Book Reviews. [1963] ECR 3. 3 ECJ, Joined Cases C-6/90 and C-9/90 Francovich v. Italy [1991] ECR I-5337; ECJ,

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1 European Business Organization Law Review 6: T. M. C.A SSER PRESS Book Reviews David W.K. Anderson and Marie Demetriou, References to the European Court, 2nd edn. (London, Sweet & Maxwell, Litigation Library 2002) cv pp., ISBN DOI /S The European Court of Justice (ECJ.) is the principal motor for European integration. Most of its rulings that have shaped the foundations of European Community law were rendered in preliminary reference procedures pursuant to Article 234 of the EC Treaty. The Court has defined the concepts of supremacy 1 and direct effect 2 of EC law, as well as the availability of a damages remedy against a Member State for breach of EC law, 3 upon the referral of questions by national courts and tribunals which sought guidance on matters of law falling within the competence of the ECJ. Such references are made in ever-growing numbers and on an ever-expanding range of subjects by national judges at all levels of the judicial hierarchy. This development will certainly continue in the medium term, as the number of national courts having jurisdiction to refer questions to the Court has significantly increased due to the recent eastward enlargement of the European Union. Furthermore, the communitarisation of new areas of law has considerably enlarged the Court s jurisdiction. The preliminary reference procedure, as laid down in Article 234 of the EC Treaty and in other Treaties, has been widely accepted, understood and practiced by national courts. Consequently, the law on the preliminary reference procedure itself has evolved significantly over the years, and few may pride themselves on having mastered it in all its details. In short, the need for a thoroughly researched manual for litigators and judges is beyond any reasonable doubt. Who else would be better qualified to write such an opus than authors closely involved in litigation before the European Court such as David Anderson Q.C. and Marie Demetriou. Anderson is a renowned barrister and sole author of the book s first edition in He has appeared in over one hundred cases before the European Court of Justice and Court of First Instance. Demetriou is also barrister 1 See, for example, ECJ, Case 6/64 Costa v. ENEL [1964] ECR 585; ECJ, Case 106/77 Amministrazione delle Finanze dello Stato v. Simmenthal SpA [1978] ECR See, for example, ECJ, Case 26/62 Van Gend en Loos v. Nederlandse Tariefcommissie [1963] ECR 3. 3 ECJ, Joined Cases C-6/90 and C-9/90 Francovich v. Italy [1991] ECR I-5337; ECJ, Joined Cases C-46/93 and C-48/93 Brasserie du Pêcheur v. Germany and R. v. Secretary of State for Transport, ex parte Factortame [1996] ECR I-1029; ECJ, Case C-224/01 Köbler v. Austria [2003] ECR I

2 150 Book Reviews EBOR 6 (2005) with remarkable exposure to European litigation. In addition, she was référendaire to Judge David Edward at the ECJ for most of the period during which the book was updated. Both authors obviously share a deep passion for ancient Greek mythology, as they open the preface by comparing the reference procedure to the Delphic oracle. The oracle was a source of divine inspiration and became a significant force for unity among the feuding city-states of ancient Greece. Similarly, the ECJ, from its site above a gorge only slightly less dramatic than that of Delphi, responds to unsolicited questions with advice that is unfailing. By this means, the authors conclude, the Court has been able not only to give the law to the national courts which constitute its questioners but also to earn from them what was by no means inevitable at the start: respect for its rulings and for the legal order of which those rulings are an expression. It is apt to spin out this comparison even further, since some of the judgments handed down by the Court are certainly as sibylline as some of the answers reported from the Delphic oracle. However, those asking the oracle for advice certainly received their answers sooner than today s national courts and tribunals, which have to wait for two years on average. References to the European Court covers the reference procedure from A to Z. It comprises fourteen chapters. Broadly speaking, the book can be divided into two parts. The first part of the book deals with general legal issues. The second part describes how a reference is drafted and which stages it passes through in Luxembourg. In addition, readers will find fourteen helpful appendices. The first chapters familiarise the reader with the basics of the preliminary reference procedure. After a broad overview of its evolution and significance (pp. 1-30), including some statistical figures on its use, Anderson and Demetriou explain which courts and tribunals may or shall refer questions to the Court (pp , ) and the jurisdictional requirements that need to be met in order to render a reference admissible (pp ). Chapters four (pp ), five (pp ) and six (pp ) are of particular importance. Chapter four analyses the circumstances under which the ECJ has refused to answer questions referred to it. This occurred, in particular, when the ECJ deemed the answers to the questions to be entirely irrelevant, that is to say, not necessary to resolve the dispute pending before the referring court. In general, however, the Court has taken a very embracing approach towards references and has even answered references in cases where it had difficulty seeing how the answers which the Court is asked to give can influence the decision in the main proceedings. 4 Moreover, the Court makes great efforts, through its Registry, to give national courts the opportunity to supplement inadequate references. The Registry draws the attention of the referring court to previous judgments which appear to provide the answer to the question posed. 4 ECJ, Joined Cases 98, 162 and 258/85 Bertini v. Regione Lazio [1986] ECR 1885, para. 8.

