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Abstract:
This article deals with the so-called internal situation rule, which prevents the application of European Community law in cases deemed to be confined to one Member State. Rather than focus on possible avenues for avoiding the 'reverse discrimination' against the actors of the regulating state (eg its own nationals) which arises because of the non-application of EC law, I assess the costs and benefits of the rule directly. The approach to this problem is, first, to conceptualise the internal situation rule as a specific, substantive requirement of EC provisions that assume cross-border movement, and not as an overarching, general principle of EC law. With this in mind, I go on to claim that the rule is largely inadequate for the purpose of protecting Member State competences. Because the rule focuses on cross-border movement in the abstract sense, it does not clearly delineate an 'internal' sphere that Member States could regulate independently. Next, I analyse how the case law of the European Court of Justice has interpreted the internal situation rule in various areas of free movement law, concluding that the rule is overly formalistic and that it fails to distinguish between cases where there is a true impact on the internal market and those where there is not. In addition, I analyse the disparities in its application, arguing that they cannot be accounted for by the differences between, eg the free movement of goods and the free movement of persons. Finally, I suggest a more substantive approach to defining internal situations, inspired in particular by public procurement and competition case law. Instead of looking for factual cross-border links, I suggest that what should be at stake is the cross-border impact of the restruction (Member State legislation, administrative measure, practice, etc) that is being challenged.
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