Business Operations in the European Union — Nontaxation (Portfolio 999)

Tax Management Portfolio, Business Operations in the European Union — Nontaxation, provides a comprehensive guide to the legal issues affecting business in the European Union.

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Unlike the usual Tax Management portfolios, Business Operations in the European Union — Nontaxation does not concentrate primarily on taxation issues, but examines a wide spectrum of EU law which should be viewed as relevant and critical to all businesses already in the EU or seeking to enter the European-wide market.

Chapter I provides a historical overview of the efforts to achieve European integration, and examines in detail the EU's institutional structure and its decision-making processes. Chapter II examines the single Internal Market Program, which defined the EU's efforts to move from a customs union to something greater.
Chapters III and IV concentrate on the laws and procedures concerning competition, “dumping,” and subsidies. Chapters V–XI provide a legislative overview of company law developments, consumer protection and product liability issues, the opening of public procurement markets, environmental and social policies, exchange controls and capital movement restrictions, and the common monetary policy.
Note: The EU customs duty system (former Chapter XII) and EU taxation issues (former Chapter XIII) are now fully covered in 7450 T.M., Business Operations in the European Union — Taxation.
Chapters XIV–XVI describe the protection of industrial and intellectual property rights, technical standardization and the provision of financial services. Chapter XVII discusses one specific industrial sector, namely telecommunications, which has tended to be of broad interest and relevance within the European context. The last chapter discusses the author's conclusions and future prognosis.


Business Operations in the European Union was authored by the following experts. 
Howard M. Liebman

Howard M. Liebman, A.B. (summa cum laude), Colgate University (1974); A.M. (with distinction), Colgate University (1975); J.D. (cum laude) Harvard Law School (1977); Member, District of Columbia Bar and “B” List of the French-speaking Brussels Bar; Belgian Member, Tax Management International Forum; Editorial Advisory Board, Practical European Tax Strategies.

Filippo Amato

Filippo Amato, Law Degree (summa cum laude), University of Turin, Faculty of law (1995); International Trade Law Post-graduate Course, University Institute of European Studies - International Training Centre of the ILO, Turin (1996); LL.M., College of Europe, Bruges (1998); LL.M., Columbia University School of Law (2001); Member of the Turin Bar and “B” List of the French-speaking Brussels Bar.

Table of Contents

Detailed Analysis

I. Introduction

Introductory Material

A. The European Union - Structure

1. Enlargement

2. A Two-Tiered Structure

B. European Union Institutions

1. The Council of the European Union

2. The Commission

3. The European Parliament

4. The European Court of Justice

5. Court of Auditors

6. Economic and Social Committee / Committee of the Regions

C. Community Law

1. Sources of Community Law

2. A Detailed Discussion of European Union Secondary Legislation

a. Regulations

b. Directives

c. Decisions

3. International Agreements

D. Legislative Procedures

1. Consultation

2. Co-operation Procedure

3. Co-decision

4. Assent

5. Information

6. Budget

E. Procedures for Enforcing Community Law

1. Actions Against Member States

a. By the Commission

b. Stages of an Article 226 Action

c. Defenses and Judgment

2. By Member States

3. Actions against European Union Institutions

a. Actions by Member States, the Parliament, the Council and the Commission to Annul Measures Adopted by the Institutions

b. Actions by Individuals

4. Actions to Require European Union Institutions to Act

5. Actions to Obtain Reparation of Damages from the Community

6. Actions to Obtain a Preliminary Ruling on Issues of EC Law

7. Indirect Article 234 Enforcement Actions by Individuals

8. Specific Actions

a. Plea of Illegality

b. Interim Measures

9. Enforcement of EC Law by National Courts

10. Summary

F. The Decision Making Process: Function and Implementation of Directives

1. Harmonization of National Laws: An Overarching Principle

2. Scope of European Union Harmonization (Approximation) Measures

3. Different Types of Harmonization and their Effects

a. "New Approach" to Technical Harmonization

b. Common Minimum Requirements

c. Partial Harmonization

II. The Single Internal Market Program

Introductory Material

A. Free Movement of Goods

B. Commission's White Paper on Completing Internal Market

1. Removal of Physical Barriers

2. Removal of Technical Barriers

3. Removal of Fiscal Barriers

4. Cecchini Report: A Cost-Benefit Analysis of the White Paper

C. Progress on Completion of the Internal Market

III. Competition Law and Procedure

A. Introduction and General Policy

B. Articles 81 and 82 of Treaty

1. Article 81

a. Elements of Anti-Competitive Practice Prohibited by Article 81(1)

b. Examples of Activities Prohibited by Article 81(1)