3 Book Reviews 151 Chapter five deals with the discretion of national courts to refer cases to the European Court, and chapter six discusses rules for courts of last instance. Article 234 of the EC Treaty states that lower courts may and final courts shall refer questions to the Court. In CILFIT, 5 the ECJ specified that national courts may apply the acte clair doctrine. Thus, even a court of last instance can refrain from using preliminary reference procedure when the Community provision in question has already been interpreted by the Court or when the correct application of Community law is so obvious as to leave no scope for any reasonable doubt. The authors evaluate the future of these guidelines against the background of their application by national courts and concede that courts of last instance have on occasion disregarded or misapplied the rules set forth in CILFIT. However, they emphasise that these strict guidelines have not damaged the relations between the ECJ and national supreme courts. They therefore argue in favour of maintaining these guidelines unchanged, with one exception that corresponds to the language of Article 104(3) of the Court s Rules of Procedure. This provision enables the Court to dispose of a case by order, in circumstances where the answer to a question may be clearly deduced from existing case-law or where the answer admits of no reasonable doubt, conditions which in the view of the authors appear to be more easy to satisfy than those laid down in CILFIT. Furthermore, they correctly point out that it would be plainly absurd to require national supreme courts to refer questions to the ECJ which are then disposed of by order. There is no statutory law laying down the requirements as to the form or content of a reference for a preliminary ruling. These requirements were shaped in the case law of the ECJ, which has also issued an Informal Note on References by National Courts for Preliminary Rulings. These requirements are analysed in depth in chapter seven (pp ). The authors give valuable guidance on how to draft a reference and further discuss procedural aspects, such as national rules governing the power to make preliminary references. The last chapters cover the stages of the reference procedure in the ECJ. After a short introduction to the Court s organisation and composition (pp ), the participants in the reference (pp ) and their rights and duties in the written and oral procedures before the Court are discussed (pp ). The book concludes with two chapters on the Court s judgments (pp ) and their effects (pp ). The appendices contain a helpful selection of materials. Readers will find, inter alia, the relevant provisions concerning the preliminary reference procedure in the Treaties, the Statute of the ECJ and its Rules of Procedure, as well as the above-mentioned Informal Note on References by National Courts for Preliminary Rulings. In comparison to the book s first edition, the amount of appendices has been reduced considerably, as most of the Community material can be easily accessed online. However, readers with no time to spare will still find a flow 5 ECJ, Case 283/81 CILFIT v. Ministry of Health [1982] ECR 3415, para. 14 et seq.

