Francovich v Italy

Introduction

One of the defining and controversial characteristics of the European Union has been the supranational nature of its institutions and laws. European laws can take the form of primary laws, which consists of the intergovernmental treaties, and secondary laws in the form of regulations, directives and decisions which are passed by the Commission. While regulations are directly applicable, directives once passed have to be implemented by Member State governments by a stated date. Directives often confer rights against the state that can be enforced in the local courts of Member States. This has been termed vertical direct effect. However directives generally do not confer horizontal direct effect in that they do not grant rights that can be enforced horizontally against private or non-state organizations. The European Court of Justice has however been keen to extend the rights that are available to EU citizens, and have made a number of key rulings that have extended the applicability and accessibility of directives. One such case was the Court’s ruling in Francovich and Bonifaci v Republic of Italy which advanced the concept of state liability as well as the development of incidental horizontal effect.

Case Outline

The facts of the case are that Mr Francovich, along with other employees, was left with unpaid salaries when his company went into liquidation. He applied for compensation under the provisions of Directive 80/987 which required Member States to institute compensation measures for such instances. In the absence of the Italian government instituting such measures, the case was referred to the Court for a ruling. The Court found that the wording of the directive was sufficiently vague as to not invoke the principle of direct effect. However to deny the claimants justice because of this deficiency would be to impinge on the effet utile or utility of EU law that was intended to provide adequate compensation. Even in the absence of sufficiently applicable directives, there was an obligation under the provisions of Article 5 EC Treaty (now Article 10), to compensate individuals for any loss suffered due to the failure of a Member State to implement Community law. Consequently the Court ruled that individuals had a right to compensation where there was a violation of a Member States’ duty to implement Community law, provided that three conditions were met. These were as follows:

“The directive must confer rights on individuals

The contents of those rights must be identifiable in the wording of the measure

There must be a causal link between the damage suffered and the failure to implement the Directive”

Issues Raised by this Case

Steiner et al outline the significance of the Court’s ruling in this case by stating; “Francovich introduced the notion of state liability, and created substantive rights for individuals in certain circumstances.” One of the main issues addressed in this ruling is the propensity for Member States to not comply with directives. A government may opt for non-compliance in the knowledge that the costs of compliance outweigh any potential sanction imposed by the Court. However non-compliance affects the uniform accessibility of rights across the Union and can cause discrimination between citizens in complying as opposed to non-complying states. Prior to this case the Court’s rulings were based on guaranteeing that directives had direct effect. This had originally been established in the case of Van Gend en Loos v. Nederlandse Administratie der Belastingen Case 26/62. However the significance of this case is that, in holding national governments accountable, they were also now liable to paying compensation for their failure to transpose a directive into national law within the stated time limit.

ECB Ruling/Outcome

The relevance of this ruling can be found in the fact that Member States are liable in instances where they have failed to implement a directive which did not have direct effect because of the imprecise nature of the directive’s wording. Of particular importance is the fact that the ruling also allows for “national private law remedies or their equivalent to be made available for breaches of Community law.” By this ruling the Court effectively tied the principle of a Member States liability to EC Law as contained in the treaties, while laying down uniform criteria governing such liability. This ruling was suitably modified in a later ruling in the case of Brasserie du Pêcheur,in which the Court extended the scope of liability to include any breach of EC law irrespective of which organ of the state was responsible for the breach. The Court also went further however in modifying the second criteria in the Francovich ruling to state that the breach must be sufficiently serious, with this being determined by testing whether the state deliberately disregarded it responsibilities.

Ultimately the relevance of the development of the principle of state liability in the Francovich ruling can be found in the proactive approach that the Court has adopted in its interpretation of EU law. It can be argued that its foremost concern has been extending the applicability of EU law to European citizens. This was evident from its early proactive rulings which established the supremacy of EU law, despite such a doctrine not being contained within the treaties at the time. Francovich is therefore one important ruling in an evolutionary continuum of rulings that have extended access to rights by Europe’s citizens from the direct effectiveness of directives to state liability, and the eventual establishment of incidental horizontal effect. This latter principle has been developed in case law to allow EU citizens to enforce rights horizontally against private individuals and organizations, and not just vertically against the state or its emanations (as per Marshall v Southampton Area Health Authority). In this the Court has had to tread a delicate line between extending these rights and protecting the sovereignty of national governments and courts, especially within the context of the subsidiarity principle which mandates (under the provisions of Article 5(3) TEU) that areas which do not fall within the exclusive competence of the Union should be devolve to the lowest level of competence in the Member States. In this sense it has been cogently and controversially argued that rulings such as Francovich have been more important to the integration process in Europe than the constitutional and political decision makings of democratically elected governments.

Bibliography

Cases Cited

Brasserie du Pêcheur SA v Germany (C-46/93) [1996] ECR I-1029

Francovich and Bonifaci v Republic of Italy (C-6, 9/90) [1991] I-5357

Marshall v Southampton Area Health Authority (Case C-271/91) [1993] ECR I-4367

Van Gend en Loos v. Nederlandse Administratie der Belastingen (Case 26/62) [1963] ECR 1

Other Sources

Cini M European Union Politics (2nd edition Oxford University Press 2003)

Craig P and De Burca G EU Law: Text, Cases and Materials (2nd edition Oxford University Press 1998)

Fairhurst J Law of the European Union (7th edition Pearson Education Ltd 2010)

Hanft J E Francovich and Bonifaci v Italy: EEC Member State Liability for Failure to Implement Community Directives (Fordham International Law Journal Vol. 15, Issue 4 1991)

Hartley T C The Foundations of European Union Law (7th edition Oxford University Press 2010)

Horspool M and Humphreys M European Union Law (5th edition Oxford University Press 2008)

Kaczorowska A European Union Law (1st edition Routledge Cavendish 2009)

Steiner J and others EU Law (9th edition Oxford University Press 2006)

Storey T and Turner C Unlocking EU Law (2nd edition Hodder Education Ltd 2010)

Wyatt D and Dashwood A European Union Law (6th edition Hart Publishing 2011)

Footnotes

M Cini European Union Politics (2nd edition Oxford University Press 2003)

Francovich and Bonifaci v Republic of Italy (C-6, 9/90) [1991] I-5357

P Craig and G De Burca EU Law: Text, Cases and Materials (2nd edition Oxford University Press 1998)

A Kaczorowska European Union Law (1st edition Routledge Cavendish 2009) 243

J Fairhurst Law of the European Union (7th edition Pearson Education Ltd 2010) 300

T Storey and C Turner Unlocking EU Law (2nd edition Hodder Education Ltd 2010)182

J Steiner and others EU Law (9th edition Oxford University Press 2006) 178

Van Gend en Loos v. Nederlandse Administratie der Belastingen Case 26/62 [1963] ECR 1

J E Hanft Francovich and Bonifaci v Italy: EEC Member State Liability for Failure to Implement Community Directives (Fordham International Law Journal Vol. 15, Issue 4 1991) 1273

Brasserie du Pêcheur SA v Germany (C-46/93) [1996] ECR I-1029

D Wyatt and A Dashwood European Union Law (6th edition Hart Publishing 2011) 308

T Storey and C Turner Unlocking EU Law (2nd edition Hodder Education Ltd 2010)183

M Horspool and M Humphreys European Union Law (5th edition Oxford University Press 2008) 172

Marshall v Southampton Area Health Authority (Case C-271/91) [1993] ECR I-4367

T C Hartley The Foundations of European Union Law (7th edition Oxford University Press 2010) 122