Principle of Proportionality

From Max-EuP 2012

by Oliver Remien

1. Concept and principle of law

The principle of proportionality is attributed as far back as to Aristotle and in broad terms means a reasonable proportion between the means and the purpose. In various legal systems and different branches of law, the principle of proportionality has been developed as a principle or at any rate as a maxim or is at least being discussed. In European Union law, the principle of proportionality holds a prominent and oft-praised position.

2. Proportionality in European Union law

As a general legal principle of Union law (general principles of law), the principle of proportionality has been acknowledged—although initially rarely—since the time of the foundation of the Community, beginning with the Fédération Charbonnière case (ECJ Case 8/55 [1956] ECR 297, 311). In that ECJ judgment, however, the principle served less as a test of an EU measure, but rather as a kind of indirect justification of a stringent law-making measure. It is a ‘creature’ of the case law of the European Court of Justice that is in alignment with divergent Member State legal systems, especially, it seems, German administrative law (see AG Dutheillet de Lamothe in ECJ Case 11/70 – Internationale Handelsgesellschaft [1979] ECR 1125, 1142, 1150). Today, in the text of the Treaty on European Union (EU Treaty), the principle of proportionality can explicitly be found alongside some general language in Art 5 TEU/5 EC.

Even if the principle of proportionality is one of Union law, it plays different roles and in these roles, it carries different weight. On the one hand, the principle of proportionality is and—it seems—was originally a measuring scale for the assessment of the legality of norms and administrative actions of the EU (see 3. below). On the other hand, the principle carries considerable importance in the framework of the application of the fundamental freedoms (see 4. below; fundamental freedoms (general principles)). Furthermore, according to Art 5(1) TEU/5 EC, the principle governs the exercise of the competences of the Union (see 5. below; legislative competence of the EU). Finally, the question of whether there is a principle of proportionality in the private law systems of the Member States (see 6. below) and in the Union (see 7. below) should be raised.

3. Legality of norms and administrative actions of the EU

After the principle of proportionality had become important in the review of norms and administrative actions from 1970 onwards, the ECJ held in its judgment in Schräder (ECJ Case 265/87 [1989] ECR 2237) that due to well-established case law, the principle should be included in and accepted as one of the general principles of community law: ‘By virtue of that principle, measures imposing financial charges on economic operators are lawful provided that the measures are appropriate and necessary for meeting the objectives legitimately pursued by the legislation in question. Of course, when there is a choice between several appropriate measures, the least onerous measure must be used and the charges imposed must not be disproportionate to the aims pursued’ (para 21). The three elements of suitability (appropriateness), necessity and—in the sense of a prohibition of excessiveness—proportionality (proportionality strictu sensu, reasonableness) are thus named. However, the level of scrutiny in European administrative law appears to lag behind that of at least German law, as shown by the examples of the ECJ’s treatment of deposits and milk quotas. Regarding judicial review it has often been criticized since the 1990s that this practice of the ECJ neglects the proportionality strictu sensu and the clear doctrinal structure and grants the organs wide discretionary powers, thus showing a deficit in the protection of individual rights. Thus, in the ‘Banana Market Regulation’ judgment (ECJ Case C-280/93 – Germany v Council [1994] ECR I-4973), the Court granted the Community legislature a ‘broad discretion’ and held, regarding the review of the measure, only a test of whether it was ‘manifestly inappropriate’ to be permissible; the ECJ declined ‘to substitute its assessment for that of the Council as to the appropriateness or otherwise of the measures adopted by the Community legislature’. Secondary legislation of the EU has so far only rarely been measured by the ECJ against the yardstick of the fundamental freedoms; with regard to acts of the EU legislature on the one hand and the Member States on the other hand, there has therefore been a critique of a ‘double standard’ (Dirk Ehlers). Some, however, praise the respect for the separation of powers.

