2.3.3. Co-operation as Extension of (the Exercise of) Regulatory Power: Co-operation in Regulatory Responsibility

A duty of mutual assistance and co-operation in good taith may operate as a limitation

on (the exercise of) regulatory powers of the Member Stales under the economic

freedoms. The question at hand however is whether such a duty also informs Member

States in their response to measures taken by sister Member States. Such co-operation

would not so much reduce any resulting hindrance to interstate trade but would rather

increase the effective scope of the measure and consequently increase any hindrance

to intra-Community trade.1"" In other words, does the duty of mutual assistance and

co-operation in good faith not only function as a limitation on the exercise of regulation

jurisdiction, but equally as an extension thereof?

In discussing the duties Member States owe each other under Article 10 FC, Temple

Lang argues that the Court deduces from Article 10 EC and the principle of proportionality,

'that each Member State has a duty to take no action that could unnecessary

(sic) or unjustifiably cause harm to another Member State, because the prosperity ot

all the Member States is a Community objective'.'" This would render a distinction

between national and Community interests superfluous. Instead, Member States would

be bound to accord effect to each other's measures subject lo what might be called a

principle of'reverse proportionality'. 'Reverse' in this sense means the proportionality

and reasonableness of the //"//-application of* foreign measure rather than that ot the

application of a national measure. However, the view that 'the prosperity ot all the

Member States is a Community objective' is, it is submitted, taking the meaning of

Community interest beyond the scope of Article 10 EC and the cases of Matteucci and

Athanasopoulos.

A different approach in this respect is presented by Von Wilmowsky. In his view

measures taken for the protection of mandatory requirements are national measures

and not Community law. Were Member States to apply such a measure of another

Member State, they would support the latter Member State's national legal order but

would not as such contribute to the realisation of Community law."" He argues instead

that Member States would be bound to apply foreign rules of mandatory law by virtue

of the requirement tor proportionality in combination with the duty of mutual

assistance. National measures must be appropriate and effective to protect the relevant

interest in order to be justified under the law of the freedoms. This may mean that

a measure must also claim a necessary minimum degree of extra-territorialitv. :' ' If that

i s the case, and a question of applicability of a national measure of o n e Member State

arises before the courts of another Member State, a refusal to apply that measure could

render the measure inappropriate and therefore unlawful. Conversely, by applying

the measure of a Member State, other Member States would assist the former in implementing

Community law.1 "

Von Wilmowsky's reasoning is not entirely convincing. Admittedly, a degree of extraterritoriality

maybe required for a measure to be proportionate. However, it is difficult

to see why the requirement of proportionality alone changes anything. Proportionality

is a limitation on a Member State's ability to take a national measure but does not

change the normative quality of that measure: the application would still support the

realisation of the national legal order rather than Community law.

The better approach, it is submitted, is taken by Roth, at least as to the nature of the

interests involved. He argues that, from a Community law perspective, measures taken

for the protection of mandatory requirements of the public interest are legitimised

in a special sense. The enacting Member State 'takes care' {wahrnchmeii) of a public

interest, which is recognised by Community law though not yet 'communitarised'.

Significantly, the notion of Member States acting as 'caretakers' of the Community

interest is not an unfamiliar one in Community law. The Court itself introduced a

similar concept in the Sea Fisheries cases and held that Member States were entitled

V o n Wilmowskv, Imropiusclic-. Krcdihiclicrmig<richi, 14%, 72.

and in some cases under a duty to take measures in the capacity o f ' t r u s t e e s of the

common interest'.1

The assumption that appears to underlie Roth's suggestion is that when Member States

exercise their regulatory powers in the context of the freedoms, they do so not just as

regulators of their own national market but also as regulators of the internal market.!

After all, the exercise of regulatory power raises an obstacle, albeit a justifiable one,

to trade and thus affects the internal market. To regard the protection ot mandatory

requirements of the public interest taking precedence over the freedoms as not

involving Community interests reflects an unduly narrow view of the internal market.

