Direct effect

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EU legislation is said to have 'direct effect' when its provisions can be relied on in national courts. That is, directly effective provisions create rights and duties between individuals, which they can enforce in the courts of member states. There is a related concept sometimes mistaken for this, 'direct applicability', which states that certain provisions of EU law become national law without further enactment. However, 'direct applicability' is an institutional concept that concerns how law is incorporated, whereas 'direct effect' is a remedial concept that concerns whether the law can be relied upon (or enforced) by individuals. The distinction between direct effect and direct applicability has come about in an evolutionary way, through the development of EU case law by the European Court of Justice (ECJ). In any event, it is now established that some legal provisions are directly effective but not directly applicable, some are directly applicable but not directly effective, and some are both directly effective and directly applicable.

Historical Basis: Development of the Concept of Direct Effect

The concept of 'direct effect' comes neither from the Treaties nor from EU legislation. The Treaties are largely silent on how member states are to give effect to rights and duties under EU law. Although some member states have the administrative machinery in place to allow international treaties to become part of domestic law, most (including the UK) do not. In the UK, it is normally necessary for Parliament to specify by legislation how a treaty is to be interpreted by the courts. For example, the UK ratified the European Convention on Human Rights (ECHR) more than fifty years ago, but this only became a source of law on the enactment of the Human Rights Act (1998) a little over a decade ago. It is very likely that the original signatories to the EC Treaty believed they were entering into the same kind of agreement, namely an international treaty requiring specific implementation in domestic law. But this is not the way the institutions of the EC themselves viewed the matter.

The doctrine of direct effect can be traced to the decision of the ECJ in Van Gend en Loos (1963), a case concerning whether what is now Art. 25 (on the abolition of customs duties) could be used as a defence against prosecution for non-payment of an import tariff. Although the EC Treaty did not state that the Art. 25 was directly effective (or even, for that matter, directly applicable), the ECJ held that it was in the spirit of the Treaty that this provision should be so. Van Gend en Loos turned out to be a landmark decision, and it was clear from the submissions of the member states at the time that the ECJ's ruling (implying that a treaty provision should have immediate legal consequence in the courts of the member state) would not be welcome. The Van Gend en Loos decision is an early example of the ECJ's generally 'teleological' interpretative process, in which it has sought to give effect to the purpose of the Treaty rather than its specific and literal wording. This constitutes a very different style of decision making than that practiced by UK courts (that is, at least openly).

In order to reduce the burden on national courts, and perhaps also to mollify reluctant member states, the ECJ imposed certain requirements for a Treaty article to have direct effect. (This also implied that it was not necessarily the case that all Treaty articles have this property). In particular, a provision may be labeled directly effective if: (i) it is clear, negative (prohibitory) and unconditional; (ii) its wording indicates that it is intended to create rights or obligations; and (iii) it does not allow for any discretion in implementation by member states. In practice, these requirements are not nearly as restrictive as they might at first seem. For instance, although a measure that imposes a positive obligation on a member state might not be justiciable, the ECJ has been willing to separate Treaty provisions into separate 'negative' and 'positive' elements, thus allowing national courts to enforce the negative ones. In Costa v ENEL (1964), for example, the ECJ was tasked with considering the direct effect of (what is now) Art. 31 of the EC Treaty. Para (1) imposes a positive obligation, a requirement to 'adjust state monopolies', which was held in itself not to be directly effective. However, para (2) states: 'Member states shall refrain from introducing any new measure which is contrary to the principles laid down in paragraph 1'. The court held that this meant the applicant could seek a declaration from his national court that a monopoly had been unlawfully created.

Moreover, even though the Van Gend en Loos decision stipulated that a provision had to be 'clear' and 'negative', in Defrenne v Société Anonyme Belge de Navigation Aérienne no. 2 (1976) the ECJ recognized as directly effective Art. 141 of the EC Treaty, a provision which neither the member states nor even the Commission believed to be sufficiently precise to warrant this status. However, the ECJ held that while the provision itself was not clear enough to allow complex questions of fact to be determined, given that the factual situation in this instance was clear, the principle (of equal pay for men and women) was sufficiently precise to be justiciable in the national courts.

