Internal market guide

for governmental agencies

June 2009

The National Board of Trade is the Swedish governmental

agency dealing with foreign trade and trade policy. Our mission
is to promote an open and free trade with transparent rules. The
basis for this task, given to us by the Government, is that a
smoothly functioning international trade and a further liberalized
trade policy are in the interest of Sweden. To this end we strive
for an efficient internal market, a liberalized common trade policy
in the EU and an open and strong multilateral trading system,
especially within the World Trade Organization (WTO).
As the expert agency in trade and trade policy, the Board
provides the Government with analyses and background material,
related to ongoing international trade negotiation as well as
more structural or long-term analyses of trade related issues.
We also publish material intended to increase awareness of
the role of international trade in a functioning economy and for
economic development.

The National Board of Trade provides service to companies, for

instance through our SOLVIT Centre which assists companies
as well as people encountering trade barriers on the internal
market. The Board also administers the Swedish Council for
Trade Facilitation, SWEPRO.
In addition, as an expert authority in trade policy issues, the
National Board of Trade provides assistance to developing
countries, through trade-related development cooperation.
We also host Open Trade Gate Sweden, a one-stop information centre assisting exporters from developing countries
with information on rules and requirements in Sweden and
the EU.

www.kommers.se

National Board of Trade, June 2009 First printing. ISBN: 978-91-978154-5-1

Foreword
Membership of the European Union (EU) means that Sweden is part of the single market, a Community
governed by the rule of law. The National Board of Trade has been commissioned by the Government to
improve awareness of the single market among Swedish Government agencies.
In this general guide to help Government agencies apply EC law on the single market we look at the fundamental legal principles which govern the internal market of the EU and the provisions which directly follow
from the EC Treaty. Sector-specific rules in EC regulations and directives are only addressed tangentially.
It is our hope that the guide will prove useful as agencies continue to develop their application of EC law.
Using this guide as a basis, the National Board of Trade is at your service throughout this process. We have
set up a special help desk for agencies. This can be accessed by telephone on 08-690 49 80 or by e-mailing
euhelpdesk@kommers.se.

Lena Johansson
Director General

Contents
1. The single market a Community of law....................................................................................................... 4
2 Swedens duty to comply with Community law responsibility of authorities........................................... 6
3 All measures of public authorities can be affected..................................................................................... 10
4 Applying the rules of the single market the same two-step procedure every time.............................. 12
4.1 The principle of free movement and potential exceptions......................................................................................12
4.2 Free movement of goods......................................................................................................................................................14
4.3 Free movement of services..................................................................................................................................................18
4.4 Free movement of persons.................................................................................................................................................. 21
4.5 Free movement of capital.................................................................................................................................................... 22
4.6 Checklist.....................................................................................................................................................................................23

Appendix: The provisions of the EC Treaty....................................................................................................... 24

1. The single market a Community of law

At the heart of todays EU

A growth project

The EUs single market, also called the internal

market, is at the heart of todays EU. The single
market is where goods, services, people and capital
should be able to circulate freely. The single market
became a reality in 1993 after extensive preparatory
work, particularly on the part of national authorities in all the EU Member States. Hundreds of EC
directives were drawn up and countless barriers to
free movement removed. At the same time, it was
made clear that free movement would not be gained
at the expense of overriding public interests such as
consumer protection, the environment, life and
health.
Today, more than fifteen years later, this market
is taken for granted by the vast majority. People
should be able to move as freely within the EU as
they do in Sweden; be able to live, work and study
in any country in the Union. For companies, the
single market should cut bureaucracy and red tape.
It must be possible to manufacture and sell products, provide services and make investments
throughout the EUs internal market.

One advantage of increasing movement between

EU Member States is that it creates growth in the
European economy. Diversity increases, as does
competition, and with it pressure on consumer
prices. For companies, the internal market can also
act as a springboard to expansion in globalised
markets.

A Community of law
The single market encompasses all EU Member
States as well as Iceland, Liechtenstein and Norway. The three latter countries are signatories to the
EEA Agreement (the agreement on the European
Economic Area).
For the market to work, the countries must have
a shared regulatory framework. This body of EU
legislation covers rules on customs union, free
movement of goods, services, capital and people as
well as rules on competition.

The EU, the EC and the EEA

Since 1995, Sweden has been a member of the European Union (EU) which numbers 27 countries1.
The work of the EU is run under what are known as three pillars.
The first pillar, the European Community (EC), is the EUs economic branch. This is where customs
union, the internal market and the common trade policy with third countries are addressed.
The two other pillars cover the Common Foreign and Security Policy (CFSP) and Police and Judicial
Cooperation in Criminal Matters (PJC) respectively.
The EEA is what is known as an association agreement between the EU and the three EFTA countries
Iceland, Liechtenstein and Norway. The agreement admits these EFTA countries to the EUs internal
market in which goods, services, people and capital are to be able to circulate freely.

EC law

Just as Swedish law consists of a number of different types of legislation (the fundamental laws (the
constitution), acts, ordinances, regulations, decisions, court rulings, etc.), EC law also called Community law consists of different types of legal instruments. A distinction is usually made between
primary legislation and secondary legislation.
Primary legislation is primarily the EC Treaty, signed in Rome in 1957. It has since been amended
by a number of treaties, such as the Single European Act, the Maastricht Treaty, the Treaty of Amsterdam and the Treaty of Nice, and the accession treaties of Member States. The EC Treaty forms the
basis of and lays down the main principles of Community law.
Secondary legislation builds on primary legislation and expresses its content in legal instruments
issued by the EUs institutions. These are primarily EC regulations and EC directives, but they also
include decisions of the European Commission in individual cases. The main aim of EC directives is to
harmonise the rules of Member States in a particular area. All secondary legislation must have a legal
basis in the treaty and can be said to follow on from the treaty. If secondary legislation does, however,
conflict with primary legislation, primary legislation always takes precedence. This is called the
hierarchy of norms.

National transposing measures

National transposing measures are the national measures (in Sweden primarily acts, ordinances, and
regulations issued by authorities) which turn EC directives into national law.

The European Court of Justice

The European Court of Justice (ECJ) in Luxembourg interprets primary and secondary legislation. Its rulings are very important. In order to understand EC law, it is at least as important to know about the rulings
of the European Court of Justice as it is to know about the EC Treaty and other EC legal instruments.
1

Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Hungary, Germany, Greece, Ireland, Italy, Latvia, Lithuania,
Luxembourg, the Netherlands, Malta, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the UK.

