European Union Law ( EU Law) - What does "state" mean in terms of state liability?

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] 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). [2014] EWCA Civ 1370; 1 CMLR 38; [2015]. 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) [2015] 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) [1999] 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 [1999] 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) [2010] ECR I-12655. State liability was imposed on Thanet District Council in Kent in Barco De Vapor [2014] 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) [2000] 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) [2003] 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) [1998] 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) [2006] 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), [2016] 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 [2010] EWCA Civ 464, [2010] 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 [2007] 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.