European Union Law Caselaw (key cases) PDF

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Important/key European Union Law cases - mainly to do with direct & indirect effect and state liability (but also includes cases on the internal market)...

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EU LAW CASES FRANCOVICH V. ITALY Mr Francovich, along with other employees, was left with unpaid salaries when his company went into liquidation. He applied for compensation under the provisions of Directive 80/987 which required Member States to institute compensation measures for such instances. In the absence of the Italian government instituting such measures, the case was referred to the Court for a ruling. The Court found that the wording of the directive was sufficiently vague as to not invoke the principle of direct effect. However to deny the claimants justice because of this deficiency would be to impinge on the effet utile or utility of EU law that was intended to provide adequate compensation. Even in the absence of sufficiently applicable directives, there was an obligation under the provisions of Article 5 EC Treaty (now Article 10), to compensate individuals for any loss suffered due to the failure of a Member State to implement Community law. Consequently the Court ruled that individuals had a right to compensation where there was a violation of a Member States’ duty to implement Community law, provided that three conditions were met. These were as follows:   

“The directive must confer rights on individuals The contents of those rights must be identifiable in the wording of the measure There must be a causal link between the damage suffered and the failure to implement the Directive”

Steiner et al outline the significance of the Court’s ruling in this case by stating; “Francovich introduced the notion of state liability, and created substantive rights for individuals in certain circumstances.” One of the main issues addressed in this ruling is the propensity for Member States to not comply with directives. A government may opt for non-compliance in the knowledge that the costs of compliance outweigh any potential sanction imposed by the Court. However non-compliance affects the uniform accessibility of rights across the Union and can cause discrimination between citizens in complying as opposed to non-complying states. Prior to this case the Court’s rulings were based on guaranteeing that directives had direct effect. This had originally been established in the case of Van Gend en Loos v. Nederlandse Administratie der Belastingen Case 26/62. However the significance of this case is that, in holding national governments accountable, they were also now liable to paying compensation for their failure to transpose a directive into national law within the stated time limit. ECB Ruling The relevance of this ruling can be found in the fact that Member States are liable in instances where they have failed to implement a directive which did not have direct effect because of the imprecise nature of the directive’s wording. Of particular importance is the fact that the ruling also allows for “national private law remedies or their equivalent to be made available for breaches of Community law.” By this ruling the Court effectively tied the principle of a Member States liability to EC Law as contained in the treaties, while laying down uniform criteria governing such liability. This ruling was suitably modified in a later ruling in the case of Brasserie du Pêcheur,

in which the Court extended the scope of liability to include any breach of EC law irrespective of which organ of the state was responsible for the breach. The Court also went further however in modifying the second criteria in the Francovich ruling to state that the breach must be sufficiently serious, with this being determined by testing whether the state deliberately disregarded it responsibilities. Ultimately the relevance of the development of the principle of state liability in the Francovich ruling can be found in the proactive approach that the Court has adopted in its interpretation of EU law. It can be argued that its foremost concern has been extending the applicability of EU law to European citizens. This was evident from its early proactive rulings which established the supremacy of EU law, despite such a doctrine not being contained within the treaties at the time. Francovich is therefore one important ruling in an evolutionary continuum of rulings that have extended access to rights by Europe’s citizens from the direct effectiveness of directives to state liability, and the eventual establishment of incidental horizontal effect. This latter principle has been developed in case law to allow EU citizens to enforce rights horizontally against private individuals and organizations, and not just vertically against the state or its emanations (as per Marshall v Southampton Area Health Authority). In this the Court has had to tread a delicate line between extending these rights and protecting the sovereignty of national governments and courts, especially within the context of the subsidiarity principle which mandates (under the provisions of Article 5(3) TEU) that areas which do not fall within the exclusive competence of the Union should be devolve to the lowest level of competence in the Member States. In this sense it has been cogently and controversially argued that rulings such as Francovich have been more important to the integration process in Europe than the constitutional and political decision makings of democratically elected governments.

