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In this review of the status of damages in the positive law of the EU, I will begin by examining their availability in the Community courts, before turning to the Community law concerning awards of damages in national courts.
The main enforcement mechanism provided for in the text of the Treaty is
that found in Articles 169 to 171,7
reproduced in Appendix B. These provisions permit the Commission or a Member
State to initiate proceedings against a Member State in the Court of Justice.
Until 1992, the Treaty provisions provided no guidance as to the kinds of
remedies available to the Court of Justice in the context of an enforcement
action under these Articles. The Treaty simply said, at Art. 171, that "if the
Court of Justice finds that a Member State has failed to fulfil an obligation
under this Treaty, the State shall be required to take the necessary measures
to comply with the judgment of the Court of Justice."
That this mechanism
was capable of being a basis for liability in damages was suggested in a 1973
decision of the Court of Justice:
... a judgment by the Court under Articles 169 and 171 of the Treaty may be of substantive interest as establishing the basis of a responsibility that a Member State can incur as a result of its default, as regards other Member States, the Community or private parties.8
However, no subsequent decision of the Court of Justice further
developed the idea of Member State liability arising under Articles 169 to 171.
In 1992, a year after Francovich, Article 171 was amended to create
the possibility of a "lump-sum payment or penalty" being ordered by the
European Court of Justice following a finding of non-compliance with a judgment
of the Court. The provision now reads:
Article 171.
1.-If the Court of Justice finds that a Member State has failed to fulfil an obligation under this Treaty, the State shall be required to take the necessary measures to comply with the judgment of the Court of Justice.
2.-If the Commission considers that the Member State concerned has not taken such measures it shall, after giving that State the opportunity to submit its observations, issue a reasoned opinion specifying the points on which the Member State concerned has not complied with the judgment of the Court of Justice.
If the Member State concerned fails to take the necessary measures to comply with the Court's judgment within the time-limit laid down by the Commission, the latter may bring the case before the Court of Justice. In so doing it shall specify the amount of the lump sum or penalty payment to be paid by the Member State concerned which it considers appropriate in the circumstances.
If the Court of Justice finds that the Member State concerned has not complied with its judgment it may impose a lump sum or penalty payment on it.
This procedure shall be without prejudice to Article 170.
Although individuals cannot avail themselves of the procedure in Articles 169 to 171 so as to enforce Community law against the Member States, the Treaty does create an individual right of action against the Community itself, in Article 173, and an individual right to compensation for damage wrongfully caused by the Community, in Article 215.9 The latter provision reads as follows:
Article 215. The contractual liability of the Community shall be governed by the law applicable to the contract in question.
In the case of non-contractual liability, the Community shall, in accordance with the general principles common to the laws of the Member States, make good any damage caused by its institutions or by its servants in the performance of their duties.
Article 178 specifies that disputes arising under the second paragraph
of Article 215 shall be heard in the Court of Justice. The Court has
interpreted this as an exclusive jurisdiction.10
Although wrongdoing is not explicitly
mentioned in Article 215, par. 2, as an element of liability, it seems clear
from the case law of the Court of Justice that it is required. A mere showing
of Community conduct causing damage, without proof that the conduct was in some
way wrongful, has never been sufficient to give rise to Community
liability.11
Moreover, where the claim
is in respect of damage caused by a "legislative measure which involves choices
of economic policy," wrongdoing is not established simply by showing that the
measure is contrary to Community law. Beginning in a 1971 case known as
Schöppenstedt, the Court has held that to be successful in claiming
damages under Art. 215, par. 2, for legislative wrongdoing, a plaintiff must
show that there has been a "sufficiently serious breach of a superior rule of
law for the protection of the individual."12
The requirement of a sufficiently serious
breach has in practice been a difficult hurdle,13 with the standard of misconduct being fixed at a
relatively high level by the Court of Justice in deference to the inherently
discretionary nature of legislative measures. According to the Court of
Justice, the test for a sufficiently serious breach was whether the institution
had "manifestly and gravely disregarded the limits on the exercise of its
powers."14 In applying this test, the Court
will consider the nature of the breach, whether the damage exceeds the normal
risks of the plaintiff's business, and the number of potential
claimants.15 The latter two factors in
particular reflect the special nature of legislative measures: individuals are
expected simply to accept a certain risk of harmful effects from legislative
activity,16 and the smaller the affected
group, the more inequitable it is for them alone to bear the burden of the
legislation.17
It was perhaps foreseeable that issues of national authorities' non-compliance with Community law would arise as much before national courts as before the judicial organs of the Community. It is true that the Treaty is essentially silent on the role of national courts in enforcing Community law and, a fortiori, it has nothing to say about remedies in the national courts. Rather, the main enforcement mechanisms provided in the text of the Treaty, discussed above, contemplate proceedings in the Court of Justice. However, the doctrines of direct effect and supremacy developed by the Court of Justice have made the national courts a primary arena for litigation regarding a Member State's compliance with Community law, and so it is in the national courts that the consequences of non-compliance are likely to be first determined. Thus, the response of national judges to domestic non-compliance is consequently a critical determinant of the practical effectiveness of Community norms: in a sense, the remedies available in the national forum are the "teeth" of the Community legal order. As a result, just as it lay with the Court of Justice to develop the doctrines of direct effect and supremacy, so too has it fallen to the Court to ensure the effectiveness of national court enforcement of Community law by laying down standards as to the palette of remedies that must be offered by national courts. It is not surprising, therefore, that the ECJ has had something to say on the issue of damages.
