European Court of Justice (ECJ) and European Economic Constitution: Difference between pages

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by ''[[Jörg Pirrung]]''
by ''[[Ernst-Joachim Mestmäcker]]''


== 1. Function ==
== 1. Overview ==


The Court of Justice of the [[European Union]] (ECJ) shall ensure, within the limits of its jurisdiction, that the law is observed in the interpretation and application of the treaties including the Euratom Treaty as well as of the secondary laws of the Union (Art 19(1) EU (formerly Art 220(1) EC), Art 136(1) EAEC, the parallel provisions of which will not be mentioned in the following text). The ECJ is, in substance, the ‘constitutional court’ of the Union. Its most important functions are the issuance, on request of a court of a Member State, of a preliminary ruling on the [[Interpretation of EU Law|interpretation of EU law]] or the validity and interpretation of acts of the Union institutions, proceedings it undertakes based on actions for infringement of obligations under Union law and on actions of the institutions against each other or against Member States, Arts 258 ff TFEU/226 ff EC, and, finally, giving opinions on the compatibility of envisaged international agreements with the EU Treaty (Art 218(11) TFEU/300(6) EC). The ECJ acts as the last instance of Community jurisdiction. Each decision of the [[General Court of the European Union (GC)]], the former Court of First Instance of the EC (CFI), is subject to appeal, although solely on a point of law based on the violation of EU law (Art 256(1)(I)2 TFEU/ 225(1)(I)2 EC). Even in cases where the GC decides on appeals lodged against decisions of the Civil Service Tribunal or eventually—in the future—on questions referred to it for a preliminary ruling in specific areas, its decisions may, exceptionally, be subject to review by the ECJ, on request of the First Advocate General of the ECJ, where there is a serious risk of the unity or consistency of EU law being affected (Art 256(2)2, (3)2 TFEU/225(2)2, (3)2 EC). In its judgment of 17 December 2009 in Case C‑197/09 – ''RX‑II'','' M v European Medicines Agency (EMEA)'' (nyr) the ECJ, for the first time, decided that a judgment of the (then-titled) CFI affects this unity and consistency. Namely, the ECJ remanded and set aside certain parts of a CFI judgment where the CFI, as appeal court, had interpreted the expression ‘where the state of the proceedings … permits’ in Art 61 of the ECJ Statute as allowing it to dispose of the case in question, rule as to the substance on the claim and order the EMEA to pay [[Damages|damages]], despite the fact that the appeal before it concerned only the examination of the treatment given at first instance to a plea of inadmissibility and that, as regards the aspect of the case which was disposed of, there had been no exchange of arguments before it or before the European Union Civil Service Tribunal as the court seized at first instance.
The [[European Union]] (EU) is founded upon the Treaty on European Union (TEU) and the [[Treaty on the Functioning of the European Union (TFEU)]]; [[EC Treaty]], [[EU Treaty]]. The EU is successor to the [[European Community]]. The Union implements its tasks through the establishment of an internal market and an Economic and Monetary Union (Art 2 TEU/1 EU). The Union’s legal order is according to the ECJ’s jurisprudence the functional equivalent of a constitution. This constitution is an economic constitution insofar as it provides for principles, aims and instruments applicable to the monetary union, the internal market, and the system of competition. The internal market is the aim and'' ''instrument of an economic space without frontiers. As internal frontiers are eliminated it becomes the Union’s permanent task to maintain the internal market governed by the principles of free trade and competition.


In 1952, the ECJ came into function in Luxembourg as the court established by the ECCS Treaty which expired in 2002. In the beginning, it had seven judges and an Advocate General. On 1 January 1958 the court’s jurisdiction was extended to the EEC and Euratom Treaties. Up to 1989 the ECJ was the only court of the Union; so it also had jurisdiction in civil and administrative matters including those regarding EC officials. Since then, more and more administrative and civil matters have been transferred to the GC. The ECJ remains the Union court essentially responsible for principal questions of Union law and its eventual development as well as its interpretation, specifically, among others, in harmonized civil law areas. As was the case for the whole Union, the extension of the EU in 2004/2007 by 12 new Member States was a great challenge for the European judicial instances.
Among the principles to be observed by the Member States and Union in the implementation of monetary policy are an ‘open market economy with free competition’ (Art 3(3) TEU/4(1) EU and Art 127 TFEU/105 EC; [[Competition (Internal Market)|competition (internal market)]]). The treaty’s general principles do not give rise to specific duties of Member States and do not create individual rights (ECJ Case 126/86 – ''Giménez Zaera'' [1987] ECR I‑3697 para 19). These principles are nevertheless relevant: with the extent of the market the overall economic advantages of cross-border division of labour grow; the cooperation of undertakings on markets contributes to efficient allocation of resources. The social market economy mentioned in Art 3(3) TEU/4(1) EU, which is a condition for the accession of new Member States, contributes to the separation of power between governments and industry. This kind of economic order limits the Union’s claim or temptation to centralize regulatory powers and simultaneously limits the impact on Member States’ sovereignty. As a matter of law these principles prevent a policy which implements the aims of Art 2 TEU/1 EU through central planning.


== 2. Organization ==
The aims of Art 2 TEU/1 EU become legally relevant in the context of the specific means provided for in the treaty. In particular, they are relevant for the interpretation of specific Union law provisions. The connection of aims and means may be so strict as to make an aim itself binding. Residual competition is a precondition for the practical effectiveness of a great number of specific provisions of the treaty. This is why restraints of competition that exclude effective competition in the common market are absolutely prohibited (ECJ Case 6/72 – ''Continental Can'' [1973] ECR 215).


The ECJ comprises one judge per Member State, Art 19(2)(1) EU/221(1) EC. Since 1 January 2007, it has, consequently, consisted of 27 judges and (as before) eight Advocates General (Art 252 TFEU/222 EC). It is the duty of an Advocate General, acting with complete impartiality and independence, to make, in open court, reasoned submissions on cases which, in accordance with the Statute of the ECJ, require his involvement. Such reasoned submissions are given on the same basis as the decisions of the ECJ itself, normally some weeks after the oral hearing. These opinions are extensive reports on the factual and legal situation of the case, concluding with a proposition for the operative provisions of the future judgment of the ECJ. As a rather general rule of thumb the ECJ decides in accordance with the report of the Advocate General in about 80 per cent of the cases.
== 2. Constitutionalized economic liberties ==


