Protection by European Law: Crop Pollution

Title: The (fictitious) Water Directive 2001 is aimed at the prevention of nitrate pollution in any water supply by virtue of the use of chemical fertilizers. The directive had to be implemented by January 2003.

Italy has implemented the directive. However, the domestic legislation applies only to the protection of the public water supply.

Francesco uses nitrates on his farm and this has polluted Gianni’s neighbouring private water supply. The private water supply is used to irrigate Gianni’s organic tomato crop.. The crop has been found to have traces of nitrate in them and as a result Gianni’s regular buyer has declined to purchase the whole crop.

Discuss whether Gianni is afforded any protection by European Law, having particular regard to the principles of direct effect and indirect effect, incidental direct effect and state liability.

ANSWER

Introduction

This paper considers the potential claims that Gianni may have in relation to an incorrectly transposed Directive under European Union law. The Water Directive 2001, for which the time limit for implementation expired in January 2003, is aimed at the prevention of nitrate pollution in any water supply by virtue of the use of chemical fertilizers. It is submitted at the outset that the Italian state has defaulted in its implementation of the Directive, by establishing domestic legislation that is applicable only to the protection of the public water supply. Given the large number of private water supplies in Italy it is clear that the Italian legislation creates a substantial lacuna or loophole, leaving such private water supplies unaffected by the new legislation. This was clearly not intended by the 2001 Water Directive and represents a contravention of EU law.

In this introduction it is pertinent to note that it is a fundamental condition of European Union membership that member states recognise the supremacy of EU law over all forms of domestic law. This long-established rule, confirmed in early cases such as Costa v ENEL^[1] stands at the very heart of the EU legal order.

However, that said it is necessary to take account of the fact that there are several different methods of producing European Union law, resulting in different forms of law and these differ in terms of their basic characteristics and the way in which they establish legal obligations. Two of the most important forms of EU legislation are Regulations and Directives. Article 249 of the Treaty of Rome^[2] defines these legislative devices, providing as follows:

“….A regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States.

A directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods.”^[3]

As a consequence of these definitions Regulations automatically create enforceable law around the Union, whereas Directives merely set out certain binding legal objectives but leave the method and manner of the implementation of those objectives to the individual member states themselves. The Water Directive 2001 therefore, which is relevant in Gianni’s case, was dependent on timely and effective implementation at a national level and in terms of the general legal framework of the EU the only enforceable law created was established by means of the transposing domestic legislation..

As has already been established the Italian state had transposed the Water Directive 2001. The brief is silent on the point but it will be assumed that implementation took place prior to the expiry of the deadline for implementation in 2003. Unfortunately for Gianni, the Italian implementing legislation applies only to the protection of the public water supply and this effectively denies Gianni a claim, because the water supply concerned in his case is a private water supply.

The doctrine of effet utile

The institutions of the European Union are preoccupied with ensuring the efficiency, development and successful integration of the body. One strategy employed to this end involves a determined drive to ensure the efficacy of EU law. As a consequence the EU applies a basic principle known as the rule or doctrine of effet utile, which is concerned with the practical effectiveness of EU law. The European Court of Justice regularly makes reference to and applies the effet utile principle in cases that arise for interpretation..

In accordance with the effet utile rule, the law established by the Articles of the Treaty of Rome and the Regulations and Directives etc made under its authority must always be interpreted and applied so as to have an effective and meaningful force and scope in practice. The doctrine therefore promotes the general effectiveness of EU law in all justifiable circumstances. The case of Johannes Hericus Maria van Binsbergen v Bestuur van de Bedrijfsvereniging voor de Metaalnijverheid ^[4] confirms the Court of Justice’s commitment to the application of the effet utile doctrine in Community law.

The European Court held, in the case Franz Grad v Finanzamt Traunstein^[5], that in principle, it would not be consonant with the binding effect attributed to Decisions in the EU legal order to exclude the possibility that any affected parties should be entitled to invoke and rely on an obligation established in a Decision. The Court of Justice reasoned that, in particular in circumstances in which obligations had been established by the Union’s institutions requiring member states to take certain action, the effet utile or effectiveness of such a measure would be substantially reduced if EU citizens were denied the opportunity to invoke the Decision in national courts and if those the national courts denied the opportunity to take the Decision into full consideration as a part of binding EC law. It should be stressed that, although the Franz Grad judgment referred specifically to Decisions it has always been treated as applying directly by implication to Directives and is therefore of relevance in the context of Gianni’s case.

