
under the same provision, there is the application of fundamental rights by national
courts through national constitutions.
There is plenty of case law from the court of justice of the European Union. You
will find some judgments in the reading material for this lecture. We will now take
a closer look at the four levels of protection.
The charter of fundamental rights was proclaimed in Nice on the 7th of December
2000. However, it became legally binding only in the December 2009, when the
Lisbon treaty entered into force.
According to Article 51 of the charter, it applies only when EU law is applicable
and when the EU member states apply EU law. However, when the charter applies,
it is binding on the EU Institutions as well as the national institutions and the
national administrations. Thus, the charter is binding for the European Court of
Justice and the national courts, the Commission and the National Competition
authorities and so on. The charter is a peculiar document, since it contains both
what is commonly called hard rights as well as soft rights.
Hard rights, are rights which concern the physical integrity of individuals. And the
protection from arbitrary interventions by the state, and the freedom of individuals.
Such rights include the right to dignity, to life, the ban of torture, and the ban of
capital sentences. Soft rights, on the other hand, are rights which are more closely
related to the organization of society and social aspects of life.
These include rights such as the right to a paid holiday, the right to fair working
conditions, and the right of workers to be consulted. Naturally, the wide scope of
these rights means that they all carry a different meaning and different effects. The
charter distinguishes between rights and principles in Article 52 paragraph five.
It is still not clear how this distinction should be made.
Also, the charter contains many rights which have been inspired by other
documents.
One such important source of inspiration is the European convention of human
rights.
You heard it right, the convention of human rights is applicable also in this setting
and not only in Article 60 EU. One reason was to ensure coherence in the
application of fundamental rights in the EU. Anyway, other rights and now we are
talking about many of the soft social rights, can also be found in directives, which
have been adopted by the European legislator. Such rights include the right to a
paid holiday and the right for workers to be consulted.
Some of these directives are only framework directives, and they are not specific
enough to have direct effect. In such a situation, the corresponding right in the
charter is also weaker.
Another distinction follows indirectly from what I just said. Those rights which
correspond to rights in the convention of human rights, must be interpreted in the
light of that convention.
The EU may choose to provide a higher level of protection however. This follows
from Article 52.3 of the charter. All this together shows that the convention of
human rights has a specific place in EU law. The EU is supposed to exceed to the
convention of human rights. The convention of human rights has been applied by
the European court of justice as the human rights standard for quite some time
now. Remember, I just mentioned how the convention forms an sort of minimum
level according to Article 52.3 of the charter.
But apparently, this was not considered to be enough. Instead, it was decided that
the EU should become a member of the Council of Europe and exceed to the
convention. There are many aspects to this question, but one which is very
important is the design of a judicial structure of the relationship between the Court
of Justice of the EU in Luxembourg on the one hand and the Court of Human
Rights in Strasbourg on the other. The negotiations for the accession are well under
way.
On the 5th of May 2014, the Court of Justice had its hearing on on what will be
opinion too, for 2013. If the Court of Justice agrees to the draft accession treaty,
the EU may exceed to the convention very soon indeed.
There is the question of general principles of EU law. Let me be brief on this point.
It does not change any level of rights protection. For all practical purpose, the
provision in Article 6.3 TEU is of little importance in this regard.
However, the fourth question, the role of national constitutions, is potentially
important. According to Article 4.2 TEU, the EU must respect national identity.
According to Article 6.3 TEU, and the Articles 52.4 and 53 of the charter, national
constitutions play an important role in the fundamental rights protection in the EU.
But if it would ever threaten the primacy, unity, and effectiveness of EU law in the
face of harmonizing measures based on mutual recognition
National constitutions must give way to the effectiveness of EU law. This outlines
the framework for the fundamental rights protection in EU law. It's impossible to
cover it all in one single lecture, but at least now we have had a brief overview.
Thank you for tuning in and see you soon again.

1. **Charter of Fundamental Rights:**

- Proclaimed in 2000 and legally binding since 2009.
- Applies when EU law is applicable and binding on EU institutions and member
states.
- Contains both "hard rights" (e.g., right to life, ban on torture) and "soft rights"
(e.g., right to fair working conditions).
- Inspired by sources like the European Convention on Human Rights (ECHR).

2. **Future Accession to the ECHR:**

- The EU is in the process of acceding to the ECHR, aiming to ensure coherence
in the application of fundamental rights.
- EU law must respect the ECHR, but the EU can provide a higher level of
protection.

3. **General Principles of EU Law:**

- Provides additional protection but does not change the level of rights
protection significantly.

4. **Role of National Constitutions:**

- National constitutions play a role in fundamental rights protection.
- However, national constitutional provisions must yield to the effectiveness of
EU law, particularly in the face of harmonizing measures based on mutual
recognition.
The Principle of Proportionality
Welcome. In this lecture I'm going to present the principle, which is of relevance
for almost every single other aspect of European law. I'm talking of the principle of
proportionality.
Play video starting at ::19 and follow transcript0:19
I have based this lecture on this excellent book, the third edition of European
Union Law written by Koen Lenaerts and Pete Van Nuffel. It was published by
Sweet & Maxwell in 2011. In life we are all called upon to make choices. They
range from what should I have for dinner to where do I want to send my kids to
school.
Play video starting at ::43 and follow transcript0:43
The law is no different. Often choices have to be made based on evidence.
Play video starting at ::49 and follow transcript0:49
In criminal law, for instance, we need to see whether the accused committed the
alleged act.
Play video starting at ::55 and follow transcript0:55
In EU law we have that, too, but because of the very special nature of EU law,
which is based on the parallel application of EU law and national law, we
sometimes must make an assessment, whether EU law and national law are
compatible. We call this a compatibility assessment.
Play video starting at :1:13 and follow transcript1:13
This assessment often leads to balancing of different interests and different results.
On one hand we have the primacy, unity and effectiveness of EU law. And on the
other hand, we have the principles of subsidiarity and conferral.
Play video starting at :1:29 and follow transcript1:29
As Lenaerts and Nuffel have explained it, the principle of proportionality serves to
assess the legality of an exercise of power where an admittedly legitimate aim is
pursued. But at the same time, other objectives deserving of protection are
damaged.
Play video starting at :1:47 and follow transcript1:47
The balancing of these interests follows a certain model.
Play video starting at :1:51 and follow transcript1:51
The model has been adopted from German constitutional law and it is applied in all
fields of EU law.
Play video starting at :1:57 and follow transcript1:57
Proportionality assessments are also different depending on the field of law.
Play video starting at :2:3 and follow transcript2:03
Is applied in relation to fundamental rights, the four freedoms, labor law and many
other fields where national measures must be assessed in the light of EU law.
Play video starting at :2:15 and follow transcript2:15
So remember in this lecture we will look at how the principle of proportionality is
applied when national measures are assessed in the light of EU law.
Play video starting at :2:26 and follow transcript2:26
In order to make the assessment transparent, the proportionality test follows three
distinct steps.
Play video starting at :2:34 and follow transcript2:34
These steps ensure not only transparency, but also function as a way of self
control, because they force judges to reason their decision.
Play video starting at :2:44 and follow transcript2:44
I will now present the three steps one by one and give you some examples from the
case law of the ECJ.
Play video starting at :2:51 and follow transcript2:51
As always, you'll find the relevant cases in the reading materials for this lecture.
Play video starting at :2:58 and follow transcript2:58
The first step in the proportionality assessment is the question whether the
measuring question is appropriate.
Play video starting at :3:5 and follow transcript3:05
This step requires a causal relationship between the measure and the objective
pursued. It controls whether the measure was taken arbitrarily.
Play video starting at :3:15 and follow transcript3:15
The Court of Justice leaves a marginal discretion to the national authority
concerned, and only considers whether there has been a manifest error.
Play video starting at :3:26 and follow transcript3:26
One example of an appropriate measure can be found in the case Dirextra.
Play video starting at :3:32 and follow transcript3:32
Apparently, Italian legislation provided certain funds to higher education on master
level on the condition that the demanding school had at least ten years experience
to provide higher education.
Play video starting at :3:46 and follow transcript3:46
The question arose, whether the Italian measure restricted the freedom of
establishment in the EU by limiting the number of schools which could receive the
funds.
Play video starting at :3:57 and follow transcript3:57
In its analysis, the Court of Justice found that the aim of the Italian measure to
ensure a high quality of the education on the Master level which makes it easier for
those who visit the school to find a job once they're done was appropriate.
Play video starting at :4:15 and follow transcript4:15
So now, it was time to go to step two.
Play video starting at :4:21 and follow transcript4:21
The second step in the proportionality assessment is the question whether the
measure was necessary.
Play video starting at :4:28 and follow transcript4:28
This test is the dominant feature in the proportionality test.
Play video starting at :4:34 and follow transcript4:34
The question is, does the measure go further than is necessary to achieve the
legitimate aim pursued?
Play video starting at :4:42 and follow transcript4:42
In practice, the question arises whether other less restrictive means, capable of
realizing the same end exist.
Play video starting at :4:52 and follow transcript4:52
Less restrictive means that it would be less detrimental to another aim or interest
protected by EU law.
Play video starting at :5:1 and follow transcript5:01
As you see, this is the part where the actual balancing takes place.
Play video starting at :5:7 and follow transcript5:07
If we continue with the example from step one, the court, after finding that the
measure was appropriate, found that since the restriction was only applicable to
Master level education and did not restrict the possibility of students to seek out
any other education, it could not be considered disproportionate to provide the
funds only to a limited number of schools which met the requirements.
Play video starting at :5:36 and follow transcript5:36
As a result, the measure was compatible with EU law.
Play video starting at :5:42 and follow transcript5:42
Finally, there is also the weighing of interests in general. This third step of the
proportionality test is sometimes overlapping with the second step.
Play video starting at :5:53 and follow transcript5:53
The advantage of this third step, however, is that it allows for a sort of rule of
reason, if an outcome would be manifestly inappropriate.
Play video starting at :6:3 and follow transcript6:03
Remember, the principle of proportionality applies in all fields of EU law. It is
used for fundamental rights as well as the review of EU legislation.
Play video starting at :6:16 and follow transcript6:16
As a matter of fact, Article 5 TEU stipulates an obligation for the EU to respect the
principle of proportionality when it exercises its competence.
Play video starting at :6:26 and follow transcript6:26
I have included two cases which cover this test in the reading materials.
Play video starting at :6:32 and follow transcript6:32
This, dear watchers, outlines the principle of proportionality. You will meet this
principle again and again in the different lectures which follow.
Play video starting at :6:43 and follow transcript6:43
I hope that you have enjoyed the lecture. Thank you for tuning in, and see you
soon again.
The Principle of Non-discrimination
In this section, I will talk about the principle of non-discrimination. This has been
described as being the DNA of EU law and the cornerstone on which European
integration is built. It permeates every aspect of EU law. It binds both the EU and
all its institutions. It binds the member states and it can even bind private parties
within the member states.
Play video starting at ::32 and follow transcript0:32
Discrimination consists of both treating like cases differently and also treating
different cases the same.
Play video starting at ::42 and follow transcript0:42
The test is whether the difference in treatment is on the basis of substantial
objective differences between the cases.
Play video starting at ::50 and follow transcript0:50
Let's give some example and try to clarify this. In most countries in Europe,
motorcyclists are allowed to travel on motorways, but people on mopeds are not.
This is a clear difference in treatment. But it is not discrimination because there are
substantial objective differences between motorcycles and mopeds in terms of
speed. Which means that mopeds are not comparable to motorcycles when it
comes to traveling on a motorway.
Play video starting at :1:17 and follow transcript1:17
On the other hand, a rule prohibiting mopeds from parking on motorbike parking
places may well discriminate. When they need to park their bikes, moped riders are
in a comparable situation to motorcycle riders.
Play video starting at :1:31 and follow transcript1:31
And to complete this example, imagine this car park charged motorcycles the same
amount to park there as a large lorry. Here, there might be discrimination because
the two cases are not comparable when it comes to occupying parking spaces, yet
they are treated the same.
Play video starting at :1:51 and follow transcript1:51
There are numerous measures in the treaty which give expression to the principle
of non-discrimination in a variety of contexts.
Play video starting at :1:59 and follow transcript1:59
The treaty expressly prohibits discrimination on grounds of nationality in Article
18 TFEU.
Play video starting at :2:6 and follow transcript2:06
And prohibits discrimination on grounds of sex in matters of employment In Art
157 TFEU. In addition, the Charter of Fundamental Rights of the European Union
contains a prohibition on any discrimination based on any grounds such as sex,
race, color, political opinion, age, sexual orientation, and so on.
Play video starting at :2:32 and follow transcript2:32
But it can be argued that all these explicit prohibitions on discrimination in EU
primary law are merely different expressions of the general principle of equality or
non-discrimination. Which is a general principle of EU law.
Play video starting at :2:48 and follow transcript2:48
And the case law of the Court of Justice shows that this general principle extends
not just to differences of treatment on grounds such as sex, race, nationality,
political opinion. Which are quite familiar to discrimination lawyers in national
law. Or in the law of the European Convention on Human Rights, for example. But
also extends to difference of treatments on any other grounds. So for instance,
treating steel producers less favorably than aluminum producers, or importers of
liquors less favorably than those of table wine, or traders in lamb meat less
favorably than traders in beef might be discriminatory.
Play video starting at :3:32 and follow transcript3:32
This has important implications for a business because it widens the range of
arguments that they can use to challenge measures that might put that business at a
disadvantage.
Play video starting at :3:44 and follow transcript3:44
Having said that, it must be recognized that measures that differentiate on grounds
such as sex or nationality are much more likely to be considered discrimination
than treating different industry sectors differently. In particular any difference of
treatment on the grounds of nationality is likely to be very problematic from an EU
law perspective. As will be discussed in the section on the internal market,
prohibiting rules which disadvantage products or persons or services from other
member states in a particular national market has been a key factor in building the
internal market and European integration.
Play video starting at :4:26 and follow transcript4:26
There are two main categories of discrimination. Direct discrimination occurs
when a person is treated less favorably because of their status.
Play video starting at :4:36 and follow transcript4:36
A good example of direct discrimination was a Greek law which stated that only
Greek nationals could hold a post of captain or first mate. Non-Greek nationals
were at a disadvantage in their employment opportunities because of their
nationality. So the Court of Justice held that the Greek law was directly
discriminatory on grounds of nationality.
Play video starting at :4:59 and follow transcript4:59
Or another example, an Irish campaign backed by the Irish government that was
designed to encourage people to buy Irish, and so put non-Irish products at a
disadvantage because of their nationality.
Play video starting at :5:15 and follow transcript5:15
But more common and more subtle is indirect discrimination. Indirect
discrimination occurs when a requirement is imposed on the person which appears,
on the face of it, to treat everyone the same way, but in reality it puts persons in a
particular group at a disadvantage.
Play video starting at :5:36 and follow transcript5:36
A good example of this are residency requirements. In one such case, an Austrian
law required that all undertakings trading in Austria to apply, only appoint
managers who were resident in Austria.
Play video starting at :5:51 and follow transcript5:51
The court found that this measure was indirectly discriminatory, because whilst it
might not make a mention of nationalities, it in fact put nationals of other member
states at a disadvantages, as non-residents are in the majority of cases, foreigners.
Play video starting at :6:10 and follow transcript6:10
Another example, this time in the context of sex discrimination, is a policy by a
department store to exclude part-time workers from its occupational pension
scheme.
Play video starting at :6:21 and follow transcript6:21
As women were much less likely than men to work full time, such a policy placed
women at a disadvantage.
Play video starting at :6:30 and follow transcript6:30
The reason for the less favorable treatment was not the sex of the workers, but the
result of the policy was nonetheless that women were less favorably treated than
men. But it's important to remember that differences in treatment, even if they
might be prima facie discriminatory, can be justified. And the treaties provide
member states with specific exemptions that allow them to justify the differences
in treatment. So rules that require imported use cars to be subject to a road-
worthiness test, that domestic use cars are not required to take, can be justified on
grounds of protecting public health.
Play video starting at :7:9 and follow transcript7:09
And decisions to deport non-national EU citizens, which of course cannot apply to
national EU citizens, can be justified on the grounds of protecting public order.
Play video starting at :7:20 and follow transcript7:20
In addition to these express requirements that are stipulated in the treaty, member
states may be able to justify indirectly discriminatory measures by reference to
other objective requirements. Such as protecting the environment, protecting
consumers.
Play video starting at :7:38 and follow transcript7:38
This issue of how differences of treatment can be justified will be dealt with in
much greater detail in the internal market part of the course.
Play video starting at :7:49 and follow transcript7:49
It's also important to remember that any such justification must respect the
principles of proportionality and respect for fundamental rights which are covered
in Magnus's lectures.
Play video starting at :8:3 and follow transcript8:03
The principle of non-discrimination in the EU law is particularly complex because
this principle can be seen as performing a number of different roles within the EU
legal system. It can have a market unifying role by removing differences of
treatment which can create barriers in the internal market. It can have a market
regulatory role, which ensures that all actors are treated the same to ensure fair
competition and prevent distortions in the market causing by treating certain
market actors more favorably than others.
Play video starting at :8:36 and follow transcript8:36
But just as the European Union has moved beyond being a merely economic union,
so the principle of nondiscrimination has grown beyond being a mere market
principle and is now evolving into a principle that protects the rights of all EU
citizens regardless of whether they are market actors. To be treated fairly and
equally. And in that role, as a constitutional principle of non-discrimination, it
comes into the scope of the principle of respect for fundamental rights. And that is
the subject of the next lecture.
The Principle of Legal Certainty
Hello again. This session with me will be dedicated to The Principle of Legal
Certainty. As it is expressed in EU law. To start us off, I think we have to ask
ourselves what is implied by this term legal certainty.
Play video starting at ::32 and follow transcript0:32
Well, in the EU context, the principle of legal certainty requires, in particular, that
rules should be clear and precise so that individuals may ascertain an equivocally
what the rights and obligations and also may take steps accordingly.
Play video starting at ::50 and follow transcript0:50
In other words, legal certainty requires a sufficient degree of foreseeability and
also guarantees against arbitrariness within the legal system.
Play video starting at :1:1 and follow transcript1:01
A problem one can see from a legal certainty perspective is that EU rights and
obligations very often are dependent on a national system and that this national
system might not be in line with the provisions of EU law.
Play video starting at :1:14 and follow transcript1:14
For example, a new piece of EU legislation may provide a right which can be
interpreted in different ways a member stake might then, in good faith, have opted
for too restrictive interpretation of this right and adapted the national law
accordingly.
Play video starting at :1:32 and follow transcript1:32
Such a situation can quite obviously create uncertainty on the part of the individual
about what his or her legal rights actually are.
Play video starting at :1:43 and follow transcript1:43
From what we discussed in my last session, we know that the primacy of EU law is
certainly one tool that can be used when faced with dissonance between on the one
hand, the EU provision and on the other hand, national provisions.
Play video starting at :1:58 and follow transcript1:58
The principle primacy will then dictate that national provisions are interpreted as
far as possible to comply with the EU provision.
Play video starting at :2:8 and follow transcript2:08
And, also, if there is a specific national legal rule standing in the way for a correct
enforcement of EU right, primacy might even dictate that this national measure
should be disapplied, so thrown out the window.
Play video starting at :2:22 and follow transcript2:22
In this sense, legal certainty is promoted as we then know that EU Law and
principle should prevail. We don't have to second guess if it's national or EU Law.
Play video starting at :2:34 and follow transcript2:34
So it will prevail when there is contradiction between EU law and national law.
Play video starting at :2:40 and follow transcript2:40
But then the question is would primacy be the only tool in the EU toolbox to deal
with the situation of legal uncertainty due to these differences between EU and
national law?
Play video starting at :2:57 and follow transcript2:57
Just like the principal of equality and nondiscrimination, which you heard about
from Eduardo in your last session, the principal of legal certainty is a general
principal of EU law. Legal certainty is even called a fundamental principle of
union law. Reflecting the fact that EU claims to be a legal order built on the rule of
law and that no such legal order with self respect could survive without adhering to
the principle of legal certainty.
Having the status of a general principle of the EU Law.
This essentially means that the legal certainty can be used in two different ways,
both as a tool for interpretation and as a standard of judicial review.
Play video starting at :3:47 and follow transcript3:47
This means that EU law as a whole should be interpreted in a way that is
compatible with the principal of legal certainty.
Play video starting at :3:55 and follow transcript3:55
That is, in a way that is foreseeable to the individuals and also to the member states
concerned.
Play video starting at :4:3 and follow transcript4:03
As for the role of the principle of legal certainty in judicial review, on the other
hand it can be used as a benchmark, both when assessing the validity EU law itself,
and when assessing the compatibility of national law with EU law. So, for
example, if an EU provision would introduce a rule with a retroactive penalty, that
is, a penalty for an act that was not in anyway subject to a penalty when the act was
committed.
Play video starting at :4:34 and follow transcript4:34
This retroactive penalty would be deemed contrary to the principle of legal
certainty and the EU provision would be held to be invalid on this ground.
Play video starting at :4:44 and follow transcript4:44
In a similar manner, national law that would fall within the scope of EU law that is,
the law that in some way overlaps with the EU legal sphere could be deemed to be
incompatible with EU law if it does not respect the principle of legal certainty.
Play video starting at :5:3 and follow transcript5:03
As an example of how the principle of legal certainty can come into plain practice,
I would like to introduce you to the ECJ's classic judgement from the 1976, in the
Defrenne case. You'll find the full judgment in your material but the basic gist of
the case is that the that has been in force since the foundation of the European
community contained a provision which obliged the member state to ensure that
men and women got equal pay for equal work.
Play video starting at :5:35 and follow transcript5:35
Miss Defrenne, an air hostess working for the Belgium aviation company Sabena,
she brought an action against her employer on the grounds that her male colleagues
got higher wages than her.
Play video starting at :5:48 and follow transcript5:48
The national court decided to send a question to the ECJ, asking whether the treaty
provision on equal pay, which was directed to the member states, could also bind a
private company such as Sebena. The ECJ gave a positive response, Sabena was in
fact obliged to give the male and female workers equal pay for equal work. The
court thereby established that the principle of equal pay between men and women
had horizontal direct effect.
Play video starting at :6:21 and follow transcript6:21
So as between private parties. As you can see on this timeline, the Treaty provision
on equal pay had been in force for about 18 years when the ECJ's judgement in
Defrenne was handed down.
Play video starting at :6:36 and follow transcript6:36
As a general rule, the ECJ's interpretation of EU law is ex tunc, which means that
the provision on equal pay should have been understood as having horizontal direct
effect all along.
Play video starting at :6:51 and follow transcript6:51
However, this was a huge shock for the private employers around Europe who
thought that the treaty provision at hand, only bound the states.
Play video starting at :7:1 and follow transcript7:01
As the outcome reached by the court was so unexpected, and that the decision
could potentially have disastrous economic effects on companies across Europe,
the ECJ decided, in the name of legal certainty, to limit the retroactive effects of its
judgement. Miss Defrenne and everyone who had already initiated proceedings at
the time of the judgement, they could get compensation for loss of wages prior to
this date. However, no one who would initiate proceedings after the 8th of April in
1976 could get compensation for discrimination. That have taken place prior to the
ECJ's Defrenne judgment.
Play video starting at :7:43 and follow transcript7:43
Before we finish of this session on legal certainty, I would like you to think about
and also try to answer this following quiz question.
Play video starting at :7:54 and follow transcript7:54
The answer to this question brings us back to how legal certainty is often ensured
in the EU context by focusing on the uniform application of EU law.
Play video starting at :8:6 and follow transcript8:06
Since it would create great legal uncertainty if EU law was disapplied or declared
invalid in some member states, but not in others.
Play video starting at :8:15 and follow transcript8:15
Even national courts at the lowest levels are bound to send a question for
preliminary ruling, if they have doubts on the validity of EU law, on any grounds.
So, as you see, there are actually many tools in the EU toolbox to ensure legal
certainty and foreseeability. Thank you for listening and enjoy the rest of the
course.

Week 4: Enforcement of EU Law and Judicial Review

Introduction
Hello, and welcome to this week. My name's Anna [inaudible] , and I'm Senior
Lecturer for EU law. This week, I'm going to talk to you about enforcement of EU
law and judicial review. This is very much meant as an introduction, as we won't
have the time to go through all the different procedures in detail. But I will provide
a reading list with some extra material that you can then have a look at if you're
interested in the subject. Or you can always come to learn and do a master in
European business law where you will learn more about this. But for this online
tutorial, we will stick with an overview to give you the tools to find the provisions
that apply to you if needed. The main question for this week is the following. How
are you, as an individual person or as a company, are able to enforce your rights at
national or EU level, or maybe even challenge and inadequate piece of legislation?
As you have already learned in previous lectures, the EU confer certain rights on
individuals and companies, which would be meaningless if there were no
mechanisms to enforce those rights at national level. At the same time, the EU only
has certain powers conferred on it by the member states. If it acts outside of those
conferred powers, imposing certain obligations on you as an individual or
company. This again can be challenged. We will be looking at these issues and
turn in the following lectures; the relevant procedures that apply and the conditions
that must be fulfilled in order to bring a successful challenge. I hope you found this
short introduction useful and are now ready to start with the first lecture. See you
soon.
Enforcement of EU rights at national level
Hello again, today we're going to talk about the enforcement of EU rights at
national level. In other words, how can you, as an individual, ears, citizen or
company, rely on any rights granted to you by EU legislation. As you already
know from your previous lectures, there is a variety of primary and secondary EU
legislation which may grant certain rights or impose obligations on individuals and
companies alike. This could be, for example, the right to equal pay or the right to
fair trial. Depending on the type of law. It might need to be implemented at
national level. But what happens if this implementation is done incorrectly or if the
national administrations and courts do not apply it correctly and give effect to the
relevant EU law provisions. Well, first of all, it is important to note that member
states are obliged to do so according to article four sub-section three of the TEU
and the principle of sincere cooperation. The European courts have thus created
three main mechanisms here to ensure a system of enforcement. Direct effect,
indirect effect, and state liability. Direct effect is the capacity for legal norms to be
invoked and relied upon directly before national courts. As you will already know,
this is the case for primary legislation, but also for certain secondary legislation.
For example, regulations or even directives, if they fulfill the three conditions to be
clear, precise, and unconditional. I won't go into details of how to enforce direct
effect, as you have already learned about this in one of your previous lectures. If
you cannot remember how it works, please go back over your materials. Then we
have indirect effect, which is an obligation on the national courts to interpret
national law in conformity with EU law. This is an alternative route when there is
no direct effect. The third and probably most important mechanism for our lecture
today is state liability, which plays a role when individuals or accompanies have
suffered damages due to their member state being in breach of EU law. Such
damages might be recoverable under certain conditions by claiming compensation
from your own member state. In order to guarantee the enforcement of EU law at
national level. Article 19-One TEU states that member states are obliged to ensure
effective legal protection in areas covered by EU law. Of course, member states are
free to choose their own procedural rules for such enforcement to take place.
However, this is subject to the principle of effectiveness and the principle of
equivalence. These are to ensure that national procedural rules and remedies do not
make it virtually impossible or excessively difficult to exercise EU law rights, so
the principle of effectiveness and that they should not be less favorable than those
relating to similar actions of a domestic nature, so the principle of equivalence. To
give you an example, in the famous case of Francovic, Francovic, It's employer
went into liquidation with some of his salary still unpaid. According to an EU
directive, however, employees have the right to recover such unpaid salaries from
guarantee bodies to be set up at national level. The problem was that Italy had not
implemented this directive. How could Mr. Francovic enforce his EU rights? May
be through direct effect. But then the relevant provisions in the directive did not
satisfy the conditions for direct effect. How about indirect effect? Unfortunately,
no national legislation could be interpreted in the light of the directive in this case,
or maybe national law? Well, Italian law did not allow actions for damages to be
brought against the legislature. This was when the court establish the remedy of
state liability, which obliges the member state to pay compensation for the harm
caused to individuals or companies if the member state is responsible for having
breached EU law. The rationale behind this is the FAE till of EU law. In other
words, if individuals could only rely on direct or indirect effect before their
national courts, but not request compensation for the damage is caused. EU law
would not be as effective. Direct effect is only a minimum guarantee but state
liability goes further. It operates as a determined or sanction for a member state
which has failed to implement or give effect to EU laws, so you are able to rely on
state liability independently from direct or indirect effect, and it is available to both
public and private employees, unlike, for example, direct effect.
Play video starting at :6:34 and follow transcript6:34
I hope you found this lecture useful and are now able to navigate through your
options to enforce EU law at national level.
Challenging an EU act
Hello, again. Today we're going to talk about how to challenge directly a piece of
legislation at EU level. Why would you want that? Well, maybe it imposes certain
obligations on your company which puts you at a competitive disadvantage, or it
discriminates against you as an individual. The most important provision here, is
Article 263 of the TFEU, as it will challenge an EU measure entirely or in parts
with the aim to declare it invalid, which is the action for an annulment. Take a
moment to read through this provision at your own pace and then resume the
video. The first subparagraph gives you an idea of the scope of review. So what
can be reviewed? It clearly states that any legislative act by any of the EU
institutions can be reviewed so any regulation, directive, or a decision which has
binding legal effects. The second subparagraph then gives you the different
grounds of review. So for which reason can you challenge an EU act? This can be
for example, if the EU would have not had the necessary competence to act or has
done so on an incorrect legal base. It might also have infringed an essential
procedural requirement during its adoption. For example, the right to a hearing, or
the measure in question might infringe the treaties or any rule of law. For example,
the principle of non-discrimination. The most important question, however, is
whether you are actually eligible to bring an action. This is called standing. As an
individual or the owner of a company, you would have to turn to subparagraph
four, which provides different options. If the measure is directly addressed to you,
then you always have standing. However, in most cases, this would not be the case.
Then you would have to prove direct and individual concern. Direct concern is a
direct link between the challenged measure and a damage for the applicant.
Individual concern is more difficult to prove according to the Plaumann criteria. In
essence, you must be part of a closed group with no potential to join. It is thus very
difficult to bring an action against the piece of EU legislation for you as an
individual or a company. In addition, you would have to observe the two month
time limit for bringing an action after the measure has been published. There are of
course, other ways to challenge an EU act, one of which is the preliminary
reference procedure via the national route. But you have already heard about that
in one of your previous lectures so I won't go into detail here. There is also another
possibility, the non-contractual liability, which you can find on the Article 340 of
the TFEU. This is the equivalent of state liability, which we have talked about in
our last lecture. The action for non-contractual liability, however, takes place at EU
level. So again, this is an action to recover damages. Any actions wrongfully
imposed by EU institutions or it's servants can be challenged under this procedure,
if these have caused the damage. Here, the threshold is much lower than under the
action for annulment, which we have talked about before. As you won't be required
to show direct or individual concern. But there must be a breach of EU law and a
direct link with the damage you have encountered. It also is an independent action.
You can also take other actions alongside and you have five years from the time
the damage has materialized to bring forward the challenge. So, I hope you found
this lecture useful to give you a quick overview for the main routes to challenge an
EU act. Of course, there are many more things that we could discuss under these
topics, as there have been many cases where the courts have to distinguish one
peculiarity from another. If you are thinking of bringing an action under one of
these procedures, or are simply interested in what nuances exist. I would advise
you to look into some of the cases and literature provided in the reading list. Thank
you very much for listening.

Week 5: The Economic Freedoms

Internal Market
Hello. My name is Annegret Engel, and I welcome you to today's lecture. In this
module, you will be learning about the EU internal market, which is also
sometimes called the single or common market, and the four freedoms that it's
made up of. This lecture will be giving you a brief overview of how the internal
market has come into being as we know it today, before looking at each of the four
freedoms in more detail in the following lectures. According to Article 26 of the
TFEU, "The union shall adopt measures with the aim of establishing or ensuring
the functioning of the internal market." It goes on, "The internal market shall
comprise an area without internal frontiers in which the free movement of goods,
persons, services, and capitalist is in short. In order to understand the internal
market, it is important to understand how each of these four freedoms have
contributed to the foundation of the internal market and are now inseparably linked
with each other. The development of the internal market can be divided into the
different stages of economic integration. Starting from a free trade area, which
later developed into the so-called customs union, it was all about the free
movement of goods in the beginning and removing the various barriers to trade,
which you will learn more about in your next lecture. With the establishment of the
customs union, the other factors of production, capital, workers, and services also
slowly started to move between the member states, which then required further
action at European level to create legal certainty. As a result, the three remaining
freedoms have been included into the treaties, so together, they could form the
internal market of the EU. This is quite important to remember as some of the
principles which were initially developed for the free movement of goods have
later been adopted in a similar vein for the other freedoms. You will also find the
relevant provisions for the free movement of goods under a separate Title 2 of Part
3 of the TFEU, than the other freedoms which are included in Title 4. It is also
worth noting that economic integration does not stop with the completion of the
internal market. In order to achieve full economic integration, an economic and
monetary union is necessary. Which includes things like the introduction of a
common currency controlled by a central authority or the harmonization of fiscal
policies, such as taxation. In particular, that last step is seen as controversial in
some member states, and even the common currency, the euro, has only been
adopted by 19 of the currently 28 member states, with countries such as Sweden or
Denmark still using their own currencies. So having looked at the different stages
of economic integration and understanding the importance of the four freedoms, it
is also worth looking at the main strategies of integration. In other words, how
does the EU manage to merge the different national markets into the European
internal market. Of course, you should already know that the EU has different
competences to legislate in certain policy areas, this is called positive integration.
Positive integration is defined as a regulatory approach to define and set new
standards which then apply all across the member states, which is usually done by
means of harmonization. If you remember from one of the previous lectures,
Article 114 of the TFEU is often used by the union to legislate widely in the
internal market, in addition to the more specific competencies it may have. So this
positive approach requires the EU legislator to take action, which as you can
imagine, is often time-consuming until a measure is finally fully enforced and may
then still face legal challenges from member states. In the absence of legislation,
and in order to facilitate the integration of the different national markets, the union
has also used negative integration as a common tool to ensure the well functioning
of the internal market and it's four freedoms. Negative integration is a deregulatory
approach which aims to strike down national measures that are protectionists in
nature and run counter the free movement provisions and the treaties. This usually
requires litigation. So that tributes a central role to national as well as European
courts in the creation of the internal market and in protecting the four freedoms. As
you will be able to see in your following lectures, the courts have developed a
range of principles such as mutual recognition and non-discrimination, which have
largely characterized the case law under the four freedoms. I hope you found this
overview useful and are now well-prepared to delve into the four freedoms one by
one.
Free Movement of Goods
Hello, my name is Julian Nowag, and today I'll talk to you about Free Movement
of Goods.
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The EU rules on free movement of goods, are one of the most important
substantive elements of EU law. The rules of free movement of goods are part of
what we call the fundamental freedoms. These include the freedom of movement
of goods, capital, service and labor.
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Free movement of goods is protected by the rules of Article 26, and Article 28 to
37 of the treaty on the functioning of the European Union TFEU.
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Moreover, EU secondary legislation ensures common standards for goods within
the EU.
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These ensure that goods can be moved easily between EU member states.
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In the following, I'll briefly talk to you about first, the prohibition of custom duties
and charges having equivalent effect. Second, about EU standards, and third, about
we use applicable in cases where no EU standards exist.
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Let us now turn to prohibition of customs duties and charges have an equivalent
effect.
Play video starting at :1:49 and follow transcript1:49
Article 28 to Article 33 TFEU, established the essence of a Customs union. The
EU charges Customs at its outside border that within the EU territory, no custom
charges are allowed.
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In other words, if you ship goods from the EU member state of Sweden to the EU
member state of Denmark, then there will be no custom duties.
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This is the effect of Article 28 and 30 TFEU which prohibit, custom duties on
imports and exports, and charges having equivalent effect.
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As the text makes clear. This provision does not apply only to custom duties.
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It also applies to charges having equivalent effect.
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What are such charges?
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The Court of Justice in Commission versus Luxembourg and Belgium, decided the
nature and form of the charge was irrelevant.
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It held that the prohibition applied to all monetary charges if they are first, altering
the price of the good. And second, I imposed only upon products that are imported
but not imposed on internal products.
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The same applies to goods for exports, that is to say a charge is prohibited if it only
applies to exported good.
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Let me give you two brief examples, Italy imposed a very small fee of 10 Lira of
on imported and exported goods.
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This fee was supposed to fund statistical surveys of Italy's trade.
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Another example, is a Belgian levy on the import of diamonds.
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The charge contributed to the social fund for workers in the diamond industry.
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in both cases the court found that this was an equivalent charge prohibited by
Article 28 and 30 TFEU.
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As a result, the state was not allowed to impose such a charge. Instead, the state
has to use its normal budget to fund such activities, should the state wish to do so.
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Without going into further details, let me mention the EU law that prohibits
discriminatory taxation.
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This prohibition is contained in Article 110 and Article 111 TFEU.
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Now that we have talked about the prohibition on customs duties and charges
having equivalent effect.
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We shall turn to our second point, EU Standards. Such standards are contained in
EU secondary legislation, that is to say directives and regulations.
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Such standards make trade and transport of goods across the EU easier.
Play video starting at :5:28 and follow transcript5:28
The rules are adopted by the EU based on its lawmaking power under Article 114
TFEU. The EU has adopted numerous standards in this way. They exist in all areas
of the economy, to give you just a couple of examples. They are EU standards on
toys, building materials, and all kinds of machines.
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These EU rules have a dual purpose. On the one hand, they ensure a high level of
for example consumer protection, all the safety of products. And on the other, they
ensure the free movement of goods.
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How do these rules ensure this?
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Well, as a trader is rather simple for you.
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Once you have feel fulfilled the requirements of the standard. You are able to sell
the goods throughout the EU without further requirements.
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For example, you produce your product in France and comply with EU standards.
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Then you know directly that your product also complies with the standards in
Sweden. Thus, selling your product in Sweden does not require you to comply with
any set of national standards in Sweden.
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One very famous example is the so called CE Marking. This marking certifies that
the product fulfills certain safety requirements and is valid throughout the EU.
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Let us now turn to our final point.
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EU rules that apply where they are no EU standards.
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As we already know, the EU does prohibit custom duties and charges having
equivalent effect.
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But the EU also prohibits quantitative restrictions and measures having equivalent
effect.
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The relevant prohibition is contained in Article 34 and 35 TFEU.
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These two prohibitions are nearly identical in their wording.
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The difference is that Article 34 relates to Imports and Article 35 to Exports.
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When looking at the prohibitions, the first prohibition is rather straightforward. EU
member states are not allowed to impose quantitative restrictions.
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Thus, the article prohibits our country from imposing quotas.
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In other words, Sweden is not allowed to impose a limit on for example, the
number of cars imported to Sweden.
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He again, the treaty text also extends this prohibition to measures having
equivalent effect.
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I'll not be going into the detail of how the court defines such measures.
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Yet to understand the area the case of Dassonville needs to be mentioned. This
case concerned the Belgian law that required sellers of Scottish whiskey to provide
a specific certificate of origin.
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Some traders who bought the whiskey not directly from Scotland, but in France
were not able to obtain such certificates.
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Thus the question was whether this law could be considered a measure having
equivalent effect under Article 34.
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In effect, the total number of bottles of Scottish whiskey imported was reduced.
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The court in that case found that, measures having equivalent effect was any
trading rule of a member state. That was capable of hindering directly or indirectly,
actually or potentially Inter-Community trade.
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However, this decision would mean that nearly all trading rules would be
prohibited.
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The court addressed this problem in the case of Cassis de Dijon.
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In that case, the court decided that on the one hand a member state cannot protect
its National Industry.
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Yet on the other hand, it can impose restrictions if they are justified by so-called
mandatory requirements. In other words, where such a rule is actually needed to,
for example protect consumers. The state is allowed to adopt such trading rules.
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Thus, rules that require food labels, so that persons with allergies know the content
of food are perfectly fine. Article 36 TFEU, contains a further list of reasons that
also justified the adoption of such restricting trading rules.
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But why does this all matter?
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Because it requires an EU member state to justify their rules.
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Thus, an EU trader that once to sell goods in another state, can challenge the rules
that restrict such trade.
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And then, the EU member state has actually to show
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that there is actually a good reason for those rules.
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So to summarize, first the EU prohibits custom duties and charges have an
equivalent effect.
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Second, the EU adopts harmonized standards. Once a trader complies with these
rules, the goods can be marketed throughout the EU without further restrictions.
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Third, the EU also prohibits quantitative restrictions and measures having
equivalent effect.
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In other words trading rules that make a cross-border transactions more
burdensome. Finally, let me remind you of one essential feature of EU law.
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These rules are directly effective.
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Thus, if national rules seem to say something, and EU law says something
different.
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Then, the National Court will have to set aside the national rules.
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Overall, I hope this lecture provided you with a basic understanding of the EU
rules on free movement of goods, and I thank you for listening.
Free Movement of Persons
Hello, I'm Julian Nowag. And today I'll talk to you about free movement of
persons in the European Union.
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Free movement of persons is a very broad area, which is sometimes seen as
contentious. On the other hand, it provides the citizens of the EU with some of the
most fundamental protection against arbitrary and discriminatory measures by EU
Member States.
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So why is free movement of persons a relevant area?
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First, it is the area of EU law that EU citizens will rely on when moving or residing
in another Member State.
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Second, it covers the rights of workers that move to another country.
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Thirdly, as a company, you may depend on the ability to employ people from
another Member State.
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In this lecture, I'll first highlight the relevant legal framework.
Play video starting at :1:15 and follow transcript1:15
Then I'll cover some of the essential legal rules relating to workers.
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And finally, we'll look into some of the rights of EU citizens by virtue of their EU
citizenship. The legal framework that covers free movement is set by primary law,
secondary law, and finally case law. That is to say, the judgments of the European
courts. The relevant primary law is the principle of non-discrimination, contained
in Article 18 of the Treaty on the Functioning of the European Union, the TFEU,
as well as the Articles 20 to 25 TFEU. Articles 20 to 25 set out the rules for EU
citizenship. Moreover, Article 45 to 48 TFEU covered the free movement of
workers.
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On the level of secondary law, the most relevant rules are Regulation 492/2011 on
the freedom of movement of workers within the Union. And Directive 2004/38/EC
on the right of citizens of the Union and their family members to move and reside
freely within the territory of the Member States, the so-called citizens or Citizens
Right Directive.
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Let's now turn to the rights that workers acquire via EU law.
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As I mentioned before, the main provisions in the treaties are Articles 45 to 48
TFEU.
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Article 45 essentially provides for the following. The freedom of movement for
workers shall be secured within the Union.
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This entails a right to accept offers of employment actually made. Move freely
within the territory of the Member State for this purpose. Stay in a Member State
for the purpose of employment in accordance with the provisions governing
employment of nationals of that state. And finally, to remain in the territory of the
Member State after having been employed in that state, subject to the conditions
which shall be embodied in EU regulations. This right does not apply to
employment in the public service. This right can be limited based on grounds of
public policy, public security or public health. Let us now turn to some of the case
law which further elaborated on the content of this right. As the court in Lawrie-
Blum held, a worker is the person to whom the following three conditions apply.
First, the person performs a service for a period of time.
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Second, this is done for or under the direction of another person.
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The third element is that the person in return receives remuneration.
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In Antonissen, the court held that the free movement of workers also applies to job
seekers.
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In particular, it held that excluding such persons from the scope would jeopardize
the chances of such persons to find work, and would thereby make the right
ineffective.
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What does this provision prohibit?
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Article 45 TFEU prohibits any form of direct discrimination as the court noted in
Dona in 1976. Similarly, it covers indirect discrimination, as for example, the case
of Clean Car exemplifies. In this case, the court found that a rule that required
managers of companies to be residents in Austria would restrict the free movement
of workers. However, Article 45 covers even rules that make the exercise of that
right less attractive, as the court, for example, noted in Bernard. Yet, restrictions of
this right can be justified by means of objective requirements, as long as the
measure does not breach fundamental rights and is proportional.
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Objective requirements is a concept established by the court.
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It is an open ended concept that covers any kind of sensible reason that could be
invoked to justify a certain rule. For example, this can be the protection of the
environment or the consumer protection, or even the objective of encouraging the
recruitment and training of young football players as the court held in Bernard.
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However, this is subject to two conditions.
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First, the rules must be proportional to this objective requirement.
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Second, a more stringent system applies to measures which are a form of direct
discrimination.
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This can, for example, be rules that set different standards for domestic and foreign
workers.
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Such discriminatory rules can only be justified based on reasons of public policy,
public security, and public health. Beyond Primary Treaty Law, Regulation
492/2011 under freedom of movement for workers within the Union is relevant.
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The objectives of these regulations are to secure free movement of workers as a
fundamental right, abolish any discrimination based on nationality between
workers of Member States,
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guarantee equality of treatment in fact and in law,
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ensure the movement of workers in the conditions of freedom and dignity.
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I'll not go into the details of these regulations. I would want to point you to Articles
7 and 10. These also safeguard equal access to social and tax advantages and the
rights of worker's families.
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Moreover, I do encourage you to have a closer look at this regulation and explore
the numerous rights and principles enshrined in it. Let us now turn to the rights that
derive from EU citizenships.
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EU citizenship is a powerful tool for the protection of the individual, as you will
see.
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Article 20 TFEU confers the status of EU citizenship on everyone who holds a
nationality of an EU Member State.
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This provides nationals of the Member States with a fundamental status.
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This status, for example, entails that national measures cannot deprive citizens of
the genuine enjoyment of the substance of the rights conferred by virtue of their
status as a citizen, as the court held in Ruiz Zambrano.
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This meant that in this case, third country parents of a minor could not be expelled.
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Their child was a minor and an EU national. If the parents would be expelled, the
kid would have to leave with them, and it would therefore, be deprived of the
genuine enjoyment of the substance of their rights as an EU citizen. Moving on
from the sometimes difficult case law on Article 20 TFEU, let's have a look at a
citizen's right directive, Directive 2004/38/EC. The purpose of this directive is to
ensure the fundamental status of EU citizens when they exercise their right to free
movement and residence.
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The directive codifies some of the court's case law, and brings together the rules on
workers, self-employed, students and other economically inactive persons, such as
family members, all into one framework.
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The aim is to simplify and strengthen the right of free movement and residence of
all EU citizens.
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To keep within the time frame, let me briefly highlight two provisions. Article 7 of
the directive regulates the right of residence for more than three months.
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Every citizen has such a right if they are workers or self-employed, or if they have
sufficient resources for themselves and their families not to become a burden to the
whole state.
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Or if they are students and have sufficient resources for themselves and their
family.
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This right of residence also extends to family members of such individuals.
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The directive also covers the rules that relate to deportation of EU citizens. The
rules in these regards are Article 27-33 of the directive. These rules regulate when
a citizen can be expelled and what procedures need to be complied with.
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I hope that you have now a general idea about free movement of persons within the
EU. Thank you for listening.
Freedom of Establishment
Hello, I'm Julian Nowag and today I'll talk to you about the freedom of
establishment in the context of EU law.
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In reality, the freedom of establishment and the freedom to provide services go
often hand in hand.
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However, today we want to focus on the freedom of establishment. Thus, we will
first examine how to determine which legal rules are relevant. That is to say how
the freedom of establishment can be distinguished from the freedom to provide
services.
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In the second part, we will examine what situations are protected by the freedom
establishment.
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Finally, we are looking to what measures are considered to restrict this freedom
and how such restrictions can be justified.
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So which rules are relevant for the freedom of establishment?
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It is in particular Article 49 of the Treaty Under Functioning of the European
Union, the TFEU.
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This article sets all that restrictions on the freedom of establishment of nationals of
a Member State in the territory of another Member State shall be prohibited. Such
prohibition shall also apply to restrictions on the setting-up of agencies, Branches
or subsidies by nationals of any Member State established in the territory of any
Member State.
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Freedom of establishment shall include the right to take up and pursue activities as
a self-employed person and to set up and manage undertakings, in particular
companies and firms.
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Article 54 and Article 55 TFEU, ensure that the freedom of establishment also
applies to companies with regard to the setting up of companies.
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Similarly, Article 51 and Article 52 of element for the freedom of establishment.
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Article 51 explains that Member States are not bound by the freedom of
establishment a long as the exercise of official authority is concerned. Article 53
provide's a justification for discriminatory measures. That is to say rules which
provide for different treatment of foreign nationals.
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Such measures can only be justified based on grounds of public policy, public
security, or public health.
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So but how do we determine whether the freedom of establishment or the freedom
to provide services, regulated in Article 56 to 62 TFEU are relevant for the rules?
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In Gebhard, the court clarified that establishment involves the pursuit of an
economic activity through a fixed establishment on a stable and continuous basis in
another Member State.
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So that the main distinguishing factor seems to be, the element of stable and
continuous basis. In other words, the fixed establishment.
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But what does the freedom of establishment entail? The freedom of establishment
provides for a right of every EU national to enter and reside in another member
state
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in order to pursue a self-employed activity and to remain in that state after having
pursued such an activity as the court established in Commission v Ireland.
Play video starting at :3:57 and follow transcript3:57
For natural persons, this right is now enshrined in the Citizens' right directive as
well.
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However, returning to Article 49 and the subsequent articles, the freedom of
establishment covers primary as well as secondary establishment.
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For natural persons a primary establishment means moving to another member
state to pursue a self-employed economic activity.
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While the freedom also covers the secondary establishment of natural persons, this
element is not so important in this case, and more relevant for companies.
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For companies, the freedom of establishment, in terms of primary establishment,
means that they can establish and transfer the central management and control of
the company to another Member State.
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This is established by the court in Daily Mail.
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In the case of Daily Mail,
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Daily Mail want to transfer its seat from the UK to the Netherlands as the tax rate
in the Netherlands was lower.
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A secondary establishment is also covered by the freedom. This means EU
companies can set up subsidiaries, branches or agencies in other Member States, as
the court found in Gebhard.
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This has important implications for companies.
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In Centros, the court found that a situation is within the scope of establishment
where a company is formed in another country first, even if this is only done to
setup a secondary establishment in another country.
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So you can, for example, form a company in Sweden maybe because the legal
framework suits you better. And then, directly establish a subsidiary in France and
conduct your business through that subsidiary.
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This can also be seen in Kamer.
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This case concerned a company formed in one member state with a secondary
establishment in another.
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The freedom of establishment meant the company had only to comply with the
rules on minimum capital and directors' liability in the country of primary
establishment.
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And not in the member state of secondary establishment.
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It thereby was able to circumvent the rules on minimum capital and director
liability in the member state of its secondary establishment.
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Another important element of the freedom of establishment, relevant both for
natural as well as for legal person is the following guarantee.
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The freedom of establishment also entails the right to purchase, exploit and transfer
real or personal property
Play video starting at :6:58 and follow transcript6:58
as well as the right to obtain loans and to have access to forms of credit as the court
clarified in Commission versus Italy.
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These cases might already give you an idea that the court takes a broad approach
when examining what can be considered a restriction of the freedom of
establishment.
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So as the court held Halliburton,
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a restriction of the freedom of establishment is any measure that discriminates by
reason of nationality or, in the case of a company, its seat.
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But restrictions are also covert forms of discrimination which, by the application of
other criteria of differentiation, lead in fact to the same result.
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But even more than that, the court in it's famous definition in Gebhard held that a
restriction is any national measures liable to hinder or make less attractive the
exercise of the fundamental freedoms.
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After we have now seen the broad reach of measures that can be seen as a
restriction, let us now turn to the question of justification.
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As you can imagine many measures are liable to make less attractive the exercise
of the freedom of establishment.
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Thus, Member States must also have a broad range of options to defend and justify
such measures.
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And yes, in the same judgment, Gebhard, the court also explained that such
methods can be justified.
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They can be justified by imperative requirements of general interest if they are
proportional to the aim, that is to say they are suitable to obtain the object for
general interest
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and they do not go beyond what is necessary in order to attain it.
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The list of imperative requirements is open.
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And the court has, for example, already recognized the protection of workers and
consumers, environmental protection, patient safety, ensuring a high standard in
education, the health of animals, social objectives, or the protection of intellectual
property.
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Yet, one thing is important to bear in mind.
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Where direct discrimination is at stake, that is to say discrimination based on
nationality
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or in the case of a company, the seat,
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imperative requirements do not apply.
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Discriminatory measures can only be justified by means of Article 53 TFEU. In
other words, public policy, public security and public health.
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Moreover, the court interprets these conditions in a narrow and restrictive fashion.
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So this concludes this segment on free movement of establishment and I hope you
now have an idea what this freedom entails for individuals and companies.
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You should have understood on the one hand how broadly this freedom is
constructed and on the other how the court tried to counter balance this with a
broad range of grounds that can be used to justify restrictions of this freedom.
Thank you for listening.
Free Movement of Services
Hello. My name is Julian Nowag, and today I'll talk to you about the free
movement of services in the EU. The EU's free movement of services is part of the
fundamental freedoms. These are part of the most important substantive elements
of EU law. These freedoms include the free movement of goods, capital, and labor
as well. Free movement of services is protected by the rules of Articles 56-62 of
the Treaty on the Functioning of the European Union, the TFEU. Moreover, EU
secondary legislation ensures the free movement of services within the EU. In this
lecture, I'll briefly talk to you about one; the objectives of free movement of
services and the difference to the freedom of establishment, two; about the most
important EU directive in this area, and three; about the general rules under
freedom to provide services. So what is the freedom to provide service about, and
what is the difference to the freedom of establishment? The basic idea is the
following; self-employed people or companies who are legally operate in one
member state should also be able to carry out these activities in another member
state. But what's the difference between on the one hand, the freedom of
establishment and on the other, the freedom of services? This distinction is rather
straightforward; the freedom of establishment protects the right of self-employed
and companies to set up a business in a member state on a constant and stable
basis. The freedom of movement of services, on the other hand, protects the right
to offer services in another member state on a temporary basis, while remaining
permanently based in their country of origin. Now that we have understood what
the free movement of service is about, let's turn to the most important legal
framework in the EU; the EU Services Directive. The aim of the service directive
is to create an open single market in services within the EU, while at the same
time, ensuring the quality of services provided. The rules of the service directive
are numerous, so I cannot cover them all here in detail. However, I encourage you
to have a look at the directive. But let me highlight some aspects of it for you. The
directive helps in the provision of cross-border services in the following way. First,
it introduces a single point of contact. Thus, service providers do not have to deal
with a huge number of different authorities in another member state. Second, it
ensures that administrative procedures can be completed from abroad, thus service
providers can do these either by mail, phone, or electronically. Third, it prohibits
discriminatory requirements such as nationality or residents requirements and
fourth, it requires the review of all authorization schemes and other burdensome
requirements. Many of the restrictions that service providers face in other EU
member states are addressed by the directive. In particular, the service directive
covers many areas such as construction services, tourism service, accommodation,
and food services, yet the directive does not cover all services. This brings us to the
third and final point of this lecture, the general rules on the freedom to provide
services. As I mentioned at the beginning of this lecture, the Articles 56-62 TFEU
are the relevant rules here. Article 56 explains that restrictions on the freedom to
provide services within the union shall be prohibited. So what are these
restrictions? How do we define them. The court held in Sager that a restriction on
the freedom to provide services is any measure that is liable to prohibit or
otherwise impede the activities of the service provider. This is obviously a very
very broad definition. However, this broad definition is counted in two ways. First,
certain services are excluded, and thus the freedom to provide services does not
apply. In particular, Article 51 TFEU excludes services which are specific
activities and functions which imply the exercise of public authority. In this
context, you could for example think about police services. Second, national
measures that restrict the freedom to provide services can be justified. In Gephard,
the court held that four conditions must be complied with for a measure that
restricts the freedom to be justified. First, rules must be applied in a
nondiscriminatory manner. Second, they must be justified by overriding reasons
based on a general interest. Third, they must be suitable for securing the attainment
of the objective which they pursue, and fourth, they must not go beyond what is
necessary in order to obtain that objective. So what does this all mean in practice?
Let's assume that Sweden has a rule that says that dental hygienists need to have a
certain training. A Danish person that has done such training, but in Denmark, can
therefore, not be prevented from offering this service in Sweden. However, a
German that has no training in dental hygiene can be prevented from offering this
service in Sweden. Why? Because the rule is justified by the general interest of
ensuring patient safety. The rule is also applied in a nondiscriminatory manner, and
finally, the rule is suitable and necessary to attain the objective of patient safety. So
let me summarize what we've talked about. First, we talked about the objective of
free movement of services and the difference between the freedom of
establishment and the free movement of services. Second, we briefly introduced
the EU service directive and finally, I talked about the general rules on the freedom
to provide services as set out in Article 56 TFEU. Last but not least, do remember
the essential feature of EU law, direct effect. So when national rules say something
different than EU law, the national court will have to set the national rules aside,
and apply EU law instead. So I hope this lecture has given you a basis to
understand the EU rules on the freedom of services. Thank you for listening.
Free Movement of Capital
Hello, my name is Julian Nowag and today I'll talk to you about free movement of
capital in the EU. Free movement of capital is part of the most important
substantive elements of EU law, the fundamental freedoms. They also include the
freedom of movement of goods, services, and labor. Free movement of capital is
protected by the rules of Articles 63 to 66 of the Treaty on the Functioning of the
European Union, the TFEU.
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Moreover, EU secondary legislation ensures the free movement of capital within
the EU. In this lecture, I will briefly talk about first, the objective of the free
movement of capital and a difference to other freedoms. Second, the development
of the most important EU rules in this area and third, I'll talk about the general EU
rules on the free movement of capital. Between EU member states, but also
between member states and third countries, restrictions on capital shall be
removed. This is what the Treaty, in particular, Articles 63 to 66 TFEU tell us.
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Why is free movement of capital important in the context of the EU?
Play video starting at :1:52 and follow transcript1:52
Free movement of capital is seen as an important foundation of the single market
in complimenting the other freedoms. What use is there for the freedom to provide
services if you cannot get paid or, if you cannot move those payments back to your
country of origin? Free movement of capital also contributes to economic growth
and promotes the use of the Euro as an international currency. Moreover, it is also
indispensable to the introduction of the Euro and for development of the economic
and monetary union.
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However, free movement of capital is different to other freedoms, it developed
gradually.
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Only the Treaty changes of 1994 introduces the current Treaty provisions on the
freedom of capital as set out in article 63 to 66 TFEU.
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So let's look a bit closer at the developments of the free movement of capital.
Originally, EU law only required the removal of restrictions on the flow of capital,
to the extent that it was necessary for the functioning of the internal market. The
first step in this direction was the first Capital Directive and its Revision in 1962. It
abolished restrictions on commercial and private capital movements in certain
areas.
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These included for example, real estate purchases, short and long term lending for
commercial transactions and securities traded on stock exchanges.
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It was only 30 years later that further liberalization took place.
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With the introduction of the Euro, all remaining restrictions on capital movements
between residents in the member states were abolished. And moreover, the Capital
Directive was amended to address measures relating to long term lending for
commercial transaction and purchases of securities not dealt on the stock
exchange. After this general overview of the development of the free movement of
capital, let's move on to our third point, the general rules on free movement of
capital.
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As already stated, the free movement of capital was introduced in 1994 into what is
now Article 63 TFEU. This article states that, all restrictions on the movement of
capital and all restrictions on payments between Member States and between
Member States and third countries shall be prohibited.
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So what are movements of capital?
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And how does the court define restrictions? Examples from the case law on the
movements of capital include, direct investments, real estate investments,
operations in security and other guarantees, financial loans and credits. But also,
inheritance, gifts, and endowments.
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As in other freedoms, the court took a very wide approach in defining what
restricts such movements. In Commission versus Portugal the court explained that
Article 63 lays down a general prohibition, which goes beyond the mere
elimination of unequal treatment on the grounds of nationality.
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Thus the court has for example, found restrictions in the case of authorization
requirements for investment. In the case of residence or establishment
requirements for investments where limitations were imposed on investment
outside a member state. In the case of so-called Golden Shares held by estate, those
are shares that have special rights that only the holder of those shares has.
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This very broad definition of restriction is countered by very broad and numerous
exceptions. Article 64 contains an exception with regard to restrictions that had
already existed in connection with third countries when, the Article, Article 63
TFEU was introduced. Article 65 allows for exceptions for reasons of tax
differentiation of prudential rules, that is to say rules relating to financial stability
and exceptions for public policy and public security.
Play video starting at :7:23 and follow transcript7:23
Moreover, the court also accepted that member states can use further justifications.
For example, in Commission versus Spain, it accepted so-called overriding
requirements of general interest, as long as the restriction is proportional to such an
aim. While the previous mentioned rules relate to questions whether restrictions on
the free movement of capital can be imposed by EU Member States. Further
restrictions might exist because not only Member States might impose restrictions.
Restrictions on capital movements can also be imposed by the EU. For example,
the EU can impose sanctions on countries or on individuals. These powers of the
EU are contained in the Article 66 TFEU and in Article 75 TFEU. After this
overview, let me summarize. First, we talked about the objective of free movement
of capital and the differences to other freedoms.
Play video starting at :8:42 and follow transcript8:42
Second, we briefly looked at the development with regard to free movement of
capital in the EU. Finally, we talked about the general EU rules on the free
movement of capital and the broad exceptions available.
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And as always in the area of three movement, don't forget direct effect. In other
words, national rules that contradict EU law will have to be set aside by the
national court.
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I hope this lecture could give you at least a basis to understand some of the
elements of this highly complex area. Thank you for listening.