Judges and Advocates General must be persons whose independence is beyond doubt and who possess the qualifications required for the appointment to the highest judicial offices in their country or who are jurisconsults of recognized competence. Before fulfilling their function with the ECJ, most of them were high ministerial officials, politicians, judges, university professors, barristers or advocates. They are appointed by common accord of the governments of the Member States for a term of six years with partial replacement every three years. They may be reappointed, even repeatedly. On average, the duration of their function with the ECJ is slightly more than nine years. Four members of the ECJ were first Advocates General before becoming judges; eight were former judges of the GC.
The European economic constitution is frequently discussed in comparison with its German origin. We have to distinguish formal economic constitutions as part of the political constitution which contain principles for the regulation of the economy (eg Weimar Constitution with a chapter on ‘The Economy’; Constitution of the German Democratic Republic). In this tradition the economic constitution is to establish political prerogatives for the organization and regulation of economic activities. The idea to develop constitutional principles for an economic order based on economic liberties was not considered or treated as self-contradictory. The theory of an economic constitution has been developed in opposition to policies of central economic planning, ad hoc intervention and discretionary administrative controls. Determinative are principles derived from individual liberties that inform the governance of the economic system as a whole. These principles coincide with the separation of government and economy in the tradition of separation of powers, with the legal guarantee of individual liberties, the maintenance of competition and simultaneous limitation of economic power. The implementing economic policy takes into account and gives priority to individual economic planning on competitive markets with free prices on the basis of a stable monetary order. These ideas were instrumental in shaping economic policies of post-war Germany. Through the Treaty of Rome (1958) these principles became directly relevant for the European Community and its economic constitution.


The organization of the ECJ is regulated in the Protocol on its Statute and in Rules of Procedure established by the ECJ with approval of the Council, acting by a qualified majority (Art 253(6) TFEU/223(6) EC). The judges elect, in a plenary session, the President of the court from among their number for a term of three years; re-election is possible. Presidents of the ECJ in the past have been: Massimo Pilotti, Italy (1952–58), Andreas Matthias Donner, the Netherlands (1958–64), Charles Leon Hammes, Luxembourg (1964–67), Robert Lecourt, France (1967–76), Hans Kutscher, Germany (1976–80), Josse J Mertens de Wilmars, Belgium (1980–84), Alexander J Mackenzie Stuart, United Kingdom (1984–88), Ole Due, Denmark (1988–94) and Gil Carlos Rodrigues Iglésias, Spain (1994–2003). Since October 2003 Vassilios Skouris, Greece, has been President.
The idea of constitutional liberty in civil society independent from the political constitution or as an annex thereto is a product of the European Enlightenment. In its application to the economy, to division of labour and decentralized economic planning on markets, it was developed by authors like Adam Smith, David Hume and Adam Ferguson. Even before the French and US declarations of human rights, they explored the systemic relevance of law and economics, of mutually respected individual liberties, particularly freedom of opinion, property rights, limited government and the rule of law. Rules of just conduct adjust economic liberties to the requirements of competitive markets: without the institution of competition the profit motive is a very real social danger (Franz Böhm). Without preventive and remediable legislation, governmental as well as private monopolies or restrictions of competition will be used to limit production and interfere with equal liberties of rivals and consumers.


The judges also elect the registrar who is responsible for the administration of the ECJ, for a renewable mandate of six years. He stands at the head of four general directions competent for personnel and finance; infrastructure; library, scientific service and documentation; and translation, also having this directing role insofar as they fulfil their functions with regard to the GC and the Civil Service Tribunal. The scientific service has, among others, the task of establishing compilations of comparative law on request of the chambers of the three jurisdictions or the respective full courts. The results of these compilations cannot be regularly seen externally, except where there are some hints to them in submissions of the Advocates General. More than half the personnel of the ECJ are working in the translation and interpretation services.
Within the framework of Economic and Monetary Union Member States retain their own welfare agenda and responsibility. Union policies that may interfere with the internal market and competition system take into account competing Member States’ interests. Examples are industrial policy, economic and social cohesion, research and technological development, social policy and the environment. In view of the economic constitution this situation is one of opportunities and risks. The particular opportunities are due to strict Union law provisions guaranteeing the priorities of the internal market and competition. These strict provisions are not subject to political bargaining. The risks follow from the temptation to give priority to national protectionist policies at the expense of the Union’s public interest. Where Union law recognizes conflicting aims they have to be harmonized and must be implemented within the limits of strict provisions. Where effective competition prevails, rule-governed economic liberties tend towards positive overall welfare effects. Interpretation and application of preventive and remediable competition rules are informed by the economic process and pattern predictions based thereon. This approach is to be distinguished from that of neo-classical welfare economics. In these theories optimal economic effects or the tendencies towards them are to be determined on the basis of competition models (Pareto optimality or Kaldor-Hicks-equilibrium). Welfare effects derived from this static model do not indicate with sufficient certainty the causal connection with the underlying conduct or practices. In particular they are of doubtful validity in passing upon the legality or illegality of the underlying conduct or practices under competition rules. In view of the economic constitution the major shortcoming of welfare economics is that there is no space for individual rights; these rights, however, are its very foundation.


According to Art 251(1), (2) TFEU/221(2), (3) EC, Art 16 of the Statute, the ECJ sits in chambers normally comprising five judges, but only three in less important cases. In very important matters or on request of a Member State or an institution of the EU, the grand chamber composed of 13 judges decides under the presidency of the President of the ECJ; it consists of the presidents of the chambers with five judges, the judge-rapporteur and additional judges determined by a list established in advance. Proceedings considering a breach of obligations or compulsory retirement are conducted before the full court when in respect of Commission members, Court of Auditors members or the Ombudsman. The decision also lies with the full court if an ECJ judge is to be deprived of his office (the concerned judge not taking part in the deliberations and the decision to remove requiring the unanimity of the other judges) (Arts 6, 16 of the Statute). All 27 judges elect the presidents of the respective chambers from among their number: presidents of the extended chambers deciding with five judges have a term of three years with only one re-election being possible. In addition to four extended chambers, each of which comprises a total of six or seven judges, there are four chambers deciding with three judges. These chambers comprise the five or six assisting judges of the four extended chambers; one judge acts as president of the chamber for one year and two others during the following two years. Which of the assisting judges sits in an individual case shall be determined according to a list published in advance in the Official Journal. The preliminary report of the judge-rapporteur chosen by the President of the ECJ has to be presented to the plenary, which on the basis of the propositions of the judge-rapporteur decides on the assignment of the case to the extended chamber, of which the reporting judge is a member, or to a chamber comprising a different number of judges.
== 3. Institutions ==


== 3. Procedure ==
All Union institutions, namely the [[Council and the European Council]], the [[European Commission]], the [[European Parliament]], the [[European Central Bank]] and the European System of Central Banks are bound by Union law in their activities. The different tasks, however, require different rules and degrees of discretion. In order to guarantee policies which are governed by Union interests and are not dependent on the political influence of Member States, Union law provides for the independence of constitutionally crucial institutions. That is a matter of course for European courts who are to ensure that in the interpretation and application of this treaty the law is observed (Art 19 TEU/220 EC). Characteristic of the Union’s institutional structure is the task of the Commission to promote the Union’s interests and to ensure that the provisions of this Treaty are applied (Art 17(1) TEU/9 EU). Even though the Commission has gradually become similar to a government, its competences are to be applied independently.


