Evidencing the Effectiveness of Health Interventions in Free Movement Cases

Angus MacCulloch, Lancaster University Law School

Two judgments on Articles 34/36 TFEU (concerning the free movement of goods) handed down by separate courts in the same week give stark examples of the importance of having a good evidence base before a State seeks to justify a public health intervention in the market. The first example was the judgment of the CJEU in Case C-148/15 Deutsche Parkinson Vereinigung, a preliminary reference considering the compatibility of a German measure setting fixed prices for prescription-only medicines. The second being the judgment of the Inner House of the Court of Session in Scotland in Scotch Whisky Assoc v LA [2016] CSIH 77, where the court upheld the Lord Ordinary’s finding that the Scottish Government’s plans to introduce Minimum Unit Pricing (MUP) for alcohol were not contrary to Art 34 (following the CJEU reference in Case C-333/14). Both measures involved health justifications for pricing restriction measures that fell foul of Art 34, but the results were very different.

Fixed Price Prescriptions

The German measure in DPV fixed the prices of all prescription-only medicines in Germany; restricting the ability of pharmacists to provide products at a discounted price. DPV, a self-help organisation for Parkinson’s disease sufferers, had set up an arrangement with a Dutch mail order pharmacy DocMorris (yes, that DocMorris) to put in place a bonus system for its members. That bonus system was challenged. The scheme was found to infringe Art 34 TFEU as mail-order pharmacies are limited in the services they can offer, and the ability to price competitively is the most likely means they have to access the German market directly [24]. The Court then turned to the argument that the system of fixed prices was justified in order to ‘ensure a safe and high quality supply of medicinal products’ [32]. The argument was that without set prices pharmacies may enter into ‘ruinous price competition’ which might result in the closure of physical pharmacies in rural or underpopulated areas. It was argued those pharmacies alone were well suited to offering safe high quality supplies, tailored advice, and effective checks on medicines [33]. At [35] the Court applied the test it set out in the Case C-333/14 SWA reference:

‘The reasons which may be invoked by a Member State by way of justification must thus be accompanied by an analysis of the appropriateness and proportionality of the measure adopted by that State, and by specific evidence substantiating its arguments’.

It was this final point on ‘specific evidence’ that proved to be crucial in the case, as the Court went on to explain in [36].

‘that court must examine objectively, through statistical or ad hoc data or by other means, whether it may reasonably be concluded from the evidence submitted by the Member State concerned that the means chosen are appropriate for the attainment of the objectives pursued and whether it is possible to attain those objectives by measures that are less restrictive of the free movement of goods’.

In the subsequent paragraphs the Court went through the submissions of the parties and suggested that there was ‘no evidence to substantiate the contention’ that the scheme was necessary to ensure a uniform supply of prescription-only medicines [37]. In fact nothing before the Court suggested that without the system mail order pharmacies, competing on the basis of price, would threaten essential services, such as emergency care or providing activities in the general interest; in fact competition might encourage traditional pharmacies to improve such services [39-40]. The assertion of the Court at [42] is perhaps the most telling:

‘it should be noted that the existence of a genuine risk to human health must be measured, not according to the yardstick of general conjecture, but on the basis of relevant scientific research’.

Because of the failure to provide convincing evidence of the effectiveness of the measure the Court found that it had ‘not been shown to be an appropriate means of attaining the objectives relied on’ [45]. It had therefore fallen at the 1st hurdle in the two-part test. As it was not shown to be ‘appropriate’, there was no need to consider if it was ‘necessary’.

Minimum Unit Pricing

The Inner House (IH) in SWA were tasked with applying the same two-part test, but this time the result was very different. The court’s summary of the evidence presented by the Scottish Govt runs across many paragraphs, [125]-[143], citing numerous studies, both domestic and international in scope. The Petitioner challenged the conclusions and methodology of a number of those studies, but the Scottish Government argued that the State had discretion and it was not unreasonable that it would ‘prefer one body of evidence the other, so long as the information which supported the choice was cogent’ [130]. As the IH was acting in an appeal it confined its review, in the most part, to confirming that the Lord Ordinary, in the Outer House, had correctly applied the law. The first important, and perhaps the most important, question was to confirm that the Lord Ordinary had identified the correct aim of the legislation. Both the AG and CJEU, in the reference, had noted that the legislation appeared to have a dual objective, whereas the Lord Ordinary had focused on a particular aim; the reduction of alcohol consumption by harmful and hazardous drinkers. The IH found that the Lord Ordinary’s particular view was identical to that of the CJEU. That is perhaps surprising, as many commentators had seen a different emphasis in the CJEU; suggesting that it had struck some form of balance between the narrow goal of dealing with harmful and hazardous drinkers, and the wider goal of reducing general alcohol consumption. The IH implicitly rejected that interpretation of the judgment.

