11.6.2.1. Brasserie du Pêcheurand Factortame III: Facts and National Background
The 1996 judgment of the Court of Justice in Brasserie/Factortame IIIis, again, a widely commented case, and does not need much of an introduction. The cases were joined as they raised similar questions though there are some differences also. Brasserie du Pêcheurderived from the German beer cases, concerning the German Biersteuergesetz which contained a prohibition against the marketing of beers lawfully manufactured in, and imported from other Member States, but which did not comply with requirements of the Biersteuergesetzunder the designation of ‘Bier’, and against the importa- tion of beers containing certain additives. Brasserie du Pêcheur, a French brewery exporting beer to Germany, was forced to discontinue these exports since the German authorities objected that its beers did not comply with the German purity law. When the Court of Justice declared that the prohibition contained in the Biersteuergesetzwas incompatible with Article 30 of the Treaty (now Article 28 EC),190Brasserie du Pêcheur brought an action against the German State for compensation of the loss suffered.
Given that the infringement, the failure to adapt primary legislation to
189This has finally been resolved in Case C–453/99 Courage Ltd v Bernard Crehan and Bernard Crehan v Courage Ltd and Others[2001] ECR I–06297; before that comments to the same effect had been made by AG van Gerven in Case C–128/92 HJ Banks & Co Ltd v British Coal Corporation[1994] ECR I–1209.
190Case 178/84Commission v Germany (German purity of beer law) [1987] ECR 1227.
conform to Community law was attributable to the legislature, and given the denial of the liability of the legislating State in German law, the Bundesgerichtshofreferred several questions for preliminary ruling.
It must be recalled that liability for legislative wrong is excluded under German law for several reasons. One reason lies in the limits of the judi- cial power, excluding the extension of the procedure of enteignungsgle- ichen Eingriff to legislative wrong attributable to Parliament itself. The other, of Drittbezogenheitdoes not lie in constitutional law,191but it has the effect of excluding the liability of the State, for legislative wrong commit- ted both through primary and secondary legislation. Both the Landesgericht and the Oberlandesgericht Kửln192 rejected the claim of Brasserie de Pêcheur. The Oberlandesgerichtchecked all possible manners available under German law for compensation to be granted. It rejected in very simple terms the claims based on Community law itself: all conse- quences of a breach of Community law by the State had to be assessed in accordance with national law,193 which did not allow damages to be granted. First, the claim based on Paragraph 839 BGB junctoArticle 34 GG failed because under constant case law of the Bundesgerichtshof, a failure to legislate does not amount to a breach of an official duty which is refer- able to the applicant. There would be no reason to adapt this case law to the requirements of Community law, since the effectiveness of Community law could not be more important than that of constitutionally guaranteed fundamental rights, the infringement of which, by Statute does not give rise to damages. Second, recourse to § 823(2) BGB194juncto Article 171 EC could bring no relief, since Paragraph 839 BGB, as lex specialis, takes precedence over the more general Paragraph 823(2) BGB.
Thirdly, claims based on the procedure of enteignungsgleichen Eingrifffailed because it applies only to lawfulacts, whereas in this case the unlawfulness of the Statute with respect to Community law was not in dispute. In addi- tion, the extension of this principle to legislative wrong would overstep the limits of the judicial function, and breach the principles of separation of powers and democracy. Whether and to what extent the breach of
191F Ossenbühl, ‘Staatshaftung zwischen Europarecht und nationalem Recht’, in O Due, M Lutter and J Schwarze (eds), Festschrift für Everling (Baden, Nomos, 1995) 1031, at 1043.
192Oberlandesgericht Kửln, decision of 20 June 1991, Brasserie du Pờcheur, EuZW, 1991, 574.
193Oberlandesgericht Kửln, decision of 20 June 1991, Brasserie du Pờcheur, EuZW, 1991, 574, at 575.
194The general tort provisions §§ 823 (1) and (2) of the BGB provide that ‘(1) Anyone who intentionally or negligently injures life, body, health, freedom, ownership or any other right of another in a manner contrary to law shall be obliged to compensate the other for the loss arising. (2) The same liability is incurred by a person who infringes a law intended to protect another person. If such a law may be infringed without culpability, liability to compensate shall be incurred only in the event of culpability’, translation taken from W van Gerven, Cases, Materials and Text on National, Supranational and International TortLaw, (Oxford, Hart Publishing, 2000), at 63, containing also a general introduction on the provision and its application in practice.
