The European Court of Justice developed the principle of State Liability. It is the allowance of an individual to recover and claim compensation directly from a Member State. Where an individual has suffered a loss due to a Member State completely failing to implement a directive or has committed any other breaches of EU Law then he or she will have the right to claim damages. The principle of State liability follows direct and indirect effect and was initially originated in the case of Francovich . This essay will present the development that this principle and leading case have taken to strengthen and progress the principle of State Liability.
As previously mentioned, State Liability was established by the European Court of Justice because of the facts of Francovich. In this case, the applicants had been made redundant and when their employer had become insolvent their owed wages were not paid. Before State liability the applicants would have been expecting to rely on Directive 80/987 to allow them to be granted the compensation they showed have been given by the Italian state. There was no national legislation for this directive. This meant that the directive was not implemented by the Italian Court so there was no way for the applicants to rightfully receive what they were owed. In doing this the Italian court failed to fulfil its Treaty Obligations, which derived from Article 4(3) TEU . This article required Member States to satisfy obligations and also to remedy the consequences of a failure to fulfil. State Liability provides rights to individuals who may have lost out due to non-implementation and other breaches. This can be viewed as a positive and development in EU Law as it displays the fact that EU citizens are having their EU rights further valued and protected, rather than having matters abandoned after breaches. The Court of Justice took additional steps into fortifying and developing the principle with the use of conditions attached to the right to damages depending on the nature of the breach. The three conditions are firstly; ‘the result prescribed by the directive entails the grant of rights to individuals’; ‘it must be possible to identify the content of those rights from the directive; and there must be a causal link between the Member State’s failure and the loss suffered by the individual.
These three conditions aid in tightening the principle so that cases can be categorised in a simpler way when deciding if damages are given right, after non-implementation is established.
Although Francovich was able to create State Liability in damages for non-implementation breaches, questions arose regarding the broadness and certainty of the principle. The Court of Justice received queries concerning the seriousness of breaches, how much could Member States get away with without it being considered a breach and should State Liability be only available to very serious breaches? It is possible for Member States to breach EU Law without having committed non-implementation, does this mean that Member State Liability is not only limited to these types of cases. The Courts will have to form a method that allows for State Liability to cover damages in other breaches of EU Law. In further detail, but stemming from the previous uncertainty, is State Liability limited only to Directives? There are effects such as, Regulation and Treaty provisions that Member States are capable of breaching, will the principle allow the Courts to cover this? It was unclear whether damages would be existing where a Member States breach arose not from non-implementation but from improper or incomplete implementation, or even any other form of transgression. Without acting on these inquires it could have been said that there was little development of the principle of Member State Liability.
The cases, Brasserie du Pêcheur and Factortame III were joined together to provide clarification as to the inquiries surrounding State Liability. In Brasserie, a French brewery had been prevented from exporting its beer to Germany because German beer purity requirements were non-compliant with EU Law. In Factortame III, it surrounded the Merchant Shipping Act. It prevented Spanish fishermen from fishing in UK territorial waters, however UK amendment to the Act were in contrast to EU Law. Both applicants sought damages for their losses as the legislation the Member States used breached Treaty provisions on the free movement of goods and rights of establishment. The development of the principle was shown here as another test was developed to ensure other breaches, seriousness was encapsulated. First the Court of Justice held that individuals relying on directly effective Treaty provisions before national courts was not enough to ensure the complete implementation of the Treaty. This is where the Court specified that individuals should receive damages for a Member States direct infringement of EU legislation. The same three conditions in Francovich applied, however, the second stage was altered to ‘the breach must be sufficiently serious’. The Courts even set a decisive test for this change in condition, the Member State would have to had ‘manifestly and gravely disregarded the limits on its discretion’. Additional criteria were added to define ‘manifestly and gravely’ with multiple factors being taken into account. These were ‘the clarity and precision of the rule breached, the measure of discretion left by that rule to national authorities, whether infringement or damage was intentional or involuntary, whether any error of law excusable or not, the possibility the position taken by an EU institution contributed towards the breach, and the adoption or retention of measures contrary to Community Law.
Francovich was only able to cover total breaches of directives, on the other hand, Brasserie & Factortame have the ability to cover ‘sufficiently serious breaches’, the scope was even widened after Dillenkofer. The Court of Justice held that non-implementation of a directive also amounted to a sufficiently serious breach, this effectively meant that Francovich would become redundant. The cases of Brassiere and Factortame did seem to positively develop State Liability in damages as the tests and criteria became more strict but expansive by ensuring more cases could be heard for justice but the but not leaving Member States too vulnerable.
There was further expansion of state liability when it was established that liability could arise as a result of incorrect implementation of a directive. In the case of British Telecommunications, the UK had incorrectly implemented Directive 90/531 against BT who then sought-after damages to cover their loss. Although, the Court of Justice held that the UK was not liable and there was no right to damages, this is another example of the positive development the principle has made. The lack of precision in the relevant provision of the Directive in this case was unclear and therefore the UK’s error was excusable, here the Courts were able to use the more precise test established by Factortame to recognise it was not sufficiently serious.
The extension of State Liability continued within the case of Köbler. A university professor being denied length-of-service pay increasement claimed that the refusal had breached EU free movement provisions, however the national courts had found the refusal to be justified, in contrast to the professor who believed the national courts had wrongfully interpreted EU Law. Damages were brought against Austria, though, the Courts of Justice did find the national courts incorrectly interpreting EU Law and it was held that, ‘an erroneous interpretation of EU Law by a court of last instance (supreme court) can give rise to state liability’. Once again, the breach was not seen as ‘sufficiently serious’, nevertheless, Köbler had developed that in cases of ‘intentional fault and serious misconduct’ by a court of last instance, liability could be established. Not only this but in Traghetti, the Court of Justice further extended it was prepared to accept liability for damages in stances where, ‘manifest errors’ of interpretation of EU Law were committed by a court of last instance.
It is clear to see the major development of the principle of State liability, the Court of Justice has, in many instances stated in this essay, looked to extend the principle whenever it could. This is certainly to ensure that especially in situations where direct and indirect effect are seen as limited there is an established, feasible principle that it able to rightly declare damages if it complies with the in-depth conditions it has laid out.