(1) Price Fixing

(2) Market Partitioning

(3) Export Bans

(4) After-Sales Service Restrictions

(5) Selective Distribution

(6) Exchange of Information

2. Article 82

a. Dominant Position

b. Abuse

(1) Examples of Activities Prohibited by Article 82

(a) Exclusive Dealing, Including Fidelity Rebates

(b) Refusal to Sell to Customers or Distributors

(c) Treating Similar Customers in Dissimilar Manner

(d) Predatory Pricing

(2) Fines

C. European Union Approval and Enforcement Procedures

1. Formal Approval Procedures Under Regulation 17: Negative Clearance and Exemption

a. Advantages of Notification

b. Disadvantages of Notification

2. Informal Approval Procedure

3. Enforcement Procedures

4. The Antitrust "Modernization" Regime: Regulation 1/2003

D. Block Exemption Regulations

1. Regulation 2790/99 on the Application of Article 81(3) to Categories of Vertical Agreements and Concerted Practices

2. Regulation 1400/2002 on Vertical Agreements and Concerted Practices in the Motor Vehicle Sector

3. Regulation 2658/2000 on Specialization Agreements

4. Regulation 2659/2000 on Research and Development Agreements

5. Regulation 772/2004 on Technology Transfer Agreements

6. Block Exemption Regulations Applicable to Other Industry Sectors

a. Transport Sector

b. Insurance Sector

c. Agricultural Sector

7. Other Communications of the Commission

E. Merger Control

1. Key Changes Introduced by Regulation 139/2004

a. Jurisdictional Issues

b. Substantive Issues

c. Procedural Issues

d. Other Amendments

2. Content of the Regulation

a. Thresholds

b. Time Limits

c. Suspension, Divestiture and Revocation

d. Implementing Measures

3. Reciprocity Element

F. Joint Ventures

1. Full-function Joint Ventures

2. Ancillary Restraints

3. Nonfull-function Joint Ventures

4. Nonfull-function Joint Ventures Exempted under Article 81(3)

5. The Administrative Procedures

G. Military Security Derogation from European Union Competition Law

H. State Aid in the European Union

1. Legal Basis

2. Types of State Aid

a. General Aid

b. Sectoral Aid

c. Regional Aid

3. Notification of State Aid

4. Procedural Rules and Remedies

5. Suspension of Aid

6. State Aid and the Single Internal Market Program

7. Developments in State Aid Policy

IV. European Union Anti-Dumping and Anti-Subsidy Law and Procedure

A. Background

B. How Dumping and Injury Are Determined

1. Dumping

2. Injury

3. Subsidies

a. Export Subsidies

b. Domestic Subsidies

c. Injury

C. Procedure of an Anti-Dumping Case

1. Lodging the Complaint

2. Initiation of Proceedings and Response to Commission Questionnaires

3. Investigation

a. Commission's Powers

b. Rights of the Parties

4. Imposition of Provisional Duties

5. Termination of Proceedings

a. Termination Without Protective Measures

b. Undertakings

c. Definitive Duties

6. Anti-Circumvention and Anti-Absorption Provisions

7. Post-Termination Procedures

a. Commission Review

b. "Sunset" Provision

c. Refund of Excessive Duties

d. "Newcomer" Reviews

8. Judicial Review

a. Timing

b. Who May Request Judicial Review (Locus Standii)

