The principle of direct effect is a technique developed to guarantee the supremacy of EU law. It refers to the status of EU law and whether it can be directly enforced by individuals in their domestic courts. The criteria for determining whether a provision has direct effect was set out in Van Gend en Loos  as follows: the provision must be clear and precise, unconditional, and must not be dependent on any further action by a Member State or the EU.
In relation to directives, for a long time they were thought to not have direct effect as they require further action by Member States in the form of implementation, thus not meeting the criteria set above. Then the European Court of Justice decided in Van Duyn  that directives could have direct effect and set the criteria as follows: the directive must be clear and precise, unconditional, and the time limit for implementation must have expired. Establishing this prevents Member States from using their inactivity or failure to implement a directive as a defence. The fundamental issue is the time limit, which according to Ratti  must have formerly ended although Inter-Environment  later held that Member States must ‘refrain from taking any measures liable to seriously comprise the result prescribed’ by the directive during the implementation period.
With directives there is also the question of whether they have horizontal or vertical direct effect, which has been a difficult question for many years, with people being divided on the subject  . Vertical direct effect enables individuals to bring actions against the State whereas horizontal direct effect allows actions between two private individuals i.e. against another individual.
The case of Marshall  seemed to solve this debate, when it was held that “a directive may not of itself impose obligations on an individual…” This meant that directives were capable of only vertical direct effect and thus could only be used to bring actions against the State or “emanations of the state”  .
However, the court has at times allowed actions against individuals using what is known as ‘incidental’ horizontal direct effect. An example of this is Unilever v Central Foods  involving a private contract where the party relying on Italian law was held to be in breach as it didn’t give effect to the relevant EU law and EU law rights.
From this, we can see the shortcomings of direct effect such as where the time limit of a directive hasn’t expired, or if an individual wants to enforce a directive against a private party. In an attempt to fill these gaps, the principle of indirect effect was created. This places an interpretative duty upon national courts in order to ensure effectiveness of EU law. It was first seen in Van Colson  where it was held that domestic courts must “interpret their national law in the light of the wording and purpose of the Directive” once the implementation period is over. On the issue of horizontal indirect effect, the authoritative case is Marleasing  where it was held that indirect effect can be invoked in cases between private parties.
However indirect effect cannot be used where the national law is unambiguous or if it would increase a person’s criminal liability.
As a result of the unfairness that direct effect can sometimes lead to, the principle of State Liability was created. This is the notion that where an individual has suffered a loss as a result of a Member State’s failure to implement EU law then they can seek compensation from the State. It has been developed through case law of the European Court of Justice with reference to the obligations in Article 10 EC and Article 4 (3) TFEU. Compensation is not mentioned in the treaty articles but has been implied into the provision by the court.
One important thing to note is that compensation is awarded in national courts. The member state must however comply with the principles of equivalence, in regard to similar claims and effectiveness, in regard to respecting EU Law.  Whilst the remedy must be effective it should only be effective as to the criteria of a given Member State thus the amount awarded in compensation varies amongst Member States.
There are two tests used to determine State Liability. The first is the Francovich test  which applies where there is a complete failure by the Member State to implement the Directive. The following three conditions must be satisfied: the provision must have conferred rights on individuals; the rights must have been clearly defined; and there must be a causal link between the Member State’s failure to implement the provision and the loss suffered by the individual.
This test aimed to fill the vacuum where there is no direct effect available. However, it left open several questions and didn’t entirely fill the vacuum as it only applies in limited cases. This lead to the principle of State Liability being extended by subsequent cases.
Two such cases are Brasserie du Pecheur  and Factortame III. In these joint cases it was established that State Liability extends to situations where a Member State has failed to amend existing national legislation, where a Member State has implemented the Directive wrongly, and furthermore it applies in situations of direct effect as direct effect is only the minimum guarantee. The conditions for State Liability under this second test, known as the Factortame test, are as follows: there must be an infringement of a law conferring rights on individuals, there must be a sufficiently serious breach, and there must be a causal link between the breach and the loss suffered. However, there then came the question of what would constitute a sufficiently serious breach. The House of Lords considered this in Factortame V  and concluded that the breach must be ‘manifest and grave’.
Another relevant case is Courage Ltd  which showed that State Liability can be applied in circumstances involving two private individuals.
One last point to note is that in certain situations an incorrect decision on EU law can give rise to State Liability as the national courts have failed to protect an individual’s rights which have been granted under the Treaty.
From all these cases and the principles they have created, we can see that there is a clear link between direct effect and State Liability. But can it really be said that State Liability serves only one purpose, and that it is to counter the ineffectiveness of horizontal direct effect?
There are those that would argue that this is indeed true as the lack of horizontal direct effect means certain EU law rights given to individuals aren’t protected, and additionally, obligations placed on individuals aren’t upheld. As a result of the unfairness produced it is only reasonable that these individuals are able to seek compensation, and as the State is at fault for not enforcing these EU rights it should be liable for any loss suffered. Therefore, it can be said that State Liability was created only to amend the injustice caused by not allowing horizontal direct effect.
On the other hand, it can be argued that State Liability is a necessary principle of EU law as it also applies in situations of direct effect and in situations where national courts have made incorrect decisions on EU law. Based on the various circumstances in which State Liability applies, it can be said that it is a principle created not only for situations of horizontal direct effect, but to generally ensure that individual’s EU rights are upheld, and where these rights are not upheld or protected, that the individual is able to seek compensation for any loss suffered.
Therefore, in conclusion, I feel that State Liability is a genuine contribution to ensuring that individuals can enforce rights conferred upon them by European Union Law. To say that State Liability exists only to counter the ineffectiveness of horizontal direct effect would mean the many other situations in which State Liability applies and is useful are not given any importance. I say this as it allows individuals to be compensated in a variety of situations where the rights given to them by EU law haven’t been protected or upheld.
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