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EU Law and National Law: Supremacy, Direct Effect, Indirect | EU Law – SQE1 & SQE2 Examinations – solicitorsqualifyingexamination.net

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EU Law and National Law: Supremacy, Direct Effect, Indirect
Effect and State Liability
Van Gend en Loos
Prior to VGeL
• Article 189 EEC (now Article 288 TFEU) – regulations binding and
directly applicable within Member States.
o BUT no specific reference within the EEC treaty to the obligations
under any other form of EEC law, including those under the treaty
articles themselves, being directly enforceable in national courts.
o This is the same under the TFEU ad TEU.
• Therefore, treaty articles seemed not to be enforceable in Member States’
own national courts – MSs free to determine how these obligations would
take effect in their own respective legal orders.
o Basic position under Public International Law = treaties are
agreements between States, and rights not enforceable in national
courts unless provisions to this effect
VGeL
• However, NV Alfemene Transport – en Expeditie Pndernemind van Gend en
Loos v Nederlandse Administratie der Belastingen (Case 26/62) [1963]
ECR 1 – EEC treaty no ordinary treaty
• Van Gend en Loos imported urea formaldehyde from West Germany in
1960.
• Changes to the classification of this product by Dutch authorities led to
duty rise from 3% to 8%.
• Article 12 of EEC: prohibition on increasing customs duties
• Van Gend en Loos claimed Article 12 gave rise to a right which could be
claimed by individuals and protected in the courts of Member States
• Dutch Customs Court made preliminary reference to the Court of Justice:
can nationals of Member States lay claim to individual rights which
national courts must protect?
• 3 MSs: written submissions to CJEU that treaty infringements can only be
submitted to CJEU under Articles 169 + 170 (Articles 258 + 259 TFEU) =
Commission v Member State; Member State v Member State
• Rejected by CJEU: ‘The Community constitutes a new legal order of
international law’ – states have limited sovereign rights within limited
fields, subjects of which are MSs + their nationals.
o Community law imposes obligations on individuals, even when
addressed to states (Defrenne v SABENA [1976])
o + Confers rights upon individuals (expressly + implicitly by
reason of clearly defined obligations on MSs and others by the
Treaty)
© Liam Porritt 2020 2
• Article 12 = clear, unconditional prohibition on Member States, not
qualified by any condition on MSs enacting legislation first to
implement it.
• = DIRECT EFFECT in national legal systems – treaty articles can confer
individual rights which can be relied upon and enforced in proceedings
brought in national courts
• Note also the purposive approach of CJEU:
o Considers spirit and general scheme as well as wording
o Protects the effectiveness of EU law – aids effectiveness of
enforcement of EU law as individuals can challenge MSs who do
not enforce
Supremacy of EU Law
• Supremacy governs the relationship of EU law and national law when
they are incompatible with one another.
o When EU law and national law are incompatible:
i) EU law has supremacy (Costa v ENEL),
ii) with immediate effect (Simmenthal),
iii) in all national courts (Simmenthal),
iv) irrespective of when that law was enacted
(Simmenthal), and
v) irrespective of the nature of the national law
(Internationale Handelsgesellschaft).
• Van Gend en Loos [1963] laid foundation for Supremacy of EU Law (did
not establish though!)
• Costa v ENEL (Case 6/64) [1964] ECR 585 ~ Established Supremacy, on
basis of preliminary reference made by Italian Court = whether or not
nationalisation of Italian electricity industry was compatible with EEC
Treaty
• Italian government argued that CJEU did not have power to make
preliminary ruling on whether national law conformed with EEC Treaty
o Power under Article 177 of EEC (267 TFEU) to interpret EEC law,
but not to rule on whether or not national law conformed with EEC
Treaty
o Nothing in Treaty enabling national courts to override national law
on the basis that national law was incompatible with EEC Treaty
• CJEU held that if national law incompatible with EEC law, then EEC law
had to take precedence: ‘the law stemming from the Treaty […] could not
[…] be overridden by domestic legal provisions, however framed’.
o Executive force of EEC law cannot vary from one state to another
without jeopardising the objectives of EEC Treaty
o If national law overrides EEC Law, then obligations under Treaty
would become contingent
o Therefore, EU law in case of incompatibility takes precedence.
