European Constitutional Law
In this case the plaintiffs are seeking recompense for the failure of the UK to correctly implement the ‘Protection Against Untrue Advertising Directive’ which the European community adopted in 1990. The first claimant, Frank, applied for, and received, a place on French Language course, it was advertised as being given by a renowned lecturer in the subject but upon payment of the deposit it transpired that the course was not what was advertised being taught by an amateur teacher rather than by the noted professor. In addition to this, Mary, joined a book club which promised original books for its members a spec from which the books fall short, and a news paper supplement which it did not deliver. Both, Mary and Frank, are told that they are liable for the balance of their contracts.
The issue arising in this case are, the issue of direct and indirect effect of EU legislation, and wither an individual can rely on EU legislation to protect their rights in a national court. Moreover Frank and Mary’s case address the issue of wither the UK can rely on its own mistakes in the passing of legislation to protect it from liability that results from the said mistake.
The directive that Mary and Frank would like to rely on to enforce their rights was original stated as ‘Where a consumer enters into a contract and subsequently discovers that the advertising on the basis of which the contract was entered into is untrue, the consumer may withdraw from the contract without financial penalty and without further obligation. All such consumers shall also be entitled to the return of any monies paid.’ The United Kingdom did implement a form of this legislation but it was implemented to apply only to financial institutions rather than to all consumer products.
The main issue in these cases is the application of direct and indirect effect on legislation passed by the EU using directives as the legislative process.
Indirect Effect is defined as the obligation of the member states to interpret national law to comply with European Union law where a directive has been incorrectly or ambiguously enacted into national law. This is opposed to the idea of direct effect which grants a private citizen of a member state certain rights without needing any changes to be made to national law. These right are directly applicable and must be upheld in a national court.
These ideas of direct and indirect effect are directly linked to the supremacy of community law and are a major tenant of the treaties of the European Union. They are considered the most important features of the community relationship.
A major issue which arises in relation to the relationship between the member states and the community is the notion of state sovereignty. When considering the legal status of legislation passed by the EU it is important for some sort of balance to be struck between the supremacy of the nation state and the primacy of EU law. While the nation state has the power and right to rescind from the Union, while a member it must fulfil its obligations as set down in the treaty. This is most apply demonstrated in Case 26/62 Van Gend en Loos v Nederlanse Tariefcommissie which involved the imposition of duties on the importing of chemicals, it was claimed by Van Gend that this was contrary to Art. 25 EC, which stated the decision of the ECJ was that the treaty constituted a ‘new legal order of international law for the benefit of which the states have limited their sovereign rights.’ With this in mind the UK’s decision or mistake in implementing the directive in the manner it did not acceptable since the government of then UK chose to limit their sovereignty, they cannot shy away from treaty obligations.
One of the major issues arising from the case is the applicability of direct effect. Direct effect is meant to ensure a uniformity of EU law, but comes in two forms verticle and horizontal direct effect.
The idea of vertical direct effect states that individuals can only rely on direct effect to invoke treaty obligations arising from provisions against the member state in proceedings against Member State and state bodies, while horizontal direct effect provides individuals with a means of invoking the treaty obligations as a means of redress in cases where the proceedings are against another individual however, this recourse cannot apply to a directive.
In Case 43/75, Defrenne v. Sabena, 1976 E.C.R. 45, where an applicant brought a case before the Tribunal du travail, in Brussels, where the claimant was being paid less than male employees doing the same job. The Belgian court referred the matter to the ECJ, it was found that the Article 119 EC, which requires equal pay for all employees was equally binding on individuals as well as state bodies. This case is the foundation of the precedent which sets down that EC Treaty Articles have horizontal direct effect.
However, while the case of Defrenne v. Sabena decided that EC treaty articles are subject to direct effect there is still some question as to whither this applies to directives. One of the most important aspects of EC law is the emphasis on the primacy of EU Community law. With this in mind it is not possible for a member state to choose not to implement a directive if it is included amoung the addressed states. Article 249 EC states that directives are “binding as to the result to be achieved upon each Member State to which it is addressed, but shall leave to national authorities the choice of form and method.”
