Concept and legal foundations of the European Single Market
Der European Single Market forms the centerpiece of the economic integration process of the European Union (EU). As a unified economic area, it is based on the fundamental freedoms of Union law and is governed by a complex network of primary and secondary legal norms. According to Article 26(2) of the Treaty on the Functioning of the European Union (TFEU), the objective of the Single Market is an area without internal borders, in which the free movement of goods, persons, services, and capital is ensured.
History and development of the European Single Market
Origins and development steps
The origins of the Single Market go back to the Treaties of Rome of 1957. With the creation of the European Economic Community (EEC), the goal of a common market was formulated in the EEC Treaty. The decisive impetus for the integration of the Single Market was provided by the Single European Act of 1986 and the Commission’s White Paper of 1985.
Completion and milestones
With the Maastricht Treaty coming into force in 1993, the Single Market was officially completed. Since then, the legal foundation of the Single Market has been continually refined and expanded through further amendments to primary law and extensive secondary legislation (directives, regulations).
Fundamental freedoms as core elements of the Single Market
The four fundamental freedoms represent the central organisational principle of the European Single Market:
Free movement of goods (Art. 28–37 TFEU)
The free movement of goods prohibits quantitative restrictions and measures having equivalent effect (e.g., import and export bans as well as quotas) between the Member States. The principle of non-discrimination and mutual recognition shape the application of the law. Exceptions, for example for reasons of health protection, are set out in Article 36 TFEU.
Free movement of persons (freedom of movement for workers and freedom of establishment, Art. 45–55 TFEU)
The freedom of movement for workers entitles nationals of a Member State to free access to employment in other Member States on the same terms as local nationals. The freedom of establishment includes the right to take up and pursue self-employed economic activity as well as to establish and manage undertakings.
Freedom to provide services (Art. 56–62 TFEU)
Service providers can offer their services across borders without having to be established in another Member State. The European Court of Justice (ECJ) has interpreted and expanded the freedom to provide services in numerous judgments.
Free movement of capital (Art. 63–66 TFEU)
The free movement of capital guarantees the unrestricted cross-border movement of capital and payments, especially for investments and securities trading. It also includes capital movements with third countries but is subject to certain possible restrictions.
Legal framework and instruments
Primary law provisions
The legal basis of the Single Market is primarily established through the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU). These basic norms are supplemented by the Charter of Fundamental Rights of the European Union, particularly regarding the prohibition of discrimination.
Secondary legislation provisions
Directives and regulations, such as the Services Directive 2006/123/EC or Regulation (EU) No. 952/2013 (Union Customs Code), serve to unify and harmonise individual market sectors. A distinction is made between full harmonisation and minimum harmonisation.
The European Court of Justice (ECJ) as the judicial authority
The interpretation of Single Market provisions and the further development of the prohibition of discrimination and restrictions have been significantly shaped by the ECJ in numerous landmark decisions (including the “Dassonville” formula, “Cassis de Dijon” decision).
Exceptions and limitations to the fundamental freedoms of the Single Market
Recognised justifications
Restrictions on the fundamental freedoms are permissible only under strict conditions, if they can be justified by overriding reasons of public interest or the exceptions expressly stated in the Treaties (e.g., public security, health, order).
Requirements and proportionality
Any national measure considered as a derogation from the Single Market freedoms is subject to the principle of proportionality and must be strictly limited in its application to what is necessary.
Institutional and administrative foundations
Responsibilities and enforcement
Enforcement of Single Market provisions is carried out partly by the Member States themselves, while the European Commission supervises the uniform application of Single Market law (infringement proceedings under Art. 258 et seq. TFEU). The ECJ decides in cases of disputes.
Single Market management and monitoring
Through the Internal Market Information System (IMI) and the SOLVIT platform, information exchange and problem solving are coordinated and supported.
External trade relations and effects
The Single Market and third countries
The Single Market is fundamentally limited to the Member States. However, numerous contractual relationships exist with non-EU countries based on association agreements with, for example, Norway, Iceland, and Liechtenstein (EEA Agreement), as well as Switzerland, which are based on common market rules.
Effects on national law
The fundamental freedoms of the Single Market take precedence over national law. Union law has direct effect. National provisions that conflict with the fundamental freedoms must not be applied.
Summary: The significance of the European Single Market in law
The European Single Market embodies an advanced level of integration of the European legal area. The aim is the permanent economic and legal consolidation of the Member States while guaranteeing the four freedoms. Its regulations shape everyday economic life and have significant impacts on businesses, authorities, and private individuals. The legal foundations are characterised by a dynamic process of rulemaking and jurisprudence, with the principles of non-discrimination and a minimum level of restriction always remaining guiding principles.
