Effective Sanctions in EC Law: A Moving Boundary in the Division of Competence

European Law Journal, Vol. I . No. 2, July 1995, pp. 205-217 0 Blackwell Publishers Ltd. 1995, 108 Cowley Road, Oxford OX4 IJF. U K and 238 Main Street. Cambridge, MA 02142. USA

Effective Sanctions in EC Law: A Moving Boundary in the

Division of Competence

Angela Ward *t

Abstract: This article details and analyses the development of European Court of Justice guidelines regarding sanctions provided by Member States to correct infractions of EC law. It will be shown that the contemporary policy of the Court sign8cantly retreats from an early practice of non-interference with the discretion of national judges to attach domestic remedies for breach of substantive Community measures. Preliminary comments will be made on the possible impact of these developments on the constitutional structure of the Community, and in particular their potential effect on the continuing debate concerning the legitimacy of EC rules.

I Introduction If a short description were required of current trends in European Community law- making, an appropriate response would highlight the growing move toward the devolution of authority to the Member States. At the political level, general manifestations of this pattern are evident in the Maastricht articulation of the subsidiarity principle, and in companion opinions of EC political institutions interpreting the concept'. Further, the same tendency is appearing more commonly in discrete areas of Community regulation, as exemplified by calls from the Commission for a broader involvement of national courts in the enforcement of EC competition rules2 .

Research Assistant, European University Institute, Florence. Thanks are due to Wolf Sauter and Professor Francis Snyder for invaluable comments on earlier drafts of this paper. Responsibility for the text remains with the author. See eg Edinburgh European Council EC Bull 12, p 12 et seq; The Principle of Subsidiarity, Communication of the Commission to the Council and the European Parliament, SEC (92). 27 October 1992; Inter institutional Declaration on Democracy, Transparency and Subsidiarity Europe Documents No 1857 4 November 1993. See Noiice on Co-operaiion between National Courts and the Commission in Applying Articles 85 and 86 EEC (OJ 1993 C39/6).

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A desire to pass law-making authority to the national level also traverses the contemporary jurisprudence of the European Court of Justice. A well-known example is found in Luxembourg’s attempt to prod national tribunals into ruling on aspects of the proportionality test, when derogations to the free movement of goods are in issue3. An additional move toward splitting jurisdiction has been suggested in the context of fundamental rights, with a proposal from one Advocate General to leave important details of the right to private property for determination by the domestic law of the Member States4.

An anomalous development has emerged in this climate of delegation with somewhat wavering and confused attempts by the Court of Justice to elevate the rules on remedies for breach of Community law to the level of Community judicial regulation. At the time this innovation was launched it appeared that extensive incursion would be made on the traditional autonomy of national courts to attach domestic sanctions and procedural rules when correcting infractions of EC law. More recent case law, however, has displayed a less strident line.

This article will chronicle the new policy direction being pursued by the Court with regard to remedies, and consider some of the difficulties involved with venturing into territory which has been traditionally governed by national law5. It will be shown’that, while the interests of increased effectiveness of Community measures may be served by current initiatives, it may also aggravate continuing doubts regarding the legitimacy of Community law and institutions6.

I1 Direct Effect and National Remedies

A The Initial Position

Early in the development of the doctrine of direct effect, the European Court of Justice employed a policy of minimal interference with the regime of national remedies used in the enforcement of Community law. The Court of Justice designed a loose formula which provided that national sanctions should be attached to claims based on Community law, provided that (a) such remedies were not less favourable than those governing analogous domestic actions (the principle of non-discrimination) and (b) national rules did not make it impossible in practice to enforce the rights claimed (principle of effectiveness)’. A third implicit requirement obliged national law to protect Community rights retroactivelyfrom their date of entry into force and not from

See Case 145188 Torfaen BC v B & Qplc [I9891 ECR 3851. See generally Rawlings, ‘The Eurolaw Game: Some Deductions from a Saga’, (1993) 20 Journal of Law and Society 309. Advocate General Jacobs in Case 5/88 Wuuchuuf[1989] ECR 2609, 2631. Cf Advocate General Gulmann in Case 2/92 The Queen v Ministry of Agriculture, Fisheries and Food, ex parte Dennis Clifford Bostock [I9941 ECR 1-955.968 who opposed such a development. See generally Curtin and Martelmans, ‘Application and Enforcement of Community Law by the Member States: Actors in Search of a Third Generation Script,’ in D. Curtin and T. Henkels (eds), Institutional Dynamics oJ European Liberation. Liber Amicorum Henry G Schermers (Nijhoff, 1994) vol. 11,423,434 and 446 et seq. See the discussion by Mestmacker, ‘On the Legitimacy of European Law’, (1994) 58 Rabels Zeitschrifr 615. Case 45/76 Comet v Produktschap voor Siergewassen [I9761 ECR 2043 (hereafter referred to as Comet); Case 33/16 Rewe v Landwirtschaftskammer Saarland [I9761 ECR 1989 (hereafter referred to as Rewe); Case 199182 Amministrazione delle Finanze dello Stat0 v. Sun Giorgio SpA [I9831 ECR 3595. See generally Oliver, ‘Le droit communautaire et les voies de recours nationales’, (1992) 28 CDE 348. 351.