4. Principle of proportionality in the application of the fundamental freedoms

In the framework of the application of the fundamental freedoms, the principle of proportionality plays a major role in the justification test. This is even one of the focal points of the case law of the ECJ on the principle of proportionality. And what is more, the judgments of the ECJ regarding the principle of proportionality for Member States reflect a distinctly more intense degree of scrutiny than those for the acts of the EU institutions (see 3. above), at times they even seem exceptionally strict. Where restrictions on fundamental freedoms can be legitimized by written grounds of justification or by unwritten mandatory requirements of public interest, in each case the principle of proportionality has to be taken into account. Also, in cases of indirect discrimination, this principle is referred to by the ECJ (eg ECJ Case C-350/96 – Clean Car [1998] ECR I-2521, para 31; Case C-281/98 – Angonese [2000] ECR I-4139, para 42). The principle of proportionality here functions as a—based on terminology of German legal writing—‘limit-limit’ (Schranken-Schranke). Some authors see the pursuit of a legitimate objective as part of the principle, but the correct view seems to be that this precedes the test for proportionality.

At an early stage, the ECJ held that the principle ‘underlies’ Art 36(2) TFEU/30(2) EC and derived from it that the authority of the Member States ‘should be restricted to what is necessary to attain the legitimate aim of protecting health’ (ECJ Case 174/82 – Sandoz [1983] ECR 2445, para 18; ECJ Case 247/84 – Motte [1985] 3887, para 23; ECJ Case 304/84 – Muller [1986] ECR 1511, para 23). ‘Objective requirements’ had been referred to before (ECJ Case 132/80 – United Foods [1981] ECR 995, para 28), and in the then-current line of cases on additives, this approach was also followed in the judgment on the German beer purity law (ECJ Case 178/84 – Commission v Germany—Beer Purity Law [1987] ECR 1227, paras 44 ff).

The principle of proportionality emerges in the different fundamental freedoms. In case of the free movement of persons, the freedom of establishment and the free movement of workers, the case law is less strict, but one may wonder whether here the principle of proportionality or rather the concept of the constitutive elements for a restriction already vary. According to settled case law, the national requirements ‘must be such as to guarantee the achievement of the intended aim and not go beyond that which is necessary in order to achieve it’ (ECJ Case C-288/89 – Stichting Collective Antennevoorziening Gouda [1991] ECR I-4007, para 15; ECJ Case C-384/93 – Alpine [1995] ECR I-1141, para 45; similar are: ECJ Case C-164/99 – Portugaia [2002] ECR I-787, para 19; ECJ Case C-94/04 – Cipolla [2006] ECR I-11421, para 64; ECJ Case C-483/99 – Commission v France—Elf Aquitaine [2002] ECR I-4781, para 45; ECJ Case C-185/04 – Öberg [2006] ECR I-1453, para 19). The burden of proof lies with the Member State and it must, inter alia, show the proportionality (eg ECJ Case C-167/01 – Inspire Art [2003] ECR I-10155, para 140; also ECJ Case 251/78 – Denkavit [1979] ECR 3369, para 24) and its contention ‘must be accompanied by an analysis of the appropriateness and proportionality of the restrictive measure adopted by that State’ ie it must submit the exact facts (ECJ Case C-8/02 – Leichtle [2004] ECR I-2641, para 45; ECJ Case C-185/04 – Öberg [2006] ECR I-1453, para 23). Sometimes, however, the ECJ leaves the closer assessment to the national courts (eg ECJ C-94/04 – Cipolla [2006] ECR I-11421, paras 65 ff).

For the suitability, it shall be enough that the aim pursued is in principle attained (see ECJ Case 152/78 – Commission v France—Alcoholic Drinks [1980] ECR 2200, para 18); the measure must not, at the time of its enactment, appear to be ‘clearly unsuitable to the goal pursued’ (ECJ Case 40/72 – Schröder [1973] ECR 125, para 14). Occasionally a residence requirement, for example, can be inappropriate (ECJ Case C-350/96 – Clean Car [1998] ECR I-2521, para 34). In the case of protection of creditors by minimum share capital requirements imposed upon a (quasi) foreign company which was actually administered and controlled by domestic headquarters, the ECJ did not consider the measure to be suitable because no such requirement is made in case of a genuinely foreign company (ECJ Case C-212/97 – Centros [1999] ECR I-1459, para 35), and it did not even consider a further examination necessary as potential creditors were put on sufficient notice about the foreign nature of the company (ECJ Case C-167/01 – Inspire Art [2003] ECR I-10155, para 135). However, an argument based on the inconsistency of a rule can also be rejected with the consideration that in this manner a lesser and more appropriate restriction can be applied (ECJ Case C-262/02 – Commission v France—Loi Evin [2004] ECR I-6569, paras 33 ff). With regard to suitability, sometimes a margin of discretion for the Member States is recognized (ECJ Case C-394/97 – Heinonen [1999] ECR I-3599, para 43).

