European Union Law ( EU Law) - limitations on the compensation recovery in state liability
The amount of damages the claimant may get in state responsibility cases may be subject to restrictions set by Member States. The "principle of equivalence" states that any such conditions cannot be less favourable than those pertaining to comparable domestic claims, and the "principle of efficacy" states that they cannot be written in a way that makes it "impossible or unduly difficult" to get restitution. The ECJ concluded that these principles applied in cases involving state liability in Brasserie/Factortame III (1996), where the Court stated:
The standards for assessing the scope of reparation shall be established by the domestic legal system of each Member State. These requirements must not, however, be less advantageous than those that apply to claims of a similar nature based on domestic law and must not, in actuality, make obtaining recompense impossible or overly challenging.
European Union Law ( EU Law) - What does "state" mean in terms of state liability?
Most cases involving state culpability include claims against the federal government. The majority of state culpability lawsuits in the UK have been filed against the national government, as seen in the aforementioned Factortame III, Hedley Lomas, and BT instances. Typically, a specific minister of the government is mentioned, as in Negassi v. Home Secretary  2013 EWCA Civ 151 Recall Support Services Ltd. & Others v. Secretary of State for Culture, Media & Sport; Delaney v. Secretary of State for Transport (2014, EWHC 1785); and Delaney v. Secretary of State for Transport (2014, 3 CMLR 32).  EWCA Civ 1370; 1 CMLR 38; . In the Republic of Ireland, claims for state culpability are also made in this manner (see Ogieriakhi v. Minister for Justice & Equality & Others (No. 2)  3 CMLR 18).
However, lawsuits based on state liability may be filed against other organizations. According to the ECJ's ruling in Berlington & Others (2015), "the principle of Member State culpability is relevant, among other places, when the national legislature was accountable for the violation." The European Court of Justice (ECJ) ruled in Konle v. Austria (Case C-302/97)  ECR I-3099] that state culpability claims might instead be filed against regional government and that compensation need not always be the duty of the central government. The Court pronounced:
‘In Member States with a federal structure, reparation for damage caused to individuals by national
measures taken in breach of [EU] law need not necessarily be provided by the federal State.’
Austria v. Konle, Case No. C-302/97  ECR I–3099
German native Klaus Konle bought a piece of land in western Austria's rugged Tyrol area. His request to have his ownership authorized was subsequently denied on the grounds that Tyrol (i.e., the regional government) statute prohibits the use of land as a second home. Even though Konle insisted he intended to make Tyrol his permanent home, this was rejected. Konle contested this and demanded compensation, claiming a violation of Article 63 TFEU (the free movement of capital - see Chapter 10). The Austrian government reacted by saying that authorization was necessary to restrict development in Tyrol because there was so little available land for construction. The ECJ determined that Article 63 was violated by the requirement that property acquisitions be authorized. Although theoretically acceptable, it went above and beyond what was required. The ECJ deferred to the national courts' judgment on whether or not this specific breach was serious enough to warrant legal action. The Court further ruled that compensation for major violations of EU law did not always have to be covered by the federal government in Member States with a federal system, such as Austria and Germany.
This is highly important since it means that when regional or local governments are to blame for the alleged violation, claimants can bring state liability claims against them rather than against central governments. The idea that regional or municipal governments can be held accountable goes beyond nations with a federal system of government. For instance, a state liability claim was made against the province of Drenthe in the northeastern Netherlands rather than the Dutch government in Combinatie & Others (Case C568/08)  ECR I-12655. State liability was imposed on Thanet District Council in Kent in Barco De Vapor  EWHC 490, a case with facts that were quite similar to those in Hedley Lomas (1996). The ECJ declared that state culpability claims might be made regardless of the "public authority... accountable for the violation" in Haim (Case C-424/97)  ECR I-5123. The following was the conclusion of the Court:
‘It is for each Member State to ensure that individuals obtain reparation for loss and damage caused to
them by non-compliance with [EU law], whichever public authority is responsible for the breach and
whichever public authority is in principle, under the law of the Member State concerned, responsible for making reparation. Member States cannot, therefore, escape that liability either by pleading the internal distribution of powers and responsibilities as between the bodies which exist within their national legal order or by claiming that the public authority responsible for the breach of [EU law] did not have the necessary powers, knowledge, means or resources … there is nothing to suggest that reparation for loss and damage caused to individuals by national measures taken in breach of [EU law] must necessarily be provided by the Member State itself.’
