Horizontal DIrect Effect to European Union - Assignment Example

To What Extent Would Conferral of horizontal direct effect to European Union Directives be a desirable legal development? The Treaty of Rome 1957 officially created the European Union (EU), with the promotion of social and economic harmony as its primary objective. The Treaty of Rome has been revised three times and the 1992 Maastricht Treaty created a new European Union radicalising the notion of European Economic Community and the European Single Market into European Community law1. This was subsequently ratified by the Treaty of Amsterdam (the Treaty). Whilst the original purpose of the EU was “to create political unity within Europe and prevent another world war….. it is the EEC (now known as the EU) that has had the most significance, particularly for law”2. It is submitted that economic integration and the policy making of the EU is inherently dependent on legislation and therefore a central issue of importance is the ability of the EU institutional framework to effectively implement and regulate EU economic objectives at national level3. As an initial observation, Baimbridge and Whyman posit that the organisational model of the EU with the roles of the Commission, European Parliament and the European Court of Justice is its inherent weakness in achieving EU harmonisation4. In supporting this argument, they refer to the EU regulatory model as the democratic deficit of the EU framework “in terms of direct influence afforded to European citizens over the decision making process of the principle institutions”5. As such, the institutional framework clearly lends itself to conflict with the national political framework of member states particularly in light of the status and impact of EU initiated legislation on the national framework particularly Directives. The focus of this paper is to critically evaluate the extent the legal status of directives and in particular the extent to which conferring horizontal direct effect on EU Directives would be a desirable legal development. In evaluating this debate, this paper will firstly evaluate the impact of EC Directive and horizontal direct effect in on UK national law. Firstly, the implementation of the European Communities Act 1972 (ECA) expressly incorporated EC law into national law, creating what has been termed the “new legal order6”. Indeed, Lord Denning MR presiding in the case of H.P Bulmer Limited v J Bollinger SA7 asserted that the effect of the ECA was to ensure that “any rights or obligations created by the treaty are to be given legal effect in England without more ado”8. As such, Lord Denning stated that EC law was directly applicable at national level under domestic law. However, the term “directly applicable” has created ambiguity and the principles of direct effect and indirect effect determine whether a Council Directive is directly applicable under UK law9. As such, the somewhat artificial distinction between direct and indirect effect has fuelled debate as to the issue of whether Directives should be accorded horizontal direct effect status in order to enable enforceability against individuals10. From a statutory perspective it is evident that if a provision of EC law is directly applicable, section 2(1) of the ECA asserts that “all such rights, powers, liabilities, obligations and restrictions…… shall be recognised and available in law, and be enforced, allowed and followed accordingly.” With regard to Directives, the specific nature of directives lies in the type of obligations they impose11. Ultimately Member States have discretion as to how to implement a Directive, however they must comply with the positive obligation to implement the directive in the first place12. Problems have arisen as to whether Directives themselves can be invoked by individuals in national courts as giving rise to individual rights13, further compounded by the question as to whether a Member State can be liable for damage resulting from its failure to implement a directive. In order for EC legislation to be directly effective, a provision of EC law must constitute a complete legal obligation capable of enforcement as such by a court14. Moreover, in the case of Francovich v Italian Republic15, it was asserted that the pre-requisite for direct effect was that the relevant provision of EC law had to be sufficiently precise and unconditional. Furthermore, in the case of Van Gend En Loos16, it was asserted that: “The wording of the…….. [EC Treaty] contains a clear and unconditional prohibition which is not a positive but a negative obligation. This obligation, moreover, is not qualified by any reservation on the part of the States which would make its implementation conditional upon positive measure enacted under national law………which makes it ideally adapted to produce direct effects in the legal relationship between Member states and their subjects.17” However, this initial approach of limiting the applicability of direct effect to negative obligations has subsequently been abandoned and extended to cover a wide range of EC law, in particular Treaty provisions18. With regard to Directives however, the controversy as to whether these are directly effective has continued to exercise EC judicial authorities in practice, supporting the need to implement certainty through the recognition of directives as directly effective through the doctrine of horizontal direct effect.19 For example, in the leading case of Van Duyn20, it had been argued that as directives included obligations of result and not conduct, coupled with the fact that only regulations were expressed to be “directly applicable” under the EC Treaty provisions; they were not capable of judicial enforcement under national law. However, this argument was emphatically rejected and the European Court of Justice (ECJ) asserted that: “If …….. By virtue of the provisions of [Article 189], regulations are directly applicable, and consequently, may by their very nature have direct effects; it does not follow from this that other categories of acts mentioned in that article can never have similar effects21”. It has been further