The procedure is regulated by the treaties, especially Arts 263 ff/TFEU/230 ff EC, in the Statute of the ECJ, according to Art 281 TFEU/245 EC laid down in a separate Protocol, and in the Rules of Procedure of the ECJ. The most important procedure before the ECJ is the preliminary procedure according to Art 267 TFEU/234 EC, Art 23 of the Statute; nearly half the matters to be dealt with by the ECJ represent this kind of procedure. Where a question concerning the interpretation of the TFEU or of secondary law of the Communities or concerning the validity and interpretation of acts of the institutions of the Community is raised in a case pending before any court (or tribunal) of a Member State, that jurisdiction may request the ECJ to provide a ruling on the question if it considers that this is necessary to enable it to render judgment. An exception to this provision was contained in Art 68(1) EC (abolished by the Lisbon Treaty), according to which, especially in cases of judicial cooperation in civil matters, only courts against whose decisions there is no judicial remedy under national law are enabled to request the ECJ to give such a ruling. Where any such question is raised in a case pending before a court against whose decision there is no judicial remedy, that court shall bring the matter before the ECJ.
The primary aim of common monetary policy is the stability of prices (Art 127(1) TFEU/105(1) EC). Such a policy requires the independence of the European System of Central Banks and the European Central Bank from Member States and from Community institutions (Art 130 TFEU/108 EC).


The request, formulated in the language of the requesting court, must present the subject matter of the originating proceedings and contain the questions to be answered. It should also indicate the claims of the parties to the dispute before it and give reasons for the request. The requesting court is, however, not obliged to make proposals as to the answers it thinks the ECJ should give to the questions. The national court should follow the guidelines given by the ECJ in its information note of 2009 (OJ C 297/1) on references for a preliminary ruling. The request shall be communicated to the Member States in the original version, accompanied by a translation into their official language; where a complete translation would be inappropriate because of its length, it can be replaced by a summary of the essential elements (Art 104(1) of the Rules of Procedure). The Member States, the Commission and the institution having made the act in question as well as the parties to the originating proceedings are entitled to submit statements or observations. Where a question is identical to a question on which the ECJ has already ruled or where the answer may be clearly deduced from existing case law or where it admits no reasonable doubt, the ECJ may give its decision by reasoned order. Although in principle an oral hearing has to take place, the ECJ, after having informed the persons entitled to submit observations, may decide otherwise (Art 44a of the Rules of Procedure). In certain matters states parties to the Agreement on the European Economic Area (AEEA) or non-Member States parties to an agreement relating to a specific subject matter may lodge statements or observations (Art 23(4) of the Statute).
Union institutions are in their relations to each other bound by and limited to their respective competencies and have to observe their respective proceedings (Art 13(2) TEU/5 EU). Contrary to the universal competence of sovereign states, the Union shall act only within the limits of powers conferred upon it by this treaty and of the objectives assigned to it therein (Art 5(2) TEU, introduced by the Treaty of Lisbon). In relation to Member States the principles of subsidiarity and proportionality apply (Art 5(3) and (4) TEU, introduced by the Treaty of Lisbon).


The ECJ renders its judgment on the request in the language of the requesting court on the basis of the written and oral statements or observations submitted to it and the reasoned submissions of the Advocate General which are given some time after the oral hearing in a language that may be different from the language of the proceedings. In preliminary proceedings the ECJ can only answer questions of law, but cannot decide on the originating proceedings themselves. Its judgment is, in the proceedings that led to the request, binding on the requesting court; if necessary, that court can however formulate additional questions in a new request. Though there is no formal binding force as to the interpretation or the validity of a decision of the ECJ in other cases or before other courts, in conformity with the aims of the procedure according to Art 267 TFEU/234 EC courts of the Member States may not decide otherwise. If, nevertheless, they should wish to do so, they could only try to convince the ECJ by way of a new preliminary request with new arguments, but such an attempt has no great chance of success. As procedures according to Art 267 TFEU/234 EC will, in spite of their preliminary character, normally last for more than 18 months because of their conception and of the necessities of translation, they do not conform to the necessity of an expeditious decision, especially in proceedings of judicial cooperation concerning divorce and parental responsibility cases or concerning penal matters. For such cases Arts 104a, 104b of the Rules of Procedure provide an accelerated as well as an urgent procedure derogating from the normal provisions.
== 4. Legal entities (agents) of union law ==


Among the direct actions, by far the most frequent proceedings are those concerning infringements of the TFEU introduced by the Commission against Member States according to Art 258 TFEU/226 EC. They are mostly based on irregular, especially belated, transformation of directives into national legislation and adjudication of the case is normally not very difficult. Most actions on annulment fall under the jurisdiction of the GC. Appeal procedures form about 12.5 per cent of the decisions of the ECJ; appeals are lodged against, approximately, one out of four decisions of the GC, with a certain success occurring in every fourth case. Opinions of the ECJ on the compatibility of envisaged agreements with the treaties are rarely obtained, representing only about 0.2 per cent of all the cases before the ECJ, but the results of these procedures are for the most part extremely important. Requests for interim measures are dealt with by the President of the ECJ acting as single judge.
The Union’s organization and the instruments at its disposal must be distinguished from rights and duties of individual Union institutions, Member States and citizens. Only entities recognized as legal persons have rights and duties in their respective legal orders. The Union is based upon international law treaties. An international law agreement does not create legal rights and obligations of private individuals. The ECJ’s ruling that under Union law, in addition to Member States, private individuals have rights and duties, is a cornerstone of the Community’s—now the Union’s—legal order (ECJ Case 26/62 – ''van Gend & Loos'' [1963] ECR 1). The recognition of private individuals as legal persons is a necessary condition of their endowment with individual rights under Union law. Such rights are conferred by Union law not only in cases where its provisions are by their very nature directly applicable among individuals as applies in particular to competition rules. Rather, Union law confers individual rights where it imposes upon Member States, Union institutions, or private individuals obligations in a clearly defined way. Obligations that are applicable unconditionally have direct effect and must be applied by courts and public authorities of Member States. Individuals have standing to enforce their individual rights. They flow from interests protected by Union law and are independent of the plaintiff’s private interests. The most important areas of applicability of these rights are the fundamental freedoms constituting the internal market and rules of competition.


