Effectiveness and Coherence in the European Union - Essay Example

55 “Effectiveness and coherence in the EU legal order would be better served if provisions in directives were deemed capable of horizontal direct effect.” Discuss. Introduction In order to answer the above it is necessary to look at the difference between horizontal and vertical direct effect and analyse when each can be used. It will then be possible to determine whether directives would be more effective and coherent if horizontal direct effect could be applied to them. Horizontal direct effect Horizontal direct effect was first brought under consideration in the case of Defrenne v SABENA (Case 2/74) [1974] ECR 631. In this case the judge made the distinction between vertical direct effect and horizontal direct effect stating that the main distinction between the two is in relation to against whom the right is being enforced. This case highlighted that horizontal direct effect is concerned with the relationship of individuals and companies whereas vertical direct effect is concerned with the state’s obligation to ensure its observance and its compatibility with national law thereby allowing actions against the state. (Craig and de Burca, 2003) Directives generally do not have horizontal effect and are usually only enforceable against the state. It was noted in Courage Ltd v Crehan (Case c-453/99) that regulations can have horizontal direct effect. What are directives? Directives are instructions issued through the EU that specify the result that is to be achieved by the implementation of the Directive. Governments can implement the directive in any manner they choose so long as the end result embodies the spirit of the directive. As directives only specify the expected result they cannot have direct effect. Directives do no create rights. (Craig and de Burca, 2003) There are some occasions where the courts have given direct effect to a directive such as in the case of Grad v Finanzamt Traunstein (Case 9/70) [1970] ECR 825 which was involved with VAT. In this case the European Court of Justice made the ruling that a directive and a decision could have direct effect if they imposed an obligation to achieve a required result. In order for someone to rely on the directives the government’s have to ensure that the directive has been implemented. In cases where the implementation of the directive has passed and the government has not implemented it the courts will have to decide whether the claimant can still rely on the directive. In Pubblico Ministero v. Ratti (Case 148/78) [1979] ECR 1629 the defendant had violated an Italian law in order to comply with an EEC directive on product packaging. The Italian government was seeking to prosecute the defendant for breaking the law. The courts stated in this case that the Italian government had no authority to prosecute the defendant. The directive should have been implemented and the government had failed to do so within the time frame of the directive. The defendant in being compliant with the directive was not at fault but the government was for not implementing the directive on time. Direct effect has been applied to directives where the directive has been incorrectly implemented (Verbond van Nederlandse Ondernemingen). It is contrary to the principle of fairness to allow horizintal direct effect against a private individual or company (Marshall v Southampton and South West Hampshire AHA (1986). Direct and indirect effect In order to determine how a directive can be applied it is necessary to examine the difference between direct and indirect effect. Direct effect is a principle which allows citizens of a Member state to enforce certain pieces of European legislation. Direct effect was first established in Van Gend en Loos v. Nederlandse Administratie der Belastingen (Case 26/62); [1963] ECR 1; [1970] C.M.L.R. 1. it was held by the courts in this case that the rights conferred on individuals by EC legislation should be enforceable by such individuals in the national courts. this led to the establishment of the ‘Van Gend en Loos criteria’. The criteria stated that the provision must be sufficiently clear and precisely stated, it must be unconditional or non-dependent and the provision must confer a specific right for the citizen to base his or her claim on. (Plender and Usher, 1993) Indirect effect compels the national courts to interpret national legislation in accordance with the desired aims of the directive wherever possible. Governments have leeway with regard to the interpretation of the directive and need only interpret the directive in a manner that satisfies the requirements of the directive. As mentioned before individuals are only entitled to bring an action against the state. In the case of Case C-188/89 Foster v. British Gas [1990] ECR I-3133) it was held that British Gas was a part of the state as it was state controlled. Local authorities and municipal governments have also been deemed to be state controlled (Case 103/88 Fratelli Costanzo v. Milano, [1989] ECR 1839). Although directives do not have direct effect they can have incidental effect. Incidental effect has the effect of linking the indirect effect of directives with law suits against individuals. Individuals cannot be sued for failing to comply with a directive but a state’s failure to comply with such a directive can have an incidental effect on a claim against an