The Court did stress that it was necessary to settle appropriate parameters to the concept of effet utile in the Franz Grad case. It was found that in each individual case, the background, wording and nature of the provision at issue should be capable of producing a direct legal effect in the relationship between the addressee of the act and relevant third parties.

As a consequence of the Court’s respect for the effet utile doctrine, several different principles have been established to improve the effectiveness of EU law and its ability to confer legal rights on EU citizens. These principles include direct effect, indirect direct effect, incidental direct effect and the doctrine of state liability. It is submitted that some of these principles may have the potential to assist Gianni in his claim, despite the fact that the Italian state has incorrectly transposed the Water Directive 2001 and thus created national law that apparently excludes his case. These principles will be discussed in turn below.

Direct Effect

Gianni can be reassured that the European Court of Justice is very well aware of the problems that are caused by the failure of a member state to transpose Directives accurately into their national legal system. The doctrine of direct effect was developed by the European Court partly as a response to the difficulties created by the legislative characteristics of the Directive.

Direct effect was established as a principle in the case Van Gend en Loos^[6], which considered the direct effect of Treaty provisions.

In Van Gend en Loos the Court set down the requirements for direct effect. These have been amended in subsequent cases^[7] and can now be stated as follows:

1) the provision must be clear and unambiguous;

2) the provision must be unconditional;

3) the provision must take effect without further action from the EC or member states

It was the case Grad v Finanzamt Traunstein^[8] which confirmed that EC Directives could in principal be treated as directly effective. In simple terms, this ruling therefore saw the Court agree that Directives could be deemed automatically to create law from the point in time at which the deadline for the implementation of the Directive expired. The Grad ruling was endorsed and applied in prominent cases such as the UK case Van Duyn v Home Office^[9], in which the applicant was permitted to rely directly on a Directive before a national court.

With a view to Gianni’s case, it is relevant that the time limit for implementation (January 2003) has now expired, because until that point in time the directive would not be deemed directly effective because until then the member state would not be in breach of a binding obligation, see: Pubblico Ministero v Ratti^[10] The case Verbond van Nederlands Ondernemingen^[11] confirms that a Directive may be invoked after implementation has taken place to allow individuals to determine whether the implementing authorities have acted appropriately before the national courts.

The case of Marshall v. Southampton and South West Hampshire Area Health Authority^[12] demonstrated in graphic terms that there is a material difference between vertical direct effect, under which litigants are permitted to enforce rights laid down in a Directive which has not been properly transposed against the defaulting member state, on the ground that the member state, has failed in its duty to implement the said Directive properly, and horizontal direct effect, which occurs where one private litigant sues another private individual who is distinct from the state or any emanation of it. The Marshall case confirmed that vertical effect is permissible but that horizontal effect is not possible.

In Marshall the appellant succeeded in her claim under a Directive (Equal Treatment Directive 76/207) because her complaint related to the actions of her employer which was a public health authority classified as an emanation of the state: for further on this see Foster v British Gas^[13]. Therefore her action could be classified as one of vertical direct effect, which is tenable under EU law. As cases such as Rolls-Royce plc v Doughty^[14] and Johnston v RUC ^[15], alongside Foster confirm, generally speaking it will be necessary to prove that a body has special powers and responsibilities for providing a public service under state control, before it will be identified with the state for these purposes. Unfortunately, in the case under discussion in this paper, Gianni is complaining about the actions of Francesco. Francesco is, at least as far as the brief suggests, no more than a private farmer. Therefore, it seems unlikely that it could be argued that Francesco could be identified as or associated with the state or an emanation of the state for the purposes of justifying an action against him as one of vertical direct effect. Given that any claim by Gianni against Francesco under the Directive would thus be an untenable horizontal private party-to-private party action it must be advised that the general doctrine of direct effect is probably of little use to Gianni under the current jurisprudence of the European Court of Justice.

It is therefore necessary to consider the possible applicability of the other principled actions established by the European Court in recent times. This analysis is provided in the following sections.

