State Liability

This piece concerns three separate questions that will be treated individually. They are:

1) A: If the UK interpretation was incorrect, was the mistake sufficiently serious to make it liable for the second outbreak; and
B: If the UK was held liable was it entitled to argue that the rules on pure economic loss in the English law of tort exempted it from having to make any compensation payment to the fish farms?

2) The allegation that the ECJ had exceeded its jurisdiction

3) The allegation from the UK that the Court of Appeal would be in breach of EC Law by overruling the ECJ's preliminary ruling.

1 A

In order to see if the UK would be liable for the second outbreak, it needs to be shown not only what constitutes a sufficiently serious mistake but also the criteria resulting in state liability. The first question to be addressed is whether the UK could be held liable for the second outbreak of the fish disease if their interpretation of the directive was incorrect. The answer to this question has to that it would be liable. Following Brasserie du Pecheur and Factortame III1. , a State will be liable regardless of which organ is responsible for the breach which includes the legislature, so a misinterpreted or poorly implemented directive represents a breach of community rules by the State and an individual will have to be compensated under the following conditions of liability

"Community law confers a right to reparation where three conditions are met: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties."2.

If these conditions are met the individual has a right to compensation. In this context, a misinterpretation of a directive, if indeed it was a misinterpretation, has led to a suspension in trading for certain individuals. Subsequently, has there been a breach of a directive intending to give rights to individuals? It could be argued that it was as the relevant directive was designed to protect not only consumers but also other traders. The second condition therefore also needs to be met. This is that a breach by the Member State must be sufficiently serious. As set out in Brasserir du Pecheur and Factorame, a sufficiently serious breach which would justify liability has to be under either failure to transpose a directive; breach of an interim order of the court; breach of a Provision of EC law where there is no reasonable doubt as to the interpretation of that provision; or a breach of EC law where there is settled case law on the matter3.. This breach would come under the failure to transpose a directive, or possibly breaching a provision when there is no doubt as to its interpretation, thus meeting the criteria as a sufficiently serious breach. The third condition is met if the directive was misinterpreted or misimplemented following the UK Act. The result of this was, again, the loss in profits to the farms within the quarantine zone and consequently the individuals have redress because;

" A right to compensation is a corollary of the direct effect of the Community provision whose breach caused the damage sustained." 4.

However, a State has no obligation to pay damages if it has implemented a directive in good faith and in keeping with the aim and intention of the EC directive. Any breach of a provision of EC law will not result in liability if the provision was poorly worded and unclear and imprecise. As long as the State has implemented the directive as well as is possible in the circumstances, there will be no liability. 5.
Consequently, the question of liability in this context is decided on whether the UK implemented the Directive in keeping with the wording, or as much as was possible, as this would prevent liability under a sufficiently serious breach. An indication of this comes from the implementation into other national legislation of the same directive into other Member States. If their interpretation is the same, following Denkavitt 6, there may be no liability. Article 24 calls for inspections of the cleaning operation and restocking can only commence following a passage of time sufficient to eradicate the pathogen. The Department for Environment, Fisheries and Rural Affairs (DEFRA) allowed 60 days. Compliance with the Article 24 of the Directive was ensured through section 7 of the Viral Haemorrhage Septicaemia Control Act. On the affected farm, Article 24 was complied with under the implementing Act, and the cleaning process supervised by DEFRA officials. Although a second inspection after 60 days would have found the pathogen, there is no requirement for this second inspection under Article 24 of the EC Directive. The UK have therefore implemented the Directive in accordance with its aims, and to its requirements, as DEFRA considered 60 days "necessary to ensure eradication of the pathogen". The UK has transposed the directive, as much as is possible and consequently there is not a sufficiently serious mistake. Consequently the UK is not liable for a breach of the Article. However, if the UK interpretation of Article 24 had been incorrect, then there would have been a misimplementation of the Article that would have resulted in liability for the UK.

B

Insofar as the UK escaping liability on grounds of domestic legislation governing 'pure economic loss' is concerned, there can be no escape from liability based on domestic legislation. Following Van Gend en Loos7it was seen that EC law is designed to give legal effect and protection to individuals under its remit.

The Francovich case also demonstrated the need for national legislation to give EC law supremacy, and also integrate it into domestic legislation. This includes paying damages where there is a breach of Directives by the Member States resulting in harm to the individual.

