LAW 1020

12/11/2019

State Liability
Doctrine of Direct Effect – many MS were not implementing directives. Directives were never
envisaged as having direct effect.

Doctrine of Indirect Effect – relies on interpretation of domestic law to be consistent with EU law.

Consider whether these actions enforceable against the state or emanations of the state? Or
whether they can be enforced against other individuals and other legal personalities.

Indirect effect could have horizontal effect in considering this, but direct effect is only applicable to
the state or emanations of the state. But what are your options when direct effect and indirect effect
are not available?

State liability: what is it?

State Liability provides for the right to damages where a Member State has breached EU law,
causing loss to the applicant. Closes accountability gap when you can’t use direct and indirect effect.

A last resort if someone wants to enforce their rights in EU law within the national courts.

Has very specific criteria: must be clear, precise and unconditional. Not applicable against private
individuals for directives, though it would be for Treaty articles and regulations. Indirect effect
cannot be used if there is a clear conflict between a measure of EU law and domestic law because EU
law is supreme. If something is inconsistent with EU law, it will lead to state liability. Provides right
for damages, where a loss is caused for there to be liability. Not just a theoretical enforcement of
your rights under EU law – must be a loss incurred at the same time. Fills gap left by direct and
indirect effect when unavailable.

C-6/90 & 9/90: Francovich:

 Directive 80/987/EEC
 Italy failed to implement the directive
 Insolvent employer
 Employees suffered damage
 Employees claimed they were entitled to compensation under Directive 80/987/EEC), which
required Member States to secure their protection.

Argument:

That the Directive should be capable of direct enforcement against the State (although the loss has
been caused by something between the claimants and the employer, the reason that this has
happened is because the State has not implemented some EU legislation that it should have done.
Ultimately, if you cannot use direct or indirect effect, the fault lies with the state for not
implementing it); OR

That he should be entitled to compensation under EU law for the loss that he sustained as a result of
the State’s failure to implement the terms of the Directive into national law.
If directive were to become national law, the State would no longer be liable.

In the judgment, the autonomous nature of EU law was highlighted. “…the EEC Treaty has created its
own legal system which is an integral part of the legal systems of the Member States and which their
Courts are bound to apply […] those rights arise not only where they are expressly granted by the
Treaty but also by virtue of obligations which the Treaty imposes in a clearly defined manner both on
individuals and on the Member States and the Community institutions” [para 30]

It promotes effectiveness of EU law and protecting the rights of individuals: “…Just as it imposes
obligations on individuals, [EU] law is also intended to create rights…” [para 30] Otherwise EU law is
not effective if you do not create rights.

“…The full effectiveness of [EU] rules would be impaired and the protection of the rights which they
grant would be weakened if individuals were unable to obtain compensation when their rights were
infringed by a breach of [EU] law for which a Member State can be held responsible.” [para 33]

Article 4(3) TEU: “Further foundation for the obligation on the part of Member States to pay
compensation …is to be found in Article [4(3) TEU], under which the Member States are required to
take all appropriate measures… to ensure fulfilment of their obligations under [EU] law. Among
these is the obligation to nullify the unlawful consequences of a breach of [EU] law…” [para 36]

State liability is about ensuring there is a consequence for States not enforcing and implementing EU
law.

Conditions for State Liability:

1. The result prescribed by the directive should entail the grant of rights to individuals. If the
directive does not concern a grant of rights to individuals in the directive (i.e. it literally
doesn’t grant them any rights), it wouldn’t come under the concept of state liability. So the
directive must literally grant rights to individuals.
2. It should be possible to identify the content of those rights on the basis of the provisions of
the directive. Should be very clear what those rights are from the provisions.
3. Most crucially there must be a causal link between the breach of the State's obligation and
the loss and damage suffered by the injured parties. If you suffer a loss, you can only recover
any damages if you can show a causal link between the defendant’s actions and your loss.
Key principle in domestic law as well.