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the date of a ruling from the Court of Justice confirming that a particular measure had direct effect8. Therefore, it was widely contended that mere declaratory relief would not suffice to enforce directly effective Community laws if the party seeking to rely on them had suffered some detriment prior to the clarification of substantive issues by an interpretative ruling9.

The following examples illustrate the early minimalist application of the Court’s guidelines. In Amministrazione delle Finanze dello Stato v Mireco lo and several other cases] I , the Court of Justice supported a national rule prohibiting ‘unjust enrichment’ of traders who sought the repayment of charges levied by national agencies in breach of Community law. It was held that the reimbursement of sums paid was not required if the national court decided that the loss had been recouped from consumers or others. In Rewe-Handelsgesellschaft Nord mbH and Rewe-Markt Steffen v Hauptzollamt KielI2 the Court of Justice stopped short of requiring Member States to supplement national sanctions with new remedies specifically designed to protect Community obligations. The case gave the overall impression that a ‘no new national remedies’ principle applied, even if it resulted in the failure of a Member State to enforce a Community measure. The Comet and Rewe casesi3 affirmed a long-standing rule which stipulated that Community law did not require national limitation periods to be reopened by an interpretative ruling from the Court of Justice on the meaning of provisions already in forcei4. A thirty-day limitation period under Dutch law was upheld, thereby implying that only traders operating in the Netherlands who had brought suit within thirty days of a regulation’s entry into force were entitled to reimbursement of illegally levied charges. As for the liability of Member States to pay damages for breach of Community law, it seemed implicit in the Court’s failure to articulate such rules in Russo v AZMZ15 that compensation claims should be governed by national law. It was held that Member States are liable for any damage caused by breach of EC

Case 106177 Amministrazione delle Finanze dello Siato v Simmenthal SpA [I9781 ECR 629; Case 61/79 Amministrazione dell Finanze dell0 Stato v Denkavit [ 19801 ECR 1205 (hereafter referred to as Denkavit); Case C-213189 The Queen v Secretary of State for Transport e.x parte Factortame Ltd and others [I9901 ECR 1-2433 (hereafter referred to as Factortame No I ) . Oliver LJ (dissenting) Bourgoin SA and Others v Ministryfor Agriculture, Fisheries and Food [I9861 QB 716 (hereafter referred to as Bourgoin); Green and Barav, ‘Damages in the National Courts for Breach of Community Law’, (1986) 6 YEL 55; Barav, ‘Damages in the Domestic Courts for Breach of Community Law by National Public Authorities’, in H.G. Schemers ei al. (eds), Non-Contraciual Liability qf the European Communities (Nijhoff. 1988) 149: cf Steiner, ‘How to Make the Action Suit the Case: Domestic Remedies for Breach of EEC Law’, (1987) 12 ELR 102 who argued that, in ordinary circumstances, Community law only required the availability of declaratory relief. See generally Lewis and Moore, ‘Duties, Directives and Damages in European Community Law’, (1993) Public Law 151, 165-167 and Curtin. ‘State Liability Under Community Law’, (1992) 21 Industrial Law Journal 74, 79; Snyder, ‘The Effectiveness of Community Law Institutions, Processes, Tools and Techniques’ (1993) 56 MLR 19.

Eg Case 68/79 Hans Just IIS v Danish Ministry for Fiscal Affairs [I9801 ECR 501; Denkavit, supra n 7. lo Case 826179 [ 19801 ECR 2559.

I2Case 158180 [I9811 ECR 1805. l3 See supra n 7. I4The applicants sought to place reliance on Case 39/73 Rewe Zentra/finanz GmbH [I9731 ECR 1039,

which established that the relevant national law was incompatible with a directly effective Community measure.

l 5 Case 60175 [I9761 ECR 45 (hereafter referred to as Russo)

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rules, ‘in the context of the provisions of national law on the liability of the State’16. This conclusion was reached despite submissions supporting the view that the retroactive nature of directly effective measures in itself obliged Member States to pay monetary c~mpensa t ion’~ .

In short, the Court’s stance on the sanctions issue during this period could be said to parallel those articulated by Advocate General Warner in Rewe. He reasoned as follows:

‘Where Community law confines itself to forbidding this or that kind of act on the part of a Member State and to saying that private persons are entitled to rely on the prohibition in their national courts, without prescribing the remedies or procedures available to them for that purpose, there is really no alternative to the application of the remedies and procedures prescribed by national law ... I see it as a situation in which Community and national law operate in combination, the latter taking over where the former left ~ff...’’~.

Further, this early ‘hands off’ policy was accompanied by an invitation from the Court of Justice to the political institutions of the Community to deal with the national remedies issue. In the Comet and Rewe it was held that Articles 100 to 102 and 235 of the Treaty empowered the Council of Ministers to legislate to overcome any market distortions that may arise due to the disparate availability of sanctions in the national legal systems20.

