INTRODUCTIONThequestion of whether the ruling in Francovich,Brasserie and Courage sufficiently protected individuals’ European Union (EU)rights will require a discussion on how the principle of State liability hasbeen operated.FRANCOVICHInthe landmark case of Francovich1,the court developed the principle of Member States liability for aninfringement of Community rules. This case concerned a Directive which obligedthe States to guarantee a minimum level of protection to the employees in casethat their employers became insolvent. Italy had persistently failed toimplement the Directive even after the Treaty infringement had already beenrecorded in a Court ruling.2 Agroup of employees brought proceedings against the State of Italy for recoveryof unsettled wages guaranteed under the Directive, or alternatively damage forthe sustained loss arising from failure to transpose the Directive intonational law.3The national courts brought the matters to the European Court of Justice (ECJ)in the preliminary reference procedure.
Direct Effect of the DirectiveThefirst issue was whether the directive had direct effect to invoke rights to theindividual. Following Becker4,the court found the Directive was not unconditional and sufficiently precise,because Member States had “a broad discretion with regard to the organization,operation and financing of the guarantee institutions.”5This meant that the Directive had no direct effect and the employee could notenforce the rights.Principle of Member State LiabilityTheECJ in turn addressed the second issue concerning whether the Italian State hadto recover damages inflicted by their infringement of Community law. It consideredthe issue in the light of both general system of the Treaty and its fundamentalprinciple.6 Itreferred to the previous judgment7laid down the principle of effective protection of rights, and held thenational court is “to apply the provisions of Community law in areas withintheir jurisdiction must ensure that those rules take full effect and mustprotect the rights which they conferred on individuals.”8Consequently, it held the full effectiveness of Community rules and of judicialprotection would be impaired if an action by private party had suffered lossdue to a violation of Community law was dismissed.9The principle of Member States liability to make good loss and damages causedto individuals resulting out of the breaches of Community law was held to beinherent in the system of Treaty and to be found in Article 5 EEC.
10 Conditions for State LiabilityTheECJ then stated the requirements which established a right to reparationdepended upon the nature of the infringement of Community law;11namely the Directive must grant rights to individuals, the content of therights must be identifiable by reference to the provisions of the unimplementedDirectives, the existence of a causal link between the infringement of State’sobligation and the damage sustained by the individuals.12The substantive issue and procedural rules for the right to claim wereaccording to national law to safeguard the individuals’ Community rights.13However,several issues concerning the principle were unresolved, namely to which degreethe Francovich principle wasapplicable in other cases and how to establish culpability of the state.14BRASSERIE DU PÊCHEUR Thesewere clarified in the joined case of Brasseriedu Pêcheur and Factortame III15.Brasserie du Pêcheur, a French brewery, brought an action against German Statefor damages sustained because the German legislation, that violated the Article30 EEC, 16forced it to discontinue the export of beer to Germany. Its claim was rejected as the legislationhad not been directed at individuals, there were no other third parties wouldgive rise to State liability.
17The case of Factortame concernedabout the legal dispute pertaining to Merchant Shipping Act 1988, which washeld to be contradictory to Community law.18In Factortame III, the claimantssought damages for loss sustained as consequence of their illegal exclusionfrom British water. Their claim failed as the public law tort of misfeasancecould not be attributable to the English Parliament. The joined cases hadseveral similarities, namely both involved violations of the Treaty which wascaused through a failure at legislative level and their claims before nationalcourts were dismissed.19TheHigh Court of England and Bundesgerichtshof referred the matter to the ECJ asto whether legal relief was afforded under Community law.Revisit FrancovichLiabilityTheCourt first considered whether the Francovichprinciple was applicable to acts of the national legislature. Francovichprinciple was held to apply to “any case in which a Member State breachedCommunity law, whatever be the organ of the State.
..”20The right of reparation was the “necessary corollary of the direct effect ofthe Community provision whose breach caused the damage sustained.”21Conditions for LiabilityTheCourt then considered the conditions were for the right of reparation underCommunity law. Linking the Francovichliability with the non-contractual liability under Article 251 EEC, it unifiedthe requirements of liability applying to Community institution and to MemberStates.22The ECJ held in the circumstances where the States were endowed with widediscretion, three requirements must be satisfied to establish a right toreparation, namely the rule of law infringed must be intended to confer rightson individual, the breach must be sufficiently serious and there must be adirect causal link between the breach and the loss or damage sustained by theindividuals.23Onewill explore the three requirements of State liability individually. One willbegin with “sufficiently serious breach” because it is submitted the first andthird requirement were utilised as legal instrument in limiting State liabilitywhen second condition is established.