Week 6: The External Dimension

Principles and Institutional Setup
Hello and welcome back. We will take a look at the external dimension of the
European Union from a legal perspective.
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First, we will take a look at the rules in the EU treaties which may be relevant. We
will also look at the institutional setup in the EU; in particular the role of different
institutions and the EU member states. These are intertwined since the rules govern
the institutional set up.
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As with most, if not all fields of EU law, there is primary law, the treaties and
secondary law, directives and regulations. The law regulates the balance between
the two main players in the external dimension. The EU itself on one hand, and its
member states on the other. It is this parallel setup that creates the complexity of
the system.
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This of course, implies that both the EU and its member states have competences
in the field of the external dimension.
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This is due to the fact that the European Union, according to Article 47 TEU, is an
international organization with legal personality. That means that it exists distinct
from it's members states. And as a result, both the EU and the member states can
act on the international arena.
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Sometimes they act at once at the same time, sometimes they act separately,
sometimes one of them acts first and sometimes they do not act at all.
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At the end of the day this is a political decision. And since this course covers the
legal dimension, I will leave these considerations aside for now.
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But the next time you listen to the news, you watch TV or read a news story online,
take a minute to ask yourself, who is acting now? Is it the European Union? Is it
the member state? And who may be competent to act in this particular case?
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In the external dimension of the European Union, there are seven main players.
One is the European External Action Service and the High Representative or the
EEAS for short.
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You'll find the legal basis in article 27 TEU. The purpose is to present a strong
coherent voice in fields outside of the common commercial policy. It is not an EU
institution which naturally limits it's influence and scope of action.
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The European Council on the other hand sets out the future policy making of the
EU and as such may influence non legal, but important foreign policy activity.
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The council is another agenda setting institution. The Foreign Affairs Council,
which consists of the ministers of foreign affairs of the member states, elaborate
the union's external action on the basis of strategic guidelines laid down by the
European Council, and ensure that the union's action remains consistent.
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The European Commission is a key player in this field.
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Although the dedicated directorate general for external relations was removed and
became the EEAS, the external dimension of most policy areas mean that the
commission has remained a key player in this field.
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The fields of trade, energy, and humanitarian aid were never transferred to the
EEAS and they remain fully in the hands of the commission.
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The commission also represents the EU abroad with the exception inter alia for the
common foreign security policy.
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The European Parliament has proven to be a very active player in the field of
external relations. The European Parliament is regularly consulted. It must give it's
consent before an international agreement can be concluded by the European
Union. This was apparent before the signing of the TTIP with the United States of
America.
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The Court of Justice, of course, plays a pivotal role in the external dimension.
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One of its main tasks is to decide on the delimitation of external competences
between the union and its member states. It's judgments in these matters are
therefore very important for the institutional balance in the EU.
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And then last but not least, there are the member states.
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Despite their membership in the EU, the member states are still international actors
themselves. The principle of conferral means that the EU can act only as long as
there is competence to act. If there is no competence for the EU or indeed if there
is a shared competence between the EU and the member states, the member states
remain free to act on the international arena.
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Now we have a picture of the actors in this field. All these play a role in the
external dimension of the EU.
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But what do they do, and how do they do it? And what are they allowed to do?
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We will try to answer some of these questions in the time that remains in this
lecture and in the lecture that follows this one.
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At this point, we will take a short look at two important provisions in the treaties.
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First, we'll take a look at article 288 TFEU. Please take a quick look at the text
now. As you can see, this provision presents the legal act, which can be adopted by
the EU and their effect.
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All instruments utilized by the EU to legislate internal policy matters can and are
being used also in the context of EU external relations.
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These tools are the regulations, the directives, and the decisions. These legal acts
are generally referred to as 'hard' law of the EU, but also 'soft' law,
recommendations and opinions, can have an impact of EU external relations.
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Recommendations and opinions play an important role.
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One example are the Conclusions of the European Council which trigger action at
all levels of governance within the EU, within the member states, and all the EU
Institutions.
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So, now we have looked at the internal aspects of the external dimension, but what
about the external dimension? How does the EU become an actor in the
International Arena or, in other words, how is the structure that I describe actually
put to use?
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With article 216 TFEU, we will move out of the EU and look at the basic provision
which opens the possibility for the EU to conclude international agreements with
3rd countries. Article 216 TFEU sets out
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the general competence of the EU to conclude international agreements. Please
note that this is the general provision. In the next lecture, we will look at the
separate fields of law where this competence may be exercised.
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According to Article 216, the EU has a competence in the following
circumstances:
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Where the treaties so provide. Where the conclusion of an agreement is necessary
in order to achieve, within the framework of the Union's policies, one of the
objectives referred to in the treaties. When it is provided for in a legally binding
union act, and when it is likely to affect common rules or alter their scope. The EU
is party to well over 1,000 treaties. Relations with third countries, now cover all
areas covered by the treaties.
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I will not burden you by listing all the treaties provisions according to which the
EU has competence to conclude any international agreement. Rather a selection
can be found in the reading materials to this lecture.
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We will now conclude this lecture by looking briefly at the procedure for the
conclusion of new international agreements.
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The procedure is laid down in Article 218 TFEU. As you can see, the procedure is
in the hands of the council, although the commission is the key actor. The
commission initiates the procedure by a recommendation, you find this in
paragraph three, but needs the approval of the council, paragraph two. The council
then controls the procedure through directives or consultations, you see this in
paragraph four.
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Then the council issues an authorization to sign, according to paragraph five.
According to paragraph six, the European Parliament must be consulted in a
number of cases.
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There are four categories of agreements. There are mixed agreements, which
implies that both the union and its member states become parties to the agreement.
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There are association, accession, and withdrawal agreements involving reciprocal
rights and obligations, common action, and special procedure.
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There is the accession to international organizations. And finally, there are the
future agreements concluded by the member states only.
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That concludes the lecture of today, the next one is about the specific fields of law
in the context of the external relations of the EU. Thank you for tuning in, and see
you soon again.
Fields of the External Dimension
Hello and welcome back to another look at the external dimension of EU law.
Play video starting at ::12 and follow transcript0:12
In the previous lecture we looked at the institutional setup of the external
dimension of the EU. We looked at the actors and institutions, the procedures, and
the tools available for action in the international arena.
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In this lecture, we're going to apply those principles in the different fields of law
where the EU has competence to conclude international agreements. We will look
at six separate fields and have a brief discussion of each.
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The Common Commercial Policy, or CCP for short, is the origin of all EU external
policies. The existence, nature, and scope of the external competences we
discussed in the previous lecture on the external dimension have largely been
defined by reference to early cases in the area of CCP.
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Bart Van Vooren and Ramses A Wessel in their textbook on EU external relations
law, which has also inspired this lecture, go as far as saying that CCP is not just a
key external relations policy but in substantive terms, it is at the very heart of your
PN integration project and a logical consequence of the interaction between
internal and external developments. Examples are the EEC as a customs union and
the rules of free trade laid down in the general agreement on tariffs and trade.
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The CCP is therefore the external complement to the internal market rules on trade.
Play video starting at :1:54 and follow transcript1:54
CCP competences are exclusively in the hands of the EU.
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There are few rules in the treaty, but those which exist clearly emphasize
integration and the abolition of restrictions on international trade.
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The treaty also emphasizes the principle of uniformity.
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In order to get an idea, please take a pause here and look at Articles 206 and 207
TFEU which contain
Play video starting at :2:26 and follow transcript2:26
these principles as well as the rules of the legislative procedure.
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So what specific instruments and policies are available for the EU to realize
integration and the abolition of restrictions on international trade?
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The first is the Common Customs Tariff. It works on a simple principle: Once
internal tariffs are removed, one needs to agree on common external tariff to
prevent goods from entering the internal market through the member state with the
lowest import tariff.
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The second are trade barriers and market access. These are usually regulated
through EU regulations and can concern such things as the relations with North
Korea or preferential rules for developing countries. One example is the so called
banana saga which arose from the fact that the EU allowed preferential treatment
of bananas from certain countries.
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Third, there are the trade defense instruments. These anti-dumping measures are
intended to prevent the market from being distorted by products sold under their
normal value. Moreover, these measures also aim to protect the internal market and
its industries from subsidized imports from third states.
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In this context, it would be appropriate to mention the application of WTO law in
the EU.
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During the so-called Banana Wars, the issue on the applicability of WTO law in
the EU was raised by importers who had suffered financial damage through the
measures adopted by the EU.
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In the context of these proceedings, it was established by the Court of Justice that
WTO law does not have direct effect in the EU.
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However, by exception, WTO law may be invoked if EU law was adopted to
implement a specific measure or when an EU measure makes an express reference
to WTO law.
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The EU has been involved in development since its inception. Its development
policy is guided by the three Cs: Complementarity, coherence, and coordination.
You find these in Articles 208 to 210 TFEU. Complementarity, that is found in
Article 208 TFEU. This concerns the nature of EU competence. It means that the
competence is shared between the member states and the EU. This is clear from the
wording of article 208, the union's development cooperation policy and that of the
member states complement and reinforce each other. They are positively and
mutually reinforcing.
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Coherence. Coherence has significant legal and political implications. There is
coherence of EU development cooperation with the more general principles and
objectives of EU external relations, poverty reduction as the primary policy
objective, providing intrapolicy focus as to how different initiatives cohere to the
central goal.
Play video starting at :6:3 and follow transcript6:03
The obligation to take account of development activities and other policies which
are likely to affect developing countries. And finally coordination. Coordination is
the operative arm of the other two Cs, complementarity and coherence. This means
that Article 210 TFEU is very important.
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There is multitrack financing of the development budget and coordination between
the commission and EEAS. And finally, since the competence is shared in this
field, the EU must coordinate with the members states.
The Common Foreign and Security Policy, or the CFSP for short. The EU loves its
acronyms as much as the Americans, although they always sound so much worse,
is based on a set of compromises. Member states have been reluctant to hand over
powers to the EU in this particular area. However, the strong links to other policies
and the single institutional structure forced the integration of CFSP into the legal
order of the EU. Originally separate from EU law, it is now an integral part of it.
However, the CFSP is still distinct. It is the only substantive policy domain found
in the treaty of the European Union. You can see for example, articles three
paragraph five and 24 paragraph one TEU. I would like you to take a look at
articles 23 to 41 TEU. In article two, paragraph four, TFEU, it is stated that the EU
shall have competence in this field. The existence of competence is therefore clear,
but the nature of that competence remains difficult to define. Under the CFSP, the
member states have an obligation to inform and consult each other. You can see
this in Article 32 TEU. They are also under the loyalty obligation, which you find
in article 24, paragraph three TEU. When it comes to the institutional balance, it is
decidedly different in the CFSP. The European Council has a leading role in
defining the CFSP. The main decision making institution is also the Council. The
commission has received a new role in the Lisbon Treaty since it may, together
with the member states, refer matters under the CFSP to the Council. Finally, the
European Parliament plays a limited role in this context, something which may
constitute the democratic deficit, depending on how you look at the role of the
European Parliament in Europe. There are a number of tools available in the CFSP.
The CFSP is often shaped on the basis of informal acts such as declarations. One
particular feature is that the CFSP legal act cannot be adopted as directives and
regulations, but only as decisions. Other possible ways include international
agreements and restrictive measures, also known as economic sanctions. The
common security and defense policy, the CSDF for short, is a part of the CFSP.
Actually, defense cooperation was a taboo for a long time, but is now growing to
become a distinct subfield of the CFSP. Before we move forward, I would like you
to read articles 42 to 46 TEU which cover this field. The CSDP is an integral part
of the CSFP. It includes the progressive framing of a common union defense
policy. Although this indicates that there is a progressive change taking place, the
obligation of loyal support in article 42 paragraph seven TEU and article 222
TFEU indicate that there is a far ranging obligations of the EU member states to
support each other in the event of a terrorist attack or a natural or man-made
disaster. The decision-making takes place along similar lines as the CFSP.
Decisions are the main tool. Within this policy, there are a number of institutions
which are not expressly regulated in the treaties. The pivotal body is the Political
and Security Committee. The European Union Military Committee is the highest
military body set up within the Council. It is composed of the Chiefs of Defense of
the member states. On the civilian side, it is complemented by the CivCom, The
Committee for Civilian Aspects of Crisis Management. There is also the CMPD,
The Crisis Management and Planning Directorate. Further bodies deal with
coordination and planning.
Play video starting at :4:46 and follow transcript4:46
As you may have seen, there's one body that is expressly mentioned in the treaty,
The European Defense Agency. It is mentioned in article 42 paragraph three TEU
and is further defined in Protocol 10 on permanent structured cooperation
established by article 42 TEU. Missions here include Mali, Operation Atlanta in
the Somalian waters, and EUPM, the European Union Police Mission in Bosnia
and Herzegovina. There are more than 20 CSDP operations since 2003.
There is no comprehensive EU external energy policy. However, the Lisbon Treaty
strengthened coherence in EU external relations and expressly conferred energy
competence onto the EU.
Play video starting at ::23 and follow transcript0:23
Today there are disagreements on the roles of the High Representative and the
EEAS. They have different views on what the EU external energy policy is about.
The strengthened role of the European Parliament must also be taken into account.
Play video starting at ::41 and follow transcript0:41
But before we continue I would like you to take a moment and read Article 194
TFEU on energy.
Play video starting at ::50 and follow transcript0:50
As you can tell from the wording of Article 194 TFEU there is no express external
competence conferred on the EU in energy policy matters. Any external action
therefore must follow the general internal rules in the EU such as the gas and
energy market packages. The provision focuses on ensuring the well-functioning of
the internal market, security of supplies and environmentally friendly energy
policies.
Play video starting at :1:20 and follow transcript1:20
The main challenge to EU policies is the tendency of member states to give
priority to their national interests over common EU interests.
Play video starting at :1:29 and follow transcript1:29
Here we will focus on two tools for the external dimension of EU energy policy.
Play video starting at :1:38 and follow transcript1:38
The first is the Energy Community Treaty. According to this treaty EU energy law
is applied to market participants from countries outside the EU.
Play video starting at :1:49 and follow transcript1:49
The treaty entered into force in 2006 for a period of ten years, and covers the EU
and large numbers of countries in Eastern Europe including the Ukraine since
2010.
Play video starting at :2:1 and follow transcript2:01
It is a regional multilateral agreement which aims to create an integrated market in
natural gas and electricity between the participants.
Play video starting at :2:13 and follow transcript2:13
The ECT is a system based on the European Coal & Steel Community with
independent bodies and independent dispute settlement system. The aim is to
create a stable, regulatory and market framework capable of attracting investment
so that all parties have access to continuous gas and electricity supply that is
essential for economic development and social stability.
Play video starting at :2:40 and follow transcript2:40
The second tool which is used for the countries not party to the ECT are bilateral
energy instruments. Such instruments have been concluded in a large number of
countries, including Russia and even India.
Play video starting at :2:54 and follow transcript2:54
These include memoranda of understanding in energy matters and other types of
joint declarations. The shared competence in this field means that the roles remain
unclear.
Play video starting at :3:6 and follow transcript3:06
Finally, there is the external dimension of freedom, security and justice. This is a
relatively new policy area that was mainly designated to facilitate cooperation
between the EU member states.
Play video starting at :3:19 and follow transcript3:19
The main areas are immigration, judicial cooperation in civil and criminal matters,
approximation of criminal law, police cooperation, and fundamental rights
protection.
Play video starting at :3:32 and follow transcript3:32
In these fields, the EU has enacted legislation and concluded international
agreements.
Play video starting at :3:38 and follow transcript3:38
One of the elements which distinguish this field from other areas is that the issues
almost always relate to what is considered to be fundamental and sometimes
constitutional dimensions of statehood.
Play video starting at :3:51 and follow transcript3:51
I would like you to pause a second and read Article 67 TFEU. As you see, it is
clear from the text of this provision that the focus is on citizen of the European
Union.
Play video starting at :4:4 and follow transcript4:04
Therefore, this particular field of EU law has sometimes been described as the
Fortress Europe, which raises barriers to entry by other nationals.
Play video starting at :4:14 and follow transcript4:14
There are a number of specific policy fields in this context. The external dimension
covers policies on border checks, asylum, and immigration.
Play video starting at :4:24 and follow transcript4:24
Judicial cooperation and civil matters, judicial cooperation in criminal matters, and
also data protection in international agreements form a part of this policy.
Play video starting at :4:36 and follow transcript4:36
Since this MOOC carries its focus on business law, I have chosen to leave this
topic here. But needless to say there is much to be said and learned about this
particular feature of EU law. But that is for another time and another MOOC.
Play video starting at :4:53 and follow transcript4:53
So, now that you have received an overview of six different fields in the external
dimension of the EU law, with a perfect alphabet soup of weird abbreviations that
are difficult to remember even for me, it is time for me to say, thank you for tuning
in, and see you soon again.
The EEA Agreement
Hello and welcome back. In this lecture, we will look at the specific field in the
external dimension of the EU. I'm going to talk about the EEA agreement.
Play video starting at ::19 and follow transcript0:19
The EEA agreement is unique in the external relations of the EU. It extends the
internal market and the rules of competition to three EFTA states, Norway, Iceland
and Lichtenstein. But the most unique feature is the judicial structure of the EEA
agreement. And the way in which EU law is incorporated in the EEA agreement to
ensure the uniform application of EU law also for the EEA states.
Play video starting at ::52 and follow transcript0:52
No other international agreement between the EU and other third countries goes as
far as the EEA agreement.
Play video starting at :1:2 and follow transcript1:02
We will now look briefly at the history of the EEA, it celebrates 20 years of
existence in 2014. And then look at the specific features of this unique legal
system.
Play video starting at :1:15 and follow transcript1:15
During the 1980s, there were two free trade organizations in Europe. The European
Economic Community and the European Free Trade Association, or EFTA for
short.
Play video starting at :1:27 and follow transcript1:27
One of the most prominent members of the EFTA, the United Kingdom, had joined
the European community already in 1973. As the EEC showed its strength, the
EFTA states started to voluntarily adapt their legislation to the directives and
regulations of the European community.
Play video starting at :1:47 and follow transcript1:47
As the 1980s drew to a close, the EFTA states decided that they wished to go even
further. They wanted to be part of the internal market.
Play video starting at :1:57 and follow transcript1:57
At the same time, however, they did not want the supranational features of the EU
law. They did not want direct effect. They were reluctant to accept primacy. In
short, they wanted access to the internal market without the effects of EU law.
Play video starting at :2:16 and follow transcript2:16
The result of the negotiations was presented in 1992 as the Agreement of the
European Economic Area, or EEA, for short.
Play video starting at :2:27 and follow transcript2:27
After a shaky start, the ECJ rejected the first draft of the agreement, it entered into
force in 1994. However, in 1995 many of the EFTA states left the EFTA, to
become members of the European Communities.
Play video starting at :2:45 and follow transcript2:45
Since the EEA Agreement is a mixed agreement, all EU member states remain
members to the EEA Agreement together with the three EEA EFTA states Iceland,
Norway and Lichtenstein.
Play video starting at :2:59 and follow transcript2:59
But what is covered by the EEA Agreement? How is the institutional structure set
up? And finally; how does it work?
Play video starting at :3:9 and follow transcript3:09
The EEA agreement covers two distinct areas, all of which have been covered
earlier in this MOOC. The first is the free movement of workers, capital services,
and the freedom of establishment. The second area is the rules of competition
including state aid control.
Play video starting at :3:27 and follow transcript3:27
But just like the EU has seen its competences move beyond these core issues, the
EEA agreement also covers other issues, but to a much smaller extent than in the
EU.
Play video starting at :3:41 and follow transcript3:41
The EEA agreement also integrates EU rules on the environment, such as the
REACH regulations, financial regulations, and so on.
Play video starting at :3:53 and follow transcript3:53
If a certain field falls outside the scope of the EEA agreement, the EU concludes
bilateral agreements with the EEA/EFTA states.
Play video starting at :4:2 and follow transcript4:02
Such an example is the bilateral agreement between the EU on one hand and
Iceland and Norway on the other on the mutual recognition of arrest warrants.
Play video starting at :4:14 and follow transcript4:14
But EU legislation, which could be said to implement the core rules in the EEA
agreement, is incorporated in the EEA agreement. Therefore EEA law contains
exactly the same directives and regulations as EU law in these fields.
Play video starting at :4:33 and follow transcript4:33
These EU directives and regulations are continuously placed in the annexes to the
EEA agreement.
Play video starting at :4:40 and follow transcript4:40
Sometimes, they contain minor adjustments in order to adopt them to the EEA.
Adaptations include everything from the addition of lists of competent authorities
in the EEA/EFTA states, to political declarations from the contracting parties in
constitutional matters.
Play video starting at :5: and follow transcript5:00
Therefore, if you ever have to deal with a EEA agreement, always look at the
relevant acts to see if there has been a specific amendment to the act when it was
incorporated in the EEA agreement.
Play video starting at :5:17 and follow transcript5:17
Once these regulations and directives have been incorporated however, they have
the same effect in the EEA as in the EU.
Play video starting at :5:28 and follow transcript5:28
Let us now turn to the institutional structure of the EEA agreement.
Play video starting at :5:34 and follow transcript5:34
The aim of the agreement, economic integration without political integration, is
obvious when we look at the institutions.
Play video starting at :5:43 and follow transcript5:43
There is no legislative process in the EEA agreement, and therefore there are no
corresponding institutions in the EEA to the Parliament and the Council.
Play video starting at :5:53 and follow transcript5:53
Instead, the decisions to incorporate EU legislation in the EEA Agreement are
taken by the EEA Joint Committee, where the EFTA states and the EU have one
vote each. And decisions are taken by unanimous vote.
Play video starting at :6:9 and follow transcript6:09
The EFTA Surveillance Authority plays the same role as the Commission in the
EU. The role of ESA, as it is often called, is to exercise the supervision in the EEA
EFTA states.
Play video starting at :6:22 and follow transcript6:22
This includes state aid control, competition policy and making sure that the EEA
EFTA states implement and apply EEA law just like the commission keeps an eye
on the EU member states.
Play video starting at :6:36 and follow transcript6:36
But there are also important differences.
Play video starting at :6:40 and follow transcript6:40
ESA cannot impose a fine for infringements of EEA law.
Play video starting at :6:46 and follow transcript6:46
And since there is no legislative process - although I personally consider the
incorporation process to be quasi-legislative - the ESA does not have the initiative
to legislation as the Commission has in the EU.
Play video starting at :7:1 and follow transcript7:01
The EEA Joint Committee and ESA are complimented by the EFTA Court, the
EFTA Court ensures the judicial functions in the EEA.
Play video starting at :7:10 and follow transcript7:10
It works very much like the ECJ in the EU. It receives requests for interpretation of
EA law in the courts of the EEA/EFTA states, and it is the appeals courts for
decisions from ESA in state aid and competition.
Play video starting at :7:25 and follow transcript7:25
It also deals with infringement cases brought by ESA against the EEA EFTA
states.
Play video starting at :7:33 and follow transcript7:33
And how does this work in practice? Here we have the EEA EFTA states. They
apply EU law, but they have their own institutions, and their own court. Isn't there
a risk that EU law and EEA law may be interpreted differently, even if the rules are
the same?
Play video starting at :7:51 and follow transcript7:51
It is tempting to say that it is easy, but actually the EEA agreement raises a number
of issues in this regard.
Play video starting at :8: and follow transcript8:00
Mostly, they are solved by the principles of homogenity and reciprocity. These two
principles are essential for the good functioning of the EEA agreement.
Play video starting at :8:12 and follow transcript8:12
In order to ensure that EU law is applied in the same way in the EU member states
and the EEA EFTA states, the EEA agreement contains provisions concerning the
homogenous application of EU law under the EEA agreement.
Play video starting at :8:27 and follow transcript8:27
The relevant provision is found in Article 6 EEA. I suggest that you take a break
and read this provision carefully.
Play video starting at :8:36 and follow transcript8:36
As you can see from this provision, the provisions of the EEA agreement in so far
as they are identical in substance to corresponding rules of the EU treaties and to
acts adopted in application of these two treaties - that is directives and regulations -
they shall, in their implementation and application, be interpreted in conformity
with the relevant rulings of that ECJ given prior to 1992. However, this principal
also applies to later case law. In another agreement, concluded between EEA
EFTA states, establishing the ESA and the EFTA court, it is stipulated that these
institutions must pay due account of later developments in the case law of the ECJ.
The question is, how far-reaching the obligation is. In the EFTA court, the
principle of homogeneity is taken seriously. In addition to rules in the EEA
agreement itself, the principle of homogeneity has also been applied to procedural
rules. This is called procedural homogeneity. But the exact scope of the principle is
unclear. There are examples where the EFTA court has let case law of the ECJ
have precedence over its own, previous case law, although, it could be discussed
whether the rules applied by the two courts in those cases were really identical in
substance as stipulated in Article 6 EEA.
Play video starting at :10:9 and follow transcript10:09
In another case, the EFTA Court has stated that homogeneity can only be applied if
the relevant provisions are identical in substance in the EU and the EEA, after a
decision in the EEA joint committee that the relevant rule should indeed be applied
in the EEA.
Play video starting at :10:29 and follow transcript10:29
These are the most extreme cases, but on the whole, the EFTA court and the ECJ
apply the rules in the same way. The ECJ regularly stresses the fact that the EA
agreement and the EU law are to be interpreted in a uniform manner.
Play video starting at :10:47 and follow transcript10:47
Actually, the EFTA court is one of the few courts regularly cited by the ECJ.
Play video starting at :10:53 and follow transcript10:53
In fact, there is an ongoing judicial dialogue between the ECJ and the EFTA court
on the interpretation of EU law.
Play video starting at :11:1 and follow transcript11:01
This is particularly important where the EFTA court must go first due to a lack of
existing jurisprudence from the ECJ.
Play video starting at :11:10 and follow transcript11:10
So, to sum up, the application of EU law and EEA law is identical if the rules are
identical. If they are not, well, that must be solved case by case.
Play video starting at :11:24 and follow transcript11:24
The principle of reciprocity in the EEA is the corollary to homogeneity, but from
the perspective of the individual. It is the core of the protection of individual rights
in the EEA agreement.
Play video starting at :11:37 and follow transcript11:37
The fourth recital of the EEA agreement underlines the purpose to establish a
dynamic and homogenous legal system, based on common rules and equal
conditions of competition and providing for the adequate means of enforcement
including at the judicial level.
Play video starting at :11:53 and follow transcript11:53
This has to be achieved on the basis of equality and reciprocity and of an overall
balance of benefits, rights and obligations for the contracting parties.
Play video starting at :12:4 and follow transcript12:04
In the jurisprudence of the EFTA court and the ECJ, reciprocity has been extended
to mean that the rights of individuals in the EEA and EU must be the same, if the
rules are identical.
Play video starting at :12:18 and follow transcript12:18
This is of particular importance in the exercise of the four freedoms. There would
be an imbalance in benefits and obligations if the exercise would not be identical in
the EU and the EEA/EFTA states.
Play video starting at :12:32 and follow transcript12:32
Take, for instance, mutual recognition or the right to social benefits, both which
may be essential for a self-employed person moving within the EEA with his
family.
Play video starting at :12:45 and follow transcript12:45
So, to sum up, the application of EU law and EEA law is identical if the rules are
identical - and this much be achieved in such a way that the rights exercised under
EU law are the same under EU law and EEA law.
Play video starting at :13:1 and follow transcript13:01
There is plenty more to discover with the EEA agreement.
Play video starting at :13:5 and follow transcript13:05
All EU member states are members of the EEA as well as Iceland, Norway, and
Liechtenstein.
Play video starting at :13:12 and follow transcript13:12
The EEA is unique in the external dimension of the EU business law. I hope that
you have received at least an idea of how the internal market can be extended
through mixed agreements between the EU, its member states and third countries.
Play video starting at :13:29 and follow transcript13:29
This is my last lecture in this MOOC. It has been a pleasure to participate and
prepare the lectures, and I sincerely hope that you feel it has been a pleasure too.
So, thank you for tuning in and goodbye.
International Trade Agreements
Hello, my name is Annegret Engel and I welcome you to today's lecture. In this
lecture, we will be looking at some examples of international agreements
concluded by the EU, and the problems and controversy surrounding them.
Play video starting at ::30 and follow transcript0:30
In your previous lectures you have already learned about the EU's competences in
the external sphere and the possibility for member states interventions.
Play video starting at ::40 and follow transcript0:40
This is very crucial to remember here, as it is one of the reasons why negotiations
with other countries can last for years or even decades before any binding rules
may finally enter into force. Of course these often depends on how complex and
ambitious the envisaged agreement is. Which may require the joint approval of
member states if their competences are also being affected.
Play video starting at :1:6 and follow transcript1:06
For example, this was the case with the international agreement between the EU
and Singapore, where the European Court found in its Opinion 2/15 that the union
did not have the power to conclude the agreement on its own. The Marakech
Treaty on the other hand concerned only a very narrow area of law, the access of
published works for people who are blind, visually impaired, or otherwise print
disabled. The court also gave an opinion here where it found that unlike the
Singapore agreement, this treaty was suitable to be concluded under the union's
exclusive competences without the need for member states approval.
Play video starting at :1:49 and follow transcript1:49
In addition to the amount of different policy areas affected by an international
agreement, the length and complexity of negotiations also depends on how
different the rules of the opposing parties are to begin with.
Play video starting at :2:3 and follow transcript2:03
In other words, if another country has very similar standards for certain product
requirements for example, and the EU enters into negotiations with that country to
facilitate trade of such products, then it might be very straightforward. On the other
hand, if a country has very different meaning much lower standards as those
applicable in the EU. And the agreement is supposed to cover multiple policy
areas, maybe also including different standards for intellectual property or human
rights. Then negotiations could be very complicated and could last a very long
time. And a successful conclusion would not be guaranteed. The EU has indeed
negotiated many agreements with other countries in the past, in order to assert its
status as a global player in international trade.
Play video starting at :2:56 and follow transcript2:56
Two of the most complex and controversial international negotiations have been
for the Transatlantic Trade and Investment Partnership, in short TTIP with the US.
And for the Comprehensive Economic and Trade Agreement in short CETA with
Canada. The US and Canada are two of the EU's most important trading partners in
the world.
Play video starting at :3:21 and follow transcript3:21
For example, a lot of cars and agricultural products are being traded across the
Atlantic, but also pharmaceutical products or services.
Play video starting at :3:30 and follow transcript3:30
Both agreements and visage to eliminate most tariffs and customs duties for those
products and mutual recognition of qualifications, in order to guarantee market
access also for service providers.
Play video starting at :3:42 and follow transcript3:42
So why did one of the agreements, the TTIP agreement fail while the other CETA
was successful?
Play video starting at :3:49 and follow transcript3:49
Well, first of all when it comes to the different standards of products, technical
standards, safety standards, consumer protection etc.
Play video starting at :3:59 and follow transcript3:59
Canada already has much higher standards as compared to the US, which means
that the gap which had to be closed in order to comply with the requirements set
under EU law was not as big.
Play video starting at :4:12 and follow transcript4:12
You may wonder why this is important. Let's assume you own a small company
and one of the member states, which is producing poultry meat and selling this all
across the EU.
Play video starting at :4:25 and follow transcript4:25
Of course you would have to comply with all the requirements imposed under EU
law. Which means that you cannot for example use certain washing procedures
which include chlorine.
Play video starting at :4:35 and follow transcript4:35
But this is a very common procedure in the US, in order to compensate for poor
hygienic standards during the production process. Which also means that these
chlorinated chickens can be produce at much lower costs.
Play video starting at :4:49 and follow transcript4:49
As you can see, this would create an uneven playing field with cheaper products
entering the internal market and being able to undermine more expensive products
that comply with a higher European standards.
Play video starting at :5:3 and follow transcript5:03
And it might not always be possible for consumers to tell the difference or the
value in a more expensive product.
Play video starting at :5:11 and follow transcript5:11
Of course one way to achieve a level playing field would be if let's say the EU
were to lower its own standards imposed on European products and services.
Play video starting at :5:21 and follow transcript5:21
But instead the EU has chosen to uphold the highest standards in many areas,
including product safety and environmental standards.
Play video starting at :5:30 and follow transcript5:30
And it still remains attractive to international trading partners despite such high
standards mainly because it is providing access to a significant market block of
over 500 million people.
Play video starting at :5:43 and follow transcript5:43
By doing so, it effectively forces other countries to align their standards if they
want to enter into a trading relationship with the EU.
Play video starting at :5:52 and follow transcript5:52
This is the so-called Brussels effect. Some of course like the UK have argued that
the union should adopt a more flexible position and trade negotiations, in order to
find a compromise and be able to successfully conclude agreements like the TTIP.
Play video starting at :6:9 and follow transcript6:09
But obviously this would also ignore many of the concerns raised over TTIP from
citizens, companies, and NGOs a like all across Europe. Which even resulted in a
European citizens initiative according to Article 11 of the TEU. Eventually the
negotiations for TTIP were officially abandoned. The CETA agreement with
Canada also faced significant opposition in the member states.
Play video starting at :6:37 and follow transcript6:37
One region in particular Wallonia which is the part of Belgium, was ready to refuse
its signature to the agreement over concerns from by Wallonian farmers.
Play video starting at :6:48 and follow transcript6:48
They felt under threat from the much more powerful agricultural industry in
Canada, where bigger farmers with more financial resources have a greater lobby.
Play video starting at :6:58 and follow transcript6:58
It was only when Canada made further concessions in this area that Belgium was
willing to sign the agreement.
Play video starting at :7:5 and follow transcript7:05
But the controversial Investment Court System remains to be a problematic point
in the ratification process.
Play video starting at :7:13 and follow transcript7:13
Belgium even requested a preliminary ruling from the European court of justice on
this issue.
Play video starting at :7:20 and follow transcript7:20
In its Opinion 1/17, the court rejected these concerns and confirmed that the
Investment Court System was indeed compatible with EU law.
Play video starting at :7:31 and follow transcript7:31
This was also good news for other international agreements which have proposed
to establish a similar system for example those free trade agreements with
Singapore or Vietnam.
Play video starting at :7:42 and follow transcript7:42
So as you have seen international agreements may face a variety of obstacles until
they can be enforced. From the initial negotiations until they're being signed and
ratified if necessary by all member states.

European Business Law: Doing Business in Europe

Week 1: Making Business Transactions
Strategic choices
Good morning everyone. Let's start this module on European Business Law by
talking business strategy. It will allow us to identify the problems to be addressed,
and topics of specific importance which will be addressed as we proceed. Let's
assume that there is a Hapsburg Nail Factory somewhere in Germany. A small
local nail producer, which has existed for more than 60 years. It has 12 employees,
all of them involved in production.
Play video starting at ::50 and follow transcript0:50
Hapsburg has over the years remained barely profitable.
Play video starting at ::55 and follow transcript0:55
The company has developed a new nail which is perfect for pallets. No sharp ends
after use. It is even subject of a patent application.
Play video starting at :1:8 and follow transcript1:08
Let us further assume that Hapsburg has been successful in selling it's nails
delivered in ton quantities in Germany.
Play video starting at :1:20 and follow transcript1:20
Hapsburg supposedly determines that it must enter a wider market, and turns to
you for assistance in forging an international strategy covering the European
market.
Play video starting at :1:32 and follow transcript1:32
How do you structure your advice?
Play video starting at :1:36 and follow transcript1:36
Well, your first advice is most likely that Hapsburg, being a small, medium sized
enterprise as it is, lacks resources to establish subsidiaries in other countries.
Play video starting at :1:50 and follow transcript1:50
Even if the company has a clever patent protection and certain excess production
capacity, it is, as we said, a small local firm with no prior international experience.
At this stage, to establish a subsidiary is out of the question. Even joint ventures
may be too much for an effort for Hapsburg. Your initial suggestion may well be
that Hapsburg should continue to test launch the product on the European market
through advertising in branch journals and selling to customers contacting the
company.
Play video starting at :2:29 and follow transcript2:29
If there is no market need, no need to bother with further activities.
Play video starting at :2:35 and follow transcript2:35
But I'm happy to inform you that when Hapsburg offers the product through
advertising it receives binding orders from several European customers. Customers
even offer secured payment in the form of bank guarantees.
Play video starting at :2:51 and follow transcript2:51
In you advising capacity now, you have to inform Hapsburg about contract law in
different EU countries, as there is no real European Union contract law. Likewise,
you have to discuss the Convention on international sale of goods, CISG, in order
to establish what rules apply, if there is no detailed sales contract that applies to the
transaction.
Play video starting at :3:19 and follow transcript3:19
You must also focus on the transfer of risk, and transportation, and the meaning of
different INCO-terms, which determine the shipment of the product.
Play video starting at :3:31 and follow transcript3:31
You will, as Hapsburg's advisor, probably prepare a simple standard sales contract
securing Hapsburg's interest without scaring off the potential buyer.
Play video starting at :3:43 and follow transcript3:43
All this will be addressed in subsequent classes. For our strategic purposes we
assume that everything went well and that Hapsburg has demonstrated the EU
potential for its product.
Play video starting at :4: and follow transcript4:00
Now then, what is your advice to Hapsburg? Well, I think you're going to agree
that a more active EU strategy than just occasional sales makes sense.
Play video starting at :4:12 and follow transcript4:12
You therefore propose that Hapsburg shall operate through a middle man.
Play video starting at :4:17 and follow transcript4:17
For example a commercial agent, an independent distributor, or a licensee.
Play video starting at :4:23 and follow transcript4:23
A commercial agent is a self-employed intermediary who has continuing authority
to negotiate the sale or the purchase of goods on behalf of another person. This
other person being referred to as the principal. Or to negotiate and conclude such
transactions on behalf of, and in the name of the principal.
Play video starting at :4:49 and follow transcript4:49
A distributor on the other hand is generally understood as a middle man who buys
the goods from the producer in its own name and for its own behalf. And who then
turns around and sells the product in its allotted market on condition that the
distributor will determine itself.
Play video starting at :5:11 and follow transcript5:11
Finally, a licensee is generally understood as a middleman who obtains rights
under existing intellectual property rights. For example, trademarks, patents,
design, or copyrights to produce, use, market, and sell the product in the allotted
territory.
Play video starting at :5:29 and follow transcript5:29
In all cases, the rights in the territory can either be non-exclusive, they can be sole.
"Sole" here meaning that the principal reserves a right to enter the market himself.
Or finally, exclusive, which does not allow the principal to enter the market.
Play video starting at :5:52 and follow transcript5:52
Generally the parties have a discretion to form the terms of their collaboration as
they see fit.
Play video starting at :6: and follow transcript6:00
So, the question is now, which form of collaboration will you recommend to
Hapsburg?
Play video starting at :6:8 and follow transcript6:08
Well, let's consider the answer from a purely economic perspective to start with.
Play video starting at :6:15 and follow transcript6:15
In the agency relation the agent acts on the principal's behalf to find customers.
The purchase agreement is entered into between the principal and the final
customer.
Play video starting at :6:28 and follow transcript6:28
The agent under agreement with the principal receives a commission of, let's say, 5
to 15% of the sales value. Hapsburg will thus maintain 85 to 95% of the sales
price. In the distribution agreement, the distributor will buy the product from the
producer, turn around and sell it at his own risk to the final customer.
Play video starting at :6:55 and follow transcript6:55
If we assume that each trade level adds 100% as its own margin, it means that the
parties each take 50% of the final price.
Play video starting at :7:7 and follow transcript7:07
Again, in a pure license relation, the licensee receives a license under, for example,
the patents and the know-how from the licencor to produce and sell the product at
its own risk to the end customer. And the licensee pays a running royalty of say 5
to 15% of the sales price to Hapsburg.
Play video starting at :7:35 and follow transcript7:35
Simple mathematics may suggest that 85 to 95% of the final price is better than the
5 to 15% royalty just discussed. But that is hardly a relevant observation.
Play video starting at :7:51 and follow transcript7:51
In the agency relationship, the principal produces the product and carries almost
the entire risk in the transaction. In the licensing relation, the middlemen shoulders
most of those responsibilities. The distribution agreement is somewhere in
between.
Play video starting at :8:10 and follow transcript8:10
As an experienced advisor, your answer will probably be that it depends.
Play video starting at :8:20 and follow transcript8:20
In fact, the different middlemen relations are neutral as to profit.
Play video starting at :8:26 and follow transcript8:26
For a company with small means a license royalty comes with no additional efforts
and the compensation is basically a profit. Whereas in the other alternatives, the
principal would have to be active and assume costs.
Play video starting at :8:42 and follow transcript8:42
Circumstances may determine which alternative is the better strategic choice.
Play video starting at :8:48 and follow transcript8:48
If the principal has excess production capacity a distributorship arrangement might
be conceivable.
Play video starting at :8:57 and follow transcript8:57
Working through a commercial agent however, in addition, means undertaking
considerable commercial risks and requires a knowledgeable principal.
Play video starting at :9:8 and follow transcript9:08
These considerations are probably more important than focusing on general
compensation principles.
Play video starting at :9:16 and follow transcript9:16
Of course, negotiation skills may alter the picture, but in order to achieve long term
successful collaboration a balance between both parties' interests must be achieved.
Play video starting at :9:30 and follow transcript9:30
Unbalanced agreements have a tendency of being very short-lived.
Play video starting at :9:37 and follow transcript9:37
So the questions then becomes, are there legal obstacles that should be considered
in this strategy?
Play video starting at :9:47 and follow transcript9:47
Well first of all, in all cases, general contract and sales law apply in all the
dimensions.
Play video starting at :9:54 and follow transcript9:54
Agency legislation is harmonized under an EU directive.
Play video starting at :9:59 and follow transcript9:59
The main rules will be discussed later. But basically, the law secures protection to
the agent at the expiration of the collaboration.
Play video starting at :10:9 and follow transcript10:09
A clean agency contract where the agent is not carrying any commercial risk is
normally exempted from competition law considerations.
Play video starting at :10:20 and follow transcript10:20
Both licensing and distributorship relations leave it basically free for the parties to
decide on the terms of their collaboration.
Play video starting at :10:30 and follow transcript10:30
However, EU strict competitions rules will come into play and impact the freedom
to contract.
Play video starting at :10:38 and follow transcript10:38
Clauses that for example, create territorial protection, contain end pricing
mechanisms, or control output are generally prohibited. And the parties risk stiff
penalties and nullified contracts when entering into unlawful agreements.
Play video starting at :11:1 and follow transcript11:01
Not until you have been through all these discussions can you provide a proper
advice or make a clear determination on how to proceed. It is a vital strategic
decision to be made early on.
Play video starting at :11:16 and follow transcript11:16
In conclusion, clever business requires good preparation in order to forge a solid
business strategy.
Play video starting at :11:25 and follow transcript11:25
Small and medium size enterprises better carefully consider before they start to
establish foreign subsidiaries, and a step-wise strategy may be preferable.
Play video starting at :11:38 and follow transcript11:38
In the first instance you need to determine that the market potential really exists.
General market research is a way forward, but starting with a regular export
transactions may be a way to establish the market. Normally it makes good sense
to have contractual sales conditions agreed between the parties in order to avoid
the future problems.
Play video starting at :12:4 and follow transcript12:04
A more active penetration may be achieved by collaborating with a middlemen.
Whether this should be an agent, a distributor, a licensee, depends to a large extent
on the capacity of the principal and especially to what extent the principal has
excess production capacity.
Play video starting at :12:25 and follow transcript12:25
To a large extent, the parties are free to determine their relationship, however,
general agency law provides protection for the agents, and competition law sets
limits for the distribution and licensing agreement. All these factors must be taken
into account when building the strategy.
Play video starting at :12:45 and follow transcript12:45
A later step is then the establishment of a subsidiary in foreign countries. This will
require knowledge about company law, taxation, labor rules, environmental
requirements. And this will all be left for subsequent modules
Contractual Arrangements in Europe
Welcome to this lecture on contractual arrangements in Europe. The first thing it
says this is an extensive and complex topic. And during such a short lecture, I hope
to give you a flavor of the complexities of contracting in Europe rather than a deep
overview of those issues. It's impossible to cover the area in vast detail. It is far too
large an area for us to cover in such a short period.
Play video starting at ::40 and follow transcript0:40
So this session does not cover global commercial law but rather focuses on the
narrower issues surrounding contractual arrangements.
Play video starting at ::50 and follow transcript0:50
There are a number of ways in which contractual considerations may arise in
Europe. For example, when every time you buy an ice cream, a package of sweets
or a cup of coffee, you are entering into a relationship with the business as a
consumer.
Play video starting at :1:6 and follow transcript1:06
There's also another side to this coin that this discussion focuses on and this is
more to do with business-to-business transactions. So two businesses entering into
an agreement.
Play video starting at :1:18 and follow transcript1:18
And what I hope to do in this lecture is to introduce three points to you. The first to
those is, why contract law is an important consideration for business transactions in
Europe? The second of those is, understanding why there is no uniform European
contract law. And finally, what can we as lawyers do, to overcome contractual
differences in our legal traditions? How can we overcome contract law
differences?
Play video starting at :1:49 and follow transcript1:49
As a starting point, laws covering trade between businesses in different countries
have existed since the medieval period. This is not new.
Play video starting at :1:58 and follow transcript1:58
However, as business and transactions have become more global, more
sophisticated, and have crossed growing numbers of national boundaries, the need
for legal uniformity has increased.
Play video starting at :2:12 and follow transcript2:12
And where this uniformity is not possible legal solutions to accommodate cross
border transactions are necessary.
Play video starting at :2:22 and follow transcript2:22
If we turn to Europe, the increased focus on the internal market project and the
removal of barriers to trade through legal provisions of the European Union. We
see that this includes the promotion, the encouragement of cross border business
transactions within Europe.
Play video starting at :2:42 and follow transcript2:42
And here, the importance of contract law and business transactions is relatively
self-explanatory.
Play video starting at :2:50 and follow transcript2:50
The law is the framework that reflects the terms of the agreement. It clarifies the
promises. It outlines the obligations of the parties to one another, to the agreement.
Play video starting at :3:3 and follow transcript3:03
But it also provides the foundation for what occurs in the event of a non or a partial
performance of a promise, as well as setting out remedies for these types of failures
Legal certainty that the law brings is a vital ingredient to establish a certain and
stable business environment.
Play video starting at :3:28 and follow transcript3:28
And this really raises the question of what the situation is. In the European Union,
when we are discussing commercial contractual law.
Play video starting at :3:42 and follow transcript3:42
You may find it surprising that there is no uniform body of contract law within the
European Union.
Play video starting at :3:50 and follow transcript3:50
This is despite contract law being an object of discussion at the European level for
the last 25 years.
Play video starting at :3:58 and follow transcript3:58
As a general point, the laws and contracts are subject to those set out by the laws
and contracts in each individual member state of the European Union.
Play video starting at :4:15 and follow transcript4:15
Statement really disguises the complexity of the situation we're facing, it's not as
simple as saying the member states retain jurisdiction over contractual matters.
Play video starting at :4:27 and follow transcript4:27
Because there is no doubt that the European Union has harmonised some aspects of
contract law, across the whole of the Union. We see the scenario such as door step
selling, consumer rights.
Play video starting at :4:41 and follow transcript4:41
These EU legislation, these affect contract law at a national level.
Play video starting at :4:48 and follow transcript4:48
This is, of course, because EU law takes precedence over national law and places
requirements on contractual relationships that we have to deal with. We have to
incorporate them into our agreements.
Play video starting at :5:4 and follow transcript5:04
In addition to these examples, a number of legislative instruments are in place to
also facilitate wider European integration. For example, Article 81 of the Treaty on
the Functioning of the European Union, provides the authority for measures on
judicial cooperation in civil matters having cross-border-implications. Article 81
paragraph 2, covers a number of important law questions regarding the applicable
law, which law will apply to the contract. The international jurisdiction. Where is
that law going to be recognized?
Play video starting at :5:46 and follow transcript5:46
And also, the recognition and enforcement of judgments relating to contractual
provisions.
Play video starting at :5:54 and follow transcript5:54
The private international law rules that regulate legal relationships with a cross-
border element in the EU include, for example. Contracts between companies
located in member state A and member state B, different member states.
Play video starting at :6:12 and follow transcript6:12
But despite this influence, despite this legislation from the European Union there
remains a gap in contract law across the union. Now, the rules and regulations we
have in the EU regulate parts of our contractual relationship certainly. But this
certainly the situation remains that member states are primarily in charge of the
body of rules related to national contract law.
Play video starting at :6:47 and follow transcript6:47
And this raises very serious concerns in relation to how we use, what we agree,
how you interpret. Provisions of contracts and especially in cases where you have
cross-border transactions.
Play video starting at :7:4 and follow transcript7:04
Because difficulties are inherent in this type of agreement for the parties.
Play video starting at :7:11 and follow transcript7:11
Not everybody is aware of everybody contract law in every member state of the
European Union.
Play video starting at :7:21 and follow transcript7:21
So as a result of this, we have a real barrier to trade in relation to the European
Union.
Play video starting at :7:30 and follow transcript7:30
We need a common legal solution for the parties.
Play video starting at :7:34 and follow transcript7:34
And one of those is the applicable law. You and I, as two business entering into an
agreement, we have the freedom of contract. We are able to choose the law that
will be applicable to our contract. This will be the law that will govern the
agreement.
Play video starting at :7:56 and follow transcript7:56
We can go further, we can agree the forum or the court or the tribunal that will
have the authority to interpret and apply the applicable law in the event of a
contractual dispute between us.
Play video starting at :8:12 and follow transcript8:12
There are concerns with this of course, it's not always easy to agree what the
applicable foreign law should be that will regulate our contract.
Play video starting at :8:23 and follow transcript8:23
And often, there is difficulty in finding out about the provisions of a foreign
contract law, for the parties associated with the agreement.
Play video starting at :8:35 and follow transcript8:35
And this also leads to a very real risk and danger that in resolving cross-border
conflicts, we will be looking at higher costs of litigation, higher costs of obtaining
legal advice, and having to take these issues up in a different territory.
Play video starting at :8:54 and follow transcript8:54
Real, real problems. There remains a push from the European Union level to
develop and adopt a contract law that could replace or supplement national
contract law in cross-border transactions.
Play video starting at :9:12 and follow transcript9:12
However, it had to be said that this has not been met with applause from the
member states.
Play video starting at :9:19 and follow transcript9:19
In fact, it's been met with a fair amount of resistance from a number of quarters
and, as yet, no mechanism has materialized for the European Union.
Play video starting at :9:30 and follow transcript9:30
So for now, within the European Union, we continue to deal with the party's being
responsible for their own choice of law. And where they choose not to choose their
choice of law, then of course, the European Union rules on private international
law will come in.
Play video starting at :9:50 and follow transcript9:50
So for now, we are left with this situation where there is disparity at a national
level.
Play video starting at :9:57 and follow transcript9:57
We are left with a legal solution, in allowing through the contractual freedom of
the party, for them to choose how to the contract is governed. But with that comes
the series of difficulties.
Play video starting at :10:11 and follow transcript10:11
Therefore, contracting in the European Union is not quite as simple as one may
first envisage it to be.
General International Sales Conditions
Welcome to this lecture on General International Sales Conditions. In the previous
lecture, we looked very much at contractual arrangements in the European Union
and we highlighted the need for law to be able to adapt to really promote and
integrate, and help global business. In this lecture, we'll be looking at some of the
international tools that could provide a different solution to those created by the
disparities under differing national contract law regimes.
Play video starting at ::48 and follow transcript0:48
Of course, it's impossible for us to cover this area in detail. Many have spent their
whole lives detailing and covering this very area.
Play video starting at ::57 and follow transcript0:57
What we can do in this session, however is to cover some of the international
instruments that may present themselves as being a possible solution for the
problems we have raised.
Play video starting at :1:11 and follow transcript1:11
So during this lecture, we have raised three instruments for our consideration and
discussion.
Play video starting at :1:17 and follow transcript1:17
The first of those is the Convention on the International Sale of Goods or CISG.
The second of those is the Principles of European Contract Law, PECL.
Play video starting at :1:29 and follow transcript1:29
And the third of those, the UNIDROIT Principles of Commercial Law or
UNIDROIT.
Play video starting at :1:36 and follow transcript1:36
Now, these are instruments that can be said to be transnational set of rules.
Play video starting at :1:42 and follow transcript1:42
In meaning that, they are detached. They're not part of or tied to a national system
of law, but they do constitute a source for us to use them, to regulate international
transactions. For example, CISG. This is an international convention that aims at
addressing the uncertainty associated with choice of law and international
commercial agreements, generally. According to CISG, the treaty aims to reduce
obstacles to international trade and particularly those associated with choice of law
issues, by creating even-handed and modern substantive rules governing the rights
and obligations of parties to international sales contracts.
Play video starting at :2:38 and follow transcript2:38
As such, CISG, when adopted, provides a legislative instrument that ensures a
uniform law that can be used as a common sales law base.
Play video starting at :2:53 and follow transcript2:53
This means that the parties can rely on this, they can rely on CISG when
conducting a cross border agreement.
Play video starting at :3:2 and follow transcript3:02
When the parties are doing such in the jurisdiction of a contracting state, then
CISG will apply uniformly to the parties and any ensuing dispute that may occur.
Play video starting at :3:18 and follow transcript3:18
International contracts falling outside the scope of application of CISG as well as
contract subjects to a valid choice of other law may not be affected by CISG,
however. So, it is possible to contract it out.
Play video starting at :3:35 and follow transcript3:35
However, what CISG brings is a real possibility of uniformity and certainty as to
the rules of the agreement. There are some things CISG that we could view as
shortcomings, which includes the fact that there are a number of jurisdictions. The
United Kingdom being an example who are not a signatory states. And therefore,
they do not apply CISG in the same way.
Play video starting at :4:4 and follow transcript4:04
It's also not generally applicable to agreements outside of general international
sales agreements. Meaning that consumer agreements, for example are not caught
into CISG, but it does provide an interesting tool.
Play video starting at :4:22 and follow transcript4:22
The second instrument that we may want to look at is one that is not founded in a
treaty and is not an international instrument of law. They are the Principles of
European Contract Law or PECL. Now, the principles have been established
primarily as a result of the difficulties associated with disparities of contract law
amongst the member states of the European Union. The principles are intended to
be applied as a general rule of contract law across the Union. But unlike CISG,
there are no signatory states to it. And as such, the principles will only apply when
the parties have agreed to incorporate them into their contract or that their contract
will be governed by them.
Play video starting at :5:18 and follow transcript5:18
The history behind the principles is that they were drawn by leading contract law
academics from across Europe.
Play video starting at :5:26 and follow transcript5:26
And in many ways, the principles reflect the basic rules of contract law that are
more generally found across the legal traditions of the member states of the
European Union. They are therefore, an interesting tool and a very well-forged,
balanced tool that we can use in these type of agreements,
Play video starting at :5:50 and follow transcript5:50
but we must do so expressly.
Play video starting at :5:54 and follow transcript5:54
The third and final instrument for our consideration are the UNIDROIT Principles
of International Commercial Contracts.
Play video starting at :6:3 and follow transcript6:03
UNIDROIT made their introduction or their appearance, 1994 and it has been
continuously updated. The latest version of the UNIDROIT principles released in
2010 and it has now expanded, it's a vast document with some 211 articles.
Play video starting at :6:27 and follow transcript6:27
And within these 211 articles, it sets out the general rules which are conceived to
be applicable for international commercial agreements. They cover a wide array of
contractual arrangements from contract formation to restitution, determination as
well as performance.
Play video starting at :6:54 and follow transcript6:54
While other principles are conceived for international commercial contracts, this
does not exclude their application to other types of agreements.
Play video starting at :7:4 and follow transcript7:04
In order for the UNIDROIT principles to apply, the parties should expressly
choose the principles as their rules of law governing their contract and they should
combine this with the choice of law clause within the agreement.
Play video starting at :7:21 and follow transcript7:21
By doing so, we ensure a common standards that can be chosen or automatically
apply to the cross border trade. And we seen that using UNIDROIT, CISG or
PECL, we can apply different types of solutions, legal solutions to cross border
trade where we are doing so with different nations and they serve a very important
function. Not only do they bring legal certainty, but they allow us to expand trade.
They promote international trade. They promote development through the certainty
of the law that applies to the agreement by relying on one of these international
instruments. This uniformity may and often does result in lower costs. Greater
transparency and enhanced relationships between the parties and this leads to
greater international trade. And in our modern society, I can think of a few things
of far greater importance to us than being able to protect international trade and
further economic global integration by using an international instrument that
allows us to negate the difficulties associated with disparities on national law level.
Thank you.
Operating through Middlemen
You have now penetrated general contract law and sales provisions.
Play video starting at ::19 and follow transcript0:19
In today's lecture we will focus on legislation surrounding collaboration.
Play video starting at ::24 and follow transcript0:24
There are trends in everything, also in trade patterns. It all started with general
export activities. Gradually, in the early 20th century, the use of middlemen in
foreign trade came into fashion. It was later followed by international expansion
through owned subsidiaries and subsequently, concentration through mergers and
acquisitions.
Play video starting at ::51 and follow transcript0:51
However, working through middlemen is still a viable option. Not the least for
small and medium sized enterprises. Parties with complementary skills have the
strength to meet competition from larger entities.
Play video starting at :1:10 and follow transcript1:10
It has been argued that one form of middlemen collaboration is not necessarily
more optimal than the other. The choice rather depends on the respective skills of
the parties.
Play video starting at :1:22 and follow transcript1:22
Irrespective of which one is chosen, the parties have a wide discretion to fit the
contract to their needs. A good contract is normally one that creates a sound
balance between the parties and allows both of them to capitalize from their
collaboration.
Play video starting at :1:43 and follow transcript1:43
However, there are important legal aspects to take into account when forging a
long term collaborative agreements with a foreign party.
Play video starting at :1:52 and follow transcript1:52
Let's starts with the collaboration between a developer, producer and a foreign
commercial agent acting on the principal's behalf. The agent will ordinarily seek
customers in its territory and take orders which are reported back to the principal.
Play video starting at :2:8 and follow transcript2:08
Agency legislation was originally in a state of flux in Europe, with some countries
granting far-reaching protection to the agent and others having no legislation at all.
National legislation has however been harmonized through Council Directive
86/653/EEC. The principal remains responsible for the end transaction with the
customer, and shall assist the agent with general sale support.
Play video starting at :2:42 and follow transcript2:42
The agent should not carry any commercial risk. or the relationship may risk
becoming an independent distributorship.
Play video starting at :2:51 and follow transcript2:51
On the other hand, the agent may not be too tied to the principal, or he may
become an employed sales representative. With all the consequences an
employment agreement may have.
Play video starting at :3:6 and follow transcript3:06
The agency legislative focus is on the type of collaboration. Is it exclusive or not?
Play video starting at :3:14 and follow transcript3:14
Article 6-12 of the directive deals with the agent's right to compensation. Under
Article 7 the agent is entitled to a commission for transactions he has generated,
but if he is an exclusive agent, on all transactions in his territory.
Play video starting at :3:34 and follow transcript3:34
Articles 14 -20 of the directive contain important mandatory provisions regarding
the termination of their relationship.
Play video starting at :3:44 and follow transcript3:44
Article 14 provides that the parties can enter into an agreement for a fixed period,
and when this period terminates, there are no further legal obligations between the
parties.
Play video starting at :3:58 and follow transcript3:58
If however the contract is prolonged, or if it runs until terminated, the contract has
an indefinite period. And mandatory compensation rules in the directive come into
play.
Play video starting at :4:14 and follow transcript4:14
Under Article 15, the period of note is, upon termination, increases with one month
with every year of the contract. And the maximum must not be less than three
months.
Play video starting at :4:28 and follow transcript4:28
In addition, under Article 17 the agent shall be indemnified with one year’s
average remunerations or compensated for damages suffered on termination.
Because he is deprived of commission whilst the principal will benefit from the
commercial agent's prior activities.
Play video starting at :4:52 and follow transcript4:52
Awareness of this rules is vital and a cautious approach is recommended in agency
agreement drafting.
Play video starting at :5:3 and follow transcript5:03
Let's now turn to the distributorship relation.
Play video starting at :5:7 and follow transcript5:07
The strategic discussion suggested that the producer with excess production
capacity may benefit from close collaboration with a marketing partner who buys
the product and sells it in his own name.
Play video starting at :5:21 and follow transcript5:21
The distributor stands the risk after transfer of product and shoulders responsibility
for marketing activities.
Play video starting at :5:30 and follow transcript5:30
The agreement is normally, or mainly, at the parties discretion. And the freedom of
contract applies. General contract and sales law concepts will complement any
deficiencies in the agreement.
Play video starting at :5:45 and follow transcript5:45
However, and this is important, the distributorship agreement may come under
antitrust scrutiny.
Play video starting at :5:55 and follow transcript5:55
Distributorship agreements between small and medium size enterprises are
normally exempted from such scrutiny under the Commission 2014 De minimis
Notice Provided that the agreements do not contain hardcore provisions.
Play video starting at :6:14 and follow transcript6:14
For other distributorship agreements, the 2010 Vertical Regulation provides a
threshold above this percentage no block exemption applies, and the parties must
assure themselves of the lawfulness of the agreement.
Play video starting at :6:33 and follow transcript6:33
The distributorship agreement should preferably stipulate the products covered, the
rights and obligations of either party, term and termination provisions, as well as
forum and choice of law provisions.
Play video starting at :6:48 and follow transcript6:48
The 2010 Vertical Regulation exempts in article two, vertical agreements within
the threshold of article three. The 30 percent market share for either the supplier or
the purchaser.
Play video starting at :7:6 and follow transcript7:06
Distribution agreements often grant exclusive territorial rights.
Play video starting at :7:12 and follow transcript7:12
As long as they do not conflict with the hard core provisions in article four of the
vertical regulation and prevent parallel trade no objection will be made. The
producer may only impose a maximum or non binding resales price and is limited
in how he operates selected distribution systems.
Play video starting at :7:36 and follow transcript7:36
Under Article five of the regulation non compete clauses may only last five years
and restrains of trade clauses which prevent the distributor from competing after
the term of the agreement may only last one year provided that secret know-how
can always remain protected.
Play video starting at :8: and follow transcript8:00
Finally, we shall discuss the licensing agreements. Which can be particularly
helpful when the licensor does not have excess production capacity and lacks
knowledge about the foreign market. The licensor provides right to produce and
sell under her know-how or intellectual property rights The licensee normally
assumes the bulk of the risks involved and pays a royalty as a percentage of actual
sales made.
Play video starting at :8:35 and follow transcript8:35
General Intellectual Property Rights Legislation only encourages licensing without
restricting the parties in how they forge their deals.
Play video starting at :8:46 and follow transcript8:46
However, and again, antitrust considerations may impact licensing, and the
commission has issued a 2014 Technology Transfer Block Exemption setting the
limits for the production and sales licenses.
Play video starting at :9:3 and follow transcript9:03
To be noted is that pure sales licensing
Play video starting at :9:8 and follow transcript9:08
License with no transfer of production right is covered by the 2010 Vertical
Regulation. The license agreement should carefully enumerate what rights are
transferred. It may well be a combination of several rights, and know-how. In the
license agreement, the licensor will focus on identifying the licensed object. And
securing through different means that the licensee will put best efforts in launching
and selling the product and of course, paying the royalties.
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Article two of the 2014 Technology Transfer Regulation exempts agreements
between competitors provided that according to article three their combined market
share does not exceed 20%, the combined market share does not exceed 20%.
whereas non-competitors must each not exceed thirty percent, the parties have a
relative freedom to form their relation as long as they are not in conflict with the
hard core provisions in article 4 of the technology transfer regulation.
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That includes resale price maintenance, output restrictions, market allocation and
possibility to exploit own inventions.
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The hardcore provisions are more restrict if for agreements between competitors.
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Article five further excludes provision granting back rights of improvements to the
licensor and clauses preventing the counterpart from challenging the validity of the
intellectual property rights.
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Otherwise royalty provisions, payment terms and accountability for correctness are
generally not of a competition concern. The same applies to provisions regarding
the subsistence of the intellectual property rights and who is responsible for taking
action in case of an infringement.
Play video starting at :11:18 and follow transcript11:18
A licensor who wants to secure a long term collaboration may well consider
stipulating different royalty levels for different intellectual property rights. And for
the know-how.
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And the elimination of one part of the royalty. When the specific protection
terminates.
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In conclusion, operating through middlemen may well be an attractive alternative
to burdensome corporate establishment in country after country.
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It allows for rapid penetration, benefitting from the strength that either party brings
to the table.
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One form is not inherently better than the other but rather dependent on the
circumstances in this specific instance.
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Agencies covered by special legislation which is focused on compensation at the
end of the collaboration. An agency relation may thus be difficult to exit.
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Distributorships and licensing have no such special legislation but must satisfy
stringent anti-trust considerations.
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As long as the agreement does not contain hardcore provisions, parties which are
within the thresholds of the block exemptions have a wide discretion to form their
relationship. Over these thresholds, the total impact of the agreement needs to be
assessed.
Trasnportation and Insurance
Hello, my name is Olena Bokareva and I will talk to you about transportation and
insurance.
Play video starting at ::21 and follow transcript0:21
First I will provide you with a background on commercial aspect of transportation
and the contract of sale between a seller and a buyer.
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Second, we will look at the contract of transportation and its relationship with a
sale contract.
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Finally, I will introduce you to some aspects of cargo insurance in the context of
international sales and transportation.
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A contract of sale is central to any international commercial transaction.
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It gives rise to other related contracts and impose additional duties on the seller and
the buyer. These contracts are insurance contract, financing agreements, for
example, a letter of credit, and contract of carriage.
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International sales are governed by the UN Convention on Contracts for the
International Sale of Goods 1980, also known as the Vienna Convention.
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Transportation of goods is an essential element in the international commercial
transactions. Since the parties to the international sale contract are located in two
different countries, the goods must be carried from the seller to the buyer.
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Large amounts of cargo usually transported by means of maritime transport, and
the carriage is performed by sea carriers.
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This also implies a risk of loss, damage, and delay while the goods are in transit.
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For example, if a buyer in France wants to buy steel cargo from a seller in Sweden,
the most common questions in connection with the contract would be, Who
arranges the transportation?
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Who pays the cost of delivery?
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Who arranges and pays for insurance?
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Who bears the costs if something happens to goods?
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When does the risk pass? And how the transaction price is paid.
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In order to answer these questions and assist the parties to a contract of sale, the
Incoterms rules are used. Incoterms is not an international convention. The rules
are produced by the International Chamber of Commerce, and represent an
recognized standard used worldwide in international and domestic contracts for the
sale of goods. They clarify the parties' obligations towards each other and their
respective responsibilities. The current version of Incoterms 2010 came into effect
on 1st January 2011. It is important to know that they do not replace a contract, but
must be incorporated in the contract, including the version. Incoterms 2010 contain
11 rules. Among them, certain rules can be used only for sea and inland waterway
transport and others for any mode of transport.
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Each rule contains provisions for the sellers' and buyers' responsibilities. For
example, CIF term is one of the most popular terms used in sea transportation. It
means cost insurance freight.
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Under this term, the seller arranges carriage, and enter into a contract with a
carrier. The risk passes, at the point of loading.
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If the goods are damaged during the voyage, the buyer can sue the carrier.
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The seller is also responsible to arrange for minimum insurance.
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Let us now turn to the second part, and look at the relationship between a contract
of sale and contract of carriage. In sea carriage, there are two types of contracts.
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The contracts covered by a bill of lading, and the contract based on a charterparty
agreement.
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The first type of contracts is they exist in liner shipping, which operates like a bus
service. The carrier offers to carry the goods from already denominated ports.
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The carrier provides a published set of standard terms which govern the contractual
relationships with potential customers.
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There is no possibility to negotiate the contract terms with every customer.
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Therefore, the bargaining power of the parties is not equal. The parties to such a
contract are the carrier and the shipper.
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In those contracts, the freedom of contract is restricted by the application of
mandatory conventions in order to protect the customers, as the weaker party, and
to create a minimum liability regime for carriage of goods by sea. In turn, the
parties to a charterparty contract negotiate the contract terms separately and are
normally of equal bargaining power and therefore subject to general contract law.
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The charterparty agreements can be concluded for one voyage from one port to
another, or can be made on a time basis, when the ship is chartered for a period of
time.
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The parties to such contracts are the owner and the charter. Currently, international
carriage of goods by sea is subject to the mandatory application of the Hague
Rules, Hague-Visby Rules, or Hamburg Rules.
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Other transport modes are governed by their respective international conventions.
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A new transport convention, known as the Rotterdam Rules, was signed in 2009,
but it's not in force yet.
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This short presentation will focus on the Hague-Visby rules, which is the most
common convention applicable to international sea carriage of goods.
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This convention applies from the time when the goods are loaded until the time
they are discharged.
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Article 3 provides for the principal responsibilities of the carrier, which are to
exercise due diligence before and at the beginning of the voyage, to make the ships
seaworthy, to man, equip, and supply the ship, and to take care of the goods. Under
the Hague-Visby Rules, this obligation is not absolute.
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It simply requires the carrier to exercise due diligence.
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Article 4 provides a list of exceptions which enable the carrier to escape liability
and also to limit its liability based on a package or weight limitation. Under the
Hague-Visby Rules, the liability limitations are 2 SDR per kilogram or 666.67
SDR per package, whichever is higher. SDR means special drawing rights created
by the International Monetary Fund, and its value is currently based on a basket of
four major currencies.
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In transport law, the documents may be negotiable or non-negotiable. The first
category is prevalent in sea carriage, whereas the second is inherent in other
transport modes.
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Negotiable documents includes bill of lading, and non-negotiable documents are
usually seaway bills, consignment notes, and airway bills.
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It must be emphasized that even in sea carriage, not all documents qualify as being
negotiable.
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Only the bill of lading fulfills a threefold function of being a receipt, evidence of
the contract of carriage, and also document of title to the goods, giving the control
of the goods to the holder.
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It is important to observe that the bill of lading is not a contract of carriage, but it
evidences its terms.
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The bill of lading is issued by or on behalf of a carrier of the goods by sea to the
shipper with whom he has contracted for the carriage of the goods.
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As mentioned earlier, the parties to a sale contract will also specify the kind of
insurance that must be obtained to cover possible loss or damage to the goods in
transit.
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Standard clauses that are used internationally are the Institute Cargo Clauses A, B,
C, 2009 published by the Institute of London Underwriters. They provide three
levels of coverage, standard cover, minimum cover, and all-risks cover.
Play video starting at :9:9 and follow transcript9:09
As was stated earlier, under CIF contract, the seller is responsible to obtain a
minimum insurance that would correspond to International Cargo Clauses C. He
does so for the benefits of the buyer.
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A buyer can pay additionally for more expensive insurance, all-risks. Cargo
insurance covers physical loss or damage to cargo, but not economic loss.
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Now, let us summarize.
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In this lecture we have looked at the background of the contract of sale and other
related contracts.
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This should help you to understand the relationship between the contract of sale
and the contract of carriage, and also insurance that should be obtained in
connection to an international commercial transaction.
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Thank you for listening.
A Practitioner’s View-Anders Steen
Good morning, Anders Steen. What a pleasure to be in your nice offices here in
central Malmo. We are going to talk about general agreement matters and other
things. But, would you please start by introducing yourself and your office. >>
Yes, you're now in Moll Wend�n Law Firm. and Malvendian Law Firm is a mid
sized law firm actually focused on international and national business law. And I,
Anders Steen, I work as a partner here, a partner and lawyer. And I'm specialized
in mergers and acquisitions, employment law. But also, in commercial contracts,
especially with an international angle. >> Sounds perfect for our cause. >>
[LAUGH] >> I've told you that in this MOOC and in this module, we have focused
on general business strategy in Europe. Contract law, purchases, middlemen
collaboration, and also transportation matters. We would like to get the
practitioner's view on how is it to deal with this in the ordinary business. And let's
assume that you have a client who is in the automotive business.
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Doing car parts, and now ready to supply to the European market. And it comes to
you, do you have any general strategic advice as to a company that hasn't been
active outside the Swedish market? Or, outside a national market I should say.
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>> Definitely, I would say that going into international business will add risk.
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And you're speaking about the automotive industry.
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As a subcontractor to the automotive industry, you will be the weaker party. You
will meet a very strong and a big counterparty. And that is quite normal when you
go international. You will meet a counterparty that is stronger. Which means that
they, the stronger party, will always try to put all risk on you as a subcontractor. So
that's one aspect, another aspect is that going internationally will also mean that a
lot of a national, international laws and regulations will, or could apply, or could at
least affect your contractual relationship somehow. And my message to the clients
in this situations is often that it's not about avoiding risk, it's about managing risk.
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You have to look into different ways of managing risk, and one way is of course
the contract. And we will come to that further on, but there are other ways of
managing risks. Insurance for example, if you're selling parts to the automotive
industry, they want you to take all the product liability for that. And of course that
is a huge liability, and how can you manage that? Well, insurance is the normal
way of doing that. Another way of managing risk would be to use a separate
corporate identity, entity. In order to put your international business into that entity
and in that way isolate the risk to that business. So that it will not go into your
other business and harm that. So there are ways.
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>> So be well prepared by investigating these different factors.
Play video starting at :4:46 and follow transcript4:46
Then there is a real business situation,
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and you're going to make a contract with this foreign buyer.
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There is no European contract law, EU contract law. >> No. >> How can you rely
on legislation?
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>> In my opinion, no, because national legislation and international legislation,
when it comes to sale of goods, it's a material. It's a legislation that's not been well
balanced for the needs in such a situation. What you will experience when you sell
products to, for example the automotive industry, or also the other industries. Is
that they will have their own standard terms of sale,
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of purchase, and it will often be a situation of take it or leave it. There are very
small parts of this contractual relationship that you can
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affect in any way by entering new clauses, new wording. And you often also meet
someone who's not a lawyer on the other side. Someone who works with
purchases, which is not a lawyer in many cases, and they have instructions to use
these standard terms of purchase. And they are not allowed to actually go outside
that frame. So you will end up in a contractual relationship governed by- >> A
foreign law even?
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>> Well foreign law can be applicable of course to the relationship. And most
often, if you sell products to, lets say, German car industry, they will force you to
have the contracts governed by German law, that's true. >> And what is your
advice to your client, if the client is not a German company?
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Take it. >> Yeah. >> Yeah? >> Because as long as it's a German law, I would say
that, if it's Dutch law, yes.
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If it's UK law, well, you can start thinking, well you have to compare it to your
own, of course, legislation and jurisdiction.
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But I would normally accept German law, Dutch law. When it comes to strange
jurisdictions like we're in Africa or Middle East or some former Republic of
Russia, well, then you have to consider it more closely. But normally, and that is
one I think very almost funny part of negotiations. You can put big efforts and lots
of time into a negotiation regarding a contract, hours and hours.
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But then when it comes to the governing law, that is something that could be
decided in [SOUND] just a second. And that could actually affect everything that
you have negotiated, somehow. And but normally, I would say that the governing
law, as long as it's, well a jurisdiction that is not too far from your own, is not big
deal. It's better I think, in my opinion, to concentrate on getting a dispute resolution
that you feel comfortable with.
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>> But what you're saying is really, you probably have to accept the standard
contracts offered by your buyer in this type of industry that we're talking about. >>
Yeah, yeah. >> Assume that now, there is no standard contract, you have to
negotiate the contract. >> Yeah. >> Will there be a difference between English
contracts and the German contracts and Finnish contracts for example, generally in
how you approach them? >> Yes, if we have a buyer in let's say the UK or in the
US, you will see lots of pages, when it come to a contract. There is a big difference
between a Swedish, a German contract compared to a US contract. But we moving
in that direction.
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>> Thanks to computers. >> Yeah, and certain areas, for example, merges and
acquisitions. We're talking about when you're buying a private company in another
country, or in Sweden.
Play video starting at :10:23 and follow transcript10:23
We are now working with contracts that are, well, they are American contracts
really. We express ourselves in many more words than we normally do including
but not limited to, [LAUGH] for example. [LAUGH] >> Witnesseth and whereas.
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Well, assume that you're advice has been successful.
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The transaction was performed, maybe you did something with transportation. Did
you manage the risk with respect to risk transfer?
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Is that something? >> Well a normal thing is of course that your transportation and
risk for the goods and insurance is normally addressed by the Incoterms agreement.
And sometimes I would say that
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my clients enter into Incoterms that they do not fully understand.
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So that is one part of our advice, to really explain what
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these transportation terms mean in terms of risk and in terms of insurance.
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>> You did that very well to your clients, the transaction was successful. The client
is detecting that there is quite a market out in Europe. And now they're coming to
you and saying, should we not change into something other than just single
transactions. What would you say then? They want to really- >> They want to start
business and expand business. >> Should they start by establishing companies all
over Europe or? >> Well, I would say that using middlemen is something that is a
good strategy in the beginning. And when we're talking about middlemen we mean
agents and distributors, resellers. >> Licensees? >> Licensees, I mean, that type of
category. It's cheaper, it's faster, and smoother I guess to start with that in the short
run. And it's important to distinguish between short term and long run. Start a
business by engaging an agent, for example, well, then, you pay a commission.
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If you don't have any sales, well, there's no commission. So that's good in the
beginning, but what you normally experience is when business grows in that
country. It becomes quite expensive because the rates are quite high for a
commission contract. But more importantly, I would say that you want a closer
relationship to your customer.
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And when you have an agent, that agent
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performs the contractual relationship, or the relationship with your customer. And
in order to really expand the business, it's a trend that you, today, you want to get
that relationship to the customer. And you do that by, well, terminating the agency
agreement. Setting up your own business or, which often happens, you acquire the
agent in that country. >> Do you make a distinction between using an agent and
using a distributor?
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>> Well, using an agent really actually means that the contractual relationship is
always between the customer and you as a principle. That middle man is just
making the deal, but
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normally you do not, that is the distinction between the reseller. The reseller
distributor will have the entire contact and the customer relationship. But in real
life, I would say that even if you use an agent or if you use a reseller, distributor,
you're still a bit too far away from the customer.
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>> Same thing with licensing? >> Yeah, I would say so, yeah.
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>> Is there something with risk here that is important for your... >> Well, the risk
exposure if you're using a distributor, it's normal that the distributor takes, the risk,
the commercial risk, by buying and selling in their own name. But that's more
about commercial risk. Then we have the commercial opportunities, and I would
say that the opportunities are greater if you are there with your own presence when
the business is big enough for that. >> So ultimately, your advice is to the
company, when you see that there is a market. Then you start thinking about
establishing yourself in one way or another in that foreign market. >> Yeah, that's
true. >> And that is actually something that we're going to deal with in the next
module. I think we have covered what we should in this module. >> Okay. >> So,
thank you very much indeed Anders for advising us on this. >> Thank you for
inviting me.

