Faccini Dori v Recreb Srl

European Law

Faccini v Recreb Srl
Image: ‘Snake Oil Salesman’ by Morgan Weistling

Private contracts between individuals are often overlooked in terms of actual rights, so when an Italian consumer entered into an agreement to purchase an English language course while visiting a railway terminal, the vendor looked to enforce the contract when notified that her order was to be cancelled.

Relying upon Doorstep Selling Directive (85/577/EEC) the applicant issued proceedings against the vendor and contended to the Giudice Concilliatore (Judge-Concillaitor) that arts.1(1), 2 and 5 conferred protective measures that allowed for rescindable notice within a period of seven days between consumers and private companies; which on this occasion was undertaken through written instruction to the contracting parties.

While the Directive had been in force for a number of years, the Italian government had failed to transpose it within the time allowed and therefore no domestic legislation existed concerning the facts of the case. As was common knowledge to Member States a failure to adopt Directives in the prescribed period results in a loss of profit to the Member State when defending against direct effect claims by their citizens. In this instance however, the terms of the Directive while both clear and precise, were related to dealings between individuals and therefore not subject to the benefit of protection unless transposed under the guidance of Community law and within the adoption window.

This presented the national court with a dilemma inasmuch as they were unable to determine exactly what rights the claimant had when seeking cancellation of the contract and if consideration was ultimately due to the vendor as per the terms of their agreement. For this reason the court sought a preliminary ruling under art.177 and requested that the European Court of Justice clarify (i) if the terms of the Directive were clear and precise enough to provide direct effect and (ii) whether despite a failure to adopt the measures in accordance with the Treaty, the claimant could rely upon them to enforce her individual right to cancel.

Having examined the arguments around horizontal effect between parties and the power of Directives, it was agreed that for reasons of legal certainty, future consideration must be given to broaden the scope of those entitlements when applying them to private and not public matters. That aside it was still held that although the terms of the Directive were that of horizontal dealings, it was not possible for the claimant to rely upon them when seeking to terminate her agreement with the vendor; however because the Italian government had failed to adopt the Directive and in light of the fact that there existed no domestic legislation to settle the matter, it was now possible for the national courts to transpose the effects of the Doorstep Selling Directive in order that a remedy could be provided in favour of the consumer.

Key Citations

“The obligation to ensure the effectiveness of Community law by way of interpretation does not relate only to the legislation adopted in order to implement a directive, but to the national legal system as a whole.”

“In the case of directives whose content is intended to have effects in relations between private persons and which embody provisions designed to protect the weaker party, 42 it is obvious that the failure to transpose a directive deprives it of effet utile.”

“Member States are not entitled to invoke, after the expiry of the period for transposition, freedoms which were conferred on them only for the purposes of the due implementation of the directive within the time limit laid down.”

“Directives are not measures of lesser quality but are addressed, with a view to their implementation, to the Member States, which are under an obligation under the Treaty to transpose them into national law in full and in good time.”

“For reasons of legal certainty, which is a fundamental right of the citizen on whom a burden is imposed, the public must be prepared as of now for the fact that directives will in future have to be recognised as having horizontal direct effect…”

“…horizontal effect seems to me to be necessary, subject to the limits mentioned, in the interests of the uniform, effective application of Community law. In my view the resulting burdens on private individuals are reasonable, since they do not exceed the constraints which would have been applied to them if the Member State concerned had acted in conformity with Community law.”

“…in the absence of measures transposing the Directive within the prescribed time limit, consumers cannot derive from the Directive itself a right of cancellation as against traders with whom they have concluded a contract or enforce such a right in a national court.”

“Where damage has been suffered and that damage is due to a breach by the State of its obligation, it is for the national court to uphold the right of aggrieved consumers to obtain reparation in accordance with national law on liability.”

R v HM Treasury ex p British Telecommunications plc

European Law

R v HM Treasury ex parte British Telecommunications
Image: ‘Red Telephone Box’ by Debbie Fisher

The successful transposition of EU Directives requires delicate application when ensuring the overriding objective of the directive remains intact. On this occasion the rules of Directive (90/531/EEC) while specific in their construction caused immediate conflict between the domestic government and a dominant telecommunications provider.

Basing their argument on principles examined in Francovich and others v Italy, British Telecom (or BT as they are commonly known) took issue with parliaments decision to edit the transposed Directive in a way that precluded them from perceived equal rights in a highly competitive industry. In fact by all accounts the telecommunications giant was already bound to cap its tariff rates, provide connection services irrespective of national geography and publish its commercial intentions for all to see. However when put in its proper context the domestic market was disparagingly divided in such a way that afforded BT a ninety-percent share while those new to the field were limited to only a collective three-percent stake.

This extended enormous advantage to the applicants and yet they still felt that under the prescribed terms of the Directive the Commission had intended that any exclusions to the benefit of community law were decidable between those contracting and not to the discretion of the member State. It was understood that in circumstances providing a balanced economic market the Directive required no degree of intervention as the playing field would in many events present itself fairly, yet the UK government having enjoyed the monopoly of British Telecoms as a state funded enterprise were only too aware that without marshalling of the transposition, the essence of equality would be lost in translation and the integrity of domestic contract law held to account.

By exercising its discretion the applicants were (rightly or wrongly) denied access to the terms of the Directive and therefore unable to determine for themselves which services they felt were excludable and why; a process that would have inevitably relied upon the wisdom of the EU Commission to decide and so was not in any way affected by those preventative measures.

When transposing Directives it is the duty of member states to incorporate the relevant terms ‘as far as possible’ which on this occasion it was deemed that those steps taken reflected that ethos. This resulted in the Court of Justice reserving the rights of the legislature to act where appropriate and that despite any sufferance on the part of the applicants there were no grounds for either ‘direct effect’ damages nor compensatory award for economic loss as the ends ultimately justified the means.

Key Citations

“…the operation of the system envisaged by the Directive, as interpreted herein, is sufficiently guaranteed by the supervisory role which the Directive itself entrusts to the Commission, also and above all as regards the possible abuses to which the United Kingdom refers.”

“…member states are in a much better position than the Commission to assess whether competition exists in the telecommunications market as regards a specific service and, consequently, that the determination by those states of the matters covered by Article 8(1) will permit the exercise of more effective control than that exercised by the Commission…”

“…a breach is sufficiently serious where, in the exercise of its legislative powers, an institution or a member state has manifestly and gravely disregarded the limits on the exercise of its powers.”

“Community law does not require a member state which, in transposing the Directive into national law, has itself determined which services of a contracting entity are to be excluded from its scope in implementation of Article 8, to compensate that entity for any loss suffered by it as a result of the error committed by the state.”