While it is only binding as to the result which are to be achieved it was made clear in the judgement by the ECJ in Case 271/91 Marshall v Southampton and South West Hampshire AHA, that there was no question of a directive having horizontal direct effect.
The United Kingdom operates a ‘dualist system’ within the EU, meaning that international law ‘has no effect in municipal law until an Act of Parliament is passed to give effect to it…’ This means that EU legislation needs to be transposed into UK national law. However, if a nation fails to transpose then it violates international law. Lord Denning states in Mc Wirter v Attorney-General  C.M.L.R 882 that sections 2 and 3 of the European Communities Act 1972 made it clear that the treaty and community legislation were binding on the UK. While Parliament may not have passed a specific piece of legislation into law, they did pass the legislation which brought the UK into the European Union and as such the supremacy of EU law has already been accepted by Parliament and as such is must apply all legislation that is address to the UK or to all of the member states.
When this information is applied to the case of Frank and Mary, it appears that they both have a method of redress for their cases. Franks case can argued in terms of direct effect and Mary’s as indirect effect. This is predicated on the assumption that both Frank and Mary were indeed sold their respective contracts on the basis of untrue advertising rather than a misconception on their part.
If the primacy of EU law is accepted by all parties then the idea of direct effect follows on from this notion. Direct effect is meant to ensure a uniformity of EU law across all member states. Since in Frank’s case the UK’s attempt at legislating this directive was incomplete or incorrect then Frank should be able to rely on this directive as it has been set down in other EU member states, assuming that the interpretation in the majority of member states is correct or true to the intention of the directive.
The key term in this instance is ‘common;’ the idea of the EU is to ensure a ‘common market’ and by ensuring common laws they can ensure consistency. Article 2 EEC states that “the Community shall have as its task, by establishing a common market and progressively approximating the economic policies of Member States, to promote… an increase in stability, an accelerated raising of the standard of living and closer relations between the states belonging to it…’ As such the unity afforded by directly effective legislation enhances this stability and the raised standard of living must be present in all member states.
If it is assumed that the UK interpretation is out of line with the other member states interpretations of the directive then in order to ensure a communality of law the UK’s interpretation of the law cannot be allowed to stand without contest. This is of course predicated on the fact that the other member states have implemented the directive in the manner in which it was intended. In this instance, as long as other member states had construed the directive to encapsulate all contracts between consumers and service providers and not exclusively financial institutions, then the United Kingdoms interpretation is not a ‘common’ position and as such does not fulfil the UK’s treat obligation as set down in Article 2 EEC. To allow a directive to be incorrectly applied would undermine the effectiveness of directives. If individual member states could implement incorrectly, or fail to implement at all, the process of using a directive to pass legislation would be useless.
However, this does not automatically grant Frank the use of direct effect as an argument for his case. In Yvonne Van Dyn v Home Office and the issue of directive 64/221, there were set down a series of requirements a case must meet before direct effect can be applied; these are, that the issue raised must be part of a legal order and must confer ‘specific’ rights on an individual. In this instance because the law in question emanates from a directive of the European Union it constitutes a legal order. Moreover, Article 1 of the directive states that an individual is entitled to reimbursement of all monies paid if the advertising is found to be false.
Through cases such as Yvonne Van Dyn v Home Office Directive 64/221, Case 11/70 Internationale Handelsgesellschaft GmbH And Case 106/77 Simmenthal SpA the conditions of direct effect were further refined to state that the law must be clear and unambiguous, unconditional, and its application must not depend on further action from the community. They go on to state that there is no discretion in relation to directives. Specifically in Yvonne Van Dyn v Home Office and Directive 64/221 restricting the movement of aliens, the ECJ, referencing Art.234 EC stated that the directive was directly applicable because it ‘imposes on member states a precise obligation which does not require the adoption of any further measure on the part of either the community institutions or of the member states and which leaves them, in relation to its implementation, no discretionary powers…’ What this means for Frank’s case is that the UK has no right to limit the scope of the directive to only cover financial institutions since the wording of the original directive does not make that distinction.
