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Life won't be easy for food makers in EU25

24-Dec-2003

The movement of foodstuffs within the European boundaries will be changed forever once the next step towards an enlarged Europe takes place. Food and Life Sciences lawyer Raymond O’Rourke takes us through a detailed look at some of the legal issues accession is likely to throw up.

While the coming months will see the final tranche of referenda by Accession countries, many lawyers may believe that the EU enlargement is all but completed, O’Rourke points out.

On 1 May 2004, 10 Central & Eastern European countries will accede to the European Union and the immediate discussion item will be a new Treaty reforming the institutional make-up of the EU so as to cater for a Europe of 25 Member States.

Issues of free movement of goods, in particular foodstuffs, might not seem to be one of the controversial items that will exercise European politicians soon after this Enlargement, but a failure by the EU to defend the legal basis of the Internal Market in recent years, has left open the possibility that the first adjustments of the Accession countries to EU membership will be over free movement of foodstuffs/food safety matters.

Free movement of foodstuffs

Existing EU legislation aims to facilitate the movement of all goods in order to create a barrier-free internal market, O’Rourke stresses. However, Member States have the power to restrict the movement of food in the interest of ‘the protection of health and the life of humans’. Naturally all such restrictions should be justified and should not have the express intention of causing a trade barrier.

The European Court of Justice’s ruling in the Cassis de Dijon (1979)[ECR 1979 p.649] case proved to be a landmark case for the establishment of the Internal Market. It arose when a German firm was refused permission to import a consignment of Cassis de Dijon liqueur because of its low alcoholic strength that rendered it incompatible with German legislation.

The German authorities sought to use EU legislation stating that they banned this product so as to protect the health of their consumers – a decision which the courts overthrew because a food product lawfully produced and marketed in one Member State should be able to circulate freely throughout the Internal Market. This principle has become one of the cornerstones of EU Food Law, as well as the Internal Market.

In the wake of Cassis de Dijon, the Commission attempted to re-orientate its approach to food law, O’Rourke says. The Commission introduced its new approach in the 1985 Communication entitled Completion of the Internal Market: Community Legislation on Foodstuffs. It stated that EU legislation on foodstuffs should be limited to provisions justified by the need to protect the public health, provide consumers with information and protection as well as ensuring adequate controls on foodstuffs.

Shortly after this Communication, the Commission proposed to the Council a number of framework Directives dealing with these essential requirements, which were subsequently adopted. These included framework Directives on additives, labelling, foods for particular nutritional uses, hygiene and official controls.

Essentially, though, in the run-up to the establishment of the Single Internal Market in 1992, EU food law was still concentrated on questions of trade and free movement of foodstuffs. Consumer protection and public health were playing second fiddle to issues of trade.

The BSE and Dioxin crises altered that approach - so much so that following a White Paper on Food Safety (2000), the Commission has established a European Food Safety Authority, transformed the official control of foodstuffs for the entire EU and is presently enacting 84 new pieces of new and amending food legislation.

Legal certainty

Since Cassis de Dijon, a large body of EU case law has been established highlighting the various measures which have been found to constitute quantitative restrictions as defined in the existing EU Treaty on trade.

The measures which have therefore been judged to be a barrier to trade and a hindrance to the smooth functioning of the Internal Market include: import licences, mandatory declarations of origin, import inspections, limited customs facilities, undue customs delays, mandatory representation in the importing Member State, advertising restrictions, restrictions on sales promotions, ban on the sale of goods and national food compositional/food quality rules.

Although infringement cases in the food sector continue to represent nearly a quarter of all Commission actions every year, the numbers are far smaller than 10-15 years ago. With the establishment of the Internal Market and the adoption of numerous harmonising legislative measures for foodstuffs, the direct influence of Cassis de Dijon has dwindled in relation to EU Food Law.

Yet another recent European Court case concerning BSE has highlighted once again the importance of the principles established by Cassis de Dijon, principles which will have ever more resonance in the context of Enlargement.

French made to buy Brit beef

In the first case - Commission v. France (2001) - the European Court ruled that France’s refusal to allow British beef to be sold in France even after the UK had introduced a stringent traceability scheme approved by the EU, was unlawful and contrary to EU law, said O’Rourke.

The Commission following various verification measures and the introduction of a date based export scheme (DBES) for the UK, decided to lift the ban on the export of British beef to other Member States as of 1 August 1999. The French refused to implement this Commission Decision as the French Food Agency (AFFSA) disagreed with the scientific risk assessment provided by the EU’s Scientific Committees as evidence for lifting the ban on UK beef.

The European court ruling outlawing their action took two years to be finalised. Even at that stage, France continued to refuse to lift their unilateral ban on British beef, although the court threatened daily fines [€158,280] and other sanctions.

In the intervening period, UK beef lost its market share in the French marketplace which has been estimated to have been worth €300 million annually. At the last moment France agreed in October 2002 to cede and permit British beef to be sold on the French market. The ability of Member States to use unilateral bans as a trade barrier in this fashion is in total variance with the principles establishing the Internal Market as enshrined in the Cassis de Dijon judgement.

