The aim of this essay is to investigate and
gain deeper insights whilst delving into concept(s) of Indirect Effect, State
Liability, Horizontal Direct Effect (HDE), Vertical Direct Effect (VDE), EU
Directives, how the directives inhibit the full extent of HDE and the issues
pertaining to the limitations of the directives.
Indirect Effect is a concept within the law of the
European Union, whereby the courts of Member States are required to have their
national courts explicate their national laws in tandem with European
provisions. This goes on to contradict the concept of Direct Effect whereby,
under certain conditions, and individual may invoke a European provision or
legislation in a national court. This concept was first seen in the case of Van
Gend en Loos1.
This was the pioneering case for the principle of Direct Effect as it made the
European provisions available for the individual to invoke whilst
in court. Van
Gend en Loos portrayed an unmatched jurisprudence of the European Court of
Justice whereby European provisions were able to tailor itself to the need of
the hour in the case of the individual. The concept of direct effect has not
been mentioned or stated in the treaty however the court held that such a set
of ideologies were of utmost importance in ensuring the adherence of member
states regarding their obligations under the Treaty of Rome.
principle of Direct Effect enshrines two other concepts within it, namely:
Horizontal Direct Effect and Vertical Direct Effect. The concept of Horizontal Direct Effect solicits
the relationship between individuals rendering the ability to individuals to
invoke a European Provision against another individual or against private entities.
The reliance of this provision was first seen in Defrenne v. Sabena2,
where the plaintiff, Miss Defrenne sued her employer for inequality in pay on
the grounds of gender under currently
Article 157 of the TFEU (ex Article 141 TEC)3.
Vertical Direct Effect is
a concept whereby, a citizen is able to enforce their rights and hold the state
liable via the means of a lawsuit. It declares the relationship between citizen
and state, making it possible for the citizen to bring a lawsuit against any
branch or sector that belongs or is operated by the government. In the case of Foster v. British Gas PLC4.
Foster, an employee at British Gas, was to retire from her job upon reaching
the age of 60 whereas men were able to work up until the age of 65. Therefore,
on the grounds of sex, Mrs. Foster and four other women claimed that their
retirement age was discriminatory. The directives, in theory were only binding
towards member states and since British Gas was a nationalised entity, Mrs
Foster had to establish foundation in her case as to how the company was a part
of the member state. It was argued by the plaintiff that the members of British
Gas’ board were appointed by a government official who was entitled to instruct
and govern the board if it had been deemed as fit. It was also the duty of the
board to report back to the official. Therefore Mrs. Foster had underlined the
link between state and company, allowing it to be inferred that British Gas was
a part of the state. It was held in European Courts that the organisation in
question had to be subject to the “authority and control” of the state and if
so, the matter was to be dealt with in national courts relying upon the
European provision. Subsequently, in national court, the appeal was allowed
after having relied on the European provision.
mentioned in the introduction, the subject of EU Directives is to be discussed
in the following paragraph. According to
of Article 249 EC, it is stated that: ‘A directive shall be binding, as to the
result to be achieved, upon each Member State to which it is addressed, but
shall leave to the national authorities the choice of form and methods.’5
European court of justice (ECJ) held that directives might be classed as direct
effect, but in a controlled manner, like in the case of Grad v Finanzamt
a case that involved value added tax (VAT). The ECJ ruled in the case of Grad v
Finanzamt, it is such that a directive can be a directly effective and had the
foundation to become direct effect but in the event of a breach in given
parameters, i.e. ‘the expiration of the deadline of the administration has
the directive could be affected and may render null and void as seen in the
case of Pubblico Ministero v. Ratti8.
It was perceived that if there was a lapse in the time limit (expiration of
deadline) in the completed administration of a certain directive, then it can
be implied and held that it cannot have direct effect or be direct effect. It
is said that directives are limited to only being vertical in nature, implying
that it would only be utilised if the member state or any entities/governing
bodies of the state were to be involved- not the common man.
do not have the ability to be horizontal in nature; meaning, as explained
before, the directives will not render the ability for a citizen to sue against
another citizen and it also prevents them from suing private entities9.
The authority to form directives is stated in
the Treaty of Rome under Article 249 which essentially permits an EU body to
dictate and set regulations in place. The function of the directives is to set
out a main framework as to what is required of individuals and organisations
under the regulation, however the implementation process of such directives is
left to the member state to enforce via the means of passing legislation in the
It can be implied that member states are
bound by EU directive set out to them therefore inhibiting the discretion of
said member state as to the outcome that would be accomplished in the process.
Having set out directives, the EU is able to
realise the multifarious implications on the imposing of new legislation or
regulation in a specific country. Factors such as the population, economic
background, the size of the country or certain practises with precedent could
affect any new laws and measures the directives may set out. There may be large
incurring costs, but the EU, via the European Commission, is able to prescribe
a time frame wherein the directives (legislation/regulation) are to be met.
In the event of vertical direct effect, a
directive may be issued but it would not be applied by the member state to whom
it is aimed at. Regarding the predicament of these directives, it may be
plausible whereby a member state does not succeed in the implementation of a
directive and as a result, may have the potential to prevent an individual
(citizen) of their rights, which they may not have been deprived of under
different circumstances. The defendant in these situations must display and
argue clearly, how and why the state did not perform its duty to the citizen by
failing to do what it should have carried out to di in the first place and how
the individual’s rights (which are distinctly set out in the directives) have
been tainted in the process.
