Direct Effect & Member State Liability in the EU

The doctrine of direct effect can be simplified to mean the enforcement of EU legislation in national courts. However, in recent times the term 'direct effect' itself has been engulfed in uncertainty, with professionals and academics seeking clarify on what the term actually means in legal reality. The case of Van Gend en Loos [1963] is seminal in this area of EU law as it highlights the broad definition afforded to the concept of direct effect and as such it can generally be accepted as the provision of bringing proceedings regarding an element of EU law to be invoked in national courts of EU member states (known as 'objective' direct effect). Direct effect therefore means that EU law is capable of being directly relied upon before national courts with the necessity for a national implementing act. The European Courts of Justice have also expanded the doctrine to include regulations and decisions on top of EU legislation. Since this, judicial precedent has focused on direct effect of directives. Direct effect is not automatic however if a provision is established as being directly effective, it is paramount that the national courts not only apply that provision, but base it off the primacy and supremacy of EU law. National law must take a back seat in favour of EU law.

For a directive to have direct effect a member state must have done:

1. Failed to implement a particular measure or,

2. Implemented it in a defective manner or,

3. Does not give the individual the full extent of rights that they should enjoy under EU law.

The seminal case of Van Gend en Loos [1963] highlighted how the treaty article in question under direct effect must be clear and unconditional, prohibition and not dependent upon member state implementation. In this case specifically, it was Article 30 which the applicant was challenging in national courts. The case was important in establishing the first step in a long sequence of judgements made by the ECJ with the primary aim of ensuring sufficient legal protection for individual rights. The further case of Reyners v Belgium [1974] established a three-part test to be applied before EU law would be directly effective in national courts. The case involved a dutch national challenging Belgian legislation which excluded non-belgians from the legal profession stating that it was in violation of Article 49 TFEU which prohibits restrictions on the freedom of establishment of nationals of a member state in territory of another member state. Subsequently, the three-tier test was defined as:

1. Must be clear and unambiguous

2. Must be unconditional

3. Must be final and not dependent upon further action from the Community or MS.

Horizontal/Vertical Direct Effect

Two different types of direct effect exist: horizontal and vertical. In case of horizontal direct effect, and individual is invokes EU law and their rights against companies and other individuals within the state. In the case of vertical direct effect, individuals are concerned with bringing proceedings against the state in order to enforce their rights or other legislative protection. The Treaties automatically by virtue of their standing have horizontal and vertical direct effect.

In the case of Defreme v Sabrena [1976], the court ruled that treaty articles could be invoked horizontally through a decision that the prohibition of discrimination between genders extends to all contracts between individuals. The applicant was an air hostess who worked for an airline whose policy was to retire female employees at 40 years old. She sued on the basis of Article 119 of equal and pay and work. Article 119 appeared to lack sufficient precision to be directly enforced by a court as key concepts such as 'equal work' and 'pay' were not defined. The case left no doubt as to the use of direct effect of treaty articles and it could be invoked horizontally against against individuals in national courts and vertically against the state. The court held that the airline was in violation of EU law.

Directives & direct effect

Directives are required to be transposed into domestic law. Article 288 TFEU states that directives are only binding as to the result to be achieved and require a transposition measure by the member state. Unlike treaty article and regulations, directives are not directly applicable. Rather, they require implementation into national laws. In the cases of Van Duyn v Home Office [1974] and Ratti [1979], the European Courts of Justice ruled against the belief that directives were in fact capable of vertical direct effect. In the former case, the courts provided a detailed and functional reason for this decision.

In Van Duyn, the applicant wanted to rely on Article 3 of directive 64/221 in order to challenge the Home Office's refusal to allow her to work with the Church of Scientology and to enter the United Kingdom. The UK government banned the entrance of foreign scientologists to the UK on grounds of public policy. In the context of Article 3, the article provides that any measure taken to deny access of entry or residence on public policy grounds must be based exclusively on the personal conduct of the applicant. However, the issue raised was that of defining 'personal conduct.' Yet, despite this, the court stated that the directive was directly effective before the national court. In its conclusion, the court stated that in order to determine if a directive is directly effective that no pre-determined test should exist, rather each directive must be examined on a case-by-case basis. That being said, the test of Van Gend (directive must be clear, precise and unconditional), can be extended for examining if a directive is directly effective.

In the latter case of Ratti, the court expanded on the decision in Van Duyn. The ECJ here outlined that a member states obligation to implement becomes absolute when the time for implementation expires and a failure to implement a directive cannot be used to deny the binding effect of a directive past the expiration date and the ECJ's argument was one of estoppel. In the event of a conflict between national law and a directive, it is now necessary to disapply national law. With this in mind, it does appear that Ratti imposes a reasonable restriction on the direct effect of directives given the backdrop of the ECJ's aim of expanding protection for individual rights.

