⇒ EU law does not prescribe specific remedies but in order to be effective has required some modifications to national law.

• Interim Relief; Challenge to Statutory Provisions; Damages; Restitution; Time Limits; State Liability

⇒ A group of ex-employees seeking arrears of wages following their employers insolvency.

• So the company they previously worked for has gone bankrupt and they are looking for the wages they are owed

⇒ Directive 80/987 required Member States to provide for a guarantee fund to ensure the payment of employees’ arrears of wages in the event of employers’ insolvency.

• A claim against a former employer would be fruitless – you cannot claim against a bankrupt, as they have no money
• So the state should’ve implemented this directive, but they didn’t
• If they had done the employees would have been able to rely on the directive to get their money back

⇒ Brought proceedings against the state

⇒ 2 Claims:

• The state had breached the claimants’ rights contained in the directive (which they claimed were directly effective)
• The failure of the state to implement, as required under Art. 288 TFEU & Art. 4 TEU.

⇒ Under Article 258 proceedings the ECJ had already held that Italy was in breach of its obligations (Commission v Italy)

⇒ First claim failed (i.e. it was not directly effective), as Directive was not sufficiently clear, precise, and unconditional i.e. did not fulfil VG en Loos criteria

⇒ But what the ECJ decide is that where a state has failed to implement an EU directive it would be obliged to compensate individuals for damage suffered if:

• The directive involved rights conferred on individuals;
• The content of those rights could be identified on the basis of the provisions of the directive; and
• There was a causal link between the states failure and the damage suffered by the persons affected.
• This makes up the Frankovich test for state liability

⇒ Courts reasoning based on:

• Member States under an obligation to implement directives under Art. 288.
• Jurisprudence in Van Gend & Costa that certain provisions are intended to confer rights on individuals i.e. direct effect
• National courts are obliged to provide effective protection for those rights (Simmenthal & Factortame)

⇒ Frankovich principles updated in this case

⇒ ECJ held that state liability not confined to a failure to implement directives but all acts and omissions of Union law that could lead to liability. So long as;

• The rule of law infringed must be intended to confer rights on individuals (this reaffirms 1st point of Frankovich)
• The breach must be sufficiently serious (departure from Frank!)
• There must be a direct causal link between the breach of the obligation resting on the state and the damage sustained by the injured parties (similar to 3rd point of Frankovich)
• “The factors which the competent court may 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.”
• They have to ask was the damage intentional or involuntary? Has it been caused by another Community institution e.g. the commission? And are these practices in general contrary to Community law?

⇒ How widely is the State conceived of in general?

⇒ Actions by government are clearly covered. What about other institutions?

• Commission v Belgium - bind all agencies and organs of a MS even those that are constitutionally independent
• Medical association of doctors held to be part of the State

⇒ An individual official may be liable in addition to the MS for any breaches of Union law.

• Safety inspections and public announcements leading to fall in sales.
• If what he said was presented as official rather than personal opinions could lead to state liability
• So if he acted in an official capacity then he could be liable

⇒ Working in Austria

⇒ Austrian legislation – if you’ve been a professor for 15yrs you get a bonus

⇒ He’d been professor for 15yrs but not in Austria, so felt this discriminated

⇒ Köbler brought a case alleging the Austrian Supreme Court had failed to apply EU law correctly.

⇒ ECJ decided courts can be implicated under the Francovich test.

• National courts that make incorrect decisions, or don’t refer to ECJ when they should, can be liable for state liability
• This is effectively creating an appeals system! And we know there isn’t one in the EU, but this seems what we are moving towards!

⇒ Courts must be adjudicating in the last instance (it has to be the last time this is able to be appealed e.g. Supreme Court in UK) for it to be liable for state-liability

• Emphasis on the mandatory jurisdiction of such a court to request a preliminary ruling – so it encourages the court to use A267 proceedings rather than just do what they wish
• Only where the court has ‘manifestly infringed the applicable law’.
• Not limited to intentional fault or serious misconduct (Traghetti case) – so need not be by purpose; can be accidental

⇒ Is the finality of judgments undermined by imposing state liability on courts?

• ECJ says findings of state-liability would NOT overturn the national court’s decision
• But, of course, would undermine judgment though – making them liable would make the national court look stupid
• Would this undermine the independence or authority of the judiciary?
• ECJ said it will enhance the effectiveness of the judiciary – national courts will be under more pressure to make correct decisions and invoke EU law

⇒ For there to be state liability the measure must confer rights i.e. give rights to the citizens

⇒ Peter Paul v Germany:

• Failure of German banking supervisory authority to correctly supervise a bank.
• They were under an obligation to ensure supervision was not combined with an independent right to compensation.
• Court decided that even they were under an obligation to supervise, this would not lead to a case of state liability
• The right would have to be clearer e.g. an unimplemented directive, like in Frankovich

⇒ For state-liability to arise it is not necessary for the infringement of EU law to have been established by the ECJ under Art. 258

• In Frankovich, for example, prior to the decision, Commission took Italy to court and it was found they acted outside the confines of the Court - This is not necessary under EU law!

⇒ Nor is it necessary to prove fault on the part of the national institution concerned going beyond that of a sufficiently serious breach of EU law.

