2.1 Fantask

A most useful cluster of cases on the Emmott rule, addressing the scope of its application when Member States have failed to adequately implement a Directive, were generated by questions referred from national courts on the interpretation of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital.³⁸ The Fantask case³⁹ was the first of a series of rulings on this topic which shed light on the compatibility of national time-limits for bringing proceedings when individuals seek enforcement of rights derived from Directives.

Fantask and a number of other Danish companies brought an action before a national court, against the Industriministeriet (Erhvervsministeriet) [Danish Ministry of Trade] to recover charges levied under Danish law between 1983 and 1992 concerning registration of new public and private limited companies, and on registration of an increase in their capital. It was argued by Fantask that a basic charge imposed at the point of registration was contrary to Articles 10 and 12 of Directive 69/335,⁴⁰ and by both Fantask and the other entities bringing suit that a supplementary charge based on the nominal value of the capital involved in the establishment or capital increase of a company (as the case may be), breached these provisions. They argued that in the light, in particular, of the judgment of the Court of Justice in Joined Cases C–71/91 and C–178/91 Ponente Carni and Cispadana Costruzioni v Amministrazione delle Finanze dello Stato,⁴¹ that Danish law breached Article 10 of Directive 69/335, which prohibits Member States from levying indirect taxes with the same characteristics as capital duty. It was further argued that the Danish measures could not be justified by Article 12(1)(e) of the Directive, which allowed Member States, notwithstanding other prohibitions laid down in the Directive, to charge ‘duties paid by way of fees or dues’.

(p. 118 ) The Court of Justice in Fantask agreed that both Articles 10 and 12(1)(e) vested individuals with rights that could be relied on in national law. More significant, however, in terms of the broader relationship between Community and national law, were the findings of the Court of Justice concerning Member State remedies and procedural rules. First, it had been argued by the Danish Government that any charges that were levied in breach of the Directive were not repayable due to the notion of ‘excusable error’ in Danish law. The charges were levied over a long period (in the case of the applicants over ten years) without the authorities or the entities concerned being aware that they were unlawful. Second, it was contended that a national time-limit of five years for bringing proceedings, which a number of the applicants had failed to meet, barred their right to recovery. The outcome of the first of these arguments will be dealt with in Part G below. With respect to national limitation periods the Court of Justice recalled that, in the absence of Community rules governing the matter, such claims were to be brought under the substantive and procedural conditions laid down by the national law of the Member States. These conditions in turn, however, had to be no less favourable than those governing similar domestic claims, and nor could they render virtually impossible or excessively difficult the exercise of rights conferred by Community law.⁴²

The Court of Justice held that, in the interests of legal certainty, which protect both the taxpayer and the authority concerned, Member States are allowed to set reasonable time-limits for bringing proceedings, and that such time-limits remain applicable even if a Directive has not been properly implemented by a Member State within the implementation period laid down in the Directive. It was concluded that a five-year time-limit was reasonable, and did not render Community law impossible in practice or excessively difficult to enforce.⁴³ It was also observed that there had been no breach of the principle of non-discrimination, in that the five-year time-limit applied without distinction to actions based on Community law and those based on national law. In addition, the Court of Justice distinguished the Emmott case,⁴⁴ by observing that the applicant in Emmott was deprived, by virtue of a national time-limit, of any opportunity to rely on individual rights paid down in an unimplemented Directive, which explained why the time-limit in that case had to be set aside.⁴⁵

(p. 119 ) The interests of legal certainty, I would argue, would have been better served in Fantask by more detailed elaboration by the Court of Justice on why Emmott was distinguishable from Fantask. In this regard, the view of former Advocate General Jacobs is most instructive. The Advocate General observed that the applicant in Emmott had been actively discouraged by government authorities from bringing her claim in good time, and concluded that the ruling stood for the proposition that ‘a Member State cannot rely on a limitation period where it is in default both in failure to implement a directive and in obstructing the exercise of a judicial remedy in reliance upon it, or perhaps where the delay in exercising the remedy is in some other way due to the conduct of the national authorities’.⁴⁶ However, the Court of Justice made a more open-ended ruling by holding in Fantask that national time-limits are lawful, provided that they do not result in depriving applicants of ‘any opportunity whatever’ to enforce individual rights contained in Directives. Later, however, it adopted exactly this approach.

