INTRODUCTION

Article 56(1) TFEU provides:

The concept of “services” is a relatively recent one, both in economic and in legal terms. While from today’s perspective the provision of services has always been an important field of the economy, it was only in the 1940s and 1950s that scholars started to conceptualize services as a distinct economic sector. In comparison to trade in goods, the legal framework for transnational trade in services began to evolve with a significant time lag. Negotiations for a global agreement on trade in services were initiated only in the 1980s, during the Uruguay Round of multilateral trade negotiations, and the General Agreement on Trade in Services (GATS) which emerged from them, came into force in 1995. The number of the Court’s cases in the field of services grew significantly during the same period.

Over the past decade, legislation and adjudication on the free movement of services has been one of the most dynamic, but also one of the most controversial, of the Treaty freedoms. The dynamic character of the field is owed to the fact that the integration of a European market in services essentially dates back only to the 1980s and 1990s. This means that a considerable number of regulatory questions are not yet fully settled, and that the legal framework has not yet been fully stabilized. Consequently, controversies persist, as unsolved regulatory questions are liable to attract different, sometimes conflicting, answers. A central field of controversy has been the area of public services. The main question in this regard has been the following: what does EU law require in a situation where a private provider wishes to offer the same service as is offered by a public provider? The question has important implications, because the issue of public services has been the center of a political conflict since the 1980s: some policymakers believed that private enterprises could provide public services more efficiently than public operators, whereas others believed that public operators were more efficient and could serve the public interest better.

INTRODUCTION

Many Western countries reacted to the Great Depression of the 1930s with massive protectionism. After the Second World War, Western industrialized countries attempted to quickly establish a modicum of global free trade. Trade liberalization in Europe took place under the auspices of the Organization for European Economic Co-operation (OEEC) (now the OECD), an organization that had been created in 1948 to administer the postwar Marshall Plan. At the same time, the General Agreement on Tariffs and Trade (GATT) was conceived to liberalize trade on a global level. The European Economic Community (EEC) was therefore created by the Treaty of Rome in 1957 in a climate of trade liberalization.

In the 1950s, trade in goods was at the core of all trade liberalization efforts (in contrast, cross-border trade in services became a significant phenomenon only in the 1980s and 1990s). This is reflected in the legal structure of the EEC: its core was constituted by a customs union, which provided for the free movement of goods among the Member States unrestrained by tariffs, quantitative restrictions or measures having equivalent effect. However, the EEC was more than just a customs union: it aimed at a relatively far-reaching integration of the economies of the Member States, which provided not only for factor mobility (i.e. mobility of labor and capital), but also for a partial harmonization of the relevant national legislation. According to a well-known scheme of regional integration developed by economist Bela Balassa in the early 1960s, European economic integration as envisaged by the Treaty of Rome was considered already well-advanced (see Table 3.1).

INTRODUCTION

The European Union (EU) was founded in 1957 as an economic organization, as is indicated by its original name – the European Economic Community (EEC). The creation of an internal market among the European countries has been its central endeavor, and remains so to this day. According to Article 26(2) of the Treaty on the Functioning of the European Union (TFEU), “the internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties.” Since the Union’s inception, however, its economic objectives were considered to be part of a broader, political mission. In the Union’s early days, this mission was to foster general rapprochement between the Western European countries and to enable reconciliation of Germany with its former enemies in the Second World War (as well as to ensure the long-term containment of Germany’s re-emerging economic power). While the political environment has changed in significant ways since then, the political ambition to promote increased openness of the European countries toward each other has remained unchanged. Article 1(2) TEU holds: “This Treaty marks a new stage in the process of creating an ever closer union among the peoples of Europe, in which decisions are taken as openly as possible and as closely as possible to the citizen.” The creation of such an ever-closer union among the European peoples appears as the EU’s central project, which the internal market is intended to support. The internal market must therefore be understood within the context of the Union’s broader, political goals.

INTRODUCTION

Article 63 TFEU deals with the free movement of capital and of payments. The former concept describes any kind of investments in bonds, shares or real estate as well as loans, gifts, inheritances and other transfers. The latter describes transactions that constitute remuneration for goods, employed or self-employed services or capital provided, and therefore are a necessary correlate to the other Treaty freedoms.

While the free movement of capital was not fully implemented until the late 1980s, the movement of payments was already liberalized in the decade that followed the signature of the Treaty of Rome. Article 106 EEC required Member States “to authorise, in the currency of the Member State in which the creditor or the beneficiary resides, any payments connected with the movement of goods, services or capital, and any transfers of capital and earnings, to the extent that the movement of goods, services, capital and persons between Member States has been liberalised pursuant to this Treaty.” As the Treaty freedoms had to be realized by the end of the transitional period in 1969, Member States could no longer restrict the movement of payments from this point onward.

