Basic Guide to International Business Law

Statement Due a very high price of the book (€37,50) I’ve made this copy for my fellow students at the university. This copy has been made under an “educational agreement” stating that any material (copyrighted or not) can be copied by students for educational purposes without violation of a trademark. Although we still find common knowledge throughout this book (articles, laws, treaties and agreements between states) that has been bundled into one powerful summary we don’t find it an intellectual property of any kind. For these two reasons I just put the book on mininova.org®!

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Ovadoze

Contents List of abbreviations 11

1

Introduction to International Private Law and European

Law 13

1.1

Introduction In1ernational Private Law 14

1.2 1.2.1 1.2.2 1.2.3 1.3

Introduction to European Law 17

The Institutions of the EC 19

Sources of EC law 21

European Court of Justice and preliminary ruling s under Art. 234 22

Cases 26

Glossary C hapter 1 41

Exe rcises Chapter 1 42

2 2.1 2.2 2.3 2.3.1 2.3.2 2.3.3 2.4

Negotiations 45

Reaching an agreement 46

Legal aspects of negotiations 49

Breaking off negotiations: breach of contract or tort? 51

Breach of contract 52

Tort 52

Breaking off negotiations: what to claim? 54

Cases at the preliminary stage 55

Glossary Chapter 2 61

Exercises Chapter 2 63

3 3.1 3.2 3.3 3.3.1 3.3.2

EEX 67

What court'of law has jurisdiction? 68

EEX Regulation: what countries are involved? 68

Provisions on jurisdiction of th e EEX 69

Choice of parties (Art. 23 EEX) 69

Jurisdiction on litigation over immovable property (Art. 22 EEX) 69

3.3.3 Jurisdiction in case of litigation over individual employment contracts

(Art. 18 - 21 EEX) 70

3.3.4 Jurisdiction in case of litigation related to consumer contracts

(Art. 15 -1 7EEX) 71

3.3.5

Jurisdiction in case of litigation related to matters of insurance

(Art. 8 - 14 EEX) 72

3.3.6 General provisions on jurisdiction (Art. 2 and 5 EEX) 73

3.4 Execution of the verdict (Art. 38 EEX) 75

3.5 Arbitration 75

G lossary Chapter 3 78

Exercises Chapter 3 79

4 4.1 4.2

ECO 81

Introduction ECO 82

Conditions on the use of ECO 82

4.3 4.3.1 4.3.2 4.3.3 4.3.4 4.3.5 4.4 4.5

Content of ECO 83

A choice of law made by the contracting parties (Art. 3, 4 ECO) 84

Law applicable to consumer contracts in Art. 5 ECO 86

Law applicable to individual employment contracts (Art. 6 ECO) 88

Law applicable under certain circumstances (Art. 7 ECO) 90

Formal validity of a contract (Art. 9 ECO) 91

Combination of EEX and ECO 92

Applicable law on international torts 93

Glossary Chapter 4 96

Exercises Chapter 4 97

5 5. 1 5.2 5.3 5.3.1 5.3.2 5.4 5.5

CISG 99

Introduction of th e CISG 100

Application of the CISG 101

Content of the CISG 102

Formation of the contract of sale according to the CISG 102

Committing a breach of contract under the CISG 104

Answers to CISG Exercises of paragraph 5.3 108

Art. 5, 1 EEX, determining place of performance of obligation in

question 11 0

Glossary Chapter 5 113

Exercises on EEX + ECO + CISG 114

6 6. 1 6.2 6.3 6.3.1 6.4

The free movement of goods 117

Introduction of free movement of goods 118

Quantitative restrictions 118

Measures having an effect equivalent to quantitative restri ctions 119

Distinctly and indistinctly applicable measures having equivalent

effect 120

Art. 30 EC·Treaty: derogation from the Art. 28 and 29 EC-Treaty 121

6.5

Case law to

6.6

7 7.1 7.2 7.2. 1 7.2.2 7.3 7.3.1 7.3.2 7.4 7.5

JUStify for restrictions on the free movement of

goods 122

Cases of the European Court of Justi ce on Free movement of Goods 124

Glossary Chapter 6 128

Exercises Chapter 6 129

Competition law 131

Introduction on competition and cartel law 132

The cartel law of Art. 81 133

Effects at the prohi bition of Art. 81 paragraph (1) 136

Exemptions under Art. 81 paragraph (3) 136

Abuse of a dominant position under Art. 82 137

What is a dominant position ? 138

The abuse of a dominant position 139

Mergers 140

Cases of the European Court of Justice on Cartel law 142

= 33Jlies (Art. 3, 4 ECO) 84

- Art. 5 ECO 86

contracts (Art. 6 ECO) 88

(Art. 7 ECO) 90

_ "'-0";

