EU Law Blog

Pharmacies, Ownership, Freedom of Establishment and Public Health: Cases C-531/06, C-171/07 and C-172/07

Can member States provide that only professionally qualified pharmacists may own and operate a pharmacy ?

Yes, answers the Court of Justice in its Grand Chamber formation in its judgments in Case C-531/06 Commission v. Italy and Joined Cases C-171/07 and C-172/07 Apothekerkammer des Saarlandes and Others.

In Case C-531/06, the Commission brought infringement proceedings against Italy seeking a declaration that Italian law which allowed only pharmacists to own and operate private pharmacies was in breach of Article 43 EC on the freedom of establishment and of Article 56 EC on the free movement of capital.

In Joined Cases C-171/07 and C-172/07, the Court answered a preliminary reference from a German court about the compatibility with Article 43 EC of German state legislation restricting the right to own and operate pharmacies to pharmacists.

In both cases, the Court disagreed with the Commission. It dismissed the action brought by the Commission in Case C-531/06.

The Court did state, however, that the national legislation in question constitute a restriction on the freedom of establishment and on the free movement of capital.

The Court recalls that Article 43 EC precludes any national measure which, even though it is applicable without discrimination on grounds of nationality, is liable to hinder or render less attractive the exercise by Community nationals of the freedom of establishment that is guaranteed by the Treaty (Case C-19/92 Kraus, paragraph 32, and Case C‑299/02 Commission v Netherlands, paragraph 15). Also, legislation making the establishment in the host member State of an economic operator from another member State subject to the issue of a prior authorization and allows self-employed activity to be pursued only by certain economic operators who satisfy predetermined requirements, compliance with which is a condition for the issue of that authorization, constitutes a restriction within the meaning of Article 43 EC. Such legislation deters or even prevents economic operators from other member States from pursuing their activities in the host member State through a fixed place of business (Case C-169/07 Hartlauer paragraphs 34, 35 and 38).

In a similar vein, it recalls that national measures are restrictions within the meaning of Article 56(1) EC if they are liable to prevent or limit the acquisition of stakes in the undertakings concerned or to deter investors from other member States from investing in their capital (see Case C-112/05 Commission v Germany, paragraph 19, and Joined Cases C-463/04 and C-464/04 Federconsumatori and Others, paragraph 21).

But the Court went on to find that the restrictions were justified on grounds of the protection of human health. It stated that medicinal products are distinguishable from other goods because of their therapeutic value. Consequently, member States can legitimately seek ways to ensure the proper an correct consumption of medicines and can require that medicinal products be supplied by pharmacists enjoying genuine professional independence.

The Court also held that member States enjoy a discretion to decide that there is a risk that less restrictive rules designed to ensure the professional independence of pharmacists, such as a system of controls and penalties, would not be observed in practice, given that the interest of a non-pharmacist in making a profit would not be tempered in a manner equivalent to that of self-employed pharmacists and that the fact that pharmacists, when employees, work under the direction of an employer who could make it difficult for them to oppose instructions.

These cases are important as the illustrate the way the provisions on freedom of establishment and the free movement of capital work in practice.

Abuse of law and Case C-212/97

Dr. Wolf-Georg Ringe of Oxford University, England, has written an interesting article entitled "Sparking regulatory competition in European Company Law: The impact of the Centros line of case-law and its concept of 'abuse of law'".

The article traces the impact of the judgment of the Court of Justice in Case C-212/97 Centros Ltd v. Erhvervs- og Selskabsstyrelsen and its progeny. Here's what the abstract states:

The case-law of the European Court of Justice in the field of company law has repeatedly touched on the question of abuse, most notably in the situation where a company was set up in a Member State only to do business exclusively in another. Starting with the landmark case of Centros in 1999, the Court has repeatedly stressed that it employs a liberal approach towards abuse in this field. According to the Court, making use of the disparities of different legal standards when setting up a company is not abuse, but explicit use of the freedom of establishment.
This paper analyses the Court’s approach towards abusive behaviour in company law and assesses the impact that the leading cases since 1999 have had both on business behaviour in the EU and on the national law-makers who have responded to the opening of the markets. It is shown that the Court has provoked a sizeable entrepreneurial migration from various countries towards the UK. This in turn has led to regulatory competition, in that other Member States in continental Europe have been forced to adapt their company law to make it more attractive for businesses.
It is argued that at least so far, the (limited) competition between Member States has been beneficial and has reduced both registration time and costs. Questions remain as to the relevance of any comparison with the United States and the future developments for corporate re-incorporations.

