Van Gend en Loos v Nederlandse Administratie de Belastingen [1963]

European Law

Van Gend en Loos v Nederlandse Administratie de Belastingen [1963]
‘Dutch Windmills’ by Eugene Louis Boudin

When a Dutch importer of ureaformaldehyde fell victim to domestically manipulated customs tariffs, the question of both ‘direct effect’ and the individual right to challenge an abuse of EU Treaties became subject to a preliminary ruling under art.177 EC. 

Because of the supranational nature of the case it was first believed inapplicable when challenges to increased (or recategorised) tax rates were put into effect by national statutes, however the argument made was that at the time of the abuse the original Treaty taxation of the affected product was set at just three percent, and so when domestic reclassification set to increase the rate to eight percent the claimant challenged the adjustment by citing art.12 of the Treaty of Rome, which explains that:

“Member States shall refrain from intro­ducing between themselves any new customs duties or imports or exports or any charges having equivalent effect and from increasing those which they already apply in their trade with each other.”

While noting how in addition to the terms of art.12, art.95 EC states that:

“A Member State shall not impose, directly or indirectly, on the products of other Member States any internal charges of any kind in excess of those applied directly or indirectly to like domestic products.”

During the preliminary ruling hearing the European Court of Justice noted that if the protective principles of Community law were to remain excluded from violations of Member States it would defeat their very purpose, thus it was held that the inherent meaning and purpose of art.12 was to afford unequivocal rights to individuals, who when taking issue with such matters, would do so in the knowledge that they were protected by the national courts.

In closing it was held by the Court that all Member States would thereon refrain from increasing levies and customs duties conflicting with those put forward in the original Treaty of Rome, and that because the recategorisation of that specific tariff was now found to be illegal, the matter was referred back to the national courts in order to establish how best to reclassify the products, while the Court reminded the parties that:

“[A]ccording to the spirit, the general scheme and wording of the Treaty, Article 12 must be interpreted as providing direct effects and creating individual rights which national courts must protect.”

Simmenthal SpA v Italian Minister of Finance [1978]

European Law

Simmenthal SpA v Italian Minister of Finance [1978]
‘White Cow’ by Nic Dartnell

This brief yet pivotal case turned upon the unfair application of import fees regardless of existing Community law enabling the free movement of goods between Member States, when under guidance of art.32 of the Italian consolidated health laws, a Monza-based meat supplier was subjected to inspection fees for a beef consignment purchased in France despite operating within the framework of Community law. 

Having waited almost three years, the supplier sought action against the Italian government on grounds that it had acted beyond the limits of its Member State obligations, and so in the first instance the local court (Pretura di Susa) sought a preliminary ruling in the European Court of Justice under art.177 EC, whereupon it was held by the Court that importation charges levied against its citizens amounted to little more than quantitive restrictions within the scope of art.30 EC and were therefore illegal and repayable with interest.

In response the Amministrazione Delle Finanze Dello Stato (Finance Administration) appealed the judgment while citing incompatibility with Italian national law (no.1239/70), a challenge that resulted in the issue of ‘direct effect’ and the reluctance of Member States or their Constitutional courts to enforce Community laws when national laws obstructed the blanket protections afforded individual citizens. 

At the time of discussion the only options available to the judiciary were the immediate repeal of the relevant legislation or declaration of incompatibility by the Constitutional Court, and while the latter approach doubtless favoured the Italian government, it was later held by the European Court of Justice that the ‘principle of the precedence of Community law’ must be held in the highest regard, therefore in order for that doctrine to continue it was paramount that the lower courts were to be given powers to enforce Community law regardless of any jurisdictional contradictions presented, while further reminding the parties that:

“[D]irectly applicable Community provisions must, notwithstanding any internal rule or practice whatsoever of the Member States, have full, complete and uniform effect in their legal systems in order to protect subjective legal rights created in favour of individuals…”

Francovich and others v Italy [1991]

European Law

Francovich and others v Italy [1991]
‘Azov Steel Mill’ by Konstantin Shurupov

The adoption of EU Directives is a prerequisite for all Member States, and so an when ignorance of the duty to transpose those obligations into the fabric of national and Community law remained unaddressed, the perfect vehicle emerged with which to underline it.

The importance of employee rights is one frequently contested in all forms of commerce, and so when Italy failed to adopt Directive 80/987/EEC, it was the joint action of a group of factory workers that directed the European Community’s attention towards the heart of industry and the anger of those being abused within the market system.

