LAWS 2017 EU Law Summative Assessment 2014/15

LAWS 2017
EU LAW
SUMMATIVE ASSESSMENT 2014/15

Page | 1

26382431

LAWS 2017 EU Law Summative Assessment 2014/15

26382431

Table of Contents
Introduction............................................................................................................... 3
Origin and Significance of the Rule of Reason....................................................................3
Limiting the Scope of the Rule....................................................................................... 4
Blurring the Lines Environmental Protection....................................................................5
Post-Essent: the Death of the Limitation?..........................................................................6
Conclusion................................................................................................................ 7
Table of Cases............................................................................................................ 8
Table of Legislation..................................................................................................... 8
Bibliography.............................................................................................................. 9

Introduction
As a principle of European Union law, the Rule of Reason refers to an inexhaustive list of
mandatory requirements, stemming from the Cassis de Dijon case1, that may justify measures
equivalent to quantitative restrictions (MEQRs) which prima facie hinder the freedom of movement
of goods, contrary to Article 34 of the Treaty on the Functioning of the European Union (TFEU). In
conjunction with the list of derogations under Article 36 TFEU, the Rule of Reason provides various
justifications to allow Member States to undertake measures that potentially hinder the trade of goods.
That said, the limited scope of this rule previously thought to apply solely to indistinctly applicable
measures has been thrown into serious doubt following a slew of cases involving environmental

1 Case 120/78 Rewe-Zentrale AG v Bundesmonopolverwaltung fr Branntwein EU:C:1979:42,

[1979] ECR 649
Page | 2

LAWS 2017 EU Law Summative Assessment 2014/15

26382431

protection. Chief among them is the recent decision in Essent2, which concerns national support
schemes for the production of renewable energy.
In this essay, I will argue that although, following Essent, the role of the Rule of Reason is in
jeopardy, the notion that the limitation has been completely obliterated is untrue. In doing so, I will
seek to first define the role of the Rule and the rationale behind its existence and application to
indistinctly applicable measures. From there, I will discuss the Rules evolving status according to
relevant case law, before finally assessing the permanence of the status of the rule.

Origin and Significance of the Rule of Reason

The genesis of the Rule of Reason lay in the enactment of consumer protection legislation by various
Member States following Dassonville3, in which the Court granted a wider scope to the application of
Article 34 by holding that all trading rules by Member States which are capable of hindering intraCommunity trade or measures equivalent to quantitative restrictions (MEQRs) now fell under its
ambit.4
The various pieces of consumer protection legislation in question were therefore all likely to
contravene Article 34 under this formulation, as they were capable of hindering trade between
Member States. Two further issues arose: first, it would have been difficult to justify these measures
using an Article 36 derogation unless they could be construed under the protection of human health
heading, since Article 36 was a strictly defined, exhaustive list; and second, since unanimous approval
was required to amend Article 36 to cover the legislation, the wait to do so would have been very
time-consuming.
In response to this deadlock, and seeing the general need for legislation that potentially hindered trade
yet was justifiable in the national interest, the Court of Justice of the European Union (CJEU) created
a parallel set of justifications in Cassis, a case involving German legislation laying down a minimum
alcohol level for certain spirits in the interest of consumer protection. In Cassis, the Court held that
MEQRs must be accepted in so far as those provisions may be recognised as being necessary in
order to satisfy mandatory requirements relating in particular to the effectiveness of fiscal supervision,
the protection of public health, the fairness of commercial transactions and the defence of the
consumer5.
Two aspects of this finding are critical. Firstly, the requirement of necessity or proportionality, drawn
from Article 36, was retained in the Rule of Reason, limiting its unfettered use. Second, the use of the
phrase in particular enabled the Court to leave room for revision for this new list of justifications.
Indeed, the Court has subsequently added to the list of mandatory requirements such justifications as
the protection of culture6, road safety7 and the fight against crime 8. The Rule of Reason established
in Cassis, being an inexhaustive, future-proof list of justifications, therefore rectified the problem
2 Joined Cases C-204/12 to C-208/12 Essent Belgium NV v Vlaamse Reguleringsinstantie voor de
Elektriciteits- en Gasmarkt EU:C:2014:2192, [2014]
3 Case 8/74 Procureur du Roi v Dassonville EU:C:1974:82, [1974] ECR 837
4 Ibid, para 5
5 Rewe-Zentrale (n1), para 8
Page | 3

LAWS 2017 EU Law Summative Assessment 2014/15

26382431

encountered by attempting to awkwardly justify legislation under the far more limited list of Article
36 derogations.