In other words…

 One of these obligations is to nullify the unlawful consequences of the breach of EU law,
achieved through damages if there’s a loss
 Court has found a strong justification for developing the concept of state liability because it
further promotes the effectiveness of EU law

Questions raised by Francovich:

The case itself dealt with a directive (the non-implementation of a directive), so the question here is:
is this only applied to non-implementation directives? We also have to consider other ways state
liability can be applied…

E.g. application of conflicting national laws – what if it’s not about directives, and national law is
being enforced but that law is in conflict with EU law. Scenario 1 (Francovich) is to do with non-
implementation of directive, scenario 2 is to do with the idea that national law is conflicting with EU
law.

What is the extent of the definition of the ‘State’ for the purposes of State
Liability?
What is the ‘State’ and ‘emanations of the state’? Foster guidelines, and Farrell and Whitty cases.

Is it just directives that we’re talking about, or is non-implementation of EU law and application of
domestic law?

The leading case here that refined the conditions for state liability is the C-46 and 48/93 Brasserie
du Pêcheur and Factortame [1996] ECR I-1029 cases. These were joint cases concerned with a
failure to apply EU law, but apply national law instead, which then caused a loss to the claimants.
Key cases for development of the state liability concept – the application of domestic law in conflict
with EU law.

Does the CJEU have the jurisdiction to introduce a principle of State Liability?
From the Brasserie du Pêcheur case, the judgment said:

“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 […] the full
effectiveness of [EU] law would be impaired if individuals were unable to obtain redress [i.e. claiming
damages] when their rights were infringed by a breach of [EU] law.” [para 20]

“Since the Treaty contains no provisions expressly and specifically governing the consequences of
breaches of [EU] law by Member States, it is for the Court, in pursuance of the task conferred by
Article [19(1) TEU] of ensuring that in the interpretation and application of the Treaty, the law is
observed…” [para 27]

It’s for the Court to decide and develop an approach in relation to the consequences of a breach of
this in pursuance to the task inferred by Article 19(1) TEU ensuring that the interpretation and
application of the Treaty is observed and upheld.

Court develops its justification for extending its jurisdiction in this area b/c the Treaty doesn’t
specifically say the Court is permitted to do this, but it does say that MS are meant to comply with
their obligations under EU law, so in accordance with that, and in accordance with the idea that
there must be consequences if they don’t do that, the Court has developed this idea of State
Liability.

Member State acting in a field in which it has a wide discretion?

We’ve seen this already with directives – directives must be implemented by MS in such a way that
carries out their provisions, but they MS are free to decide how they want to do that in such a way
that fits neatly with their culture and customs.
In interpreting national law in accordance with EU law, there is some discretion in terms of how
that’s done. What came out of the Brasserie du Pêcheur case is a refinement of the Francovich
criteria:

1. Still has to be this intention that the measure of law confers rights on individuals, this must
be present otherwise you don’t have any recourse to state liability.
2. The breach must be sufficiently serious.
3. There must be a direct causal link between the breach of the obligation resting on the State
and the damage sustained by the injured parties [see para 51]

“[…] 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.”

These are the conditions required for state liability.

Question now is, if we go back to Francovich…

Are things like not implementing directives sufficiently serious?

Think about the following:

 The clarity and precision of the rule breached, is it clear?

 The measure of discretion left by that rule to the national or EU authorities
 Whether the infringement and the damage caused was intentional or involuntary (some
leeway here in terms of whether this was an intentional act of the state or not)
 Whether any error of law was excusable or inexcusable (allowing for mistakes)
 The fact that the position taken by an EU institution may have contributed towards the
omission by the state, the adoption or retention of national measures or practices contrary
to EU law.

“On any view, a breach of Community [EU] law will clearly be sufficiently serious if it has persisted
despite a judgement 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.” [para 57]

I.e. if there’s settled case law on the matter, it’s going to be very difficult for the MS to argue that
they’re not in breach.

The takeaway here so far is…

 Francovich case was about creating rights for individuals so the measure of law in question
(in this case a directive) had to be something that would create rights for individuals, that
these rights were identifiable in the face of the directive and there was a causal link between
breach and the loss of the claimant.
 Brassiere du Pêcheur case – this creation of rights for individuals, but it must be a serious
breach – not just a breach and there’s a direct causal link between breach and loss.
C-178/94 Dillenkofer v Germany:
Another key case for state liability – also about non-implementation of a directive. What came from
this case was a decision that if a directive is not implemented, that constitutes as ‘sufficiently
serious’.