Week 2: Establishing a Company

Developing a Strategic
Hello I'm Julian Nowag, and my research focuses on competition and EU law. In
this lecture, I'll venture into a different field, a field where law and business
strategy meet.
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I'll try to cover some and get you to think about aspects that relate to the
establishment of companies and to the development of a strategy In particular with
a view to EU business law.
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One of the important first challenges that any person trying to set up a business
faces is a strategic one and it is two-fold. First, what kind of company or
corporation do you want to set up?
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There are numerous different options, from partnerships and nonprofits to different
forms of limited liability partnerships.
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And from the perspective of an EU business lawyer, the second and related
question is, where do you want to set up your business?
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Given the freedom of establishment and free movement of goods, services, and
people, which jurisdiction has the best solution for the kind of incorporation that
you want?
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Are you concerned about minimal capital requirements? Or more about different
requirements for book and record keeping for the company?
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Questions like these might guide where you want to incorporate.
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However, strategically, a number of other questions related to EU business law
might also influence your decision where to incorporate or how you develop your
business once you have decided where to incorporate.
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Such issues are, amongst others, questions related to employees.
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These concern labor law, which is also in part regulated by the EU.
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Questions can also arise in the context of hiring nationals from other member
states.
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So that free movement of workers or EU citizenship might come into play.
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Once you get started, you might ask whether you need a separate license to
conduct this form of business or sell these goods or services. In particular, if your
business involves a cross border element, the EU free movement rules might be of
help.
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As we all know, taxes are always an important matter.
Play video starting at :3:1 and follow transcript3:01
How and what will be taxed?
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What about taxation in the case of cross border trade?
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In the context of tax, as well as in the context of setting up a business at a certain
location, questions about receiving certain, maybe, selective benefits from the state
in form of special tax arrangement, subsidies, or investments might raise issues
related to EU state aid rules.
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When you're selling goods and services across the EU borders, question on the
applicable law and how to design a contract or the contract terms might arise.
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Issues related to EU private or international private law.
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More over, EU public procurement rules come into play where you want to sell to
the state, either from within or across borders.
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Similarly, when you're working with the internet,
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issues related to EU data protection law might arise.
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And while we are talking about agreements, agreements with competitors or even
with your distributors might raise concerns under EU competition law.
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Finally, an important issue these days is intellectual property.
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These questions of EU law reach from trademarks to patenting.
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Also in this context, your company or the company that you depend upon might
come into contact with EU competition or free movement law.
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These are numerous considerations that might influence not only how you conduct
your business, but also, where you want your money. Where you want to
incorporate.
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I have to admit, that from the point I raised, my focus on competition law might
shine through. However, this is only a very brief list of business related issues,
where EU law is relevent.
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And had not even spoken about EU banking, EU consumer protection and many
other areas of EU law.
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In any case, I hope this little teaser lecture gave you some food for thought.
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Thank you for listening.
Fundamental Company Law Concepts
Hi, my name is Niklas Arvidsson. I am an associate professor here at the faculty of
law, Lund University. My teaching and research mainly focuses on company law
and commercial contract law.
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This lecture aims to give you a basic but critical introduction into company law
and its European dimension.
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First, it is important to realize that both company and contract law, whatever they
are, deal with phenomena of huge importance for us all.
Play video starting at ::48 and follow transcript0:48
This is quite easily understood. Society at large is dependent upon markets. And
market transactions are in essence contractual transactions. So without contracts,
there simply is no market.
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But markets also presuppose the existence of stuff to be bought and sold.
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As we all know, this stuff is called goods and services. Without them, there will be
no transaction. The reason is that the very function of transactions is to create
rights and duties over this stuff.
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But goods and services aren't given by God, not directly anyway. Instead, someone
has to invent and produce them. And this someone is often a company.
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Why? Because invention and production comes at a cost. And this cost often
exceeds the means of a single person. This is especially true on production. A
single person might invent something. He might even produce something out of his
invention. But he will certainly find mass production very hard to accomplish.
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Companies are designed to overcome these difficulties. Basically the company is a
legal tool for accumulating resources, including money and people, in order to sell
stuff. And as I mentioned, contracts are the legal tool for selling and buying stuff.
Of course, all this is extremely simplified, but in essence it is nevertheless true.
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In fact companies are also closely related to contracts in another sense. Generally
speaking, a company is a voluntary association formed and organized to carry on a
business. And the fact that companies are voluntary association means that they are
contractually or semi-contractually based.
The European Framework for Company Law
Okay, so, what does European law have to say about companies? Unfortunately,
this questions cannot be answered unless we first pursue an answer to another
question.
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The question I have in mind is what it means to speak about company law.
Play video starting at ::32 and follow transcript0:32
An answer to this question is logically needed in order even to understand the first
question. Furthermore, our answer has to be universal.
Play video starting at ::42 and follow transcript0:42
Without a universal concept of company law it is impossible to speak of company
law across jurisdictions, as I am certainly trying to do right now.
Play video starting at ::53 and follow transcript0:53
Here we are touching upon really interesting stuff.
Play video starting at ::56 and follow transcript0:56
To what extent is it really possible to communicate legal knowledge across
jurisdictions, and the different languages that are tied to them.
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I don't know. One thing is sure though.
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Legal science is completely and radically different from natural sciences.
Play video starting at :1:15 and follow transcript1:15
Don't be fooled by those saying otherwise. There are universal descriptive theories
of particle physics. But there can be no universal descriptive theories of law,
including company law.
Play video starting at :1:29 and follow transcript1:29
Having said this I still think it's possible to elaborate on the minimalist universal
concept of company law. Let me at least try.
Play video starting at :1:39 and follow transcript1:39
Roughly speaking, company law is law specifically targeted at companies. As we
remember, a company is a voluntary association formed and organized to carry on
a business.
Play video starting at :1:53 and follow transcript1:53
This definition is large enough to comprise both companies limited by shares and
partnerships. It should be mentioned, however, that the word company often is
used as a shorthand for company limited by shares, also known as corporations.
According to this usage, partnerships are not companies at all.
Play video starting at :2:15 and follow transcript2:15
But here, I don't use the word in such a narrow meaning.
Play video starting at :2:19 and follow transcript2:19
No doubt the vast majority of the laws applicable to companies are not part of
company law. Instead these laws are usually members of other areas of law. Such
as contract law, securities law, tort law or tax law. Company law then is law
applicable to and only to companies.
Play video starting at :2:41 and follow transcript2:41
Now a universal concept of company law can not be too content focused. The
reason is, that there are huge differences between different jurisdictions, as to how
companies are regulated.
Play video starting at :2:55 and follow transcript2:55
One kind of difference, concerns available company forms. Most company forms
are not shared by all the jurisdictions on planet Earth.
Play video starting at :3:5 and follow transcript3:05
However, some forms are more or less universal. Such as the company limited by
shares and the general partnership.
Play video starting at :3:14 and follow transcript3:14
The trouble is that within such more or less universal forms there are still
differences as to applicable rules. The differences and similarities between
jurisdictions are discussed within a international discipline, called comparative
company law.
Play video starting at :3:36 and follow transcript3:36
In view of the pluralism, however, it has become fashionable to shift focus from
rules to functions, the underlying idea that rules address extra legal problems and
that different rules can address the same problem. Hence, in spite of the fact that
there are a few universal rules, maybe there are universal functions. And maybe a
universal theory of company law could be built upon such functions.
Play video starting at :4:9 and follow transcript4:09
A problem here is that the word function is ambiguous.
Play video starting at :4:14 and follow transcript4:14
Sometimes it is used to describe effects and sometimes it is used to describe
intended effects. And as we all know, there is no guarantee that a rule has the
intended effects. As a matter of fact, there is no guarantee at all that the rule is
underpinned by any intentions. I am aware that this might sound strange. We are so
used to viewing law instrumentally, that we often have a hard time accepting the
possibility of purposeless rules.
Play video starting at :4:48 and follow transcript4:48
Anyway, the dominating functionalist view of company law is built upon
economics. The point of departure consists of the so-called agency theory.
According to this theory, problems of any company law are derived from
information as symmetries between so called agents and principals. The reason is
that these asymmetries rise to so called agency costs. And company law it is
thought can best be explained as motivated by an endeavor to minimize such costs.
In its most general form, a principal is anyone whose interests are affected by the
actions of another person. This other person, then, is an agent.
Play video starting at :5:38 and follow transcript5:38
And thus, if A and B are persons, and A's decisions influence B's welfare, And B is
A's principal, and A is B's agent. However, in law, agency relationships presuppose
the existence of direct or indirect legal relationships between agents and principals.
Play video starting at :6: and follow transcript6:00
In the context of a company, there usually are multiple agency relations. For an
example, such relations exist between the company's members. They also exist
between, on the one hand, members and, on the other hand, non-members who are
invested with decision-making authority.
Play video starting at :6:21 and follow transcript6:21
And they exist between members and other company stakeholders including the
company's creditors.
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No doubt agency theory has proven very fruitful in explaining the fundamental
problems of company law. But I will not dwell on this theory here. Instead I would
like to construct of more rule-oriented concept of company law.
Play video starting at :6:52 and follow transcript6:52
In spite of the difficulties I believe that such an account is possible. But of course it
has to be sufficiently general in character to accommodate very different company
forms and company roots. I will, however, only speak of companies with so-called
legal personality. This means that I'm only interested in company forms which as a
matter of law can have rights and duties.
Play video starting at :7:21 and follow transcript7:21
The core of company law has three components. First, there have to be rules
concerning the decision-making procedures within a company.
Play video starting at :7:32 and follow transcript7:32
These rules organize and regulate the decision-making authority on behalf of the
company. In that way, they construct what is known as the company's internal
relations. Secondly, there have to be rules that organize and regulate the
representational authority on behalf of the company. These rules concern what is
know as the company's external relations and thirdly there have to be rules
regarding the responsibilities for the company's debts.
Play video starting at :8:6 and follow transcript8:06
Rules regarding decision making procedures are necessary, since companies
usually have many members. Often they also have other persons involved in the
decision making such as directors and officers.
Play video starting at :8:22 and follow transcript8:22
Due to this pluralism there have to be rules that decide when a company decision
exists. In other words, these rules identify the conditions under which a decision is
ascribed to the company. For example, within a company limited by shares, the
individual share holders usually have no decision making authority on behalf of the
company. Instead, this authority is granted to entities such as the general meeting
and the board of directors.
Play video starting at :8:53 and follow transcript8:53
But rules that help us identify company decisions are insufficient. Instead, they
have to be complemented with another type of rules. These are rules which decide
when a given company decision is lawful or not, from the perspective of company
law.
Play video starting at :9:12 and follow transcript9:12
Even though a person or an entity might have decision making authority on behalf
of a company, that authority is not only potent, instead it is circumscribed by other
rules. These rules limit the decision making authority and they do so in order to
safeguard the interests of some kind of legally recognized stakeholders in the
company.
Play video starting at :9:40 and follow transcript9:40
Such stakeholders typically include company members and company creditors. An
intensely debated normative question concerns how the relevant stakeholders
should be conceived. Especially in the context of multi-national corporations. This
question has a defining character for the international movement that calls for an
enlarged corporate social responsibility. This is not the place to discuss these
things further.
Play video starting at :10:10 and follow transcript10:10
Let me just say that the issue might be explained in terms of so-called externalities.
Actions taken by multi-national corporations no doubt have an enormous societal
impact.
Play video starting at :10:23 and follow transcript10:23
It seems clear then that the welfare of humankind at large is strongly affected by
corporate actions, for good and evil.
Running a Company
Let us return to our main story. We have seen that rules regarding the decision-
making authority is a core element within any kind of company law. But this is not
the only core element. Another one consists of rules regarding the representational
authority. You see, in order to have effect, decisions have to be implemented in
action. Someone has to execute the decisions taken by the company.
Play video starting at ::46 and follow transcript0:46
Of course, the company itself cannot do anything.
Play video starting at ::50 and follow transcript0:50
Instead, the law has to identify persons who are empowered to represent the
company, otherwise the company simply couldn't conclude any business contracts.
But as there have to be limits to the decision making authority, there have to be
limits to the representational authority, too.
Play video starting at :1:10 and follow transcript1:10
These limits define the conditions under which agreements and other legal acts are
valid or not.
Play video starting at :1:18 and follow transcript1:18
If they are invalid, they don't give rise to obligations for the company. But
remember, we are speaking here of situations where a representative has acted on
behalf of the company.
Play video starting at :1:31 and follow transcript1:31
Furthermore, these rules are connected to the rules that organize and limit the
decision making authority. Typically, a necessary condition for invalidity is that
the challenged legal act isn't based on lawful company decision.
Play video starting at :1:49 and follow transcript1:49
Either it's not based on a company decision at all, or it's based on a forbidden
decision.
Play video starting at :2:1 and follow transcript2:01
So far, we have discussed two core elements of the universal concept of company
law.
Play video starting at :2:7 and follow transcript2:07
These are rules regarding the decision making authority and the representation
authority respectively. But I also want to stress a third and final element.
Play video starting at :2:19 and follow transcript2:19
This element consists of rules regarding the responsibility of the company debts, of
course the company itself is responsible for its debts. Remember, we only speak of
companies with legal personality here, but other persons might as well be
responsible. For an example, the members.
Play video starting at :2:40 and follow transcript2:40
If the members in principle have no personal responsibility, it is common to speak
of limited liability companies. The most famous example is the company limited
by shares.
Play video starting at :2:54 and follow transcript2:54
As I earlier mentioned, this company form is also called the corporation. From a
societal point of view, the corporation, no doubt, is the most important company
form. It has the largest impact of all company forms on such things, as economic
growth, the labor market, environmental sustainability, and human rights. Actually,
it is no exaggeration that say that capitalists, and thus the world as we know it, is
virtually unthinkable without the corporation.
Play video starting at :3:30 and follow transcript3:30
As contrasted with other company forms, the corporation builds upon the idea of
investor ownership.
Play video starting at :3:38 and follow transcript3:38
Members of the corporations are called shareholders and in virtue of the idea of
investor ownership, shareholders are supposed to regard their rights in the
company as a capital investment. The ingenuous thing with corporations then is
that they enable a meeting of capital and productive ideas.
Play video starting at :3:59 and follow transcript3:59
As is well known, capitalists do not necessarily have any productive ideas. And
people with good ideas do not necessarily have deep pockets.
Play video starting at :4:10 and follow transcript4:10
I have already mentioned that the corporate form is about as universal as a
company form can be. Moreover, in general, at least two corporate forms are
acknowledged. Private and public corporations. Simply put the distinction
concerns whether the shares are allowed to be publicly traded or not. On stock
markets, only public corporations are to be found.
Play video starting at :4:37 and follow transcript4:37
As a consequence, private corporations typically don't have as many shareholders
as public corporations. Many private corporations have only a few owners and
often the owners also function as directors and employees.
Play video starting at :4:59 and follow transcript4:59
Let us return to the question of European Company Law. Let me first say that
when I speak of European Law, I mean European Union law, when speaking of
European company law it's important to distinguish between two very different
questions. The first is whether there are any European company forms? The second
is whether European law has anything to say about companies formed under
national company forms in the member states. At the present, there is only one
clear-cut European company form. It is called The European Company. There is
also another form called The European Economic Interest Grouping, but the latter
form is something of a hybrid between cooperative and a partnership.
Play video starting at :5:50 and follow transcript5:50
The European company, on the other hand, is a public corporation. It was
introduced by the regulation in 2004. Interestingly enough, European companies
are only partly regulated by European law. According to the regulation, many
questions are governed by national public company law in the member state where
the company is registered.
Play video starting at :6:16 and follow transcript6:16
As a consequence, there are as many types of European companies as there are
member states in the European Union. As of yet, the European company has not
been a success. At present, there are only around 1,800 European companies. To
put this into perspective, in Sweden alone, there are around 450,000 corporations.
Of course, the great majority of them are a small, private corporations.
Play video starting at :6:47 and follow transcript6:47
Since 2008, there is also a proposal for a European private company. Probably,
such a company forum will be introduced one day. But it remains to be seen to
what extent it will be used.
Play video starting at :7:2 and follow transcript7:02
Regarding company forums then, European law hasn't, as of yet, brought about any
substantial changes in the landscape of company law. Businesses within the
European union still largely conducted by national companies. But this is not to
say that there is no European company law, instead the existing European law has
taken other ways. First, a European company law dimension has been created as a
result of the quest for harmonization on national company law.
Play video starting at :7:37 and follow transcript7:37
Secondly, another dimension has been created by developing some of the
fundamental rights provided for in the treaty on the functioning of the European
Union. In the following, I will simply speak of the Treaty.
Play video starting at :7:53 and follow transcript7:53
Harmonization has been brought about by a fairly large number of company law
directives. Of course, these directives must be interpreted in light of case law from
the European Court of Justice. However, to a large extent company law
harmonization, has focused on national law applicable to public corporations.
Play video starting at :8:21 and follow transcript8:21
As I mentioned, another European dimension is founded on rights flowing from the
Treaty. Of paramount importance is the right of establishment which also includes
companies. The European Court of Justice has in a number of cases expanded
these rights.
Play video starting at :8:41 and follow transcript8:41
Due to this development, the court has created an opening for regulatory
competition between the member states with regard to company law.
Play video starting at :8:51 and follow transcript8:51
Within some boundaries, this means that it's possible to choose which national
company law that best suits your interests. Subject to these boundaries, you can,
for example, choose the law of the member state A, even though you only do
business in another member state B.
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The consequence is, that the courts in member state B are obliged to apply the
company law of member state A.
Play video starting at :9:20 and follow transcript9:20
As could be expected, it's a matter of debate whether this development is good or
evil. Those who said it's good argue that the market will force all member states
national laws to converge on an optimal company rule. And those who say it's bad,
instead argue that the convergence will be upon the worst law. What will happen
remains to be seen.
Play video starting at :9:47 and follow transcript9:47
Thank you for listening
Company Governance and Control
Welcome to this lecture on company governance and control.
Play video starting at ::17 and follow transcript0:17
As we've explored in earlier lectures, the importance of uniformity cannot be
overstated when it comes to promoting cross border trade. As with the lack of a
European contract law, harmonizing the business environment, so too is the area of
company governance and control. While the union has some competence in this
area, it has grown on a rather piecemeal basis from the mid 1980s, and as such
remains a complex and difficult area for discussion. Obviously, in this short
introduction, these issues can't be explored in full, but we will certainly do this
from a helicopter perspective. So we will do it from looking on the top down and
identify some of the pressing issues within this lecture. We've chosen to focus on
three points here, and the first of those is enhancing transparency. Secondly,
engaging shareholders. And thirdly, how we use governance to support companies'
growth and competitiveness in the union.
Play video starting at :1:23 and follow transcript1:23
Now, as a starting point, it is uncontroversial to say that the separation of
ownership and control over the modern company has become a central issue for the
modern day corporation. The potential conflict of interest between shareholders on
the one hand and management on the other, has led to a number of structural
changes in the modern day corporation law.
Play video starting at :1:51 and follow transcript1:51
Certainly at an EU level, the question remains one of bringing about stability to the
investor, security to the shareholder.
Play video starting at :2:2 and follow transcript2:02
And the necessary transparency for trading partners to be able to assess the
company, the management, and the shareholders.
Play video starting at :2:12 and follow transcript2:12
As with contract law, there are a number of national approaches to these questions.
So we have a number of different national laws, which apply to companies. Of
course, the harmonization of these rules relating to company law and corporate
governance, are necessary in the European Union. And this includes harmonization
of the relevant and applicable accounting and auditing standards. For example, to
give you an example, Directive 2005/81 is a directive that focuses on transparency.
In fact, the directive is the so-called Transparency Directive. Although it's more
applicable to the relationship between member states and public undertakings, it
certainly highlights the need to focus on transparency and financial reporting. We
need to have the transparency. We need to have the standard of financial reporting,
in order to secure the shareholder confidence. We need to protect the shareholder,
and the investor, and the management from these types of false reporting and
promising exercises that lead us to publicly traded companies not fulfilling their
obligations to the market and to the investor.
Play video starting at :3:31 and follow transcript3:31
But what about bringing these uniformity and transparency practices and reporting
into small and medium enterprises, or SMEs? Well, we've seen in previous
lectures, that the free movement of establishment of companies is a crucial vehicle
for the European Union's internal market, or single market project. And the closer
economic integration that the union strives for.
Play video starting at :3:58 and follow transcript3:58
And attached very closely to this is the matter of the free movement of capital. And
of course, the free movement of capital remains one of the four freedoms. And
according to the European Commission, the free movements in capital enables and
integrates an open, competitive and efficient European financial market.
Play video starting at :4:18 and follow transcript4:18
It facilitates the buying of shares, the selling of shares in non-domestic companies.
And allows investment where the best return as likely.
Play video starting at :4:29 and follow transcript4:29
For companies, this principally means being able to invest in and own other
European companies, and to take an active part in forming the management and
direction of where that company will go.
Play video starting at :4:44 and follow transcript4:44
So here we see that the issue of corporate governance and the engagement with
shareholders, and providing equivalent protection or harmonized protection for
shareholders and other parties concerned with companies is a crucial, crucial
element.
Play video starting at :5: and follow transcript5:00
National disparities in these areas all, of course, to barriers on the free movement
of capital. And certainly since 1968, the European Union has introduced some 28
directives that place obligations on companies to engage with and offer optimal
transparency and protection to shareholders.
Play video starting at :5:21 and follow transcript5:21
The communication from the Commission to the European Parliament provided an
action plan on European company law and corporate governance.
Play video starting at :5:30 and follow transcript5:30
And this was really situated around establishing a modern legal framework to
engage shareholders and create sustainable companies. And in this document, it
states that good corporate governance is the first and foremost responsibility of the
company concerned. And the rules at European and national levels are in place to
ensure that these standards are respected. The European corporate governance
framework is a combination of legislation and soft law.
Play video starting at :6:4 and follow transcript6:04
Namely, national corporate governance codes, which are often applied on a comply
or explain basis.
Play video starting at :6:13 and follow transcript6:13
Which gives companies and their shareholders a very important degree of
flexibility.
Play video starting at :6:20 and follow transcript6:20
And shareholders do, of course, have a very crucial role to play in promoting better
governance of companies.
Play video starting at :6:27 and follow transcript6:27
They hold companies to account. And by doing this, they act in both the interest of
the company and, of course, in their own interests, to their own benefit as well. But
due to the promotion of the internal market and the centrality of these four
freedoms, especially the free movement of establishment, this could be a very big
danger to the European company law. Harmony and respect for the traditions and
the member states, buttressed by this European goal of integration, really does rely
on the freedom of establishment being facilitated, and allowing companies to
enhance their position. And it does another important thing, it brings legal
certainty. It enables companies to grow and to be competitive.
Play video starting at :7:23 and follow transcript7:23
And one of the associated issues that we see in this discussion is the conversation
on the ability of companies to move their seats.
Play video starting at :7:32 and follow transcript7:32
And as such, we don't have clarification on this yet. Although the Commission has
acknowledge the positives and advantage with having this harmony on this point of
moving seat, they've also acknowledged that this is not something that can be very
easily achieved.
Play video starting at :7:50 and follow transcript7:50
And really, this is part and parcel of the difficulties associated with the disparities
of the national rules across the European Union.
Play video starting at :7:59 and follow transcript7:59
However, the ability of companies to set up daughter companies seated in a
member state is a possibility. And this allows them to take advantage of the free
movement rules, and allows for an increased European competitiveness.
Play video starting at :8:17 and follow transcript8:17
So we are able to expand into Europe. For publicly traded companies, there are far
greater restrictions on their operations. And a lot of these focus on bringing about
transparency, and providing shareholder and investor protection.
Play video starting at :8:37 and follow transcript8:37
It has to be said that the same principles applied to these larger companies are
becoming essential to small and medium enterprises, or SMEs.
Play video starting at :8:48 and follow transcript8:48
And a number of national rules are already in place that place very high
requirements on these companies to comply with these principles.
A Practitioner’s View-Mikael Wahlgren
Hello Mikael Wahlgren. Hello. What a pleasure to be here with you. And perhaps
even before we start, why don't you say a few words about yourself and your
practical experience. Absolutely. I have been an in-house counselor for 25 years. I
work with a number of multi-national companies, like, or I've worked for Skanska,
ABB, Alstom, Rolls Royce and NCC. And for the last 10 years I've been the
general council, the group general council, for Alfa Laval, where I have managed
the legal function and also being the secretary of the board. And dealt a lot with
aquisitions, coordinating disputes, and IPR, and
Play video starting at :1:2 and follow transcript1:02
all the business and company law. Here we are standing at the very southern tip of
Sweden.
Play video starting at :1:9 and follow transcript1:09
Yeah. And we're overlooking, you can see Denmark over there. Yeah, absolutely.
And we're overlooking this wonderful bridge, which in a way is an incarnation of
collaboration between countries. Yup. And you've been involved in. Absolutely.
This was my last project with Skanska. I was in charge of all the subcontracts. And
actually here they shipped all the bridge sections out with a big crane, which was
called the Swan. Okay. And that was specially built to get this marvelous bridge in
place. So this is the right place to talk with you. Absolutely. We are going to talk,
we're not going to talk about the bridge, we're going to talk about establishment of
corporations in other countries. Yup. And we are supposed to elaborate a bit on the
establishment, the free movement rules in the Treaty. Articles 49 to 55, and
especially focus on the establishment of corporations.
Play video starting at :2:28 and follow transcript2:28
Any comments regarding the Treaty provisions? Articles 49 to 55, things that you
think are important? Yeah. If you look at the 49 which is the general statement
about that one should harmonize the corporate, the legislation and the way of
setting up company. I think that is something that is to say they are working on it
and is working fairly well, if you look upon the companies when you set up a
company in Europe. The article 50 has all the more details about how to go about.
And I mean, there is one part which is the C I think, where they talk about that they
should remove all the bureaucracy and all the administration. And there they have
a long way to go yet, because we have to account and assess our own rules and it's
a quite individual legislation that's still around there. That will need some more to
say, unified company law to achieve that. And also the article 50H, which is the
one about that you are not allowed to premiere your own activities by aid. State
aid. State aid, thank you. State aid. And then of course, there are still countries who
does that, and that of course hampers the harmonization. But generally speaking
you are quite happy. The rules are there. There have been directives implementing
these basic principles. And you can feel that companies can today establish
themselves without suffering discrimination. Absolutely. I think it's done a lot for
the European Union as such to get companies, big or small, to dare to go out and
establish themselves in other European countries, which I think was much less
contemplated in the old days. Where it was very firm, national borders and it was a
big thing to develop or establish elsewhere.
Play video starting at :4:39 and follow transcript4:39
Let's be a bit practical. Yup.
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Why do you establish companies in foreign countries at all?
Play video starting at :4:49 and follow transcript4:49
Well that's a number of aspects I suppose. I mean, you can of course do it by just
exporting. But I mean, the most important thing is that if you want to be in a
market, you often need the local knowledge. And it also gives you a possibility of
growing there, and maybe in some cases the companies you establish there become
a major player in your organization. So it gives a signal and it also gives the
possibility to gain from the local resources. Should anyone establish a company, or
should you rather start, if you're a small entity, should you rather start in another
way? I think you should be very careful. I mean, first of all, you need to consider
why am I starting it and in what form I'm starting it. And then of course you should
also consider the financial impact which I'll come back to. And of course in what
form? Do I have the strength? Do I have the knowledge? Do I have the resources at
all to do this? It's quite a big thing to establish yourself in another country. And
you could use, I know you talked about earlier, agents and distributors, and that's
of course a very good way to start off to feel the market. Yeah. You have the
possibility to establish yourself either through a subsidiary, a corporation, but you
could also go with what? A Branch. A branch office, what's the difference? Well I
think it's a matter of the control you want to have. I mean if you establish a
company, a subsidiary, well then you have a much firmer stand in that country. It
also gives a clear signal to that country that you're there for a long a time, which
can help you in raising funds, employing people, I mean that is more permanent
presence. Branch of course, and of course the the negative things is maybe that you
have less control because you will have a local management. And maybe also local
board, which you have to govern them from a distance. A branch of course, then
you are fully in charge of it and in control of it. But as I said, it's not as permanent
as a subsidiary.
Play video starting at :7:30 and follow transcript7:30
More responsibility in one or the other form for the mother company?
Play video starting at :7:36 and follow transcript7:36
Of course a branch, there you have the full liability. It's also a liability or risk
mitigation that if you have a branch, well then it's you acting there fully
responsible. If you have a subsidiary, I mean in the worse case you have a limited
liability company or something like that, and that of course limits your risk. Okay,
how do I do? From a practical perspective how do I start a foreign corporation?
What do I have to think about? To what preparation would I have to undertake?
Apart from what I said before, you of course need to do the thorough due
diligence.
Play video starting at :8:28 and follow transcript8:28
There you need to look into all the aspects of competition. You need to look at the
what resources do I have, what network do I have in place? What is the political
climate? What is the legal maturity? What is the procedure? I mean that's a big
difference in Europe still where you could take everything from one day to ten
days to incorporate the company.
Play video starting at :8:53 and follow transcript8:53
So there is a number of those practical aspects, and then of course the most
important thing is that you have the funds. Because it costs a lot to, I mean not only
the share capital but then you have to be able to run it for a while without any
revenue, and that's of course is something you should have in mind.
Play video starting at :9:15 and follow transcript9:15
What obstacles should I expect, any specific obstacles?
Play video starting at :9:21 and follow transcript9:21
Yeah, apart from the competition which you probably will make, try to make. If
you are, say a competitor, they do not really appreciate you will have some, you
may even have problems with the authorities.
Play video starting at :9:36 and follow transcript9:36
The local established companies. Bureaucracy, I should always think. Bureaucracy
is always a hamper, of course.
Play video starting at :9:43 and follow transcript9:43
Some systems in some countries are smoother than others, so that is one obstacle.
Play video starting at :9:50 and follow transcript9:50
That you have the movement of money, which could be a problem. You hopefully
earned a lot of money in a country, and then you want to transfer it. And that could
also be cirumstanced by a lot of rules and tax, tax is another obstacle. And then of
course you have the labor legislation which you have to take in consideration, how
you protect your, or in which way you can protect your properties and assets?
Play video starting at :10:22 and follow transcript10:22
So talking about the procedure,
Play video starting at :10:29 and follow transcript10:29
one, two, three, four, how do you go about to establish the company? Well, first of
all, after having made a decision, I think it's very important you go into the more
practical things which is you contact the local company house.
Play video starting at :10:50 and follow transcript10:50
You start to do the practicalities there by often paying in the shared capital. You
have to establish your article of association. You need to do the instructions for the
CEO or the General Manager, and the board. So what are these instructions? What
do they contain? Well the instruction is of course there, to govern or to make sure
that the owners sets down the rules for the CEO or the General Manager regarding
his authority. What kind of authority does he have and when do he need, what can
he take decision on himself? When can he say, we take these issues together to one
of the board members or, when do we have to talk to the whole board to get the
approvals? That's one part of it. Then of course, can he represent the company in a
dispute? Can he take up loans in the banks? That's a lot of practicalities that is then
governed strictly by this internal document, of course.
Play video starting at :11:56 and follow transcript11:56
In terms of funding. Yup. Creating a contact with the bank, are there any other
problems in funding? Well I mean. Having enough funds? Having enough funds is
of course very, very important. You should be mindful that you need to have I
think a good amount of money with you, because to take up loans locally often is
not that simple. Because you need to have some kind of proven record before you
can do that. And that's another thing with this, as I've mentioned with the
establishing a subsidiary, you will probably get a much, it would be easier for you
to say get recognition because then you have assets in place, you have a permanent
establishment. Do you at this stage consider tax and tax problems? Absolutely, and
I mean the important thing is always as I said before to involve local advisers.
Yeah. And when it comes to financial parts, you need to be very clear, what do I
want to do with the money? How much money can I keep in the country? How
much money do I expect to transfer away from it? And then use the auditors, use
the tax advisers, because that's one of the things that these articles
Play video starting at :13:22 and follow transcript13:22
should probably result in, is that you have harmonization of the tax legislation.
And also that would simplify the procedure, and also this kind of transfer money,
how you can finance in a more European way.
Play video starting at :13:38 and follow transcript13:38
Very good advice. Yeah. Do you have any additional advice that you'd like to
share with us. Well, I mean, you need to be thorough. You should not be over-
optimistic. You need to keep cool and focus on that it's always a number of
unexpected occurrences that pops up. Then of course you should have some one in
place that is the project manager or if you have an in-house counsel that person,
but he needs to be a dedicated person who runs the whole show, because too many
chefs make a bad soup, as we say. Thank you very much Michael. Thank you. And
this wonderful place. It's massive, impressive.