2.2 Ansaldo Energia, Edis, Spac and Santex

A welcome feature, therefore, of three subsequent cases concerning Directive 69/335 was express reference to conduct of national authorities which might have discouraged the applicant. The rulings of the Court of Justice in Ansaldo Energia, Edis and Spac were all elaborated on 15 September 1998, and all concerned barriers operating under Italian law that prevented the applicants from reclaiming charges levied by the Italian state in breach of Directive 69/335. An argument that was common to all three cases concerned the Emmott ruling, and more particularly the absence of authority in the hands of the Italian Government to rely on failure of the applicants to comply with a three-year national time-limit for bringing proceedings. The Court of Justice, however, in these cases went further than had done did in its ruling in Fantask, and made the following assertion in support of the application of domestic time-limits for bringing of proceedings.

Moreover, having regard to the documents before the Court and the arguments presented at the hearing, it does not appear that the conduct of the Italian authorities, in conjunction with the existence of the contested time-limit, had the effect, in this case, as it did in Emmott, of depriving the plaintiff company of any opportunity of enforcing its rights before the national courts.⁴⁷

Santex also sheds some light on the test for determining if a time-limit is ‘reasonable’. The Court of Justice applied, in the context of time-limits for bringing proceedings, the general principle that, in deciding whether the principle of effectiveness has been breached, ‘each case which raises the question whether a national procedural provision renders application of Community law impossible or excessively difficult must be analysed by reference, in particular, to the role of that provision in the procedure, its progress and its special features, viewed as a whole’.⁵⁰ It was for this reason that the Court examined the ‘particular circumstances of the case’, which entailed close scrutiny of the conduct of the party seeking to rely on the expired time-limit in considering whether effectiveness requirements had been breached.⁵¹ In the past, the Court of Justice had been somewhat enigmatic in declaring national time-limits ‘reasonable’ or otherwise. In Fantask itself no explanation was offered for the ‘reasonableness’ of a five-year limitation period.

An equally enigmatic ruling was issued in the Preston case.⁵² There the Court held that the time-limit for enforcing equal treatment law could not begin to run from the end of each individual (temporary) employment contract, but rather had to commence from the end of the parties' overall employment relationship. It merely observed that legal certainty also required that ‘it be possible to fix precisely the starting point of a limitation period, the fact nevertheless remains (p. 121 ) that, in the case of successive short-term contracts…setting the starting point of the limitation period at the end of each contract renders the exercise of the right conferred by Article 119 of the Treaty excessively difficult.’⁵³ No criteria were set for reaching this conclusion.

2.3 Confining the Emmott Principle to the Enforcement of Directives

Further suggestion has been made for modification of the Emmott rule. Both the opinions of two of the Court's Advocates General, and a limited number of cases from the Court of Justice itself, tended to suggest that the Emmott principle was also grounded on the specific characteristics of Directives. This implied that any principle that Emmott stood for should not be extended to other types of Community rules that can vest individuals with rights, such as Decisions, Regulations, and directly effective Treaty Articles. This might have meant that, with respect to breach of these rules, the old Comet/Rowe rule on time-limits for bringing proceedings would continue to apply. For example, former Advocate General Jacobs, in the Opinion covering Haahr Petroleum, Texaco and GT-Link,⁵⁴ argued, in the context of breach by a Member State of Article 90 of the EC Treaty, that none of the factors that might render the exercise of rights derived from Directives impossible in practice or excessively difficult had any relevance to claims based on Article 90, given that, as the Court of Justice had noted in the Emmott case itself that its ruling was based on ‘the particular nature of directives’.⁵⁵ The former Advocate General took the view that ‘there can be no question’ of applicants seeking repayment of charges levied in breach of Article 90 ‘having been unable to ascertain the extent of their rights, since those rights derive from a Treaty provision which dates from 1957, which was unequivocally declared by the Court to be of direct effect in 1966, and which was applied in Denmark—taking precedence over national rules to the contrary—since its accession on 1 January 1973’.⁵⁶ Similarly, Advocate General van Gerven in Fisscher,⁵⁷ argued, in the context of breach of Article 141 by a private sector actor, that the Emmott case was not a ‘relevant precedent’⁵⁸ because it was based on the principle of venire contra factum proprium or nemo auditur. In horizontal situations concerning private parties, the culpability of a national government in failing to respect Community law did not arise, so the ‘classic’ deference to national procedural rules should apply.⁵⁹

