The ground upon which the Francovich case was decided is the principle of effective protection of individuals.
The case law concerning this principle has evolved remarkably during these last ten years, the Court having moved from an initial position which amounted to almost complete indifference to the remedial aspect of the rights conferred on individuals by Community law, to an ever greater involvement in questions concerning the conditions under which the protection of such rights is ensured by the judiciary of the Member States.
The initial position was the result of a widespread belief that Community law in general was only interested in substantive aspects of law, the procedural aspects having been left to the competence of the Member States. In the Rewe and Comet cases, for example, the Court ruled that it was for each national legal system to determine the procedural aspects of actions claiming the protection of individual rights provided by Community law. There were two qualifications, namely that the domestic remedies had to be no less favourable than those established for comparable national rights, and that in any case the remedies conferred had to be effective, but the actual incidence of Community law on procedure was virtually non-existent.
The Francovich decision does mantain the traditional rule whereby procedures to ensure the execution of Community law are left to national legal systems, but with a small, and not so innocent, change; the competence of Member States ceases to be a principle, and becomes the rule only in the absence of relevant Community provisions.
These qualifications of the principle of the competence of Member States in procedural matters acquired relevance long before Francovich. In the Simmenthal case, notably, the principle of the effectiveness of judicial protection ceased to be a mere obiter dictum and began to bite.
In that case another Italian judge of first instance, the Pretore of Susa, had asked the Court of Justice whether it was consistent with Community law for a national system of judicial review to make it the duty of every judge, before excluding the operation of a national legal provision in conflict with Community law, to request a preliminary ruling by the Italian Constitutional Court. The European Court, as is well known, held that:
"any provision of a national legal system and any legislative, administrative or judicial practice which might impair the effectiveness of Community law by withholding from the national court having jurisdiction to apply such law the power to do everything necessary at the moment of its application to set aside national legal provisions which might prevent Community rules from having full force and effect are incompatible with those requirements which are the very essence of Community law".
On this ground the Court held that a system of centralised judicial review such as the one existing in Italy which delayed the final decision by requiring the matter to be referred to the Constitutional Court was not compatible with the principle of the effective protection of individual rights which was based upon Community law, and for this reason had to be set aside by every judge in the Member State.
Even in Simmenthal, however, it could be thought that the real issue was not just the effective protection of individuals; what was actually at stake in that case was which court was to have the last word when national law conflicted with Community law. If every national judge had to make a reference to the Constitutional Court, it would be that Court which determined the consistency of the national law with Community law, without even consulting the Court of Justice, because the Italian Constitutional Court never made a reference under article 177 of the EEC Treaty. On the other hand, if every judge was left free to decide the conflict between national and Community law on his own, he would probably resort to the European Court to have Community law interpreted and the question of compatibility assessed. It was a struggle of power, the Court of Justice v. the Italian Constitutional Court, and latter finally bowed to the supremacy of Community law and of its Court.
More relevant to the protection of individuals were the decisions concerning the repayment of wrongly paid taxes. On reference by some Italian courts, the Court of Justice in the San Giorgio case held it to be inconsistent with Community law for a national provision to subject the right to restitution of sums paid pursuant to a national tax law contrary to Community law to proof that the charge had not been transferred to the final consumer of the goods; the Court in fact thought that it was contrary to the principle of effective judicial protection to impose on citizens invoking their Community law rights an onus of proof which was almost impossible to discharge.
There can be no doubt that Factortame is the most important decision so far concerning the consequences of the principle of the effectiveness of judicial protection of individuals; its impact upon the respective role of the Community and Member States in the creation of remedies for infringements of Community law rights seriously undermines the position according to which procedure is a matter to be left to Member States.
The facts which constitute the background to, and the legal questions involved in, the Factortame decision are widely known on the Continent as well as in Britain. It is sufficient to recall that some owners of fishing vessels had challenged the conformity to Community law of British a British statute and regulations designed to ensure that ships flying the Union Jack were owned and operated by British citizens or corporations.
