Basic EU Trading Rights
European Union Rights
European Union law gives Irish residents and Irish businesses very valuable rights in relation to trading with the United Kingdom and the other countries of the European Union (EU) and the European Economic Area (EEA) (which is the EU plus Iceland, Norway, Switzerland).
The original European Union Treaties granted rights to trade with and to provide services and to establish businesses in other EU states. Over time, these general rights have been given real substance and teeth by detailed rules, which give individuals and businesses the ability to avail of these rights. . EU law now gives powerful rights to businesses which give real effect to the right to export to other EU states.
One of the earliest successes of the EU was the completion of a Customs Union between the EU countries. This means that goods originating in one EU Member State may be freely be exported to other Member States. Member States may not impose customs, duties, taxes or quotas. The EU has been rigorous in ensuring States uphold these rights.
A single Common Customs Tariff applies to the whole of the EU. This means that goods imported into the EU are subject to a single customs law and customs tariff. Goods exported out of the EU are subject to similar common rules. Goods in so-called “free circulation” within the EU are free of all customs duties. It is possible to impose restrictions and requirements on the importation of goods on very limited grounds related to public security, health and public policy.
Hidden Barriers to Trade Prohibited
The free movement of goods and services between EU member States could be impeded if national standards and regulations had the effect of creating barriers to free trade, even though they did not seem to be discriminatory on the face of it. National rules on shape, content, package labelling which might not appear to be discriminatory but could in practice affect and inhibit trade.
EU law requires that member States do not discriminate against goods and services from other member States. They may not impose procedures and “invisible barriers” which might in effect impede free trade. The European Union Treaty outlaws laws, measures or practices in one member state which has the effect of restricting trade. Any such indirect discrimination is unlawful.
Marketing rules as to how a product is sold, when it is sold and to whom it is sold can cause indirect restriction on free movement on goods and services. Rules of this nature often have the effect of protecting the domestic producer. Such rules will only be permissible if they protect all businesses and have the same burden at law and in practice on each.
The EU Courts have struck down as unlawful national laws, trading rules and measures which might directly or indirectly, potentially or actually restrict or hinder trade unless there is a very good reason that such rules should apply. For example, EU successfully challenged the Buy Irish campaign by the Irish Government as this amounted in practice to the promotion of Irish goods over foreign goods.
Examples of national laws or rules which EU law prohibits include the imposition of higher standards to imports, procedures that delay importation, additional transport cost, additional licensing requirements, requirements for certificates and approvals that do not apply to home goods. Rules requiring the production of certificates of authenticity or any rules which require that imports being channelled in in such a way that only certain people can import are invalid.
National rules giving preference or an advantage to home products are also unlawful. In the Dundalk Water case, a clause in a tender to supply pipes for drinking water specified that the pipes had to be made by a firm approved by the Irish Standards Body. Only one Irish firm had been approved. The authorities rejected a tender by an Irish/Spanish consortium. The European Court found that the tender discouraged foreign tenders and was therefore invalid.
In another case involving Ireland, Irish law required that all imported goods (but not domestic goods) depicting motifs suggesting they were souvenirs of Ireland e.g. a wolfhound or shamrock had to bear an indication of the country of origin or the word “foreign”. The Court rejected this rule as invalid as it gave an advantage to domestic Irish manufacturers.
In addition to overtly discriminatory rules, EU law makes unlawful rules which do not appear to be discriminatory but place a particular burden on imported goods. For example, rules in the importing state relating to presentation of goods and packaging which compel the importer to adjust the presentation of their products are invalid.
Requirements regarding the composition of a product or its designation can also be invalid as an obstacle to importation. For example, a French rule restricting the words “Edam” to cheese with a minimum fat content 40% was held invalid because it had the effect of excluding German cheese with a fat content of 34%. Another example, was an Italian rule limiting the name “chocolate” to products containing certain vegetable fats which was found invalid as it discriminate against British and Irish chocolate.
Right to Export and Provide Services
EU law grants full freedom to Irish businesses to export goods and provide services to other European states. The EU is a single unit for the purposes of customs laws. There is a single common European customs code and tariff that only applies when goods are exported or imported into the EU. Goods within the European Union are in free circulation and no taxes or similar measure can be imposed on their movement between member states.
The key tax on the supply of goods and services, VAT is an EU based tax. EU rules prescribe common standards and principles to VAT law so that they operate uniformly across the EU. See our separate guide on taxation, and in particular VAT. VAT is organised in such a way as to facilitate the easy exportation of goods and services both within the EU and outside of it.
The European Union Treaty lays the principles of freedom to provide services by a person or company established in one member state to a recipient established in another member state. This right has been given greater effect over time by the provision of common standards over a range of areas. The completion of the process has been accelerated by the EU services directive.
Services cover the whole range of service providers to professional services, trade, tourism, education, health, financial services etc., The right to provide service includes the right to enter the other European Union state, including bringing a workforce for the purpose of providing the service. Member states must not discriminate on the grounds of nationality against those wishing to provide or receive services.
Right to establish in another EU state
A key right under European Union (EU) law is the right of a business established in one EU state to establish itself in another state. A business from outside the EU established in Ireland is entitled, on the basis of being established in Ireland, to also establish itself in the United Kingdom or any other EU member state. The right includes the right for an individual to take up a business as a self employed person in an other EU state.
The rights of establishment applies to both individuals and companies. There is a right to set up and manage a company or firm in another member state. Restrictions on setting up agencies, branches and subsidiaries are prohibited.
EU rules contemplate both primary and secondary establishments. A primary establishment can be set up by incorporating a company in the other member state or by setting up directly either as an individual. Another possibility is that the company sets up a secondary establishment such as a branch or agency or subsidiary in the host member state.
The host member state must accord equal treatment to the company or person exercising this so-called “right of establishment”. This must cover the full social and tax advantages which the “host” state accords to businesses or self-employed person. Once a company has established itself either directly or as a branch, it must enjoy the same benefits and advantages available to national companies and bodies. Obstacles restrictions or hindrances on the enjoyment of freedom of the establishment must be removed.
Harmonisation of Laws
In order to give full effect to the freedoms to sell and provide goods and services throughout the European Union, numerous laws have been passed at European Community level, harmonising standards for products and providing common recognition schemes for qualifications.
There are specific EU regulations in many other areas of service provision. For example, there are directives facilitating the practice of certain professions on a permanent basis in another member state other than where the qualification was obtained
Financial services are an area in which common rules on services have provided enormous benefit for Ireland. In the areas of finance, banking and insurance, there is very comprehensive harmonisation legislation across the EU which makes the laws almost entirely uniform. Mutual funds based in Ireland have been able to freely market their services throughout the EU.
The general principle in the financial services area is that banks, insurance companies, intermediaries etc. can provide services into other EU member states on the basis of being regulated from a standards point of view in their home state and by complying with doing business type rules or consumer protection rules of the host state.