The Court of Justice echoed these views in its rulings in Texaco and Haahr Petroleum. It concluded that one of the factors on which the Emmott case was (p. 122 ) based was the ‘particular nature of Directives’,⁶⁰ and that since the reimbursement in question was not based on incorrect transposition of a Directive, but ‘rather on the effect of a provision of the Treaty’ then reasonable national limitation periods were not contrary to Community law.⁶¹

However, these findings are not consistent with subsequent case law. So much can be distilled from the ruling in Aprile II, in which the paragraph reproduced above concerning the role of misconduct by the state also appeared,⁶² even though the case concerned a charge levied by the Italian Government in breach of provisions of the EC Treaty banning charges equivalent to customs duties, and not infraction of an EC Directive. Further, the entitlement of an individual to invoke interference by the wrong-doer in order to overcome obstructive national procedural rules was spelled out in the ruling in Case C-326/96 Levez,⁶³ in the context of restrictions on in arrears payments in a horizontal case concerning directly effective Treaty Articles. It would seem therefore that the ‘conduct’ principle is equally applicable to cases concerning breach of EC rules other than Directives.

2.4 Grundig: Inadequate Transitional Measures as a Breach of the Principle of Effectiveness

Yet, the post-Emmott rules can still lead to disapplication of national time-limits for bringing proceedings, even in the absence of discouraging conduct. Indeed, Grundig may have prized open the clasp which the Court of Justice has placed around the Emmott rule. It established that, if reductions on time-limits for bringing proceedings are not accompanied by transitional measures generous enough to allow individuals to take advantage of a previous, but longer, time-limit, the breach of the principle of effet utile will result.

The most curious element of the ruling of the Court of Justice in Grundig, lay in the fact that it concerned the interpretation of the same law that had been reviewed by the Court of Justice in the cases of Aprile II⁶⁴ and Dilexport.⁶⁵ Article 29(1) of Law no 248 of 29 December 1990 laying down provisions for compliance with the obligations arising from Italy's membership under the European Communities provided that:

The five year time-limit laid down in Article 91 of the Consolidated Customs Law…shall be deemed to apply to all claims and actions brought for the refund of sums paid in connection with customs operations. That period [shall be reduced] to three years as from the 90th day after the entry into force of this law.

In Aprile II and Dilexport the Court of Justice had ruled that the three-year time-limit would not infringe Community law, provided that the principles of effectiveness and non-discrimination were respected.⁶⁶ Thus, there was no objection in principle to the three-year time-limit set by Article 29(1).⁶⁷ Advocate General Ruiz Jarabo Colomer, in his Opinion of 14 March 2002 in Grundig, expressed the view that the reply is implicit in an extensive body of the judgments of the Court of Justice and therefore could perfectly well have been given using the quicker and more efficient route under Article 104(3) of the Rules of Procedure.⁶⁸ On the basis of this past case law, the Advocate General concluded as follows:

Community law does not preclude the application of a national provision establishing a transitional period for the entry into force of a new time-limit, shorter than that existing until that time, for persons entitled to reimbursement of sums paid but not due to bring the relevant actions, based on Community law and arising as the result of payments made before that national provision entered into force, provided that the transitional period, by reason of its length and of the other procedural and substantive circumstances of fact and law present in the national legal order, does not make it virtually impossible or excessively difficult to bring the actions in question.⁶⁹

the provision at issue sets a time-limit which is sufficient to guarantee the effectiveness of the right to reimbursement. It is clear from the written observations and oral arguments presented to the court that the Italian courts, including the Corte suprema di cassazione itself, have interpreted that provision as allowing proceedings to be instituted within the three years following its entry into force. In those circumstances, that provision cannot be regarded as having retroactive effect.⁷¹

