The Effect of Community
Law
Lecture Two
Lecture Aims
• Follow on lecture from lecture one on
effect of Community Law
• Examination of the development of
– indirect effect (doctrine of sympathetic
interpretation)
– incidental horizontal direct effect
– principle of state liability
Reminder
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In order to be directly effective a provision of Community law must
satisfy the conditions laid down in Case 26/62 Van Gend en Loos
Treaty Articles capable of both horizontal and vertical direct effect
Directives only capable of vertical direct effect (as against the state)
Directives not capable of horizontal direct effect
– Case 152/84 Marshall v Southampton Area Health Authority
Creation of an anomaly
– Case C-91/92 Dori (Paola Faccini) v Recreb Srl
Wide definition of the state/emanation of the state
– Case C-188/89 Foster v British Gas
ECJ developments
• ECJ has recognised the anomaly created by Marshall
and has developed different means by which
individuals can seek to rely on unimplemented
/wrongly implemented directives
– indirect effect
– incidental direct effect
– state liability
Duty of sympathetic
interpretation or indirect effect
• Case 14/83 Von Colson and Kamann
– Claimants seeking to rely on Directive 76/207/EEC
– Article 6 of the Directive required Member States to introduce into their
national legal system such measures as are necessary to enable all
persons, (who consider themselves wronged by discrimination) to pursue
their claims by judicial process
– ECJ said that “it follows that Member States are required to adopt measures
which are sufficiently effective to achieve the objective of the directive”
– However, since directive did not prescribe a sanction it follows that Member
States have discretion in deciding how to achieve that objective
Duty of sympathetic
interpretation
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“However, the Member States’ obligation arising from a directive to achieve the
result envisaged by the directive and their duty under Article 5 [now 10] of the
Treaty to take all appropriate measures, whether general or particular, to ensure
the fulfilment of that obligation, is binding on all the authorities of the Member
States including, for matters within their jurisdiction, the courts. It follows that, in
applying the national law and in particular the provisions of a national law
specifically introduced to implement (..the directive), national courts are required
to interpret their national law in the light of the wording and the purpose of the
directive in order to achieve the result referred to in the third paragraph of Article
189 [now 249]…” Paragraph 26
•
“It is for the national court to interpret and apply the legislation adopted for the
implementation of the directive in conformity with the requirements of
Community law, in so far as it is given discretion to do so under national law”
Paragraph 28
Duty of sympathetic
interpretation/indirect effect
• Article 10 (ex art 5) obligation on Member States to take all
appropriate measures to give effect to Community law
• Article 10 applies to all national authorities including the national
courts (national courts are organs of the state)
• National courts therefore under a duty (obligation) to interpret
national law in the light of the wording and purpose of the
directive in order to achieve the results of the directive
• Clearly enhances the effectiveness of directives that have not
been implemented/inadequately implemented
• Question: can indirect effect work to the benefit of the state as
against an individual (horizontally?)