This is intriguing, but it may raise more concerns than it answers, particularly regarding the definition and application of the term "public authority" in this context. The Association of Dental Practitioners in the Nordrhein area of Germany was the defendant organisation in Haim. This illustrates that the idea of "public authority" includes professional, regulatory groups (at least). In Köbler v. Austria, the ECJ stated that even judicial violations of EU law could result in state culpability (2003). The Austrian Supreme Administrative Court was accused of violating EU legislation in that case, but the claim was rejected. Nevertheless, the ECJ explicitly decided that national courts "adjudicating at final instance" could be held liable, but such a case would need to be "extraordinary." The Court declared that:
When the infringement in question results from a judgement rendered by a national court sitting in last instance, the competent national court must decide whether the decision has plainly violated the applicable legislation while also taking into account the unique nature of the judicial function. Only in the rare instance where the national court has flagrantly broken the relevant statutes and the Supreme Court's case law can the state be held liable.
Austria v. Köbler (Case C-224/01)  ECR I–10239
Austrian-born professor Gerhard Köbler previously held positions at several universities in Germany, but since 1986, he has held positions at Innsbruck University. He submitted an application for a special 15-year service increase for professors under Austrian law in 1996. This was disregarded, though, as the law only covered volunteer work done in Austrian colleges. On the grounds that Austrian law was (indirectly) discriminatory based on nationality, he filed a complaint with the Austrian courts, alleging a violation of Article 45(2) TFEU (see Chapter 12). The matter was referred to the ECJ by the Austrian Supreme Administrative Court (VWG). The Court retorted that the VWG may want to drop its plea because it had just recently decided in Schöning-Kougebetopoulou (Case C-15/96)  ECR I-47 on nearly identical grounds. (It was implied in no uncertain terms that Köbler's claim would be upheld.) The request for a preliminary finding was dropped, but in its ruling, the VWG rejected Köbler's argument and determined that the raise qualified as a "loyalty bonus" that allowed for a deviation from Article 45 TFEU. After that, Köbler filed a lawsuit for damages against Austria, claiming that the VWG had seriously broken EU legislation. The ECJ ruled that there was no impediment to bringing a state culpability claim if a national court ruling in last instance violated EU law. If people were unable to receive compensation for harm brought on by an EU law violation attributed to such a court, the "essential function" played by the judiciary in upholding individuals' EU rights would be compromised. In the end, the ECJ decided that although the VWG's decision was incorrect and so violated EU law, notably Article 45(2) TFEU, it was not plainly incorrect (i.e., the violation was not "sufficiently significant"); consequently, Köbler was not entitled to damages.
In the case Traghetti del Mediterraneo v. Italy (Case C-173/03)  ECR I-5177, which involved a complaint against the Italian Supreme Court, this was confirmed. The European Court of Justice (ECJ) emphasised that "State liability can only be imposed in the extraordinary scenario when the national court adjudicating at final instance has obviously violated the applicable legislation." More recently, the European Court of Justice (ECJ) decided that state liability could result from the Portuguese Supreme Court's failure to refer a question to the Court of Justice under the preliminary rulings procedure (Case C-160/14),  1 CMLR 26. A national court of last resort "must comply with its obligation to make a reference to the Court" in situations like the current case, which was "characterised both by conflicting lines of case-law at national level" and by the fact that the relevant provision of EU law (Directive 2001/23) "frequently gives rise to difficulties of interpretation in the various Member States."
In "Text and Telos in the European Court of Justice" (2015) 11 ECL Rev 184, Joxerramon Bengoetxea had foreseen this development, stating, "I would not exclude the possibility of the Köbler (or Traghetti) jurisprudence being applied to a stubborn national court of last instance abusively declaring acte clair in situations that should have been submitted for preliminary ruling."
Due to the ruling in Köbler (2003), it is now possible for a state liability lawsuit filed against a national court to be resolved there. This actually occurred in Cooper v. Attorney General  EWCA Civ 464,  3 CMLR 28, where the Court of Appeal had to rule on a state culpability action brought against it. Two prior Court of Appeal judgements from 1999 and 2000, according to the claimant, were gravely in violation of EU law. The High Court heard the claim, found in favour of the defendants, but the result was appealed. The Court of Appeal determined (in 2010) that although the earlier Courts had broken EU legislation, it was not a significant enough violation to warrant the imposition of state liability. (Note that the Court of Appeal had been "adjudicating at final instance" in the cases from 1999 and 2000 because the House of Lords could not be appealed.)
Finally, the ECJ established a type of vicarious liability when it ruled that EU law "does not preclude an individual other than a Member State from being held liable, in addition to the Member State itself, for damage caused to individuals by measures that that individual has taken" in violation of EU law (AGM v. Finland, Case C-470/03  ECR I-2749]. Therefore, in theory, a Member State might be held accountable for violations of EU law committed by specific members of its government.