_I

Ia:::r:::= to the CISG 102

- .. CISG 104

5_3 108

t~__.,..,c.arlce of obligation in

-=-_

-8

. =-..antttalive restrictions Jt ''''''''''''''''' having equivalent

_ Free movement of

132

Carriage, Incoterms & Payments 159

Carriage 160

Parties in a contract of carriage 160

8. 1.1 8. 1.2 Carrier and shipper 161

8. 1.3 Carriage and documents 162

8.1.4 CM R-consignment 163

8.1.5 Jurisdiction in CM R Convention and under EEX Reg ulation 166

8.1. 6 CMR Convention and applicable law according to ECO Treaty 166

Incoterms 166

8.2 8.2.1 Objects of Incoterms 167

8.2.2 General set up of Incoterms 168

8.2.3 Incoterms 2000 168

8.2.4 Liability of the seller and buyer in case of damage during carriage 171

International payments 17 1

8.3 Payments in open account or clean payments 172

8.3.1 8.3.2 Cheque 172

8.3.3 Bills of Exchange (Drafts) 172

8.3.4 Bank Guarantee 174

8.3.5 Documentary Collections 174

8.3.6 Letter of Credit 175

Glossary Chapter 8 180

Exercises Chapter 8 181

8

8. 1

11 9

--_ 28 and 29 EC-Treaty 121

e:. =-ea movement of

Glossary Chapter 7 155

Exe rc ises Chapter 7 156

Index 183

4.3 4.3.1 4.3.2 4.3.3 4.3.4 4.3.5 4.4 4 .5

Content of ECO 83

A choice of law made by the contracting parties (Art. 3, 4 ECO) 84

Law applicable to consumer contracts in Art. 5 ECO 86

Law applicable to individual employment contracts (Art. 6 ECO) 88

Law applicable under c ertain circumstances (Art. 7 ECO) 90

Formal validity of a contract (Art. 9 ECO) 91

Combination of EEX and ECO 92

Applicable law on international torts 93

Glossary Chapter 4 96

Exercises Chapter 4 97

5 5.1 5.2 5.3 5.3.1 5.3.2 5.4 5.5

CISG 99

Introduction of the CISG 100

Application of the CISG 101

Content of the CISG 102

Formation of the contract of sale according to the CISG 102

Committing a breach of contract under the CISG 104

Answers to C ISG Exercises of paragraph 5.3 108

Art. 5, 1 E EX, determining place of periormance of obligation in

question 110

Glossary Chapter 5 113

Exercises on EEX + ECO + CISG 114

6 6. 1 6.2 6.3 6.3.1

The free movement of goods 117

Introduction of free movement of goods 118

6.4 6.5

6.6

7 7.1 7.2 7.2.1 7.2.2 7.3 7.3.1 7.3.2 7.4 7.5

Quantitative restrictions 11 B

Measures having an effect equivalent to quantitative restrictions 119

Distinctly and indistinctly applicable measures having equivalent

effect 120

Art. 30 EC·Treaty : derogation from the Art. 28 and 29 EC-Treaty 121

Case law to justify for restrictions on the free movement of

goods 122

Cases of the European Court of Justice on Free movement of Goods 124

Glossary Chapter 6 128

Exercises Chapter 6 129

Competition law 131

Introduction on competition and cartel law 132

The cartel law of Art. 8 1 133

Effects of the prohibition of Art. 81 parag raph (1) 136

Exemptions under Art. 81 parag raph (3) 136

Abuse of a dominant position under Art. 82 137

What is a dominant position ? 138

The abuse of a dominant position 139

Mergers 140

Cases of the European Court of Justice on Cartel law 142

11

List of abbreviations CFR CIF CIP CISG CMR CPT DIA DIP OAF DDP DDU DEQ DES EC ECJ ECO EEC EP EEX