"The Francovich action for compensation, whose terms are increasingly dictated by the ECJ, is likely to be provided as part of the Member States' tort systems or Codes." 8.

A state cannot subsequently claim that its own legislation prevents it from paying compensation for a breach of EC legislation as EC law has supremacy over domestic legislation. The direct effect of certain articles including the one dealt with here, dictates compensation to be paid. Factortame laid out the principle that if there was a piece of domestic legislation preventing interim relief in a dispute it should be ignored;

"It follows that a court which in those circumstances would grant interim relief, if it were not for a rule of national law, is obliged to set aside that rule." 9.

The conclusion to be drawn from this is that the existence of national legislation preventing the supremacy of EC law must result in the removal or disregarding of the domestic legislation to ensure the supremacy of EC law. Therefore, in this context, the tort law on 'pure economic loss' is an irrelevance if EC law has been breached, as relief has to be given in accordance with the rights of the individual within EC law, not domestic legislation.

"Thus there is nothing novel in according supremacy to rules of Community law in those area to which they apply and to insist that, in the protection of rights under Community law, national courts must not be inhibited by rules of national law from granting interim relief inappropriate cases is no more than a logical recognition of that supremacy."10. (Lord Bridge in Factortame.)

2

The second question is whether the ECJ has exceeded its jurisdiction. The Arsenal v. Reed case has addressed some issues on jurisdiction. The High Court in this case found that the ECJ (European Court of Justice)

"Had no jurisdiction to make findings of fact or reverse the national court on its findings of fact." 11.

This means that the ECJ can only pass judgement on points of law to facilitate a judgement by a national court which applies that judgement on the relevant point of law, to the facts of a specific case in order to reach a verdict. The ECJ is said to exceed its jurisdiction under Article 234 EC Treaty if it makes preliminary judgements on points of law based on facts of a case. In Arsenal v. Reed the conclusions reached by the ECJ were based on the facts of the case.

"The Court of Justice had not answered a question in the affirmative or the negative, but had stated only that the club should succeed in the circumstances of the case. It had disagreed with the conclusions of fact reached at the trial, and had indicated that the club should win because the defendant's use was such as would be perceived by some customers or users as a designation of origin. If that were so, the Court of Justice had exceeded its jurisdiction, and the High Court was not bound by its final conclusion" 12.

The ECJ has to give guidance as to points of law, and not facts of a case, otherwise it will exceed its jurisdictional boundaries. Therefore, question relevant to this context is whether the ECJ gave a judgment based on fact and not points of law. The ECJ analysed the situation and came to conclusions that the second infection was a result of the reintroduction of fish with the disease into the farm. In doing this it had to contradict the High Courts analysis that the second infection was due to a persistence of the infection from the first outbreak. This represents a breach of jurisdictional boundaries by the ECJ according to the principles laid out in the Arsenal v. Reed case. In light of this, the ECJ should have passed judgement on the actual implementation of Article 24 as it relates to the UK Viral Haemorrhage Septicaemia Control Act, and not the cause of the second outbreak. The cause of the second outbreak is only relevant to the ECJ vis-à-vis the question of whether the second outbreak is a result of misimplemented legislation by the UK. To pass judgement on the cause of the second outbreak on the facts is a breach of jurisdiction by the ECJ under the Arsenal v. Reed principles and Article 234 EC.

3

The final question to be addressed is the allegation from the UK that the Court of Appeal would be in breach of EC Law by overruling the ECJ's preliminary ruling. Again looking at Arsenal v. Reed, it can be argued that if the ECJ has gone beyond its jurisdiction, with the consequence that its judgement should be ignored. As the ECJ has exceeded the boundaries of its jurisdiction it would not constitute a breach of EC law to overrule the ECJ judgement, as it is not valid and therefore not binding. Article 234 EC allows for preliminary rulings by the ECJ on the following:

(a) The interpretation of the Treaty
(b) The validity and interpretation of acts of the institutions of the Community and of the ECB
(c) The interpretation of the statutes of bodies established by an act of the Council, where those statutes so provide.

