By Josef Weinzierl and Jonas Weissenmayer
Minimum harmonisation has always been in the toolbox of the EU legislature as one way of regulating the internal market, and its normative virtues are hotly debated in the literature. The concept also raises a quirky and often neglected constitutional issue: are minimum harmonising Directives compatible with the re-regulatory aim of Article 114 TFEU, despite the fact that they allow for varying national standards that go beyond the common floor of the Directive, hence failing to eliminate all obstacles to trade? The CJEU’s answer to this question given in the recent Philip Morris judgment, emerged from the latest round of challenges by the tobacco industry against Directive 2014/40/EU, seems to be ‘no’. This post offers some reflections on the controversial regulatory structure of Directive 2014/40, as well as on the reasoning of the Court.
The Regulatory Structure of Directive 2014/40
Directive 2014/40 is an example of partial harmonisation. This is evident in Article 1(b), which clearly states that the measure only seeks to approximate national standards in relation to ‘certain’ aspects of the labelling and packaging of tobacco products, as well as numerous recitals (47, 48, 53, 55). Further, Article 24 indicates that the Directive pursues minimum harmonisation only in that it allows Member States to adopt stricter rules than those laid down in the Directive. Yet, the correct understanding particularly of paragraphs 1 and 2 of this Article has turned out to be extremely controversial. The wording of these paragraphs is as follows:
- Member States may not, for considerations relating to aspects regulated by this Directive, and subject to paragraphs 2 and 3 of this Article, prohibit or restrict the placing on the market of tobacco or related products which comply with this Directive.
This Directive shall not affect the right of a Member State to maintain or introduce further requirements, applicable to all products placed on its market, in relation to the standardisation of the packaging of tobacco products, where it is justified on grounds of public health, taking into account the high level of protection of human health achieved through this Directive. Such measures shall be proportionate and may not constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States. Those measures shall be notified to the Commission together with the grounds for maintaining or introducing them. (Emphasis added.)
The claimants and some interveners (Ireland, the UK and Norway) argued in favour of a literal interpretation: Member States were banned from regulating aspects that had been harmonised by the Directive, unless they fulfilled the requirements of paragraph 2; but crucially, once these requirements were fulfilled, Member States were free to adopt stricter rules even in relation to aspects that fell within the scope of the Directive. On the contrary, the Portuguese Government, the European Parliament, the Council, the Commission and AG Kokott (paras 105-11) were of the view that paragraph 2 was actually deeply ambiguous: the expressions ‘further requirements’ and ‘standardisation’ were not defined whatsoever, as a result of which it was unclear whether or not Member States were allowed to regulate aspects falling within the scope of the Directive. For there was hence more than one feasible construction of paragraph 2, the Court should opt for an interpretation that did not undermine the harmonisation achieved under the Directive and accordingly rule that paragraph 2 only allowed for stricter national rules falling outside the scope of the Directive.
The Reasoning of the Court
The CJEU endorsed the second option, accepting that Article 24, paragraph 2, was indeed ambiguous for the precise reasons outline above (para 69), before seeking recourse to its settled stance that if a legislative measure lent itself to more than one interpretation, preference should be given to the one that rendered the measure compatible with the Treaties (para 70). It then pivotally held that allowing Member States to deviate from the rules harmonised by the Directives would be incompatible with Article 114 TFEU for two reasons (paras 71-72). First, it would directly run counter to the very purpose of harmonisation achieved under the Directive. Second, it would allow Member States to sneak around the Commission notification and authorisation requirements for deviating from harmonisation measures encapsulated in Article 114(4) to (10). Paragraph 2 was hence to be interpreted as merely referring to ‘further requirements’ not covered by the Directive (para 73).
But the Court did not stop there and continued to ask whether even this interpretation was compatible with Article 114, for it ‘[a]dmittedly (…) does not guarantee that products whose packaging complies with the requirements of the directive may move freely on the internal market’ (para 79), rightly observing that national rules enacted outside the scope of the Directive may still constitute barriers to trade for products complying with the Directive. Nevertheless, the Court now reached the opposite conclusion, again for two reasons (paras 80-81). First, it considered this effect to be ‘the inevitable consequence of the method of harmonisation chosen by the EU legislature’ that enjoyed a wide margin of discretion to pursue either gradual or immediate full harmonisation (para 80). Second, ‘whilst (…) [partial harmonisation] does not eliminate all obstacles to trade, it does eliminate some’ (para 81).
