Is State liability a genuine contribution to ensuring that individuals can enforce rights conferred on them by European Union law or is it simply a necessary device to counter the ineffectiveness of horizontal direct effect?

The legal system set up by the European Community (EC) has constantly been in a balancing act between the rights of private parties and the ability to enforce EC law within the national courts, without threatening the sovereignty of Member States. The functioning of the European Court of Justice (ECJ) is dependent on the supremacy of its law and it is the responsibility of the lower national courts to apply the Community law in situations where the national law fails to protect the citizen by providing weaker rights than the higher EC law. Where legislation is unclear or ambiguous, national courts can seek clarification from the ECJ. For example when a Community law has not been implemented properly on the national stage then an applicant can seek redress under Article 226 EC against the Member State for their failed inaction. The ways in which private parties can enforce and challenge these violations is through direct and indirect effect which shall be discussed further. Moreover, when these avenues fail the courts turn to the concept of State liability in order to mend the holes left by the ineffectiveness of horizontal direct effect and its similar situations. Some of the cases discussed are precedent setting moments in EC law which play a crucial role in providing outlets for private parties to enforce their rights under the EC and use the provisions which help to enforce EC law within their nation’s courts.

The case of Van Gend en Loos instigated the right for private parties to enforce their Community rights from EU Treaties on Member States, and established precedent allowing private parties to rely on other sources of EU legislation(cite) . The Van Gend en Loos criterion is now the main test for the application of direct effect for provisions of EC law. It was a landmark case as the ECJ allowed for Treaties to have both vertical and horizontal direct effect. The horizontal effect of Treaties being clarified in the case of Defrenne v Sabena where it was found that certain treaty provisions are capable of being applied horizontally as long as the provision is acceptably precise and unconditional) (cite). Vertical direct effect allows citizens to rely on EC law in actions against the State, while horizontal direct effect allows citizens to rely on EC law in actions against other individuals. Despite these variations the ECJ has been reluctant to overuse the doctrine of direct effect and has set limits which restricted the use of direct effect by ensuring that “the Articles must be clear, unconditional and may be relied upon only against the State" (Van Gend). The judgement of this case opened up the gates towards enabling private parties, to a certain extent, to enforce the rights given to them by the provisions of EC law in their national courts.

In the case of Von Colson v Land Nordrhein-Westfalen, the courts took the public/private distinction and put it to the side while upholding the requirement of Article 5 EC (directing states to take “all appropriate measures to ensure the fulfilment of their community obligations)(cite) to be binding on all Member States and their national courts. The onus is on the courts to interpret the national law in an appropriate way which ensures the objectives of the Directive. Therefore EC law has the ability to be apply indirectly (by way of interpretation) even while Community law is not directly effective. However, there is still uncertainty as to whether national courts are responsible to comply with the principles under Von Colson (where interpretation of EC law is in compliance with an EC directive) when the domestic measure has been introduced prior to the directive.

These issues were raised in Marleasing where it was held that the national courts’ duty to comply with EC directives applied whether the national provision in question were adopted before or after the directive (cite). However, the ECJ acknowledged that there were limits to the principles of indirect effect. In Von Colson, the national courts’ obligation to give indirect effect to Community Directives was expressed to exist ‘insofar as they have discretion to do so under national law’ (cite). Under Community Law, it seems that national courts may refrain from interpreting domestic law against its clear and intended meaning, where to do so would breach the legitimate expectations of individuals and their rights.

With the existence and application of direct and indirect effect, the ECJ developed a third strain to remedy individuals who have suffered due to a breach in Community law. Member states may be liable for damages if they are found to be in breach of a Community law. Until the seminal case of Francovich v Italian State there wasn’t a general conception of state liability as far as damages, for breaches of EC law in the absence of direct or indirect effect. Most breaches of EC law were due to the member states inadequate implementation of directives. Many of these directives were designed to bestow rights on individuals. When a Member state fails to implement the directive or does so incorrectly, the individual is deprived of his/her essential Community rights. The principle of state liability was needed for a few reasons. The principle of direct effects was effective to provide remedy in the individual case- where the individual is aware of his/her community rights and willing to enforce them. This principle is not available against private enterprises nor is the principle of indirect effects. The primary problem in the EC at the time was the non-implementation of directives by member states, and neither direct nor indirect effects remedied this problem.

It was in Francovich the courts took a new approach and held that under circumstances a state may be

“liable to make good damage to individuals caused by a breach of Community Law for which it is responsible." (cite Franc). The breach by the Italian State in this case was the non-implementation of directive 80/987. The Italian States lack of implementation left the claimants in a position of disadvantage as there were owed arrears of wages and sought compensation. Their claim was based on two points; first being the applicability of direct effect, where the courts held the directive was not directly effective. The second claim was the actual breach by the state for failing to implement the directive, where the courts found the state liable. They held that the failure of the member state to take all necessary means to achieve the desired outcomes required by the directive, gave rise to the damages (cite) The ECJ judges created three conditions which must be satisfied for State liability to exist. Firstly, the result required by the directive includes the conferring of rights for the benefit of individuals. Secondly, the content of these rights may be determined by reference to the provisions of the directive, and finally there must be a causal link between the breach of the obligation of the state and that damage suffered by the person affected.(cite).

Thus in Francovich the court created the new remedial principle to supplement the inadequacies of direct and indirect effect, while providing states with a meaningful incentive to fulfil their obligations under EC law. Although Francovich created a way for private parties to enforce their rights under EC legislation, it must be noted that only when direct and indirect fail to provide the necessary remedies will the courts differ to whether the Member state has liability. In most circumstances the courts would try and protect the Member state by applying direct/indirect effect rather than putting the entire onus of liability on the State.

The concept of state liability was developed further in the case of Brasserie du Pecheur, which expanded state liability to include all manners of breaches which violated community law. It expanded the circumstances which might give rise to liability in cases where no enforceable rights could be confirmed due to lack of horizontal direct effect (cite). The ECJ also held that national courts are required to grant relief to an individual who has suffered due to a breach, but consequently private individuals are unable to bring direct action against a Member state and must go through the formal process outlined by the courts (cite). The current focus has shifted towards the seriousness of the breach, as was seen in Factortame which introduced the revised criteria that the breach must be analogous to that applied to liability of the EC institutions under article 288 (2) (cite factor). This is known as the Schöppenstedt formula and in order for liability to arise on the part of the member state, there must have been a sufficiently serious breach of a superior rule of law designed for the protection of individuals.

The ways in which private parties are able to enforce their EC law rights is dependent on the applicability of direct/indirect effect within the dispute. State liability provides an alternative route a top indirect effect which enables the enforcement of Community law within public and private disputes. However, State liability along with indirect horizontal effect can be viewed as an incomplete system of remedies to a breach of rights, as there still exist situations where it is difficult for citizens to evoke these rights. As the EC continues to progress towards protecting private parties rights its aim with state liability is a daunting balancing act between the protection of citizens’ rights and the interests of governments. The evolution of EC law will depend on this patchwork approach to protect rights while not infringing on state sovereignty, as future solidarity of the EU will depend on these issues.