In this review of the status of damages in the positive law of the EU, I will begin by examining their availability in the Community courts, before turning to the Community law concerning awards of damages in national courts.
A. In the Community Courts
1. Articles 169-71
The main enforcement mechanism provided for in the text of the Treaty is that found in Articles 169 to 171,1 reproduced in Appendix B. These provisions permit the Commission or a Member State to initiate proceedings against a Member State in the Court of Justice. Until 1992, the Treaty provisions provided no guidance as to the kinds of remedies available to the Court of Justice in the context of an enforcement action under these Articles. The Treaty simply said, at Art. 171, that “if the Court of Justice finds that a Member State has failed to fulfil an obligation under this Treaty, the State shall be required to take the necessary measures to comply with the judgment of the Court of Justice.”
That this mechanism was capable of being a basis for liability in damages was suggested in a 1973 decision of the Court of Justice:
... a judgment by the Court under Articles 169 and 171 of the Treaty may be of substantive interest as establishing the basis of a responsibility that a Member State can incur as a result of its default, as regards other Member States, the Community or private parties.2
However, no subsequent decision of the Court of Justice further developed the idea of Member State liability arising under Articles 169 to 171.
In 1992, a year after Francovich, Article 171 was amended to create the possibility of a “lump-sum payment or penalty” being ordered by the European Court of Justice following a finding of non-compliance with a judgment of the Court. The provision now reads:
1.—If the Court of Justice finds that a Member State has failed to fulfil an obligation under this Treaty, the State shall be required to take the necessary measures to comply with the judgment of the Court of Justice.
2.—If the Commission considers that the Member State concerned has not taken such measures it shall, after giving that State the opportunity to submit its observations, issue a reasoned opinion specifying the points on which the Member State concerned has not complied with the judgment of the Court of Justice.
If the Member State concerned fails to take the necessary measures to comply with the Court's judgment within the time‑limit laid down by the Commission, the latter may bring the case before the Court of Justice. In so doing it shall specify the amount of the lump sum or penalty payment to be paid by the Member State concerned which it considers appropriate in the circumstances.
If the Court of Justice finds that the Member State concerned has not complied with its judgment it may impose a lump sum or penalty payment on it.
This procedure shall be without prejudice to Article 170.
2. Article 215
Although individuals cannot avail themselves of the procedure in Articles 169 to 171 so as to enforce Community law against the Member States, the Treaty does create an individual right of action against the Community itself, in Article 173, and an individual right to compensation for damage wrongfully caused by the Community, in Article 215.3 The latter provision reads as follows:
Article 215. The contractual liability of the Community shall be governed by the law applicable to the contract in question.
In the case of non-contractual liability, the Community shall, in accordance with the general principles common to the laws of the Member States, make good any damage caused by its institutions or by its servants in the performance of their duties.
Article 178 specifies that disputes arising under the second paragraph of Article 215 shall be heard in the Court of Justice. The Court has interpreted this as an exclusive jurisdiction.4
Although wrongdoing is not explicitly mentioned in Article 215, par. 2, as an element of liability, it seems clear from the case law of the Court of Justice that it is required. A mere showing of Community conduct causing damage, without proof that the conduct was in some way wrongful, has never been sufficient to give rise to Community liability.5
Moreover, where the claim is in respect of damage caused by a “legislative measure which involves choices of economic policy,” wrongdoing is not established simply by showing that the measure is contrary to Community law. Beginning in a 1971 case known as Schöppenstedt, the Court has held that to be successful in claiming damages under Art. 215, par. 2, for legislative wrongdoing, a plaintiff must show that there has been a “sufficiently serious breach of a superior rule of law for the protection of the individual.”6
The requirement of a sufficiently serious breach has in practice been a difficult hurdle,7 with the standard of misconduct being fixed at a relatively high level by the Court of Justice in deference to the inherently discretionary nature of legislative measures. According to the Court of Justice, the test for a sufficiently serious breach was whether the institution had “manifestly and gravely disregarded the limits on the exercise of its powers.”8 In applying this test, the Court will consider the nature of the breach, whether the damage exceeds the normal risks of the plaintiff’s business, and the number of potential claimants.9 The latter two factors in particular reflect the special nature of legislative measures: individuals are expected simply to accept a certain risk of harmful effects from legislative activity,10 and the smaller the affected group, the more inequitable it is for them alone to bear the burden of the legislation.11
It was perhaps foreseeable that issues of national authorities’ non-compliance with Community law would arise as much before national courts as before the judicial organs of the Community. It is true that the Treaty is essentially silent on the role of national courts in enforcing Community law and, a fortiori, it has nothing to say about remedies in the national courts. Rather, the main enforcement mechanisms provided in the text of the Treaty, discussed above, contemplate proceedings in the Court of Justice. However, the doctrines of direct effect and supremacy developed by the Court of Justice have made the national courts a primary arena for litigation regarding a Member State’s compliance with Community law, and so it is in the national courts that the consequences of non-compliance are likely to be first determined. Thus, the response of national judges to domestic non-compliance is consequently a critical determinant of the practical effectiveness of Community norms: in a sense, the remedies available in the national forum are the “teeth” of the Community legal order. As a result, just as it lay with the Court of Justice to develop the doctrines of direct effect and supremacy, so too has it fallen to the Court to ensure the effectiveness of national court enforcement of Community law by laying down standards as to the palette of remedies that must be offered by national courts. It is not surprising, therefore, that the ECJ has had something to say on the issue of damages.