Frank’s case fulfils the requirement of being clear and precise in it’s wording, in so far as the directive sets down the specific sequence of events that are required before a customer is able to withdraw from their contract. Since this is expressly set down in the Directive it falls under Article 10(5) EC which asserts that ‘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.’
Moreover, assuming that this Directive included the UK among the member states to which it was addressed then it is deemed to be unconditional and must be enacted into legislation by the UK. This is also supported by the Van Dyn decision which removes state discretion in terms of address in the case of directives.
Lastly, the directive which Frank intends to rely on does require further action in so far as it was supposed to be implemented into national law, however the ECJ has found in other cases that if the time span for implementation has expired or if the directive has been implemented incorrectly then an enforcement action can be brought against the member state and direct effect can be relied upon by claimants even if it is a directive. This is also demonstrated in Case 148/78 Tullio Ratti where the ECJ decided that ‘a member state which had not adopted the implementing measures required by a directive in the prescribed period may not rely, as against individuals, on its own failure to perform obligations which the directive entails.’ This is also demomnstrated in Case 8/81 Ursula Becker v. Finanzamt Munster Innenstadt  ECR 53 and in Case 271/91 Marshall v Southampton and South West Hampshire AHA, in these cases both the UK and German governments failed to implement a Directive which granted specific rights and privileges to their citizens, in both cases the cases were found in favour of the plaintiffs, and the legislation was deemed to be directly affective.
Moreover, if a member state has transposed something incorrectly before the implementation period is ended then a claimant need not wait until the time limit is up to begin proceedings to bring about an enforcement action against the country as seen in Case 51/76 VNO  ECR. In addition to this, Van Gend en Loos stipulates that while direct effect cannot apply before the end of the implementation period for the directive, if a directive has been implemented incorrectly then the status of the implementation period does not matter and direct effect can be ascribed to the piece of legislation as it stands. In the mean time member states have an obligation to refrain from “taking any measures liable to seriously compromise the result prescribed by the directive.”
This does however hinge upon the idea that Frank’s case is against an emanation of the state. His case would seem to be an instance of vertical direct effect, which provides a means of redress for an individual against a state body. Frank’s action against the University of Northern Ireland comes under this heading, since the university is an emanation according to the definition set down in the judgement of the ECJ in Case188/89 Foster v British Gas, in which an eminaton of the state is defined as ‘a body, whatever its legal form, which has been made responsible, pursuant to a measure adopted by the state, for providing a public service under the control of the state…’ The same judgement goes on to explain that such a body is ‘included in any event among the bodies against which the provisions of a directive capable of having direct effect may be relied upon.’ The classification of the university as an emanation of the state is a matter for the national courts but the university should be construed as an emanation of the state either through the manner in which the university was founded or on the grounds of the part funding of services by the government and the legislation which secures this funding. Moreover, in Case C-419/92 Scholoz v Opera Universitaria di Cagliari  ECR I-505, an Italian university was found to be an emanation of the state. As with the case of National Union of Teachers v Governing Body of St Mary’s Church of England School  IRLR 242; ICE 334 (CA), a school is classified as an emanation of the state because it is a public institution regulated by the government and its various de-centralised agencies.
A defense position may be that since the choice of form and method with a Directive is left to the discretion of the individual member states all directives require further action and as such cannot be directly applicable. However in Minister of the Interior v Cohn-Bendit  1 C.M.L.R 543 the ECJ has not accepted this argument as it would make directives less effective than other forms of legislation within the EU. Since Frank’s case against the University of Northern Ireland fulfils the criteria set down in Van Dyn and it can be shown that the university constitutes an emanation of the state his case qualifies for vertical direct effect and so he has the right to access the rights set down in the ‘Protection Against Untrue Advertising Directive’.
