1
PUBLIC MORALS IN WTO AND EU LAW
Looking for a balance between cultural autonomy and international commitment
Master’s thesis 28-07-2017
Remko Mooi 10834737
Supervisor: Dr. Ingo Venzke University of Amsterdam
2 Content
1. Introduction 3
2. The public morals-exception in the WTO 5
2.1. General exceptions within the WTO 5
2.2. The conditions set out in paragraph (a) 6
2.2.1. The definition of ‘public morals 6
2.2.1. ‘Designed to protect’ public morals 8
2.2.2. The requirement of necessity 12
2.3. The requirements of the chapeau 15
3. Public morals and the internal market of the European Union 17
3.1. Public morals in EU law 17
3.2. A move away from strict proportionality 18
3.3 The express derogation of public morality 21
3.4 Public morals as a part of the public policy exception 24 4. Comparing the public morals-exceptions in WTO- and EU law 24
5. Conclusion 29
Bibliography 31
3 1. Introduction
In both the World Trade Organization and the European Union, the liberalization of interstate trade is a core objective. However, the duty of states to conform to the primary obligations under the treaties is not an absolute one. Under certain circumstances, it is allowed for Members to impose trade-restrictive measures. States and the EU in its affairs therefore have a certain degree of regulatory autonomy, which allows them to take trade-restrictive measures if certain concerns of public policy are at stake. In the context of the World Trade Organization, disputes concerning the invocation of these general exceptions by Members often takes place in the area of environmental and health regulation.1 A less frequently invoked, but especially interesting ground for these legitimately trade-restrictive measures is the one of the protection of public morals. This exception is laid down in paragraphs a of Article XX of the General Agreement on Tariffs and Trade (GATT 1994) and Article XIV of the General Agreement on Trade in Services (GATS), while it also constitutes a ground for trade-restrictive measures within the internal market of the European Union (Article 36 of the Treaty on the Functioning of the European Union, TFEU).
The way that the Panel and the Appellate Body (AB) of the WTO have applied the criteria for the use of this public morals-exception in recent cases, and especially in the EC – Seals case, has been the topic of a considerable amount of criticism.2 Even though the judgment was also praised by various authors, the fact that the AB refrained from determining what exactly could fall under the term ‘public morals’ was by some seen as problematic. This, so it was argued, might allow virtually anything to fit under the public morals-exception. Furthermore, the conditions of the necessity test were seen as vague and overly broad. The ruling was therefore by some seen as the confirmation of many of the original concerns relating to the inclusion of the public morals-exception in the GATT and GATS.3
In this thesis, the way that the Panel and the AB apply the criteria for the application of the public morals-exception is compared to the way the European Court of Justice (ECJ) applies this exception within the internal market of the European Union. It is argued that the application of the consistency criterion by the ECJ, with which it tests the consistency of the policy of the Member concerning a certain public moral, would be a valuable addition to the application of the public morals-exception within the WTO. It would offer a solution for the current problem posed by the contradiction between the Member’s freedom to determine the level of protection that it wishes to afford to its public morals, and the fact that the trade-restrictive effects of the measures seem to play a role in the determination of the necessity of the measure.
1 Jeremy Marwell, ‘Trade and Morality: The WTO Public Morals Exception After Gambling.’ New York University Law Review, 81 (2006), 808.
2 Julia Möllenhoff, Framing the ‘public morals’ exception after EC – Seal Products with insights from the ECtHR
and the GATT national security exception (Master’s thesis, Graduate Institute Geneva 2015), 61.
4
By applying the criterion of consistency in the internal policies of Members, the importance of an objective can be measured without applying external, international standards.
The WTO and the EU are of course very different international organizations, and in analyzing the role of public morals the differences between these regimes should be kept in mind. As a supranational, regional union, the EU is strongly tied to its citizens. It aims to protect the interests of the citizens of its Members as EU-citizens. Citizenship of the European Union, which is additional to the primary national citizenship that civilians have, directly results in certain rights. Amongst these rights are the right to vote, the right to free movement, settlement and employment across the European Union, and legal protection by EU law (Article 20 TFEU). The European Union therefore has a very direct connection with EU-citizens. The WTO, on the other hand, is ‘merely’ an intergovernmental organization, with no nexus to nationals of its Members. Its main objective is essentially a negative one, in the sense that it aims to take away trade barriers, whereas the goals of the European Union go much further than just the taking away of barriers created by its Member States. I do believe, however, that a comparison in this regard is meaningful, and that the core problems associated with the application of the public morals-exception are similar in both regimes.
In the first chapter, the functioning of the public morals-exception within the WTO is discussed. Here, the various steps that the Panel and AB take in order to establish that a measure falls under a paragraph of Articles XX GATT and XIV are analyzed, as well as the additional requirements of the chapeau. The reasoning of the Panel and AB is studied, as well as the writings of various relevant authors in the field. Then, the way the public morals-exception functions within the internal market of the EU is analyzed. Here too, the emphasis is placed on case law of the European Court of Justice, complemented with literature on the topic. Finally, the last chapter compares the ways in which the public morals-exceptions in the two legal regimes function.
5 2. The public morals-exception in the WTO
2.1. General exceptions within the WTO
Article XX of the General Agreement on Tariffs and Trade (GATT) 1994 and Article XIV of the General Agreement on Trade in Services (GATS) can in certain cases be invoked in order to circumvent undesirable consequences of WTO-obligations. Due to the fact that these two treaties fulfill a similar function, the general exceptions are deemed to function identically in these two treaties.4 Article XIV (a) GATS also entails the additional ground to invoke measures ‘to maintain public order’, but case law concerning the protection of public morals under Article XIV GATS can be used in order to interpret Article XX of the GATT, and vice versa.
In order to be able to successfully invoke these general exceptions, the conditions of a two-tier test have to be met.5 In the case of an appeal to the public morals-exception, it will first have to be proven that the disputed measure falls under paragraph a (of either Article XX of the GATT or Article XIV of the GATS). The condition that is set out in this paragraph is that the measure is ‘necessary to protect public morals’. Subsequently, the Member needs to demonstrate that the requirements of the chapeau are met.6 The chapeau poses additional requirements for the invocation of the exceptions under the paragraphs of Articles XX GATT and XIV GATS. It states that ‘the measure cannot be applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail’ and is not a ‘disguised restriction on international trade’. These conditions can be seen as an ‘expression of the principle of good faith’.7
Regarding the public morals-exception, only four WTO disputes have so far involved this exception, namely US – Gambling (2005), China – Audiovisuals (2009), EC – Seals (2014) and Indonesia – Horticulture (2016). It has been suggested, however, that the public morals-exception will come to play
4 United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services (US – Gambling), Report of the Appellate Body, WT/DS285/AB/R, 07-04-2005, para. 291.