The Court of Justice in Grundig Italiana reached a conclusion different from that of the Advocate General. The Court restated its classical case law to the effect that it is compatible with Community law for Member States to lay down reasonable time-limits for bringing proceedings ‘in the interests of legal certainty which protects both the taxpayer and the administration concerned’.⁷³ The Court observed that a three-year time-limit reckoned from the date of the contested payment appeared reasonable.⁷⁴

Nor did the principle of effectiveness present an absolute bar to the retroactive application of a new, and shorter, period;⁷⁵ however, this was held by the Court of Justice to be subject to the following important caveat:

…whilst national legislation reducing the period within which repayment of sums collected in breach of Community law may be sought is not incompatible with the principle of effectiveness, this is subject to the condition not only that the new limitation period is reasonable but also that the new legislation includes transitional arrangements allowing an adequate period after the enactment of the legislation for lodging claims for repayment which persons were entitled to submit under the original legislation. Such transitional arrangements are necessary where the immediate application to those claims of a limitation period shorter than that which was previously in force would have the effect of retroactively depriving some individuals of their right to repayment, or of allowing them too short a period for asserting that right (Case C–62/00 Marks & Spencer [2002] ECR I-6325, paragraph 38).

Thus, the transitional period must be sufficient to allow taxpayers who initially thought that the old period for bringing proceedings was available to them a reasonable period of time to assert their right of recovery in the event that, under the new rules, they would already be out of time. In any event, they must not be compelled to prepare their action with the haste imposed by an obligation to act in circumstances of urgency unrelated to the time-limit on which they could initially count.

A transitional period of 90 days prior to the retroactive application of a period of three years for initiating proceedings in place of a ten- or five-year period is clearly insufficient. If an initial period of five years is taken as a reference, 90 days leaves taxpayers whose rights accrued approximately three years earlier in a position of having to act within three months when they had thought that almost another two years were still available.

Where a period often or five years for initiating proceedings is reduced to three years, the minimum transitional period required to ensure that rights conferred by Community law can be effectively exercised and that normally diligent taxpayers can familiarise (p. 125 ) themselves with the new regime and prepare and commence proceedings in circumstances which do not compromise their chances of success can be reasonably assessed at six months.⁷⁶

Grundig Italiana can be distinguished from Aprile II and Dilexport in that different issues were raised in the order for reference. While all three cases concerned interpretation of the same provision of Italian law, neither Aprile II nor Dilexport featured questions on the adequacy of the transitional 90-day time-limit. When subjected to close scrutiny, it was found to breach the principle of effectiveness.⁷⁷ It is perhaps more surprising that the question of crafting an appropriate time-limit was not left to the national court, but was rather imposed by the Court of Justice, as part of its ruling on the requirements of effectiveness.

2.5 The Deville Prohibition on the Promulgation by Member States of Measures Specifically Designed to Frustrate Community Law

It is important to recall, however, that the entitlement of Member States to adjust time-limits for bringing proceedings, to protect legal certainty and the taxpayers concerned, is subject to a further caveat, aside from the principles of effectiveness and non- discrimination. As was mentioned in chapter 3, under the Deville principle, Member States are precluded from adopting procedural rules which specifically reduce the possibility of recovery of illegally levied charges subsequent to a judgment from the Court of Justice confirming that a domestic measure was incompatible with Community law.⁷⁸

The subtlety of the distinction between this principle and those applicable in examining the reasonableness of adjustments to time-limits, is exemplified by the fact that in both Dilexport and Aprile II the Court of Justice considered whether the Italian authorities had altered the limitation period with a view to frustrating Community law rights, but concluded that, given the measures concerned applied (p. 126 ) to all unlawfully levied customs, and a whole range of internal taxes and charges, the legislation at issue could not be regarded as intended to specifically limit the consequences of the findings made by the Court in its judgments.⁷⁹

