July 22, 2019

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Commercial Transactions Law in the European Union

Commercial Transactions law under the European Union framework is premised on the principle of four freedoms which must be upheld in each member state’s domestic market in order to erase barriers and increase fluidity between the member states while ensuring a level playing field and preventing anti-competitive practices.

The Treaty Establishing the European Union (EEC treaty) and the Treaty on the Function of the European Union (TFEU) entrench the need to uphold the four freedoms in European Union commercial transactions law.

The four freedoms are as follows:-

  • Freedom of movement of goods;

  • Freedom of movement of persons;

  • Right of establishment; and

  • Freedom to provide services.

Freedom of movement of goods

The European Economic Community is a free trade area that effectively functions as a customs union. While barriers to trade are removed amongst member states with a blanket ban on import and export taxes between member states, uniform tariffs on goods and services originating outside the EEC are imposed.

Article 16 of the EEC Treaty states that all member states are to remove all export levies and duties as they may apply to their fellow member states.  Any objects that are assigned a monetary value are considered “goods” in Article 9. This definition includes historic or artistic objects. Any duty which in effect functions as an export duty even if it is not framed as such will fall foul of this clause.

Article 30 of the TFEU forbids member states from imposing duties on goods passing from one member state to another. Other taxes having the same effect as customs duties are also prohibited.

Freedom of movement of persons

Article 45 of the TFEU forbids discrimination in connection with remuneration, employment and other work-related matters. Discrimination in relation to citizenship is also forbidden. Employed persons have the right to freedom of movement in connection with job applications, job searches, residence permits for the purposes of work and the continuity of such residence permits following the conclusion of a job.

Right of Establishment

Freedom of establishment is contained in Article 49 of the TFEU. It forbids the placing of barriers to freedom of establishment of citizens of a member state in another member state. Barriers to setting up subsidiaries, branches or agencies by any citizen of a member state in any other member state are also prohibited. The right of establishment extends to the right to engage in self-employment and to establish and oversee business entities.

Freedom to provide services

Article 56 of the TFEU sets out the freedom to provide services within the member states of the European Union. Any restrictions on the freedom of nationals of member states to provide services anywhere within the European Union are prohibited.

Implications of the treaties

The treaties requires the removal of barriers that may infringe upon the four freedoms in respect of commercial transactions.  In order to comply with the treaties, member states will have to revise their domestic laws to ensure that they do not fall foul of the prohibitions contained in the treaties.