BRASSERIE DU PÊCHEUR V. GERMANY & R FACTORTAME V. SS FOR TRANSPORT A French brewery sued the German government for damages for not allowing it to export beer to Germany in late 1981 for failing to comply with the Biersteuergesetz 1952 9 and 10. The Commission viewed this to breach TEEC article 30 and brought infringement proceedings against Germany for (1) prohibiting marketing for products called beer and (2) importing beer with additives. The ECJ had held the prohibition on marketing was incompatible with the Treaties in Commission v Germany (1987) Case 178/84. Brasserie du Pêcheur then claimed DM 1.8m, a fraction of loss incurred. The BGH said that under BGB §839 for a state be liable it has to have acted wilfully or negligently, and only if a law was written to benefit a third party. In the joined case, Spanish fishers sued the UK government for compensation over the Merchant Shipping Act 1988. The UK government argued the legislation had been passed in good faith, and did not mean to breach the Treaty provision, so should not therefore be liable.

In his Opinion, Advocate General Tesauro noted that only 8 damages awards had been made up to 1995. ECJ Ruling The Court of Justice held that it was irrelevant that Parliament passed the statute, and it was still liable. A prior ruling by the ECJ was also not a precondition for liability. For damages, a law (1) had to be intended to confer rights on individuals (2) sufficiently serious (3) causal link between breach and damage. Member state liability flows from the principle of effectiveness of the law. Member state liability follows the same principles of liability governing the EU itself. In a legislative context, with wide discretion, it must be shown there was a manifest and grave disregard for limits on exercise of discretion. Both FACTORTAME and SIMMENTHAL highlight the five obligations national courts have: 1. Apply community law in its entirety and protect rights which the latter confer on individuals 2. Any provisions of national law which may conflict with community law must be set aside 3. Any conflicting provision of current national law will be rendered automatically inapplicable 4. Preclude the valid adoption of new national legislative measure 5. National courts should suspend national legislation that may be incompatible with EU1 law until a final determination on its compatibility has been made.

COURAGE LTD V. CREHAN In 1991, Crehan agreed with Inntrepreneur, which controlled 7,355 pubs, to take two leases on pubs in Staines, where he would have to buy the beer from Courage Ltd, which owned 19% of UK beer sales. He had to buy beer exclusively at a specified price. The lease was a standard form, and it was not negotiable. In 1991, Courage and Grand Metropolitan had set up Inntrepreneur as a jointly owned company. The leases were all extended to 20 years, much longer than previously. However, the Secretary of State, in charge of competition law enforcement at the time, required that holdings be reduced to 4,350 by October 1992, and that ties be released by March 1998. However Crehan could not compete for anywhere near that long against free houses nearby who could buy beer more cheaply, and in September 1993 his business failed, with a loss. He was sued for £15,226 for outstanding sums for beer. Courage Ltd claimed that Crehan had not paid for deliveries of beer. Crehan argued that the agreement was contrary to TEC article 81, and unenforceable, and counterclaimed for damages. It was shown that free houses were able to buy beer at much lower prices than tied tenants, reducing their profitability. Inntrepreneur had sought negative clearance from the Commission in 1992 that it could not infringe competition law under TEC article 81(3). In 1994, Crehan and others applied for a declaration that there was an infringement. In 1997, after a different agreement was negotiated, Inntrepeneur withdrew its application, and the