"'"

EXW FAS FCA FOB ICC Incoterms LlC m.h.e.e. URC

Cost. and Freight Cost, Insurance and Freight Carriage and Insurance Paid Convention on the International Sales of Goods Convention on the contract for the International Carriage of Goods by Road Carriage Paid Documents against Acceptance Documents against Payment Delivered At Frontier Delivered Duty Paid Delivered Duty Unpaid Delivered Ex Quay Delivered Ex Ship European Community European Court of Justice European Communities Convention on the Applicable Law on Contractual Obligations European Economic Community European Parliament European Communities Regulation on Jurisdiction and Enforcement of Judgements in Commercial and Civil matters Ex Works Free Alongside Ship Free Carrier At . .. Free on Board International Chamber of Commerce INternational COmmercial TERMS Letter of Credit measures having equivalent effect Uniform Rules for Collections

13

1 Introduction to International Private Law and European Law

1.1

Introduction International Private Law

1.2

Introduction to European Law

1.3

Cases

International law is law set up by states and applicable to these states and in most cases their nationals. It is laid down in rules referred to as Treaties, Conventions, Regulations and Declarations. Most states around the world have signed up to seve ral thousand of these rules in which case that state is referred to as a Contracting State of th is Treaty or Convention. The effect of signing a Treaty can vary from Treaty to Conve ntion. The states that sign a Treaty or a Convention wish to be bound to this set of rules. Sometimes states reserve the right to determine the effect of this Treaty or this Conven tion on their state or their nationals at a later point in time.

International Public Law

International Private Law

International law can be divided into International Publ ic Law and International Private Law. International Public Law concerns itself with such issues as the set-up of international institutions (United Nations, European Community, and European Human Rights Court) , human rights (European Convention on Human Rights) and the extradiction of nationals from another country to their home country. The aim of International Private Law is to solve legal problems arising out of different leg al systems that apply to internation al, legal relationships. As every country has its ow n legal system, so a legal relationship f.e. arising out ota contract of sale may have links with at least two national legal systems. In the event the legal conflict only involves two parties living in the same country, no such choice for a legal system exists. International Private Law provides a set of rules to either decide on the matter, or refer the litigating parties to a national legal system where the answer lies. Basically every country has its own International Private Law, but over the years several Treaties and Regulations have been set up to deal with these legal problems internationally. International Private Law deals with three main issues: jurisdiction in case of litigation between tw o parties coming from different states (including the possibilities of executing the verdict given by the court

14

1 INTRODUCTION TO INTERNATIONA L PRIVATE LAW AND EUROPEA N LAW

of law that has jurisdiction, in the countries of the litigating parties) , the law to be applied in case of international litigation between two private parties, and solutions to legal problems arising out of an international legal relationship. Apart from the developments in the field of International Private Law, the law applying to the Member States of the European Community (EC) has become more voluminous and more important over the years. EC law stands for the EC Treaty and all legislation on which it is based , that binds all Member States of the EC. The European Court of Justice of the EC, an institution based on the EC Treaty, has decided that EC law takes precedence over the laws of the Member States of the EC. This is as a result of the transfer of sovereignty by the Member States to the EC in the fie lds of administration, legislation and jurisdiction. For that reason the EC is referred to as a supranational organisation. EC law deals with several aspects of International Private Law. In these situations EC law sets aside any provision the law of a Member State might have in this field and other Treaties or Conventions to which the Member State is a contracting party. International Private Law will be d iscussed in paragraph 1.1. EC law w ill be discussed in paragraph 1.2. The subject matter dealt with are the institutions of the EC, the sources of EC law, the European Court of Justice and Art. 234 as an addition to the sources of law. Paragraph 1.3 examines several cases given by the European Court of Justice, each of which deal with the essentials of European Law.

