Direct effect is a principle of EU law. It enables individuals to immediately invoke a European provision before a national or European court. This principle relates only to certain European acts. Furthermore, it is subject to several conditions. It can apply in relation to regulations, directives, treaty provisions and decisions.
The term ‘direct effect’ was first used by the Court of Justice of the European Union (CJEU) in a judgement on 5 February 1963 when it attributed, to specific treaty articles, the legal quality of direct effect in the case of NV Algemene Transporten Expeditie Onderneming van Gend en Loos v. Nederlandse Administratie der Belastingen (Case 26/62). In this case, the CJEU identified three situations necessary to establish the direct effect of primary EU law. These are that:
- the provision must be sufficiently clear and precisely stated;
- it must be unconditional and not dependent on any other legal provision;
- it must confer a specific right upon which a citizen can base a claim.
If these conditions are met, the provisions of the treaties can be given the same legal effect as regulations under Article 288 of the Treaty on the Functioning of the European Union (TFEU). However, there is little legislation on employment and industrial relations to be found other than in primary law and in the regulations on the free movement of workers.
By virtue of the doctrine of the supremacy of EU law, provisions of Community law with direct effect take precedence over domestic laws (Flaminio Costa v. ENEL, Case 6/64). EU labour law rules take precedence over national labour law rules.
Taken together, the principles of direct effect and supremacy mean that treaty provisions may be used to make claims before domestic courts and override domestic law. Probably the best-known example is Defrenne v. Sabena (Case 43/75), where the CJEU decided that:
The principle that women and men should receive equal pay, which is laid down by Article [141 EC now 157 TFEU], may be relied on before the national courts. These courts have a duty to ensure the protection of the rights, which that provision vests in individuals.
In the Viking case (Case C-438/05), Article 43 of the Treaty of the European Union (now Article 49 TFEU) is interpreted as capable of conferring rights on a private undertaking that may be relied on against a trade union or an association of trade unions. In the Laval Case (Case C-341/05), Article 49 of the Treaty of the European Union (now Article 56 TFEU) was held to have direct effect, so that Member States must amend national laws that restrict any freedom incompatible with the Treaty’s principles.
Most EU law on employment and industrial relations takes the form of directives. According to Article 288 TFEU, ‘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’. Therefore, the CJEU’s decision to extend the principle of direct effect to directives was crucial.
The rationale for attributing direct effect to directives was to secure the ‘useful effect’ of EU legislation. Since EU law was a new transnational legal order capable of conferring rights on individuals, an interpretation of Article 249 of the Treaty of the European Union (now Article 288 TFEU) was developed, which emphasised the binding result to be achieved by directives, rather than, as stated by Article 288 TFEU, leaving ‘to the national authorities the choice of form and methods’.
Direct effect can apply both horizontally and vertically, with the distinction based on against whom the right is being enforced, and the nature of the right itself.
Vertical direct effect
Where rights conferred by a directive are violated by the State or by emanations of the State, a citizen can exercise vertical direct effect. Vertical direct effect concerns the relationship between EU law and national law, and the State’s obligation to ensure its legislation is compatible with EU law. Citizens can apply it in claims against the State (or against an emanation of the State) as defined in Foster v. British Gas (Case C-18/89). Following this case, the criteria laid down to define the emanations of the State could include privatised industries or services that formerly provided public services. Employees in these industries and services may rely directly on provisions in EU directives, so that a large proportion of the national workforce can directly enforce rights contained in the directives.
The impact of the concept of vertical direct effect is substantial in certain areas, such as the provision on equal pay between women and men in Article 157 TFEU. Moreover, when the CJEU held that the doctrine of vertical direct effect applied also to the substantial body of EU legal measures in the form of directives (Van Duyn v. Home Office, Case 41/74), the implications were much greater for the field of employment and industrial relations. Employment rights contained in directives now became capable of direct enforcement against the State before national courts.
Horizontal direct effect
Horizontal direct effect is a legal doctrine developed by the CJEU whereby individuals can rely on the direct effect of provisions in the treaties, which confer individual rights, in order to make claims against other private individuals before national courts.
By virtue of the doctrine of the direct effect of treaty provisions, individuals can rely directly on EU law before their national courts. There is no need for the implementation of EU law by Member States through national law. The CJEU’s creation of the doctrine was driven by Member States’ failure to comply with EU law.
