Every Legal System Requires the Existence of a Scheme of Procedures and Remedies

Critically analyse the above statement in the light of ECJ case law both on state liability and on the effectiveness of national court remedial and procedural rules.

This essay will consider whether the Unibet [1] judgment does indeed merely reinforce the ECJ’s previous case law or whether it in fact extends it. The essay examines whether the ECJ’s respect for national procedural autonomy is indeed ‘far outweighed’ by a desire for effective enforcement, or whether the ECJ is prepared to engage in a more sensitive balancing exercise of these principles. In particular, the law relating to state liability and the effectiveness of national court remedial and procedural rules will be drawn upon in answering these questions.

Every legal system requires, for its successful operation, the existence of a scheme of procedures and remedies which safeguards and enforces the application of its substantive provisions. [2] Such a scheme should specify the courses of action which are open to individuals and the circumstances in which they may seek judicial protection, and should describe the kind of remedy which will be available in the event of a successful claim. However, EU law does not provide a scheme of procedures, except for where legislative harmonisation has already taken place. Therefore, it is for the national legal systems to determine the procedures applicable. [3] Thus, the principle of national procedural autonomy provides that in the absence of harmonised rules on procedure, rights conferred by EU law must be exercised before national courts in accordance with national procedural rules. [4]

The principle of national procedural autonomy is subject to two general principles of EU law. They are: the principle of equivalence or non-discrimination, meaning that the remedies and forms of action available to ensure the observance of national law must be made available in the same way to ensure observance of EU law; and, the principle of effectiveness, which requires that the national conditions and procedures should not make the exercise of the right impossible or excessively difficult in practice. [5]

Subject to the two principles above, it is therefore for the Member States, in the absence of harmonisation, to utilise their own domestic procedures and remedies. In Rewe-Handelsgesellschaft Nord v Hauptzollant Kiel, [6] which concerned whether a trader had a right under EU law to require a national court to compel a competitor to comply with his EU obligations, the ECJ ruled that:

“[It] must be remarked first of all that, although the Treaty has made it possible in a number of instances for private persons to bring a direct action, where appropriate, before the Court of Justice, it was not intended to create new remedies in the national courts to ensure the observance of Community law other than those already laid down by national law.” [7]

Thus, the ECJ appeared to be stating that although the national courts must ensure the equivalent and effective protection of EU law rights, there was no need for the national courts to create new remedies, as those courts were free to make use of their own national procedures. This will be returned to below.

Initially, the ECJ placed great emphasis on the requirement of effectiveness, and it is at least arguable that the principle of effectiveness did indeed greatly outweigh respect for procedural autonomy. In Simmenthal [8] it was held that the national court was required to set aside national law, thereby not applying it to the facts of the case, where that law was incompatible with EU law, without waiting for the national legislature to recognise it as incompatible, in order to give effectiveness to EU law.

In Von Colson [9] the ECJ was asked to consider whether a particular national rule relating to a remedy was effective. In that case the damages for sex discrimination were held by the national court to amount to the ‘actual loss’ suffered by the claimants, and amounted to a nominal sum relating to travelling expenses. The ECJ found that in order to ensure that EU law is effective, the compensation must be adequate and must have a deterrent effect. Thus, in this case the ECJ found that the remedy provided must itself be effective, although it did not require any establishment of a new remedy.

In Dekker [10] the claimant sought damages from the national court against an employer who had discriminated against her. The claim, under national law, was subject to a requirement of fault on the part of the defendant, and could be defended on the basis of justification. It was found by the ECJ that to subject a claim to these requirements would undermine the effectiveness of EU law. Again, in this case the principle of effectiveness far outweighed procedural autonomy.

Similarly, in cases relating to limitation periods, the ECJ adopted a strong interventionist approach to effectiveness, and required national courts to disregard limitation periods imposed under national law. [11] However, subsequent cases have demonstrated that limitation periods are acceptable, [12] provided that they do not allow the Member State to profit from their own wrongdoing, [13] or where they are discriminatory in nature. [14]

The ‘high water mark’ [15] of the effectiveness jurisprudence may be demonstrated by the cases of Marshall II [16] and Factortame I. [17] In Marshall II the national law set compensation for the particular claim at a statutory ceiling which was lower than the loss suffered by the claimant. The ECJ held that the action based on a EU law right should be subject to full compensation, including interest, and that a national system which provided that compensation was subject to statutory limits would not be sufficiently effective. In Factortame I the ECJ was asked to examine a national rule which prevented an interim injunction being issued against the Crown. It was held that:

“the full effectiveness of Community law would be… impaired if a rule of national law could prevent a court seised of a dispute governed by Community law from granting interim relief in order to ensure the full effectiveness of the judgment to be given on the existence of the rights claimed under Community law.” [18]

The consequence of this ruling was that, although the national court was not required to adopt an entirely new remedy, it was required to utilise an existing national remedy in an entirely new way.

The above cases may be analysed as representing a shift away from respect for national procedural autonomy towards the prominence of effectiveness. It is therefore arguable that “the ECJ at this stage was prioritising the principle of effectiveness over the principle of autonomy.” [19]

Indeed, in relation to remedies, the principle that no new remedies need be created has been eroded. In Fracovich [20] the ECJ developed the principle of Member State liability, which essentially provides that where a Member State is in breach of its EU obligations, the breach is ‘sufficiently serious’ and results in loss or damage to an individual, that individual can make a claim in damages directly against the Member State. [21]

Such an action against a Member State provides an entirely new remedy for individuals. For example, in the UK, there was no previously existing action which could be viewed as equivalent. [22] In R v Secretary of State for Transport, ex parte Factortame Ltd (No 5) [23] the English Court applied the concept of state liability as set out in EU law by the ECJ, thereby acknowledging the unique nature of the action, and thus the remedy, rather than attempting to place the case into more traditional English actions.

