Sunday 15 May 2011

State Liability


Individuals do not have extensive rights to enforce Union law directly in the Court of Justice of the European Union. They can only do so under very strict standing conditions through the judicial review procedure (Article 263 TFEU), actions for failure to act (Article 265 TFEU) and in private actions for damages against the Union institutions (Articles 268 and 340 TFEU). Enforcement of Union law rights by individuals or legal persons (companies) therefore mainly takes place at the national level in the domestic court.

The approach taken by the court had been to state that it was national law to determine in which courts an action could be brought and what procedural rules should govern the action. On this basis, the general rule was that community rights were to be treated no less favorable than analogous domestic law rights. In this way assumed that domestic law would fully protect community rights by providing a remedy obtainable in national courts. The court stated that the effectiveness of community law could be called into question, and the protection of rights would be weakened, if individuals could not obtain compensation when community rights were undermined by violation of community law. No uniform remedy was prescribed by Union Law.

As a result, several problems may arise. In Case Von Colson v Land Nordrhein- Westfalen [1984] ECR 1-891, the directive did not stipulate what the remedies for breach of the rights protected in the Directive should be. The remedy offered was clearly inadequate for the wrong that Ms Von Colson had suffered. However, it complied with the principle of “practical possibility”- it was neither impossible nor virtually impossible for her to receive a remedy and it may well have complied with the principle of “equivalence”- German law may not have had remedies for sex discrimination at all or may have had similarly weak remedies. European Union law rights would have no value if there was no possibility of a proper remedy of some kind. To solve this problem, the court of Justice therefore had to take the European Union law requirements of the national system of remedies one step further and insist on the adequacy, effectiveness and deterrent effect of remedies for European Union law rights.

Moreover, where as a consequence of the doctrine of horizontal direct effect the claimant can not enforce a union right against a private party and hence the wronged claimant can get no remedy at all. This usually occurs because of the failure of the member state to implement the directive in question. The Francovich case involved Directive 80/987, which provided for the approximation of the laws of the Member states relation to the protection of employees in the event of the insolvency of the their employer. The Italian government had not implement the directive, which the result that, when Francovich’s employer become insolvent, the employees had substantial arrears of salary.  This directive was insufficiently precise and was not unconditional, and so did not have direct effect. Thus, Francovich and the other employees involved could not rely on the Directive in order to recovery of their lost wages. ECJ considered the question if the circumstances in which a member state could be held liable in damages for its violation of community law. Finally court stated that, as a general principle, Member States are obliged to make good damage caused to individual by violation of community law for which they are responsible.

In this case, the Court laid down three conditions for making Italy liable where it has failed to transpose a Directive.
a)     The Directive must be intended to confer rights on individuals.
b)     The content of those rights must be ascertainable from the terms of the Directive.
c)      There must be a causal link between the loss suffered and the Member State’s breach. In other words, there must be a link between the cause of the loss suffered and the breach of EU law by the Member State.

Although Francovich involved the non implementation of a directive, a broad interpretation of the court’s judgment could be that there is a general right to compensation where an individual has suffered loss as a result of a breach of other community law. For example: in Kirklees MBC v Wickes Building Supplies Ltd, the House of Lords held on the basis of Francovich that if the ECJ considered s.47 of the Shops Act 1950 to be invalid as being in conflict with Art 28, the UK might be obliged to make good the loss caused to the individuals by the breach. Furthermore, Member State could also be liable in damages for breaches of Treaty Articles, was the issue in Joined Cases C-46/93 and C-46/93 Brasserie du Pecheur v Germany and R v Secretary of Transport ex parte Factortame (Brasserie du Pecheur/Factortame III).

The Court also stated that ‘in the absence of a particular justification’, the conditions for the liability of the state would be the same as for the Community institutions under Article 215 of the Treaty, (now Article 340 TFEU). It is not strict liability.

A Member State will be liable to an individual for breach of its Union law obligations where:
a) The rule of law breached is intended to confer rights on individuals
b) The breach is sufficiently serious
c) There is a direct causal link between the breach of the obligation resting on the state and the damage sustained by the parties.

As to whether the breach of Union law is sufficiently serious, the decisive point is whether the Member State has ‘manifestly and gravely ignored the limits on its discretion’.

It is for the national courts to decide whether this is the case, but the Court listed a number of factors to be taken into account by the national court. These were:
a)     The clarity and precision of the rule breached
b)     The measure of discretion left by that rule to the national or Union authorities
c)      Whether the infringement and the damage caused was intentional or involuntary
d)     Whether any error of law was excusable or inexcusable
e)     The fact that the position adopted by a Union institution may have contributed towards the omission
f)        The adoption or retention of national measures or practices contrary to Union law.

It is not necessary for the Commission to have obtained a ruling under Article 263 TFEU from the European Court that the Member State has breached Union law. If there would have such a ruling (as had been the case in Francovich) and the Member State persisted in the breach that would automatically lead to a finding that the breach was ‘sufficiently serious’.

Following this European Court ruling on the preliminary reference, the House of Lords decided in R v Secretary of State for Transport ex parte Factortame Ltd and others [1999] 4 All ER 906, that the breaches of EC law by the United Kingdom arising out of provisions in the Merchant Shipping Act 1998 were sufficiently serious to entitle Factortame Ltd and 96 others to compensation under the principle of state liability. Again, In Case 190/94 Dillenkofer v Germany [1996] ECR I-4845, the Court held that the non-implementation of a Directive is always a sufficiently serious breach.