In short, it seems that the real requirements for a Treaty provision to be directly effective is that it: (i) be unconditional; (ii) be intended to create rights and duties; (iii) leave no further implementation to member states; and (iv) be necessary to give effect to important Community principles. There is, however, little specific support for this stance in the Treaties themselves; it is purely a reflection of the ECJ's teleological (or purposive) approach to interpretation.

Direct Effect of Treaty Articles

As far as primary legislation (or Treaty provisions) is concerned, the ECJ established the principle of direct effect in the Van Gend en Loos (1963) judgment. However, it laid down (as we have just seen) the conditions that the provision in question: (i) be clear, negative (prohibitory) and unconditional; (ii) be intended to create rights and obligations; and (iii) not allow for any discretion in implementation by member states.

As such, the ECJ has specified that the following Articles in the Treaty establishing the European Community (the EC Treaty) are of direct effect:

  • Article 12 on the prohibition of discrimination on grounds of nationality;
  • Article 25 on the prohibition of customs duties or charges having equivalent effect;
  • Articles 28 and 29 on the prohibition of quantitative restrictions;
  • Article 39 on freedom of movement for workers;
  • Article 43 on the right of establishment;
  • Article 50 on the free movement of services;
  • Article 81 on the prohibition of concerted practices and Article 82 on the prohibition of abuse of a dominant position;
  • Article 88 on state aid;
  • Article 95 on the prohibition of discrimination in the taxation of imported goods;
  • Article 141 on equal treatment for men and women.

Note that the ECJ has distinguished between Treaty provisions that have 'full' (i.e. both vertical and horizontal) direct effect (e.g. Articles 39, 43, 50 and 81) and those that have 'partial' (i.e. vertical only) direct effect (e.g. Articles 12 and 95).

In sum, for the terms of the EC Treaty, and other Treaties that have followed it, to have their full intended effect, it is seen as necessary for their Articles to have the force of law in each member state. The provisions of the EU Treaties have therefore been given both direct effect and superiority ('supremacy') over national laws following the decisions of the ECJ, provided the Articles in question satisfy the Van Gend en Loos criteria.

Direct Effect of Regulations

The early cases on direct effect concerned Treaty articles. However, once the concept of direct effect was established in this context, there seemed little doubt that the ECJ would apply it to Regulations as well, provided it made good sense to do so. After all, Art. 249 states that a Regulation shall be 'binding in its entirety and directly applicable'. In principle, direct effect and direct applicability (which all Regulations are) go hand in hand; this is indeed the case as regards Regulations. However, certain provisions may have direct effect without being directly applicable; this is the case with directives, which have direct effect (under certain conditions) but are not directly applicable (as they have to be transposed). Following the decisions in Leonesio v Italian Minister of Agriculture (1973) and the more recent Munoz v Frumar (2002), it is now clear that any Regulations fulfilling the Van Gend en Loos criteria enjoy both horizontal and vertical direct effect.

Direct Effect of Directives

Two challenges arise in extending the principle of direct effect to directives: first, not all directives are sufficiently precise that they can be directly effective; second, it is unclear whether directives may, as Treaty articles and Regulations can, have 'horizontal' (in addition to 'vertical') direct effect. Provision that have horizontal direct effect are capable of being invoked in the courts of member states in the context of actions between private parties. Most of the landmark decisions regarding direct effect before the ECJ's judgment in Van Duyn v Home Office (1975) (see below) concerned actions against the state. The question whether the same rules might apply to actions between private parties was never considered, at least not in any great detail. It now seems settled law that both Treaty articles and Regulations are capable of having 'horizontal' direct effect, and the issue remains controversial only in the case of Directives.

Can Directives be Directly Effective at all?

Regulations are of general application, binding in their entirety, and directly applicable in all member states without the need for individual member states to enact these domestically. Directives, on the other hand, are addressed to one or more member states, requiring them to achieve (by amending national law if necessary) specified results. They are not directly applicable, as they do not create enforceable Community rights in member states until the state has legislated in accordance with the Directive. In this sense, it is the domestic statute that creates the corresponding Community rights for the citizens of that country.

