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Effect of European Union law

Previous: Preliminary reference procedure

It has already been established that EU law is supreme over that of Member States and other related organisations. This page shall explore the different effects of this supremacy.

Direct effect

Direct effect of a legal measure means that individual citizens of member states may rely on that measure in national courts. This is not to be confused with direct applicability, which refers to the lack of an implementation requirement. Van Gend En Loos [1963], which introduced this concept, finding that Treaty provisions were directly effective if they were clear and concise, unconditional and did not require implementation. The relied upon Treaty provision was directly effective, such that an import duty was found to be illegal. It is perhaps ironic that direct effect pre-dates the CJEU’s declaration of EU supremacy the year after in Costa v ENEL [1964].

Although a Treaty provision must be unconditional to be directly effective, as illustrated by Defrenne v Sabena [1976], exceptions have been made by the CJEU in cases such as Van Duyn [1974], where a conditional right not to discriminate was found to be unconditional for the purpose of direct effect.

There are two types of direct effect: horizontal and vertical. Horizontal direct effect means that a legal measure may be relied upon in a private dispute (between individuals) and vertical direct effect means that a legal measure is enforceable against the state, such as in Foster v British Gas [1990].

Regulations are directly effective, both horizontally and vertically. Directives are not usually directly effective, as by their very nature, they require Member States to implement them. However, if unimplemented or implemented incorrectly, they may become vertically directly effective, such that they may be relied on by citizens against their state. In Van Duyn [1974], it was said that this potential for vertical direct effect was required to prevent integration from having a negative effect on individuals. In Ratti [1979], Italy was prevented from relying on its own wrongdoing where it had incorrectly implemented a directive on solvent labelling. Marshall I [1986] confirmed that as Directives are addresses to Member States, it would be unfair for them to have horizontal direct effect, as this would prejudice individuals. In Faccini Dori [1994], the non-implementation of a Directive prejudiced the claimant, who had to make vertical claim under the principle of state liability as opposed to being able to rely on the unimplemented Directive. Decisions are only vertically directly effective on the Member States to whom them are addressed.

Indirect effect

Indirect effect is less of an effect and more of a duty: one akin to Section 3 of the Human Rights Act 1998. National courts are under a duty, by virtue of Article 4(3) TEU (the fidelity provision) to, as far as possible, interpret national law to maximise the enforceability of EU law. This duty, according to Pfeiffer [2005], is “inherent in the system of the Treat[ies]”. Thoburn v Sunderland City Council [2002] illustrates this duty, where a Henry VIII clause in the European Communities Act 1972 was required to be interpreted as overriding provisions in the 1985 Weights and Measures Act.

It is to be recalled from Marshall I [1984] that directives can only have vertical direct effect. However, interpretation may still affect individuals. In Von Colson [1984], where a job was refused on the basis of gender, the national court was under a duty to stretch the meaning of national law resulting from the implementation of a Directive to suit the intended consequences of the Directive. Adeneler [2006] found that this duty applies during a Directive’s implementation (or transposition) period, pre-empting Member States from adopting measures contrary to a Directive during this period and even interpreting existing national law in accordance with the unimplemented Directive. The duty on the national court is to stretch the national measures as far as is possible, according to Marleasing [1990]. However, a national court’s ‘stretching’ must not place obligations on individuals, according to the Court of Justice in Arcaro [1996]. The Advocate General in Arcaro [1996] commented that allowing obligations to be conferred by unimplemented directives would create a ‘back door’ in giving them horizontal direct effect, which is prohibited. Another limit to this duty of interpretation was set out in Rolex [2004]: indirect effect may not undermine the general principles of law. Of course, if there is no national law which could possibly be interpreted in conformity with EU law, indirect effect will not operate.

Incidental effect

Although it is has been said that Directives can never have horizontal effect (direct or otherwise), incidental effect is the exception to the rule. There are two circumstances in which Directives can have horizontal effect.