4 152 Book Reviews EBOR 6 (2005) chart that provides a quick guide to whether a preliminary reference is possible. Furthermore, there is a procedural checklist that sets out the various states through which a reference passes in Luxembourg and also highlights the obligations that a legal counsel has in each of them. The second edition of References to the European Court is a thoroughly updated and comprehensive handbook. It provides a detailed account of the procedure for referring questions to the ECJ for preliminary rulings. This manual is not only targeted at UK practitioners. Only few sections refer entirely to UK court practice. Most passages also discuss legal issues in light of rulings from other Member States. The book is therefore also very instructive for litigators and judges in other EU Member States. To sum up, I entirely concur with The Right Honourable Lord Slynn of Hadley, who notes as follows in his foreword to the book: Written by authors with detailed knowledge of the subject in practice, it can be relied on with complete confidence. It is an essential part of a judge s and a Community lawyer s library. Wolfgang Wurmnest. Jagdish Bhagwati, Free Trade Today (Princeton/Oxford, Princeton University Press 2002) vii pp., ISBN DOI /S The field of free trade is very divided. On the one hand, a majority of economists embrace the notion of free trade. Its favourable effect is competition, which increases productivity and upgrades efficiency, enhances variety among different goods and increases real income due to lower prices. On the other hand, there is the public domain, which demands several kinds of protectionist instruments that allegedly lead to greater individual good. Jagdish Bhagwati, a professor at Columbia University and André Meyer Senior Fellow in International Economics at the Council on Foreign Relations, aims to bridge the gap between these two different opinions. He deals with the critiques and threats that have been made against free trade, examines them and, in the process, reveals and summarises the core arguments in favour of free trade. Jagdish Bhagwati s Free Trade Today is based on three lectures that he delivered at the Stockholm School of Economics in the late 1990s. In the preface, he describes it as a sequel to another series of lectures he gave there a decade Dr Wolfgang Wurmnest, LL.M. (Berkeley), Max Planck Institute for Foreign Private and Private International Law, Hamburg.

5 Book Reviews 153 before, which where published as the widely known Protectionism. In the first lecture, Bhagwati deals with traditional threats to trade. This leads him to discuss environmental and social arguments in his second lecture. The third lecture presents options and alternative ways for achieving free trade for the good of all. His intention is to involve a wide range of people in the argument on protectionism and free trade and to provide an accessible insight into the views of the sceptics and critics of the notion of free trade. Conventional arguments against free trade though lacking any real influence have not yet been eliminated. Bhagwati s first lecture deals with these arguments, which were advanced from the 1930s until the 1980s. He considers the relevant stereotypes one after another, analyses them and eventually rejects them firmly. Bhagwati begins by introducing doubts concerning free trade formulated by economists as a result of market failure and distortion. Only in an open economy is the allocation of resources determined by the market, thus leading to efficiency as described in Adam Smith s The Wealth of Nations. If this precondition is not stipulated, voices are likely to declare that free trade is suboptimal in the presence of market failure (Proposition 1, p. 13). Bhagwati provides a survey of the classic exceptions that have challenged the doctrine of free trade since the 1840s. He commences by introducing monopoly power as an argument against free trade. In every economy, there are some firms that exercise market power, and most markets are thus not perfectly competitive. There is also the argument in favour of the infant industry. In order to compete in international markets, new industries that are still weak in some respects need assistance. Moreover, the notion of free trade is weakened in times of unemployment due to a lack of aggregate demand. Securing protection from import competition, tariffs and other trade protection instruments appears to be an acceptable solution. Bhagwati admits that, on the surface, free trade might not be the best policy in certain situations or in countries faced with market distortions. In theory, a country can improve its welfare by deviating from free trade in cases of market failure. However, even in an imperfect market situation, Bhagwati holds on to the notion of free trade as the best policy. He examines all arguments that invoke protection from an historical and analytical viewpoint. He takes note of many of the theoretical studies on free trade that doubt its advantages. The first lecture thus forms an informal guide to the history of trade theory and its advocates. In his examination, however, the theoretical advantages of protectionism disappear and the notion of trade protection only offers humble solutions that cause further adjustments away from free trade. Referring to several of his earlier publications, Bhagwati introduces a policy that directly intends to offset these market distortions instead. In purely domestic market failures, policies should be aimed directly at fixing the market distortion concerned. This can be achieved by means of direct inter-