© Liam Porritt 2020 3
• Internationale Handelsgesellschaft v Einfuhr und Vorratstelle für
Getreide und Futtermittel (Case 11/70) [1970] ECR 1125 – EU law has
precedence over the national constitutional law of a Member State
(including fundamental rights)
o National courts of some EU MSs have not entirely accepted this
o CJEU mitigated effect of this somewhat – protection of
fundamental rights is a general principle of EU law, so EU law must
be applied bearing that in mind
• Amministrazione delle Finanze dello Stato v Simmenthal SpA (Case
106/77) [1978] ECR 629
o National courts must not wait for national law that conflicts with
EU law (no matter when enacted) to be set aside by national
authority: EU law must be applied immediately, with national law
disapplied (not voided).
o Applies to all national courts
• Principle of Supremacy reiterated in Declaration 17 of Lisbon Treaty
(2007) – label: Primacy of EU law.
© Liam Porritt 2020 4
Direct Effect
Principle of Supremacy does not tell you conditions under which EU law is
enforceable in the MSs.
Article 288 provides for regulations: Article 288 says they are to be ‘directly
applicable’.
Direct Effect and Direct Applicability have come to have distinct meanings:
• Direct Applicability – Fully applicable in the Member State without
measure being taken to implement it (= regulations + Treaty Articles) –
See Costa
• Direct Effect – Confers immediate rights on individuals which can be
enforced in national courts
Requirements for Direct Effect
Van Gend en Loos – rights conferred by a provision must be:
• Sufficiently clear and precise – Cooperativa Agricola Zootecnica
S.Antonio: Sets out an obligation in unequivocal terms
o Sufficiently not absolutely clear: Van Duyn v Home Office [1974] –
the mere fact that a provision raises questions of interpretation
does not disapply direct effect, as long as question can be resolved
by a court
o Defrenne v SABENA [1976] – men and women ‘equal pay for equal
work’ (Art 119 EEC)
§ Direct effect here when concepts of ‘pay’ and ‘work’ as
defined in article are used = overt/direct discrimination
(e.g. in legislative provisions, collective labour agreements
or employment contracts) = direct effect and enforceable.
§ However, not direct effect in cases of more indirect
discrimination, as provision not sufficiently clear and
precise in these cases.
• Unconditional – Cooperativa Agricola Zootecnica S.Antonio: Obligation
not qualified by any condition OR subject, in implementation or effects, to
taking of any measure by Community institutions or MSs.
o If right only available once obligation implemented, then
measure does not have direct effect.
o Francovich & Bonifaci v Italian Republic [1991]
§ Just because a MS can choose among several possible
means of achieving a result required by a directive does not
disapply direct effect
§ However, in this case (where employee sought outstanding
wages after employer bankrupt, but institution had not
been established to do this by Italian government), the
person liable to provide guarantee in the event that no
© Liam Porritt 2020 5
guarantee institution had been established was not clear
(i.e. needed to say: “if there’s no guarantee institution, the
Minister/state will be liable to provide guarantee” =>
therefore no direct effect.
o Von Colson & Karmann v Land Norhrhein-Westfalen [1984] ~
women failed applications to be social workers in male state
prison on grounds of sex; no provision in West German law
allowing the women to claim (they were only entitled to nominal
compensation for costs of travelling to interview), so court asks
CJEU if must order prison to employ women; Art. 6 of Equal
Treatment Directive requires: ‘such measures as are necessary […]
to pursue their claims by judicial process’ = not clear or precise +
subject to measures by MS.
Direct Effect of Positive Obligations
• Van Gend en Loos = negative obligation, which is highlighted in decision of
CJEU
• Lütticke – Article 110 TFEU ~ provision could have direct effect even
though it contained a positive obligation to remove discriminatory
measures (taxation on goods of other MSs) by 1 Jan 1962
Direct Effect Against Whom?