Community law by the Legislature proper would create a right to com- pensation was for the Legislature to decide, and had nothing to do with the relation between national law and Community law. The Bundesgerichtshof195confirmed the decision of the OberlandesgerichtKửln as concerns German law, adding that a claim on the basis of enteignungs- gleichen Eingriff would in any case fail, since the case did not concern a breach of a protected property right. However, the Bundesgerichtshof doubted that a right based in Community lawwould exist in this case.
The Factortame IIIreference was a sequel to the saga of the Spanish fish- ermen who were excluded from the British fishing quota. It will be remembered that the Spanish fishermen objected to the new Merchant Shipping Act 1988, which introduced a new system of registration of fish- ing vessels, imposing certain conditions relating to nationality, domicile and residence, depriving the Spanish fishermen, in practical effect, of their right to fish in British waters. The Spanish fishermen had been pre- vented from fishing during the interval between the entry into force of the Merchant Shipping Act (1 April 1989) and the application of the Order of the President of the Court of Justice ordering the British authorities to sus- pend the application of the Merchant Shipping Act (2 November 1989).196 When the Court of Justice decided that the United Kingdom had indeed failed to fulfil its Treaty obligations by imposing conditions as to nation- ality,197the Divisional Court made an order giving effect to the judgment in respect of the registration of the Spanish vessels, and directed the applicants to give detailed particulars of their claims for damages against the Secretary of State for Transport. The Divisional Court considered that if English law were to be applied, there would be no remedy in damages under Bourgoin, but doubted whether Francovichliability would lie.
In both cases, the infringement of a directly effective provision of the Treaty was imputable to Parliament itself – as had been the case in Francovich. In contrast to Francovich, the infringement did not consist of the failure to implement a directive – a clear and simple breach of a posi- tive obligation – but of the adoption of primary legislation contrary to directly effective provisions of the Treaty, from which individuals may derive directly effective rights, enforceable in the national courts. Several fundamental points of a constitutional nature were argued before the Court, relating to the jurisdiction of the Court of Justice and the liability of the legislating State.198
195Bundesgerichtshof, decision of 28 January 1993, Brasserie du PêcheurNVwZ 1993, 601.
196Case 246/89 R Commission v United Kingdom (Merchant Shipping Act) [1989] ECR 3125. The United Kingdom partially amended the Merchant Shipping Act with effect from 2 November 1989.
197Case C–221/89 The Queen v Secretary of State for Transport, ex parte Factortame (Factortame I)[1991] ECR I–3905, on reference from the Divisional Court, relating to the compatibil- ity of the Merchant Shipping Act with the Treaty.
198No fewer than seven Member States intervened.
11.6.2.2. The Constitutional Issues
The first point, and a crucial one indeed, concerned the competence of the Court of Justice, and its jurisdiction to create a principle of State lia- bility for legislative acts infringing Community law. Several Member States, among which most prominently Germany, argued that the Court of Justice did not have jurisdiction to develop such principle in the absence of a Treaty provision to that effect, and given that the Member States had rejected the introduction of such provision during the latest revision of the Treaties. According to the German Government,199 the extension of State liability to legislative wrong would constitute a revo- lution in many legal systems, would have an important impact on the financial situation of the Member States, and would have to be approved by the national Parliaments. Secondly, both referring courts had emphasised that prevailing national constitutional law prevented the State from being held liable in damages for this particular type of infringement directly attributable to the primary Legislature.
Furthermore, it was argued, the Community itself would not be held liable in parallel cases, given the restrictive approach of the Court to lia- bility for normative acts under Schửppenstedt. Why, then, should the Member States be so liable?
The first issue was probably the most difficult for the Court to answer, because it was crucial to convince its audience that Francovich liability constituted a lawful development of Community law, and a justified piece of judge-made law. If the national courts or other members of the audience were not convinced of the legitimacy of the Court’s case law, Francovichcould die a sudden death, and the Court’s legitimacy could be seriously damaged even beyond the issue of state liability.