Limitations of direct effect of directives

In the case of Marshall v Southampton [1986], a distinction between horizontal and vertical direct effect in the context of directives was established, which clarified that directives are only capable of being horizontally directly effective. In the case, Mrs Marshall was the employee of a health authority and sought to challenge, much like the case of Van Duyn, the health authorities compulsory retirement age of 65 for men and 60 for women, which she believed that it breached the Equal Treatment Directive 76/207/EEC. The ECJ stated that the applicant could rely on the directive depended on whether the health authority was expressed as part of the state (vertical) or a private body (horizontal). The court held that the health authority was in fact an emblem of the state. The case confirmed that a health employee would have greater benefits and protections if employed by a private hospital, for example, rather than in a national health organisation. The reason behind this was based upon the fact that "the binding nature [of directives] exists only in realtion to each member state it addressed" as noted by Albors-Llorens (2014). This decision of imposing only horizontal direct effect on directives owed the court much criticism, the primary being due to the unfairness and unjustness of the decision with regards to employment protection.

The case of Foster v British Gas [1990] attempted to expand on the definition of 'the state' as expressed in the case of Marshall v Southampton [1986]. In the case of Foster, the court expanded on the definition of the state in the context of directives, establishing a three-tier test to establish the status of a state body. In a similar circumstance as the case of Marshall, a group of female employees challenged British Gas's compulsory requirement for females to retire at 60 and men at 65 on the basis that it infringed the equal treatment directive. The question again arose as to whether British Gas was a 'state body.' As British Gas was a nationalised industry it was controlled by the British state. Subsequently, the court held that once a directive is unconditional, clear and precise and the time limit for transposition has passed, applicants can rely on it directly against the state. The case demonstrated that a body which has been given responsibility for providing a public service as an apparatus of the state has powers beyond that normally applicable between private individuals and companies. British gas was held by the court to be an emblem of the state. The three-tier test established for considering if the organisation is part of the state is:

1. Is the body made for providing public service

2. Is the body to be under state control

3. Does the body possess special powers beyond those normally applicable to an individual.

The effect of the test broadly expanded the definition of the state to encompass a diverse range of companies which further expanded the protection afforded to the individual.

In the case of Von Colson, the plaintiffs sought to rely upon the Equal Treatment directive to challenge the appointment of two male social workers by the German prison service. The claim was based on ground of sex discrimination. The plaintiffs sought to either be appointed as social workers or to have damages paid to them for breach of the directive. German law however, only permitted payment of travelling expenses and the issue of the adequacy of the remedy was referred to the ECJ for consideration. The ECJ held that the limited damages allowed under German law was in breach of the principle of effectiveness since the damages did not provide for employers not to infringe the terms of the directive. Regardless if the directive did not have direct effect, the member state was under a duty pursuant to ex-Article 10 to take all necessary measures to ensure the effectiveness of directives as binding upon all authorities of member states, including the courts. The position in Von Colson was confirmed in the case of Eunice Sutton, whereby damages are confirmed as an appropriate remedy in response to the state's breach of its obligation under a directive and as such, applicants can sue for damages under the principle of member state liability.

Member state liability

The rule exists that if a member state fails in its duty to implement EU law that a if a citizen lacks a remedy or suffers loss/damage, they are entitled to sue against the member state for any injury suffered. This doctrine is known as member state liabiltiy and was initially recognised in the case of Francovich v Italy and the test as established in Francovich for member state liability is also confirmed in the cases of Brasserie de Pecheu and Factortame [1996]. In the latter cases, the ECJ refined the conditions for the imposition of state liability:

a. Confer: The rule infringed must be intended to confer rights on individuals

b. Serious: The breach must be sufficiently serious to justify state liability

c. Causation: There must be a casual link between the breach of EU law obligation by the member state and the damage actually complained of by the applicant.

In the case of Kobler, the ECJ considered if the court could incur liability on the part of a state for a failure to implement EU law correctly. In answering this question, the court reflected on the case of Factortame and others, stating that the doctrine of state liability on the part of a member state for damage inflicted on individuals is inherent in the system of the Treaty and must be adequately followed. The case further clarified that organs of the state are part of a single entity, being 'the member state.' Subsequently, the member state as a single entity is liable for any violation of EU law, regardless of whether the legislature, judiciary or the executive were responsible for the breach.

Concluding thoughts

The principle of direct effect and member state liability originally established as a strict and restrictive protection of individual rights. These protections have been expanded and developed, as highlighted through the case law mentioned above, and as such state liability appears to genuinely enforce individual rights of member state citizens by bringing action within EU law, and the principle has diverse implications for the enforcement of EU labour law in particular, however various issues still remain to be resolved. In particular, directives on equal treatment of the sexes, health and safety regulations at work, for example, have become a fertile field for examining the scope of member state liability.