Limiting the Scope of the Rule

In addition, a further limitation to the Rule of Reason lay in the scope of its application. In Gilli and
Andres9, the Court confirmed that the Cassis justifications were to be limited to indistinctly applicable
measures which, while formally treating imported and domestically-produced goods equally, de facto
disadvantaged imported products. As a result, distinctly applicable measures that formally
discriminated between imported and domestic goods remained under the sole remit of Article 36.
This seemed logical for two reasons. In the first instance, the mandatory requirements needed to be
confined to indistinctly applicable measures because [o]therwise, the ECJ would face the criticism
that it was unilaterally making amendments to the treaty by adding extra express grounds of
justification10 to Article 36.
Second, when comparing the open-ended Rule of Reason to its counterpart in Article 36, an
exhaustive list, it seemed more appropriate to limit its application. The Cassis mandatory
requirements contain a range of justifications in the public interest, yet the European Unions
prohibition on discrimination under Article 18 TFEU, in line with its objective of an internal market,
must arguably trump these justifications. As Craig and De Burca note, The ECJs willingness to
create a broader category of justifications for indistinctly applicable rules is explicable because
discriminatory rules strike at the very heart of the EU, and hence any possible justifications should be
narrowly confined11. It therefore appeared rational to confine the instances of discriminatory
derogation from the free movement of goods to a strictly defined list of exceptions.

Blurring the Lines Environmental Protection

By and large, the CJEU has used mandatory requirements exclusively for indistinctly applicable rules.
A grey area exists, however, in the area of environmental protection a category of justification not
provided for by Article 36, and one that was only incorporated as a mandatory requirement in the
ADBHU case12 in 1985. In ADBHU, the Court was clear to state that such measures should neither be
6 Joined Cases C-60 and 61/84 Cinetheque SA and Others v Federation Nationale des Cinemas
Franais EU:C:1985:329, [1985] ECR 2065
7 Case C-314/98 Snellers Autos BV v Algemeen Directeur van de Dienst Wegverkeer EU:C:2000:557,
[2000] ECR I-8633
8 Case C-265/06 Commission v Portugal (Tinted Film for Car Windows) EU:C:2008:210, [2008]
ECR I-2245
9 Case C-788/79 Italian State v Herbert Gilli and Paul Andres EU:C:1980:171, [1980] ECR 2071
10 Etienne Durand and Malcolm Keay, National support for renewable energy and the single market
in Europe: the lands Vindkraft case, 11 August 2014, The Oxford Institute for Energy Studies
11 Paul Craig and Grainne De Burca; EU Law: Text, Cases and Materials (5th edn, OUP 2011) 677
12 Case C-240/83 Procureur de la Republique v ADBHU EU:C:1985:59, [1985] ECR 531
Page | 4

LAWS 2017 EU Law Summative Assessment 2014/15

26382431

discriminatory nor go beyond the inevitable restrictions which are justified by the pursuit of the
objective of environmental protection13. Environmental protection was therefore explicitly defined as
a mandatory requirement that applied solely to indistinctly applicable measures.
The Court began to show signs of an unsteady stance on environmental protection, however, during
the Walloon waste case14, in which the European Commission challenged Belgian legislation that
banned the import of waste into Wallonia, yet did not apply to waste produced locally. Although the
legislation could prima facie be construed as discriminatory, the Court nevertheless allowed the
application of the mandatory requirements, holding that, owing to the special nature of the subject
matter (the waste), the measure was not discriminatory.
More significant, however, has been the CJEUs approach on a new line of cases, stemming from
Preussen-Elektra15, that involve national support schemes which encourage the production of local
renewable energy by indirectly discriminating against renewable energy originating from other
Member States.
In Preussen-Elektra, Advocate-General Jacobs suggested that even directly discriminatory measures
can sometimes be justified on grounds of environmental protection 16. In particular, he noted that in
cases such as Aher-Waggon17, the fact that the measure in question noise limits on aircraft in
Germany was distinctly applicable was entirely overlooked by the ECJ when applying public health
and environmental protection justifications.
AG Jacobs further argued more generally for a relaxation in the distinction between Article 36
derogations and the rule of reason exceptions to Cassis. Although the ECJ in Preussen-Elektra did not
give guidance on the relationship between Art 36 and the exceptions to Cassis, it did however allow
the national measure to be justified on environmental grounds.
The final nail in the coffin for the distinction seemed to be the parallel cases of Essent and lands
Vindkraft18, which dealt with national support schemes that imposed quotas whereby electricity
suppliers were required to ensure by way of the purchase of green certificates that a certain
amount of energy they supplied was produced from domestically-based renewable sources each year,
or face various penalties. At the same time, although formal provision had been made to allow
guarantee of origin certificates from other Member States to be substitutable for the green
certificates, in practice the governing body failed to implement it and continued to refuse to accept the
foreign certificates.
In each case, while it was eminently clear that the measures were discriminatory in nature towards
renewable energy produced in other Member States, the Court nevertheless allowed environmental
13 Ibid, para 15
14 Case C-2/90 Commission v Belgium EU:C:1992:310, [1992] ECR I-4431
15 Case C-379/98 Preussenelektra AG v Schleswag AG EU:C:2001:160, [2001] ECR I-2099
16 Preussenelektra, Opinion of AG Jacobs, para 226
17 Case C-389/96 EU:C:1998:357, [1998] ECR I-4473
18 Case C-573/12, EU:C:2014:2037
Page | 5