The procedure for bringing an action for damages against the state will be governed by national rules. Case 392/93 l v HM Treasury ex parte British Telecommunications plc [1996] ECR I-1631 is an interesting case concerning the incorrect transposition of a Directive. The breach was held not to be sufficiently serious because the wording of the EC Directive was unclear, and several other Member States had also unintentionally misinterpreted it.
Court extended the concept of State Liability in some cases. In Case C-424/97 Haim v Kassenzahnärztliche Vereinigung Nordrhein [2000] ECR I-5123, a public law body separate from the state was held liable under the principle of state liability.

For the first time in Case 224/01 Köbler v Republik Österreich [2003] ECR I-10239, the European Court ruled that it was possible for the principle of state liability to apply where the alleged infringement stemmed from a decision of a national court of last instance. The question of liability would depend on the established criteria for state liability.

Whether the infringement of Community law was sufficiently serious depended on consideration of the same factors cited in the Factortame III case: whether the national court had manifestly infringed the applicable law, that is, whether the ‘infringement was manifest’. In deciding what this meant, regard had to be given to the specific nature of the judicial function and to the legitimate requirements of legal certainty. In order to decide whether the infringement was ‘manifest’, the national court hearing a claim for damages must take account of ‘all the factors which characterise the situation put before it’. Surprisingly, on the facts presented in the particular case, there was not a ‘manifest infringement’ of EC law.

The doctrine of state liability forms part of the package of doctrines (direct effect, indirect effect) developed by the European Court with the dual objectives of ensuring that Union law prevails and is enforced within the Member States, and on the other hand that individuals can obtain their rights under Union law. By introducing State Liability, court considered a different way of giving maximum possible effect to Community law in addition to Direct effect for breach of Community law, irrespective of whether legislation had direct effect or not. Thus it overcomes the problems inherent in the direct effect doctrine where the conditions are not fulfilled and where direct and indirect effect cannot apply.

Saturday 14 May 2011

Supremacy of EU Law


The supremacy principle as formulated by the court of Justice can help to resolve legal problems where there is a conflict between a national rule and a point of Union law by indicating to the national court that of the two rules to be applied, the court should give effect to the union law. The principle of supremacy or primacy of Union law has been developed by the Court of Justice. It is implicit in Case 26/62 von Gend en Loos [1963] ECR I which founded the doctrine of direct effect.

It was stated explicitly in Case 6/64 Costa v ENEL [1964] ECR 585 where the Court said that,

“By crating a community of unlimited duration, having its own institutions, its own personality, its own legal capacity and capacity of representation on the international plane and, more particularly, real powers stemming form a limitation of sovereignty or transfer of powers from the state to the community, the member states have limited their sovereign rights, albeit within limited fields, and have thus created a body of law which binds both their national and themselves.”

In a further step, in Case 11/70 Internationale Handelsgesellschaft GmbH [1970] ECR I-125, the Court held that Community law took precedence even over a fundamental rule in the German national constitution.

The clearest statement of the implications of the supremacy of Community law came in Case 106/77 Simmenthal SpA (No 2) [1978] ECR 629 where the Court held that national courts, even a lowly court of first instance, have a duty to set aside provisions of national law which are incompatible with EC law. There was no need to wait for the national law to be amended in line with national constitutional procedures: the national rule had to be set aside immediately if it conflicted with a directly applicable or directly effective Community provision.

Nor does the obligation to set aside conflicting national rules only apply to national courts: even an administrative agency dealing with a national social insurance scheme was held to be required to do so in Case C-118/00 Larsy v INASTI [2001] ECR I-5063.

Although the national measure is rendered ‘inapplicable’, this does not absolve the Member State from the need formally to repeal it. In the interests of legal certainty, the Court said that Member States must also repeal the offending national rule: Case 167/73 Commission v France (French Merchant Seamen) [1974] ECR 359.

Even if it is not yet clear whether a person actually has a right which they claim under Union law (i.e. it is a ‘putative’ right, not a definite one), the doctrine of supremacy requires a national court to set aside any national procedural rules which might prevent them from getting the full benefit of the Union right if it is eventually found that they have it!

This was laid down in the case C-213/89 R v Secretary of State for Transport, ex parte Factortame Ltd and others [1990] ECR I-2433. Spanish fishermen claimed that the UK’s Merchant Shipping Act breached a number of EC Treaty articles and wrongly prevented them from fishing in British waters. They asked for interim relief (an injunction setting aside the offending clauses of the Act pending the full hearing of the case). The problem was that under English law, courts could not grant an injunction ‘against the Crown’, that is, they could not order the suspension of an Act of Parliament. On the other hand, if the Act continued to be applied, the Spanish fishermen would probably be driven out of business and any subsequent judgment in their favour in the main proceedings would be useless – their Community law right would be rendered ‘ineffective’. The Court ruled that, in order to ensure the ‘full effectiveness’ of Community law, the English rule preventing suspension of the Act must be set aside. The House of Lords went on to grant the injunction.

Moreover, the supremacy principle can also permit to reopen a settled matter if the decision or judgment was based upon the incorrect assumption as to what the requirement of Union law might be. In case C-453/00 Kuhne & Heitz (2004) Dutch citizen authorities had made an administrative decision on the clarification of poultry meat for customs tariff purposes that required Kuhne & Heitz to pay more than it should if the relevant community law provision had been correctly applied. When the community law position was subsequently clarified, Kuhne & Heitz sought a refund. From the Dutch authorities’ perspective this matter had been long settled and general practice was not to reopen administrative decisions. The court noted however that the Dutch administrative bodies are able to reopen final decisions and that the courts, when the matter came before them, had misinterpreted the community law provision without referring the matter to the court for a preliminary ruling. Also taking in to account the promptness with which Kuhne & Heitz could require this settled matter is reopened by the Dutch authority so Kuhne & Heitz could get its money back.

