Damages and legal action
A member state is liable in damages to individuals who suffer loss as a consequence of its infringement of European Community laws. It must pay compensation in accordance with its domestic system of civil liability.
This principle follows from the supremacy of European law and the practical necessity to give it effect. It acts as a sanction against states who delay in fulfilling their obligations to faithfully implement directives. The possibility of a claim for damages incentivises states to fulfil their requirements.
The principle applies even where the directive is not sufficiently clear as to be immediately directly effective. Liability may still arise for breach of the state’s obligation to implement the provision, notwithstanding that it may not have direct effect because it is insufficiently detailed. Where the directive provides rights, which are clearly identifiable and there is a link between the absence of implementation and breach, damages by way of compensation may be paid.
This principle is an aspect of the rule of law. Both citizens and member states together with the institutions themselves are bound by European law.
Requirements for Private Action I
An award will only be made where the breach is sufficiently serious to merit it. It must generally be a manifest and grave disregard of obligations. The court should consider
- the clarity of the relevant EU rule which has been breached,
- the degree of discretion on the part of states,
- whether the infringement is accidental or intentional
- whether an excusable error was involved and
- whether the Commission’s advice or action contributed to the breach.
The breach must cause loss in accordance with general principles of civil liability.
The principle applies to the failure to implement legislation or maladministration. The state may be liable regardless of which entity has breached the law, provided that it is an organ of the state under its auspices which has acted or failed to act. A state may be liable even if its agents and employees act outside of their authority. It is not necessary to show that the state or its institutions have been at fault. This may be a factor but is not determinative.
In effect, a principle broadly similar to vicarious liability applies where action or inaction is done under cover of an official or apparent governmental authority. If a person can reasonably suppose that the actions or inactions are taken by the authority, the authority and state are liable notwithstanding that the person doing the act of making the omission did not have the authority or acted outside its laws.
National courts have a duty to vouch whether there has been a breach of EU law giving rise to a civil claim. States must give EU law the same status and protection as its domestic law. Procedures may not be imposed which make it more difficult to vindicate these rights.
The breach must relate to a provision which confers rights on citizens. It must be capable of being identified with sufficient provision from the Treaty or measures made under it. The person making the claim for damages must be identifiable as a beneficiary of the rights concerned.
Requirement for Private Actions II
In order for the breach to be sufficiently serious, there must be a manifest disregard by the states of the limit set out in relation to it discretion. Where the discretion is wide and the original directive imprecise, there is less likelihood of a liability.
Where the position is less clear or there is greater discretion for states, damages are much less likely to be granted.
The loss caused must be directly linked to the breach. National rules on civil liability apply. In Ireland, the analogous provision would be by reference to breach of statutory duty.
The principle of liability may even apply where the loss comes by reason of a judgment or decision of the court. The general immunity of courts from civil liability does not shield a state from being liable for one of its organs, notwithstanding that it is wholly independent.
However, in practice, it is difficult to show such breaches. Only in exceptional cases would a judgment of the courts, in particular, the appeal courts, be such as to manifestly infringe EU law. The courts themselves were obliged to give effect to the supremacy of community law.
Role of Courts
National rules on procedure apply to the claims. Accordingly, the general principles of civil wrong in relation to causation, remoteness, remedies such as injunctions, the quantum of damages, burden of proof etc. apply.
Notwithstanding that national procedures are used; the European Court of Justice has sought to provide some uniformity. Non-nationals must be treated no less favourably than nationals. The national rules must not nullify the EU law rights or make them excessively difficult to assert. The national position must be proportionate. The compensation granted must be adequate and proportionate.
In some cases, the Court of Justice has required that the unduly short limitation periods under national law are ignored where this would make it impossible or very difficult to exercise the rights. National rules which limit compensation may not be applicable in appropriate cases where their effect is to nullify the right. The Court of Justice has required that national courts grant interim leave where necessary, even if national rules do not so allow.
The court has gone so far as to require states and courts to provide a right of damages even if there is no equivalent right known to its national law.
Commission Actions against States
The EU Treaties provide that if the Commission considers a state has failed to fulfil an obligation under the treaty, it shall deliver a reasoned opinion on the matter after giving the state concerned the opportunity to submit its observations. If the state does not comply within the relevant period, the commission may bring the matter before the Court of Justice.
The Commission gives the state the opportunity to rectify the situation. If it fails to do so, it may bring the state before the Court of Justice.