B Like many key principles of EC constitutional law, the scheme described above was largely designed in cases concerning customs duties and other charges levied by Member States in breach of Community law2’. This was a wholly unsurprising

Movement Toward Closer Community Review

I h Ibid p 56 (emphasis added). I ’ lbid p 49. Divergent views have been expressed on the effect of the Russo ruling. Green and Barav, op cir n

9, p 63 argued that there was scope for interpreting the Russo ruling as obliging Member States to award damages for breach of directly effective Community laws. Advocate General Warner in Rewe supra n 7, p 2003 did not share this view, and argued that the Russo ruling confirmed that the conditions for damages liability remained a question of national law. This opinion is supported by Lewis and Moore op cit n 9, p 151 and 159. However, Advocates General Mischo and Van Gerven have interpreted Russo as laying down the principle that the State has an obligation to make good the harm caused, leaving it to national law to deal with the details. Re. the former opinion see Case C-6/90 Francovich and Bonifaci v Iralian Republic [I9911 ECR I 5357, 5383 - 5384 (hereafter referred to as Fruncovich). Re. the latter see Case C- 128/92 H . l Banks and Co Ltd v British Coal Corporation [I9941 ECR 1-1209, 1253 (hereafter referred to as Banks) and Case C-211/91 Marshall v Southampton and South- West Hampshire Area Health Authority No 2 [I9931 ECR 1-4367 (hereafter referred to as Marshall No 2). Supra n 7, p 2003. See also Advocate General Reischl in Denkavit supra n‘8, p 1233 ‘That the legal position of the individual may differ in the various Member States is simply a consequence of the implementation of Community law by the Member States, which is accepted by the Community legal system.’ See generally Bridge, ‘Procedural Aspects of the Enforcement of European Community Law through the Legal Systems of Member States’, (1984) 9 ELR 28.

l 9 Supra n 7 . *O Ibid p 2053 of Comer and p 1998 of Rewe. This source of legislative authority has only been intermittently

activated by the Council. See eg Council Directive 92/13 Co-ordinating the laws, regulations, and administrative provisions relating to the application of Community rules on the procurement procedures of entities in the water, energy, transport, and telecommunications sectors, (OJ 1992 L76/14). See generally S . Arrowsmith (ed.), Remedies for Enforcing Public Procurement Rules (Earkgate Press, 1993). The Community has to some extent also asserted jurisdiction over procedural issues and sanctions in the Community Customs Codes. Reg 2913/92 (OJ 1992 L302/1). As can be seen from the study by Tatham, ‘Restitution of Charges and Duties by the Public Administration in Breach of European Community Law: A Comparative Analysis’, (1994) 19 ELR 146.



development, given that the substantive subject matter of the EC law at the time was largely focused on constructing an ‘economic’ Community. Breaking down direct barriers to trade among Member States was clearly a central objective of this enterprise.

However, the range of topics falling within the ambit of Community regulation has expanded enormously since the original concept of the common market was inaugurated. Even so, the Court’s guidelines on remedies were couched in general terms, and it would have been reasonable to anticipate the same degree of reverence to domestic judicial independence when disputes emerged falling beyond the parameters of pristine economic regulation.

In fact the inverse occurred. The well-known equal treatment cases of Von Colson and Kamann v Land of North Rhine Westphalia22 and Dorit Harz v Deutsch Tradax G m b S 3 hosted the elaboration of the rule that national sanctions must provide a real deterrent effect against breach of Community law. In Ann Cotter and Norah McDermott v Minister for Social Werfare and Attorney GeneraP4, the Court held that such rules could not restrict the entitlement of the applicant to payment in arrears of social security benefits to which she was entitled under Community law25, despite reliance by the Irish Government on a domestic prohibition of unjust enrichment. The Court ruled that blocking payments to avoid unjust enrichment of beneficiaries would mean that Member States ‘would be able to use their own unlawful conduct as a ground for depriving ... the directive of its full effect’26.

Factortame No 12’, albeit in oblique terms, narrowed and arguably buried the ‘no new national remedies’ principle2*. In the context of an action concerning, inter aha, Article 52 rights to establishment, and the Article 7 prohibition on discrimination on grounds of nationality, the Court of Justice considered whether the absence of a facility in English law for issuing interim orders against the Crown excused the non- application of Community rules. The Court concluded that it could not, and declared that restrictive domestic laws must be set aside if they were ‘the sole obstacle’ precluding a national court from granting interim relieP9.

The rights of workers to have recourse to a guaranteed fund to protect their wages in the event of the insolvency of their employers was the venue for the apparent elevation to Community level of damages liability. In the Francovich case30, the Court issued a bold ruling which contrasted markedly with the circumspect silence of the Russo decision. It was held that individuals were entitled to compensation from national governments for failure to implement directives when: (i) the relevant

22 Case 14/83 [I9841 ECR 1891. 23 Case 79/83 [I9841 ECR 1921 (hereafter referred to as Dorit Harz). 24 Case C-377189 [I9911 ECR 1 - 1155 (hereafter referred to as Cotter and McDermott). 25 By virtue of Dir 79/7 on the progressive implementation of the principle of equal treatment for men and

women in matters of social security (OJ 1979 L6/24). Hereafter referred to as the Social Security Directive.