There was a hint very early on that breach of the Treaty would trigger an obligation to make good any resulting harm. As early as 1960, several years before its classic pronouncements on supremacy and direct effect, the Court of Justice made the following remark, in a case involving the Coal and Steel Treaty:
[S]i la Cour constate dans un arrêt qu'un acte législatif ou administratif émanant des autorités d'un État membre est contraire au droit communautaire, cet État est obligé, en vertu de l'article 86 du Traité CECA, aussi bien de rapporter l'acte dont il s'agit que de réparer les effets ilicites qu'il a pu produire ; cette obligation résulte du Traité et du protocole (sur les privilèges et immunités des Communautés européennes) qui ont force de loi dans le États membres à la suite de leur ratification et qui l'emportent sur le droit interne.18
Article 86 of the Coal and Steel Treaty is the equivalent of Article 5
EC, which obliges Member States to "take all appropriate measures, whether
general or particular, to ensure fulfilment of the obligations arising out of
this Treaty or resulting from action taken by the institutions of the
Community."
However, with the exception of the 1973 case referred to in
the discussion of Articles 169-171, above, nothing further was heard from the
Court of Justice on the issue of Member State liability until twenty years
later, in Francovich.
In Francovich, a group of laid-off Italian workers whose employer
became insolvent and unable to meet its redundancy payments sued the Italian
government for non-compliance with Directive 80/987, which provided that Member
States were required to set up guarantee funds to cover precisely this type of
event. The Italian trial court referred to the ECJ certain questions arising
from the workers' claim.
The directive was not unconditional or
sufficiently precise so as to be directly effective against the Italian
government, but the claimants argued in the alternative that the Member State
could be held liable in damages for its failure to implement the directive. The
Court of Justice agreed in principle, on the basis that
[t]he full effectiveness of Community rules would be impaired and the protection of the rights which they grant would be weakened if individuals were unable to obtain redress when their rights are infringed by a breach of Community law for which a Member State can be held responsible.
...
A further basis ... is to be found in article 5 of the Treaty, under which the Member States are required to take all appropriate measures, whether general or particular, to ensure fulfilment of their obligations under Community law. Among these is the obligation to nullify the unlawful consequences of a breach of Community law ... .19
The Court concluded that, as a matter of Community law, a breach by a
Member State of its Community legal obligations should, subject to certain
conditions, give rise to liability in damages to those harmed.
Where the
breach consisted of failing to implement a directive, the conditions for
liability were as follows:
The first of those conditions is that the result prescribed by the directive should entail the grant of rights to individuals. The second condition is that it should be possible to identify the content of those rights on the basis of the provisions of the directive. Finally, the third condition is the existence of a causal link between the breach of the state' s obligation and the loss and damage suffered by the injured parties.20
If these conditions were met, then there was in principle a right to
compensation as a matter of Community law.
The Court of Justice created
some doctrinal uncertainty by ruling that this right to compensation was to be
exercised "in accordance with the rules of national law on liability,"21 so long as
... the substantive and procedural conditions laid down by the national law of the various member-States on compensation for harm [are not] less favourable than those relating to similar internal claims and [are not] so framed as to make it virtually impossible or excessively difficult to obtain compensation.22
The Court's nod to the principle of national institutional autonomy was consistent with some of the Court's previous case law,23 but it set the stage for further litigation regarding the scope left for national legislation to impose additional conditions, particularly "substantive" conditions, to the right to compensation. This issue, among others, was addressed by the Court of Justice in the joined cases, Brasserie du Pêcheur and Factortame III.24
Brasserie du Pêcheur involved a claim by a French beer
producer whose product was excluded from the German market because it did not
meet the purity requirements imposed by German law. When the ECJ ruled that the
German law violated the ban on measures having an effect equivalent to
quantitative restrictions on imports (Art. 30 EC), the French company brought
an action in the Bundesgerichtshof (German Federal Court of Justice), claiming
damages against the German government. The German Court referred to the ECJ
certain questions relating to the principles to be derived from Francovich,
concerning, among other things, whether the German Court was entitled to
apply the conditions of German law regarding State liability.
