Another GATT exception includes treating parties betterwithin Customs Unions or Free Trade Areas as opposed to those outside (Art.XXIV GATT).1As Netherlands and the UK are within the same customsunion, Go-Faster should get preferential treatment from Netherlands. Go-Faster could also rely on thefree-trade, Comprehensive Economic and Trade Agreement (CETA) between the EUand Canada, which provisionally entered into force in 2017, to get preferentialtreatment from Canada.2 Theagreement facilitates trade andinvestment between EU and Canada, making it easier for Go-Faster to exportmanufactured goods, by abolishing 98% ofthe customs duties they pay at Canadian customs.3 EU law can also provideprotection for Go-Faster if they choose to set up the subsidiary in Netherlands.Under Art.
28(1) TFEU, the Unionshall comprise a customs union which prohibits customs duties on imports andexports and of all charges having equivalent effect (Art.30 TFEU)4, discriminatoryinternal taxation (Art.110 TFEU)5, and theprohibition of quantitative restrictions and measures having equivalent effect onimports, between member states (MS’s) (Art.34 TFEU).6 Article 34 prohibits measures that are both distinctlyand indistinctly applicable i.
e. measures that discriminate directly between domesticand foreign products and those that despite being equally applied to both, favourthe former against the latter.7However, Netherlands can overcome these rulesusing exceptions, under Art. 36 TFEU which include public policy, protection ofhuman, animals and plant health and protection of industrial and commercialproperty.8 Judges held in Dassonville that even a measure potentially hindering trade, evenindirectly, are considered as measures having an equivalent effect toquantitative restrictions.9 Asa discriminatory intent does not need to be identified,10the ‘Dassonville formula’ is considered much wider than WTO rules. However,Cassis de Dijon introducedrestrictions to this.11 EuropeanCourt of Justice (ECJ) aimed to create a balance between allowing the freemovement of goods, through the principle of mutual recognition where a productlawfully marketable in one MS should be freely marketable in another, even ifthe product infringed national rules, whilst also providing MS sufficient discretion to ensure theirnational interests were considered by allowing restrictions on imports if it was justified by satisfyingmandatory requirements.
These related to the effectiveness of fiscalsupervision, the protection of public health, fairness of commercialtransactions and the defence of the consumer. The German government attempted to use suchjustifications, when they refused to permit the import of French ‘cassis de dijon’ liquor intoGermany, arguing that requiring a minimum alcohol volume of 25% leads tostandardized products on the market and fairer commercial transactions. However,this was held to be excessive as fair transactions can be ensured by requiringthe alcohol content to be displayed on the product’s packaging instead. Hence, thefixing minimum alcohol content breached Article 34 as an obstacle to the freemovement of goods. The difficulty in proving a mandatory requirement exists to justifydiscrimination shows the Court’s interpretation of Article 34 restricts MS’abilities to regulate their own markets,12exemplified by Commission v Germany.13Germanbeer purity laws argued the addition of additives to beer was prohibited underthe mandatory requirement exceptions for public health and protection. France and Italy, which produced beers with additional ingredients, argued the laws were “measures havingan equivalent effect” under Art.
34 TFEU. ECJ held that noting the potential dangers of consuming additives and thefact that the German public consumelarge quantities of beer does not warrant the burden of stricter rules on beerimports. It also declared Germany’s policy as contradictory as the additives thatother MS use in beer are also permitted by German rules to be used in almostall other German beverages. Therefore, Germany’s unlawful restrictionon imports under Article 34TFEU was not saved by any statutory exceptions.
ingestingDiscriminatory measures mustalso be proportionate to their desired objective and be implemented in a mannerthat minimizes obstructions to trade.14 ECJheld Article 95 of the EEC treaty “supplements the provisions prohibitingcustoms duties and charges having equivalent effect”, by preventing the protection of domestic products occurringthrough internal taxation that discriminates products from other MS.15 TheCourt held in Commission v United Kingdom, MS laws must not “crystallize consumer habits for nationalindustries to consolidate an advantage.”16 It heldthe UK could not discriminate wine due it having different alcoholic strength tobeer as consumers’ are more influenced by their general characteristics and end-consumptioninstead in which wine and beer were similar.
Therefore, UK breached article 95,by taxing wines imported from other MS at a higher rate than beer to provideprotection to domestic beer production.Investment law As Go-Faster’s subsidiary is classed as an “investment”in the form of an enterprise or an asset they own/control, directly or indirectly inan enterprise, they can be protected by investment law. Go-faster can beprotected through customary international law in which states are accountable formistreatment of alien property17or via Treaty Law using International Investment Agreements (IIAs) in the formof Multilateral Free Trade (MFN) Agreements (for example, CETA) or BilateralInvestment Treaties (BIT)). IIAs can reduce political/legal risks and increase security forforeign investors by putting controls on domestic laws. Under IIA’s, host states must ensureforeign protection from inequitable and unreasonable treatment including theprevention of foreign investors being refused access to national legal channels.
18Under ‘national treatment’ in BIT and MFT’s, contractingstates must treat all foreign investors no less favourably than domesticinvestors.19 S.4 of the CETA agreement guarantees “fair and equitable treatment”,providing full protection to foreign investors.
20 S.3of CETA allows foreign companies to sue states through a dispute settlementtribunal if a state has breached its non-discriminatory treatment responsibilitiesand caused the company to sufferlosses.However,CETA cannot officially be enforced until the ECJ deems it is compatible with EUlaw.21 However, protectionby IIAs isconditional on the investment being foreign, determined by the location of the investor’s/company’smain seat.22 Althoughthe subsidiary is classed as wholly independent, the main seat of Go-Faster isin Warwick.
Also, in thecontext of investment arbitration, subsidiaries in the host state are classedas possessing the parent company’s nationality23so Go-Faster would be considered a foreign investor and could rely on IIAs. Consequently,Go-Faster’s subsidiary can be protected in Netherlands by a Netherlands BIT orin Canada by the MFN agreement CETA.