The supremacy of Union law over national law is now stated in a Declaration attached to the Treaty of Lisbon. This reiterates the doctrine as stated by the Court as follows:

“The Conference recalls that, in accordance with well settled case law of the Court of Justice of the European Union, the Treaties and the law adopted by the Union on the basis of the Treaties have primacy over the law of Member States, under the conditions laid down by the said case law.”

There is also attached the Opinion of the Council Legal Service of 22 June 2007 which states:

It results from the case-law of the Court of Justice that primacy of EC law is a cornerstone principle of Community law. According to the Court, this principle is inherent to the specific nature of the European Community. At the time of the first judgment of this established case law (Costa/ENEL, 15 July 1964, Case 6/64) there was no mention of primacy in the treaty. It is still the case today. The fact that the principle of primacy will not be included in the future treaty shall not in any way change the existence of the principle and the existing case-law of the Court of Justice.

Thus, it is clear that the supremacy of Union law is firmly established by the decisions of the Court of Justice and the deliberations of national courts. The way in which Union law enters into the legal systems of the Member States depends, from a constitutional point of view, on whether the Member State is monist or dualist in its approach to international law.

Under the monist doctrine, domestic and international law constitute a single integrated legal system. As a result, in monist states international law is automatically incorporated into national law which out the need for further transposition.  In addition, while monism does not logically imply the precedence of international over domestic law in the event of conflict, it is commonly associated with that principle. France and Italy are examples of monist states; the Netherlands also has a monist system, albeit a qualified one.

Dualism presupposes the existence of two separate systems of law: international law and national law. These two systems of law have different purposes and occupy different spheres. Under dualism, international law does not become part of national law until, and to the extent that, appropriate national measures so provide. What legislative or administrative from then measures take does not matter, provided the one selected provides for the proper transposition of the international legal measure.

A dualist member state may still acknowledge a privileged status to Union law within its domestic legal order. Thus, both primary and secondary Union law may be entrenched in national law through an express constitutional amendment or other enactment to that effect. Ireland, Poland and the United Kingdom are examples of dualist states.

United Kingdome
Treaties entered into by the UK government do not affect the law applied by the domestic courts and are only binding in international law. As a dualist states, a treaty will only have effect in the domestic legal system if an Act of Parliament incorporates. Thus, when the UK joined the EEC, the European Communities Act 1972 had to be adopted to give effect to directly effective provisions of Community law within the UK. It has been amended, following the adoption of the Single European Act and all the subsequent treaties by the relevant European Communities (Union) (Amendment) Acts.

The ECA 1972 section 2 provides for the application of community (now union) law arising from the treaties, secondary legislation and the case law of the court of justice, in the British courts. Without using the terms, section 2(1) provides for the direct applicability and the direct effect of Union law as determined by Union law. The ECA 1972 sections 1 and 2 are both backward and forward looking in scope, requiring the adoption of existing Union law and providing for the adoption for future Union law.

Lord Denning in Bulmer v Bolinger (1974) said that “Parliament has decreed that the Treaty is henceforward to be part of our law. It is equal in force to any statute.” This view may not have been widely shared at this time, and even if it had been, there remained question as to whether community law could have greater force than a statute, by being able to prevail over any Acts of Parliament in conflict with it. In 129/79 McCarthys Ltd v Smith (1980) Lord Denning again considered the supremacy point and stated that if on close investigation it should appear that our legislation is deficient or is inconsistent with community law by some oversight of our draftsmen then it is out bounded duty to give priority to Community law.

Day by day the courts were interested to establish the supremacy of EC law. The House of Lords accepted in the landmark case: Regina v Secretary of State for Transport, ex parte Factortame Ltd and Others (No 1) [1990] ECR I-2433, that an English court could be obliged to set aside a rule of national law in order to safeguard putative EC law rights. This meant that the application of an English Act of Parliament had to be suspended pending the outcome of a claim that its provisions infringed Community law. Under English rules, courts could not grant an injunction ‘against the Crown’ (i.e. suspend an Act of Parliament) but the House of Lords accepted, following a reference to the ECJ, that such national rules had to be set aside if they interfered with the protection of Community rights.

This case has far-reaching constitutional implications in the United Kingdom. It takes it clear that any Act of Parliament must be read as subject to directly enforceable rights under Union law.

On the application of the principle of indirect effect in the UK, courts show how the English judiciary has traditionally based its application of Union law on the rules laid down in this English statute rather than on any abstract notion of supremacy stemming from the Union Treaties. For the ways in which English courts have dealt with the interpretation of national law in accordance with Community law. Litster v Forth Dry Dock and Engineering Co Ltd [1990] 1 AC 546 HL is the case where a claim against a private employer, which prevented any question of direct effect arising, was based on the “Transfer of Takeovers” directive. The statutory instrument in question had been introduced in order to implement the directive and therefore, the House of Lords were prepared to interpret the regulation contrary to its prima facie meaning in order to comply with the directive.

The cases Thoburn v Sunderland County Council, Hunt v London Borough of Hackney, Harman and Dove v Cornwall County Council and Collins v London Borough of Sutton [2003] QB 51 are also interesting on this issue. They concerned the so-called ‘metric martyrs’ who refused to use metric weights as well as imperial weights as required under EC law. They were convicted under the Weights and Measures Act 1985 and a number of other statutory instruments and appealed to the High Court. The case was heard by Sir John Laws, who dismissed the appeals. He reiterated the traditional view about the basis of the supremacy of EC law in the UK, basing it on the constitutional law of the UK rather than on principles of EU law. He stated that the European Communities Act 1972 is a constitutional statute which means that it cannot be impliedly repealed by a later inconsistent statute. Hence it would prevail over later statutes which were inconsistent. However, he went on to comment that: In the event, which no doubt would never happen in the real world, that European measure was seen to be repugnant to a fundamental or constitutional right guaranteed by the law of England, a question would arise whether the general words of the ECA were sufficient to incorporate the measure and give it overriding effect in domestic law.