Treaty articles are capable of being relied upon (subject to interpretation of
Treaty Article, e.g. Articles 34-5 TFEU on free movement of goods have not thus
far been held to be enforceable against a private party) against:
• An organ of the state (Van Gend en Loos) (VERTICAL DIRECT EFFECT)
• A private party bound by obligations to which direct effect applies
(Defrenne v Sabena (Defrenne II) – Article 119 EEC (HORIZONTAL
DIRECT EFFECT)
o NB that Article only makes reference to Member States being
under the obligation to pay men and women equally for the same
work, but that CJEU found that objective = equal pay, and most
employment relations between private parties, therefore, direct
effect.
• Bodies that regulate in a collective manner (collective agreements) (e.g.
Walgrave v Association Union Cycliste Internationale, rules that
pacemakers and competitors must be of the same nationality ~ breach of
Article 18 TFEU)
o Shows especially that DE applies to situations of discrimination.
© Liam Porritt 2020 6
Direct Effect of regulations and decisions
Regulations (Art 288)
• Capable of direct effect: Politi s.a.s. v Ministry for Finance of the Italian
Republic [1971] + Franz Grad
• Vertical DE
• Horizontal DE: Antonio Munoz y Cia SA v Frumer Ltd [2002]
• DE according to VGeL criteria (for ‘hybrid regulations’, which require
some implementation): Azienda Agricola Monte Arcosu Srl v Regione
Autonoma della Sardegna [2001] – two Regulations required MSs to
define ‘farmer practising farming as his main occupation’ ~ subject in
implementation to taking of measures by MS = no DE
Decisions
• DE: Frantz Grad v Finanzamt Traunstein [1970]
• DE against party to whom decision is addressed only: Carp Snc di L.
Moleri V. Corsi v Ecorad Srl [2007])
Recommendations and opinions
• No DE: Grimaldi v Fonds des Maladies Professionnelles [1989]
© Liam Porritt 2020 7
Directives
• Article 288: ‘A directive shall be binding, as to the result to be achieved,
upon each Member State to which it is addressed, but shall leave to the
national authorities the choice of form and methods.’
o Only binding on Member States
o Must be implemented by MS, so appears inherently conditional
• Van Duyn v Home Office [1974] – can have DE, if satisfy VGeL criteria
• Following refusal to accept the DE of Directives in France and Germany:
Pubblico Ministero v Ratti [1979]: ‘a Member State cannot rely against
individuals on its own failure to perform the obligations that the
Directive entails’.
Requirements for DE
• (1) Sufficiently clear and precise – as elsewhere
• Unconditionality – more elaborate definition
o (2) Implementation date has passed (Ratti)
o (3) AND:
§ Not implemented at all (Ratti)
§ Partially or incorrectly implemented (VNO)
§ Correctly implemented but national measures not being
applied by national authorities in a way that achieves the
result sought by it (Marks and Spencer plc [2002] – VAT
overpaid b/c directive not properly implemented; then
correct implementation by implementation date, but M&S
still entitled to claim tax that was overpaid, and directive
had DE in case)
• Principle could apply before time limit, where
domestic measures have been introduced for the
purpose of complying with the directive, but do not
achieve result sought (Officier van Justitie v
Kolpinghuis Nijmegen)
• Vertical DE only – Article 288: directives only bind member states, and
do not impose obligations on private parties
o Marshall v Southampton & S.W. Hampshire A.H.A
§ Note: even if the State is acting in the capacity of employer,
akin to a private employer, the directive still has DE.
o Confirmed in Dori
§ Advocate-General recommended that Directives should
have DE against private parties, but this was rejected.
© Liam Porritt 2020 8
What is the State? – Emanations of the State
• The State could be…
o Tax Authority (Becker)
o Police Force (Johnston – these bodies are ‘emanations of the
State’)
o Local / Regional Authority (Fratelli)
• Note: none of these are responsible for the failure of a MS to implement a
directive.