As regards the course of the procedure, especially regarding direct actions and appeals, the parties have to follow the Instructions to the registrar of the ECJ and the Practice Directions relating to these remedies, compare also the Notes for the guidance of counsel. Private parties have to be represented or assisted by a lawyer authorized to practice before a court of a Member State or a state party to the AEEA. Member States and institutions shall be represented by officials as agents appointed for each case who may be assisted or advised by a lawyer. In principle, the language of the case shall be chosen by the applicant. Actions against Member States or nationals of Member States are lodged in their official language. Member States intervening or taking part in preliminary procedures are entitled to use their own official language. In all cases, the judge-rapporteur presents, with the assistance of his collaborators (each judge has three ''référendaires'', ie academic assistants), his purely internal preliminary report in the French working language to the general assembly of the ECJ, when the written procedure consisting of application, defence and, normally, reply and rejoinder has been completed. This report contains recommendations as to whether preparatory steps should be undertaken and to which form of chamber the case should be assigned. The judge-rapporteur also prepares a report for the hearing.
An economic constitution based upon market economy principles is predicated upon the individual freedom of action and planning of undertakings and consumers. [[Freedom of Contract|Freedom of contract]] and property rights ([[Property Rights, Protection of|property rights, protection of]]) as well as a right to participate in competition are essentials of the economic constitution. This functional interdependence of a market economy and private law systems is taken for granted by Union law and is operative independently from prior harmonization. Individual rights under Union law do not serve private interests and are not directed against Union interests. This is an important difference from German public law where individual rights of citizens protect their private interests and are to be enforced against governmental public interests. In the Union individual rights serve Union law interests and contribute to the practical effectiveness of Union law in the legal order of Member States. They are supplementary to the procedures and remedies which are at the disposal of the Commission in enforcing Union law against Member States.


== 4. Important contributions of the ECJ to the development of Union law ==
== 5. Fundamental freedoms ==


Especially during periods of relative standstill in the development of Union legislation, the ECJ has shown itself to be a driving authority for improvement and reinforcement of EU law. On the other hand, its interpretation of the rules on the competence of the Union in their relationship to the Member States has not always been accepted free of fundamental criticism. For example, had the court shown a greater willingness to embrace ideas closer in spirit to the subsidiarity principle, a less ‘EU friendly’ and more ‘Member State friendly’ interpretation could have resulted in preliminary judgments in cases such as C-285/88 – ''Tanja Kreil'' [2000] ECR I-69 and C-144/04 – ''Mangold ''[2005] ECR I-9981. Yet, on the whole, the very existence of the ECJ as an EU-wide acting institution responsible for a uniform understanding of European law is such an important element of the movement towards European unity that the fact that some individual judgments may not be entirely immune from doubt must be accepted in the interest of the idea of uniformity.
The [[Fundamental Freedoms (General Principles)|fundamental freedoms (general principles)]] and competition rules create and govern the internal market. The dynamic development of [[Free Movement of Goods|free movement of goods]], [[Free Movement of Services|free movement of services]], free movement of persons, [[Freedom of Establishment|freedom of establishment]] and [[Free Movement of Capital and Payments|free movement of capital and payments]] progressed from the prohibition of discriminations to the prohibition of restraints and from the country of destination principle to the country of origin principle. This convergence of principles does not exclude different conflicts of interest and difficulties that are due to specific functions of the respective fundamental rights. This applies particularly to different exemptions recognized by the ECJ for compelling public interests of Member States.


Already at an early stage, the ECJ had decided that Union law was (also) to be applied directly in favour of individual persons subject to the law and not only with regard to Member States (ECJ Case 26/62 – ''van Gend & Loos''/''Nederlandse Administratie der Belastingen ''[1963] ECR 1), and this with priority in relation to the law of the Member States (ECJ Case 6/64 – ''Costa v ENEL'', judgment of 15 July 1964 [1964] ECR 585, in German 1251, in French 1141). Individuals may claim damages for legislative inaction (ECJ Case 6/90 – ''Francovich and Others'' [1991] ECR I-5357) and for the inappropriate action of a judge (ECJ Case C-224/01 – ''Köbler'' [2003] ECR I-10290) in a Member State when (not) applying Union law. Within certain limits a citizen can also invoke the fact that directives have not been transformed in due time into national law.  
The most important general exemption provided for in the treaty is applicable to undertakings that are entrusted with the operation of services of general economic interest (Arts 14, 106(2) TFEU/86(2) EC). The application of Union law rules to these undertakings is excluded where their application does in fact or in law obstruct the performance of the particular task assigned to them. So far some Member States have tried in vain to introduce a general exemption. The Commission and the Court examine according to the principle of proportionality whether the exemption under Art 106(2) TFEU/ 86(2) EC is indispensable.


The ECJ has developed clear definitions of the five fundamental freedoms of EU law in many judgments: so the [[Free Movement of Goods|free movement of goods]] (ECJ Case 120/78 – ''REWE v Bundesmonopolverwaltung für Branntwein (Cassis de Dijon)'' [1979] ECR I-649; ECJ Case C-267/91 – ''Keck and Mithouard ''[1993] ECR I-6097), the [[Free Movement of Capital and Payments|free movement of capital and payments]] (ECJ Case C- 302/97 – ''Konle'' [1999] ECR I-3122), the [[Free Movement of Services|free movement of services]] (ECJ Case 158/96 – ''Kohll''/''Union des Caisses de Maladie ''[1998] ECR I-1931), the free movement of persons (ECJ Case C-415/93 – ''Union Royale Belge des Sociétés de Football Association v Bosman and Others ''[1995] ECR I-4921) and the [[Freedom of Establishment|freedom of establishment]] of legal persons (ECJ Case C-212/97 – ''Centros v Erhvervs- og Selskabsstyrelsen ''[1999] ECR I-1459; ECJ Case C-208/00 – ''Überseering ''[2002] ECR I-9919; ECJ Case C-167/01 – ''Inspire Art ''[2003] ECR I-10155). Similarly, this assessment also applies to the prohibition of discrimination because of nationality, eg in connection with the German garnishment procedure (§ 917(2) of the German Code of Civil Procedure, CFI Case C-398/92 – ''Mund & Fester v Hatrex Internationaal Transport ''[1994] ECR I-474). The opinion of the ECJ on the new Lugano Convention (of 2 February 2006 – Opinion 1/03 [2006] ECR I-1145) has clarified the limits of the competence of the Member States in relation to the Commission in matters of judicial cooperation. In more than 150 judgments the ECJ has interpreted the notions of the Brussels Convention on jurisdiction and enforcement of judicial decisions in civil and commercial matters and afterwards the Brussels I Regulation 44/2001 which has replaced that Convention. In doing so, the ECJ has, overwhelmingly, applied the principle of uniform international interpretation, initially with regard to the notion of civil and commercial matters (ECJ Case 29/76 – ''LTU v Eurocontrol ''[1976] ECR 1541). It was, however, an unfortunate coincidence that no judges from any of the common law Member States participated in the judgments declaring the principle of ''forum non conveniens'' inapplicable under the Convention (ECJ Case C-281/02 – ''Owusu ''[2005] ECR I-1383) and affirming the inadmissibility of anti-suit injunctions with regard to proceedings in other Member States (ECJ Case C-159/02 – ''Turner ''[2004] ECR I-3565), though in both cases the results of the decisions should not be criticized.
The fundamental freedoms specify the prohibition of discrimination for reasons of nationality in Art 18 TFEU/12 EC. Exemptions are recognized only if provided for in the Treaty itself.  


