From Francovich to Brasserie du Pecheur - Essay Example

From Francovich to Brasserie du Pecheur Introduction: The doctrine of liability is one of the fundamental tenets of European Union law designed to ensure enforcement and implementation of EU law by the Member States. Whereas not envisaged by the original Treaties, the principle of state liability is a hallmark of judicial activism and pursuit of effet utile1 on the part of the European Court of Justice. As in the case of many other institutions of European law, the shape and functioning of state liability is subject to crucial limitations in the form of an attempt to maintain a fragile equilibrium between the enforcement and practicality of EU law, the protection of individual interests, and finally the maintenance of rather rudimentary supremacy of national legal systems. This gentle balance has been recently seen to tip in the favour of Member States which may be absolved of responsibility if the breach in question is not sufficiently serious. Hence, the original doctrine has been modified since inception, however, as any development in such a crucial area, it is problematic almost per se regardless whether the direction of change is considered positive or negative The case of Francovich2 first established liability that would rest upon a Member State for the infringement of individual rights. Since Francovich, a succession of cases3 have extended the principle of Member State liability to cover other instances where infringement of individual rights occurs under circumstances that could reasonably have been foreseen by the State. However, the Courts have also refined the Francovich principles such that a Member State is not liable in every instance for damages due to violation of Community law, especially when there is reasonable difference of opinion that may exist on the law itself and how the law as written is to be interpreted. Issues that are relevant in examining the refinement of the Francovich principle are (a) the need to establish a causal link between violation of community law by the State and the damages resulting to individuals (b) the relevance of Article 215(2) (c) the principle of res judicata4 and (d) the concept of fault. Francovich5 is a landmark case because it established the fact that European Community law confers certain rights on individuals and if there is an infringement of these rights by a Member State, then the State will be legally and financially liable and will have to make reparation to the individuals concerned for the losses and damages sustained by them due the Member State’s breach of Community law6. Application of national law where individual rights may be violated, will be limited by the obligation of the Member States to implement the EU Directives.7 Francovich, Bonfaci and others filed the suit against Italy for failure to implement the provisions of a European Directive that was not directly effective in Italy and required payment of unpaid wages to individuals in the event of insolvency of their employer. Italy was held liable for damages to be paid to the Plaintiffs. In specific reference to the damages sustained by individuals and the obligation of the Member State to assume liability, the Court relied upon Article 5 of the EEC Treaty in establishing that such a principle was inherent in the Treaty.8 State liability had earlier been established in other cases9, where the supremacy of individual rights had been established to the extent of requiring states to be liable if those rights were infringed. However, although the case of Francovich firmly established the principle of State liability in terms of implementing a Directive, it also provided loopholes by stating that establishing such liability would be dependent on the nature of the breach.10 It is necessary to keep in mind that a Directive, is to be binding on the member state while leaving “to the national authorities, the choice of form and methods.”11 Therefore, a Member State retains the right to choose the best means of implementation of a Directive to achieve the desired results. When a Directive remains unimplemented by a Member State and the Directive does not clearly identify who will be liable, then the causal link between the breach of the individual’s rights and damages sustained vis a vis (as compared to) such breach of Community law by the State must be clearly established before liability can be attributed to the State. Therefore, the basis upon which the Court stated its decision in this case established liability of the State only when it can be held responsible for infringement of individual rights through a causal link between its failure to act and the damages caused. Thus, while the Francovich principle of State liability does cover a breach of Community law under conditions where damages to individuals can be foreseen by member States, the qualifications in the judgment in this case also made it clear that a Member State will not be liable in every instance to compensate for losses, neither will it be liable when there is a reasonable doubt about the extent of the scope of application of Community law. According to the Francovich decision, a Member State’s liability to make reparation for losses suffered by individuals will be dependent upon its own laws, especially in the absence of Community legislation. Nonetheless, less favorable national laws cannot be a basis upon which a Member State can escape liability. Yet again, there are three conditions that must be satisfied before the liability of a Member State can be established12: (a) the law infringed must be such that its purpose is to confer rights on individuals (b) the breach of that right must be serious enough to merit punitive action and (c) there must