Moreover, the House of Lords seemed to have concluded that the duty arising under community law to interpret British Legislation in a manner securing consistency with community law is confined to legislation that was passed to give effect to community obligation. The question arise in Case C-32/93 Webb v EMO Cargo (UK) Ltd [1994] ECRI-356, where the dismissal of a woman employed to cover a period of maternity absence had been prompted when the woman providing the cover notified her employer of her own pregnancy. British court felt that UK law on this point was clear: the situation was not prohibited act of sex discrimination within the meaning of relevant employment legislation. Relevant points of community law came to a different result, one which classed the treatment of Ms Webb as direct discrimination since she had been dismissed for a reason related to her pregnancy.

Germany
In Case 11/70 Internationale Handelsgesellschaft [1970] ECR 1125, the ECJ had stated that the validity of Community measures could only be judged according to Community criteria, not according to principles enshrined in the German constitution. The German Administrative court did not agree and referred the matter to the German Federal Constitutional Court.

This ruling was not accepted by the German Federal Constitutional Court (FCC) in Internationale Handelsgesellschaft (Solange I) [1974] 2 CMLR 540. It noted that the protection of fundamental human rights was an essential element of the Basic law, and that this power could not automatically be restricted by transferring sovereignty to a supranational organization under Article 24 of the Basic law. In the opinion of the FCC, the fundamental rights guaranteed by the basic law were insufficiently protected under community law, as the community lacked a democratically legitimated and directly elected parliament as well as a codified catalogue of human rights. The protection of fundamental rights by the court of justice was considered insufficient as the case law of courts could not fully guaranteed legal certainty. FCC confirmed that it would not rule on the validity or invalidity of a rule of Community law, but it held that the German authorities or courts should not apply rules of Community law which infringed a rule of the Basic law relation to basic rights as long as the Community did not itself provide adequate protection of fundamental rights. In cases of doubt the FCC would rule on the existence of such an infringement.

However, FCC changed its position in Wünsche Handelsgesellschaft (Solange II) [1987] 3 CMLR 225. The FCC acknowledged that Community law now had its own equivalent standard of human rights protection. On this basis it ruled that it would no longer exercise its jurisdiction to review secondary community law by the standard of the fundamental rights guaranteed by the Basic law.

Nonetheless, in Brunner v The European Union Treaty [1994] 1 CMLR 57, when considering whether the Maastricht Treaty on European Union unduly extended the competences of the European Community and made too many inroads on German sovereignty, the Federal Constitutional Court again re-affirmed German constitutional sovereignty and its right to review the scope of Community competence.

In its judgment after various constitutional complaints had been brought before it by private citizens as well as by a political party in respect of the ratification of the Lisbon Treaty, the FCC ruled in June 2009 that the Treaty was in accordance with the German Basic Law and simply objected to the domestic law which implemented the Treaty and annulled the law. As regards the Lisbon Treaty itself, it spelt out in a lengthy judgment the limits to which integration could go and emphasized the safeguards under the German Basic law which must be respected. It did not, however, consider that the Treaty as such exceeded the boundaries of what was acceptable under the Basic Law. A new implementing law was then passed in September 2009 and ratification duly followed.

France
There are two main separate court systems in France. The judicial courts which deal with civil and criminal matters and administrative courts review the legality of administrative action. The highest court in judicial order us the Council de cassation while the Council d’Etat is the supreme administrative court.

The Cour de Cassation (Highest civil court) accepted the primacy of directly effective EC law, on the basis of Article 55 of the French constitution which states that Treaties or agreement which have been duly ratified or approved shall, on publication, have higher authority than that of statutes: Vabre and Weigel [1975] 2 CMLR 336.

The Conseil d’Etat (Highest administrative court) has shown reluctance to accept the primacy of Union law. In Chemins de Fer Francais (1962) the court d’etat ruled that, on the basis of Article 55 of the French Constitution, the EEC treary had similar status to that of French statutes.

Moreover, the Conseil d’etat has refused to accept that Directives can have direct effect (in the French Court’s view, only a French implementing measure can give effect to a Directive according to Article 249 EC (now Article 288 TFEU): Minister of the Interior v Cohn-Bendit [1980] 1 CMLR 543. Here, the Commissaire du Governement, who has a similar function to that of the Advocate General in the Court of Justice of the European Union, argued by citing all the relevant cases decided by the court and had come to a directly different conclusion.

The court adopted a more positive attitude towards the doctrine of supremacy of Community law in its decision in Nicolo (1990). In its judgment, the Conseil d’etat impliedly recognized that the EC treaty would prevail over a French statute in case of conflict. The Conseil d’etat took a further step in Boisdet [1991] 1 CMLR 3 where, for the first time, it recognized the primacy of EC regulation over a France statute, even though this was enacted after the EC regulation concerned. Then, in case concerning directive: Rothmans and Arizona Tobacco [1993] 1 CMLR 253 the Conseil d’etat acknowledged that a directive would prevail over a subsequently adopted statute. It also awarded damages under the Factortame principle, for loss caused by a Ministerial order which conflicted with an EC Directive.

While, in practice, therefore, the French courts accept the primacy of directly effective of Union law, their reasoning is frequently based on the French constitution, rather than on the European Court’s doctrine of supremacy. This is a similar view to that expressed in UK and German courts that it is the national constitution which is at the head of the legal order and that Union law supremacy exists only in so far as it is provided for under national law.