The case was
joined with a British case, Factortame III, the third of a series of
cases involving a new system for the registration of fishing vessels in the
United Kingdom. In Factortame I,25 the Court ruled that the Crown's immunity from
interim relief barring enforcement of a statute could not be absolute, and that
it might be required to give way in cases involving a pending challenge to the
compatibility of a statute with EC law. In Factortame II,26 the Court ruled that certain restrictions
contained in the fishing registration statute discriminated on the basis of
nationality and were therefore inconsistent with EC law. As a result, certain
persons who had been denied registration under the statute claimed compensation
for the damages they had suffered as a result of being deprived of the right to
fish. This claim was the basis of Factortame III. Since, under British
law, there was no liability for losses suffered by reason of legislation, the
Court of Justice was asked to rule on whether this principle could survive in
light of Francovich.
Brasserie du Pêcheur and
Factortame III were distinguishable from Francovich in that they
involved State action incompatible with a Treaty provision, rather than a
failure to implement a directive. However, the Court of Justice chose to ignore
this difference and simply took it for granted that the conditions articulated
in Francovich could be generalized so as to apply to actions as well as
omissions in respect of any category of Community law, so long as the Community
norm infringed was concerned with granting rights to individuals.
The
important questions dealt with by the Court were (1) whether the principle of
Member State liability developed in Francovich applied to national
legislative acts, and (2) whether the right to compensation was conditional on
the existence of fault or could be made subject to other restrictions found in
national law on State liability. The Court also took the opportunity to
introduce an additional requirement for liability.
On the liability of
Member States for legislative acts, the Court of Justice analogized Member
State liability to international law, and stated:
[In] international law a State whose liability for breach of an international commitment is in issue will be viewed as a single entity irrespective of whether the breach which gave rise to the damage is attributable to the legislature, the judiciary or the executive. This must apply a fortiori in the Community legal order since all State authorities including the legislature, are bound in performing their tasks to comply with the rules laid down by Community law directly governing the situation of individuals.27
As a result, the Court held that the right to compensation for breach of
Community existed even where the breach was caused by an act of the national
legislature.
Concerning the conditions which national law might impose on
State liability, the Court of Justice all but foreclosed the possibility of
additional substantive conditions. The ECJ was not content simply to reiterate
that such restrictions must not be such as to "make it impossible or extremely
difficult to obtain effective reparation for loss or damage resulting from a
breach of Community law."28 For greater
certainty, the Court gave examples of unacceptable restrictions. Member States
could not, for instance, make reparation dependent upon the infringing law
being addressed to an individual situation (a condition found in German law) or
on a showing of misfeasance in public office (as in English law). Even the
introduction of "fault" as an additional condition (again, a requirement of
German law), would be "tantamount to calling in question the right to
reparation founded on the Community legal order."29
The Court, evidently, was concerned in
part with ensuring that there would be a certain uniformity of remedies
throughout the Community or, to put this concern another way, with preventing a
divergence in the remedies available before various national courts.30 This concern for uniformity did not, of course,
bar the Court from articulating a new substantive condition based on Community
law. Borrowing from its case law on the liability of Community institutions
under Art. 215, par. 2, the Court of Justice held that the liability of a
Member State was conditioned on there being a "sufficiently serious breach."
The Court explained the concept as follows:
[T]he decisive test for finding that a breach of Community law is sufficiently serious is whether the Member State or the Community institution concerned manifestly and gravely disregarded the limits on its discretion.
The factors which the competent court may take into consideration include the clarity and precision of the rule breached, the measure of discretion left by that rule to the national or Community authorities, whether the infringement and the damage caused was intentional or involuntary, whether any error of law was excusable or inexcusable, the fact that the position taken by a Community institution may have contributed towards the omission, and the adoption or retention of national measures or practices contrary to Community law.
On any view, a breach of Community law will be sufficiently serious if it has persisted despite a judgment finding the infringement in question to be established, or a preliminary ruling or settled case law of the Court on the matter from which it is clear that the conduct in question constituted an infringement.31
It can be seen that the Court's opinion in the joined cases (referred to
hereinafter simply as Brasserie du Pêcheur) brought some
additional doctrinal clarity to the issue of compensation. Subsequent cases
have resolved further issues, relating principally to the application of the
"sufficiently serious breach" criterion.32
For example, the Court has made it clear that a complete failure to transpose a
Community obligation into national law33
or a transposition founded on a manifestly incorrect interpretation34
will be considered "sufficiently serious breaches." In addition, the Court has
expanded upon the principle relied on in Brasserie du Pêcheur
concerning the liability of the whole State and the irrelevance of
international jurisdictional divisions, by ruling that, in Member States with a
federal structure, the Member State will be liable for violations of rights on
the part of political sub-units.35
However, neither Brasserie du Pêcheur nor the Court's subsequent
case law has shed any new light on the theoretical basis for Member State
liability. On the contrary, by analogizing Member State liability
simultaneously to two quite different legal phenomena - State responsibility in
international law and the non-contractual liability of the institutions of the
Community - the Court may be in the process of obscuring even further the real
theoretical underpinnings of Member State liability.
