Francovich v Italy (Case C-6&9/90) [1991] ECR I-5357

The Francovich v Italy case is a landmark decision by the European Court of Justice (ECJ) that established the principle of state liability, where Member States of the European Union (EU) can be held accountable for failing to implement EU directives, resulting in losses to individuals. This case emphasises the supranational nature of EU law and its direct impact on Member States and citizens. It also underscores the ECJ’s proactive approach in extending the applicability of EU law to safeguard individual rights.

Background of Francovich v Italy

The European Union operates under a dual legal framework comprising:

  1. Primary Law: Treaties that form the constitutional backbone of the EU.
  2. Secondary Law: Includes regulations, directives, and decisions. While regulations are directly applicable, directives require implementation into national law by Member States within a specific timeframe.

EU directives often create obligations for Member States to confer rights on individuals. These rights are enforceable in domestic courts against the state (vertical direct effect), but generally not against private parties (horizontal direct effect).

The ECJ has progressively expanded citizens’ rights under EU law through its rulings. Francovich v Italy exemplifies this evolution by addressing the issue of Member State non-compliance with EU directives and establishing mechanisms for redress.

Facts of Francovich v Italy

  1. Directive Involved: Directive 80/987/EEC (Insolvency Protection Directive) required Member States to implement measures ensuring employees receive compensation for unpaid wages if their employers become insolvent.
  2. Failure to Implement: Italy failed to transpose the directive into national law by the 1983 deadline, leaving no mechanism for employees to claim their rights under the directive.
  3. Claimants:
    • Andrea Francovich was owed 6 million Lira in unpaid wages after his employer, CDN Elettronica SnC, went bankrupt.
    • Danila Bonifaci and 33 other employees were collectively owed 253 million Lira after the bankruptcy of Gaia Confezioni Srl.
  4. Legal Action: The claimants sued the Italian government for compensation, arguing that Italy’s failure to implement the directive had directly caused their losses.

Issues

  1. Can individuals claim compensation against a Member State for its failure to implement an EU directive?
  2. Does Directive 80/987 confer specific rights on individuals enforceable under EU law?
  3. What conditions must be met to establish state liability?

Francovich v Italy Judgement

The European Court of Justice in Francovich v Italy ruled in favour of the claimants, holding the Italian government liable for the losses incurred due to its failure to implement Directive 80/987. The Court’s decision laid down key principles:

  1. State Liability: Member States can be held accountable for breaches of EU law, including failure to implement directives. Individuals must be compensated if the breach results in identifiable and direct losses.
  2. Conditions for State Liability: To claim compensation under state liability, the following criteria must be met:
    • The directive must confer rights on individuals.
    • The content of those rights must be identifiable in the wording of the directive.
    • There must be a causal link between the state’s failure to implement the directive and the damage suffered by individuals.
  3. Directive’s Applicability: The Court in Francovich versus Italy found that the directive’s wording was too vague to invoke direct effect. However, denying compensation would undermine the effet utile (effectiveness) of EU law.
  4. Enforcement: The Court emphasised that it is the responsibility of national courts to enforce state liability within their procedural frameworks.

Conclusion

Francovich v Italy is a milestone in the development of EU law, establishing the principle of state liability and reinforcing the supremacy and effectiveness of EU directives. By holding Member States accountable for non-compliance, the ECJ ensured that individuals can seek redress for losses caused by breaches of EU law. The case also marked a significant step in the EU’s legal evolution, balancing the need for integration with the challenges of respecting national sovereignty. Despite criticisms, Francovich remains a foundational precedent for protecting citizens’ rights and promoting the uniform application of EU law across Member States.

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