Italy
The Italian Constitutional Court has accepted the supremacy of Union law, based on Article 11 of the Italian constitution: Frontini v Ministero delle Finanze [1974] 2 CMLR 372. However it reserved the right to ensure that the fundamental principles of the Italian constitution were not infringed by Union law. It reaffirmed this position in Fragd [1990] CML Rev 94, stating that if it found that a Community measure infringed those fundamental rights, it would declare it inapplicable – thereby giving precedence to the Italian constitution.


Direct Effect


6.1
Direct effect
Some of the most difficult and controversial questions in Union law concern the relationship between Union law and the law of the Member States. There are ways in which Union law is applied and enforced within the national courts and the ways in which individual EU citizens can enforce their Union law rights. In this respect, doctrine of direct effect is relevant here. Direct effect means that, subject to certain conditions, Union law creates rights and obligations which individuals may rely on and enforce in their national courts. The principle of direct effect is not found in the Treaty but has been created and developed by the European Court in a series of judgments.

Arguably the most important case in Union law is Case 26/62 van Gend en Loos v Nederlandse Administratie der Belastingen [1963] ECR I. In this case, the Court decided that an individual could rely directly on a Treaty Article and enforce it in his own national court although the Treaty Article had not been legislated into the Member State’s legal system. This is called the principle of ‘direct effect’. Normally the question of the operation of an international treaty in the domestic legal system is determined by the constitutional law of the individual country concerned. In this case, the Court of Justice decided that it had jurisdiction to decide the effect of the Treaty of Rome on a Dutch citizen. Nothing is said in the Treaty about the effect of Treaty Articles on individuals, and it looked as if the only way that individuals could use EU law to enforce their rights was by leaving it to the Commission and the Member States to do so. However, in van Gend en Loos the Court addressed this problem and at one stroke transformed the legal status of the Treaty from a conventional, if far-reaching, Treaty governed apparently by the normal rules of international law, into the foundation of a sui generis ‘new legal order’ that would operate directly for the benefit of the citizens of the signatory states.

The facts of the case took place in the first stage of the establishment of the EEC when customs duties had not yet been abolished but where there was a clear prohibition in Article 12 of the EEC Treaty (now Article 30 TFEU) of any increase in customs duties. Van Gend en Loos was a company importing urea formaldehyde (a kind of glue) from Germany into the Netherlands, where a customs duty was imposed. In 1958, when the EEC Treaty came into force, the duty on this product was fixed at 3 per cent under an existing Benelux Customs agreement. Despite the prohibition on increases of customs duties, the Dutch government in 1959 entered into an additional Protocol which re-classified the product, which had the effect of increasing the duty on it to 8 per cent. The company, van Gend en Loos, forced to pay this increased duty, brought an action challenging the legality of the increase under Community law in the Amsterdam Customs Court, the Tariefcommissie. The Dutch court made a preliminary reference to the Court of Justice.

The first (and most important) question asked by the Tariefcommissie was whether Article 12 EEC had an effect within the territory of a Member State. On the basis of this Article, could citizens of the Member States enforce individual rights which courts of the Member States must protect?

The Belgian and Dutch government argued forcefully that this was a matter of national constitutional law. The Netherlands government claimed in these proceedings that ‘the EEC Treaty does not differ from a standard international Treaty’ and that international treaties were really just a compact between states and did not give rise to rights that individual could enforce in their national courts. The Advocate General gave an Opinion much along those lines, stating that the individual was afforded sufficient protection in Articles 258, 259 and 261 TFEU.

The Court, however, disagreed with the Advocate General and in a groundbreaking judgment stated that, according to the spirit, the general scheme and the wording of the Treaty, Article 12 must be interpreted as producing direct effects and creating individual rights, which national courts must protect.

The reasons behind this groundbreaking decision are that the objective of the EEC treaty, which is to establish a common market, the functioning of which is of direct concern to interested parties in the community, implies that this treaty is more than an agreement which merely creates mutual obligations between the contracting states. This view is confirmed by the preamble to the treaty, which refers not only to government but also to peoples. It is confirmed more specifically by the establishment of institutions endowed with sovereign rights, the exercise of which affects member states and also their citizens.

Moreover, it was also argued that the preamble of EU which refers to citizens as well as to states, and the preliminary ruling procedure establishes in what is now under Article 267 of TFEU envisaged that parties before national court or tribunal  could plead and rely on points of EC law.

Furthermore, the ECJ rejected the argument of the member states and opinion of the Advocate general. It held that public enforcement of EEC law through the commission via Article 258 did not preclude private enforcement via direct effect. Thus the court developed the concept of direct effect principally in view of the kind of legal system which it considered necessary to carry through the ambitious economic and political program outlined in the treaties. The ECJ considered a strong enforcement method was needed to ensure that member states complied with the provisions to which they had agreed. Automatic internalization of treaty rules within national legal system would clearly strengthen the effectiveness of community norms as well as aiding the commission in its Article 258 enforcement function by involving individuals and all levels of the national court system directly in their implementation.

However, in van Gend the Court prescribed conditions which must be satisfied in order to get direct effect. These conditions are:
a)     clear and precise
b)     unconditional
c)      Its operation did not require a legislative implementing measure on the part of the State.
d)     The Article must lay down a negative prohibition rather than a positive obligation

The fourth condition imposed in van Gend en Loos is no longer necessary. This is because in critical analysis it is possible to find out both positive and negative obligation in any article. So this condition was dropped in case: 57/65 Alfons Lütticke GmbH [1966] ECR 205.