(1) Complainants and Exporters

(2) Importers

(3) Original Equipment Manufacturer Buyers

(4) Member States

c. The Potential Suspensory Effect of Judicial Review

d. The Standard of Review

D. Practical Suggestions

1. Avoidance Measures

2. Defense of a Case

E. Conclusions

V. Company Law

A. Policy

B. Existing Legislation

1. First Company Law Directive (Safeguards)

2. Second Company Law Directive (Limited Liability Companies)

3. Third Company Law Directive (Mergers)

4. Fourth Company Law Directive (Annual Accounts)

5. Sixth Company Law Directive (Split-Ups)

6. Seventh Company Law Directive (Annual Consolidated Accounts)

7. Eighth Company Law Directive (Professional Qualifications of Auditors)

8. Eleventh Company Law Directive (Accounts of Branches)

9. Twelfth Company Law Directive (Single Shareholder Private Limited Liability Company)

10. Special Company Law Issues

a. Financial Institutions

b. Securities Laws and Prospectuses

c. European Economic Interest Groupings

C. Proposed Legislation

1. Fifth Company Law Directive (Company Structure and Employee Participation)

2. Tenth Company Law Directive (Cross-Border Mergers)

3. Thirteenth Company Law Directive (Takeovers)

4. European Company (Societas Europae)

5. Ninth Company Law Directive (Corporate Groups)

VI. Consumer Protection, Product Liability and Product Safety

A. Overview of Consumer Protection Policy

B. Product Liability Directive

C. Product Safety

VII. Public Procurement

A. Policy

B. Public Procurement Agreements with Third-Party Countries

1. The GATT Agreement on Public Procurement

2. The Government Procurement Agreement

C. The Pre-1985 Legislation

1. Public Works

2. Supplies

3. The Excluded Sectors

4. Enforcement Procedures

D. The Single-Market Public Procurement Program

1. Public Works

2. Supplies

3. Comparison of the Works and Supplies Rules

4. Excluded Sectors

5. Public Services

E. The New Directives

F. Judicial Remedies

VIII. Environment

A. Introduction

B. Legislative Basis

C. Primary Areas of Community Environmental Legislation

1. Water Pollution

2. Air Pollution

a. Air Quality Standards

b. Product Quality Standards

c. Car Emissions

d. Air Pollution from Industrial Plants

e. Chlorofluorocarbons

3. Control of Chemical Substances

4. Waste

a. Waste Prevention

b. Waste Recycling and Re-use

c. Waste Disposal

5. Integrated Environmental Management

6. Miscellaneous

a. Climate Change

b. Noise

c. Genetically Modified Organisms

D. General Issues

1. Information and Coordination

a. The European Environment Agency

b. Access to Information

2. Environmental Impact Assessments

3. Environmental Liability

4. Environmental Crime

IX. Social Concerns

A. Policy

B. Existing Legislation

1. Free Movement of Workers

2. Social Security for Workers and their Families

3. Equal Treatment for Men and Women

4. Improvement of Working Conditions

a. Collective Redundancies

b. Transfers of Undertakings

c. Insolvency of Employer

d. European Works Council

e. Working Conditions

5. Health and Safety of Workers

6. National Action Plans for Employment and Employment Guidelines

X. Exchange Controls and Capital Movements

A. Policy

B. Basic Principles

C. Single Internal Market Program

XI. Common Monetary Policy

Introductory Material

A. Economic and Monetary Union - The Historical Underpinnings

B. European Currency Unit

C. Economic and Monetary Union and the Euro

1. Timetable for Economic and Monetary Union

a. Stage One

b. Stage Two

c. Stage Three

2. Economic and Monetary Union Institutions

a. European System of Central Banks

b. European Monetary Institute

c. The Euro Council

3. "Opt-Out" Clause for the United Kingdom and Denmark

4. Preliminary Observations

D. Effects of Economic and Monetary Union on Business

XII. Customs Duty System

A. Policy

1. European Union's Customs Territory

2. Customs Classification

3. Development of Combined Nomenclature

4. Content and Structure of the Combined Nomenclature

5. Content and Structure of Tarif Intégrée Communautaire

6. The Single Administrative Document

B. Preferential Trade Arrangements

1. Association and Cooperation Agreements

2. The European Economic Area

3. African, Caribbean and Pacific Countries

4. Generalized System of Preferences

C. Customs Relief Measures

D. Valuation of Goods

1. Background

2. Valuation Methods

a. Transaction Value

b. Identical or Similar Goods

c. Deductive Value

d. Computed Value

e. Residual Valuation Method

3. Charges Excluded from Customs Value

a. Transportation within the European Union

b. Advertising Expenses

c. Technical Assistance

d. European Union Customs Duties and Other Taxes

e. European Union-Based Engineering and Development

f. Financing Charges

g. Software

h. Patents, Trademarks, and Know-How

4. Implementation of the Customs Valuation Methods

E. Rules of Origin

1. Rules of Nonpreferential Origin

a. General Rule of Regulation 2913/92

b. Origin Rules for Specific Products

2. Rules of Preferential Origin

F. Special Customs Procedures

1. Inward Processing

a. Requirements for Inward Processing Authorizations

(1) Community Establishment

(2) Evidence of Re-Export

b. Economic Interests of the Union

c. Inward Processing Authorizations

2. Outward Processing

3. Processing under Customs Control

4. Customs Warehouses

5. Free Zones

6. Community Transit Procedures

a. External Transit

b. Internal Transit

XIII. Taxation

A. Introduction

1. General Policy

2. Other Policy Concerns

a. In General

b. Excise Duties

c. Direct Taxes

B. Indirect Taxation

1. Value-Added Tax

a. Historical Background

(1) July 1987 Proposals

(2) June 1989 Proposal and 1991 Directive

(3) 1994 Report on the Transitional Arrangements

(4) July 1996 Adoption of a Definitive (Common) Value Added Tax Work Program

(a) 1996 Proposal for a Standard Value Added Tax Rate of 15%-25%

(b) June 26, 1997 Proposal for a Change in the Legal Status of the Value Added Tax Committee

