European Union Law and Its Relevance to the U.S. Companies Doing Business in Europe.

The European Union (“EU”) is the world’s largest economic block, containing more than 500 million consumers and accounting for almost a fifth of global trade. The EU is the most important market for American companies: the transatlantic market yields five trillion dollars in commercial sale every year, and the U.S. and Europe are each other’s primary source and destination for FDI. In 2011, the EU purchased $12.4 billion worth of goods from Washington State, and EU FDI in Washington State supports approximately 42,500 jobs. Since the European market is attractive for many American companies, and as a U.S. company doing business in even a single European country will likely encounter EU laws and should be familiar with the basics of the EU and its legal framework. The EU’s basic structure and the rules on its functioning and decision-making procedures are laid down in international treaties among its 28 member states. Common policies are implemented through the adoption of EU laws. In political terms, the EU is much more integrated than an international organization or a free trade area, but it is not a federal state. In economic terms, it is a single market, with a shared currency and monetary policy in 18 of the 28 member states. In 2012, the EU members made a “Fiscal Compact” that subjected national budgets to EU oversight. In the wake of the recent economic crisis, the EU is also in the process of developing a common financial regulatory scheme. The EU is governed by three decision-making bodies: the European Commission, the Council of the EU, and the European Parliament, as well as various bodies that provide guidance and advice. The European Commission has 28 appointed commissioners (one by each member state), and directs policy concerning common interests, proposes EU legislation, adopts rules implementing legislation, and negotiates international trade agreements on behalf of the entire EU. Together, the Council of the EU and the European Parliament consider and adopt the proposed legislation. Currently, more than 70% of the legislation in force in Europe originates from EU decision-making. EU law takes several forms: (i) regulations, which are legally binding rules of general application that are directly applicable in the member states; (ii) directives, which are legally binding rules of general application that individual member states must incorporate into their national law; (iii) decisions, which are legally binding on either the individuals involved or more broadly (depending on the circumstances) that are directly applicable in the member states; and (iv) recommendations and opinions, which are not legally binding. EU directives are one of the most characteristic features of the EU’s legal order, as they allow the adoption of common rules while leaving member states flexibility as to their implementation. EU law has supremacy over national law, and creates individual rights that are enforceable in national courts. Thus, the national judges are the primary enforcers of EU law. However, the Court of Justice of the European Union has limited jurisdiction over areas covered within the EU treaties, including enforcement actions against EU institutions and member states; conflict resolution between member states and the EU, and between EU institutions; and uniform interpretation of EU law. The EU acts within the limits of the competence conferred on it by its member states. There are three tiers of competences: exclusive, shared, and supporting. The EU typically takes action outside of areas of its exclusive competence (such as customs, competition, monetary policy, and trade) only when its goals cannot be achieved by member states acting on their own.
Categories: Tax Blog

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