Limits of Indirect Effect
• Case 80/86 Criminal Proceedings against
Kolpinghuis Nijmegen BV
• “the obligation of the national court to refer to the content of the
directive when interpreting the relevant rules of its national law
is limited by the general principles of law which form part of
Community law and in particular the principles of legal certainty
and non/retroactivity... Paragraph 13
• ... a directive cannot, of itself and independently of a law
adopted for its implementation, have the effect of determining or
aggravating the liability in criminal law of persons who act in
contravention of the provisions of that directive “ Paragraph 14
Further extension of duty of
sympathetic interpretation
• Case C-106/89 Marleasing
– horizontal litigation between two companies
(Marleasing & La Commercial)
– the directive in question (68/151/EEC) had not
been implemented into Spanish law
– “it follows that, in applying national law, whether the
provisions in question were adopted before or after the
directive, the national court called upon to interpret it is
required to do so, as far as possible, in the light of the
wording and purpose of the directive in order to achieve the
result pursued by the latter” Paragraph 8
Limits of indirect effect
• Case C-168/95 Arcaro
– “However, the obligation of the national court to refer to the
content of the directive…reaches a a limit where such
interpretation leads to the imposition on an individual of an
obligation laid down by a directive which has not been
transposed, or more especially, where it has the effect of
determining or aggravating…the liability in criminal law of
persons who act in contravention of that directives
provisions”
Indirect Effect
• Case C-456/98 Centrosteel
– horizontal litigation between two companies, C and A
– C seeking to rely on terms of directive 86/653/EEC whereas
A seeking to rely on the national law
– If C could rely on the indirect effect of the directive the
consequence would be that A could not rely on the national
law (and would effectively be defeated in the action)
– Note -Advocate General Jacobs in this case gives some
detailed consideration to the limits of indirect effect
Summary
• In Centrosteel ECJ reinforcing the doctrine of indirect
effect
• National courts under an obligation to interpret
national law in the light of the wording/purpose of the
directive even where this has the effect of
prejudicing/imposing an obligation on an individual
• Main limit arises where the effect would be to impose
criminal liability on an individual (as with
Kolpinghuis)-see Advocate General Jacob’s opinion
in Centrosteel
Limits of indirect effect
• “the national court called upon to interpret it is required to do so,
as far as possible, in the light of the wording and purpose of the
directive in order to achieve the result pursued by the latter”
• It is not always possible for a national court to interpret the
national legislation to give effect to the directive
• Case C-334/92 Wagner Miret
• Case C-192/94 El Corte Inglés
• Case C-91/92 Faccini Dori v Recreb Srl
Incidental Direct effect
• Further development by ECJ
• Cases where the application of a
directive, by a national court,
incidentally affects the legal position of
a private party.
‘Incidental’ direct effect
• Case C-94/94 CIA Security International SA v
Signalson SA and Securitel SPRL
• S & S claimed that the alarms being sold by CIA had not been
approved by Belgian authorities and CIA brought the action claiming
that S&S had libelled them by making this claim
• CIA accepted it had not sought approval for the alarms but argued that
Belgian legislation breached Art 28 and that the Belgian government
had not notified Commission of its technical specifications relating to
burglar alarms ( as was required under terms of Directive 83/189/EEC)
• Question-was the directive directly effective and should the national
court refuse to apply the national regulation which had not been
communicated to the Commission. (In short: did the failure to notify the
regulation to the Commission render the Belgian rules inapplicable ?
(in which case S & S could not rely on them)
CIA Security International SA v Signalson
SA and Securitel SPRL
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Directive laid down a precise obligation on state to notify the
Commission of technical regulations
What would happen when the State breached this requirement- would it
result in the national regulations being inapplicable? (in which case
they could not be enforced against CIA)
ECJ said the rules requiring notification were fundamental part of
securing the free movement of goods
The effectiveness of Community rules would be improved if the breach
of the directive rendered the national rules inapplicable
Accordingly CIA could rely on directive as against states technical
regulations
Directive doesn't impose any obligations on S&S but removed their
ability to rely on the (inapplicable) national law-Thus S&S incidentally
effected by the directive
Summary
• Directives are not capable of horizontal direct effect
(Marshall and Faccini Dori v Recreb)
• Unimplemented directives may be relied upon
indirectly through the duty of sympathetic
interoperation (indirect effect)
• There are limits to indirect effect, a national court can
only interpret national law in conformity with a
