Francovich v Italian Republic (Joined Cases C-6/90 and 9/90)

• Jurisdiction: European Union
• Date: 19 November 1991
• Court: European Court of Justice

Court of Justice of the European Communities.

(Due, President; Sir Gordon Slynn, Joliet, Schockweiler, Grévisse, and Kapteyn, Presidents of Chambers; Mancini, Moitinho de Almeida, Rodríguez Iglesias, Judge-Rapporteur, Díez de Velasco and Zuleeg, Judges; Mischo, Advocate-General)

Francovich

and

Italian Republic

Bonifaci and Others

and

Italian Republic

Treaties — Effect in municipal law — EEC Treaty, 1957 — Legislation enacted by EEC institutions — Status under municipal law — Directives — Direct effect — Conditions — Failure of Member State to implement provisions of directive by specified time — Whether directive may be relied upon by individuals before municipal courts — Whether provisions sufficiently unconditional and precise — Margin of discretion left to Member States — Provisions involving choice from range of options — Whether ‘minimum obligation’ incumbent upon Member States can be adequately defined

International organizations — EEC — Powers — Legislation — Directives enacted by Council — Direct effect — Directive conferring margin of discretion on Member States — Non-implementation within prescribed period — Directive requiring Member States to establish social benefit — Institution liable to provide benefit not identified — Whether directive can be relied upon by individuals to enforce payment against Member State in national courts — Option for Member States to set ceiling on amount of liability in accordance with social objective of directive —Whether such option can be relied upon by Member State to defeat direct effect of directive

International organizations — EEC — Liability of Member States — EEC Treaty, 1957 — Breach of Community law for which Member State responsible — Principle of State liability for harm caused to individuals by such breach — Whether inherent in treaty system — Conditions for State liability — Absence of Community legislation — Whether claim for compensation can be brought by individuals against State before national courts — Applicability of national rules on liability — Requirement that conditions should be no less favourable than those applicable to similar internal claims — Requirement that it should not be excessively difficult to obtain compensation

Relationship of international law and muncipal law—Treaties — Effect in municipal law — EEC Treaty, 1957 — Nature of legal order established by Treaty — Article 189 — Directives — Whether capable of conferring rights on individuals

State responsibility — Responsibility based on fault — Breach of European Community law for which Member State responsible — Liability of State to pay compensation when non-compliance with Community norm causes harm to individuals — Principle of such liability — Conditions — Whether governed by Community or national law — The law of the European Economic Community

Summary: The facts:—The plaintiffs in the main proceedings were employees of Italian companies which had become insolvent, owing them considerable sums in unpaid wages which they had been unable to recover. They instituted proceedings before two Italian courts against the Italian State in which they claimed payment of their arrears of salary or, in the alternative, compensation. Their claim against Italy was based upon its failure to implement EEC Council Directive 80/987, which was intended to guarantee a minimum of protection for employees in the event of the insolvency of their employer. In a judgment of 2 February 1989 (Case 22/87, Commission v. Italy) the Court of Justice of the European Communities had held that, by failing to implement the directive by the prescribed date (23 October 1983) Italy was in default of its obligations under the EEC Treaty. Article 3(1) of the directive provided that Member States should take the measures necessary to ensure that guarantee institutions, to be established or designated by them, guaranteed payment of employees' outstanding wage claims for the period prior to a given date. The directive allowed the Member States to choose one of three dates relating to the insolvency or discontinuance of the employment relationship (Article 3), and to limit the liability of the guarantee institutions (Article 4).

By orders of 9 July and 30 December 1989, the two Italian courts stayed the proceedings and referred identical questions to the Court of Justice for a preliminary ruling pursuant to Article 177 of the Treaty. The Court of Justice was asked principally to give a ruling on the following question:

Under the system of Community law in force, is a private individual who has been adversely affected by the failure of a Member State to implement Directive 80/897 (a failure confirmed by a judgment of the Court of Justice) entitled to require the State itself to give effect to those provisions of that directive which are sufficiently precise and unconditional, by directly invoking the Community legislation against the Member State in default so as to obtain the guarantees which that State itself should have provided, and in any event to claim compensation for the damage sustained in relation to provisions to which that right does not apply?

Opinion of the Advocate-General:—The Advocate-General argued that, in accordance with the Court's settled case law on the direct effect of directives, an employee could only enforce the rights which Directive 80/987 was intended to create, before their implementation in municipal law, if the provisions concerning (i) the identity of the persons intended to benefit, (ii) the scope of the rights and (iii) the identity of the person liable, were sufficiently precise and unconditional. He considered that the provisions concerning the identity of beneficiaries were sufficiently precise. However, with regard to the scope of the rights, he rejected the Commission's argument that it was possible precisely to determine from the provisions of the directive a ‘minimum obligation’ incumbent upon the Italian authorities. He considered that this approach disregarded the extremely broad discretion left to the Member States, in particular to fix a ceiling for the amount of their liability in accordance with the social objective of the directive. On the question of the identity of the person liable, he again disagreed with the Commission, which had argued that it was possible to show that financial responsibility for the benefits provided under the directive was ultimately borne by the State, so that a national court could order the State to pay the minimum compensation provided for by the directive. The Advocate-General considered that, since the Member States were required to make a choice as to the method of financing the guarantee institution, the provision in question was not unconditional. He therefore proposed that the Court should rule that the provisions of Directive 80/987 were not sufficiently precise and unconditional to give rise to rights enforceable before the national courts by individuals.

The Advocate-General then turned to the question of whether an individual harmed by the failure to implement the directive was nevertheless entitled to claim compensation from the Member State concerned for any consequent loss. He considered that, whilst it was in principle for the legal system of each Member State to determine the procedure enabling Community law to be fully effective, the Member States were limited in their freedom of action by their obligation under Community law to ensure such effectiveness. In the event of failure to implement a directive or its incorrect implementation, a Member State deprived Community law of its desired effect and violated Article 5 and the third paragraph of Article 189 of the Treaty. The Advocate-General considered that, by virtue of Community law, it should be possible in such circumstances for a Member State to be held liable to individuals, at least where the same basic conditions were met as those establishing the liability of a Community institution. In other respects such proceedings should, as Community law now stood, be governed by national law subject to the dual proviso that the rules were no less favourable than those relating to similar internal claims and did not make it virtually impossible to obtain compensation. Accordingly the Advocate-General proposed, in agreement with the Commission (although on different grounds) but disagreeing with the governments of four Member States, that the Court should rule that Community law must be interpreted as meaning that individuals should be entitled to bring proceedings against a Member State before the national courts for compensation for harm caused to them by the failure to implement the provisions of Directive 80/987.

Held:—The provisions of Council Directive 80/987 were to be interpreted as meaning that the persons concerned could not enforce the rights in question against the State before national courts when no implementing measures had been adopted within the prescribed period. Nevertheless a Member State was required to pay compensation for the harm suffered by individuals as a result of its failure to transpose the directive into municipal law.

On the direct effect of the provisions of the directive

(1) A Member State which had not adopted the implementing measures required by a directive within the prescribed period could not, against individuals, plead its own failure to perform the obligations which the directive entailed. Thus wherever the provisions of a directive appeared, as far as their subject-matter was concerned, to be unconditional and sufficiently precise, those provisions could be relied upon as against any national provision which was incompatible with the directive or in so far as the provisions defined rights which individuals were able to assert against the State (p. 196).

(2) It was therefore necessary to establish whether or not the provisions of Directive 80/987, which determined the rights of employees, were unconditional and sufficiently...