The failure to act may result from an omission or a failure to implement the state’s obligations in accordance with EU law. Some cases may involve a technical failure by the state to follow a requirement. Others may involve the imperfect transposition of a directive. Many cases involve the failure to implement a directive in time.
The action may be taken in respect of an administrative practice which has become general and consistent in nature. The practice itself may be the subject of the application.
State Liable for its Components
The state is liable even though the action on inaction does not happen at the level of the state itself. If it relates to an organ or body of the state under its umbrella, the state may still be accountable for its failure to act.
The state may be liable even where the organ or branch of its government is independent under the Constitution. A government cannot usually its parliament to adopt a particular measure, but the government/state will nonetheless be liable.
This may occur in a more pointed way with federal states where the federal state has relatively little control of the local autonomous bodies. This is in contrast to other possible actions under EU law for damages by individuals which may be against governmental and sub-federal governmental divisions. Under the failure to act article, only the state itself may be held accountable.
States are liable for their autonomous and semi-autonomous bodies. The Irish government was held liable for the breaches on the part of the Irish Goods Council in the Buy Irish campaign.
A state may be liable where the failure arises on the part of its judiciary. A state may be liable, in some cases, even if the highest court erroneously interprets European Union law. The state may be held liable for failure to amend its law in such circumstance to rectify the court’s decision.
Factors that are relevant include
- whether the judgment is such that it is followed by lower courts
- whether there had been a number of decisions or whether they are influential;
- how significant the impact of the decisions are.
The Commission is very reluctant to take action for breach of the EU law by the highest courts. (The possibility of a claim for damages also exists in such circumstances).
The referral may be made for failures to comply with obligations under the treaty. This includes not only breaches of the treaty itself, but all measures under community law including regulations, directives and decisions. It also applies to international agreements concluded by the EU with third parties which are binding on states.
It appears that a state may be held liable and enforced against for failure to comply with general principles of community law. See the separate chapter on these principles. They are not expressly stated. The European courts, however, have emphasised that they are part of the general principles of community law, are an integral part of community law and that they may be invoked in proceedings.
The treaty obliges states to take appropriate measures whether general or particular to ensure fulfilment of obligations arising out of the treaty or as a result of actions taken by the institutions of the EU. They must facilitate the achievement of the community’s tasks. They must abstain from any measure which would jeopardise the attainment of the objectives of the treaty.
The Commission is the party which takes proceedings against states. The first phase is informal. The Commission assesses whether there is a breach and considers whether it is necessary to commence proceedings. Sensitive political issues may arise.
Consideration should be given to whether the matter might be settled. Proceedings might be disproportionate if the breach is minor and political pressure would be more successful.
Commission Pre-Action Process
Complaints about breaches are registered with the general secretariat of the Commission. A report is made regarding the alleged violations. Reports are prepared, and they are forwarded to the Commission with observations.
If there is sufficient evidence for breach, the Commission may institute proceedings. States are invited to give explanations. They have a duty to cooperate. In many cases, the matter will be settled at this stage and the state will come into compliance.
A more formal pre-litigation procedure is undertaken first. During the pre-litigation part, the Commission gives formal notice and makes a reasoned opinion.
The letter of formal notice is part of the proceedings and determines the scope of later proceedings. The member state is invited to make observations on the matters concerned and the procedure may terminate if the Commission is satisfied there is no breach.
The reasoned opinion follows. It is intended to define the dispute from the Commission’s side and enables the state to prepare a defence. The Commission must set out in the reasoned opinion the arguments for the basis of the alleged failure.
The reasoned opinion requests cessation of the infringement and sets out the measures that are required to terminate it. It sets out a time limit for compliance, usually two months, but shorter in more urgent cases.
The Commission’s opinion is not determinative. Ultimately only the Court of Justice (or another appropriate court) can determine the matter. Accordingly, compliance in accordance with the terms of the reasoned opinion does not necessarily immunise the state from a future legal action.
The Commission has a discretion as to whether to take action or not. This discretion is maintained at all times. The Commission has no obligation to act in the first place. Whether or not the state has failed to comply with its obligations is determined at the end of the procedure. The procedure is not punitive.
When the matter is brought before the court, the court will assess whether the relevant procedure has been complied with. If the procedure has not been complied with, the matter will be dismissed by the court entirely. The application may be dismissed if the Commission has not given reasonable time, if the complaints and arguments made in the application do not equate to those in the reasoned opinion on formal notice or if the Commission does not give reasons for its requirements.
