* Respectively lecturer and senior lecturer.
Very few judgments are as well known as that of the Francovich case (1991 [ECR] I-5357), in which the Court held that Member States are obliged to make good any loss or damage caused to individuals as a result of breaches of Community law for which the Member States are responsible. The scope of this ruling has been clarified by the Court, to some extent, in joined Cases C-46/93 and C-48/93, Brasserie du Pêcheur and Factortame III, of 5 March this year. Both of these cases concerned claims brought by individuals against Member States for damages caused by the Member State's failure to respect Community law. Brasserie du Pêcheur concerned a French brewery which had been unable to export to Germany between 1981 and 1987 due to the German beer purity laws (Reinheitsgebot). In 1987, the Court of Justice ruled that this legislation was incompatible with Article 30 of the EC Treaty. The brewery subsequently brought an action against the German State for reparation of the loss suffered between 1981 and 1987.
Factortame III was part of the ongoing affair concerning British law which laid down certain conditions relating to nationality and domicile which had to be fulfilled before a boat could be registered in Britain. In Factortame I, these provisions were held to be contrary to Article 52 of the EC Treaty. The plaintiff consequently sought damages for losses incurred as a result of the legislation. One of the applicants in Factortame III also sought damages for 'unconstitutional behaviour' on the part of the authorities.
The two central questions which the Court dealt with in its judgment concern, firstly, the conditions under which the State may incur liability for acts and omissions of the national legislature contrary to Community law and, secondly, whether it is possible to make reparations conditional upon the existence of fault. In answer to the first question, the Court pointed out that the conditions under which State liability gives rise to reparations depend on the nature of the breach of Community law in question. Taking into account the fact that, in both cases, the German and UK legislatures had acted in a field in which they had wide discretion, the Court adopted a restrictive approach to the issue of determining liability in such circumstances. The Court laid down three conditions which must be fulfilled before damages may be claimed: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach and the damage. The Court, in the application of these conditions, held that both Article 30 and Article 52 of the EC Treaty are intended to confer rights on individuals, and that it was for the national courts to decide in relation to the two other conditions.
With respect to the second question, the Court refused to admit that liability could be subject to an additional requirement of proof of fault. In the view of the Court, the imposition of such a condition would result in the calling into question of the right to reparation founded in the Community legal order.
The Court refused to limit the temporal effect of the judgment. (Case C-212/94 FMC of 8 February contains a brief summary of the Court's case law on its power to limit the temporal effect of its judgments.)
It is clear from the Court's ruling that the compensation must be commensurate with the loss or damage sustained, as it is only in this way that effective protection can be ensured. In the absence of relevant Community provisions, it is up to the domestic legal systems to determine the extent of compensation available. However, this freedom is subject to certain minimum requirements imposed by Community law. It is worth noting that exemplary damages cannot be ruled out if such damage can be awarded in relation to a similar claim based on national law.
Brasserie du Pêcheur and Factortame III should be read in connection with the judgment in Case C-392/93 of 26 March, in which British Telecommunications requested compensation for loss resulting from the UK's incorrect implementation of a directive on procurement in the utilities sector. The Court stated that the conditions for liability in the case of incorrect implementation were the same as for the situation in which a State legislator is acting in an area in which it has wide discretion (see the three conditions mentioned above). Even though it is, in principle, up to the national courts to decide whether or not the conditions have been fulfilled, in this case the Court itself held that no damages should be awarded as the breach in relation to the implementation of the directive in question was not 'sufficiently serious'. Further clarification on the issues of State liability and judicial protection will hopefully be forthcoming in two pending cases: Case C-5/94 Hedley Lomas and C-178/94 Dillenkofer.
The principle according to which a directive cannot have horizontal direct effect was reiterated in Case C-192/94 El Corte Inglés SA of 7 March. The judgment is a confirmation of the famous Faccini Dori case (1994 [ECR] I-3325). The background to the case was that Ms Rivero had bought a package holiday from a travel agency and was not satisfied with it. The purchase was financed by a loan from the finance company 'Cortes Ingles SA' ,which had an exclusive right to grant loans to the agency's clients. Ms Rivero complained against the agency and, after a certain amount of time, stopped paying off the loan. The Court stated that Ms Rivero could not rely on Directive 87/102/EEC on consumer credit against the financing company as directives did not have horizontal direct effect. The insertion of Article 129a on consumer protection into the EC Treaty could not provide the basis for horizontal direct effect.