26 Supra n 24, p 1 186. 27 Supra n 8. 28 Toth, ‘Case Commentary’, (1990) 27 CMLR 573, 586 expressed doubts as to whether Factortame No I

required judges to fill gaps in national remedies. For arguments that the ‘no new national remedies’ rule no longer applies see Advocate General Mischo in Francovich supra n 17; Oliver, ‘Interim Measures: Some Recent Developments’, (1 992) 29 CMLR 7; Curtin op cit n 9, p 79.

Supra n 17. 29 Supra n 8, p 2475.



directive confers rights on individuals; (ii) the content of those rights is identifiable by reference to the terms of the directive; and (iii) there is a causal link between the violation by the State and the damage suffered by the person injured3’. These conditions were held to be ‘sufficient’ to give rise to a right to r e ~ a r a t i o n ~ ~ , which was said to be ‘founded directly on Community law’33. Member States, in the absence of Community rules, retained their traditional jurisdiction over procedural rules and the designation of competent courts.

However, despite such forceful assertion of Community jurisdiction, a cryptic closing passage of the judgment indicated that national law would have some role to play in determining the substantive bases of damages liability. It was asserted that, subject to the three conditions listed above, ‘it is on the basis of the rules of national law on liability that the State must make reparation for the consequences of the loss and damage caused’34. The precise meaning of this reservation is yet to be determined.

Further marginalisation of national damages rules appeared in Marshall No 2. It was held that the effective application of Community law prohibited Member States from fixing a ceiling on the quantum of damages available for breach of the Equal Treatment Directive35. The Court concluded that, when Member States had chosen to meet the objectives of a directive by an award of compensation, the award had to be ‘adequate, in that it must enable the loss and damage actually sustained as a result of the discriminatory dismissal to be made good in full in accordance with the applicable national rules’36. The decision diverged substantially from the opinion of Advocate General Van Gerven, who had argued that the Francovich case merely laid down minimum standards for damages claims against Member States, while residual issues should be determined by domestic law3’. In the opinion of the Advocate General, the principles of non-discrimination and effectiveness were the only means by which a court could review the amount of compensation paid.

Finally, and perhaps most controversially, another case concerning social security hosted what seemed at the time as a dramatic demise of the Cornet and Rewe rule concerning the application of national limitation periods. In Theresa Ernrnott v Minister of Social WelJare and the Attorney GeneraPg the Court declined to bar the applicant’s claim for payment of benefits arising from the Social Security Directive39,

Ibid p 5415. T2 Ibid. T1 Ibid. 34 Ibid pp 5415-5416 (emphasis added). The Francovich guidelines were repeated by the Court in Case C-

T5 Dir 761207. (OJ 1976 L39140). T6 Supra n 17, p 4408. T7 See Advocate General Van Gerven in Marshall No 2 supra n 17, p 4381 et seq. See also his opinion in

Banks supra n 17, p 1253 et seq. The Advocate General has argued that damages liability should be the same whether Community law has been breached by an individual, a Member State, or an EC institution. See Van Gerven, “on-contractual Liability of Member States, Community Institutions and Individuals for Breaches of Community Law with a View to a Common Law for Europe’, (1994) 1 Maastricht Journal of European and Comparative Law 6. Restrictive national conditions on the quantum of damages were recently held to be incompatible with Community law in Case 382192 Commission Y United Kingdom of Great Britain and Northern Ireland [I9941 ECR 2435; Case 383192 Commission v United Kingdom of Great Britain and Northern Ireland [I9941 ECR 1-2479.

91/92 Paola Faccini Dori v Recreb Srl, [I9941 ECR 1-3325, 3357-3358 (hereafter referred to as Dori).

?* Case C-208190 [I9911 ECR 1-4269. 39 Supra n 25.



even though her action was brought after a three month limitation period imposed by Irish law had expired. It was concluded that until the directive had been implemented by national measures, individuals will be uncertain as to the extent of their rights, and thus limitation periods cannot begin to run before a directive is properly transposed into the domestic legal system.

By mid-1993, therefore, it appeared that the Court of Justice was radically re- working the jurisdictional rules which had previously applied between itself and the national courts in the field of sanctions40.

C A Hasty Retreat ?

No sooner had the new framework outlined above been put in place than a deconstruction pattern appeared. First, despite the stern language of the Emmott case, the authority of national courts to limit retroactive claims of Community law rights was resurrected in H. Steenhorst-Neerings v Bestuur van de Bedrijisvereniging voor Detailhandel en H ~ i s v r o u w e n ~ ~ and confirmed more recently in Elsie Rita Johnson v Chief Adjudication In both these decisions national rules which restricted arrears claims for social security benefits to twelve months prior to the making of the application were challenged. These prohibitions applied even though the substantive provisions of the Social Security Directive gave rise to an entitlement to benefits prior to that period. It was argued that the Emmott case dictated that back payments must be made from the date of the Directive’s entry into force.