The case points to a lack of ‘legal certainty’ in the present EU judicial system. The long drawn outcome of the UK-French Beef War case was a travesty for the principles of free movement of goods enshrined in the EU Treaty. Sadly, the reaction of the EU institutions to such a flagrant violation of EU law by France has been conspicuous by its silence, O’Rourke says.

Enlargement

While the European Court has been making judgements in relation to BSE, Accession negotiations with 10 new Member States have been progressing and food safety has been one of the most difficult and protracted issues to finalise.

The agri-food industry is vitally important to many of these Accession countries and these countries have had to allay the concerns of the EU over the possibility of unsafe food products from third countries like Russia, Ukraine and Moldova slipping through weak border inspections posts and entering the Internal Market.

In response to these concerns, a special ‘safeguard clause’ [Article 38] has been inserted in the Treaty of Accession providing the EU with draconian emergency powers to seal-off one of these countries if a food safety problem occurs.

Safeguard measures may be taken under Article 38 up to three years after accession and may remain in force beyond this period. Obviously such safeguard measures should not be invoked as a means of arbitrary discrimination or as a disguised restriction on trade between Member States. The safeguard measures may even be invoked before accession on the basis of Commission advice. Obviously, the safeguard measures shall be maintained no longer than strictly necessary and in any case, will be lifted when the relevant commitments are implemented.

The evidence at present is that Agriculture and Trade Ministers from Estonia to Slovenia are imposing increased import duties and minimum import prices, enhancing domestic and export subsidy programmes and tightening veterinary checks, as a way of attempting to alleviate the market situation for their agri-food producers.

For the 10 Accession countries, this will be the last chance to indulge in such strategies before their agri-food markets are thrown open to the competitive pressure of a borderless Internal Market, O’Rourke stresses. The scramble to protect the market has been prompted above all by Poland’s decision in February 2003 to spend an extra PZ98 million (€43 million) on pigmeat export subsidies, recognised as the most trade-distorting of all agricultural subsidy types.

The EU approach to accession – demanding that these countries fully transpose all EU food laws and accept special safeguard clauses in the Treaty of Accession seems eminently sensible. Yet, O’Rourke questions, is the EU’s approach sensible when already the Commission is threatening Poland with these safeguards powers even before she has had a referendum to join the EU?

The EU is threatening a prospective Member State that as indicated is quite prepared to use major trade-distorting measures in the run-up to EU membership as a means of protecting its agri-food industry. In its efforts to protect consumer health, the EU has forgotten that it has left open a major loophole – the lack of legal certainty in relation to the Internal Market. By failing to deal adequately with the fallout of the UK-French Beef War case which has so undermined the basis of the Internal Market, the EU has created a legal vacuum which may be exploited by new Member States.

Countries like Poland, whether in an effort to protect their own agri-food industries or in retaliation against what they perceive as unfair use of emergency powers by the EU, may retaliate by banning various EU food products from their own market. They have the example of France, demonstrating that ultimately a Member State will never be fined or sanctioned for flouting EU law, and that such threats are ’toothless’, O’Rourke says. These new Member States will be happy to be able to demonstrate that even if perceived as being ‘New Europe’ they can follow ‘Old Europe’ when it suits them.

Judicial reform

The European food industry is the leading industrial sector in Europe – it is worth €600 billion, is the third largest employer [2.6 million], comprising 26,000 companies and is a leading exporter totalling €45 billion. Can such an industry be at the mercy of such events as the UK-French Beer War, O’Rourke questions?

His answer is that action is needed immediately in the discussions on reforms to the EU institutions/Treaties so as to ensure that a system is put in place whereby major ‘political’ disputes involving the free movement of foodstuffs/goods can be dealt with expeditiously by the European Court. Expeditious legal procedures exist in all national legal systems and now need to be introduced at EU level.

It is interesting to note that in all the discussions taking place on a draft EU Constitutional Treaty there has been very little debate about the functions and institutional importance of the European Court of Justice, O’Rourke stresses. Media headlines have been all about a possible European President, EU Minister of Foreign Affairs, qualified majority voting and subsidiarity. This is a pity, as unless EU Law is adequately enforced by the European Court, the citizens of Europe cannot have faith in the integrity and importance of the EU to their daily lives.

If the EU fails to uphold the integrity of the Internal Market in this fashion in a Union of 15 Member States, it is unlikely to do so in a Union of 25 Member States. The delay of two years in order to get legal rulings on highly contentious political issues involving the smooth functioning of the Internal Market is likely to get worse in a Union of 25 Member States.

Sadly, the inadequate response of the EU to this pending backlog of legal cases does not bode well for the European food industry. The new Member States will be able to conveniently respond that the issue is before the European Court and everyone must await those legal proceedings. The only faint hope is that when this draft EU Constitutional Treaty is discussed by the soon to be established Intergovernmental Conference (IGC), that the important role of the European Court of Justice in upholding EU law will gain the prominence it rightly deserves.

If not, O’Rourke ultimately believes that there are certain to be many major political skirmishes between ‘Old’ and ‘New’ Europe in the coming years, which will further undermine the integrity of Internal Market as well as cause major disruption to the European Food Industry.

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