State Liability Outline

I’ve done my best if you see a mistake feel free to message me or if you have any questions 😀 Happy revision (if there is such a thing)

State Liability

• Attempt to mitigate the harshness of the rejection of horizontal direct effect of Directives (Marshall)
• Imposes liability on state to pay damages for non-implementation of a Directive.
• Principle has been extended to cover breach of community law other than non-implementation of Directives.
• Important debate: does EU law create new remedies that didn’t exist before through this?

• Failure to implement a Directive

Principle established in Francovich

• Established right to compensation from the state for the loss caused by non-implementation of Directives. Landmark decision as courts took the chance to develop its jurisprudence on the direction state liability cases
  • Court created this idea of damages based on Article 4(3) solidarity provision.
  • Facts: company went insolvent and no fund was set up to pay employees, can’t use direct effect, no national/pre-existing law. Employees sue Italy for non-implementation of a Directive. Nothing in the treaty suggests individuals can receive damages for non-implementation of Directives.

Conditions to be met for state liability:

• Directive must confer rights for the benefit of individuals
• Content of the rights must be identifiable from the Directive
• There must be causal link between the damages suffered and the breach

• : State liability for legislative action in breach of treaty provisions.

Factortame No3

Case enhances enforcement of EU law and gives individuals power.

• The rule infringed must be intended to confer rights on individuals
• The breachmust be sufficiently serious.
  • = has there been a grave and manifest disregard of the limits of discretion,
  • Also look at clarity and precision of the rule breach, measure of discretion left (if the courts have little discretion, they will quickly find state liability.), was the error excusable?
• There must be a causal link between the breach and the loss suffered. It is for national courts to determine whether there is such a direct causal link.

Where these ‘necessary and sufficient’ conditions are satisfied =state liable.

• Conditions laid down by applicable national laws can’t be less favourable than those relating to similar domestic claims or be framed in such a way that makes it impossible or excessively difficult to practice or obtain reparation.
• Case enhanced enforcement of EU law. Gives individuals power. Criticism of state liability= who will be paying and how?
• Conditions under which State liability arises depends on the nature of the breach– bearing in mind the need for full effectiveness of community law, protection of individual rights and obligations of Member States under Article 4(3) TFEU

• Intended to confer rights on individuals?

Dillenkofer

• Clarified that in Francovich, the breach was obviously sufficiently serious as non-implementation will always be.

• sufficiently serious breach

• Most important condition as it stops the test from being one of absolute or strict liability.
• Conditions apply to all Francovich claims but its more easily satisfied in some claims than others:

1.4.1: state liability for incorrect implementation of Directive.

Ex parte British Telecommunications 1996

• First case where incorrect implementation was held as being sufficiently serious.
• There was an ambiguity of EC provision. This was the first case where incorrect implementation was held to be sufficiently serious.
• Court- though UK incorrectly transposed Directive into national law, no manifest and serious breach occurred- the Directive has been unclear and thus capable of the interpretation given to it by the British authorities bona fide. No requirement to compensate BT for any loss suffered as a result of the error committed by the state.

1.4.2: State liability for executive state action in breach of treaty provisions

Ex parte Hedley Lomas 1996 (sheep slaughter case)

• Important because the court expressly recognised that ‘serious breach’ more easily satisfied in cases of non-legislative actions, liability seems stricter in such cases.
• The mere infringement of community law is enough to warrant a breach- chances of breach increased.
• Here Member State minister found to have acted in an administrative sense in breach of a directly effective free movement of goods provision. Where the discretion is reduced or there is none, mere infringement of community law is enough to warrant breach, chances of being liable increased. In this case minister had two choices, yes or no (narrow), he chose the wrong one.

1.4.3: State liability for non-implementation or incorrect implementation of a Directive (again!)

Dillenkofer 1996

• Important because court faced with identical situation as the one in Francovich i.e. non-transposition of Directive. Explains the conditions in Francovich and post-Francovich cases are the same and the extent to which the nature of breach affects application of those conditions.
• Case addresses uncertainty and gives you a short
• In a problem q- non-implementation you don’t have to go through all the conditions of Francovich, Factortame, – this case says by definition non-implementation is ALWAYS A SUFFICIENTLY SERIOUS BREACH. Moral of the story if you’re advising a state, go for incorrect implementation rather than non-implementation.

1.4.4: state liability for judicial failure to comply with community obligations

Kobler 2003

• Facts: uni professor in Austria where there was a system of salaries/pensions being calculated by length of service. His application rejected because he had spent time not working in Austria- brought claim against employers. Referencing rule- if you’re in the court of last resort – court from which whose decision has no appeal) the court MUST make a reference to the CJEU. Supreme court Austria withdrew reference- failing under EU law. So Kobler bring case on this judicial activity but does state liability cover this? Austrian law itself said, there’s no liability or damages for any loss suffered as a result of state activity.
• State liability DID apply however as it goes against protection of those rights.
• Case crosses the line because there are issues created when you create liability for judicial actions.
  • Legal uncertainty, can anyone who previously lost a case now come forward.
  • Judicial hierarchies can be upset- in the judgement it said that Member States SHOULD DECIDE WHICH COURTS WILL BE REVIEWING THE DECISIONS OF THE HIGHER COURTS.
  • This decision creates a threat.

Traghetti del Mediterraneo v Italy 2006

• Lower courts shouldn’t be reviewing higher courts. Judicial failings do give rise to liability
• Reference system is unique and successful system of collaboration of courts within the EU through references creating harmonious implementation.

1.4.5: state liability for breach of settled caselaw

Fub v Stadt

• causal link between the breach and damage

Clear from Factortame- in the absence of EU laws of causation, the national courts should determine what causation rules apply (so state liability is a tort, so national tort laws apply.)

Danfoss 2011

• Ruled that a defence raised by the State that P has no direct causal link because P did not pay the tax to the State would breach the principle of effectiveness.