5 ‘Exceptions to WTO Rules: General Exceptions, Security Exceptions, Regional Trade Agreements (RTAs), Balance- of- Payments (BOPs) & Waivers’ WTO E-learning Module 8, accessible through
https://ecampus.wto.org/admin/files/Course_382/Module_537/ModuleDocuments/eWTO-M8-R1-E.pdf (accessed on 10-06-2017).
6 The order of this test, with the requirements of the paragraphs being examined first, cannot be reversed, since this reflects the ‘fundamental structure’ of the GATT and the GATS. See: United States – Import Prohibition of Certain
Shrimp and Shrimp Products (US – Shrimp), Report of the Appellate Body, WT/DS58/AB/R, 12-10-1998, para.
119. 7 Ibid.
6
an increasingly important role within the WTO.8 In general, the increased heterogeneity of WTO Members, together with the growing importance of international trade for national economies, is likely lead to trade disputes arising more often. Furthermore, the general tightening of the WTO regime concerning regulations in various areas (most notably environmental protection and the protection of human health) could lead to Members restating their arguments in terms of public morality. Another factor behind an increased importance of the public morals exception could be the way new technological developments are leading to concerns on their morality. Areas which were previously outside the reach of human intervention can increasingly be modified through technological inventions (e.g. growth hormones, DNA-modification on animals), and it seems likely that this continuous technological progress will be the cause of a number of moral concerns to various countries. The fact that nearly 100 free trade treaties (both multilateral and bilateral) have adopted a public morals exception is indeed a clear indicator that public morals are starting to play an increasingly important role in the area of international trade.9
2.2. The conditions set out in paragraph a
As said before, the first step that is taken by the Panel and Appellate Body in order to analyze whether a disputed measure by a Member falls under the public morals-exception entails an analysis of the requirements of paragraph a of Article XX of the GATT and Article XIV of the GATS. Since the chapeau states that nothing in the GATT and GATS shall be construed to prevent the adoption or enforcement of measures ‘necessary to protect morals’, it needs to be examined which measures are in fact ‘necessary to protect public morals’. This requirement entails an analysis of the design of the measure and its necessity.10
2.2.1. The definition of ‘public morals’
First of all, it of course needs to be determined what exactly ‘public morals’ are. For this, the US – Gambling from 2004 dispute was important. US – Gambling was the first WTO dispute in which public morals were
8 Marwell, ‘Trade’ 808. Also see Anne-Marie De Brouwer, A. ‘GATT Article XX’s Environmental Exceptions Explored: Is There Room for National Policies?, The WTO and Concerns Regarding Animals and Nature (Nijmegen 2003).
9 Paul Serpin, ‘The Public Morals Exception After the WTO Seal Products Dispute: Has the Exception Swallowed
the Rules?’ Columbia Business Law Review, No. 1:217 (2016) 229.
7
invoked in order to justify trade-restrictive measures.11 Antigua and Bermuda (‘Antigua’) disputed an American ban on the cross-border supply of online gambling and betting services. Such a ban, Antigua claimed, resulted in a ‘total prohibition’ on the cross-border supply of betting services from Antigua, which in turn was contrary to the obligations of the United States under the GATS. Specifically, Antigua stated that it believed the measures to be contrary to American obligations under the GATS Schedule and Articles VI, XI, XVI and XVII of the GATS.12 The United States, however, argued that the prohibition was necessary in order to protect ‘public morals’ and ‘public order’ within the meaning of Article XIV(a). In its opinion this was the case, since remote gambling was particularly vulnerable to abuse by minors, and could additionally be used for money laundering.13
Since US – Gambling was the first WTO dispute in which the concept of public morals played a role, the Panel and Appellate Body had to decide on a number of doctrinal matters. Firstly, the question needed to be answered how it could be determined when an issue brought forward by a country is legitimately a matter of public morals. Contrary to health or environmental concerns, which can in principle be determined through objective scientific research, public morals are a more elusive concept. A fundamental difference between environmental matters and matters of public morality, is that environmental policies are often globally recognized.14 Morals, on the other hand, may vary widely between countries, and it is difficult, if not impossible, to truly ‘measure’ them. Matters which might seem insignificant in certain cultural contexts could be the cause of very genuine moral concern in others, which would mean that a requirement of a general consensus on the content of public morals would inevitably lead to certain culturally specific morals being excluded from the provision. On the other hand, the acceptance of anything as a matter of public morals could lead to an abuse of the clause for purposes of protectionism.
In US – Gambling, the Panel adopted a ‘flexible approach’ towards determining the scope of the term ‘public morals’. The Panel noted that ‘public morals’ refer to ‘standards of right and wrong, that can be described as ‘belonging to, affecting, or concerning the community or nation’.15 The Panel also noted that ‘Members should be given some scope to define and apply for themselves the concepts of ‘public morals’ and ‘public order’ in their respective territories, according to their own systems and scales of values’.16 The AB therefore seemed hesitant to decide for Members that something does not constitute a concern of public morality. The fact that in none of the WTO disputes in which the public morals-exception
11 United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services (US – Gambling), Report of the Panel, WT/DS285/R, 10-11-2004, para. 6.460.
12 US – Gambling, Panel, para. 2.1 (b). 13 US – Gambling, Panel, para. 6.444.
14 Laura Nielsen, The WTO, Animals, and PPM’s (Leiden: 2007). 15 US – Gambling, Panel, para. 3.278.
8
was invoked the Panel or the AB have found that something was not a matter of public morals, confirms this.
On the other hand, in US – Gambling the Panel also seemed to attach some importance to a quantitative confirmation in order to determine the legitimacy of the American moral concerns. After looking at the definition of public morals from an etymological point of view, the Panel established that other jurisdictions had accepted that gambling activities, in order to protect public morals, could lead to a derogation of legislative rules.17 This, in turn, allowed the panel to accept that gambling and betting services could constitute a cause of legitimate public moral concern. The fact is, therefore, that in its analysis of what public morals could mean, it did not look at the specific situation of the United States. In contrast, the panel mainly looked at international practice when it comes to defining public morals.
This is a fundamental matter in the question of how the scope of public morals can be determined: can countries declare unilaterally that something is an issue that touches upon public morals, or does there need to be some form of international consensus?18 These two views are reflected in the ‘unilateral approach’ and the ‘universalist approach’. This ‘universalist approach’ has, however, been criticized, since it requires a certain communality for a moral concern in order for it be able to constitute a derogatory clause under the GATT/GATS. As Jeremy Marwell stated, this approach leads to the definition of domestic public morals being based on evidence external to the state, imposing a threshold of a ‘moral majority’19. On the other hand, it is clear that a ‘unilateral approach’ could also lead to difficulties. Members could, when they wish to take trade-restrictive measures, have too much freedom to bring matters within the purview of morals, leaving the doors to protectionism open.20
In EC – Seals, the Appellate Body again did not in detail go into the way in which it can be determined whether an appeal on the protection of public morals is genuine. It thereby left it largely up to the Members to determine the definition of the public morals in question.