be a causal link between the alleged breach and direct damage sustained by the injured party.13 The European Court of Justice has further developed the conditions under which member States could be held liable for breaching Community Law by establishing that the protection of individuals mandated under Community law cannot be conditional upon whether a Community authority or a national authority is responsible for the violation.14 Such damages and liability that may be imputed to a Community institution have been defined by the Court under Article 215(2). The original EEC Treaty does not contain any provisions on the breach of Community law by Member States. The grounds for resisting liability for damages caused to individuals in cases such as Francovich was based upon legislative limitations. In the absence of specific legal provisions in the EC Treaty, the decisions of the European Court of Justice in Francovich and subsequent cases had been rendered on the basis of the fundamental principles on which the legal system of the Community has been established, which are geared towards the achievement of unity and closeness among the European peoples15. The Court has drawn an analogy between the liability of the member states and the tortious liability of the Community institutions under Article 215(2). The provisions of this Article state that within a legislative context where the Community enjoys a wide discretion in the exercise of its powers including within the sphere of economic activities, it would be liable for violations of those powers and incur liabilities only when it could be firmly established that it had seriously disregarded the limitations of those powers and their attendant responsibilities. State liability may therefore be incurred regardless of which administrative section or body was responsible for the breach.16 This was also the position taken by the ECJ in the cases of Factorame II17 and Brasserie18. In both these cases State liability was found because the national legislature had been responsible for the breach in question - the State or institution had disregarded the limitations on its powers thereby causing damages and losses to individuals. This was sufficient to establish a required direct causal link between the breach and the damages suffered by the individual. In the case of Brasserie du Pecheur, suit was bought by a French brewery in view of the prohibition that existed in Germany, on the marketing of beers that did not satisfy the purity requirements that were laid out under German Beer Purity laws. The point at issue was whether such requirements were a violation of Article 30 of the EC Treaty. In the case of Factorame III, the point at issue were the provisions of Part II of the Merchant Shipping Act of 1988, which spelt out conditions relating to the nationality, domicile, etc of fishing vessels registered within the United Kingdom and were deemed to be in violation of Article 52 of the EC Treaty. Therefore, the first condition of the qualification of the national law as breaching the rights of individuals endowed by the Treaty was established. The German and UK legislatures enjoyed a wide scope of discretionary power in the implementation of their powers, the German legislature in regard to the quality standards of beer and the UK legislature in reference to the registration of vessels. The ECJ held that this discretionary power had been seriously disregarded. Preceding case law was drawn upon by the ECJ in arriving at its decision – in the Brasserie du Pecheur case, the Court referred to the Cassis de Dijon19 case and in the Factorame case, it referred to Commission v United Kingdom.20 On the basis of precedent, it was established that the member states (Germany and UK) had discretionary powers, however by ignoring the precedents set in prior cases which had spelt out the limits of State authority and by disregarding the similar principles upon which community law had been deemed to supersede national regulations, it was equivalent to their disregard of the limitations on those powers. But in these cases also, while the ECJ held that national rules could not be less favourable to individuals than Community laws and thereby dismissed the actions of the German and UK Governments, it still left a loophole that remained unplugged after Francovich – i.e, the extent of liability of the Member States could be determined by national Courts. Hence it was made more difficult for individuals to obtain reparation for damages or losses, since a national judiciary would be bound to uphold the laws passed by the legislature of the member States and would be slow to impute liability on the member State. In both Brasserie and Factorame, the Courts were prevented by their own laws from awarding damages to the individuals in question.21 This limitation existed within the legislative context of Member state liability, from Francovich to Brasserie du Pecheur as well, since the ECJ established that it is only when it may be shown that a Member State has seriously disregarded the limitations on its powers that it will be held liable. The determination of a breach of Community law was to be adjudicated in accordance with the circumstances, thereby there was flexibility accorded for each individual case. Moreover, by retaining the power of national Courts to determine Member State liability, the ECJ upheld the principle of legal certainty and res judicata22, which was a further aid to Member States in eschewing liability in the case of every breach of Community law. When breach to community law is caused through judicial action, the principle of judicial immunity from liability has thus further expanded the scope of the Member States to escape strict liability. Also, as pointed