The court will investigate the complaint. It will rely on legal arguments submitted by the parties. It may give an interlocutory ruling inviting the Commission and states to find a solution allowing for reopening of proceedings if it is not implemented.
There are very limited defences to non-implementation. If the breach is found, there is generally no defence available. However, if the requirement is invalid because it is outside the powers of the EU or is otherwise in excess of powers, it cannot be the subject of an enforcement and this might be declared in the reference.
The Commission must specify the position with sufficient clarity such that the state knows what it must do. States may require the court to clarify what must be done where this is not clear. The fact that the government is not in a position to carry the legislation through parliament due to dissolution etc. is not a defence.
There are very limited defences. Force majeure or necessity is very, very limited in scope. The fact that the states cannot make its parliament pass particular legislation is not a defence. The fact of economic problems, threats of strikes and resistance etc. are not a valid basis. It is not sufficient that the breach is no trivial effect or that the legislation is due for reform etc. It is not relevant that it does not in fact impact on the market.
Another state may take an action under the treaty or request the Commission to take the actions. It cannot take unilateral retaliatory action in relation to the breach. The state may not invoke the procedure if it itself is in breach of the same obligation.
Such applications are relatively rare. More commonly, the state may make a complaint which is dealt with by the Commission.
Court Stage II
Before another state brings an action on the basis of an infringement, it must bring the matter to the attention of the Commission. The Commission shall deliver a reasoned opinion after each state has been given the opportunity to submit its case and make observations on the other party’s case verbally and in writing.
If the Commission has not delivered an opinion within three months of the date on which the matter was brought before it, the absence of such opinion shall not prevent the matter being brought by the other state before the Court of Justice.
The discretion of other states to commence the action is relatively unlimited. They need not justify the action as such.
The Commission is involved in the proceedings. It must first be informed by the state of the complaint. It proceeds in the same way as in a complaint initiated by it. It gives the parties the opportunity to make submissions and gives a reasoned opinion. In some cases, the Commission may be able to find an acceptable solution.
Sanctions and Enforcement
There is no direct legal effect on foot of the proceedings. The Court of Justice declares the measures required. The defaulting state must comply with the court’s judgment. This may involve an obligation to pay costs. States are obliged to comply with the court’s judgment. There is this procedure whereby the commission may start proceedings for noncompliance with the judgment. In this case, pecuniary sanctions may be imposed.
The obligation of states to comply with court order judgment commences immediately. The court may declare the position so that third parties can rely on it even in national proceedings to seek redress where it has been caused loss.
The Treaty of European Union introduced a provision for pecuniary sanctions for noncompliance with a judgment. If the Commission considers the state has not taken measures to comply with the judgment, necessary to comply with the judgment, it may, after giving the state the opportunity to make observations give a reasoned opinion.
If the state fails to take the measures within the time limit, it may bring the matter before the Court of Justice. In so doing, it shall specify the amount of the lump sum or penalty to be paid by the state concerned which it considers appropriate. The matter is brought before the Court of Justice and if it finds the state has not complied, it may impose a lump sum penalty.
The rate of penalty imposed is relative to the seriousness of the breach. The penalty should be foreseeable, consistent, and transparent. There may be a lump sum and daily penalties or periodic penalties.
There is simplified relief against defaulting states for certain breaches of internal market provisions. It applies where the failures relate to the free movement of goods, tariff barriers, or provisions incompatible with harmonisations, protection of the environment or working environment. Under the procedure, matters may be brought directly before the court in a much shorter period.
Notification of Measures
National measures may be notified to the Commission for the purpose of compliance with the narrow exceptions to the core Treaty freedoms and narrow scope for continuing national legislation relating to public morality, public policy, public security, protection of health and life of human and animals, protection of treasures, archaeological matters, protection of the environment, protection of intellectual property, protection of working conditions.
National measures may be notified, and the Commission may decide whether to approve them. Commission or a state may bring procedures directly before the court if it is of the view that the state has applied national rules incompatible with the internal market, protection of the environment or working environment without prior authorisation.
In certain circumstances relating to national security, in particular in relation to arms and ammunitions trade, states may adopt necessary measures, but they must not affect competition. In the event of war, serious international disturbance or international tension a state must consult with other member states with a view to taking steps which should prevent the functioning of the internal market being affected by measures taken by the state.
The Commission and other states may examine the proposal of how to accommodate the state concerned while ensuring the proper functioning of the market. If the state makes improper use of the procedure, the commissioner on the other state may apply directly to the Court of Justice.