2.2.2. ‘Designed to protect public morals’
Now that it has been determined that the scope of the term ‘public morals’ is not likely to pose problems for Members, since it is largely left to their discretion to determine whether something is a matter of public
17 The Panel here explicitly names the European Court of Justice, which had already accepted national legislation prohibiting the holding of lotteries as legitimately protecting public morals of the nationals of these Members. 18 Mark Wu.’Free Trade and the Protection of Public Morals: An Analysis of the Newly Emerging Public Morals
Clause Doctrine’ The Yale Journal of International Law 33 (2008) 231.
19 Marwell, ‘Trade’ 806.
20 Yeasmeen, N. ‘Interpretation of ‘Public Morals’ under Article XX of the GATT’ IOSR Journal of Humanities and
9
morals, the two specific requirements of paragraph a need to be assessed. In Colombia – Textiles, the Appellate Body stated that in order to see whether a measure is necessary to protect public morals two requirements need to be met.21 Firstly, the disputed measure needs to be ‘designed to protect public morals’, and furthermore it is required that the measure taken to protect public morals is ‘necessary’. The AB clarified that the requirements regarding the design and the necessity of the measure are conceptually different, but not entirely disconnected.22 There may therefore be some overlap between the two steps, and some considerations may be relevant to both the design- and necessity criterion.
In order to examine the way that the Panel and the AB interpret the requirement regarding the design of the measure, the EC – Seals (2014) and Indonesia – Horticulture (2016) cases are relevant. In Indonesia – Horticulture, for the first time it was found by the Panel that a measure was not in fact designed to protect public morals while the state invoking the measure claimed that it was. In this case, 18 Indonesian measures were disputed by New Zealand and the United States. These measures affected the import of horticultural (the branch of agriculture dealing with growing plants) products, animals, and animal products. Various licensing regimes had been imposed for these products, some of which Indonesia defended by stating that their goal was to ensure that products on the Indonesian market were Halal.23
New Zealand and the United States nevertheless found that the Indonesian measures constituted quantitative restrictions, breaching Articles III:4 and XI:1 of the GATT. Indonesia found the protection of Halal a matter of public morals, and for two of the disputed measures it invoked the public morals-exception of the GATT. The complainants in turn did not argue that Halal was not a matter of public morals, but that the measures taken by Indonesia did not in fact aim to protect Halal. There was, in short, no genuine relationship between the measures and the protection of the public morals.
The Panel stated that in order to establish that a measure is designed to protect a certain objective, the bare assertion of this objective is not sufficient.24 Conversely, the fact that a certain objective is not mentioned does not automatically lead to the determination that is not pursued. The Panel then proceeded to look at the ‘design’ of the measures, including their content, structure, and expected operation.25 The protection of Halal was not mentioned as the policy objective of the measures imposing the import regimes,
21 Colombia – Measures relating to the Importation of Textiles, Apparel and Footwear (Colombia – Textiles), Report of the Appellate Body, WT/DS461/AB/R, 07-06-2016, para. 5.76. Also in EC – Seals, the AB clearly made a distinction between the need for a measure to be designed to protect the interest at stake, and the need for it to be necessary in order to achieve this goal. See European Communities – Measures Prohibiting the Importation and
Marketing of Seal Products (EC – Seals) Report of the Appellate Body, WTO/DS400/AB/R, WTO/DS401/AB/R,
22-05-2014. 22 Ibidem.
23 From the disputed 18 disputed measures in the Indonesia – Horticulture case, Indonesia defended Measures 5 and 6 under the public morals-exception.
24 Indonesia – Importation of Horticultural Products, Animals and Animal Products (Indonesia - Horticulture), Report of the Panel, WT/DS477/R, 22-12-2016, para. 7.655.
10
and looking at the wider legal context of these measures, the Panel was not convinced that there was a connection between the measures and the protection of Halal. The Panel therefore determined that Indonesia had not demonstrated that the measures for which it invoked the public morals-exception were provisionally justified under paragraph a of Article XX GATT.
The Panel therefore set out clear limits on which measures can be justified under the public morals-exception: there needs to be a relationship between the WTO-inconsistent measure and the protection of public morals, which is determined by looking at the design of the measure. Since the Indonesian measures clearly pursued other aims, the Panel determined that such a relationship did not exist. The Indonesia – Horticulture case is, however, clear-cut due to the fact that is rather obvious that the Indonesian measures did not have much to do with the protection of Halal. The EC – Seals case is more interesting in this regard, since it raised the question of to what extent a policy of a Member invoking the public morals-exception needs to be consistent.
The EC – Seal Products case was the third WTO-dispute in which the protection of public morals played a role, and the first one in which the public morals exception was applied to the protection of animal welfare. Due to the fact that the European Union implemented trade-restrictive measures on the basis of moral concerns about animal welfare, the case could have widespread consequences: also the import of products that involved animal-testing, and meat from animals that lived in small pens and cages could be banned.26
In this dispute, a number of regulations from the European Union were disputed by Canada and Norway. Specifically, the ‘Basic Regulation’ of the European Parliament (No. 1007/2009) and the ‘Implementing Resolution’ (No. 737/2010), jointly also referred to as the ‘EU Seal Regime’, were argued to be a violation of the TBT Agreement and the GATT. The Basic Regulation placed far-reaching restrictions on the placing on the market of seal products. According to Article 3 of the Regulation, in three occasions seal products were allowed to be placed onto the EU Community market. Firstly, this was the case if these products resulted from ‘traditional hunts’, such as hunts conducted by Inuit. Also, the import of seal products was permitted if it was from an ‘occasional nature’ and consisted exclusively of goods for the personal use of travelers or their families. Finally, the seal products could be placed on the Community market if they resulted from ‘by-products of hunting’, and if this hunting was regulated by national law and it was conducted for the purpose of sustainable management of marine resources.
The EU thus chose not to impose a ban on seal products resulting from inhumane seal-hunting practices, which would have been a process and production method (PPM) measure. Rather, the EU chose
26 David Pabian, and Gregory Shaffer, ‘The WTO EC - Seal Products Decision: Animal Welfare, Indigenous Communities and Trade (Shorter Version) University of California School Legal Studies Research Paper Series 69 (2014) 5.
11
to adopt a total ban on products, with three exceptions. The main consequence of this ban was that seal imports which were allowed under the exceptions of the ban mainly came from EU Member States or from Greenland, which is a part of the Danish Kingdom.27 Imports from Canada and Norway, where seals are mainly hunted through commercial hunts, were however in principle found to violate the EU Seal regime, even if the seals had been hunted in a humane manner.
