From Francovich to Köbler and beyond: The evolution of a State liability regime for the European Community LL.M. Thesis August 2005 Evangelos Nikolaou ἀλλὰ πρὸς τοῦ βλάβους τὴν διαφορὰν μόνον βλέπει ὁ νόμος, καὶ χρῆται ὡς ἴσοις, εἰ ὃ μὲν ἀδικεῖ ὃ δʹ ἀδικεῖται, καὶ εἰ ἔβλαψεν ὃ δὲ βέβλαπται. ὥστε τὸ ἄδικον τοῦτο ἄνισον ὂν ἰσάζειν πειρᾶται ὁ δικαστής· Αριστοτέλης, Ηθικά Νικομάχεια, Βιβλιο Ε, Κεφάλαιο Δ The law looks only to the distinctive character of the damage alone, and treats the persons as equal, if one commits and the other suffers injustice, and also if one has done and the other suffered damage. So that the judge endeavours to make this injustice, which is unequal, equal. Aristotle, Nicomachean Ethics, Book V, Chapter IV TABLE OF CONTENTS PREFACE 3 INTRODUCTION 4 Part 1: The Development of the Case law on Member State Liability for Breach of EC Law 9 Chapter 1: The Seminal Francovich and Brasserie du Pêcheur: Setting the General Framework for Member State Liability. 9 1.1 The Francovich Case 9 1.2 Brasserie du Pêcheur and Factortame III 13 Chapter 2: The Second Phase of the State Liability Doctrine. Clarifying the Brasserie Criteria 17 2.1 First Condition: The Rule of Law Infringed Must Have Been Intended to Confer Rights on Individuals 17 2.2 Second condition: The Existence of a Sufficiently Serious Breach 19 2.2.1 The Breach of EC Law Must Be Committed by a Public Authority 20 2.2.2 The Breach Must be Sufficiently Serious 25 2.3 Third Condition: The Existence of a Causal Link 31 2.4 The Extent and Form of Compensation 34 Part 2: Member State Liability for Acts of the Judiciary 36 Chapter 3: Köbler v. Austria and its Implications 36 3.1 Introductory Remarks 36 3.2 The Actual Facts of the Case 38 3.3 The Establishment of State Liability as a Matter of Principle 40 3.4 The Substantive Conditions for State Liability by Judicial Breaches 56 3.5 Conclusion: When Köbler Meets Kühne & Heitz 60 Part 3: The Third Phase of the State Liability Doctrine: Fundamental Rights v. Fundamental Freedoms 61 Chapter 4: Spanish Strawberries in France, the Blocking of the Brenner Highway and the Implications on State Liability Claims 61 4.1. The Ruling in Case C-265/95, Commission v. France 61 4.2 The Implications on Francovich Claims 63 4.3 Schmidberger and the New Approach towards Fundamental Rights 67 Part 4: Τhe Francovich Doctrine Encounters the Principle of Legal Certainty 71 Chapter 5: Francovich and Brasserie du Pêcheur: A Breach of Legal Certainty by Judicial Activism? 71 5.1 Introductory Remarks 71 5.2 The Predictability of the Francovich Doctrine 72 5.3 The Acceptability of the Francovich Doctrine 75 Concluding Remarks 83 Table of Cases 84 Bibliography 91 2 Preface I have been interested in the topic of Member State liability for breach of EC law ever since my participation at the European Law Moot Court 2003/2004 competition, where the case was relevant with the evolution of the Francovich doctrine. Even from that time, as an undergraduate student at the Faculty of Law of the Aristotle University of Thessaloniki, Greece, I found it very stimulating to study this new remedy for the protection of individuals’ rights, which was progressively employed through the case law of the Court of Justice. During my postgraduate studies on European Law at the Faculty of Law of the University of Helsinki, I had the opportunity to look deeper into the relevant case law and realized that, surprisingly, in the post-Francovich era, no State liability actions have been directed against my home country, Greece, notwithstanding the poor record that it traditionally possesses in the implementation and enforcement of Community law. My surprise became even bigger when I realised that the Greek law on civil liability of the State, dating long before the establishment of a State liability regime within the Community, is fully compatible with the substantive conditions that were subsequently set by the ECJ. These factors gave me an even stronger impetus to deal with the topic. In writing this paper I would like to thank my supervisor at the University of Helsinki, professor Juha Raitio, for his encouragement, support and understanding throughout the academic year. I would also like to mention Mr. Niilo Jääskinen, judge at the Supreme Administrative Court of Finland, for devoting some of his time to reply to my questions as regards the application of the Francovich doctrine in Finland and Mr. Dimosthenis Lentzis, PhD candidate at the Faculty of Law of the Aristotle University and my coach at the European Law Moot Court competition 2003/2004, whose ideas and friendship have always offered me valuable guidance. Finally, I would like to thank my family for all the support they are offering me in order to achieve my academic goals