== 5. Tendencies for reform ==
The prohibition of discrimination does not cover barriers to cross-border trade which are due to the divergence of non-discriminatory Member State policies or measures. Even those may, however, interfere with cross-border trade. They can be justified by unwritten exemptions if and insofar as they are indispensable in light of overriding public interests of Member States (ECJ Case 120/78 – ''Cassis de Dijon'' [1979] ECR 649, 662 para 8). Member States can justify their measures only if they are, in light of their legitimate purpose, viable and proportionate.


The functions of the ECJ increasingly concentrate on those corresponding to a ‘constitutional court’ of the EU. To introduce a special institution alongside the ECJ with jurisdiction in all matters of competence of the EU would weaken the ECJ and consequently do harm to the ''acquis ''of European judicature. It will, however, become increasingly difficult to take adequate account of the legal systems of all 27 (and, eventually, in the near future more than 30) Member States in fundamental questions. As a minimum, certain categories of infringement procedures could be transferred to the GC as soon as this court were to dispose of more capacities, achievable, for example, by increasing its number of judges (a reform not permitted for the ECJ itself, Art 254 TFEU/224 EC). Similarly, at least some preliminary proceedings in matters of judicial cooperation in penal and civil matters could be transferred to the GC, taking into account that the restrictions in civil matters contained in former Art 68 EC have been abolished by the Lisbon Treaty.  
If no exemption applies, products and services which are marketed legally in any Member State cannot be excluded from import into other Member States. This modification of the country of destination principle to the country of origin principle may lead to the coexistence of different Member State regulations. This situation is frequently referred to as ‘competition of systems’.


If the tendency towards accelerated and urgent procedures continues to prove the utility of these variations in favour of fast decisions, especially in divorce and parental responsibility matters as well as in other preliminary proceedings concerning Arts 67 ff TFEU/61 ff EC where there is a need for expeditiousness, such procedures might provide a path to more effective judicial protection. Recent experiences are encouraging: in a first accelerated procedure with the participation of five Member States, the grand chamber rendered an important decision on basic questions of the Brussels II''bis'' Regulation concerning the return of a child illegally retained (ECJ Case C-195/08 PPU – ''Rinau ''[2008] ECR I-5271) on 11 July 2008 less than two months after reception of the preliminary request from a court in Lithuania. Immediately thereafter, only four months after the introduction of a request in an accelerated procedure featuring many parties and comments from 10 governments, another judgment of the grand chamber decided equally important questions regarding Dir 2004/38 concerning the right of Union citizens and their family members who are nationals of non-member countries to move and reside freely in the territory of a Member State (ECJ Case C-127/08 – ''Metock and Others v Minister for Justice'','' Equality and Law Reform ''[2008] ECR I-6241).
In this situation Member States have the following political options:
 
(i) The coexistence of different Member State regulations with the consequence that their own undertakings have to observe rules that are stricter than those that are applicable to their competitors from other Member States.
 
(ii) The adaptation of their own regulation in order to arrive at a regulation that is equivalent to that of other Member States.
 
(iii) The proposal of approximation of laws under Arts 114, 115 TFEU/94, 95 EC, particularly with respect to such regulations of other Member States which are under the ECJ’s jurisprudence justified because of overriding public interests and which interfere with cross-border trade.
 
(iv) In the case of a majority decision of the Council (Art 114(4) TFEU/95(4) EC), there is the possibility of maintaining trade barriers that are justifiable under Art 36 TFEU/30 EC or for reasons of labour, environment, or the protection of either.
 
The only active participants in regulatory competition are Member States. The Member State for whose undertakings stricter rules apply must decide whether to tolerate competition of systems, to adapt its own regulation autonomously or to participate in the approximation of laws under Union law. The country of origin principle does promote economic competition and contributes to the dynamics of political processes in the Union.
 
A by-product of open markets which continue to feature diverging Member State regulations is the most controversial problem of ‘reverse discrimination’. Union law does not oblige Member States to protect their own undertakings against competitive disadvantages caused by Union law.
 
Since the establishment of the Economic and Monetary Union, restrictions on the free movement of capital are prohibited not only between Member States but between Member States and third countries as well (Arts 63–66 TFEU/56–59 EC). The potential reach of the free movement of capital is particularly relevant because it is applicable to Member State regulations that prevent the acquisition of shares of an undertaking or that are liable to deter potential investors from other Member States (ECJ Case 112/05 – ''Commission v Federal Republic of Germany'','' Volkswagen'' [2007] ECR I‑8995, 9020). In these cases compelling public interests of Member States may justify an exemption. The further question whether strict rules of national corporation laws of general applicability may be found to be incompatible with free movement of capital and whether they may be justified has so far not been decided.
 
== 6. The Union’s economic constitution ==
 
The Union’s economic constitution is based upon the interdependence of a monetary union, a [[European Internal Market|European internal market]], and competition. Cross-border trade is no longer subject to Member State regulations. Economic policy purposes of Member States do not justify exemptions from the principle of free cross-border trade. The well-established jurisprudence on the systematic unity of the internal market and competition does not exclude differences due to specifics of economic areas or different legal positions of the legal entities concerned. The principles that apply in such cases of conflict to the supremacy of Union law over the law of Member States are a touchstone for the economic constitution.  
 
The applicability of Union law provisions to Member States and undertakings, respectively, is independent from the traditional separation of private and public law in Member States. The equal and effective application of Union law leads to the specification of principles that are derived from private law and exchange transactions on competitive markets. The following cases are but examples of a more general principle.
 
The treaty does ‘in no way prejudice the rules in Member States governing the system of property ownership’ (Art 345 TFEU/295 EC). Under the court’s jurisprudence rules of Union law are nevertheless applicable to the exercise of property rights as well as to Member States as owners of public undertakings. It is not the ownership of economic resources that determines the character of an economic order but the coordination principle of competition.
 