Even the remaining three conditions, which suggest that provisions with direct effect will be the exception rather than the rule, have been whittled away. A provision which is ‘conditional’ on some objective circumstance or factor, for example, can be applied by a court because the court can determine whether or not that circumstance or factor is present. Only provisions which are conditional in the sense that they confer a discretionary power on a third party (e.g. on the Member States or the Commission) would be excluded from having direct effect – because the national court cannot usurp that discretion. Similarly, the requirement that a measure must not be dependent on further action is not the obstacle that it, at first, appears. This is because, whenever the Treaty includes a time-limit within which such further action should take place, the Court has held that, once that time-limit has expired, the measure has direct effect: Case 43/75 Defrenne v SABENA [1976] ECR 455.

The central idea, then, is whether a provision is capable of being applied by a national court. Even a lack of clarity will not necessarily prevent direct effect – because the national court can seek clarification from the Court of Justice through the Article 267 TFEU preliminary reference procedure if necessary. As a result, direct effect of Treaty provisions has become the norm, rather than the exception.

EC treaty can be contrasted with other international treaty. The position with regard to other international agreements is more complex and controversial. In Cases 21–24/72 International Fruit Company v Produktschap voor Groenten en Fruit (No 3) [1972], ECR I-219 the question was posed whether the GATT (General Agreement on Tariffs and Trade) provisions could have direct effect. The Court concluded that ‘the spirit, the general scheme and the terms’ of the provisions were different from those in the EEC Treaty and that its provisions not sufficiently precise and unconditional for direct effect to apply. Free trade agreements were also held not to be capable of creating direct effect, as their aim was not to create a single market (Case 270/80 Polydor and RSO Records Inc v Harlequin Record Shops and Simons Records Ltd [1982] ECR 329. However in Case 104/81 Hauptzollamt Mainz v Kupferberg [1982] ECR 3641 another provision of the same agreement was found to have direct effect, as it did fulfill the conditions and fell within the purpose of the agreement. More recently, the Court ruled in Case C-280/93 Germany v Council [1994] ECRI-4973 that under very limited circumstances a GATT provision could prevail over an EC provision, but only if the relevant EC provision expressly referred to the GATT provision.

6.1.1
Direct effect of Treaty Articles
In van Gend, it is established that Treaty Article will get direct effect if the relevant treaty satisfies three conditions as discussed above. In same case, the parties were in a ‘vertical’ relationship: that is, the case was between an individual and a Member State. The question of whether an individual could rely on an Article of the EEC Treaty in an action against another individual (horizontal relationship between the parties) was dealt with in Case 43/75 Defrenne v SABENA [1976] ECR 445. It was held that Ms Defrenne could bring an action against her employer for breach of a Treaty Article requiring equal pay for men and women.

6.1.2
Direct effect of Regulations
Article 288 TFEU states that a Regulation is ‘directly applicable’ in all the Member States. Regulations, therefore, become automatically part of national law and this will normally mean that they can be relied on by individuals in their national courts and thus also have direct effect. The European Court has nonetheless recognised that in order to have direct effect, Regulations must satisfy the three standard conditions. The provision must be sufficiently clear and precise to be enforced by a court: Case 403/98 Azienda Agricola Monte Arcosu v Regione Autonoma della Sardegna [2001] ECR I-103. Sometimes Regulations need further legislation: Case 39/72 Commission v Italy (Slaughtered Cows) [1973] ECR I-01.

6.1.3
Direct effect of Decisions
Although Article 288 TFEU does not state that Decisions are directly applicable, they are ‘binding in their entirety on those to whom they are addressed’. The Court of Justice has held that they can have direct effect. A national of a Member State to which a Decision had been addressed could invoke that Decision in the national court: Case 9/70 Grad v Finanzamt Traunstein [1970] ECR 825. In reaching this conclusion, the Court emphasised that this would increase the effectiveness (‘effet utile’) of the Community measure.

6.1.4
Direct effect of Directives
More controversial was whether a Directive could have direct effect. Directives are meant to be implemented, that is brought into effect by national legislation within a certain time period. Article 288 TFEU provides: A Directive is to be binding, as to the result to be achieved, upon each Member State to which it is addressed… The plain interpretation of these words is that a Directive is addressed to the Member States. To say that it requires national implementing measures. It was thought that Directives could never fulfill the Van Gend conditions for direct effect because, by their nature, they require ‘further implementing measures’.

However, a Directive can only be directly effective after the expiry of the time limit given for its implementation since, until that time the Member State is not in breach of any obligation which was given to it to implement the directive. This was confirmed in the Case 148/78 Pubblico Ministero v Ratti [1979] ECR I-629.

Moreover, in Case 41/74 van Duyn v Home Office [1974] ECR I-337, the Court held that Ms van Duyn could rely on a clause in a directive, which the UK had not introduced into national law. It means directive have direct effect upon the expiration of time limit.

Now it is well established that directive will have direct effect. There are several reasons like behind this view. Firstly, the key reasoning given by the court for the direct effect of treaty provisions was that the fundamental aims of the Treaty and the nature of the system it was designed to create would be seriously hampered if its clear provisions could not be domestically enforced by those they affected.

Secondly, Article 177 (now Article 267 TFEU) allows national courts to refer questions concerning any community measure to the ECJ, including directives, and this implied that such acts could be invoked by the individual before national courts.

The third rational, articulated in Ratti case, is the estoppels argument. This principle is one borrowed from English law, but for our purpose, it means that the state cannot rely on its own wrongdoing to frustrate the rights of individuals under Directives. Where the Member State is at fault, (either because it has not transposed the Directive into national law at all or because it has done so inaccurately) an individual can claim against that state the rights he or she should have had if the Directive had been correctly implemented.