Commission stated (given the withdrawal) now that only the national court could decide. Rulings Court of Appeal - The Court of Appeal held that English law did not permit a party to an illegal agreement to recover damages, and so an action in damages would in any case be barred for Mr Crehan even if an article 81 action were successful. European Court of Justice - The ECJ held that article 81(2) made agreements void, Mr Crehan could obtain relief, and in principle claim damages. A rule of national law that barred such a claim was precluded. It was true, as a principle of EU law, that a litigant should not profit from unlawful conduct, but this did not apply if the party did not bear significant responsibility for the distortion of competition, paras 22–28. At 32 it said to determine responsibility, the bargaining power of the parties and their conduct should be taken into account. At 34 it said a network of contracts could have a cumulative effect on competition, and the party who contracts with the one controlling a network cannot bear significant responsibility. 24 - It follows from the foregoing considerations that any individual can rely on a breach of Article 85(1) of the Treaty before a national court even where he is a party to a contract that is liable to restrict or distort competition within the meaning of that provision. [...] 32 - In that regard, the matters to be taken into account by the competent national court include the economic and legal context in which the parties find themselves and, as the United Kingdom Government rightly points out, the respective bargaining power and conduct of the two parties to the contract. 33 - In particular, it is for the national court to ascertain whether the party who claims to have suffered loss through concluding a contract that is liable to restrict or distort competition found himself in a markedly weaker position than the other party, such as seriously to compromise or even eliminate his freedom to negotiate the terms of the contract and his capacity to avoid the loss or reduce its extent, in particular by availing himself in good time of all the legal remedies available to him. 34 - Referring to the judgments in Case 23/67 Brasserie de Haecht [1967] ECR 127 and Case C-234/89 Delimitis [1991] ECR I-935, paragraphs 14 to 26, the Commission and the United Kingdom Government also rightly point out that a contract might prove to be contrary to Article 85(1) of the Treaty for the sole reason that it is part of a network of similar contracts which have a cumulative effect on competition. In such a case, the party contracting with the person controlling the network cannot bear significant responsibility for the breach of Article 85, particularly where in practice the terms of the contract were imposed on him by the party controlling the network. 35 - Contrary to the submission of Courage, making a distinction as to the extent of the parties' liability does not conflict with the case-law of the Court to the effect that it

does not matter, for the purposes of the application of Article 85 of the Treaty, whether the parties to an agreement are on an equal footing as regards their economic position and function (see inter alia Joined Cases 56/64 and 58/64 Consten and Grundig v Commission [1966] ECR 382). That case-law concerns the conditions for application of Article 85 of the Treaty while the questions put before the Court in the present case concern certain consequences in civil law of a breach of that provision.

High Court - Park J held that he was not bound by findings of fact by the Commission in 1999 that it was difficult to gain access to the UK beer market. The market had not been foreclosed, and so Crehan’s claim was dismissed. Court of Appeal - The Court of Appeal held that this probably conflicted with the Commission’s views, and so the High Court’s decision was precluded. Damages were awarded. House of Lords - The House of Lords held that the first instance judge’s decision was to be restored. Conflicts between the Commission’s decisions and courts should be avoided, but the decisions were different enough that the Court of Appeal should not have interfered.

MARLEASING SA V. LA COMERCIAL INTERNACIONAL DE ALIMENTACION SA Marleasing SA (the Applicant) brought an application before the Spanish national courts for an order that the contract establishing "La Comercial" was void and that the formation of La Comercial should be nullified on the grounds that establishment "lacked cause, was a sham transaction and was carried out in order to defraud the creditors of Barviesa (a co-founder of La Comercial)". Spanish law at the time, Articles 1261 and 1275 of the Spanish Civil Code, stated that "contracts without cause or whose cause is unlawful have no legal effect". La Comercial argued that the action should be dismissed in its entirety on the grounds that article 11 of the First Council Directive 68/151/EEC of 9 March 1968 on coordination of safeguards which, for the protection of the interests of members and others, which had not yet been implemented by Spain, provided an exhaustive list of the cases under which the nullity of a company may be ordered and that "lack of cause" was not a ground listed therein. The Spanish court then referred the following question to the European Court of Justice: "Is Article 11 of [the] Council Directive 68/151/EEC of 9 March 1968, which has not been implemented in national law, directly applicable so as to preclude a declaration of nullity of a public limited liability company on a ground other than those set out in the said article?" RULING

