Brasserie du Pecheur SA v Federal Republic of Germany; R v Secretary of State for Transport, ex parte Factortame Ltd (No 4) (Joined Cases C-46/93 and C-48/93)

• Jurisdiction: European Union
• Court: European Court of Justice
• Date: 05 March 1996

Court of Justice of the European Communities.

(Rodríguez Iglesias, President and Rapporteur, Kakouris, Edward and Hirsch, Presidents of Chambers; Mancini, Schockweiler, Moitinho de Almeida, Gulmann and Murray, Judges; Tesauro, Advocate-General)

Brasserie du Pêcheur SA

and

Federal Republic of Germany

Regina

and

Secretary of State for Transport, ex parte Factortame Ltd and Others

State responsibility — Breach of treaty obligations — Breach of European Community law for which Member State responsible — Principle of State liability for damage caused to individuals — Whether inherent in treaty system — Whether applicable even where provision of European Community law breached is directly effective and can be relied upon by individuals before national courts — Whether applicable where breach attributable to national legislature — Whether State regarded as single entity in respect of liability for breaches of international commitments irrespective of organ responsible

Treaties — Interpretation — EC Treaty — Role of Court of Justice of European Community under Article 164 of Treaty — Interpretation by reference to fundamental principles of Community legal system and general principles common to legal systems of Member States — Principle of State liability for breaches of Community law — Whether inherent in treaty system — Reference to Article 215 of Treaty concerning non-contractual liability of Community institutions — Whether evidence of general principle that public authorities should make good damage caused in performance of their duties

State responsibility — Breach of treaty obligations — Breach of Community law for which Member State responsible — Conditions for State liability — Whether governed by Community law or national law — Whether conditions in principle the same whether Member State or Community institution incurring liability — Requirement that breach of Community law be sufficiently serious — Test of whether Member State or Community institution has manifestly and gravely disregarded the limits of its discretion — Whether any requirement to prove fault — Scope of applicability of national rules on liability — Requirement that conditions should be no less favourable than those applicable to similar domestic claims

Damages — Grounds for awarding damages — Breaches of Community law for which Member State responsible — Loss suffered by individuals — Scope of right to reparation under Community law — Community rules governing claims brought before national courts against Member States — Requirement that reparation must be commensurate with loss or damage sustained — Requirement that loss of profits must be claimable — Requirement that exemplary or other special damages must be available if such damages could be awarded under domestic law — Requirement that reparation should also cover loss sustained prior to court judgment finding infringement of Community law

International organizations — European Community — Liability of Member States for breaches of treaty obligations causing loss to individuals — Breach attributable to national legislature — Whether claims can be brought by individuals before national courts — Conditions for liability — Scope of right to reparation — The law of the European Community

Summary: The facts:—In Case C-46/93 Brasserie du Pêcheur SA, a French company, had claimed that it had been forced to discontinue beer exports to Germany in 1981 because the competent German authorities considered that the beer it produced did not comply with purity requirements contained in the Law on Beer Duty 1976. In proceedings brought by the Commission of the European Community (‘EC’) against Germany for failure to fulfil treaty obligations, the prohibition on marketing beers which did not comply with purity requirements was held to be contrary to Article 30 of the EC Treaty in a judgment of the Court of Justice of 12 March 1987.1 Brasserie du Pêcheur then brought an action before the German courts against the Federal Republic for reparation of the loss suffered by it between 1981 and 1987 as a result of the import restriction.

In Case C-48/93 Factortame Ltd, a British company, had challenged the compatibility of Part II of the Merchant Shipping Act 1988 with Community law, in particular Article 52 of the EC Treaty, in proceedings brought before the Divisional Court of the High Court of Justice in the United Kingdom. The Merchant Shipping Act provided for the introduction of a new register for British fishing vessels and made their registration subject to certain conditions relating to the nationality, residence and domicile of vessel owners. Vessels ineligible for registration were deprived of their right to fish. The

conditions in question were held to be contrary to Community law by a judgment of the Court of Justice of 25 July 1991.2 At the same time, the Court held that it was not contrary to Community law to stipulate, as a condition for registration, that vessels must be managed and their operations directed and controlled from within the United Kingdom. In separate proceedings, the EC Commission also brought proceedings under Article 169 of the EC Treaty against the United Kingdom concerning the new system of registration, and the Court of Justice, in a judgment of 4 October 1991,3 held that the United Kingdom had failed to fulfil its obligations under Article 52 of the Treaty. In further proceedings before the Divisional Court of the High Court of Justice, Factortame sought damages from the Secretary of State for Transport for losses incurred due to its inability to obtain registration and operate its fishing vessels between April 1989 and November 1992, when the new United Kingdom legislation had been amended to make it compatible with Community law.

The Federal Supreme Court (BGH) (Case C-46/93) and the Divisional Court of the High Court of Justice (Case C-48/93) decided to stay the proceedings in the cases before them and to make references to the Court of Justice of the European Communities for preliminary rulings under Article 177 of the EC Treaty. Both national courts considered that, if their respective national laws were applied in their present state, there would be no remedy, basically because the damage caused was the result of acts and omissions of the national legislature rather than the administration. The relevant German legislation imposed a condition for State liability that the act or omission in question should be referable to an individual situation whilst the British legislation required proof of misfeasance in public office.

The Court of Justice decided to join the two sets of proceedings because of the similarity of the questions which they raised. By their questions, the national courts essentially sought a ruling on

(i) whether the principle of Community law (established in the Court of Justice's judgment of 19 November 1991 in the FrancovichINTL case)4 that Member States were obliged to make good loss and damage caused to individuals by breaches of Community law for which they could be held responsible was applicable where the national legislature was responsible for the infringement in question;

(ii) under what conditions a right to reparation of loss or damage caused to individuals by breaches of Community law attributable to a Member State was, in the particular circumstances, guaranteed by Community law; and

(iii) according to what criteria the extent of the reparation payable by the Member State responsible for the breach should be determined.

Opinion of the Advocate-General:—Advocate-General Tesauro pointed out that the Court now had to establish whether the principle of State liability in

damages for infringements of Community law established in Francovich should be confined to cases of failure to implement a directive whose provisions could not be relied on directly by individuals or should be extended to cases, such as those now before the Court, in which the loss or damage suffered arose out of the application of a national law conflicting with Community provisions which could be relied on directly in the national courts. The German, Irish and Netherlands Governments contended that Member States should be required to make good loss or damage caused only where the provisions breached were not directly effective and could not therefore be invoked by individuals to protect their rights. Those Governments argued essentially that the Community law principle of State liability was merely a means of closing a lacuna in the protection of rights and not a principle of broader scope. But the Advocate-General could not accept this view. He argued that every individual right had a substantive content and a financial content which could generally be quantified. The substantive reinstatement of a right which had been impaired was the optimum means of protection for an individual. But at times this was not enough to ensure effective judicial protection. The principle of the State's financial liability to make good damage caused by its infringement of provisions of Community law applied as a remedy which was both alternative and additional to substantive protection. Consequently a claim to establish State financial liability should be available whether or not the provision infringed had direct effect (pp. 48–60).

In their respective reference orders, the national courts indicated that their national law did not allow them to award damages because the infringements of Community law at issue were attributable to the legislature which had failed to amend a national law to align it with Community provisions (Case C-46/93, Brasserie du Pêcheur) or had passed a national law inconsistent with Community law (Case C-48/93, Factortame). The Advocate-General argued that there was no reason why the Francovich principle should not apply equally irrespective of whether the acts or omissions of the Stale causing loss or damage were the responsibility of the legislature or...