“So, where […] a Member State fails […] to take any of the measures necessary to achieve the result
prescribed by a directive within the period it lays down, that Member State manifestly and gravely
disregards the limits on its discretion.” [para 26]

This case set out that not implementing a directive would satisfy the Brassiere du Pêcheur criteria
also and is deemed sufficiently serious to seek state liability.

Does state liability apply to all organs of State?

See C-224/01 Köbler v Austria [2003] case, which says in regard to specific organs of a state:

“…in international law a State whose liability for breach of an international commitment is in issue
will be viewed as a single entity, irrespective of whether the breach which gave rise to the damage
is attributable to the legislature, the judiciary or the executive. The same must apply […] in the [EU]
legal order…” [para 32]

I.e. it doesn’t matter what branch caused the issue, the entire state, seen as a single entity, is still
liable if there is a breach. So even the courts, as an organ of the state, through non-implementation
or application of EU law, could be liable, even though it’s not specifically an action of the executive
or legislature.

State liability will only apply to a decision of last-instance courts (e.g. UK Supreme Court, CJEU).
Won’t apply to lower courts:

“State liability for an infringement of [EU] law by a decision of a national court adjudicating at last
instance can be incurred only in the exceptional case where the court has manifestly infringed the
applicable law.” [Köbler, para 53]

“[…] an infringement […] will be sufficiently serious where the decision concerned was made in
manifest breach of the case law of the Court on the matter.” [para 56]

The National/Supranational Framework

Action for compensation itself is determined by national law. Relates to the extent of your loss
under domestic law.

See Case C-118/08 Transportes Urbanos y Servicios Generales. Use CURIA to find EU case law.

See Chalmer’s 7.6-7.7

Problem Scenario:
Interim Recap – Problem Scenario
South Belfast Council Press Release

Several articles have recently appeared in the local and national press in relation to the actions we
have taken in relation to Francisco Almodóvar. Mr Almodóvar is a Spanish National who, for many
years, has been trading at Belfast Central Market. Last week, following a complaint from a local
resident, one of our Trading Standards Officers impounded the Spanish manufactured hair products
being sold by Mr Almodóvar. These products did not conform to the labelling requirements of UK
law. UK rules now require the warnings on wax cosmetic products to be written in English, Welsh,
Scots Gaelic, Irish and Ulster Scots. Mr Almodóvar protested that they were labelled in accordance
with the recent EU Directive 2017/9999 “on consumer protection in the cosmetic sector”, which
deals with chemicals in cosmetic and beauty products, since that directive requires the warnings to
be accompanied with signs, and that it is the UK rules that are at fault. However, this Directive,
although implemented in Spain, has not yet been implemented by the government in the UK, as the
government believes that its own rules are better for protecting consumers.

Mr Almodóvar’s products did not comply with the current UK regulations so his goods were
impounded. The Council has acted lawfully in order to protect local consumers. [END OF PRESS
RELEASE]

Botanic Bugle Editorial

HAIR WAX ATTACKS BY EU (by Orla O’Ranting)

Another day and another example of crazy confusion created by the EU. How long do we have to
put up with this before we leave? As reported last week local Spanish market trader Mr Almodóvar
is planning to challenge the Council’s decision to impound his stock of hair wax products through the
courts – because it complies with EU rules but not UK ones.

Now local MEP Nigel McBrexman has burst into the debate. As you may recall, he made a personal
pledge when he was elected to do all he can to resist encroaching regulation from the EU and assert
the sovereignty of the UK Parliament. He has stated repeatedly that he thinks the EU is a profoundly
undemocratic and wasteful institution – despite it currently being his sole employer!

Today he has come out to say that he is “outraged” that South Belfast Council has been criticised in
the Spanish press for applying UK law when impounding Mr Almodóvar’s hair products. He also
fumed “I believe the UK should be free to control its own laws. This is a basic issue of Parliamentary
sovereignty. We don’t tell Spain what to put on its tortilla labels. We might as well start taking back
control now!! The UK clearly opposed this Directive, but could do nothing because it was adopted by
a majority decision. We had no power to veto it. If it had been presented differently, the UK would
have had a veto.”