You can download it here.

Boycotts, Strikes and the Freedom of Establishment: Case C-438/05

The Court of Justice has handed down its eagerly awaited judgment in Case C-438/05 International Transport Workers' Federation & The Finnish Seamen's Union v. Viking Line.

The Court held that the threat of strike action by a trade union to force an employer to conclude a collective agreement the terms of which are liable to deter it from exercising freedom of establishment constitutes a restriction on that freedom prohibited by Article 43 EC.

The facts of the case are fairly remarkable. In October 2003, Viking Line, a Finnish ferry company, gave the Finnish Seamen's Union (FSU) notice of its intention to reflag its vessel Rosella, which operated on the Baltic between Finland and Estonia on the "booze cruise". The Rosella operated at a loss and so Viking Line wished to register it in Estonia, where it had a subsidiary, in order to be able to employ an Estonian crew, at a lower level of pay than that applicable in Finland. That way, Viking Line hoped to compete with other booze cruise ferries on the same route. In November 2003, following a request from FSU, the International Transport Workers' Federation (ITF) in London sent a circular to all its affiliates requiring them to refrain from entering into negotiations with Viking Line, with the threat of a boycott of all Viking Line vessels if they failed to comply. FSU imposed conditions on the renewal of the manning agreement with Viking Line and announced its intention to strike. It required, on the one hand, an increase in the number of the crew on the Rosella, and, on the other, the conclusion of a collective agreement, requiring Viking Line, if the vessel was reflagged in Estonia, to continue to comply with Finnish labor law and would not lay off crew. Then, Estonia joined the EU in 2004. Viking Line, which was determined to register the loss-making vessel under the Estonian flag, brought proceedings before the courts in England where ITF had its seat to oblige it to withdraw its circular threatening a boycott and seeking an order against the FSU that it must not infringe Viking's right of establishment with regard to the reflagging of the Rosella.

The English Court of Appeal referred a series of questions to the Court of Justice on whether the rules on the freedom of establishment in Article 43 EC applied in such a case as this one.

The Court of Justice's judgment is a rich one that rewards careful reading.

The Court held that Article 43 EC on freedom of establishment applies to collective action initiated by a trade union or a group of trade unions against an undertaking to force it to enter into a collective agreement, the terms of which are liable to deter it from exercising that freedom. It makes clear that Article 43 EC confers rights on a private undertaking which can be relied on against a trade union or an association of trade unions exercising their autonomous power, pursuant to trade union rights, to negotiate with employers or professional organisations the conditions of employment and pay of workers (Case C-309/99 Wouters and others, paragraph 120, Case 43/75 Defrenne, paragraphs 31 and 39 and Case C-112/00 Schmidberger, paragraphs 57 and 62).

It held that the conditions laid down for the registration of vessels must not form an obstacle to freedom of establishment (Case C-221/89 Factortame and Others, paragraphs 20 to 23). According to the Court, the strike action envisaged by the FSU has the effect of making less attractive, or pointless, Viking Line’s exercise of its right to freedom of establishment, because its aim is to prevent both Viking Line and its Estonian subsidiary from enjoying the same treatment in the host member State (Estonia) as other economic operators established in that State. Secondly, collective action taken in order to implement ITF’s policy of combating the use of flags of convenience, which seeks, primarily, to prevent ship-owners from registering their vessels in a State other than that of which the beneficial owners of those vessels are nationals, must be considered to be at least liable to restrict Viking Line’s exercise of its right of freedom of establishment.

The Court held that Article 43 EC applies in such a case notwithstanding the fact that the right to strike is not a right regulated by EC law according to Article 137 EC and is recognized as a fundamental right.

Finally, the Court examined whether the restriction on the freedom of establishment was justified. It stated that it is for the referring national court to determine whether the objectives of the labor unions were in fact those of protecting workers. The Court did give some guidance on the matter. It held that although the protection of workers' rights was a matter of overriding public interest (see Joined Cases C-49/98, C-50/98, C-52/98 to C-54/98 and C-68/98 to C-71/98 Finalarte and Others, paragraph 33), the restriction on the freedom of establishment could not be justified if it were established that the jobs or conditions of employment at issue were not jeopardized or under serious threat. If, on the other hand there was a threat to jobs or conditions of employment, the threat of strike action must be proportionate to the aim of protecting them.