2. Swedens duty to comply with Community

law responsibility of authorities
EC law is part of the legal system of every Member
State. It is derived from the EC Treaty, which
Sweden, like the other EU countries, has signed.
The Swedish Parliament has confirmed the full
effect of EC law in Sweden in a separate act (the Act
on the Accession of Sweden to the European Union
1994:1500), and so have the Swedish courts.
For Swedish authorities (Government agencies),
this means that not only Swedish acts and ordinances but also EC law must be taken into account.
Every individual authority, independently of the
legislator, the Government or other authorities,
bears its own responsibility for ensuring that EC
law is complied with and applied correctly. This is a
consequence of the duty of loyalty in the EC Treaty.
As the Supreme Administrative Court puts it:
Authorities and courts have a duty to comply with
Community law.
Complying with EC law means

ignoring any Swedish law (an act or ordinance)

which conflicts with EC law. An authority which

discovers that a Swedish legislative provision
conflicts with EC law is obliged to disregard the
provision. Compliance with Swedish law can
therefore never be used as an excuse for an

2
3
4

authority to act in contravention of EC law.

Paradoxically, this means that it may be illegal to
comply with Swedish law.

ensuring that the authoritys own measures do

not contravene EC law. This applies to all types

of measures on the part of authorities (see below)
and irrespective of whether a superior rule conflicts with Community law or not.

The common legal system of the EU countries is

based on EC law taking precedence over national
law, on rules being able to be invoked directly before
national courts and authorities, and on countries
having undertaken a duty of loyalty to the treaty.

Responsibilities of authorities
what do the preparatory documents say?
Neither the EU Accession Act nor the Instrument of Government expressly mentions the
responsibilities of authorities. However, this is
clearly stated in the preparatory documents.
Swedish authorities must:
comply with EC law: Swedish [] authorities are obliged to apply the standards of EC
law. They are thus obliged, for example, to
immediately without the creation of an intermediate layer of national legislation apply
the Community treaties and legal instruments
issued by the Council to the extent that these
are directly applicable or have direct effect
[]2.
give precedence to EC law: A [] fundamental principle is that EC law takes precedence over national law. If a legislative provision in a country conflicts with an EC rule, the
countrys [] authorities are obliged to apply
the EC rule over the domestic legislation. This
applies in principle even if the domestic
norms are part of the countrys constitution3.
disregard national rules which conflict
with EC law: The Swedish authorities must
[] respect the effects of EC law and not
apply any Swedish rules which contravene it4.

Government Bill 1993/94:114 Amendments to the Constitution prior to Swedish membership of the European Union, p. 32.
Government Bill 1993/94:114 Amendments to the Constitution prior to Swedish membership of the European Union, p. 13.
Government Bill 1994/95:19 Swedens membership of the European Union, pp. 529-530.

The principle of the supremacy of EC law

If a national rule conflicts with a rule in EC law, EC
law must always be applied and the national provision (act, ordinance, regulation, etc.) be disregarded.
This principle of the primacy of EC law has been
laid down and developed by the European Court of
Justice. The principle must guarantee that EC law is
not undermined by national law but is applied
equally in all Member States. In several rulings, the
European Court of Justice has also made it clear that
EC law takes precedence over all forms of national
law, i.e. even the Swedish Constitution.

Example
The ban on appeals in the Swedish Agriculture
Ordinance contravened EC law
The company Lassagrd AB had applied to the County
Administrative Board in the county of Halland for subsidies in accordance with an EC Regulation on agricultural
aid ([EEC] No 3887/92). The County Administrative
Board rejected Lassagrds application because it was
sent in too late. The company appealed against the decision to the Swedish Board of Agriculture but the appeal
was rejected because according to a Swedish ordinance
on agriculture (1994:1715) no appeals could be brought.
Lassagrd then brought the case before the administrative courts. The Supreme Administrative Court, which
reached a judgment in the final instance, found that Lassagrd was entitled to appeal against the decision in
accordance with the principle of EC law on the right to
apply to the courts. The Swedish ordinance therefore con5

travened EC law. As EC law takes precedence, the provision prohibiting appeals in the Swedish agricultural ordinance must not be applied.5
The agricultural ordinance concerned has been
repealed. After the ruling, in 1998 Section 22 a of the
Swedish Administrative Procedure Act introduced an
opportunity for appeals against administrative decisions
to be made in the County Administrative Court.
If a measure by a public authority conflicts with EC
law, under the EC Treaty it must not be implemented. If it has already been implemented, it may
be declared invalid by a court. In certain circumstances, the state can also be obliged to pay compensation to individuals for breaches of EC law.

Example
Norbotten County Administrative Board had
to pay compensation
One of several examples which clearly demonstrate the
obligation to pay compensation is the dispute which arose
between Norbotten County Administrative Board and a
number of companies which provide services in conjunction with small game hunting. In spring 2006, the County
Administrative Board decided to delay the start of the
hunting season for all hunters not entered in the Swedish
population register and required residence in Sweden or
entry in the Swedish population register for granting hunting rights. This decision was disastrous for companies
which offered hunting packages to foreign hunters, and

Ruling of the Supreme Administrative Court in case no. 219-97 (R 1997 ref. 65).

The principle of direct effect

The principle that a provision in EC law has
direct effect means that individuals and companies
can invoke it before national courts or authorities.
For a rule to have direct effect, the following
conditions must be met:

it must be unconditional, i.e. it can be applied

without any supplementary measures having
to be taken,

its content must be clear and precise, and

its period for transposition (EC directives) must
have expired.

was reported to the Chancellor of Justice. In line with the

National Board of Trade, the Chancellor of Justice found
that the decision contravened the free movement of services (Article 49 EC) and the principle of non-discrimination (Article 12 EC). In three separate cases, the Chancellor of Justice ordered Norbotten County Administrative
Board to pay over SEK 1.5 million in compensation to the
companies affected.6

Example
Car scrapping charge repaid on return to Germany
A German citizen moved to Sweden and brought his car
with him. In conjunction with the move, he had to pay a
car scrapping charge for the car in Sweden. On returning
to Germany a few years later, he requested that the
charge be repaid because the car was not going to be
scrapped in Sweden. The National Road Administration
and a County Administrative Court refused repayment,
citing Swedish legislation. In line with the National Board
of Trades opinion in the case, however, the Administrative
Court of Appeal in Jnkping found that while it was true
that a refusal to repay the charge could be justified under
national law, it would mean breach of EC law, which
prohibits discriminatory internal taxation (Article 90 of
the EC Treaty). The Administrative Court of Appeal
therefore rejected the decision of the National Road
Administration and the County Administrative Court.7
6
7
8

The majority of rules on free movement contained

in the EC Treaty have direct effect and can be
invoked by individuals and companies. In several
judgments the European Court of Justice has also
stated that certain provisions in EC regulations,
directives and decisions also have direct effect.

Direct applicability
As well as direct effect, we sometimes talk about
direct applicability. Direct applicability means that
the rule is directly valid in all Member States.
According to the European Court of Justice, it may
not be incorporated or transposed into national
law8. Under the EC Treaty, for example, regulations
are directly applicable.
Not all rules of Community law which are
directly applicable have direct effect. Some rules,
for example, are directed at states or other public
bodies and do not provide any individual rights to
individuals.