Of particular importance is the test of necessity. Here it must be asked whether less stringent measures for attaining the same result are possible (ECJ Case 40/82 – Commission v UK [1982] ECR 2793, para 41). In this context, reference may be made to ‘the technical means currently available and their excessive cost’ (see ECJ Case C-262/02 – Commission v France—Loi Evin [2004] ECR I-6569, para 34). There are numerous cases in which the ECJ held that provisions on information duties were sufficient for attaining the desired objectives and that therefore outright prohibitions were unjustified. For example, instead of reserving certain sale descriptions to products with particular qualities fixed by law, it may be sufficient to require a labelling of a product concerning the nature and characteristics of the product for sale (ECJ Case 178/84 – Commission v Germany—Beer Purity Law [1987] ECR 1224, para 35; Case C-184/96 – Commission v France—foie gras preparation [1998] ECR I-6197, para 22).

A consequence of the principle of proportionality is that in unfair competition law, the expectations of the average consumer, reasonably well informed and reasonably observant and circumspect, are decisive (ECJ Case C-220/98 – Estée Lauder—Lifting [2000] ECR I-117, para 28; unfair competition (basic principles)). A system of subsequent declaration can enjoy preference to a prior authorization (see ECJ Joined Cases C-163/94, 165/94 and 250/94 – Sanz de Lera [1995] ECR I-4821, paras 23 ff). A wide discretionary power in the administrative authorization scheme can render the measure unnecessary (ECJ Case C-483/99 – Commission v France —Elf Aquitaine [2002] ECR I-4781, para 51); rather, an administrative authorization scheme must be based ‘on objective, non-discriminatory criteria which are known in advance to the undertakings concerned … [a]nd all persons affected by a restrictive measure based on such a derogation must have a legal remedy available to them’ (ECJ Case C-205/99 – Analir [2001] ECR I-1271, para 38; ECJ Case C-463/00 – Commission v Spain [2003] ECR I-4581, paras 69, 73 ff, also contrast with ECJ Case C-503/99 – Commission v Belgium [2002] ECR I-4809, paras 48 ff). The ECJ demands legal certainty and the existence of legal remedies. A prior administrative authorization scheme is only necessary ‘where a subsequent test is to be regarded as being too late to be genuinely effective and to enable it to achieve the aim pursued’ (ECJ Case C-390/99 – Canal Satélite [2002] ECR I-607, para 39). It may be unnecessary so that a prior declaration scheme is to be preferred (ECJ Case C-300/01– Salzmann [2003] ECR I-4899, paras 50 ff), and even when the requirement of prior declaration is proportionate, the envisaged penalty in case of late submission of the declaration, such as an automatic retroactive invalidity of a contract, can still be disproportionate in relation to the aim pursued (ECJ Case C-213/04 – Burtscher [2005] ECR I-10309, paras 54 ff).

Furthermore, if the schemes of control in the Member State of origin and the host Member State are comparable, a double control is not necessary (ECJ Case 251/78 – Denkavit [1979] ECR 3369, para 23). This rule also applies to job qualifications (ECJ Case C-340/89 – Vlassopoulou [1989] ECR I-2357), but only in a restricted manner in case of biocides (ECJ Case 272/80 – Biologische Producten [1981] ECR 3277, paras 13 ff). Non-discrimination of imported products has already been required in ECJ Case 5/77 – Tedeschi v Denkavit [1977] ECR 1555, paras 42 ff). Early on the ECJ had held, with regard to agencies for entertainers for instance, that the requirement of a licence ‘is not objectively justified when the service is provided by an employment agency which comes under the public administration of a Member State or when the person providing the service is established in another Member State and in that state holds a licence issued under conditions comparable to those required by the state in which the service is provided and his activities are subject in the first state to proper supervision covering all employment agency activity whatever may be the Member State in which the service is provided’ (ECJ Case 110/78 – van Wesemael [1979] ECR 35, para 30); this leads to a restricted country of origin principle. However, according to the ECJ, ‘the fact that one Member State imposes less strict rules than another Member State does not mean that the latter’s rules are disproportionate’ (ECJ Case C-384/93 – Alpine [1995] ECR I-1141, para 51; ECJ Case C-262/02 – Commission v France—Loi Evin [2004] ECR I-6569, para 37).

