The seal product cases (II): Case T-526/10 Inuit Tapriit Kanatami and others

In a second round of cases in Luxembourg, a number of seal hunters failed (yet again) to convince the General Court to annul the EU-wide ban on trade in seal products. In a nutshell, the seal hunters argued that the EU acted ultra vires by adopting the ban on the basis of article 114 TFEU (harmonization of rules for the establishment and functioning of the internal market). Moreover, the applicants argued that the ban violated their fundamental rights and the principles of subsidiarity and proportionality. According to the applicants, the EU-wide ban was not aimed at improving the functioning of the internal market, but rather at safeguarding the welfare of animals, an objective for which no legal basis exists within the EU Treaties.

In dismissing the arguments put forward by the seal hunters, the General Court made a number of interesting statements regarding the EU’s ability to severely restrict trade of an ‘exotic import’ (a product not made within the EU) within the EU’s internal market on grounds of protecting the welfare of animals living outside the EU. In this post I will focus on the competence issue by discussing the particularities of EU constitutional law and the (modest) challenge a ban on the sale of exotic imports such as seal products poses for EU legislative competence.

 

Background

In 2009, in response to public concerns over the cruel hunting methods employed by seal hunters and the national bans placed on seal products by a number of Member States, the EU imposed a ban on the placing on the entire EU market of seal products. The ban was subject to two exceptions. The first exception – the “indigenous peoples” exception – allows seals products resulting from seal hunts by Inuit and other indigenous communities to be marketed within the EU. The second exception – the “natural resources” exception – allows the marketing of seal products which result from ‘by-products of hunting that is regulated by national law and conducted for the sole purpose of the sustainable management of marine resources.’

The ban, while of relatively minor economic importance, has led to strong reactions from seal hunting nations such as Canada and Norway and the seal hunting community itself: these countries are outraged by the EU’s ‘interference’ with a business model that they see as perfectly normal. Both Canada and Norway have challenged the validity of the EU seal product regime before the WTO, arguing essentially that the EU’s animal welfare policy is not consistent and is disproportionate (see for more information Rob Howse’s comments on the oral hearings of the case last week on the IELPBlog).

The seal hunters have already had one hearing before the Luxembourg courts. In the prior case, the seal hunters challenged the basic regulation banning trade in seal products (Regulation 1007/2009 of the European Parliament and the Council), but lost because the General Court found that they lacked standing to challenge a legislative act (this case is currently under appeal). In the second and present set of cases, the seal hunters are again challenging the basic regulation, but this time through a plea of illegality that challenges the Commission’s implementing Regulation (Regulation 737/2010). While the chances of success in either case is not great, the second direct challenge is, from a procedural point of view, much more likely to be at least admissible. I won’t comment on locus standi too much here; suffice it to say that the General Court put a rather large cart before a potentially even larger horse by skipping the admissibility issue altogether in the present case and dealing with the substantive issues head on (‘for the sake of the economy of the procedure’).

The source of contention in all of these cases is that a number of third countries and seal hunters are not too happy with the EU’s decision to damage their economic interests for reasons of protecting the health and life of animals not situated within the territory of the EU (granted, Greenland is part of the Kingdom of Denmark, but most EU law does not apply there, see article 198-204, 355 TFEU and Annex II of the Lisbon Treaty).

The EU seals ban is – in short – a prime example of a conflict resulting out of globalization: as a result of extensive economic ties between countries, people on one side of the globe become aware of activities on the other side that are objectionable in their view, and no longer wish to be a part of those objectionable activities, which decision in turn affects the economic interests of those engaged in such activities.

 

The objective of the ban: market regulation, not animal welfare protection

The first argument put forward by the seal hunters in this case is that the EU should not be able to rely on article 114 TFEU as a legal basis to adopt the seal product ban. According to the applicants the main objective of the Regulation is the protection of animal welfare, not the functioning of the internal market. According to well established case law, article 114 TFEU does not grant the EU general competence to regulate the internal market, but rather only to take measures which genuinely improve the conditions for the establishment and functioning of the internal market. A ban on the marketing of seal products does not contribute to that aim.

