6.2 EU Law – the ECJ and primacy over national laws

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In this article, Martin Howe QC explains the basics of EU law:

  • how, unlike normal international treaties, it penetrates into the domestic courts and internal legal systems of Member States;
  • how it has ‘primacy’ and claims to override all national laws including fundamental and constitutional laws;
  • how the European Court of Justice has set about expanding the scope of its own powers and the scope of EU law by creative and politically driven ‘interpretation’ of the treaties and of EU laws.

The basics – EU law and national law

What is the key feature that makes the EU treaties different in kind from every other international Treaty to which this country belongs,  and quite possibly makes them unique in the world?  To this question,  a lawyer can give only one answer:  the key feature is EU law, formerly known as Community law – is a system of law that penetrates inside the member states and takes precedence over national laws in the domestic courts of the Member States.

Many treaties bind states with rules at the international or external level  –  but it is this internal penetration which marks out the European treaties (formerly the Treaty of Rome) as different from other treaties.  In fact, this internal penetration is a classic characteristic, not of international treaties, but of the internal constitutional arrangements of federal states.  And like a federal state,  the European Union has its own supreme court,  the European Court of Justice,  which has the ultimate power of decision over both the content and the scope of EU law.

This court is not a neutral or impartial interpreter of the rules.  If we look back over the nearly 60 years since the Treaty of Rome was signed in 1957, it allows us to see clearly how profoundly that original Treaty has been changed by the actions of the ECJ.  I am not speaking here of the many changes to its text which have been made by successive amending treaties such as the Single European Act,  Maastricht or Lisbon.  I am referring to the profound changes in the effective content of the Treaty which have occurred as a result of a process of so-called “interpretation” of the Treaty by the Court.

The key point that Treaty articles have a direct effect inside the Member States is nowhere stated in the Treaty,  but was decided by the European Court in the Van Gend en Loos case in 1963.  It said:

“The Treaty is  more  than an  agreement which merely creates mutual obligations between the contracting states.  This view is confirmed by  the  preamble  to the  Treaty  which refers not only to governments but to peoples. …  the Community constitutes a new legal order in international law for whose benefit the states  have  limited  their  sovereign rights,  albeit  within limited fields, and the subjects of which comprise not only the Member States but also  their  nationals.”

Shortly afterward, in 1964 in the  Costa  v.  ENEL case,  the Court ruled that Community law over-rides conflicting national laws:

“The transfer by the States from their domestic legal system to the Community legal system of rights and obligations arising under the Treaty carries with it a permanent limitation of their sovereign rights … “

By 1970, in the Internationale Handelsgesellschaft case, the European Court had declared its view that Community law should take precedence even over the constitutional laws of the Member States  — including basic entrenched laws guaranteeing fundamental rights.

When we joined the EEC in 1973

These basic principles were well established in Community law before the UK joined the EEC at the beginning of 1973.  The European Communities Act 1972 was passed through Parliament in order to allow the UK to join, and two of its key provisions gave effect within the United Kingdom to the so-called “direct effect” of Community law, and the doctrine that that law has primacy over other laws.

Section 2(1) of the 1972 Act states that rights arising from the EU treaties and under the system of law under the treaties are to be enforced and followed in UK courts:

“2 (1)  All such rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Treaties, and all such remedies and procedures from time to time provided for by or under the Treaties, as in accordance with the Treaties are without further enactment to be given legal effect or used in the United Kingdom shall be recognised and available in law, and be enforced, allowed and followed accordingly;  …”

Another and even more fundamental provision is contained in subsection 2(4), and this reads:

“(4) … any enactment passed or to be passed, other than one contained in this part of this Act, shall be construed and have effect subject to the foregoing provisions of this section;”

The implications of these provisions in the 1972 Act and the doctrine of primacy of Community law do not seem to have been fully understood or appreciated by many politicians until they were graphically illustrated in the Factortame case

That case was prompted by Spanish fishing interests who registered a UK off-the-shelf company called ‘Factortame Ltd’ and used that nominally British company to register fishing vessels under the British flag so they could then fish against the UK quota under the Common Fisheries Policy.  Parliament passed the Merchant Shipping Act 1988 which placed restrictions on the registration of vessels under the British flag when the companies owning them were not actually British owned or controlled.

Factortame challenged these parts of the Merchant Shipping Act 1988 as incompatible with Community law and asked for an interim order suspending the Act. The case went to the UK’s highest court, the House of Lords, where Lord Bridge said that the effect of section 2(4) of the 1972 Act (quoted above) was that later Act of Parliament such as the 1988 Act would be disapplied if they were inconsistent with rights under Community law:  R (Factortame) v Sec of State for Transport [1990] AC 85 at 140B-D. The Lords, however, were doubtful whether that gave UK courts the power to suspend Acts of Parliament on an interim basis and referred the question of whether they should have such a power as a matter of Community law to the ECJ, who ruled (Case 213/89; [1990] 3 CMLR 1 at 30):

“a national court which,  in a case before it concerning Community law,  considers that the sole obstacle which precludes it from granting interim relief is a rule of national law must set aside that rule.”