1.1

Introduction International Private Law "-

International Private Law

International Business Law as a part of International Private Law is a specific field in itself. Until recently every country had its own 'international private law'. Various treaties to cover larger areas of Inte rnational Private Law were drawn up to offer some guidance as to the use and development of International Private Law. First, here are some examples of topics w ith which International Private Law is concerned. Every act or conflict in national private law also has an international component. Examples An automobilist living in Germany, causes a traffic accident with an automobilist living in France at a parking lot in Amsterdam (Holland) , resulting in causing unbearable psychological damage to the Irish setter owned by the German driver, in crushing a very valuable box of Cuban cigars and smashing a bottle of Scotch whisky. The questions are: • Does a Dutch court of law have jurisdiction in this case, or should parties turn to an English, German, Irish, Cuban , UK or French court of law? • What law must be applied to this case?

1. 1 IN TRODUCTION INTERNATIONAL PRIVATE LAW

15

A Dutch national, living in Enschede (Holland) and who works for a German employer established in Gronau (Germany). At the end of his first year there his employer decides to fire him, for no apparent reason. The relevant questions in this situation are : • Can a Dutch court of law decide on this conflict between a German employer and a Dutch employee? • Does Dutch law apply to this individual employment contract? A seller, established in the UK, delivers 1,500 pair of ladies' shoes to a buyer who is established in Italy. However, the buyer, despite several reminders, does not pay the price they agreed on. The English seller starts litigation against the Italian buyer, in an attempt to cancel the sales contract and to get back the shoes he delivered. The questions in this case are: • What court of law has jurisdiction in this case? • Is English law applicable to the sales contract? • Is there an international Treaty that might deal with matters such as these? • In case there is a Treaty, does this supersede English law or not? • Is it possible for the seller - in one way or another - to declare the sales contract null and void , and if so , what are the effects of this act? Will the shoes be returned by the buyer? The rules of International Private Law provide answers to such cases by focussing on aspects such as the place of residence of the defendant, the place where the employee usually works, or the place of business of the seller and (sometimes) the nationality of one party. Most of the questions mentioned in the examples given in this paragraph will be dealt with in Ch~pter 2 up to and including Chapter 5 that examine the contents of three relevant international Treaties and Regulations.

Three pillars

Three main issues of International Private Law can be derived from the examples mentioned. These main issues are also referred to as the three 'pillars' of international private law. Hereafter, the three questions raised will have to be linked with the words 'main issues'. Ouestion 1: What court of law has jurisdiction in case of litigation? How is the verdict of the court of law that has jurisdiction executed?

Example A seller established in Holland, supplies 1,500 kilos of cheese to a buyer, established in Germany. The buyer however, despite several reminders, does not pay the price they agreed on. What court of law has jurisdiction in this case? A Dutch or a German court of law? In case a Dutch court of law has jurisdiction and gives a verdict, how is the verdict going to be effected i.e. executed in (both Holland and) Germany?

16

1 INTRODUCTION TO INTERNATIONAL PRIVATE LAW AND EUROPEA N LAW

To answer questions like these we are going to use the European Communities Regulation on Jurisdiction and Enforcement of Judgements in Commercial and Civil matters, hereafter referred to as the 'EEX'. The EEX will be dealt with in Chapter 3. Question 2: What law is to be applied in order to solve the conflict between the - contracting - parties i.e. the parties in the contract?

Example A man with the Dutch nationality and at that time living in Groningen (Holland) works in Nigeria for his employer Shell Petroleum. At the end of his first year there his employer decides to fire him, due to the fact that the employee has accepted bribes. Does Dutch law apply to this individual employment contract? Or is it still possible to apply Nigerian law, in case this should prove to be more favourable to the Dutch employee? The treaty to be used here is the European Communities Convention on the Applicable Law on Contractual Obligations, referred to as 'ECO' (sometimes as 'EVO') and is dealt with in Chapter 4.

Contracting parties

Question 3: Is there a specific treaty that provides an immediate solution to the conflict of the contracting parties? During this course this question will be dealt with by using the contract of sale.

Example A seller established in Germany, delivers 500 barrels of beer to a buyer, established in Belgium. The buyer does not pay the price they agreed on, because the beer has gone bad during transport from Offenburg to Bruges. The Belgian buyer wants to cancel the sales contract and to get back the down payment he made. Is it possible for the buyer to declare the sales contract null and void, and if so, what are the effects of this act?