The internal market is not merely about deregulation and liberalisation, and cannot

exist without sufficient regulatory support in those areas which are recognised by

Community law as taking precedence over the freedoms.1 1 Accordingly, it is misleading

to consider the powers of the Member States in the context of the freedoms

as merely a right to regulate; it also is a responsibility to regulate for the Member States

under Community law.

To speak in terms of regulatory responsibility rather than right is in no way irreconcilable

with the wide discretion Member States enjoy to make their own regulatory

choices, to set the level of protection they regard as appropriate and to select the means

by which to achieve them. In absence of harmonisation 'it is for the Member States

to regulate all matters'.1 ' However, Community law sets certain limits for the exercise

of regulatory power. Thus, Member States are bound by the requirements of proportionality

and necessity. This, admittedly, does not support the view of regulatory

responsibility as opposed to right, though it does not undermine it either. The requirement

of proportionality is merely a restriction contingent on the exercise of a right.

The nature of Member States' regulatory powers as a responsibility is made explicit

by the fact that Member States are not entirely free in deciding whether to regulate

at all or, it is submitted, to set the level of regulation. Community law may under some

circumstances in fact compel Member States to exercise their regulatory power, thus

denying it being only a right to regulate and precluding Member States from essentially adopting a laisserfaire attitude.1 " This is illustrated by the Court's judgment in Spanish

Strawberries.

The case concerned violent protests by French farmers directed against transports of

agricultural products from other Member States and the failure of the French government

to intervene. " Fven though it concerned the area of public order and lawenforcement,

the Court held that France was required by virtue of Article 28 FC in

conjunction with Article 10 FC to exercise its regulatory powers in such a way as to

take 'all necessary and appropriate measures' to ensure the free movement of goods.

In other words, France had a responsibility to act and to ensure a sufficient level of

protection. The Court acknowledged that the regulation of these m a t t e r s - public order

and law enforcement - belongs to the exclusive competencies of the Member States.

I lowever, that fact did in no way preclude the existence of a duty under Community

law to exercise those powers. It may not be for the Community institutions to prescribe

th e measures they have to adopt, and the Member States necessarily enjoy a margin

ol discretion in selecting the most appropriate measures,

ihjowever, it falls to the Court, taking due account of the discretion referred to

above, to verify, in cases brought before it, whether the Member State concerned

has adopted appropriate measures for ensuring the free movement.I s"

Consequently, within the scope of Community law and the internal market, both

regulatory action and ///action are subject to Community control and the scrutiny of

the Court.1"1 There can be little doubt that if France wouldhave required the assistance

of other Member States to perform its duty, those other Member states would have

been duty bound under Community law to provide that assistance and to co-operate

in good faith. That is the core of the principle of co-operation established in the

judgments in Matteneci and Athamisopoidos. It would then, it is submitted, be

inconsistent to deny the existence and force of the duty ot mutual assistance and cooperation

in good faith in cases where the Member States act on their responsibility

in conformity with Community law.

The Court's judgment in Ccntivs lends further support for the idea that the exercise

of regulatory powers in the context of the economic freedoms 'triggers' the duty of

mutual assistance and co-operation in good faith."' While Denmark was not allowed

to refuse the registration of the branch of Centres, the Court did state that Denmark

was entitled to adopt any appropriate measure for preventing or penalising fraud, ' if

need be in cooperation with the Member State in which |thecompany] was f o r m e d ' . " '

Would the Member State of incorporation, in easu the United Kingdom, be free under

Community law to refuse such co-operation outright if requested by the Member State

of recognition? Or did the Court implicitly refer to the principles expressed in

Matteneci and Athanasopoulos and would the United Kingdom therefore be under a

duty to lend the assistance requested and to co-operate in good faith? It is submitted,

the latter is the case and the duty of mutual assistance and co-operation in good faith

not only exists as a limitation on, but also as an extension of, the regulatory powers

of the Member States.