The General Court responded with the following statement:

In the present case it is clear from the basic regulation that its principal objective is not to safeguard the welfare of animals but to improve the functioning of the internal market. (para. 35)

For some, this statement might sound surprising, since the measure effectively makes trade in a particular product impossible in order to achieve a high level of animal welfare protection. One must keep in mind here, though, that the EU ban concerns commercial activity relating to seal products, not conservation measures aiming at improving the life and health of seals within the EU. The measure is directly aimed at regulating the conditions for the placing on the EU market of seal products and not directly aimed at protecting seals. The Regulation thus does not prohibit cruel hunting methods as such, nor does it attempt to regulate hunting methods for seals.

Nonetheless, it is quite remarkable that the General Court suggests that an EU-wide ban on the sale of seal products improves the functioning of the internal market, since trade in those products is effectively prohibited. The General Court’s reasoning is the result of the CJEU’s (in my opinion, rather unfortunate) legal meanderings on the EU’s competence to use article 114 TFEU to facilitate trade on the internal market. In Tobacco Advertising the CJEU effectively put a fence around the EU’s rule-making power under article 114 TFEU by holding that that article does not give the EU a ‘general power to regulate the internal market’. Recourse to article 114 TFEU is only possible when a rule will genuinely improve the conditions for the establishment and functioning of the internal market. This in turn means that the measure must either remove obstacles to trade that are the result of divergent national laws, or  remove appreciable distortions of competition.

To say the least, this is a troubling view if one wishes to limit the operation of free markets in order to protect important public interests such as the environment, animal welfare, consumer interests, and public health. This is because these conditions suggest that article 114 TFEU can only be used for trade facilitation, not trade regulation. Granted, trade can often be facilitated by taking public interests into account, for example by laying down uniform product requirements. But actually trumping trade with non-trade concerns becomes much more difficult. A ban on a product is not ‘trade facilitating’ at all: it is trade preventing. Many will argue that in such instances the EU needs to have recourse to another legal basis in the Treaty (although there is none for animal welfare). To me however, this appears to be contrary to the purpose of the Treaties itself which ‘by establishing a Common Market and progressively approximating the economic policies of the Member States seeks to unite national markets in a single market having the characteristics of a domestic market’. You would  expect the Union legislator to have the powers of a domestic legislator to protect vital non-trade interests and not to depend on Member States to subject the market to societal interests. Or even worse: to prevent Member States from subjecting the market to societal interests through weaker trade facilitating measures.

Fortunately, – as the Dutch say – the soup is not consumed as hot as it is served, as the CJEU softened its approach in two ways. Firstly, as soon as the conditions (removing obstacles to trade or preventing appreciable distortions of competition from arising) have been met by the EU legislature, the EU cannot be prevented from relying on article 114 TFEU on the ground that the protection of other public interests such as animal welfare is the decisive factor in the choices made (see para. 41 of the case under discussion). This is also in line with constitutional requirements of Union law making. Article 13 TFEU requires the Union, in formulating its internal market policy, to pay full regard to the welfare requirements of animals ‘since animals are sentient beings’.

Secondly, according to the CJEU, even the ban of a product facilitates the smooth operation of the internal market. The CJEU indicated in Swedish Match that product bans are permissible under article 114 TFEU. In that case, the CJEU held that a total ban (except for Sweden) on snuff, a tobacco product, was justified because it was likely that if the EU did not impose a ban divergent laws among the EU Member States would lead to obstacles to trade in the product concerned.  The ‘trick’ employed by the CJEU in Swedish Match as well as by the General Court in this second Inuit case is that a ban might in fact facilitate trade in other (similar) products and remove distortions of competition by uniformly limiting the availability of the product regulated.

According to the General Court, existence of disparities between national regulations on seal products discourages consumers from buying other products that do not involve seal hunting, but which might not be easily distinguishable from seal products (such as Omega 3 capsules) or products that contain seal products without being clearly recognisable as such (para. 39 and 47).  A Union-wide ban in seal products is therefore justified in order to restore consumer confidence ‘by offering them a general guarantee that no seal product would be marketed on the Union market, inter alia by banning the import of such products from third countries.’ (para. 45) The General Court also noted that seal products may still be traded within the EU as long as those seal products qualify for one of the two (rather limited) exceptions in the Regulation. I am quite curious whether a complete ban would have also passed the test of Tobacco Advertising as it did in Swedish Match, but in any event the exceptions appear to be rather marginal in scope.