The rules of competition are applicable to ‘undertakings’. The functional interpretation of this term means that competition rules are applicable to Member States as such as well as other public law organizations whenever they participate in the economic process.
 
The rules applicable to public procurement are derived from the fundamental economic freedoms. They obligate Member States to organize their procurement such that it is analogous to private purchases of products or services under conditions of competition. Member States have to provide for competitive bidding and to protect bidders against discrimination and arbitrary practices of public or semi-public buyers. Competition rules are applicable in addition to procurement rules.
 
In cases where Member State investments in private undertakings are subject to state aid rules, conditions must meet the market economy investor principle.
 
Where market structures prevent effective competition as in telecommunications or in energy, Member State regulations must under the Union’s guidance develop rules that will lead to or substitute the effects of competition.


==Literature==
==Literature==
Richard Plender (ed), ''European Courts'':'' Practice and Precedents'' (1997); Mark Brealey and Mark Hoskins, ''Remedies in EC law'':'' Law and Practice in the English and EC Courts'' (2nd&nbsp;edn, 1998); Henry G Schermers and Denis F Waelbroeck, ''Judicial Protection in the European Union'' (6th&nbsp;edn, 2001); Joël Rideaux and Fabrice Picod, ''Code des procédures juridictionnelles de l’Union européenne'' (2nd&nbsp;edn, 2002); Hans-Werner Rengeling, Andreas Middeke and Martin Gellermann (eds), ''Handbuch des Rechtsschutzes in der Europäischen Union'' (2nd&nbsp;edn, 2003); KPE Lasok and Timothy Millett, ''Judicial Control in the EU'':'' Procedures and Principles ''(2004); Waltraud Hakenberg and Christine Stix-Hackl, ''Handbuch zum Verfahren vor dem Europäischen Gerichtshof'','' vol&nbsp;1'' (3rd&nbsp;edn, 2005); Koen Lenaerts, Piet van Nuffel and Robert Bray (eds), ''Constitutional Law of the European Union'' (2nd&nbsp;edn, 2005); Koen Lenaerts, Dirk Arts, Ignace Maselis and Robert Bray (eds), ''Procedural Law of the European Union'' (2nd&nbsp;edn, 2006); Ulrich Everling, ‘Zur verfehlten Forderung nach einem Kompetenzgericht der Europäischen Union’ in ''Festschrift Günter Hirsch ''(2008) 63; Karol PE Lasok, ''Lasok’s European Court Practice and Procedure'' (3rd&nbsp;edn, 2011); Court of Justice of the European Communities, Annual Report 2010 (2011).</div>
FA Hayek, ''The Constitution of Liberty'' (1960); Franz Böhm, ‘Rule of Law in a Market Economy’ in Alan Peacock and Hans Willgerodt (eds), ''Germany’s Social Market Economy'':'' Origins and Evolution'' (1980); Christoph Engel, ‘Imposed Liberty and its Limits—The EC-Treaty as an Economic Constitution for the Member States’ in Talia Einhorn (ed), ''Spontaneous Order'','' Organisation and the Law'','' Roads to a European Civil Society'' (2003) 429–37; Wernhard Möschel, ‘Competition as a Basic Element of the Social Market Economy’ in Talia Einhorn (ed), ''Spontaneous Order'','' Organisation and the Law'','' Roads to a European Civil Society'' (2003) 285–92; Josef Drexl, ‘Competition Law as Part of the European Constitution’ in Armin von Bogdandy and Jürgen Bast (eds), ''Principles of European Constitutional Law'' (2006) 632–74; Armin Hatje, ‘The Economic Constitution’ in Armin von Bogdandy and Jürgen Bast (eds), ''Principles of European Constitutional Law'' (2006) 587–632; Ernst-Joachim Mestmäcker, ‘On the Legitimacy of European Law’ in Ernst-Joachim Mestmäcker, ''Wirtschaft und Verfassung in der Europäischen Union'' (2nd&nbsp;edn, 2006) 133–52; Ernst-Joachim Mestmäcker, ''A Legal Theory Without Law'','' Posner von Hayek on Economic Analysis of Law'' (2007).</div>




[[Category:A–Z]]
[[Category:A–Z]]
[[de:Europäischer_Gerichtshof]]
[[de:Europäische_Wirtschaftsverfassung]]

Latest revision as of 18:39, 5 June 2025

by Ernst-Joachim Mestmäcker

1. Overview

The European Union (EU) is founded upon the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU); EC Treaty, EU Treaty. The EU is successor to the European Community. The Union implements its tasks through the establishment of an internal market and an Economic and Monetary Union (Art 2 TEU/1 EU). The Union’s legal order is according to the ECJ’s jurisprudence the functional equivalent of a constitution. This constitution is an economic constitution insofar as it provides for principles, aims and instruments applicable to the monetary union, the internal market, and the system of competition. The internal market is the aim and instrument of an economic space without frontiers. As internal frontiers are eliminated it becomes the Union’s permanent task to maintain the internal market governed by the principles of free trade and competition.

Among the principles to be observed by the Member States and Union in the implementation of monetary policy are an ‘open market economy with free competition’ (Art 3(3) TEU/4(1) EU and Art 127 TFEU/105 EC; competition (internal market)). The treaty’s general principles do not give rise to specific duties of Member States and do not create individual rights (ECJ Case 126/86 – Giménez Zaera [1987] ECR I‑3697 para 19). These principles are nevertheless relevant: with the extent of the market the overall economic advantages of cross-border division of labour grow; the cooperation of undertakings on markets contributes to efficient allocation of resources. The social market economy mentioned in Art 3(3) TEU/4(1) EU, which is a condition for the accession of new Member States, contributes to the separation of power between governments and industry. This kind of economic order limits the Union’s claim or temptation to centralize regulatory powers and simultaneously limits the impact on Member States’ sovereignty. As a matter of law these principles prevent a policy which implements the aims of Art 2 TEU/1 EU through central planning.

The aims of Art 2 TEU/1 EU become legally relevant in the context of the specific means provided for in the treaty. In particular, they are relevant for the interpretation of specific Union law provisions. The connection of aims and means may be so strict as to make an aim itself binding. Residual competition is a precondition for the practical effectiveness of a great number of specific provisions of the treaty. This is why restraints of competition that exclude effective competition in the common market are absolutely prohibited (ECJ Case 6/72 – Continental Can [1973] ECR 215).

