1. The Effect of Community Law Lecture Two

2. 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

3. Reminder 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

4. 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

5. 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

6. Duty of sympathetic interpretation “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

7. 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?)

8. 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

9. 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

10. 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”

11. 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

12. 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

13. 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

14. 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.

15. ‘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)

16. CIA Security International SA v Signalson SA and Securitel SPRL 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

17. 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

18. 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

19. The Francovich decision 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

20. The Francovich decision “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 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 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

21. Francovich conditions for state liability 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. 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 Does the principle of state liability apply to cases where the M/S has breached the Treaty by making a legislative choice?

22. 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

23. 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)

24. Arguments against extending state liability State liability compensation should not be available for directly effective provisions since national remedies were already available for this. –“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... –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 –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

25. Arguments against extending state liability 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 –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

26. 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

27. 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

28. Sufficiently serious breach 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 “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

29. Sufficiently serious breach 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

30. Disregarding limits of discretion? 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 Remember Article 10 EC Treaty- Member State obligation to comply with Community Law Look at Treaty articles such as Art 28 which contain a clear prohibition

31. a manifest and grave disregard –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

32. 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

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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.

39. 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

40. Summary 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

41. 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 R v Secretary of state for Transport, ex parte Factortame Ltd (no.5) HL [1998]

42. ‘State’ Liability 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 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

43. 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.