The initial rationale of direct effect was partially changed when the question arose of the direct effect of directives. The CJEU held that the doctrine of direct effect did apply to directives. However, directives had only vertical direct effect (see above). Therefore, individuals could claim only the rights conferred by directives against the State or emanations of the State. This, more limited, version of the doctrine prevented individuals claiming rights under the directive as against other private players (‘horizontal’ direct effect).
However, the State may appear in a number of emanations of public authority. The scope of the ‘different emanations of the State’ depends on the criteria developed by the CJEU to define them. Nonetheless, the rule of horizontal direct effect remains that directives do not have direct effect against private individuals. A number of Opinions by Advocates-General have attempted to overturn the limitation in the doctrine of horizontal direct effect, extending the effect of directives to private persons, but without success (Dori v. Recreb srl, Case C-91/92). The CJEU’s doctrine of indirect effect (see below) achieves, partially, the result obtainable through the rule of direct effect; however, this is only insofar as the national law is not wholly inconsistent with EU law.
The impact of the doctrine of horizontal direct effect, when applied to provisions of the treaties, has been limited in the fields of employment and industrial relations, since relatively few treaty provisions confer individual rights in those areas. However, the Charter of Fundamental Rights of the European Union was incorporated into primary EU law by the Treaty of Lisbon, which came into force on 1 December 2009. The inclusion of fundamental rights concerning employment and industrial relations into primary EU law, as was the case with equal pay for women and men (Article 157 TFEU), could lead the CJEU to attribute binding direct effect – vertical and horizontal – to provisions of the Charter.
The doctrine of indirect effect requires national courts, as organs of the Member State responsible for the fulfilment of EU obligations, to interpret domestic law consistently with directives. This doctrine achieves indirectly, through the technique of judicial interpretation of domestic law, the result obtainable through the doctrine of direct effect of directives.
Indirect effect can thus be seen both as an addition to, and as the corollary of, the doctrine of direct effect. In the case of provisions of directives having direct effect, national courts must disregard domestic law where there is a conflict between the directive and domestic law. In the case of a directive lacking direct effect, the national courts must make every effort to interpret domestic law consistently with the directive.
The doctrine of indirect effect is of vital importance to the enforcement of EU rights against private persons (horizontal direct effect). As directives have only vertical direct effect in claims based on directives against private persons, domestic law may be the only legal basis for a claim. The domestic court is obliged to exert itself to ensure that domestic law is interpreted consistently with the EU directive. However, this result is obtainable insofar as the national law is not wholly inconsistent with EU law.
See also: compensation; enforcement of EU law; Francovich principle; judicial enforcement of EU law; justiciability of EU law; national labour courts; remedies for infringements of EU law; sanctions; state liability.
VERTICAL DIRECT EFFECT OF DIRECTIVES. CLARIFICATIONS IN THE RECENT CASE-LAW OF THE COURT OF JUSTICE OF THE EUROPEAN UNION
One of the most complicated aspects of European Union Law is linked to the possibility that directives will have a direct effect. Without being provided for in the Treaties (unlike regulations), the possibility that in certain circumstances the provisions of a directive may have direct effect, but only in the vertical relations between individuals and the Member State (vertical direct effect) has been established by the case-law of the Court of Justice of the European Union. The same case-law excludes the possibility that a directive may be invoked in relations between individuals, prohibiting their horizontal direct effect. However, despite the rule of no-horizontal direct effect, the Court has adopted a broad definition of the scope of direct vertical effect of directives, admitting the possibility that the provisions of a directive to be opposed even an entity or a private law body, which may be considered as a "emanation of the state" under certain circumstances.
Making a brief overview of case-law on the direct effect of directives and of doctrinal opinions on this case-law, the paper focuses on identifying the conditions under which a body can be considered a "State" or "emanation of the State", especially in the context of the recent clarifications given by the Court in case Farrell (C-413/15). Underlining the importance and implications of these clarifications, we conclude that the flexible way of interpreting the criteria on which a body must meet in order to be considered an emanation of the state for the purposes of vertical direct effect of a directive are in fact assisting at the blurring of the distinction between vertical and horizontal direct effect of directives.
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