Firstly, if a Member States breaches the requirements set out in Directive 83/189 on technical standards, its citizens will be able to rely on that Directive in private disputes. As a result, in CIA Security v Signalson [1996], the failure of Belgium to request the Commission’s permission to enact a law making some burglar alarm systems illegal gave Directive 83/189 horizontal effect, allowing the Belgian law to be found invalid in a private dispute. Similarly, in Unilever v Central Food [2000], although the Italian government had applied for approval for an olive oil labelling law, as approval had not yet been granted, the olive oil in question was not illegal and the Italian law was invalid. The Directive had horizontal effect in a private dispute.

Secondly, Directives may have horizontal effect if they concern a general principle of law. In Kukukdeveci [2010], a directive had horizontal effect as anti-age discrimination was found to be a general principle of law.

It is arguable that incidental is merely another interpretative duty. If this argument is convincing, the friction between incidental effect and the Faccini Dori rule (that Directives should never place obligations on individuals) can be avoided.

State liability

It has been said several times that Directives do not (usually) have horizontal effect between private parties. However, if a private party suffers a loss due to their Member State’s non-compliance with EU law (including the non-implementation of Directives), that loss may be claimed from the Member State under the principle of state liability. Although the Treaties do not reference this principle, it has been developed by the Court of Justice in a number of cases.

Francovich [1991] first recognised the principle: a directive providing for privileged claims against insolvent employers remained unimplemented by Italy, resulting in loss to Francovich. Indirect effect was inapplicable as there was no law possible to stretch, therefore, Francovich was permitted to recover from Italy itself. Three preconditions were laid out for recovery: a directive intended to grant rights to individuals, clear content and a causal link to the loss sustained.

These preconditions were modified by Factortame III [1996], aligning them with Article 340 TFEU’s criteria for contractual liability. State liability is therefore premitted where a right is intended by the EU, the Member State’s breach is ‘sufficiently serious’ and a causal link may be made between the breach and the loss claimed. ‘Sufficiently serious’ is a question of fact assessed in light of the clarity of the right, Member States’ discretion, the EU’s intent and Member States’ excusability. In both BT [1996] and Denkavit [1996], as other states had made the same mistake as the defendants in interpreting a Directive in a particular way, no state liability was found.

Outside of the context of Directives, state liability may also be imposed as a result of the premature withdrawal of a preliminary reference, as occurred in Kobler [2003], or where a Member State manifestly disregards the case law of the Court of Justice or fails to make a preliminary reference, as said in Traghetti [2006].

National procedural autonomy

A final effect of EU law is that on national procedural autonomy. The EU must not interfere with the legal orders of Member States, according to Rewe [1976], yet it must ensure that individuals can assert EU law rights in national courts through two principles: equivalence and effectiveness.

Principle of equivalence

The principle of equivalence demands that Member States have equivalent procedural rules for EU law as they do national law. It was said in Levez [1998] that the purpose and characteristics of similar national actions should be consider to ensure that equivalence is present. An example of equivalence in action would be if an EU legal measure provided for a certain sanction, yet national courts had no method applicable to EU law which could implement this sanction. The CJEU would require national procedure to be able to deal effectively with the implementation of EU law.

Principle of effectiveness

If there could be no equivalent remedy in national law under the principle of equivalence, the principle of effectiveness provides that EU law rights must be protected nationally, as a result of Article 19(1) TEU, which provides that Member States will provide remedies sufficient for the adequate legal protection. Butterfahrten [1980] says that EU law is not intended to create national remedies, however, as well illustrated by Factortame (No 1) [1990], if a national procedural rule prevents EU law from being effective, it must be set aside. Emmott [1991] suggested that a Member State may be estopped from denying a claim where the claim may have succeeded had the state not failed to implement EU law; but this estoppel exception was severely limited by Johnson [1994]. As an additional treaty provision, Article 47 of the CFREU provides for a right of effective judicial protection.

Next: Judicial review and the European Union

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