Direct effect is a principle of EU law. It enables individuals to immediately invoke a European provision before a national or European court. This principle relates only to certain European acts. Furthermore, it is subject to several conditions. It can apply in relation to regulations, directives, treaty provisions and decisions.
The term ‘direct effect’ was first used by the Court of Justice of the European Union (CJEU) in a judgement on 5 February 1963 when it attributed, to specific treaty articles, the legal quality of direct effect in the case of NV Algemene Transporten Expeditie Onderneming van Gend en Loos v. Nederlandse Administratie der Belastingen (Case 26/62). In this case, the CJEU identified three situations necessary to establish the direct effect of primary EU law. These are that:
- the provision must be sufficiently clear and precisely stated;
- it must be unconditional and not dependent on any other legal provision;
- it must confer a specific right upon which a citizen can base a claim.
If these conditions are met, the provisions of the treaties can be given the same legal effect as regulations under Article 288 of the Treaty on the Functioning of the European Union (TFEU). However, there is little legislation on employment and industrial relations to be found other than in primary law and in the regulations on the free movement of workers.
By virtue of the doctrine of the supremacy of EU law, provisions of Community law with direct effect take precedence over domestic laws (Flaminio Costa v. ENEL, Case 6/64). EU labour law rules take precedence over national labour law rules.
Taken together, the principles of direct effect and supremacy mean that treaty provisions may be used to make claims before domestic courts and override domestic law. Probably the best-known example is Defrenne v. Sabena (Case 43/75), where the CJEU decided that:
The principle that women and men should receive equal pay, which is laid down by Article [141 EC now 157 TFEU], may be relied on before the national courts. These courts have a duty to ensure the protection of the rights, which that provision vests in individuals.
In the Viking case (Case C-438/05), Article 43 of the Treaty of the European Union (now Article 49 TFEU) is interpreted as capable of conferring rights on a private undertaking that may be relied on against a trade union or an association of trade unions. In the Laval Case (Case C-341/05), Article 49 of the Treaty of the European Union (now Article 56 TFEU) was held to have direct effect, so that Member States must amend national laws that restrict any freedom incompatible with the Treaty’s principles.
Most EU law on employment and industrial relations takes the form of directives. According to Article 288 TFEU, ‘a directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods’. Therefore, the CJEU’s decision to extend the principle of direct effect to directives was crucial.
The rationale for attributing direct effect to directives was to secure the ‘useful effect’ of EU legislation. Since EU law was a new transnational legal order capable of conferring rights on individuals, an interpretation of Article 249 of the Treaty of the European Union (now Article 288 TFEU) was developed, which emphasised the binding result to be achieved by directives, rather than, as stated by Article 288 TFEU, leaving ‘to the national authorities the choice of form and methods’.
Direct effect can apply both horizontally and vertically, with the distinction based on against whom the right is being enforced, and the nature of the right itself.
Vertical direct effect
Where rights conferred by a directive are violated by the State or by emanations of the State, a citizen can exercise vertical direct effect. Vertical direct effect concerns the relationship between EU law and national law, and the State’s obligation to ensure its legislation is compatible with EU law. Citizens can apply it in claims against the State (or against an emanation of the State) as defined in Foster v. British Gas (Case C-18/89). Following this case, the criteria laid down to define the emanations of the State could include privatised industries or services that formerly provided public services. Employees in these industries and services may rely directly on provisions in EU directives, so that a large proportion of the national workforce can directly enforce rights contained in the directives.
The impact of the concept of vertical direct effect is substantial in certain areas, such as the provision on equal pay between women and men in Article 157 TFEU. Moreover, when the CJEU held that the doctrine of vertical direct effect applied also to the substantial body of EU legal measures in the form of directives (Van Duyn v. Home Office, Case 41/74), the implications were much greater for the field of employment and industrial relations. Employment rights contained in directives now became capable of direct enforcement against the State before national courts.
Horizontal direct effect
Horizontal direct effect is a legal doctrine developed by the CJEU whereby individuals can rely on the direct effect of provisions in the treaties, which confer individual rights, in order to make claims against other private individuals before national courts.
By virtue of the doctrine of the direct effect of treaty provisions, individuals can rely directly on EU law before their national courts. There is no need for the implementation of EU law by Member States through national law. The CJEU’s creation of the doctrine was driven by Member States’ failure to comply with EU law.