Hence, by definition, Directives are provisions that must be implemented by member states by means of their own legislative machinery. If that is the case, can Directives, which technically are not pieces of EU legislation, have direct effect? The answer, which was a matter of controversy when first stated in Van Duyn v Home Office (1975), is that they can. Directives cannot impose legal obligations on individuals or private parties, but they do confer rights on individuals and private parties against the state and state bodies, even before they have been implemented by changes to national law. In other words, Directives are clearly capable of being directly effective. In fact, the Van Gend en Loos formula may be applied to Directives to determine whether this is the case. Of course, the very nature of Directives means that the rights and obligations they create will often be less precise than those contained in either Treaty provisions or Regulations, with the result that they are less likely to possess this property than these other two forms of EU legislation.

In Van Duyn v Home Office, the ECJ opined that a Directive (in this instance, prohibiting restrictions on free movement) could be directly effective against the state, provided its obligations were clear enough for it to be justiciable. This decision, like Van Gend en Loos in its day, was not welcomed by the member states. They argued that if the Treaties drew a line between non-discretionary Regulations and discretionary Directives, at least some measure of discretion by the state must be preserved with respect to this form of 'legislation'. However, to recognize Directives as 'justiciable' in the context of a legal action initiated by a private party would effectively override any discretion the states might hope to possess. A few years after its decision in Van Duyn v Home Office, the ECJ, in the case Ratti (1978), was even more unequivocal about the direct effect of Directives. It stated that it would be contrary to EC law for a member state, when asked by a litigant who had complied with EC law to rule in his favour, to prefer its own 'special' rules to those of the Community.

Despite this perceived blow to the power of member states, in the days of Van Duyn v Home Office the ECJ could not then impose financial penalties on a particular state for having failed to implement a Directive. As a consequence, the only way for the ECJ to compel recalcitrant states to do so was to allow actions brought against them by private parties to succeed where otherwise they would have failed. This punitive use of direct effect was emphasized by the ECJ in Ratti, which also imposed a limit on the scope of this concept in the case of Directives. The reasoning of the Court in Ratti was based on the 'estoppel' principle: if member states were to be free to resile from their obligations to implement Directives, many vital ones would never take effect. Member states should therefore be estopped from relying on the strict discretionary nature of Directives as a defence against allegations of non-implementation. However, the court held that this could only occur once the deadline for the Directive's implementation had passed.

Note that the ECJ has recognized direct effect as also applying to cases where the Community itself (and not just member states) have failed in its lawful obligations; see, for instance, Reyners v Belgium (1974).

Can Directives be Horizontally Directly Effective?

Directives are provisions of EC law that bind member states, to which they are addressed, as to the result to be achieved, but leave the choice of form and method of implementation to the member states. They are normally used for the purpose of harmonising the laws of the member states so as to comply with general Community policies in specific areas, such as electronic commerce, the environment, intellectual property and public procurement. The Directive is the instrument most used by EU institutions.

We have seen that a Directive may have 'vertical' direct effect where the state fails to adopt measures to implement the directive or takes measures that do not fully comply with its provisions. In such a situation the parties affected may rely upon the provisions of that Directive against the State. By virtue of the ECJ's decision in Ratti (1978), a Directive that is not implemented, or that is not properly implemented, cannot become directly effective before the period for the implementation of the Directive has expired. Once this period has expired, by virtue of the ECJ's decision in Van Duyn v Home Office (1975), the Directive may have vertical direct effect provided the provisions sought to be relied upon are clear and unambiguous, unconditional, and not dependent on further action for their implementation.

A non-implemented or mal-implemented directive may not give rise to horizontal direct effect, that is, it may not be relied upon by a private party to assert rights in domestic courts against another private party. A Directive may not of itself impose obligations on an individual and, accordingly, a provision of a Directive may not be relied upon against such a person. This limits the scope for pleading provisions of non-implemented or mal-implemented provisions of Directives in domestic courts. As such, it has been widely criticised. (See e.g., Craig, 'Indirect Effective Directives in the Application of National Legislation' in Andenas and Jacobs (eds.), European Community Law in the English Courts (1998), pp. 37- 55.) Indeed, if the purpose of recognizing direct effect in various types of legislation is to ensure that the Community's project is not hindered by non-compliance of the member states (or the institutions of the EU), and if Regulations and Treaty articles can have horizontal direct effect, it seems strangely inconsistent to deny Directives horizontal direct effect. There seems to be little basis in the Treaties for distinguishing Directives in this regard. Nevertheless, the ECJ has consistently refused to allow individuals to rely on Directives in actions against other individuals.