individual. In Case C-194/94 CIA Security International SA v. Signalson SA and Securitel Sprl ([1996] ECR I-2201) the CIA had attempted to market a burglar alarm in Belgium that did not comply with the technical specifications required in Belgium. In this case the Belgian government had failed to report the specifications required to the EU as they had been directed to by a 1983 directive. The court held that this was a substantial degradation of the effectiveness of the directive and Belgium’s breach of the directive made the Belgian law inapplicable to individuals. Indirect effect has been effectively used when dealing with contracts. The court of Justice has made the point that a substantial defect in the implementing of a directive could nullify a contract under national law (Case C-443/98 Unilever Italia SpA v. Central Food SpA, [2000] ECR I-7535) If the directives are not properly implemented the national courts could interpret legal problems based on their own contract law (Case C-159/00 Sapod Audic v. Eco-Emballages SA, June 6, 2002)( Hilson and Downes, p.125) In cases where the individual will be deprived of the right to bring an action against the company with regard to the implementation of a directive due to the company not being state owned the individual has to rely on the state to bring an action against the company. Francovich damages In some instances where individuals are unable to claim against a company due to the rules on horizontal direct effect and directives claimants have relied on the principles established by the case of Francovich and others v Italy cases C–6/90 and C–9/90. In this case the appellant sued the Italian government on the grounds that he had suffered a loss as a result of the government’s failure to implement EC Directive 80/987. This directive was intended to provide protection for employees in the event of the insolvency of their employer. Francovich was employed by an electronics company in Vicenza. The employer went bankrupt owing Francovich 6 million lira. He was able to gain a judgment in court for the money but as the employer had gone bankrupt he was unable to recover the money. If the directive had been properly implemented his loss would have been eliminated or reduced. The court in Vicenza referred the matter to the European Court of Justice with the result that the Italian government was ordered to pay compensation to Francovich. (Plender and Usher, 1993) The implication this case has for individuals is that it can achieve the objective of circumventing the problem of non-horizontal enforceability of a directive. This would effectively mean that in cases where an individual cannot rely on direct effect as the action being pursued is against a company and not the state there is still a remedy for the individual in being able to get compensation from the state. One of the other advantages of Francovich damages is that the individual can often claim significantly more than they would have been able to against an individual. The case of Brasserie du Pécher SA v Germany and R v Secretary of State for Transport ex p. Factortame (cases C–46/93 and C–48/93 added a further proviso that the breach must be sufficiently serious in order for the appellant to be able to claim. The courts have held that where a member state fails to implement a directive within the given time limit this will be a sufficiently serious breach per se (Dillenkofer and others v Germany cases C–178/94). As can be seen from the above there are some instances where the courts have been able to intervene and in essence give direct effect to a directive that under the normal rules governing such claims should not be allowed. Should Directives have direct effect? The main reason for the application of vertical direct effect is to prevent the State from benefiting as a result of its failure to implement the directive. The courts have defended against horizontal direct effect as they consider it unfair to impose such requirements on individuals in the transposition of directives into their business. Recent case law would appear to suggest that in some cases directives can have direct effect (Kraaijeveld C-72/95, [1996] ECR I-5403). In past case law horizontal direct effect has prevented an individual from bringing actions against other individuals. In the case of Unilever Italia C-443/98, [2000] ECR I-7535 the defendant invoked the inapplicability of national law that had been adopted in breach of the directive. By allowing the defendant to render the legislation inapplicable the court effectively allowed an individual to invoke the directive thereby circumventing the rule of horizontal direct effect. Horizontal direct effect of a directive could also be implied from the decision in Smithkline C-77/97, [1999] ECR I-431. In this case the defendant was manufacturing toothpastes in Germany which were being sold in Austria. Adverts produced by the company suggested that the toothpaste helped prevent paradontosis and prevented the formation of tartar. Unilever brought an action to restrain the company from making these statements stating that the statements were contrary to the Austrian legislation. In making its decision the court held that the directive was designed to prevent certain forms of marketing and as such Smithkline were forced to stop their marketing strategy. In essence the court allowed Unilever to give horizontal direct effect to the