2. Constitutionalized economic liberties

The European economic constitution is frequently discussed in comparison with its German origin. We have to distinguish formal economic constitutions as part of the political constitution which contain principles for the regulation of the economy (eg Weimar Constitution with a chapter on ‘The Economy’; Constitution of the German Democratic Republic). In this tradition the economic constitution is to establish political prerogatives for the organization and regulation of economic activities. The idea to develop constitutional principles for an economic order based on economic liberties was not considered or treated as self-contradictory. The theory of an economic constitution has been developed in opposition to policies of central economic planning, ad hoc intervention and discretionary administrative controls. Determinative are principles derived from individual liberties that inform the governance of the economic system as a whole. These principles coincide with the separation of government and economy in the tradition of separation of powers, with the legal guarantee of individual liberties, the maintenance of competition and simultaneous limitation of economic power. The implementing economic policy takes into account and gives priority to individual economic planning on competitive markets with free prices on the basis of a stable monetary order. These ideas were instrumental in shaping economic policies of post-war Germany. Through the Treaty of Rome (1958) these principles became directly relevant for the European Community and its economic constitution.

The idea of constitutional liberty in civil society independent from the political constitution or as an annex thereto is a product of the European Enlightenment. In its application to the economy, to division of labour and decentralized economic planning on markets, it was developed by authors like Adam Smith, David Hume and Adam Ferguson. Even before the French and US declarations of human rights, they explored the systemic relevance of law and economics, of mutually respected individual liberties, particularly freedom of opinion, property rights, limited government and the rule of law. Rules of just conduct adjust economic liberties to the requirements of competitive markets: without the institution of competition the profit motive is a very real social danger (Franz Böhm). Without preventive and remediable legislation, governmental as well as private monopolies or restrictions of competition will be used to limit production and interfere with equal liberties of rivals and consumers.

Within the framework of Economic and Monetary Union Member States retain their own welfare agenda and responsibility. Union policies that may interfere with the internal market and competition system take into account competing Member States’ interests. Examples are industrial policy, economic and social cohesion, research and technological development, social policy and the environment. In view of the economic constitution this situation is one of opportunities and risks. The particular opportunities are due to strict Union law provisions guaranteeing the priorities of the internal market and competition. These strict provisions are not subject to political bargaining. The risks follow from the temptation to give priority to national protectionist policies at the expense of the Union’s public interest. Where Union law recognizes conflicting aims they have to be harmonized and must be implemented within the limits of strict provisions. Where effective competition prevails, rule-governed economic liberties tend towards positive overall welfare effects. Interpretation and application of preventive and remediable competition rules are informed by the economic process and pattern predictions based thereon. This approach is to be distinguished from that of neo-classical welfare economics. In these theories optimal economic effects or the tendencies towards them are to be determined on the basis of competition models (Pareto optimality or Kaldor-Hicks-equilibrium). Welfare effects derived from this static model do not indicate with sufficient certainty the causal connection with the underlying conduct or practices. In particular they are of doubtful validity in passing upon the legality or illegality of the underlying conduct or practices under competition rules. In view of the economic constitution the major shortcoming of welfare economics is that there is no space for individual rights; these rights, however, are its very foundation.

3. Institutions

All Union institutions, namely the Council and the European Council, the European Commission, the European Parliament, the European Central Bank and the European System of Central Banks are bound by Union law in their activities. The different tasks, however, require different rules and degrees of discretion. In order to guarantee policies which are governed by Union interests and are not dependent on the political influence of Member States, Union law provides for the independence of constitutionally crucial institutions. That is a matter of course for European courts who are to ensure that in the interpretation and application of this treaty the law is observed (Art 19 TEU/220 EC). Characteristic of the Union’s institutional structure is the task of the Commission to promote the Union’s interests and to ensure that the provisions of this Treaty are applied (Art 17(1) TEU/9 EU). Even though the Commission has gradually become similar to a government, its competences are to be applied independently.

The primary aim of common monetary policy is the stability of prices (Art 127(1) TFEU/105(1) EC). Such a policy requires the independence of the European System of Central Banks and the European Central Bank from Member States and from Community institutions (Art 130 TFEU/108 EC).

Union institutions are in their relations to each other bound by and limited to their respective competencies and have to observe their respective proceedings (Art 13(2) TEU/5 EU). Contrary to the universal competence of sovereign states, the Union shall act only within the limits of powers conferred upon it by this treaty and of the objectives assigned to it therein (Art 5(2) TEU, introduced by the Treaty of Lisbon). In relation to Member States the principles of subsidiarity and proportionality apply (Art 5(3) and (4) TEU, introduced by the Treaty of Lisbon).

4. Legal entities (agents) of union law

The Union’s organization and the instruments at its disposal must be distinguished from rights and duties of individual Union institutions, Member States and citizens. Only entities recognized as legal persons have rights and duties in their respective legal orders. The Union is based upon international law treaties. An international law agreement does not create legal rights and obligations of private individuals. The ECJ’s ruling that under Union law, in addition to Member States, private individuals have rights and duties, is a cornerstone of the Community’s—now the Union’s—legal order (ECJ Case 26/62 – van Gend & Loos [1963] ECR 1). The recognition of private individuals as legal persons is a necessary condition of their endowment with individual rights under Union law. Such rights are conferred by Union law not only in cases where its provisions are by their very nature directly applicable among individuals as applies in particular to competition rules. Rather, Union law confers individual rights where it imposes upon Member States, Union institutions, or private individuals obligations in a clearly defined way. Obligations that are applicable unconditionally have direct effect and must be applied by courts and public authorities of Member States. Individuals have standing to enforce their individual rights. They flow from interests protected by Union law and are independent of the plaintiff’s private interests. The most important areas of applicability of these rights are the fundamental freedoms constituting the internal market and rules of competition.

An economic constitution based upon market economy principles is predicated upon the individual freedom of action and planning of undertakings and consumers. Freedom of contract and property rights (property rights, protection of) as well as a right to participate in competition are essentials of the economic constitution. This functional interdependence of a market economy and private law systems is taken for granted by Union law and is operative independently from prior harmonization. Individual rights under Union law do not serve private interests and are not directed against Union interests. This is an important difference from German public law where individual rights of citizens protect their private interests and are to be enforced against governmental public interests. In the Union individual rights serve Union law interests and contribute to the practical effectiveness of Union law in the legal order of Member States. They are supplementary to the procedures and remedies which are at the disposal of the Commission in enforcing Union law against Member States.

5. Fundamental freedoms

The fundamental freedoms (general principles) and competition rules create and govern the internal market. The dynamic development of free movement of goods, free movement of services, free movement of persons, freedom of establishment and free movement of capital and payments progressed from the prohibition of discriminations to the prohibition of restraints and from the country of destination principle to the country of origin principle. This convergence of principles does not exclude different conflicts of interest and difficulties that are due to specific functions of the respective fundamental rights. This applies particularly to different exemptions recognized by the ECJ for compelling public interests of Member States.