Fearing that irrecoverable damage could accrue pending the judgment, the plaintiffs had asked for an interim measure, but this was refused by the Court of Appeal which held that courts had no authority under the law to suspend the application of a legal provision which had not yet been judicially determined to be in conflict with Community law. The House of Lords, having come to the same conclusion on the point of English law as the Court of Appeal, thought it necessary to ask the Court of Justice for a preliminary judgment under article 177 whether, in relation to the grant of interim protection in the circumstances of the case, Community law overrode English law. The precise text of the questions posed was as follows:
"1. Where: (i) a party before a national court claims to be entitled to rights under Community law having direct effect in national law ('the rights claimed'), (ii) a national measure in clear terms will, if applied, automatically deprive that party of the rights claimed, (iii) there are serious arguments both for and against the existence of the rights claimed and the national court has sought a preliminary ruling under article 177 as to whether or not the rights claimed exist, (iv) the national law presumes the national measure in question to be compatible with Community law unless and until it is declared incompatible, (v) the national court has no power to give interim protection to the rights claimed by suspending the application of the national measure pending the preliminary ruling, (vi) if the preliminary ruling is in the event in favour of the rights claimed, the party entitled to those rights is likely to have suffered irremediable damage unless given such interim protection, does Community law either (a) oblige the national court to grant such interim protection of the rights claimed; or (b) give the court power to grant such interim protection of the rights claimed? 2. If question 1(a) is answered in the negative and question 1(b) in the affirmative, what are the criteria to be applied in deciding whether or not to grant such interim protection of the rights claimed?".
The Court of justice, following the learned conclusions of Advocate General Tesauro, held that:
"Community law must be interpreted as meaning that a national court which, in a case before it concerning Community law, considers that the sole obstacle which precludes it from granting interim relief is a rule of national law must set aside that rule".
Decisive to the outcome of the Factortame case was, according to the Court of Justice which laid great emphasis on its precedent in the Simmenthal case, the consideration that:
"the full effectiveness of Community law would be [...] much impaired if a rule of national law could prevent a court seised of a dispute governed by Community law from granting interim relief in order to ensure the full effectiveness of the judgement to be given on the existence of the rights claimed under Community law".
Just as in Factortame it was from the principle of the effectiveness of Community law that the Court of Justice deduced the necessity of interim protection, so in Francovich it distilled the necessity of the concession of damages when Community law is infringed.
These decisions, it is submitted, mark the definitive departure by the Court of justice from the model, recalled above, according to which Community law was confined to the substantive aspects of law, to the definition of rights and duties, while the rules governing the actual enforcement of such rights and duties depended entirely on the possibly different legal rules in force in the various Member States.
The new approach is not limited to the case law. It is sufficient to remember two EEC directives, namely directive 89/665 and more recent 92/13, both designed to promote uniformity of national remedies for violation of Community rules applicable to public work and procurement contracts.
From a comparative point of view it is clear that, under the mounting pressure exerted by the case law of the Court of Justice and also by the legislator, Community law has increasingly begun to "fasten upon remedies", in this way introducing at a continental level a style of legal thinking which was characteristic of common law rather than civil law systems.
Having laid down the principle under which Member States are to pay for damage caused by their infringement of rules of Community law, the Court of Justice in Francovich devoted its attention to the conditions under which liability might be found. In particular the Court listed three conditions held to be at the same time necessary and sufficient to establish liability for not correctly implementing any EEC directive. The conditions required by the Court are: first, the rule infringed must be one established for the protection of individual rights; second, the scope of such rights must be ascertainable in the light of the directive in question; third, there must be a causal link between the damage suffered by the plaintiff and the violation imputed to the Member State.
These conditions, as the Court made clear, are both necessary and sufficient to give rise to liability. According to analysts one consequence is that fault, not being mentioned, is held to be irrelevant; the liability of Member States introduced by the Francovich decision has to be described as a strict one, and the plaintiff is relieved of the onus of proving negligence on the part of the defendant government.
While the last condition, requiring both damage and causal link, is obvious enough, the first two deserve a more extensive comment.
As regards the possibility of ascertaining the content of the right conferred upon the individual by the Community law rule infringed, it can be observed that the Court is no more demanding than in the hypothesis where direct effect of a directive is in discussion. In fact, in the present case, the ascertainability of the content of rights conferred by the 80/987 directive was already established; the direct effect of its rules had been excluded only because the subject, and not the object, of the corresponding duty was not clearly identified in the provisions of the directive. On this point the Court does no more than apply to the particular problem of the conditions of liability for violation of Community law the well known set of rules forged in case law dating as far back as to the 1960s, to the Van Gend & Loos decision mentioned above.
A key element in the exact definition of the limits of the new form of governmental liability introduced by the Court of Justice in the Francovich case lies in the first condition laid down by the decision, that is that the rule infringed be one designed to protect an individual by granting him a right.
This condition represents an extension to the liability of Member States, though with some modification, of a requisite developed by the case law of the Court of Justice concerning the tort liability of Community organs under article 215 of the EEC Treaty, para. 2 of which says that the non-contractual liability of Community organs has to be judged according to the principles common to the laws of Member States.
In the field of liability for acts intended to have legal effects - as opposed to liability for other acts - the Court ruled in a number of decisions that the liability of the Community can only be involved when there is a "sufficiently serious breach of a superior rule of law for the protection of individuals"; such rulings are in their turn the application in Community law of a German doctrine known as the Normzwecktheorie under which not every illegality affecting an administrative act gives rise to tort liability; the theory requires that the provision violated by the act should have been introduced with the aim of protecting an individual.