More light was later cast on how to determine whether a change to Member State law violated the Deville prohibition. This resulted from the combined effects of Case C-437/97 EKW and Wein & Co⁸⁰ and Case C-147/01 Weber's Wine World?⁸¹ In EKW the Court of Justice held that a duty imposed under Austrian law on alcoholic beverages was incompatible with an EC VAT Directive. One week prior to this, the Land of Vienna made an alteration to the Vienna Tax Code, by providing retroactively,⁸² in amended Article 185(3) of the Code, that there would be no entitlement to repayment on unlawfully levied taxes where the burden had been passed on to others. The Land of Vienna, and other Lander, had been concerned by an Opinion of Advocate General Saggio of 1 July 1999, in which he had found the taxes impugned incompatible with EC law. Paragraph 185(3) was preceded by much debate, during which time reference was made to the Opinion of the Advocate General, and the disastrous consequences for the finances of the Austrian municipalities which would result if the Court of Justice declared the duty on beverages incompatible with Community law.

When the Court of Justice issued its ruling in EKW, it limited the temporal effects of the judgment, by precluding possibility of repayment for those who had not launched a challenge to the charges prior to the date of the judgment. The claimants, in the case that became Weber's Wine World⁸³ challenged for recovery of the taxes it had paid prior to that date. However the Austrian tax authorities, due to paragraph 185(3), rejected the claim for repayment with respect to duties that had already been passed on.

The Court of Justice concluded that the ‘purpose’ of paragraph 185(3) was to preclude the effects of the EKW judgment, should it, without limiting temporal effects, deem the duty on alcoholic beverages contrary to Community law.⁸⁴ However, that was not enough to determine whether the paragraph sought ‘specifically to reduce the possibilities of bringing proceedings for repayment of the duty on alcoholic drinks which had been levied but not due’.⁸⁵ The Court observed that the national referring court had emphasized that the measure in issue did not refer solely to the payment of duties which were levied in breach of EC law, and the Court also noted that the parties, the Austrian and Italian Governments, and (p. 127 ) the Commission had made different submissions on this point. It was therefore concluded that ‘it is not for the Court to resolve a dispute relating exclusively to the interpretation of national law: that task is solely a matter for the national court’.⁸⁶

Weber's Wine World, and the death of post-Deville decisions in which a Member State has been found in violation of it, illustrates that the threshold for finding new procedural rules in breach of the Deville prohibition is set very high. A ‘purpose’ of precluding the effects of an individual Court of Justice judgment is not enough; a ‘specific’ aim of reducing the possibility of bringing a successful claim is what must be shown. Further, the ruling in Weber shows that this is, in any event, a question that in most circumstances will be best determined by national judges.⁸⁷

The Deville threshold is therefore more difficult to meet than the Emmott‘conduct’ rule, given that the latter case law has thus far focused on confusing ‘effects’ resulting from the wrong-doers actions, and has fallen short of requiring a specific intention to frustrate Community law rights.⁸⁸ A search for deliberate or premeditated action of the Deville kind could also place the Court of Justice in an awkward position. Thus, in the Berlusconi case, discussed in chapter 2, neither the Advocate General nor the Court of Justice considered whether an Italian law which had reduced the criminal liability of the Prime Minister, and others, under the Company Law Directives, violated the Deville rule. From one perspective, Berslusconi might have been apprehended as a case concerning conflict between the Arcaro⁸⁹ prohibition on recourse to aggravation of criminal liability by reference to a Directive, and the Deville rule, given that a change in Italian law had benefited a politician accused of breaching obligations enshrined in an EC Directive. The absence of reference to Deville in Berlsuconi perhaps illustrates that there may be good policy reasons to refrain from investigating whether senior EU law makers have acted with the aim prescribed in Weber's Wine World.

