Addressing market distortions created by failure to implement EU law – what can a Member State do?

Christopher Brown

On 2 September, the Environment, Food and Rural Affairs Select Committee published a report into the implementation of the Welfare of Laying Hens Directive. What is so interesting about that, you may ask. The answer is that it discusses, albeit briefly, an important issue in EU law: what happens when one Member State (here, the UK) implements a directive in relation to a particular product on time but certain other Member States do not, with the effect that some products of that type imported into the UK are not compliant with the directive? Can the UK take unilateral action against those products, banning their import until the Member State of provenance takes the necessary action? Or is it tough luck, with the compliant Member State having to rely on the Commission to commence infraction proceedings against the offending Member State(s)?

The issue is particularly important in relation to the Welfare of Laying Hens Directive.  Under the directive, which has to be fully implemented by 1 January 2012, the use of conventional ‘battery’ cages will be prohibited in the EU, as will the marketing of eggs from hens kept in them. In essence, hens must be given more space in which to live (although not much more). This increases producers’ cost base. If producers in some Member States are able to continue selling eggs into the UK from battery hens, because their Member States have not taken the necessary measures to ban them, UK producers will be at a disadvantage. One can see why UK producers, who have spent a lot of money getting ready for the change of law, are unhappy.

The Government shares such concerns. It told the Select Committee that:

“The UK government wishes to protect compliant UK producers from any competitive disadvantage of illegal production in other Member States or indeed the UK. Such behaviour would affect economic stability and fairness within the sector. Simply relying on infraction proceedings against non-compliant Member States will not be enough to deal with the commercially negative impact that the non-compliance would cause. Additional measures will need to be put in place to prevent market disturbance.”

Among the options under consideration by the Government was “unilateral action”, although “the Minister was not prepared to discuss what that action might be or whether the government would pursue a unilateral UK ban on non-compliant eggs” (see para 56 of the report).

The Select Committee recommends that Defra “investigate the potential for putting in place a UK ban”. It also criticised the Commission’s rather laissez-faire approach to implementation thus far by Member States. But would a unilateral ban be lawful as a matter of EU law?

Whilst the UK might try to justify such a ban on the basis of Article 36 TFEU (which, among other things, allows Member States to impose restrictions on imports in the name of the health of animals), the Court of Justice has said that this justification cannot be relied on where the EU has adopted harmonisation measures (as it has here). In a case called Hedley-Lomas (C-5/94), the Court ruled that the UK had breached the Treaty rules by refusing to issue licences for the live export of sheep to Spain due to concerns that Spain had not properly implemented a directive on the stunning of animals prior to slaughter. It rejected the UK’s argument that the directive did not exhaustively regulate the area concerned because no compliance measures were included. Instead, it said that “the Member States must rely on trust in each other to carry out inspections on their respective territories” (para 19).

The UK might, however, try to distinguish the Hedley Lomas case on the basis that, in that case, the directive had actually been transposed into national law in Spain; the UK’s concern was that the Spanish authorities were not actively policing the law. Here, by contrast, the UK will be able to point to straightforward non-implementation of the directive. It is not, therefore, simply a case of “trusting” the other Member States.

Attractive as that argument is, the Government would undoubtedly be taking a risk of infraction proceedings, as things currently stand, if it were to take the law into its own hands. There is also a risk that foreign producers who suffer loss as a result of not being able to access the UK market during such a ban could bring actions against the UK for so-called Francovich (C-6/90 & C-9/90) damages (although they would have to show that the UK’s breach of EU law was flagrant).

It will certainly be an interesting test case if the UK were to impose an import ban; the Government might think it is worth the risk – the Commission may not wish to expend resources and political capital fighting the UK rather than concentrating its efforts on the recalcitrant Member States. We will have to wait and see.

One thought on “Addressing market distortions created by failure to implement EU law – what can a Member State do?

  1. Interesting stuff! It’s difficult to imagine a Francovich damages action succeeding, though, isn’t it?

    It seems to me the UK would have a decent argument that what it was doing was “in good faith” (and therefore not a sufficiently serious breach of EU law to found a right to damages), not only because it was actually upholding the Directive but because that Directive isn’t merely harmonising, but is a welfare measure. It seems odd to claim that in spite of the Directive, traders have a right, enforceable by damages, to sell battery eggs.

    If I were the government, I’d be tempted to think unilateral action might be worth taking here. Even a ban could work, given the reference to animal health in a36. But short of that, this might be an opportunity to do a “British eggs meet the best EU animal welfare standards” type of campaign – and perhaps get away with it.

    If they’re smart, the British egg lobby, or better still the animal welfare lobby, will simply start such a campaign themselves without government involvement. If the campaign was 100% accurate and fair (making clear which other EU eggs meet the standard) I think it could be very hard to argue that the government has a positive obligation enforceable by damages to prohibit such a campaign.

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