Aside from the obvious impact of state liability, however, it is clear that the ECJ has moved away from its early strong interventionalist approach and is now adopting a more balanced approach to the tension between national procedural autonomy and effectiveness. [24] For example, in Van Schijndel [25] the ECJ was asked to consider a rule which precluded the national court from referring a question to the ECJ when the parties had not raised EU law. In this case, unlike in Factortame I, the ECJ began by restating the concept of national procedural autonomy and, rather than emphasising the effectiveness of EU law as a guiding principle, it returned to considering whether the rule made the exercise of the right impossible or excessively difficult. The ECJ stated that national rules should be viewed as a whole and the basic principles of the national legal system, “such as the protection of the rights of the defence, the principle of legal certainty and the proper conduct of procedure”, should be taken into consideration. Essentially this means that the impact of the national rule should be considered on the facts of the individual case in order to examine whether the exercise of the right in EU law has been rendered impossible or excessively difficult, taking into account natural justice and legal certainty. Thus, it will be for the national courts to establish whether the national rule is in breach of the effectiveness principle and in doing so they will have to balance competing interests. [26]

However, where the national rule means that the exercise of the EU right is not effective, the Member State will not be able to rely on national procedural autonomy to escape the need to provide effectiveness. Thus, in Metallgesellschaft & Hoechst v Inland Revenue [27] an advance tax which applied to subsidiary companies whose parent companies were not UK domiciled but not to those whose parents were in the UK was held to be subject to a remedy of restitution for lost interest and interest on that sum in order to ensure effectiveness of the requirement of equality in EU law.

The case of Unibet (London Ltd) and Unibet (International) Ltd v Justitiekanslern [28] may be considered to draw together the case law in this area, which has previously been somewhat inconsistent. The case arose from proceedings in Sweden concerning the Swedish law on lotteries. The national law provided that lotteries and other chance games require an administrative licence and it was not permitted for commercial operation to promote participation in unlawful lotteries abroad. Unibet had purchased advertising in Swedish media with the intention of promoting its chance games service. The Swedish authorities obtained injunctions and commenced criminal proceedings against Unibet. No proceedings were brought against Unibet. Unibet brought an action alleging a right, in EU law, to promote its services. Under Swedish national law a self-standing application could not be brought for a declaration that a national provision conflicted with a higher legal rule. However, Unibet would be able to challenge the compatibility of the law with EU law if proceedings were brought against it or in the event of judicial review of a decision rejecting a licence application. [29]

The ECJ considered the law relating to national procedural autonomy and the creation of new remedies. It held that the principle of effective judicial protection is a general principle of EU law and that under the principle of co-operation, Member States are required to ensure judicial protection of EU law rights. The ECJ emphasised the principle of national procedural autonomy, stating that in the absence of harmonising measures it is for the domestic legal system of the Member States to designate the legal procedure governing actions for safeguarding EU law rights. The ECJ again stated that the EC Treaty was not intended to create new remedies in national courts, but stated that it “would be otherwise only if it were apparent from the overall scheme of the national legal system in question that no legal remedy existed which made it possible to ensure, even indirectly, respect for an individual’s right under Community law”. [30] The ECJ noted that the concept of national procedural autonomy is subject to the principles of equivalence and effectiveness. It found that it is for the national courts to interpret national procedural rules, wherever possible, in accordance with the principle of judicial protection. This did not require it to be possible to bring a free standing action to dispute the compatibility of a national law with EU law, as long as the principles of equivalence and effectiveness were met. In this particular case, the Swedish law followed the principle of equivalence. Furthermore as there was an indirect method of challenge, the effectiveness principle was also met. It was reiterated that the question of whether a national procedural provision rendered the application of EU law impossible or excessively difficult should be considered by reference to the role of the rule and domestic legal principles. However, the national court must be able to provide interim relief, unless the inadmissibility of the application under domestic law was certain and EU law had not questioned that inadmissibility. Finally, it was found that with regard interim relief, procedural autonomy would be respected provided the principles of equivalence and effectiveness were observed.

Essentially the ECJ in this case has reaffirmed the principle of national procedural autonomy and the ‘no new remedies’ principle, but on the condition that the national rules and remedies meet the requirements of equivalence and effectiveness. Thus, Member States have a discretion, in the absence of harmonising measures, to adopt their own rules on procedure and remedies. Thus, an indirect challenge is sufficient. However, where those rules and remedies are discriminatory as between national law and EU law, or where they mean that EU law is rendered ineffective, EU law will step in and render the national rules ineffective or provide new remedies. Therefore, if no challenge at all had been available, the ECJ may have required that a free-standing action be made available.

The case clarifies the nature of interim remedies, after Factortame I, as it is now clear that the case only set aside the prohibition on the interim measure, rather than provided an automatic entitlement to provisional protection. [31]

It may be concluded that the Unibet decision merely confirms the previous case law, providing that there are some constraints on the principle of national procedural autonomy and requires that national rules be interpreted in line with the principle of effective judicial protection. [32] Thus, Unibet does merely clarify the existing law, however, it also reaffirms the importance of a balance approach to national procedural autonomy and the statement that this concept is far outweighed by effectiveness is therefore incorrect. The true position is that national procedural autonomy will be respected unless it renders EU law ineffective, at which point effectiveness will take priority.