Indirect Effect

Gianni cannot rely on simple direct effect because Francesco is clearly a private party and horizontal direct effect has not been accepted by the European Court. However, the Court is well aware of the anomalies created by the distinction between vertical and horizontal effect and it has devised a number of other potential avenues of legal redress which may be invoked to sustain a right of action and remedy in circumstances such as those faced by Gianni.

The first of these alternative avenues of redress is referred as the doctrine of indirect direct effect. This species of action was established when the Court of Justice ruled on the cases of Von Colson^[16] and Harz.^[17] These cases both concerned claims under Article 6 of the Equal Treatment Directive (76/207). In Von Colson the action was brought against a public employer, while in Harz a private party was the respondent. As the above analysis of the general law on direct effect suggests, a remedy was thus made available in the Von Colson case but not in Harz. Mindful of the inequity of the situation, the Court did not however allow itself to be frustrated by the problem of the inability of Directives to sustain horizontal direct effect. Instead, the European Court focused on Articles 10 and 249^[18] of the Treaty of Rome which demand that member states comply fully with their obligations as members of the Community. Article 249 EC is reproduced in part above and Article 10 EC provides as follows:

“Member States shall take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising out of this Treaty or resulting from action taken by the institutions of the Community. They shall facilitate the achievement of the Community’s tasks.

They shall abstain from any measure which could jeopardise the attainment of the objectives of this Treaty.”

It was held in Harz, on the strength of these Treaty provisions, that national courts must interpret and apply legislation adopted so as to interpret a directive “in the light of the wording and purpose of the directive” in order to achieve the objective of the Directive where possible.

In establishing the doctrine of indirect direct effect, the Court of Justice created a commitment applicable not just to the governments of member states but to all emanations of the member states, including in particular the national courts and judiciaries. Indirect direct effect was therefore founded to encourage domestic courts and tribunals to apply the terms of an incorrectly transposed Directive if the words of the Directive are sufficiently clear and sufficiently precise to sustain a form of creative interpretation by the national court in the circumstances of the claim at issue. This is designed to ensure that the relevant national law can be applied in such a way as to ensure an effective remedy is provided in the terms laid down in EU law. It is submitted that, as is the case with direct effect itself, the creation of the indirect direct effect doctrine was inspired primarily by the effet utile principle of EU law.

The national courts were initially reluctant to endorse the doctrine in some member states. In Duke v Reliance Systems Ltd ^[19], for example, the House of Lords rejected the indirect direct effect approach.. However, just one year later the House of Lords accepted the obligation to give effect to EC obligations by interpreting national legislation purposively, wherever the circumstances permitted in Litster v Forth Dry Dock Engineering^[20].

Extending the indirect effect doctrine the Marleasing^[21] ruling developed the concept of indirect effect by confirming that a duty exists to interpret national law to conform to a Directive, regardless of whether the domestic law at issue entered into force before or after the time limit for the implementation of the Directive expired.

Gianni case should be considered in particular against the backdrop of the jurisprudence set down in Faccini Dori v Recreb Srl^[22]. In this case an Italian woman entered into a contract but later sought to cancel it within a seven-day cooling off period provided by Directive 85/577. The Italian state had failed to implement the Directive. It was held by the Court of Justice that a remedy based on indirect effect was appropriate on the facts, repeating its formulation in Marleasing as to the national court’s obligation to interpret its own law in light of the relevant Directive.

Confirming our previous conclusion on ordinary direct effect in regards to Gianni’s claim the Court of Justice showed its determination, in both Marleasing and Faccini Dori, not to extend horizontal direct effects to Directives.

It is uncertain whether the doctrine of indirect effect will assist Gianni on the facts before us. If the Italian legislation expressly and exclusively applies to public water supplies it is hard to see just how a national court could, either with genuinely purposive or fully creative intent, interpret that measure to include private water supplies, which appear to be definitively excluded from the national law.

Incidental Direct Effect

The doctrine of incidental direct effect is further offspring of the overarching effet utile principle. The principle associates the indirect effect of EU directives with litigation against private individuals. As has been clarified above, an individual cannot be held horizontally liable for failing to comply with an EU directive. However, in terms of incidental direct effect the member state’s failure to comply can be treated as an incidental factor in an action against an individual party.