directive, is so far as possible Wagner Miret
• Possibility that directives may have incidental effect
on individuals CIA Security
The Principle of State Liability
• Cases C-6&9/90 Francovich & Others v Italy
– Failure by Italian authorities to implement the Directive
80/987/EEC
– Italy already been held to be in breach of its obligation to
implement the directive in Commission v Italy Case 22/87
– Francovich and others unable to make claim for wages
because of the failure of the state to set up the scheme as
required by the directive
– National court asked ECJ whether the directive had direct
effect
– Not sufficiently precise to ECJ held it did not because it was
not sufficiently precise
The Francovich decision
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ECJ begins by reminding us that Community law is intended to give rise to rights which
become part of our legal heritage (Paragraph 31)
Reminds us that the national courts are under a duty to protect and give effect to those
rights (Paragraph 32)
Then “ the full effectiveness of Community rules would be impaired and the protection of the
rights which they would grant would be weakened if individuals were unable to obtain
redress when their rights are infringed by a breach of Community law for which a Member
State can be held responsible” Paragraph 33
“The possibility of obtaining redress from the Member State is particularly indispensable
where, as in this case, the full effectiveness of Community rules is subject to prior action on
the part of the State and where, consequently, in the absence of such action, individuals
cannot enforce before the national courts the rights conferred upon them by Community
law.” Paragraph 34
The Francovich decision
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“It follows that the principle whereby a State must be liable for loss and damage caused to
individuals as a result of breaches of Community law for which the State can be held
responsible is inherent in the system of the Treaty.” Paragraph 35
Justification
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A further basis for the obligation of Member States to make good such loss and damage is
to be found in Article 5 (now 10) of the Treaty, under which the Member States are required
to take all appropriate measures, whether general or particular, to ensure fulfilment of their
obligations under Community law. Among these is the obligation to nullify the unlawful
consequences of a breach of Community law Paragraph 36
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It follows from all the foregoing that it is a principle of Community law that the Member
States are obliged to make good loss and damage caused to individuals by breaches of
Community law for which they can be held responsible. Paragraph 37
Francovich conditions for state liability
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NB- these have changed since this decision and this decision related to the failure to
implement a directive
– 1. The result prescribed by the directive should entail the grant of rights to
individuals.
– 2. It should be possible to identify the content of those rights on the basis of
the provisions of the directive.
– 3. The existence of a causal link between the breach of the State' s
obligation and the loss and damage suffered by the injured parties.
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Those conditions are sufficient to give rise to a right on the part of individuals to
obtain reparation, a right founded directly on Community law
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Does the principle of state liability apply to cases where the M/S has breached
the Treaty by making a legislative choice?
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The Principle of State Liability-some
questions
• Does the principle of state liability apply to other
breaches of Community law ?-(for example in cases
where the M/S has breached the Treaty by adopting
legislation contrary to the Treaty.)
• ECJ addressed these issues in
– Joined Cases C-46, 48/93 Brasserie du Pêcheur SA v
Germany and R v Secretary of State for Transport ex parte
Factortame
Joined Cases C-46, 48/93 Joined Cases C-46, 48/93 Brasserie du
Pêcheur SA v Germany and R v Secretary of State for Transport ex
parte Factortame
• Brasserie du Pêcheur SA v Germany
– BP, French company, claiming damages from German government
in respect of lost sales caused by German Beer Purity rules which
infringed Article 28 EC Treaty (ex Article 30)-free movement of
goods
• R v Secretary of State for Transport ex parte
Factortame
– Spanish fishermen claiming damages in respect of losses caused
by application of Merchant Shipping Act 1988 which breached
Article 49 (ex Article 52) (freedom of establishment)
Arguments against extending
state liability
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State liability compensation should not be available for directly effective
provisions since national remedies were already available for this.
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“The Court has consistently held that the right of individuals to rely on the directly effective
provisions of the Treaty before national courts is only a minimum guarantee and is not
sufficient in itself to ensure the full and complete implementation of the Treaty...