The initial rationale of direct effect was partially changed when the question arose of the direct effect of directives. The CJEU held that the doctrine of direct effect did apply to directives. However, directives had only vertical direct effect (see above). Therefore, individuals could claim only the rights conferred by directives against the State or emanations of the State. This, more limited, version of the doctrine prevented individuals claiming rights under the directive as against other private players (‘horizontal’ direct effect).
However, the State may appear in a number of emanations of public authority. The scope of the ‘different emanations of the State’ depends on the criteria developed by the CJEU to define them. Nonetheless, the rule of horizontal direct effect remains that directives do not have direct effect against private individuals. A number of Opinions by Advocates-General have attempted to overturn the limitation in the doctrine of horizontal direct effect, extending the effect of directives to private persons, but without success (Dori v. Recreb srl, Case C-91/92). The CJEU’s doctrine of indirect effect (see below) achieves, partially, the result obtainable through the rule of direct effect; however, this is only insofar as the national law is not wholly inconsistent with EU law.
The impact of the doctrine of horizontal direct effect, when applied to provisions of the treaties, has been limited in the fields of employment and industrial relations, since relatively few treaty provisions confer individual rights in those areas. However, the Charter of Fundamental Rights of the European Union was incorporated into primary EU law by the Treaty of Lisbon, which came into force on 1 December 2009. The inclusion of fundamental rights concerning employment and industrial relations into primary EU law, as was the case with equal pay for women and men (Article 157 TFEU), could lead the CJEU to attribute binding direct effect – vertical and horizontal – to provisions of the Charter.
The doctrine of indirect effect requires national courts, as organs of the Member State responsible for the fulfilment of EU obligations, to interpret domestic law consistently with directives. This doctrine achieves indirectly, through the technique of judicial interpretation of domestic law, the result obtainable through the doctrine of direct effect of directives.
Indirect effect can thus be seen both as an addition to, and as the corollary of, the doctrine of direct effect. In the case of provisions of directives having direct effect, national courts must disregard domestic law where there is a conflict between the directive and domestic law. In the case of a directive lacking direct effect, the national courts must make every effort to interpret domestic law consistently with the directive.
The doctrine of indirect effect is of vital importance to the enforcement of EU rights against private persons (horizontal direct effect). As directives have only vertical direct effect in claims based on directives against private persons, domestic law may be the only legal basis for a claim. The domestic court is obliged to exert itself to ensure that domestic law is interpreted consistently with the EU directive. However, this result is obtainable insofar as the national law is not wholly inconsistent with EU law.
See also: compensation; enforcement of EU law; Francovich principle; judicial enforcement of EU law; justiciability of EU law; national labour courts; remedies for infringements of EU law; sanctions; state liability.
Homewood: EU Law Concentrate 4e
Trace the development of the principles of direct effect, indirect effect, and state liability by the Court of Justice, evaluating their significance for individual claimants.
Your answer should address direct effect, indirect effect, and state liability in turn, ensuring relevant analysis and evaluation as you go along. As all three doctrines were created by the Court of Justice, the case law will feature strongly, as the question itself indicates. You should begin by reference to the doctrine of supremacy, which forms the basis of the three principles.
Supremacy of EU law
- Sovereignty of the European Union (previously Community) legal order: 'The Community constitutes a new legal order in international law, for whose benefits the states have limited their sovereign rights, albeit within limited fields . . .' (Van Gend) '. . . the EEC Treaty has created its own legal system which became an integral part of the legal systems of the Member States . . .' (CostavENEL).
- The corollary of EU sovereignty is the supremacy of EU law: EU law takes precedence over national law (Costa vENEL, Internationale Handelsgesellschaft, Simmenthal, Factortame II).
- Meaning of 'direct effect: set out a definition – if a provision of EU law is directly effective, it can be invoked by individuals in the national court.
- The principle is not contained in the Treaty. Trace its development by the Court of Justice, discussing Treaty articles, regulations, directives.
- Van Gend: Creation of the principle. Treaty articles capable of direct effect. The Treaty is not only an agreement creating obligations between Member States. EU law imposes obligations upon individuals and confers on them legal rights.