LAWS 2017 EU Law Summative Assessment 2014/15

26382431

protection to be pleaded as a justification, thereby conflating the mandatory requirements and Article
36 derogations. As AG Bot noted in his Opinion in Essent, cases such as Walloon Waste, AherWaggon and Preussen-Elektra have led to the extension of the Rule of Reason to directly
discriminatory measures19. As a result, he notes, Pursuit of an environmental objective may therefore
have the result either of neutralising the discriminatory nature of a national measure, despite the fact
that it is acknowledged, or of simply avoiding an examination of whether or not the measure is
discriminatory.20

Post-Essent: the Death of the Limitation?

The judgments in Essent and lands Vindkraft seem have concerned commentators who believe that
the Rule of Reason has now been put to bed. As Filippo Fontanelli writes, in Essent, [t]he Court
nonchalantly applied a mandatory requirement to a facially discriminatory measure, sending Cassis to
the museum of judge-made law no longer in force, and tacitly ignoring the exhaustiveness of Article
36 TFEU.21
One can envisage why the Court might take such an approach. As Craig and De Burca argue, the
distinction has also become less tenable because of the difficulty of distinguishing between cases
involving indirect discrimination and indistinctly applicable rules 22, and the simplification of the
distinction would enable justifications to be available in principle for all MEQRs. This is in line with
Jukka Snells assessment that it may be that rigid distinctions and the Rule of Reason simply do not
fit together.23
Yet the extent to which reports of the death of the limitation are true may be revealed by looking
more closely into the judgment in Essent itself. As AG Bot notes in Essent, the CJEU has never
explicitly made an exception to the distinction between distinctly and indistinctly applicable
measures, even in environmental protection cases. Rather, such an exception emerges,
surreptitiously, from case-by-case reasoning along differing lines. 24
It is far more likely, in this writers opinion, that the result in Essent was influenced by a flawed
proportionality analysis by the Court, which appeared more concerned with the economic and policy
reasons for the measure than a purely legal assessment of discrimination and necessity. In Essent, the
Court noted that it is essential that Member States be able to control the effect and costs of their
19 Essent (n 2), Opinion of AG Bot, paras 88-90
20 Ibid, para 91
21 Filippo Fontanelli, The Essent judgment: Another revolution in the case law on free movement of
goods?, EU Law Analysis, Published Friday 19 September 2014,
<http://eulawanalysis.blogspot.co.uk/2014/09/the-essent-judgment-another-revolution.html>,
accessed 17 November 2014
22 Craig and De Burca (n 15); 677-678
23 Jukka Snell, Economic Aims as Justification for Restrictions on Free Movement, in Annette
Schrauwen (ed), Rule of Reason: Rethinking another Classic of European Legal Doctrine (Europa
Law Publishing 2005)
24 Essent (n 2), Opinion of AG Bot, para 92
Page | 6

LAWS 2017 EU Law Summative Assessment 2014/15

26382431

national support schemes according to their potential, whilst maintaining investor confidence 25.
Another factor seems to be the need to ensure demand for green electricity at a higher price than that
of conventional energy26. The Court, however, failed to shed sufficient light on why it would not be
possible to simply enable the interchangeability of green certificates and foreign guarantees of origin
a far less restrictive measure other than to say that, in the absence of harmonisation measures,
such a territorial limitation may in itself be regarded as necessary 27.
A second reason is that, in view of the current absence of specific harmonisation directives for
national support schemes and the pressing need for green energy, the CJEU is willing to give
individual Member States a degree of freedom in order to promote the use of renewable energy. This
has been argued both in Essent as well as lands Vindkraft.
It has also been suggested that the CJEUs leniency has been borne from a desire to create local greenenergy industries, in which case any infant industry policy inherently involves some deal of
temporary protectionism, but is for a good cause 28. However, the Court in Essent shied away from
such reasoning.