Duty of loyalty
Sometimes it is not sufficient for an authority to
apply a rule of EC law correctly or to set aside
national provisions which conflict with this rule.
The EC Treaty also requires that all appropriate
measures are taken to ensure that the obligations
under the EC Treaty and other EC legal instruments
are complied with. This requirement is a consequence of what is known as the duty of loyalty
under Article 10 of the treaty.

Decisions of Chancellor of Justice of 15 January 2008 (ref. 5003-07-40 Arctic Air Aktiebolaget), 4 March 2009 (ref. 1608-08-40 Heli i Arjeplog Aktiebolaget)
and 5 March 2009 (ref. 2294-08-40).
Ruling in case no. 2622-05, Jnkping Administrative Court of Appeal.
Judgment of the European Court of Justice in Case 39/72 Commission of the European Communities v Italian Republic.

Article 10 of the EC Treaty

Member States shall take all appropriate
measures, whether general or particular, to
ensure fulfilment of the obligations arising out
of this Treaty or resulting from action taken by
the institutions of the Community. They shall
facilitate the achievement of the Communitys
tasks.
They shall abstain from any measure which
could jeopardise the attainment of the objectives of this Treaty.
In practice the duty of loyalty means that authorities in the Member States must refrain from applying or introducing provisions which jeopardise the
purpose of the ECs rules. National rules which
conflict with the effective functioning of the internal market must be abolished. The duty of loyalty
also means that national authorities must cooperate with authorities in other EU countries. This
facilitates the correct application of the ECs rules.

3. All measures of public authorities

can be affected
The consequences of the duty to comply with EC
law is that all measures by a public authority can be
affected by EC law. When new regulations are being
drawn up or existing regulations amended, other
types of decision made or when a minor intervention is carried out, for example when information is
provided in a press release, EC law must be taken
into account. Consideration must be given to the
EC Treaty (primary legislation), regulations, directives and decisions (secondary legislation), as well
as the case law of the European Court of Justice.

Regulations issued by authorities

Regulations in non-harmonised areas
Where there is no secondary legislation in a particular area, Member States are free to adopt their
national rules as they see fit. However, these may not
contravene the fundamental requirements in the EC
Treaty or the case law created by the European Court
of Justice in interpreting the articles of the treaty.
Regulations transposing directives
The measures taken to transpose an EC directive
must result in achieving the purpose and objective
of the directive.
When a directive fully harmonises an area, there
is generally no opportunity to add purely national
requirements. Such a directive will result in Community requirements applying in all Member
States, without exception.
There may be cases where a directive only regulates particular parts of an area, or only lays down
certain minimum requirements. When transposing
this type of directive, Member States may introduce
additional national requirements or impose higher
requirements that those set out in the directive.
However, such national rules may not contravene
the fundamental provisions of the EC Treaty or the
case law created by the European Court of Justice in
interpreting the articles of the treaty.

Decisions in individual cases

The question whether a national statutory provision is compatible with EC law is often turned on
9

10

its head in an individual matter for an authority

concerning a product, service or a person from
another EU Member State. One example is the
Swedish Companies Registration Offices decision
on a case concerning the registration of a limited
company.

Example
The Swedish Companies Registration Office applied
EC law instead of the Swedish Companies Act.
The case concerned a Swedish entrepreneur who had a limited
liability company. The companys Finnish supplier wanted to
buy a stake in the company. This was arranged in such a way
that the Finnish supplier purchased 20 percent of the shares of
the company (the share capital was increased at the same time).
The problem was that the money for the purchase was
placed in a bank in Finland. According to Swedish regulations, however, a wholly Swedish bank was required for this
type of change in a limited company to be able to be registered with the Swedish Companies Registration Office. The
Swedish Companies Registration Office thus chose to base
its decision directly on EC law, because the Swedish Companies Act in its then form, contravened EC law.

Press releases, campaigns, etc.

The rules of the internal market must also be taken
into account when non-binding measures are carried out by an authority, such as invitations, recommendations and campaigns, if these affect free
movement. If an authority issues a press release providing information on products which are hazardous to health, this may have a negative effect on the
sale of products which are legally sold in other EU
Member States. In such a case, recommendations
can only be given if the authority can prove that
there is an objective interest in the information and
that the measure is proportional (see section 4.1).

Example
The European Court of Justice ruled against
an Irish Government advertising campaign
In the Buy Irish case the European Court of Justice established that even non-binding measures are covered by EC law9.

Judgment of the European Court of Justice in Case 249/81 Commission of the European Communities v Ireland.

In an advertising campaign, the Irish Government

encouraged the purchase of domestic products. Ireland
considered that the prohibition under EC law of restrictions to the free movement of goods was not applicable
because this only applies to binding measures.
The European Court of Justice did not agree. Instead
the Court issued the following statement: Even measures
adopted by the Government of a Member State which do
not have binding effect may be capable of influencing the
conduct of traders and consumers in that state and thus
of frustrating the aims of the Community
As the campaign could have had a limiting effect on
trade in foreign goods, Ireland was forced to abolish it.

Formal procedural requirements

Right to appeal, obligation to investigate, etc.
Administrative procedure is regulated by Swedish
law, primarily in the Administrative Procedure Act
and the Administrative Judicial Procedure Act. In
some cases, EC law can also lay down requirements
governing procedure, for example, covering communication, force of law, the right to appeal and
obligation to investigate. This has to be examined
in each individual case.
Non exercise of official authority
information, etc.
The Administrative Procedure Act lays down
requirements regarding the rights of parties to be
informed and on communication. The act also
includes an obligation to state the reasons for the
decision reached. According to EC law, such
requirements can also apply to measures which are
not considered to constitute the exercising of official authority, for example where the authority
informs the general public that a particular product
is dangerous. Such information must be preceded
by an exchange of letters with the foreign producer
or Swedish importer, whose EC rights on free
movement of goods are restricted by the measure
concerned.

The ex officio obligation

Community law must be applied ex officio, i.e. without any party having invoked it. An authority must
thus draw attention to any potential Community
dimension even if the parties have not mentioned it.

Example
The Supreme Administrative Court rejected advice
from the Council for Advance Tax Rulings
A person who had been given staff options in Ericsson
contacted the Council for Advance Tax Rulings to find out
how moving abroad would affect the taxation of the
options. The Council for Advance Tax Rulings gave an
answer without taking EC law into account.
The case was referred to the Supreme Administrative
Court, which established that authorities must take EC
law into account even when the applicant has not specifically drawn attention to the Community law aspect. The
Supreme Administrative Court therefore rejected the decision by the Council for Advance Tax Rulings.
Opportunity to apply to the courts
All measures by a national authority which may
restrict free movement must be appealable against to
a court. Also information which an authority provides to the general public and which may restrict a
companys rights under EC law on free movement
must be able to be reviewed by a court. This is made
clear by the case law of the European Court of Justice.
Different cases brought before the European Court of
Justice illustrate the way in which EC law sets more
stringent requirements than Swedish legislation in
this area. See also the Lassagrd case in section 2.