The most important general exemption provided for in the treaty is applicable to undertakings that are entrusted with the operation of services of general economic interest (Arts 14, 106(2) TFEU/86(2) EC). The application of Union law rules to these undertakings is excluded where their application does in fact or in law obstruct the performance of the particular task assigned to them. So far some Member States have tried in vain to introduce a general exemption. The Commission and the Court examine according to the principle of proportionality whether the exemption under Art 106(2) TFEU/ 86(2) EC is indispensable.

The fundamental freedoms specify the prohibition of discrimination for reasons of nationality in Art 18 TFEU/12 EC. Exemptions are recognized only if provided for in the Treaty itself.

The prohibition of discrimination does not cover barriers to cross-border trade which are due to the divergence of non-discriminatory Member State policies or measures. Even those may, however, interfere with cross-border trade. They can be justified by unwritten exemptions if and insofar as they are indispensable in light of overriding public interests of Member States (ECJ Case 120/78 – Cassis de Dijon [1979] ECR 649, 662 para 8). Member States can justify their measures only if they are, in light of their legitimate purpose, viable and proportionate.

If no exemption applies, products and services which are marketed legally in any Member State cannot be excluded from import into other Member States. This modification of the country of destination principle to the country of origin principle may lead to the coexistence of different Member State regulations. This situation is frequently referred to as ‘competition of systems’.

In this situation Member States have the following political options:

(i) The coexistence of different Member State regulations with the consequence that their own undertakings have to observe rules that are stricter than those that are applicable to their competitors from other Member States.

(ii) The adaptation of their own regulation in order to arrive at a regulation that is equivalent to that of other Member States.

(iii) The proposal of approximation of laws under Arts 114, 115 TFEU/94, 95 EC, particularly with respect to such regulations of other Member States which are under the ECJ’s jurisprudence justified because of overriding public interests and which interfere with cross-border trade.

(iv) In the case of a majority decision of the Council (Art 114(4) TFEU/95(4) EC), there is the possibility of maintaining trade barriers that are justifiable under Art 36 TFEU/30 EC or for reasons of labour, environment, or the protection of either.

The only active participants in regulatory competition are Member States. The Member State for whose undertakings stricter rules apply must decide whether to tolerate competition of systems, to adapt its own regulation autonomously or to participate in the approximation of laws under Union law. The country of origin principle does promote economic competition and contributes to the dynamics of political processes in the Union.

A by-product of open markets which continue to feature diverging Member State regulations is the most controversial problem of ‘reverse discrimination’. Union law does not oblige Member States to protect their own undertakings against competitive disadvantages caused by Union law.

Since the establishment of the Economic and Monetary Union, restrictions on the free movement of capital are prohibited not only between Member States but between Member States and third countries as well (Arts 63–66 TFEU/56–59 EC). The potential reach of the free movement of capital is particularly relevant because it is applicable to Member State regulations that prevent the acquisition of shares of an undertaking or that are liable to deter potential investors from other Member States (ECJ Case 112/05 – Commission v Federal Republic of Germany, Volkswagen [2007] ECR I‑8995, 9020). In these cases compelling public interests of Member States may justify an exemption. The further question whether strict rules of national corporation laws of general applicability may be found to be incompatible with free movement of capital and whether they may be justified has so far not been decided.

6. The Union’s economic constitution

The Union’s economic constitution is based upon the interdependence of a monetary union, a European internal market, and competition. Cross-border trade is no longer subject to Member State regulations. Economic policy purposes of Member States do not justify exemptions from the principle of free cross-border trade. The well-established jurisprudence on the systematic unity of the internal market and competition does not exclude differences due to specifics of economic areas or different legal positions of the legal entities concerned. The principles that apply in such cases of conflict to the supremacy of Union law over the law of Member States are a touchstone for the economic constitution.

The applicability of Union law provisions to Member States and undertakings, respectively, is independent from the traditional separation of private and public law in Member States. The equal and effective application of Union law leads to the specification of principles that are derived from private law and exchange transactions on competitive markets. The following cases are but examples of a more general principle.

The treaty does ‘in no way prejudice the rules in Member States governing the system of property ownership’ (Art 345 TFEU/295 EC). Under the court’s jurisprudence rules of Union law are nevertheless applicable to the exercise of property rights as well as to Member States as owners of public undertakings. It is not the ownership of economic resources that determines the character of an economic order but the coordination principle of competition.

The rules of competition are applicable to ‘undertakings’. The functional interpretation of this term means that competition rules are applicable to Member States as such as well as other public law organizations whenever they participate in the economic process.

The rules applicable to public procurement are derived from the fundamental economic freedoms. They obligate Member States to organize their procurement such that it is analogous to private purchases of products or services under conditions of competition. Member States have to provide for competitive bidding and to protect bidders against discrimination and arbitrary practices of public or semi-public buyers. Competition rules are applicable in addition to procurement rules.

In cases where Member State investments in private undertakings are subject to state aid rules, conditions must meet the market economy investor principle.

Where market structures prevent effective competition as in telecommunications or in energy, Member State regulations must under the Union’s guidance develop rules that will lead to or substitute the effects of competition.

Literature

FA Hayek, The Constitution of Liberty (1960); Franz Böhm, ‘Rule of Law in a Market Economy’ in Alan Peacock and Hans Willgerodt (eds), Germany’s Social Market Economy: Origins and Evolution (1980); Christoph Engel, ‘Imposed Liberty and its Limits—The EC-Treaty as an Economic Constitution for the Member States’ in Talia Einhorn (ed), Spontaneous Order, Organisation and the Law, Roads to a European Civil Society (2003) 429–37; Wernhard Möschel, ‘Competition as a Basic Element of the Social Market Economy’ in Talia Einhorn (ed), Spontaneous Order, Organisation and the Law, Roads to a European Civil Society (2003) 285–92; Josef Drexl, ‘Competition Law as Part of the European Constitution’ in Armin von Bogdandy and Jürgen Bast (eds), Principles of European Constitutional Law (2006) 632–74; Armin Hatje, ‘The Economic Constitution’ in Armin von Bogdandy and Jürgen Bast (eds), Principles of European Constitutional Law (2006) 587–632; Ernst-Joachim Mestmäcker, ‘On the Legitimacy of European Law’ in Ernst-Joachim Mestmäcker, Wirtschaft und Verfassung in der Europäischen Union (2nd edn, 2006) 133–52; Ernst-Joachim Mestmäcker, A Legal Theory Without Law, Posner von Hayek on Economic Analysis of Law (2007).

Retrieved from European Court of Justice (ECJ) – Max-EuP 2012 on 23. July 2025.

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