The second issue was a difficult one to argue for the German govern- ment: The Court of Justice, an international Court, never accepts argu- ments in defence based on the constitutional set-up of the State, or on constitutional principles.200In that sense, and raised before the Court of Justice, the argument is not a very strong one. The Member States as a whole are under an obligation to comply with Community law, and to
199Supported by the Netherlands and Irish Governments, see Opinion of AG Tesauro, Joined Cases C–46/93 and C–48/93 Brasserie/Factortame III, at marginal number 24.
200The Court consistently rejects arguments based on constitutional division of powers within the State. The Court knows only the States as monolithic blocks (the unitary prin- ciple), and does not look beyond the State boundaries. Member States as such are declared to have infringed Community law, not a particular constituent part thereof, and independent of the organ to which the breach is attributable. Horizontal or vertical sep- aration of powers cannot serve as a valid defence in enforcement procedures, see e.g.
Case 77/69 Commission v Belgium[1970] ECR 237; Case 8/70 Commission v Italy [1970]
ECR 961; Case 100/77 Commission v Italy[1978] ECR 879;Case 239/85 Commission v Belgium[1986] ECR 3645; Case C–85/89 Commission v Germany[1991] ECR I–4983; see also Case 9/74 Casagrande v Munich[1974] ECR 773.
organise their institutions and organs in such a way that Community obligations are met. On the other hand, the second argument helped to reinforce the first argument. To hold the State liable in damages for harm caused by the primary legislature in cases before national courts, where they could not be so held in national law, constituted such a constitu- tional revolution, that it could not be carried out by the Court of Justice, but required the intervention of the Member States acting as Community legislature or constitutional legislature. The argument based on the par- allel between liability of the Member States on the one hand and of the Community on the other touched upon a very sensitive issue, and the Court would have to be very careful not to displease the Member States and to retain the goodwill of the national courts. The way it would han- dle the question of parallellism would contribute to convincing the audi- ence of the first point, i.e.that this constituted a lawful development of Community law in the hands of the Court.
11.6.2.3. The Court’s Judgment201 Liability of the Legislating State
Under the heading ‘State liability for acts or omissions of the national legisla- ture contrary to Community law’the Court combined several fundamental issues, not all of which concern the question of liability of the legislating State. Firstly, the Court discussed the issue of the relationship between direct effect and State liability, and held that direct effect and State liabil- ity are not mutually exclusive: where there is no direct effect, as in the case of the failure to transpose a directive, Francovichliability serves to provide reparation for the injurious consequences of the failure to implement, in so far as the beneficiaries are concerned. However, in the event of infringement of a directly effective provision of Community law, the right to reparation is the necessary corollaryof direct effect. Secondly, the Court entered into the most sensitive issue concerning its legitimacy and juris- diction to introduce a general right to reparation for individuals.202The Court held, firstly, that it did have subject matter competence: the ques- tion had been referred by national courts under the preliminary rulings procedure and concerned a question of interpretation relating to the con- sequences under Community law of a State’s infringement of Community law. Secondly, as there is no specific provision dealing with the issue in the Treaty, it is for the Court under Article 164 of the Treaty (now Article
201It took the Court 3 years to answer the questions referred. The references were received at the Court in February 1993; the judgment was delivered on 5 March 1996.
202The question of whether or not the Court was right to develop the doctrine of State lia- bility is discussed in D Wyatt, ‘Injunctions and Damages against the State for Breach of Community Law – A Legitimate Judicial Development’, in M Andenas and F Jacobs (eds), European Community Law in the English Courts (Oxford, Clarendon Press, 1998) 87.
220 EC) to rule on it, in accordance with generally accepted methods of interpretation, i.e.by reference to fundamental principles of Community law and general principles common to the legal systems of the Member States, also reflected in Article 215 of the Treaty (now Article 288 EC). In many Member States the essentials of the legal rules governing state lia- bility are judge-made. There was, it was implied, nothing in any way novel in a court developing a system of state liability. Moving on to the thirdfundamental issue, concerning liability of the legislating State, the Court inferred from the fact that the principle of State liability is inherent in the Treaty, that it must hold good regardless of the organ whose act or omission was responsible for the breach. In addition, the Court went on, it was a fundamental requirement that Community law be uniformly applied, and accordingly, that the obligation to pay damages could not depend on domestic rules as to the division of powers between constitu- tional authorities. Finally, the Court drew on international law, where the State is viewed as a single entity, whose liability arises irrespective of whether the breach is attributable to the legislature, the judiciary or the executive. This must apply a fortiori in Community law, since all national authorities, including the legislature, are bound to perform their task to comply with Community law.