• Criteria to work out what is part of the State in Foster v British Gas Plc (at
time of case, British Gas is a nationalised company)
o CJEU, paragraph 18 of Foster: Bipartite test:
§ Emanation of the state =
• Subject to the authority or control of the State; OR
• Has special powers beyond those which result from
the normal rules applicable to relations between
individuals
o CJEU, paragraph 20 of Foster: Tripartite test:
§ Emanation of the state, in any event, if…
• Has been made responsible, pursuant to a measure
adopted by the State, for providing a public service;
AND
• Under the control of the state; AND
• Has special powers beyond those which result from
the normal rules applicable to relations between
individuals
• In paragraph 22 of Foster, the CJEU simply holds that Directive 76/207
may be relief upon against a body which satisfied the tripartite test, with
no mention to the bipartite test.
o British Gas passed tripartite test:
§ Gas Act 1972 – public service by supplying gas
§ Control of Secretary of State (government owned), who
could dictate policies
§ Special monopoly power under which it could prevent
anyone lese from supplying gas in the UK without its
consent
• Problem: which test should be applied in which circumstances?
© Liam Porritt 2020 9
Which Test?
Tripartite test used in commercial undertakings:
• Doughty v Rolls Royce Plc [1992] – owned by government, but not a public
service and no special powers ~ therefore, not an emanation of the state.
• Griffin v South West Water Services Ltd [1995] ~ Public service by acting
as a water and sewage undertaker under statute; Secretary of State has
powers over it; special powers e.g. hosepipe bans, making by-laws and
entering land to lay pipes
However, Doughty – Musthill LJ: tripartite in case of same type as Foster, but not
all cases, due to ‘in any event’, which implied that there were some events where
the bipartite test is sufficient: i.e. in non-commercial undertakings where the
government does not have a ‘stake’.
• NUT v St Mary’s School – public service; school has entered state school
system and the Secretary of State and the Local Education Authority were
able to exercise a sufficient degree of control over the school. No special
powers needed.
o Not commercial case, and tripartite test not applied = situation in
UK.
Turn to CJEU for clarification:
Bipartite test:
• Kampelmann – regulatory authority + public undertakings => for national
court to decide
• Sozialhilfeverband Rohrbach – companies established by local authority =
EoS
Tripartite test:
• Una Film City Revue
o Here, exceptionally, we do not have an individual relying on a
directive in a national court, and referral to CJEU by national court
(preliminary reference) . Una Film brings application directly
before CJEU to challenge validity of a Directive banning tabacco
advertising.
o Therefore, must prove individually concerned by it – they say it
could have DE against them, therefore effected. However, CFI
accepted in principle that the State in Una Film held control, but it
failed the tripartite test, so no DE, therefore ≠ EoS
§ Evidently, under bipartite test, DE would have been
applicable.
• Reiser Internationale – company to maintain and run Austrian toll roads =
EoS
© Liam Porritt 2020 10
• Portgás
o Private company with rights to distribute gas in NE of Portugal
o Doubts as to satisfying tripartite test – public service, but not
necessarily special powers (it has special rights), and perhaps not
controlled by state.
§ Portuguese court to make the final decision
o Public authorities can rely on obligations under directives
AGAINST emanations of the State (i.e. if tripartite test satisfied,
Portuguese authorities could enforce Directive against Portgás).
The crucial case: Farrell v Motor Insurers Bureau of Ireland [2017]
Grand Chamber of CJEU rejected the tripartite test – it had not intended to lay
down a general test in paragraph 20 of Foster.
Reformulated bipartite test:
• They are legal persons governed by public law that are part of the State in
the broad sense such as local or regional authorities; or
• They are subject to the authority or control of a public body; or
• They have been required, by such a body, to perform a task in the public
interest and have been given, for that purpose, such special powers.
Note: Example G4S – if working for state = EoS; but if working for Primark, they
are not.