The Court did not share this view. In upholding the relevant national rules, it was concluded in Steenhorst that Emmott related only to the right to bring proceedings before national courts, and did not affect national rules limiting the retroactive effect of claims made43. This view was reiterated by the Court in Johnson, where it was held that the solution adopted in Emmott was confined to the particular circumstances of that case, ‘in which a time-bar had the result of depriving the applicant of any opportunity whatever to rely on her right to equal treatment under the directive’4.

Further clarification of the role of national limitation periods in actions concerning Treaty articles recently emerged in Case C- 128/93 Geertruida Catharinu Fisscher v Voorhuis Hengelo B V and Stichting Bedrijys-pensioenfonds voor de D e t ~ i l h a n d e l ~ ~ . Here the applicant argued that, by virtue of the Treaty Article 119 prohibition against discrimination between men and women in matters of pay, she enjoyed a right under Community law to access to an occupational pension scheme. As a married woman, she had been denied membership to such a system under Dutch law until 31 December 199046. It was further contended that her rights were enforceable from 8 April 1976,

40 See eg Tash, ‘Remedies for European Community Law Claims in Member State Courts: Toward a

41 Case C-338/91 [I9931 ECR 5475. 42 Case C-410/92, judgment of 6 December 1994, nyr. 43 Supra n 41, p 5503.

45 Case C-128/93, [I9941 ECR 1-4585. Hereafter referred to as Fisscher. 46 A membership right was said to flow from Case C-262/88 Barber v Guardiun Royal Exchange Assurance

Group [I9901 ECR 1-1889 (hereafter referred to as Barber) in which the European Court decided that retirement pensions paid under private occupational schemes constitute pay within the meaning of Art. 1 I9 EC.

European Standard’, (1993) 31 Columbia Journal of Transnationul Law 377.

Supra n 42, para 26.

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the date of the ruling in Defrenne v. S ~ b e n a ~ ~ confirming the direct effect of Article 119.

The domestic tribunal hearing the case referred questions to the Court of Justice concerning, inter alia, whether the temporal restriction on occupational pension claims which had been formulated in the Barber case48 applied to the facts at hand, and whether it was ‘relevant that the plaintiff did not act earlier to enforce the rights which she now claims to have?’49.

The lengthy analysis of Advocate General Van Gerven was most instructive. After deciding that the time caveat formulated in Barber (and indeed the Barber protocol attached to the TEU) did not apply to the right tojoin an occupational pensions0, the Advocate General elaborated on the scope of the Emmott rule on national limitation periods. He concluded that the Emmott principle will only apply when an individual seeks to ‘vertically’ invoke directly effective provisions of Community law against the State. ‘Horizontal’ situations (when one private individual seeks enforcement of Community measures against another) were said to be governed by ‘the “classic” conditions laid down by the Court in relation to national procedural rules in the absence of Community rules’: namely, the principles of effectiveness and non- discrimination. Provided that these parameters were respected, the right to join a pension scheme was said to be subject to fetters laid down in national limitation periods5’.

The Court, however, formulated a broader ruling than had been suggested by the Advocate General. While it was agreed that the Barber time restriction did not extend to pension scheme membership, domestic limitation periods were held to be of crucial significance. The Court asserted that it had ‘consistently held’ that:

‘...in the absence of Community rules on the matter, national rules relating to time-limits for bringing actions are also applicable to actions based on Community law, provided that they are no less favourable for such actions than for similar actions of a domestic nature and that they do not render the exercise of rights conferred by Community law impossible in practice..’52.

The Rewe case was cited to support this proposition, and no reference was made to the wave of decisions, discussed in Part B, which impinged on the discretion of domestic judges to apply national remedies and procedural rules. Further the publidprivate distinction (which had been important for the Advocate General) was not alluded to. The Fisscher decision could therefore be interpreted as reasserting the Court’s original policy on the role of domestic limitation periods, at least regarding the enforcement of Treaty articles.

Second, there are indications that national rules prohibiting unjust enrichment will not be completely excluded when Community laws are enforced. In his Vroege and Fisscher opinion, Advocate General Van Gerven also focused on the public or private

47 Case 43/75 [1976] ECR 455. 48 Supra n 46. 49 Supra n 45, para 7.

See opinion delivered for Case C-57/93 Anna Adriaanlje Vroege v NCIV Instituut voor Volkshuisveshug BV and Srichting Pensioen Fonds NCIV [I9941 ECR 1-4541, 45514557 (hereafter referred to as the Vroege and Fisscher opinion).

5 1 Ibid p 4563 et seq. 52 Supra n 45, pp 45994600.



nature of relevant actors in deciding that the Cotter and McDermott prohibition only operates if a national authority seeks to frustrate claims based on Community law by resort to rules on unjust enrichment. Under this hypothesis, domestic principles will continue to apply in actions between private individual^^^. The Court has yet to express an opinion on the Advocate General’s suggestion.