1. Before Francovich
There was a hint very early on that breach of the Treaty would trigger an obligation to make good any resulting harm. As early as 1960, several years before its classic pronouncements on supremacy and direct effect, the Court of Justice made the following remark, in a case involving the Coal and Steel Treaty:
[S]i la Cour constate dans un arrêt qu’un acte législatif ou administratif émanant des autorités d’un État membre est contraire au droit communautaire, cet État est obligé, en vertu de l’article 86 du Traité CECA, aussi bien de rapporter l’acte dont il s’agit que de réparer les effets ilicites qu’il a pu produire ; cette obligation résulte du Traité et du protocole (sur les privilèges et immunités des Communautés européennes) qui ont force de loi dans le États membres à la suite de leur ratification et qui l’emportent sur le droit interne.12
Article 86 of the Coal and Steel Treaty is the equivalent of Article 5 EC, which obliges Member States to “take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising out of this Treaty or resulting from action taken by the institutions of the Community.”
However, with the exception of the 1973 case referred to in the discussion of Articles 169-171, above, nothing further was heard from the Court of Justice on the issue of Member State liability until twenty years later, in Francovich.
In Francovich, a group of laid-off Italian workers whose employer became insolvent and unable to meet its redundancy payments sued the Italian government for non-compliance with Directive 80/987, which provided that Member States were required to set up guarantee funds to cover precisely this type of event. The Italian trial court referred to the ECJ certain questions arising from the workers’ claim.
The directive was not unconditional or sufficiently precise so as to be directly effective against the Italian government, but the claimants argued in the alternative that the Member State could be held liable in damages for its failure to implement the directive. The Court of Justice agreed in principle, on the basis that
[t]he full effectiveness of Community rules would be impaired and the protection of the rights which they grant would be weakened if individuals were unable to obtain redress when their rights are infringed by a breach of Community law for which a Member State can be held responsible.
A further basis ... is to be found in article 5 of the Treaty, under which the Member States are required to take all appropriate measures, whether general or particular, to ensure fulfilment of their obligations under Community law. Among these is the obligation to nullify the unlawful consequences of a breach of Community law ... .13
The Court concluded that, as a matter of Community law, a breach by a Member State of its Community legal obligations should, subject to certain conditions, give rise to liability in damages to those harmed.
Where the breach consisted of failing to implement a directive, the conditions for liability were as follows:
The first of those conditions is that the result prescribed by the directive should entail the grant of rights to individuals. The second condition is that it should be possible to identify the content of those rights on the basis of the provisions of the directive. Finally, the third condition is the existence of a causal link between the breach of the state' s obligation and the loss and damage suffered by the injured parties.14
If these conditions were met, then there was in principle a right to compensation as a matter of Community law.
The Court of Justice created some doctrinal uncertainty by ruling that this right to compensation was to be exercised “in accordance with the rules of national law on liability,”15 so long as
... the substantive and procedural conditions laid down by the national law of the various member-States on compensation for harm [are not] less favourable than those relating to similar internal claims and [are not] so framed as to make it virtually impossible or excessively difficult to obtain compensation.16
The Court’s nod to the principle of national institutional autonomy was consistent with some of the Court’s previous case law,17 but it set the stage for further litigation regarding the scope left for national legislation to impose additional conditions, particularly “substantive” conditions, to the right to compensation. This issue, among others, was addressed by the Court of Justice in the joined cases, Brasserie du Pêcheur and Factortame III.18
3. Brasserie du Pêcheur, Factortame III and Subsequent Cases