Thesecond criteria under Francovichprinciple was the establishment of a sufficiently serious breach. It resolvedthe issue in Francovich, i.e.
thedifficulty in establishing culpability of the Member States. The liability ofthe States would only be established when they were manifestly and gravelydisregarded the limit on the exercise of their powers. The ECJ submittedseveral factors which might be considered while establishing the seriousness ofthe breach.24Theissue of discretion of the State was crucial for the establishment of secondcriteria.
In Dilenkofer25,the ECJ clarified the “sufficiently serious breach” criterion was dependent onthe States’ fault in disregarding the limit on their powers, and that wherethere was reduced discretion the mere infringement of Community law wassufficiently serious to incur liability.26This was further developed in Haim II27,where it acknowledged discretion was not the sole element for determining thesecond criterion on the grounds of reduced discretion, various factors in Brasserie should be taken into account.For instance, in Hedley Lomas28,it was held the mere infringement of Community rules was sufficiently seriousto incur liability on the administrative authorities of the United Kingdom, asthe lack of discretion conferred upon Member States under the directive and theclarity of the rules of Community rules infringed.However,it is submitted discretion might became a defence in Francovich claims as well as in the interpretation of theprovision.
29The focus is on “sanctioning highly neglectful conduct rather than securing redressfor litigants.”30Thisclearly undermine the protection of individuals’ rights. As shown in British Telecom31,the case concerned an incorrect transposition of Directive 90/351. The ECJ heldUnited Kingdom in fact misread an article, but refused to impose a right toreparation, as the State was endowed with wide discretion in the exercise ofits legislative functions.
Thus, the violation of the Community law was notsufficiently serious because the wording of the article of the directive wasambiguous and arguable. The interpretation derived from the States had not beenplainly wrong since it had been given in good faith and no clear guideline frompast jurisprudence. Similarly, in Denkavit32,it held that an erroneous transposition of Directive by German legislature didnot amount to “sufficiently serious breach”, because all the States had come tosame explanation and no previous jurisprudence.Thethird condition was the existence of direct causal link between theinfringement of Member State and the damage suffered by the litigant. Thenational court would establish the casual link based on the facts of the case.
It is submitted “the Court took a more aggressive stance in constricting therequirement by sometimes determining it itself had enough facts at its disposalto decide whether or not a causal link could be established.”33InBrinkmann34,the ECJ constricting the Francovichprinciple without mitigating its strict policy that non-implementation of adirective is per se a sufficiently serious breach.35 Despitethe omission to transpose Directive by Danish Government, the nationaladministrative authorities had given immediate effect to a non-implementeddirectives. It held there is no direct causal link between the infringement andthe claimant’s damage.
It was the misinterpretation and misapplication of theprovisions by the Danish administration that caused the claimant’s loss. Theruling in Brinkmann render it moredifficult for individuals to receive compensation under Francovich for breaches, which have been attempted to be conveyedimmediate effect by administration, although it is clear that inaction of thenational legislature has infringed the Community rules.36 InDanfoss37,where oil firms passed an excise duty on oil unlawfully levied on them byDenmark on to Danfoss (the purchasing party), the Court limiting the principlein a similar fashion as in Brinkmann.The ECJ held Danfoss should have sued the oil companies for damages rather thanthe Danish State on the basis no direct link could be established between theimposing of tax by the State and the harm sustained by Danfoss.
Only in thosecircumstances, where such claim was made not virtually or exceedingly difficultunder national law, would causation be found to exist.38It was unexpected the court held in the absence of State liability, therecovery of wrongfully levied tax was in issue of procedural law, pursuant tothe general principles of effectiveness and equivalence.39However,in Rechberger40,the ECJ held where the States’ breach consisted of a non-implementation of adirective, the direct causal link between the breach and claimant’s damagecould not be destroyed by the misconduct of third parties or the occurrence ofunexpected circumstances. Thus in certain situations, the nationaladministrative bodies might not submit as a legitimate justification in theabsence of implementing legislation.41Thefirst condition was the provision must be intended to confer rights on theindividuals. This was determined by the ECJ as it involved the matter ofinterpretation of Community law. It is submitted the ECJ had not established acomplete theory of right, the method of arriving at its conclusions varied tothe extent from case to case.