Week 3: Employing and Working in Europe

Labour Law and Social Policy
Labour law is central to the functioning of society and economy but also to the
everyday life of individuals.
Play video starting at ::16 and follow transcript0:16
Labour law regulates the individual employment relationship, and employment
rights, as well as the labour market more generally. The development and content
of EU labour law, throughout the years and still today, reflect the tension between
the EU and national sovereignty, economic and social integration, and market and
human rights discourses. EU labour law is regulated by a complex mix of treaty
provisions, fundamental rights, general principles of EU law, secondary law,
collective agreements at EU level, case law from the Court of Justice of the
European Union, and soft law measures. To this we must add regulation at national
level.
Play video starting at :1:6 and follow transcript1:06
Social policy is often understood to include areas connected to the welfare state,
such as social security, social assistance, health care, and housing. But at EU level,
most of the hard law regulation in the area of social policy actually refers to EU
labour law. The European social model is an often-used but rather vague concept.
Values such as democracy, individual rights, collective bargaining, and equality of
opportunity are central to the European social model, a model which is recognized
by all EU institutions.
Play video starting at :1:51 and follow transcript1:51
Despite a common European social model, there is still great variety among the
member states' labour law and industrial relation systems. As regards, for example,
the importance for constitutional principles, the balance between legislation and
collective bargaining, the degree of state intervention, the role of courts and case
law, and the degree of trade union organization and forms of workers'
representation.
Play video starting at :2:24 and follow transcript2:24
In this context it is common to refer to the Romano-Germanic system, the Anglo-
Irish system, and the Nordic system of industrial relations.
Play video starting at :2:37 and follow transcript2:37
EU labour law only aims for a partial harmonization of the different labour law and
industrial relations systems in the member states. The personal scope of most EU
labour directives is defined in relation to the different notions of an employee
developed and existing in each of the member states.
Play video starting at :2:59 and follow transcript2:59
However, in the area of free movement of workers, EU law contains a separate,
autonomous, and far-reaching notion of an employee.
Play video starting at :3:9 and follow transcript3:09
And this uniform notion of an employee has recently seemed to spread into other
areas of labour and equality law, such as equal pay and working time. There is no
comprehensive coverage of EU labour law, and it does not exactly replicate
national labour law. In addition, EU labour law emphasizes and regulates issues of
a cross-border nature in the intersection between the internal market and
fundamental freedoms, and national labour law.
The legal framework for the adoption of EU rules on labour law has changed a
number of times, and the treaty competence has gradually expanded and is now
quite extensive.
Secondary law is now also well developed, and a large number of directives have
been adopted in this area. But the development has not been linear. There have
been phases both of activity and stagnation. EU labour law is an area of shared
competence, and the principles of subsidiarity and proportionality are very
important. Article 3(3) of the Treaty of the European Union is important for labour
law, and highlights, after the Lisbon Treaty, a social market economy as one of the
main aims of the EU. And this confirms the EU's economic and social objectives.
In the social policy field more specifically, Article 151 of the Treaty of the
Functioning of the European Union provides that the Union and the member states
shall aim for, for example, the promotion of employment, improved living and
working conditions, social protection, and dialogue between management and
labour. But the competence of the EU is still limited. Central aspects of national
labour law and industrial relation system, such as pay, the right of association, and
the right to strike, are excluded from the EU's competence to adopt directives,
though not from the scope of EU law as such. A question to which we will return
in the lecture on Freedom to Provide Services, Freedom of Establishment, and
National Collective Labour Law.
The traditional community method, where the Commission proposes legislative
measures and the Council and European Parliament adopt them, is important in EU
labour law. Actually, the main body of EU labour law is made up of directives
which provide flexibility and adaptability in relation to the variety of national
labour law and industrial relations systems in the EU. Directives must be
implemented in the member states either by legislation or by the social partners.
And by the social partners I mean the employers' organizations and trade unions,
and they use collective bargaining.
In national labour law and industrial relations systems, the social partners are often
consulted and involved in the legislative process, and collective agreements
regulate working conditions and other labour law issues. The Maastricht Treaty
and the Social Policy Agreement first introduced a similar process at EU Level, the
so-called European Social Dialogue, now regulated in Articles 154 and 155 of the
Treaty of the Functioning of the European Union.
Before submitting proposals in the social policy field, the Commission must
consult the European social partners, employers' organizations and trade unions at
EU level on the possible direction of Union action; the so-called first consultation.
If the Commission considers union action advisable, it must consult the European
social partners regarding the content of the envisaged proposal, the so-called
second consultation. The European social partners may then inform the
Commission of their wish to negotiate and initiate the process provided for in
Article 155, possibly resulting in European collective agreements. Social dialogue
actually takes place at both cross-industry and sectoral levels, and a number of
agreements have been reached at cross-industry level, for example, on parental
leave, part-time work, and fixed-term work. These agreements can be implemented
either through the decision by the Council and a directive or by the social partners
themselves. In recent years, the European Social Dialogue at cross-industry level
seems to have stagnated though. Soft-law measures are increasingly important in
EU labour law, both as a complement and alternative to hard-law regulation. After
the insertion of the employment title into the treaty, after Amsterdam, and the
development of the European employment strategy, labour law is now seen as an
integrated part of employment policy which, in turn, is subject to the integrated
guidelines and the Europe 2020 strategy.
Play video starting at :8:45 and follow transcript8:45
The Court of Justice of the European Union has played a central role in EU labour
law, and case law has contributed greatly to the development of this area of law.
The principles and rules developed by the Court of Justice in case law have often
been codified later in secondary law. The Court of Justice has frequently
strengthened the protection of individual employees. But when faced with a
conflict between the free movement rules and employment rights, it has favored
free movement.
Play video starting at :9:20 and follow transcript9:20
In recent years, at least after the enlargement of the EU, it has been increasingly
difficult to reach political agreement on hard law solutions. Instead, there has been
a continued emphasis on soft law mechanisms and an increased importance of the
Court of Justice and case law.
Play video starting at :9:41 and follow transcript9:41
At an early stage, respect for fundamental rights and freedoms became part of EU
law. And the Court of Justice's jurisprudence on fundamental rights and general
principles of EU law developed with reference to constitutional traditions common
to the member states and international conventions, most especially the European
Convention of Human Rights. The Lisbon Treaty implies a new emphasis on
fundamental rights and a further constitutionalization of EU labour law.
Play video starting at :10:17 and follow transcript10:17
According to Article 6 of the Treaty of the European Union, the EU Charter of
Fundamental Rights is made legally binding and part of primary law, and the EU is
to accede to the European Convention of Human Rights.
Play video starting at :10:33 and follow transcript10:33
Can you think of any rights or freedoms in the EU Charter of Fundamental Rights
that are relevant for labour law?
Play video starting at :10:43 and follow transcript10:43
Actually, the EU Charter of Fundamental Rights encompasses several rights and
freedoms of great relevance to EU labour law; such as respect for private and
family life, freedom of expression, freedom of association, non-discrimination,
equality between men and women, right to information and consultation, right of
collective bargaining and collective action, protection in the event of unjustified
dismissal, and fair and just working conditions.
Play video starting at :11:19 and follow transcript11:19
At present, as the case law of the Court of Justice on the EU Charter of
Fundamental Rights develops, attention is drawn both to the content and meaning
of specific articles, and to the general scope, application, and interpretation of the
Charter.
Play video starting at :11:38 and follow transcript11:38
Today EU labour laws enjoys elaborate treaty support and encompasses a large
body of secondary law. The Court of Justice has also developed a rich case law in
these areas.
Play video starting at :11:52 and follow transcript11:52
In the following lectures we will discuss the crucial interplay between EU law and
national law in this area and a selection of key labour law issues, such as
restructuring of enterprises, information, consultation, and work of participation.
Fundamental treaty freedoms and national collective labour law, flexible work and
working conditions, the EU and national labour law in times of severe economic
crisis, and equality and non-discrimination. Thank you very much.
Restructuring Enterprises and Information
In this lecture, we will first discuss EU labour law regulation related to transfers of
undertakings, collective redundancies, and employer insolvency, and continue with
the consideration of information, consultation and worker participation.
Play video starting at ::23 and follow transcript0:23
The Transfers of Undertakings, Collective Redundancies, and Employer
Insolvency Directives often referred to as the Restructuring Directives were
adopted in the 1970s. The Directives address social consequences of restructuring
and economic change, as relevant today as in the 1970s,
Play video starting at ::43 and follow transcript0:43
and aim to increase the protection of employees and to promote industrial
democracy and worker participation.
Play video starting at ::52 and follow transcript0:52
The Transfer of Undertakings Directive aims at safeguarding the rights of
employees when a business is transferred, and to provide rights to information and
consultation for workers' representatives.
Play video starting at :1:6 and follow transcript1:06
The Directive applies to any transfer of an undertaking, business, or part of an
undertaking or business to another employer as a result of a legal transfer or
merger. The extensive case law of the court of justice of the European Union on
the very crucial concept of a transfer of an undertaking has now been codified in
the directive.
Play video starting at :1:31 and follow transcript1:31
This definition of a transfer of an undertaking covers many different situations and
in principle includes contracting out.
Play video starting at :1:41 and follow transcript1:41
The directive provides for an automatic transfer of the employment relationship
and the transferor's rights and obligations arising from a contract of employment to
the transferee.
Play video starting at :1:53 and follow transcript1:53
The transferee must continue to observe the terms and conditions agreed in any
collective agreement for a specified period.
Play video starting at :2:2 and follow transcript2:02
The directive also provides some employment protection.
Play video starting at :2:6 and follow transcript2:06
The transfer of an undertaking does not itself constitute grounds for dismissal, but
does not stand in the way of dismissals due to economic, technical, or
organizational reasons.
Play video starting at :2:20 and follow transcript2:20
The Employer Insolvency Directive applies to employees' claims from
employment contracts against employers who are in a state of insolvency. The
member states are required to put in place an institution which guarantees the
employees the payment of their outstanding claims for remuneration for a specific
period.
Play video starting at :2:45 and follow transcript2:45
The Collective Redundancies Directive contains an obligation to inform and
consult workers' representatives. As well as an obligation to notify the competent
public authority of large scale redundancies. This emphasis on information and
consultation can also be found in the Transfers of Undertakings Directive.
Play video starting at :3:8 and follow transcript3:08
EU labour law aims for a partial harmonization of information, consultation, and
worker participation.
Play video starting at :3:17 and follow transcript3:17
When employers are contemplating collective redundancies, they must begin
consultations with the workers' representatives in good time with a view to
reaching agreement.
Play video starting at :3:30 and follow transcript3:30
These consultations must at least cover ways and means of avoiding collective
redundancies or reducing the number of workers affected and of mitigating the
consequences. The employer must also supply workers' representatives with all
relevant information.
Play video starting at :3:49 and follow transcript3:49
The Transfers of Undertaking Directive also provides that both the transferer and
the transferee are required to inform the workers' representatives of the date and
reasons of the transfer and the legal, economic, and social implications of the
transfer.
Play video starting at :4:9 and follow transcript4:09
But, what about a more general duty to inform and consult workers?
Play video starting at :4:16 and follow transcript4:16
Within the EU, the national systems of information, consultation, and worker
participation display clear differences.
Play video starting at :4:25 and follow transcript4:25
The legal basis varies, and there are differences in the ways in which worker
participation is delivered.
Play video starting at :4:33 and follow transcript4:33
In so-called single-channel systems, worker participation is channeled only
through trade unions. While, in so-called dual-channel systems, worker
participation is channeled both through trade unions and works councils.
Play video starting at :4:51 and follow transcript4:51
EU law in this area has developed chronologically starting with worker
participation relating to specific questions, such as transfers of undertakings and
collective redundancies, as we have heard, then to worker participation in
transnational companies, through European works councils, and finally, to a
general framework for information and consultation at workplace level. The
subject matter of information and consultation varies, and the degree of
involvement also varies from simple information to consultation, and, most intense
of all, consultation with a view to reaching an agreement.
Play video starting at :5:39 and follow transcript5:39
Several attempts to establish procedures for transnational information and
consultation in the EU were made prior to the adoption of the European Work
Council's Directive in 1994. The preamble to the Directive emphasizes that
national procedures for informing and consulting employees are often not geared to
the transnational structure of the entity which makes the decisions affecting those
employees.
Play video starting at :6:8 and follow transcript6:08
The purpose of the directive is thus to improve the right to information and
consultation of employees in union-scale undertakings and groups of undertakings.
To that end, a European Works Council or a procedure for informing and
consulting employees must be established.
Play video starting at :6:30 and follow transcript6:30
In respect of a general framework for information and consultation, after much
discussion and political compromise, the Information and Consultation Directive
was adopted in 2002. The purpose of this directive is to to establish a general
framework which sets out minimum requirements for the right to information and
consultation of employees.
Play video starting at :6:56 and follow transcript6:56
The employer and employee's representatives must work in a spirit of cooperation,
and the directive provides different rules on information and consultation, such as
an obligation to consult with a view to reaching an agreement on decisions likely
to lead to substantial changes in work organization or contractual relations. To sum
up, EU labour law in this area is well developed and provides both for important
protection for individual employees and key procedures for cooperation between
management and workers and their representatives. Thank you very much.
Equality Law
In this lecture, we will focus on equality law, which is a central and well-
developed part of EU labour law.
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Equality law has gradually extended its reach beyond working life.
Play video starting at ::21 and follow transcript0:21
Equality law has a clear human rights basis but also a market and economic basis.
Play video starting at ::29 and follow transcript0:29
The inclusion of the equal pay provision in Article 119 in the Treaty of Rome, now
Article of 157 of the Treaty of the Functioning of the European Union, was
actually based on an economic rationale. And the concern that some member states
could gain a competitive advantage through the use of cheap female labour. In
time, the human rights and social basis of equality law was strengthened.
Play video starting at ::58 and follow transcript0:58
EU equality law first contained protection against discrimination on grounds of
nationality and gender. EU law, in general, builds on the development and content
of gender equality.
Play video starting at :1:13 and follow transcript1:13
In 1999, through the Amsterdam Treaty, the EU's competence in the equality field
widened significantly through the inclusion of a new provision, now Article 19 of
the Treaty of the Functioning of the European Union. In 2000, two important
directives were adopted on this basis, the race directive and the employment
equality directive covering discrimination on grounds of religion or belief,
disability, age and sexual orientation.
Play video starting at :1:46 and follow transcript1:46
This development is often described as a move towards to comprehensive equality,
which entails the protection of more and broader discrimination grounds both
within and outside of working life. The EU Charter of Fundamental Rights also
provides for equality before the law, non-discrimination and equality between men
and women.
Play video starting at :2:13 and follow transcript2:13
What then about secondary law in the area of gender equality?
Play video starting at :2:19 and follow transcript2:19
Little happened until the 1970s, when three gender equality directives were
adopted.
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The equal pay directive, the equal treatment directive, and the equal treatment in
social security directive. Subsequent directives include directives on occupational
schemes, and on the self-employed.
Play video starting at :2:41 and follow transcript2:41
Following the Maastricht Treaty, in the 1990s, another set of directives was
adopted. The directive of pregnant workers, the directive on parental leave and the
burden of proof directive and later on, a directive on goods and services was
adopted.
Play video starting at :3: and follow transcript3:00
The development of equality law has been intertwined with social, political and
economic developments. Such as increased labour market participation for women,
increased migration, a shift from standard to flexible employment and aging
population and restructuring and globalization.
Play video starting at :3:24 and follow transcript3:24
The equality directives are generally based on a human rights model. The
prohibition against discrimination is designed as an individual right and enforced
through complaints to the courts. Traditionally, discrimination law was based on
formal equality, and the premise that what is alike shall be treated alike.
Play video starting at :3:48 and follow transcript3:48
But EU law has recognized a role for substantive equality. That is, equality as
regards outcome and results. For example, by bans on indirect discrimination, rules
on a reversed burden of proof, and provisions on positive action.
Play video starting at :4:10 and follow transcript4:10
A proactive mainstreaming approach, meaning that the EU, in all its activities and
policies, must aim to eliminate inequalities and to combat discrimination has also
been developed and enforced, and now enjoys treaty support. Today, the equality
and non-discrimination directives are aligned to a great extent and contain
protection in the form of the prohibition on direct and indirect discrimination,
harassment and instructions to discriminate with scope for positive action and a
reversed burden of proof. The directives also contain provisions on victimization,
sanctions and remedies and procedures.
Play video starting at :4:57 and follow transcript4:57
However, the scope of protection differs between the directives. Discrimination
based on gender is prohibited in employment, vocational training, social security,
and goods and services. While discrimination based on religion or belief,
disability, age, and sexual orientation is only prohibited in employment and
vocational training. The protection against race discrimination is the most far-
reaching and applies, apart from the areas mentioned before, also to social
advantages, education, and healthcare.
Play video starting at :5:37 and follow transcript5:37
Direct discrimination is closely related to formal equality and refers to the situation
where one person is treated less favorably on the grounds of sex or another
discrimination ground than another is, has been or would be in a comparable
situation.
Play video starting at :5:57 and follow transcript5:57
Direct discrimination requires no motive or intention to discriminate. It is enough
if the less favorable treatment is grounded upon, for example, gender. However, in
principle, there is a need to identify an actual or hypothetical comparator and
basically, direct discrimination cannot be justified.
Play video starting at :6:21 and follow transcript6:21
The ban on indirect discrimination was first developed by the Court of Justice and
inspired by the concept of disparate impact in American law. The ban on indirect
discrimination targets measures that are discriminatory in effect. It refers to
situations where an apparently neutral provision, criterion or practice would put
persons of one sex at a particular disadvantage compared with persons of the other
sex. Unless that provision, criterion or practice is objectively justified by a
legitimate aim, and the means of achieving that aim are appropriate and necessary.
Play video starting at :7:4 and follow transcript7:04
Now, seven of the sex equality directives have been recasted and are consolidated
in the recast directive.
Play video starting at :7:13 and follow transcript7:13
Harassment is defined as unwanted conduct related to the gender of a person or
another protected discrimination ground with a purpose or effect of violating the
dignity of a person or of creating an intimidating, hostile, degrading, or offensive
environment. And harassment is, per se, discriminatory.
Play video starting at :7:37 and follow transcript7:37
The protection and efficiency of equality law has been increased by the reversed
burden of proof developed by the Court of Justice and later on, codified in
secondary law.
Play video starting at :7:49 and follow transcript7:49
Persons who consider themselves discriminated against have to establish facts
from which it may be presumed that there has been direct or indirect
discrimination. And it is then for the respondent to prove that there has been no
breach of the principle of equal treatment.
Play video starting at :8:10 and follow transcript8:10
The Court of Justice clarified early on in the Dekker case that discrimination on
grounds of pregnancy constitutes direct discrimination on grounds of sex, as
pregnancy is intrinsically linked to the female sex. In these cases, there is no need
for a comparator.
Play video starting at :8:31 and follow transcript8:31
The directive on pregnant workers aims to implement measures to encourage
improvements in the safety and health at work of pregnant workers or workers who
have recently given birth or who are breast feeding.
Play video starting at :8:46 and follow transcript8:46
Workers are entitled to a continuous period of, at least, 14 weeks of maternity
leave.
Play video starting at :8:54 and follow transcript8:54
The aim of the parental leave directive is to lay down minimum requirements
designed to facilitate work life balance. Men and women are entitled to an
individual right to parental leave, which must be prompted for, at least, a period of
four months but the member states decide themselves whether parental leave
should also be paid.
Play video starting at :9:19 and follow transcript9:19
And now, do you remember, does EU law provide protection against
discrimination on other grounds than nationality and gender?
Play video starting at :9:32 and follow transcript9:32
Yes, the Race Directive and the Employment Equality Directive provide protection
against discrimination on grounds of racial or ethnic origin, religion or belief,
disability, age, or sexual orientation.
Play video starting at :9:47 and follow transcript9:47
In addition, Article 21 of the EU Charter contains a so-called open list of non-
discrimination grounds.
Play video starting at :9:58 and follow transcript9:58
The Race Directive states that direct discrimination requires one person to have
been treated less favorably than another. Despite this, the Court of Justice found in
the case of Firma Feryn that a public statement by an employer that he would not
recruit employees of a certain ethnic or racial origin constituted direct
discrimination, even though there was no identified victim. This has been called
discrimination by declaration and Firma Feryn has later been confirmed in the
Accept Case relating to sexual orientation.
Play video starting at :10:37 and follow transcript10:37
The Employment Equality Directive, like the Race Directive, contains protection
against direct and indirect discrimination, harassment, as well as a rule on a reverse
burden of proof. In relation to disability, there is a requirement for reasonable
accommodation. In Coleman, a woman who’s found to have suffered
discrimination when she was treated less favorably and harassed because of her
son's, not her own disability, so-called transferred discrimination. The legal
regulation of age discrimination stands out in some respects. The protection covers
both old and young people.
Play video starting at :11:23 and follow transcript11:23
Discrimination on grounds of age can be justified to a greater extent than
discrimination on other grounds and this has to do with the traditional role age is
assigned in the labour market.
Play video starting at :11:38 and follow transcript11:38
According to Article 6, member states may provide that differences of treatment on
grounds of age shall not constitute discrimination if, in the context of national law,
they are objectively and reasonably justified by a legitimate aim such as
employment policy, labour market and vocational training objectives. The means
also have to be appropriate and necessary.
Play video starting at :12:8 and follow transcript12:08
In recent years, much of the case law from the Court of Justice has evolved around
age discrimination. The first case was Mangold in 2005, which created a lot of
attention and debate.
Play video starting at :12:22 and follow transcript12:22
Here the Court of Justice declared that not only was age discrimination covered by
the directive, but also that EU law encompassed an independent general principle
of non-discrimination on grounds of age, which might have some form of
horizontal application.
Play video starting at :12:42 and follow transcript12:42
Many of the cases have dealt with mandatory retirement. The Court of Justice
basically deems mandatory retirement rules to be age discriminatory, but these
rules can be justifiable
Play video starting at :12:57 and follow transcript12:57
and the member states have been given a large margin of appreciation. When
applying Article 6, the court has found the differences of treatment on grounds of
age to be justified by legitimate aims such as inter-generational fairness,
prevention of humiliating forms of termination of employment and a reasonable
balance between labour market and budgetary concerns. In addition, the means for
achieving these aims have frequently been found appropriate and necessary.
Play video starting at :13:33 and follow transcript13:33
EU labour law and equality law will continue to face important societal and
economic challenges. These challenges relate, for example, to enlargement and the
continuing variety in member state's labour law systems, increasingly, segmented
labour markets and vulnerable groups of workers, an ageing population and high
youth unemployment. The key question will be how to find the appropriate balance
between competing interests as well as between competing rights. Thank you very
much.
Flexible Working Conditions
EU labour law also regulates important issues, which affect the individual
employment relationship. In this lecture, we now turn to a discussion of the
regulation of flexible work and working conditions.
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The flexibilisation of the labour market has lead to an increase in flexible work,
such as fixed-term work, temporary agency work, and self-employment.
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In recent years, EU labour law and employment policy have been greatly
influenced by a flexicurity agenda - inspired, for example, by the practice in the
Netherlands and Denmark.
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Flexicurity is about combining flexibility for employers, and security for
employees, and aims at reducing labour market segmentation and increasing
economic growth.
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But flexicurity is also partly about deregulation of employment protection
combined with equal treatment of various forms of flexible employment.
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It is also about effective active labour market policies, reliable and adaptable
systems for life-long learning, and modern social security systems.
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Today flexicurity is part of the European Employment Strategy and the Europe
2020 Strategy, and has been criticized for focusing predominantly on labour
market flexibility and deregulation.
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The Part-Time Work, Fixed-Time Work and Temporary Agency Work Directives
form part of this flexicurity agenda. The Part-Time Work and Fixed-Time Work
Directives result from the European Social Dialogue.
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What are then the aims of these directives? First of all, the aims differ in part. The
purpose of the part time work directive is to provide for the removal of
discrimination against part-time workers and to improve the quality of part-time
work, while also facilitating the development of voluntary part-time work, and
contributing to the flexible working time in the interests of both employers and
workers.
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The purpose of the Temporary Agency Work Directive is to ensure protection of
temporary agency workers and to improve the quality of temporary agency work,
while also taking into account the need to establish a suitable framework for the
use of temporary agency work in order to create jobs and develop flexible forms of
work.
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The Fixed-Term Work Directive is more restrictive as regards flexibility, and it's
purpose is to improve the quality of fixed-term work, by insuring the application of
the principle of non-discrimination, and to establish a framework to prevent abuse
arising from the use of successive fixed-term employment contracts.
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Thus, the first two Directives want to encourage this type of flexible work while
the third Directive has an emphasis on the protection of a flexible workers.
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The principle of non-discrimination and equal treatment has not been given a
coherent design in the directives. In the Part-Time Work Directive and the Fixed-
Term Work Directive there is a principle of non-discrimination, which states that
in respect of employment conditions, part-time or fixed-term workers must not be
treated in a less favourable manner than comparable full-time or permanent
workers solely because they work part-time or have a fixed-term contract,
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unless that differential treatment is justified on objective grounds.
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In these two directives, the principle of non-discrimination is limited since is
requires that any unfavorable treatment of the part-time worker or the fixed-time
worker is to relate solely to the part-time work of fixed-term employment contract.
It also enables the employer to justify such unfavourable treatment with objective
grounds.
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By contrast, the Temporary Agency Work Directive, the principle of equal
treatment states that for the duration of their assignment and user undertaking, the
basic working and employment conditions of temporary agency workers must be at
least those which would apply if the workers had been recruited directly by that
undertaking to occupy the same job.
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There is no possibility of justifying different treatment but there are some
important exceptions to the rule, including allowing states the possibility of not
applying the principle of equal treatment for a certain period.
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Employment protection is an important element of national labour law and the
protection of individual employees. What do you think; do EU labour law provide
employment protection?
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Yes and no. At EU level, employment protection is only partly regulated. There is
no EU employment protection directive. Instead, we find 'patchwork' regulation in
Article 30 of the EU Charter of Fundamental Rights, the Fixed-Term Work
Directive, the Transfers of Undertakings Directive, the Collective Redundancies
Directive, and in the different Equality Directives, which ban discriminatory
dismissals.
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Working conditions and their improvement is an important aspect of EU labour
law, and there is regulation on health and safety and working time.
Play video starting at :6:28 and follow transcript6:28
The Framework Directive on Health and Safety aims at measures to encourage
improvements in the health and safety of workers at work, and lays down
minimum standards in this area.
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Another directive is the Working Time Directive, which aims at laying down
minimum health and safety requirements for the organization of working time.
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The Directive contains privations on daily rests, breaks, weekly rest periods,
maximum weekly working time, annual leave and night work.
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Article 31 of the EU Charter of Fundamental Rights on fair and just working
conditions also states every worker's right to an annual period of paid leave.
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In recent years the Court of Justice has delivered a series of judgments in relation
to paid annual leave. The Court has emphasised that 'the entitlement of every
worker to paid annual leave must be regarded as a particularly important principle
of European Union Labour law from which there can be no derogations'. The
Working Time Directive and The Court of Justice's case law in this area is
controversial and has been difficult to align with the demands of certain sectors,
particularly health care. Several attempts have been made to revise the working
time directive in recent years, but so far they have proved unsuccessful. To sum up,
EU label law must be considered when regulating the individual employment
relationship.
Freedom to Provide Services
Cross-border issues are central to EU labour law. We will now explore the
important relationship, and as it turns out, conflict between the internal market and
fundamental freedoms and national collective labour law. We will focus on
freedom to provide services, freedom of establishment, posting of workers, and the
right to collective action.
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The free movement of services is one of the fundamental treaty freedoms regulated
in Article 56 of the Treaty of the Functioning of the European Union.
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Posting of workers, which means the transnational provision of services whereby a
company sends or 'posts' workers from one member state, the so-called Home
State, to another member state, the so-called Host State, to fulfill a contract, raises
important questions.
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What wages and working conditions should be applied to posted workers? Should
they be governed by the laws of the host state or the home state, and why is this
important?
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If home state laws apply, this puts service providers from a state with lower labour
costs, for example one of the new member states, at an advantage over contractors
established in the host state which must pay higher labour costs.
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If host state laws apply to the posted worker, this competitive advantage is lost, but
protection against social dumping is more effective.
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According to the Court of Justice, for example in the Sager-judgment, a restriction
of the free movement of services may only be accepted if justified by overriding
reasons of public interest, and if proportional, that is if the measure is suitable for
securing the attainment of the objective pursued and does not go beyond what is
necessary in order to attain it.
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Article 56 of the Treaty of the Functioning of the European Union is supplemented
by the Posted Workers Directive. It has a two-fold and conflicting aim to enable
the free movement of persons and services, and to provide protection for workers
in the case of the posting of workers.
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Article 3 of the Posted Worker's Directive lays down the so-called nucleus of
mandatory rules for minimum protection, which the host members state must
insure that the undertakings guarantee to workers posted to their territory. The
terms and conditions in questions can be laid down by a legislation and or by
collective agreements declared universally applicable within the meaning of article
3.8. This nucleus of the mandatory rules covers for example maximum work
periods and minimum rest periods, minimum paid annual holidays, the minimum
rates of pay, health, safety at work, and equality of treatment between men and
women and other provisions on non-discrimination. Article 3.7 states that the
Directive will not prevent application of terms and conditions of employment
which are more favorable to workers. The recent controversial case law
developments in this area, such as the Laval, Rüffert, and the Commission v
Luxembourg judgments and the debate they have caused, display very clear
tension and difference of perspective between the old and new member states and
member states which are receiving or sending posted workers.
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This case law clarifies that the Posted Workers Directive establishes only a
minimum protection of a nucleus of mandatory rules, and does not provide for
equal treatment of domestic and foreign employers as a means of combatting social
dumping. In other words, the host state can apply its labour law rules to posted
workers but only in the areas listed in Article 3.1; in all other areas, home state law
applies. Furthermore, the cases show that the directive is really a maximum
directive, establishing a 'ceiling' for the terms and conditions of employment that a
trade union or a state may require foreign service providers to apply to employees.
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Increasing European integration, enlargement and cross border activity highlight
free movement and economic freedoms as well as the need for social protection
and the need to protect against social dumping. Important case law from the Court
of Justice, the Viking and Laval judgments, addresses these issues. The Viking
case was referred by the Court of Appeal in the U.K. to the Court of Justice for a
preliminary ruling. It concerned a dispute between a Finnish Trade Union and the
International Transport Workers' Federation on the one hand and Viking, a ferry
operator, on the other.
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Viking wanted to 'reflag' one of it's vessels, from the Finnish flag to the Estonian
flag in order to reduce wage costs. As long as the vessel was under the Finnish
flag, Viking was obliged under Finnish law and the terms of their collective
agreement to pay the crew wages at the same level as those applicable in Finland.
Estonian wages for crew were lower than Finnish wages. Reflagging the vessel to
Estonia would enable Viking to enter into a new collective agreement. Since the
International Transport Workers' Federation was running a campaign opposing
such 'Flags of Convenience', it sent out a circular to its affiliates asking them, in
the name of solidarity, to refrain from entering into negotiations with Viking. The
Finnish Trade Union gave Viking notice of a strike.
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The Laval case was referred by the Swedish Labour Court to the Court of Justice
for a preliminary ruling. In May 2004, Laval, a Latvian company posted workers
from Latvia to work on Swedish building sites. The work included the renovation
and extension of school premises. In June 2004, Laval and the Swedish Building
Workers Union started negotiations with a view to concluding a collective
agreement.
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But Laval later signed collective agreement with a Latvian trade union, regulating
the work at the site.
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Consequently, no agreement was reached between Laval and the Swedish Building
Workers' Union. In November, the Swedish Trade Union therefore started
collective action in the form of a blockade at all Laval building sites. And another
Swedish trade union took sympathy action.
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After work on the site had been interrupted for some time, the company became
bankrupt and the Latvian workers posted by Laval returned to Latvia.
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Viking addresses questions on the compatibility of the right to take collective
action with the freedom of establishment in Article 49 of the Treaty of the
Functioning of the European Union, while Laval addresses questions of the free
movement of services in Article 56, the right to take collective action, and the
Swedish implementation of the Posted Workers' Directive. Today we will focus on
the right to take collective action.
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In both Viking and Laval, the Court of Justice declared that collective action fell
within the scope of the treaty and that articles 56 and 49 could be invoked against
trade unions. The Court of Justice with reference to Article 28 of the EU Charter
Fundamental Rights, also recognized the right to take collective action as a
fundamental right which forms on the integral part of the general principles of
union law. However, the exercise of the right to collective action could be
restricted. The Court of Justice then considered in Viking whether the collective
action at issue constituted the restriction of the freedom of establishment, and in
Laval whether the collective action constituted a restriction on the free movement
of services. Although in both cases, the Court of Justice emphasized that the
European Union not only has an economic but also a social purpose, it concluded
in Laval that collective action constituted a restriction on the free movement of
services. The Court of Justice declared that the right to take collective action for
the protection of the workers of the host state against social dumping could
constitute an overriding reason of public interest. However, the specific obligations
linked to the signing of the collective agreement in the building sector in Laval
could not be justified as necessary to attain such an objective and the collective
action was unlawful.
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Similarly, in Viking, the Court of Justice found that the collective action
constituted a restriction on the freedom of establishment.
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But when it came to justification and proportionality, the Court of Justice instead
left the assessment to the national court. However, it provided some guidance
requiring the national court to consider whether the jobs and conditions of
employment of the trade union members on board the vessel were jeopardized or
under serious threat, and if so, whether the trade union did not have other means at
its disposal, which were less restrictive on freedom of establishment. Only if these
conditions were satisfied would the strike action be justified and proportionate.
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Both Viking and Laval have been interpreted as putting fundamental treaty
freedoms and economic integration first and trade union rights and social
integration second. The cases prompted huge and critical debate. Some member
states, such as Sweden and Denmark, have also had to reform their laws on
collective action and posted work, especially those building on so called
autonomous collective bargaining. At EU level, it was thought that the Lisbon
treaty and the new emphasis on social market economy might have changed the
landscape. In 2012, the Commission put forward two proposals; a 'Monti II
Regulation', on the exercise of the right to take collective action in cross-border
situations, and a Directive on the enforcement of the Posting of Workers' Directive.
The Monti II Regulation had to be withdrawn by the Commission following
serious opposition from the trade unions and by many member states parliaments
on grounds of subsidiarity, but the so-called Enforcement Directive has been
adopted.
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Another important development post-Laval and Viking has been the re-orientation
of the European Court of Human Rights' case law regarding precisely freedom of
association, and the resulting, possibly conflicting case law of the Court of Justice
of the European Union and the European court of human rights.
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This is crucial considering the future accession of the EU to the European
Convention of Human Rights. In two landmark judgments from 2008 and 2009,
the case of Demir and Baykara and the case of Enerji Yapi-Yol Sen, the European
Court of Human Rights aligned its case law with ILO Conventions No 87 and 98
on freedom of association and right to collective bargaining as well as with the
Council of Europe's European Social Charter. The freedom of association, as
protected by Article 11 of the European Convention of Human Rights, is now said
to comprise also the right to bargain collectively and the right to collective action.
The ILO Committee of Experts and the Counselor of Europe's European
Committee of Social Rights, have also expressed concern about Viking and Laval
and their implications for national labour law systems and found them to be in
conflict with fundamental trade union rights.
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So finally, these developments at the international level prompt the important
question: Are Viking and Laval and EU law compatible with international labour
law, such as ILO Conventions, the European Convention of Human Rights and the
European Social Charter? Thank you very much.
Crisis
The current economic crisis, and the EU's and the Member States' responses, have
had important implications for European Labour Markets and for Labour Law.
High unemployment, especially youth unemployment has had devastating affects
in many countries and has led to social protest and unrest, and put into question the
EU's legitimacy. The responses to the crisis has varied among the member states
and have also come in different stages. In 2008 and 2009, many member states first
put crisis related measures in place, such as short time working arrangements and
wage concessions. The subsequent sovereign debt crisis in 2010, caused in part by
government's attempts to 'bail-out' banks in financial difficulty, led to fundamental
financial and governance reforms at EU level.
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Since the evaluation of the currency is not an option within the Euro zone, focus
has instead been on far-reaching austerity measures and deregulatory labour law
reforms in many Member States. These measures have targeted employment
protection regulation, collective bargaining and wage-setting, at the very heart of
national labour law and industrial relation systems and also crucially areas which
largely fall outside of EU competence.
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The Member States that have been given so-called 'bail-out' packages by the
'Troika', the European Commission, the European Central Bank and the
International Monetary Fund - for example, Greece, Portugal and Ireland - have
been particularly affected.
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The so-called Memoranda of Understanding, accompanying the 'bail-out' packages
and signed by these member states specify which labour law and labour market
reforms are to be considered and introduced. There are also signs that some
governments may be using the crisis as a 'cover' for introducing further
deregulation.
Play video starting at :2:29 and follow transcript2:29
These developments have been harshly criticised by the ILO, trade unions, and
labour law scholars and deep concerns have been expressed, for example as
regards to the disrespect for fundamental rights and the strong move towards
labour market flexibilization.
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These reforms have also been legally challenged at several levels; in national
constitutional courts, in the Court of Justice of the European Union, and before
international human rights bodies, such as the ILO and the Council of Europe.
Greece has particularly been in the spotlight in this regard.
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A number of preliminary references have also been made to the Court of Justice
related to national measures introduced as part of 'bail-out' packages. So far the
Court has refused to apply the EU Charter to these cases.
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By contrast, the European Committee of Social Rights, in relation to a number of
collective complaints, has found, for example, recent Greek reforms to be in
violation of the right to a fair remuneration and the right to social security.
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In 2011 the ILO sent a specific high level mission to Greece and the ILO
committee of experts has also expressed deep concern about the Greek
developments in relation to Conventions No 87 and No 98 and the freedom of
association and right to collective bargaining. The way in which the balance
between flexibility and security is struck within the EU has been debated. The
developments following the economic crisis intensified these debates and some
would even argue that the economic crisis has given rise to a crisis as to regards
the whole of the EU and social Europe.
A Practitoner’s View-Jenny Welander Wadstrom
Good day. >> Good day. >> Welcome, Jenny Welander Wadstrom, partner at
Roschier law firm. I'm very happy that you could come and discuss labor law
issues with me. >> Thank you very much and I'm very happy to be here. >> Could
you please tell me a little bit more about yourself and the work that you do today,
and how you ended up where you are today.
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>> Yes, I'm a partner of a Roschier law firm, I specialized in employment and
benefits.
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I have a team of approximately seven lawyers who are assisting me in these kind of
matters.
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I've been with a law firm for about 12 years now. But during that time, I've also
been working as a judge in the Swedish labor court as assistant judge for one year.
But apart form that, I've been working in a law firm almost my entire career and
representing employers in the various employment law matters. And at Roschier is
a business law firm.
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We're a leading Nordic law firm, with offices in Helsinki and Stockholm, and we
have quite a strong focus on MNA technology and disputes. And as an
employment lawyer, you're very well integrated in all these areas, assisting in MA
projects for examples or in trade secrets disputes. But we also have our own stand
alone business. About more in to the individual employment law matters.
Everything in there is difficult or sensitive and the clients usually tend to ask
Instead of having the matter themselves. >> Yeah, and I'm working as a professor
at the faculty here so it seems to be very different roles but actually we go a long
time back. Because we were students at one time together here at the faculty. So let
me ask you what do you remember from your own studies of labor law?
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>> Actually was almost 18 years ago that I studied labor law at the university. I
didn't take any extra courses in labor law at that time but I took the mandatory
course which was during the third semester, I think here at the university.
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And I found very interesting because it had so many aspects.
Play video starting at :2:46 and follow transcript2:46
And if there was much politic in the society related
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issues but also individual aspects in the social dimension of being an employee.
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It was very interesting but actually at that time I hadn't decided whether to go for
employment lawyer or not, but when I actually started in a law firm then I realized
that was what I wanted to do.
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>> Today we are talking about labor law and that is really important both fo doing
business but also for working in the EU. So I was wondering from your
practitioner's perspective what label law issues are most relevant or topical or
challenging in your daily work?
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>> First of all I think that employment law issues have become increasingly
important in the business life. And that is because today the business is not so
much about the machinery anymore. It is very much about the intellectual property
rights and the human capital.
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So I think as an employment lawyer I have seen the progress in the last ten years
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that companies are very interested in employment law questions.
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And they also want to makes sure that the corporate government's perspective have
done all they can to protect the business and to keep the talents they need around
the business. And also, they want to avoid any kind of disputes in that area because
that can really damage the reputation of the company.
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So I see a strong focus on these issues today. And for example, to have your
employment contracts in order is very important.
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And of course to have all the policy documents that you need to be able to instruct
the employees on how to proceed in the daily work life. >> As we know in the EU
free movement it's fundamental core value for workers but also for businesses. But
it's also globalization that influences work outside of the EU and doing business
outside of the EU, and how does globalization impact on the practice of labor law?
>> I think the assets of the company
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is more difficult to protect today because of the globalization. You don't have the
control over the business any more. You may have the research department in one
country and the sales department in other countries.
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So it's become more difficult to organize the business which means that you really
need to have everything in order, like the contracts, or the policies, and make sure
that you spread your message all over the group. What kind of standards you
would like, all of these legal entities or units to adhere to.
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>> In recent years Europe has been facing economic crisis and globalization also
leads to relocalization and restructuring of companies.
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And in these situations, EU now rules on transfers of undertakings are important
and very complex, most importantly complex for students to study, I think. So why
are these rules on transfers over the takings important? And why are they
challenging to consider and to apply in the business transaction?
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>> Well they're very important for our clients to know about at an early state.
Because it's very much about how to structure a transaction. Will there be any
transfers of business or not? And that will actually have effect on the timing of the
transaction and also the process you need to follow. But the most important thing is
that it's so difficult to determine whether that rules apply or not. And when you do
that as an advisor you may not have all the information at that time.
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Since we know that the criteria that the court has rule on, or among other things,
how many employees are, will be covered by their transaction, or by their transfer.
And that is something that you usually don't know, until a very late stage into those
actions. So you really have to make the call, as a state we don't have that
information. And in many cases I think we usually treat as it transfers, as transfer
on the taking, according to the rules just to be sure that we don't do anything
wrong. But of course it's usually, at the end of this, there's a section you can, you
can read it, it takes a decision whether it will transfer on the second or not. >>
Yeah, and of course it has very important implications not only for the business but
also for the employee. Because it would then decide if you or your employment
would follow the transaction. Follow the every transfer to a new employer and also
what kind of conditions or working conditions that will apply to you. So of course
it is extremely important. >> Yes, it is. I need to involve the unions and the places
as required in all stage
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in order to make sure that you follow the procedure and give everyone the chance
they should get to follow the business. >> Is it possible to use contracts or to
design contracts in order to sort of make up for this uncertainty? Can you by means
of contracts actually structure the process in order to increase the certainty for
clients and for perhaps for employees, as well. >> Well, to some extent, you can, is
my understanding. Or what I give advice, I give to my clients. But it depends very
much on, if it's a business with not so much equipment. It's very much about,
whether the employees will transfer or not. And that's something that you can
actually try to influence between the parties. It's often that the parties of the
transaction don't have the same meaning.
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Maybe the new service provider of software doesn't want to take on the employees
but the former one would not like to keep them so it's also a matter of discussing in
between both parties,
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how to scope the transaction in order the get the results you want. You may not
have the same agenda always. >> And definitely there also is influenced by
ongoing flexibilization of work. So how you choose to structure your company if
you contract out or if you contract in or if you work in a cross border context. So I
can just imagine, it can be increasingly more complex as business life changes and
the way that you organize. >> Yeah, I think the very ways that the practice is that
[INAUDIBLE] industry. The parties acting in that industry cannot decides between
them whether the treats change of service provider as the transfer are taken or not.
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Because it's too difficult to assess it over time. >> Yeah. >> So and usually if they
have the unions on board that's why we like assessments, the risk is very low that
in the single employee would afterwards they complain about this. So I think the
cause of the uncertainty, companies working within an industries where there are a
lot of change of writers. They actually have adapted through making decisions in
between them how to go about because then they will know that they have wanted
threated in the same way. It's also high competition between them so left hand of
comes down, not feeling but it's very good way to go to about but. >> It's also
interesting because at EU level the court of justice has interpreted the EU charter
and the freedom to conduct business in article 16, precisely in this context, so I
think we can look forward to interesting developments. And this line of
development has been very much criticised. So it's interesting to see even in this
quite technical field in a way, it's actually a question about balancing a
fundamental right to conduct a business and fundamental rights of having fair
working condition or having protection for example. >> Yeah, but the core
decisions are not always easy to interact with. And I think also there's been a shift
during the years.
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So I think today it's actually
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the view on what is the transfer of undertaking at this more strict than
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that was a few years ago when it comes to and the service business. >> Yes. >> So
it has been working in the advantage the company somehow. >> Yeah, non-
discrimination laws is an area of labor law that has been expanded in recent years.
And it's of increasing importance in the EU but all over the world. Why is that? >>
I think the awareness has increased about what rules really mean. And it's more
clear sort of in how to interpret the rules. So I think it's one of the reason for why
there are more isolation claims than the companies are actually
Play video starting at :13:18 and follow transcript13:18
aware of the need to take these risks into account when drafting incentives gains or
Play video starting at :13:26 and follow transcript13:26
handling employees recruitment or termination cases, for example. >> And what,
in your experience, are the main difficulties in practicing non-discrimination law?
Play video starting at :13:41 and follow transcript13:41
>> I think proving what really happened is something that I find very challenging.
because usually, people have their own view on what happened in a certain
situation. What things really was all about.
Play video starting at :13:59 and follow transcript13:59
So it's very often I think a misunderstanding between people that causes these
problems and allegations of discrimination. Or I think because employers are very
aware of the legislation today, so that they know that what the borders are for what
they can do and say for example. But I think usually we come in quite late but our
main objective is to make sure there is not a dispute about discrimination
allegations. Because the companies have so much to lose on having on such a
dispute ongoing with all that publicity that have would mean. Because nobody
wants to be associated with such bad behaviour. So I think, but it's also because
nowadays, you realize how bad it will be for your reputation if you would end up
in such a situation. So you really try to live by the rules and try to avoid. >> Yeah.
>> Too much drama. >> And of course it's increasingly complex because claims of
indirect discrimination, they might easily surface. For example, we have also
increasingly perhaps claim of inter-sectional discrimination where different
grounds Interact with each other. So it's truly complex trying to devise schemes for
benefits or for different kinds of working conditions. And not to contribute in
discrimination law that we see. >> No, so I think that stuff has been going on for a
few years. This discussion, so I think that a lot has happened already when it
comes to how programs are assigned and the policies are drafted enough. So I
think it's been come a long way already
Play video starting at :16:21 and follow transcript16:21
from the employee side to understand what those mean. >> Yeah, and also in
Sweden where we are based. Swedish law is famous for having an early emphasis
on active measures not only focusing on the bans on discrimination and individual
disputes. But precisely proactive work trying to adapt working life to each and
everyone.
Play video starting at :16:52 and follow transcript16:52
It's not only labor law that's is constantly changing but it's also the legal framework
for conducting business in younger old which is multifaceted. So I was wondering
in your experience, labor law is not working on its own or in isolation, so which
other areas of law interact with labor law when it comes to a certain business
transaction or conducting business more in general? >> Well, there are a lot of
other areas that come in in our assignments. For example, when it comes to unit
consultations in sensitive acquisitions where maybe the companies involved are
listed.
Play video starting at :17:40 and follow transcript17:40
Then of course, the insider regulations come into play. We have to take into
account, the risk of bridging those, compared to not be compliant with union
consultation obligations.
Play video starting at :17:58 and follow transcript17:58
Those kind of assessments are very difficult to do, I think. Because you have to set
up rules that don't really match and you need to make the best of it. And based on
the risk assessment. Definitely, and in general of course labor law, perhaps not so
much from a business law point of view but from the individual and please point of
view interact with social security. So if you can't work you will have to receive
your income from somewhere else and that would be from social security. >> That
is always something that comes up when negotiating, termination makes
disagreements of course. >> Yeah. >> What will happen to the employee after the
severance pay has been paid and so forth.
Play video starting at :18:52 and follow transcript18:52
Yeah, it's important for the employee as well.
Play video starting at :18:56 and follow transcript18:56
>> Yeah, well, it has been tremendously interesting to discuss you only for this
very short time all these interesting labor law issues, and I'm so thankful that you
took the time to meet me, and to discuss these issues. And I'm hoping that the
students and the persons listening to our interview and to the lectures will learn a
lot of labor law and how it functions in the currently you.