(c) May 1997 Proposal for a Programme of Community Action

(d) Status of the Definitive (Common) Value Added Tax System

b. Value Added Tax Rates

c. Examples of Significant Value Added Tax Case Law

d. Recent Value Added Tax Developments

(1) Telecommunications

(2) Value Added Tax on Electronic Commerce

(3) Tax Representative

(4) Invoicing Rules

(5) Information Exchange

(6) Eighth Directive on Value Added Tax Refunds

(7) Recovery of Claims

e. Other Considerations

2. Excise Duties

3. Capital Duties

4. Taxation of Financial Transactions

C. Direct Taxation

1. Introduction

2. Corporate Income Tax Provisions

a. General Comments

b. Corporate Tax Measures

(1) Parent-Subsidiary Tax Directive

(2) Mergers (Tax) Directive

(3) Arbitration Convention

(4) Interest and Royalty Withholding Tax Exemption

c. Other Proposed Directives and Measures

(1) Loss Consolidation

(2) A Code of Conduct for Business Taxation

(3) Taxation of Income from Savings

(4) Proposal for a Consolidated Company Tax Base

3. Information Exchanges

4. Case Law on Nondiscrimination

a. Taxation of Individuals

b. Taxation of Corporations

(1) Commision v. France (1986)

(2) Commerzbank (1991)

(3) St. Gobain (1999)

(4) AMID (2000)

(5) Hoechst (2001)

D. European-Wide Business Entities

1. European Economic Interest Grouping

2. European Company Statute

3. Prospects, Ideas, and Future Developments

E. The Impact of the European Economic Area on Taxation

XIV. Industrial and Intellectual Property Rights

A. Policy

1. Introduction

2. Free Movement of Goods and the Exhaustion of Rights Doctrine

3. Free Movement of Services

4. Conclusions

B. Existing and Proposed Legislation

1. Measures against Goods Infringing Intellectual Property Rights

2. Enforcement of Intellectual Property Rights

3. Patents

a. The European Patent Convention

b. The Community Patent Convention

c. Patentability of Computer-implemented Inventions

d. Patent Term Restoration

e. The Legal Protection of Biotechnological Products

4. Trademarks

a. Trade Mark Directive

b. Trademark Regulation

5. Copyrights

a. Computer Programs

b. Rental and Lending Rights

c. Term of Protection of Copyright and Neighboring Rights

d. Databases

e. Data Protection

f. Private Copying

g. Moral Rights

h. Resale Rights

i. Collecting Societies

6. Protection of Topographies of Semiconductor Products

7. Audiovisual Policy

a. Television without Frontiers

b. Satellite Broadcasting and Cable Retransmission

c. Protection of Encrypted Services

8. Designs

a. The Directive on the Legal Protection of Designs

b. The Regulation on Community Designs

9. Utility Models

XV. Norms and Technical Standards

A. Purpose of Standards

B. European Union Harmonization of Standards

1. Legislative Base - Article 94 of the Treaty

2. Standstill Agreements

3. The "New Approach"

a. Essential Requirements

b. Basic "Protection Objectives"