Perhaps the leading case on incidental direct effect is CIA Security International SA v Signalson SA and Securitel Sprl^[23], which provided a definition of the concept and held that, contrary to the line taken in Faccini Dori and Marleasing etc, the provisions of a Directive might in certain circumstances be invoked in a claim involving exclusively private parties. The matter arose in an action for unfair competition. The defendants were accused of using unfair trading practices by seeking to market burglar alarm security systems that did not conform to Belgian law. The relevant Belgian law had however been passed in breach of Directive 83/189 and as a consequence the defendants claimed that the Belgian law should not be applied.

Interestingly, in its earlier ruling in Enichem Base v Comune di Cinisello Balsamo^[24], which involved similar facts, the Court of Justice held that the Directive did not have the ability to create individual rights. However, in CIA Security International the Court did find that the case before it constituted a significant reduction in the effectiveness of the Directive, which had after all been designed to remove barriers to trade and improve the efficiency of the Single Market. Enichem was distinguished and the Court held that the Directive in CIA Security International was sufficiently clear and precise enough to be applied by a national court.

It is important to stress that the Court of Justice did not state that the Directive should be applied so as to derive horizontal direct effect. However it did declare the national law to be inapplicable on the facts. It is submitted that the practical effect of this decision was to permit the Directive to be enforced, if not against individuals (because the Directive was being utilised as a shield against liability), then at least to the detriment of a private individual attempting to rely on the national provisions. This would appear to be a restricted form of horizontal effect.^[25]

The key question flowing from the above analysis is whether Gianni could rely on the incidental direct effect of the 2001 Water Directive so as to sustain an action against Francesco? It is argued that the answer is probably No. First, it is clear that CIA Security International has been largely confined to its own facts by the European Court. The Court had the opportunity to endorse, apply and even extend the notion of incidental direct effect in the case of Lemmens^[26], which involved very similar facts to those of CIA, but in fact the latter case was distinguished rather than applied. This suggests the Court of Justice is backtracking on the idea of incidental direct effect. Moreover, in CIA itself the Directive was only permitted to be used as a shield in a deserving circumstance.. In Gianni’s case it would be necessary to use the Water Directive not as a shield but as a sword, and that would be a far more serious and intrusive endeavour.

It is submitted that the doctrine of incidental effect is unlikely to prove useful to Gianni on the basis of the foregoing analysis.

State Liability

The state liability route maybe the best option for Gianni. In situations where national law is simply not susceptible to purposive or so-called “creative” interpretation in such a fashion as to provide the injured party with an effective remedy, another cause of action has now been made available. It is now possible to claim damages as a remedy in situations where a member state has failed in its duty properly to implement EU law. In these circumstances the liability of the defaulting member state is based on the fact of the non-transposition or incorrect transposition of the EU law at issue. This is deemed to leave the member state in breach of its Union obligations.

The doctrine of state liability was first established in the Francovich v Italy case.^[27] This was another case in which the Directive in question could not support direct effect, but undeterred by this the Court drew on the underlying Community effet utile objective of the uniform and effective transposition of EC legislation to justify the imposition of liability on member states to compensate for their failure to implement EC law properly.^[28]

In the Francovich case the Court of Justice set down a three-point test to be applied in the determination as to whether member states should be obliged to compensate individuals who have suffered loss as the consequence of a breach of non-implemented provisions of the EC legal order:

“1) the aim of the directive must include the conferring of individual rights;

2) the scope and content of those rights must be clearly identifiable in the text of the Directive; and

3) it must be shown that the state’s failure to implement caused the damage suffered.”^[29]

In terms of the choice of cause of action available to Gianni in the case before us, it is submitted that it is highly significant to note that in El Corte Ingls SA v Rivero^[30] the Court of Justice, in endorsing the Faccini Dori ruling that a Directive could not be invoked directly against a private party (horizontal effect), did not suggest a remedy based on indirect effect as it had in Faccini Dori, or on incidental effect as it had in CIA Security International, but rather had focused exclusively on the prospect of a claim against the state under Francovich.

Gianni can be assured that the so-called Francovich doctrine of state liability has been endorsed and extended in many subsequent cases before the Court. In the Brasserie du Pcheur and Factortame III^[31] cases, the Court of Justice ruled that member states may be required to pay damages in compensation in well founded claims for loss sustained as a consequence of national law enacted in conflict with directly effective Treaty provisions.^[32] The Dillenkofer v Germany^[33] case confirmed the application of this principle in the context of inaccurately implemented Directives.

