Effects of Derivatives in National Legislation

Effects of Derivatives in National Legislation In the case before us the United Kingdom has failed to transpose the directive into national law, resulting in a detrimental effect for both Rachel and Jose. The fact that the UK government voted against the Directive when it was adopted in the council of ministers by QMV[1] and believes that existing legislation adequately covers teacher’s rights is of no consequence if the state of the law doesn’t give effect to the directive. Initially it was envisaged that the infraction procedure as set out in Article 226[2] EC treaty would be the primary means of enforcement of community law against member states[3]. Article 226 proved itself to be ineffective; at the time lacking provisions[4] to impose penalties on member states. Article 226 is also incapable of safeguarding the rights of individuals (a compensation order cannot be made against the defaulting state in favour of the aggrieved individual)[5]. Due to the inadequacy of Article 226 in the case of Van Gend en Loos 1962[6] the principle of direct effect was born. Van Gend en Loos had had a customs duty imposed on his goods by the Dutch contrary to Article 25 breaching rules in relation to the free movement of goods. Van Gend brought proceedings against the Dutch government in the national courts claiming reimbursement of the customs duties. The Dutch court sought a preliminary ruling from the ECJ[7] who first of all considered whether treaty provisions coul d confer directly effective rights upon individuals. The ECJ held that â€Å"community law†¦ not only imposes obligations on individuals but is†¦ intended to confer†¦rights which become part of their legal heritage†¦ (arising)†¦ not only where they are expressly granted by the treaty, but also by reason of obligations which the treaty imposes in a clearly defined way upon individuals as well as upon member states†. Article 249 provides that a directive is binding as to the result to be achieved but not as to the method employed by the state[8]. The direct effect of directives was first recognised by Van Duyn v Home Office[9]. Van Duyn was a scientologist refused entry to the UK as the UK government had imposed a ban on foreign scientologists entering the UK. Van Duyn challenged the ban as falling foul of Directive 64/221/EEC which required that any ban be based on the personal conduct of an individual. The ECJ held that â€Å"it would be incompatible with the binding effect attributed to a directive by Article 249 to exclude, in principle, the possibility that the obligation which it imposes may be invoked by those concerned†¦ (particularly where a directive)†¦ has imposed on member states obligations†¦ the useful effect †¦ (of which)†¦ would be weakened if individuals were prevented from relying on it before their national courts. Another justification for direct effe ct of directives is that of estoppel[10]; it would be wrong for a member state to be able to rely on and gain advantage through their failure to implement an obligation under a directive; they are thus estopped from denying the direct effect of directives once the deadline for transposition has passed. The estoppel argument has one very important implication; as direct effect is based on the fault of the member state in failing to implement the directive it follows that parties may invoke and rely on the directive against the state only; (i.e. only vertical not horizontal direct effect). Where a directive is properly implemented individual rights flow from the implementing legislation and not the directive itself. The limit to vertical direct effect can be best illustrated by the case of Marshall[11]; â€Å"a directive may not of itself impose obligations on an individual and that a provision of a directive may not be relied upon against such a person†. An important requirement is that â€Å"it is necessary to examine in every case, whether the nature, general scheme and wording of the provision are capable of having direct effect†[12]; the provisions must be â€Å"unconditional and sufficiently precise†[13][14]. So, Rachel, working for an entity of the state (a state school) may be able to enforce her right to a break with direct effect through the English courts; the â€Å"teacher’s employment rights† directive imposes on member states obligations to ensure that teachers are afforded a 3 hour break. Clearly as the directive has not been transposed Rachel has been deprived of this right and the English judge should rule in favour of her right to a break. The directive also fulfils the Becker test; it is unconditional and sufficiently precise. Jose, ostensibly will not be able to enforce his rights through the English courts, although he is being denied his break he works for a private institution, a problem insofar as direct effect of directives is permitted only vertically (individual v the state[15]) and not horizontally (individual v individual). This two tier legal system, affording increased rights to public sector employees has come under a barrage of criticism from the judiciary and academia alike[16]. Conversely to allow horizontal direct