The ECJ first articulated its stance regarding horizontal direct effect for Directives in Marshall v Southhampton and South West Area Health Authority No. 1 (1986). In this case, the court refused to extend the principle it had established in Van Duyn v Home Office in order to provide for horizontal direct effect, although it did accept that vertical direct effect could exist against state-run bodies (or 'emanations of the state'), as well as the central organs of state. However, there were at least two problems with the court's reasoning. First, the ECJ cited a number of objections to horizontal direct effect in the case of Directives that are either no longer valid or apply equally to vertical direct (which the court had already recognized). Second, some of its arguments appeared to apply also to horizontal direct effect in the case of Regulations (which the court also had already recognized). For example, the court suggested that because Directives were not publicly available, it would be unjust to expect private parties to organize their affairs according to laws of which they were unaware. However, Art. 254 now imposes an obligation to publish all Directives; this argument is therefore no longer valid. It also argued that the discretion accorded member states in implementing Directives made it unlikely that recognition of horizontal direct effect could ever (by virtue of Van Duyn v Home Office) apply; but if so, it would be difficult to see how vertical direct effect managed to escape this objection.

Most likely the ECJ's willingness to allow for vertical, but not horizontal, direct effect in the case of Directives is a compromise. While logic would suggest that Directives ought to be horizontally directly effective if Regulations are, member states have, however reluctantly, conceded vertical direct effect but have appeared unwilling to accept horizontal direct effect. All the same, there are indications that the ECJ would prefer to extend horizontal direct effect to Directives as it has consistently sought to achieve roughly similar results by other means.

Indeed, the ECJ has developed three strategies for overcoming this perceived deficiency in EC law. First, it has adopted a generally broad definition of the 'state'. Second, it has imposed an obligation on domestic courts to interpret national law, as far as possible, in light of the wording and purpose of Directives so as to achieve the results they prescribe. (Note that while this interpretative obligation prohibits domestic courts from applying homegrown enactments that are inconsistent with the provisions of unimplemented Directives, it stops just short of granting domestic courts jurisdiction to enforce rights conferred by non-implemented Directives against private parties.) Third, the ECJ has provided remedies in damages against members state where private parties have suffered loss as a result of non-implementation, or mal-implementation, of Directives.

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Limitations on the Indirect Effect of Von Colson (1984) and Marleasing (1989)

In Litster v Forth Dry Dock and Engineering Co. Ltd (1989), the House of lords determined that a Statutory Instrument (a form of UK legislation created by a body authorised by Parliament - such as a Government Minister - to legislate in delegated areas) which was passed specifically to implement an EC directive into UK law would be subject to the Von Colson principle and may therefore grant rights actionable against private individuals.

Litster is notable because it goes against the decision in Duke v GEC Reliance Ltd (1988), where the House of lords stated that to apply the Von Colson principle would be “unfair” on the defendant. The suggestion is therefore that where legislation is passed specifically to give effect to EC Directives or to bring UK law into line with that of the EC, the courts are more likely to accept the Von Colson principle.

Further limitations on the effect of the principle were established in Luciano Arcaro (1996), when the European Court of Justice ruled that the principle could not be used to impose criminal liability on a private individual where the Member State in which the case is brought has not given effect to the Directive on which the claimant is relying. The decision in Duke is therefore a re-stating of Article 6 of the European Convention on Human Rights; paragraph 2 of which states that anyone “charged with a criminal offence is innocent until proven guilty according to the law”.

The Von Colson principle allows an individual to sue for violation of rights granted by an EC Directive in certain circumstances, even where that Directive would not normally have a direct effect. The principle cannot be effective where giving it effect would render criminal liability. In cases where it is effective however, it allows for remedies to injustice where such remedies would otherwise be unavailable.

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Direct Effect of Decisions

By Article 249 of the EC Treaty, Decisions are binding in their entirety upon those to whom they are addressed, whether member states, or natural or legal persons. Precise and unequivocal provisions of the decision addressed to a member state may be relied upon by individuals against the member state concerned. (See Case C-156/91, Hansa Fleisch Ernst Muntd GmbH & Co v KGV Landrat Des Kreises Schleswig (1992).)
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