In EC – Seals, the Appellate Body agreed with the earlier ruling of the Panel that the main objective of the EU Seal regime was to address public morals concerning seal welfare. The situation was different from the Indonesia – Horticulture dispute, since, according to the Panel and the AB, the legislation adopted by the EU clearly had the protection of animal welfare as an objective. This conclusion was reached by looking at the text and legislative history of the Seal regime, as well as ‘other evidence pertaining to its design, structure and operation’.28 Examining this evidence, the AB agreed with the Panel and concluded that the objective was ‘to address the moral concerns of the EU public with regard to the welfare of seals’.29
However, Canada brought forward the matter of consistency. Its argument was that consistency in the EU-policy regarding animal welfare was required in order for the public morals-clause to be applicable. Canada argued that in order to establish that the trade restrictive measures of the European Union protected public morals, it had to be established that these public morals were at risk. Much like New Zealand and the United States in Indonesia – Horticulture, Canada did not state that animal welfare was not a genuine concern within the EU or a matter of public morals. It however argued that some level of consistency had to exist within the general EU policy on the matter of animal welfare, in order for a certain ‘risk’ to these public morals to exist. It therefore stated that in order to identify a risk to the public morals, ‘a certain standard or norm of the right and wrong conduct in the context of animal welfare had to be identified within the European Union’.30 It then named the example of standards of animal welfare in slaughterhouses and within terrestrial wildlife hunts, policy areas of the European Union where it believed much less stringent animal welfare norms applied. Therefore, since there was no consistent regulation concerning animal welfare throughout different policy areas of the European Union, Canada argued that public morals could not be deemed to be truly at risk.
The Appellate Body, however, did not agree, and stated that a requirement for consistency throughout different policy areas would be an infringement of the right of Members to determine the level of protection that they wish to seek for, in this case, public morals.31 This means that it is allowed for
27 Laura Nielsen & Maria Alejandra Calle, ‘Systemic Implications of the EU – Seal Products Case’ Asian Journal of
WTO & International Health Law & Policy, 41, 2013, 44.
28 EC – Seals, Panel, para. 7.410; EC – Seals, AB, para. 5.167, 29 EC – Seals, AB, para. 5.166.
30 EC – Seals, para. 5.194. 31 EC – Seals, para. 5.200.
12
Members to protect a certain public moral to different extents in different policy areas. It has been argued that it would indeed lead to an overstretching of the powers of the WTO.32 If the Panel and Appellate Body would be allowed to review the legislation of Members in order to establish the required consistency, this would be contrary to the WTO’s institutional mandate. Furthermore, the requirement of consistency throughout all policy areas would be ‘unworkable in the real world of policymaking’, since a variety of priorities need to be balanced against each other and a demand for true consistency would be unrealistic. Under WTO law, there is therefore no requirement to have a consistent policy in place concerning a certain matter of public morality in order to successfully invoke the public morals-exception.
2.2.3. The requirement of necessity
Secondly, after establishing that the measure was designed to protect public morals, the measures taken by the Member need to be ‘necessary’ in this regard. In various WTO reports, it has been established that Members are free to determine the level of protection they consider appropriate for the interests laid down in Article XX of the GATT and Article XIV of the GATS.33 The Appellate Body noted that necessity relates to the existence of ‘a sufficient nexus between the measure and the interest protected’.34 This is, in principle, an ‘objective’ standard’.35 According to the AB in US - Gambling, the requirement of necessity reflects the shared understanding of Members that obligations under the GATS ‘should not be deviated from lightly’.36 In order to determine whether this is the case, the Appellate Body stated that ‘a process of weighing and balancing a series of factors’ should be carried out.37 In Korea – Beef, this process was followed by a determination of whether a ‘WTO-consistent alternative measure which the Member concerned could ‘reasonably be expected to employ’ was available, and whether this less WTO-inconsistent measure was ‘reasonably available’.38
According to the AB in, amongst other cases, US – Gambling and Korea – Beef, three factors are assessed during this process of ‘weighing and balancing’. Firstly the ‘relative importance’ of the interests
32 Rob Howse, Joanna Langille, and Katie Sykes, ‘Sealing the Deal: The WTO’s Appellate Body Report in EC – Seal Products’ ASIL Insights 18:12 (2014) 5.
33 Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef (Korea – Beef), Report of the Appellate Body, WT/DS161/AB/R, 11-12-2000, para. 176. Also see European Communities – Measures Affecting Asbestos
and Asbestos-Containing Products (EC – Asbestos), Report of the Appellate Body, WT/DS135/AB/R, 12-03-2001,
para. 168.
34 US – Gambling, ABR, para. 292. 35 US – Gambling, ABR, para. 304. 36 US – Gambling, ABR, para. 308.
37 Korea – Beef, ABR, para. 164; US – Gambling, ABR, para. 305 38 Korea – Beef, ABR, para. 166.
13
protected by the measure are assessed. Even though it is difficult to speak in general terms about the importance of public morals, in the China – Audiovisuals dispute the Panel stated that ‘the protection of public morals ranks among the most important values or interests pursued by Members as a matter of public policy’.39 According to the Panel, the fact that the protection of public morals was the first of the exceptions named in Article XX of the GATT and Article XIV of the GATS is indicative of its importance. The importance of public morals at stake is therefore gauged by referring to the importance of public morals in general.
Then, the contribution of the measure to the realization of its aims are examined. In Korea – Beef, the AB ruled that it could not be held that a measure needed to be ‘indispensable’ for the protection of the interest.40 ‘Absolute necessity’ is therefore not required. However, when placed on a continuum between ‘indispensable’ and ‘making a contribution to’, it should be located ‘significantly closer’ to the former.41 In Brazil - Tyres, the Appellate Body focused on whether the measure was ‘apt to make a material contribution to the achievement of the objective’.42 Immediate results were therefore not required. In EC – Seals , the Appellate Body stressed that in previous cases it had not set out a generally applicable standard regarding this contribution.43 Rather, it noted that it ‘primarily’ aims to establish this necessity through ‘evidence or data, pertaining to the present or the past’.44 However, the focus of the AB on the aptness of a measure to make a material contribution to the protection of the objective should be seen in the light of the particular circumstances of that case: the AB was forced to assess the contribution of a measure that was part of a broader policy scheme, and which was expected to only yield protective results in the long term. This is especially relevant in the case of an appeal on the public morals-exception. In EC – Seals, the AB explicitly notes the differences between the subject matter of the interests protected under Article XX(a) and Article XX(b). When Members invoke the protection of the environment or public health in order to take trade-restrictive measures, the contribution of these measures towards the protection of these interests can, in general, be measured through methods of scientific inquiry. In the case of the protection of public morals, the Appellate Body notes that ‘such risk-assessment methods do not appear to be of much assistance’.45
In the China – Audiovisuals case from 2009, a range of Chinese measures which regulated activities concerning the import and distribution of certain publications and audiovisual entertainment products were disputed. Chinese regulations limited the import of these products to wholly State-owned enterprises and
39 China – Measures affecting trading rights and distribution services for certain publications and audiovisual
entertainment products (China – Audiovisuals), Report of the Panel, WT/DS363/R, 12-08-2009, para. 7.817.