11

4. Applying the rules of the single market

the same two-step procedure every time
The rules of the single market do not always give
precedence to free movement. A balance must be
reached between the four freedoms and important
public interests such as consumer protection, environmental protection or protection of life and health.
The rules on free movement follow the same fundamental principles even if they are worded in slightly
different ways depending on the freedom concerned.
This section begins with an overview of the fundamental principles of free movement (section 4.1).
The following sections (4.2 to 4.5) look at the application of these principles to the four freedoms.

4.1 The principle of free movement and potential exceptions

In applying the rules on the internal market to a
national measure (act, ordinance, regulation, decision, etc.). The same two-step process always applies:
1. Does the measure constitute a barrier to free
movement (principle of free movement)?
2. If so, can the measure be justified (exception)?
A measure which presents a barrier which cannot
be justified is not permitted.

The principle of free movement

The principle of free movement is a fundamental
principle of Community law. It means that goods,
services, people and capital must be able to circulate within the EU in the same way as in Sweden.
There is a general prohibition on rules which by their
effect, directly or indirectly, actually or potentially, limit
free movement. Such rules are illegal even if they are
incorporated in Swedish legislation see section 2 above.
It is not the purpose of the rule or measure posing a barrier which determines whether or not it
contravenes the EC Treaty, but the effect that it has.
If a proposed rule or measure potential or actual
can lead to access to the market being hampered
or prevented, an investigation must be carried out
into whether or not it conflicts with EC law.
The principle of free movement incorporates a prohibition on discrimination and a prohibition on restrictions.

12

Prohibition on discrimination
The prohibition on discrimination means that foreign and Swedish goods, services, companies and
individuals must be treated equally. Requirements,
for example may not be imposed on products from
other EU countries which are not imposed on
equivalent domestic products.
The prohibition also encompasses hidden discrimination, what is known as indirect discrimination. One example of this would be where the
requirements for granting a licence are the same for
operators from Sweden and other EU Member
States, but in practice the time taken to process the
application is longer for companies or individuals
from other EU countries.
Measures which lay down criteria other than
purely nationality can also be discriminatory. These
may, for example, concern language requirements
or unjustified residence requirements.
What is important is that Swedish stakeholders
do not gain an advantage no matter which over
other EU stakeholders . Discrimination against
Swedish stakeholders, what is known as reverse
discrimination, is, however, permitted under EC
law.
Prohibition on restrictions
Measures by public authorities which are not
discriminatory may nevertheless be prohibited.
This concerns measures which in some way hinder
or make it less attractive to exercise the four
freedoms in Sweden. One example is if an authority issues a requirement that lorries in Sweden
must have an impact tested cab. The requirement
in itself is not discriminatory because it applies to
all lorry manufacturers irrespective of nationality.
However, it can make it more difficult for foreign
manufacturers to sell their lorries in Sweden,
especially if the same requirement does not apply
in the country of manufacture. Therefore such a
requirement can constitute a non-discriminatory
restriction. Such a trade restriction may, however,
possibly be objectively justified see below.

The principle of mutual recognition

The prohibition on restrictions also takes into
account the problem of double burdens. This means
that national requirements which are formally
applied in a non-discriminatory manner often hit
foreign goods, services or companies harder
because these have to comply with the requirements
in both the host country (the recipient country) and
their home country. The principle of mutual recognition has been developed for this reason.
The principle is based on legislators and supervisory authorities in Member States trusting each
other and relying on each others judgment. An
authority in the host country is expected to accept
the requirements made of a foreign operator in his
or her home country, without imposing other
requirements. A French cheese which has been
tested and been shown to comply with all the
requirements for marketing in France can thus not
be subjected to additional checks in Sweden. In the
same way, the professional qualifications of a nurse
from Spain are assumed to be sufficient in order to
work as a nurse in Sweden.10

Exceptions to the general rule on free movement

The prohibitions on discrimination and restrictions
are not absolute. There are a number of exceptions
to the general rule of free movement. The exceptions
which can be invoked are found in the EC Treaty
and in the case law of the European Court of Justice.
Before an exception is applied, it is important to
be aware that it is the authority which bears the

burden of proof. In other words, it is the authority

which must be able to show that it was justified in
banning a product, making things more difficult for
a supplier of services or making it less attractive for
a private individual to cross borders.
A measure by a public authority which is carried
out for overriding reasons of public interest/protection may be permitted under EC law, despite
constituting a barrier to free movement.
Applying exceptions correctly requires that the
following criteria are met.
The measure must be justified on objective
grounds and necessary. The authority must be
able to demonstrate that the measure carried out
results in the protection of the public interest. If
there is a choice between various measures to
attain the same objective, it should choose the
means which least restricts free movement.

The measure must also be proportional. In other words

it must be in reasonable proportion to its purpose.

What are the objective grounds?

Several objective grounds or public interests are a
direct consequence of the treaty. These primarily
concern protection of human health, public policy
and public safety. Others are derived from the case
law of the European Court of Justice. Examples of
these include

environmental protection
consumer protection
protection of minors

10 Recognition of professional qualifications is regulated in a separate EC directive, Directive 2005/36/EC, see section 4.4 below.

13

 rules on professional ethics

road safety
protection for employees (the physical environment and terms of employment)

requirements on language skills in particular professional groups

stability of the social insurance system.

For restrictions to be permitted, they must not result
in arbitrary discrimination or a hidden restriction
on free movement between Member States. Protectionism can therefore never be approved.
What is a proportional barrier?
Even if the measure is considered to be necessary
in order to safeguard an overriding protective interest, it must be proportional. If an authority has a
choice between various measures to attain the same
objective, it should choose the means which least
restricts free movement.
One familiar example is a German requirement
that only beer manufactured from barley malt,
hops, yeast and water could be sold under the name
beer. Foreign beers which did not contain these
four ingredients could not be called beer in Germany, which impaired their sales opportunities.
From the German point of view, the requirement
was necessary so that German consumers were not
misled. The European Court of Justice considered,
however, that the same purpose could be achieved
through less restrictive measures, for example by a
clear list of ingredients .11

4.2 Free movement of goods

The rules on free movement of goods are to be
taken into account, for example when the contents
of consumer goods are to be checked, decisions
made about which materials can be used for a particular construction project, or when requirements
are laid down for manufacturing processes. These
rules can be found in several places in the EC
Treaty, including Articles 25, 28, 29, 30 and 90 (see
appendix). What the rules mean is that all measures which restrict the free movement of goods are
prohibited, unless they can be justified on objective
grounds and are proportional.

