Is State Liability a Genuine Contribution?

The ability of private parties to enforce European Community law in national courts is now an essential feature of the integrated legal system set up by the European Community.  Although the European Court of Justice is the supreme court of the European Community, the onus is on the lower; that is to say national, courts to apply the Community law.  Private parties can apply to national courts to enforce their Community rights where their national law provides lesser rights than Community law.  However, where the national courts are unclear on the meaning of the Community legislation, they may seek clarification from the European Court of Justice.  In the case of Community law which should have been transposed into national law, the applicant may request the Commission to take proceedings under Article 226 (ex 169) EC against the Member State for failing to do so.  Some of the cases that will be discussed are precedent setting cases which have played important parts in providing avenues which now enable private party applicants to enforce Community rights given to them by various provisions of EC law in their national courts.

Although Community law is part of our legal system and is therefore directly applicable in the UK, not all Community law is directly effective, that is to say, capable of judicial enforcement.  The Court of Justice has ruled in a number of cases that for a Treaty Article, Regulation or Decision to be directly effective, it must be sufficiently clear and unconditional for reliance to be placed on it, and there must be no scope for the exercise of Member State discretion in implementing it.  Direct effect is a community concept developed by the court of justice to apply to treaties, regulation, directives and decisions. It is the term given to judicial enforcement of rights arising from provisions of community law which can be upheld in favour of individuals in the courts of the member states.

The case of Van Gend en Loos1 initiated the right for private parties to enforce their Community rights from EU Treaties on Member States and became a precedent to allow private parties to rely on other sources of EU legislation.  The Van Gend en Loos criteria are now the test for the application of direct effect for provisions of EC law.  Furthermore, the Court of Justice in a later case allowed for Treaties to have both vertical and horizontal direct effect: (the horizontal effect of Treaties being clarified in the case of Defrenne v Sabena (Case 43/75) vertical direct effect meaning that a State’s citizens are able to rely on EC law in actions against the State; and horizontal direct effect meaning that citizens are able to rely on EC law in actions against each other.  Despite this, the use of the doctrine of direct effect is somewhat limited by the restrictions which the Court of Justice set: that the Articles must be clear, unconditional and may be relied upon only against the State.  In this way, the judgement of the case did provide avenues to enable private party applicants to enforce their rights given to them by the provisions of EC law in their national courts to a certain extent.

In Von Colson v Land Nordrhein-Westfalen[13], the court sidestepped the public/private distinction and held that Article 5 EC (which requires all states to take ‘all appropriate measures’ to ensure the fulfilment of their community obligation) was binding on all authorities of member states, including courts. The courts therefore have to interpret national law in such a way as to ensure the objectives of a Directive are achieved. EC law can therefore be applied indirectly, by way of interpretation, even if the Community law is not directly effective.

For some while, however it was unclear whether national courts were obliged to comply with the ‘Von Colson principle’ to interpret EC law to comply with an EC directive when the domestic measure had been introduced prior to the directive. These questions were raised in Marleasing SA v La ComercialInternacional de Alimentacion SA[14]. The Court held that the national courts’ obligation to comply with EC directives applied whether the national provision in question were adopted before or after the directive.

However, even the ECJ conceded that there were limits to the principles of indirect effect. In Von Colson, the national courts’ obligation to give indirect effect to Community Directives was expressed to exist ‘insofar as they have discretion to do so under national law.’ Even under Community Law therefore, it seems that national courts may refrain from interpreting domestic law against its clear and intended meaning where to do so would breach the legitimate expectations of individuals.

In addition to the doctrines of direct and indirect effect, the Court of Justice has developed a third potential remedy for those individuals who have suffered as a result of breach of Community law.  The Member State may, in certain circumstances, be liable in damages for its own breach of Community law.  This includes not only the national government but other public-law bodies such as territorial bodies to which certain legislative or administrative tasks have been devolved.  Therefore, the Court of Justice has developed the Francovich conditions to govern such liability.

Until Francovich v Italian State there was no general principle of state liability in damages for breaches of Community Law in the absence of direct or indirect effects. Many breaches of EC law by member states concerned the inadequate implementation of directives. Many of these directives were designed to confer rights on individuals. When states fail to implement them or implement them incorrectly then individuals are deprived of their Community rights.

The principle of state liability was needed for a few reasons. The principle of direct effects was effective to provide remedy in the individual case- where the individual is aware of his/her community rights and willing to enforce them. This principle is not available against private enterprises nor is the principle of indirect effects. The primary problem in the EC at the time was the non-implementation of directives by member states, and neither direct nor indirect effects remedied this problem.

In Francovich, the court established this new principle, that, under certain circumstances, a state may be ‘liable to make good damage to individuals caused by a breach of Community Law for which it is responsible.’ The breach in question was the non-implementation of directive 80/987 by the Italian State.. In this case the Italian State had not implemented the directive; the claimants were owed arrears of wages and they sought compensation from the Italian State. They based their claim on two points; the first being direct effect, which the court found that the provision was not directly effective.

The second base of their claim was the state’s breach to implement the directive, for which the court found the state liable. They held that the failure by the member state to take all necessary steps to achieve the results required by a directive gave rise to a right to obtain damages based directly on Community Law.

Three Conditions must be met in order for the State to be held liable. Firstly, the result required by the directive includes the conferring of rights for the benefit of individuals. Secondly, the content of these rights may be determined by reference to the provisions of the directive, and finally there must be a causal link between the breach of the obligation of the state and that damage suffered by the person affected.(cite)

Thus in Francovich the court laid down a new principle wholly independent of direct and indirect effect. It was to supplement for individuals the inadequacies of the principles of direct and indirect effects, and it would also provide states with a powerful incentive to fulfil their obligations under Community Law.

Although the from the outcome of Francovich (Cases C-6/90 & C-9/90), a precedent and further avenue for private parties to enforce their rights set out in EC legislation seems to have been made, it is only in the instance that direct and indirect effect cannot provide a remedy that the Court of Justice will consider that the Member State has liability.   It seems that the Court of Justice would strive to protect the Member State and apply resolving doctrines of direct or indirect effect as an alternative to applying the onus of fault onto a State.

Furthermore the court held in Brasserie du Pecheur[19] that all manner of breaches of community law by all three arms of state could lead to liability to individuals. Thus it expands the circumstances which might give rise to liability in cases where otherwise there would be no enforceable rights because there is either no horizontal direct effect or even no direct effect at all. The court also confirmed that national courts are required to grant relief to private individuals who suffer as a result of a breach of community law by a member state. However private individuals are unable to bring direct actions against a member state in the EC.

The focus has now moved to the seriousness of the breach, the Factortame[20] case introduced the revised criteria that the breach must be analogous to that applied to liability of the EC institutions under article 288 (old 215) (2). This is known as the shoppenstedt formula and in order for liability to arise on the part of the member. There must have been a sufficiently serious breach of a superior rule of law designed for the protection of individuals.

The remedies have clearly expanded the possibilities for private parties to be able to enforce their EC law rights in their national courts, all in significantly differing ways.  Although this is most obviously can be seen as important progression of the European Communities in the sight of protecting private parties rights, each remedies creation seems purely to protect the European Communities legislation, rather than to investigate the Member States action in implementing or transcribing the EC laws.  While on the whole, this allows for each MemberState to maintain their own degrees of sovereignty, control, interpretation and discretion, the remedies do not suggest that the institutions of the European Community are willing and prepared to discipline Member States who are liable for not implementing legislation and penalise them for doing so.  Much rather, they would ideally remedy the dispute by striving to directly or indirectly apply the EC legal rights into the national law of Member States.