In its examination of the appropriateness of the measure the IH noted the extent of the problem with alcohol consumption; the ‘societal, family, and personal effects of excessive alcohol consumption in Scotland are difficult to over-estimate’ [178]. This assertion was based on the ‘raft of statistical material [which] was produced’ [180]. It also recognised the clear view that the policy would target harmful and hazardous drinkers. It noted that it was possible to attempt to rebut figures used in support of the measure, or counter the conclusions drawn by the Govt, but that ‘there was and is ample objective material to support the proposition’ [182], and, at [183], that:

‘the Lord Ordinary cannot be faulted in finding that there was evidence from which it could be inferred that minimum pricing was an appropriate method of securing the objective by tackling the specific consumption of cheap alcohol’.

When turning to the proportionality of the measure the IH considered the Petitioners preferred measure, the increase of general taxation, which they argued would be ‘as effective’ as MUP. But that argument was rejected; ‘[t]he fundamental problem with an increase in tax is simply that it does not produce a minimum price’ [196]. The IH pointed towards evidence that retailers have sold below cost or absorbed, or off-set, tax increases. Also that price increases in the lowest cost products would ‘produce a greater reduction in sales than across the board price increases’ [199], as trading down to lower cost products was not possible. In fact a general taxation increase would have, ‘disproportionate, undesirable and unnecessary effect on moderate drinkers, who do not generally represent a significant problem in societal terms’ [200]. Finally, at [204], the IH addressed the choice of 50p per unit:

‘Such a figure, on the material produced, will reduce consumption amongst harmful and hazardous drinkers in that quintile of the population whose health is affected most by the consumption of cheap alcohol. The benefits of this are well documented’.

On that basis the Inner House, upheld the findings of the Lord Ordinary and refused the reclaiming motion.

One interesting feature of the case before the IH was that the CJEU had made it clear in its preliminary reference that a domestic court should address the proportionality of the measure at the time it gives its ruling, not at the time the measure was adopted. As the original pleadings were lodged in 2012 a significant amount of new evidence and policy material had become available in the intervening period; including new evidence since the CJEU judgment in the reference was handed down in December 2015. The IH took note of the evidence that was considered by the Lord Ordinary, and the subsequent proceedings, and decided that it was in the interests of justice that any pertinent new material should be considered. But it stressed that the new information would only be significant if it was such that it would have altered the Lord Ordinary’s view of the facts. It was apparent that the new evidence merely added to the exiting body of evidence that supported the effectiveness of MUP as an intervention.

Conclusions

In a series of recent decisions, including, for example, Case C‑639/11 Poland & Case C‑61/12 Lithuania, the CJEU has begun to stress the importance of evidence to support an attempt to justify a restriction on free movement. In DPV we see that requirement given greater emphasis, and a new focus on the type of evidence that will be required. It is not sufficient for a member State to rely on mere assertion or conjecture. They will have to produce more. The Court’s preference is clearly for hard statistical or scientific evidence, although it will accept other forms. Domestic courts are charged with ensuring that the State has good evidence to support the appropriateness and proportionality those measures. The judgment of the IH shows how that analysis can be undertaken. It also makes clear that the analysis of proportionality is not an event, rather a process. If a policy stands or falls by its evidence, it must therefore be the case that changes in the evidence base can alter whether that measure is ‘appropriate’ and/or ‘necessary’ over time.

Barnard & Peers: chapter 12, chapter 16

Art credit: “Beer Street and Gin Lane”, William Hogarth

The 'emergency brake' on EU citizens' benefits: Must the Commission or Council control it?

Steve Peers, Professor of Law, University of Essex

One issue that has arisen in the UK’s renegotiation of EU membership is the procedure for the UK (or other Member States) invoking an ‘emergency brake’ to limit access to in-work benefits by EU citizens. Should a Member State be able to pull the ‘emergency brake’ on its own initiative (perhaps with a requirement to notify the Commission and Council)? Or should it only be able to make a request to that effect, with the Commission and/or Council deciding on whether to authorise it?

The following analysis demonstrates that there is no legal rule which requires that only the Commission and/or Council can authorise a Member State to pull the emergency brake. Therefore it is a matter of political discretion to decide on who should pull it.

Treaty rules

There is no general rule in the Treaty governing the use of Member States’ safeguards and derogations. The possible limits on free movement rules on grounds of public policy et al refer only to decisions by Member States’ governments, although the EU institutions have the power to adopt legislation on these issues. Similarly, the power to disapply EU law in times of war, threat of war or civil disturbance is invoked by Member States; the Treaty only refers in this case to discussions with the Commission, and a possible special procedure before the Court of Justice. (To keep this text readable for non-lawyers, I have put the precise details of all the laws referred to in an annex.)