42InPeter Paul43,the Court held the Banking Directives did not intend to confer rights onindividual depositors if their accounts were not available due to inadequatesupervision, which limited to protecting the stability of financial markets. Itis submitted it took into account the express provisions in EU law conferringrights on individuals, i.e. it was insufficient if such provision merelyreferred to individuals in its preamble. Such narrow interpretation ofindividual rights would render the individuals difficult in establishing Francovich claim and influencing therange of factors that may be relevant to whether the breach was “sufficientlyserious.”44Asshown in Leth45,the Court held the Environmental Impact Assessment Directive protectedindividuals against pecuniary loss flowing from the devaluation of theproperty, but it stressed the failure of State in conducting an obligatoryassessment could not confer upon individual the right to reparation arisingfrom devaluation of property, since the purpose of the Directive was only torequire an assessment and it did not determine any substantive rules.46 It is submitted “the specific nature of theclaimant’s intended right as defined by the Court had a decisive impact uponthe nature of causal link.
“47DamagesInthe Brasserie’s ruling, the Courtalso addressed the issue of quantum of damages. In principle, compensationshould be proportionate to the damage sustained, so the effective protection oftheir rights were safeguarded. It held loss of profits were recoverable butnational law was to regulate how damages were to be calculated.
48Nonetheless, it is submitted “damages actions against the State is a possibleaction to give some form of remedy but is wholly insufficient to ensurecompliance with the law and give the individual their rights”49, Hedley Lomas would be a good example.COURAGEThe Francovich liability was furtherextended to violations of Community law committed by private parties. Inthe competition law case of Courage50,it concerned the right to reparation enforceable against another private partyin the circumstance where the English law barred the claim on the grounds ofillegality.51The ECJ held Article 81 EC provided a right to a party to an illegitimatecontract to make a claim for loss sustained, because it “would strengthen theworking of EC competition law by discouraging restrictive practices which areoften covert in nature.”52It also held Community law did not prevent domestic law from barring the claimdue to claimant’s own illegitimate action, but national courts first had toconsider a number of factors to establish the claimant must not profit out ofhis action pursuant to principles of effectiveness and equivalence.53Despitethe failure to introduce common condition of liability, as opined by SaraDrake, interpreting the wording of the judgment in Courage in broad terms, arguably it had introduced a new Communityright to reparation for infringement of Article 81 EC between private parties.
54 InManfredi55,the Court affirmed the new Community right to reparation for breach of Article81 EC. It also introduced the requirement to prove there is a causal linkbetween the breach of Article 81 EC and the loss suffered. An infringement ofArticle 81 EC automatically qualified for a liability.
The national rules wasapplied to determine the casual link. It is submitted the liability regime forprivate individuals is independent from the Francovichliability because the Court discuss extensively the importance of Article 81 ECand a right to reparation could be established by proving a causal link withoutthe need of a “sufficiently serious breach”.56Thelimits of Courage doctrine is theeffect of its ruling allows national courts broader scope57to apply national rules on such remedy.
It render “a distinction between alevels of jurisdiction protection which it deems to be effective and that whichis full and complete”.58In other words, the effective application depends on the attitude of the nationalcourts, which caused to diversity in the level of protection available.59This will undermine the judicial protection for individuals due to thecomplexity of Community system of enforcement and the absence of an effectiveand uniform legal framework for strengthening private actions in damages.60Also, it is submitted the judgments in Courageand Manfredi illustrated thisdoctrine is applicable to a very limited field of Community legislation, suchas competition law.61CONCLUSIONAllin all, one would disagree the assertion of the question.
The criterias in theprinciple of Member State liability focus more to the enforcement of EU lawthan to provide sufficient protection for the individual, especially the secondcriteria (sufficiently serious breach). Alternatively, the Courage doctrine would provide limited protection to individuals’ EUrights due to the impact on a judge-made system of private remedies.1 Joined Case C-6/90 and C-9/90Andrea Francovich and Danila Bonifaci vItalian State 1991 ECR I-5357.2 Case 22/87 Commission v Italy 1989 ECR 143.3 Kenneth Parker, ‘CaseComment: State Liability in Damages for Breach of Community Law’ (1992) 108 LQR181, 182.4 Case 8/81 Becker v FinanzamtMuenster-Innenstadt 1982 ECR 53.5 Francovich (n1) paras25-26.
6 A Arnul and D Chalmers, TheOxford Handbook of European Union Law (1st edn, OUP 2015) 226.7 Case 106/77 Amministrazionedelle Finanze dello Stato v Simmenthal 1978 ECR 629.8 Francovich (n1) para 32.