40 Korea – Beef, ABR, para. 161. 41 Ibid.
42 Brazil – Tyres, AB, para. 151. 43 EC – Seals, AB, para. 5.214. 44 Brazil – Tyres, AB, para. 479. 45 EC – Seals, AB, para. 5.198.
14
prohibited foreign-invested enterprises from doing so. Both the Panel and the Appellate Body found the Chinese measure to be a breach of China’s Accession Protocol. China defended the import restrictions on the basis of the public morals exception under Article XX(a) of the GATT. Both the Panel and the Appellate Body however did not find the Chinese measures to be ‘necessary’ to protect public morals. According to their reasoning, it was not proven that foreign-invested companies were inherently unable to perform the required ‘morality tests’ that supposedly only Chinese state-owned were allowed to do. The Panel and AB were therefore not convinced that the measure in fact contributed to better controls on the content of the imported products.46 In the case of appeals on the public morals-exception, the Panel and AB therefore mainly seem to look at the logic behind certain measures, instead of demanding empirical evidence.
Finally, the impact of the measure on international trade is estimated. Even though it is clear that the trade-restrictiveness of the measure is certainly not a leading consideration for the Panel and the AB in this process, it is consistently mentioned throughout cases. 47 There is no ‘formula’ regarding the weight that should be attached to the possibly trade-restrictive effects of a measure, and in EC – Seals the AB determined that the weighing-and-balancing is a ‘holistic’ exercise, which involves ‘putting all the variables of the equation together and evaluating them in relation to each other’.48 Christian Pitschas and Hannes Schloemann have rightly noted that this process therefore remains a ‘somewhat subjective exercise’.49
Then, after having ‘balanced and weighed’ these three factors, a comparison is carried out between the challenged measure and possible alternatives. The three factors that were mentioned above set the bar for the search for an alternative measure. The results of this comparison are then ‘considered in the light of the interests at stake’.50 If less trade-restrictive, but more costly measures are found, the fact that these measures are more costly does not necessarily prevent them from being an alternative. In China - Audiovisuals the AB decided that in this case it had to be determined if an ‘undue burden’ would be placed upon the Member. If not, the Member could be held to adopt these alternative measures.51
To conclude, even though the basic presumption of the system of general exceptions in the WTO is that states can determine the desired level of protection for the objectives that are covered by the paragraphs of Article XX GATT and Article XIV GATS, the way the necessity analysis is carried in WTO case law seems to suggest something else. True autonomy regarding the objectives covered by the general exceptions would
46 China – Audiovisuals), AB, para. 277.
47 Brazil – Measures Affecting Imports of Retreaded Tyres (Brazil Tyres), Report of the Panel, WT/DS332 /R, 12-06-2007, para. 7.113; Brazil – Retreaded Tyres, AB, para. 156; Colombia – Textiles, AB, para. 5.70; EC – Seals, AB, para. 5.214.
48 Ibidem.
49 Christian Pitschas, and Hannes Schloemann, WTO Compatibility of the EU Seal Regime: Why public morality is
enough (but may not be necessary) (Halle 2012), 20.
50 US - Gambling, ABR, para. 307; Korea – Beef, ABR, 166. 51 China – Audiovisuals, AB, para. 327.
15
lead to Members being able to protect these objectives in whichever way they like, as long as the measures taken genuinely protect the objective and are not more restrictive than necessary. However, since the trade-restrictiveness of a measure is a factor that is consistently mentioned by the Panel and the AB during the determination of the necessity of the measure, a trade-off is made between Member autonomy and the interest of the international community. It is true that the Panel and the AB certainly do not put place an emphasis on this factor. It is, however, consistently mentioned, and various authors have stated that a less trade-restrictive measure is more likely to be found necessary than a more trade-restrictive one, even if all other factors (such as its contribution to the objective) are equal.52
Furthermore, consistency in the policy of Members is not required. In order to establish that a measure is designed to protect the stated objective, the focus is on the architecture and the history of the measure itself. The analysis of the necessity of the measure sees to its contribution to the objective stated. Also, its importance to the Member is weighed against the damage that is done to international trade, and the existence of less trade-restrictive alternatives is investigated.
2.3. The conditions of the chapeau
The two identical chapeaux above Articles XX GATT and XIV GATS state that measures which are aimed to protect the interests laid out in these articles cannot be applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination, or a disguised restriction on trade. In its core, the chapeaux are an expression of the general principle in international law of good faith, and prohibits abuse of the rights laid down in the subsequent sub-articles.53 An abuse of its own rights by a Member would lead to an infringement of the rights of another State. Numerous appeals on general exceptions have been lost on the requirements of the chapeau, and it has been argued that the application of the conditions of the chapeau is of increased importance when the requirements of the individual sub-articles are relatively vague.54 In the case of public morals, it is therefore of great practical importance.
The requirement to not apply these measures in a way that would lead to arbitrary or unjustifiable discrimination between countries where like conditions prevail relates both to the content of the measure and to the way the measure is applied. In US – Shrimp, the Appellate Body stated that an abuse of an exception under Article XX takes place not only when the provisions of the measure themselves prescribe
52 Michael Du, ‘Autonomy in setting appropriate level of protection under the WTO law: rhetoric or reality?’
Journal of International Economic Law 13 (2010), 1093.
