Abuse of union law and regulation of the internal market

Abstract

Abuses of Union law can be defined as undesirable choices of law made by Union citizens. The treatment of choices of law by Union citizens has proved inconsistent under Union law, being alternatively endorsed (Centros) or sanctioned (Cadbury Schweppes) by Union institutions. This inconsistent treatment of choices of law is a manifestation of a broader dialectic between two conceptions of economic integration, designated as the paradigms of Regulatory Neutrality and Regulatory Competition. If economic integration is conceived as competition among Member States (Regulatory Competition), artificial choices of law ought to be endorsed as a legitimate process of regulatory arbitrage, by which Union citizens elect their favourite national law. Conversely, if the objective of economic integration is to avoid the competition among private businesses being distorted by national laws (Regulatory Neutrality), artificial choices of law ought to be sanctioned as abuses of law. Accordingly, ‘regulatory arbitrage’ and ‘abuse of law’ are two masks covering one phenomenon: the election of a more favourable national law by Union citizens. More generally, this dialectic between two conceptions of economic integration pervades our perception of the internal market, and therefore accounts for long-established contradictions of internal market law. Social dumping and reverse discriminations distort the competition among private businesses, but represent the ordinary functioning of the competition among Member States. Union harmonisation is desirable under Regulatory Neutrality, whereas Regulatory Competition requires regulatory diversity. In the context of the freedoms of movement, Regulatory Neutrality promotes Host equality (equal treatment of migrant citizens with Host society), while Regulatory Competition endorses Home equality (equal treatment with Home society). State aids should be prohibited under Regulatory Neutrality, but allowed under Regulatory Competition. In sum, one (internal market) law is assigned the contradictory mission of ensuring the proper functioning of two competitive processes: the competition among private businesses (Regulatory Neutrality) and among Member States (Regulatory Competition).