The Court of Justice never applied its Emmott ruling to the context of temporal restrictions on payments due to individuals. In the ordinary course of events, national limits on the retroactive payment of sums due to individuals will be compatible with Community law.⁹⁰ However, the same exceptions have been extended to temporal restrictions on repayment of sums due as have been applied (p. 128 ) to national time-limits for bringing proceedings. That is, retroactive limits on sums claimable will breach the principle of effectiveness if (i) they are not reasonable;⁹¹ (ii) in the case of new legislation restricting retroactive periods for payment, failure to include transitional arrangements allowing for entitled persons to submit claims under the original time-limit;⁹² and (iii) the conduct of the wrong-doer has impacted on the time-frame for the operation of in arrears payments.⁹³

However, as will be illustrated by the Maggorian case, the determination of whether a temporal restriction wholly precludes application of EC measures (and is therefore unlawful) or merely narrows rights of access to judicial process in a manner that can be accommodated within European Court guidelines on remedies and procedures, is not entirely straightforward. It appears to require a case-by-case analysis. Thus legal certainty problems are as pervasive in this area of the time-limits case law as they are in others.

3.1 Steenhorst-Neerings

Case C–338/91 H Steenhorst-Neerings v Bestuurvan de Bedrijfsvereniging voor Detailhandel en Huisvrouwen⁹⁴ concerned interpretation of the Social Security Directive. Prior to 1979, a Dutch law concerning incapacity for work entitled men and unmarried women to benefits after their first year of incapacity for work, which would be payable up to the age of 65. In 1979 a new law on equal treatment extended that entitlement to married women, with the exception of married women whose incapacity for work arose before 1 October 1975. By several judgments issued in 1988, the Dutch social security court held that this latter measure constituted discrimination on grounds of sex, given that it excluded married woman from disability benefits under conditions in which they would have been available to men and single women. The Dutch Court held that from 1 January 1980, the date on which the Dutch equal treatment law came into force, married women whose incapacity for work arose before 1 October 1975 were also entitled to disability benefits.

On the strength of these rulings, in May 1988 Mrs Steenhorst-Neerings applied for disability benefits, but a temporal restriction obstructed her claim. Under Article 25(2) of the General Law on Incapacity for Work, Mrs Steenhorst-Neerings was only entitled to payments 12 months in arrears from the date of making her claim, that is from 17 May 1987. In order to evade this problem, Mrs Steenhorst-Neerings invoked the EC Social Security Directive.⁹⁵ She argued that the Directive also prohibited discrimination on grounds of sex in social security matters, and that she was entitled to receive disability benefits from 23 December 1984, the date of entry into force of the Directive. She further contended that the Emmott (p. 129 ) case precluded the Dutch Government from relying on temporal restrictions that would ordinarily apply under national law.

Advocate General Darmon viewed Mrs Steenhorst-Neerings' case as being entirely analogous with the Emmott decision, and argued that she should receive payments from the date of entry into force of the Social Security Directive. He rejected arguments to the effect that disapplication of national time-limits would vest an individual with a right to lodge claims for pensions many years after any discrimination arose, and did not agree that, in any event, a factor of this kind should be determinative of the Courts decision. Advocate General Darmon asserted that:

such an eventuality could only be the result of prolonged failure by the State to implement the directive in national law, and it would be unfair to require the beneficiary of rights deriving from a Community measure to suffer the consequences of such failure because of the expiry of internal procedural time-limits.⁹⁶

where a directive creates rights for individuals, they cannot be denied access to those rights and the benefit of the rights cannot be restricted by reason of time-limits for bringing proceedings under domestic law if the directive had not been implemented in national law at the date of an individual's claim.⁹⁸

…the aim of the rule restricting the retroactive effect of claims for benefits for incapacity for work is quite different from that of a rule imposing mandatory time-limits for bringing (p. 130 ) proceedings. As the Government of the Netherlands and the defendant in the main proceedings explained in their written observations, the first type of rule…serves to ensure sound administration. It also reflects the need to preserve financial balance in a scheme in which claims submitted by insured persons in the course of a year must in principle be covered by the contributions collected during that same year.¹⁰¹