What measures can be prohibited?

According to the EC Treaty, the Member States are
prohibited from introducing between themselves
restrictions on imported and exported goods. The
ban concerns both fiscal and quantitative restrictions.
Prohibition on fiscal restrictions
Fiscal restrictions primarily refer to customs duties,
taxes and other charges which are only charged on
imported and exported products (prohibition on
discrimination). Even if both domestic and foreign
goods are subject to the same charge (to obtaining a
licence, for example), the charge can be seen as discriminatory if the national products gain some kind
of advantage. This may, for example, concern an
opportunity to defer which is only granted to local
producers.

11 Judgment of the European Court of Justice in Case 178/84 Commission of the European Communities v Federal Republic of Germany.

14

Prohibition on quantitative restrictions

Quantitative restrictions and measures with equivalent effect refer to quotas, and requirements on
size, packaging and contents, among other things.
In its case law, the European Court of Justice has
clarified the meaning of the ban on quantitative
restrictions.
Examples of measures which can affect
imported products are:

a way which is equivalent to a quantitative import

restriction.
In addition to the prohibition of quantitative
import restrictions, the EC Treaty also prohibits all
measures of public authorities which discriminate
against exports.

border formalities
inspections and administrative procedures
sales and marketing prohibitions
technical requirements, in other words require-

When it comes to goods, there are opportunities for

quantitative restrictions in accordance with the exceptions to the main rule on free movement (see page 13).
One example of a trade barrier which could be
justified in terms of protection of human health
and life is the Swedish ban on trichloroethylene.

price regulation
encouraging discrimination

The Swedish prohibition on trichloroethylene is permitted

In Sweden the use of trichloroethylene has been prohibited since 1 January 1996. Trichloroethylene is an organic
compound commercially used as a solvent. Its use
requires an exemption from the Chemicals Inspectorate. A
company which uses trichloroethylene in manufacturing
tools applied for an exemption but was refused by the
Chemicals Inspectorate. The Inspectorates decision was
appealed against in the Administrative Court of Appeal in
Stockholm, which in turn requested a judgment from the
European Court of Justice on whether the Swedish prohibition was compatible with EC law.
The European Court of Justice considered that the
prohibition on trichloroethylene constituted a barrier to
the free movement of goods. However, this trade barrier
was justified on objective grounds because its purpose
was to protect human health and life. The European
Court of Justice referred particularly to the latest medical
research in the field, including studies from the US and
the World Health Organisations International Cancer
Research Agency. According to this research, there was
strong evidence that trichloroethylene is carcinogenic.
Furthermore, the court considered that the Swedish prohibition was proportional because it was associated with
the opportunity for individual and conditional exemptions, which took into account both protection for workers
and the undertakings requirements. The Swedish prohibition could therefore be justified.14

ments on the composition, labelling, size, packaging, naming of goods or requirements on tests
and controls of such requirements

Example
The Swedish ban on alcohol advertising
contravened EC law
One example of rules which at first glance do not appear to
affect trade is the Swedish ban on advertising alcohol. The
European Court of Justice, however, considered that it contravened EC law because the prohibition risked hitting the
sale of goods from other Member States especially hard.
This, according to the court, was because the consumption
of alcohol was linked to traditional social practices and to
local habits and customs. According to the European Court
of Justice, a prohibition on advertising was liable to impede
access to the market by products from other Member States
more than it impedes access by domestic products, with
which consumers are instantly more familiar12. The Market
Court, which reached a judgment in the final instance on
this matter, therefore considered that the Swedish prohibition contravened EC law13. The Swedish law was amended
as a result of the judgment.
Common rules which fall within the prohibition
on quantitative restrictions are those which contain
what are known as technical requirements. These
mean that imported products have to be adapted in
order to be able to be sold on the national market.
Because this involves additional costs for producers
or importers, they are considered to hinder trade in

What are the exceptions to the main

rule on free movement?

Example

When it comes to quantitative restrictions, there

are far certain opportunities for exceptions to be

12 Judgment of the European Court of Justice in Case 405/98 Konsumentombudsmannen (KO) v Gourmet International Products AB (GIP), item 21.
13 Judgment of the Market Court in case MD 2003:5 Konsumentombudsmannen (KO) v Gourmet International Products AB (GIP).
14 Judgment of the European Court of Justice in Case 473/98 Kemikalieinspektionen v Toolex Alpha AB.

15

made. These are almost entirely lacking for fiscal

restrictions.

The principle of mutual recognition

regarding goods
Regarding goods, the principle of mutual recognition means that all products which are legally manufactured or placed on the market in a Member
State15 must be able to be sold in all other countries
without having to be adapted.
The principle is also applicable in cases where a
Member State can demonstrate that the criteria for
exemption from the prohibition in the EU Treaty
are met. Let us suppose that a Swedish authority
can demonstrate that in order to protect public
health, it is necessary to lay down special requirements for a particular food product. It may not
contain too high amounts of a hazardous substance
and must undergo tests. Here the testing requirement is a measure which restricts trade, but it could
be justified on health protection grounds.
However, this does not mean that an authority
can require that a food must be tested by a laboratory accredited for the task by the Swedish Board
for Accreditation and Conformity Assessment,
SWEDAC. According to the principle of mutual
recognition, the authority must accept food which
has undergone an equivalent test in another country. A national authority can certainly decide that a
particular level of protection is to be guaranteed,
but can never lay down requirements governing
how this level of protection is to be achieved.
A foreign product manufactured in accordance
with that countrys rules can therefore not be
stopped purely on the grounds that it does not
comply with Swedish technical requirements. In
each individual case, the authorities must determine whether the foreign requirements lead to a
level of protection which is equivalent to that in
Sweden.
The principle of mutual recognition applies on
the basis that EC law takes precedence, and therefore does not need to be written into Swedish legislation. However, in practice the European Commission requires that a clause on mutual recognition is
introduced directly in the national regulation. This
keeps those operating in the market informed and
facilitates the application of the regulations.

Mutual Recognition Regulation

In order to ensure that the principle of mutual recognition works better in practice, the principal has
recently been supplemented by an EC regulation16.
This regulation lays down administrative procedures which authorities must follow if they decide
to prohibit the release of a particular product on the
market which has been lawfully marketed in
another Member State, i.e. decisions where the principle of mutual recognition is relevant. Authorities
are instructed to ensure that such prohibition decisions are justified in accordance with criteria which
are acceptable under EC law. Authorities must also
inform manufacturers and other affected operators
of such decisions within certain time frames. Furthermore, authorities have an obligation to inform
the National Board of Trade of these decisions17. If
an authority neglects to inform an operator concerned at the right time, a fall-back rule is applied
and the product in question is automatically considered to be lawfully marketed in the country.
According to the Regulation, Member States must
also establish contact points to which operators, etc.
can turn in order to find out which technical rules
apply in the country in question. The Government
has appointed the National Board of Trade to act as
such a contact point. The Mutual Recognition Regulation started to be applied on 13 May 2009.