The case Brasserie du Pcheur saw the Francovich conditions rephrased and applied and incorporated an additional requirement that for state liability to be imposed in the context of the breach of Community obligations the breach must be sufficiently serious.. The similar term “manifest and grave” has also been employed in the Factortame case. In the case R v Ministry of Agriculture Fisheries and Food, ex parte Hedley Lomas (Ireland) Ltd ^[34] the Court commented on what was necessary to establish a sufficiently serious breach:

“Where at the time when it committed the infringement, the member state in question was not called upon to make any legislative choices and had only considerably reduced or even no discretion, the mere infringement of Community law may be sufficient to establish the existence of a sufficiently serious breach.”

On the facts presented, the Water Directive 2001 was clearly and directly aimed at the prevention of nitrate pollution in any water supply, be it public or private, by virtue of the use of chemical fertilizers. If the European Union institutions had wished to make a distinction between public and private water supplies it could easily have done so but it choose not to. Presumably this decision was taken with a view to the serious health implications of nitrate pollution.

For some reason only known to the Italian authorities, the Italian state chose to implement this straightforward and clear provision only in part, restricting the ambit of the domestic measure to the protection of the public water supply. It is submitted that this is a blatant failure of the Italian state and a manifest breach of its Community obligations. The Italian state had no discretion to make the provision applicable only to public water supplies and given that it is now 2007 Italy has had no fewer than 4 years since its incorrect and insufficient transposition of the Water Directive to remedy the situation by amending the domestic legislation to include protection for private water supplies, which it is ventured, are not uncommon in Italy.

It appears quite clear that the Italian state’s breach in this regard is also directly responsible for the loss suffered by Gianni. In other words there is a strong causal connection between the failure of the Italian state to prohibit the nitrate pollution of private water supplies and the contamination of Gianni’s organic tomato crop, which has been rendered unmarketable as organic produce. It is possible that the crop could be still be sold. The brief is silent on this point and further particulars would be useful in allowing firmer advice to be offered, but on the assumption that the tomatoes could still be sold on the ordinary (non-organic) tomato market then the damages owing to Gianni would be the difference in sale price between an organic crop and a non-organic crop. This may be substantial given that organic produce typically attracts a premium price in the market.

In conclusion, it is advised that Gianni’s best method of obtaining the protection of the Water Directive 2001 and compensation for his loss would be to pursue an action based on the Francovich doctrine of state liability.

Summary of advice

The Water Directive 2001 represents the supreme source of law applicable to the problem of nitrate pollution of water supplies relevant to Gianni’s problem. It is unlikely that the doctrine of direct effect will prove to be of much assistance to Gianni, given that he cannot sue Francesco, who is a private party, under the Directive. The reason for this is that as a rule Directives do not support the necessary horizontal direct effect. The principle of indirect effect is also unlikely to be of assistance, given that there is little room for the creative interpretation of the Italian law on the facts. In similar fashion the doctrine of incidental effect is unlikely to offer much in the way of assistance. This doctrine is restrictively applied (this case would need a highly expansive application) and may even have fallen out of favour at the European Court today. However, the Francovich doctrine of state liability does provide Gianni with a clear and strong case against the Italian state for compensation, and such an action will provoke a ruling that the Italian law be amended to bring it into conformity with the Water Directive..

THE END

WORD COUNT : 4583 (excluding footnotes)

BIBLIOGRAPHY

Treaty establishing the European Economic Community: http://europa.eu.int/eur-lex/lex/en/treaties/dat/12002E/htm/C_2002325EN.003301.html

Europa: Gateway to the European Union: http://europa.eu.int/index_en.htm

Law of the European Union, Kent, P., (2001) Longman

Textbook on EC Law, Steiner and Woods, (1998) Blackstone Press Ltd

EU Law – Text Cases and Materials, Craig and de Burca, (2003), Oxford University Press

From Direct Effects to Francovich: Shifting Means of Enforcement of Community Law, Steiner, 18 E.L.Rev. 3 (1993)

The King Can Do Wrong: State Liability for Breach of European Community Law in the Post-Francovich Era, Betlem G., [1996] 4 Web JCLI.

EC Legislation 2005-2006, Foster (2005) Blackstone’s Statutes

Cases as footnoted, drawn from original law reports.

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Footnotes