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The purpose of that right is to ensure that provisions of Community law prevail over national
provisions. It cannot, in every case, secure for individuals the benefit of the rights conferred
on them by Community law and, in particular, avoid their sustaining damage as a result of a
breach of Community law attributable to a Member State. As appears from paragraph 33 of
the judgment in Francovich and Others, the full effectiveness of Community law would be
impaired if individuals were unable to obtain redress when their rights were infringed by a
breach of Community law.” Paragraph 20
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It is all the more so in the event of infringement of a right directly conferred by a Community
provision upon which individuals are entitled to rely before the national courts. In that event,
the right to reparation is the necessary corollary of the direct effect of the Community
provision whose breach caused the damage sustained. Paragraph 22
Arguments against extending
state liability
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Germany/UK argued that a general right to reparation could only be created by
EC legislation. ECJ rejects this argument
ECJ under duty to ensure EC law is observed and ECJ has power to interpret
that law
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Since the Treaty contains no provision expressly and specifically governing the
consequences of breaches of Community law by Member States, it is for the Court, in
pursuance of the task conferred on it by Article 164 of the Treaty of ensuring that in the
interpretation and application of the Treaty the law is observed, to rule on such a
question in accordance with generally accepted methods of interpretation, in particular
by reference to the fundamental principles of the Community legal system and, where
necessary, general principles common to the legal systems of the Member States.
Paragraph 27
CONDITIONS FOR STATE LIABILITY
• The rule of law infringed must be
intended to confer rights on individuals;
• The breach must be sufficiently serious;
• There must be a direct causal link
between the breach and the damage
sustained
Intention to confer rights
• In general terms this will not be difficult since the ECJ
has given a generous interpretation to the Treaty and
generally most treaty provisions confer rights- note
these need not be directly effective rights
Sufficiently serious breach
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Based upon Art 288 (ex 215)-non-contractual liability of the institutions
“Secondly, those conditions correspond in substance to those defined
by the Court in relation to Article 215 in its case-law on liability of the
Community for damage caused to individuals by unlawful legislative
measures adopted by its institutions.” Paragraph 53
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“the conditions under which the State may incur liability for damage
caused to individuals by a breach of Community law cannot, in the
absence of particular justification, differ from those governing the
liability of the Community in like circumstances. The protection of the
rights which individuals derive from Community law cannot vary
depending on whether a national authority or a Community authority is
responsible for the damage” Paragraph 42
Sufficiently serious breach
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As to the second condition, as regards both Community liability under
Article 215 and Member State liability for breaches of Community law,
the decisive test for finding that a breach of Community law is
sufficiently serious is whether the Member State or the Community
institution concerned manifestly and gravely disregarded the limits on
.
its discretion Paragraph 55
Disregarding limits of discretion?
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That said, the national legislature ° like the Community institutions ° does not
systematically have a wide discretion when it acts in a field governed by
Community law. Community law may impose upon it obligations to achieve a
particular result or obligations to act or refrain from acting which reduce its
margin of discretion, sometimes to a considerable degree. This is so, for
instance, where, ...Article 249 (then 189) of the Treaty places the Member State
under an obligation to take, within a given period, all the measures needed in
order to achieve the result required by a directive. In such a case, the fact that it
is for the national legislature to take the necessary measures has no bearing on
the Member State' s liability for failing to transpose the directive. Paragraph 46
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Remember Article 10 EC Treaty- Member State obligation to comply with
Community Law
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Look at Treaty articles such as Art 28 which contain a clear prohibition
a manifest and grave disregard
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the clarity and precision of the rule breached
degree of discretion open to the State under that rule
whether the damage caused was intentional or involuntary
whether the error of law was excusable or inexcusable
the fact that a institution may have contributed towards the
omission
– the adoption or retention of national measures or practices
contrary to Community law
– See paragraph 56 of the judgment
Sufficiently serious breach
• On any view, a breach of Community law will clearly be
sufficiently serious if it has persisted despite a judgment finding
the infringement in question to be established, or a preliminary
