European Business Law, the fourth volume in our series, shows how the European authorities simultaneously abolish all restrictions on access to and exercise of economic activities and support the growth of domestic markets, through the harmonization the internal legislation or the enactment of genuinely unified regulations.

European Business Law

The possibility for individuals or undertakings that are the victims of a breach of European law, to bring a liability action against the Member State in order to obtain compensation for the damage suffered, was admitted for the first time by the Court of Justice in the Francovich judgment . According to the European court, the full effectiveness of European 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 European law for which a Member State can be held responsible. The principle whereby a State must be liable for loss and damage caused to individuals as a result of breaches of European law is inherent in the system of the Treaty. A basis for this can be found in Article 4 TEU, under which the Member States are required to take all appropriate measures, whether general or particular, to ensure fulfillment of their obligations under European law. The action for redress is thus particularly indispensable where the full effectiveness of European rules is subject to action on the part of the State. Since the right to redress is the necessary corollary of the direct effect recognized to the European provisions whose breach caused the damage sustained, it is not limited to rules which may not directly be relied on before national courts . 

Three cumulative conditions must be met to obtain redress: the result prescribed by the directive must entail the grant of rights to individuals; the breach of European law must be sufficiently serious ; there must be a causal link between the breach of the State's obligation and the damage sustained by injured persons.

The seriousness of the breach of European law depends on the margin of discretion given to the Member State to implement the provision . Failure to take any measure to transpose a directive to achieve the result prescribed within the period laid down for that purpose constitutes per se a serious breach of European law where the result prescribed by the directive entails the granting of rights to individuals . By contrast, the assessment error committed by a Member State when transposing a directive cannot be regarded as a sufficiently serious breach of European law where the provision was imprecisely worded and was reasonably capable of bearing the interpretation given in good faith by the national lawmaker  or where the Court of Justice had not yet given a ruling on the provision at the time of the facts and almost all the other Member States have interpreted it in the same way .

When assessing the seriousness of the breach, the national court must take into account the clarity and precision of the rule infringed, whether the infringement and the damage caused was intentional or involuntary and whether any error of law was excusable or inexcusable . However, pursuant to the national law which the court applies, reparation of loss or damage cannot be made conditional upon fault (intentional or negligent) on the part of the public body responsible for the breach .

The nature of the national rule adopted in breach of European law is irrelevant. The Member State may thus have its liability incurred due to the fact that a decision was adopted by a national court adjudicating at last instance . Likewise, whether it has a federal structure  or not, the Member State is jointly and severally responsible for the breach of European law together with any legally distinct public-law body to which legislative or administrative tasks are devolved with a certain degree of autonomy . 

Redress may take the form of a retroactive application in full of the measures implementing a directive transposed late, provided that the directive has been properly transposed and that the reparation of the damage suffered by the individual is appropriate . 

Case C-6/90 Francovich and Bonifaci v Italy [1991] ECR I-5357, LawLex200900001066JBJ.

Case C-46/93 Brasserie du pêcheur v Bundesrepublik Deutschland and The Queen v Secretary of State for Transport, ex parte Factortame and others [1996] ECR I-1029, LawLex200900000955JBJ.

Case C-302/97 Konle [1999] ECR I-3099, LawLex200900001444JBJ.

Case C-424/97 Haim [2000] ECR I-5123, LawLex200700001648JBJ.

Case C-94/95 Bonifaci and others and Berto and others v INPS [1997] ECR I-3969, LawLex200900001211JBJ; Case C-131/97 Carbonari and others [1999] ECR I-1103, LawLex200700001793JBJ.

In the landmark ruling, the court only required that the content of these rights should be identified on the basis of the European provisions: Case C-6/90 Francovich and Bonifaci v Italy [1991] ECR I-5357, LawLex200900001066JBJ; for the new wording, C-46/93 Brasserie du pêcheur v Bundesrepublik Deutschland and The Queen v Secretary of State for Transport, ex parte Factortame and others [1996] ECR I-1029, LawLex200900000955JBJ.

Case C-140/97 Rechberger and others [1999] ECR I-3499, LawLex200700001794JBJ: a defective transposition of a provision of a directive by a Member State which enjoyed no margin of discretion constitutes a sufficiently serious breach of EU law; C-424/97 Haim [2000] ECR I-5123, LawLex200700001648JBJ, which states that the discretion is taken into account by reference to European law.

Case C-178/94 Dillenkofer and others v Bundesrepublik Deutschland [1996] ECR I-4845, LawLex200900000736JBJ; C-150/99 Stockholm Lindöpark [2001] ECR I-493, LawLex200900000598JBJ.

Case C-392/93 The Queen v H.M. Treasury, ex parte British Telecommunications [1996] ECR I-1631, LawLex200900000655JBJ; C-319/96 Brinkmann Tabakfabriken v Skatteministeriet [1998] ECR I-5255, LawLex200900001477JBJ.

Case C-283/94 Denkavit Internationaal and others v Bundesamt für Finanzen [1996] ECR I-5063, LawLex200900002143JBJ.

Case C-118/00 Larsy [2001] ECR I-5063, LawLex200900000402JBJ.

Case C-224/01 Köbler [2003] ECR I-10239, LawLex200900001291JBJ: such a solution does not call into question the principle of res judicata or the independence of the judiciary, where the principle of State liability has not as corollary the obligation to go back over the court decision having caused it a damage.

187. Liability of the Member State