With respect to the free movement of persons, the full Court delivered an interesting judgment in Case C-193/94 Skanavi of 29 February. Ms Skanavi, a Greek national, had been resident in Germany for more than one year when she was stopped by the German police. At the time, Ms Skanavi still had her Greek driving licence, despite the fact that she was legally required to have exchanged it for a German licence as she had been resident in the country for over a year. Consequently, she was fined DEM 3,000. Ms Skanavi contested the fine and the national court sent a preliminary reference to the Court of Justice concerning the legality of the fine. Under German law, any persons failing to exchange their driving licence within a year of taking up residence were treated in the same way as persons driving without a licence. The Court considered that this was disproportionate and that it infringed Community law. As the Court pointed out, a criminal conviction may have consequences for the exercise of a trade or profession by an employee which would further constitute lasting restriction on freedom of movement. On this basis, the Court stated that Article 52 of the EC Treaty precluded a Member State from punishing Mrs Skanavi by imprisonment or fine.
As regards freedom of establishment and freedom to provide services, the Court gave a preliminary ruling in Case C-177/94 Perfili of 1 February. Mr Perfili took out an insurance policy with the insurance company Lloyd's against theft. Two years later, Mr Perfili declared the theft of some jewellery to Lloyd's. The Italian authorities called Mr Perfili to appear before the court in Rome on charges of attempted fraud. Lloyd's could not bring a civil action against Mr Perfili since the general power of attorney conferred on its general representative for Italy did not confer a special power to bring such an action in the criminal proceedings against Mr Perfili. Under English law, such a general power of attorney may implicitly signify an intention to grant such a power. The Court held that Article 6 of the EC Treaty in conjunction with Articles 52 and 59, laying down the principle of non-discrimination on grounds of nationality, must be interpreted as not precluding national legislation from requiring a victim of a criminal offence, who wishes to bring suit as a civil party in criminal proceedings, to grant his/her representative a special power of attorney. While the Court's judgment is, to some extent, surprising, it is nevertheless understandable in view of the fact that neither the legal points nor facts in the national court's order enabled the Court to examine whether the Italian legislation could constitute an unjustifiable obstacle to the freedom of establishment or the freedom to provide services.
The Court has handed down a number of decisions concerning direct and indirect discrimination. In Case C-342/93 Gillespie of 13 February, the Court upheld the right of a woman absent on maternity leave to receive a pay rise granted to working colleagues. The Court pointed out that payments made to a woman who is on maternity leave constitute pay within the definition of Article 119 of the EC Treaty and the directive on equal pay. While the Court considered that these provisions do not require that women should receive full pay during maternity leave, it nevertheless considered that the amount of benefit payable must not be so low as to undermine the purpose of the leave. The Court stated that, in assessing the adequacy of the payment made, the national court should take into account the length of the maternity leave as well as other forms of social protection afforded by national law in the case of justified absence from work. In this respect, it is worth noting that the Court did not deal with Council Directive 92/85 on workers who have recently given birth or are breast feeding, as it had not yet come into force when the facts of the Gillespie case arose.
Case C-13/94 P and S and Cornwall County Council of 30 April concerned the dismissal of a transsexual as a result of gender reassignment. The plaintiff, P, claimed that this constituted sexual discrimination and the national court referred a question concerning the scope of Directive 76/207 on equal treatment for men and women as regards access to employment. What the national court essentially wished to know was whether dismissal of a transsexual for a reason related to gender reassignment constitutes a breach of the directive. Both the UK and the Commission argued that dismissing a person under such circumstances did not constitute sexual discrimination as the employer would also have dismissed P if he had been a woman and had undergone an operation to become a man. The Court rejected this contention, pointing out that the scope of the directive cannot be confined simply to discrimination based on the fact that a person is either one sex or another. In the view of the Court, if a person is dismissed as a result of a change in their gender, this constitutes discrimination based essentially on the sex of the person concerned. The person undergoing the reassignment is being treated unfavourably in comparison to persons of the sex to which he/she was deemed to belong before undergoing the reassignment. The Court considered that to tolerate such discrimination would be tantamount to the failure to respect the dignity and freedom to which the person concerned is entitled, and that the discrimination fell within the scope of Directive 76/207.