CISG

Jurisdiction

Since the conditions of an international sales contract have been fulfilled, the treaty to use here is the United Nations Convention on the International Sales of Goods, referred to as 'CISG'. The CISG is dealt with in Chapter 5. Bear in mind that, in this particular case if the answer to Question 1 were to be that a Dutch court of law has jurisdiction, this does not automatically mean that, Dutch law should also be applied as a result of this (answer to Question 2). It might very well be that a Dutch court of law must apply Belgian, French , English or any law other than Dutch law, according to the treaty mentioned by Question 2. Question 1 and Question 2 are on different topics and are to be found in different international rules. The conclusion is that these two questions are not to be connected. The same applies to Question 3, i.e. another international treaty with its own topics, contracting states and results. An answer to a problem raised under Question 3 does not give answers to issues raised under the first two Questions.

1.2 INTRODUCTION TO EUROPEA N LAW

1.2

European Law

17

Introduction to European Law

European Law in itself is also International Law. One of the main differences is the fact that all EC law is based on one Treaty, the EC-Treaty, instead of numerous Treaties on various subjects. Another difference is that several institutions and forms of legislation are based on this EC-Treaty, and this does not happen with Treaties in the field of International Private Law very often. European Law is more important than we often realise since European Law must be applied over the national laws of the countries that have signed the EC-Treaty. Because European Law does not cover all areas w here competition takes place between Member States or between undertakings that are or are not of the same Member State, other international rules and also national Regulations still play their role. The EC has been working on a European civil code for several years now, but until this civil code comes into effect, the Dutch 'Burger/ijk Wetboek' will remain the law to be used by Dutch nationals as the 'Bundesgesetzbuch' or the 'Code Civif will remain the law to apply for German or French nationals. To examine the effect EC law has over national laws see the case Costa vs. EN EL. This case exemplifies the theory related to the relationship between national and European Law and the effect of European Law on (Italian) nationals. In this case the nationalisation of an electricity company was found to be in order under Italian law, but in conflict with EC law. According to the European Court of Justice, Italian law was to be set aside in this case. The case Costa vs. ENEL is located in paragraph 1 .3. Undertakings that operate within one country that is a Member State of the EC, or operate within several EC countries, have to be aware of the rules of European Law. They have to operate within the borders set by the EC-Treaty. The European Commissio~ investigates and decides whether or not the conduct of such an undertaking is, for example, in conflict with the rules of Art. 81 of the EC-Treaty. Is there an agreement that restricts the competition within the EC, or does the undertaking abuse the dominant position they have according to Art. 82 of the EC-Treaty? If so the European Commission is known to have imposed heavy fines on several undertakings for breaking the rules on competition law issued by the EC.

Supranational organisation

The main objective of the EC is to achieve a general economic integration through the use of a common market where goods, persons, capital and services can circulate freely. A very important condition to make this principle of a common market work is for the Member States to give up their sovereignty in those areas governed by the EC-Treaty. As a result of this the EC becomes a so-called supranational organisation, a 'State above the Member States', that is capable of making rules that bind the Member States of the EC, without their specific and prior consent. The starting point here is the supremacy of EC law: EC law takes precedence over national law and in this way EC law is applied uniformly

18

1 INTRODUCTION TO INTERNATIONAL PRIVATE LAW AND EUROPEA N LAW

throughout the EC. Exami ne the case Costa vs. ENEL. We have to distinguish between: 1 directly applicable EC law; 2 directly effective EC law. Directly applicable

EC law that is directly applicable means that the provisions of EC law take effect in the legal systems of the Member States, without the need for further acts by the governments of these Member States. Therefore direct applicability is a concern of the Member States themselves. Examp le: according to Art. 249 a Regulation is directly applicable.

Directly effective

Directly effective EC law means that these provisions give rights or obligations on which nationals can rely before a national court. This is of interest to ind ividuals who are engaged in some kind of lawsuit against a third private party or their national government. One knows whether a provis ion , for instance, a Treaty Article has a direct effect only if the ECJ has said it does. The ECJ decides whether this is the case, therefore one cannot assume that an Article or a Directive or a decision probably might or might not have direct effect without such a decision.