3.2 Johnson No 2

Soon after the ruling in the Steenhorst case, the Court of Justice confirmed that the demand for effective enforcement of Community law would not require national judges to ignore domestic rules restricting past consequences flowing from unlawful conduct. Case C–410/92 Elsie Rita Johnson v Chief Adjudication Officer¹⁰² concerned principles of English law which were similar to the Dutch procedural rules that were challenged in Steenhorst. In Case C-31/90 Johnson v Chief Adjudication Officer¹⁰³ the applicant had successfully challenged the compatibility with Community law of an English measure which automatically extended severe disablement allowances to beneficiaries who had qualified for it under a scheme that had existed up until 1984. Mrs Johnson was granted the allowance in 1981, but it was withdrawn in 1982 when she commenced co-habiting with a male friend. During that time a woman cohabiting with a man was required, in order to qualify for the benefit, to prove not only that she was unfit for work, but also that she was unfit to carry out normal household duties. The household duties test did not apply to men.¹⁰⁴ Therefore, men who qualified for severe disability allowances before 1984, but who could not have met the ‘normal household duties’ test enjoyed automatic entitlement to continue to receive the benefit, while persons such as Mrs Johnson were not.

In Johnson No 1 the European Court had concluded that the relevant national measures were incompatible with Article 4 of the Social Security Directive,¹⁰⁵ given that they gave rise to discrimination on grounds of sex in a social security scheme. As a result of Johnson No 1, domestic social security authorities granted Mrs Johnson severe disability benefits from 16 August 1986, that is 12 months prior to the making of her application. However, they refused to grant payments in respect of any period preceding that date. The social security authorities argued that s165A of the Social Security Act (1975) limited the period in which she was entitled to recoup the benefit to 12 months prior to the date on which she made her claim.

Mrs Johnson then brought a second action, which was heard by the English Court of Appeal. It referred a question to the Court of Justice concerning the relevance of the Emmott case to Mrs Johnsons circumstances. In Johnson No 2 it was argued before the Court of Justice that the Emmott decision required the (p. 131 ) United Kingdom Government to pay severe disability benefits to Mrs Johnson from 22 December 1984, when the period for transposing the Social Security Directive expired. At the time of the Court of Appeal's Article 234 reference, the Emmott case indicated that this argument had some chance of success. However, after the reference but before the European Court formulated its Johnson No 2 ruling, the Steenhorst judgment was issued. It suggested that Mrs Johnson's claim should fail.

The Court of Justice in Johnston No 2 applied the traditional test for determining the compatibility of national procedural rules with Community measures. It affirmed as follows:

the right conferred by the direct effect of Article 4(1) of Directive 79/7 to claim benefits for incapacity for work under the same conditions as men must be exercised under the conditions determined by national law, provided that, as the Court has consistently held, those conditions are no less favourable than those relating to similar domestic actions and that they are not framed so as to render virtually impossible the exercise of rights conferred by Community law.¹⁰⁶

A distinction therefore emerged between national procedural rules which ‘preclude individuals from relying on Community law’ in their entirety, and those which ‘simply limit’ the period in which payment of benefits to which an individual is entitled can be made.¹¹² While application of the former will (p. 132 ) precipitate an Article 10 breach of the duty on Member States to ensure effective enforcement of Community law, the latter will not.

3.3 Magorrian

The results flowing from application of these principles is not always straightforward. This problem is borne out by Case C–246/96 Magorrian and Cunningham v Eastern Health and Social Services Board and the Department of Health and Social Services¹¹³ in which United Kingdom legislation imposing a retroactive restriction on pension rights were considered by the Court of Justice to differ fundamentally from the rules impugned in Steenhorst and Johnson No 2.

Prior to their retirement, both applicants in Magorrian had been employed as mental health nurses by a public sector health board in Northern Ireland. Mrs Magorrian ceased working on 18 October 1992 after over 20 years service, while Mrs Cunningham commenced her retirement in April 1994 after an engagement of over 26 years. Both women had begun their careers in full-time employment, and had moved over to part-time nursing when family responsibilities increased. At all times during these periods the applicants had been making contributions to pension schemes that had been contracted out by the State.