The problem with theories like the Normzwecktheorie is not only to establish whom a given provision is intended to protect, but more generally, whether such protection must be the sole aim or only one of several. Many provisions are to protect both public and private interests, but the theory does not explain whether the private interest must predominate or not.
Considering the impact of the Francovich decision on English law, it will be noticed that the European case law is far less demanding than that of many Member States; the fact that the interest of the individual is one of those for whose protection a rule was enacted is generally taken as sufficient to establish liability.
In any case there seems to be a difference between the liability of Member States and the liability of the Community. As regards the former, the decision of the Court of Justice does not require the existence of a "sufficiently serious breach of a superior rule": a breach of a Community law provision is held to be sufficient to give rise to liability in tort. While the omission of any reference to the superior character of the rule is hardly noteworthy, since Community law in itself and in general is superior to national law, the silence of the Court on the "seriousness" of the breach is highly significant.
Scholarly opinions differ as to the significance to be attached in Community law to the requirement of the seriousness of the breach; sometimes the breach is said to be serious when it can be characterised as gross negligence; at other times the accent falls upon the extent of the damage or the number of persons affected. The Court has not yet clarified its position on the point as a matter of law applied to torts committed by the Community, but whatever the right opinion is, it is clear that the requirement is used by European judge to limit the liability of Community organs.
No such limit can be found in the Francovich decision, not even - it is submitted - as an implication; as has been said above, the Court was explicit in stating that three conditions were not only necessary but also sufficient to give rise to liability; among them is a breach - not a serious breach - of a rule designed to protect individuals. Furthermore, the formula of serious breach is reiterated in almost every decision concerning a tort imputed to a Community organ, so that the omission of the adjective cannot be dismissed as a mere stylistic variation of the same concept.
The conclusion is that the Court is more demanding with the Member States than in respect of Community organs; this attitude is difficult to condone, because what is at stake in both cases is the remedy for the infringement of Community law.
A question which has not been brought to the attention of the European Court concerns the identification of the subjects who can be held liable for violations of a Community law provision. It is submitted that the scope of the principle laid down by the Court is wider than the actual words used in the decision, which refer to Member States.
To find out who is liable to third parties for infringing a Community law rule it is expedient to distinguish according the to the nature, and effects, of the provision violated.
In the case of directives and decisions which have not yet been implemented by the Member States, as was the case in Francovich, it is suggested that one could apply the rules which have been elaborated by the Court of Justice on the question of the limits of the direct effects of such provision. It is well known that recent European case law, following the Costanzo decision, has imposed on every public body, and not just on the organs of the State in their public law capacity, the duty of applying Community law provisions which are sufficiently clear in their content despite the absence of national implementing legislation or if such legislation in non-compliant with the Community law provision. Although the theory of the direct effect of directives (and decisions) has now been limited to the so called vertical effect, an unimplemented directive can be applied as against every kind of public body, even if, as was held in Marshall, the relevant body was acting in its private law capacity.
A provision having direct effect can assist a plaintiff only against a public body and no liability can attach to a private person for failing to act according to a directive which has not yet been translated into national law; even if some qualification may be necessary in the light of the most recent development of the case law, the rule is still that unimplemented directives produce no horizontal effect. On the other hand, given that every public body or organ has the duty to apply unimplemented directives, liability will necessarily follow in the event that such a duty is not respected. This conclusion is supported by the fact that the ratio decidendi of the Court decision in Francovich imposing liability on Member States is found in article 5 of the EEC Treaty, which in turn applies not only to the governments of the Member States, but to every public body. The extension of liability beyond the central organs of the States may require qualification in the event of the infringement of a provision of Community law which, though its content can be ascertained, is nevertheless devoid of direct effect, because, for example, as in the Francovich case, Member States are free to choose the subject upon whom the duty provided for by the provision will fall. In such a case, only the Member State, that is the government, can be held liable, for it is up to the government to make the necessary choice and until the choice is made no one else can be said to have duties which arise from the Community provision which, ex hypothesis, has no direct effect whatsoever.
As has been pointed out the solution is different, and it is submitted that liability is more wide-ranging, if either the Community law provision infringed does not require implementation by national measure, as is the case of regulations and some Treaty provisions, or if it has been correctly implemented by the Member State. In these cases, Community law can not only confer rights on individuals but also impose on them duties, whose breach will give rise to liability. It is suggested that there is no reason to distinguish the position of public bodies and individuals on this point, as both have the same duty to respect directly applicable or duly implemented Community law provisions.
There can be no doubt, however, that the legal position will be clarified over the course of time by the European Court.