Moreover, Article 288 TFEU (ex Article 249 EC) says that directives are “binding as to the result to be achieved”. The court says this provision would be frustrated if member states’ failure to implement them were to deprive Directives of effect. So directive will be more effective if individuals can enforce them in national courts.
  
6.1.4.1
Vertical but not horizontal direct effect
Now an important question arises as to whether direct effect of directive will get both vertical and horizontal effect or not? In Case 152/84 Marshall v Southampton & Southwest Hampshire Area Health Authority (Teaching) [1986] ECR 723 the court held that a Directive can only be invoked vertically, by an individual against the state, and not horizontally, by one individual against another.

Several reasons behind this decision like- firstly, a directive may not of itself impose an obligation on an individual rather than member state and that a provision of a directive may not be relied upon as such against a person. Failure to implement of a directive is a fault of member state not individual person. Therefore, for states failure, way an individual person will be liable against another individual person.
A counter argument is put forward against this reasoning is that this argument is also applicable for regulation and as regulation is given both vertical and horizontal effect, so that directive should be given both effects.

Secondly, a rule of law argument has also been put against the horizontal effect of directives. The condition of rule of law is that law should be clear and unambiguous and should not be conditional and secret. As directive requires implementation measure by member state so that it is conditional. Moreover, prior to 1992, directives were not published. Therefore, it was violation of rule of law, as directives were secret. Furthermore, in directive a direction is given to a member state to achieve the results, as such, like law- the provisions of directive are not dealt in depth. As a result, the content is not sufficiently clear, which is required to be law.

However, a counter argument may be put forward that as from 1992 the directives are published officially. So that now a days the directive are not secret though the other problems still in exist.

The third argument is that horizontal direct effect of directive will erode the distinction between regulations and directives. This is, so the argument goes, because directives would thereby have legal impact even though they had not been implemented in the member states, thereby eroding the distinction between regulation, which are directly applicable, and directives which are not.

However this argument is problematic because the key distinction between regulation and directive is that member states are intended to have choice as to form and methods of implementation for directives. Giving direct effect of directives, whether vertical or horizontal, is not intended to undermine this. It is not intended to take away this choice.

Fourthly, argument adduced against horizontal direct effect is legal certainty. Directives, even where their core aim or principle is clear and subject to judicial enforcement, often leave much to be fleshed out in national implementing measures.

However, the counter argument is that this may equally be true of the “vertical” direct effect of directives, so why not in case horizontal direct effect.

This rule of Marshall has been criticized because it can lead to inequality: an individual’s ability to bring an action based on a Directive will depend on whether they are suing the state or a private person or company. The Advocate General’s Opinion in Case C-91/92 Faccini Dori v Recreb srl [1994] ECR I-3325 where he proposed that Directives should be given horizontal direct effect.

The Court, however, did not follow the Advocate General but confirmed the original rule that Directives can only have vertical direct effect. However, in recent years the Court has increasingly resorted to other measures to give effect to Union law in what would, at first sight, be purely horizontal cases.

Broad definition of State:
One the other hand, the Court has given a wide definition to ‘the state’ and thereby has extended the reach of the vertical direct effect of Directives. Now any body can be sued on the matter of EU law subject to some conditions even though there is no state. The four-part test prescribed in Case C-188/89- Foster v British Gas [1990] ECR I-3313 must be satisfied by that particular body in order to be sued. The test is used by national courts to decide whether a body was an ‘emanation of the state’:

a)     Does it perform a public service?
b)     Pursuant to a measure adopted by the state?
c)      Under the control of the state?
d)     Does it have special powers going beyond those of normal commercial undertakings?

The four conditions must all be fulfilled (they are cumulative, not alternative). An interesting example of how widely the definition can extend is the case of National Union of Teachers v Governing Body of St Mary’s Church of England Junior School [1997] 3 CMLR 360, in which the English Court of Appeal held that the definition of ‘an emanation of the state’ included the governing body of a Church of England state school.

Indirect effect of Directives
The starting point for this doctrine is Case 14/83 Von Colson v Land Nordrhein-Westfalen [1984] ECR I-891. Although this case concerned a vertical claim against the German prison service, the Directive in question did not have direct effect because the provision (concerning remedies for sex discrimination) was insufficiently precise to be enforced by a court. However, the European Court held that the national court is under a duty to interpret existing national law, so far as possible, to achieve the result laid down by the Directive. The doctrine is based on the idea that national courts are part of the state and, consequently, are bound by what is now Article 4(3) TEU (formerly Article 10 EC).

That Article requires Member States ‘pursuant to the principle of sincere cooperation’ to ‘take any appropriate measure… to ensure the fulfillment of their obligations’ under the Treaties. The effect of the ruling is to shift the responsibility for giving effect to Directives on to national courts in situations where their governments have failed to introduce adequate national implementing measures. The principle means that national courts are under a duty to interpret national legislation ‘in the light of the wording and purpose’ of Union law and directive is a part of it. In Von Colson, there was some national legislation which purported to implement the Community Directive but which did so inadequately. As a result, it was initially thought that the duty of harmonious interpretation only applied to national legislation which had been intended to implement the Directive in question. Whether the rule applied to the interpretation of national law, more generally was unclear. The European Court has since made clear that the duty applies in relation to all national legislation, whether passed before or after the relevant Union legislation, and whether intended to implement it or not; Case C-106/89 Marleasing SA v La Comercial Internacional de Alimentacion SA [1990] ECR I-4135. This is because it is a rule applicable to the court, rather than the parties, it applies irrespective of whether the action is ‘vertical’ or ‘horizontal’.