Third, despite the Court’s robust ruling in the Francovich case, it has not shown the same degree of enthusiasm to formulate rules on damages liability for breach of Treaty articles. The issue was evaded in the Banks decision54, in which Advocate General Van Gerven had argued that, given particular defined conditions, private individuals should be obliged to compensate loss caused by breach of directly effective provisions of the EC treaties. In Banks the relevant articles of the agreement establishing the European Coal and Steel Community were held to lack the preconditions for direct effect, and so the liability question was not addressed55.

Very shortly, however, similar issues, will appear before the Court in Joined Cases C- 46/93 and C-48/93 Brasserie du PEcheur SA v Federal Republic of Germany and The Queen and Secretary of State for Transport ex parte: Factortame Limited and Others (pending). The main difference is that compensation is claimed for Treaty provisions which the Court has already confirmed to be directly effective. Further, redress is being sought from Member State authorities and not private parties. Given that the Francovich case featured passages invoking Member State liability for breach of Community law in generaP6, there are reasonable chances that a liability rule of some description will be imposed in the pending cases. However, the decisions discussed in this article fail to reveal a sufficiently clear policy line to allow confident prediction of the outcome. In particular, it is almost impossible to foresee which issues will be left to the legal systems of the Member States, and which will be subsumed under Court of Justice control.

On the other hand, a recent decision provides faint suggestions that national rules will play the most prominent role in determining damages liability for breach of Treaty articles by private individuals. In Coloroll Pensions Trustees Ltd v James Richard Russell et a157 the Court was again concerned with the consequences of including some types of pension within the meaning of pay under Article 119, and its findings on the repercussions of failure to observe Article 119 were most significant. It was held that ‘problems arising because the funds held by the trustees [of the pension fund] are insufficient to equalise benefits must be resolved on the basis of national law in the light of the principle of equal pay...’58. In other words, the ruling implies that any compensation to which victims of an Article 119 breach might be entitled, (in the event, for example, of receipt of only part of sums payable under the equal treatment rule) would be determined by national law. Further, the Coloroll court employed the

53 Supra n 50, p 4563. 54 Supra n 17. 55 Supra n 17, p 1275. sf, Supra n 17, p 5414. The inclusion of comments in the Francovich case going beyond Member State

liability for breach of directives has been criticised. See Rt. Hon. Lord Slynn of Hadley, ‘Sanction in Community Law: Overview’, in M. Verwilghen (ed.), Access to Equalily Between Men and Women in the European Community (Presses Universitaires du Louvain, 1993) 121.

57 Case C-22/91, [1994] ECR 1-4389. 58 [bid para 5 of the Court’s conclusions. See also Advocate General Van Gerven in the Vroege and Fisscher

opinion supra n 50, p 4563 where it was argued that it was for ‘the national court to achieve appropriate restoration of that worker’s rights’. Cf his article op cit n 37.


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same approach appearing in the Fisscher decision, in that the imperative need for effective enforcement of Community law was not mentioned, nor was any reference made to cases indicating a prominent role for Community law in assessing damages claims.

I11 The Right to an Effective Remedy and Non-Directly Effective Measures A deepening of Community review of national sanctions is not the sole constitutional initiative presently being pursued by the Court. A broadening of the import of EC remedies rules has unfolded in two neighbouring developments. First, in the Fruncovich case the Court of Justice applied the right to an effective remedy to a non- directly effective directive59, and the same principle has also appeared in decisions in which one private party sought to enforce a directive against another60. This tends to indicate that the developments outlined in Part 1 will apply to all Community measures, even if the traditional preconditions for direct effect are not satisfied. Consequently, one commentator has argued that the right to an effective remedy has evolved into a general principle of Community law6’.

Second, the Court of Justice has further expanded the tools for grafting EC law into the domestic legal systems of the Member States. Even though it has rejected the notion that directives can be applied horizontally between private individuals6*, national judges remain bound to interpret all national laws falling within the scope of a directive, or indeed a treaty article, in the light of the wording and purpose of those measures63.

This development raises further issues which are directly related to the scope of the case law on sanctions. For example, will unjust enrichment frustrate a claim founded on an ambiguous provision of national law which has been construed in the light of a directive? Will a domestic judge be obliged to provide interim relief when a dispute hinges on the extent to which national law can be interpreted in conformity with a Treaty article? These are the types of issues which are likely to confront the Court in future cases.

IV A Coherent System of Remedies? The most obvious criticism of the developments here described lies in their ~ o m p l e x i t y ~ ~ . While the boundary between Community jurisdiction and national

59 Francovich supra n 17. See generally Coppell, ‘Rights, Duties and the End of Marshall’, (1994) 57 MLR

6o Case C-177188 Elisabeth Johanna Pacrfica Dekker v V J V [I9901 ECR 1-3941; Dorit Harz, supra note 24. 61 Oliver, ‘General Principles of Community Law and Horizontal Effect’, (1993) 13 Europaische Zeifschrift

62 Dori, supra n 34. 63 Re Directives see Case C-106189 Marleasing SA v La Comercial Internacional de Alimentacion SA [I9901

ECR 1-4135. Re Treaty articles see Case C-165191 Simon 1M. Munster v Rijksdiensf voor Pensioenen

In Case 143188 and Case C-92/84 Zuckerfabrik Siiderdithmarschen AG v Hauptollamt Itzehoe and Zuckerfabrik Soest GmbH v Hauptzollamt Paderborn [1991] ECR 1415, 541 (hereafter referred to as Zuckerfabrik) the ‘coherence of interim legal protection’ was relied on by the Court in allowing Member States to issue interim orders in invalidity claims.