Finally, the Court clarified its finding in para 104 of Tobacco Advertising I, where it indicated that the Directive at issue’s failure to provide for a market access clause for products complying with the Directive was incompatible with Article 114 TFEU (para 82): this finding was not to mean that all products fulfilling the requirements of the Directive must enjoy free circulation throughout the internal market, but merely that Member States were banned from adopting stricter rules that were inconsistent with the Directive.
The message of the CJEU is clear: minimum harmonisation is emphatically rejected, partial harmonisation warmly endorsed. If followed in future judgments, this would helpfully tidy up the Court’s ambivalent stance on minimum harmonisation prior to Philip Morris. There is one line of cases suggesting that para 104 of Tobacco Advertising I clearly establishes that a provision ensuring free circulation of products complying with the Directive is indispensable for minimum harmonising Directives to ever be compatible with Article 114 TFEU. Examples of this category are ex parte BAT (para 74) and Tobacco Advertising II (paras 73-74), where the Court commented favourably on the presence of a market access clause, reasoning that it contributed to the functioning of the internal market.
But there also is the 1989 Buet ruling, where the Court approved France’s move to ban doorstep selling of certain educational material to protect a particularly vulnerable group of consumers, despite the fact that the Directive at issue covered exactly this type of market practice and regardless of the circumstance that France had not had the ban authorised by the Commission pursuant to Articles 114(4) to (10) TFEU. Furthermore, there are more recent cases such as DocMorris, A-Punkt Schmuckhandels GmbH or Rina Services SpA, where the Court dealt with minimum harmonising Directives without mentioning Tobacco Advertising I at all, but instead seemed to reason under the assumption that Member States were principally able to justify national standards that go beyond the harmonisation standard set by the Directive. This pattern arguably confirmed the approach adopted in Buet.
Philip Morris may be seen as replacing all of these precedents with an intermediate position: to comply with Article 114 TFEU, harmonising Directives need not provide for a market access clause guaranteeing free circulation of all products fulfilling the requirements of the Directive throughout the internal market, but they also must not allow for stricter national rules that are inconsistent with the harmonisation achieved under the Directive; such rules may only relate to aspects that fall outside the scope of the Directive. Yet, if taken seriously, the effect of this ratio on the legislative acquis would be exorbitant: prominent minimum harmonising measures such as the ‘Unfair Terms’ Directive 93/13/EEC or the ‘Services’ Directive 2006/123/EC would have undergone significant reformulation overnight. The Court may thus be inclined to limit the reach of Philip Morris, or indeed ignore it altogether and continue to apply Buet, when confronted with such measures.
In normative terms, the stark contrast between minimum harmonisation being unequivocally dismissed and partial harmonisation being happily sanctioned is striking, not least because the Court accepts that partial harmonisation too does not remove all obstacles to trade. The Court’s reasoning is also not entirely convincing. First, it is questionable if partially harmonising Directives really are a first step towards full harmonisation. In many cases, harmonisation will remain partial forever. Second, if Member States enjoy a wide margin of discretion in choosing what method of harmonisation they want to pursue, it is hard to discern why the popular minimum harmonisation tool should be removed from the box when its overall harmonising effect is identical to that of partial harmonisation: both do not eliminate all obstacles to trade, but they do eliminate some. Third, it is open to question if minimum harmonisation is really inconsistent with the Commission authorisation procedure laid down in Article 114(4) to (10) TFEU. This procedure may as well be seen as Member States’ option of last resort when confronted with maximum harmonising measures. It is far from obvious that these provisions are designed to completely pre-empt the EU legislature from pursuing minimum harmonisation in the first place.
But despite all of this, the Court understandably had to draw the line somewhere. Killing off both minimum and partial harmonisation as hinted at in Tobacco Advertising I would have left the EU legislator with nothing but full harmonisation; allowing both would have run the risk of rendering harmonisation under Article 114 TFEU into no more than harmonisation attempts, which would soon be undermined by ever more divergent national rules. Seen this way, Philip Morris achieves a nuanced balance between two conflicting extremes.
The difficult relationship between minimum harmonisation and competence issues has troubled the CJEU for quite some time. The underlying themes are complex and often only dealt with beneath the surface. The recent Philip Morris ruling is a bold move against minimum harmonisation that has potential to considerably narrow the EU legislator’s room for manoeuvre, if followed in subsequent cases. The Commission, known for its passionate aversion to minimum harmonisation, will be delighted, some Member States perhaps not so much. Observers of these developments pleasingly witness that the tobacco advertising cases continue to shape the law of the internal market in exciting and important ways.