Mutual recognition clause

The requirements of this Regulation do not
apply to products
either lawfully manufactured and/or marketed
in another EU Member State or in Turkey
or lawfully manufactured in an EFTA State
that is a contracting party to the Agreement on
the European Economic Area
However, the provisions will apply in cases
where [the authority] has proof that the product
in question does not provide a level of protection equivalent to that sought by this Regulation.
Another way of ensuring that a regulation is compatible with EC law is to introduce an exception for products from other EU/EEA countries. One example of
such an exception is the National Food Administrations amendments to its regulations on cider.

15 As well as the EUs 27 Member States, the internal market for products also includes the three EFTA countries which signed the EEA Agreement, plus Turkey.
16 Regulation (EC) No 764/2008 of 9 July 2008 laying down procedures relating to the application of certain national technical rules to products lawfully
marketed in another Member State and repealing Decision No 3052/95/EC
17 See Sections 5-7 of Ordinance (2009:52) on a contact point and information procedures regarding the application of mutual recognition of technical rules for
products, and the National Board of Trades regulations KFS 2009:1.

16

Example
The National Food Administrations regulations
on cider do not apply to EU cider
The National Food Administration adopted new regulations
on cider in 2005. These define what can be described as
cider. The regulations refer, among other things, to containing fruit juice, permitted food additives and fermentation.
In order to avoid a regulation which contravened EC
law, the National Food Administration introduced an
exception clause, according to which the regulations do not
apply to products lawfully produced or marketed in
another Member State in the European Union or in Turkey, or lawfully produced in another country that is a contracting party to the Agreement on the European Economic
Area (the EEA Agreement).18

Notification obligation for technical

regulations, Directive 98/34/EC
In order to combat new national statutes which create
trade barriers being adopted in Member States, a
European consultation procedure has been put in
place for technical regulations19. The system means that
authorities are obliged to notify the Commission of
any draft technical regulation which contains any type
of requirement governing a products characteristics.
The European Commission is notified via the
National Board of Trade, which is the contact point
for the procedure in Sweden. After the Commission
has translated the proposal, it is sent out to all the
Member States which have three months to submit
opinions. The proposal may not be adopted until
this three-month period has expired. If the Commission or a Member State has serious comments
to make on the statute in question, the period is
extended to six months. The notifying country
must inform the Commission of the measures it
intends to take as a result of the comments.
However, there are several exceptions to this
notification obligation. The most important exception is that there is no need to provide notification
of national measures which are solely transposing a
binding Community act.
The consultation procedure, which was created
in 1983, has led to a number of national regulations
being adapted before being adopted. This is
because other Member States or the Commission
pointed out that they risked creating trade barriers
in contravention of EC law.
18
19
20
21
22

According to a judgment of the European Court of

Justice20, failure to notify a proposal will have as result
that those parts of the national regulation which constitute technical regulations lacking legal effect. They
can thereby not be applied against individuals in a
national court. There are several examples where
Swedish courts have explained that technical rules
could not be applied because notification was not
provided in accordance with Directive 98/34/EC.

Example
Amendments to the Swedish Lotteries Act should
have been notified to the European Commission
An amendment to the Lotteries Act in 1996 prohibited a
certain type of gaming machine. With the support of the
amended act, the police seized and confiscated several
machines and the organisers were charged with organising unlawful games of chance.
However, notification had not been given of the
amendments in line with the procedure in Directive
98/34/EC. Therefore several Courts of Appeal overturned the polices seizure and acquitted the organisers.
In one case a decision of the Court of Appeal was
appealed against to the Supreme Court, which requested
a preliminary ruling from The European Court of Justice.
As a result of the judgment of the European Court of
Justice21, the Supreme Court considered that the amended
provisions cannot be applied against an individual22
because they were not notified in accordance with the
provisions of the Directive. The charge of organising
unlawful games of chance and breach of the Lotteries
Act was therefore overruled.

LIVSFS 2005:11.
Directive 98/34/EC laying down a procedure for the provision of information in the field of technical standards and regulations and regulations on information society services.
Judgment of the European Court of Justice in Case 194/94 CIA Security International SA v Signalson SA and Securitel SPRL.
Judgment of the European Court of Justice in Case 267/03 Lindberg.
Judgment of the Supreme Court of 20 April 2006 in Case no. B 4461-00.

17

4.3 Free movement of services

The EC provisions on the free movement of services must be taken into account, for example, in
cases in which one EU country requires a permit
for service providers from other EU countries,
where the marketing of services is regulated or
where requirements are made regarding the qualifications of foreign providers of services.
Provisions can be found in several places in the
EC Treaty, including Articles 46, 49 and 55 (see appendix). They mean that all restrictions on the free movement of services are prohibited, unless they can be
justified on objective grounds and are proportional.

What measures can be prohibited?

As shown above (page 12) the principle of free
movement encompasses a prohibition on discrimination and a prohibition on restrictions23. An
authority, for example, may not

require that a foreign provider of services is

established or regulated in Sweden

limit the right of a foreign provider of services to

market services in Sweden

require the professional qualifications of the host

country for the provision of cross-border services

require a particular legal structure (e.g. limited

liability company) for a provider of services

limit a foreign service providers right to run

auxiliary operations.

23 See European Court of Justice judgment in Case 76/90 Sger.

18

Example
Limited opportunities for new checks on scales
SP Technical Research Institute of Sweden (a Swedish
accredited body) is not allowed to carry out periodic reverification of scales in Denmark. The scales, which are
intended for weighing waste, are mounted on vehicles.
Re-verification may only be carried out by a body
authorised by the Danish Accreditation and Metrology
Fund. Authorisation can only be granted to companies
operating in Denmark. The requirement is the subject of
an investigation into whether this trade barrier can be
justified on objective grounds.

What are the exceptions to the main

rule on free movement?
In the area of services too, in some exceptional
cases authorities may cite objective reasons of public
protection to justify restrictions on free movement.
However, the authority must be able to demonstrate that the measure restricting trade is necessary
for interests of protection and that it is proportional.

Example
Can a requirement for a particular legal structure
be justified on consumer protection grounds?
A Swedish company wanted to run its funeral business,
including legal advice, in the form of an economic association in Denmark. Denmark, however, issued the requirement that only lawyers in a law firm were permitted to
provide legal advice. The rules were justified on consumer

protection grounds. Consumers must be able to rely on

the advice given. It was said that quality was guaranteed
by running the business in the form of a law firm. Denmark has now amended this requirement in accordance
with EC law.