4. Review and Extension of the "New Approach"

C. Declaration of Conformity

D. European Standards-Setting Bodies

1. European Committee for Standardization/European Committee for Electrotechnical Standardization

a. Structure

b. Aims

2. European Telecommunications Standards Institute

a. Membership and Structure

b. European Telecommunications Standards Institute Deliverables

c. Relations with Other Standards-Setting Bodies

E. Product Certification and Testing

1. The Global Approach to Certification and Testing

a. Guiding Principles

b. Application of Global Approach

c. Modules for Assessing Product Conformity

2. European Organization for Conformity Assessment

F. Commission Green Paper on European Standardization

G. International Cooperation

XVI. Financial Services

Introductory Material

A. Insurance

B. Banking

C. Transactions in Securities

XVII. Telecommunications

A. Policy

B. Telecommunications Legislation before 2002

1. Liberalization of the Terminal Equipment Market

2. Liberalization of Telecommunications Services

a. Deregulation of the Telecommunications Services Market

b. Provision of "Open Networks" and Interconnections

3. Pan-European Mobile Communication Services

a. Radio Spectrum

b. Cellular Digital Land-Based Mobile Communications

c. Digital European Cordless Telecommunications

d. European Paging System

e. Commission Report on Trans-European Telecommunications Networks

f. Mobile Telephony

g. Universal Mobile Telecommunications System

4. Internet Protocol Telephony

5. Commission Green Paper on Satellite Communications

C. The New Regulatory Package

1. Directive 2002/21 on a Common Regulatory Framework for Electronic Communications Networks and Services (the"Framework Directive")

2. Directive 2002/19 on Access to, and Interconnection of, Electronic Communications Networks and Associated Facilities (the "Access Directive")

3. Directive 2002/20 on the Authorization of Electronic Communications Networks and Services (the "Authorization Directive")

4. Directive 2002/22 on Universal Service and Users' Rights Relating to Electronic Communications Networks and Services (the "Universal Service Directive")

5. Directive 2002/77 on Competition in the Markets for Electronic Communications Networks and Services (the "Liberalization Directive")

6. Decision 676/2002 on a Regulatory Framework for Radio Spectrum Policy in the European Community (the "Radio Spectrum Decision")

7. Recommendation on Relevant Product and Service Markets and Guidelines on Market Analysis and the Assessment of Significant Market Power

8. European Regulators Group and Communications Committee

D. Terminal Equipment and Type Approval

1. Directive on the Approximation of the Laws of Member States Concerning Telecommunications Terminal Equipment, Including Mutual Recognition of their Conformity

2. Integrated Services Digital Network

E. Telecommunications Standardization

1. Directive Defining a Procedure for Providing Information in the Field of Technical Standards and Regulations

2. Council Recommendation on the Implementation of a Common Approach in the Field of Telecommunications

3. Council Decision on Standardization in the Field of Information Technology and Telecommunications

4. European Commission's Green Paper on Development of European Standardization

5. Role of European Telecommunications Standards Institute

F. Electronic Commerce

G. Protection of Personal Data Relating to Telecommunications Sector

H. Telecommunications Public Procurement Procedures

XVIII. Practical Implications and Conclusions

Working Papers

Working Papers

Table of Worksheets

Editor's Note: The materials listed below are available in the electronic versions of this portfolio.

Worksheet 1 EC Decision-Making Process Chart: Pre-Maastricht

Worksheet 2 The EC Legislative Procedure: Post-Maastricht

Worksheet 3 Description of Selected Miscellaneous EC Tax Legislation

Worksheet 4 Selected Provisions of the Treaty of Rome as amended: Arts. 28-30, 81-82, 90, 95

Worksheet 5 Corporate Taxation Measures

Worksheet 6 Directive 2003/49 on a Common System of Taxation Applicable to Interest and Royalty Payments Made Between Associated Companies of Different Member States, OJ L/157 of June 26, 2003, at 49

Worksheet 7 Sixth Directive No. 77/388 on the Harmonization of the Laws of the Member States Relating to Turnover Taxes - Common System of Value Added Tax: Uniform Basis of Assessment, O.J. No. L/145 of June 13, 1977, at 1

Worksheet 8 Directive No. 77/799 Concerning Mutual Assistance by the Competent Authorities of the Member States in the Field of Direct Taxation, O.J. No. L/336 of Dec. 27, 1977, at 15

Worksheet 9 Directive 2003/93 Amending Council Directive 77/799/EEC Concerning Mutual Assistance by the Competent Authorities of the Member States in the Field of Direct and Indirect Taxation, OJ L/264 of Oct. 15, 2003, at 23

Worksheet 10 Regulation No. 2137/85 on the European Economic Interest Grouping (EEIG) O.J. No. L/199 of July 31, 1985, at 1

Worksheet 11 Regulation 139/2004 on the Control of Concentrations Between Undertakings (the EC Merger Regulation), OJ L/24 of Jan. 29, 2004, at 1




European Legal Documents

Competition Law and Procedure

Consumer Protection and Product Liability

Company Law

Public Procurement


Customs Duty Sytem


Exchange Controls and Capital Movements

Intellectual and Industrial Property Rights

Social Policy

Industry - Financial Services

Industry - Manufacturing Sectors

Industrial Policy - Norms and Standards



Economic and Monetary Policies

EC Anti-Dumping and Anti-Subsidy Law and Procedure