7 Once the Amsterdam Treaty enters into force, these will be Articles 226-228 of the consolidated EC Treaty.
8 Case 39/72, Commission v. Italy, [1973] E.C.R. 101, [1973] C.M.L.R. 439, at par. 11.
9 Article 288 of the consolidated version of the EC Treaty, after the entry into force of the Amsterdam Treaty.
10 Cases 106-120/87, Asteris v. Greece, [1988] E.C.R. 5515, at p. 5539, par. 18.
11 In a 1972 case, the Court of Justice was invited to adopt the French doctrine of égalité devant les charges publiques, a principle of no-fault liability which I discuss in Part II. The Court disposed of the case on other grounds, and, as a result, did not consider whether to adopt the doctrine. See Cases 9, 11/71, Compagnie d'Approvisionnement v. Commission, [1972] E.C.R. 391. As Schwarze observes, the Court has probably not yet spoken its last word on the issue: Schwarze, European Administrative Law, at p. 533.
12 Cases 83, etc./76, Bayerische HNL et al. v. Council and Commission, [1978] E.C.R. 1209, at p. 1224. See also Case 5/71, Zuckerfabrik Schöppenstedt v. Council, [1971] E.C.R. 975. See generally Schwarze, at pp. 524-30.
13 J. Shaw, Law of the European Union, 2nd ed. (MacMillan, 1993), at p. 357.
15 See C. Lewis, Remedies and the Enforcement of European Community Law (London: Sweet & Maxwell, 1996) at p. 265, and the cases cited therein.
16 Bayerische HNL, supra, at p. 1224, par. 5 and 6.
17 Lewis suggests another explanation, namely the Court's pragmatic concern for the financial consequences of incurring liability to large number of claimants. See p. 266-67.
18 Case 6/60, Humblet, Rec., Vol. VI, p. 1125.
23 Case 45/76, Comet BV v. Produktschap voor Siergeswassen, [1976] E.C.R. 2043; Case 33/76, Rewe-Zentralfinanz eG and Rewe-Zentral AG v. Landwirtschaftskammer fur das Saarland, [1976] E.C.R. 1898. See generally R. Kovar, "Voies de droit ouvertes aux individus devant les instances nationales en cas de violation es normes et décisions du droit communautaire," in Les Recours des individus devant les instances nationales en cas de violation du droit européen (Colloquium, 24 and 24 April 1975) at pp. 248-51; Lewis, at pp. 55-56.
24 Joined cases C-46 and 48/93, Brasserie du Pêcheur v. Germany and R. v. Secretary of State for Transport, ex. p. Factortame, [1996] E.C.R. I-4845.
25 Case C-213/89, [1990] E.C.R. I-2433
26 Case C-221/89, [1991] E.C.R. I-3905
27 Brasserie du Pêcheur, at par. 34.
30 Despite its desire for uniformity of remedies, the Court has not overruled the principle of national procedural autonomy, and, in cases since Brasserie du Pêcheur, it has reiterated the principle. See, for example, Case 66/95, Sutton v. Secretary of State for Social Security, [1997] E.C.R. I-2163, in which the Court indicated that the heads and quantum of damages were a matter for national law, subject only to the general principles that Community law causes of action must not be treated less favourably than those under domestic law, and that national rules must not make it impossible or excessively difficult to obtain redress. See also Case C-127/95, Norbrook Laboratories v. M.A.F.F., [1998] E.C.R. I-1531, at par. 111.
33 See, for example, Joined Cases C-178, 179 and 188-90/94, Dillenkofer et al., [1996] E.C.R. I-4845, at par. 29: "... failure to take any measure to transpose a directive in order to achieve the result it prescribes within the period laid down for that purpose constitutes per se a serious breach of Community law..."; Case C-319/96, Brinkmann Tabakfabriken v. Skatteministeriet, [1998] 3 C.M.L.R. 673.
34 See Case C-140/97, Rechberger et al. v. Austria, decision of June 15, 1999, at par. 50-51.
35 Case C-302/97, Konle v. Austria, decision of June 1, 1999, at par. 62. The Member State's responsibility would be discharged by providing in national law for damages to be obtained from the sub-unit.
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