The principle of mutual recognition

regarding services
The principle of mutual recognition also applies to
services. In order to particularly facilitate the temporary provision of services, the court in several
decisions has taken into account the fact that guest
service companies already possess the necessary
qualifications from their home country.
Thus it is not automatically permitted to
demand additional checks, approval, etc for guest
companies over and above the requirements
already in place. One example from case law concerns Belgian authorities who were unable to
demand that a guest service company, in addition
to the identity documents the company had from
its home country, should also apply for an identity
card issued by the Belgian Ministry of the Interior.24

Example
Mutual recognition of qualifications for
German scaffolders
A German scaffolder worked temporarily in Ireland. The
Irish authority required supplementary theoretical further
education and two years of work experience in Ireland.
Otherwise the scaffolder was not allowed to build scaffolding more than 7 metres high. The Irish authorities did
not evaluate the German qualifications which the scaffolder already possessed.
When it was made clear to the Irish authority that it
was obliged to evaluate the training which the scaffolder
had undergone in Germany, it judged that the German
requirements far exceeded the requirements in Ireland.
The German scaffolders were therefore permitted to work
in Ireland. In order to avoid similar trade barriers in the
future, the responsible Irish authority has established a
database of the qualification requirements in different
countries.

Freedom of establishment
The EC Treaty also prohibits national requirements
which restrict the opportunities of companies (including people who are sole traders) to freely establish a
business in a Member State other than their own.

This prohibition means that the Member States

may not have rules which discriminate against citizens and companies from other Member States, or
rules which otherwise make establishment more
difficult or less attractive.
Examples of restrictions limiting freedom of
establishment are:

requiring a particular legal structure to gain the

right to run a business

discriminatory economic needs testing

Example
Needs testing for a furniture company restricts
freedom of establishment
The right of a furniture company to set up in Germany
was dependent upon the company being able to demonstrate that there is economic scope or demand on the local
market for another furniture company. As such provisions make it more difficult for foreign furniture companies to set up business in Germany, they contravene freedom of establishment. This, as well as other barriers,
formed the basis of the Services Directive (Directive
2006/123/EC, Article 14 no 5).
Distinction between establishment and
temporary service provision
Depending on whether a company intends to become
established in another EU country or only operate
there on a temporary basis, the Member States have
varying opportunities to intervene. The authorities in
the host country do not have the right to set equally
high requirements for those offering services on a
temporary basis as for those intending to establish a
business. The factors which authorities must take into
account in assessing whether a company is established is how long and how often the company operates in a particular Member State. Consideration must
also be given to whether the company has an infrastructure in the host country which makes it possible
to contact potential customers there.

The Services Directive

In December 2006 the Directive of the European
Parliament and of the Council on services in the
internal market was adopted. It must be transposed
in all Member States no later than 28 December
2009. In Sweden a separate horizontal act on services in the internal market is being drafted as well

24 See Judgment of the European Court of Justice in Case 355/98 Commission of the European Communities v the Kingdom of Belgium.

19

as a number of sector-specific rules to transpose

the Directive. The purpose of the Directive is to
facilitate the free movement of services.
The most important elements in the Services
Directive include:
A principle of freedom to provide services.
Permanent exceptions to the main principle and
opportunities to intervene in individual exceptional cases.

Contact points to facilitate entry into the market
(see below on the contact point in Sweden).
An electronic system for administrative cooperation in the Member States, primarily to facilitate
temporary provision of services (see below on the
Internal Market Information System).

Contact point for the Services Directive

In order to facilitate cross-border trade in services,
the Member States are to set up national contact
points. The contact point is to enable service providers to obtain information on the requirements laid
down for entry into the market, the contact details of
competent authorities and information on access to
justice in the event of disputes. Via the contact point
the service provider must also be able to complete
all the procedures and formalities required for entry
and for performing the service. Information on permits, etc must be easily accessible and able to be
accessed remotely. In the same way, procedures
and formalities for permits must be able to be completed easily, remotely and electronically.
The Services Directive also gives the recipients
of services the right to information. This concerns
information on requirements laid down for access to
and performance of services, access to justice in the
event of disputes and on where they can obtain
practical help.
In Sweden the Government has decided that initially there is to be a Government-run contact point.
Service providers and service recipients will be able
to access its services. The contact point will consist
of an interactive Internet portal provided by the
Swedish Agency for Economic and Regional
Growth and a supplementary manual help desk provided by the National Board of Trade.
In a new Swedish act on services the competent
authorities are ordered to communicate with service providers via the contact point where these have turned to it.

20

Increased requirements that national authorities,

when intervening against service companies from

another EU or EEA country, justify the reasons for
their intervention. For example, authorities in the
Member States, if the intervention concerns the
safety of the service, are to follow an intervention
procedure. This procedure involves administrative
cooperation with the authorities in the country in
which the guest service company is established
and an obligation to inform the Commission.

The Directive also includes obligations for the

service company to provide information about

the content of its services and the requirements
they are subject to in the country in which the
company is established.

Co-operation between national authorities within

the EU the IMI
The Internal Market Information System (IMI) has
been developed to facilitate communication between
the administrations of EU countries. It is an electronic tool and a system for exchanging information
when cooperating on the application of legislation
for the internal market. IMI is designed to overcome
concrete barriers such as differences in administrative and work cultures, different languages and the
fact that people do not always know who they
should turn to in other Member States. Its purpose is
to reduce the administrative burden and make dayto-day cooperation between Member States more
efficient. In each Member State there is a national
IMI coordinator. The National Board of Trade is the
national coordinator for IMI in Sweden.
At the moment IMI is being used to support the
mutual assistance required by the Directive on the
recognition of professional qualifications (2005/36/
EC). From December 2009 onwards, IMI will also
be used to support administrative cooperation under
the Services Directive. As far as Sweden is concerned, 13 authorities are currently registered as
competent authorities. Because IMI is a tool with a
general structure, it can be used for different areas
of legislation within the internal market. Therefore the
idea is that the system will be able to be developed
further such that in the future it can also be used in
other legislative areas.

4.4 Free movement of persons

All citizens of the European Union and people with
a residence permit in an EU Member State are entitled to live, study and work in any other country
within the EU/EEA. The provisions of the free
movement of persons are particularly provided in
Articles 18 and 39 of the EC Treaty. For entrepreneurs, the rules on free movement of services and
right of establishment apply see section 4.3 above.
Secondary legislation contains more detailed
provisions, for example on the rights of family
members, pensioners and students.

What measures can be prohibited?

The right to live in another Member State may not
be restricted by particular rules on moving or residence. Nor may Member States apply separate
working conditions or separate social and tax conditions for immigrant workers. These workers must
have the same rights as citizens in the host country.
Both the Study Support Act and tax legislation
previously contained unlawful Swedish provisions.