9 Ibid para 33.10 Ibid paras 35-36.11 Ibid para 38.12 Ibid para 40.13 Ibid para 42.14 M Haba, The Case of StateLiability: 20 Years after Francovich (1st edn, Gabler Verlag2015) 31.15 Joined Case C-46/93 and C-48/93 Brasserie du Pêcheur SA v Bundesrepublik Deutschland and The Queenv Secretary of State for Transport, ex p Factortame Ltd1996 ECR I-1029.
16 Case 178/84 Commission vGermany 1987 ECR 1227.17 Brasseriedu Pêcheur SA (n14) paras 6-7.18 Case C-221/89 R v Secretary of State for Transport exparte Factortame 1991 ECR I-3905.19 Haba (n14) 35.20 Brasseriedu Pêcheur SA (n15) para 32.21 Ibid para 22.22 Ibid paras 42-45.23Ibid para 51.
24 Ibid para 56.25Joined Cases C-178/94, C-179/94 and C-188/94- 190/94 Dillenkoferand Others v. Federal Republic of Germany 1996 ECR I-4845.26 Victoria King, ‘The Fault Issue in StateLiability: From Francovich to Dilenkofer’ (1997) 18(2) E.C.L.R.
110, 113.27 Case C-424/97 Salomone Haim v.Kassenzahnärztliche Vereinigung Nordrhein 2000 ECR I-5123.28 Case C-5/94 R v Ministry ofAgriculture, Fisheries and Food, ex parte: Hedley Lomas Ltd 1996 ECRI-2553.29 J Marson, ‘Holes in the safety net? Stateliability and the need for private law enforcement’ (2004) 25 (2) LiverpoolL.
R. 113 < http://shura.shu.ac.uk/8869/3/Marson_-_Holes_in_the_Safety_Net_Paper.pdf> accessed 31/12/2017.30 D Chalmers and G Davies and G Monti, European Union Law: Text and Materials(3rd edn, CUP 2014) 332.
31 Case C-392/93 R v H. M.Treasury, ex parte British Telecommunications plc 1996 ECR I-1631.32 Joined Cases C-283/94, C-291/94and C-292/94 Denkavit International BV & Others v.Bundesamt für Finanzen1996 ECR I-5063.
33 Haba (n14) 58.34 Case C-319/96 Brinkmann Tabakfabriken GmbH v. Skatteministeriet 1998ECR I-5255.35 Haba (n14) 58.36 Georgios Anagnostaras,’The Allocation of Resposibility in State Liability Actions for Breach ofCommunity Law: A Modern Guardian Knot?’ (2001) 26(2) E.L. Rev. 139, 146.
37 Case C-94/10 Danfoss A/S & Others v. Skatteministeriet 2011 ECR I-9963.38 Chalmers (n30) 332.
39 Haba (n14) 61.40 Case C-140/97 Rechberger, Greindl and Others v. Austria 1999ECR I-3499.41 Haba (n14) 59.
42 Ibid 63.43 Case C-222/02 Peter Paul & Others v. Bundesrepublik Deutschland 2004ECR I-9425.44 Michael Dougan, ‘Addressing Issues of Protective Scope within theFrancovich Right to Reparation’ (2017) 13 EuConst 124, 135.45 Case C-420/11 Jutta Leth v. Republik Österreich and LandNiederösterreich EU:C:2013:166.
46 Dougan (n44) 135.47 Ibid.48 Arnul (n6) 228.49 J Marson (n29).50 CaseC-453/99 Courage Ltd v.
Bernard Crehan 2001 ECR I-6297.51 Arnul (n6) 229.52 Courage (n50) para 27.53 Haba (n14) 9954 Sara Drake, ‘Scope of Courage and the Principle of “IndividualLiability’ for Damages: Further Development of the Principle of EffectiveJudicial Protection by the Court of Justice’ (2006) 31(6) E.
L. Rev. 841,853-854.55 Joined Cases C-295/04 and C-298/04 Manfredi v.
Lloyd AdriaticoAssicurazioni & Others 2006 ECR I-6618.56 Arnul (n6) 229.57 Case 33/76 Rewe-ZentranlfinanzeG and Rewe-Zental AG v Landwirtschaftskammer für das Saarland 1976ECLI:EU:C:1976:188.58 Drake (n54) 855.59 Ibid 862-863.60 Ibid.61 Haba (n14) 104.