53 US – Shrimp, AB, para. 158.
54 Arthur Appleton, ‘PIL and IEL: Will seal deaths resurrect the dream of international legal coherence?’ Questions
16
arbitrary or unjustifiable actions, but also when an on its face fair and just measure is applied in an arbitrary or unjustifiable measure.55 The Appellate Body stated in US – Gambling that the chapeau of Article XX identifies three standards: arbitrary discrimination, unjustifiable discrimination, and a disguised restriction on trade.56 Fundamentally, the non-discrimination requirement of the chapeaux of GATT XX and GATS XIV encompasses a comparison between the treatment of foreign products and the treatment of like domestic products.57 In US – Shrimp, the Appellate Body named a number of scenarios that could lead to unjustifiable discrimination being established: when a Member fails to take into consideration the different conditions occurring in other countries; when it is unwilling to pursue negotiations with other states, when an aspect of the application of the measure is difficult to reconcile with the declared objective of the measure.58 Arbitrary discrimination can be constituted by rigidity and inflexibility of the measure.59
In EC – Seals, the AB found that the EU Seal regime constituted a breach of the chapeau of art. XX due to a number of factors. The AB found the EC Seal regime to have discriminatory elements in it due to the regulatory differences between seal products resulting from traditional and commercial hunts, and the origins of these two categories of products.60 Seal products that were the result of traditional hunts mainly came from Greenland (which is part of an EU Member State), whereas seal products resulting from commercial hunts came from Norway and Canada. The EU Seal regime was thus de facto discriminatory. It found that the European Union had failed to prove that the discrimination was “rationally related” to the objectives that the regime pursued.61 The EU made the argument that the exemption made for products obtained from Inuit hunts was aimed to ‘mitigate the adverse effects on those communities’, but the AB was unable to establish such a relationship. Furthermore, it noted that the EU had not taken measures to ensure that the welfare of the seals caught during IC-hunts was ensured, given that IC hunts can lead to the same suffering that the EU aims to prevent.62 Therefore, in order to determine that the discriminatory effects of the measure were justified, the AB looked at how exactly the measures aimed to protected the objectives they aimed to pursue.
Furthermore, the Appellate Body criticized the criteria of the IC exception (the exception under the EU Seal Regime for seal products obtained from seals hunted by Inuit or other indigenous communities). The AB noted ambiguities regarding the ‘partial use-criterion’ (a criterion according to which seal products
55 US – Shrimp, AB, para. 160. 56 US – Gambling, AB, para. 6.581. 57 Marwell, ‘Trade’ 829.
58 US – Shrimp, AB, para. 164, 165, 172 and 177. 59 US – Shrimp, AB, para. 177.
60 EC – Seals, AB, para. 5.316. 61 EC – Seals, AB, para. 5.320. 62 EC – Seals, AB, para. 5.320.
17
must at least be partially used, consumed or processed within these indigenous communities in order for them to be allowed access to the European Market). According to the AB, it was not clear whether this criterion was enforced with regard to individual seals or to the catch of an entire season, leaving it unclear what the criterion exactly entailed.63
In short, the Panel and the AB apply a number of criteria in the assessment of whether a Member can invoke the public morals-exception. Amongst others the design of the measure, its contribution to the goal, possibly less trade-restrictive alternatives, and possible discriminatory effects are taken into account. Equally noteworthy is the fact that there seem to be no requirements concerning the content of the morals themselves, or that a Member invoking them does not in this regard need to show consistency in its policies.
3. Public morals and the internal market of the European Union 3.1. Public morals in EU-law
The possibilities of EU Member States to invoke public morality in order to restrict the fundamental freedoms of the European Union are relatively complex. Moral considerations by Member States are recognized as grounds for Member States for restricting these freedoms either by way of express derogations laid down in the Treaty on the Functioning of the European Union, or by way of public interest grounds that have an important moral dimension and have been developed in case law of the European Court of Justice.64 Furthermore, in EU law, the concepts of public morality and public policy or public order often intertwine: often a notion of morality underlies an appeal to the protection of public policy or public order, and it has been argued that the concepts can often be used interchangeably.65
However, despite of the many differences between the legal systems of the WTO and the EU, I believe a comparison between the role that the matter of public morality plays in both regimes is relevant. In both the EU and the WTO, the invocation of the protection of public morals can limit the functioning of the internal market, while the assessment of such morals is a culturally sensitive matter. Moreover, also in the literature on EU law it has been argued that the ECJ seems to prefer a ‘hands-off approach’ when it comes to determining the limits of the possibilities of Member States to restrict the freedoms of the internal
63 EC – Seals, AB, para. 5.325.
64 Dimitrios Doukas, ‘Morality, free movement and judicial restraint at the European Court of Justice’ Exceptions
from EU movement law Panos Koutrakos, Niamh Nic Shuibhne, Phil Syrpis ed., (Oxford 2016), 120.
18
market due to public morality considerations.66 In the context of this thesis, a study of the way that certain issues that are raised in the WTO context are regulated in law and in practice within an even more integrated community as the EU, could provide a helpful perspective. Does the ECJ, like the Panel and the AB, leave the assessment of the exact content of public morals up to the Member States? How does it balance the interests of the Member State against the interest of the Union as a whole? And does it require consistency in the policy of its Member States?
3.2. A move away from strict proportionality
Before analyzing the way that the ECJ has concretely handled cases concerning public morality, it is important to go into the general working of the principle of proportionality in EU law. Even though moral considerations can constitute a ground for Member States to justify measures that limit the functioning of the internal market of the EU, they are unlikely to preclude the applicability of the free movement provisions of the Treaty on the Functioning of the European Union.67 This is due to fact that the application of the Treaty is ‘triggered’ by the fact that an activity (such as the sale of goods or the rendering of services) is legal in one EU Member State. The fact that it is illegal in another Member State does not preclude the applicability of the free movement conditions: in fact, one of the goals of the internal market of the European Union is to stimulate movement in goods and services that are not offered somewhere else, and might even be controversial.68 Prostitution is, therefore, an activity that is protected by the freedoms laid down in the Treaty.69 The only way that the illegality of a good or service can prevent the application of the Treaty, is if the good or service is illegal in the home state (where it is offered). The fact that the protection of the freedom under the TFEU to offer morally questionable activities could lead to undesirable situations, does not preclude the applicability of the Treaty.70
However, Member States can in certain cases apply derogatory measures in order to protect certain interests. In the determination of whether these measures are allowed under EU law, the concept of proportionality plays an important role. Within the context of EU law, the principle of proportionality applies both to acts of the European Union and measures of Member States, which have a trade-restrictive
66 Christine Janssens, The Principle of Mutual Recognition in EU Law (Oxford: 2013) 47. 67 Doukas, Morality, 121.
68 Case C-159/90 Spuc v Grogan EU:C:1991:378, para. 19. 69 Case C-268/99 Jany EU:C:2001:616, para 50, 57.
70 The opinion of AG Bot in Bwin was not followed, since he stated that the normal benefits resulting from the internal market of the EU would not be realized in the case of an expansion of gambling possibilities for EU citizens. See Case C-42/07 Bwin EU:C:2009:519, para. 245.
19
effect within the Union.71 In the first case, the application of the principle of proportionality limits the actions of the EU to what is necessary to achieve the objectives of the EU Treaties (Article 5 of the Treaty of the European Union). Therefore, the content and form of the EU actions must be in line with the aim that is pursued. In the case of measures taken by Member States that have a trade-restrictive effect, a proportionality test is applied in order to limit the national regulatory autonomy in this regard.