6 154 Book Reviews EBOR 6 (2005) ventions, such as taxes and subsidies, and not through trade protection. If market failures are caused by external factors, meaning that the distortion exists in the international market, trade protection also triggers more negative effects than positive results. In this context, Bhagwati accuses governments of being negatively influenced by lobbyists and pressure groups. According to Bhagwati, a policy that directly tackles the cause of the distortion must also be devised. He persuasively argues against trade protection as the right solution for addressing market failures and stresses his arguments for free trade when pointing out the indirect costs of trade restraints and the losses resulting from foreign trade retaliation. In introducing reasonable policies, domestically as well as in international trade (depending on the origin of the market failure), he suggests that free trade leads to greater growth after all. Bhagwati rejects protectionist arguments and thus confidently concludes that, despite two centuries of challenges, free trade is still the first-best policy. Free trade nowadays faces new challenges, which in his second lecture, Bhagwati divides into demands for fair trade, concerns regarding the environment, charges regarding the compatibility of free trade with social and moral agendas and the fear that free trade creates more poverty in poor countries and leads to welfare reductions in rich countries. A great variety of groups support these social agendas, claiming a general interest and disapproving of free trade as the instrument of capitalists and multinational corporations. However, Bhagwati argues that free trade can further all of these social and environmental issues to a greater extent than protectionist policy. He condemns the abuse of social and moral issues for political purposes. In this respect, he warns against an unfairtrade obsession that he refers to as the American virus, which declares every asymmetry with another country as an example of unfair trade and thus serves the protectionist cause. As an example, he presents the Section 301 policy of the United States, which initially appears to serve an anti-unfair trade purpose but instead imposes harmonisation demands on foreign countries by threatening trade retaliation. Section 301 of the Trade Act of 1974, as amended by the Omnibus Trade and Competitiveness Act of 1986, authorises the US government to address unfair trade practices. The unilateral use of Section 301 without recourse to the dispute settlement system was declared illegal in a finding of the WTO Panel in Instead, the mechanism used by the US trade representatives to identify unfair trade practices must be based on reports of the WTO Panel. In this respect, the decision of the Panel confirms Bhagwati s strong arguments in favour of multilateralism and his denial of aggressive unilateralism. Bhagwati then defends the differing domestic policies pursued by different countries, which in turn lead to different environmental and social standards in 1 WTO, United States Sections of the Trade Act of 1974 Report of the Panel (22 December 1999) WT/DS152/R.

7 Book Reviews 155 each country. Their justification lies in the different stages of development as well as the different national objectives and policies of each country. Bhagwati argues strongly against a race to the bottom caused by these different social standards, for which no empirical evidence can be found. Instead, he claims that protectionism is the main danger to environmental and social values. Moreover, he does not find proof that multinational firms exploit lower environmental and social standards when making their business decisions. Taking this into consideration, he suggests expanding key standards to national firms abroad rather than imposing constraints that these firms do not already impose on themselves. However, Bhagwati has some reservations regarding the inclusion of human rights or environmental obligations in trade agreements. In order to serve both of objectives most appropriately, separate procedures, instruments and controls need to be found for trade issues, one the one hand, and environmental and social agendas, on the other. In this context, he uses the example of child labour and the use of trade sanctions to demonstrate that such sanctions cause more problems and poverty to the people affected. Bhagwati suggests tackling the problem directly, as in the case of any other social and environmental issue. Free trade should be pursued through trade policy, whereas social agendas should be advanced through international agencies and treaties that are aimed at directly solving the environmental or social problem concerned: the International Labour Organisation for labour standards, the United Nations Environment Program for environmental issues, UNICEF for children s rights and UNESCO for cultural preservation. In addition, Bhagwati sees tremendous advantages in a system of voluntary codes, which by nature differ across the countries that apply them. Continuing from his first lecture, Bhagwati dispels each protectionist argument thoroughly and proves his exceptional talent to get to the core of disagreements about free trade. He refuses to regard unequal environmental and labour standards as unfair trade and argues convincingly that trade can serve as a powerful engine for prosperity and, hence, social good for workers in all countries. Instead of accusing multinational firms of exploiting the world s poor, he shows that the development of poor countries is furthered if they participate in world trade. Moreover, he presents the environmental issues more likely to be addressed in a world where the free flow of goods and services is guaranteed. In this respect, it is the governments particular responsibility to manage social and moral agendas properly. In his first and second lectures, Bhagwati addresses both the traditional objections against free trade and the more recent environmental and social arguments. He proves them wrong and argues convincingly in favour of free trade. This leads him to conclude as follows: I would boldly say that we can confidently instruct our policymakers and tell our students that free trade is a policy that makes eminent sense. (p. 94) This conclusion brings him to the question of how to achieve free trade, a subject addressed in the third lecture.