Week 4: Paying Taxes and Complying with Environmental

Standards
Tax Law Policy
Hello, and welcome to this session on European tax law. The goal of this tutorial is
to provide you with an overview of the applicable EU law, as it stands today in the
field of taxation.
It's a fascinating legal area, while lots of political debate tends to underlie each and
every question.
Indeed, governments are faced with a policy dilemma. They have to strike a
balance between the need to finance domestic welfare, by letting high taxes, and at
the same time keeping those who voted for them content.
In addition, they also need to attract foreign capital and address the issue of their
domestic tax basis disappearing the globalized world where capital moves so
easily.
Political choices have to be made within the boundaries of the EU legal
framework.
You may have read about Google in the news.
The Internet search giant, which only paid a tax rate of 2.6% on $8.1 billion USD.
in non-U.S income in 2012 because it's channeled almost all of its profits to a
subsidiary in Bermuda. Where no corporate income tax is levied.
Almost all the profit around from non U.S. clients, in form of license fees for the
use of Google's intellectual property is transferred perfectly legally out of high
taxed jurisdictions. And this is now triggering a debate in the G20 on how to find a
better way of taxing multinational corporations, according to their ability to pay.
The material I'm going to cover is organized as follows. First, I'll give you some
elements of tax policy. Before this the sources of EU law applying in a field of tax
law. After this introduction, we will take a tour of the world for use of relevance to
your basic understanding of this topic.
All states have a private and a public sector, the public sector is financed by taxes
that are levied on the economic activities carried on in the private sector. In the
market economy, economic transactions in the private sector come about through
voluntary agreements between individuals. However, taxes are not the result of a
voluntary decision by individuals. They're imposed on tax payers by national
political decisions of parliament and other political subdivisions. The primary
purpose of taxation is to create space for public sector activities to the detriment of
the private sector. Taxation is, therefore, the most important economic and social
policy instrument for each national government. So, it’s no wonder that taxation is
still so central through to sovereignty of member states. And then, of course, you
have to keep in mind that the EU not being a federation has no power to levy taxes
for its own budget. That's also another reason why the member states of the EU
still have the sovereign power to levy taxes on their own territory. There is no
general EU-level income tax, nor does the EU benefit directly from that member
states tax revenue.
Play video starting at :3:50 and follow transcript3:50
Once more, another really important feature of this discipline is that member state
have to agree unanimously on any secondary legislation. And although this has
occurred, it's been in a limited fashion.
Play video starting at :4:5 and follow transcript4:05
Member states are at liberty to determine the size of public sector they wish to
create. And they're free to choose the tax systems that consume most appropriate to
their political lens. In other words, they determine the tax mix applicable within
their own borders. A statistic shows public sector size varies tremendously from
one state to another one. The European Union is relatively high tax area with tax
revenues representing almost 40% of national GDPs.
Play video starting at :4:42 and follow transcript4:42
Denmark, Belgium, France, Austria, Finland, and Sweden each have a large public
sector. When the tax revenue reaches 45% of the GDP, that is 7% higher than the
EU average.
Play video starting at :4:59 and follow transcript4:59
As a starting point, you might wonder what kind of taxes we are talking about.
Taxes can be classified from an economic, legal or tax policy view point. From an
economic viewpoint, taxes are usually levied on three kinds of items. Labor,
Capital and Consumption.
Play video starting at :5:19 and follow transcript5:19
Taxation on labor includes personal income tax and, to a certain extent, social
security contributions, but I'll leave those contributions outside the scope of this
presentation.
Play video starting at :5:32 and follow transcript5:32
Taxation on capital includes taxes on corporation and investment income as well as
property and inheritance taxes.
Play video starting at :5:41 and follow transcript5:41
Taxation on consumption includes value added tax and excise duties. VAT applies
to the value of the goods and services that are bought and sold for domestic
consumption.
Play video starting at :5:56 and follow transcript5:56
Goods and services sold abroad, exports, are not subject to the VAT in the country
of origin, but in the country of destination. Conversely, imports are taxed so as to
keep the system fair for producers. Excise duties are often levied to improve
people's lifestyle. For instance, tax on tobacco or to anchorage and environment
friendly production, tax on harmful emission, for instance.
Play video starting at :6:27 and follow transcript6:27
From a legal viewpoint, taxes are classified either as direct taxes,
Play video starting at :6:33 and follow transcript6:33
those which are levied on taxpayers directly, or indirect taxes, which are levied on
consumption, but remitted by taxpayer who passes on to the consumer the
economic charge of the tax. As that's the case of the VAT and excise duties.
Play video starting at :6:53 and follow transcript6:53
From a tax policy viewpoint, it is well known that some taxes are more conducive
to growth than others. Taxation on capital and corporations hampers growth most
severely, mainly because this taxes lead to fewer innovations and are levied on
particularly mobile tax base. In a perfect world, tax is a mutual to the investment
decisions of economy characters and they also respect European union law.
Regulating taxation in the EU
What are these EU law rules? Well, the main issue we need to think about now is
what is and what is not harmonized in the field of taxation? Bound up to with this,
we also need to consider why certain types of taxes are harmonized and other not,
and on what the legal bases, the decision whether to harmonize has been made.
Play video starting at ::42 and follow transcript0:42
We usually talk about several sources of EU law. EU law consists of the founding
treaties, that is the treaty on the European Union and the treaty on the functioning
of the European Union, and the legal provisions based on the few legislative
powers in this field delegated to the European Union by the founding treaties.
Play video starting at :1:3 and follow transcript1:03
The provisions of EU law that may have an effect on taxes are referred to
collectively as EU tax law. After the entry into force of the Lisbon Treaty, the
European Convention on Human Rights also became a part of EU law. And, of
course, the Court of Justice of European Union, the CJEU, has had many
opportunities to interpret these sources of EU law in response to primarily ruling
requests referred by domestic judges and in enforcement procedures initiated by
the Commission against member states. As you might imagine, some taxes are
more harmonized than others depending on their impact on the integration process.
And my goal is to explain to you now and why and how this has come about.
Play video starting at :2:1 and follow transcript2:01
So let's start with what's been achieved in the EU in the area of tax law, and
especially with the sources of primary law.
Play video starting at :2:13 and follow transcript2:13
To start with, it is often said that the main idea for the European Union is actually
fiscal. The European Union's mission statement, Article 3.3 of the TEU, provides
for the establishment of a common market and the implementation of common
policies. This requires undistilled conditions of competition elimination of
disparities, as well as abolition of obstacles to cross-border activities within the
common market. However, the proper functioning of the internal market may be
hampered, for instance, by differential tax treatments of domestic and imported
goods. Tax burdens on cross-border transactions, and the administrative difficulties
in dealing with several different systems all over the EU.
Play video starting at :3:5 and follow transcript3:05
These obstacles may influence an economy cooperator's behavior, and therefore
create a hindrance to the free movement in the internal market.
Play video starting at :3:16 and follow transcript3:16
Custom union is therefore an essential element in the functioning of a single
market. The single market can only function properly when there is a common
application of common rules at its external borders. This implies that the 28
Customs Administrations of the European Union must act as though they were one.
Play video starting at :3:39 and follow transcript3:39
Article 28 of the Treaty of the Functioning of the European Union provides for
this. One, it therefore states that the Union shall comprise a customs union.
Obviously, a custom union also implies a common customs tariff applying outside
the border of the union, which is provided for in Article 31 of the TFEU. The
common customs tariff came into force on the 1st of July, 1968.
Play video starting at :4:16 and follow transcript4:16
So except for these custom unions, what has the European Union achieved so far?
Curiously, or perhaps not, not much is said about taxes in the primary EU law, but
there are lots of rules that apply indirectly to taxes.
Play video starting at :4:34 and follow transcript4:34
Either granting a mandate to the EU institutions to harmonize taxes, that's what we
call positive integration, or to disallow taxes which amount to obstacles to cross-
border transactions, which is referred as negative integration.
Play video starting at :4:49 and follow transcript4:49
The only article in the TFEU that actually deals specifically with positive
integration and taxes, Article 113, which states that the European Union has the
power to harmonize turnover taxes, excise duties, and other forms of indirect
taxation. To the extent such harmonization is necessary to ensure the establishment
and the functioning of the internal market and avoid distortion of competition.
There are other rules dealing with the fundamental freedoms, and they are Article
28, 30, 34, and 110 of the TFEU for indirect taxes, and Article 39 to 64 of the
TFEU for direct taxes. But none of these provisions directly mentions the word tax.
There are also subordinate references to taxation in the TFEU, such as Article 65.1,
on the free movement of capital, or Article 179.2 to 190, on research and
development and on space. And Articles 191(2) to 194(3) on environment and
energy, which reserved competence to member states in the area of taxation.
Play video starting at :6:11 and follow transcript6:11
So in a nutshell, we can say that harmonizing taxes is possible since the Union's
institutions are granted the necessary powers to harmonize indirect taxes, insofar as
necessary for the establishment and the functioning of the European Union. But the
same is not true for direct taxes.
Play video starting at :6:30 and follow transcript6:30
Indeed, as far as taxes which are not indirect or concerned, Article 115 of the
TFEU provides for the council acting unanimously in accordance with the special
legislative procedure. Enough to consult in the European parliament and the
economic and social committee to issue directives for the approximation of such
laws, regulations, or administrative provisions of the member states as directly
affect the establishment of the functioning of the internal market.
Play video starting at :7:5 and follow transcript7:05
Only a few of these directives have been so far enacted. These have been in the
field of mutual assistance and cooperation in tax matters, or even in the field of
savings taxation or corporate income taxation for groups of companies.
Indirect Taxation
Welcome. As explained in the previous tutorial, direct and indirect taxes have to
fulfill a number of requirements that are set for us by the Treaty of the Functioning
European Union and that is what we're going to look at in this lecture.
Play video starting at ::34 and follow transcript0:34
To start with we can take a look at Article 30 of the TFEU Treaty which forbids
import and export duties between member states, or any charges having an
equivalent effect to a customs duty.
Play video starting at ::51 and follow transcript0:51
Article 34 also prohibits quantitative restrictions on imports, and all measures
having equivalent effect.
Play video starting at :1:1 and follow transcript1:01
The prohibition of import and export duties would be meaningless if it was not
combined by an obligation on member states to treat imported products from the
EU in the same way as the treat products produced domestically.
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Therefore article 110 of the TFEU prohibits discriminatory and protective product
taxation.
Play video starting at :1:31 and follow transcript1:31
This article, only allows product taxation as part of a general, domestic
consumption tax, levied indiscriminately on both, domestic and foreign products.
That is, turn over taxes and excise duties. Current taxation is particularly
challenged under this prohibition. As most member states of the EU with a strong
vehicle manufacturing sector tend to favor their national production. The series of
cases at the Court of Justice of the EU offer an example of the application of
Article 110 of the TFEU.
Play video starting at :2:11 and follow transcript2:11
For instance, in the case 112/84 the French road tax was held to be in breach of
Article 110 of the TFEU. As the rate of tax payable was determined by the power
rating of the car and it's applied at a much higher rate to extremely powerful cars,
over 16 horsepower, which car manufacturers in France did not produce, but which
were manufactured and imported from Germany.
Play video starting at :2:43 and follow transcript2:43
Although in the application of this tax, no formal distinction was made based on
the origin of the car, it manifestly showed protected features as it applied only to
imported cars. Because of this, consumers were discouraged from buying non-
French cars and Article 110 of the TFEU was found to apply.
Play video starting at :3:7 and follow transcript3:07
In some cases, where there has been no domestic production to protect such as the
Denmark, the court has found Article 34 prohibiting quantity of restitution to
imports to apply instead. As a very high tax on imported new cars may still have
the effect of restricting importation of new cars, even if not discriminatory or
protective.
Play video starting at :3:33 and follow transcript3:33
Another landmark case in the field of value added tax showing how article 110 of
the TFEU applies is the Gaston Schul case 15/81, dealing with the intra EU
importation of a second hand yacht from France by an end consumer, which
triggered Dutch VAT on the import. Had the boat been purchased from a Dutch
seller, no VAT would have been charged.
Play video starting at :4: and follow transcript4:00
The court held this levy of VAT to be in breach of Article 110 of the TFEU, as
accumulating a VAT for imported goods favored domestic transactions.
Play video starting at :4:14 and follow transcript4:14
However member states with a national policy that pursues an objective and
legitimate aim that is non discriminatory and non protectionist such as health
protection like alcohol taxation may adopt discouragement taxes under certain
restraints. Besides its prohibition of discrimination taxation of foreign products,
Article 113 of the TFEU specifically provides for the council, acting unanimously,
in accordance with the special legislative procedure. And after consulting the
European Parliament and the Economic and Social Committee to adopt provisions
for the harmonization of member states rules in their area, of indirect taxation,
principally in VAT and excise duties.
Play video starting at :5:4 and follow transcript5:04
A large number of directives and regulations, that is secondary legislation have
already been agreed in this area on the basis of that article. The commission's
legislative strategy, particularly in respect of VAT, as well as environmental and
energy taxation, has been clearly established.
Play video starting at :5:28 and follow transcript5:28
There is also another reason why indirect taxes and especially VAT and customs
duty are harmonized but not direct taxes which has to do with the financing of the
European Union own resources.
Play video starting at :5:44 and follow transcript5:44
The EUs traditional loan resources consist of custom duties on imports from
outside the EU and sugar levies. EU governments keep 25% to cover the cost of
collection.
Play video starting at :5:59 and follow transcript5:59
The European Union also collects an own resource, a standard percentage which is
levied on the harmonized VAT bases of each country.
Play video starting at :6:10 and follow transcript6:10
The VAT resource accounts for 14 billion euros.
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That VAT base is to be taxed
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is capped at 50% of gross national income for each country.
Play video starting at :6:25 and follow transcript6:25
This rule is intended to prevent less prosperous countries having to pay a
disproportionate amount in such country's conception and so VAT tend to account
for a higher percentage of national income.
Play video starting at :6:40 and follow transcript6:40
Finally, a standard percentage is levied on the gross national income of each EU
country, which has nothing to do with member states taxes, and which is actually
the largest source of revenue. It's 99 billion Euros for 2010.
Play video starting at :6:59 and follow transcript6:59
It is therefore essential that the basis of VAT is the same in all member states of
European Union. And therefore the VAT basis are harmonized principally in a six
VAT directive of 1977 that was recast on 1st January 2007, by number
2006/112/EC. That is charged as a percentage of the price of goods and services
which means that the actual tax burden is visible at each stage in the production
and distribution chain. The tax is collected fractionally, that is, via a system of
partial payments whereby the taxable person, a VAT-registered business, can
deduct from the VAT they have collected, the amount of the tax they have paid to
other taxable person on purchases for their business activities.
Play video starting at :7:58 and follow transcript7:58
This mechanism ensures that the tax is neutral regardless of how many transactions
are involved. The tax is paid to the revenue by the supplier of the goods or services
who is the taxable person. But it is actually paid by the purchaser to the supplier as
part of the price. It is therefore an indirect tax.
Direct Taxation
As regard direct taxes, the only primary source of law that had any impact was
Article 293 of the EC treaty, and it was enforced prior to first of December, 2009.
This was the basis on which member states adopted the arbitration convention
dealing with tax audits on transfer pricing. It provided that member states should in
so far as necessary enter in to negotiations with each other. With the view of
securing the benefit of their nationals, the abolition of double taxation within the
community. This article was repealed and nobody knows why. But whether, why
not? Secondary EU legislation are directors and regulations exists, Member States
tax systems and tax treaties must in any event respect the fundamental EU treaty
principles on the free movement of workers, services, capital and the freedom of
establishment. That are dealt with by Articles 45, 49, 56, 63 of the TFEU and the
principal of non-discrimination. Moreover, in more general terms Article 21 of the
treaty provides that every citizen of the union has the right to move and reside
freely within the territory of member states. The agreement on the European
Economic Area extends to individual and enterprises of EEA states. Iceland,
Liechtenstein and Norway. It applies the principles of free movement of goods,
persons, services, and capital. As well as article conditions of competition and non-
discrimination. However, secondary legislation does not apply in these EEA states.
In the light of these rules, from 1986 onwards, the Court of Justice European
Union, has consistently ruled in more than 350 cases, that although direct taxation
falls within the competence of individual member states, members still, must
exercise that competence in conformity with a EU law. The court has for instance,
found that taxpayers who move their residence to another member state are
exercising their freedom of establishment under Article 43 and 49 of the treaty,
with the consequence that the state of departure may not impose exit taxes on them
as this may discourage them from moving. A lot of cases have also condemned
member state tax legislation. Which taxes proceed from capital, investments from
abroad, such as dividends, interest, or capital gains on the sale of assets. These may
not be taxed heavier than domestic investments. So basically, a member state may
not discourage cross-border transactions through a penalizing tax system.
Play video starting at :3:44 and follow transcript3:44
Equally, member states may not attract foreign direct investment from other states
through domestic tax legislation which may be held in breach of EU competition
rules on state aid. Indeed, the ECJ has ruled in several cases that Article 107 of the
treaty forbids states to adopt tax reliefs that may in effect benefit a specific
category of taxpayers, such as non residents. Gibraltar, had very attractive tax
regimes for non residents that it had to repeal.
Play video starting at :4:27 and follow transcript4:27
The same is also true for state aid to national economic actors. And many times the
court has stated that a member state may not reserve tax breaks. Or advantages that
benefit a sectorial or geographical business sector.
Play video starting at :4:47 and follow transcript4:47
Yet, another limit on member state's powers lie in the need to combat aggressive
tax planning strategies. And the court has always been deliberately strong in the
face of arguments from member states. Most states try to protect their tax bases
and use anti-abuse provisions to counter schemes. Involving the use of artificial
transactions, in order to reduce tax liability.
Play video starting at :5:18 and follow transcript5:18
For instance, most states refuse the benefit of favorable inbound dividend, when
the distributing subsidiary is located in a low tax jurisdiction. The court of justice
has consistently stated that such anti-abuse provisions are incompatible with a
freedom of establishment or to freedom of capital. If they strike blindly on all
transactions, presuming that a lower tax in another member state automatically
amounts to tax avoidance. Only tax provisions that catch wholly artificial
arrangements designed to escape the national tax normally applicable are
compatible with the fundamental freedoms.
Play video starting at :6:9 and follow transcript6:09
The rule of the European Court of Justice to interpret the TFEU has a considerable
impact on member states tax legislation.
Play video starting at :6:21 and follow transcript6:21
Over 350 cases deal with the free movement provisions, with help of principles of
law, such as the Equality principle, that is the rule underlying equal treatment of
tax payers in comparable situations. The Legality principle, that is no taxation
without representation. And last but not least, the Proportionality principle, which
allows the aggregation of the before mentioned principles, only to the extent or in
balance of the overall goal of a tax legislation in question, especially where the line
of delimitation between tax planning and tax abuse is difficult to draw.
Play video starting at :7:9 and follow transcript7:09
To conclude and sum up this tutorial session, I just want to come back to the
statement made at the beginning where I highlighted the difficult mission facing
the member states. They are trying to finance their domestic welfare with the help
of taxes over which they have exclusive competence while at the same time
seeking to respect their EU law obligations which forced them to give up some tax
basis to the benefit of other member states. When tax payers engage in cross border
transactions, this results in a huge number of conflicts between tax payers and the
national tax administrations. And there is more than enough material in relations to
these interesting issues in this area to merit further study.
Play video starting at :8:4 and follow transcript8:04
This is why we offer a one year Master's Degree in European and International
Taxation at the Department of Business Law of School of Economic and
Management in co-operation with the law faculty. Thank you for your attention.
Complying with Environmental Standards
Hello everyone and welcome to this lecture on Environmental Law. You may
wonder how, if at all, is environmental law relevant to the study and practice of
European Business Law. Today, I will mention and briefly go through three, non-
exhaustive instances illustrating the high relevance of environmental law in this
regard.
Play video starting at ::31 and follow transcript0:31
First, environmental law may create barriers to trade. You may remember from the
initial lectures on the internal market, that EU law prohibits such barriers. The
control of fiscal barriers, prohibition of discriminatory taxation, state aid rules,
procurement law, and the free movement provisions are clear examples of treaty
stipulations that aim to ensure the functioning of the internal market. For instance,
Article 34 of the Treaty of the Functioning of the EU stipulates the prohibition of
quantitive restrictions between member states on imports and all measures having
equivalent effect.
Play video starting at :1:18 and follow transcript1:18
National environmental protection measures may amount to such prohibitive trade
restrictions.
Play video starting at :1:26 and follow transcript1:26
In case of the Court of Justice Commission versus Austria, Austria was found to be
in breach of the free movement provisions in trying to reduce air pollution by
prohibiting traffic of heavy goods vehicles on a highway important to inter-union
trade.
Play video starting at :1:48 and follow transcript1:48
There is much similar case law to this and also certain exceptions to the prohibition
rules. However, these we will not discuss here.
Play video starting at :1:58 and follow transcript1:58
Instead, the key point to be made is that to fully appreciate EU business law,
internal market law and environmental law have to be considered jointly and their
overlaps and intersections understood and studied.
Play video starting at :2:15 and follow transcript2:15
Second, environmental law may be applied to enhance economic prosperity. Here,
it is important to remember that the union is regulatory in nature.
Play video starting at :2:27 and follow transcript2:27
The foundation of the internal market was a gigantic regulatory project that
includes the adoption of more than 300 directives and regulations only in the first 5
years, all aimed at creating a market without frontiers. This particular tier of
governance can be described to follow a catch model as coined by Vogel of Freer
markets- more rules. Here it is important to note that the type of rules that are
enacted in the EU are of importance, also in adopting environmental laws.
Play video starting at :3:6 and follow transcript3:06
The core idea is that through better and smarter, also environmental regulation, the
economy can be, or will be stimulated by creating so-called win-win situations,
allowing companies to behave responsibly and maximize profits at the same time.
Here, the economy and the environmental protection are not seen as being
inevitable conflict. Rather, the focus is in embracing the two.
Play video starting at :3:36 and follow transcript3:36
This perspective has a number of policy implications.
Play video starting at :3:42 and follow transcript3:42
First, regulatory scenarios, including employing clean technology, and the creation
of tradeable permits to natural resources or pursued, as they're understood to result
both in enhanced economic efficiency and reduce damage to the environment.
Play video starting at :4:2 and follow transcript4:02
In line with this rationale, carbon markets, market and fishery quotas, water
markets that rely on market mechanisms in controlling the use and access to
common resources are employed.
Play video starting at :4:18 and follow transcript4:18
Second, this view recognizes that due to the limited resources of this state, it
cannot be exclusively responsible for protection of the environment. And therefore
a wider social mobilization is required. This is the consequence of creating
regulation that crosses boundaries between public and private law. What this
illustrates is that debates on regulation are central to the EU. It constructs internal
market via regulation and it is also through the use and interpretation of these
regulations and the relevant competences that the internal market has progressed to
secure high standards of environmental protection. At the same time,
environmental law tends to be constructed and reformed so as to help enhance this
market and its competitiveness indicating a clear symbiosis between the two. The
significance of this is that environmental law discourses in the EU are inherently
tied to the internal market, and more precisely, the EU legal order.
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Third and perhaps most importantly, is that the process of creating this single
European market realizes not only economic freedoms, but also the protection of
high social and environmental standards. This can be seen in Article 3, sub-
paragraph 3 of the Treaty of the EU, which provides that the Union shall establish
an internal market that is 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.
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Moreover, Article 114 subparagraph 3 of the Treaty of the Functioning of the EU,
vests regulatory power with the union to approximate laws on the grounds of the
functioning of the internal market, obliging the commission to consider a high
level of environmental and consumer protection in its legislative proposals.
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What this shows is that the internal market follows deep social structures that
stretch far beyond laissez faire policies of a market. The idea of establishing a
market with a particularly regulatory goal includes that of environmental
protection, dates back to the first environmental action program. Which admitted
that a harmonious development of economic activities and a continuous and
balanced expansion cannot be imagined in the absence of an effective campaign to
combat pollution and nuisance of an improvement in the quality of life and the
protection of the environment. In the present constitutional arrangement, title 20
provides the legal basis for environmental policy. In addition, article 37 of the now
legally binding charter, co-defines environmental protection, meaning that safe
guarding the environment has obtained a human rights significance in the EU legal
context.
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This shows that market discourses in the EU are clearly embedded in a
kaleidoscope of aims, including the creation of Prosperity, Social Security, and
Environmental Protection. This demonstrates that the market mentality at the EU
level is neither neutral nor purely profit oriented.
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Discussing environmental law is thus inevitably tied to a broader market discourse,
particular to the EU. So to sum this up, understanding of environmental law and it's
position in EU law, more broadly, is a prerequisite to understanding the operation
of the internal market. Environmental law is relevant to this regard in many
different ways, as a possible trade barrier, economic booster and/or indeed as part
of the European legal ethos.
Identifying Environmental Standards
Hello again. In the previous class, we pointed to three instances showing the high
relevance and embodiment of the environmental law in EU Business Law. Here,
we're going to consider how environmental law, or environmental-law inquiry, is
constructed in this particular European legal context.
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To start with, it is important to note that the study of environmental law is not just
about finding straight forward solutions to saving particular areas, environmental
areas, animals, or more generally making the world a better place.
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It is a complex subject that requires us to think carefully about environmental law
and law more generally.
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To illustrate this point, as an example, look at this apple.
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Now consider, also encouraged in your further reading list, how did this apple end
up in my local store in Lund? Did it have to pass any quality tests before accessing
the internal market? Did the seller have to comply with information about the apple
and it's production?
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Was the apple organically farmed, or were pesticides used?
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Is it genetically modified? And how do EU rules on GMOs fit the broader
international trade liberalization?
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How was it transported, was biofuel used? Was the biofuel subsidized? Was the
farm subsidized where it was grown? And if so, how does that comply, if at all,
with EU law? These different strands of inquiry paint a broad picture of questions
that may arise and that are relevant in studying and applying environmental law.
Especially in a European business context.
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To unpack these questions it is crucial to understand the nature of environmental
problems as a start, this means investigating, is it of collective nature? That would
be the case for climate change, which results from various causes. Each complex,
in its own right. Or is it rather an issue concerning the commons that would include
the management and control of water, air and land which are open to all.
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Another focus could be the increasing human population.
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The focal point would then, again, be slightly different. This first line of inquiry is
important as it frames how we see the environmental problem and how we then
later tackle it.
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In studying carbon markets, I discovered that these are seen to remedy distinct
environmental problems.
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One was the need to stimulate the market. Another was substituting state control of
the commons. Or a third was a simple revision of traditional environmental law.
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These different framings of the environmental problem leads to different
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legal constructions of cover markets being proposed and furthered. The second
issue is to identify the purpose of environmental laws that apply to the
environmental problem. And more importantly to understand that often these laws
represent a fusion of influences from diverse collection of laws and legal cultures.
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This means that you as an environmental lawyer or as a lawyer in a European
business context
Play video starting at :4:4 and follow transcript4:04
need to have good knowledge of all the relevant legal frameworks and legal ideas
that operate in them.
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Here the EU Emissions Trading Scheme, the EU carbon market, makes an
interesting study.
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It was introduced in the EU legal order, following the Kyoto Protocol, and
subsequently, international environmental laws and agreements.
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In the EU, it was enacted as a directive in line with the EU legal order and
competences.
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It was implemented in the national legal systems through national laws.
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Understanding how these different legal frameworks fit or even clash, is crucial in
following environmental-law inquiries through. The third point is to appreciate that
the understanding of environmental problems and the corpus of law and policy that
apply to these is a very complex exercise in itself.
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To clarify this point let us again returned to carbon markets
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Debates on these are cross-disciplinary, although economists and economic
analysis mainly dominate the discourses. To respond and contribute to this debate
on carbon markets, imposes certain challenges for us as lawyers. For instance, it
requires mastering particular methodologies
Play video starting at :5:32 and follow transcript5:32
required by specific disciplines. For example, in case of climate change,
understanding scientific data, or in other cases understanding economic analysis,
and be able to translate these findings into a legal framework.
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This exercise is not straight forward and it is made harder by common dichotomies
expressed in the framing of market mechanisms, for instance. It is often perceived
as a regulatory strategy that is distinct from direct regulation On the basis that
carbon markets operate according to market mechanisms, as opposed to being
state-controlled, which direct regulation is assumed to be. The effect of such a
distinction is to construct an image of markets as distinct from the state or more
dramatically, from law.
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What this means is that important overlaps between, for instance, judicial discourse
or legal discourse and market constructions are overlooked. Just as the complex
and dynamic relationship between markets and the state in the context of carbon
markets are oversimplified.
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So to sum this up environmental law is a challenging subject to study. But tackling
these challenges is what makes engagement with environmental law rewarding
A Practitioner’s View – Tonie Persson
Good morning, Tonie Persson. It's a real pleasure and honor to have you on board
this interview this morning. We're here today to talk about EU tax law but before
that I would like you to present yourself. >> Yes, thank you for giving me the
opportunity to have this interview with you. As you said, my name is Tonie
Persson and I work with the international taxes at EY in our Malmö office here in
Sweden. And I have been doing this for a couple of years and before that I started
at the master program here in Lund with the International and European tax law.
And I also have some studies in the business administration and economics and a
LLM also in general law.
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So that is my background. >> But you specialize in taxes. >> Yes, I specialize in
taxes. Direct taxation and especially cross border with multinational enterprises
and structuring transactions and so on. >> You could maybe tell us a little bit more
about your firm.
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>> Yes, EY is a, as I guess everybody knows, it's one part of the big four auditing
firms. And we have a presence probably all over the world which give us a very
strong network which is extremely important as an international tax practitioner.
It's always possible for me to pick up the phone and call a colleague if we need to
discuss something. So a very good network to be a part of.
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>> And in order to join this kind of companies or firm, you need a solid education
in international tax law, right?
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But why is it so important to learn about EU tax law? >> Well, since Sweden
obviously is a part of the EU.
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It is important to know about EU tax law even if you only concentrate on the direct
taxation and not indirect taxation. That even though it's not harmonized it does
affect. It's not only the cross border situation that will get affected with EU tax law.
But also, it affects our domestic tax law. So in order to be a good tax practitioner,
you really have to have an understanding of the fundamentals, at least, of EU tax
law.
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>> Can you give us an example of how it is important for a practitioner to know
about the fundamental freedoms and the integration series? >> Well, first of all, I
believe that what is really important is to obtain the knowledge of the EU tax law.
That if you don't have the knowledge, you cannot identify when you need to apply
it. So number one, obtain the knowledge about the EU tax law. When you have
that knowledge, it is really something of the backbone of what you do as tax
practitioner. Because you have the merger directive, parent subsidiary directive,
interest royalty directive and that has a great effect on both the work that I do as a
tax practitioner but also for the clients. If we don't know about these directives and
how they affect the business and how to structure a transaction. That would be a
great disadvantage not to know. So it's really really important to have those skills
and that knowledge.
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>> In your studies, at which level did you get this knowledge? >> Well, it started
when I did my LLM studies, we started with general EU law. Not EU textbook, but
EU law, to understand the basics and the principles with the EU foundations and
the most important case law.
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But then, when we went on and started study tax law at not advanced level, it was
more broad studies. So not much in depth on EU tax law. It was obviously a part of
the studies but not in depth. But then I started your master program here at Lund
University which focuses on international and European taxation. And that is really
where we go more in depth and really really focus the applicable case law. And
how to use it from a pure tax perspective. So, that is, I believe, where I gained the
knowledge that I use on a day to day basis as a tax practitioner. >> That's right.
And now, we're going to talk a bit about a very hot topic in the news papers which
is the Panama leaks and what is going on. Banks and business actually transfer
their taxable bases either in tax havens or in countries where the lack of exchange
of information is utmost. And the question is very simple. The EU has no mandate
to harmonize taxes, and so what can we do? What's the solution to this problems?
>> Obviously, something needs to be done and there is much work. We have
OECD, we have the G20, even the UN. And also, of course the EU. So the
question is who should do what, should we do it on our EU level or should we try
to do it on more global level? Because there is also a risk that let's say, that OECD
and G20 try to do one thing, EU does another and they get intertwined. They have
proposed some rules from the EU, other rules from the OECD and they don't match
100%. And that can be a problem. So what I would like from a tax payer's
perspective is to have something that is coherent. What is important for a tax payer
is of course that we know the rules. What are the rules? How will they be applied
and so on to limit the number of gray areas? What is most important? It is stability.
So we know what do apply and what doesn't apply.
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>> Okay, so what you're striving for is legal certainty? >> Yes. >> Which is an
area where we've seen the ultimate decision maker is the court of justice of the
European union. Even though the rulings tend not to apply to Panama or to other
states around the world. But how much is the knowledge of this court of justice's
case law used in your every day work? >> Well, if I looked at my colleagues who
work in indirect taxation, it is very much of use. Obviously, because my colleagues
have meetings every week. They have group discussions in the group. Where they
go through the latest developments from the ECJ. But for me, as a direct tax
practitioner, it's a little bit different. If we get a case from the ECJ and it perhaps it
is about, let's say, Portuguese domestic tax legislations. Then, we have to think
about it. How can this apply in the Swedish situation? Or how does this effect the
rules that we have in Sweden. And what to do about it. So, it's not as direct as in
indirect taxation. But it's still of course of great great importance and it does effect
our domestic rules. But one problem is also, if we interpret a case from the ECJ in
a certain way, the tax agency has a difference of opinion. What can we do? We
don't have direct access to the ECJ. We have to go through our domestic courts and
we have to rely on them to refer the cases to the ECJ. But the problem is, I will not
say as often say but it's not uncommon that they do not refer cases where we think
they should. So maybe one solution to that problem, I think that, the CILFIT
doctrine, maybe they should do something more about it in order to get the
domestic courts to refer more cases. But on the other hand, the problem with going
to the ECJ if we have a case referred. Then we will have a waiting period of
probably a number of years.
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I can see that sometimes they are not willing to wait that long and to live with that
uncertainty. So that is another aspect. How could we make the ECJ to move faster?
How can we give them some further funding or something to make their work
more effective. Because, that's the other side of the coin. If more cases are referred,
obviously, the waiting period will be longer. >> Right. >> And what can we do
about that. That is a real important question because even if you believe you have
made a correct interpretation of a certain case or piece of legislation you still need
to have a ruling about it. >> Right, right. Have you ever won a case yet in your
short career? >> [LAUGH] >> Yeah, yeah. Of course, we win some, we lose some.
But we have won cases. But we also have had cases where we would like to go to
ECJ but we have this problem with that it takes a long time. So, so far, I'm not been
at the ECJ yet, but maybe someday. [LAUGH] >> Something fun to look forward.
>> Yeah, exactly. >> Thank you very much for your time and for your answers,
Tonie Persson
A Practitioner’s View – Amanda Kron
Hello, my name is Britta Sjostedt, I'm a senior lecturer in Environmental Law at
the Faculty of Law at the university, and today we have with us, Amanda Kron.
She is an associate expert on climate change, and environment, at the office of the
UN High Commissioner for human rights, and Amanda could you tell us a little bit
about your work? >> Of course, and thank you for having me. So, I am part of the
environment and climate change team, at the office of the UN High Commissioner
for human rights, or OHCHR. As it's also known, and OHCHR promotes a human
rights based approach to environmental action, and governance, in many different
ways. Including, supporting the inclusion of civil society, and affected persons and
peoples, and environmental decision making. Access to information, and access to
effective remedies, assisting human rights mechanisms, in engaging on
environmental matters. Undertaking research and advocacy, on the environment
and human rights, and of course collaborating with other international
organizations. UN Agencies on the Environment and human rights, and in
integrating a rights based approach in environmental action. >> And how would
you say a normal work they would look like? >> Well, I undertake research and
advocacy of course, on the environment human rights, I provide technical support,
on the environment. Climate change, human rights, and I also represent the office
at events. So for instance I participated in the first HR delegation to the 25th and
26th conferences of the parties to the UN. Framework convention on climate
change, and also to the fifth UN Environment Assembly. >> And what would you
say you like the most about your work? >> Well, among many interesting aspects
of my work, I particularly enjoy engaging with rights holders, and partners,
including from academia, civil society, international organization, states and many
other actors. And this can for instance be in the context of the UN Environment
Management Group, as well as the meetings of Multilateral Environmental
Agreements. [MUSIC] >> So increasingly, International Environmental lawyers,
also work on human rights issues. Could you tell us a little bit about the inter
linkages between human rights and environment? Yes so, it is clear that
environmental degradation, including climate change, nature loss, and pollution,
has negative impacts, on the effective enjoyment, of human rights. And this
includes the right life, right food, right to water, right health, right to development
and the right to healthy environment, among many others. We also know, that
persons and groups, peoples who are already living in vulnerable situations, for
instance, living in marginalized situations or in poverty, are disproportionately
impacted, by the negative impacts of climate change, and environmental
degradation. So in order to effectively respect, protect and fulfill human rights,
ambitious environmental action is critical, and this is something that the Human
Rights Council has also recognized. Including through its, recent resolution 48
to13, recognizing the right to a clean, healthy and sustainable environment, as well
as resolution 48 to14 establishing a special rapporteur, on climate change and
human rights. [MUSIC] >> So in your previous position at the UN Environment
Program Unit, you worked on environmental peace building. What could you tell
us about this topic? >> Yes so, it is clear that again environmental degradation,
including climate change pollution. Nature loss, can act as a threat multiplier,
multiplying security risks, and human rights harms. And it is also clear, that
persons and groups and peoples living in vulnerable situations, are again
disproportionately impacted, by these negative effects. We also know that
environmental human rights defenders, are often in particularly vulnerable
situations, in crisis and conflict affected context. For instance, in relation to land
rights. While I was at the UN Environment Program or, I was working with the
Environmental Cooperation for peace building program, and I was also working
with the EU. Unit partnership on climate change security, and this partnership was
developing integrated approaches, to address climate change and security, at the
global level, and also at the national and local levels, in Sudan and Nepal.
[MUSIC]. >> For many students having a job at the UN and pursuing an
international career is a dream. Could you tell us a little bit about your journey of
getting a job at the UN. And perhaps if you have any advice for students, on how
to engage in international issues during their studies. >> Yeah of course. So an
important part of my own journey, has been participating in the Junior Professional
Officers program, and this is a program that is open to young professionals, often
with an advanced university degree, and a minimum of two years, of professional
experience. And there are of course many other relevant initiatives as well,
including with UN volunteers, with the UN Young Professionals program, and
undertaking internships, at UN agencies, including at UNA or CHCR. I would also
recommend studying languages, for instance one of the six UN languages, and
studying abroad. And finally I would recommend engaging with student
associations and organizations, that have an international outlook. So for instance,
during my own studies, I volunteered with the European Law Students
Association, including developing, and coordinating a moot court competition. >>
Well thank you very much Amanda for coming here, and for sharing your insights,
and I hope you enjoyed listening.
Week 5: Resolving Cross-border Disputes
What is Private International Law?
My name is Michael Bogdan and I'm senior professor of Comparative and Private
International Law here at the University of Lund in Sweden. Now the branch of
law called private international law deals mainly with family and business
relationships and disputes having international implications. Today it is for
example not unusual that the marriage or a contract is entered into by two parties
who are citizens of Abitur residents of different countries. A harmful act is
sometimes committed in a country other than that where the resulting damage
arises, or where the parties habitually reside. An object sold while situated in one
country may subsequently be moved to another country where the validity of the
sale is challenged, and so on.
Play video starting at :1:10 and follow transcript1:10
Now imagine that the Swedish company signs, in Italy, an agreement with the
Greek company. The contract provides that the Swedish company will repair some
machinery owned by the Greek company, but situated in Hungary. Just like purely
domestic contracts lacking foreign elements, this agreement can conceivably give
rise to various disputes. For example, the parties may disagree on whether the price
of the spare parts needed for the repair is included in the agreed remuneration. Or
one of the parties may claim compensation for an alleged breach of contract by the
other party. One of the parties might even argue that the whole contract is invalid
because it was entered into under the influence of fraud committed by the other
party.
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Now, whenever a business or family relationship, having international connections
with more than one country, and thereby with more than one legal system, gives
rise to a legal controversy, the international character of the situation causes a
number of complications. To begin with, the content of the laws of the various
countries connected with the situation may differ, and thus could lead to different
outcomes. It may therefore be necessary to decide which of them should govern
the substance of the dispute. It is not self evident that the court adjudicating the
disputes should apply its own law. Which might have a very weak or no relation to
the actual situation. It is more reasonable to apply the law of the country with
which the relationship is most closely connected. But which law is it? Returning to
our example, is it the law of the country where the contract was signed? That is
Italian law. The law of the provider of the repair service? Sweden law. The law of
the country of the customer? That would be Greek law. The law of the country
where the repair has been carried out or is supposed to be carried out? Hungarian
law. Or some other law. This is the moment where private international law steps
in, and it provides an answer to this question by designating the law to be applied.
As the problem is often perceived as involving a conflict between the legal systems
of the countries connected in some way with the legal relationship in question, the
rules designating the national law to be applied are commonly called conflict rules.
This conflict rules constitute the very core of private international law. Which is
the reason why in some countries for example, in the United States, private
international law is simply called conflict of rules. An example of a typical conflict
rule found in Article 4 over the EU regulation from 2008 on the law applicable to
contractual obligations, stipulates that to the extent the law applicable to the
contract has not been agreed by the parties themselves, a contract for the provision
of services should be governed by the law of the country where the service
provider has his Abitur residence. That is, in our example Swedish law. This
example illustrates the fact that conflict rules are mainly over technical nature.
They do not deal with the substance of the dispute, but merely with a question
about which national legal system is to be applied to that substance. Conflict rules
are therefore rules about applicable rules rather than rules about reality. In a wider
sense, private international law comprises not only conflict rules, but even rules
dealing with certain procedural situations having international character. The most
important of such provisions regulate the international jurisdiction of courts. That
is, they specify which connection between the dispute and a country is sufficient to
make the courts of that country competent to adjudicate. Returning to our example,
if the Greek company wants to sue the Swedish company, does it have to do it in a
Swedish court or can it turn to a court in Greece? Or perhaps a court in Hungary or
Italy? Of great importance are also rules or recognition and enforcement of foreign
judgment. If the Greek company obtains a Greek, Italian, or Hungarian judgement
against the Swedish company, can it have it enforced in Sweden, where all the
assets of the Swedish company are assumed to be situated?
Is there a Truly European Private International Law?
The rules of private international law. In spite of the word International. Have been
of national origin and vary from country to country. Due to the differences
between the various national config rules. And the frequent non recognition of
foreign judgments, it could easily happen that, for example, the same contract was
considered valid in one country but not in another. The same could occur in the
field of family law. For example, a couple divorced in one country could in another
country continue to be considered married. Such complications arise. In spite of
certain efforts to resolve them on a global level, even today. But there are
particularly problematic in Europe because they can affect adversely the
functioning of the European common or internal market characterized by the free
movement of persons, goods, services and capital. It is at present not realistic to
expect the total unification or harmonization of the substantive private law of the
EU member states. The European Civil Code will, within the foreseeable future,
hardly be anything else than a dream. This makes it particularly important to unify
the private international law in the member states so that the law of the same
country is applied regardless of in which member state the dispute is adjudicated. It
is equally important that the judgments given by a court of a member state are
recognized and enforced in the other member states. Since the turn of the
Millennium, the EU has therefore been very active in the field of private
international law. The legal basis of used legislative competence regarding private
international law is today. Article 81 of the treaty on the functioning of the
European Union. Which provides that the union should develop judicial
cooperation in civil matters. Having cross border implications, particularly when
necessary for the proper functioning of the internal market. This Corporation in
civil matters includes taking measures aimed at ensuring, among other things, the
compatibility of the rules applicable in the member states concerning conflict of
laws, jurisdiction of courts, and the mutual recognition and enforcement between
member states of judgments. On the basis of Article 81, and it's pretty assessors,
the European Union has issued a substantial number of instruments dealing with
these matters. The most important among those of them that are relevant for cross
border business transactions are the regulation on jurisdiction and the recognition
and enforcement of judgments in civil and commercial matters. The socalled-
Brussels one BIS regulation, the regulation on insolvency proceedings, the
regulation on the low applicable to contractual obligations, the so called Rome.
One regulation. And the regulation on the low applicable to non contractual
obligations. The so called Rome. Two regulation. The EU has also enacted some
important ancillary rules making the adjudication of cross border dispute simpler,
such as the EU regulation on the service in the member states of Judicial and
extrajudicial documents in civil and commercial matters and the regulation on
cooperation between the course of the member states in the taking of evidence in
such matters. All these regulations are binding on the courts of the member states.
They are in principle to be understood and applied uniformly in the whole
European Union and the authoritative interpretation of the meaning is entrusted to
the Court of Justice of the European Union. Which is already rendered a large
number of judgments regarding them. It must be mentioned that due to special
arrangements, then mark in spite of being an EU member state does not participate
in this legislative cooperation. And the United Kingdom and Ireland, although not
obliged to participate, have in most cases made use of the right to opt in. That is, to
take part in it on a voluntary basis. It is expected that most of these rules will in
one way or another continued to be applied in the United Kingdom even after
Brexit. The creation and ongoing growth of European private international law.
Attract the attention of many legal academics and as given, rise to significant legal
research. An association of leading specialists in the field is the European group
for private international law. Shadeep, which means annually, to discuss and adopt
recommendations concerning current developments and projects
Which Courts have Jurisdiction?
This lecture will deal with the jurisdiction of courts and the recognition and
enforcement of judgments in business disputes. Due to time constraints, I shall
leave aside what family law and the special rules protecting the weaker parties,
such as consumers or employees. The relevant provisions are found in the so-called
Brussels 1 bis regulation that has already been mentioned. Pursuant to the main
rule, a person who in business disputes is usually a company of some sort,
domiciled in a member state must be sued in the courts of that member state, while
persons domiciled outside the EU remains subject to the national jurisdictional
rules of the member state of the court. For example, Sweden has a rule that grants
Swedish courts jurisdiction regarding monetary claims against any foreign person
having assets in Sweden. This rather exorbitant ground over jurisdiction continues
to apply in Sweden. If the defendant is domiciled in, for example, the United
States, Russia, or South Africa, but it cannot be used if the defendant is domiciled
in, for example, Germany, because Germany is a member state of the EU. Now
Some jurists, in particular in the United States, have criticized this approach is
unfair and discriminatory. The main rule on the exclusive jurisdiction of the court
of the member state of the defendants domicile is subject to several exceptions, for
example, in matters relating to a contract, a person domiciled in a member state
may also be sued in another member state where the place of performance is
located. Some kinds of disputes must always, irrespective of the domicile of the
defendant, be dealt with by a court designated on another ground, for example,
proceedings having as the object right in immovable property, fall within the
exclusive jurisdiction of the member state in which the property is situated. It is
also permitted for the parties under certain conditions to agree that the courts of a
certain member state are to have jurisdiction to settle disputes between them.
Play video starting at :2:50 and follow transcript2:50
The prohibition of the use as against defendant's domiciled in the EU over
exorbitant national jurisdictional grounds such as dimension Swedish rule makes it
possible to be generous when it comes to recognition and enforcement. A judgment
given in a member state is in principle recognized in the other member states and it
is also enforceable there. But even here, there are exceptions, though, such as the
recognition wouldn't be manifestly contrary to the public policy in the member
state in which recognition is sought, or if the foreign judgment is irreconcilable
with the judgment given in a dispute between the same parties there.
Which Law applies?
This lecture, we'll deal with the designation of the law applicable to cross-border
contracts and torts. Or in other words, the law applicable to contractual and non-
contractual obligations having international or four in elements. Let me start by
refreshing your memory concerning the example I used in my previous lecture. A
Swedish company has signed in Italy an agreement with the Greek company. The
agreement provides that the Swedish company will repair some machinery owned
by the Greek company in Hungary. Subsequently, the parties disagree on which of
them is to pay for the spare parts needed for the repair. One of the parties claims
compensation for an alleged breach of contract by the other party, or one of the
parties asserts that the whole contract is invalid because of fraud committed by the
other party. The party disagree also on which law governs these issues. Similar
problems regarding the designation of the applicable law may also arise in
connection with non-contractual obligations where the alleged liability does not
arise out of the contract, but is rather based on some kind of alleged, intentional or
negligent act causing damage to persons or property. The designation of the law
governing a non-contractual obligation may be of crucial importance for deciding
such matters as, for example, the extent of liability and the assessment of the
damage. In the private international law of the EU, the designation of the
applicable law to contractual and non-contractual obligations is governed by
conflict rules found in two regulations, namely, regulation from 2008 on the law
applicable to contractual obligations, also called the Rome 1 regulation and
regulation from 2007 on the law applicable to non-contractual regulation, they're
called the Rome 2 regulation. An important feature of both these instruments is
that while there are binding on the courts of the member states only, the law
specified by them is applied whether or not it is the law of a member state. They
may thus lead to the application of Chinese, Russian, or South African law. There
is no requirement of reciprocity, because the law of a foreign country, whether or
not it is a member state, is not applied in the interest of that particular country but
rather because the EU legislator is of the view that the application of that law is
conducive to a reasonable resolution of disputes having international implications.
Such application foreign law is therefore in the interest of the EU in particular
because it contributes to the smooth functioning of international commerce. The
main principle of the Rome 1 regulation on the law applicable to contractual
obligations is the principle of party autonomy. A contract is governed by the lower
chosen by the parties. The choice may take place at the time of contracting or later,
and it can be explicit or otherwise clearly demonstrated by the terms of the contract
or the circumstances of the case. With some minor exceptions, the freedom of
choice of the parties is not limited to legal systems having some natural connection
with the situation, so that, for example, a Swedish and a Greek company may agree
on subjecting their contract to English law simply because they both are familiar
with it. Surprisingly enough, the parties to contract of international nature refrain
often from making use of the freedom to choose the applicable law. The reasons
are manifold, ranging from ignorance of private international law to reluctance, to
burden contractual negotiations with an additional potential cause of disagreement.
Now whatever the reason, the limited user party autonomy increases the practical
importance of the Rome 1 regulations conflict rules designating the applicable law
in the absence of choice by the parties. The Rome 1 regulation contains a number
of seemingly fixed conflict rules For some of the most common types of contract,
for example, to the extent that the applicable law has not been chosen by the
parties, a contract for the sale of goods is governed by the law of the country where
the seller has his habitual residents. And the contract for the provision of services
is governed by the law of the country of habitual residence of the service provider.
However, many important infrequent contracts ranging from money loans to
trademark licenses are not on the list. Furthermore, it is not uncommon, but the
contents of the same single contract constitutes a mixture of several types of
contracts. Such as, when a contract for the sale of machinery include the training of
the buyer staff and the license to put the seller's trademark on the final product.
Such so called mixed contracts are governed by the laws of the country of habitual
residence of the party required to carry out, but the regulation cause the
characteristic performance. Meaning the specific performance as opposed to the
performance consisting of payment of money. It is permitted to deviate from this
conflict rules where it is clear from all the circumstances of the case that the
contract is manifestly more closely connected with another country.
Play video starting at :6:27 and follow transcript6:27
What is just been said applies mainly to business to business contract. The
regulation contains also special conflict rules for certain so called weak party
contracts, such as contract between the businessman and a consumer or between an
employee and employer. Where an unlimited party autonomy could be abused by
the stronger party to the disadvantage of the weaker party, normally the consumer
or the employee. Therefore, the regulation provides that the typical consumer
contract is normally governed by the law of the country where the consumer has
his habitual residence. And that the choice of another law will not be invalid per se,
must not deprive the consumer of the mandatory protection. But is the protection
the parties cannot delegate from by agreement provided by the law of his country.
Similarly, even though an individual employment contract is in the first place
governed by the law chosen by the parties. That choice must not deprive the
employee of the mandatory protection he enjoys pursuant to the law that would
govern the contract in the parties had not chosen another law. With regard to non
contractual obligations, the Rome II regulation gives the party some very limited
space to agree on the applicable law, but in most cases this is not a realistic option.
The main conflict rule of the regulation stipulates that the law applicable to an
obligation arising out of a tort, is the law of the country in which the damage
occurs. Irrespective of the country in which the event giving rise to the damage
occurred and irrespective of the country or countries in which the indirect
consequences of that event occur. For example, imagine a careless hunter who
while standing in Sweden, fires the shorter the deer, but the bullet crosses the
border and injures an American tourist in Finland. Pursuant to the rule just
described, the civil liability of the hunter will be governed by Finnish law. The law
of the place of direct and immediate damage, irrespective of the the shot was fired
from Sweden and that indirect damage such as the cost of medical treatment or the
loss of income was suffered by the victim in the United States. However, if both
the person claimed to be liable and the person who sustaining damage have their
habitual residence in the same country at the time when the damage occurs, the law
of that country applies. Another exception to the main rule concerns those cases
where it is clear from all the circumstances of the case that the tort is manifestly
more closely connected with another country. In particular, you to some
preexisting relationship such as a contract between the parties.
Play video starting at :9:39 and follow transcript9:39
Regarding certain types of torts, the Rome II regulation contains special conflict
rules which prevail over the general conflict rules that have just been described.
One such special conflict rule, for instance, deal with the compensation to be paid
for environmental damage. And gives the person seeking compensation the option
to choose to base his claim on the law of the country in which the event giving rise
to the damage occured. Meaning, the law of the country where the harm to the
environment originates. Rather than to rely on the main rule referring to the law of
the country of the resulting damage.
Play video starting at :10:25 and follow transcript10:25
Both regulations permit the court dealing with the dispute to refuse the application
of foreign law if such application would be manifestly incompatible with the
public policy of the country of the court. For example, a contract for the payment
of a bribe should and almost certainly would not be enforced by the courts of the
EU member states, irrespective of what the law governing the contract says.
Concluding Remarks
The application of some of the traditional, but to some extent even of some of the
recent rules of private international law is affected by modern technological
achievements such as the advance of the Internet. Some of the jurisdictional and
conflict rules assume that it is possible to ascertain, for example, the place of
contracting, the place of performance of the contract, the place of the harmful
event, or replace of the resulting damage. The nature of the Internet has made it
possible, and in fact quite commonplace to both enter into and perform a contract
in cyberspace. For example, today it is possible to conclude the sale of digital
goods such as music, computer games, or movies, pay for them, and even have
them delivered on the Internet. Harmful acts such as defamation or copyright
infringement can also be committed in cyberspace. All these constitutes a
challenge to private international law, which has to be adopted and to some extent
has already been adapted to our new digital world.
Play video starting at :1:26 and follow transcript1:26
Within the framework of the short presentation, it is of course impossible to
enumerate and describe all private international law rules enacted by the EU. These
rules covering a great variety of issues about family and business law filled today
hundreds of pages in the Official Journal of the European Union. And they're often
very detailed, containing many exceptions and exceptions to exceptions. In
addition to the volume in this regulations, such as those previously mentioned,
many scattered rules of private international law relevance are found in various
directives dealing mainly with the approximation of substantive legislation, for
example, in the field of consumer law.
Play video starting at :2:14 and follow transcript2:14
Also, the treaty on the functioning of the European Union, which is itself directly
applicable in the court of the member states, contains some provisions with direct
impact on private international law issues, for example, the articles prohibiting all
discrimination on grounds of nationality or protecting the freedom of movement of
persons, goods, services, and capital. For example, it can be argued that the refusal
to recognize a chattel mortgage created in another member state would indirectly
create an unlawful obstacle to the free movement of goods.
Play video starting at :2:58 and follow transcript2:58
Private international law has traditionally been considered small marginal subject
that is of interest only to a small group of jurists engaged in international
transactions. The creation of the common internal European market and the
enactment of voluminous EU legislation in this field have changed the situation
radically. The negative side of this development is that it has become very difficult,
if not practically impossible for judges and practicing lawyers to master the
subjects and apply the rules correctly without the assistance by specialists.
Unfortunately, in the law school curricula, in many of the member states, private
international law is not found among the required compulsory subject. And it is
offered, if offered at all, merely as an elective subject taken by minority of
students. I'm happy and proud to say that at my university, this is not the case. And
that all our law graduates have been made familiar with at least the basic features
of private international law, including the private international law of the European
Union.
A practitioner’s View-Christoffer Monell
Christoffer Monell very welcome to Lund University and our MOOC on doing
business in Europe. You're a practitioner and you and I, we're going to talk about
international private law. But could you please introduce yourself a bit and also the
company that you are working with? >> I suppose, I would like to start by saying
I'm grateful to be here, and it's an honor to be here of course. And I work at the
Swedish law firm that is called Mannheimer Swartling, it's a commercial, fully
serviced firm. We're an independent firm, but we have international presence. We
have offices, of course, in Sweden, but we have also offices in Germany, in Russia,
in China. And we have representation offices in New York and also a competition
law office in Brussels. So, we try to maintain our international prescence and, as I
said, mainly almost exclusively commercial law.
Play video starting at :1:16 and follow transcript1:16
>> As I said, we're going to talk about international private law >> Yes >> That is
an odd name, isn't it >> Yes, I think so, I think it has probably historical
explanations, but I think today it is a bit awkward. But I guess, one is trying to sort
of make a difference between public international law and private law in between
sort of private entities. I think that it's a cumbersome name. >> Yes.
Play video starting at :1:43 and follow transcript1:43
The Americans, the English, they'd rather talk about conflict. >> Yes, and I think
that is probably more what it really is about. >> And you are active in your law
firm, are you a specialist in conflicts? >> Both yes and no. My true specialism is in
dispute resolution and also in solvency law. But we have a number of lawyers who
sort of tend to get these international law questions and confidence law questions,
and I am one of them. But I don't think we have any true specialists in a Swedish
law firm that mainly, or exclusively, deals with these type of questions. But
everybody, I think, working in commercial law today must have some knowledge
about these questions.
Play video starting at :2:32 and follow transcript2:32
>> And I agree with you on that, so I mean, you cant be active in international
transactions without thinking a little bit about the problems that may occur when
you're dealing within different jurisdictions. >> No, no I think is impossible, even
though a lot of parties fail to think about it, but as a lawyer you you must.
Play video starting at :2:56 and follow transcript2:56
>> There are basically three areas that we need to talk about. We need to talk about
how to select a law to apply to the transaction. We need to think about where to
resolve the dispute. And we also need to think about the execution of that
judgment, or whatever it is. Let's start talking about the law. >> Yes. >> Is it
important to select a law when you're involved in the international business
transactions? >> Yes, I think so, because our sort of main focus is to avoid
uncertainty, we want to know what is this agreement about and what are the party's
rising obligations. And if you don't know the applicable law, it's very difficult to
make that sort of analysis. So we would prefer to have a clear cut choice of law
already in the agreement, because that would save a lot of problems later on.
Play video starting at :3:55 and follow transcript3:55
And of course, if there are sort of very important obligations or rights that you
want to safeguard, you should probably make some sort of due diligence in
advance, looking into that sort of potentially applicable laws and make a decision
based on that perhaps. Often I think that the choice of law is perhaps not based
very much on honestly the legal realities, but rather it's a kind of negotiation
between the parties. And a lot of other factors will be sort of considered as well. Of
course, one major factor being the party's sort of strength with each other. And a
very big party will have it easier to sort of impose a certain law on the other party.
>> So now you're representing the bigger party. >> Normally, I am yes. >> Well if
we assume that, >> Yeah. >> What law would you select then? >> I mean, if I
have a free choice, I would of course choose, I'm a Swedish lawyer, I would
choose Swedish law on the contract. Because that is my sort of default mode and I
will have a rough idea at least of most major aspects of Swedish commercial law
and what that would entail. Your German counterpart, your lawyer sitting on the
other side of the table, he thinks the same way. >> Exactly, exactly. >> So here
you have one saying let's have Swedish law and the other one saying let's have
German law.
Play video starting at :5:19 and follow transcript5:19
>> And then you would have to negotiate and of course, have a number of ways to
resolve that negotiation. If we have two parties that are sort of equal in strength
maybe like you can do a trade off. You can say well let's have arbitration in
Sweden, but German law to the contract, or the other way around. One can have a
sort of a mutual place. We can say, well let's have a Swiss law one and this will be
Switzerland. That would sort of give both parties, a certain disadvantage because
you're trying to find a compromise. >> Compromise, yeah. >> Is there any
compromise that you would not accept? Any type or any country that, where you
hesitate to have. >> I think that from a sort of European perspective, European
lawyers are bit afraid of US lawyers. Especially, when it comes to damages, for
instance, and the potential liabilities that can arise from a US court dispute for
instance and even though the pick of the law is something different >> But still
you have the risk of punitive damages for instance, and so on. So I think US law
sort of general US law would be something that we'd try to avoid if possible. >>
Your problem is that the American is often the big company. >> Yes, yes that's
true. That's true. >> So US law, you're at least shying away from. >> Yes. >>
Anything in Europe? [SOUND] No, not really, and not on a, sort of, a general
basis. But, then, it may be, sort of, an issue, depending on that particular contract.
>> Mm-hm. .> And then, you would have to look into what is this contract, and are
there any, sort of, peculiarities in UK law? >> Mm-hm. >> If that is something that
we are discussing, is there any risk? So then you would do an analysis in advance
to say, can we accept this from a legal standpoint? But, from off my head, no I
don't have any sort of problems with European law in that regard, not generally
speaking.
Play video starting at :7:22 and follow transcript7:22
>> Would you contact a local council in order to
Play video starting at :7:27 and follow transcript7:27
>> Find out what? >> Yes. I mean, one would have to do that. I am only a sort of
knowledge in Swedish law, so I would have to go through a local council. But of
course, it is a question for the client, a question of resources, how much will this
sort of due diligence cost? And is it worth it in the long run? I mean, one could
start off by looking into Sort of available textbooks. Do we have any sort of
strange things in this particular legislation, of course, we have articles and
newspaper reports and so on. But, I mean, if there's an important question then I
will definitely go to a local council and have some kind of opinion regarding this
particular issue.
Play video starting at :8:11 and follow transcript8:11
>> So selecting law is important? >> Yes. >> In commercial contracts? >> Yes. >>
Is it equally important to select the place or the institute that is going to resolve the
dispute? >> I think so, and perhaps even a bit more important actually, because >>
It's a problem with dispute resolution is as we discussed initially the enforceability.
Even if I have a very good contract and the applicable law is in my favour and I
win the case in the courtroom, the arbitration, but then I have a judgment or award
that must be enforced. And if that sort of document is not enforceable, then all of
this was for nothing. So I think that the dispute resolution and the method with
dispute resolution is very, very important.
Play video starting at :9:3 and follow transcript9:03
>> Any alarms ringing here with respect to specific countries?
Play video starting at :9:11 and follow transcript9:11
Once again USA is a problem with them sort of the risk for user trial. Of course
and that could be a problem especially for a non US court. I think mainly the
problem also in this regard goes to courts But not maybe the legislation as such
withdraw their sort of the sort of administrative burden for various courts. Do we
have a problem with corruption in certain countries and so one. So from that
perspective there are a lot of alarms ringing in certain countries especially in
southern and eastern Europe. But that is not, the litigation as such rather that sort of
general in society, I guess. >> With respect to jurisdictional issues is there some
type of mistake That part is generally due when they are trying to select?
Play video starting at :10:12 and follow transcript10:12
>> Yes, yes I think one thing that's very very often, surprisingly often actually, is
that when they draft their list of resolution clauses, if it's a provisional clause or an
arbitration clause >> That they don't, sort of attend to the details. And they point
for instance to a court that doesn't exist. Do they use the correct name? Or some
type of court that doesn't exist in that particular country. And it's also very
common when you want to point to certain arbitration institute. That you do not do
with the model process, but instead name an institute that sounds almost the same
but not quite, and even though these sort of mistakes can seem minuscule, they
could ultimately create large problems. Because if you are unlucky, you have
created a clause that doesn't allow you to start dispute resolution anywhere.
Because the court maybe that you pointed out that is not does not exist. So no other
court will accept because they say well you have pointed to this court but that's not
us. And similarly if you sort of name the wrong arbitration institute And maybe
none of the arbitrations are prepared to hear the disputes. And then maybe you can
go to court but that will cost you a lot of time and money ultimately for a very
small gain.
Play video starting at :11:30 and follow transcript11:30
>> Make no mistakes when you draft the choice of law or the jurisdictional
permission. >> Exactly.
Play video starting at :11:38 and follow transcript11:38
they are provisions which the court will interpret very carefully. >> Yes, yes. >>
And they very well may be interpreted against the stipulator. >> Definitely,
definitely, that could be a problem, as well. I don't think, I mean, the devil is in the
details, that is true in this case
Play video starting at :12:1 and follow transcript12:01
You are very much reasoning from a strategic perspective. >> [SOUND] >> When
I think about what knowledge do you need to have, what do you think is important
as a practitioner, what should you know? >> Well I must have a sort of idea of
course of the basic >> Sort of jurisdiction rules that will apply. And we have, of
course, in the last decades received a lot of legislation from the European Union
and that has changed the landscape quite a lot actually. But I think you must have
at least sort of a good knowledge about those instruments because that will help
you understand where will dispute resolved if we do not have a specific agreement
in that regard. >> So what instruments are you talking about? >> I'm talking
mainly about the Brussels I regulation and also the Lugano convention of course in
order- >> Those two you actually know quite well and probably you're >> On
national procedure as well >> yes, yes that's what makes it >> And do you think
that to a large extent these regulations and conventions have resolved problems in
Europe? On both selection of law and jurisdiction? >> Yes, I mean when we talk
about the choice of law, that would be the Rome regulations, the Rome I
regulation. I think they have solved a lot of problems, definitely, and created a
much better foreseeability when it comes to these questions applicable and also of
course the venue for the dispute resolution. But not all problems, there are still
technical, legal problems that could occur, even though I think it's mainly in the
enforcement scenario, but there are differences between judgments from various
states, and that could create a problem, even though formally they are enforceable,
but then you start to look on sort of the actual operative part of the judgment, for
instance. And is that really enforceable under German the way it's enforceable in
Sweden, for instance? That type of criteria, and that is not dealt with in. In the
European legislation, that is for national laws, and so we still have problems but it's
much, much easier just than 15, 20 years ago. >> To enforce a judgment. >> To
enforce a judgment, and also to foresee how will the court resolve the problem. If
they don't have a social law clause, what will the court sort of arrive at on the
matter?
Play video starting at :14:32 and follow transcript14:32
You have a choice to select either an ordinary court of law, or you can go to
mediation, you can select arbitration. Do you have any preferences for these, or
any strategic reasoning in how you select one or the other? >> Yes, and I think our
preference is definitely arbitration. And there are a number of reasons for that. One
important reasons is once again enforceability. Even though within the European
union we have the Brussels One regulation that helps us. But that only applies
within Europe. And of course we have trade partners in the rest of the world. We
have the U.S., Russia, China. And those are not party to the Brussels regulation.
And from a Swedish perspective, a Swedish judgment will not be not be
enforceable in the US and vice versa. So of course, in such an agreement,
arbitration is the really only available sort of solution, because an arbitrate award
will be enforceable under the new convention. But that is one major advantage of
arbitration. >> So in the choice between ordinary court and arbitration, you would
prefer to [INAUDIBLE]. How about arbitration and mediation?
Play video starting at :15:54 and follow transcript15:54
Mediation is something that has become extremely popular lately. >> Yes it is.
And in my world mediation can never be the only the form for dispute resolution.
Once again, if the parties do not agree you don't have anything and there's also a
question about the outcome of a mediation and to what extent that would be
enforceable actually. Mediation can be a part, but there must be something as an
alternative. Mediation fails, then you must be able to go to court or arbitration. I
am aware that mediation has become more popular over the last decade or so, and
especially in the US it's a very big thing. I don't think that it has really grown like
that in Sweden. And I think one explanation is that sort of traditionally Swedish
parties are trying to agree before going to court or going to arbitration, so that is
something that The parties will trying nonetheless and if the parties have some
kind of rejoins ground I don't think that they really need a sort of a specific
mediation arrangement, because they can always if they are speaking tongues they
will always be able to sort that out. And I think that my own experience is perhaps
not truly reflecting the sort of successful mediation. But I have tried, on numerous
occasions, disputes that we have felt have been sort of difficult because the parties,
there's some kind of personal vendetta or Third parties involved or sort of things
that are disturbing this commercial minds of the parties. And unfortunately all
those mediation attempts has failed for some reason. So I think that, well, I'm not
against it but I don't think that it solves everything and as I said, it must be
complimented by something else. Because maybe the. >> When I listen to you it
sounds like Europe has come quite some way in harmonizing rules regarding and
commercial transaction where to resolve the dispute. And also recognition and
enforcement. Do you see this as a future European procedure statue? >> No I don't
really, maybe in a very very long run but I think that's feels a bit unlikely because I
think this is very strongly rooted. Is sort of traditionally within each country. And I
mean these crisis when it comes to choice of and venues and so on I mean that is
one thing. But when you sort of look at how the trial shall be conducted, I think
that is something completely different. And I don't think that the, sort of, European
countries are prepared to really Throw everything out and replace it with
something else. And we have, of course, big differences when it comes to
procedural law. On one hand the civil countries and then, of course, the UK. And I
think that Sweden is kind of in between, that we have the civil law as such, of
course, is influenced by the civil law, so to say. But when you look at the conduct
of a trial That is very much the influence by the US and UK systems. >> So you
see a future for lawyers involved in international private lawyer conference. >>
Yes I do, yes I do.

European Business Law: Competing in Europe

Trademarks as Essential Assets
Brand and Trademark Strategy
Everybody knows about trademarks, and trademarks give rise to strong opinions.
When the word trademark is mentioned, not only pictures of famous brands and
logos will appear in the mind of the general public, but also pictures of less known
personal favorites that attract surprisingly strong feelings. People in general would
also agree that trademarks can be valuable for companies.
Play video starting at ::46 and follow transcript0:46
It is less apparent what amounts to a trademark and how it can be legally protected.
Most people would be equally unaware of the fact that trademarks are the most
valuable assets in a majority of modern global companies.
Play video starting at :1:4 and follow transcript1:04
As a matter of fact, the world's most well-known trademarks are valued on a level
similar to the total GDP of a small country. Despite the fact that it is hard to find an
objective method for measuring trademark value, it is evident that some
notoriously well-known trademarks are valued more than 100 billion USD.
Moreover, trademark value is increasing rapidly in today's society, where more and
more of world business is intangible, which means that it consists of trademarks,
patents and such assets.
Play video starting at :1:49 and follow transcript1:49
To work strategically with trademarks is therefore not an option, it is a matter of
life and death for the modern business.
Play video starting at :2: and follow transcript2:00
A starting point in understanding trademark strategies is to understand the
difference between a trademark and a brand.
Play video starting at :2:8 and follow transcript2:08
In everyday speech, trademark strategies and brand strategies are used as
synonymous concepts but there are significant differences.
Play video starting at :2:18 and follow transcript2:18
The word 'brand' is a term that comprises all activities in a company that may help
to build a reputation.
Play video starting at :2:27 and follow transcript2:27
In line with that, branding is an activity that involves the company's overall work
with its trademarks, comprising among other things marketing activities.
Play video starting at :2:39 and follow transcript2:39
Branding may therefore be defined as a social activity and trademarks as a social
construction, whereas they are nourished and developed in relation to a company's
existing potential customers and stakeholders. Trademarks, on the other hand, are
also legal constructions defined and explained by trademark law. Although
different constructs, it is crucial for a company to be aware of both trademark and
brand strategies in the overall development of business. The work with brand
strategies is usually the responsibility of a company's marketing department, and it
is an activity that in different ways focuses on value adding activities. In this
context, brand equity is used as an expression. Brand equity refers to the value of a
brand and it is based on the presumption that a well known brand will generate
more revenue because potential customers will believe that a product with a well
known brand is better than a product that is less famous.
Play video starting at :3:54 and follow transcript3:54
As indicated, brand equity is a crucial asset in many companies, but it is an asset
that is almost impossible to quantify.
Play video starting at :4:4 and follow transcript4:04
It is however, easy to conclude that a company's trademarks are within the core of
brand equity.
Play video starting at :4:13 and follow transcript4:13
In this regard, the trademark portfolio may be described as the framework within
which branding occurs.
Play video starting at :4:21 and follow transcript4:21
The one would not exist without the other. Even though there is a strong
relationship between trademarks and branding, the trademark portfolio is usually
the responsibility of a company's legal department, if such a department exists. Or
an activity that is actually outsourced to a law firm.
Play video starting at :4:44 and follow transcript4:44
Strategic trademark work is about knowing the details in trademark law to build a
strong legal protection in relation to a company's most valuable assets. In other
words, securing the legal structure for the future development of value adding
brand activities.
Play video starting at :5:5 and follow transcript5:05
It is common that problems in modern business appear because the marketing
division that focuses mainly on brand strategies is not effectively communicating
with the lawyers at the legal department that are more focused on the legal
protection of trademarks. In the lectures that will follow, this module will provide
an introduction in general to trademark law and it will focus on basic elements of
European trademark law.
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Such knowledge is essential for anyone with an interest in business. And it will
also facilitate a better understanding of the relationship between branding. For
instance marketing activities and trademark protection.
Trademark Law and Global Harmonization
During the last 40 years, there has been a rapid increase in interest regarding IP
rights, and this development was first manifested by the inclusion of IP rights in
the world trade negotiations conducted by the World Trade Organization, WTO,
also located in Geneva. In 1995, the TRIPS agreement was signed as an appendix
to the General Trade Agreement that was a result of the WTOs negotiations.
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The TRIPS agreement is very similar to the Paris and Berne Conventions regards
the substantive definition for IP rights,
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but a novelty in this agreement is the fact that rules regarding enforcement of IP
rights have been included.
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Another and important and influential actor in the development of the modern IP
law is the EU.
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Early on the EU showed an interest in IP law and there have been countless
initiatives in the form of directives and regulations with relevance for IP law.
Furthermore, the EU has developed a system of protection for community rights.
Such systems exist for trademarks and designs. And both these systems are
governed by the Office for Harmonisation in the Internal Market, OHIM, located
in Alicante in Spain.
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In addition to that, there are ongoing discussions as to similar systems for patents.
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A general remark in relation to EU's engagement in IP law is that this area of law is
closely related to foundational EU principles. For instance, the principle of free
movement of goods and the principle of effective competition. One example where
IP law becomes relevant in relation to other areas of EU law is exhaustion of
rights.
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This quite complicated doctrine aims at finding a balance between interests as to
free movement of goods and effective competition on the one hand. And the
interest to uphold strong and functioning IP rights on the other.
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The solution to this dilemma is that a proprietor, according to EU law, is entitled to
an effective protection that cannot be challenged by way of competition law or free
movement of goods arguments. In contrast to the use and exercise of IP rights,
which may be challenged. The exhaustion of a rights doctrine is a derivative of this
perception and it states that: "An IP right cannot be used to oppose the free
movement of goods protected by IP rights if those goods have been put on the
market by or with consent from the proprietor."
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To put it simply, it is always okay to have the right, but you may have to take
account to other interests when you are exercising that right.
Introducing European Trademark Law
The last two decades have seen an increased focus and interest in trademark law
and trademark is no longer a mere identifier and guarantee for quality, but also a
communicator of commercial messages and a carrier of enormous values.
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The increasing attention is visual in the jurisprudence.
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From an EU perspective, trademark law was quick to become a focus and as a
result of this focus, it became the first of the IP areas that was harmonized across
the union.
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The first harmonization directive entered into force in 1989 and a trademark
regulation establishing a separate system of community trademarks was launched
in 1994.
Play video starting at :1: and follow transcript1:00
Today, both the directive and the regulations are replaced by codified versions, but
the fact remains; since the beginning of the 1990s, trademark law has been
harmonized within the European Union.
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The starting point for our discussion will center on the previously mentioned
trademark directive, and the trademark regulation.
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Although the Paris convention and the Trips Agreement, discussed during the
introductory lectures are also relevant, they are of less direct importance.
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In addition to the trademark specific legislation, there are further acts that
interrelate with trademark law.
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One example is the Enforcement Directive, And further examples are directives in
the field of marketing practice.
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Moreover, it is relevant to recall that competition law and rules of free movement
of goods are closely related to IP law in general.
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Case law development occurs in two situations:
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First, there are the preliminary questions, where courts from member states are
asking the European court of justice for guidance as to the interpretation of the
Trademark Directive.
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In addition to that, there is administrative case-law. This latter group of cases are a
result of introduction of the community right system, with an administration of
registration at Office for Harmonization, OHIM. Administrative decisions, for
instance a refusal to approve a trademark registration, may be appealed. And
during that administrative process that follows, both the General court and the
Court of Justice, may be activated.
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This twofold system produces crucial, but rather non-transparent material.
Henceforth, I will refer to the Trademark Directive, but corresponding provisions
in the community trademark regulation will be highlighted.
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It is recommended that you have access to the directive to be able to follow the
lectures in trademark law.
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One specific aspect of trademark law is the fact that trademarks, in contrast to
other copyrights, may be infinite. All other IP rights have a limitation in time as to
the term of protection.
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Thus a trademark can live for ages.
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An illustrative way to identify relevant aspects of trademark law is therefore to rate
different relevant rules to the lifespan of a trademark.
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Some rules are applicable during the birth of the right, others are mainly applicable
during the life of a trademark and finally some rules apply in relation to the death
of a trademark.
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During this lecture, and the lectures to come, I will focus on foundational
principles of European Union trademark law and I will mention provisions in the
trademark directive that becomes relevant along the lifespan.
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Rules that governs the birth, or creation, of trademarks would be such rules that
deals with prerequisites for protection and exceptions from protection, and you'll
find such rules in Article 2 and 3 of the Directive.
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Then there are rules that governs the exercise and use of trademarks.
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That would be the life of a right, relevant in relation to what the proprietary is
allowed to do with a trademark.
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Such rules are to be found in Article 5, dealing with infringements, Article 6 and 7
dealing with limitations and Article 10 dealing with use as such.
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And finally, there are those rules, one example would be Article 12, dealing with
revocation, that governs how and when a trademark may be terminated and
consequently, deceased.
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The lifespan of a trademark may also be of use to illustrate the development of
case law. As was indicated above, there are both preliminary judgments from the
European Court of Justice and administrative decisions from OHIM, The General
Court and the Court of Justice.
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This latter group contains cases that deal with the registration of Community
trademarks. Examples is, a denial of registrations and or objections to registrations,
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and the legal background is to be found in the trademark regulation.
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The preliminary judgments, on the other hand, are based on a need to interpret the
Trademark Directive. And a majority of those cases surround an interpretation of
the use and exercise of trademarks.
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These two groups of cases are based on different legal grounds but it is important
to note that the substantive rules in the Trademark Directive and in the Trademark
Regulations, all formulated in an identical manner. Therefore, it is necessary to
consider case law from both groups in order to fully understand European Union
trademark law.
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During next lecture, I will proceed and develop the discussion as to the creation of
the right. Before that, however, it's timely to conclude that the trademark, as a
principle rule, is a registered right.
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Consequently, it is relevant to do a search in the trademark registry and secure that
a sign that is to become a trademark application is available before we discuss the
prerequisites for protection.
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Thus, it is time to resume acquaintance with the company.
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The company is about to introduce a new information tool that is to provide
patients with updated information on specific diseases and provide guidance for
self care.
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The service will also include the secure and corrupted service where patients can
receive direct access to their own health records.
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And the working name for the service, as we have been informed, is InfoMed. And
our first task is to do a trademark search to find out whether or not it is a sign that
is available in the registry.
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So for the purpose of this course, it's suffice to do a simple search using OHIM's
services, but you are, of course, allowed to conduct additional searches on your
own.
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Good luck, see you soon.
Obtaining and managing EU Trademark Protection
Welcome back. I hope that you by now have figured out how to manage OHIM
Tools and that you have a result from your trademark search.
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For the purpose of this course, we assume that the trademark that we are interested
in is available, and that a company wants to go through with the registration.
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A trademark is, as a general rule, a registered right and registrations are relatively
affordable, and the registration may be renewed on innumerable occasions. A
trademark right, in other words, may be described as a perpetual right. However,
not all science can be registered as trademarks in the first place.
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For a registration to be approved the trademark applied for must meet certain
requirements in trademark law and consequently, there is a need to investigate the
prerequisites for protection.
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The starting point for such an investigation would be Article 2 in the Trademark
Directive. As is evident from this provision there are two prerequisites that must be
fulfilled.
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First, a sign must be capable of being represented graphically. And in addition to
that, a sign must be capable of distinguishing a good or a service
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and this is, in other words, to have a distinctive character.
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The fact that a trademark needs to have a distinctive character indicates the behind
lying core value that a trademark protects. Namely, the commercial link that exists
between a trademark and its users, which is all potential buyers of the goods and
services that are marked by this trademark.
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As long as this link exists, distinctive character is at hand, and trademarks may be
justified.
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In this regard, a trademark is a valuable asset that communicates crucial
information to potential buyers.
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Simultaneously, a trademark may pose problems for other actors that operate on
the same markets selling similar products.
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In order to facilitate effective competition, it is necessary to have open and
searchable trademark registries, so that other actors, competitors can investigate if
a sign may cause confusion on the market.
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This is one of the prevailing arguments in favor of the prerequisites that a
trademark must be graphically represented.
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There must be a possibility to visualize the trademark so that others can take the
trademark into consideration, when planning their marketing strategies. In a
majority of cases, it is easy to represent a trademark graphically; word, figures,
packaging, etc, but modern trademark law embraces new ways to identify goods
and services by the use of music, sounds, videos, movements in general.
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And there are new forms of trademarks, sound-marks, and movement-marks, just
to mention some examples,
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which poses problems in relation to graphical representation.
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And there is an ongoing discussion as to the need to rephrase these requirements in
trademark law, and that it should be possible to visualize a trademark graphically.
But irrespective of whether or not this prerequisite will be replaced, the underlying
principle remains.
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It must be possible to represent a trademark in a clear and perceptible way if
protection is to be justified.
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As to our company and its trademark, it is definitely possible to represent this
trademark graphically, it's a word mark, and we can assume, at least for the
purpose of this course, that it has distinctive character.
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Still, we need to investigate whether or not there are exceptions that may create
obstacles in relation to the creation of the trademark.
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As we discussed during the introductory lecture there is a threshold for protection,
meaning, in relation to trademark law, that not all signs are viable for protection.
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Grounds for refusal to register a trademark, or to invalidate a trademark that is
already registered, are dealt with in Article 3 in the Trademark Directive. The
obvious ground for a refusal is that the sign can not constitute a trademark in
accordance with the prerequisites in Article 2, which is; if it can not be represented
graphically and/or lacks distinctive character.
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Further grounds for refusal are, according to Article 3.1 (c), if the mark consists
exclusively of signs or indications which may serve in trade to designate, for
instance, the kind, quality, quantity of the goods.
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In other words, a trademark protection for descriptive words is not justified and,
consequently, such words are excluded from protection.
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This is partly due to the need to allow free speech and commercial communication.
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Furthermore, a sign may not be registered as a trademark if it has become
customary in the current language or in the bona fide and established practice of
the trade.
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All the grounds for refusal so far have more or less dealt with distinctiveness.
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A descriptive or customary word is according to the principal rule of trademark
law, not distinctive enough to be allowed protection.
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This deficiency, however, maybe be cured by use. And this is in accordance with
Article 3(3) where it is made clear that a trademark shall not be refused registration
if it has acquired a distinctive character through use.
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There are additional grounds for refusal that are not curable by use. For instance,
Article 3.1 (e) that deals with the relation to patent and design protection and
clarifies that it is not possible to register a sign which, broadly speaking, aims at
fulfilling a technical function.
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Furthermore, it is not possible to register signs which are of such a nature as to
deceive the public or if the sign is contrary to acceptable principles of morality or
public policy.
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So, what answer are we now going to give to our client, the company? Is our
trademark, the InfoMed, a sign that is viable for protection?
Play video starting at :7:35 and follow transcript7:35
That is, of course, a hypothetical question, but it is not far-fetched to conclude that
it is likely that this word mark meets the requirements in trademark law and that no
exceptions are applicable, even if this word is possible to describe as a partly
descriptive word.
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Thus, let's assume that we now have a valid registration, and that the company has
started to use this trademark, InfoMed, in the course of trade.
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Using or exercising trademark is the right to prevent others from using that sign in
specific situations.
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However, it is not an absolute right. The possibility to prevent others can be
limited, and not all situations of use amount to an infringement.
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One of the most problematic aspects of trademark law is to learn how all those
aspects interrelate. What are the limitations and when does someone else's use
correspond to an infringement?
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So let's focus on the limitations first.
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Limitations in trademark law, applies in relation to the exercise of valid
trademarks. And they relate, to the scope of protection, in as much as they impose
restrictions in relation to the proprietor, by way of indicating certain situations,
where others shall be entitled to use the trademark.
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One such example is that a third party must be allowed in the course of trade to use
his or hers name and or address.
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The same applies in relation to indications concerning the generic expressions;
kind, quality and quantity. And it is also accepted that a third party shall be
allowed to use a trademark where it is necessary to indicate the intended purpose
of the product. For instance, this is necessary in relation to spare parts.
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The observant viewer may have noted that the limitations mentioned so far mainly
surround expressions that are generic and/or descriptive and consequently not
distinctive.
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Therefore, it is likely to conclude that there should be no problem, all of the above
mentioned will not be protected by trademark law in the first place, due to lack of
distinctiveness. And we need to recall the fact that lack of distinctiveness is a
curable ground for refusal. A general remark is that all limitations in relation to the
proprietor's right to prevent others from using, is that the use that is to fall outside
the scope of protection must be in accordance with honest practice in industrial or
commercial matters, which is stated in Article 6.1, last sentence.
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A final limitation to mention is The Exhaustion of Rights Doctrine that was
mentioned during the introductory lecture.
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In relation to trademark law, this principle is expressed in Article 7.1, and it states
that a trademark shall not entitle the proprietor to prohibit its use in relation to
goods which have been put on the market in the community under that trademark
by the proprietor or with his or hers consent.
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This may sound like a clear principle and it is, but it is also a principle that may
prove to be quite complicated to apply in practice.
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Complications may arise due to the fact that Article 7 also includes a limitation to
the limitation. In sub-paragraph two it is stated that paragraph one shall not apply
where there exists legitimate reasons for the proprietor to oppose further
commercialization of the goods. Especially where the condition of the goods is
changed or impaired after they have been put on the market.
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The problem may be illustrated with an example as to pharmaceuticals. In this
branch, specific problems arise in relation to re-packaging of medicine, which is an
operation that is necessary for the consumer markets that need specific information
in the local language. Simultaneously, a proprietor may argue that re-packaging is
equal to a change that puts Article 7 subparagraph 2 into play.
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And this is the limitations of trademark law.
Safeguarding EU Trademark Protection
Welcome back to this lecture. By now, I hope that you have managed to find some
cases in the Court of Justice database and that you have learned more about
limitations and some about infringements.
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Now we will continue this lecture by developing the paths of the lifespan of the
trademark.
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So far, we have learned that a registered trademark is a strong but not absolute
right that may be perpetual.
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However, a strong perpetual right is pointless if it doesn't provide the proprietor
with benefits.
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Consequently, it is relevant to investigate how a proprietor can exercise a
trademark in a useful way.
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The exercise of a trademark right means that the proprietor is using the right to
prevent a third party from using an identical or a confusingly similar sign.
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Another way to express such exercise is that a trademark may be used to prevent
infringements.
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This right that is conferred by trademark is expressed in Trademark Directive
Article 5. And this provision separates three types of infringing acts that a
proprietor is entitled to prevent.
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Firstly, the use of identical signs for identical products; The double identity rule.
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Secondly, the use of similar signs for similar products; The rule regarding
likelihood of confusion.
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And thirdly, use that exploits the good will of famous trademarks, which is the rule
on extended protection.
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The double identity rule provides the proprietor with a right to prevent any sign
which is identical with the trademark in relation to goods or services which are
identical with those for which the trademark is registered. Article 5(1)a, this
provision aims at preventing obvious situations of counterfeiting and such actions
are usually rather easy to judge.
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The second, and more problematic rule, is article 5(1)1b regarding a likelihood of
confusion. This rule states that a proprietor may prevent any sign where there
exists a likelihood of confusion on the part of the public. And this includes the
likelihood of association between the sign and the trademark.
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By the wording of this provision, it may be evident that there can be severe
problems in application.
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Several problematic situations arise in the assessment of when likelihood of
confusion occurs, and it is to be regarded as a principle rule, that a proprietor and
the potentially infringing user have dissenting opinions as to the assessment.
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There are plenty of cases from the Union courts regarding this rule, and how it is to
be interpreted.
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Some key points in the interpretation is that it matters if it is a strong and well-
known trademark. These marks will gain a broader protection and thus the ability
to prevent not so similar use. Whereas others' less famous trademarks will have to
stick with a more narrow scope of protection.
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It is also important to note that there is a close relationship between similarity of
signs and similarity of products and/or services. If both signs are used in relation to
identical products/services, there is a need for a more extensive difference as to the
sign in order not to create likelihood of confusion.
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On the other hand, if the product and/or service are not so similar, it may be
possible to use similar or even identical signs without risking likelihood of
confusion.
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Finally, there is this third rule, extending the protection for well-known
trademarks.
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The rule is to be found in Article 5, sub-section 2, and it is a rule that is tailored for
notoriously well-known trademarks. Or to put it differently, trademarks with a
reputation.
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This rule has no prerequisites as to likelihood of confusion, thus it provides a
stronger protection for the trademark that is covered by the rule.
Play video starting at :4:54 and follow transcript4:54
However, there is a prerequisite that the use in question without due cause takes
unfair advantage of what, or is detrimental to, the distinctive character or the repute
of the trademark.
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One could state that this is the only rule in trademark law that really protects
reputation and goodwill. But this favorable output is only afforded to famous
marks.
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For not-so-famous marks, the protection for goodwill is mainly to be found in
other fields of law. And one example would be the marketing regulations.
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In order to exercise a trademark right effectively, there is a need to be able to
impose effective sanctions.
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In other words, the proprietor needs to be able to enforce the right. As indicated
during the introductory lecture, this is an area that we will only address briefly.
Play video starting at :5:50 and follow transcript5:50
However, I would like to draw your attention to the fact that up until recently,
enforcement of rights was not part of the EU harmonization. But in 2004, a
directive regarding enforcement was signed, and with severe delays in many
member states, implemented, for instance in Sweden 1st of April 2009. And this
enforcement directive provides detailed rules regarding sanctions and other means
to effectuate enforcement.
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And the fact that enforcement of IP rights are now within the realm of harmonized
EU law, will bring forward a development in case law from the Union courts, that
will be necessary to take into account when enforcement of intellectual property
rights are at stake.
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As been indicated before, a trademark protection may be perpetual. But it is to be
remembered that a right that is registered needs to be renewed every tenth year.
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If you forget to renew the registration, your trademark will cease to exist.
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In other words, despite this perpetual nature of a trademark, there are situation in
which protection may be revoked.
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Besides renewal of registration, other reasons to end protection would be that the
trademark is not being used, which is stated in Trademark Directive Article 12,
subsection 1.
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Partly due to this generous time limit for protection, the endless right, there is a
requirement that the right has to be used.
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If there is no use, there is a grant for revocation of protection. The use requirement
in the trademark directive states that the trademark shall be liable to revocation if,
within a continuous period of five years, it has not been put to a genuine use in the
member states in connection with the goods or services in respect of which it is
registered, and there are no proper reasons for non-use. Another ground for
revocation is to be found in Article 12, subsection 2a. This rule states that a
trademark shall be liable for revocation if, in consequence of acts or inactivity of
the proprietor, it has become the common name in the trade for product or service
in respect of which it is registered.
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Another way to put this would be to say that the trademark has degenerated, and
degeneration in a simplified explanation is a process that usually means that a
trademark becomes a verb.
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One topical example may be the fact that people in general are not searching for
information on the Internet, they are Googling.
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This ought to be an alarm bell for the proprietor that this trademark may be on the
verge of being degenerated. Degeneration is usually a threat only to a notoriously
well-known trademark, but it may also be an issue when a new product is
introduced on the market.
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This was the case with Windsurfing and similarly almost happened with
Rollerblades that during the first years after the introduction of inlines, which is the
actual name of the product, among many users, became the common name for the
product.
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The important lesson, for a proprietor to avoid degeneration, is to be careful and
observant as to how a trademark is used, both in spoken and written language.
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Also important to note is the fact that when a new product is introduced on the
market, it is equally important to invent a name for the product, to which the
trademark can be related.
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If that do not happen, it is likely that the trademark will become the generic
common name of the product and it will no longer be possible to protect the name
as a trademark.
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As is hopefully evident from the lectures on trademark law, there are several
aspects that needs to be taken into account when a proprietor is building a proper
trademark strategy.
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A trademark has an enormous potential and it may become a company's most
important asset. And more often, that is actually the situation in modern
companies.
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And due to the fact that trademarks are perpetual if we use them, we may regard
them as old friends; crucial for our existence and necessary to foster. And if you
learn to take good care of your trademarks, they will likely show you loyalty
forever.
A Practitioner’s View – Kristina Fredlund
Welcome to this interview. We are in Malmo, on the seventh floor in a very nice
building with a view over the Malmo dockside. And I'm happy to introduce
Kristina Fredlund, as one expert in, among other things, trademark law. Would you
want to say something to begin with? >> Well thank you, and very welcome to our
office. We're in our main office, here in Malmo.
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Which is weird because most patent firms, they have their main office in the
capital of the country where they're practicing. >> We're in the capital of Scania,
yeah. >> We are in the capital of Scania, the very south of Sweden and close to
Copenhagen.
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And Avapatent is, it's one of the larger IP firms in Europe. I would say top five, I'm
not quite sure. But there's 300 people working in our firm as a total.
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And we have offices all over Sweden, in Denmark, in Hong Kong, and in Beijing
as well.
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And out of those 300 people there are 160 attorneys. And they can be patent
attorneys with a civil engineer background or lawyers, so there are like maybe 40,
45 lawyers.
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>> Interesting. And how about you? >> Well, I've been- >> With your background
as a lawyer. >> I've been actually working in trademark law for more than 30
years. So I started, I was a law student in Lund, at the university.
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>> Of course. >> Of course. >> Yeah. >> And after a while I got pretty bored and
needed a break because it was just too much theory for me personally.
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And I was fortunate enough to get a year as a petitioner in another patent firm in
Malmo. So I worked there as a sort of trademark assistant, you could say, for a
year.
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And I was totally hooked so I finished my law degree and started working here in
1989. So- >> So it was when you were practicing law that you actually picked up
trademarks. >> Yeah. >> And so there were not much teaching in trademark law
during your time at the Lund program. >> Very little, I actually worked with a
professor, Lars Hernquist, who was in charge of the IP education in Lund. But I
will say that I personally found the rest of my studies much more interesting after
having one year out in the real world seeing what you could use, all the good legal
knowledge in practice too.
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>> So when you started law back in the 80s, one could say then that trademark law
was not that important, at least it appears so. Would you say it's more important
now and more relevant? >> Well, there was a movement in the 90s where you
started evaluating IP and trademarks in particular.
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So that you sort of put a focus on the fact that there are really really important
assets in companies. And that's made people fight more about trademarks. We had
hardly any litigations in trademark law in Sweden before. But in the 90s it picked
up, and the need for lawyers doing trademark law increased as well.
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>> And during that period the European community trademark, now the European
Union trademark, was introduced. Do you think that that had an impact on the
development? >> I would say not really, but it's sort of a result of the complaints of
the industries. Because it was a really complex world navigating in Europe before,
with all those different legislations, and patent offices, and different practices.
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It was a headache, to be frank. And the EU system has really simplified matters.
>> Due to the fact that they are cross-boarder and provide protection in many
countries. >> Yes. >> And you rarely work with trademark then, if I understand
you correctly, on a national level. Trademarks are a cross-boarder instrument. >>
But it really depends on the client because I've frequently advised my clients to go
national. If they have a sole national interest for the product and
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the business is small, there's no need for EU trademark if you're not going to go out
into the international arena for like four or five years at least.
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>> Sounds wise. Another question, when I talk to people in general they usually
refer to branding and stuff like that. And they rarely speak about trademarks,
specifically. Would you say that there is a difference? >> Yes, well there is a
difference. A trademark is, you can compare a trademark to like a vase, a vessel,
something that keeps the value, which then results in the brand. So the trademark is
the legal surroundings of this product and the better the framework, the more
sound legally the trademark is, the more it can contain. So you need like the basic
container to build your brand. And the brand is the final result that's in the
perception of the consumer out in the marketplace, eventually. >> Can you say that
it's the visualization of the trademark? >> Yeah, you can say that. >> And it can be
more than just the trademark. >> Well, it's all those values that you combine with
the trademark. For instance, like Volvo and Safety, that's the classical example.
And I would say that all businessmen and women who start off choosing a
trademark have the idea on what brand they would like to have in the future. But
whether or not they're going to reach that depends on how successful they are in
the marketplace and the success of the product.
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>> And now, listening to your expert advice, another question then. Would you
think that trademark law is an area in which you should specialize and work with
specifically? Or is there something that every lawyer working in business law
should know something about? >> Well, every lawyer working in business law
should know the basics. They should know that there is something called a
trademark and that you can register it. And they should know that it's an asset that
can't be transferred and so on.
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But then when it comes to, for instance, litigation and opposition work and so on,
that's fairly complex and pretty detailed. And I've been busy for 30 years, just
focusing on trademark law, really. So there's plenty of things to know, and plenty
of things to further specialize within this area. For instance you could be like a
counterfeiting expert and only do that aspect. >> Which is a very specific area of
the trademark law. >> It's a very specific area of the trademark law. >> Good,
talking about trademarks as assets. How would you think of trademarks from a
strategic point of view? Because that is also a topical issue, trademark strategies,
and there is a lot of talk about that. What does that mean to you? >> Well,
trademark strategies, it can be many things. For me, I am a strategic advisor to my
clients. And some of my clients, if they are fairly large and have a trademark
intensity, then they very often require
Play video starting at :8:46 and follow transcript8:46
a really solid trademark strategy. Like a written document that is fully incorporated
with the business model of the company. But then again, even small clients, they
require strategic advice. And every time you choose one trademark over another,
and when you choose how you wish to position your trademark in the marketplace,
that's strategical trademark use and requires strategic thinking. So I would say you
use the strategy all through the cycle, the life cycle of a trademark.
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Whereas, it's the choice of the trademark initially, or obtaining the registration
right, or in a litigation afterwards. >> And how would you say? Does this strategic
thinking, does it come natural for your clients or do you have to educate them? >>
It doesn't even come natural to all lawyers working in a trademark area. Because
you need to be an advisor that's really interested in the business of your client. And
by making the trademark products a good asset that fits in the business idea, that's
the strategical advice. So the ones who know the business idea and the business
strategy, that's the client and they have to educate me in what they want to achieve.
And I have to add my knowledge in trademark law to give them tools to be better
at competing in the marketplace. >> So this is really a close collaboration between
you as an expert and the client. >> Yeah, and the longer you work with the client
the better advice you get. >> So it becomes family almost. >> Yeah, yeah, and you
really know their problems, you know their competitors, you know their
marketplace, you know where they make their money.
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And that's important to be able to give the right assertions. >> So it sounds really
like you are enjoying every day at work. >> Yeah I do, I do.
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>> A final question then perhaps. This strategic work with trademarks. I think
already that you have convinced my students that it's wise to take this course. I was
thinking, we are talking about trademarks during this part of the course, but we are
doing that in connection with competition strategies as well. Would you, as a final
saying perhaps, want to consider a trademark as a competition tool, or competition
asset? >> Well it's vital, I would say without a good trademark that you have like a
firm and solid legal structure around, you're without a chance in the marketplace.
Without a good trademark you can't compete, so it's really essential.
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And the better you take care of your trademark, for instance by watching it and by
keeping a clear arena around a trademark, a defensive area so that you can keep
your competitors away, the better it will turn out for you. >> So eventually at the
end a trademark can become the most vital asset in a company then? >> Most of
the time it is in successful companies. You could say that trademark usually is 80%
or more of the total assets of the company. So yeah, it's a big deal.
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>> Thank you so much... >> Thank you. >> ... for sharing. >> Thank you for.
>> ... all your experience. >> Nice to talk to you.
Week 2: Defending Patents
Patents as a Strategic Tool
Good morning, everyone. Our first lecture on patent law.
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Like other intellectual property rights, patent protection is a limited exception to
the basic general free trade rule.
The concept of rewarding an inventor can be traced way back to the Greeks and
was early on used by the British to grant exclusive royal concessions.
In the US patent law is authorized by the US Constitution, which stipulates that
and I quote, the Congress shall have power to promote the progress of science and
useful arts by securing for limited times to authors and inventors the exclusive
right to their respective writings and discoveries.
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Modern patenting started with national legislation in the 19th century. And
international corporation was initiated with the Paris convention in 1983. Why is it
important to achieve patent protection? Well, first of all, protection is granted for a
period of 20 years from the date of application as a reward for disclosure of new
ideas.
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A solid patent protection offers exclusivity and the possibility to charge monopoly
rents during the term of protection.
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On the other hand, the ideas disseminated in detail to the general public and allows
a creative and dynamic development.
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Patents are costly to obtain and to maintain. A reasonably complex patent in a
reasonable number of countries will cost its owner more than 100,000 euros. The
protection has a limited life and once the protection ends, the disclosed knowledge
is open for others to use.
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It may therefore be important to develop a patent strategy as a part of an overall
business strategy.
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In doing so, companies should consider ways of encouraging and incentivizing
employees to develop and share new ideas. But equally important is to secure that
ownership is vested in the company for future exploitation.
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Employment contracts and contractor agreements must be reviewed to secure
automatic assignment, nondisclosure, and noncompete provisions to the benefit of
the company.
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Every new invention should not necessarily be protected.
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It is important to secure freedom to operate by investigating that other patents will
not hinder the exploitation of your new technology.
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The strategy should then indicate which strategic fields should be subject of patent
protection. In other areas it may be enough to disclose information in order to
prevent others from patenting the field. So called defensive patenting.
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Sometimes it may be more beneficial to simply keep the know how secret. A well
designed strategy requires good organization. Patent persecution is an expert
activity in itself.
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Patent applications must be filed in a timely and correct way. Objections from
patent authorities must be addressed and fees paid.
Play video starting at :3:47 and follow transcript3:47
The alternative is to hide the new invention as secret knowledge, and secure that no
one else has access to it. It is an inexpensive solution without time restrictions.
Play video starting at :4: and follow transcript4:00
The risk, however, is of course that the knowledge any way comes into the public
domain, or that the same invention is made by others, and the entire advantage is
lost.
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Secrecy agreements must be entered into to prevent unauthorized disclosure and
use.
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Patents are just one way of legally protecting an ingenious development. As an
alternative, the inventor can consider using design rights which in EU grant up to
25 years protection for a non-functional shape.
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Or copyright which protects the expression which normally has an artistic
individuality but could also cover arts, craftsmanship and similar physical
products. Or trademarks which are foremost intended to identify the origin of the
product but could actually also protect a distinguishing shape.
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The patent grants an important first mover right, what is originally patent protected
may acquire a longer protection, if also covered by design or copyrights. The 20
year patent exclusivity should be used to establish a well-known trademark which
retains value, long after the patent has expired.
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It may be strategically important to see these alternatives as complements.
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Let me take an example.
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Maybe you know Maglite flashlight. A well known US product.
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The mini Maglite was introduced in 1984 in the US, and it is a barrel shaped
aluminium flashlight designed to use A cell batteries.
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Similar flashlights for CND cell batteries have been on the market since the early
1970s.
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After the expiry of the patent protection, Maglite has been active in aggressively
protecting its exclusivity on the market. Features on the minimal light torch were
patent-protected. Later the flashlight also obtained trademark protection for its
distinctive shape, style and overall appearance. The Swedish Supreme Court in
April 2009 declared that the shape was so original that it was awarded Swedish
copyright protection during the life of the original inventor plus 70 years.
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Through a carefully designed and aggressively implemented IPR strategy,
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Maglite has thus been successful, in almost evergreening its protected position.
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Is all this rational? The TRIPS Agreement in article 33 prescribes patent protection
from the date of application and for a period of 20 years. It's so relatively short
period.
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Trademarks can be prolonged eternally, and copyright protection lasts for the life
of the author plus some 50-70 years. Even a design right can be prolonged up to 25
years.
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No rational can explain these differences, and they impact the industrial behavior.
Play video starting at :7:34 and follow transcript7:34
In fast moving industries like information technology and communications with
product cycles of a year or even less than a year, the 20 year long patent protection
does not carry the same significance.
Play video starting at :7:49 and follow transcript7:49
It is different in, for example, the pharmaceutical industry where development and
regulatory requirements demand very long lead times. The 20 year period is often
too short to allow the company to recover its investments.
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In the European Union, a five year extension has been introduced through a special
patent certificate, referred to as SPC.
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A further drawback in the pharmaceutical industry is that know how is difficult to
maintain secret.
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Originating companies must submit all details about that product and its production
process to the regulatory authorities.
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This information will be kept secret for a limited period, some ten years. After this
period, the generic competitor may refer to the secret knowledge. In that sense,
secrecy does not always secure exclusivity.
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At what time in the development should protection be applied for?
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There is a general tendency that technical advances come step-wise. Quite often
several inventors are addressing the same problem simultaneously. And it becomes
a race to the patent offices.
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The winner takes it all. Under the first to file principle. Which would suggest that
the application should be made early in the process.
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However, it is equally true that it is rarely the original invention that becomes the
final product to the market.
Play video starting at :9:31 and follow transcript9:31
This would support withholding the application as long as possible. Again, a very
difficult balance.
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Another advantage with delaying the application is, of course, that the duration of
the protection is prolonged. Once the 20 year clock starts running, the applicant
must act rapidly. It is not the first year in the market that will be lost, but rather the
final years, when sales normally are at a peak.
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Patent protection has its limits. In spite of the 20 years exclusivity protection, once
the product has been put on the market, patent protection does not prevent further
sales of that specific physical product.
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Anyone who has rightfully acquired the product and can commercially handle it
without being prevented by the protection.
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The protection has been extinguished or exhausted for that specific physical
product.
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The principles of independence and territoriality, however, means that sales in one
country does not necessarily exhaust sales in another. Different exhaustion
principles apply internationally.
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The TRIPS Agreement in Article 6 is silent on which exhaustion principle applies
in the world.
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The question was, how the exhaustion principle should apply in the single EU
market, consisting of a number of independent member states, each with their own
patent legislation. Article 345 on the functional treaty provides that the treaty shall
not in no way prejudice the rules in member states governing the system of
property ownership which could indicate that this was only a national concern.
This conclusion seems to be confirmed by Article 36 of the treaty, which states that
the prohibition on quantitative restrictions shall not prevent restrictions on
import/export or goods in transit, justified on grounds, of among others, the
protection of industrial and commercial property.
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The court of justice of the European union has, however, relied on the last sentence
in article 36 of the Treaty, which states that such prohibitions or restrictions shall
not, however, constitute a means of arbitrary discrimination or
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disguised restriction on trade between member states.
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After initial confusion, the Court of Justice established a European approach to
parallel trade in the Union
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in the early 70s, and addressed goods from foreign countries in the late 90s.
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In the Case 15/74 Centrapharm-Stirling Drug, regarding importation of a patented
medical product to Holland, the Court of Justice established a Euro-wide
exhaustion principle.
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The court held in paragraph 9, and I quote again, "A derogation from the principle
of the free movement of goods is not, however, justified where the product has
been put onto the market in a legal manner, by the patentee himself or with his
consent, in the member state from which it has been imported, in particular in the
case of a proprietor of parallel patents."
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This principle has gradually been established in all EU IPR legislation.
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The draft patent regulation also confirms the exhaustion principle in Article 9.
Play video starting at :13:31 and follow transcript13:31
The question of how to address goods coming from third countries remained
unresolved until the judgment in case C-355/96 Silhouette.
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The Court of Justice held that exhaustion does not apply to goods from outside the
European Union.
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European patent protection can be invoked to prevent such importation.
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In summary, patent law has existed for a long time, and must be considered as a
strategic tool in ordinary business transaction.
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It has a limited life and is expensive to uphold, an alternative may be to simply
keep the technology a secret. No time limitation and no costs, but the risk that it
comes into the public domain.
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It is possible, but difficult to combine different IPR protections, the most likely
combination is to make a trademark known during the patent protection and then to
capitalize from the mark after patent expiration.
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Patent protection is more important in industries with long lifecycles, like
pharmaceutical industry, than the opposite like, for example the mobile telephone
industry.
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Protection should be applied for timely, that is, before competitors but as late in the
development process and as one dares.
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During the patent life exhaustion principle applies and limits the control of the
rights of the patent holder.
European Patent Protection
Hi again, and welcome back to the patent week. In the first class we talked
generally about IP strategy and especially the importance of patents in business
transaction.
Play video starting at ::26 and follow transcript0:26
It may provide substantial advantages, but patent protection comes at a price and
alternatives should carefully be considered.
Play video starting at ::36 and follow transcript0:36
The patent grounds exclusivity, but an important caveat is that once a product has
been put on the market, the IP right is exhausted, and the buyer may proceed to sell
the product without risking infringement.
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In this class we will consider the available alternatives to obtain patent protection,
and the usefulness of one and the other system. The 1883 Paris Convention
establishes important patent principles, which at the time had to be integrated into
the national substantive legislation. And thereby initiated a global harmonization of
fundamental patent concepts. Under the principle of national treatment in Article 2,
members shall secure that nationals in other member countries enjoy the
advantages countries grant to their own nationals.
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Foreigners shall have the same protection and the same legal remedy against any
infringement of their rights, as the nationals have.
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It is an early nondiscrimination rule in international law. Securing the patent
applications in a foreign jurisdiction can be made and defended on the same terms
as applied to citizens of that country.
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The second principle in Parish Convention is that of Priority in Article 4. Priority
normally applies from the date of the first application.
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However, the Paris Convention secures a grace period of 12 months from the date
of the first application to file further applications in other countries, relying on the
priority date of the first application.
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Without this rule, the first filing would serve as a novelty obstacle to any further
application.
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In addition, it allows time to undertake translations and perhaps securing financing.
Play video starting at :2:46 and follow transcript2:46
The third principle in the Paris Convention relates to the Independence of patents
in Article 4 bis.
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The independence rule applies to patents obtained for the same invention in
different countries.
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It is the national law, and not the international treaties, which provides the
substantive patent rules. Protection only applies in a designated country and in
accordance to the law of that country.
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For example, the principle of exhaustion that we have already discussed does not
apply to products put on the market in another country unless national law provides
for international exhaustion.
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The Paris Convention also provides rules regarding for example, working
obligations, unfair trade, etc.
Play video starting at :3:38 and follow transcript3:38
Seeking national patents, often in some 50 countries or more, is a cumbersome and
costly task. Therefore, international coordination has been instituted in order to
facilitate the process. The 1970 Patent Cooperation Treaty, PCT, is a procedure for
filing international patent applications in some 150 countries in one single
application. The application will be scrutinized in a preliminary examination by an
examining authority, which results in a search report.
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The PCT application established a filing date in all contracting states, and is
followed by a national phase in countries designated by the applicant.
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Upon receiving a PCT application, the national offices then start with the
examination, often using the search report drawn up by the international bureau as
a basis.
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The national procedure eventually leads to the ground of the patent in that country.
The 1973 European Patent Convention, referred to as EPC, goes one step further
than PCT and institutes the European Patent Organization, referred to as EPO in
Munich. EPC is a separate treaty outside the European Union collaboration. EPC
provides assistant for requesting, searching and the granting of the European
patents in a single language application.
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So, the applicant files one application and designates the countries in Europe in
which he or she wants to have patent protection.
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EPO performs a novelty search and prepares a search report. And the examining
division then determines the patentability of the invention. And EPO grants the
patent in the designated countries.
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Article 52 and 57 contains the substantive rules that must be satisfied for EPO to
grant the patent. They cover any invention which is new, involves an inventive
step, and is susceptible of industrial application, discoveries, scientific theories,
aesthetic creations, computer programs are examples of creative activities which
are not patentable under the EPC rules.
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Nor are methods for treatment of the human or animal body patentable. And
patents must not be contrary to ordered public or morality.
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The moment the patent has been granted by EPO, the further procedure is referred
to the designated national system. Issues of validity and infringement must be dealt
with according to the National Patent Law in each country, and the principle of
independence applies. The 1994 Agreement on Trade-Related Aspects of
Intellectual Property Rights, the TRIPS Agreement, does not facilitate the
application procedure.
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TRIPS focuses rather on minimum standards among others' patents. It also
specifies enforcement procedures, remedies, and dispute resolution procedures
between states.
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The overall object of TRIPS is to promote technological innovation and transfer
and dissemination of technology.
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Article 27 of TRIPS stipulates that patents shall be available for any inventions, in
a non-discriminatory way, in all fields of technology, provided that they are new,
involved in an inventive step, and are capable of industrial application.
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Article 28 then clarifies that the patent confers exclusive rights to prevent third
parties from making, using, selling, and importing the product
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with a right to assign the patent and to include licensing contracts.
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Furthermore, Article 29 requires that an application shall disclose the invention in
a clear and complete manner for the invention to be carried out by a person skilled
in the art.
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Countries may also require the applicant to indicate the best mode for carrying out
the invention which is known to the inventor. The TRIPS agreement in Article 33
stipulates 20 years protection and also opens up for compulsory licensing. It
requires that fundamental competition concepts are not violated.
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With respect to process patents, Article 34 requires proof that the potential
infringer is not using the protected process. A reverse burden of proof you could
say.
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The TRIPS agreement has initiated revisions of the US and the EpC patents truce.
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Trademarks and design rights have, in the European Union, been unified by
directives and regulations. Copyright has been addressed by piecemeal regulations.
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Apart from special rules for medicines under the SBC, that we have already talked
about, the EU patent system is still in its making. In 2012, the European Parliament
voted positively for an EU draft regulation concerning a unitary patent protection
and translation arrangements. 26 countries were in favor, with Croatia and Spain
opting out.
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The regulation entered into force in 2013. But will only apply from the date of
entry into force of the agreement on an unified patent code.
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The EU unitary patent is an EU wide patent granted and administered by the EPO
in Munich. It provides an alternative to national patents. English, German and
French are official languages. No translation will be required if the patent holder
opts for a unitary patent.
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Infringement matters will eventually be referred to a specialized court system
under the Unified Patent Court, a European court.
Play video starting at :10:41 and follow transcript10:41
Presently the entering into force of this long awaited system hinges on details
regarding this procedure.
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On January 1st, 2016, 9 out of 13 requests it required states had ratified the
instruments. Germany and UK must do it, but have still not done it.
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National law will remain applicable, side-by-side with the EU patent, and provide
solutions for applicants interested in a more limited protection.
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In conclusion, National Patent Law is still the prevailing system for patent
protection. However, most national laws have been streamlined by international
conventions providing fundamental concepts, substantive rules and facilitating
procedures. The 1883 Paris Convention harmonized the important principles such
as national treatment and priority rules. The 1994 TRIPS Agreement established
detail substantial provisions which have been integrated into the national
provisions in most countries of the world.
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The PCT facilitates the application procedure by allowing a single application, a
common filing date, and a joint surgery board. Final ground is made by the
national system.
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EPC, as we said, takes one step further and grants the patent on behalf of
designated European member states. From that moment, the patent is transferred to
the designated countries and national procedures determine the fate of the patent.
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The EU patent regulation establish
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an EU unitary patent in complement to the national patents.
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Once the patent is granted by EPC, it becomes a European patent, which
administered by the EPO, but with the EU Patent Court as a last resort. The system
is still awaiting a couple of ratifications before it can be implemented.
Protecting a Solution to a Problem
Hello there, welcome back to the patent week. In the prior classes, we looked at the
international patent system, and how fundamental principles and substantive rules
have been harmonized and patent procedures facilitated through international
collaboration.
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In this lecture, we will consider the substantive rules regarding the requirements
for patent protection.

