Legal obstacles in Member States to Single Market rules

The functioning of the Single Market is a shared responsibility between the EU and the Member States. Differences in interpretation and application of EU law are inevitable. Despite years of hard work and substantial real progress, we appear to be some distance from having a well-functioning Single Market, free from unjustified or inappropriate obstacles to free movement.

On behalf of the European Parliament, Copenhagen Economics – together with Bruegel, CEPS and VVA Brussels – have analysed and described the current state and recent trends in the functioning of the Single Market, focusing on the free movement of goods, services and the right to establishment, digital Single Market, consumer protection and public procurement.

Member States understandably seek to ensure that national objectives are met in terms of, for instance, consumer protection, safety, public health and the environment. In these sensitive areas, risk preferences of Member States can differ, and there may be objectively valid grounds for divergence among Member States.

However, although justification is required, it is not always clearly or specifically provided. Moreover, Member States often neglect to balance any domestic justification against possible adverse impacts on free movement in the Single Market.

Although rarely outright discriminatory or protectionist, there are numerous instances of national rules and measures that restrict trade within the EU Single Market, such as:

• Requirements for national marks and certificates in manufacturing sectors
• Outdated harmonisation measures in fast-developing sectors
• National labelling requirements for food and beverage products
• Lack of a single market for waste management, processing and shipping
• The principle of mutual recognition remains seriously underused – authorities often fail to show an evidence-based rationale in case of refusals
• Businesses struggle to find relevant and high-quality information about applicable rules
• A lack of transparency of new national rules for service provision and establishment
• Almost 6,000 national rules on professional services – around one-quarter are only regulated in one Member State
• Specific national requirements on corporate ownership
• Authorisations and local content requirements in the retail sector
• The process of posting workers is often cumbersome and lacks transparency
• The country-of-destination principle for VAT makes e-merchants subject to divergent rules in each Member State they do business in
• Similar problems exist with regard to diverging consumer protection rules, which is particularly problematic for e-merchants
• The EU framework for public procurement is now well-developed, but there is substantial room for improvement on the ground – the Single Market Scoreboard for public procurement reveals that 140 of 324 Member State entries are “unsatisfactory”

Many of these issues are long-lived – there does not appear to be an overall trend of increasing barriers to free movement, although there are exceptions. The problem is rather that “old” issues are not sufficiently addressed and removed.

Even though the root cause of the problem is clear – the dual responsibility between the EU and the Member States (at national, regional or local levels of governance) – it does not lend itself to a single, simple solution. To make progress, a more localised scrutiny of proposed national rules that potentially conflict with Single Market rules and principles may be needed. Local EU bodies could help not only by being better placed to scrutinise national measures, but also by providing expertise, guidance and assistance to facilitate the ability of national, regional and local bodies to comply with EU law. This type of localised enforcement of EU rules already exists in e.g. EU competition law.

The study is commissioned by the European Parliament’s committee on Internal Market and Consumer Protection (IMCO).

Please find a two-page summary here