5 February 1963: Europe toughens its tariff laws

On this day in 1963, the Netherlands lost a landmark dispute in the European Court of Justice, establishing the doctrine of "direct effect", entitling citizens to sue governments who broke free trade rules.

The Treaty of Rome was signed in March 1957, creating the European Economic Community (EEC). The idea was that this would ensure free trade in goods between member states. The treaty accepted that it was not possible to drop all tariff barriers between member states immediately, so countries were instructed to reduce, and ultimately abolish, them as quickly as possible.

Tariff increases were banned; if a country breached this principle it would be sued by either a member state or the European Commission (the EEC's civil service).

In 1961, Holland reclassified the industrial chemical urea-formaldehyde in such a way that importers of it had to pay a tariff. Van Gend en Loos, a transport company, sued the Dutch customs office, arguing that this constituted an effective tariff hike.

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The Dutch authorities argued that the treaty allowed them to raise tariffs in specific cases. More importantly, they argued that member states, not individuals or private companies, were the only ones who could enforce the treaty in the courts.

Initially, it seemed the Dutch would prevail. The advocate-general, who advises the European Court of Justice (ECJ), concluded that individuals could sue to enforce some parts of the treaty, but the tariff clause was not one.

However, the ECJ ignored this and ruled that all citizens were entitled to sue and that national courts had to enforce the law, rather than refer the matter to the ECJ. This resulting doctrine of "direct effect" is now a bedrock of European law, and has made it harder for countries to get around EU rules.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

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