Let me start with the general patent requirements.

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Under Article 52 EPC, patents shall granted for any invention in all fields of
technology provided that they are new, involve an inventive step, and are
susceptible of industrial application.
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An invention is generally regarded as a solution to a problem. But discoveries,
estethic creations, and computer programs are not regarded as inventions and can
according to the wording not be patented.
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Furthermore, under Article 53 EPC, items contrary to public order,
microorganisms or medical treatment methods are excluded from patent protection,
and do thus not come under what is referred to as a patentable subject matter.
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For example, human embryos are not patentable subject matters in Europe.
Play video starting at :1:41 and follow transcript1:41
The US approach is less restrictive and patents can be obtained for anything under
the sun that is made by man provided that it produces a useful, concrete, and
tangible result rather than just being an abstract idea. These include software,
microorganism, and medical methods. The US position has gradually forced a
more relaxed attitude in the European Patent Office.
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The invention shall be presented in writing and registered with the Patent Office.
The application shall contain a request, a description of the state of the art and the
invention, as well as a summary and carefully specified claims.
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The claims must define precisely the invention and limits the reach of the patent
protection.
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Once the patent application has been filed, claims can be modified, provided that
the modification is supported by the description. Nothing can now be added at this
stage. An invention is new if it does not form part of the state of the art.
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State of the art comprises everything made available to the public before the date
of filing of the European patent application.
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Prior disclosure can be written or oral descriptions, use, or any other way.
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State of the art includes prior patents and patent applications, but also any other
public information, often scientific papers.
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In contrast, in the US publications by the inventor, up to one year before the
application, a so-called US grace period do not destroy the novelty.
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The complete invention must be described in one single prior document for that
document to be considered novelty destroying.
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If the invention claims that something should be connected to a wall with a nail,
and a new application describes the same system with a screw, then the second
invention is novel.
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Anyone will understand that a nail can be replaced by a screw. However in patent
law, it is considered to be a matter of obviousness and not of novelty.
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The novelty requirement is an important hurdle to overcome in the application
process. Prior art is often referred to as important evidence in the future
infringement and in validation procedures.
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Furthermore, the invention must contain an inventive step.
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It doesn't require a drastic invention. Improvements of prior inventions are also
inventions. It is not enough that it is new in the sense that it has not been described
in an earlier single document.
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In addition, the invention must involve an inventive step. It must not be a
development that is obvious to make for a person skilled in the art.
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The result should come as somewhat of a surprise to this skilled person, or as the
Americans put it, it should be non-obvious. Something is obvious if it can be
demonstrated that the literature at the time of the invention contains a suggestion,
or a hint to apply that measure in a situation in which it was applied in the
invention.
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In this evaluation, in contrast to the novelty requirements, different prior art
documents may be combined.
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But it must be demonstrated that the skilled person would be led to those
publications and would apply them in a situation as it occurred in the patent
application, even if he had not access to the patent.
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The novelty requirement is normally the major hurdle in the application process. It
will be more difficult to demonstrate in a future invalidation process, especially as
hindsight reasoning, based on the knowledge presented in the patent application, is
not accepted.
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Let's turn to the third patent requirement in Article 56 EPC. It indirectly specifies
that an invention must be useful in industrial applications.
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The invention shall be considered as susceptible of industrial application if it can
be made or used in any kind of industry.
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The invention must be able to be applied for practical purposes, which means that
it can not only be theoretical.
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In the US, this third requirement is referred to as utility.
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International treaties often use utility and industrial applications as synonyms.
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This definition aims to distinguish aesthetic and scientific inventions. Industries
should be understood in a broad sense and includes, for example, agriculture.
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It does exclude methods for treatment of the human or animal body by surgery or
therapy and diagnostic methods practiced on the human and animal body.
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This exception applies in Europe and not in the US. The underlying reason is that
medical treatment by a doctor should not be exclusionary and therefore the subject
is not patentable.
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The rule does however not apply to medicines or devices used by the doctor, which
are useful and patentable subject matters.
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Generally, this third requirement is rarely considered as problematic.
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The patent ability is normally hinging on whether the invention is truly new and
not obvious to a person skilled in the art.
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The written application must satisfy stringent formalities and be carefully drafted.
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According to Article 83 EPC, it shall disclose the invention in a manner
sufficiently clear and complete for it to be carried out by the person skilled in the
art.
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It must also contain the best mode of practice.
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All inventors must be mentioned, which can sometimes be tricky when it is a group
which has produced the result. It shall refer to prior art and how the new invention
deviates from other similar patents.
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All information must be true and correct and deliberate omissions are not accepted.
Play video starting at :8:52 and follow transcript8:52
Failure to meet any of these requirements will mean that the patent will not be
granted or maybe invalidated at a later stage.
Play video starting at :9:3 and follow transcript9:03
The specifications may describe the patent invention in a broad way, but the scope
of the patent protection is exclusively determined by the claims.
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Claims should be clear and precise and are interpreted literally and in a restrictive
way.
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A product infringes a patent if it has all the elements of one of the claims in the
patent. The reality may be more complex. Courts have therefore developed a
doctrine of equivalence.
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This doctrine of equivalence allows the court to determine if the feature in the
allegedly infringing product is an equivalent of the element in the claim. Even if it
does not fall within the literal scope of the patent claim, but nevertheless is
equivalent to the claimed invention.
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If it is non-obvious, or rather I should say if it is notorious that certain elements
have equivalence, it is less likely that a court will accept infringement under the
doctrine of equivalence.
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To return to the nail screw example,
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If it does not matter which one is used, the patent will use a generic term, like a
fastening device, and thereby cover both items and much more.
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However if the patent refers specifically to a nail, the court should not rule a screw
to be equivalent.
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In conclusion, an invention is a solution to an identified problem. Patent protection
will be granted if the patent application satisfies stringent formalities and discloses
an invention, which is new, contains an inventive step, and adds an industrial
application.
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It must be clear, complete, and disclosed best most of practice, and enumerate all
your measures.
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All statements must be true with no omissions. The precise claims determine the
scope of the patent protection. They will be interpreted literally with a caveat for
the doctrine of equivalence
Capitalizing from your Patent
Hello again, and welcome back to the EU patent law week.
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We now have know how to apply for a patent and how we through
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PCT and EPC can facilitate a patent application.
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We have also seen that a promising development is on it's way in the European
Union.
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The question is basically, when will it happen?
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Today we will, in a glance, look at how we can capitalize from the granted patent,
and especially, possibilities to license rights to third parties.
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The patent is an intellectual property granting the owner a limited exclusivity. The
exclusivity language should not be misunderstood.
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The patentee may prevent anyone who has not received his or her consent from
using what is protected. That is what patents means.
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The patent does not always secure a right to exploit. Sometimes exploitation
depends on special permission.
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As is the case in the farming industry.
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The exclusive right is the right to produce, use, sell, and import the protected item,
or have others doing it, or any combination thereof.
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The patentee may build a strategy based entirely on her own efforts, or by
licensing, grant others the right to do so. It is also open to the patentee to simply
sell and transfer all rights to the patent.
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As the patent has a limited life, the patentee better decide a viable business strategy
early on and execute on it rapidly. Own use is a natural strategy if you represent a
company able to address the international market by itself. This requires muscles
and financial resources to cover all steps from conception, to product in the hands
of the customer. Including development, registration, production and marketing
capacity.
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It is especially risky to start establishing foreign subsidiaries to handle sales
activities.
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Smaller patentees better carefully consider their options. If the company has
production capacity, it may be beneficial to produce the product and contract out
territorially
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restricted licenses to market, sell, and use the product.
Play video starting at :2:54 and follow transcript2:54
Universities often farm out the right to produce to one company, called toll
manufacturer or a subcontractor and the right to market and sell to others. And
serve as a virtual spider in the middle of its partners.
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Licensing appears as an attractive solution for such small and medium sized
enterprises. Either to license out to one licensee who shoulders exclusive global
responsibility for all further activities during the term of the protection.
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This type of exclusive licensing borders on a sale where the purchase price comes
in installments depending on the success of the product.
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Or, secondly, as a piecemeal licensing, dividing up the rights between different
licenses based on activity and or territory and or application.
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The licensing agreement can basically be negotiated freely. Article 73 EPC only
stipulates that European patent application may be licensed in whole or in part for
the whole or part of the protected territories.
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Earlier draft versions of an EU patent regulation contained
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several stipulations regarding licensing.
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To a large extent, these have been eliminated. However, Article 11 of the EU Draft
Patent legislation promotes so called License of Rights, which is a statement that
the patentee will allow any person to use the invention as a licensee in return for
appropriate compensation, it's called a contractual license.
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Such an in blanco undertaking will reduce the registration costs for the applicant.
Play video starting at :5:2 and follow transcript5:02
National patent law does normally not contain any limitations apart from an
obligation to exercise the right within a limited period and the legislation often
provides for compulsory licensing in very specific situations. IPR, intellectual
property rights, does not really limit how licensing agreement can be construed.
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Nor does general contract law, at least not as long as the agreement is reasonably
balanced.
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From a small and medium sized enterprise licencor perspective, important points to
consider may be the following.
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First, the grant provisions, it is always crucial. Identify the licensed object and the
right transferred. Are they exclusive, sold, or non-exclusive?
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Exclusive is normally understood as no one else, whereas sole often signifies that
the licensor reserves the right to enter the market itself.
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It could be wise to be specific on these points in the contract, as there is no legal
definition.
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Furthermore, does the grant cover the right to produce and or use and or sell? Has
the licensee a right to sublicense? How are developments addressed? Is the license
global or are there territorial restrictions? All these points must be considered.
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Financial considerations must also be stipulated. Any upfront payments, what is
the royalty level,
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and what are the payment conditions, they must of course be clarified.
Play video starting at :6:55 and follow transcript6:55
The small and medium sized anti-price licensor also has to secure that the licensing
will work with the product with best efforts, perhaps by securing a minimum
royalty stipulation.
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And furthermore, who is responsible for patent infringements? And what about
liability in case of product defects?
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Finally, term and termination provisions, as well as dispute resolution, are normal
stipulations, in a licensing relation.
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If no specific legislation applies to licensing, competition concerns must be
evaluated, that's important.
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The small and medium size enterprises are protected by European the deminimis
rules. And the 2014 Technology Transfer Regulation which provides block
exemption applies to competing undertakings if their combined market share, does
not exceed 20% of the relevant market.
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If they are not competitors, the market share of each must not exceed 30%.
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Harmful practices are however, not block exempted, under the hardcore provisions
in Article 4(1), the block exemption. And that includes resale price maintenance,
output restrictions, territorial restrictions with absolute protection, customer
allocation. Whereas field of use restrictions are more acceptable, U.S. law does not
make that difference. It's a very fine distinction.
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Restriction on the use of own research and development and technology.
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What is regarded as hardcore in this way is not likely to be individually exempted.
If the parties are not competitors, the rules are somewhat relaxed in Article 4(2).
The 2014 regulation in Article 5 indicates a negative stance also against grant back
provision and the parties must also avoid too stringent non-attack provisions.
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A solution may be that the licensee is not prohibited from trying to invalidate the
patent protection, but if he does, the license to source should be entitled to
terminate the license agreement.
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Thereby, a certain terror balance is created between the parties.
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The commission guidelines further exemplify the border between lawful, and
unlawful provisions.
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Clearly, the drafter of a license agreement must be careful. The US guidelines on
licensing does not take such a stringent attitude to licensing under either
competition law, or any misuse doctrine.
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Let me take an example from the case law.
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You know Holly Schweitzer? Holly Schweitzer in California developed the noble
art of wind surfing.
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He patented his vessel and received trademark protection and exploited it in
licensing contracts divided the European market according to national borders.
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The agreement structure was challenged by the commission, and the matter
appealed to the Court of Justice.
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The court limited the reach of the patent in spite of the fact that the European
economic community at that time had no competence to deal with patents.
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The court then took a fairly formal approach in determining if the individual
stipulations were covered by the patent grant or not.
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The answer was always negative.
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The licensor was not allowed to tie the sale of the rig and the board. As the board
was not covered by the patent, nor could he request that his trademark be affixed to
the board.
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Royalties could not be charged on the board. Clauses prohibiting attack on
windsurfing's intellectual property rights were unlawful. In addition, the licensees
could not be limited in their purchase of boards.
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This very strict interpretation by the court has had a negative influence on EU
licensing and the revised 2014 technology transfer regulation takes a more
permissive attitude.
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Still, concerns linger in the European industry.
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Finally, an alternative to licensing is of course an outright sale of the patent.
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The buyer should shoulder all future responsibilities for the patent. And the
transfer of ownership should be registered with the patent offices.
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Payment may be organized in installments, not much different from running
royalty. The major difference is perhaps that upon termination of a license
agreement, the ownership remains in the hands of the licensor. But in a sale
transaction, the ownership is vested with the licensee.
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In summary, the patentee may build a strategy based on her own efforts, or license
others the right to do so.
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It is also open to the patentee to simply sell and transfer all rights to the patent.
Play video starting at :12:51 and follow transcript12:51
Patent legislation is basically silent with the respect to how the license agreement
can be construed.
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The parties should strive to present a respective rights and obligations in a
balanced and lasting way allowing both to capitalize from the collaboration.
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The parties are, however, not entirely free in how they build their relationship.
Competition law will come into play through the prohibition against anti-
competitive agreements in Article 101 of the treaty. The minimist rules and the
2014 Technology Transfer block exemption are meant to relax the prohibition for
enterprises coming within the specific thresholds.
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However, hardcore provisions in the licensing agreements regarding, for example,
sales prices or absolute territorial protection are always challenged by the
competition rules.
Antitrust Infringement and Patent Misuse
Welcome back to this last lecture on patents. We have so far touched upon the
importance of patent protection and how to achieve and capitalize from the patent.
In this lecture, we will dwell on ways to misuse the patent.
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In the European Union such misuse normally falls under the notion anti-
competitive behavior or abuse of dominance. Patent law and competition law are
two separate and independent pieces of legislation promoting a dynamic, free and
fair trade. From an hierarchical perspective, the two laws have the same legal
status.
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Patent law has US constitutional backing which does not apply to the important US
antitrust legislation. In the European Union, the situation is the reversed.
Competition law is covered by the treaty provisions which is not the case for
intellectual property rights.
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On the other hand, European intellectual property rights are ownership rights and
ownership is excluded from the European competence by Article 335 of the
functional treaty.
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And from the rules on free movement by Article 36 of the same treaty.
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The treaty drafters must have regarded these ownership rules as an exclusive
national competence.
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US case law has retained the differentiation between the two sets of legislation,
and rather handles harmful patent exercise through the use of a patent misuse
doctrine, even if the Rubicon was recently transgressed in the 2013 Actavis case.
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The European view on the relationship has gradually developed through case law.
Free competition has been held to be a fundamental EU principle, in cases like C-
126/97 Eco Swiss, and C-453/99 Courage.
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The Court of Justice of the European Union has distinguished between the
existence of the intellectual property rights and their exercise. National laws
creating industrial property rights are not called into question by the European
legislation. Their exercise of the right must however be in line with EU
competition law requirements and misuse can be reached by these rules.
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European abuse, misuse of patents can take the form of exploitative or
exclusionary use of a dominant position. Relying on the special responsibility that
dominant companies carry, EU case law has gradually identified a number of
activities which come under the prohibition in Article 102. The Court of Justice
has emphasized that the patent does not automatically, in itself, confer a dominant
position.
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A holistic evaluation must be made.
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If hardcore practices like pricing, output and territorial restrictions are performed
by dominant undertakings, Article 102 of the functional treaty may be applicable.
But the special responsibility goes further than that.
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Refusal to license by a dominant actor can be held to be an abuse. Fraud on the
patent office could also be held an abuse and pay-for-delay may also be an abuse.
A single use restriction may even be regarded as an abuse.
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The Court of Justice has used the vague notions of special responsibility and
competition on the merits to reach different types of behavior. The court has even
in AstraZeneca case established that the fact that the activity is lawful under some
legislation does not prevent the application of the competition rules. In 2004, the
commission found that Microsoft had abused its super-dominant position by
refusing to supply its competitors with interoperability information. The
competitors could not develop and distribute competing products on the work
group server operating system market. The general court held in case T-201/04
Microsoft that even if the finding of a dominant position does not in itself, imply
any criticism. The dominant undertaking has a special responsibility not to allow
its conduct to impair genuine undistorted competition.
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Undertakings are free to choose their business partners. But when a dominant
company refuses to supply its intellectual property rights, it may, in exceptional
circumstances, constitute an abuse.
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Such exceptional circumstances could be if the refusal relates to a product
indispensable to the exercise of a particular activity on a neighboring market. Or
two, excludes any effective competition on a neighboring market. And three, it
prevents the appearance of a new product for which there is a potential consumer
demand.
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The absence of interoperability with Windows domain architecture reinforced
Microsoft's competitive position on the market. Although its competitors offered
features to which consumers attached great importance.
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The refusal entailed a risk of elimination of competition and also limited technical
development and the appearance of a new product to the prejudice of consumers.
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Microsoft objected that it was only relying on its intellectual property rights.
According to the court, that could not constitute an objective justification.
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If the mere fact of holding intellectual property rights could constitute objective
justification for the refusal to grant a license, the exception established by the case
law could never apply.
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The court underlined that it was only in exceptional circumstances that this refusal
could be characterized as abusive.
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Microsoft again alleged that such a position would reduce its incentive to innovate.
The court refuted this argument as well, there would be no cloning risk, according
to the court.
Play video starting at :7:30 and follow transcript7:30
So the court established that exceptional circumstances were present in the case.
By way of remedy, Microsoft was required to disclose the specifications of its
client-server communication protocols, to any undertaking, wishing to develop and
distribute work group server operating systems.
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The concept of abuse is an objective concept referring to a dominant undertaking,
hindering existing or potential competition by using methods different from those
governing normal competition. Article 102 of the treaty prohibits a dominant
undertaking from eliminating a competitor and thereby strengthening its position
by other methods than competition on their merits.
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The pharmaceutical company AstraZeneca notified several national patent offices
that it had obtained its first marketing authorization for Omeprazole in March
1988. This date was important as it triggered a special patent certificate, the SPC,
which would prolong AstraZeneca's exclusivity by up to five years.
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However, AstraZeneca did not inform the offices of the legal basis of the choice of
the date or of the existence of a technical authorization issued in France already in
April, 1987.
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Had it done so it would not have received patent prolongation in certain member
states.
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For six other products than Omeprazole, AstraZeneca had communicated the date
of their technical authorization to the authorities.
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By failing to specify its interpretation underlying the choice of the dates, the patent
offices would construe AstraZeneca's representations as indicating that the first
technical authorization had been issued in March 1988. According to the general
court, AstraZeneca's consistent and linear conduct was highly misleading and
manifestly lacked transparency.
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AstraZeneca's deliberate attempts to mislead the patent offices and judicial
authorities fell outside the scope of competition under merits. An undertaking in a
dominant position can not use any means with the aim of misleading public
authorities.
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Such an approach is manifestly not consistent with competition under merits and
the specific responsibility on a dominant undertaking not to prejudice effective and
undistorted competition. It cannot however, be inferred from this reasoning that
any patent application made by a dominant undertaking which is reacted on the
grounds that it does not satisfy the patentability criteria automatically gives rise to
liability under Article 102.
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The third case I'd like to talk about relates to recent phenomena which is pay-for-
delay in the pharmaceutical industry. In its inquiry into pharmaceuticals sector, the
commission indicated a number of practices that could delay entry of cheaper
medicines into the EU market. It issued statements of objections in several
investigations. Furthermore, the commission has monitored patent settlements, in
order to identify potentially problematic settlements, which limit generic entry,
against the value transfer from an originator company to a generic company.
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The volume is low and the vast majority of patent settlements are unproblematic
from an antitrust perspective.
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But there a couple of cases and one is about
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Citalopram which is a blockbuster antidepressant medicine produced by the Danish
Lundbeck company and it was actually its best selling product.
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After Lundbeck's basic patent for the molecule had expired, it only held a number
of related process patents which provided a more limited protection.
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Producer of cheaper generic versions of Citalopram therefore had the possibility to
enter the market.
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Indeed one of them had actually started selling its own generic version of the
product, and several other producers had made serious preparations to do so. In
2002, Lundbeck agreed with these generic companies to delay the market entry of
the generic versions of the product. Lundbeck paid significant lump sums,
purchased the generic stock for the sole purpose of destroying it, and offered
guaranteed profits in a distribution agreement.
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The agreements gave Lundbeck the certainty that the generic producers would stay
out of the market for the duration of the agreements without giving the generic
producers any guarantee of market entry thereafter. These agreements violated
according to the commission Article 101 of the treaty.
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According to the commission, experience shows that effective generic competition
drives prices down significantly, reducing dramatically the profits of the producer
of the branded product and bringing large benefits to patients. For example, prices
of generic Citalopram dropped on average by 90% in the United Kingdom
compared to Lundbeck's previous price level once widespread generic market entry
took place following the discontinuation of the agreements.
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In 2013, the commission imposed fines on Lundbeck and the generic producers
totaling some 145 million euros. The matter has been appealed and we are now
waiting the judgment from the general court. Interestingly, a similar situation was
addressed in the US Supreme Court where the majority against an upset minority
also came to the conclusion that pay-for-delay could be in conflict with a rule of
recent application of the American antitrust system.
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In summary, we have in prior lectures established that the patentees have to be
careful when drafting license agreement in order not to fall afoul of Article 101 of
the treaty.
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Especially hardcore prohibitions should be avoided.
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This lecture indicates that IPR do not in themselves create a dominant position. A
holistic evaluation must be made.
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If in fact a company is dominant, it has a special responsibility to compete on the
merits.
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The notions are vague and the impact is gradually established through case law. It
appears likely that the dominant company should avoid practices which are
regarded as hard core for non-dominant entities.
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But the responsibility goes further than that. A dominant company must, for
example, be cautious when refusing to license as demonstrated by the Microsoft
case.
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Similarly, a dominant company cannot deliberately mislead authorities or enter
into agreements to delay introduction of generic competitors. The list will
gradually grow with new case law.
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What is apparent in European law is the use of competition law to rectify
shortcomings in the intellectual property legislation.
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This replaces a misused doctrine that has been more actively employed in the US.
The reason is probably the far-reaching competence that the Court of Justice has
had in competition matters. Whereas, it is only lately that the intellectual property
rights has become an EU concern.
A Practitioner’s View – Maria Stenback
Maria Stenback, it is spring and we're sitting here talking about patents. Very nice
to be together with you. Would you please say a few words about your own
background and the company that you are working for? >> Of course. Well, I kind
of closed the circle. I started my studies at Chemical Center just- >> Behind it. >>
Around here. >> Yeah. >> And now I work across the street in BioInvent as IP
director. I've been here for about a year. Before that, I worked as a patent attorney
in a major IP firm in Sweden. >> And what is BioInvent? >> BioInvent is a
research based pharmaceutical company. We discover and develop antibody-based
drugs that can be used for cancer treatment.
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>> IP director, what does that include? >> Well, it includes all- >> All intellectual
property. >> All intellectual property but with a major focus on patents because
that's what's most important to us. But it also involves trademarks and other kinds
of IP.
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>> And we are going to talk about patents and patent protection today.
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What is a patent to start with?
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>> Well, a patent is a sort of contract with the state. You pay for it by disclosing
your invention, describing the invention so other people can use the invention. And
in return, you get 20 years of a right to prevent others from using it. But after those
20 years, anyone can use it. >> Then, I have to ask you, what is an invention? >>
An invention, if we're talking especially about the European area, an invention is a
solution to a technical problem.
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>> So before you can start thinking about patenting you have to find the problem.
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You must know the problem before you can create a solution to it. >> Yes, that's
right, but sometimes you don't really see it as a problem.
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For example, scientists, as in BioInvent, they always see problems and they always
try to find solutions to improve something or to find a new cure for a new cancer or
replacement drug or- >> And they are equally excited every time? >> Yes, well,
not every time [LAUGH] but most of the time, yes. >> When they're successful.
>> Yes. >> Do you patent-protect everything, every new idea that comes up? >>
No, no, when we have new ideas, we talk about them to see if there is some
business interest in them, because there are lots of ideas, and scientists they come
up with ideas all the time. >> Exactly. >> And some of them are very interesting
but they don't fit what we do, and some of them are not interesting because there's
no market for a product. So first you have to think about that. >> You carefully
select what you are going to patent and protect. >> Yes, as the company, that's not-
>> If there is something that is interesting, but you have decided not to protect it,
do you do any? Are you trying to protect yourself against someone else patent
protecting it? >> Well, it's interesting. If we take the first aspect, a patent, as I said
before, you only get 20 years of right to prevent others from doing something. So if
you have a really good idea or something really, really good, for example, a
process, and you think you can keep that as a secret, that's sometimes the best way
to do it. Because then you can keep it secret forever and treat it as company know-
how. >> This notion, due diligence, what is that and when you do due diligence?
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>> Well, due diligence in the IP world is, for example, if we have a major
company that wants to invest money in BioInvent, they want to look at our patent
portfolio to see what patents we have, if they're valid or if we have patent
applications. If it's possible to get them granted, which countries we have covered,
all sorts of things, and vice-versa. For example, if someone contacts us to see if we
want to have a license to a patent that they own, we have to look into that. >> I'm
probably using the wrong word. I should rather ask you about freedom to operate?
>> Yes, that's also very important. And that's also a part of a due diligence process
because even if you get a patent or hundreds of patents in a company, that doesn't
mean that you're free to practice the invention yourself. Because there can be
thousands of patents in your area out there.
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Before you do something in a company, or before you start a new process, or
before you go any deeper into development of a new product, you need to see what
other patents that are out there to make sure that you don't infringe someone else's
patents. >> You want to know that you have freedom to operate. >> Yes. >> No
one is destroying that for you. >> Yeah, and that is also very often a
misunderstanding because people say, well, I have a patent so now I can practice
the invention. But the patent only gives you rights to prevent others from doing
something.
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>> Let's talk about the patent itself. >> Yes. >> Here the inventor comes and says
here's the brilliant idea, please write a patent. >> Yes. >> How do you do that? >>
Well, there's two aspects of that. First, what you do beforehand, and then once you
start writing the patent. >> Let's start beforehand. >> Beforehand you look at first
what has been patented or published before. Is this really a novel idea or has
someone done that already? And you look at what the inventor really has done. Is
this the product or is this the product? Maybe you need to expand some parts.
Because sometimes, initially, you don't think of all aspects of an invention.
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And another question is, if the invention really has been made. Because many
times, an inventor can come up with a good idea, but they haven't come up with the
solution yet and then you can patent it. So you have to wait. >> So you want to see
their efforts and trials and things like that. >> Yeah, we have to know. >>
Experiments. Yes, for example in the pharma industry, a scientist can realize that
this mechanism is extremely important in order to be able to treat the disease.
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So they want to patent that, but you can't patent the mechanism. You would have to
find the drug that can affect the mechanism in the right way. And you can't file a
patent application until you have the drug that you want to protect, so sometimes
it's a bit too early to patent. >> So you've done your preliminary controls and
you're happy and you decide to sit down and write the patent application. >> Yes.
>> What does that contain? >> Well, what I first focus on is the claims. That's the
important part or the most important part of the patent application because that
defines what protection you will get. And you have to make sure that the claims
covers all aspects of the invention.
Play video starting at :8:16 and follow transcript8:16
And it takes some time to get the claims right and discuss them with the inventor.
>> But that comes at the end on the patent document. >> Yes, that's right. >> But
you start- >> I start with that because that, the claims need to be ready before you
can write everything else because all the rest will have to support the claims.
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So you start by writing all the other text, then you don't know if that is going to
support your claims or not. >> So what are the all the other things then? >> All the
other parts of the patent application is, well, you have to have a title of the patent,
but that can be most anything. It can be, for example, for BioInvent, it could be a
new antibody. It doesn't have to say that much. And you have a short paragraph
explaining what the field of the invention is. So it can, for example, be cancer
treatment or some other field. And then you have a description. Usually, that starts
by saying what the background technology is, what others have done, and what the
problems with the background is. The problems that you want to solve for your
invention, and usually that is kept quite short. And then, you have a long
description of your invention where you've taken all aspects or different
alternatives that you can have. For example, if you have a process running at 20
degrees, maybe you don't want to cover them with 20 degrees. You are going to
have 10 to 30 degrees, so you have to specify all variance you can have. >> So first
a general background which describes the state of the art. Do you mention any
other patents in that background- >> Yes. >> That might be close to it. >> Yeah.
>> And then when you've done that, you go into the detailed description and you
try to not only describe precisely the invention, but also develop that. >> Yes, so
you get all different variants of the invention that you want to prevent others from
doing so they can't get too close to what you're doing.
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And that also contains, depending a bit on what technology you're working, but
usually that's a part with examples. For example, if we patent antibodies, we have
to describe the antibodies, how to produce them, and to show what effects they
have.
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>> Is your patent application ready?
Play video starting at :10:56 and follow transcript10:56
Or is there something, there is a summary. >> Yes, and it's an abstract. >> An
abstract? >> At the end, which will be published. But it has to be there. But it's not
important when you consider what the patent covers. But it has to be there. >>
Most important, the claims. >> Yes. >> Precise wording and terminology matters
very much. >> Yes, yes. >> You're a linguist, you have to be very good. Are you
filing all your patent applications in English? >> In English, yes. I think during
my, what is it now, my 22 years in the patent profession, I've written three patents
in Swedish. So it's in English, yes.
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>> And you will then enter into some type of discussion with the patent authorities
and you will- >> Yes. >> Gradually- >> Yeah, that's right. >> Adjust your- >>
That's right. You first choose where to file your first patent application.
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It could, for example, be in Sweden. Or if you have an inventor or part of the
invention has been made in the US, you need to file in US first. Or if you have a
British inventor, you have to file in Great Britain first. And there's also several
rules, but you choose your first country to file in and then you get a priority date
which is very, very important. Because when the patent offices later search your
patent or consider if they're going to grant a patent, they would look for what's
been published before the priority date.
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And within 12 months from the priority date, you have a possibility of filing the
patent in other countries, as well.
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Usually, that is done by filing an international patent application, or PCT
application, which sometimes you see called, In the papers they call it a world
patent but there is no world patent, but there is a PCT application. And then within
30 months from the priority date, you file that PCT applications in all the countries
where you want to have patent protection. >> Talking about work patents, is there
a European patent? >> Yes. >> There is? >> So one of the applications that you
will normally file within the 30 months from the priority date is the European
Patent Application. >> Where do you file that? >> You file that with the European
Patent Office which is based in Munich, or well, they have offices in The Hague
and Vienna and Berlin as well. >> Is that a European patent? >> It's a European
patent, it's not a European Union patent, but it's a European patent.
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And there is a lot of countries that have joined the European Patent Organization. I
think, I don't have the number correctly, I think it's 36 countries. So we have
European Union countries and you have Norway and Switzerland and then Turkey
and lots of other countries, yes.
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>> So you adjust your patent application in this dialogue with the authorities. >>
Yes. >> Then the patent is granted, and you said for 20 years. >> Yes, from the
first filing date. Not from the priority date but from the date you filed the
international application. >> Okay, in BioInvent, you file fairly early. How long
time do you have on the market actually for your product? >> Yes, that's a problem
for the pharma industry because sometimes once the patent is granted, or actually,
when you get the marketing authorization, because that's what regulates when you
can start selling your product, that can be a very short time left of the patent
protection.
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But to help pharma companies in that and with that problem, there's a system
which in Europe is called a Supplementary Protection Certificate. The similar law,
for example, in the US which is called Patent Term Extension where you can get
some additional years.
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Maximum five years in Europe. >> Five years. >> Yes, and that depends on the
time it took from the grant of the patent until you got your marketing authorization.
>> Okay, there is one more thing that is coming up now and that's a European EU
patent, what is- >> Yes, a unitary patent. >> Are you looking forward to EU
patenting? >> Yes, [LAUGH] I am a bit hesitant, I'm not sure yet how good it's
going to be. >> It will be cheap, it will be less expensive. >> It will be. The filing
procedure and after grant will be exactly the same because you will file a European
patent application as you do now with European Patent Office. And then, once the
patent has been granted, you can decide whether or not you want to do as you do
today and validate that in European countries where you want your patent, or if
you want to have a European patent with unitary effect. >> That sounds good.
What worries you? >> Well, that's good, and it's recently been decided that
because once the patent is granted, you have to pay the national renewal fees each
year to the national patent offices. And the fear in the beginning was that the
renewal fee for the unitary patent would be very high, but now they settled for a
fee that will
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be approximately the fee of four countries, so that's good. If you want to have
protection in more countries than four, it's good. >> So what's negative? >> Well,
the negative thing is that there will also be a European patent court which will have
jurisdiction for European patents with unitary effect but also for European patents,
the traditional European patents. And since the court hasn't start working yet no
one knows how they will handle cases. >> You're worrying about the future. Yes,
we haven't seen the judges yet. We haven't seen any case law because there's no
cases yet. So that's a bit worrying, especially for the pharma industry, because the
pharma industry usually has a few very important patents. If you're in the telecom
business, for example, you have maybe for a mobile phone you have thousands of
patents. And each one is not that important.
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But it's going to be very interesting.
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>> Thank you, Maria. I think we get the point. And you're adding a lot to our
theoretical lectures that we've had. >> That's good. >> Thank you very much. >>
Just one thing? >> Yeah? >> [LAUGH] >> Well, we talked about the European
patent with unitary effect. You will get a European patent covering, well, we don't
know how many countries yet because that hasn't been decided. But there is not yet
an SPC, a Supplementary Protection that covers Europe, so you will have to go
nationally. >> And the European Commission has started working or started
making some kind of survey to see how they are going to implement a unitary SPC
so we'll see. But the unitary patent took 40 years to have in place so maybe we'll
see in 40 years.
Competition:Illegal Cooperation
Introduction to European Competition Law
Hello, my name is Julian Nowag, and today I will give you a brief overview about
the European Competition Regime. The European system protecting competition is
mainly comprised of three elements, Article 101 and Article 102 TFEU.
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The third element is the European Merger Regulation.
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Article 101 prohibits anti-competitive agreements between companies.
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Article 102 prohibits a company in a dominant position on the market to abuse this
position of economic power.
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The EU merger regulation finally prohibits anti-competitive mergers between
companies.
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These provisions form the core of European competition law. However,
competition also exists at the level of European member states.
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The relationship between EU law and national law can occasionally be quite
complicated.
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If you want, you can have a look at Article three of the Regulation 1/2003. Which
sets out the details. As a rule of thumb EU law trumps national previsions, except
for Article 102. In this area member states can be more stringent than EU law.
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Turning back to EU competition law now: Who enforces the European competition
law? In the context of EU competition law, the primary enforcement organ is the
European Commission.
Play video starting at :1:57 and follow transcript1:57
However, national competition authorities and national courts can also enforce
Article 101, and Article 102. When The Commission takes an infringement
decision, it can order a company to stop a certain behavior, it can impose a fine on
a company or in the context of mergers decide whether the merger can go ahead or
not.
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The Commission has a number of enforcement tools at his hand. For example, the
Commission can inspect properties, interview witnesses in order to determine
whether the company has infringed competition or not.
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The details are set out in regulation 1/2003 which is, as you may have already
noticed, the main regulations that sets out procedural rules in EU competition law.
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If the company is not happy with the decision by the European Commission, the
company has the option to appeal the decision and to take the matter to the courts.
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In the first instance, the General Court, previously called Court of First Instance,
hears the case.
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Judgments can then be appealed to the European Court of Justice.
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I hope this lecture provided you with an overview of the legal rules of the
European Competition Regime and its main actors.
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This should provide you with a basis to further delve into this, I think, quite
fascinating area of law. Well, I might be biased as this is my area of research.
Anyhow, thank you for listening
Why Competition Law?
Let's start by asking two fundamental questions. Firstly, what is competition? And
secondly why is it that we need to protect it?
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Well, the simple answer is that free competition is a key element of an open market
economy. In a European context it stimulates European economic performance and
offers consumers, like you and me,
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a broader choice, better quality products, services, and of course, all at more
competitive prices. So, an objective of European Union competition policy is to
ensure competition is not distorted in the internal market by ensuring that similar
rules apply to all the companies operating within.
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Some firms, of course, attempt to distort this idea of free competition and adopt
anti-competitive behavior in order to impose their own rules. For example, firms
carrying out similar activities may come to arrangements with each other to control
prices. How much will they charge you and me, the consumer? Will they fix their
prices?
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Will they divide up the market amongst themselves to ensure maximum profits and
market share?
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Of course, what I'm speaking about here are the most commonly known anti-
competitive practices, namely cartels.
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Here we see the price fixing, the dividing of markets, the carrying out of other
potentially harmful behavior.
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Of course in other instances, where it's just a single firm, that firm might hold a
dominant position in a market.
Play video starting at :2:6 and follow transcript2:06
And may be able to really use that dominance
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in a way that excludes competitors from the market.
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Meaning that they're free to charge whatever prices they want. They're not
regulated by other competitors.
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This is not good for either the consumer or for the European Union.
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As a result of this, the EU has put in place
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regulations to both prosecute firms and also prevent them from engaging in this
type of anti-competitive behavior.
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And in addition to this we see allure of mergers and acquisitions. This is where one
firm, of course, merges with another or acquires a competitor or a complimentary
market.
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But this could also mean the creation or the strengthening of a dominant actor in
the market.
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Therefore, we control this idea of merging and acquisitions. And you'll look at this
later in the series. When Bjorn speaks to you about the idea of concentrations with
the European Union dimension.
Defining the Market
I've spoken a lot about market, affecting the market, anti-competitive behavior on
the market. But what exactly is it that I mean by market? Because, in competition
law, we have a very specific meaning for market. Because our analysis of whether
or not a particular behavior or agreement is anti-competitive depends on its
potential effect on a market.
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In competition analysis, we therefore focus on the question of whether or not
companies are, or will be, in a position to exercise market power. And we can't do
this without reference to a market. The effects of the actions and the agreements at
issue can only be expected to have a significant impact on any relevant market if
the company's concern possess some market power.
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So, the market because the crucial, the critical, aspect.
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And one typically needs to proceed to an analysis of what we mean by market in a
particular case. Of course, the objective of defining a market is to identify both the
product market and the geographic dimension of where those products are capable
of constraining the commercial behavior of the company concern. It therefore
provides us a context within which to assess the competition issues,
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be it the competitive impact of a given agreement, a certain type of conduct by a
single company, or indeed a merger or an acquisition.
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This concept of market is key to all our analysis underlying competition.
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Companies generally will try to do this in a very broad way to illustrate that their
effect on the market is minimal, they have very little market power.
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Perhaps they might say that they are only limited geographically to a very watered
down power.
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But as we'll see in the later lectures, and as runs through competition law, agreeing
a definition of the relevant market becomes central to understanding whether or not
potential behavior does indeed distort, or potentially distort, competition on the
market. We'll do this by looking at some particular concepts.
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Is there substitutability of a product? Can consumers simply buy another product?
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How narrow is the market on which a company operates? The narrower the
market, the greater the market share. The greater the market share, the greater the
ability of a company, or an association of companies, to abuse or distort
competition on those markets.
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That's all I have for today, and I shall be back later in the series
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to consider more detailed elements of competition law with you.
Anti-competitive behaviour
Hello, welcome to the short introduction into the first of the competition law rules
to be considered in this course.
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This session considers in a very general way the application of 101(1) of the Treaty
of the Functioning of the European Union. And our objective in this session is to
introduce, in an overview way, the main components of Article 101(1) of the
Treaty of the Functioning of the European Union.
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Of course, the article prohibits agreements, decisions by associations of
undertakings, and concerted practices that are restrictive of competition.
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But, in order to establish when article 101(1) has been breached, we need to really
consider four essential questions. The first of these is whether there are
undertakings or associations of undertakings involved in the potentially anti-
competitive behavior. The second, is whether or not there is an agreement or a
concerted practice. Or in fact the decisions of by associations that is under
consideration. And thirdly, we need to really look to see whether or not there has
been an effect on trade, or a potential effect on trade between member states.
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And lastly, the consideration is whether or not this behavior, either by its object, or
by its effect, prevents or distorts competition within the internal market.
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So, turning to the first point for us to consider today is whether or not we can
define the concept of undertaking. Of course it is a critically important term since
only agreements and concerted practices between undertakings fall under the
provisions of article 101(1). However, the treaty itself does not give us a definition
of undertaking, and we really need to look at the case law from the European
Union courts to clarify what exactly we mean by this concept undertaking.
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In the first of these cases, the case of Hofner & Elser, we see that the court stated
that the concept of an undertaking,
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encompasses every entity engaged in an economic activity, regardless of the legal
status of the entity, and the way in which it is financed. In other words, we have a
very broad definition of what amounts to an undertaking.
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But in Pavlov, the court added to this by stating that it also
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includes any activity consisting in the offering of goods or services on a given
market.
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This will all be economic activities for the purposes of being an undertaking.
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And finally, so as not to labor the point, in the case of Wouters, here we see the
court saying that the competition rules do not apply to activity which by its nature,
its aim, and the rules to which to which it is subject, does not belong to the sphere
of economic activity or which is connected with the exercise of the powers of a
public authority. Almost the reverse, here we were looking at those undertakings
which are unlikely to fall within the scope of Article 101. And we can see here that
that generally means public authorities. Any other undertaking engaged in
economic activity and the offering of services or goods is likely to fall within this
broad interpretation of the concept undertaking.
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You should also remember that article 101 applies not only to agreements and
concerted practices between two or more undertakings. It also applies to decisions
of associations of undertakings.
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So for example, a trade association does not have to have a commercial or
economic activity of its own to be subjected to article 101(1). 101(1) may well be
applicable to the decisions of a trade association even if it does not apply to its
agreements. Because the association does not enter into an agreement as an
undertaking.
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So you can see here we have this very broad concept of an undertaking, which
really sucks in and brings in almost any activity that has an economic element to it.