On the other hand, there are some Treaty Articles which provide for authorisation for Member States’ action by the Commission (as regards higher national standards following internal market harmonisation), or by the Council (to authorise a state aid which the Commission has ruled out, or to permit a tax rule restricting movement of capital to third countries).

The Treaty provisions most directly relevant to social security and immigration of large numbers of people give the final say to Member States. In particular, if a Member State pulls an ‘emergency brake’ to stop EU decision-making on social security for EU citizens exercising free movement rights, there is discussion in the European Council, but the proposal can ultimately be blocked if there is no agreement there among all Member States. The case law of the CJEU implicitly confirms that if Member States wish to restrict the free movement of EU citizens on grounds of public health, they may do so without being subject to an EU control procedure (Bressol). And the power to control the volumes of non-EU citizens coming from third countries to the EU to work rests entirely with the Member States.

In certain cases, the CJEU has insisted upon a Community (EU) control procedure for Member States’ derogations. But those cases apply to circumstances where the EU both has exclusive competence, and there are Treaty provisions relating to the control procedure. In Commission v UK, the Court relied on the 1972 Act of Accession and the exclusive EU competence over fisheries conservation to justify its conclusion that Member States have ‘special duties of action and abstention’ where the Commission has made proposals to the Council which had not yet been adopted, entailing prior Commission approval of Member State action. In its subsequent judgment in Bulk Oil, the Court essentially confined the Commission v UK judgment to its particular facts.

In Donckerwolke, the Court stated that national measures relating to trade with non-EU countries needed Commission approval. Again, though, this was in light of the exclusive EU competence in the area, and in particular of Article 115 EEC (since repealed), which detailed this process. The exclusive EU powers over these two issues can be distinguished from the shared power over the internal market. 

Secondary law

The most relevant provisions in EU secondary legislation tend to give power to Member States to trigger derogations, with at most an information and consultation requirement for the EU institutions. Most significantly, the EU citizens’ Directive leaves it entirely to Member States to trigger the exceptions to EU citizens’ access to benefits. The EU’s patients’ Directive (more on that Directive here) allows Member States to limit reimbursement of costs incurred by patients in other Member States, subject only to a requirement to inform the Commission.

Equally the legislation referring to movements of large numbers of third-country nationals reserves power to Member States. The asylum procedures Directive allows Member States to adopt a longer deadline to decide on asylum applications where there a ‘large number’ of applications, without even a notification requirement. Also, Member States alone decide on whether to derogate from the rules on border procedures in the event of a ‘large number’ of applications at the border or in a transit zone.

Under the Directive on reception conditions for asylum-seekers, Member States may adopt different rules where the normal accommodation to be provided is ‘temporarily exhausted’, with no control requirement. And under the Returns Directive, Member States can derogate from some safeguards on immigration detention if there are an ‘exceptionally large number’ of irregular migrants; but they need only inform the Commission of this decision.

Finally, an example from outside the field of immigration, free movement and social security proves that Member States are often given sole discretion to decide on derogations in other fields of EU law too. The working time Directive provides for four categories of derogations. The first three categories are entirely up to Member States’ discretion. The fourth category, which sets out transitional rules for doctors in training which have now expired, set out rules requiring only a Commission opinion before Member States extended the relevant transitional period.

Of course, secondary EU law is required to comply with EU primary law in the Treaties, and so the lack of EU control procedures over derogations would be invalid if it violated the Treaties. But as discussed in the first part, the Treaties set out no general rule on the EU political institutions’ control of Member States’ derogations from EU law. Indeed, in the particular areas of free movement and social security, they expressly leave the power to decide on such measures to Member States. This is, however, without prejudice to the possibility of judicial control (by the national courts and the CJEU) to determine whether most of these national decisions (except for the ‘emergency brake’ on social security decision-making) have been validly exercised.