out by Craig and De Burca23, the field of Justice and Home Affairs within the European Community has been hitherto held to be exclusive of EC law, but under the Treaty of Amsterdam in 1997, this third pillar has slowly become more closely linked with institutional structure. The cases cited above also raise the issues of conflict of EC law with State law and the extent to which the independent judiciary of a Member State can be held liable for damages sustained by individuals. In the recent case of Kobler v Austria24, Member States presented the argument that the independence of the judiciary – based upon the principle of legal certainty and res judicata in fact precluded State liability. The European Court of Justice made allowance for this principle of legal certainty by clarifying that where an individual’s rights had been breached and the causal connection between the breach and losses could be established, then a restorative remedy would be required rather than a revision of the decision of the court of last instance of a Member State.25 The Court’s decision in Kobler v Austria has underlined the role of the Courts of Member States as arms of the Community courts or specifically the ECJ which are required to ensure the application of Community law in the member states and where necessary, impute State liability, which is a recent extension and clarification of the Francovich principle to address the issue of res judicata. The question of liability of a State for incorrect or improper implementation of an EC Directive was also an issue in the case of R. v. H.M. Treasury26 and in the case of Hedley Lomas.27 The case of R v H.M.Treasury, ex parte British telecom28 concerned the incorrect implementation of a Directive for which State liability was imputed by the Plaintiff and the case of Lomas concerned the rights of the applicant which had been breached by a national authority under the provisions of Article 34 of the EC Treaty. In the case of British Telecom, the Court held that the same test that had been set up in Factorame would apply, i.e, was the State guilty of disregarding the limitations on the exercise of its powers? In this case also, the Court upheld the principle that the national Courts were to determine liability of the State, but in this instance the Court was of the view that such grave disregard had not been shown by the U.K. It was the view of the Court that the provision of the Directive which was being implemented was “reasonably capable of bearing ... the interpretation given to it by the United Kingdom in good faith and on the basis of arguments which [were] not entirely devoid of substance.”29 In the case of Hedley Lomas, the court was able to establish the first provision – that there had been a breach of Article 34 and therefore a potential breach of rights accorded to individuals under EU law, thereby direct effect was relevant and applicable. However, the Court was of the view that the deliberate disregard of the Member State to the limitations on its powers could not be clearly established and it followed the principle in earlier cases such as Brasserie and Factorame, to let the national courts adjudicate upon the matter of liability. One of the most important developments in the Brasserie case which was left undefined in the Francovich case is the concept of attributing fault before liability can be established. Craig has also pointed out that in the Brasserie and Factorame cases, the ECJ held that the finding of a serious breach would depend upon “objective and subjective factors connected with the concept of fault.”30 This is one of the most important distinctions between Francovich and Brasserie, since it raises the issue of whether a Member State will be subject to strict liability for a breach of community law or whether the element of fault must first be demonstrated. This has further widened the scope of limitation of State liability. Francovich did not clarify the concept of fault, however subsequent cases such as Brasserie and British Telecom have established that where discretionary executive powers of member States exist and where the meaning of the Community Directive is not precise, “illegality per se will not suffice to create liability.”31 Hence it seems that some fault is needed in addition to illegality of State actions. On this basis, it may be noted that the principle of State liability that was mooted in Francovich through the non implementation of a Directive has been further clarified through being applied in more complicated contexts. The case of British telecom dealt with the timely implementation of a Directive, while the case of Lomas dealt with the decision of an executive of the Member State administration that was in breach of an EC Directive. Factorame concerned the question of State liability within the context of a legislative act, while the case of Brasserie du pecheur dealt with a legislative omission. Based upon the judgments in the cases above, it may also be seen that the parameters of State liability have been redefined. The supremacy of Community law over national law, especially where the provisions of the EC Treaty according rights to individuals are breached, has been established by all these cases. However, while Francovich did not deal with the issue of fault in attributing liability for the State, Brasserie du pecheur indeed did. State liability has been deemed to be conditioned by (a) whether there was an issue of individual rights provided by the EC Treaty at stake (b) whether the Member State had shown a blatant disregard for the limitations of their discretionary powers and (c) the treatment on par - of member State liability and tortious liability of the Community institutions accorded under Article 215(2). Finally, the