- Direct effect of Treaty articles: subject to the conditions first formulated in Van Gend (measure must be sufficiently clear, precise, and unconditional and its implementation must not be dependent upon any implementing measure), then subsequently reworked and loosened, for instance in Defrenne (the measure must be sufficiently clear, precise, and unconditional).
- Van Gend: Treaty articles capable of vertical direct effect (explain) but the question of their horizontal direct effect (explain) was left unresolved.
- Defrenne: Treaty articles can be invoked horizontally.
- Since Van Gend and Defrenne: numerous Treaty articles held to be vertically and horizontally directly effective, including the internal market provisions.
- Significance for individuals: ability to invoke, in the national court, Treaty rights against the state and other individuals.
- Regulations: capable of vertical and horizontal direct effect, subject to the same conditions as are applied to Treaty articles (Politi, Leonesio).
- Article 288 TFEU: directives must be implemented into national law.
- Originally not thought to be capable of direct effect: not intended to operate as law within national systems, since that is the role envisaged for the relevant national implementing measures; addressed to Member States and do not appear to affect individuals directly; seen as giving Member States a broad discretion in implementation, being binding only as to the result to be achieved, and therefore considered to be insufficiently precise to fulfil the Van Gend criteria.
- Van Duyn: directives can be directly effective, provided clear, precise, and unconditional.
- Ratti: additionally, the implementation deadline must have passed. Rationale: it would be unfair to permit a directive to be invoked against a Member State until its obligation to implement had become absolute. By the same token, it would be unfair to allow a Member State to rely on its failure to implement a directive to escape obligations arising under it.
- Van Duyn did not address the possible horizontal direct effect of directives.
- Marshall: directives can only be invoked vertically against the state or a public authority, but not horizontally. Reiterated in Faccini Dori.
- Court of Justice's refusal to permit directives to be invoked horizontally frequently criticized as anomalous and unfair. In the employment context, for instance, individuals employed by the state or a public body can invoke rights under a directive against their employer, whilst those working for private employers cannot.
- In response, Court of Justice refers to the Community (now EU) legal order: rights under directives must be enshrined in national implementing measures, upon which claimants can rely in national courts. Only Member States, not individuals, should be held accountable for a state's failure to implement directives.
- Mitigation of this approach: indirect effect and state liability and broad interpretation of 'public body'.
- Public body: Foster '. . . a body, whatever its legal form, which has been made responsible, pursuant to a measure adopted by the State, for providing a public service under the control of the state and has for that purpose special powers beyond those which result from the normal rules applicable in relations between individuals'.
- Application of Foster test (Becker, Fratelli Costanzo, Johnston).
- Doctrines of direct effect and supremacy immensely significant. Require national courts to apply EU law at the suit of individuals in priority over any conflicting provisions of national law. National courts must disapply national measures that conflict with directly effective provisions of EU law.
- Direct effect is especially important where a Member State has failed to meet its obligation to implement EU law or where implementation is partial or defective. Direct effect provides a mechanism for the enforcement of individuals' EU rights but also an additional means of supervision of Member States' compliance with EU obligations.
- Especially significant: overcoming the shortcomings of direct effect in 'horizontal' situations or where a provision is not sufficiently clear.
- Von Colson: the principle established. Set out the definition of indirect effect.
- Applies to pre-dating and post-dating legislation – Marleasing, Webb v EMO Air Cargo
- Marleasing: all national law must be interpreted in line with Union law, but only 'so far as possible'. It may not always be possible (Wagner Miret) so the principle has its limitations.
State liability in damages
- A means to overcome the limitations of direct and indirect effect.
- Francovich: damages for loss incurred as a result of a state's failure to implement a directive. Conditions for liability: the directive entails the grant of rights to individuals; it is possible to identify the content of those rights; a causal link between the state's failure and the loss.
- Factortame III: damages for other kinds of breach. Set out the conditions.
- ‘Sufficiently serious breach’ - ‘Manifest and grave disregard of the limits on its discretion’ – factors to be considered (see Para 56 of Factortame III) – clarity, excusable etc.
- Application of Factortame III: legislation infringing EU law (Factortame III); incorrect implementation of a directive (BT); administrative breaches (Hedley Lomas); incorrect interpretation of EU law by a national court of last instance (Köbler).
Direct effect, indirect effect and state liability all play a crucially important role in the protection of individuals' EU law rights in national courts.