There are limits to the usefulness of this doctrine from the point of view of the individual, however, since it presupposes the existence of some relevant national legislation that is capable of being interpreted to mean what the Directive enquires. National courts are only required to carry out this duty ‘so far as possible’ – so if there is no relevant national law, or if the relevant national law is only capable of one interpretation, the doctrine cannot be used.  Moreover, debate also has continued over the question how strongly national courts are being encouraged to interpret otherwise clear provisions of national law to comply with the terms of a directive. Advocate General Van Gerven suggested in Marleasing, it remains essentially a matter for resolution in accordance with national principles of interpretation, the Treaty-derived obligation national courts to take all measures possible to comply with community law, clearly alters and constrains the interpretive discretion they would otherwise have under national law alone. After this decision, the ECJ did not noticeably retreat from its strong encouragement to interpret domestic law in conformity with directive.

The Coote ruling equally demonstrates the ECJ’s readiness to articulate a strong interpretation obligation and to provide firm guidance to the national court. In this case, the ECJ gave a clear indication that when interpreting a national law in the light of a Directive, the national court should read it in the light of the obligation imposed by the Directive.

Furthermore, ECJ in Connect Austria case stated that when it is impossible to construe the national implementing legislation in conformity with the directive, the directive should be directly enforced against the state by means of misapplying conflicting national law. In addition, “the principle of interpretation in conformity with community law thus requires the referring court to do whatever lies within its jurisdiction, having regard to the whole body of rules of national law to ensure that a directive is effective”: Pfeiffer case.   

The positive obligation of Harmonious interpretation applies only after the time limit for implementation of the directive has expired: Inter Environnement wallonie. Though, a number of Advocates General had argued that the obligation of harmonious interpretation should apply before expiration of the time limit for implementation and this also deemed to be implicit in the ECJ’s ruling in Pupino case. However, in Adeneler, the ECJ finally point directly and ruled that the general obligation owed by national courts to interpret domestic law in conformity with the directive exists only once the period for its transposition has expired.

The Court has also made clear that the application of the doctrine is subject to the general principles of law, such as legal certainty and non-retroactivity: Case 80/86 Kolpinghuis [1987] ECR 3969. Again, Case 168/95 Criminal Proceedings against Luciano Arcaro [1996] ECR I-4705 suggest that where an interpretation of national law in the light of a directive amounts to “the imposition on an individual of an obligation laid down in the directive” it goes too far and is neither permitted nor required by EC law. However, in Centrosteel, Advocate general Jacobs suggested tat the ruling in Arcaro should be read in the context of the criminal proceedings in which the case has arisen. Such a limitation does not appear to exist in relation to the imposition of civil liabilities on individuals. In Case 456/98 Centrosteel v Adipol [2000] ECR I-6007, the ECJ said that the duty to interpret national law in the light of the wording and purpose of Community law applied even when this would impose a civil liability on private parties.

Incidental horizontal direct effect of Directives
Thirdly, this development has lessened the impact of the Marshall/Dori and introduced a line of case laws which permit the use of unimplemented directives in certain case between private parties. This is known as “incidental horizontal effect”. It arises to give effect horizontally on Directives in exceptional triangular situations.

For example: in Case 194/94 CIA Security International v Signalson [1996] ECRI-2201 CIA security brought proceedings against the defendants before the Belgian commercial courts asking for orders requiring them to cease unfair trading practices. CIA argued that the two companies had libelled it by claiming that the alarm system which it marketed had not been approved as required under Belgian legislation. CIA agreed that it had not sought approval but argued that the Belgian legislation was in breach of Article 28 EC and had not been notified to the commission as required by Directive 83/189 on technical standards and regulations. The court held that those articles may be relied on by individuals be fore national court as it was unconditional and sufficiently precise in their content. Further, the court claimed that it did not of itself impose a legal obligation on the defendants; it removed from them the protection of the national technical regulation and exposed them to potential liability under other provisions of national law.

Other case on the ‘incidental’ horizontal direct effect of Directives is Case 444/98 Unilever Italia v Central Food SpA [2000] ECR I-7535. This case involved a contractual dispute where the referenced Directive was merely incidental to proving the breach of contract and had nothing to do with enforcing an EC right. The conflict was over the relevance of different labeling requirements and which should be complied with. Directive 83/189 was involved, since Italy had introduced labeling requirements for geographical origin on olive oil. Under the Directive, Italy should have notified the Commission of its intention to regulate this labeling. The Commission intended to regulate itself Community-wide and so under the Directive Italy should not have introduced any such regulation. Central Food was supplied by Unilever without the labeling required under the Italian regulation and was refusing to pay because the labeling did not conform to Italian law. Unilever argued that Italian law could not apply, since it was effectively in breach of the Directive. The ECJ agreed, holding that this did not conflict with the restriction on horizontal direct effect in the case of Directives because the relevant Directive in this matter did not involve rights on which any of the parties might rely. In essence, the ECJ held that a substantial procedural defect in implementing a Directive could nullify domestic law in the context of a contract and give domestic courts the power to interpret any legal dispute arising in this context based solely on their own contract law.
Unilever (2000) illustrates one of three strategies employed by the European Court of Justice for approximating the results of horizontal direct effect without expressly applying the concept. In this instance, the court sanctioned the use of an unimplemented Directive in a legal dispute between private parties. In so doing, it implicitly allowed for horizontal direct effect, provided no particular obligation was placed on the defendant.
Incidental horizontal effect applies only in a very few situations, and these seem mostly to be a ‘one-off’, where private parties were concerned on both sides, but where no particular obligation was put on the defendant.