Well, it looks like Mr McBrexman is one turkey who doesn’t mind voting for Christmas – no doubt we
will hear more from him before then!

A spokesperson for the council said, “UK law has not changed, and we doubt the government
intends to change it with Brexit just around the corner”. Nevertheless, Mr Almodóvar has
announced his plan to challenge the decision and claims he should be entitled to compensation.
[END OF EDITORIAL]

Identify the key legal issues here, focusing on the following questions:

a. What is an EU Directive and is it possible not to implement a Directive?

b. Can Mr Almodóvar rely on an unimplemented Directive?
c. When does a Member State have the power to veto EU legislation?
d. How far has UK Parliamentary sovereignty been limited by EU law?

EXTRACT FROM (FICTITIOUS) DIRECTIVE

DIRECTIVE (EU) 2017/9999 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

Of 24 January 2017

On consumer protection in the cosmetic sector

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 169
thereof,

Acting in accordance with the ordinary legislative procedure…

3. Any safety warnings on wax cosmetic products must be accompanied with illustrations.

(a)…

(b) Member States may not impose language requirements that go beyond the 24 official languages
of the EU, regarding the instructions accompanying pictures.

Transposition

17. Member States shall adopt and publish, by 31 December 2019 at the latest, the laws, regulations
and administrative provisions necessary to comply with this Directive.

Addressees

This Directive is addressed to the Member States

[Martin Regan 04/11/19]

 Deals with implementation of a fictitious directive.

When doing a problem question, you want to understand the terms of the problem, clarify key
terms, establish who the key parties involved are, the timeline, summarise the problem in some way
and analyse the problem/define the legal issues. Apply the law to the facts and try to draw some
conclusions.

Create a timeline. Establish key parties. Define and summarise the problem.

UK govt did not support the Directive in Council when it was considered, and some say we should
not have to comply with it because we are to leave shortly after.
Can Mr Almodóvar rely on an
unimplemented Directive?
Directives have to be implemented. They don’t
have direct applicability like Treaty articles and
regulations, where they automatically and
immediately become part of domestic law
What is an EU Directive without implementation. Vertical/horizontal issue
isn’t relevant in this issue because it is the State
and is it possible not to
who has acted against the claimant. Are the
implement a Directive? provisions clear, precise and unconditional? They
Directives are binding as to the result are very clear. The deadline hasn’t passed, so it
because EU law is supreme. They must be cannot have direct effect. Claimant can rely on it
implemented by the deadline otherwise after 31st Dec. Indirect effect is another option – if
the MS is in breach of EU law. Can you the bylaws relating to this case had been
challenge the law? You could by saying the
wrong legislative procedure was used. But Problem Title introduced relatively recently within the time this
Directive was made, that could be seen as not
not in this case because the UK was being in accordance w/ EU law. If it has been
outvoted in Council through QMV. Brexit around for 20 years, it would not be seen as
has no effect here because the something done to frustrate EU law. But there
implementation deadline is before the UK would still be the obligation to try and interpret
leaves the EU. this law in accordance with EU law. This directive
cannot be interpreted in a way consistent with
the Directive, therefore, claimant’s only option is
to claim damages in State Liability.

How far has UK Parliamentary

sovereignty been limited by EU law? When does a Member State have
Section 2 of the European Communities Act 1972 gives direct the power to veto EU legislation?
effect to EU law, and this is the case even when there’s conflict Ordinary and special legislative procedures – but the special
with national law, so you cite cases like Costa and ENEL and procedures is reserved for matters that directly effect the
Gazelschaft. MS have limited their sovereignty voluntarily; UK establishment and functioning of the internal market. It is hardly the
statutes can be disapplied – e.g. Factortame No. 2. Doctrine of case that hair wax labels would satisfy this criteria, so most secondary
implied repeal does not apply to EU law. Idea of ordinary and legislation like this directive would be enacted using ordinary legislative
constitutional statutes. Speaks to point about conflict between procedures and the Treaty of Lisbon has expanded the situations where
national law and EU law. HS 2 case, conflict between two QMV is sufficient for this (because of the addition of more MS), and the
constitutionally significant statutes (EU law and Bill of Rights). simple answer is to say that the UK was outvoted in this particular
scenario, and that’s tough titties.