and my friends back in Greece for always being there whenever I need them. 3 Introduction The European Community, an autonomous legal order, is a creation of law and a source of law at the same time. The Court of Justice of the European Communities1 has played a pivotal role in securing that the rule of law is observed and, pursuant to Article 220 EC Treaty2, it has tried to ensure that neither the Member States nor the Community institutions would avoid “a review of the question whether the measures adopted by them are in conformity with the basic constitutional charter, the Treaty”3. As a community based on law, the European Community, is necessarily depended on the assumption that the legal obligations which stem from its constituent document shall be fully respected by its subjects, namely the Member States, its own institutions and private individuals. The EC Treaty, like any other international treaty, confirms the pacta sunt servanda principle and contains a number of supervisory procedures to ensure that the law it establishes shall be observed. Article 226 entrusts a supranational institution, the Commission, to initiate proceedings before the ECJ each time it considers that a Member State has failed to fulfil its obligations under the Treaty, whereas Article 227 gives the same opportunity to other Member States4. The dispute is subsequently taken to the Court which, if it considers that the Member State in question has acted in breach of Community law, shall record the violation in a judgement taking the form of a declaration that the Member State has failed to fulfil its Community obligations. This judgement of the Court, even declaratory in nature, is binding and, pursuant to the first paragraph of Article 228 EC Treaty, the Member State is obliged to terminate the violation found by the Court, though it can choose the way this will be done5. However, Member States have not always been willing to comply with the judgements of the Court in infringement proceedings, a fact that has raised the concern of the European Commission to such an extent to point out in 1989 that “this situation gives rise for concern as it undermines the fundamental principles of the 1 Hereinafter mentioned as “the Court” or “the ECJ”. 2 Article 220: “The Court of Justice and the Court of First Instance, each within its jurisdiction, shall ensure that in the interpretation and application of this Treaty the law is observed.” 3 Case 294/83, Parti Ecologiste “Les Verts” v. Parliament [1986] ECR 1339, para 23. 4 Article 227 has been rarely used due to the political implications it would occasion between Member States. However, see Case 141/78, France v. United Kingdom [1979] ECR 2923 and, more recently, Case C-388/95, Belgium v. Spain [2000] ECR I-3121. 5 Trevor C. Hartley, The Foundations of European Community Law, Oxford University Press, Oxford, 2003, at 317. 4 Community based on law”6. Therefore, the Maastricht Treaty amended Article 228 EC Treaty to include a procedure for the imposition by the Court, after a second round of infringement proceedings initiated by the Commission, of fines to Member States that fail to give effect to its decisions under Article 2267. Still, however, the long and cumbersome procedure to reach this "ultima ratio which enables the Community interests contained in the Treaty to be protected against the inertia and resistance of the Member States"8 is not devoid of criticism for its practical effects. Political considerations enter the picture during the so-called administrative face of the whole procedure, when the Commission has almost absolute discretion as to whether and when it shall bring the proceedings. The role of individuals is almost non-existent, even though the Commission relies to a great extent on their complainants to sustain its position in law enforcement9. A further problem with Article 226 EC is that it is primarily interested in enforcing EC law against the State than providing a remedy for the injured party10, as individuals are not provided with compensation for the period that they have been deprived of their Community rights due to the illegal conduct of the Member States. The whole historical background of the late 1990’s, with the pressure posed by the imminent 1992 deadline for the completion of the internal market, to be achieved largely through harmonization by directives, made the problem of Community law enforcement more acute. As Steiner writes, "despite redoubled efforts by the Commission under Article 226 States continued to neglect their duties of implementation and even successful proceedings failed to secure compliance… If the internal market programme were to succeed, something more had to be done"11. Once again, the Court gave the solution.