Criminal Liability – DE of Directives
• Berlusconi – investigated for being in charge of companies with
fraudulent accounts ~ new law passed meaning that offences he had
committed became summary offences, with a deadline for bringing
criminal prosecution, which has passed!
• Prosecutors wanted to rely on Directive to say that this change in law did
not comply with need under Directive to provide appropriate penalty for
failure to disclose accounts
• No DE, because Berlusconi is a private individual (as head of media
organisation), BUT…
• In any case, directive alone cannot have the effect of determining or
aggravating the liability in criminal law of persons who act contrary to
that directive
o Conclusion drawn on basis of INDIRECT EFFECT – Criminal
Proceedings Against Kolpinghuis Nijmengen BV.
© Liam Porritt 2020 11
Indirect Effect
Von Colson & Kamann v Land Norhein-Westfalen [1984]
• Directives can have indirect effect in that their provisions can be used by
national courts in interpreting the meaning and scope of national
legislation
The Von Colson Principle
• Male prison – two female workers discriminated against, but under
German law (implementation of the Equal Treatment Directive) only
entitled to nominal damages
• Preliminary reference to the ECJ – no direct effect as not sufficiently clear
and precise
• However, Article 4(3) TEU: MSs take ‘all appropriate measures’ to ensure
that their obligations under EU law are fulfilled
o Binding on all authorities of MSs, inc. courts
o MSs to interpret domestic laws implementing a directive in
conformity with the wording and purpose of EU directive, in so
far as the court is given discretion to do so under national law
• It was thus for German court to decide what the proper sanction needed
to be to guarantee the right to equal treatment under the Directive ~
more than nominal!
• No need to distinguish between vertical and horizontal claims for
indirect effect
o Harz v Deutsche Tradax confirmed
Clarifying Von Colson – Marleasing SA v La Comercial Internacional de
Alimentatción
• Case ouline:
o Marleasing wanted declaration of company (La commercial) as
void, because ‘lack of cause’, grounds provided for by Spanish Civil
Code
o La Comercial said unimplemented directive from EU gave
exhaustive list of reasons for nullity – ‘lack of cause’ not one =>
there appears disparity between national law + directive
• National law provisions adopted before or after directive can be
interpreted by national court in line with purpose and result of
directive
• Provisions of an unimplemented directive could be used to interpret
national law
o Controversial b/c this effectively required ‘interpretation’ contrary
to the Civil Code, and led to the limitation in Wagner Miret (below)
• Obligation to interpret national law as a whole in conformity with EU law
– Pfeiffer v Deutsches Rotes Kreuz, Kreisverband Waldshut eV
© Liam Porritt 2020 12
Limiting Von Colson
Wagner Miret v Fondo di Garantía Salarial
• Case outline:
o Obligation on MSs to set up institutions to pay wages in case of
company insolvency
o Existing law in Spain: guarantee, but not for senior management
• National Courts required as far as possible to interpret national law in
conformity with wording and purpose of directive (Marleasing).
• Therefore, indirect effect not possible where national law expressly
contradicts provision of EU law
o Confirmed: Criminal Proceedings Against Pupino – no need for
interpretation contra legem
• NB: principle of state liability applied – Spanish State liable to compensate
senior managers for unpaid salaries
Adeneler v Ellinikos Organismos Galaktos (ELOG)
• Interpretation of national law in line with directive only after
implementation date of directive
Criminal Proceedings Against Kolpinghuis Nijmengen BV
• Member States cannot rely on a directive itself and independently of an
implementing law to determine or aggravate criminal liability.
Other forms of law + Opinions and Recommendations
• Decisions can have indirect effect
• Opinions can influence interpretation of domestic law of MSs by national
courts (Grimaldi v Fonds des Maladies Professionnelles).
