Member State Liability

The signficance of Francovich and the provisions of Article 226 - Justin Santiago

The Francovich judgement established the principle of state liability to pay compensation for failure to transpose Community obligations into national law as outlined by Article 10. Francovich signaled the beginning of member state liability where member states can be held liable for non-implementation of a directive. This decision has paved the way for individuals to outflank the no horizontal direct effect ruling and to sue the State in damages where the state has failed to implement a directive. Three conditions were required to be fulfilled :-

1. Objective sought by the directive must include the creation of individual rights
2. The content of the rights must be ascertainable from the provision of the directive
3. There must be a causal link between breach of duty on the part of the State and the losses incurred by individuals

De Burca has additionally suggested that the case for direct enforcement against the state appears to be based on a concept of estoppel thereby the state may not rely upon its own failure to implement a directive properly.

However it has also been argued that the State should not be held liable as the State did no wrong to the claimants and the decision has blurred the distinction between private law rights and public law rights.

The correct course of action should have been by way of Article 226 which allows the Commission to take action against Member States which the Commission believes to be in breach of Community law and to ensure that Member States comply with their Community law obligations and procedure which includes implementing a directive. If the Commission considers that a Member State has failed to fulfill an obligation under the Treaty, it shall deliver a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations.This will result in a Declaration by the court to that effect. This stage ends with the Commission issuing a reasoned opinion which forms the bases of the judicial stage of the proceedings before the ECJ. Art 228 was introduced by Treaty of the European Union in order to add a financial penalty to ensure Member States complied with Art 226 judgements. Art 228 is a separate action to impose fines to have a further deterrent effect depending on the seriousness of the breach and duration of the breach.

However Francovich was deemed necessary in light of the fact an action under Art 226 can be a long process. There are also limits to the effectiveness of Article 226 in ensuring compliance of Community law on the part of Member States :-

1 .The Commission has absolute discretion on whether to start the Art 226 EC procedure and as to whether to take a case to the ECJ : Commission v Belgium. The decision not to make a reasoned opinion and the decision not to submit a case to the ECJ have been held to be not reviewable under Art 230 EC as they are not acts that have legal effects : Alfons Lutticke. The discretion of the Commission to bring proceedings under Article 226 is excessively arbitrary.

2. The process is ineffective. The process is delicate, secret and often protracted - the effectiveness of an Art 226 action is diminished by the length of time the process takes and the lack of a serious penalty.

3. There is no genuine sanction against a member state which refuses to abide by the court’s ruling. The only result of a finding by the ECJ under Art 226 is that the Member State is in breach is a declaration to that effect. The Member State can continue to avoid complying with Community law obligations. The individual has no say in determining whether or not the Commission actually initiates proceedings against a Member State : Star Fruit v Commission – Commission was not bound to take action but had a discretion also Commission had a right but not a duty to initiate proceedings before the ECJ following non-compliance with the reasoned opinion. Although documents related to the infringement proceedings is available a major source of frustration is difficulty in obtaining access to documents related to infringement proceedings.

4. The Commission does not have enough resources to bring enforcement proceedings against member states under Article 226. By introducing the concept of direct effect of EC law as well as indirect effect or in action for damages on the basis of the state liability doctrine, the ECJ enabled individuals and companies throughout the EU to become enforcers of Community law in the Member States without the need for Commission involvement. An Art 226 declaration that a member state in breach will facilitate a state liability action by an individual.

There are also limited defences :-

1. Reciprocity

Argument of reciprocity was not applicable in the context of Community law as it was a new legal order which was not limited to creating reciprocal obligations as under international law.

2. Other Member States in breach

Grounds have been pleaded numerous time by Member States without success C266/03 Commission v Luxembourg

3. Force majeur

Difficulties in parliamentary procedures or problems with the separation of powers within their systems to explain delay in compliance with EC law – rejected by the ECJ. However could be pleased where a bomb attack presented insurmountable difficulties rendering compliance with the Treaty impossible : Case 33/69 Commission v Italy (Re Transport Statistics) – data processing centre had been bombed however ECJ held that “time will erode the validity of the excuse.”

4. Internal difficulties

Internal difficulties not the Commission’s concern : C128/78 Commission v UK (tachographs)

5. Non-applicability of the offending law

C167/73 Commission v France (French Merchant Seamen) – rule in French code maritime was not enforced in practice against EU nationals but was not accepted because it gave rise to uncertainty about legal rights.

6. Community measure is illegal

C226/87 Commission v Greece – defence rejected because the appropriate remedy within the system of remedies set up by the Treaty was an action for judicial review under Art 230 EC.

7. Adequate implementation of the relevant community law by administrative measures

C29/84 Commission v Germany (Re Nursing Directives) – administrative measures widely publicized and not easily subject to alteration

8. Protection of fundamental human rights

Case 112/00 Schmidberger v Austria – freedom of expression and freedom of assemble were fundamental human rights guaranteed by the ECHR which are to be protected by the EC according to the TEU and hence the action by the claimant whose business of transporting goods was hampered by a demonstration failed.

Advantages of proceedings under Article 226 are that the ECJ will pronounce directly on the compatibility of a Member State’s conduct with Community law compared to a preliminary reference from a national court under Article 234 where the ECJ will only give a ruling on the interpretation of Community law leaving it for the national court to spell out the implications of that ruling in the particular case.