Example
The Study Support Act contravened the free
movement of persons
One example of a barrier to the free movement of persons
was the Swedish Study Support Act, which was judged by
the Supreme Administrative Court to conflict with EC
rules on free movement of persons.
A woman was forced to pay off her study loan because
she was resident abroad. If she had lived in Sweden, a ceiling would have applied which would have meant she did
not have to pay because her annual earnings did not reach
the amount laid down. The Supreme Administrative Court
found that the relevant provision in the Swedish Study Support Act could have a hindering or deterrent effect on people wishing to exercise their rights to free movement.25

Example
The tax rules contravened free movement of workers
A German citizen who worked and lived in Sweden for a
shorter period than six months, according to Swedish tax
rules was not entitled to the Swedish personal allowance.
Nor had he any taxable income in Germany. Because
workers who were resident in Sweden for longer than six
months were granted the personal allowance, the Swedish
rules were in breach of Article 39 of the EC Treaty.26

What are the exceptions to the main rule

on free movement?
The EC Treaty gives the Member States several
opportunities to prevent citizens from other countries from travelling to or becoming resident in the
country. The reasons for this may be considerations
of public policy, safety and health. One example is
the Greek citizen who was expelled from Germany
(see below).
In the same way as for free movement of goods,
services and capital, the Member States are able to
limit the free movement of persons on the basis of
an overriding reason of public interest. Such a measure must however be objective and proportional.

Example
Exceptions to free movement of persons
A Greek citizen was expelled from Germany, where he
was resident, on the grounds of public policy and security.
The reason was that he was a drug abuser, had committed several drug related and violent crimes in Germany
and had received a custodial sentence.
The European Court of Justice stated that expelling
the Greek citizen was compatible with EC law provided
that the German authorities did not only state that there
were previous criminal convictions against him but also
made an overall assessment of his behaviour. Furthermore, considerations of public policy and safety must be
weighed up against the fact that his family were living in
Germany.27

Recognition of qualifications and

professional expertise
One barrier to free movement can be the fact that
an occupation is regulated and some form of
authorisation or licence is required. Occupations
which are often regulated are doctors and lawyers.
According to the rules in secondary legislation on
the recognition of examinations and professional
expertise, a person who is qualified to practise an
occupation in his or her home country must in
principle also be able to practise it in other Member
States. In some cases the host country may however
demand supplementary training.
Here too the European Court of Justice has given
its opinion in several judgments. See the example
below on the doctor from Belgium who was not
allowed to work in France.

25 Judgment of the Supreme Administrative Court in R 2002 ref. 32.

26 Judgment of the European Court of Justice in Case C-169/03 Florian Wallentin v Riksskatteverket.
27 Judgment of the European Court of Justice in Case C-482/01 Georgia Orfanopoulos and Others v Land Baden-Wrttemberg.

21

Example
Recognition of medical diploma
A doctor started her training in Algeria
and then moved to Belgium. The Belgian authorities allowed her to receive
credit for the Algerian training and she
completed her medical training in Belgium. The doctor then moved to France
but was not allowed to work as a doctor there. The reason given was that she had completed some of her training in a third country. However, the European Court of
Justice ruled that the French authorities could not deny
her work as a doctor in France because she had proof of
education from an EU country.28

Coordinating social security benefits

To prevent a person who moves from one Member
State to another losing his or her social benefits,
there are rules on coordinating the social security
systems of Member States. The basic principle is
that people are covered by the Social Security system in the country in which they work.
In addition there are other general principles
such as the aggregation principle and the exportability principle. The aggregation principle means
that the social security benefits earned in one
Member State must be taken into account when
moving to another Member State. The exportability
principle means that benefits from one Member
State must be able to be paid out in another.

4.5 Free movement of capital

Questions of investments in other countries and
cross-border financial transactions are covered by
the rules on free movement of capital. The principle
of the free movement of capital is laid down in Article 56 of the Treaty.

What measures can be prohibited?

Free movement of capital means that all restrictions
on capital movements and payments between EU
Member States and between these and third countries are prohibited.
Examples of measures which may be forbidden are:
an establishment requirement when a foreign
company or private individual intends to invest
in a country

legislation which retains a golden share (shares
with preferential rights) for the state in conjunction with privatisation
requirements that mortgages in property are
made in the national currency
restrictions on share ownership based on nationality.

What are the exceptions to the main rule

on free movement?
In certain cases national legislation can be approved
despite it having an effect which hinders trade. In
such cases the restriction must be justified on the
basis of overriding reasons of public interest and no
other, less restrictive, measures must be possible. In
the case law of the European Court of Justice, ensuring the coherency of the national taxation system
and effective fiscal supervision have been considered to be expressions of overriding reasons of public interest which can justify acceptable exceptions.
However, such exceptions have only been accepted
by the European Court of Justice in a few cases.

28 Judgment of the European Court of Justice in Case C-110/01 Malika Tennah-Dunez v Conseil national de lordre des mdecins.

22

4.6 Checklist
The National Board of Trade has set out the series
of questions you should ask yourself in determining

Checklist
Is a measure by a public
authority compatible with
EC law?
NO

whether a measure is compatible with EC law in the

checklist below. We have staff on hand with extensive expertise on EC law available to provide help
and support. We look forward to hearing from you.

Is there a harmonisation
directive covering this
area?

YES
Is the measure
compatible with
the directive?

YES*

NO

Is the measure
discriminatory?

NO

YES

Does the measure

restrict free movement?

NO

YES
Can the measure
be justified on
objective grounds?

YES

NO

Is the measure
proportional?

YES

NO

The measure is
compatible with
EC law

The measure is
not compatible
with EC law

* Issues not exhaustively regulated in the directive must comply with the EC Treaty

23

Appendix: The provisions of the EC Treaty

General principles of EC law

Article 10 EC: duty of loyalty

Article 12 EC: principle of non-discrimination

Free movement of goods

Article 25 EC: prohibition on customs duties and charges with equivalent effect
Article 28 EC: prohibition on import restrictions
Article 29 EC: prohibition on export restrictions
Article 30 EC: exceptions to the prohibitions on import and export restrictions
Article 90 EC: prohibition on discriminatory taxes and charges on goods

Free movement of services

Article 43 EC: prohibition on restrictions on the freedom of establishment

Article 49 EC: prohibition on restrictions on freedom to provide cross-border services
Articles 45, 46 and 55: exceptions to the prohibitions regarding freedom of establishment and free movement of services

Free movement of persons

Article 18 EC: Union citizenship

Article 39 EC: prohibition on restrictions relating to freedom of movement for workers

Free movement of capital

Article 56 EC: prohibition on restrictions relating to free movement of capital

24

2009 06

Box 6803, S-113 86 Stockholm, Sweden

Phone +46 8 690 48 00 Fax +46 8 690 48 20
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