859.

fur Wirtschaftsrecht 993.

[ 19941 ECR 1-466 1.



competence in the sanctions domain was never neatly defined, the consistent application of framework guidelines described in Part 1 restricted confusion to a manageable level. A former judge of the Court has candidly highlighted the ‘enormous difficulties’ now facing national judges in determining the substance of remedies required by EC law65. This argument must hold some merit, given that the range of national rules which are now subject to scrutiny by the Court of Justice are no longer clear. For example, it has been held post-Francovich and Marshall No 2 that national rules on self-incrimination need not fall when confronted with the imperative of effective enforcement of Community law66. However, one Advocate General has recently argued that Community law will be breached by a domestic law obliging national courts, in proceedings to which a public authority is a party, to appoint one of the authority’s servants as an expert wi tned7 . Further, the criticism over legal certainty is reinforced by the Court’s failure to cite precedents which were contrary to the conclusion reached in a given case6? a failing which is particularly evident in its jurisprudence on national time limits.

However, despite the untidiness of the time-limits case law, it is submitted that the Fisscher reassertion of domestic principles for the enforcement of Treaty articles was both necessary and welcome. Advocate General Mischo in Cotter and McDermott suggested that a principle of national law ‘may never be invoked by a Member State to prevent compliance with an obligation under Community law’69. Yet it would seem difficult to find a defensible rationale for such extensive incursion into the legal systems of the Member States, especially when it would result in an entitlement to enforce Community measures ad infinitum.

At a more fundamental level an examination needs to be made of the assumptions behind the Court’s decision to tamper with domestic judicial autonomy to supply remedies in the first place. It is widely accepted that the push toward Court of Justice regulation of damages liability arose out of a perceived need to fortify effective enforcement of Community law70. However, while the precise direction that the Court is taking is not yet clear, it may be embarking on a path of imposing sanctions standards that surpass those which apply when the validity of Community acts is in issue7’. Such a development may be perilous, in that it carries assumptions on the maturity of EC law-making which may not match reality.

The following will clarify this point. In the past national judges have been free to apply local remedies when repayment was sought of charges levied by national

65 Rt. Hon. Lord Slynn of Hadley op cit n 56, p 131. 66 Case C-60192 Otto BV v Postbank N V [I9931 ECR I ~ 5683. 67 Advocate General Darmon in Case C-236192 Comitato di Coordinamento per la Difesa della cava and

68 See in particular Arnull, ‘Owning up to Fallibility: Precedent and the Court of Justice’, (1993) 30 CMLR

69 Cotter and McDermott, supra n 24, p 1175 (emphasis added). ’O See eg Steiner, ‘From Direct Effects to Francovich: Shifting Means of Enforcement of Community Law’,

(1993) 18 ELR 3. Eg Advocate General Darmon in Case C-228192 Roquette Freres SA v Hauptzollamt Geldern [1994] ECR 1-1445, 1463 noted that national rules on unjust enrichment will apply when repayment is sought of charges levies pursuant to an invalid Community act. Cf Zuckerfabrik supra n 64, p 541 where the Court implied that the same standards govern the availability of interim relief whether Member State violation of Community law or invalidity of a Community measure was in issue. Cf the Court’s ruling in Factortame No I supra n 8.

others v Regione Lombardia and others [1994] ECR 1-483, 492-494.

241.



authorities on the basis of an invalid Community measure; but again subject to the principles of effectiveness and non-d i~cr imina t ion~~. If such parity of treatment between Community invalidity and Member State breach of EC obligations is abandoned, how would it be justified? In a federal state this kind of discrepancy on the consequences of illegal conduct is sustainable by recourse to the primary ranking of central government law and policy. However, such a ploy could hardly succeed in the EC context, given the as yet unsolved problem of the democratic deficit in the Community. Indeed, it could be more convincingly argued that Community measures should be subject to a higher standard of judicial review, given the scale of distance between individual citizens and the law-makers who govern their conduct.

It is perhaps for this reason that two Advocates General have suggested that Member States can only be held liable for damages under the same circumstances in which Article 215 (2) compensation liability of the Community arises73. But this solution leads to a circular and potentially ironic result. Despite calls for the Court to relax its policy of restricting the non-contractual liability of EC institution^^^, there is no firm indication that it will do Consequently, if the Community standards were adopted, judges in some Member States might find themselves bound to enforce a less stringent test for damages liability of government authorities than would. otherwise apply under national law.