The case law of the ECJ conveys the impression that reasonableness of the measure plays a marginal role in the test for proportionality. Occasionally, when the expression ‘not disproportionate’ is used, the requirement of necessity seems to be the real point at issue (see ECJ Case C-94/04 – Cipolla [2006] ECR I-11421, para 70). Certain limits on prohibitions—in case of which, however, also the reproach of inconsistency could be at hand—can lead to the fundamental freedom being less restricted and the measure thus being ‘proportionate to the objective pursued’ (ECJ Case C-262/02 – Commission v France—Loi Evin [2004] ECR I-6569, paras 35 and 36).

The question of justification and proportionality also arises where, according to case law, actions of private persons are to be measured against the fundamental freedoms and constitute a restriction (generally fundamental freedoms (general principles); especially free movement of workers, free movement of services, freedom of establishment). Here, the ECJ often does not insist on an evaluation according to ‘mandatory requirements of the public interest’, but deems ‘objective factors’ sufficient (ECJ Case C-281/98 – Angonese [2000] ECR I-4139, para 42; ECJ Case C-415/93 – Bosman [1995] ECR I-4921, para 106 mentions ‘legitimate’ aims) and also allows individuals to rely on justifications on grounds of, for example, public policy (ECJ Case C-415/93 – Bosman [1995] ECR I-4921, para 86). There are thus, it seems, further possibilities of justification than in case of governmental restrictions of the fundamental freedoms. In legal writing, it has even been considered whether actions of private persons should be deemed unjustified only in those instances where they are arbitrary (prohibition of arbitrary decision-making, Willkürverbot). At any rate, the fundamental rights of the private person responsible for the restriction have to be respected, including the freedom of association (ECJ Case C-415/93 – Bosman [1995] ECR I-4921) and the right to take collective action (ECJ Case C-341/05 – Laval [2007] I-11767, para 104; ECJ Case C-438/05 – International Transport Workers’ Federation [2007] ECR I-10779, para 77). With regard to a Member State’s obligation to protect against a blockade of the Brenner corridor, the ECJ has balanced the free movement of goods on the one hand and the freedom of expression and the freedom of assembly on the other (ECJ Case C-112/00 – Schmidberger [2003] ECR I-5659, paras 77 ff).

Recently, a kind of definition of proportionality has emerged in secondary Union law, namely in Art 16(1)(III)(c) of the Services Directive 2006/123: ‘the requirement must be suitable for attaining the objective pursued, and must not go beyond what is necessary to attain that objective’. This provision relates to service transactions, while Art 9(1)(c) on authorization schemes under the freedom of establishment for providers does not mention suitability but only specifies: ‘the objective pursued cannot be attained by means of a less restrictive measure, in particular because a posterior inspection would take place too late to be genuinely effective’. It is apparent that these provisions have been drafted in alignment to the previously discussed case law on primary legislation.

5. Exercise of Community competences

According to Art 5(4) TEU/5 EC, any action of the Community shall not go beyond what is necessary to achieve the objectives of the Treaty. This provision, incorporated by the Treaty of Maastricht, is seen as a positive expression of the principle of proportionality. It makes clear that the principle of proportionality is also valid for the exercise of competences vis-à-vis the Member States.

6. Principle of proportionality and private law (of the Member States)

The principle of proportionality in Union law can, in its role in the field of application of fundamental freedoms (see 4. above), also involve rules of private law; furthermore, the question arises whether a principle of proportionality is part of the private law systems of the Member States.

Insofar as national private law provisions constitute a restriction of the fundamental freedoms, a justification by reference to mandatory requirements of the public interest comes into consideration but must respect the principle of proportionality. Thus, in the field of review of national private law, the principle of proportionality applies: restrictions must be proportionate even in case of mandatory requirements of the public interest. One can also speak of a test of rationality. Concerns about a ‘general test of proportionality for all private law’ (Ernst Steindorff) are, however, counter-balanced by the Keck judgment (ECJ Joined Cases C-267/91 and 268/91 [1993] ECR I-6097) and case law. In view of the fact that the EU itself is bound by the fundamental freedoms, the test of proportionality applies also to the provisions of EU private law (see 7. below).