By combining distinct issues, the Court conceals the weakness of some of the arguments. The reference to Article 288(2) EC (then Article 215 of the Treaty) is hardly convincing when it comes to the liability of the legis- lating State. Indeed, any comparative survey — a method which appears to be assumed under Article 288 EC — demonstrates that it is notin accor- dance with the general principles common to the Member States to recog- nise liability for legislative wrongs committed by the legislature proper.203 Reference to Article 288 EC does not give much support to an extension of the principle to legislative wrong attributable to the legislature proper.
On the other hand, the Court had to deal with the critique, justified it is submitted, that it was applying a double standard requiring a more strin- gent approach to Member State infringements and infringements by the Community institutions, without offering a satisfactory explanation.
203See W van Gerven, ‘Taking Article 215(2) EC Seriously’, in J Beatson and T Tridimas (eds), New Directions in European Public Law, (Oxford, Hart Publishing, 1998), 35, at 36; When the ECJ had to rule on the issue of the liability of the Community for normative acts, the AG’s in the landmark cases did enter into a comparative study of the national law. Their main conclusion was, that there was not much of a common approach in the Member States which could be transposed to the liability of the Community. See AG Roemer in Case 5/71 Aktien-Zuckerfabrik Schửppenstedt v Council [1971] ECR 975; Opinion of AG Capotorti in Joined Cases 83 and 94/76, 4, 15 and 40/77 Bayerische HNL v Council and Commission[1978] ECR 1209: Capotorti pointed out that the issue of the liability of the legislating State for Acts deriving from the sovereign parliaments was, in national law, very disparate, and far from settled even in those Member States where these acts could be reviewed in the light of higher national principles, Italy and Germany.
Double standards are always difficult to justify,204and cause resentment on the part of national courts, as is exemplified by the judgment of the Court of Appeal in Bourgoin.205The reference to Article 288 EC in the judg- ment is misleading.
The analogy with international liability of the State seems an obvious one given that the European Court is an international court, which views the State as a single entity. However, Brasserieand Factortame IIIoriginated in national courts, which form part of the State, and do not normally view the State as a single entity. To require the national courts not to distinguish as to the organ responsible for the infringement, is an intrusion par excellence in the national constitutional system, whereby the national courts are elevated to the level of international courts, standing, as it were, outside the constitutional system which has instated them. One can imag- ine the schizophrenia on the part of the national courts. It must be recalled that the liability must be assessed in accordance with the national rules, subject to the conditions of equivalence and effectiveness. Furthermore, liability in international law does not intend to protect individuals; it involves interstate relationships. International liability may not be a well chosen standard of reference.206
Conditions for Liability
Turning then to the conditions for liability, the Court followed the path set out in Francovich, that the conditions would depend on the type of the breach. It then sought to relate the conditions of the liability of the State to those applying to similar situations of Community liability. One of the most serious and consistent critiques of Francovich had been that the Court was more severe on the Member States – Francovichalmost consti- tuted a form of strict liability – than on the Community institutions, which in many cases escape liability. The difficulty was, then, to find a common denominator: which types of acts and omissions in the field of Community law by Community institutions and Member States should be treated in the same way and be decided under similar conditions? It could not be an institutional denominator, as is the case in many national
204See however the Opinion of AG Léger in Hedley Lomaswho insisted that State liability and liability of the Community should not be treated along the same lines. Member States, he said, are subject to a hierarchy of legal norms which does not exist in the Community, and moreover, it would seem paradoxical to align state liability for breach of Community law with Article 215 of the Treaty which was considered to afford insuffi- cient protection to individuals’, see Opinion of AG Léger in Case C–5/94 The Queen v Ministry of Agriculture, Fisheries and Food, ex parte Hedley Lomas (Ireland) Ltd [1996] ECR I–2553, at paras 138 et seq.
205See P Oliver, ‘State Liability in Damages following Factortame III’, in J Beatson and T Tridimas (eds), New Directions in European Public Law (Oxford, Hart Publishing, 1998) 49, at 53.
206Also the statement that this must a fortioribe true for Community law makes one wonder.