The ECJ held that the Spanish Courts were under a duty to interpret national law in a way that gave effect to European law. ...it should be observed that, as the Court pointed out in its judgment in Case 14/83 Von Colson and Kamann v Land Nordrhein-Westfalen [1984] ECR 1891, paragraph 26, the Member States' obligation arising from a directive to achieve the result envisaged by the directive and their duty under Article 5 of the Treaty (article 4(3) TEU now) to take all appropriate measures, whether general or particular, to ensure the fulfilment of that obligation, is binding on all the authorities of Member States including, for matters within their jurisdiction, the courts. It follows that, in applying national law, whether the provisions in question were adopted before or after the directive, the national court called upon to interpret it is required to do so, as far as possible, in the light of the wording and the purpose of the directive in order to achieve the result pursued by the latter and thereby comply with the third paragraph of Article 189 of the Treaty." Para “[8]…in applying national law, whether the provisions in question were adopted before or after the directive, the national court called upon to interpret it is required to do so, as far as possible, in the light of the wording and the purpose of the directive in order to achieve the result pursued by the latter…” - The national courts are required to interpret law as far as is possible. Indirect effect has advantages in relation to vertical effect – there’re no conditions Limitations: if the national law is clear you cannot interpret the law in whatever way you need - In order to rely on a directive there has to be a pre-existing national law – in the absence of national law, you cannot use the directive. So if there is no national law there first you cannot use the directive. - A national court must interpret pre-existing national law in the light of a directive only where the internal law is reasonably capable of that interpretation

C-387/02 ET AL SILVIO BERLUSCONI

PFEIFFER V. DEUTSCHES ROTES KREUZ Workers of the German Red Cross, including Mr Pfeiffer, who served as emergency workers, doing ambulance runs claimed that a collective agreement that set their hours at 49 hours per week violated the Working Time Directive. The Red Cross contended that as emergency workers they were akin to civil servants and thus fell outside the Directive's scope. JUDGMENT The Grand Chamber of the Court of Justice held that workers could not be asked to work 49 hours a week by a collective agreement. They had to opt out individually. As

a starting matter it held that the exception for civil servants was not applicable, holding that ‘the civil protection service in the strict sense thus defined, at which the provision is aimed, can be clearly distinguished from the activities of emergency workers tending the injured and sick which are at issue in the main proceedings.’ The ‘worker's consent must be given not only individually but also expressly and freely’. 67. Since they are exceptions to the Community system for the organisation of working time put in place by Directive 93/104, the exclusions from the scope of the directive provided for in Article 1(3) must be interpreted in such a way that their scope is limited to what is strictly necessary in order to safeguard the interests which the exclusions are intended to protect (see, by analogy, the judgment in Jaeger, paragraph 89). [...] 82. Any derogation from those minimum requirements must therefore be accompanied by all the safeguards necessary to ensure that, if the worker concerned is encouraged to relinquish a social right which has been directly conferred on him by the directive, he must do so freely and with full knowledge of all the facts. Those requirements are all the more important given that the worker must be regarded as the weaker party to the employment contract and it is therefore necessary to prevent the employer being in a position to disregard the intentions of the other party to the contract or to impose on that party a restriction of his rights without him having expressly given his consent in that regard…

C-456/98 CENTROSTEEL V. ADIPOL Concerned independent civil law obligation not arising in national law Held: The courts of Member States are under a obligation to interpret their national laws in such a way as to achieve the result pursued by the directives. That obligation also applies to proceedings between individuals.

PUBBLICO MINISTERO V. RATTI Mr Tullio Ratti claimed that he should not have to comply with a stricter Italian law that required him to label his solvents, on the ground that it conflicted with two Directives. Mr Ratti sold solvents and varnishes, some of which were imported from Germany that complied with two Directives. Directive 73/173 (adopted 4 June 1973, to be implemented 8 December 1974) and Directive 77/728 (adopted 7 November 1977, to be implemented 9 November 1979) required solvents and varnishes to be packaged and labelled specially. Mr Ratti complied with the Directives, but an Italian law of 1963 was stricter in some respects. Mr Ratti was prosecuted for failure to comply with the Italian law. Directive 73/173 was already meant to have been implemented, but Directive 77/728 was not yet required to be impleme...