directive. (Dougan, 2003) Despite the outward appearance that directives have on occasion been given horizontal direct effect the court in the case of El Corte Ingles stated that an individual cannot rely on a directive as a legal basis for bringing an action against a private individual. (Craig and de Burca, 2003) The same principle was also adopted in the case of Centrosteel C-456/98, [2000] ECR I-6007 where the court refused to recognise the use of horizontal direct effect against an individual when concerned with the implementation of a directive. A similar conclusion was reached in the case of Riunione Adriatica di Securtà SpA (RAS) C-233/01, [2002] ECR I-9411 where the Italian court stated that by refusing to apply national law in this case the defendant would be obliged to pay the full amount of the insurance premium to the insurance company thereby giving horizontal direct effect to the insurance company. In summing up in this case the judge stated. (Lenz, Tynes and Young, 2000) “With a view to replying to the national court, it should be recalled that, in accordance with settled case-law, when applying national law, whether adopted before or after the directive, the national court having to interpret that law must do so, as far as possible, in the light of the wording and the purpose of the directive so as to achieve the result it has in view and thereby comply with the third paragraph of Article 249 EC, but a directive may not of itself impose obligations on a private individual and may not therefore be relied on as such against such a person.” Although as can be seen from above there are some instances where the courts have given direct effect to directive through indirect means it is obvious that the courts are still not content with the notion of giving horizontal direct effect as a general policy. Conclusion It could be argued that not allowing horizontal direct effect produces unfairness for those seeking to rely on the directives, however, the fact that on occasion the courts have interpreted the legislation in ways so as to make the directive have direct effect shows that the courts are willing to adopt a flexible approach in order to produce a just result. It has been argued that allowing directives to have horizontal direct effect could be just as harmful to an individual as it is in some instances in its present form where direct effect is not recognised. From the above it is not possible to conclude that giving directive horizontal direct effect would produce a more coherent and effective legal order. The decisions of the courts and the affirmation that the present situation should not be changed seem to suggest that those responsible for the administration of EU law are fearful that allowing directives to have direct effect is likely to cause more harm than good. The present situation were indirect effect has produced the desired result for the plaintiff seeking to rely on the directive would appear to be the best way of dealing with directives as it does not allow a blanket use of horizontal direct effect. Indirect effect could be regarded as an instrument designed to correct an unfairness relied on by the company that do not transpose the directive into their working practices or transpose the directive incorrectly. There are very few occasions where the plaintiff would need to rely on horizontal direct effect and therefore it would seem appropriate that the courts continue to use indirect effect in this way. Allowing direct effect could open the floodgates for spurious claims against individuals and impose on them unfair terms. It would seem fair to conclude from all of the above that changing the present system is likely to cause greater problems for individuals and should therefore not be considered. Bibliography Ch. Hilson, T. Downes, Making Sense of Rights..., p.125 Craig, P and De Burca, G, EU Law Text Cases and Materials, 2nd edition, 1998, Oxford University Press, Oxford. Lenz, D.S. Tynes, L. Young, Horizontal What? Back to basics, 25 ELR 2000, p. 512 M. Dougan, 40 CMLRev. 2003, pp. 203 and 204 P. Craig, G. de Burca, EU Law, Oxford 2003, p. 221 and 222 Plender and Usher, Cases and Materials on the Law of the European Communities, 3rd edition, 1993, Butterworths, London. Table of Cases Brasserie du Pécher SA v Germany and R v Secretary of State for Transport ex p. Factortame (cases C–46/93 and C–48/93 Case 103/88 Fratelli Costanzo v. Milano, [1989] ECR 1839). Case C-159/00 Sapod Audic v. Eco-Emballages SA, June 6, 2002). Case C-188/89 Foster v. British Gas [1990] ECR I-3133) Case C-194/94 CIA Security International SA v. Signalson SA and Securitel Sprl [1996] ECR I-2201) Case C-443/98 Unilever Italia SpA v. Central Food SpA, [2000] ECR I-7535) Centrosteel C-456/98, [2000] ECR I-6007 Courage Ltd v Crehan (Case c-453/99) Defrenne v SABENA (Case 2/74) [1974] ECR 631 Dillenkofer and others v Germany cases C–178/94 Francovich and others v Italy cases C–6/90 and C–9/90 Grad v Finanzamt Traunstein (Case 9/70) [1970] ECR 825 Kraaijeveld C-72/95, [1996] ECR I-5403). Marshall v Southampton and South West Hampshire AHA (1986). Pubblico Ministero v. Ratti (Case 148/78) [1979] ECR 1629 Riunione Adriatica di Securtà SpA (RAS) C-233/01, [2002] ECR I-9411 Smithkline C-77/97, [1999] ECR I-431 Unilever Italia C-443/98, [2000] ECR I-7535 Van Gend en Loos v. Nederlandse Administratie der Belastingen (Case 26/62); [1963] ECR 1; [1970] C.M.L.R. 1. Read More