Therefore, while the developments here discussed are unlikely to give rise to open revolt in national courts, they may publicise rather than camouflage flaws inherent in the Community system. At a time when some commentators are calling for a dilution of strict supremacy when directives affect entrenched principles of national civil law76, and evidence is fermenting of failure on the part of domestic courts to refer important issues to L u ~ e m b o u r g ~ ~ , the Court of Justice will be constrained to tread with great care in calculating the broad constitutional consequences of reinforcing the effectiveness of Community law.

Bibliography Arnull, ‘Owning up to Fallibility: Precedent and the Court of Justice’, (1993) 30 CMLR 247. S . Arrowsmith (ed.), Remedies for Enforcing Public Procurement Rules (Earlsgate Press, 1993). Barav, ‘Damages in the Domestic Courts for Breach of Community Law by National Public

Authorities’, in H.G. Schermers et al. (eds), Non-Contractual Liability of the European Communities (Nijhoff, 1988) 149.

72 Eg Case 130/79 Express Dairy Foods v Intervention Board for Agricultural Produce [ 19801 ECR 1887. ’j See Advocate General Van Gerven in Banks supra n 17 (and op cit n 37) and Advocate General Mischo in

Francovich supra n 17. l4 See eg Advocate General Darmon in Case C-282/90 Industrie- en Handelsonderneming Vreugdenhil BV v

Commission [I9921 ECR 1-1937, pp 1947ff. 75 Note however. the success of the applicants in Joined Cases C-104/89 and C-37/90 1 M . Mulder. and others

v Council and Commission [I9921 ECR 1-3061. The case indicated that harm need no longer be confined to a limited number of individuals.

76 Samara-Krispis and Steindorff, ‘Case Commentary, Joined Cases C-19/90 and 20/90 M. Karella and N Karellas v Ypourgos viomichanias, energias kai technologias, Organ ismos Anasygkrotiseos Epicheiriseon A E (1992) 29 CMLR 615.

77 See description by Docksey and Fitzpatrick, ‘The Duty of National Courts to Interpret Provisions of National Law in Accordance with Community Law’, (1991) 20 Industrial Law Journal 11.



Bridge, ‘Procedural Aspects of the Enforcement of European Community Law through the Legal

Coppell, ‘Rights, Duties and the End of Marshall’, (1994) 57 MLR 859. Curtin, ‘State Liability Under Community Law’, (1992) 21 Industrial Law Journal 74. Docksey and Fitzpatrick, ‘The Duty of National Courts to Interpret Provisions of National Law in

Green and Barav, ‘Damages in the National Courts for Breach of Community Law’, (1986) 6 YEL 55. Lewis and Moore, ‘Duties, Directives and Damages in European Community Law’, (1993) Public

Mestmacker, ‘On the Legitimacy of European Law’, (1994) 58 Rabels Zeifschrift 615. Oliver, ‘General Principles of Community Law and Horizontal Effect’, (1993) 13 Europiiische

Oliver, ‘Le droit communautaire et les voies de recours nationales’, (l992)28 CDE 348. Oliver, ‘Interim Measures: Some Recent Developments’, (1992) 29 CMLR 7. Rawlings, ‘The Eurolaw Game: Some Deductions from a Saga’, (1993) 20 Journal ofLaw and Society

309. Samara-Krispis and Steindorff, ‘Case Commentary, Joined Cases C-19/90 and 20/90 M. Karella and

N Karellas v Ypourgos viomichanias, energias kai technologias, Organ ismos Anasygkrotiseos Epicheiriseon AE’ (1992) 29 CMLR 615.

Rt. Hon. Lord Slynn of Hadley, ‘Sanction in Community Law: Overview’, in M. Verwilghen (ed.), Access to Equality Between Men and Women in the European Community (Presses Universitaires du Louvain, 1993) 121.

Snyder, ‘The Effectiveness of Community Law Institutions, Processes, Tools and Techniques’ (1993) 56 MLR 19.

Steiner, ‘From Direct Effects to Francovich: Shifting Means of Enforcement of Community Law’, (1993) 18 ELR 3.

Steiner, ‘How to Make the Action Suit the Case: Domestic Remedies for Breach of EEC Law’, (1987)12 ELR 102.

Tash, ‘Remedies for European Community Law Claims in Member State Courts: Toward a European Standard’, (1993) 31 Columbia Journal of Transnational Law 377.

Tatham, ‘Restitution of Charges and Duties by the Public Administration in Breach of European Community Law: A Comparative Analysis’, (1994) 19 ELR 146.

Toth, ‘Case Commentary’, (1990) 27 CMLR 573. Van Gerven, “on-contractual Liability of Member States, Community Institutions and Individuals

for Breaches of Community Law with a View to a Common Law for Europe’, (1994) 1 Maastricht Journal of European and Comparative Law 6.

Systems of Member States’, (1984) 9 ELR 28.

Accordance with Community Law’, (1991) 20 Industrial Law Journal 11.

Law 151.

Zeitschrift f i r Wirtschaftsrecht 993.


Effective Sanctions in EC Law: A Moving Boundary in the Division of Competence

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