European Union Law ( EU Law) - Direct causal connection in state liability
Regarding the third requirement, the ECJ has ruled that, in general, it is up to the national courts to decide whether there is a direct causal connection between the breach and the damage (Rechberger & Others (1999)). JUDGMENT was issued by the Court in Leth & Others v. Austria (Case C-420/11)  3 CMLR 2.
‘The existence of a direct causal link between the breach in question and the damage sustained by the
individuals is, in addition to the determination that the breach of EU law is sufficiently serious, an
indispensable condition governing the right to compensation. The existence of that direct causal link is a matter for the national courts to ascertain.’
European Union Law - State Liability - Participation of an EU institution
Although it is rarely mentioned, the final element can be significant. The European Commission's involvement (or lack thereof) was cited in BT (1996) as one of the arguments against the allegation. The UK government had provided the Commission a draft of its implementing legislation, but there was no response. The implementing legislation could have been changed and the legal action completely averted had the Commission responded and pointed out the error.
European Union Law( EU Law) - Justifiable breach
The fourth consideration is whether the infraction was excused. Many of the aforementioned examples included Member States acting in good faith, which suggested that any violations were excused (BT, Denkavit). Due to the fact that it was an excusable mistake, the German government's violation of Article 34 TFEU in the case of Brasserie du Pêcheur was ultimately deemed to be insufficiently serious (see the ruling of the German Federal Court of Justice in Brasserie du Pêcheur v. Germany (No. 2)  1 CMLR 971).
European Union Law ( EU Law) - intentional violation in State Liability
The third consideration involves determining if the violation was purposeful (which makes it more likely to be serious). For instance, in Factortame III  3 WLR 1062, when the matter was handed back to the House of Lords from the ECJ, the House finally decided that the UK had seriously violated Article 49 TFEU because the government had done so on purpose. Lord Slynn said (italics in original):
"It seems to me evident that the willful passage of legislation that was manifestly discriminatory on the basis of nationality and that inherently violated [Article 49 TFEU]... constituted a flagrant breach of fundamental Treaty duties," the court wrote. It was a serious violation of the Treaty both on its own terms and in light of the repercussions it was certain to have—or, at the very least, was most likely to have—on the responders. It has not been demonstrated that it was excuseable.
In contrast, the Court of Appeal determined that the UK government's failure to effectively implement Directive 2003/9 was not sufficiently significant in Negassi v. Home Secretary  EWCA Civ 151;  2 CMLR 45. The lack of intent on the part of the government was one of the factors that the Court considered while making this ruling. Kay LJ said (italics in original):
"I believe that the assessment of the seriousness of the infringement in this case is pretty delicately balanced. I've come to the opinion that the violation wasn't severe enough to pass the test. It wasn't planned, either. It was the outcome of a misinterpretation of recent regulations in a topic that had recently raised EU concerns. It wasn't an egregious or cynical misunderstanding.
European Union Law ( EU Law) – State liability ( Discretion )
It will be harder to establish that a breach happened, much less that it was a significant infringement, where a Member State has considerable discretion under EU law. For instance, the claimant, a German road haulage company, claimed in Schmidberger v. Austria (Case C-112/00)  ECR I- 5659 that the Austrian government had significantly violated Articles 34 and/or 35 TFEU by approving a road closure to facilitate an environmental demonstration. The European Court of Justice (ECJ) rejected the claim, noting that the Austrian government needed to be given a "wide margin of discretion" due to the need to balance opposing (if not incompatible) interests: the need to safeguard the protestors' fundamental rights to exercise their right to free speech (on the one hand) and the claimants' economic rights to import and export goods across international borders (on the other hand) (on the other). The Court determined that:
The national authorities were therefore rationally authorized to draw the conclusion that the legitimate goal pursued by that demonstration could not be reached by means less restrictive of trade, given the wide discretion that must be accorded to them in the subject. As a result, it cannot be claimed that Austrian authorities violated [EU law] to the point where they are liable.
On the other hand, a lack of discretion makes it far more likely that the breach was sufficiently serious. For instance, the lack of discretion made the UK's violation of Article 35 TFEU in Hedley Lomas (Case C-5/94)  ECR I-2553 appear serious. The Court declared in that instance (emphasis added):
The simple violation of [EU law] may be sufficient to demonstrate the presence of a sufficiently significant breach "where, at the time it committed the infringement, the Member State in question was not called upon to make any legislative choices and had only considerably reduced, or even no, discretion."