Conclusion
Where, then, does Essent leave us? Clearly, in environmental protection cases, the Court has
seemingly lost interest in making a big deal of the difference between discrimination de jure and
discrimination de facto29. However, there does not appear to be any deviation thus far from the
traditional Cassis interpretation vis--vis other justifications.
At the same time, while in Essent, AG Bot believed the Court ought to clarify the situation by giving
formal recognition to the possibility of relying on environmental protection as a justification for
measures which impede the free movement of goods, even if they are discriminatory 30, the Court
refused to do so in its judgment, leaving open the possibility that such leniency will give way once
harmonisation measures come into effect.
For the moment therefore, Cassis remains good law, yet its status and permanence have been thrown
into doubt. While it may well be that the significant leeway granted to environmental protection cases
will be retracted following harmonisation, it is also possible that the ECJ will no longer distinguish
between distinctly and indistinctly applicable measures at all, and that the Cassis test will become
obsolete, or even that Cassis will continue to apply except in the case of environmental protection.
While the limitation of the Rule of Reason to indistinctly applicable measures may not yet be dead
and buried, it most certainly is on life support.

25 Ibid, para 102

26 Ibid, para 109
27 Essent (n 2), para 97
28 Fontanelli (n 21)
29 Ibid
30 Essent (n 2), Opinion of AG Bot, para 92
Page | 7

LAWS 2017 EU Law Summative Assessment 2014/15

26382431

Table of Cases

Aher-Waggon GmbH v Bundesrepublik Deutschland (C-389/96) EU:C:1998:357,

[1998] ECR I-4473

lands vindkraft AB v Energimyndigheten (C-573/12) EU:C:2014:2037

Cinetheque SA and Others v Federation Nationale des Cinemas Franais (C-60/84 and
61/84) EU:C:1985:329, [1985] ECR 2065

Commission v Belgium (C-2/90) EU:C:1992:310, [1992] ECR I-4431

Commission v Portugal (Tinted Film for Car Windows) (C-265/06) EU:C:2008:210,

[2008] ECR I-2245

Essent Belgium NV v Vlaamse Reguleringsinstantie voor de Elektriciteits- en

Gasmarkt (C-204/12 to C-208/12) EU:C:2014:2192, [2014]

Italian State v Herbert Gilli and Paul Andres (C-788/79) EU:C:1980:171, [1980] ECR
2071

Preussenelektra AG v Schleswag AG (C-379/98) EU:C:2001:160, [2001] ECR I-2099

Procureur de la Republique v ADBHU (C-240/83) EU:C:1985:59, [1985] ECR 531

10

Procureur du Roi v Dassonville (C-8/74) EU:C:1974:82, [1974] ECR 837

11

Rewe-Zentrale AG v Bundesmonopolverwaltung fr Branntwein (C-120/78)

EU:C:1979:42, [1979] ECR 649

12

Snellers Autos BV v Algemeen Directeur van de Dienst Wegverkeer (C-314/98)

EU:C:2000:557, [2000] ECR I-8633

Table of Legislation
1

Article 18, Treaty on the Functioning of the European Union

Article 34, Treaty on the Functioning of the European Union

Article 36, Treaty on the Functioning of the European Union

Page | 8

LAWS 2017 EU Law Summative Assessment 2014/15

Page | 9

26382431

LAWS 2017 EU Law Summative Assessment 2014/15

26382431

Bibliography
Fontanelli F, The Essent judgment: Another revolution in the case law on free movement of
goods?, EU Law Analysis, Published Friday 19 September 2014,
<http://eulawanalysis.blogspot.co.uk/2014/09/the-essent-judgment-another-revolution.html>,
accessed 17 November 2014
Snell J, Economic Aims as Justification for Restrictions on Free Movement in Annette
Schrauwen (ed), Rule of Reason: Rethinking another Classic of European Legal Doctrine,
(Europa Law Publishing 2005)
Durand E and Keay M, National support for renewable energy and the single market in
Europe: the lands Vindkraft case, 11 August 2014, The Oxford Institute for Energy Studies
Craig P and De Burca G; EU Law: Text, Cases and Materials (5th edn, OUP 2011) 677

Page | 10