The second element in relation to 101(1), again, requires us to look closely at the
case law coming from the European Union courts and what is it that we mean by
an agreement or a concerted practice? In the case of Bayer, the general court
reviewed the case law from around the Union on the meeting of an agreement. And
for the General Court, this concept centered around the existence of a concurrence
of wills between at least two parties. The form in which that concurrence will is
manifested is unimportant so long as it constitutes a faithful expression of the
parties intention.
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What does this mean? Well, a legal contract, of course, would qualify as an
agreement, but so too would so-called gentlemen agreements or simple
understandings.
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Even though these are not strictly speaking legally binding, but there is no
requirement that an agreement be supported by so-called enforcement procedures.
What about concerted practices then? Well, concerted practices really establishes
the case for conduct, which is not attributable to an agreement or a decision.
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These may, within themselves, amount to an infringement. For example, the very
popular case of the dyestuffs, food dyestuff, and this surrounded a number of
producers of dyestuffs who were accused of price fixing through concerted
practice. In other words, they came together, they spoke about what prices to put
their products out on the market for and what charges to make for the services they
undertook. There was no agreement. There was no conclusion of a contract and
this became common practice amongst these organizations. This is a concerted
practice and the court has said that a concerted practice is a 'form of coordination
between undertakings which, without having reached the stage where an agreement
properly so-called has been concluded, knowingly substitutes practical cooperation
between them for the risks of competition.'
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Again, a very wide definition we see coming from the courts, both of agreement as
well as concerted practice. We see that these all-encompassing interpretations
capture the activities and the agreements of undertakings however they choose to
participate in anti-competitive behavior.
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Let's be honest. Companies engaged in unlawful activity are highly unlikely to
write it down and bring such a contract into a court to enforce against one of their
partners. And certainly, they don't want to write it down into an agreement to later
be used against them in a court as evidence of their anti-competitive behavior.
That's the second facet. The third, of course is this question of effect on trade
between member states.
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Now in line with what we've already seen, the history of this concept, both by the
Commission and the European courts, has seen the adoption of a very legal and
liberal interpretation of this so-called interstate trade clause. The enlargement and
the great scope that this clause has given means that a lot more cases are likely to
fall within Article 101. In other words, more activities by undertakings where they,
in some way, have an impact on trade between member states is likely to fall
within the competence of the European Union Competition Law and we've seen
that the concept of trade is not limited to this traditional exchange of goods and
services across borders. It's a much wider concept and in relation to this effecting
trade between member states, we see that all activity, including the establishment
of undertakings, of agencies, of branches or subsidiaries in other member states, all
fall within this concept of effecting trade. In other words, you don't necessarily
need to have the traditional good passing over a border In order for there to be an
effect on trade between member states.
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Because the concept of trade also cover situations where the competitive structure
of the market is effected by agreements and conduct. So, effecting or solidifying a
particular market in one member state may well change the overall competitive
structure on that market within the Union.
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Meaning that you need not necessarily have to have a cross-border element in
order for the competition on the market to be distorted. Very wide again, and here
we can really see that the European Union competition laws become very, very
encompassing.
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The final question that we need to really look at, however, is whether or not the
agreement or practice has by its object or effect the prevention or distortion of
competition within the internal market.
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The wording of the article itself, 101, it doesn't make clear what we mean by object
or effect, but the case law has in some ways tried to illuminate what we mean by
these particular notions. I should point out that these are alternative and not
cumulative requirements for the filing of an infringement of Article 101. And when
we are speaking of the idea of distorting competition by object, we see in the case
of GlaxoSmithKline Services,
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the Court said that in order to decide whether an agreement restricts by object,
regard must be had inter alia to the content of its provisions. We need to really look
at the agreement. We need to establish the objectives that the agreement seeks to
attain and the economic, and legal context of which it forms part of.
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According to the court in T-Mobile Netherlands, it need not cause an anti-
competitive effect. It need only potentially distort competition on the market.
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So again, very wide. Just by object, you could be found to have infringed European
Union competition law.
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Put another way, agreements that have as their object the restriction of competition
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will satisfy this point of Article 101(1) by mere existence.
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The concept of effect, on the other hand, applies where from the agreement, it does
not have the object of the restriction of competition. In other words, it's not clear
from the agreement that the intention of the parties is to restrict competition.
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Here it is a little bit more difficult to establish whether or not there has been an
effect on the market and this requires a higher burden of proof of the Commission
to bring before the courts and to bring the evidence to illustrate the actual effect
that the anti-competitive behavior, or agreements has had on the relevant market.
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So taken together, these are the four key elements that we need to have in place in
order for us to say that Article 101(1) has indeed been engaged. And in the event
that we have a case where all of these are satisfied, then we could have the
situation where a particular agreement could be found automatically void under
Article 101(2).
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That of course is quite a severe thing to happen in a commercial environment, but
even if a company is found or companies are found to have infringed Article
101(1), they can have it declared inapplicable where the criteria set out in Article
101(3) are satisfied or the companies fall under a relevant block-exemption. What
do I mean by 101(3)? Well, 101(3) provides a legal exception to the prohibition in
Article 101(1) by providing that it may be declared inapplicable in respect to the
agreements, decisions or concerted practices or of categories of agreement,
decisions or concerted practices that satisfy four conditions. So 101(3) has four
cumulative conditions that an undertaking will need to satisfy in order to have
101(1) deemed inapplicable. The first of these is that the agreement must
contribute to improving the production or distribution of goods, or to promoting
technical or economic progress whilst allowing consumers a fair share of the
resulting benefit.
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The other two are these: The agreement must not impose on the undertakings
concerned. Restrictions which are not indispensable to the attainment of these
objectives, nor afford such undertakings, the possibility of eliminating competition
in a substantial part of the products in question. As I said already, these are
accumulative and they all need to be satisfied if 101(3) is to be applicable. So
101(1) catches anti-competitive behavior. 101(2) voids such agreements and
101(3) offers a potential legal defense, if you'd like, to the application of 101.
Well, hopefully, this has provided you with a helicopter view of Article 101 TFEU.
And of course, there is much more debate and considerations surrounding the
application of this article as well as the applicability of the so-called block
exemptions, but time prohibits us from dealing with these in more depth. There is
additional reading, which has been attached to this lecture and I encourage you to
followup on this reading to get a greater understanding of the issues that remain
surrounding Article 101 and the application of the block exemptions, which fall
very much and stem from and flow through Article 101(3).
A Practitioners View – Marcus Glader
Marcus Glader, what a pleasure to have you back in Lund again. You are a doctor
of law here at the Lund Faculty. What was your thesis about? >> My thesis was
about innovation markets and the way that competition law tries to take into
account the fact that there is competition also at the innovative or entry stage of
product development etc.
Play video starting at ::42 and follow transcript0:42
And that led you to leave the faculty. >> That led me first to a small stint with the
European Commission, and the unit responsible for pharmaceuticals, and then to
eventually leave Lund and go to private practice in Brussels. >> With what law
firm was that? >> With Cleary Gottlieb. >> The big Cleary Gottlieb law firm? And
then you left Cleary Gottlieb and you are working with your Swedish law firm
now. >> Yep. Working in the Stockholm since five years. >> And what's the name
of the law firm? >> Vinge law firm. >> What is Vinge specialized in? >> Vinge is
a full service law firm, so it's hard to point out any specific practice group but
M&A is the core and then we have full service of other specialize departments. >>
Business law or? >> Business law. >> Primarily. >> Okay. And what's your role in
the Vinge law firm? >> My role is, I'm partnering in the EU and competition
group. So we specialize in the, primarily, antitrust and competition law. And we
work closely with our Brussels for more general EU law cases as well.
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And that fits precisely, that this is the reason why we have invited you here. >>
Yeah. >> I've told about our MOOC and as you know, we have in two segments
now been discussing antitrust and competition law problems on the European
level.
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And it is extremely nice for us to be able to
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go back and revisit certain questions by talking to a practitioner. And so you're
here in your capacity as a practitioner... >> Yep. >> ... and not as a legal scholar.
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The lectures proceed in different steps. Of course we are starting by talking about
agreements and relating that to Article 101 in the Treaty. In your practice, are you
dealing the agreements at all? >> Yes we do. Surprisingly perhaps, it's not the
major part of our practice. Normally, you would think that an antitrust lawyer
would deal with 101 aspects almost in daily basis and as the major part of the
work. But we do, and it's usually when our clients have some kind of projects or
technology transfer in mind or etc. And they would like to conclude an agreement
that they can rely on and which brings together not only the competition aspects
but also the general commercial agreements aspects and the civil law aspects and
IP law aspects or whatever to form a robust basis for their corporation or
transactional whatever. >> So you must be able to draft a good distribution
agreement or licensing agreements or some. Do you know all the competition
aspects when you are sitting down to write that or are you using any type of
resources in order to be able to? >> Well first of all I think we need to try to figure
out what is it that the part actually intend with this agreement and what is the
factual background. It usually starts with a quite extensive dialogue with the client
depending on the complexity of the agreement and the corporation. But if we take
the technology transfer example, there it might not be so evident what the parts
actually are, are they competitors, are they in a vertical relationship. What are
they? So what kind of animal do we have in front of us from a competition
perspective? But also, how do we then make sure that's the general contract law
aspects and the IP law aspects, etc, are also taken into consideration, and so we
also work with our colleagues in the other departments to put together >> ... All the
different aspects. >> Yeah. >> That will actually affect the legality of the
agreement in the future. >> Right, because one of the major points, I think from the
commercial and competition law aspect here is to get agreements in place that you
can rely on.
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Irrespective if you are going to make investments into this collaboration or into
technology transfer, what you're going to do. Or if you're going to give away
business secrets or knowledge that
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will affect your own business, you want to be able to rely on the agreement. And
the agreement should then reflect what the parties jointly intend to do in this space.
And one of the major risks, from a competition perspective or from a commercial
perspective, is the civil law consequences if the counter party might use
competition law to try to get out of their obligations under the agreement. >> So at
this stage, you worry not so much about whether there are going to be fines or not.
But you worry about it if the agreement is under Article 101(2), if it is valid or not
valid. >> In most cases, that's the primary risk involved, yes. And that could relate
to the entire agreement but more often so to specific articles of the agreement, that
might be particularly important to one or the other party and where you can suspect
that the counterparty at some point might try to
Play video starting at :6:48 and follow transcript6:48
get out of that obligation. >> Okay I think that's an important practical aspect.
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You said that this is maybe not what you spend most of your time doing. The
situation is rather that the client is coming to you with a relationship based on a
contract and has a problem. >> That's equally often the case, and so then you have
different, then you are probably a few years down the road and one or the other
party is trying to use competition law as a tool to get out of an agreement or to...
And things might have changed, the markets might have changed, the relationships
might have changed. There's a feeling that the agreement doesn't reflect reality
anymore and that it's onerous in one of the parties and they try to renegotiate and
that fails. And then, ultimately, you might end up in an arbitration or in a court
proceeding and with a dispute. >> Have you noticed that there are specific
competition problems that will appear when they come to you and say here's the
question? >> That's a hard question. I think that reality is so >> In reality, there are
so many different types of aspects that can come up. It's hard to point to any
specific. I think that in general, the longer the time period has passed, and the more
the things have changed in the markets and in the technology or in the whatever >>
The more likely it is that there will be more and more friction in these
relationships... And that one or the other party then will. So you can think of
obligations under an agreement that might trigger that such as grant backs or
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post patent terms etc that can lead results that are... >> How about the hard core
provisions? I mean, the agreement is not supposed to contain certain elements; no
resale price maintainance.
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>> Right.
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Careful with the territorial restrictions. >> No. Those might be tricky too, because
it's not always evident or black or white or you have very complex types of the
pricing mechanisms in certain markets and the part is also involved in different
practices that are hard to pinpoint what they actually are about. But I think there, at
least you have a framework to start out and you can sort of often steer the
agreement
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to be able to cope with those risks and perhaps also to
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steer the collaboration agreement structure in a way that it would be safe under the
competition rules and still achieve what the parties want to achieve. >> But when
they are coming with the problem, then it's often fairly obvious to you if it contains
resale price maintainance laws or... Yeah. >> ... Which you may either use to your
client's advantage, if the client wants to get out of the agreement, or where you
have a problem to
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solve for the client which is difficult to solve. >> Right, and in most cases that I
can remember now >> I think there's more of complex type of arguments. So you
can always make a competition arguments, if you want to, under most of these
types of obligations or restrictions. So it's not always that the claimant will be
successful but they try to do that as a basis for renegotiation or for trying their luck
in an arbitration or in court. >> Do you know all the rules that relates to
agreements or do you have some type of support in anything?
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Well, obviously you always have to go back to the sources and you go back to
block exemption, regulations, and guidelines and... >> Case law? >> ... Case law,
and you follow up on recent developments. And you again try to figure out what
the factual situation is in this particular case, because the arguments that you can...
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... if you now take the step back again if you are in the stage where you are writing
an agreement or you are guiding the parties, or one of the parties, in a transaction
or in drafting agreements. There it's a lot about trying to understand the context,
and to see what risks might appear here, materialize, and what could be reasonable
and what could be unreasonable also between the parties to see see where are the
likely conflicts going to be. And then relate to how strong arguments will there be
in favor or against a certain type of restriction, also from a competition perspective.
>> Let me test your knowledge.
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There is a grant back in the agreement. Is a grant back okay or not?
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>> In most cases, yes. But then again, it all depends. And so I would go back to the
block exemption. I would go back to the guidelines, and I would also talk to my
clients and try to understand why is this important. How will this actually work etc.
and to fit that into the legal framework. >> Uh-huh. >> It's one of those types of
provisions that you need to watch out for. But at the same time usually you can
achieve quite a lot and still be on the safe side. >> A non-compete obligation?
>Yeah, it's a similar one and as long as you are not dominant then usually you can
do quite a lot. But again, be aware of potential risks and counter arguments and
how important it is to you in this context. >> Mm-hm. >> Sometimes it's good not
to be too greedy in these agreements
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because if you impose restrictions on the counter party that you actually may not
need and... So you shouldn't always try to go as far as you can, so to say, in a
negotiation.
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>> So there is always this balance? >> Yeah. >> And in the end, the client is
saying, I want to know that this is not coming out under Article 101 or at least you
have to assure me that I get an exemption under Article 101(3). >> Yep. >> Are
you prepared to say to the client, I promise you that your agreement is absolutely
okay, there would be no problems. >> Well, the problem for the practitioner here is
that you're not only, what the client is actually asking is not only what I think but
also what the competition authority would think. if they were to scrutinize this, but
even more often what would an arbitration panel, the composition of which I don't
know today, what would they make of this agreement if this was ever to become an
issue. >> Since, as we said, most of these questions actually arise in a private
context where there is dispute between the parties. So it's very hard to say what an
arbitration panel,
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composed of maybe not even competition lawyers, would say about it. >> But if it
makes sense, and if you have good grounds and arguments for why this is a
sensible provision in an agreement, because it reflects what the parties must intend
to do and why that safeguards the different interests. Then you've come a long
way, both commercially and from a competition perspective. >> So you're a bit
bad to give advice. >> Yep. You probably have a solid insurance behind yourself.
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>> Yes I hope so. Yeah.
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>> Thank yo. We should continue with the discussion later on, talking about the
dominant position and mergers and acquisition. But thank you so far, Marcus.

Competition: Abuse of Dominance and Mergers

Abusing a Dominant Position
Hello, my name is Julian Nowag, and today I'll talk to you about Article 102
TFEU.
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This article prohibits the abuse of a dominant position in the internal market.
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In the following, I'll briefly talk to you about the main elements of this prohibition.
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Article 102 was previously contained in Article 82, EC Treaty.
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It prohibits one or more undertakings which hold a dominant position in the
internal market or a substantial part of that from abusing that position insofar as it
may affect trade between members states. Thus, Article 102 has four cumulative
elements that must all be fulfilled to find an infringement:
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First, there must be an undertaking.
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Second, the undertaking must hold a dominant position within the internal market
or a substantial part of it.
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Third, the undertaking must abuse this position. And fourth, the behavior must
affect trade between member states. However, Article 102 does make clear that
this prohibition does not only apply when there is one undertaking which holds
such a position. Instead, Article 102 also applies to cases of collective dominance.
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That is where two or more undertakings jointly hold a dominant position.
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When dealing with the prohibition of Article 102, it is important to keep in mind
that the dominant position itself is not prohibited.
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It is only the abuse of this position that is prohibited by Article 102.
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In terms of the four defining elements, I'll focus today on the definition of a
dominant position and the definition of the abuse.
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The two other elements, namely, definition of undertaking and the issue of effect
on trade between member states are essentially the same as in Article 101 TFEU.
So in the interest of time, they should not be repeated here.
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Let us now turn to the definition of dominance.
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Early on, the Court of Justice and United Brands and Hoffman and La Roche set
out a definition of this concept.
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According to this definition, dominance exists when undertaking can act, as the
court said, to an appreciable extent independently of its competitors, customers,
and ultimately of its consumers.
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To determine whether this is the case, European competition law requires that a
market is defined.
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In the definition of the so-called relevant market, economics is of the utmost
importance.
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Economics is also important where it needs to be established whether a firm is able
to act independently from competition.
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In the EU, the Court of Justice in AKZO established a certain form of a
presumption of dominance.
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Thus, the Commission does not need to prove that an undertaking is dominant
when undertaking has the marketing share of more than 50 %. Instead it would be
for the undertaking to show that it is not dominant if it holds such a market share.
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If we now turn to the second element, it becomes clear that dominance itself is not
prohibited. It is only the abuse of position of dominance that is prohibited by
Article 102. When determining whether behavior is abusive within the meaning of
Article 102, the lists in the article might give you a first indication.
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The Court of Justice, however, made clear that this list in Article 102 is not
exhaustive.
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That is to say that there is behavior that is not directly listed in that article, but it is
still prohibited.
Play video starting at :4:19 and follow transcript4:19
In general, one can distinguish between exploitative and exclusionary abuses.
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Exploitative abuses are, for example, excessive pricing.
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However, the focus in the has been on exclusionary abuses.
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An exclusionary abuse is a behavior by a dominant undertaking that closes off the
market for effective competition by the competitors. The concept of exclusionary
abuse has been established by Hoffman-La Roche in 1979. The courts since have
developed a distinction between competition under merits, and exclusionary
conduct that amounts to an abuse.
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This distinction is difficult in practice and involves understanding the economic
realities of the market.
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To give you an idea of an exclusionary abuse, the following list of exclusionary
abuses can be made. There is predatory pricing, exclusive dealing, exclusionary
discounts and rebates, tying and bundling, and refusal to supply.
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With this short overview of Article 102, I hope I have provided you with an
introduction into some of the basic concepts of this article.
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I hope it also became clear that it is not prohibited for an undertaking to be in an
dominant position, but that EU competition law places a special responsibility on
such undertakings.
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Such undertakings have a responsibility not to abuse their position of dominance.
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Thank you for listening to me.
Merging Businesses
Hello, my name is Julian Nowag and today I'll talk to you about EU merger
regulation. The EU's rules on mergers are a third substantive element of EU
competition law. However unlike the prohibition on anti-competitive agreements,
article 101, and the prohibition on abuse of dominance, article 102, the rules are
not primary law. That is to say, merger rules are not contained in the EU's treaties.
Play video starting at ::50 and follow transcript0:50
The merger rules are Secondary Law, they are contained in a regulation, which was
adopted by the EU. To be more precise, the merger rules are contained in
Regulation 139/2004. In the following, I'll briefly talk to you about mergers, the
history of merger regulation in the EU, the substantive elements of merger
regulation, and finally, about the procedure in merger cases. In legal practice,
procedure rules are of great importance.
Play video starting at :1:27 and follow transcript1:27
In today's business world mergers are a common place. A merger occurs when two
or more companies combine their businesses into one entity on a lasting basis. The
purpose of merger control is to enable competition authorities to regulate such
changes in the market. Merger control should help the authorities to identify
mergers which create competition problems and at the same time allow mergers
which provided substantial efficiencies to go ahead. Before 1990, the EU had no
merger regulation, The Commission had to rely on Article 101 and Article 102 to
address competition problems that resulted from mergers. The EU merger
regulation came into force in 1999, it was amended in 1997 and received its current
form in 2004. After this short historical overview, we will now turn to the
substantive assessment. Under the current European merger regulation any
concentration with an EU dimension which significantly impedes effective
competition in the common market or substantial part of it, in particular as a result
of the creation or strengthening of a dominant position, is prohibited. From this we
can extract the following three criteria: Concentration, EU dimension, significant
impediment of effective competition, in particular, through strengthening or
creation of a dominant position. As you could have already guessed, a
concentration is another word for merger. Legally, the regulation defines a
concentration as a situation where two or more undertakings on the market merge.
Or where one or more undertakings on a market acquire control over another one.
The second element is EU dimension, this element is a jurisdictional one. It
determines whether the EU or the member state's merger rules apply. Naturally, an
EU law can only apply where a merger has an impact beyond the borders of a
national state. In practice this is established by means of a quantitative test. This
means that the turnover of the undertakings involved is used to determine whether
the EU, or the national merger rules apply.
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When merger reaches the EU's turnover threshold, said in Article 1 of the
Regulation, the EU has jurisdiction. I'll not go into the details of thresholds, but I
encourage you to have a look at Article 1 of the Merger Regulation.
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In any case, where a merger reaches the threshold, it needs to be notified to the
European Commission. In other words, the companies involved will have to tell
The Commission that they plan to merge their businesses. The companies have two
specific forms for this notification. The information on these forms help the
European commissioner in accessing the mergers. For the companies, this has the
advantage of a one stop shop, that is to say that the companies only need to notify
the European Commission. There is no need to notify maybe 28 national
competition authorities. In contrast, where a merger transaction does not reach the
EU threshold, the transaction may need to be notified to all National Competition
Authorities. But this is also only the case where the national thresholds are
reached. This means there are still a large number of mergers that do not need to be
notified. Neither to the commission nor to the National Competition Authorities,
because the companies involved in these mergers are too small. Let us now briefly
turn to the third element of the substantive test. The question, whether effective
competition will significantly be impeded by the merger.
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In this substantive assessment, economic analysis is indispensable. The
Commission, in the assessment, will weigh the harmful effects on competition
against the benefits of the merger. One way a merger can be harmful to
competition is by reducing the number of players on the market. You could, for
example, imagine the broadband market with four competing companies, after the
merger, there would only be three left, and competition may be softened as a result.
This is what we call a horizontal merger. A non-horizontal merger can also be
problematic. This is, in particular, the case where, for example, in a vertical
situation, exclusion might arise. What do I mean by that? Imagine a market with a
number of players, all selling the Product A.
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All these players are dependent on one specific input, Product X. Product X is only
produced by one company, called the X Company, problems may now arise if a
company in the Market A merges with the X Company. The competitive risk is
that the new merged entity would simply stop supplying all other companies
selling Product A. After some time, the newly merged company would've
established a monopoly in the market for A. While these are some of the
competitive damages, or dangers, mergers can also produce substantive efficiency
gains. For example, the combination of two companies can lead to cost savings,
these savings can, for instance, be derived from synergies. The cost savings can be
translated into cheaper products, which benefit the consumers. As you see, the
balance between the risks for competition and the benefits for the consumers is a
tricky one. It will be a very fact specific question and depends highly on the
economic analysis of the case. Let me finally turn to some procedural aspects of
the European merger regulation. As I mentioned, any merger that reaches the
threshold needs to be notified to The Commission. This notification needs to take
place before the completion of the merger. Moreover, the completion needs to be
suspended during The Commission's investigation of the merger. If these
obligations are not complied with The Commission can impose a fine, as Article
14 of the Merger Regulation specifies.
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After the notification to the Commission, the Commission has 25 working days to
issue a decision. If there are more serious competition concerns this timeline can
be extended to 90 days.
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Merger proceedings may end with the Commission prohibiting the merger,
allowing the merger, or allowing the merger with conditions. Such conditions can,
for example, consist of selling certain parts of the combined new business.
Play video starting at :9:30 and follow transcript9:30
To summarize, EU merger regulation applies to mergers and acquisitions if the EU
threshold is reached. The Commission then examines the possible effects on
competition. Companies can be fined where they do not notify a transaction before
its completion or if they go ahead without waiting for the Commission's approval.
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I hope this lecture provided you with the basic understanding of the EU merger
rules. Thank you for listening.
Competition Procedure
In this short session, I'll be discussing a much more practical approach to the
enforcement of European Union competition law.
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In other words, we're going to be looking at how does the Commission carry out an
investigation and exactly what powers does the Commission have in order to reach
a conclusion of an investigation? And following from that, what are the potential
punishments or penalties relating to an infringement of European Union
competition law?
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I should start by saying that since 2004, we've seen a modernization of our
competition procedure. This has led to a set of new rules being brought in that
apply the anti-trust procedures and we find these in Council regulation no 1/2003.
Which I, of course, have no doubt that you have all read before tuning in for this
lecture.
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And if you have, you'll know that the objective of the new regulation is to ensure
that we have a much more effective enforcement of European Union competition
rules.
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The enforcement of this is in line with objectives of our competition laws, namely,
in the interest of consumers and businesses.
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At the same time, the new rules ease the administrative burden of firms doing
business in Europe.
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We now have a decentralized application of competition rules and the
strengthening of control for The Commission. Being able to lightening their
administrative workload and allowing The Commission to concentrate it's
resources on the enforcement of the most serious competition infringements.
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In other words, companies are a lot more free now to decide where and when their
activities fall inside and outside of European Union competition law. Meaning that
the commission now has the ability to focus predominantly on the most serious of
offenses of competition law.
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Article 4 Regulation no 1/2003, provides for the purpose of applying Articles 101
and 102 of the Treaty, the Commission shall have powers provided for by this
Regulation. In other words, Article 4 allows the remaining articles of the regulation
to come alive for the Commission.
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And what we see in the regulation, very briefly is that between Articles 7 and 10,
the types of decisions that the Commission is empowered to adopt are set out.
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It is these provisions and the powers of investigation, vested in the Commission
under Articles 18 to 21, that are really the drivers enabling the Commission to
effectively enforce European Union competition rules.
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The powers of the European Commission, what are they? Why do we have them?
We have them to ensure that the rules of competition concerning agreements,
decisions of undertakings and restrictive practices and abuses of dominant position
are applied in a way that allows the commission to conduct thorough investigations
and only impose penalties when such penalties are based on decisions made
following thorough investigations.
Play video starting at :3:51 and follow transcript3:51
The Commission, of course, chooses when to exercise these powers and this
usually occurs following a complaint from you or me, or from another company, or
from competitors.
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And it gives the European Union Commission
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the power to find an infringement under Articles 101 or 102.
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They are, in fact, able to make the decision of guilt or innocence, if you like, to put
it very simply.
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More than this, they can enter into a decision finding and terminating the
infringement, where the Commission has found that such an infringement occurs.
They can adopt a decision requiring the undertaking or association of undertakings
concerned to bring a particular action or agreement to an end.
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They can act very quickly, so interim remedies, such as an injunction. Of course,
an injunction is a decision ordering the undertaking to stop doing what it is that
they're doing. We have the ability to communicate, to negotiate with the
Commission.
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A company can offer commitments to the Commission.
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We saw this when we discussed our Article 102. You saw this very briefly in a
different context when you looked at the Commission's ability under the merger
regulation. Here we have companies that can offer commitments to the
Commission. Rather than allowing a full investigation, we have the
communication channels open between the two. We allow the Commission and the
undertaking to reach an agreement,
Play video starting at :5:45 and follow transcript5:45
taking into account the market and the opinions of those players on the market
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particular actions offered by the undertaking to the Commission.
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To allay those anti-competitive concerns that the Commission has brought to their
attention. Where the Commission makes such a decision, those commitments
become binding, completely on the undertaking offering such commitments.
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On top of this, the Commission can make a decision finding that Articles 101 and
102, are simply inapplicable.
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Here, the Commission has a wide array of reasons for which it may make such a
decision. It could be within the public interest.
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It could be based very specifically on the facts of a particular case. It could well be
that the conditions of Article 101 are not met or that the Commission is convinced
that Article 101(3) are applicable. But this is all fine.
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It's not all about the Commission.
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The regulation also makes specific reference to the European Union Charter of
Fundamental Rights. More importantly, we ensure within Europe that where the
Commission opens an investigation against a company or a group of undertakings,
that they have the proper right of defense.
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Of course, the Commission does not take these decisions in isolation, because
before taking any decision, which will have an effect on the undertaking or an
association of undertakings,
Play video starting at :7:38 and follow transcript7:38
they are given the opportunity to be heard on the aspects to which the Commission
has raised as objectional behavior.
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The parties also have the right of access to the Commission's file,
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provided of course, that it doesn't results in business secrets being divulged or
leaked out.
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Moreover, the Commission allows for a hearing.
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It allows the undertaking to come forward and orally plead their case.
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It should be said though, that the Commission or all national competition
authorities acting under the Commission's command, for that matter, are not under
an obligation to divulge information that they have acquired or exchanged
internally.
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Here, we see that undertakings are entitled to information that the Commission
relies on
Inquiries and Investigations by the Commission
What about the investigation? What about before the decision is made? Well, the
Commission has a wide range of powers of investigation. They can conduct sector
inquiries, so they could choose a particular sector, such as the pharmaceutical
sector.
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Where they find that the trend of trade between member states suggest that they
could be circumstances that lead to an anti-competitive or a distorted competition
on that particular market.
Play video starting at ::49 and follow transcript0:49
They can request information.
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They may by request or by decision, ask undertakings and associations of
undertakings to provide them with information that the Commission feels
necessary for them to fulfill their duties and to carry out their investigation under
this regulation.
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Of course, companies and people may have information that is necessary or helpful
to either the Commission or to the undertaking concerned.
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Very often, it is in the interest of the parties to cooperate with the Commission to
try to resolve the matter.
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I should also say that the Commission has the ability and the competence to ask
government and national competition authorities for any information.
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It requires to carry out their investigative duties.
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The commission can take statements. They can interview any natural or legal
person who consents to be interviewed. So of course there is no legal obligation on
you as an employee of an undertaking to sit down and be interviewed by the
Commission. Your rights of defense are protected.
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Perhaps the most spoken about
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power of the Commission is their ability to conduct inspections. Well, what does
this mean? Well, it means that the Commission can conduct what they deem to be
any necessary inspection of any undertaking or association of undertakings. And
more importantly, these companies are required to submit to such inspections. So
this means in practical terms that Commission is entitled to enter the premises, the
land or any means of transport of undertakings and associations of undertakings,
including the homes of directors, managers or other staff members. Of course, they
can only do so in conjunction with national law and if reasonable suspicion exists
that books or other records related to the business and the subject matter of the
inspection might be held there.
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The Commission is entitled to examine books and other records to take copies or
extracts of books or records, to seal up business premises for later inspection, to
mirror computers and hard drives, service. And to take that information back to the
Commission and to go through it as part of their investigation.
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It doesn't mean that Commission can simply knock on your door and come in any
day they want. They have to exercise their power
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in accordance with the rights of defense with this regulation.
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They have to have a written authorization specifying the subject matter and the
purpose of the inspection and the possible penalties of noncompliance.
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European competition authority also works very closely with national competition
authorities. And it may well be that national competition authorities act on behalf
of the Commission in carrying out these information gathering investigative duties.
Penalties and Sanctions
Once the investigation is all done and a decision is taken, and if such a decision
means that the Commission's of the view that an undertaking or the association of
undertakings has indeed breached European Union competition law.
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One of the biggest penalties that the Commission can impose are fines, financial
fines.
Play video starting at ::37 and follow transcript0:37
And these can be imposed on undertakings to a total not exceeding 10% of their
total turnover realized in the proceeding business year.
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Now that can be quite substantial findings.
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The fine acts as a serious detriment to breaching Article 101 or 102 of the TFEU.
In addition to this, the Commission is able to place periodic penalty payments on
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undertakings or association of undertakings, of course, not exceeding 5% of their
average daily turnover in the preceding business year.
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In order to compel the companies to put an end to an infringement, to comply with
a decision ordering interim measures, to comply with a commitment that the
Commission has a made a decision to make binding.
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Or to supply complete and correct information which the Commission has
requested and the undertaking is for one reason or another, not playing ball with
the Commission. Or until such a time as an undertaking submits to an inspection,
which the Commission has ordered.
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So here we see that the investigative, the decision-making powers under
Regulation 1/2003 create a huge framework within which the Commission has vast
powers, both to investigate and to deal with infringements of the Union
competition laws.
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Their decision, however, is not final.
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The courts play a role in this and the courts' role in this is to review the
Commission's decisions.
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Have the Commission acted within the confines of the law? Have the Commission
respected the rights of defense of companies? Have the Commission imposed the
correct level of fine or penalty on the undertakings? So once the Commission has
vast powers of investigation, has great powers to impose fines or order
commitments, this is not done in isolation.
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The courts act as the judicial hand brake on the powers of the Commission. Well,
that's really all we have time for.
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I suggest that you carry out the additional reading which is attached to this lecture.
This is a highly topical area and it's very often a tension between companies not
wanting to give up too much information to the Commission services to self
incriminate themselves and the Commission really looking to get as much
information as possible so as to reach the fairest and most just of decisions. Which
ever side you fall on you will no doubt find opposing opinions in the reading that
we have set forward with this lecture.
A Practitioners View – Marcus Glader
Marcus Glader, welcome back. Thank you. Earlier, we talked about agreements.
Let's now focus on situations where there is market power involved. Yeah. We will
actually talk about how you can abuse your market power especially in situations
where there is some type of concentration involved in it. But let's start by talking
about abuse. Is that something that will end up on your table as well? Will clients
come to you and deal with abuse issues? Absolutely. It's a little bit similar to the
101 discussion that we had earlier: That you can see two different types of cases or
problems. First of all, on the preventive side, that clients wish to come and gets
advice on how to conduct their business and to see whether they have any exposure
to potential one or two issues or that they later on might be exposed to authority
investigations or to counter parties in the market arguing that there's an abuse of
dominance or vice-versa, that you are advising clients that believe that there's a
problem conducted by others. When a client comes to you and says, "This is my
situation. This is what I want to do," and it's a client that perhaps has some market
power. Does the client know if it's a dominant company? That's often a very
difficult part of the equation here, to figure out whether there is actually a
dominance in the end. Particularly, in the technology markets because the
technology markets are seldom straightforward to define as relevant markets, and
certain market players might have a very high market share in the licensing of a
certain technology etc. Is that a dominant company or not? In other situations, it
might be more straightforward in more traditional industries maybe with the
market shares that are stable and markets have been defined in the past etc. So the
different types of contexts also gives rise to not only different types of analysis of
dominance, but also will a certain type of behavior likely be deemed as an abuse or
not. The first question is difficult. Is this company dominant or not? If it's not
dominant and if it hasn't entered into an agreement, can the company do whatever
it likes? Pretty much so. Pretty much, yes. So finding out if there is dominance... ...
Or whether, again, as we discussed before in the 101 segments, if it's likely that
there's an authority or an arbitration panel or a court would deem that they are
dominant. So we're actually not only making our own assessment, but actually
what do we think that someone else would make out of this. So that's often an
important part, and then comes the also equally tricky part which is whether there's
an abuse at the end of the day. Certain types of behavior are pretty well-known.
You go back to the core, the type of provision. What are the do-nots? Again, it
depends on the context, but if you retaliate against the customer because they are
starting to deal also with competitors of yours or if you impose long-term
exclusivity agreements saying that they would need to buy a 100 percent or close
to that of there requirements for you etc. Those are typically the do-nots. Excessive
prices or excessively low prices? Yeah, but that's one of those areas where it's
often tricky. What is an excessive price, and how would you benchmark that? But
you know what an excessively low price is, a predatory. There you can at least
have some economic models to help you along, but again that's with the help of
economists and often requiring quite a bit of data and depending on what type of
data you plug into the model, you get different results in the end. So it's not
straightforward, but at least you have a framework. The abuse rules are on the
margin the more difficult ones because on the one hand we want dominant or big
companies with market power to compete aggressively in the markets. That's what
they're supposed to do, that's what competition's always about. At the same time,
they have some kind of a responsibility not to step over a certain line that's drawn
in the sand, which is a bit elusive and no one really knows where it's drawn. The
special responsibility. If no other argument is valid, then it seems like the Court is
referring to this special responsibility. Could you define special responsibility? No,
I don't think that anyone can, and that's why it's illegal rather than economic or
whatever concept you put into words, something that you can't really define. But
it's also the case that competition law is used increasingly as a means of fixing
problems in markets that maybe you didn't foresee 10 or 15 years ago, and
suddenly that becomes an abuse by one of the today leading companies in that
market. So the main problem for you is to try with sometimes unusual behavior to
determine if this may be a non-competitive way of acting. You have a special
responsibility to compete on the merits. That's what the Court is saying, and what
two very vague notions, and the client is asking you, "Am I dominant? Then I have
a special responsibility. Am I competing on the merits?" That's a difficult. It might
be a difficult question. Again, it depends so much on the context or what the client
is actually engaged in. We have some guidance at least on rebates, it's also on the
margin. It's difficult to say, but there you can still classify different types of
schemes and refusal to license or refusal to deal, there is guidance. Again, in this
particular context, you can evaluate whether that's a likely argument that would
hold up or not, depending on the situation and why a company is refusing to deal
or refusing to license or whatever. If I understood you before, you're suggesting
almost that the authorities are using these unspecified powers in order to extend the
reach of competition or to new areas. I think in the area of abuse of dominance and
in looking at the high-tech markets or technology-driven markets in particular, that
is certainly the case that we see issues come up as abuse-type cases that were not
foreseen before. And where maybe it's hard to get the legislature to address the
problem through regulation, and at the EU level also quite a long and hard process.
Then competition law might be an attractive tool to try to get to a certain market
practices or certain problems in certain markets that it's hard to attack otherwise.
Then you have to ask yourself the question if the anti-trust authorities, competition
authorities are properly equipped to deal with those types of questions. This might
be the case, particularly if you look at maybe the European Commission, but then
you should also bear in mind that this will then be replicated down by national
authorities, and they might take those concepts even further and go astray a bit and
not keep to what the Commission maybe have in mind etc. So there's a danger of
trying to look upon competition law as a fix-it-all type of regulation. The
pharmaceutical market has been very much discussed really. It's now moving into
the IT markets to a very large extent. Any specific problems? We have this; Apple,
Microsoft, Facebook, Google, type of what's going to come out of this market in
the end? It seems like the authorities are very interested in... Rightfully so. I think
it's fair enough that they are interested in that. I think that there's a danger if you
look too much beyond safeguarding competition and acts that really threatens
competition. If you do that with a too short-term view of these markets there are
inherently dynamic and where you have different market leaders over time etc. I
think that there's a risk of over-regulation if you start to interfere with product
development and to have the authorities decided what types of products are going
to be tied to each other etc, or not. Because I think that that underestimates the
markets and actually interferes in the market mechanism. If I recall from our
earlier discussion, you said, "As a lawyer, I use Article 101 both in order to help
the client to avoid getting into problems but perhaps also to use it as a sword." To
help the client to get out of the contract. When you look at article 102, in abuse of
dominance, how do you use that in relation to your client? Well, first of all, it
depends on which side of the fence you're at. But obviously, when you talk about
abuses, it's a little bit similar to 101. Usually, if you have an exclusionary abuse
situation, that's often directed to a certain competitor and then you might have this
similar situation there. That you're engaged in civil proceedings or you complained
to the authorities. The risk is that the competitor will complain, and you get into a
major procedural issue which is costly. Yeah. Or that the competitor or
counterparty, it goes to court and claim damages. Exactly. Because it's easier to
prove than the cartel, for instance, because it's often a relationship of some sort in
the background. You don't need always to wait for full authority to hand down a
judgment or a decision first. Let me turn to mergers and acquisitions. We only
have this legislation since 1989. But now, I assume that that is fairly extensive part
of your legal practice. Yeah. I would say it has been, or we as a group, might be
spending half of our time on mergers. So here comes a client with a proposal for a
merger,
Play video starting at :13:35 and follow transcript13:35
how do you attack that?
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Hopefully, if we start, there are so many different types of mergers as well. Some
clients are very active in the M&A projects, private equity companies etc., they
might have a number of potential deals going on at any given time. They have
developed processes for when to contact us and to get the merger control work
stream going as well. Then you have more strategic transaction where perhaps
more industrial companies are looking to buy competitor or to buy upstream or
downstream company. Let's talk about the strategic acquisition. A company sees
that by merging with that other company or acquiring that other company, it will
become a better entity on the market. How do you address that proposal? Are you,
first of all, interested in jurisdictional issues? Both the material is difficult, so
whether it's substantive issues, those types of transactions, and the ones that are
more about getting the approvals where there shouldn't be material issues. The
jurisdictional part is a very important part, an increasingly important part. So we
talk about that first and then we'll move into the substantive. What do you mean by
jurisdictions? We are in a situation where a merger control, we've had it since
1989, but it's been a huge export success since. So we have a 100 countries plus
around the world with their own merger control rules. Everybody wants their own
merger control rules. We have increasingly international and globalized markets
where even companies that are mainly, or have their headquarters in rather small
countries, have a global footprint. That means that combinations of different
businesses today increasingly trigger merger control filings in various parts of the
world. Even if there is no substantive issues that requires a fair amount of
coordination, a fair amount of planning, the rules and regulations and processes
looks differently in different parts of the world, timing is affected, some
jurisdictions are very formalistic, you needed a lots of formalized, notarized, and
postalized documents, etc. Others are lengthy, and they require lots of information.
Competition law is used as a means of getting information by the authorities etc.
So the jurisdiction point is definitely important from a commercial perspective, on
the timing of the transaction, on the financing of the transaction. Also, within the
European Union, you'll have to decide if you want to be in national or EU. Right. I
mean, the EUMR is good in the sense that there is one-stop shop, and you don't
want to end up in 20 different member states, they seldom do, but you could. Now,
the European Commission is also quite... That process can also be comparatively
lengthy and burdensome in terms of the information requirements and the
prenotification practice of the European Commission, where you actually sort out
any questions before you actually file and then the five weeks go by without many
questions also in trivial cases. Because that's an interesting thing. That's not the
regulation, but that's how a merger practice... In your practice, how prepared is this
summit? Will the Commission come and ask you surprise questions, or are you
already aware of this even before the merger happens? Hopefully, we're aware of
of the potential questions before the merger happens. In more difficult cases, if we
move over to the substantively difficult ones, you have to be prepared on
beforehand because you don't want to end up with filing, notifying your
transaction, and then be surprised by the questions and the problems that arise. So
you have already advised your clients on that it's likely that the Commission is
going to ask for a commitment, sell off that part or do something. You see these
things in advance? Yes. As far as you can and you try to prepare for that as well.
It's also an important contractual point because someone would typically bear the
risk if there are issues along the process and in complex transactions, you might
not know exactly what type of commitments will be necessary or will be accepted.
It also depends on what the authorities get out of the market researcher or the
market testing that they do during the process. So it's a bit of a moving target. But
in order to be able to also put this into a contract, who's going to bear the risks for
this, the timing etc., you want to get your arms around it before you notify. It's also
the fact that it's hard to make your case in a persuasive way, if you haven't foreseen
the questions on beforehand. You're going also assist your clients with negotiating
the agreement and filing their notifications to the European Commission or to the
member states. Can one person really in a larger merger do all these things? No. I
mean, there is many different specialities involved here. You have the M&A team
driving the main due diligence part of the transaction, and negotiating the
agreements, you have a finance team working with the banks, etc. Such aspects
involved. We are dealing with the merger control aspects. Obviously, you want to
coordinate so that it all comes together as a package here, but there's a big team
usually involved in the bigger transactions. Anything else that you'd like to
specifically point out in terms of mergers and acquisitions that is important for you
as a lawyer? Now, I think the interesting part of this is, again, how it ties into the
commercial aspects of what the commercial needs between the parties and what
they are trying to achieve. Taking a step back and looking at what's happening
right now, maybe one could also emphasize that we are in this increasingly
international transactions, that there are other types of regulations that are
increasingly important such as foreign investments regulations, it's not merger-
controlled, but you are looking to see who is actually investing in certain domestic
markets. So both in Russia and in the US, for instance, there is increased focus on
vetting transactions from also from those, and then blocking or making conditional
on various commitments, transactions that could threaten national security in a
very broad sense or domestic interests of other kinds. Thank you very much,
Marcus, for spending time with our MOOC on European Business Law. My
pleasure. Thank you.
Week 5: Selling to the State and State Aid
What is State Aid?
Hello and welcome to a lecture concerning one of my favorite subjects, state aid.
Play video starting at ::14 and follow transcript0:14
Today I will present you with an introduction to state aid law and present the
definition of state aid in Article 107 TFEU.
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The main question is, how do we define state aid?

A colleague of mine will tell you more about the exceptions from the provision of
state aid in another lecture.
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I will tell you more about state aid procedure and the traditional procedure linked
to state aid control in a separate lecture on Article 108 TFEU.
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In order to profit from this lecture, I suggest you read through Articles 106, 107,
and 108 TFEU. When you have done so, you can continue to watch the
presentation.
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First, let me tell you something about state aid law in general.
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State aid law is generally speaking the common term to denote the prohibition in
the treaty of member states providing subsidies to companies, which threaten to
distort competition in the EU.
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As we will see the prohibition is shaped so that it allows a wide margin of
discretion for the administration. Both on the European and on the member state
level, the law leaves space for politics.
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One such example is the decision of European governments and the Commission
to allow state aid to banks during the financial crisis.
Play video starting at :1:45 and follow transcript1:45
But there is another side too, that is the economic side of state aid. State
intervention in the economy is a common feature in developed countries. Since the
state is so powerful, an intervention can have an impact on the economy.
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While some argue that this is a positive force, others argue that this is a negative
force.
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In any case, the application of state aid law will always have an economic
dimension.
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The nature of state aid is, therefore, best described by the state aid triangle. In this
course we will deal mainly with the law part of the triangle. But keep in mind that
the other aspects are just as important.
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The definition of state aid is found in Article 107 (1) TFEU.
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According to this provision, save as otherwise provided in the Treaties, any aid
granted by a Member State or through state resources in any form whatsoever
which distorts or threatens to distort competition by favoring certain undertakings
or the production of certain goods shall be, insofar as it affects trade between
Member States, incompatible with the internal market.
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The notion of undertaking is a very flexible one. It includes any entity that engages
in an economic activity regardless of its legal status or how it is financed.
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It has also been described as an economic entity which consists of a unitary
organization of personal, tangible and intangible elements which pursue specific
economic aim on a long-term basis.
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This does not mean that an undertaking must be profit driven. It is sufficient that
the undertaking operates on the market in which there is competition between
undertakings.
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Activities which consist in the exercise of public authority are not considered to be
economic activities. And therefore the rules on state aid do not apply to these
undertakings. This rule concerns child care and education and such services.
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There are four main criteria which have to be fulfilled for a measure to be defined
as state aid. The first is that aid must be granted by a state or through state
resources. This is called imputability. That is the aid must come from the purse of a
state.
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The notion of state carries a wide definition. It does not only cover the state per se
but also the administration and companies which have very close links to the state
and fulfill administrative functions.
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The decisive question is whether the state has a determining influence in the
company.
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Here already, there is an important exception. If the state acts like a private
investor in the market economy, the intervention is considered to be a normal
investment.
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Such an intervention is not considered to fall under the prohibition of state aid in
article 171 TFEU.
Play video starting at :5:15 and follow transcript5:15
Therefore, if state controlled companies follow market- oriented transactions, there
is no state aid.
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If the state acts like a creditor, owner and investor on market terms there is no state
aid.
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The second criterion is that the aid must bring an advantage.
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Article 107 (1) TFEU speaks of favouring undertakings. In short, the beneficiary of
the aid must be better off after the aid has been granted than he was before. But it
doesn't have to be a transfer of money.
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The provision also covers the situation where the state does not take out a levy or a
tax or otherwise must be paid by everybody else.
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The third criterion is that the aid must be selective. Article 107 (1) TFEU prohibits
state aid only if it favors certain undertakings or the production of certain goods.
This means that the targeted measure to a specific undertaking or groups of
undertakings is prohibited.
Play video starting at :6:33 and follow transcript6:33
However, if a measure is general in character, it's not covered by this criterion.
You can imagine that this leads to big difficulties when it comes to tax measures,
because how do you determine that a certain tax measure is selective?
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There is a lot of discussion on this particular topic and a lot of case law from the
Court of Justice.
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The fourth criterion concerns the distortion of competition.
Play video starting at :7:2 and follow transcript7:02
Here we have a presumption that if the first three criteria are fulfilled, the last one
is fulfilled too.
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However, this does not free the authorities from making an assessment on this
point.
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But the burden of proof goes over to the State, or beneficiary, to show that the
measure in question does not distort or threaten to distort competition.
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There has been discussions about how to make this assessment more scientific
based on competition economics, but that discussion effectively ended with the
financial crisis.
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The question whether these four conditions are fulfilled are always made based on
objective criteria, that is, the intention behind an intervention by the state plays a
secondary role.
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So remember, when these four criteria are fulfilled, a measure qualifies as state aid
under Article 107 (1) TFEU.
Play video starting at :8:14 and follow transcript8:14
However, there is much more to be said about the state aid system.
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At the center stage of the system you will find the exceptions to the prohibition
which are laid out in Article 107 (2) and 107 (3) TFEU. As far as state aid is
concerned, these exceptions and how they are applied by the Commission
contribute to a much softer application of the prohibition than the wording of
Article 107 (1) TFEU may imply. So when you hear the following lecture on
Article 107 (2) and 107 (3) TFEU and the other exceptions to the prohibitions on
state aid, keep in mind that those provisions only apply to measures that have
already been declared state aid as such.
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It's just that they may be justified, or as we say in EU law, declared compatible
with the internal market.
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We now have reached the end of this lecture, which concerned the basic notion of
what is a state aid.
How to control State Aid?
Hello and welcome back. In this lecture we are going to look at the procedural
aspect of state aid law, what is commonly called state aid control.
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This is also part of state aid law where political aspects of the topic can be
illustrated.
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Before we go into the substance of this lecture, I just want to say that I hope you
have familiarized yourself with Article 108 TFEU and with Regulation 659/1999,
also referred to as the procedural regulation.
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If you haven't had the time, I suggest that you look at least at article 108 TFEU to
get an overview of this lecture.
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Before we go into the details, let me give you a brief outline on how the state aid
control system is set up.
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The purpose of state aid control, as we noted in the earlier lectures, is to control
state interventions in the market.
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The system is supervised by the European Commission.
Play video starting at :1:13 and follow transcript1:13
Only the Commission can declare a state measure compatible with internal market.
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The Commission cooperates with the member states. The member states must
notify state aid measures to the Commission so that the Commission can make its
assessment whether the aid is compatible with the internal market or whether the
measure is an aid at all. Pending this assessment the Member State may not put the
aid into effect. This is the so-called stand-still obligation.
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The relationship between the Commission and the Member States is an exclusive
one.
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Beneficiaries and their competitors do not play a direct role in that procedure.
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However, beneficiaries and competitors play an important indirect role as sources
for information.
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Individuals in undertakings can also submit complaints to the Commission if they
know or suspect that somebody receives state aid.
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Moreover, they can also use national courts to stop a Member State from paying
state aid until the Commission has made its assessment of the measure.
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This, in short, is how the system is designed.
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Now let's take a closer look at how the system works.
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As I said in the introduction, the Member States must not define new state aid to
the Commission.
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This means, first and foremost, that aid must be new.
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If it concerns an existing aid measure, aid which has already been cleared by the
Commission, the measure does not have to be notified.
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More importantly, if it concerns existing aid, the stand-still clause in Article 108(3)
TFEU may not apply.
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The control of existing aid is regulated through Article 108-1 TFEU and specified
in the procedural regulation. According to the treaty, the Commission shall, in
cooperation with Member States, keep under constant review all systems of aid
existing there.
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It's only if such an existing aid is changed in its substance that the stand-still
obligation in Article 108(3) TFEU applies and the aid must then be notified to the
Commission as new aid.
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This means that an aid measure which the member state wishes to introduce or any
substantive change that the member state wishes to make to an existing aid scheme
must be notified to the Commission.
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You find this principle in the first sentence of article 108(3) TFEU.
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However, there are exceptions. Because a strict application of these rules would be
prohibitively disruptive in the economy, there are a number of types of aid that the
Commission has declared are presumed compatible with the internal market and
therefore do not need to be notified.
Play video starting at :4:46 and follow transcript4:46
These types of aid are defined through block exemptions which are introduced
through regulations adopted by the Commission.
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The block exemptions contain very detailed rules on how and what aid the
Commission would accept.
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They cover aid such as environmental aid, agricultural aid, and soon possibly,
infrastructure aid.
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So in short, new aid must be notified to the Commission unless it is covered by a
block exemption.
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The stand-still obligation is a very specific feature of state aid control. Before the
Commission has declared an aid compatible with internal market, the aid must not
be put into force.
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This is regulated by the last sentence of Article 108(3) TFEU, according to which a
Member State may not put a proposed measure into effect until the control
procedure has resulted in a final decision. The types of decision which are
considered final is regulated in a procedural regulation.
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Article 108(3) TFEU has direct effect. This means that the provision can be
invoked before a national court. The Court of Justice has emphasized that national
courts must be able to prevent the Member State from putting a measure into effect
if the Commission has not cleared the measure. If they have questions they can
always refer the case to the Court of Justice for a preliminary ruling under Article
267 TFEU.
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This is also the case if the measure has not been notified. Many Member States fail
to report all their new aid measures and changes to existing aid measures to the
Commission.
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The procedure in Article 108(3) TFEU is also meant to apply to these categories of
aid.
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So in short, if a measure constitutes state aid in the meaning of article 107(1)
TFEU it must not be put into effect until the Commission has made its assessment.
National courts may decide to enforce this prohibition.
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Now let us look at the assessment the Commission makes and the procedure linked
to that assessment.
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In another lecture you have been told about the criteria and the conditions under
which the Commission can declare an aid compatible with the internal market
using Articles 172, 173 and 106 TFEU.
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Here we're going to focus on the procedural aspect.
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The foundations for the procedure are found in Article 108(3) and 108(2) TFEU.
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I mentioned them in reverse order because that is how they apply.
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According to the middle sentence of Article 108(3) TFEU, after it has received a
notification and if it has doubts whether the aid may be compatible with the
internal market, the Commission shall initiate the procedure provided for in Article
108(2) TFEU.
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This is an obligation, a decision not to open the formal investigation procedure can
be challenged before the general court.
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Now, article 108(2) TFEU mainly states that the Member State concerned must be
allowed to submit comments. The details of the procedure are laid down in
procedural regulation. Basically, the procedure looks like this. The decision to
open the formal investigation procedure is published in the Official Journal of the
European Union, with an invitation to submit comments.
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Then the Member State and any other interested party can submit their comments
to the Commission.
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The Commission then usually goes a second round or more with the Member State
concerned and then issues a final decision.
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During the procedure, the Commission may issue a number of procedural
injunctions to ensure the cooperation of the Member State concerned.
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There are three types of final decisions that the Commission can issue at the end of
the investigation. It's a positive, a conditional or a negative decision.
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A positive decision means that the aid is declared compatible with the internal
market and can be put into effect.
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A conditional decision means that the aid is declared compatible on the condition
that the Member State concerned takes certain measures to adapt it so that the
Commission can accept it.
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Finally, the negative decision means that the aid is declared incompatible with
internal market.
Play video starting at :10:7 and follow transcript10:07
This aid must not be put into effect, and if aid has already been paid, it must be
recovered from the recipients.
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Recovery is mandatory in such a situation. It's only if it's absolutely impossible to
recover the aid that the Member State may escape this obligation.
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If it fails to do so, the Commission can open an infringement proceeding under
Article 108(2) TFEU.
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If the Commission takes a decision not to open the formal investigation procedure
or takes a negative conditional or even positive final decision, the decision can be
appealed to the General Court of the EU.
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The Court will make an assessment of the law as well as the facts but will leave the
assessment of complex economic assessments largely to the discretion of the
Commission.
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An appeal can be brought by a Member State or by a party concerned. There is
ample case law on who may or may not be considered concerned. Beneficiaries,
for instance, are generally considered to be concerned, while their competitors find
themselves in the gray zone.
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After a judgment of the General Court, this can be appealed to the Court of Justice.
The ECJ does not make a second assessment of the facts, but only makes a control
of the legality of the judgment of the General Court.
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If the appeal is successful the case may be referred back to the General Court,
unless the ECJ has enough information to decide the case itself.
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The full procedure takes many years. Often the final judgment at the end of the
chain comes up to five years after the original measure was taken by the Member
State.
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So to conclude this odyssey through stated procedure, I hope that you have gotten a
general idea about the system of stated control and the procedure that comes with
it.
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Thank you for tuning in and see you soon again.
Services of General Economic Interest
As you already know, state aid is, according to Article 107 in the Treaty on the
Functioning of the European Union, prohibited.
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However, there are exceptions to this rule and during this lecture I will explain
what kind of state aid that is permissible. I will start with a general rules and
thereafter discuss the concepts, services of general economic interest.
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It must be pointed out that the European Commission has an important role in
deciding what kind of state aid that is permissible. State aid can affect the
conditions for competition on the internal market.
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It's therefore very important that state aid, even if they are beneficial for the
society, are granted on the same conditions in every Member State.
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This makes a centralization of the state aid control system necessary and very
much in the hands of the Commission.
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All state aid shall therefore, as a starting point, be notified to the Commission and
the Member States must wait for clearance before they can accord the aid to an
undertaking.
Play video starting at :1:20 and follow transcript1:20
However, in certain situations, an aid does not have to be notified.
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One general exception exists for small amounts of aid. According to the so-called
de minimis principle, aids up to 200,000 euros granted over a period of three years,
do not have to be notified.
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Such aids are presumed to have an insignificant impact on trade between Member
States and should therefore not be considered to constitute aid within the meaning
of Article 107. Furthermore, it is possible that an aid falls under a so-called block
exemption. These exemptions have been designed by the Commision, and concern
certain categories of aid.
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If all the conditions mentioned in a block exemption are fulfilled, the aid is
considered to be compatible with the internal market and does not have to be
notified to the Commision.
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There are block exemptions for small and medium sized enterprises, training,
employment, environment etc.
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A special category of aid is aid in support of services or economic interest. There is
a special de minimis regulation for this kind of aids and also block exemption
decision, but I will come back to that at the end of this lecture.
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It is now time to have a look at the treaty based exemptions. The Treaty articles are
also the basis for the group exemptions. We find them in Article 107, second and
third paragraph.
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The second paragraph makes clear that aid having a social character, granted to
individual consumers is permissable. The same goes for aid that is granted in order
to make good that damage caused by natural
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disasters or exceptional occurrences. The third paragraph provides that an aid may
be permissible under certain conditions.
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This is first aids that promote economic development of underdeveloped areas.
This is areas which are regarded as particularly backward in accordance with uni
criteria.
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Second, aids that promote execution of an important project of common European
interest, or are intended to remedy a serious disturbance in the economy of a
Member State.
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Third, aids that facilitate the development of certain activities or areas, and finally,
aids that promote culture.
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The word 'may' in this Article implies that before these aids can be granted, the
Commission must approve them if there are no applicable group exemptions.
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Finally, I will give a broader view of the important concept of service of general
economic interest.
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It has a special relevance as regard state aid law. The concept is mentioned in
Article 14 in the Treaty. This Article stresses the important place occupied by
services of general economic interests in the shared values of the Union.
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They're also important in promoting social and territorial cohesion.
Play video starting at :4:49 and follow transcript4:49
The Union and the Member States, each within their respective powers, shall
therefore take care that such services operate on the basis of principles and
conditions which enable them to fulfill their mission.
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Services of general economic interest is a dynamic concept which can vary from
Member State to Member State, and also over time. The Member States have
discretion to decide which services of general economic interest they wish to
promote. Typical services are postal services, broadcasting, education and health
care.
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That brings us to the question of financing services of general economic interest.
An article that is very important in this regard is Article 106, second paragraph.
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It provides that undertakings entrusted with operation of services of general
economic interest shall be subject to the rules contained in the Treaty, in particular
to the rules of competition, but only insofar as application of such rules does not
obstruct the performance in law or in fact or in the particular task assigned to them.
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The possible use of Article 106, second paragraph, as regards to financing of
services of general economic interest, has been discussed at several occasions by
the Court of Justice.
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One very important case is the Altmark case.
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In this case a region in Germany wanted to keep running a bus line that was not
fully economically viable. It therefore gave the company some additional financing
in order to run the line. The court was requested to decide whether the additional
financing constituted state aid. And if that was the case, if it could be permissible,
in accordance with Article 106, second paragraph. The Court found that
compensation for a service of general economic interest is not state aid and that it
was therefore not necessary to use Article 106, second paragraph.
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However, the Court developed several conditions, which all must be fulfilled in
order to make sure that the compensation can be considered as a fair compensation
for the extra cost involved in the public service mission.
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If the undertaking is granted overcompensation it's state aid not only
compensation. Accordingly, the Court said that public subsidies are not state aid
where such subsidies are to be regarded as compensation for the services provided
by an undertaking in order to discharge public service obligations.
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But this is only true if four conditions are met.
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First, the undertaking must actually be required to discharge public service
obligations and those obligations must be clearly defined.
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Second, the parameters on the basis of which the compensation is calculated must
be established beforehand in an objective and transparent manner.
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Third, the compensation must not exceed what is necessary to cover all or part of
the costs incurred in providing the service of general economic interest.
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Finally, where the undertaking which is to provide this service, is not chosen in a
public procurement procedure, that is to say on market conditions, the level of
compensation needed must be determined on the basis of an analysis of the costs
which a typical undertaking, well-run and adequately provided would have.
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This judgment was welcomed in general but it was not without controversy.
Play video starting at :8:45 and follow transcript8:45
It is difficult for the Member States to fulfill all these conditions. Especially when
it comes to old systems developed without any knowledge of the conditions
stipulated in Altmark.
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The Commission has therefore complemented the case law from the Court with a
rather complex package composed of four different acts.
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First there exists a non-binding communication on the application of the state aid
rules as regards to services of general economic interest. This communication
clarifies the view of the Commission on the Altmark case and other important
developments in the case.
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Second, there exists a regulation on de Minimis aid granted undertakings providing
services of general economic interest. In this regulation the de Minimis amount is
500,000 Euro over a period of three years. It it thus higher than the ordinary de
Minimis rule stipulating 200,000 Euro. Third, a decision exists on the application
of Article 106, second paragraph, regarding services of general economic interest.
This is a group exemption decision. If the conditions in this decision are met, no
notification to the Commission is required.
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Finally, a framework exists for state aid in the form of public service
compensation. This complement the decision but state aid covered by this
framework must be notified to the Commission before it can be granted to an
undertaking.
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All these gives the Member States more possibilities to finance services of their
own economic interests. But the rules are complex and require a lot of work and
analyses at the national level.
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That brings us to the end of this lecture, thank you for your attention.
The Framework of selling to the State
Hello, I'm Julian Nowag, and today I will be giving you a brief introduction into
the legal framework for selling goods and services to a state in European Union. In
other words, public procurement.
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First, I'll talk about why are public procurement rules important in the EU.
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Second, I'll highlight the relevant legal framework of EU public procurement law
and the aims and goals of these rules. Third, I'll talk about some of the basic
principles that underpin EU public procurement law.
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And finally, I'll briefly put EU public procurement law in the context of
international procurements rules.
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So, let me now turn to the question of why public procurement rules are important
in the EU.
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If we look into statistics, the importance of public procurement rules becomes
directly clear.
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Per year, over a quarter of a million public authorities spend about 14% of the EU's
GDP of purchasing services, works and other supplies. For many areas, the state is
the main or even the only buyer on the market. Think, for example of transport,
waste management, social protection, health care, education.
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As you can imagine, the state purchase activities cover a huge area, such as the
construction of buildings and facilities, furniture, computers, cleaning services, or
even pen and paper.
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If we link these activities back to the EU internal market rules and the aim of
allowing cross-border trade,
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it becomes clear that exclusion of foreign goods or services providers from these
markets would have substantial effects on the EU's internal market.
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Thus, the EU is involved in the regulation of public procurement. And the history
of EU law in this area goes back to as early as the 1970s.
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Let us now move a bit closer and examine the legal framework for public
procurement. The legal framework is set by primary law, that is the EU treaties,
and secondary law, in other words EU directives and regulations as well as the
relevant case law of the EU courts. Finally, each EU Member State has legislation
in place which implements in particular the EU directives.
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Let us now turn to EU primary law relevant for EU public procurement.
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All Member States, must comply with the obligations under EU treaties, whenever
they conclude public procurement contracts.
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In particular, they must comply with the free movement provisions of goods,
services and establishment.
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Thus, Articles 28 to 30 and 110 TFEU for goods Article 56 TFEU for services and
Article 49 for establishment are relevant. Other primary law principles that are
relevant for public procurement are non- discrimination and equal treatment,
transparency and proportionality and mutual recognition.
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These rules and principles a particular development for procurement that does not
fall under this EU secondary legislation because it does not reach development
thresholds of the directives.
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However, in the context of this lecture, we will not look into the details of these
rules and principals under EU primary law,
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because primary law only prohibits certain behavior, so called negative integration.
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It was decided that more could be done by providing a common framework for
public procurement in the EU. This framework was enacted by means of directives
and regulations.
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The main rules these days are Directive 2014/24 on public procurement, Directive
2014/25 on procurement by entities operating in the water, energy, transport, or
postal sectors and Directive 2014/23 on the award of concession contracts.
Moreover, the Implementation Regulation 2015/1986 on standard forms for
publication of notices in the field of public procurement development.
Additionally, soft law, that is to say non-binding explanations of the relevant legal
framework in form of an EU guidelines on contracts that are not covered by the
directive, exists. This guideline is called the Commissions interpretative
communication on the Community law applicable to contract awards not or not
fully subject to the provisions of the Public Procurement Directives.
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The aim of these rules on EU procurement is to ensure fair,
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transparent and a competitive public procurement process across the EU.
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The procurement regime supports a single market objective of the EU and provides
business opportunities and should help with economic growth and the creation of
jobs.
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One of the famous catch phrases in the area of public procurement is that public
procurement rules provide a level playing field for all businesses across Europe.
Let's now move on to our third point. The basic principles that underpin the EU's
public procurement rules and in particular, the procurement directives.
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If you keep in mind the aims of the EU procurement law, which we have just
discussed, the core principles will not come as a surprise. The four main principles
are transparency, equal treatment, open competition and sound procedures to
ensure procedural fairness.
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Finally, let me briefly highlight the interaction between EU public procurement
law and international law.
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At an international stage, the EU is one of the main advocates of opening up public
procurement markets.
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Under WTO rules, there is now a separate agreement which covers public
procurement markets, the agreement on government procurement.
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This agreement sets up which market access opportunities must be open to
international tendering.
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However, the effects of this agreement are rather modest.
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Not all countries have signed the agreement, and moreover,
Play video starting at :8:27 and follow transcript8:27
big parts of the US and the Japanese public procurement market, for example, are
not yet open to international bidders. Similarly, the majority of Chinese public
procurement excludes foreign bidders.
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The EU's public procurement directives do not explicitly state that bidders from
third countries are not covered by their scope.
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Yet, in certain areas, such as defense or utilities like water, telecoms, energy and
the like, the Directives directly allow for the exclusion of third country foreign
bidders.
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As a reaction to this situation at an international stage, the EU is considering the so
called International Procurement Instrument.
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Under this instrument, the Commission can investigate discrimination against EU
companies in third countries and can initiate a process that can ultimately lead to
the exclusion of bidders from that country from the EUs public procurement
market.
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This concludes our brief introduction into the legal framework of public
procurement rules in the EU. And you now have an idea of why public
procurement rules are important. You know all the relevant legal framework in the
EU. And I hope you also understand the aims and basic principles as well as the
international dimension of the EU public procurement rules. Thank you for
listening.
Publications to Contrast Signing
Hello, my name is Julian Nowag and in this lecture I'll provide you with a brief
overview of the public procurement procedures under the EU rules.
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Given that this material is very complex and there are numerous options and
requirements under different public procurement procedures, you'll only obtain a
broad overview over this difficult area of EU law.
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The EU Member States have implemented the EU procurement rules with some
variations into their national law but the basic principles are the same as they stem
directly from EU law.
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So in this lecture we will cover first:
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Which provisions of the EU public procurement law are relevant.
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Second: Some of the basic principles of the procurement procedures under the
procurement directives.
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And third: Questions of enforcement and remedies under EU procurement law.
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The first question we need to address is, how do we determine the relevant EU
framework for procurement by a Member State? The main dividing lines are the
thresholds set by the Procurement Directives. That is Directive 2014/24 on public
procurement, Directive 2014/25 on the procurement by entities operating in the
water, energy, transport and postal sectors, in other words utilities, and Directive
2014/23 on the award of concessions contracts. Each of these directives sets
minimum thresholds, where the monetary value of the goods or services that the
state wants to buy exceeds these thresholds, the contract or tender is presumed to
be of cross border interest.
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So the Directives apply to ensure fair, equitable, transparent and non-
discriminatory public procurement.
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Where such a tender has a monetary value that is below these thresholds,
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the Member States are free to determine the procurement procedures by
themselves. However, even then they must respect the general principles of EU
law, and in a particular, the free movement and the state aid rules. If you want to
know more about the requirements for tenders below the threshold you can have it
look into the Commission's guideline called the Commission interpretative
communication on the community law applicable to contract awards not or not
fully subject to the provisions of the Public Procurement Directives. A very
difficult name. Let us now move in a bit closer and examine the legal framework
for the public procurement.
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Under the Public procurement Directives, the Member States are free to chose
different forms for the procurement procedures.
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Three important procedures are the open tender procedure, the restricted tender
procedure and the competitive dialogue.
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All these procedures are aimed at ensuring transparent and competitive public
procurement in the European Union.
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The basic principles are the same while the details vary on different procedures.
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In general, projects that exceed the threshold set by the directives are considered to
be of cross-border interest and have to be published in the Official Journal of the
European Union.
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These days they are made instantly available through TED, the EU's web-based
system, officially called Tender Electronic Daily.
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This publication is mandatory and while the tenders can be advertised also in other
ways, Member States are forbidden to include more information than those made
available in the official journal. On a certain date after the deadline, the bids are
assessed and the contract is awarded based either on the lowest costs or on the
basis of the most economically advantageous tender.
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This is followed by a debriefing period in which the contracting authority must
provide the bidders with certain information as to how and why the contract was
awarded. The award then has to be published in the official journal and a contract
can only be signed after the so-called stand-still period.
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This period should give the losing bidder the opportunity to challenge the decision
by the state to award the contract to a certain bidder.
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Let us now briefly look into some of the important procedures.
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First, the open tender procedure.
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It can be used for all kinds of procurements.
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In this case, any interested party may submit a tender after the publication in the
official journal. This procedure does not allow for any negotiations with the
bidders and where a large number of bids is expected, the use of this procedure
might become problematic due to the amount of work involved in evaluating the
bids. Second, the restricted tender procedure. It can equally be used for all kinds of
procurements.
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As compared to the open tender, the restricted tender procedure includes a pre-
qualification stage
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and only bidders who meets the selection criteria of this pre-qualification stage will
be invited to tender for the contract. At least five bidders must be invited to tender
after the pre-qualification stage.
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In this restricted tender procedure, negotiations with the bidder are equally
prohibited. However, to eliminate extent it is possible to further clarify the bids and
to finalize the terms. Third, the competitive dialogue. This procedure is only
available for particularly complex contracts. It involves a pre-qualification stage
after which a dialogue between the authority and qualified bidders takes place.
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This dialogue is used to develop suitable solutions for the needs of the authority.
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After the dialogue provided suitable solutions, the tenders are invited.
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As in the restricted tender procedure, no further negotiations are allowed. Only
limited clarifications and finalizing the terms are possible.
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As you have already heard in the section on the basic principles of the public
procurement procedure, the EU rules on public procurement also includes elements
of enforcement and remedies. The first important element to enforce the public
procurement rules is the stand-still obligation after the award decision. During this
time, the authority is not allowed to enter into the contract with the winning bidder.
This allows the losing bidder to challenge the decision of the authority.
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During the appeal procedure, the decision to award the contract to a certain bidder
can be set aside and the losing bidder might be able to obtain damages.
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Should the authority not comply with the stand-still obligation and a contract with
the winning bidder is done before the appeal has been launched, or the appeal
procedure has ended, there are still options.
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The losing bidder could receive damages and in certain cases, the appeal body
might even declare the contract to be ineffective or shorten the term of the contract.
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Finally, there is the possibility of submitting a complaint to the European
Commission and a possibility of fines.
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So. You should now have an idea which EU rules are relevant to public
procurement. You should have understood some of the basic principles of the EU
public procurement procedures, and you should have gained insight into remedies
in the context of public procurement. Thank you for listening
Environmental and Social Clauses
Hello, I'm Julian Nowag and I will talk to you about environmental and social
issues in public procurement. EU public procurement law is an area with a very
complex and detailed procedural element. Member States need to strictly follow
these procedures set out in the EU procurement laws.
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At the end of the process, the award needs to be given to the party which offered
either the lowest cost or put forward the most economically advantageous tender.
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This begs the question, what about environmental, social or other considerations
that the state might rightly want to foster?
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Can, and if so, how can this play a role in the EU procurement law?
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In this lecture, we will briefly examine first, why the EU might legally be required
to allow its member states to take into account such considerations and why taking
into account such considerations can have quite an impact?
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Second, we will briefly highlight developments of EU law with regard to the
integration of environmental and social considerations. And finally, I'll draw your
attention to how the current EU procurement rules integrate such considerations.
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Ok, why would the EU be required to allow its member states to take account of
environmental or social considerations? Like whether the material used to perform
a contract as sourced in a sustainable manner or that the workforce is not exploited.
While such considerations might be well, laudable aims, they also might seem to
allow for ambiguity.
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And this ambiguity might be used by the authority to discriminate against foreign
businesses.
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Moreover, it could equally mean that the authority and in the end the tax payer
needs to pay a higher price than is actually necessary.
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So could the EU not exclude such considerations to ensure non-discrimination and
cheap procurement? The answer lies in the EU treaties.
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Specifically, article 7 to article 14 of the Treaty under Functioning of the European
Union, the TFEU.
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Article 9, for example, requires that in defining and implementing its policies and
activities, the Union shall take into account requirements linked to the promotion
of a high level of employment,
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the guarantee of adequate social protection and other similar social considerations.
Similarly, Article 11 TFEU requires that environmental protection requirements
must be integrated into the definition and implementation of the Union's policies
and activities and in particular with a view to promoting sustainable development.
Thus, the Union has an obligation to integrate such considerations. There is not
only an obligation to integrate such considerations, the integration into public
procurement can also have a major impact. As you might know, the EU's public
procurement market makes up to about 14 % of the EU's GDP. The public
authorities are major consumers and can use their purchasing power to make a
substantial contribution to sustainable consumption and sustainable production.
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Let's now move on and briefly look at the development of the case law with regard
to the integration of environmental and social considerations.
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Already in 1990, the Court clarified in Beentjes, for the Dutch speakers, sorry
excuse my pronunciation, that a contractor can be required to employ long-term
unemployed persons. This was subject to complying with the non-discrimination
principles and adhering to the procedures.
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Similarly, the court in Laboratori Bruneau found that social and environmental
requirements could be included in public procurement requirements, provided that
the documents and the process are non-discriminatory. Moreover, the Court
clarified that environmental and social requirement in the procurement process do
not need to provide a direct economic benefit to the public purchaser. This is
exemplified in Concordia Bus.
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While the Court has been open to allowing environmental and social conservations
in procurement, there are limits.
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For example, in Dutch Coffee, the court held that a procuring authority can require
to use a fair trade or organic product,
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yet it cannot provide a specific label or brand. Therefore there must be a chance for
a bidder to show that it complies with the requirements without having that label.
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The shift towards sustainable procurement becomes already clear when we look at
the principles of procurement as laid down in these directives.
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All directives mentioned a social and environmental dimension in their sections
under principles of procurement. For example, article 18(2) of Directive 2014/24
on public procurement or article 36(2) of Directive 2014/25 on the procurement by
entities operating in the water, energy, transport and postal service sectors. Or
article 30 of Directive 2014/23 on the award of concessions.
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However, developments of these considerations can only be seen in design of the
procurement.
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A procuring authority can make a social or environmental requirement part of the
procurement process.
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However, these requirements need to be related to the subject matter of the
contract or in order to have an effect on the final evaluation of the tender.
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For example, Article 42 of Directive 2014/24 and Article 60 of Directive 2014/25
allow for considerations of such requirements when defining the requirements of
the contract.
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Similarly, Article 42 of Directive 2014/23 on the award of concession, allows for
environmental, social, innovation related criteria as long as they are linked to the
subject matter of the concession. In terms of the use of environmental or social
labels, Article 43 of Directive 2014/24 or Article 61 of Directive 2014/25 are
relevant and regulate the use of such labels. Moreover, the procuring authority can
also make social and environmental requirements part of the conditions for the
performance of those contracts. This is regulated by Article 70 of Directive
2014/24 on public procurement and Article 87 of Directive 2014/25 on
procurement by utilities.
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To help procuring authorities and contractors across the EU, the EU has developed
green procurement criteria.
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These aim at providing a good balance between environmental protection,
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costs and other considerations like ease of evaluation at the procuring
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end of the procuring process. This criteria can be adjusted to the needs and
ambitions of the authority.
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And they are available for a range of goods and services. These range from
cleaning products, copying and graphic paper, electricity,
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food and catering services and furniture to office buildings, road design,
construction and management of these and water infrastructure.
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Moreover, the European Commission has published guides for procuring
authorities on green public procurement and on buying social. These help
authorities to include social or environmental considerations in their public
procurement. I hope you now have an idea why and how the EU integrates
environmental or social considerations into their procurement rules.
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Thank you for listening.
A Pracatitioner’s View – Martin Levinsohn
Martin Levinsohn, what a pleasure to be here in your nice facilities in the Central
Malmo. We're going to talk about public procurement today, but perhaps before we
even start, will you be so kind to say a few words about yourself and your law
firm? Absolutely. Martin Levinsohn is my name. I'm a partner at Setterwalls law
firm here in Malmo and I'm specialized in competition law including public
procurement law and intellectual property law as well. Setterwalls, the firm that I
work at is one of Sweden's oldest law firms. We date back to the late 19th century.
We are about 200 lawyers and we are a full service commercial law firm. Only
established in Sweden or also abroad? In Sweden. We have offices in the three
major cities in Sweden. Stockholm, Malmo and Gothenburg? Exactly. And we are
in Malmo. Okay. We're going to talk about public procurement and I listened to
Julian Nowag's lecture and in his lectures I think he's trying to imply that public
procurement is a very important subject. It's 14% of gross national product in the
European countries. Would you as a practitioner agree that public procurement is
important? Yes, of course. I agree that it's important to have procedures for how
the government procures goods and services. I think that in Sweden it might even
be higher than 14 % of the gross national product and towards 20 % almost, so it's
significant economic values that we're talking now. In your practice, are you
working on behalf of the public authorities or on behalf of private practitioners?
Both actually. We represent both the contracting authorities and their suppliers. I
would say perhaps 70 % of our matters are for suppliers and around 30 % for
authorities. Martin, when I was a practicing attorney as in the 70s and 80s, I cannot
remember one single case where I dealt with public procurement. It has all
changed recently or? Yes. It was actually the same when I started working as a
lawyer back in 2002, 15 years ago. At that time we didn't have any practice group
for public procurement law and I think it was the same for other law firms as well.
And then we had a judgment from the European Court of Justice that required us to
have this stand-still period that enabled the suppliers to challenge public
procurement awards and this led to a significant increase in the number of court
cases and sort of, the public procurement law came into the attention of law firms
and from that it has developed significantly and I think every larger law firm has a
practice group for public procurement law and have people specialize in it. Would
you say that there are people who are specializing in just public procurement
today? Yes, definitely. That's a very interesting development. All the European
public procurement directives have been or are in the process of being
implemented in national legislation. The legislation should be non-discriminatory,
it should be transparent, covering proportionality and mutual recognition. Would
you say that this set of legislation has led to more of transactions on the European
level? Well, what we see from a practical perspective is mainly for larger projects,
typically larger infrastructure projects and construction projects where we see
bidders coming directly from other member states and participating in Swedish
procurement. Julian is in his lecture talking about the thresholds but he's not
indicating a threshold. I think thresholds are, especially for goods and services, at a
fairly low level? Yes. What level, about? We're talking about 120,000 euros,
around that. Would such a small transaction really trigger cross-border trade or are
you talking about larger transactions? No. I don't think we see any cross-border
trade in that type of project. It's much larger projects, for a couple of hundred
thousand euros at least, millions. So in larger transactions there have been an
increase in cross-border trade during the last decades thanks to the legislation?
Yes. We have seen an inflow of tenders from construction companies particularly
from Germany, Austria, France and Italy. How do you keep track of it? How do
you know that there is a transaction where you should make a bid? Well, at the
center of it is of course TED, Tender Electronic Daily, which is the European
Union's database where you have to publish announcements of procurements and
then you have a lot of private services that take information from there and then
send it out to whoever is interested. So trade in Europe has developed thanks to
these directives and this legislation. You have the same type of rules on the WTO
level. What has happened there? We don't come into contact with those rules at all
in our practice, really, so can't say much about. We haven't still seen very much of
international public procurement. I know there is an ongoing discussion with the
United States but we also know that there is a new presidency coming into place.
Could we expect more public procurement on the international level in the future
or what do you think about the Trump era? Well, no. I guess that it seems quite
unlikely that Mr. Trump would open up US procurements to foreign bidders. So
there is a risk of more, not less nationalism in these type of matters in the years to
come? Yeah. I think we see that across the world really. There are basically three
types of public procurement. Say, we're talking about the open procedure, the
restricted procedure and the competitive procedure. From your perspective, what's
the difference between these different procedures? Well, I would say that there are
four really. There's also the negotiated procedure and we have on the one hand the
open procedure which as the name indicates anyone can participate in by
submitting a tender. The other procedures, there is a pre-qualification round where
the bidders are selected and so that not everyone can submit a tender. Then of
course in the competitive dialogue and the negotiated procedures, you have the
extra step up of some form of dialogue and negotiation between the supplier and
the authority. As a practitioner which one are you more involved in? Well, the
most frequently used procedure in Sweden is the open procedure. Then of course,
there are additional challenges in the competitive dialogue and the negotiated
procedures so that there's probably more work associated with those procedures but
we see them less frequently. In the latest revision of the Directive, it's opening up
for innovation procurement. Is it something new? How do you look upon this
possibility? Is it a fifth alternative? Yeah. It's presented as a fifth alternative, the
innovation partnership procedure. It's possible already under the current rules or I
say current for Sweden has not yet implemented the new directives although we
should have had. But the procurement rules has allowed for full innovation for
quite some time. There is the possibility of allowing alternative bids. So you don't
have to follow a solution that has been specified in the tender documents but you
can present an alternative solution.