In most cases, it can be said that
regulations may contain elements of both horizontal and vertical direct effect,
however when it comes to the directives, the directives are unable to possess
characteristics of horizontal direct effect. This dissimilarity has a murky
concept whereby the common people find it tough to perceive and comprehend as
to why remuneration may be claimed in the case of regulations but not in the
case of EU directives.
In the case of Marshall v Southampton10,
the plaintiff, Mrs. Marshall, brought a claim, under the grounds of
discrimination stating that it had been made essential for her to retire well
before her male co-workers. Mrs. Marshall’s appeal was allowed following her
claim to the ECJ even though an EU directive had not completely been imposed in
United Kingdom, therefore making this directive vertically directly effective
in nature which was why her claim had been allowed.
This was due to the fact that her employers
were considered to be under some governance of the state and in the likelihood
of the state having failed to enforce said directive, it could have been agreed
upon that the state that agreed upon said directive must also be willing to
compensate the plaintiff for the direct infringement of the directive. The
directive in place was viewed as vertical direct effect in this case as Mrs.
Marshall’s employer was linked to the member state’s government rather than a
private entity. In contrast to this case, in Duke v GEC Reliance Ltd11,
Mrs. Duke was unable to rely on the EU directive due to the fact that her
employer was a private company and had nothing to do with the state.
The plight of the Duke case may not render comprehensiveness to the layman
however as mentioned earlier, in Foster v British Gas plc, by virtue of being
under the influence of the state, was considered a part of the state and
therefore Mrs. Foster’s claims were allowed in court by the virtue of vertical
Subsequently, in the matter of Gibson v East Riding of Yorkshire Council12,
the plaintiff, a swim coach had her claim allowed with regards to leave
(holiday) privileges even though the directive of ‘Working Time’ was not
implemented within said time frame and therefore her employers were deemed an
’emanation of state’.
EU directives that have failed to be
implemented by member states do not have a horizontal direct effect and due to
this, individuals such as the citizens of the member state are deprived of
their rights against parties that are not regarded as ’emanation of the state
‘. As pointed out in Duke v GEC Reliance, the plaintiff had not been able to
rely on a directive that Mrs. Marshall (in Marshall v Southampton) had relied
upon in getting what was fair for her. Due to the sole reason that Mrs. Duke’s
company was not an ’emanation of the state’, her claim had been quashed,
resulting in the fact that she had not been given her rights. A direct
inference can be made as to the flaws in the system, whereby once case merits
the unfairness due to being an “emanation of state” and the other not being one.
more recent times, the jarring dichotomy in this concept has been alleviated
due to precedent from the case of Francovich v Italian Republic13.
It was seen that the government of the Italian Republic had failed in the
implementation of a EU directive that was set out to provide a safety net for
employees in the event that their employers were suffer insolvency. The
plaintiff had made a claim against the state of Italy, regarding pending wages
that had not been paid once his employer had become insolvent. Since the
Italian Republic had not implement such directive, Mr. Francovich has been
entitled to compensation and thereafter, his claim had
With regards to
Mr. Francovich’s claim, the European Court of Justice (ECJ), had laid out
conditions that needed to be satisfied before claim may be allowed. The first
condition was regarding the rights of the individual and whether they were
deemed as explicit and well defined. The second being that the directive
enabled the rights of an individual and the third being the idea of the
correlation between the violation in directive of the state and the effects and
implications pertaining to this breach in obligation.
pertaining to the dichotomy between those entities which were ’emanations of
state’ versus those who were not, has majorly affected the EU court’s
acceptance in the directives outlining the rights of individuals to be able to
make claims regarding their employers, discounting the sector of their
employer. The problems caused by the distinction made between employers forming
part of the state and those who did not has largely been overtaken by the
European court’s acceptance of the right of individuals to a claim for
compensation irrespective of which sector their employer was in14.
1 VAN GEND EN LOOS (CASE
26/62) 1963 CMLR 105
2 Case 43/75 Defrenne v. Sabena (Defrenne No 2) 1976 ECR 455
3 Article 157 (ex Article 141
TEC)”Each Member State shall ensure that the principle of equal pay for male
and female workers for equal work or work of equal value is applied”.
v. British Gas plc (Case C-188/89) 1990 ECR I-3313)
5 Article 249 (ex
189) of the Treaty of Rome 1957
9/70) Grad v Finanzamt Traunstein 1970
Ministero v. Ratti (Case 148/78) 1979 ECR 1629,
v Southampton and south-west Hampshire Area Health Authority (Teaching)
(Case152/84) 1986 ECR 732
10 Marshall v Southampton and South West Hampshire Area Health authority
(1986) Case 152/84
11Duke v GEC Reliance (Formerly Reliance Systems Ltd)
1988 AC 618
12 Gibson v East Riding of Yorkshire Council 2000
IRLR 598 (CA)
v Italian Republic (1991) C-6/9
14 The Queen v HM Treasury, ex parte British Telecommunications plc
Brasserie du Pecheur SA v Federation of Republic of Germany
R v Secretary of State for Transport, ex parte Factortame Ltd (No 4)