The relationship between the ECJ and national courts is becoming more vertical in that they are referring matters to the ECJ, which has a sense of being a superior court to the national bodies, which then makes a judgement on the issue at hand and passes its judgement back down to the national courts. The national courts then give a judgement that enforces the ECJ idea of EC law. There do exist circumstances when the ECJ ruling will not have to be enforced. As shown in the Arsenal v. Reed case, an example is when the ECJ breaches its powers under Article 234 EC and gives a preliminary ruling on an issue not covered by that Article. In the context being dealt with here, the decision by the ECJ was made on the facts of the case, not on points of law that it was asked to clarify. It is therefore in breach of Article 234, as it was asked to give judgement regarding Article 234 EC (b), the validity and interpretation of acts.
The ECJ itself has declined to give a judgement on a case that specifically dealt with the facts.

"This means that the questions asked by the national a court, having regard to the circumstances in this case, do not fall within the framework of the duties of the Court of Justice under Article 234 of the Treaty.
The Court of Justice accordingly has no jurisdiction to give a ruling on the questions asked by the national court." 13.

This case serves to illustrate the ECJ's reluctance to pass judgements regarding the facts and circumstances of a case if it breaches its jurisdictional boundaries. It is therefore possible to construe that the breaching of jurisdiction would render a judgement invalid, as the ECJ believes it should not pass judgement outside its jurisdiction. Consequently, the overturning of an invalid ECJ judgement by a national court has to be permitted, as the aforementioned ECJ ruling is deemed illegitimate due to the exceeding of jurisdictional boundaries. In conclusion of this point, the ECJ ruling arguably went beyond its jurisdictional boundaries. The ECJ has to pass judgement on questions of interpretation and the Treaty as well as other subjects. Following these judgements the national courts must show creativity in being able to articulate the aims of the ECJ into the specific facts of the case in hand. The ECJ must stay within the boundaries provided by Article 234 EC, and the national courts must apply the ECJ judgements to specific issues, otherwise the whole process becomes illegitimate. In conclusion, the ruling by the ECJ was outside their jurisdiction and consequently invalid. As such, it can be ignored without repercussion.

  1. Cases C-46/93 and C48/93 Brasserie du Pecher SA v. Germany and R. v. Secretary of State for Transport, ex parte Factortame Ltd. And others ECR I-1029[^ Return]
  2. Cases C-46/93 and C48/93 Brasserie du Pecher SA v. Germany and R. v. Secretary of State for Transport, ex parte Factortame Ltd. And others ECR I-1029 para 51 [^ Return]
  3. paras 55-57[^ Return]
  4. Cases C-46/93 and C48/93 Brasserie du Pecher SA v. Germany and R. v. Secretary of State for Transport, ex parte Factortame Ltd. And others ECR I-1029 para 22[^ Return]
  5. Case C-392/93, R. v. HM Treasury, ex parte British Telecommunications plc [1996]ECR I-1631 paras 43-45 of ruling[^ Return]
  6. Cases C-283, 291 & 292/94 Denkavitt International v. Bundesamt fur Finanzen [1996] ECR I-5063 paras 51-52 of ruling[^ Return]
  7. Case 26/62, NV. Algemene Transporten Expeditie Onderneming van Gend en Loos v. Nederlandse Adminisrtatie der Belgastingen [1963] ECR 1, [1963] CMLR 105[^ Return]
  8. Craig and De Burca 'EU Law Text Cases and Materials', 2nd ed. 1998 pp 252[^ Return]
  9. Case C-213/89 R. v. Secretary of State for Transport, ex parte Factortame Ltd. and Others 1990 ECR I-2433, [1990] 3 CMLR 1 para 21 of ruling[^ Return]
  10. Factortame Ltd. V. Secretary of State for Transport (No.2) [1991] 1 AC 603 [^ Return]
  11. Arsenal Football Club PLC v Reed [2003] 1 All ER 137 from www.lawcampus.butterworths.com[^ Return]
  12. www.lawcampus.butterworths.com[^ Return]
  13. Case 104/79, Pasquale Foglia v. Mariella Novello [1980] ECR 745, [1981] CMLR 45 paras 12-13[^ Return]


BIBLIOGRAPHY and SOURCES

D. Chalmers 'EU Law Vol. 1'

Craig&De Burca 'EU Law Text Cases and Materials 2nd Edition 1998

www.lawcampus.butterworths.com

www.lawreports.co.uk/euro.cj

Foster 'EC Legislation' 10th edition 1999

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