Example In the Case Van Gend & Loos, the European Court of Justice laid down the conditions for a Treaty Article to have direct effect. In this case Van Gend & Loos, a transport company established in Holland, entered into a lawsuit against the Dutch customs authorities. In its view, Van Gend & Loos claimed that Dutch customs acted in conflict with Art. 12 of the EC Treaty. Art. 12 EC Treaty prohibits the Member States from introducing new taxes amongst themselves, but it is only possible for Van Gend & Loos to rely on Art. 1 2 if it is directly effective. Therefore the Dutch court of law puts a question before the ECJ to give a preliminary ruling under Art. 234 in order to make sure whether or not this Article has a direct effect. Can Van Gend & Loos rely on Art. 1 2 before a Dutch court of law? In this particular case the ECJ has given the requirements for a Treaty Article to have a direct effect: • The provision must be clear and unambiguous (interpretation of the text). • The provision must be unconditional (example = no extra national measures necessary). • The provision must take effect without further acts of the EC or the Member States. These criteria have been used quite liberally in the cases that followed Van Gend & Loos. Final conclusion of the ECJ = Art. 12 is directly effective, so: • Van Gend & Loos can rely on this Article before a Dutch court of law, and

1.2 INTRODUCTION TO EUROPEAN LAW

19

~_........J-----------------,(.

• Van Gend & Loos did not have to pay the taxes that were issued contrary to Art. 1 2. So bear in mind that from this moment on Art. 12 came directly into effect in all Member States of the EC. Other examples of Articles of the ECTreaty which the ECJ has decided have a direct effect: • Free movement of persons (Art. 39). • Free movement of goods (Art. 28, 29, 30). • Right to equal pay for men and women (Art. 119). • Competition law (Art. 81 + 82). Therefore these Articles can be enforced before a national court by all EC nationals. Through the years the number of members of the EEC has grown to 25 Member States: • Germany, • France, • Italy, • Netherlands, • Belgium, • Luxemburg, • United Kingdom, • Ireland, • Denmark, • Greece, • Spain, • Portugal, • Austria, • Finland, • Sweden, • Poland, • Lithuania, • Latvia, • Estonia, • Czech Republic, • Slovenia, • Malta, • Hungary, • Cyprus, • Slovakia .

.2.1

The Institutions of the EC

EC institutions are unique. They do not correspond to any institutions at either national or international level nor do they have any connection with Treaties other than the EC-Treaty. The European Human Rights Court, for example, has absolutely no connection with the EC-Treaty.

20

1 INTRODUCTION TO IN TERNATIONA L PRIVATE LAW AND EUROPEA N LAW

~.-----------------------------------------------------------------------------

Institutions of the EC

European Parliament

Council of Ministers

The institutions of the EC are: • the European Parliament (Art. 7, 189 - 201 EC-Treaty); • the Council of Ministers (Art. 7, 202 - 210 EC-Treaty); • the European Commission (Art. 7, 211 - 219 EC-Treaty); • the European Court of Justice (Art. 7, 220 - 245 EC-Treaty); • the Court of Auditors (Art. 7, 246 - 248 EC-Treaty).

The European Parliament The European Parliament (EP) is chosen by means of direct elections, that is European citizens elect the Members of the European Parliament. The number of representatives of 'national ' Members of the European Parliament varies according to the size of the country. The elected members take part in Parliamentary Committees that deal with spec ific aspects of EC policy such as agriculture , international trade or transport. The European Parliament has a role in approving the budget of the EC. The Counci l of Ministers submits a draft of the budget to the European Parliament. The European Parliament also has a role in the legislative process of the EC. Until the Maastricht Treaty it had been a largely co nsultative role. How ever, consulting the Eu ropean Parliament is compulsory in specific areas such as the implementation of competition rules. If the European Parl iament is not consulted , the legislation is annulled . In the new Constitution of the EC a more fundamental role has been laid down for the European Parliament in order to attain a more democratic Europe and to bring Eu ropeans closer to the EC. The Council ..... of Ministers The Council of Ministers is also referred to as the Council of the European Union and it has a rotating membership of representatives at ministerial level. Each representative is authorised to commit his own government. So the Membership of the Counci l depends on the issue that is under discussion. Example The SSE crisis: the Council of Ministers consists of the Ministers of Agriculture of every Member State. Admiss ion of new Member States to the EC: the Council of Ministers consists of the Prime Ministers of every Member State. The functions of the Council are: • making EC policy in all areas; • making decisions, based on proposals of the Commission. Much of the work of the Council is done by COREPER, a permanent body of representatives from the Member States whose function is to examine the proposals of the Commission before the Council makes a final dec ision.