Two other cases dealt with indirect discrimination and the issue of justification. Both Case C-457/93 Lewark of 6 February and Case C-278/93 Freers of 7 March concerned part-time workers who had not been compensated for time which they had spent on a training course having taken place outside their normal working hours. Both Ms Lewark and Ms Freers were staff council members and it had been generally agreed that attendance of the training course was necessary for the performance of their council functions. Similarly, it was clear that, in both cases, had the two female plaintiffs been full-time employees, they would have received compensation. In both cases, the vast majority of part-time employees were female. The Court upheld the claim of indirect discrimination in both instances, noting that unequal treatment can be deemed to exist whenever the overall pay of full-time employees is higher than that of part-time employees for the same number of hours worked.
Having determined the existence of a prima facie case of discrimination, the Court then went on to deal with the issue of justification. The German government argued that the difference in treatment was justified by the fact that staff council members are not paid in order to ensure their independence. This was also an aim of German social policy. As the Court considered that such an objective was not related to any discrimination on the grounds of sex, it accepted that, if Germany was able to demonstrate that the measures chosen reflected a legitimate aim of its social policy, were appropriate to achieving that aim and were necessary for doing so, then the legislation did not infringe Article 119 EC.
In the joined Cases C-171/94 and C-172/94 Merckx and Neuhuys of 7 March this year, the Court had to consider whether the transfer of a dealership in motor vehicles from one undertaking to another can constitute a transfer which falls within the scope of the directive on transfers of undertakings, and whether the directive precludes an employee from objecting to the transfer of his/her contract of employment to the transferee. In reply to the first issue, the Court reiterated previous case law in which it had emphasized that the decisive criterion for establishing whether or not a transfer had taken place in the meaning of the directive was whether or not the body in question had retained its economic identity. In determining this issue, a number of factors were relevant, and these included: the type of undertaking or business concerned; whether or not the tangible assets of the business had been transferred; the value of the intangible assets at the time of the transfer; whether or not the majority of the employees of the business had been taken over by the new employer; whether or not the customers had been transferred; and the degree of similarity between the activities performed before and after the transfer and the period, if any, for which these activities had been suspended. In the case, the Court considered that a transfer had taken place within the meaning of the directive, despite the fact that there had been no transfer of tangible assets, the structure and organization of the undertaking had not been preserved and the transferor had definitively ceased trading and gone into liquidation. Similarly, the fact that the majority of the staff had been dismissed upon the transfer of the dealership was not sufficient to bring the transaction outside the scope of the directive; nor was the fact that there was no contractual link between the transferor and the transferee.
Having established that a transfer of undertakings had taken place within the meaning of Article 1 of the directive, the Court went on to consider the extent to which an employee can prevent the transfer of his/her contract or the employment relationship. The Court firstly pointed out that the directive does not oblige the employee to continue his/her employment relationship with the transferee, as such an obligation would jeopardize the fundamental rights of the employee, who must be free to choose his/her employer and cannot be obliged to work for an employer who he/she has not freely chosen. Consequently, if an employee decides not to continue the employment relationship with the transferee, it is up to the Member States to determine the future of the contract of employment or employment relationship. On the other hand, according to Article 4(2) of the directive, in situations in which there is a substantial change in the working conditions to the detriment of the employee, the employer is to be regarded as having been responsible for the termination of employment. In this respect, a change in the level of remuneration awarded to the employee is to be regarded as a substantial change. As a result, in situations in which the contract of employment is terminated due to the fact that the transfer involves such a change, the employer must be regarded as having been responsible for the termination of employment.
Various decisions have also dealt with Council Regulation (EEC) No 1408/71 on the application of social security schemes to employed persons and their families moving within the Community. In Paletta II (C-206/94 of 2 May), the Court of Justice recognized that an employer has the right to dispute a medical certificate produced by an employee taken ill abroad while on his/her annual holiday. The case concerned the family Paletta, the members of which had reported ill while on holiday in Italy. The German company refused to pay their wages for the first six weeks following the onset of the sickness as the firm did not consider itself bound by the medical findings in Italy. From the case, it appears that the firm had good reason to doubt the veracity of the medical findings as the Court of Justice considered that, notwithstanding the existence of a medical certificate, an employer may adduce evidence supporting the view that a worker was in fact not ill. In such circumstances, the regulation will not apply and entitlement to the continued payment of wages will be forfeited .