It could be argued that Frank’s right to the ‘Protection Against Untrue Advertising’ should be guaranteed under Art.5 EC which asks that member states ‘take all appropriate measures to ensure the fulfilment of their community obligations.’ This was the view taken by the court in Case 14/83 Von Colsen and Kamann v Land Nordrhein-Westfalen which dealt with the issue of the application of direct effect of a Directive.
Mary’s case on the other hand cannot be claimed as direct effect as her claim is made against an organisation which is wholly separate from the state. Indirect effect is a doctrine rather than a Community provision and a directive may not be vertically directly effective but can still have indirect effect.
The book company with whom Mary has a contract is not an emanation of the state; rather it is a legal entity. Her case however, could be argued on the grounds that the UK courts have an obligation to interpret national law so as to comply with the unimplemented, or more accurately, incorrectly implemented Directive.
As demonstrated in the sex discrimination case of Von Colson and Kamann v Land Nordrhein-Westfalen  ECR 1891 (C-14/83), the ECJ requires that national courts must, under Article 5 EC, ‘take all appropriate measures’ to fulfil their treaty obligations. This is limited however to the implementing law only. Furthermore in Case C-106/89 Marleasing SA v La Comercial Internacional de Alimentacion SA  ECJ, in which the ECJ upheld the decision of Vol Colson and went further to say that ‘It follows that, in applying national law, whether the provisions in question were adopted before or after the directive, the national court called upon to interpret it is required to do so, in so far as possible, in the light of the wording and purpose of the directive in order to achieve the result…’ as long as there are ‘safeguards equivalent throughout the Community.’
A feature that we also see in Case C-32/93 Webb v EMO Carriers  as well as Marleasing is that regardless of the date of the national legislation, a purposive approach should be taken in interpreting national law whither it was adopted before or after the Directive.
Since the UK failed to fully implement the ‘Protection Against Untrue Advertising Directive’ before the 1993 deadline but instead transposed into national law a piece of legislation which protects against untrue advertising within the financial sector, Mary’s case could be argued on the grounds of indirect effect. With the emphasis on a purposive approach to interpretation and the already established primacy of EU law, Mary would ask that the court take a purposive interpretation o the ‘False Advertisements Act 1992′ which fulfils the Directives obligations in everything but scope. In Mary’s case this would mean the ‘Financial Institutions’ which are traditionally interpreted as banks, credit unions, building societies, or any institution through with people can borrow or save money would be given a much broader meaning. In this instance to comply with the duty of the member state to fulfil their community obligation, the national legislation which offers protection from ‘false advertising by banks and other financial institutions’ could be interpreted to construe ‘financial institution’ as any private (shareholder-owned) or public (government-owned) organizations that provides a service to a client in exchange for a cash amount as a consumer product.
This interpretation would afford Mary a method of redress and also ensure that Mary is entitle to civil liability in the form of compensation, as was found in Case C-456/98 Centrosteel v Adipol  AG Jacobs, which states that “ national courts must nevertheless interpret national law, as far as possible, in the light of the wording and purpose of relevant directives. While that process of interpretation cannot…have the effect of determining or aggravating criminal liability, it may well lead to the imposition upon an individual of civil liability or a civil obligation which would not otherwise have existed.”
The Centrosteel case while providing Mary with an avenue for civil liability, does preclude her from claiming any sort of dishonesty or malice for the failure to implement as the ‘process of interpretation cannot…have the effect of determining or aggravating criminal liability…”
Moreover, a defence argument for the notion that indirect effect does not apply in this instance because the History Book Club is an independent organisation, which was following the letter of UK law. As seen in Case C-168/95 Criminal Proceedings Against Luciano Arcarro  where it “leads to the imposition on an individual of an obligation laid down in a directive which has not been transposed.” They may not be able to be held accountable for the failings of the Government to effectively transpose the Directive into national legislation.
