The essence of the Law on the Guarantee of Market Unity has been declared unconstitutional by the Spanish Constitutional Court

Written on 27 Jul 2017

The Spanish Constitutional Court, by Judgement issued on 22 June 2017, has declared unconstitutional several legal provisions of the Law on the Guarantee of Market Unity (articles 18.2 b), c) and e), 19, 20 and the 10th additional provision), related to the principle known as “single license”, or origin authorisation. The Constitutional Court has also declared article 127 section 2 of the Law governing the Contentious-Administrative Jurisdiction to be unconstitutional, which provided the automatic suspension of the effects of any resolutions or administrative acts challenged by the CNMC (National Markets and Competition Commission), but only in relation to resolutions issued by the autonomous communities. The grounds of the Judgment lies in the alleged lack of equivalence among licenses and, consequently, in the impossibility of recognizing extraterritorial effects.

Law 20/2013 of 9 December, on the Guarantee of Market Unity (“Law on the Guarantee of Market Unity”) is mainly based on two basic principles: i) Spanish market unity, in order to guarantee the principle of free movement of goods and services; and ii) the search for a progressive administrative deregulation, which impedes administrations from obstructing the aforesaid freedom of movement.

Provisions of the Law on the Guarantee of Market Unity affected by the Judgement

One of the cornerstones of this Law was that known as the “single license” principle, under which economic operators could provide their services, and their products could move freely and be commercialised outside the territories of origin, provided that the territory of destiny could accept the full validity of the requirements, qualifications, prior inspections or guarantees of the territory of origin, even when these did not exist (article 19). This principle was defined in the following article when referring to the effectiveness of the actions of a competent authority within the whole territory (article 20) regarding, in a non-exhaustive manner, all “means of interventions by the competent authorities that allow the access to an economic activity or its exercise, or that confirms the fulfilment of certain qualities, qualifications or circumstances”.

On the other hand, article 18.2 b), c) and e) detailed – from the legislator’s point of view-, among others, the actions of the authority of destiny that were liable to limit the freedom of establishment and movement. Those actions could be related to the acts, provisions or means of intervention containing or implementing specific requirements for the exercise of activities within a competent authority’s territory other than the authority of origin (paragraph b); additional professional qualifications to those of origin (paragraph c); or technical specifications for the legal circulation or use of products/provision of services, different from those of the manufacturing location (paragraph e).

Finally, the 10th additional provision referred to the determination of the authority of origin, leaving its election to the economic operator (goods producer or service provider), which entails the extension of the validity of the licenses to the whole of the national territory.

Precisely, the articles of the Law on the Guarantee of Market Unity examined above (18.2, b), c) and e), 19 and 20 as well as the 10th additional provision) are those that have been declared unconstitutional and, thereby, null by Judgement of the Constitutional Court of 22 June 2017.

According to the Constitutional Court, even if the national legislator can – in exercise of its exclusive competence regarding bases and coordination of the economic activity’s general planning (article 149.1.13 of the Spanish Constitution “SC”) – establish a certain administrative intervention in order to guarantee market unity (which is similar to the European doctrine of mutual recognition (Cassis de Dijon doctrine)), and the effectiveness within the national territory of administrative resolutions issued by an autonomous community, this recognition is only suitable when there is an “equivalence among applicable rules” between the origin and the destiny legislations. In this sense, the Constitutional Court believes that there will be no equivalence if (i) the origin regulation has no common denominator with the destiny legislation, or if (ii) “licenses” obtained in the origin without any requirements are considered as valid. Anything different would involve “forcing an autonomous community to accept, within its territory, a plurality of foreign policies” and would also imply a competence gap.

Provisions of the Law governing the Contentious-Administrative Jurisdiction affected by the Judgement

Additionally, the Judgement has declared unconstitutional article 127 section 2 of the Law governing the Contentious-Administrative Jurisdiction, but only in relation to the provisions of autonomous communities. This legal provision enabled the CNMC to request the suspension of the challenged provision, act or resolution at the time the contentious administrative appeal was filed, which is automatically granted by the Court “ex lege”. According to the Constitutional Court, this provision “grants an exorbitant procedural privilege to the CNMC in relation to the autonomous communities”.

The Constitutional Court considers that the constitutional control system of the State towards acts and provisions of the autonomous communities – regulated in articles 150, 153, 155 and 161 of the Spanish Constitution- is an exclusive competence of the State, as far as those exorbitant controls “are reserved to some bodies and not to others” and, that such control (prescribed in the Law governing the contentious-administrative jurisdiction), different from the ones contained in the Spanish Constitution, “by no means can be available for those who do not represent the general interest in constitutional terms”, referring to the CNMC.

Main implications of the declaration of unconstitutionality

The declaration of unconstitutionality of article 127 section 2 of the Law governing the contentious-administrative jurisdiction will imply -in the future- that the CNMC will no longer hold the privilege of automatic suspension of resolutions of autonomous communities, just by filing an appeal. It remains to be seen in relation to pending procedures, whether the Judgement could imply the review of those suspensions automatically granted in the past by virtue of a legal provision –now declared null. In principle, the answer should be negative, whilst in our constitutional justice model, “erga omnes” effects derived from the declaration of unconstitutionality of a rule are not retroactive and do not lead to the review of consolidated situations produced under the Law –now declared unconstitutional-, with the only exception of rules of a punitive nature (Judgement of Constitutional Court 45/1989). Insofar as the suspension granted is a precautionary measure, that can be reviewed by definition if the circumstances considered at the time the suspension was granted change, and considering that these are cases in which no judgment has been issued yet, consideration could be given to the feasibility of its review as a precautionary suspension could hardly be considered as a consolidated situation, although this may be questionable and requires a deeper analysis that exceeds the purpose of these lines.

The scenario is more complex regarding the provisions of the Law on the Guarantee of Market Unity. The declaration of unconstitutionality of the aforementioned “single license” produces legal uncertainty to those service providers and goods producers authorised under the regulations of a territory and providing services or commercialising goods in a different territory. The Constitutional Court itself is aware of this situation in which a Law is, in a certain way, crippled and reminds the legislator that the Constitutional Court cannot replace its role or give guidelines/instructions on how to reconstruct the provisions now declared unconstitutional.

In our view, from the day following the Judgement’s publication in the BOE (time at which it acquires the validity of “res judicata” -article 164.1 of the Spanish Constitution) the nullity will imply that “licenses” may be adapted to the regulation of the territory where the goods or services will circulate; that is, to the situation preceding the entry into force of the Law of Market Unity. On the other hand, while the State adapts the recognition of future licenses issued by autonomous communities, it is worth considering what will happen to those already granted. An individualised analysis may possibly be required, in order to determine whether the origin and destiny regulations have an equivalent content that may allow the homologation of those “licenses”. Anyhow, there is no doubt of the future need to adapt the destiny regulation where origin legislation is not equivalent or is non-existent. In any case, the legislator must be the body providing a solution to the current situation derived from this Judgement, apart from the actions that can be carried out by the autonomous communities.