In Cabanis Issarte (Case C-308/93 of 30 April), the Court recognized the right of a surviving spouse of a migrant worker to rely on Articles 2 and 3 of Regulation 1408/71 for the purpose of determining the level of contribution relating to a period of voluntary insurance completed under an old-age pension scheme of the Member State in which the worker was employed. The significance of the case lies in the fact that, in previous cases the Court had ruled that members of a migrant worker's family could not rely on the same articles in order to claim, on the grounds of being entitled to treatment equal to that granted to nationals of the host State, a social security benefit provided for by the legislation of that State. In the view of the Court, this resulted from the fact that the benefit in question was granted as a right in personam and not by reason of the beneficiary's status as a member of the worker's family. In this case, the Court departed from its previous case law as, if the plaintiff had been unable to rely on the relevant articles, it would have been impossible for her to enforce her right to equal treatment in relation to the granting of benefit, and the Court considered that this was contrary to the spirit and the purposes of the equal treatment rule. Furthermore, the Court considered that the distinction between rights in personam and derived rights could undermine the uniformity of Community law in so far as the applicability of Community rules depended on national law.
In its judgment in Case C-208 /94 Posthuma-van Damne of 1 February, the Court held that national rules which make benefits for the incapacity to work conditional upon the receipt of some income over the year immediately preceding the incapacity, and thereby excluding more women than men, pursued a legitimate social policy aim and were therefore compatible with Community law. Another aspect of interest was the fact that the Court recognized the right of the applicant to rely on Council Directive 79/7/EEC of 19 December 1978 on the progressive implementation of the principle of equal treatment for men and women in matters of social security on the grounds that a person who failed to earn 'some income' over the year preceding his/her incapacity did not necessarily fall outside the broad concept of the term 'working population' contained in Article 2 of the directive.
In the field of public procurement, the Court has handed down two interesting judgments, one against Germany in Case C-318/94 of 28 March, and the other against Belgium in Case C-87/94 of 25 April. Germany was found guilty of having awarded a contract by negotiated procedure without prior publication of a tender notice. This award procedure may only be used for reasons of extreme urgency brought about by events which could not have been foreseen. The German Government considered that this condition had been fulfilled as the regional authority which was to approve the project had not done so. This had obliged the town of Papenburg to amend the project before the regional authority could give its final approval. Due to the fact that this procedure was so lengthy, the town was unable to follow the usual publication procedures. The Court stated, not surprisingly, that the possibility that an authority which must approve a project might raise objections was something which was foreseeable and, consequently, the situation did not fulfil the conditions for the application of the award procedure.
The Belgian case produced a very significant judgment in the field of public procurement, second in importance to perhaps only the Danish Storebælt case (1993 [ECR] I-3353). The Court held that, during the procedure for the award of a large contract relating to buses, by taking into account important supplementary technical information relating to buses after the opening of tenders, and awarding the contract on the basis of this information, the Walloon authorities had failed to fulfil their obligations under the first utilities directive (90/531), which has since been replaced by Directive 93/38.
In Case C-441/93 Panagis Pafitis of 12 March, the full Court interpreted Articles 25 and 29 of the Second Council Directive (77/91/EEC) of 13 December 1976 concerning coordination of safeguards required of companies in respect of the formation of public limited liability companies and the maintenance and alteration of their capital. The Court held that the directive was applicable to banks in the form of public limited liability companies and that it precluded national legislation under which the capital of a bank existing in this form is, in exceptional circumstances, increased by an administrative measure without the resolution of a general meeting. In relation to the more technical issue of whether the publication of an offer of subscription in the daily newspapers can constitute information given in writing to the holder of registered shares within the meaning of the directive, the Court found that this was not the case.
In its Opinion 2/94 of 28 March, the full Court ruled that the EC Treaty,
and more precisely Article 235 EC, did not contain the necessary legal
basis for the Community's accession to the European Convention
on Human Rights. The major importance of this Opinion is that it states
that, in the event of accession, an amendment to the EC Treaty would firstly
be required. This may be discussed during the Intergovernmental Conference
but, in the light of this Opinion, it appears unlikely that unanimity among
the Member States could be reached within the Council on the issue of accession
to the Convention.