Essay: State liability and Francovich

An establishing and contentious quality of the European Union has been the growth of the international nature of its European institutions and laws. European laws consist of both primary and secondary laws in terms of treaties written for European Union law, administrative regulations and directives based on the treaties which are issued by the European Council and Commission etc. These laws come with their regulations and directives which need to be executed by Member State Governments within a stated time limit; the regulations can be directly and indirectly applicable. Whereas, the directives either have a vertical direct effect or an indirect effect which does not include a direct effect done horizontally to meet the time limit for implementation. The European Court of Justice acknowledged this important issue and extended the rights available to citizens of the European Union, and made several rulings to help improve and increase the attainability and applicability of directives. A renowned case which was part of the Court’s rulings was Francovich v Italy which developed the principle of state liability and is the focus of this assignment. This essay looks to assess the proposition of state liability with reference to Francovich and other subsequent judgements involved by viewing the history and relevance of the case, stressing both the strengths and weaknesses, analysing the factors which I find most important about the case and my opinion on them. Lastly, my final thoughts and conclusion of the essay will be stated.
State Liability is a process in the European Law where European Union Member States are legally obligated to pay money to individuals who have incurred a loss, due to Member States failing to attain its legal responsibilities. It is used to provide solutions for loss and damages suffered by workers, and also established substantive human rights for individuals in certain circumstances. The idea of state liability was introduced by Francovich from the Court’s rulings in he’s case. The case of Andrea Francovich, Danila Bonifaci and others v the Italian Republic was brought to the European Court of Justice for a preliminary ruling. This case followed Francovich and other employees that were owed wages and salaries by their employer when the company became insolvent. Francovich, a worker in the main proceedings in the Case had worked for CDN Elettronica SnC in Vicenza from 11th January, 1983 until 7th April 1984, but had only received irregular payments of wages and was owed 6 million, while Bonifaci and 33 other employees were owed 253 million all together, after the company Gaia Confezioni Srl went into liquidation on 5th April, 1985. The workers realised their debts owed by the companies were unlikely to be funded through the insolvency procedure, which led them to present judicial proceedings against Italy for failing to fulfil the necessary Directive.
Under the Italian law, there were no solutions for Francovich and his fellow colleagues, but Francovich decided to refer the case to the European Court of Justice and apply for compensation under Directive 80/987 which Italy had failed to transpose. The Directive required Member States to set up a system where employees of companies in bankruptcy would receive compensation for their loss. The Court ruled that the directive was not sufficiently accurate to have a direct effect, neither could it be directly ineffective due to an absence of Italian legislation which follows the agreed measures to be sufficiently applicable. Despite these problems, a remedy was still needed for Francovich, he along with the other plaintiffs could not be denied of their rightful justice. The Court ruled that the Italian Government had breached its legal agreement and should recompense Francovich; they explained that Member States are liable to reimburse Francovich to prevent the value of community law to diminish, if claimants could not receive compensation from a State which was accountable for a violation of Community law and the reason for the loss. Also, Article 5 of the European Economic Community Treaty, currently known as Article 10 require all Member States to take all suitable measures, whether general or particular to make certain that they accomplish their Treaty duties which include compensating individuals for any loss experienced due to the deficiency of a Member State to implement Community law. Member States are to refrain from any act which could risk fulfilling the purpose of this Treaty, and any serious implications and loss from the breach of the legal agreement will be their liability.
The European Court of Justice ordered that Francovich’s loss and damages from the breach be accessible for the National Court to process. The Court followed up the process and ruled that Member State liability be restricted for failing to apply directives to circumstances where three main conditions were met. The conditions were ‘The result prescribed by the Directive must involve the grant of rights to individuals, the content of those rights must be clear from the Directive and there must be a causal link between the breach of the State’s obligation and the damage suffered by the individual’.
Leading up to the Case of Francovich, the European Court of Justice’s preliminary ruling was based on assuring that directives had a direct effect, which was initiated from the judgement in the Case of Van Gen en Loos. Nevertheless, the Court recognized that to obtain reparation, the proceedings of the case required the interpretation of Community legislation which is pursuant to the legal system of the European Economic Community Treaty. The system of Community law creates rights for people in Europe and it also binds Member States. It permits Treaty provisions, obligatory acts of Community institutions, international agreements by the community and general principles of law including basic human rights which was acknowledged by the European Court of Justice from their judgments in the Case of Costa v ENEL. In addition to that, the National Courts, who are authorized and responsible for the provisions of Community law must ensure the rules of state liability take place to guarantee the full effectiveness of its legislation, there is protection of fundamental rights of citizens and Member States must accomplish Article 5 of the Treaty obligations as ruled in previous Cases of Factortame and Amministrazione v Simmenthal.