This proportionality-requirement was confirmed by the ECJ in 1979 in the case of Cassis de Dijon. Here, the Court stated that a minimum alcoholic content for the import of spirits, which was required by German law, amounted to a trade-restrictive measure, which was disproportionate.72 A reasonable alternative would have been the labelling of products in order to inform customers. In the Fedesa case of 1990, the European Court of Justice set out three conditions which must be fulfilled by the restrictive measure by the Member State.73 Firstly, the measures are appropriate and necessary to achieve the objectives that it pursues; when there is a choice between different appropriate measures, the least restrictive measure must be chosen; and the effect of the protective measure must not be disproportionate to the aim that is pursued. From these demands, a three-tier proportionality test was formulated.74 Measures needed to be suitable for the objective that was pursued, they needed to be necessary for the achievement of that objective, and their effects on the internal market of the European Union could not be excessive (proportionality stricto sensu).
According to Wolf Sauter from Tilburg University, concerning the regulatory autonomy of EU Member States proportionality plays an especially important role in the case of Treaty based public policy exceptions.75 As was noted before, different versions of the proportionality test are applied here, whereas on the EU level only one test is used. This would be the case because here different levels of government are balanced, as opposed to individuals and the state. Furthermore, there seems to be a correlation between the restrictiveness of a measure on the internal market, and the strictness of the proportionality test that is applied.76 Also, the degree of harmonization seems to be of significant influence on how strictly the proportionality of a measure is measured.77 The reason behind this tendency would be that the degree of
71 Federico Ortino, Basic Legal Instruments for the Liberalization of Trade: A Comparative Analysis of EC and
WTO Law (Oxford: 2004).
72 Case C-120/78 Cassis de Dijon EU:C:1979:42 73 Case C-331/88 Fedesa EU:C:1990:391. 74
75 Wolf Sauter. ‘Proportionality in EU law: a balancing act?’ Cambridge Yearbook of European Legal Studies, 15 (2013) 439-466.
76 See Jan Jans, ‘Proportionality Revisited’ Legal Issues of Economic Integration 3 (2000) 239-265; Grainne De Burca, ‘The Principle of Proportionality and its Application in EC Law’ Yearbook of European Law 13 (1993) 105-150.
20
harmonization reflects the extent to which Member States have agreed to adopt a common EU-policy, and, in line with this, have agreed to give up regulatory autonomy, even when a legitimate purpose is pursued.78 Even though the three requirements laid out in Fedesa were clear, in case law the proportionality analysis for Member State measures has developed in a different direction.79 When looking at trade-restrictive measures from Member States, the Court overturns these when a less restrictive and effective alternative is available. Therefore, it sees if the measure pursues a legitimate objective, whether the measure is appropriate in order to fulfill this objective, and whether less trade-restrictive means are available (the so-called ‘LRM-test’). The Court does not continue to carry out a weighing and balancing of the costs and balances of the measure, which would have amounted to seeing if the measure would be proportionate stricto sensu.
One of the most significant cases in this regard is Gebhard from 1995.80 Here, Italy prevented the German lawyer Gebhard from using the title avvocato (lawyer) in Italy, since he was only registered as a lawyer in Germany.81 Even though the ECJ does not explicitly mention proportionality, it does lay out four criteria that a Member State must meet in order for it to be allowed to restrict market access. Firstly, the measures must be applied in a non-discriminatory manner. Secondly, the measures must be justified by imperative requirements in the general interest. Furthermore, they must be suitable for the attainment of the objective that is pursued. And finally, the measures must not go beyond what is necessary in order to attain this objective. When looking at these requirements, it is clear that the ‘Gebhard-test’ does not lead to a weighing-and-balancing of interests of some sort. Proportionality stricto sensu is therefore not required. It only requires non-discrimination, a legitimate objective, an appropriate measure, and the application of the least-restrictive means.
When looking at how the LRM-test is applied, three factors are relevant. Firstly, the Court will see if alternative measures could offer the same level of protection. If this is not the case, the current measure will usually pass the test, since the LRM-test is by definition a comparative test. The Motorcycle trailers case demonstrated that in this regard it is relevant if the in the area of regulation full harmonization has been realized.82 If this is not the case, the Member State is in principle allowed to determine the level of protection for its interest. Furthermore, the fact that another Member State applies a more liberal regulatory scheme does not lead to an unlawful restriction of trade by a Member State where more restricted
78 Sauter, Proportionality, 445.
79 Herwig, A. & Serdarevic, A. ‘Standard of Review for Necessity and Proportionality Analysis in EU and WTO Law’ Gruszczynski, L. & Werner, W. (eds.), Deference in International Courts and Tribunals (2014) 212. 80 Sauter, Proportionality, 449.
81 Case C-55/94 Gebhard EU:C:1995:441. \
21
regulations apply.83 Finally, the burden of proof that is placed on the Member State to show that no other measures could have been taken does not mean that it should demonstrate that ‘no other conceivable measure, which by definition would be hypothetical, could enable those tasks’.84 The LRM-test thus specifically relates to the conditions occurring in the Member State that has imposed the protective measure.
3.3. The express derogation of public morality
As said before, the possibility of states to restrict the free movement of goods and services within the internal market can be derived from the express derogation of public morality, or from what has been established in case law. The express derogation of public morality is directly laid down in Article 36 TFEU, which recognizes that ‘the provisions of Articles 34 and 35 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality’. Furthermore, considerations relating to public policy as an express derogation (under Articles 45(3), 52(1), 62, 65(1)b TFEU) often involve the question to which extent Member States can restrict the fundamental freedoms of the internal market due to moral concerns.85
Regarding the question what falls under the umbrella of ‘public morals’, a number of cases are relevant. In Schindler, the Court went into the prohibition of gambling as a common policy amongst Member States of the European Union.86 It said that it could not disregard the ‘moral, religious or cultural aspects of lotteries, like other types of gambling, in all the Member States’. Then, it noted that ‘the general tendency of the Member States is to restrict, or even prohibit, the practice of gambling’.87 The Court then concluded that ‘in those circumstances, it is for them to assess not only whether it is necessary to restrict the activities of lotteries, but also whether they should be prohibited’. In Schindler, the Court thus seemed to see added value in a more universal recognition of a matter as a source of moral concern. However, it did not explicitly state that universality was required for national regulatory authority. This was later stressed by the Court in Omega, where it noted that: ‘it was not its intention, by mentioning that common conception, to formulate a general criterion for assessing the proportionality of any national measure which restricts the exercise of an economic activity’.88
83 Case C-384/93 Alpine Investments EU:C:1995:126. 84 Case C-157/94 Import electricity EU:C:1997:499. 85 Doukas, Morality, 123.