INTRODUCTION

Union citizenship was introduced in 1992 by the Treaty of Maastricht. In the course of the two decades since then, Union citizenship has become one of the Union’s most ambitious legal projects. Union citizenship is, in the words of the Court, “destined to be the fundamental status of nationals of the Member States.”

Today, Union citizenship is considered not only an emblematic showpiece of evolutionary progress in European integration, but also tangible proof that the Union has transcended its original confines as a regional trade organization. Yet it is noteworthy that there have been important initiatives predating the Maastricht Treaty that created rights for individuals beyond a narrow economic scope. As early as 1951, Walter Hallstein, the Commission’s first President, described the freedom of movement of workers in the European Coal and Steel Community as coming close to what he called a European citizenship; and, in 1968, the Commission’s Vice-President, Lionello Levi-Sandri, declared that the free movement of economically active persons “represents something more important and more exacting than the free movement of a factor of production. It represents rather an incipient form – still embryonic and imperfect – of European citizenship.” And, indeed, the Union’s early legislation on worker mobility has moved beyond the narrow framework of mere economic mobility. Regulation 1612/68 (1968), for example, granted broad equal treatment rights not only for workers but also for their families in areas such as social and tax advantages and access to the education system. The underlying assumption was that workers would not exercise their mobility rights if they were treated like second-class citizens. Advocate General Jacobs took the view in Konstantinidis (1993) that:

INTRODUCTION

The freedom of movement for workers is a core feature of the European Union and, from its inception, distinguished it from other regional economic organizations. The European Coal and Steel Community (ECSC, 1951) established the mobility of workers in the coal and steel sectors. The Treaty of Rome (1957) provided for the gradual establishment of a general freedom of movement of workers in the EEC. Article 48(1) EEC provided: “Freedom of movement for workers shall be secured within the Community by the end of the transitional period at the latest.” Even before the end of the transitional period in 1969, the Community institutions began to implement the Treaty provisions governing the free movement of workers. An early example is Directive 64/221/EEC on the “co-ordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health.” It limited the discretionary powers of the Member States to restrict movement of the citizens of other Member States. One of the most important acts of legislation was Regulation 1612/68, spelling out the principle of equal treatment with regard to employment. Directive 68/360/EEC, furthermore, eliminated many restrictions on movement and residence, creating movement and residence rights which, a few years later in the 1970s, were extended to self-employed persons (see Chapter 6 below). The early European legislative measures aimed at establishing a far-reaching principle of equal treatment which the Court then further generalized. In Sagulo (1977), the Court held that “community law . . . is based on the freedom of movement of persons and, apart from certain exceptions, on the general application of the principle of equal treatment with nationals.” It extended the principle of equal treatment to areas that it held to be important to facilitate mobility and the integration of the worker and his or her family into the host society.

INTRODUCTION

Article 49(1) TFEU provides:

It grants individuals the right to establish themselves in another Member State to pursue an economic activity on a self-employed basis. The Court held in Gebhard (1995) that the rationale of the freedom of establishment is “allowing a [Union] national to participate, on a stable and continuous basis, in the economic life of a Member State other than his State of origin and to profit therefrom, so contributing to economic and social interpenetration within the [Union] in the sphere of activities as self-employed persons.”

According to the EEC Treaty, freedom of establishment had to be implemented over the course of the transitional period, which ended in December 1969. This process was laid down in the “General Programme for the abolition of restrictions on freedom of establishment” (1962). In particular, the General Programme mapped out the liberalization of the various economic sectors through numerous legislative measures. By the early 1970s, broad economic sectors, including commerce, industry and crafts, had been opened up to European competition. After the transitional period had ended, the freedom of establishment became directly effective. As a consequence, the Court became increasingly relevant in the continuing integration of the European markets. This was particularly the case in areas where no consensus among the Member States for harmonizing measures could be found.

Preliminary remarks

The riotous fiascos in Seattle, in London and Berlin on May Day and, more recently, in Nice at the summit of the European Union have at least one thing in common: some measure of popular disaffection with the workings of intergovernmental constitutions. It therefore seems appropriate and timely to raise certain issues of World Trade Organisation (WTO) institutional reform again. After all, such debates, both in governmental and academic circles, have all along accompanied the birth and lifetime of the General Agreement on Tariffs and Trade (GATT) and, of course, featured prominently immediately prior to, during and after the Uruguay Round of Multilateral Trade Negotiations (UR). Furthermore, “constitutionalism,” underpinning a third liberal revival, “turning to Market Democracy,” has become part of building a new post-Cold War world which had produced both an age of uncertainty about basic goals and a shift in “world views” or simply “the mood of the time.” It also prompted some socio-economic engineering aimed at changing the socio-economic and socio-ecological context of a more complex and interdependent international economic order, a kind which had previously led to a resounding defeat for the draft Havana Charter and led to the claims made by some Developing Countries (DCs) at the time that “the apparent equality of the procedure can involve the most tremendous and unjust inequalities.”