8 156 Book Reviews EBOR 6 (2005) In his final lecture, Bhagwati provides the reader with alternative ways of achieving free trade. He introduces two different ways of freeing trade: the unilateral approach divided into the conventional and the aggressive method and the reciprocal reduction of trade barriers either through multilateral negotiations or through preferential trade agreements. In examining the two options, he praises unilateral liberalisation as well as multilateral negotiations such as GATT/WTO. On the other hand, he condemns aggressive unilateralism and preferential trade agreements. Instead, he argues strongly for the unilateral elimination of trade barriers, even though trading partners might not reduce their trade barriers equally. This going it alone does not delay the process of liberalisation, as occurs when countries expect their trading partners to lower barriers first. Instead, it might encourage others to liberalise. Bhagwati stresses this argument by reminding the reader of the repeal of the British Corn Laws in 1846 and mentioning countries, such as Singapore, Hong Kong, Chile, Australia, New Zealand, Indonesia and India, that have successfully practised unilateral liberalisation to their own benefit during the last two decades. This beneficial liberalisation must be distinguished from what Bhagwati describes as aggressive unilateralism, which may be employed by a country that has sufficient weight in the global economy to force other countries into liberalisation. As a graphic example of this, he again refers to the Section 301 policy of the American legislature and embraces the latest ruling of WTO as the end of the era of aggressive unilateralism. As far as the reciprocal reduction of trade barriers is concerned, Bhagwati goes further in his argumentation and claims that negotiations that are not multilateral are counterproductive and raise the risk of politicising trade. He therefore criticises bilateral and regional free trade agreements (RTAs) and recent developments in this area. He argues that RTAs, such as the European Union, NAFTA and Mercosur, create a growing chaos in the world trading system and divide it into trading blocks rather than furthering the main goal of multilaterally liberalising world trade. According to Bhagwati, this trade-diverting effect will cause tremendous losses, because the countries involved very often raise their trade barriers against non-members. He warns that the energy needed to further the worldwide liberalisation process is taken away and diverted to regional liberalisation efforts instead. The creation of a spaghetti bowl of overlapping agreements leads to confusion in world trade and endangers the principle of nondiscrimination. Bhagwati concludes that free trade has surmounted traditional objections and is able to meet recent challenges, but he has very strong concerns about the growing movement towards preferential trade. In this regard, most economists might agree that RTAs do not provide the best possible solution, but Bhagwati s strong condemnation will go too far for some of them. In sum, Bhagwati s work gives a splendid insight into the arguments for free trade for anyone interested in economic policy. It can be read either by those that are very familiar with the field of economic trade theory, but it can also serve as

9 Book Reviews 157 an excellent introduction to this field. Throughout his book, moreover, Bhagwati refers to his earlier important contributions as well as to other theoretical studies on trade theory and thus gives an insight into this area of the academic literature. Free Trade Today shows Bhagwati s liberal opinion but nevertheless regards social and environmental agenda as equally important. He shows respect to all critics and takes their arguments seriously. Nevertheless, he proves them wrong when analysing their logical argumentation, referring to empirical evidence or raising valid concerns in favour of free trade. This book offers a defence of free trade in an extensive, advanced and practical manner, and Bhagwati once again proves his standing as the world s foremost spokesman for free trade. Lilian Habermann LL.M. oec., Lecturer and Researcher at the Institute for Economic Law of the Faculty of Law at Martin-Luther-University Halle-Wittenberg and Doctoral Candidate under Prof. Christian Tietje.

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