Case C-5/94 - Hedley Lomas  ECR I–2553 The UK's Ministry of Agriculture, Fisheries and Food (MAFF) consistently refused to grant licenses for the transport of live animals destined for slaughter to Spain between April 1990 and January 1993. This was done because the MAFF was convinced that several slaughterhouses in Spain were not in compliance with an EU directive on animal welfare regarding the stunning of animals prior to slaughter, either because they lacked the necessary equipment or because the equipment was not used properly or at all.
The MAFF believed that the degree of non-compliance with the directive justified a general restriction on export licenses, despite the fact that it lacked sufficient facts regarding the general situation in Spanish slaughterhouses. A British company named Hedley Lomas was denied an export license for live sheep in 1992, despite the fact that the company had knowledge that the specific butcher where the sheep were destined complied with all applicable animal welfare regulations. Hedley Lomas filed a lawsuit, claiming that the license's denial violated Article 35 of the Treaty on European Union. According to MAFF, it was justified by the protection of animal health in accordance with Article 36 TFEU. The ECJ determined that when harmonising directives were already in place and required to accomplish the same goal, recourse to Article 36 TFEU was not feasible. To conduct inspections in each other's territories, Member States required to have mutual trust. As a result, the MAFF's actions represented a grave violation of Article 35 TFEU.
In the case of Rechberger & Others v. Austria, the decision was similar (1999). The implementation date of Directive 90/134 (the Package Travel Directive), notably Article 7, had been unilaterally postponed in this case by the Austrian government, which is never permissible. The claimants reportedly suffered financial damage as a result. The lack of discretion was the primary factor in the ECJ's conclusion that the breach was sufficiently serious:
Austria has no option over when the provisions of Article 7 would become enforceable under its own laws. As a result, the restriction on protection mandated by Article 7 is obviously at odds with the requirements of the directive and so represents a sufficiently grave violation of [EU law].
A (lack of) discretion is frequently correlated with how clearly the regulation was broken. For instance, the Sixth VAT Directive, a regulation of EU law that was violated in Stockholm Lindöpark v. Sweden (2001), was expressly stated (indicating a major violation). Furthermore, the Swedish government lacked discretion because the regulation was so clearly broken, demonstrating how seriously it was broken. According to the Court, "[Sweden] was not in a position to make any legislative choices" (emphasis added) "Given the unambiguous wording of the Sixth Directive."
European Union Law ( EU Law) - Clarity and accuracy
In many state responsibility instances, a Directive's improper implementation is a factor. Depending on how precisely the Directive is worded, such violations may or may not be considered sufficiently significant. The shortcomings by (respectively) the UK and Germany were ruled not to be severe in the cases of BT (Case C-392/93)  ECR I- 1631 and Denkavit International v. Germany (Case C-283/94)  ECR I- 5063, partly due to the lack of accuracy or clarity in the Directives' text. Additionally, both states had attempted to correctly execute the Directive in good faith (suggesting the breach was also excusable).
Case C-392/93, E BT,  ECR I–1631 Through the Utilities Supplies & Works Contracts Regulations of 1992, the UK put Directive 90/531 into effect. The transposition, according to BT, was made erroneously, and the company filed a claim for damages to cover the costs of complying with the regulations as well as the harm it suffered as a result of being at a competitive and commercial disadvantage. Although the ECJ found that the UK government had not correctly implemented the regulation, it rejected the claim for damages because the violation was not severe enough. There were several causes: Since the UK acted in good faith, there was no guidance from ECJ case law regarding the proper interpretation of Article 8(1) of the Directive, the Commission did not object when the 1992 Regulations were adopted, and the offending portion of the Directive was based on a vaguely worded provision that was reasonably capable of bearing the meaning given to it by the UK.
In contrast, in Stockholm Lindöpark v. Sweden (Case C-150/99) and Rechberger & Others v. Austria (Case C-140/97)  ECR I- 3499), Because the relevant Directives were expressly stated in both instances  ECR I-493, it was determined that improper implementation was significant and that the violation was not justifiable.
European Union Law( EU Law) - A sufficiently significant violation is a requirement for state liability
European Union Law( EU Law) - A sufficiently significant violation is a requirement for state liability
According to Brasserie; Factortame III (1996), the second condition—a breach that is "sufficiently serious"—is determined by whether the Member State "manifestly and severely violated the limits on its discretion." A breach will be automatically regarded as significant in two circumstances. The first scenario is when a Member State refuses to implement a Directive by taking any action. "Failure to take any step to transpose a directive in order to accomplish the effect it prescribes within the period fixed down for that purpose constitutes per se a serious breach of EU law," the Court declared (emphasis added) in Dillenkofer & Others v. Germany (Case C-178/94)  ECR I-4845.