1.2 INTRODUCTION TO EUROPEA N LAW

21

--.L______r-----------------------------------------

European Commission

European Court of Justice

The European Commission The European Commission has 25 Members appointed by agreement of the governments of the Member States. The Commission operates independently of any government, body or person . Every Commissioner has his or her own portfolio, such as cartel issues, defence, international trade, agriculture , etcetera. The functions of the Commission are that of: Initiator = it initiates EC legislation. All EC laws start w ith the European Commission. Guardian of the Treaties = to investigate whether Member States or undertakings live up to the obligations of the EC-Treaty or those imposed on them by the institutions of the EC. If not, they have to stop these Member States or undertakings from infringing on EC law and also have the right to take legal action against that Member State or undertaking. Executive = implementing the policies decided on by the Council. The European Court of Justice The European Court of Justice of the EC only has jurisdiction in those cases where a provision in the EC Treaty gives jurisdiction to this court. In case the conditions of a Treaty Article dealing w ith matters of jurisdiction are met, the European Court of Justice has jurisdiction. As the verdicts given by the European Court of Justice are very important, it is relevant to know which Articles give jurisdiction to the European Court of Justice most often. Therefore this chapter pays special attention to Art. 230 (the action for annulment of a decision of f.e. the Commission) and Art. 234 (the preliminary ruling of the European Court of Justice, an advice asked of the European Court of Justice by a court of law of a Member State on f.e. the interpretation of a Treaty Article relevant in a national lawsuit pending before that court of

I~w) . 1.2.2

Sources of EC law

Apart from the EC-Treaty, several other forms of legislation can be distinguished: Regulations , Directives and Decisions.

Regulations Regulations

Regulations are general rules that apply uniformly throughout the EC, and no further acts of the Member States are necessary. There are Regulations on numerous topics ; a Member State can neither change the application nor the effect of a Regulation on its own territory or its nationals. Directives

Directives

Directives are binding according to the result that must be achieved within a certain period of time by each Member State to which the Directive is addressed. It grants the Member State discretionary powers as to the means of implementation. Note that a Member State can be penalized in case it does not implement the Directive within the prescribed term. In the Francovich case (paragraph 1.3), the Italian national government was held

22

1

INTRODUCTION TO INTERNATIONAL PRIVATE LAW AND EUROPEA N LAW

' , - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - -liable to pay damages to a private person who sued his own state because he suffered damage as result of the fact that the Italian State had not implemented a Directive in time. Either way it is important for a Member State to implement Directives into its own national legal system within the prescribed time limits. Sometimes the Directive is used as a means of legislation in case the EC is convinced that a Regulation will not receive enough support by the Member States for it to be issued.

Example Rules on product liability have to be incorporated in every national legal system of every EC Member State, according to a Directive issued by the European Commission. If the Dutch government does not do so in time , it must pay severe fines to the EC. As the Netherlands is a Member State of this supranational organisation , it must implement this directive in time. As such it can neither object to nor change these rules and this includes their effect on Dutch nationals.

Decisions

Decisions Decisions are individual acts, binding for a Member State or an individual or a group of individuals. An example of this is a fine of the Commission given in a cartel case.