ECJ in most of the cases has upheld the right of national courts to determine whether Member State breach of community law is sufficiently serious to impute liability in provision of damages, however if the provisions of the national law are too restrictive then the Community law is to reign supreme where individual rights are infringed. On this basis therefore, it may be noted that State liability has not been adjudicated on a strict liability basis and cannot be applied in the case of every breach of Community law. Illegality as such will not automatically create liability, it is first necessary to establish that the breach was sufficiently serious and that the Member State was at fault, having been guilty of an abuse of its discretionary powers. The salient aspects that are highlighted through these decisions is that Community law is supreme, individual rights have priority over the legislature and executive of member states, however liability of the Member State must be demonstrated to be sufficiently serious. Craig has argued that the test of liability as established by the Courts is the correct approach32 – i.e, that an ultra vires act will not itself impute liability. While Community law must have precedence over national laws in order to achieve the goals of integration and individual freedoms laid out in the Treaty, it is vital that any action against the State be properly substantiated before liability is imputed. The ascribing of strict liability would place too much of a burden on the State and create an unacceptable degree of interference of judicial authority into legislative policy which needs to take into account varied and diverse aspects in implementation. It would also undermine the authority and sovereignty of the Member States through an unacceptable level of interference by the ECJ. Amtenbrink has also pointed out how the decision in Kobler v Austria has rendered decisions of national courts virtually meaningless33. Green and Barav have, however, pressed for an enhanced role of the Community to further the goals of integration of the Treaty34. Davis has highlighted the problems arising out of the need to establish a direct causal link between a breach of individual rights and state action before liability can be established, arguing that a concept of vicarious liability may be more appropriate to ensure justice to individuals.35 He also points out the difficulties in ascribing the entire Community or an entire member State as one unit and imputing liability irrespective of which arm of the administration is responsible for the breach. The rights of the individual have been accorded the highest priority under Community law. In furtherance of the goal of integration of the European Community, the supremacy of Community law must stand. Imputing liability on Member States on an indiscriminate basis however, creates an onerous burden on Member States where the action of an individual executive or official may create liability, or where the ramifications in passing of laws may create untold difficulties for Member States in redesigning laws. However, the approach of the ECJ in cases from Francovich to Brasserie du pecheur appears to be appropriate, since it has established some conditions that must be fulfilled before Member State liability can be established. It has also adopted the right approach in leaving it to national courts to determine whether a breach of Community law is sufficiently serious. The other side of this coin however, is the fact that individuals may be left with little remedy if national courts of last instance deny their claims. But, the ECJ decisions have clearly established that individual rights cannot be breached – they will have priority and liability will exist when a causal link can be established. Therefore, the ECJ’s decisions and test of liability offers a balanced approach wherein the rights of individuals and States are taken into account, while also establishing and safeguarding the supremacy of Community law. Bibliography Cases: * Andrea Francovich and Danila Bonifaci and others v Italian Republic, Joined Cases C-6/90 and C-9/90, European Court Reports 1991 page I-05357 * Brasserie du Pecheur SA v Germany (C46/93) [1996] E.C.R. I-1029 (ECJ) * Case 60/75, Russo v. Aima [1976] E.C.R. 45 at 9 * Case 120/78, Rewe-Zentral (""Cassis de Dijon") [1979] E.C.R. 649 * Case 193/80, Commission v. Italy (Re Vinegar) [1981] E.C.R. 3019 * Case C-246/89, Commission v. United Kingdom [1991] E.C.R. I-4585 * Case C-5/94 R v. Ministry of Agriculture, Fisheries and Food, ex parte Hedley Lomas (Ireland) Ltd, The Times, June 6, 1996 * Kobler v Austria (C224/01) [2003] E.C.R. I-10239 (ECJ) * Laboratoires Pharmaceutiques Bergaderm SA (C-352/98 P) [2000] ECR I-5291. * R. v Secretary of State for Transport Ex p. Factortame Ltd (C48/93) (1996) * R. v Secretary of State for Transport Ex p. Factortame Ltd (C48/93) (1996) * R v H.M.Treasury, ex parte British telecommunications Case C-392/93 R. v. H.M. Treasury, ex parte British Telecommunications Plc [1996] 2 C.M.L.R. 217 Books/Journals: * Amtembrink, Fabian, 2004. “ECJ examines State liability for National judgments: Kobler v Austria” EU Focus, 137, p 4-6 * Craig, Paul P, 1997. “Once more unto the breach: the Community, the State and Damages Liability” Law Quarterly Review 113, pp 67-94 * Craig, Paul and de Búrca, Grainne, 2003. “EU Law: Text, Cases and Materials” (3rd ed). Oxford: Oxford University Press. * Davis, Roy W, 2006. “Liability in damages for a breach of Community law: some reflections on the question of who to sue and the concept of ‘the State’.”European law review, 31 (1), pp 69-80 * Green and Barav, 1986. "Damages in the National Courts for Breach of Community Law" 6 Y.E.L. 55 * The EC Treaty Read More