Case C-178/94, Dillenkofer & Others v. Germany  The Package Travel Directive, ECR I-4845 Directive 90/134, was due to go into effect on December 31, 1992. The organiser and/or retailer parties to the contract are required to "offer appropriate evidence of security for the reimbursement of money handed over and for the repatriation of the consumer in the case of insolvency," according to Article 7. The directive was not put into effect by German authorities until July 1994. Two German package trip companies filed for bankruptcy in 1993. The numerous claimants—among them Erich Dillenkofer—thus either lost their vacations, for which they had already paid, or were already on vacation and had to pay for flights back to Germany. Inability to receive compensation from the tour operators led the claimants to file a lawsuit against the German government, claiming that if the government had acted sooner, the tour operators would have been required to have adequate security (such as insurance) to pay for refunds and/or repatriation. The German government said that the delay in implementation was due to the necessity for more time for consultation with the affected bodies. According to the ECJ, the directive's Article 7 was meant to grant people rights. The failure to implement the directive by the deadline constituted a grave breach of EU law that automatically entitled the holder to damages, subject to proof of causation.
In the second scenario, the Member State disobeys unambiguous ECJ case law. For instance, the European Court of Justice (ECJ) noted that the employment conditions imposed on fire fighters in the German city of Halle were not only in violation of Directive 2003/88 (the Working Time Directive - see Chapter 17), but also of at least three earlier ECJ decisions, in Fuß v. Stadt Halle (Case C-429/09)  ECR I-12167. It comes as no surprise that this was deemed a significant violation of EU law. The Court declared (emphasis added) that:
"Where the decision in question was issued in apparent violation of the case law of the Court in the matter, an infringement of EU law will be sufficiently serious," the court stated.
Foot vs. City Halle (Case C–429/09)  ECR I–12167 German firefighter Günter Fuß worked in Halle. He was required to work an average of 54 hours per week under the terms of his job contract. Much of this time was spent on "stand-by," where Günter was obligated to be present at the fire station in case of an emergency but was not actually performing any tasks. Nevertheless, he claimed that his working hours exceeded those allowed by Directive 2003/88, which limits the length of the workweek to a maximum of 48 hours on average. Günter requested backdated overtime pay in exchange for the hours he had worked in violation of the directive up until that date. The ECJ determined that imposing a 54-hour workweek was a major violation of the directive's intent to grant rights to individuals. In coming to that finding, the Court noted that "standby" time had already been unambiguously established as "working time" in numerous earlier ECJ cases dating back to 2000. e'. The German court had to decide whether there was a direct causal connection. ts.
In theory, it is up to the national courts to determine whether a violation of EU legislation qualifies as "sufficiently serious." However, the ECJ has identified a number of variables that may be employed, including the following:
whether the violation and damage were made intentionally or accidentally; the clarity and specificity of the rule that was broken; the amount of discretion the regulation left open; If a legal mistake was made, whether it was justifiable or not; whether the stance taken by a Union institution may have influenced the adoption or maintenance of national policies or practices that violate EU law.
European Union law - Intention to grant people rights is a prerequisite for state liability.
Here, direct influence is strongly related. An alleged violation of Article 45(2) TFEU (the freedom of migrant workers to work without discrimination on the basis of nationality ) was at issue in the case of Köbler v. Austria (Case C-224/01)  ECR I-10239. 'The rule of law ostensibly infringed... is immediately effective and its goal is consequently essentially to confer rights on persons,' wrote A-G Léger in that case (emphasis added). Several directly applicable Treaty provisions, such as Articles 34 and 35 TFEU (free movement of goods;) and Articles 49 and 56 TFEU (right of businesses and self-employed individuals to "establish" themselves in another Member State or to provide services to someone from another Member State; have been deemed to satisfy Condition 1. Several EU legal provisions that have been found to satisfy the first criteria of state culpability are included in a table at the end of this chapter. The second requirement becomes important if the first condition is met, but the claim is invalid if it is not. It was decided by the ECJ in Paul & Others v. Germany (Case C-222/02)  ECR I-9425 that Article 3(1) of Directive 94/19 was not meant to grant people rights. In Berlington & Others v. Hungary (Case C-98/14)  3 CMLR 45, the ECJ determined that while Directive 98/34 was not meant to grant persons rights, Article 56 TFEU (the freedom to supply services) did.
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