commented that while this decision may have signified a subtle foundation for arguing the direct effect of directives, “subsequent developments have rendered this doctrinal shift irreversible22”. Moreover, in the case of Marshall v Southampton and South West Hampshire AHA23 (Marshall II) the Court asserted that the fact that a directive gives a choice to Member States as between alternative methods of attaining a given result does not necessarily mean that the provisions in question are not capable of judicial enforcement under the principle of direct effect. Furthermore, it was also asserted in Marshall II24 that once the state had chosen pecuniary compensation as the means by which it would implement a provision, it was then bound to provide an effective compensatory remedy. As such, it had no discretion in applying the chosen solution and in reaching this conclusion the Court effectively widened the scope of direct effect, combining it with effective remedies25. Additionally, the effect of the Marshall litigation was that Directives did not have horizontal direct effect on the grounds that Directives were not addressed to individuals. As such, the general position is that individuals cannot enforce Directives against other individuals, which has rendered the public/private body distinction of extreme importance when determining the scope of Directive enforceability at national level26. This distinction is of extreme importance if we highlight the contrast between the position of individuals as against the state under vertical direct effect. For example, under the Marshall rationale, it would appear that a Directive is capable of being directly effective based on the positive obligation of the UK government or state bodies to implement a Directive. Additionally, the Marshall decision was based on the rationale that whilst the directive in that case had conferred discretion as to the method of implementation, the state had itself chosen to offer pecuniary compensation as its preferred method of implementation. Accordingly, once the state had chosen this method, it was under a positive duty to implement this and enabled individuals to claim institute proceedings against the state or public bodies under the doctrine of vertical direct effect. Additionally, if we consider by analogy the Francovich27 decision; the claimants had been made redundant when their employers became insolvent and Italy had failed to implement a Directive which required member states to set up guarantee funds to cover compensation claims of employees made redundant in the event of their employers’ insolvency. The employees claimed that the Italian state was responsible for payment of the compensation either by direct effect of the Directive or on grounds of liability for failure to implement the directive. With regard to the direct effect argument, the ECJ held that the minimum guarantee requirement in the Directive was not sufficiently precise as the Directive did not specify what form the guarantee was to take. As this was ultimately at the discretion of the member states, the ECJ asserted that the Directive was not directly effective. Accordingly, the distinction between vertical direct effect and horizontal direct effect not only impacts an individual’s position to rely on Directive provisions, but also arguably can result in the frustration of the purpose of the Directive being implemented28. Moreover, the legal status of Directives creates further problems in practice on grounds that even if the Directive does have direct effect, the ability to enforce rights will intrinsically depend on the principles of horizontal and vertical direct effect or alternatively indirect effect29. As highlighted above, this matter was initially considered in the case of Marshall v Southampton and South West Hampshire AHA (Marshall I)30 which stated that Directives were not horizontally directly effective. This was reiterated in the Duke case31, where it was asserted that directives did not give directly effective rights to individuals which could be relied on horizontally. The Duke case involved a private employer and a claim for equal treatment in retirement and the failure of the House of Lords to acknowledge the horizontal direct effect of directives against private employers resulted in an arbitrary protection of individual rights. This lack of consistent protection for individuals under Directives reinforces the desirability of acknowledging the direct effect of directives to ensure even protection of individuals under EU initiatives. Furthermore, although the decision in Foster v British Gas32 extended the definition of “emanation of state” in order to widen the applicability of direct effect it is unlikely to aid individuals greatly on the inherent limitation of distinctly private structures. Indeed, it has been argued by commentators that whilst the judicial approach in Foster was a welcome acknowledgement of the need to ensure even protection for individuals under Directives; the intrinsic limitation of what can fall within the definition of “state” fails to address the central problem of the vertical/horizontal direct effect distinction with regard to Directives. Indeed, whilst the Foster decision widens the ambit of what can be considered an “emanation of the state”; ultimately the public/private distinction remains, which results in an uneven protection of individuals. This has created problems as evidenced by the decision in Rolls Royce plc v Doughty33 where the Court of Appeal refused to acknowledge Rolls Royce as an “emanation of the state” for the purposes of direct effects claims. Accordingly, as asserted in Marshall I34, individuals can only rely on the rights under Directives vertically against the state on the following basis: 1) Have the time limits for the implementation of the Directive expired? And 2) If so, are the relevant provisions of the Directive directly effective?35 In the case of Publico Ministero v Ratti36, it was asserted that an individual could only bring a claim in respect of failure to implement a Directive if the time limit for implementation had expired. . Alternatively, another