86 Case C-275/92 Schindler EU:C:1994:119, para. 60. 87 Schindler, para. 60.
22
Indeed, in a number of cases it was confirmed that when a Member State had adopted a system of protection that differed from the one adopted by other Member States, this did not render the protective measure disproportionate or void of necessity. On the contrary, the Court stated the measure ‘must be assessed solely in the light of the objectives pursued by the national authorities of the Member State concerned and of the level of protection they seek to ensure’89 The complete freedom of states to determine the standard of national public morals and the extent to which they have to be protected was reiterated in a number of other cases. In Jany, the Court repeated that concerning the content of the morals that a Member State chooses to protect, the Court does not play a role: ‘so far as concerns the question of the immorality of that activity, raised by the referring court, it must also be borne in mind that, as the Court has already held, it is not for the Court to substitute its own assessment for that of the legislatures of the Member States’.90 Regarding the content of the morals that are protected, the Court prefers to leave this matter to the discretion of Member States.
In the Henn and Darby case of 1979, a measure of the United Kingdom restricting the import of pornographic magazines (products labelled as ‘indecent and obscene materials’) was disputed due to its trade-restrictive and discriminatory effects.91 On the matter of the freedom of the United Kingdom to restrict trade on the ground of the protection of public morals laid down in Article 36 TFEU, the ECJ ruled that ‘in principle, it is for Member State to determine in accordance with its own scale of values and in the form selected by it, the requirements of public morality in its territory’.92
The only true demand posed by the ECJ in Henn and Darby was the requirement that there was no arbitrary discrimination on the part of the United Kingdom. The Court noted that in regard of regional differences in UK legislation on the prohibition of indecent and obscene materials, ‘the fact that certain differences exist between the laws enforced in the different constituent parts of a Member State does not thereby prevent that State from applying a unitary concept…’.93 The Court therefore did not attach much weight to the fact that within the UK certain differences concerning the standards for indecent and obscene materials, as long as there was a certain general policy to be discerned. In order to determine whether the measure of the United Kingdom was nonetheless discriminate, due to the claim that trade in indecent and obscene materials was more easy within the United Kingdom, the Court again took a relatively broad
89 Case 124/97 Läärä EU:C:1999:435, para. 36 Also see case 67/98 Zenatti EU:C:1999:514, para. 34; Case C-6/01 Anomar EU:C:2003:446, para. 80.
90 Jany, para. 56.
91 Case 34/79 R v Henn and Darby EU:C:1979:295. 92 Henn and Darby, para. 15.
23
viewing point. It stated that ‘on a comprehensive view, there was no lawful trade…’.94 It therefore did not look into the national standards with great scrutiny, and did not engage in a proportionality test.
This approach was criticized, since it was relatively lenient regarding the legality of domestic regulations deviating from the import prohibition.95 In the Conegate case (1986) the Court seemed to apply a more ‘rigorous approach’ on this matter.96 In this case, the United Kingdom had banned the importation of inflatable female sex-dolls, since it considered them ‘indecent or obscene articles’.97 While the Court only applied the prohibition on arbitrary discrimination as the only ‘limit’ on the Member States ability to invoke the public morals-exception, it did find the fact that the United Kingdom did not have strict provisions under national law to oppose the distribution of these products problematic.98 The Court argued that ‘the fact that goods cause offence cannot be regarded as sufficiently serious to justify restrictions on the free movement of goods where the Member State concerned does not adopt, with respect to the same goods manufactured or marketed within its territory, penal measures or other serious and effective measures intended to prevent the distribution of such goods’.99 The Court therefore, at least in the case of goods causing offence, created a standard for domestic regulation in the case of an import ban: penal measures or other serious and effective measures had to have been taken in order to prevent domestic distribution.
The United Kingdom lost the Conegate case due to the fact that its regulations were found to be arbitrarily discriminatory, but it has been argued that the judgment strongly reflected a proportionality appraisal.100 This was, amongst others, done by Advocate General Poiares Maduro in his opinion on the Ahoikanen and Leppik case from 2006.101 Even though it acknowledged the right of the United Kingdom to assess the matter of the protection of public morals by itself, the fact that the Court ruled that its internal regulations were not serious enough in order to be able to determine that the objective that it protected (the protection of public morals) was of sufficient importance to restrict the freedoms of the internal market. This view, that only ‘sufficiently serious threats affecting the fundamental interests of society’ can warrant the invocation of an express derogation, balances the interests of the Member State and the EU as an economic community.102
In Conegate, the Court thus demanded a certain level of consistency within the policies of the Member State in order to establish ‘genuineness’, which was in turn necessary to determine that a certain
94 Henn and Darby, para. 21.
95 Malcom Jarvis, Application of EC Law by National Courts: The Free Movement of Goods (Oxford: 1998). 96 Helen Toner, Partnership Rights, Free Movement, and EU Law (Oxford: 2004).
97 Case C-121/85 Conegate EU:C:1986:114, para. 2. 98 Conegate, paras. 16 and 20.
99 Conegate, para. 15. 100 Doukas, Morality, 124.
101 Case C-434/05 Ahoikanen and Leppik EU:C:2006:609, para 29.
102 Damian Chalmers, Gareth Davies & Giorgio Monti, European Union Law, Texts and Materials (Cambridge: 2010) 903.
24
trade-restrictive measure was proportionate.103 While this requirement was originally part of the Court’s analysis of whether the measures of the UK were arbitrarily discriminate, it has increasingly been applied as part of the proportionality principle.104
3.4. Public morals as a part of the public policy exception and judge-made public moral grounds
Next to the obvious role that public morals play when they invoked under the express derogation of Article 36 TFEU, they also play a significant role in the determination of the Member State’s freedom to restrict the internal market’s freedoms under the public policy-exception. This express derogation is laid down in Articles 36(1), 45(3), 522(1) and 61(1)(b) TFEU. Also in the Court’s jurisprudence concerning the public policy-exception, a substantial latitude of Member States to justify measures that frustrate the freedoms of the internal market on the basis of moral concerns can be seen.105 Since this thesis focusses on public morals as an express derogation under WTO- and EU law, this indirect functioning of the concept of public morality is not analyzed as substantially, but it is important to note that in the literature, it has been recognized that the Court tends to leave matters of significant moral concerns to the discretion of Member States.
Furthermore, objectives of Member States of a moral nature have been recognized in case law of the ECJ as reasons able to justify restrictions on EU free trade provisions. In fact, Member State concerns regarding public morality have led to the relaxation of the application of the proportionality test for its trade-restrictive measures.106 In Dynamic Medien, German measures concerning the mandatory rating of content of DVD’s were found to be appropriate, despite their trade-restrictive effects. Therefore, also in this part of EU law, it becomes clear that Member States are left relatively wide discretionary powers to restrict trade within the internal market in order to protect their public morals.
4. Comparing the public morals-exceptions in WTO- and EU law
The main criticism on the ruling of the AB in the EC – Seals dispute seems to be that the AB provided few guiding principles to answer the question when a Member State can exactly invoke the public morals
103 Chalmers et al., European, 903. 104 Chalmers et al., European, 901-911. 105 Doukas, Morality, 126.
