Read the summary and the most important questions on European Internal Market Law

• Lecture 3

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• What is the difference between, on the one hand, the free movement of goods, the free movement of persons and the free movement of services and, on the other hand, the free movement of capital?

  The Treaty provisions on the free movement of goods, persons and services are only applicable in relationships between Member States whereas the Treaty provisions on the free movement of capital are applicable in relationships between Member States and relationships between Member States and third countries.

• Which are the two reasons why the development of the free movement of capital took longer than the development of the free movement of goods, persons and services?

  The first reason is that Member States were concerned that a fully developed free movement of capital impairs with their economic and monetary policy. The second reason is that a fully developed free movement of capital affects the balance of payments of a Member State.

• Which are the two differences between Article 67(1) TEEC and Article 63(1) TFEU?

  The first difference is that you find no mention of the application of the free movement of capital between Member States and third countries in Article 67(1) TEEC whereas Article 63(1) TFEU explicitly says that the free movement of capital applies in those relationships. The second difference is that, under Article 67(1) TEEC, Member States had to abolish between themselves all restrictions on the movement of capital to the extent necessary to ensure the proper functioning of the common market whereas Article 63(1) TFEU prohibits all restrictions on the movement of capital between Member States unconditionally.

• What did the Court's ruling in Casati mean for the development of the free movement of capital?

  Citizens of Member States could not rely on Article 67(1) TEEC in front of a national court. National courts would not pose preliminary questions about the application of Article 67(1) TEEC to the Court. Hence, the development of the free movement of capital depended on the adoption of harmonisation measures from the side of the Council.

• What did the Court say in Sanz de Lera?

  According to the Court's ruling in Sanz de Lera, Article 63(1) TFEU is sufficiently clear and precise and is unconditional so that citizens of the Member States can rely on Article 63(1) TFEU vis-à-vis a Member State to challenge restrictions on the free movement of capital.

• Why is Directive 88/361, although repealed and replaced by Article 63(1) TFEU, still of relevance with regard to the free movement of capital?

  To fall within the scope of Article 63(1) TFEU, you need a capital movement. Capital movements have not been defined in the Treaty. In Commission v Netherlands, the Court said that you have to determine whether or not you are dealing with a capital movement by taking into account the nomenclature annexed to Directive 88/361. The nomenclature annexed to Directive 88/361 has indicative value when it comes to defining capital movements.

• Which are the six most important examples of capital movements for the purposes of Article 63(1) TFEU enumerated in Annex I to Directive 88/361?

  The nomenclature is not an exhaustive list for the notion of capital movements. To consider something a capital movement, you need to establish a cross-border element. Under I, you see that direct investments are labelled as capital movements. According to III and V, portfolio investments are capital movements. II says that investments in real estate on national territory by non-residents and abroad by residents classify as capital movements. Financial loans and credits define capital movements, according to VIII. XI identifies personal capital movements as capital movements for the sake of Article 63(1) TFEU.

• What is a direct investment for the purposes of point I of Annex I to Directive 88/361?

  A direct investment is the acquisition of a shareholding with a view to effectively participate in the management and control of a public or private limited liability company.

• Which national measures are prohibited under Article 63(1) TFEU?

  Article 63(1) TFEU says: 'Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.' As a consequence, Article 63(1) TFEU prohibits directly discriminatory measures (also known as distinctly applicable measures), indirectly discriminatory measures (also known as indistinctly applicable measures) and all restrictions on the free movement of capital, even if genuinely non-discriminatory in nature.

• What is a directly discriminatory measure prohibited under Article 63(1) TFEU?

  A directly discriminatory measure (also known as a distinctly applicable measure) discriminates on the basis of nationality (when it concerns natural persons) or on the basis of place of establishment (when it concerns legal persons).