UK Indirect Effect
HM Revenue and Customs v IDT Card Services Ireland Ltd [2006]
• Statutory language does not have to be ambiguous
• Interpretation can involve substantial departure from the language
o But, not rewriting legislation going beyond interpretation:
§ Not words read in against grain of legislation
§ Not against cardinal principle
• Not policy choices
• No practical repercussions which court ill-equipped to evaluate
© Liam Porritt 2020 13
State Liability
• Compensation from MS for losses incurred as a result of the failure of MS
to fulfill obligations under EU law
o Remedy where no direct or indirect effect
o Remedy where direct and/or indirect effect
Francovich & Bonifaci v Italian Republic [1991]
• Directive: guarantee institutions for lost wages in case of insolvency
• Italy had not implemented + deadline passed
• Commission found Italy in breach of obligations under directive
(Commission v Italy [1989])
• VGeL conditions not met + no national law to be interpreted by IE
• Italy liable for loss and damage to individuals by breaches of Community
law
Three conditions of SL (Brasserie du Pêcheur SA v Germany)
• Facts: French brewers forced to stop exports to Germany, contrary to
their Art 34 rights
• This may be used instead of Francovich test (as done so in Dillenkofer v
Germany)
o Only difference is number 2 in below test in Francovich is: ‘it
should be possible to identify the content of those rights on the
basis of the provisions of the directive’.
• Applies to any case in which a MS breaches EU law – any organ of State,
and even when direct effect.
1. Directive/Treaty Art intended to grant rights to individuals
2. The breach must be sufficiently serious – NB: MS does not need limited
discretion (as with direct effect)
o In spite of difference from Francovich test in step 2, this BdP test
and the Francovich test are the same in substance (Dillenkofer)
§ In Dillenkofer, the state’s failure to implement a directive
requiring refunds on package holidays when a company
goes bust => sufficiently serious breach
3. Direct causal link between breach of the State’s obligation and the loss
and damage suffered by the injured parties
© Liam Porritt 2020 14
Sufficiently serious? (Brasserie)
• State ‘manifestly and gravely disregarded the limits of its discretion’
o Little or no discretion ~ infringement here is likely sufficiently
serious
• The clarity and precision of the rule breached.
• The measure of discretion left to the Member State by the rule.
• Whether the breach was intentional.
• Whether the breach was excusable.
• The extent to which a position taken by a Union institution may have
contributed to the breach.
• The extent to which the Member States had adopted or retained national
measures contrary to EU law.
Application in cases
• Ex p. Hedley Lomas – refusal to grant exports because of concerns re:
Spanish slaughterhouses => where there is no discretion given by the
directive to the state, the breach = sufficiently serious
• Ex p. BT plc – Breach here found excusable as: i) not manifestly contrary
to directive; ii) directive imprecise; iii) UK interpreted directive in good
faith; iv) other MSs interpreted the directive in the same way.
Applies to national courts
• National courts that breach Brasserie du Pêcheur conditions come under
state liability
o Manifest errors, e.g. failure to make obligatory preliminary
reference to CJEU (Köbler v Republik Österreich)
Applies to breaches of competition law
• Analogous form of liability for damage caused by infringements of EU
competition law by private undertakings has also been established:
Courage Limited v Crehan.
© Liam Porritt 2020 15
Summary
Possible to fall through cracks:
• DE not available b/c not sufficiently precise OR directive against private
party
• IE – not possible to interpret national law
• SL – compensation only + must be ‘sufficiently serious’ breach
R v Secretary of State for Transport, ex parte Factortame Ltd and Others (esp.
no 2) [1991]
• Relationship between UK and EC law.
• UK fishing vessels to be 75% UK owned
• HoL confirmed supremacy of EU law
• No 2: ECJ: offending provisions to be disapplied by UK, as they were
against Art 49/54 freedom of establishment rights
• No 3: ECJ: UK could be liable for damages in an action by European
Commission for breach of EU law
• No 4: HoL: Doctrine of State liability ~ damages can be awarded against
MS for losses suffered by private parties
• No 5: Claims after 1996 statute-barred, as claims against a MS like other
claims in tort under the Limitation Act 1980.

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