effect would render the distinction between directives and regulations meaningless so as to be effectively one and the same[17]. Although a directive has in certain cases been used as a â€Å"shield† in a dispute between private parties to prevent provisions of conflicting national being invoked against each other[18] Jose may though be able to claim direct effect; if, although he works for a private institution it has a public function; â€Å"a body†¦ which has been made responsible†¦ for providing a public service under the control of the state†¦ is included among the bodies against which the provision of a directive capable of having direct effect may be relied on†[19]. So in the case of Jose it is a question of fact whether he may be able to rely on the directive. The concept of state liability stems from the case of Francovich[20]. The full effectiveness of community rules would be impaired and the protection of the rights granted would be weakened if individuals were unable to obtain redress when their rights are infringed by breach of community law for which a member state can be held responsible[21]; state liability for loss and damaged caused to individuals is therefore inherent in the treaty[22] In Francovich the court held that in cases where there was a failure to implement community law under Article 249 that there was a right to compensation provided (a) the result which had to be attained by the directive involved rights conferred on individuals. The directive undoubtedly confers rights (better working conditions on both Rachel and Jose) (b) the contents of the rights could be identified from the provisions of the directive (this is satisfied as the directive is clear and unambiguous as to the applicable rights) (c) there must exist a casual link between the failure by the member state to fulfill its obligations and the damage suffered by the person affected (clearly if Rachel and Jose are dismissed because they refuse to work without the break provided for in the directive then there is a casual link). On the face of it Rachel (and Jose) would be able to bring an action for damages against the British government. It is for the national courts†¦ to ensure legal pro tection which persons derive from community law[23][24]. In anycase in the case of Jose, if he is not able to enforce his rights directly (and a complaint to the commission is a lengthy process-see below) industrial action by his trade union could be an attractive alternative. Article 226 plays the leading role in the â€Å"centralised enforcement† of EU law (as opposed to direct effect for instance at the national level)[25]. 226 provides that â€Å"if the commission considers that a member state has failed to fulfil an obligation under this treaty, it shall deliver a reasoned opinion on the matter after giving the state concerned the opportunity to submit its observations†¦ if the state concerned does not comply with the opinion within the period laid down by the Commission, the latter may bring the matter before the court of justice†. In addition Article 227 provides that a â€Å"memberstate which considers that another member state has failed to fulfil an obligation under the treaty may bring the matter before the Court of Justice†. The use of Article 227 has been rare though, member states preferring to leave it to the commission to take action under Article 226[26]. The infrequent use of Article 227[27] can best be attribute d to politics, especially with the increased use of QMV making it even more imperative to maintain good relations with fellow member states[28]. Also in the case before us the failure to implement correct break times for teachers lecturers in the UK is probably not of much concern to the Spanish government!! Returning to article 226 the procedure compromises two elements; the administrative stage and the judicial stage. The Commission, upon being notified of the member states infringement by a member state or a individual initiates matters with an informal letter to the member state government outlining the reasons upon which it suspects and infringement. The member state government is then invited to reply and to submit further information. This is then followed by a formal request to the member state to submit its observations (the letter of notice). Ideally the commission and the member state will negotiate an agreement by this stage, especially if it is the case that the member state is genuinely unaware of the infringement or is simply buying time before implementing the directive. In the UK as there is a chronic shortage of teachers the implementation may well have far reaching applications, for this reason the UK may well call commissions bluff and refrain from implementing the directive for a period of time. Only if no agreement is reached in the early stage will the commission deliver its reasoned opinion. Then only if the infringement continues will the commission move from the administrative phase to the judicial phase. It is of note that only a minority of cases will reach the judicial phase, in 2002 approximately ten percent and in 2003 approximately thirteen percent[29]. It is worth noting