Consequently, the State had to appeal to Community Legislation opposed to the Member States, for failing to implement Directive 80/987, in order to secure the guarantees in which any event to claim compensations for claimant’s loss, their request would be approved by the rights and provisions of Treaty. Although, Directive 80/987 gave workers the right to be paid their complete wages within a time limit, the Member States in Francovich’s case did not comply with that rule. The government may then select a non-agreement in a situation where the costs of compliance exceed any probable penalties enforced by the Court. In spite of that, the non-agreement still affects the consistent accessibility of the European Union rights and it could be the root of prejudice between citizens where their Member States comply with their directives contrary to Member States who do not abide by their directives.
A benefit of the Court’s ruling in Francovich’s case, is the Member States are legally accountable in a situation where there is a failure to implement directives which do not have a direct effect, due to vague wording of instructions for companies. The use of this type of directives by companies would have aggravated over the years, if the principle of state liability was not initiated by Francovich. Also, the European Court of Justice permits National private law remedies to be made available for any violations made in the Community legislation. With this judgement, the Court had linked state liability of the European Union under Article 215 of the European Treaty, while laying down the uniform rules for controlling such liability. This judgement was later used in a ruling in the Case of Brassierie du Pecheur where the Court decreed that any breach of Community law by Member States will be covered by the state liability. Also, the Court proclaimed that for principle of state liability to take place, the breach of the agreement must be sufficiently significant by establishing if the State purposely ignored its obligations or the breach was unintended.
The European Court of Justice soon realized that the conditions of other Cases after Francovich’s Case were all comparable and required similar judgements. A Case which was referred to the principle of state liability for the Court’s judgement was the case of Wagner v Fondo. Member States of this Case could not implement Directive 90/987 of the European Economic Community Treaty and called for reparation. Also, the Case of Faccini Dori v Recreb which referred to the Case of Marshall , required horizontal direct effect of a Directive, but Member States failed to be directly effective in the Directives. A lawsuit against the Member State was then presented; the Court recalled of its own motion, like in the rulings in the case of Francovich to redevelop the first condition for state liability to take place, where the condition implies that any outcomes authorized by Directives must accord with the rights of individuals. The Case of El Corte Ingles v Blazquez Rivero is also similar to the previous case, given that the three requirements are all met for the principle of state liability to proceed.
However, subsequent judgements had changed after Cases of Brasserie and Factorme British Telecommunications, Hedley Lomas, Dilleonkofer and others. The principle of state liability is consistently applicable when Member States follow its three requirements of a sufficiently important breach. But, in circumstances where a requirement is excluded, individuals cannot be redress. The European Court of Justice also believes an infringement of criteria’s of law in state liability is intended to confer rights on people, which means the third requirement is defied and there is a casual link between the breach of the State’s obligations, and damages and loss are suffered by individuals. Another shortcoming of state liability is that the Directive is only relevant to workers whose employer had been issued to the stated types of insolvency affairs. Where, the Italian law concluded in Francovich’s case that the employer could not accustom to such insolvency affairs. Therefore, in holding the National Government accountable for the loss and damages, they were also legally responsible to pay compensation for failure to invert a directive into National law within the specified time.
Furthermore, the European Court of Justice ruled that in the Case of Francovich v Italy, Francovich was not entitled to protection of Directives and failure of Italy to fulfil the Directive had not been the reason for Francovich’s loss. With that knowledge, the Court opted for the Case of Factortame in 1996 and restated the principle of state liability . The Court felt that the obligations under Article 5 of the Treaty were more relevant in the present case where rights of individuals are allowed to rely in National Courts rather than the case of Francovich where rights contravened were not permitted in the National Courts.
Nonetheless, the principle of state liability from my point of view had an impact on the European Court of Justice. The judgements in Francovich became legitimate when the Court began to use its theory in the European Union law. This proves how relevant the rulings were and how it introduced the supremacy of European Union law. Moreover, it allowed the rights of citizens be easily incorporated in the court; I feel with the Case of Francovich, the Court became more aware of the fundamental rights of citizens and how workers have rights to claim unpaid wages and salaries in an event of liquidation. The principle also encouraged the protection of human rights and permitted European citizens to impose a vertical effect on Member States and a horizontal effect on companies or individuals if needed.
Ultimately, Francovich played an important role in the development of European Union law, and the rulings in he’s Case has been essential and pertinent in many subsequent case rulings. The essay highlights the background and applicability of the principle of state liability, while drawing attention to other Cases which found the principle rewarding and others who were displeased. The judgments in Francovich showed more relevance and improvement to the merger in European Union law than the statutes authorized by the Member State Government, and its concept for state liability will be consistently praised for that reason.