Barnard & Peers: chapter 13

Photo credit: www.moroccoworldnews.com

Annex – Articles in Treaty and legislation referred to

Free movement exceptions: Articles 45(3), 52(1), 62 and 65(1) TFEU

Emergency wartime derogation: Article 348 TFEU

Higher national standards following internal market harmonisation: Article 114 TFEU

State aid authorisation: Article 108(2) TFEU

Tax rule restricting movement of capital to third countries: Article 65(4) TFEU

Social security and free movement of persons: Article 48 TFEU

Volumes of third-country nationals coming to work: Article 79(5) TFEU

Fisheries conservation ruling: Case 804/79 Commission v UK, referring to Article 102 of the 1972 Act of Accession (paras 17, 28 and 31 of the judgment)

Case 174/84 Bulk Oil: para 56

EU competences: Articles 3(1) and 4(1)(a) TFEU

EU citizens’ Directive (Directive 2004/38): Article 24

EU’s patients’ Directive (Directive 2011/24): Article 7(9) and (11)

Asylum procedures Directive (Directive 2013/32): Articles 31(3)(b) and 43(3)

Directive on reception conditions for asylum-seekers (Directive 2013/33): Article 18(9)(b)

Returns Directive (Directive 2008/115): Article 18

Working time Directive (Directive 2003/88): Article 17

Applying the EU Charter of Rights to Member States' internal market derogations

By Steve Peers

Today’s judgment of the Court of Justice of the European Union (CJEU) in Pfleger confirmed an important issue as regards the scope of the EU Charter of Fundamental Rights – but also raised some implicit questions about its added value in such cases.

The case concerned Austrian restrictions on gambling machines. In fact, the CJEU has decided very many cases relating to national restrictions on gambling, an issue which is not regulated by detailed EU legislation but which is nonetheless in principle subject to EU internal market law. Here, the parties challenging the enforcement of the Austrian law raised questions concerning the compliance of that law with the EU Charter, in particular as regards Articles 15 to 17 of the Charter (concerning freedom to conduct an occupation, to run a  business and the right to property) and Article 50 (the prohibition on double jeopardy).

Does the Charter apply?

Article 51 of the Charter limits the scope of its application to EU bodies, and to the Member States ‘only’ when they are ‘implementing’ EU law. At first sight, this rule narrows the established scope of the previous CJEU case law on the scope of human rights protection, which (going back to the 1991 judgment of ERT) had always held that any national derogations from EU free movement rights had to comply with human rights obligations as general principles of EU law. On a strict interpretation, such national derogations could not easily be seen as measures ‘implementing’ EU law, and many academics therefore wondered whether the Charter was narrower in scope than the general principles.

However, last year’s judgment in Fransson confirmed that the scope of the Charter was exactly the same as the scope of the general principles. Logically, it followed that national derogations from free movement rules are within the scope of the Charter, but the Pfleger case was the first opportunity that the Court has had to confirm this.

Comparing internal market rules and the Charter

Despite the importance of this case from a human rights perspective, the main issue in the Pfleger judgment is the compliance of the national rules with EU internal market law. The CJEU, no doubt exhausted with the amount of litigation on this issue, simply reiterates its prior case law, and asks the national court to apply it to the facts. Also, the CJEU does state that if the national restrictions on gambling do not have any real link to combating crime or social problems, but are simply a means of increasing tax revenue, then this cannot be justified – but it relies on the national court’s findings in this regard.

What does the Charter add to this? On the facts of this case, not very much. According to the CJEU, if the national law restricted internal market freedoms, then it also restricted the economic rights in Articles 15-17 of the Charter. Equally, if it could not be justified under the internal market rules, then it could not be justified as a limitation on Charter rights pursuant to Article 52 of the Charter either.

It should be noted that the Court did not rule that an analysis of the internal market rules in the Treaty would always lead to the same result as the Charter analysis. The ruling expressly concerned ‘circumstances such as those at issue in the main proceedings’. So it is possible to imagine, for instance, that as regards a different aspect of the free movement of services more directly connected to human rights than gambling – broadcasting, for instance – a national restriction might be proportionate from the point of view of the internal market but a questionable restriction of freedom of expression. At the very least, a separate application of the internal market and human rights rules would surely be called for where (for instance) the content of communications is being restricted.

The Court did not touch on the separate question of whether the enforcement (as distinct from the substance) of the national rules needed to be judged from a human rights perspective, noting only that if the national rules breached the Treaty rules on internal market freedoms, they could not be enforced anyway. The Advocate-General’s opinion, in contrast, assumed that if the national rules were substantively in compliance with internal market law and the Charter, the details of their enforcement could still be tested for compliance with the Charter.

Implications of the judgment

While this judgment only concerned national derogations from internal market Treaty freedoms, there is no reason to think that its impact is limited to such cases. There is a lot of EU legislation on different issues which allows Member States to derogate in various ways from its rules, and there is no reason to think that the internal market Treaty provisions are in some way special as regards the scope of application of the Charter.

In particular, as discussed already on this blog, the national derogations from the e-privacy Directive, as regards data retention and other forms of interception of telecommunications, are subject to the Charter, even following the annulment of the data retention Directive. The Court has already examined such national derogations in the context of civil proceedings, and logically should do so as regards criminal proceedings too.

Barnard & Peers: chapter 9, chapter 16