ruling or settled case-law of the Court on the matter from which
it is clear that the conduct in question constituted an
infringement. Paragraph 57
Sufficiently serious breach
• National courts are responsible for
determining this question• must have regard to criteria laid down
by the ECJ
• In most instances the national courts
have sought a preliminary ruling
Whether error of law
excusable
• R v HM Treasury, ex parte British
Telecommunications 1996
– rule in directive was not clear and precise
– UK had acted in good faith
– no judicial or legislative guidance
– Breach was therefore excusable nd not
sufficiently serious
Excusable/inexcusable
• Case 283, 291 &292/94 Denkavit
– Faulty implementation
– the incorrect interpretation of the directive by
Germany was consistent with the incorrect
interpretation by all other M/S
– lacked sufficient clarity
– lack of previous preliminary rulings
– therefore excusable
Automatically serious
• Failure to implement a directive
• Dillenkoffer and Others v Germany 1996
– Germany failed to implement Directive 90/314/EEC
– Under Article 249 Member States are under an obligation to
achieve result prescribed by the directive (hence they have
no discretion about this-the only discretion arises in relation
to how they achieve the result)
– non transposition of a directive amounts to a sufficiently
serious breach
Degree of discretion left to
the State
• Case C-5/94 Hedley Lomas
• UK breached Article 29 by refusing export licences to Spain
• argued that it was justified under Article 30
• ECJ-UK had “ where, at the time when it committed the
infringement, the Member state in question was not called upon
to make any legislative choices and had only considerably
reduced, or even no, discretion, the mere infringement of
Community law may be sufficient to establish the existence of a
sufficiently serious breach.” Paragraph 28
•
Degree of discretion left to
the State
– Case C-140/97 Rechberger
– Austrian implementation of Directive 90/314/EEC
– The national law only allowed claims to be made after a
particular date which was several months after the date
specified in the directive (thus legal implementation was on
time but practical implementation was delayed by the
national legislation)
– Held national legislation was manifestly incompatible with
the terms of the directive/Member State had no discretion to
do this.
Direct Causal Link
• For the national courts to decide as a
question of fact
– See R v Secretary of State for the Home
Department, ex parte Gallaagher [1996]
– Court of Appeal determined that the was
no causal link between breach and losses
sustained
– See also opinion of Advocate General
Jacobs in Schmidberger Case C-12/00
Summary
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A breach will be sufficiently serious it has persisted despite a judgment
finding the infringement in question Brasserie du Pêcheur SA v
Germany and R v Secretary of State for Transport ex parte Factortame
Failure to implement a directive will automatically constitute a
sufficiently serious breach Dillenkoffer and Others v Germany
Incorrect transposition of a directive may constitute a sufficiently
serious breach if the provisions of the directive are insufficiently clear
and precise Denkavit and R v HM Treasury, ex parte British
Telecommunications
Where a Member state was not called upon to make any legislative
choices and had only considerably reduced, or even no, discretion, the
mere infringement of Community law may be sufficient to establish the
existence of a sufficiently serious breach.” Hedley Lomas
R v Secretary of state for Transport, ex
parte Factortame Ltd (no.5) HL [1998]
• House of Lords conclude that the breach by UK government
amounted to a sufficiently serious breach
• House of lords, employing criteria laid down by ECJ found that
the UK government had
– Deliberately adopted legislation that was manifestly discriminatory
– Government did not expect any challenges to the legislation
because it was in the form of a statute (rather than a statutory
instrument)
– Was aware of the adverse effect the legislation would have on the
respondents
– Enacted the legislation even though the UK Government knew of
the Commissions position
‘State’ Liability
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Case C-302/97 Konle It is for each Member State to ensure that individuals
obtain reparation for damage caused to them by non-compliance with
Community law, whichever public authority is responsible for the breach and
whichever public authority is in principle, under the law of the Member State
concerned, responsible for making reparation. A Member State cannot,
therefore, plead the distribution of powers and responsibilities between the
bodies which exist in its national legal order in order to free itself from liability on
that basis. Paragraph 62
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Case C-224/01 Köbler v Austria
In the light of the essential role played by the judiciary in the protection of the
rights derived by individuals from Community rules, the full effectiveness of
those rules would be called in question and the protection of those rights would
be weakened if individuals were precluded from being able, under certain
conditions, to obtain reparation when their rights are affected by an infringement
of Community law attributable to a decision of a court of a Member State
adjudicating at last instance. Paragraph 33
Conclusion
• Indirect effect
• Incidental direct effect
• State Liability
– Conditions
– Sufficiently serious breach
– Means by which individuals can seek to
enforce their rights under Community law.