According to the General Court, both exceptions to the ban facilitated trade in permitted seal products and facilitated trade in products in which trade might be hampered if there were no clear cut ban at the EU level. The General Court stated that:

In order to ensure that the products authorised under Article 3(1) of the basic regulation and all the products not made from seals, but which might not be easily distinguishable from similar goods made from seals, or products which might include elements or ingredients obtained from seals without this being clearly recognisable, are able to circulate freely on the internal market of the Union, the legislature provided, in Article 4 of the basic regulation that ‘Member States shall not impede the placing on the market of seal products which comply with [the basic regulation]’. It must be considered that this provision gives the basic regulation its full effect as regards its objective of improving the conditions for the functioning of the internal market. That article precludes Member States from impeding the circulation in the Union of all those categories of product by means, inter alia, of more restrictive provisions which they might find necessary to ensure the welfare of animals or to reassure consumers. Thus, Article 4 of the basic regulation expresses the objective set out in Article 1 of that regulation.

The ‘exotic import’ and article 207 TFEU

Another interesting aspect of the judgment by the General Court is the dismissal of the need for article 207 TFEU as an additional legal basis. Article 207 TFEU gives the EU competence to regulate commerce with third countries. The applicants had argued that the ban in seal products essentially affects commerce with third countries. This is obviously right. All seal products originate from third countries, or – to be a bit more precise – from territories that are not part of the EU customs union (Norway, for instance, incorporates – but has no say in – most EU internal market law, and is not part of the EU customs union). Formally speaking, the ban only affects the marketing of seal products, not their importation (although the ban is enforced at the border in accordance with the Ad Note to Article XI GATT), but there is no doubt that the Regulation amounts to a de facto import ban of seal products. Nonetheless, the General Court proceeded to classify the measure as an internal rather than an external measure on formal grounds. The GC notes that, firstly, the Regulation only prohibits the placing on the market of seal products and does not prohibit either the import or export of seal products (para. 69). Secondly, according to the GC ‘the basic regulation does not prevent the entry, warehousing, processing or manufacture of seal products in the Union, if they are intended for export and are never released for free circulation in the Union.’ In addition, imports are allowed if seal products are intended for personal use and not for commercial purposes, and seal products may be marketed if they are the result of national conservation measures. The GC therefore concludes that:

The prohibition on imports [as a result of enforcement at the border of the marketing ban] is in fact laid down in order to prevent the placing on the market of seal products and, by that means, to achieve the sole objective of the basic regulation which is to improve the functioning of the internal market. In that context, the effects of that regulation on external trade are merely secondary.

Again, I think the position of the General Court is understandable for the reason that if it were to rule otherwise, the regulation of all ‘exotic imports’ by Member States would be off limits. EU common commercial policy is an exclusive EU competence, and this means that everything that falls within its scope can no longer be undertaken by Member States. If the General Court were to accept the argument that if a rule only affects products from third countries only the EU may regulate that product, this would be a huge impediment to Member States’ competence to regulate their own markets and to determine which product is safe, healthy, or environmentally friendly enough to be sold on their territory.

Nonetheless, the General Court’s reasoning might create some uncomfortable smiles over at the European Commission. The Commission has always vehemently litigated in front of the CJEU to extend its competence under the common commercial policy as much as possible. The General Court’s non-functional reading reduces the scope of 207 TFEU to, inter alia, the negotiation of international economic agreements, anti-dumping measures, and the imposition of quantitative restrictions in the formal sense. The regulation of products stemming from third countries through means other than border measures is thus outside EU exclusive competence.

 

2 comments

  1. Pingback: SEALS DISPUTE – Regulation 2015/1775 – by Johannes Hendrik FAHNER | EUdevelopmentblog
  2. Pingback: SEALS DISPUTE – Regulation 2015/1775 – by Johannes Hendrik FAHNER | RSIEAblog

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