• So you do not have to prove the national institution intended to do it, it just needs to be a sufficiently serious breach of EU law

⇒ The institution must have ‘manifestly and gravely’ exceeded the limits of its discretion

⇒ The breach must be ‘inexcusable’

• Given the lack of clarity at times of Union law, and that MSs are obliged to respect it, it is submitted that the crucial element of Brasserie du Pêcheur will be the clarity and precision of the rule breached.
• In other words, sometimes Union law is not very clear an precise – an in those circumstances, where the EU measure is unclear or lacks precision, the State’s action may be excusable as it may be possible to have read the measure in a number of different ways

⇒ BT alleged improper implementation of a Directive

• This had financially disadvantaged them.
• Found that although the UK implementation was in breach of the directive the relevant parts were sufficiently unclear as to make the UK’s error excusable
• So they decided there would be some directive that aren’t clear or precise enough to establish a claim for state liability
• The court said the article in question was “imprecisely worded” = lacked clarity and precision
• So, the directive was not clear/precise enough to establish claim for State liability
• ‘A restrictive approach to state liability is justified… to ensure that the exercise of legislative functions is not hindered by the prospect of actions for damages whenever the general interest requires the institutions or Member States to adopt measures which may adversely affect individual interests.’

⇒ Claim for damages by an exporter for losses suffered as a result of a UK ban on exporting live sheep to Spain.

⇒ Ban had been imposed following complaints from animal welfare groups that Spanish slaughterhouses did not comply with a council Directive (so, the Spanish slaughterhouses were not up to the right conditions)

⇒ Spanish authorities had implemented the said directive, but had no method of ensuring its compliance.

• So the Spanish authorities had implemented the directive, but had no remedy to make people comply with it

⇒ The UK raised the matter with the Commission but decided not to raise it as an action under Art 258.

⇒ UK ban itself was in breach of Art 35 and could not be justified under Art 36 as the UK had provided no evidence.

⇒ This breach was found to be sufficiently serious under Francovich.

• The UK’s breach on banning exporting live sheep was found to be a sufficiently serious breach of EU law

⇒ ‘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 EU law may be sufficient to establish the existence of a sufficiently serious breach’.

• So if there is any infringement of EU law (E.g. ban on free movement of goods counter to EU law) may trigger the sufficient seriousness to bring a claim in state liability

⇒ Germany’s failure to implement a directive designed to protect consumers in the event of travel organisers’ insolvency was ‘sufficiently serious’

⇒ Faulty implementation of a directive in this case

• Followed its reasoning in BT and decided that the directive lacked clarity and precision
• Case law also lacked clear guidance.
• So, Germany’s breach could not be regarded as sufficiently serious.
• So when looking at sufficiently serious meaning, we must look at case law and look at whether the directive was clear and precise

⇒ Although the ECJ has concluded whether a breach was sufficiently serious to give rise to liability this should be left up to national courts.

• ECJ should give guidance (in accordance with Art. 267)
• So any cases of state liability go back to them to decide whether there was sufficient seriousness or state liability!
• SO the national court have to be the ones to say they have made a sufficiently serious breach and are liable as a state!

⇒ ‘Where the MS was not called upon to make legislative choices, and had considerably reduced, if no discretion, the mere infringement of [EU law] may be sufficient to establish the existence of a sufficiently serious breach’.

• So where the MS has no choice in terms of legislation and no discretion, if they infringe EU law they may be liable
• Again it was left it to the national court to decide

⇒ If national courts are to assess the seriousness of a breach it is crucial that the guidelines are clear/make sense

• Brasserie du Pêcheur – guidelines pretty clear
• Hedley Lomas – ‘mere infringement’ clouds the issue.
• This idea of a mere infringement was said to be only applicable in conjunction with Brasserie du Pêcheur

⇒ Even if there is some ambiguity in the text of the relevant measure the BT approach (i.e. where a provision is unclear or not precise) will not be followed if the ECJ has already interpreted that issue and the MS has failed to follow that provision.

• EU seems to be moving a precedent based system since Costa

⇒ Schmidberger v Austria

• Advocate-General Jacobs
• Necessary to establish loss or damage which is attributable, by a direct causal link, to a sufficiently serious breach of EU law.
• This includes a right to claim for lost profit e.g. lost some money you would have potentially made
• Willing to accept that it may not be quantifiable in which case a flat-rate will be used
• Flat-rate system used when you cannot determine damage that might have been caused my MS

⇒ R v Secretary of State for Transport, ex parte Factortame Ltd (No 5) [1998]

• Hobhouse LJ concluded that the UK breach was serious enough to warrant liability. Sufficiently serious because:
• The UK had introduced the measures in primary legislation in order to ensure that the implementation would not be impeded by legal challenge
• The Commission had advised against the legislation.

⇒ Lord Slynn

• Dissenting judgment
• The views of the Commission should not be conclusive proof as to
• Whether there has been a breach of Union law
• Whether the breach was sufficiently serious to justify an award of damages.

⇒ Direct effect – No need to consider whether something is ‘sufficiently serious’.

⇒ Can state liability be used in preference to direct and indirect effect?

• Used where there is a gap in protection (Faccini Dori)
• A corollary of direct effect (Brasserie du Pêcheur)
• An approach of last resort (Lindöpark)
• Important to talk about direct and indirect effect before you talk about state liability in questions!

⇒ State liability remains a hybrid – part national law, part EU law – with national courts ultimately responsible for applying the conditions of a particular case.

• National courts decide:
• Whether the breached law was intended for the applicant
• Whether there was a link between the breach and the damage
• Whether the damage suffered was a type for which damages can be awarded.

⇒ A principal of liability for acts in breach of EU law, clearly breaks new constitutional ground in most if not all MS’s.

• As a consequence, it is unlikely to be applied overwhelmingly in practice – National Courts unwilling to use it often

⇒ National law may lay down specific conditions, provided they do not make it impossible or excessively difficult to obtain compensation caused by a MS’s breach of EU law.

• Finnish limited to damage caused by criminal offence, the exercise of public authority, other especially serious reasons.
• So they said they will only use state liability if there is any of the 3 things above
• ECJ said this was too restrictive.
• Any limitations on the ability to obtain compensation likely to be seen as too restrictive under the Lehtinen case