In addition to this, in Case C-334/92 Wagner Miret  the ECJ expressed that the national court should decide if it could give a ‘consistent interpretation’ to the Directive ‘without dictating’ the result, it went on to state that ‘National courts should strive as far as possible to interpret their national law so as to give effect to EC law, but ultimately “action against State in damages may lie instead”
Both Frank and Mary’s cases focus on the importance of the primacy of EU Community Law, as demonstrated in cases such as Van Gen den Loos and Defrenne v. Sabena. While the UK has made some effort to implement the ‘Protection Against Untrue Advertising Directive’ it is not enough to remove libability. Mary and Frank have both suffered a financhial law as a direct result of the UK’s failure to implement and it is demonstrated in cases such as Case C-178 Dillenkofer and others v Federal Republic of Germany ECR I-4845, that the failure to implement is not a viable excuse for a member state. The result of this is that both Frank and Mary may be able to claim state liability for their loss.
The idea of state liability was explored in Case C-6 Francovich and Bonifaci v Republic of Italy  ECR I-5375, in which the ECJ set down a compensation for workers in the event of the insolvency of their employers, the Italian Government was found to have failed to implement directives which would have protected the workers. This is markedly the same as the case of Frank and Mary, by failing to implement the ‘Protection Against Untrue Advertising Directive’ the UK Government left Frank and Mary unprotected under the law for their contracts.
Any break of EU law potentially creates state liability, and while there is a possibility that Frank and Mary’s case will attach state liability this is predicated on the fact that the UK made a singular mistake in its implementation of the Directive. However, if every member state did not interpret the Directive correctly, or in the manner in which it was intended then the scope of liability is more limited. If the state in question was not the only state to mis-interpret the requirements of the Directives then state liability does not attach. In this case the court will use a discretionary power set out on the R v H.M. Treasury ex parte, British Telecommunications plc  ECR I1631, where the UK failed to implement a Directive into national law, and the Case C-46/93 Brasserie du Pêcheur  ECR I-1029.
Member states cannot however, wilfully choose to mis-interpret the Directives, they are obliged under the definition of co-operation set down in Article 5 EC that ‘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.’ Further to this in Case C-46/93 Brasserie du Pêcheur  ECR I-1029 found that if a breach of Community law is attributable to a mistake made by the Government of the member state, citizens of that member state who suffer a loss as a ‘direct result’ are entitled to compensation and reparation where the ‘law breached is intended to confer rights upon them’ the breach is sufficiently serious and there is a direct causal link between the breach and the damage sustained by the individuals
Given the wording of Article 1 of the ‘Protection Against Untrue Advertising Directive,’ as provided, it would seem unlikely that any breach of EC law was accidental given that the article makes no reference to financial institutions, which means that the interpretation of the article to refer solely to financial institutions has been inferred by the member state. In this instance it is likely that the breach would be considered ‘sufficiently serious and the attachment of state liability would be made as it was in the case R v Ministry of Agriculture, Fisheries and Food ex parte, Hedley Lomas (Ireland) Ltd  ECR I-2553**
Sufficienty Serious Breach
The main issue which dictates state liability is the issue of a ‘sufficiently serious’ breach. If the provisions of the Directive to be enacted are clear and precise, and if the member state has little discretion in the result which is to be achieved then this can be termed a sufficiently serious breach using the criteria set down in Hedley Lomas. This was expressly stated in the Factortame decision in the House of Lords.
The decisive test for finding that a breach of Community law is sufficiently serious is whether the Member State concerned manifestly and gravely disregarded the limits on its discretion…take into consideration include the clarity and precision of the rule breached, the measure of discretion left by that rule to the national or Community authorities, whether the infringement and the damage caused was intentional or involuntary, whether any error of law was excusable or inexcusable, the fact that the position taken by a Community institution may have contributed towards the omission, and the adoption or retention of national measures or practices contrary to Community law.
Alternitivly, if an enforcement action has been brought against the member state for the failure to implement the Directive then this constitutes an automatic ‘sufficiently serious’ breach. However, in the case of Frank and Mary, there is no indication of an enforcement action and as such a ‘suffiently serious’ breach cannot be assumed by the claimants. This was stated in the Factortame III decision, which says ‘On any view, a breach of Community law will be sufficiently serious if it has persisted despite a judgment finding the infringement in question to be established, or a preliminary ruling or settled case-law of the Court….’