Another question is whether, irrespective of Union law, private law of the Member States is subject to a principle of proportionality or itself contains such a principle. This question, however, is rarely dealt with and appears to have scarcely been analysed from the perspective of comparative law. Sometimes it is argued that private law is also subject to the principle of proportionality. Some of the authors in this context expressly borrow from the developments in public law. However, this cannot be considered as a generally accepted opinion. To be sure, however, where rights of private law character are exercised, often considerations of reasonableness have to be made. Areas especially worth mentioning are company law, insurance law and rules on industrial action, though in general private law other examples may be found, such as preconditions of grounds for justification of formally illegal acts, usury, control of contractual penalty clauses, exercise of a right of retention etc. At any rate, it is to be emphasized that a general test of proportionality is not acknowledged for private actions—it would indeed be too strong an encroachment on private autonomy.

7. Principle of proportionality in EU private law

Just as with private law of the Member States (see 6. above), EU private law will, where subject to the fundamental freedoms, have to satisfy the principle of proportionality. This means that EU private law also may not restrict the fundamental freedoms in a disproportionate manner. As examples, one might envisage the scope of application of utilities and public procurement rules and perhaps the consistency of the provisions granting a right of withdrawal in the area of consumer protection. On the basis of the fundamental freedoms, the principle of proportionality would then be a formal principle for EU private law.

Furthermore, the question can be asked whether EU private law not only is, as to its content, in conformity with the principle of proportionality, but also whether it establishes a rule binding actions of private persons to a principle of proportionality. As this (as already shown) is sometimes discussed in the academic world in regards to Member State private law, it is a natural corollary to consider this also for EU private law. In the current state of development of EU private law, elements of proportionality can be found, but, so it seems, a general principle of proportionality is not discernible: Art 3(1) of Dir 93/13 on unfair terms in consumer contracts regards a contractual term that has not been individually negotiated as unfair if, ‘contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer’. The Directive on the Sale of Consumer Goods (Dir 1999/44) recognizes the ‘appropriate reduction made in the price’ in Art 3(2) and (5) and excludes claims of repair or replacement, if these are ‘disproportionate’; subsection 2 provides for cases where the remedy is ‘disproportionate’. The Directive on Credit Agreements for Consumers (Dir 2008/48) recognizes a ‘fair and objectively justified’ compensation in case of early repayment. Further examples could probably be found. A kind of kinship to the principle of proportionality exists for the prohibition on the abuse of rights, which is also acknowledged in Union law (ECJ Case C-373/97 – Diamantis [2000] ECR I-1705). However, a general principle of proportionality as a yardstick for review of acts or omissions in the realm of private law is to be rejected in EU private law just as in private law of the Member States for it would erode private autonomy. Accordingly, recent academic rules and principles or restatements do not contain anything of this kind.

Literature

Franz Wieacker, ‘Geschichtliche Wurzeln des Prinzips der verhältnismäßigen Rechtsanwendung’ in Festschrift Robert Fischer (1979) 867; Hans Kutscher and others, Der Grundsatz der Verhältnismäßigkeit in europäischen Rechtsordnungen (1985); Ernst Steindorff, ‘Anmerkung zu EuGH 2.8.1993—verb. Rs. C-259, 331 und 332/91 (Allué II)’ (1994) JZ 95; Ulrich Everling, ‘Will Europe Slip on Bananas?’ (1996) 33 CMLR 401; John A Usher, General Principles of EC Law (1998); Eckhard Pache, ‘Der Grundsatz der Verhältnismäßigkeit in der Rechtsprechung der Gerichte der Europäischen Gemeinschaft’ (1999) Neue Zeitschrift für Verwaltungsrecht 1033; Thomas von Danwitz, Der Grundsatz der Verhältnismäßigkeit im Gemeinschaftsrecht, Europäisches Wirtschafts- und Steuerrecht (2003) 393; Oliver Koch, Der Grundsatz der Verhältnismäßigkeit in der Rechtsprechung des Gerichtshofs der Europäischen Gemeinschaften (2003); Jürgen Schwarze, Europäisches Verwaltungsrecht, Entstehung und Entwicklung im Rahmen der Europäischen Gemeinschaft (2nd edn, 2005); Dirk Ehlers, ‘§ 7: Allgemeine Lehren’ in Dirk Ehlers and Ulrich Becker (eds), European Fundamental Rights and Freedoms (2007).

Retrieved from Principle of Proportionality – Max-EuP 2012 on 02 October 2022.

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