The effect of the doctrine of primacy of Community law as illustrated by the Factortame case was explained in graphic terms by Mr Justice Hoffmann in Stoke on Trent v. B & Q [1990] 3 CMLR 31 at  34 in the following terms:

“The  Treaty  of  Rome is the supreme law of this country, taking precedence over Acts of Parliament.  Our entry into the Community meant that (subject to our  undoubted  but  probably  theoretical right  to  withdraw  from  the  Community  altogether) Parliament surrendered its sovereign right  to  legislate  contrary  to  the Treaty  on  the  matters  of  social and economic policy which it regulated.”

The ECJ further advances its powers

Having secured the basic principles that Community law penetrates inside the legal systems of Member States and takes precedence over all national laws in the courts of the Member States, the ECJ went on to build its powers further after our entry in 1973.

In the 1987 Foto-Frost case, the European Court ruled that national courts had no power to question the validity Community measures and reserved that power exclusively to itself,  even though there was nothing in the Treaty or in general principles of international law which would require states to recognise the validity of acts which are outside the powers conferred by the Treaty.

The EEC was (mistakenly) regarded as just the “common market” by many people in this country and during the 1976 referendum campaign it was presented almost exclusively in those terms.  But the ECJ made it increasingly clear that it regarded a European common market not as an end in itself, but simply a means to a greater end.

The court spelled out its thinking in 1992 in the European Economic Area Agreement Case:

“An international treaty is to be interpreted not only on the basis of its wording, but in the light of its objectives. … The Rome Treaty aims to achieve economic integration leading to the establishment of an internal market and economic and monetary union.  Article 1 of the Single European Act makes it clear that the objective of all the Community treaties is to contribute together to making concrete progress towards European unity. It follows from the foregoing that the provisions of the Rome Treaty on free movement and competition,  far from being an end in themselves,  are only means for attaining those objectives. … As the Court of Justice has consistently held, the Community treaties established a new legal order for the benefit of which the States have limited their sovereign rights, in ever wider fields, and the subjects of which comprise not only the member-States but also their nationals.” (emphasis added)

In the last sentence,  the important change in wording from the 1963 Van Gend case should be noted.  By 1992,  “limited fields” had become “ever wider fields”,  reflecting the Court’s endorsement of the doctrine that there can only ever be a one-way transfer of powers from the Member States to the centre.

The Court has also expanded the powers of the Community/EU over the external relations of the Member States.  It developed a doctrine of implied external competence – that the Community had the power to make external agreements relating to fields over which it had acquired internal competence.  Furthermore,  under this doctrine,  the Member States lose their own powers to conclude international agreements relating to areas of policy over which the Community (now EU) has attained an internal competence.

Whilst the ECJ has liberalised the internal market,  it has often used its growing powers over the external trade of the Member States in a way which inhibits the liberalisation of trade across the external borders of the EU.

In the 1998 Silhouette case, it interpreted the Trade Marks Directive as requiring Member States to prohibit so-called “parallel imports” of genuine trade marked goods from non-member states when the proprietor of the mark has not consented to the marketing of his goods within the Community.   This enables trade mark proprietors to prevent the importation of their own genuine goods into the EU from other countries where they have placed them on the market (e.g. Levi jeans in the USA), so enabling them to charge consumers within the EU a higher price than in other markets.

Similarly,  in the field of regulations and technical standards,  the ECJ has ruled in the 1999 Agrochemicals case that the UK is prohibited by EU law from licensing “parallel imports” from non-EU countries,  even though the products are identical to agrochemicals licensed inside the EU and made by the same manufacturer.

The rationale of this “fortress Europe” mentality is baffling and is particularly painful for a global trading nation such as the United Kingdom.

ECJ overcomes national vetoes by creative “interpretation”

Where the onward progress of European integration has been blocked by national vetoes,  the Court has been willing to re-interpret the Treaty to make up for the lack of progress on the legislative front.  In a whole series of tax cases,  the Court invoked the general clauses of the Treaty on non-discrimination to strike down national tax legislation.    An important example is the 2002 Lankhorst-Hohorst case on tax credits on payments by a subsidiary to its parent in another member state.  What is significant is that the Court departed from its earlier cases which had decided that such arrangements were compatible with the Treaty.

The Treaty had not changed,  but its meaning,  according to the Court, had.  Thus,  the effective harmonisation of direct taxes proceeds step by step at the hands of the Court despite the UK’s theoretical veto on this area under the Treaty.  The problem now is that ECJ’s case law in this area makes it very difficult for national legislation effectively to tax the activities of multi-national companies who use tax avoidance structures set up, for example, under Luxembourg law.

In a 2005 environmental protection case,  the Court decided that the EC could, under its first-pillar supranational law-making powers,  specify and impose criminal offences and penalties in the very wide fields where the EC had an existing competence.  The remarkable thing about this decision is that,  if it is right,  the EEC had these powers over criminal law from the day the Treaty of Rome was signed on 25 March 1957.

Yet if this had been suggested to those who signed the Treaty in 1957,  or to those who signed Britain’s accession treaty in 1972,  they would have laughed.

The ongoing process of expansion of powers through ‘interpretation’

By looking back over time, we can see how powerful has been the effect of the rolling process of the ECJ’s re-interpretation of the European Treaties, coupled with the doctrines of direct effect and primacy.

In more recent years, the ECJ has further extended the reach and scope of the EU law and of its own powers.  Its most powerful new weapon in doing so is now the Charter of Fundamental Rights of the European Union.

Next Chapter:

7. Brexit in Different Sectors