The Law To Know

Union law in national courts · European Union · about 4 minutes

State liability for breach of Union law

The warranty on a roof

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In one breath

A Member State must compensate individuals for loss caused by its serious breaches of Union law, whether by failing to implement a directive or by passing contrary legislation. The Court of Justice created the principle in its case law, and national courts decide the claims, using national rules on damages within limits set by Union law.

The picture

The warranty on a roof

A builder promises a roof that will keep out the rain, and gives a warranty. If a gap in the roof lets water through, the owner does not need to prove that the builder meant to do harm. Three things matter: the warranty was meant to protect owners like her, the failure was not a trivial slip, and the leak really did ruin her carpets. If all three are present, the builder pays.

State liability has the same three parts. The rule of Union law that was breached must be intended to confer rights on individuals. The breach must be sufficiently serious, which for a State with discretion means that it manifestly and gravely disregarded the limits on that discretion. And there must be a direct causal link between the breach and the loss. When these conditions are met, the State pays damages, even if the Union rule itself had no direct effect.

Where the picture stops working

A roofing warranty is a contract the builder agreed to. State liability is imposed by the Court as a general principle inherent in the Treaties, because without it the rights of individuals would be weak. A warranty claim is against one builder, whereas liability here can arise from conduct of the legislature, the administration or even a court of last instance.

How it really works

  1. 1Know where the rule comes from. The principle comes from the Court’s case law and does not appear in the Treaties. It is separate from the Union’s own liability for damage caused by its institutions (Article 340 of the Treaty on the Functioning of the European Union).
  2. 2Identify the breach. Francovich concerned failure to implement a directive, and Brasserie du Pêcheur and Factortame III extended the principle to breaches by the national legislature in an area of discretion.
  3. 3Apply the three conditions in the usual formulation: the rule of law infringed is intended to confer rights on individuals; the breach is sufficiently serious; and there is a direct causal link between the breach and the damage.
  4. 4Assess seriousness. Factors include the clarity of the rule, the measure of discretion left, whether the breach was intentional, whether any error was excusable, and whether an institution’s position contributed to it. Persisting in a breach after a Court judgment is normally sufficiently serious.
  5. 5Remember the forum. The claim is heard in the national courts, under national rules on damages, but those rules must respect equivalence and effectiveness. The principle extends to infringements by a court of last instance in manifest cases (Köbler).

Why people get it wrong

  • Assuming that any breach of Union law gives a right to damages. The breach must be sufficiently serious.
  • Believing that the principle depends on direct effect. It does not, and it is often invoked precisely because a provision has none.
  • Mixing it up with the Union’s liability. Here the defendant is the Member State and the case is in a national court.
  • Thinking only the executive can be liable. Legislative failures, and in manifest cases judicial ones, can also count.
  • Expecting national fault rules to apply. A requirement of intent or negligence beyond the Union conditions would make compensation excessively difficult.

A worked example

The facts are invented

A directive requires every Member State to set up a guarantee fund that repays the wages of workers whose employer becomes insolvent. The deadline passes and the State sets up nothing. A bakery goes bankrupt, owing its baker, Silvio, several months of wages. Silvio cannot rely on the directive directly, because the content of the fund is not specified enough to be enforced against the State.

Silvio sues the State in its own courts for damages. He can show that the directive was meant to give workers rights, that the content of those rights could be identified from the directive, and that his loss flows directly from the State’s failure to implement it. Complete failure to transpose by the deadline is, in the usual view, sufficiently serious. The State must compensate him, and the national court sets the amount under national rules, which must not make recovery virtually impossible.

Try it

A State completely fails to transpose a directive by its deadline, and an individual suffers loss as a result. The directive’s provisions are not clear enough to have direct effect. Can the individual claim?

Landmark authorities

Read the sources themselves; this list is a starting point.

  • Francovich and Bonifaci v Italy, Joined Cases C-6/90 and C-9/90, 1991
  • Brasserie du Pêcheur v Germany and R v Secretary of State for Transport, ex parte Factortame (No 3), Joined Cases C-46/93 and C-48/93, 1996
  • Köbler v Austria, Case C-224/01, 2003

Where to go next

More hard concepts in European Union law

This page is an educational overview. It is not legal advice and not a substitute for the sources: the statute, the rule, the case itself. EU law is made by the Union’s institutions under powers that the Member States have conferred on it in the Treaties, and it is applied by national courts and the Court of Justice together. The national law of each Member State still governs most of private and criminal law. Each page says whether the idea comes from the Treaties, from regulations and directives, or from the Court of Justice’s case law. Each page states the usual formulation of the rule and names landmark decisions; check the primary sources, and the law of your own Member State, before relying on any rule.