Frequently Asked Questions
How is the free movement of goods legally ensured within the European Single Market?
The free movement of goods is one of the four fundamental freedoms of the European Single Market and is mainly regulated by Articles 28–37 of the Treaty on the Functioning of the European Union (TFEU). Legally, Article 30 TFEU prohibits customs duties as well as charges having equivalent effect between Member States. Furthermore, Article 34 TFEU prohibits quantitative import restrictions and measures having equivalent effect, which include all national regulations that are likely to hinder intra-Community trade, directly or indirectly, actually or potentially. The European Court of Justice (ECJ) has interpreted this prohibition broadly, so not only expressly discriminatory measures are prohibited, but also those that have the same effect in practice, even if they apply equally to domestic and foreign goods. Exceptions are only permissible under certain conditions and on the basis of Article 36 TFEU, for example for the protection of the health and life of humans, animals or plants; however, these exceptions must be interpreted narrowly and applied proportionally.
What is the significance of the freedom of establishment for companies within the Single Market?
Freedom of establishment is guaranteed by Articles 49 to 55 TFEU and forms a central legal basis for companies wishing to transfer their registered office or central administration to another Member State or to establish subsidiaries and branches there. It protects not only natural persons but also legal persons established under the law of a Member State. The freedom of establishment includes the right to take up and pursue self-employed activities under the same conditions as are granted to nationals. Restrictions by national legal provisions that hinder or make the exercise of freedom of establishment less attractive are generally inadmissible unless they are justified by overriding reasons of public interest and are proportionate.
How is the movement of services legally treated within the European Single Market?
The freedom to provide services is regulated in Articles 56–62 TFEU and prohibits restrictions on the free movement of services within the Member States. It concerns cross-border services where the service provider and the service recipient are in different Member States or at least move across borders for the provision and receipt of the service. National regulations that impede the provision or reception of such services are not permitted, unless they can be justified by overriding reasons of public interest and are applied proportionally. This is particularly relevant in the fields of consumer protection, health, or public safety. The principle of mutual recognition plays a central role: If a service provider is authorised in accordance with the rules of their home state, the host state is generally not permitted to impose additional requirements.
What legal limits exist for the free movement of capital within the European Single Market?
The free movement of capital is regulated by Articles 63–66 TFEU and prohibits any restrictions on capital and payment transactions both between Member States and with third countries. It covers both direct investments, such as company holdings and real estate purchases, and securities trading, loans, and other financial transfers. However, Article 65 TFEU contains specific exceptions, for example to combat tax evasion or to control capital movements on grounds of public order or security. Restrictions must always be proportionate and must not exceed what is necessary to achieve the legitimate objective. Union law and ECJ case law further restrict the possibility of national measures, in particular regarding arbitrary discrimination and anti-circumvention rules.
What is the legal basis for the prohibition of discrimination in the context of the European Single Market?
The prohibition of discrimination is a fundamental principle of the Single Market and results from several provisions of the TFEU, in particular Article 18 TFEU, but also specifically for each fundamental freedom. In the context of the fundamental freedoms, the prohibition of discrimination forbids any different treatment of EU citizens and companies from other Member States compared to nationals, unless there is an objective reason. Discrimination can occur directly through explicit unequal treatment or indirectly through factual disadvantages. In some cases, different treatment is permitted, for example for overriding reasons of public interest, provided a proportionality test is carried out and the measures are suitable and necessary to achieve the intended aim.
What is the relationship between national law and Union law regarding the Single Market rules?
In the area of Single Market rules, the principle of supremacy of Union law over national law applies. This means that national rules incompatible with the provisions and objectives of the Single Market must not be applied. This was clarified by the case law of the ECJ, especially in the case “Costa/ENEL” (1964). Union law either has direct effect (directly applicable rules such as regulations or clear treaty provisions) or creates obligations to implement (directives). National courts are obliged to interpret national law in light of European provisions and, if necessary, to disregard provisions that would otherwise conflict, in order to ensure the primacy and effectiveness of Union law.
What legal role does mutual recognition play in the European Single Market?
The principle of mutual recognition is a cornerstone of the Single Market and means that products and services lawfully produced or offered in one Member State may generally be placed on the market in any other Member State without additional national requirements. The legal basis for this lies especially in the “Cassis de Dijon” judgment (ECJ, 1979) and has since also been supported by secondary Union law. Exceptions are only possible if overriding reasons of public interest, such as health, environmental, or consumer protection, justify them and the measures are suitable and proportionate. Mutual recognition thus promotes legal certainty and market integration by eliminating double regulations and trade barriers.