1.2.3 European Court of Justice and preliminary rulings under Art. 234 According to Art. 234 (1) the ECJ shall have jurisdiction to give preliminary rulings concenai ng: (a) the interpretation of this Treaty; and (b) concerning

the validity and interpretation of acts of the institutions of the Community (.. .). European Court of justice

Preliminary ruling

Most of the major verdicts passed by the European Court of Justice have been made under references to Art. 234. Furthermore, most of the cases in this book are the result of such a preliminary ruling under Art. 234. As has been explained earlier, by rendering, for example, a preliminary ruling the ECJ gives its interpretation on a Treaty Article. I.e. what exactly does this Article mean in relation to a particular case? Does the Article have a direct effect or not? By ruling whether it does or not, Art. 234 enables the European Court of Justice to add new law to EC law already in existence; therefore a preliminary ruling given by the European Court of Justice can be seen as a (fourth) source of EC law. A national court is entitled to put questions concerning the validity and interpretation of EC law to the ECJ. National proceedings are suspended during the period of time the ECJ requires to give an answer to the questions raised by the national court. Therefore Art. 234 ensures a uniform interpretation of the Articles of the ECTreaty and uniformity in the application of EC law throughout the EC. The ECJ does not apply the law in the national proceedings. This is still the

1.2 INTRODUCTION TO EUROPEAN LAW

23

--,'------' task of the national court of law. The national court of law will eventually render a verdict and do this in light of the preliminary ruling passed by the ECJ under Art. 234. The ECJ does not rule on the conflict between the two litigating parties.

Preliminary ruling

Conditions for a preliminary ruling under Art. 234 1 'Courts and tribunals' have the opportunity to request a preliminary ruling Under Art. 234 'every court or tribunal of a Member State ' may request a preliminary ruling of the ECJ. The name of the court or tribunal is not relevant. Therefore, any body that exercises a judicial function , makes legally binding decisions on rights and obligations of individuals and is subject to control of public authorities is considered to be a court or tribunal under Art. 234. Example A regular Dutch court of law such as the 'Rechtbank' or the Dutch Supreme Court (Hoge Raad) meets the conditions that are mentioned above concerning a court or tribunal and are therefore entitled to make a reference before the ECJ under Art. 234. An arbitrator appointed under a private contract is not a court or tribunal under Art. 234 since no public authority can exercise any control. In case of arbitration (paragraph 3.5) it is not possible to make a reference to the ECJ under Art. 234.

2 The necessity of the preliminary ruling Another condition mentioned in Art. 234 (2) is that a decision by the European Court of Justice on the question raised by the national court is necessary to enable it (i.e. the national court) to give judgement. In the Cilfit case (paragraph 1.3) the ECJ held that a reference under Art. 234 is not necessary provided: • the question of EC law is irrelevant, or • the question of EC law has already been decided on by the ECJ (= a deed clair) , or • the correct interpretation of EC law is so obvious, that there is no room for any doubt (= also a deed clair). This can be decided on by the national courts of law themselves. If a party claims that the national court of law should make a reference to the European Court of Justice, it is basically up to the national court - based on the criteria from the Cilfit case - to decide whether or not a reference should be made. It is not up to the parties that are litigating.

Shall

3 No judicial remedy under national law Art. 234 (3) states that in a case pending before a court or tribunal of a Member State against whose decisions there is no judicial remedy under national law, that court or tribunal shall bring the matter before the Court of Justice. What Art. 234 (3) covers is not clear and has given rise to controversy as to

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INTRODUCTION TO INTERNATIONAL PRIVATE LAW AND EUROPEAN LAW

.." - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ; ; . .

Shall Must

the exact interpretation of the word 'shalf and where it leaves the criteria put forward in the Cilfit case? Two issues are at hand here: • Does this section only concern the national courts which constitute a court of final resort, such as the House of Lords, the Conseil d'Etat and the Hoge Raad? In general this question is answered affirmatively: a court of final resort shall put the question to the ECJ. Moreover, the ECJ has adopted the view - when reviewing the Costa vs EN EL case -, that lower national courts must refer the matter to the ECJ since there is no right of appeal or other judicial remedy under decisions made by national law. • Where does this leave the national courts of last resort with regard to the word' shalf? A national court of last resort need not make a reference under Art. 234 where one of the three criteria of the Cilfit case has been satisfied. The national court of last resort therefore still has the right to decide itself whether a reference under Art. 234 should be made. However, the lower national court whose decisions offer no right of appeal, must make the reference under Art. 234, regardless of the criteria in the Cilfit case. In schedule 1.1 the procedure of Art. 234 in relationship with the national court system of a Member State is explained.

Schedule 1.1 European law system vs National Law system

I

European law system National law system

European Court of Justice

: 0 0 0 0 0