that the Commission is under no obligation to take action with regards to Article 226. If the member state takes no heed of the reasoned opinion then the Commission may begin the judicial stage but there is no time limit that the commission must adhere to in doing so[30]. Once the ECJ has judged against the member state failure to observe the terms of that judgment will constitute a breach of Article 228(1). The state may be required to remedy, introduce or revoke national law to comply with the courts judgment. If the state continues to be in breach of the judgment then the commission may invoke fresh proceedings under Article 228(2). The three administrative stages of Article 226 will then apply. If the commission decides to progress to the judicial stage then the commission will recommend a lump sum and or penalty payment[31] to be imposed against the defaulting member state (although I issue the caveat that this is only a recommendation to the court and there is no upper limit on the amount that may be fined). The Court of justice has consistently imposed fines on member states in Art 228(2) proceedings. In the case of Commission v Hellenic Republic[32] the ECJ held that although Article 228(2) did not specify the period in which the judgment had to be complied with the importance of immediate and uniform application of community law meant that the process of compliance had to be initiated at once and completed as soon as possible[33]. The process of Article 228(2) is a very long and drawn out one, with many cases taking a decade or more. Given that several years or more may elapse between the initial complaint to the commission and the hearing before the court of justice, the commission, in circumstances where continuing damage is being caused while the case is processed may well apply to the court for interim relief. The court may apply interim relief under Art 243; â€Å"the court of Justice may in any cases before it prescribe any necessary interim measures†. In the present scenario the issue of interim relief is, seemingly academic as they have not yet been sacked, instead I mention it to try and give a broader view of the area. In summation the commissions actions under Art 226 (or in the unlikely case of a state art 227 actions) are long, drawn out processes and will be of little use to Rachel and Jose who will have long moved on before their protests come to fruition. Bibliography: Chalmers, D. Hadjiemmanuil, C. Monti, G. Tomkins, A. (2006) European Union Law. Cambridge: Cambridge University Press. Craig, P. Directives: Direct effect, Indirect effect and the construction of national legislation. E.L. Rev. 1997, 22(6), 519-538 Fairhurst, J. (2005). Law of the European Union. Harlow: Pearson Longman. Harden, I. What future for the Centralised enforcement of community law? (2002) 55 CLP 495 Harlow, C. Rawlings, R. Accountability and law enforcement: The centralised EU infringement procedure. E.L. Rev. 2006, 31(4), 447-475 Meltzer, D. Member state liability in Europe and The United States. 2006 Jan 4 Int’l J. const. L. 39 Pachnou, D. Direct and Indirect effect of directives and state liability: their applicability in relation to procurement remedies. P.P.L.R. 2000, 5, 251-260 Weatherill, S. Breach of Directives and Breach of contract. (2001) 26 European Law review 177-183 Footnotes [1] Qualified Majority Voting [2] Formerly article 169 [3] Chalmers, Hadjiemmanuil, Monti and Tomkins, 2006, p365 [4] Subsequently amended by the TEU Article 228(2) [5] Fairhurst, 2006, p234 [6] Van Gend en Loos v Nederlandse Administratie der Belastingen Case 26/62 IN RELATION TO A TREATY ARTICLE [7] European Court of Justice [8] A directive is addressed to the state and NOT its citizens, As opposed to regulations (addressed to its citizens) which are binding as to both the method of implementation and the result to be achieved. [9] Case 41/74 [10] First employed in Ratti Case 14878 [11] Marshall v Southampton and SW Hampshire Area Health Authority (1986) Case 152/84 at Para 48 [12] Van Duyn v Home Office. Case 41-74 at Para 12 [13] Ursula Becker v Finanzamt Mà ¼nster-Innenstadt. Reference for a preliminary ruling: Finanzgericht Mà ¼nster Germany. Direct effect of directives. Case 8/1981 at Para 25 [14] See also Craig, 1997, 522 [15] See Faccini Dori v Recreb Case 91/92 [16] See for instance Case 316/93 Vaneetveld v Le Foyer and Faccini Dori v Recreb Case 91/92 [17] See Faccini Dori v Recreb Case 91/92 at Para 24 [18] Weatherill, 2001, p177 [19] Foster v British Gas Case 188/89 [20] Joined cases C-6 and 9/90 Francovich and Bonafici v Italy [21] Ibid at Para 33 [22] Ibid at Para 34 [23] R v Secretary of State for Transport ex parte Factortame Ltd Case 218/89 [24] Meltzer, 2006, 59 [25] Harden, 495, 2002 [26] Harlow and Rawlings, 2006, 451 [27] As yet on only two occasions see Case 141/178 France v United Kingdom and Case 388/95 Belgium v Spain [28] Chalmers, Hadjiemmanuil, Monti and Tomkins, 2006, p349 [29] European Commision 21st Annual report on the application of Community law, COM (2004) 839 [30] See the 6 year wait in Commision v Germany Case 422/92 [31] See Case 304/02 [32] Case 387/97 [33] Pachnou, 2000, 256