Quiz:
1. Name the two current treaties of the EU (Check all that apply)
A. TEU
B. TFEU
C. TFU
D. GATT
E. TEUL
2. What was one of the main features of the Treaty of Maastricht?
A. The Court of Justice of the EU was established.
B. The name European Economic Community was changed to the
European Union.
C. The Charter of Fundamental Rights was adopted.
D. It established a European Constitution.
3. By which treaty did the Charter of Fundamental rights become binding?
A. Lisbon Treaty
B. Treaty of Nice
C. Treaty of Amsterdam
D. Treaty of Rome
E. Treaty of Maastricht
4. Which of the following statements are true? (Check all that apply)
A. The European Council consists of Heads of States or Governments.
B. The Council is made up of ministers, such as the ministers of
agriculture, the foreign ministers, etc.
C. The European Council and the Council are different names for the same
institution.
D. The European Council sets out overall guidelines for EU policies, while
the Council has legislative functions.
5. Which institution elects the President of the European Commission?
A. The European Council.
B. The Council.
C. The European Commission.
D. The Court of Auditors.
E. The European Parliament.
6. What are some of the functions and roles of the European Commission?
(Check all that apply)
A. It proposes new Legislation.
B. It oversees the practice of the other institutions of the EU, such as the
Council.
C. It sets out general guidelines for EU policies.
D. It acts as the “Guardian of the Treaties”.
7. What is the role of the Advocate General?
A. It acts as a defense attorney for individuals who have brought cases before
the court.
B. It has the casting vote when the court rules.
C. To provide advice to the Court in the form of an opinion.
8. What happens if a country withdrawing from the European Union has not
been able to agree on the terms of withdrawal within the two year period
provided by the TEU?
A. The Country remains member and a new exit application procedure could be
restarted.
B. If the period is not mutually prolonged the country is excluded from all
EU collaboration.
C. The Country will automatically be included in the existing EEA
collaboration.
9. Which principles are covered by the TFEU environmental policy?
A. “The precautionary principle”
B. “The principles of preventive action”
C. “The principle that environmental damage should be rectified at
source”
D. “The polluter pays principle”
10.The environmental chapter requires that environmental requirements must
be integrated into all Union policies and activities, with a view to promoting
sustainable development. What other stipulations in the Treaty have
explicitly been given such broad impact?
A. Competition policy
B. Human health protection
C. Employment policy
D. Consumer protection

1. What is the name of the main legal database of the EU?

A. European Times
B. The Database
C. European Legal Review
D. Eur-Lex
2. In which database will you find cases from the Court of Justice of the EU?
A. Suria.
B. Luria.
C. Curia.
D. Duria.
3. What is true about EU publications?
A. They are only available to people residing in EU member states.
B. They are mostly available online for free.
C. They must usually be requested from the institution where they have been
drafted.
D. They are only rarely translated into all official languages of the EU.
4. If you browse through the current Treaties you will find numbers in brackets
below most article numbers. What are these numbers in brackets?
A. The number that will be adopted in the future EU Constitution.
B. A reference to case law of the ECJ.
C. The old number of that particular article in the previous Nice Treaty.
5. What are some examples of EU Secondary Legislation? (Check all that
apply)
A. Directives.
B. The Charter of Fundamental Rights.
C. Decisions.
D. The Treaties.
E. Regulations.
6. What is true about the following legislation act? Council Regulation (EC)
No 1/2003 (Check all that apply)
A. The Commission is behind the act.
B. The act is a Regulation.
C. It was adopted in 2003.
D. The act is a Directive.
E. EC means that the act has not yet been adopted.
F. The Council is behind the act.
7. What is true about the following case? C-43/01 (Check all that apply)
A. The case is from 1943
B. It’s a case from the Court of Justice
C. The case is from 2001
D. It’s a case from the Tribunal
8. Why is the opinion of the Advocate General important when reading case
law from the Court of Justice of the EU? (Check all that apply)
A. The Advocate General has the casting vote when the court rules.
B. It usually contains a detailed analysis of the case.
C. The Advocate General represents the opinion of the Commission, which has
a strong voice in how the Court decides its cases.
D. It many times contains more information than the actual judgment.
9. Where are proposals for new legislation from the Commission published?
A. In the COM documents series.
B. In the Official Journal.
C. On the EU website.
10.Which of the following statements about primary and secondary law are
true?
A. Primary law is principally made up of the Treaties.
B. Primary law forms the basis not only of the EU institutions, but also of
the powers that can be exercised by those institutions and the procedure
under which they must operate.
C. Secondary law is the same as national law.
D. Secondary law is comprised of law that the EU system produces by
itself.

1. Following concerns from animal rights campaigners in several member

states about the cruelty of seal hunting, and following the introduction by a
number of member states of rules prohibiting or limiting the marketing of
seal meat and other seal products, the EU introduced a Regulation banning
the import of seal meat and other products made from seals. The legal basis
 for the Regulation was Article 114 TFEU. Several organizations
representing seal hunters and traders in seal products brought an action
before the Court of Justice of the EU challenging this Regulation, on the
grounds that the it breached the principle of conferral, as the EU did not
have competence to ban the import of seal products. You are a lawyer
advising the EU institutions. What is your advice?
A. Argue that the measure is necessary for the proper regulation of the internal
market.
B. Admit that the EU is wrong and that the Regulation should be invalidated.
C. Argue that the measure is necessary for the functioning of the internal
market.
D. Argue that animal welfare is a legitimate interest of both the member states
and of the EU, and therefore the EU has competence to legislate where this
is necessary to achieve a high standard of animal welfare.
2. An important tool in the EU legal toolbox to maintain legal certainty and
uniform application of EU Law is the possibility for national courts to ask
the European Court of Justice for a preliminary ruling. This is usually done
when a question of interpretation of EU law arises before a national court of
last instance and that court considers that an ECJ decision on this question is
necessary to produce a judgment in the case before it. In fact, in such cases
the judge of the court is obliged to send a reference to the ECJ. But what
about the lower courts, can they also send reference to the ECJ?
A. Yes, all national courts to send references for preliminary rulings to the
Court of Justice of the EU.
B. No, this possibility is only available to the court of last instance.
3. Which one of the principles below is a principle that stems from the national
legal orders and is not unique to the EU legal order?
A. Principle of direct effect
B. Principle of EU conform interpretation
C. Principle of legal certainty
D. Principle of primacy
4. According to an EU directive, the Member States shall take the measures
necessary to ensure that every worker is entitled to paid annual leave of at
least four weeks. Emma Larsson works for a private employer who refuses
to grant her the said four weeks of annual leave, since she has been on sick
leave during the better part of the past year. According to the national
applicable law, a company only has to grant paid annual leave to employees
 who have actually been working during at least half of the reference period
(constituting the past year). However, said national law also stipulates that
certain absences, such as those due to maternity leave or work-related
accidents, shall count as periods of actual work for the purposes of
calculating the length of paid leave that an employee is entitled to. Emma’s
employer claims that her sick leave cannot count as a period of actual work
and that she has, hence, not actually worked for the minimum period of time
required for her to be granted paid annual leave. Can Emma force her
employer to grant her the four weeks of paid annual leave that is stipulated
in the EU directive?
A. Yes, since the national law should be given an EU conform
interpretation, her sick leave should be counted as periods of actual
work.
B. No, but she could possibly sue the Member State where she is working for
damages, since the Member State has not implemented the Directive
correctly.
5. Which of the below statements are true about regulations? (Check all that
apply)
A. Regulations always form part of secondary EU law.
B. The parts of a regulation that gives raise to right of individuals must be
transposed by the national legislator into the national legal order.
C. Regulations have to be transposed by the national legislator into the national
legal order.
D. If a regulation develops a general principle of EU law (e.g. the principle of
legal certainty), the regulation is considered to form part of primary EU law.
E. Regulations should never be transposed by the national legislator into
the national legal order.
6. What is the basic condition that must be fulfilled for the EU Charter to
become applicable?
A. That there is a violation of a subjective right
B. The applicability of EU law
C. The applicability of national law
D. The circumstances must have taken place in Europe
7. Where would you find the basic text in the Treaties on proportionality in the
exercise of Union competence?
A. Art 5 TEU
B. Art 6 TEU
C. Charter of Fundamental Rights
D. Art 19 TEU
8. A national law of Factoria (an imagined EU member state) stipulates that
owners of fishing vessels registered in Factoria must be resident in that
member state. Non-Nationals of Factoria are much less likely to be resident
in Factoria than nationals, so the practice puts non-nationals at a
disadvantage, and so it is likely to be indirectly discriminatory on grounds of
nationality. What does this mean?
A. That the national law breaches EU law.
B. That the national law will breach EU law unless Factoria can show that
the difference of treatment is justified on grounds allowed by the
Treaties.
9. Complete the following sentence: Direct discrimination occurs when a
person is treated less favourably ________ their status.
A. Notwithstanding
B. Despite
C. undeterred by
D. because of
10. Complete the following sentence: In areas where the EU has shared
competence, as soon as the EU legislates to regulate a particular area,
member states are ___________________ also legislate on the same area.
A. encouraged to
B. no longer allowed to
C. allowed to

1. Under which provision can private persons/companies bring an action for

annulment against an EU measure?
A. Article 261 TFEU
B. Article 263 TFEU
C. Article 265 TFEU
D. Article 267 TFEU

1. Which ground cannot justify a restriction on the free movement of capital?

A. Public housing policy
B. Agriculture
C. Economic concerns
D. Town and city planning
2. What principle is enshrined in Article 45(2) TFEU and re-iterated in
Regulation 492/2011 in relation to workers?
A. Mutual recognition.
B. Non-discrimination.
C. Proportionality.
D. Supremacy
3. The public service exception in Article 45 (4) TFEU entails that... (Check all
that apply)
A. Nationality quota are compulsory in the public service because it should be
reflective of society.
B. Indirect discrimination based on nationality towards employees in the
public sector may be allowed.
C. Nationality quota are prohibited in the public sector because it is part of the
exercise of the Member State's sovereignty and therefore reserved for its
own nationals solely.
D. Direct discrimination based on nationality towards employees in the
public sector may be allowed.
4. On what grounds may Member States restrict rights of free movement of
persons? (Check all that apply)
A. Public policy
B. Environmental grounds
C. Economic grounds
D. Educational grounds
E. Public security
F. Public health
5. Does the principle of mutual recognition mean that a product lawfully sold
in one national market shall always be lawfully sold at all other national
markets within the EU internal market?
A. Yes
B. No
6. Under which conditions does a certain selling arrangement fall outside the
scope of Article 34 TFEU according to the Keck judgement? (Check all that
apply)
A. The measure is generally applicable (concerns all affected traders)
B. The measure is proportionate to the aim in view
C. The measure does not entail any discrimination in law or in fact
7. In addition to freedom of establishment, what principle is enshrined in
Article 49 TFEU in relation to the self-employed?
A. Mutual recognition.
B. Supremacy
C. Non-discrimination
D. Proportionality
8. On which grounds can derogations be made to the freedom of establishment
and the freedom to provide services? (Check all that apply)
A. Public policy
B. Consumer protection
C. Public security
D. Environmental protection
E. Public health
F. The rule of reason
9. What status is established by Article 20 TFEU?
A. European Union citizenship.
B. Minority status.
C. Worker status.
D. Citizenship of the Member States.
10.Which transport service falls under the general Treaty provisions on the free
movement of service?
A. Train
B. Air transport
C. Road transport
D. Inland waterways

1. In which field in the External Dimension does the EU have exclusive

competence?
A. Common Security Policy
B. Common Defence Policy
C. Common Commercial Policy
D. Common Environmental Policy
2. Article 218 TFEU establishes the procedure by which agreements between
the European Union and third countries or international organisations shall
 be negotiated and concluded. In this procedure, which is the most important
EU institution?
A. The European Commission
B. The Council
C. The European Parliament
D. The European Council
3. Does WTO law have direct effect in EU law?
A. Yes
B. No
4. Which of the following fields is the Common Security and Defense Policy
(CSDP) an integral part of?
A. The ECT
B. TheCommittee for Civilian Aspects of Crisis Management (CIVCOM)
C. The Common Foreign and Security Policy (CFSP)
D. The Common Commercial Policy (CCP)
5. How is new EU legislation made part of the EEA Agreement?
A. By the EEA Joint Committee
B. By the European Commission
C. By the EFTA Surveillance Authority
D. By the European Parliament
6. Is there any obligation for EU Member States to support each other in the
event of terrorist attack?
A. Yes
B. No
7. Please decide if the following statement is true: The European External
Action Service and the High Representative (EEAS) is an EU institution
and stands responsible for the external policy making.
A. True
B. False
8. What kind of EU policies does the EEA agreement also cover? (Check all
that apply)
A. A common defense policy
B. Rules of competition
C. Environmental goals
9. What is one of the main roles of the European Parliament in the field of
external relations?
A. It must give its consent before any EU member state concludes an
international agreement that might effect other member states' foreign
policy.
B. It has no major role in the external dimension.
C. It must give its consent before the EU concludes most types of
international agreements.
10.In what way is the Court of Justice of the EU important in the field of
external relations?
A. It decides on the delimitation of external competence between the EU
and its member states.
B. It must always rule on the constitutionality of all international agreements
concluded by the EU.
C. It has little importance in the field of external relations.

1. In forging a long-term business strategy, what appears to lead to a better

result?
A. A step-by-step approach where the grounds are tested and balanced
relations achieved
B. A rapid establishment of subsidiaries in all EU Member States
C. A successful agreement where one's principle wins on all items
2. What type(s) of middleman agreement is more affected by EU competition
law?
A. The distributorship relation
B. The agency agreement
C. The licensee agreement
3. When an Agency relation with unlimited term expires, the agent has a
mandatory right to:
A. Prolong the agreement on an annual basis
B. A limited indemnity covering his loss of future Commission on
transactions he has organized
C. Compensation for investments he has made
4. Which of the following provision(s) is/are hard core prohibited in
distributorship agreements:
A. A prohibition to sell the products to customers who intend to export the
product outside the distributor’s territory
B. An undertaking not to challenge the patent protection held by the producer
C. A recommended sales price of 9.99 EUR
5. What is the name of the document that is commonly used in international
sea carriage of goods?
A. Transport document
B. Sea waybill
C. Consignment note
D. Bill of lading
6. What is the major legal regime that applies to international sea carriage of
goods?
A. The Rotterdam Rules
B. The Hague-Visby Rules
C. The Hamburg Rules
D. The Hague-Rules
7. What is the distinction between an agent and a distributor?
A. The agent only pays a limited royalty to the principal whereas the distributor
shares the proceeds;
B. The agent receives a commission on sales reported whereas the
distributor determines his own margin
C. Distributors are under EU law more protected than agents
8. Both licensing and distributorship relations leave it basically free for the
parties to decide on the terms of their collaboration. However, EU
competition rules impact the freedom to contract. Please indicate which
undertakings that are prohibited:
A. Create territorial protection
B. Contain end pricing mechanisms
C. Control output
9. May a licensor do the folowing in a licensing arrangement? If not, which of
the following is unlawful?
A. She charges as royalty which almost deprives the licensee of any margin.
B. She requests compensation for the fact that the licensee also is granted
rights to any invention made by the licensor and requests that the
licensee shall free of charge grant back inventions made by him/her.
C. She divides the royalty by relating it partly to the licensed trademarks, patent
and know-how respectively thereby trying to secure evergreen royalty
payment.
10.What is the maximum compensation the shipper can receive based on weight
limitation if the goods were carried by sea?
A. 8,33 SDR per kilo
B. 2 SDR per kilo
C. 19 SDR per kilo
D. 17 SDR per kilo

1. In European Union law there is at present but one company form: The
European Company. Nonetheless there are as many possible types of
European Companies as there are member states. How can this be?
A. It can´t be, the statement is incorrect
B. Because every member state adds its cultural flavor to any European
Company set up in that member state
C. Because to a fairly large extent national law is applicable to European
Companies
2. What is meant by “regulatory competition” with regard to company law
within the European Union?
A. That companies from different member states compete with each other by
adapting their by-laws to the preferences of investors in other member states
B. That different interest groups compete with each other in order to influence
the development of European Union company law
C. That member states compete with each other by adapting their national
company law in order to attract primary establishments of companies
3. Rules regarding the representational authority on behalf of the company fall
into two groups. Which of the two following options are correct?
A. One group of rules tells us when a representative has acted wrongly
B. One group of rules identifies the conditions, under which a person or
set of persons is empowered to affect changes in the company's external
legal relations
C. One group of rules tells us when a representant is allowed to perform legal
acts on behalf of the company
D. One group of rules draws the limit between valid and invalid legal acts
which a representant has performed on behalf of the company
4. Why does comparative company law often focus on rule-functions rather
than the content of rules?
A. Because rules as such are viewed as uninteresting
B. Because rules as such cannot be compared with each other
C. Because functions are viewed as more universal than rules
D. Because a multiplicity of rules is consistent with a much more limited
set of functions
5. The core of company law can be said to consist of three types of rules.
Which are these three?
A. Rules concerning the responsibilities for the company's debts
B. Rules concerning the decision-making authority on behalf of the
company
C. Rules concerning the bodies of the company and their internal relations
D. Rules concerning the membership in the company
E. Rules concerning the representational authority on behalf of the
company
F. Rules concerning the company´s relation to its stakeholders
6. Is there such a thing as a European Company?
A. True
B. False
7. Rules regarding the decision-making authority on behalf of the company fall
into two groups. Which?
A. One group of rules tell us when a company decision exists
B. One group of rules tells us which rights members have with respect to the
content of company decisions
C. One group of rules draws the limit between lawful and unlawful
company decisions
D. One group of rules tells us which rights other stakeholders than members
have with respect to the content of company decisions
8. What does the "comply or explain" code entail?
A. It allows companies to depart from particular recommendations of the
applicable code, provided they explain the reasons for doing so.
B. Adapt to the rules.
C. Laissez-faire for all legal requirements.
9. Which of the following alternatives gives the best definition of “company
law”?
A. Legal rules that regulate companies
B. Legal rules that affect companies
C. Legal rules designed to solve typical conflicts within companies
D. Legal rules only applicable to companies
10.How are companies and contracts related?
A. Contracts presuppose companies as an institution
B. Companies presuppose contracts as an institution
C. Both contracts and companies are institutions in the service of private
autonomy
D. Companies are a species of contracts
E. Contracts are a species of companies

1. EU labour law is regulated by primary and secondary law. Secondary law in

this area is mostly made up of:
A. Regulations
B. Directives
C. Decisions
2. The EU Charter of Fundamental Rights became legally binding in 2009.
How is it relevant for European Labour Law?
A. It contains explicit protection for certain labour rights, such as
collective bargaining, collective action, and right to information within
the undertaking
B. It contains articles protecting freedom of expression, freedsom of
assembly, and equality between men and women, which are relevant in
labour law situations
C. It regulates the relationship between labour rights and the freedom of
movement
D. The Charter doesn’t apply to labour law situations
3. Which of the following alternatives are part of the important so-called
‘restructuring’ Directives that were adopted in the 1970s?
A. The Collective Redundancies Directive (98/59/EC)
B. Temporary Agency Work Directive (2008/104/EC)
C. Posting of Workers Directive (96/71/EC)
D. The Employer Insolvency Directive (2008/94/EC)
E. The Transfers of Undertakings Directive (2001/23/EC)
4. The (2001/23/EC) Transfers of Undertakings Directive regulates some
aspects of employment protection. A transfer of an undertaking does not in
itself constitute grounds for dismissal, but does not stand in the way of
dismissals due to economic, technical or organisational reasons.
A. True
B. False
5. The important Laval judgment (Case C-341/05) from the Court of Justice of
the European Union deals with posting of workers, the right to industrial
action and …
A. ... the freedom to provide services
B. … the freedom of establishment
C. … the free movement of capital
6. The aim of the (96/71/EC) Posted Workers Directive is to enable the free
movement of persons and services and to provide protection for workers in
the case of the posting of workers and the transnational provision of
services.
A. False
B. True
7. Which of the following EU labour law directives regulate different forms of
flexible work? Please select all that apply.
A. Temporary Agency Work Directive (2008/104/EC)
B. Part-Time Work Directive (97/81/EC)
C. Fixed-Term Work Directive (99/70/EC)
D. Employer Insolvency Directive (2008/94/EC)
E. Posted Workers Directive (96/71/EC)
8. The (97/81/EC) Part-Time Work Directive, the (99/70/EC) Fixed-Term
Work Directive and the (2008/104) Temporary Agency Work Directive
provide protection for employees through a specific principle, which?
Several answers could be correct.
A. The principle of mutual recognition
B. The principle of of legal certainty
C. The principle of non-discrimination
D. The principle of equal treatment
9. The EU mainstreaming approach as regards gender equality and non-
discrimination means that the EU in all its activities and policies must aim to
eliminate inequalities, to promote equality between men and women and to
combat discrimination.
A. True
B. False
10.What does the following definition refer to: ‘a situation where an apparently
neutral provision, criterion or practice would put persons of one sex at a
particular disadvantage compared with persons of the other sex, unless that
 provision, criterion or practice is objectively justified by a legitimate aim,
and the means of achieving that aim are appropriate and necessary’
A. Direct discrimination on grounds of age
B. Indirect discrimination on grounds of sex
C. Indirect discrimination on grounds of age
D. Direct discrimination on grounds of sex

1. Is it a breach of EU law for member states to tax at a higher rate dividends

distributed to non-residents taxpayers?
A. There is a risk such measure would infringe article 63 TFEU, the free
movement of capital, which forbids restrictions on capital.
B. It is not a breach since the principle of subsidiarity allows a member state to
levy a tax for non-residents and not at the same time levy it on residents.
C. The member state can levy a tax at a higher dividends distributed on non-
residents as long as the tax is equal for all non-residents.
2. Which tax is levied on the most mobile tax basis?
A. Individual Income Tax
B. Corporate Income Tax
C. VAT
3. Why are VAT and indirect taxes harmonized?
A. Since it is a tax levied by the EU
B. Since Member States’ membership fee is partly based on the custom
duties and VAT
C. Since Member State need to cooperate rather than to compete on tax base
allocation
4. Which of the following sources of law deal with taxes on the internal
market?
A. Article 28 TFEU
B. Article 31 TFEU
C. Article 4 TEU
D. Article 6 TFEU
5. At which level of government are taxes decided upon?
A. European Union
B. National Governments
C. Local Governments
6. Do you think it is possible for a member state to tax at a higher rate dividens
distributed to non-resident tax payers?
A. Yes
B. No
C. It depends
7. The TFEU obliges Member States to equalize their domestic taxes with that
of other States.
A. True
B. False
8. Corporate income tax is a tax on capital (in the economic sense of it) and is
levied on a highly mobile tax basis, especially due to the free movement of
capital in the EU.
A. True
B. False
9. Why is environmental law relevant to the study and application of European
business law?
A. It overlaps with internal market law
B. There is no relevance
C. It is international law that overrides EU law
10.‘Environmental protection always overrides free movement provisions in the
EU legal context’. Consider this statement and answer whether you think it
is:
A. True
B. False
C. Dependant on the legal nature of the environmental protection measure

1. Pursuant to the Brussels I Regulation, a person domiciled within an EU

Member State (MS) can be sued in matters relating to tort in the MS where
he/she is domiciled.
A. True
B. False
2. Pursuant to the Brussels I Regulation, a person domiciled within an EU
Member State (MS) can be sued in matters relating to tort in the MS where
the harmful event occurred.
A. True
B. False
3. Pursuant to the Brussels I Regulation, where can a person domiciled within
an EU Member State (MS) be sued in matters relating to tort?
A. Either in the Member State where the harmful event occurred or the
Member State where he/she is domiciled, at the choice of the plaintiff
B. A person must be sued in the Member State where he/she is domiciled
C. A person must be sued in the Member State where the harmful event
occurred
4. A judgment given in an EU Member State must be recognized by the other
Member States even when they find it manifestly contrary to their public
policy.
A. False
B. True
5. Following EU Member States have been granted special standing regarding
the EU private international law rules:
A. Sweden
B. Denmark
C. Italy
6. The main rule of Rome II Regulation refers to the law of the country where:
A. The damage occurs
B. The harmful act was committed
C. None of the above
7. Even if an EU conflict rule refers to the law of a non-member state, the
conflict rule must be followed.
A. True
B. False
8. A Spanish company and a French company have entered into a contract
regarding research and development cooperation. The contract stipulates that
it is governed by German law. This choice is of law valid.
A. True
B. False
9. Can some of the provisions of the Treaty on the Functioning of the European
Union have a direct impact on the Private International Law of the Member
States?
A. True
B. False
10.Does EU law, as it is today, cover the whole Private International Law of the
Member States?
A. True
B. False

1. The value of trademarks is decreasing in today’s society.

A. False
B. True
2. EUIPO plays an important role as regards to the development of European
trademark law. Which of the following is a correct description as to what
EUIPO has as its principle task?
A. EUIPO is a not-for profit non-governments organisation that encourages the
development of Community wide Intellectual Property Rights.
B. EUIPO acts as first instance as regards trademark infringements on the
European level.
C. EUIPO is an EU-institution that developed autonomous policies as regards
European Trademark Law.
D. EUIPO is the EU Institution that governs the system of community
rights and registers community Trademarks (and Community Designs).
3. Are there any limitations regarding the lifespan of a trademark?
A. No.
B. Yes, 20 years.
C. Yes, 50 years.
4. It is necessary to consider both preliminary judgements from the ECJ on one
hand and administrative decisions from EUIPO, the General Court and the
ECJ on the other to fully understand EU trademark law.
A. True
B. False
5. A first question as to regards trademark protection is to define what a
trademark is, or to put it differently, what kind of signs that may be afforded
protection. In the new trademark directive (EU) 2015/2436 there are a
number of prerequisites that a sign must meet to be allowed protection.
Which of the following is not a prerequisite for trademark protection?
A. The signs must be capable of being represented on the register in a manner
which enables the competent authorities and the public to determine the
clear and precise subject matter of the protection afforded to its proprietor.
B. The signs must be used in the course of trade.
C. The signs must be capable of distinguishing the goods or services of one
undertaking from those of other undertakings
6. All signs cannot constitute trademarks and there are consequently several
grounds for refusal of a trademark registration. In article 3(1) c it is stated
that a sign may not constitute a trademark if the sign consists exclusively of
indications which may serve, in trade, to designate e.g. the kind, quality,
quantity, of the goods. Which of the following is a correct description as to
how article 3(1)c is to be applied and understood?
A. The wording of article 3(1)c speaks of signs that exclusively consist of
descriptive elements. This means that there is no ground for refusal as soon
as the sign also consists of some additional element.
B. The lack of distinctiveness that is indicated in article 3(1)c may be cured
by use and acquired distinctiveness.
C. As soon as there is something indicating a descriptive element a sign cannot
constitute a trademark Article 3(1)c only applies in relation to word marks.
7. Even if a trademark right exists a third party shall, under certain
circumstances, be allowed to use the trademark. Which of the following is
allowed regarding usage of a trademark, in the course of trade? (Check all
that apply)
A. It is allowed to use one’s own name in commercial information
B. It is allowed to use a competitor’s trademark in order to benefit from the
goodwill of the competitors trademarks.
C. It is allowed to use a competitor’s trademark in keyword advertising in order
to inform potential costumers about an offer to sell products that are
confusingly similar to the products provided by the competitor.
D. More or less all types of trademark use is allowed, as long as it is in
accordance with honest practices in industrial or commercial matters.
E. It is allowed to use a competitor’s trademark where it is necessary to
indicate the intended purpose of a product or service.
F. It is allowed to use a competitors name and address in commercial
information.
8. A trademark infringement may be defined as an unauthorised use of a
trademark. However, in order for such use to be regarded as infringing a
trademark right there are a number of prerequisites that have to be fulfilled.
Which of the following is a prerequisite for an infringement according to
article 5 trademark directive? (Check all that apply)
A. The use in question is not descriptive.
B. The use gives result to a likelihood of confusion.
C. The use in question has to be performed within 5 years from the day of
registration.
D. The use regards use of any sign which is identical with a protected
trademark in relation to goods or services which are identical with those
for which the trade mark is registered.
9. The “double identity” rule provides the proprietor with a right to prevent any
sign which is identical with the trademark in relation to any goods or
services.
A. True
B. False
10.What does degeneration mean?
A. That a trademark shall be revoked if, in consequence of acts or
inactivity of the proprietor, it has become the common name in the
trade for a product or service in respect of which it is registered.
B. That a trademark shall be revoked if it is not being used.
C. That a trademark shall be revoked if the person who registered the trademark
in the first place dies and no one else within the company takes over the
registration.

1. Which (one or several) of the following IPR-related exercises requires

vigilance by a dominant company?
A. Refusal to license essential facility.
B. Resale price maintenance (RPM – establishing licensee’s sales price) in
licensing r elations.
C. Territorial allocation for its distributors.
2. Is it possible to divide the royalty payment obligation to relate partly to the
patent, a TM and the know-how and thereby secure payments even if the
patent should be invalidated?
A. No
B. Yes
3. An invention has to be absolutely new in order to receive patent protection.
How do you prevent that your own patent application becomes an obstacle
to patent applications in other countries? Several alternatives may apply).
A. By filling a PCT application you actually obtaining a single filing date in
all designated countries and thereby avoid that one application disturbs
the other.
B. If you file your subsequent patent applications within a twelve months
period, you will be entitled to priority from the first national
application.
C. You select the countries where you want protection and file your
applications at the same date in all these countries.
4. Is the following statement correct? When determining novelty the invention
must be described in a single prior document, whereas when considering
inventive step reference can be made to several documents which hints at the
invention.
A. Incorrect
B. Correct
5. At what stage is it optimal to apply for patent protection?
A. Once the final product has been established but before a competitor has
been able to destroy the novelty.
B. Once the product is introduced on the market.
C. Never. Don’t apply. It is costly, short-lived and easy to circumvent. Rather
keep it dead secret.
6. In order to address harmful practices related to industrial property rights, the
Commission will apply:
A. A European patent misuse principle.
B. European competition law principles.
7. The EU Patent Regulation has been agreed and is awaiting final ratification.
Is it true that the newly established Unified Patent Court will decide on
infringement procedures?
A. Yes
B. No
8. May a licensor who has granted a license to its invention as well as any
future development require that the licensee assigns his development to the
licensor?
A. Yes
B. No
9. Could novelty be destroyed by a non-scientific article?
A. Yes
B. No
10.Can the German patentee prevent importation of his patented protected
product sold by his licensee in Spain from being imported into Germany?
A. Yes
B. No

1. Which are the three main rules that collectively make up the substantive
rules in EU competition law?
A. Regulation 1/2003
B. Article 101 TFEU
C. The EU merger regulation
D. The national competition laws
E. Article 102 TFEU
2. Which of the following can typically be found at the start of a competition
law investigation in the EU?
A. A decision by the European Commission.
B. A decision by an EU court.
C. A decision by a national court.
D. A decision by a national competition authority.
3. What are some of the benefits of competition?
A. Increased competition benefits the consumer by offering more, different
and cheaper products.
B. Someone is able to establish a monopoly which is beneficial in terms of the
financial outcomes for the company.
4. The relevant market combines the product market and the geographic
market, which of the following is the correct definition as provided by the
EU Commission?
A. A relevant product market comprises all those products and/or services
which are regarded as similar or substitutable by the consumer by reason of
the products' target group, fabric and intended use.
B. A relevant geographic market comprises the area in which the firms
concerned are involved in the supply of products or services and in
which the conditions of competition are sufficiently homogeneous.
C. A relevant product market comprises all those products and/or services
which are regarded as interchangeable or substitutable by the consumer
by reason of the products' characteristics, prices and intended use.
D. A relevant product market comprises all those products and/or services
which are regarded as provided in an area in which the firms concerned or
retailer are located and in which the conditions of competition are
sufficiently homogeneous.
5. What are the elements that must be fulfilled to establish a breach of Article
101?
A. An undertaking or an association of undertakings must be involved.
B. The agreement, concerted practice or decision by an association must
have the object or effect of distorting competition in the internal
market.
C. The agreement, concerted practice or decision by an association must be
made in secret to harm customers.
D. There must be an effect on trade between EU Member States.
6. EU competition law can only be applied to entities which are recognized as
companies in a member State. True or false?
A. True
B. False
7. An agreement within the meaning of EU competition law requires a written
or at least legally binding agreement between the parties. True or false?
A. True
B. False
8. Article 101(3) provides a ‘legal exception’ to the prohibition in Article
101(1). Which of the following constituent elements must be satisfied for the
application of Article 101(3) TEFU?
A. An agreement must not afford such undertakings the possibility of
eliminating competition in a substantial part of the products in
question.
B. An agreement must contribute to improving the production or
distribution of goods or to promoting technical or economic progress.
C. An agreement must allow consumers a fair share of the resulting
benefit.
D. An agreement must not impose on the undertakings concerned
restrictions which are not indispensable to the attainment of these
objectives.
9. An agreement is void under Article 101(2) TFEU if:
A. It is fulfilling the conditions of Article 101(1) TFEU.
B. It is fulfilling the conditions of Article 101(1) TFEU and not fulfilling
the conditions of Article 101(3) TFEU.
10.How can the conditions of 101(3) TFEU be described best?
A. An exception for agreements which restrict competition only a bit, so called
agreements of minor importance or de minimis agreements.
B. An exception for agreements which bring about efficiency.
C. An exception for agreements that do not restrict competition.

1. When is a company dominant within the meaning of EU competition law?

A. When a company’s market position is so strong that it can behave
independently of its customers.
B. When a company in the context of its business dealings is telling others what
to do.
C. When a company holds a strong market position in more than half of EU
member states.
D. When a company in the EU has a market share that is higher than its two
closest competitors.
2. Which of the following abuses is typically not considered to be
exclusionary?
A. Excessive pricing.
B. Exclusive dealing.
C. Exclusionary discounts and rebates.
D. Tying and bundling.
E. Predatory pricing.
F. Refusal to supply.
3. Which law regulates mergers in the EU?
A. Regulation 139/2004
B. Regulation 1/2003
C. The TFEU
4. What are the three conditions set out in the Regulation that need to be
fulfilled to intervene in a merger?
A. EU dimension.
B. An anticompetitive agreement between two companies.
C. Concentration.
D. Significantly impediment of effective competition in particular through
creating or strengthening of a dominant position.
 5. What is the one-stop shop under the EU merger regulation?
A. A place where you can hand in your notification and it will be distributed to
all the relevant authorities.
B. A place where you can buy everything in one stop.
C. The European Commission, so there is no need to notify elsewhere.
6. When is a merger harmful to competition?
A. Where the merger creates a dominant position.
B. Where the merger lessens competition significantly.
C. Where the merger leads to an increased level of competition.
7. Which law regulates the Commission’s enforcement procedure in
competition proceedings relating in particular to cartel and abuse of
dominance investigations?
A. Article 101 and 102 TFEU (does not regulate the procedure but contains the
substantive prohibitions
B. Council Regulation 1/2003.
C. The European Merger Regulation (only relevant regarding mergers)
8. Which power of the following powers does the European Commission not
have within the current enforcement framework?
A. Request information for the companies involved in proceedings.
B. Conduct sector inquiries.
C. Wiretap phones of the companies involved.
D. Take witness statements.
E. Conduct dawn-raids/inspections.
9. What is the role of the Court in competition proceedings in the EU?
A. The Court issues warrants for dawn raiding companies suspected of
infringing EU competition law.
B. The Court imposes fines on companies that infringed EU competition law.
C. The Court reviews the European Commission’s decision in EU
competition proceedings.
10.The Commission may by decision impose fines on undertakings and
associations of undertakings where, either intentionally or negligently:
(a) they infringe Article 101 or Article 102 of the Treaty; or
(b) they contravene a decision ordering interim measures under Article 8; or
(c) they fail to comply with a commitment made binding by a decision pursuant to
Article 9.
For each undertaking and association of undertakings participating in the
infringement, the fine shall not exceed 10 % of its total turnover in the preceding
business year.
Where the infringement of an association relates to the activities of its members,
the fine shall not exceed 10 % of the sum of the total turnover of each member
active on the market affected by the infringement of the association.
True or false?
A. True
B. False

1. What could never be considered an undertaking under Article 107 TFEU?

A. The State itself
B. A company run by the State
C. A private undertaking
D. A municipal body which provides services
2. What is the main characteristic of EU State aid control?
A. It is legal
B. It is political
C. It is economic
D. All of the above
3. Which is the supervisory body in State aid procedure?
A. The Member State’s competition authority
B. The European Commission
C. The European Council
D. The Council
4. What are the consequences of a negative decision in State aid?
A. The aid must be repaid
B. The decision to pay the aid is invalid
C. The payments must stop but the recipient can keep the paid amounts
D. They normally carry no real effect
5. How do we define an ‘undertaking’ in Article 107(1) TFEU?
A. Companies registered in an EU Member State
B. An entity engaging in economic activity regardless of its legal status or
how it is financed
C. Registered companies, regardless of where they are registered
D. Privately owned limited companies
6. What are the consequences for the application of Article 107 TFEU if the
State acted like a normal, private investor?
A. There is no State aid in the meaning of Article 107(1) TFEU
B. The State must reimburse only parts of the aid EU
C. The State must repay the aid itself
D. The aid is considered legal by the Commission, which has to deliver a
positive decision
7. What provision in the Treaties regulates services of general economic
interest?
A. Article 106 TFEU
B. Article 107 TFEU
C. Article 108 TFEU
D. None of the above. It’s only case law of the Court of Justice
8. Which of the following is not part of the four main principles of EU public
procurement rules?
A. Open competition
B. Procedural fairness
C. Non-discrimination
D. Transparency
E. Cost effectiveness
9. Which steps are relevant for a typical procurement procedure under the EU
public procurement law?
A. Debriefing of the parties
B. Publication on the TED
C. Submission of bids only until a deadline
D. Standstill period
10.What are the legal reasons that the EU cannot exclude environmental or
social considerations?
A. The demands of the Member States
B. Article 7 to Article 14 TFEU
C. Article 7 to Article 14 TEU

1. What TEU is abbreviated for?

A. Treaty of the Europe Unification
B. Treaty of the Europe Unit
C. Treaty of the Europe Utility
D. Treaty of the Europe Union
2. Pursuant to the Brussels I Regulation, where can a person domiciled within
an EU Member State (MS) be sued in matters relating to tort?
A. Either in the Member State where the harmful event occurred or the
Member State where he/she is domiciled, at the choice of the plaintiff
B. A person must be sued in the Member State where he/she is domiciled
C. A person must be sued in the Member State where the harmful event
occurred
3. Is EU labor law mostly regulated in and mostly made up of regulations?
A. Yes
B. No
4. What is the one-stop shop under the EU merger regulation?
A. The European Commission, so there is no need to notify elsewhere
B. A place where you can hand in your notification and it will be distributed to
all the relevant authorities.
C. A place where you can buy everything in one stop
5. The principle of proportionality has been adopted from…. And it is applied
in all fields of EU law.
A. French law
B. Scotland law
C. UK law
D. German law
6. What is not the main characteristic of EU State aid control?
A. It is legal
B. It is political
C. It is economic
D. All are not correct
7. In forging a long-term business strategy, what appears to lead to a better
result?
A. A step-by-step approach where the grounds are tested and balanced
relations achieved
B. A successful agreement where one’s principle wins on all items.
C. A rapid establishment of subsidiaries in all EU Member States
8. What has been described as being the DNA of EU law and the cornerstone
on which European integration is bulit?
A. All are correct
B. Principle of proportionality
C. The principle of transparency
D. The principle of non-discrimination
9. Who is company’s stakeholders?
A. All are correct
B. Creditor
C. Employees
D. Shareholders
10.Which institution elects the President of the European Commission?
A. The European Council
B. The European Parliament
C. The Court of Auditors
D. The European Commission
11.The legal certainty principle can be used in….
A. Two different ways, both as a tool for interpretation and as a standard
of judicial review
B. One way, which is to secure the transparency of the law
C. Three ways, which is a tool for interpretation, a standard of judicial review
and a tool for resolving disputes
D. None of the answers is correct
12.What are the legal reasons that the EU cannot exclude environmental or
social consideration?
A. Article 7 to Article 14 TEU
B. Article 7 to Article 14 TFEU
C. The demands of the Member States
D. None of the answers is correct
13.The council is also commonly called
A. The council of the European Union
B. The council of Ministers
C. A and B are correct
D. A and B are incorrect
14.Why unifying international law is deemed particularly important?
A. Because the law of the same country is applied regardless of in which
member state the dispute is adjudicated
B. Because the judgments given by a court of a member state are recognized
and enforced in the other member states
C. A and B are correct
D. A and B are incorrect
15.Most EU publications are available online?
A. True
B. False
16.Is the following statement correct?
“When determining novelty the invention must be described in a single prior
document, whereas when considering inventive step reference can be made
to several documents which hints at the invention.”
A. Incorrect
B. Correct
17.Are taxes the result of a voluntary decision by individuals
A. No. They’re imposed on taxpayers by national political decisions of
parliament and other political subdivisions
B. Yes. Taxes are voluntary agreements between individuals
C. Yes. Because the nature of taxes is depending on the honesty of individuals
D. None of the provided answers is correct
18.Is treating importers of liquors less favourably than those of table wine
discriminatory?
A. Yes
B. No. Table wine is more profitable, so its producers are required to be treated
with more favours
C. No. Because liquors are more harmful than table wine so we should treat
them less favourably to discourage the use of these
D. There is no correct answer
19.What is EU Secondary Legislation?
A. Regulations
B. Decisions
C. Directives
D. All are correct
20.How do we define an ‘undertaking’ in article 107(1) TFEU?
A. Companies registered in an EU Member State
B. An entity engaging in economic activity regardless of its legal status or how
it is financed
C. Registered companies, regardless of where they are registered
D. Privately owned limited companies
21.What was one of the main features of the Treaty of Maastricht?
A. The Charter of Fundamental Rights was adopted
B. The Court of Justice of the EU was established
C. It established a European Constitution
D. The name European Economic Community was changed to the European
Union
22.Could novelty be destroyed by a non-scientific article?
A. Yes
B. No
23.Flexicurity is about…..
A. Combining flexibility for employers
B. Security for employees
C. A and B are correct
D. A and B are incorrect
24.The free movement of services is one of the fundamental treaty freedoms
regulated in Article 56 of the Treaty of the Functioning of the European
Union
A. True
B. False
25.The benefits of competition that consumers may receive is… (3 answers)
A. Offering more products with cheaper price
B. Increase a monopoly and outcomes of the companies
C. The products in the market will be variously enriched
D. More promotions between competitors will benefit consumers
26.Is it correct that the charter of fundamental rights was proclaimed in Nice on
the 7th of December 2000 and became legally binding in the same year?
A. Yes, it is correct
B. No. The charter of fundamental rights was proclaimed in Nice on the 7th of
December 2000. However, it became legally binding only in December
2009, when the Lisbon treaty entered into force.
C. No. The charter of fundamental rights was proclaimed in Nice and become
legally binding on the 7th of December 2000
D. None of the provided answers is correct
27.What principle is enshrined in Article 45(2) TFEU and re-iterated in
Regulation 492/2011 in relation to workers?
A. Supremacy
B. Mutual recognition
C. Non-discrimination
D. Proportionality
28.Rules regarding the decision-making authority on behalf of the company fall
into two groups, which are….
A. One group of rules tell us when a company decision exists
B. One group of rules draws the limit between lawful and unlawful company
decisions
C. A and B are correct
D. A and B are incorrect
29.Why does comparative company law often focus on rule-functions rather
than the content of rules?
A. Because rules as such are viewed as uninteresting
B. Because rules as such cannot be compared with each other
C. Because functions are viewed as more universal than rules, and a
multiplicity of rules is consistent with a much more limited set of functions
30.Following EU Member States have been granted special standing regarding
to the EU private international law rules:
A. Sweden
B. Denmark
C. Italy
D. All are granted
31.The aim of the (96/71/EC) Posted Workers Directive is to enable the free
movement of persons and services and to provied protection for workers in
the case of the posting of workers and the transnational provision of services
A. True
B. False
32.Article 101(3) provides a ‘legal exception’ to the prohibition in Article
101(1). Which of the following constituent elements must be satisfied for the
application of the Article 101(3) TEFU?
A. An agreement must not afford such undertakings the possibility of
eliminating competition in a substantial part of the products in question
B. An agreement must not impose on the undertakings concerned restrictions
which are not indispensable to the attainment of these objectives
C. A agreement must contribute to improving the production or distribution of
goods or to promoting technical or economic progress
D. An agrement must allow consumers a fair share of the resulting benefit
33.Resale price maintenance (RPM- establishing licensee’s sales price) in
licensing relations is an IPR-related exercise requiring vigilance by a
dominant company. What is your identification about this?
A. True
B. False
34.An agreement within the meaning of EU competition law requires a written
or at least legally binding agreement between the parties. True or False
A. True
B. False
35.Is it true that the current version of the TEU and TFEU contain very much of
the old original treaty?
A. True. The current version of the TEU and TFEU still contain very much of
the old original treaty
B. False. Both TEU and TFEU are significantly different from the original
versions
C. False. Only TFEU is different from the original versions
D. False. Only TFEU is significantly different from the original versions
36.The EU mainstreaming approach as regards gender equality and non-
discrimination means that the EU in all its activities and policies must aim to
eliminate inequalities, to promote equality between men and women and to
combat discrimination.
A. True
B. False
37.The Common Foreign and Security Policy (CFSP) is an integral part of the
Common Security and Defense Policy (CSDP)?
A. True
B. False
38.What is the name of the document that is commonly used in international
sea carriage of goods?
A. Sea waybill
B. Transport document
C. Consignment note
D. Bill of lading
39.What is the name of the main legal database of the EU?
A. The Database
B. European Times
C. Eur-Lex
D. European Legal Review
40.What are the elements that must be fulfilled to establish a breach of Article
101?
A. An undertaking or an association of undertakings must be involved
B. The agreement, concerted practice or decision by an association must have
the object or effect of distorting competition in the internal market
C. All are correct
D. There must be an effect on trade between EU Member States
41.The flexibilisation of the labour market has led to an increase in…..
A. Fixed-term work
B. Temporary agency work
C. Self-employment
D. All are correct
42.EU’s Regulations must be transposed by the National legislator into the
national legal order
A. True
B. False
43.Is treating traders in lamb meat less favourably than traders discriminatory?
A. Yes
B. No
C. It requires more information to decide on the case but generally, there is no
discrimination
D. There is no correct answer
44.An invention has to be absolutely new in order to receive patent protection.
How do you prevent that your own patent application becomes an obstacle
to patent applications in other countries? (Several alternatives may apply)
A. By filling a PCT application you actually obtaining a single filing date in all
designated countries and thereby avoid that one application disturbs the
other
B. If you file your subsequent patent applications within a twelve months
period, you will be entitled to priority from the first national application
C. All are not correct
D. All are correct
45.What does degeneration mean?
A. That a trademark shall be revoked if the person who registered the trademark
in the first place dies and no one else within the company takes over the
registration
B. That a trademark shall be revoked if it is not being used
C. That a trademark shall be revoked if, in consequence of acts or inactivity of
the proprietor, it has become the common name in the trade for a product or
service in respect of which it is registered
46.Which of the following abuses is typically not considered to be
exclusionary?
A. Tying and bundling
B. Excessive pricing
C. Predatory pricing
D. Exclusive dealing
47.What is the maximum compensation the shipper can receive based on weight
limitation if the goods were carried by sea?
A. 2 SDR per kilo
B. 17SDR per kilo
C. 8,33 SDR per kilo
D. 19 SDR per kilo
48.“Patent protection is more important in industries with long lifecycles, like
pharmaceutical industry, than the opposite like, for example the mobile
telephone industry”
A. This statement is correct
B. This statement is incorrect
49.Refusal to license an essential facility is an IPR-related exercise requiring
vigilance by a dominant company. Is it correct?
A. Yes
B. No