method utilised to alleviate the consequence of the limitations upon the direct effect of directives is through the principle of construction, which requires national courts (in conformity with their duty under Article 10 of the EC treaty) to give effect to EC law and interpret all national law in light of EC law regardless of direct effect. This is referred to as indirect effect or the “Von Colson” principle. In the Von Colson37case, the ECJ held that although a directive may not be horizontally directly effective, the Member States’ courts should take the provisions of a Directive into account when applying national law, thereby according rights to individuals under EC law by the principle of indirect effect. This was reiterated in the case of Marleasing38 and Kopinghuis39 asserting the positive obligation of the ECJ to interpret national law in accordance with Article 10 of the EC Treaty. However, the Von Colson rationale has been criticised on grounds that whilst it enabled parity of rights for individuals regardless of the public/private distinction; the Court of Justice decided to focus on the Article 10 provision whilst avoiding any discussion on the arbitrary nature of denying horizontal direct effect to directives. This lacuna in individual protection under Directives is further compounded by the fact that the Von Colson principle is rooted in national compliance with Directive objectives. However, this interpretation lends itself to increased national discretion. As such, the Von Colson principle has resulted in the judiciary being able to avoid discussion on the horizontal direct effect issue altogether. This is evidenced by the decision in Mangold40which has been interpreted by some as conferring horizontal direct effect to Directives de facto. However, it is submitted that in reality the Mangold decision only extends the Von Colson principle in terms of national obligations in relation to interpretation of Community law. On the other hand, another method of circumventing the lack of horizontal direct effect is the Francovich 41decision; which determined that an individual could bring a claim against the state for damages caused as a direct result of failure to implement a Directive. The rationale behind this decision was that member states had a positive duty to implement EC law and failure to do so constituted a breach of Treaty provisions in line with the Von Colson argument. This principle was refined by the decision in Factortame v Secretary of State for Transport42, which was applied in the British Telecommunications43 case where it was asserted that in order to bring a claim against the state for damages caused by failure to implement a directive, the Directive itself had to expressly confer rights on individuals, the content of which was clear and not open to interpretation. Moreover, in the case of Dillenkofer,44 it was stated that if the Directive has not been implemented by the prescribed limit, this would be sufficient for a ruling of serious breach of EC law in order to impose state liability. Moreover, in the Francovich45 case, it was determined that damages payable to a claimant must be in respect of all losses incurred directly as a result of the breach. On the one hand, it could be argued that in light of the supremacy of EC law argument, ultimately individuals are protected under Directives notwithstanding the lack of horizontal direct effect under the positive Treaty obligation on member states to comply with Community law. Indeed, the ECJ elucidated this point in the case of Costa v ENEL46, asserting that in the case of conflict between European and national law, European law prevails. The judicial reasoning of the ECJ justified EC supremacy on grounds of independence, uniformity and efficacy of Community law47. From this perspective, it was asserted that Community law “is an integral part of …… the legal order applicable in the territory of each of the Member States48” and that provisions of Community law are “by their entry into force render automatically inapplicable any conflicting provision of current national law49”. It has been commented that this concept of primacy in application as opposed to primacy in validity, also applies to member states’ constitutional provisions, leading to arguments of a European constitution incorporated through the back door50. However, it is submitted that relying on the Von Colson and interpretation argument under the supremacy argument fails to address the reality of cost implications for individuals in bringing a claim against the state for failure to implement Directives. Additionally, the interpretation obligation argument extrapolated by the Von Colson decision is intrinsically dependent on national authority interpretation. As a result, the risk of uneven protection individuals under the public/private distinction with regard to Directives remains and reinforces the desirability of acknowledging the horizontal direct effect of Directives. BIBLIOGRAPHY Artis M and Nixson F, The Economics of the European Union. (Fourth Edition, Oxford University Press, 2007). Baimbridge M, Harrop J, Philippidis G, Current Economic Issues in EU Integration. (Palgrave Macmillan, 2008). Damian Chambers, Christos Hadjiemmanuil, Giorgio Monti & Adam Tomkins European Union Law. (Cambridge University Press, 2006) A. Carroll., Constitutional and Administrative Law. (4th edition, Pearson Education Harlow, 2007) Craig & Burca, EU Law: Text, Cases and Materials. (4th Edition Oxford University Press, 2007) Eliot, C. & Quinn, F: English Legal System (8th Edition, Longman, 2007) Trevor Hartley., European Law in a Global Context: Text Cases and Materials. (Cambridge University Press, 2004) Franz C. Mayer “Supremacy –Lost WHI Paper” (2006) 2/06 German Law Journal Vol 6 No 11 Norbert Reich, Understanding EU Law: Objectives, Principles and Methods of Community Law. (Intersentia, 2003). Jo Shaw, Law of the European Union. (3rd Edition Palgrave Macmillan, 2000) Steiner, Woods & Twigg-Flesner, Textbook on EC Law (8th Edition Oxford University Press, 2003) All Treaties available at www.eur-lex.europa.eu and www.eurotreaties.com Read More