After serving as a loyal employee for an electronics firm, the claimant found himself redundant through the process of liquidation and yet left unpaid for work undertaken and uncompensated for his loss of earnings, and so in a conjoined hearing, Danila Bonifaci and thirty-three other employees (case C-9/90) sought recompense within the same matter.

In the first instance the Pretore di Vicenza and Pretore di Bassano del Grappa both sought a preliminary hearing under art.177 EC, and so the first approach taken by the European Court of Justice was to determine if the respondent’s failure to adjust their domestic laws in line with Directive 80/987/EEC had rendered itself liable to individual enforcement of accountability for payment of lost earnings, or whether the pecuniary losses sustained by the claimants were sufficient enough to award damages based upon state avoidance.

Through an examination of the qualifying criteria for ‘direct effect’ claims, the Court established that this particular case satisfied those terms, and yet noted how the respondent’s non-adoption had failed to fulfil a key element of the Directive requiring proper identification of the companies subscribed to those duties, which left the Commission unable to determine who the two employers were, and how they would be obliged to provide payment or legally defer the onus to the Italian government. 

However the Court also noted how in Simmenthal SpA v Italian Minister of Finance they had held that:

“[D]irectly applicable Community provisions must, notwithstanding any internal rule or practice whatsoever of the Member States, have full, complete and uniform effect in their legal systems in order to protect subjective legal rights created in favour of individuals…”

Which showed that the inability to reflect EU laws will be used as an example when serving the interests of the Community, thus the Court unanimously held that all Member State national courts were held to a duty to redress the inequity of failed transposition, thus full state funded compensation was now due, while reminding the parties that:

“[W]herever the provisions of Directive appear, as far as their subject matter is concerned, to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed period, be relied upon as against any national provision which is incompatible with the Directive or in so far as the provisions define rights which individuals are able to assert against the State.”

Courage Ltd v Crehan [2001]

European Law

Courage Ltd v Crehan
‘In the Brewery in Munich, 1892’ by Philip de Laszlo

Under English law the courts refuse to endorse a claim for damages when the claimant was a party to a contract borne from illegal principles, while this is echoed in equity under the maxim ‘he who comes to equity must come with clean hands’, and so reminds those considering such arrangements that they do so without the aid of the judiciary.

However in this matter the claimant was a party to a publican agreement drawn up through the merger of a large brewery and owners of a number of public houses across the United Kingdom, while as part of this agreement the claimant brewery contracted to supply beer to existing tenants (publicans) under a non-negotiable tariff purportedly designed to protect the interests and profits of those purchasing, and yet after the tenant had somehow amassed a debt of around £15,000 the brewery sought recovery through the courts.

Having previously discovered that the brewery was supplying the same beers for lower prices to non-contracted third parties, it was then counter-claimed that the agreement demonstrated a breach of art.85 EC (formerly art.81 EC) therefore damages were owed and no payment for previously provided beer was due.

After the case reached the Court of Appeal it was decided that due to the conflict between national and Community law a preliminary ruling to the European Court of Justice under art.234 EC needed to confirm: 

1. Whether art.85 EC allowed a party to a prohibited agreement to claim damages?

2. Whether a party can claim when relying upon their own adherence to the agreement?

3. Whether a national law preventing recovery under prohibited agreements remained consistent with Community law?

4. Where deemed incompatible which situations allowed national law to apply?

Having evaluated the aims of national law and the claim’s validity it was agreed that while those contracting in the distortion of fair competition are themselves contributors to their own demise, there are certain scenarios demonstrating an inequality of bargaining power and thus grounds for reconsideration. 

Here the Court noted how in this instance the tenant was subjected to the terms of the agreement with little to no room for bargain, and so while it was agreed that the terms of art.85 EC precluded claims of that nature, it did so on the proviso that the claimant was proportionately liable for any market distortion, while it was also clear that where no such arrangement existed, the effects of art.85 EC (which provided for direct effect and application between individuals) were sufficient enough to allow for a claim despite  any objections raised under English law, while reminding the parties that:

“[C]ommunity law precludes a rule of national law which prevents a party subject to a clause in a contract which infringes Article 81 EC from recovering damages for the loss suffered by it on the sole ground that it is a party to that contract.”

Faccini Dori v Recreb Srl [1994]

European Law

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

Private contracts between individuals are often overlooked in terms of actual rights, therefore 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 later issued proceedings against the vendor and contended to the Giudice Concilliatore (Judge-Concillaitor) that arts.1(1), 2 and 5 conferred protective measures allowing for rescindable notice within a period of seven days between consumers and private companies, which on this occasion had been undertaken through written instruction to the contracting vendor.