Compensation If state liability can be established in Frank and Mary’s cases then the guidelines for comesurate compensation are based on the national system as set down in the judgement of Case 5/71 Aktien-Zuckerfabrik Schöppenstedt v. Council  ECR 975. This would be decided in a national court, and given the relatively small sums (under £5,000) this would likely be the Magistrates Court within Northern Ireland. Compensation can be claimed against the state if it was an ‘act or omission by an organ of the state that caused the breach.’ In this instance the failure of the UK Government to implement the ‘Protection Against Untrue Advertising Directive’ constitutes an ‘omission by an organ of the state’
In addition to this there is a possibility that the University of Northern Ireland and The History Book Club may have their own cases to make against the UK for loss of revenue, since by following the legislation as it stood they were following the law. The fact that they will have to refund Frank and Mary is the result of an ‘omission by an organ of the state.’
Case 26/62 Van Gend en Loos v Nederlanse Tariefcommissie
Case 43/75, Defrenne v. Sabena, 1976 E.C.R. 455
Case 271/91 Marshall v Southampton and South West Hampshire AHA
Case 11/70 Internationale Handelsgesellschaft GmbH
Case 106/77 Simmenthal SpA
Case 148/78 Tullio Ratti
Case188/89 Foster v British Gas
Case C-419/92 Scholoz v Opera Universitaria di Cagliari  ECR I-505
Case C-126/96 Inter-Wallonie ASBL v Region Wallonie 
Case C-14/83 Von Colson and Kamann v Land Nordrhein-Westfalen  ECR 1891
Case C-106/89 Marleasing SA v La Comercial Internacional de Alimentacion SA  ECJ
Case C-32/93 Webb v EMO Carriers 
Case C-456/98 Centrosteel v Adipol  AG Jacobs
Case C-334/92 Wagner Miret 
Case C-168/95 Criminal Proceedings Against Luciano Arcarro 
Case 51/76 VNO  ECR
Case C-178 Dillenkofer and others v Federal Republic of Germany ECR I-4845
Case C-6 Francovich and Bonifaci v Republic of Italy  ECR I-5375
Case C-46/93 Brasserie du Pêcheur  ECR I-1029
Case 5/71 Aktien-Zuckerfabrik Schöppenstedt v. Council  ECR 975
Case 8/81 Ursula Becker v. Finanzamt Munster Innenstadt  ECR 53
Mc Wirter v Attorney-General  C.M.L.R 882
National Union of Teachers v Governing Body of St Mary’s Church of England School  IRLR 242; ICE 334 (CA)
Minister of the Interior v Cohn-Bendit  1 C.M.L.R 543
R v H.M. Treasury ex parte, British Telecommunications plc  ECR I1631
R v Ministry of Agriculture, Fisheries and Food ex parte, Hedley Lomas (Ireland) Ltd  ECR I-2553
Article 119 EC
Article 249 EC
Article 234 EC
Article 10(5) EC
Treaty Establishing the European Union
Article 2 EEC
Industrial Law Journel, Volume 26 Emanation of the State: National Union of Teachers v Governing Body of St Mary’s Church of England School , September 1997
Industrial Law Journel, International & Comparative Law Quarterly (1979), 28: 319-353 Cambridge University Press The’Direct Effect’ of EEC Directives A.J Easson
Industrial Law Journel, Volume 22, No 2, June 1993, International & Comparative Law Quarterly
Sex Discrimination and Pregnant Women
Webb v EMO Air Cargo (UK) Ltd and SZYSZCZAK 22 (2): P133. (1993)
‘The Status to Be Accorded to Motherhood’: Case C-32/93, Webb v EMO Air Cargo (UK) Ltd, by Erika Szyszczak The Modern Law Review, P.860 1995
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