Although Directive 85/577/EEC had been in force for a number of years the Italian government had failed to transpose it within the allotted time, therefore no domestic legislation existed in support of this specific issue, while it was acknowledged that a failure to adopt Directives in the prescribed period resulted in a loss of profit to the Member State when defending against ‘direct effect’ claims by their citizens.

However in this instance the terms of the Directive were both clear and precise, yet  related to dealings between individuals and so not subject to the benefit of protection unless transposed under the guidance of Community law and within the adoption window, which 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 agreement.

For this reason the court sought a preliminary ruling from the European Court of Justice under art.177 EC, while asking:

1. Were the terms of the Directive clear and precise enough to provide direct effect?

2. Despite a failure to adopt the measures in accordance with the Treaty, could the claimant rely upon them to enforce her individual right to cancel?

Having examined the arguments around Directive powers and the horizontal effect between parties, 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, yet it was still held that although the terms of the Directive served horizontal dealings it was not possible for the claimant to rely upon them when seeking to terminate her agreement with the vendor.

However the Court held that in light of the fact that the Italian government had failed to adopt the Directive and in the absence of relevant domestic legislation, it was now possible for the national courts to transpose the effects of Directive 85/577/EEC in order that a remedy could be provided in favour of the consumer, while reminding the parties that:

“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 (1996)

European Law

R v HM Treasury ex parte British Telecommunications
‘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 (BT) took issue with Parliament’s 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 EU 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 BT 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’, whereby on this occasion it was deemed that the 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, while holding that for future reference:

“[I]t is not open to a Member State, when transposing the Directive into national law, to determine which telecommunications services are to be excluded from its scope in implementation of article 8(1), since that power is vested in the contracting entities themselves.”

R v Secretary of State for Transport ex parte Factortame Ltd (No.2) (1990)

English Constitutional Law

R v Secretary of State for Transport Ex parte Factortame Ltd
‘NERIED, Cannery Tender’ by Steve Mayo

Direct effect compatibility, and the obligation owed by Member States to transpose Directives and Treaties as binding upon national laws, was a ruling that would soon unearth conflicts of interest. On this occasion, the contention was brought about by aggressive amendment to statute in favour of the UK fishing industry.

Until 1988, those parties involved in domestic commercial fishing were required to register under the Merchant Shipping Act 1894; an Act that allowed overseas companies to operate outside British waters, but still have their fleets registered under UK incorporation. As a means of preventing ‘quota hopping’ (over-fishing), it was enacted by Parliament to include Part II of the Merchant Shipping Act 1988 and Merchant Shipping (Registration of Fishing Vessels) Regulations 1988, to the effect that all those trading were to re-register under new conditions.

These terms required that in order to qualify for registration, the company must have a minimum of seventy-five percent British ownership, and where ownership fell outside the United Kingdom, there needed to be a seventy-five percent share hold by British citizens. This translated that the appellants, who had been previously registered for over almost twenty years, were now unable to re-register, as the owners were Spanish and therefore exempt from the new legislation.

Having appreciated the United Kingdom’s position as a Member State, and subsequent membership to EU Community law, the firm sought proceedings under the principle that the choice taken to exclude other EU members from registration had displayed an overt refusal to comply with art.177 of the EEC Treaty. Furthermore, it was claimed that where Community rights were held to have ‘direct effect’, it was the onus of the national courts to suspend challenged legislation, with the granting of interim relief where proven necessary.

When heard in the Divisional Courts, the claim was supported and provisions made to allow the unfettered trading of the claimants, until such time that clarification was found in the challenge against the amended Act. However, when appealed by the Secretary of State, Court of Appeal Court set aside the previous finding, while granting leave of appeal to the House of Lords.

In this instance, the House agreed that should the claimants’ fail in their argument, the financial damage would be sufficient enough to cause irretrievable damage to the firm, but that without a preliminary ruling by the European Court of Justice (COJ), it was impossible to determine (i) if the courts were empowered to suspend legislative effect, and (ii) how best to determine what form the interim relief should take.

Upon deliberate consideration by the COJ, it was unanimously agreed that when the objectives of direct effect were designed, they were done so in a way that intended literal application with immediate purpose, and that unless under exceptional circumstances, it was the duty of the national courts to hold the powers of Community law above those of domestic interest, whereupon the House held that:

“[N]ational courts are required to afford complete and effective judicial protection to individuals on whom enforceable rights are conferred under a directly effective Community provision, on condition that the Community provision governs the matter in question from the moment of its entry into force…”