Even so, their pension entitlements differed from those extended to employees who had been in constant full-time employment. Neither Mrs Magorrian nor Mrs Cunningham were eligible for certain additional benefits that were extended to members of the scheme who had the status of ‘Mental Health Officer’ (MHO). This was only possible for members engaged in full-time employment, while Mrs Magorrian and Mrs Cunningham worked in MHO capacity for only nine and fifteen years of their respective periods of full-time employment. They were engaged in part-time employment at the point of retirement, which precluded their classification as MHOs, and were thus denied additional benefits. Significantly, eligibility for the additional benefits was not dependent on any extra contribution to the scheme by either the employer or the employee, and no such contribution had been paid by MHOs who were actually awarded the additional benefits. In other words, there was little scope for argument that the applicants' contributions fell short of those made by members who were entitled to the sums in dispute.¹¹⁴

It was concluded by the national referring court that exclusion of part-time psychiatric nurses from MHO status constituted indirect discrimination on grounds of sex, since a considerably smaller proportion of women than men were able to attain it. More problematic, however, were two provisions of Northern Irish law which seemed to curtail the applicants ability to enforce this ruling. Section 2(5) of the Equal Pay Act (Northern Ireland) 1970 restricted payments in respect of failure to comply with equal pay principles to two years before (p. 133 ) the date on which the proceedings were instituted. Further, Regulation 12 of the Occupational Pension Schemes (Equal Access to Membership) Regulations (Northern Ireland) 1976 No 238, amending the Equal Pay Act, provided that, in proceedings concerning access to membership of occupational pension schemes, the right to be admitted to the scheme was to have effect from a date no earlier than two years before the institution of proceedings. These two provisions heavily limited the sums that would otherwise have been payable to Mrs Magorrian and Mrs Cunningham arising from breach by the British Government of the Article 141 (Article 119) prohibition on discrimination on grounds of sex. The national court therefore referred questions to the Court of Justice to assist it to rule on the compatibility of these measures with Community law, and to aid it in isolating the date from which periods of employment must be taken into account for the purposes of calculating additional benefits.

The Court of Justice first ruled that the case at hand was not one concerned with benefits payable under a pension, but the right to join an occupational pension scheme.¹¹⁵ That being so, the temporal limitation laid down in the Barber case, and reflected in Protocol No 2 of the Treaty on European Union (which limited periods of employment which could be counted in equal treatment pensions disputes to employment undertaken after 17 May 1990) was not relevant to the applicants' claim. It was concluded therefore that periods of service undertaken from 8 April 1976, the date on which the Court of Justice held that Article 141 had direct effect,¹¹⁶ were relevant for the purposes of calculating additional benefits. Having reached the conclusion that the dispute at hand was ‘not for the retroactive award of certain additional benefits but for recognition of entitlement to full membership of an occupational scheme through acquisition of MHO status which confers entitlement to the additional benefits’,¹¹⁷ the Court observed that Regulation 12 of the Occupational Pensions Regulations prevented the entire record of service completed by those concerned after 8 April 1976 and until 1990 from being taken into account for the purposes of calculating additional benefits. This distinguished the case at hand from the rules at issue in Steenhorst and Johnson which merely limited the period, prior to the commencement of proceedings, in respect of which backdated benefits could be claimed.¹¹⁸ The Court ruled as follows:

Consequently, unlike the rules at issue in the judgments cited above, which in the interests of legal certainty merely limited the retroactive scope of a claim for certain benefits and did not therefore strike at the very essence of the rights conferred by the Community legal (p. 134 ) order, a rule such as that before the national court in this case is such as to render any action by individuals relying on Community law impossible in practice.

Moreover, the effect of that national rule is to limit in time the direct effect of Article 119 of the Treaty in cases in which no such limitation has been laid down either in the Court's case law or in Protocol No 2 annexed to the Treaty on European Union.¹¹⁹

It is submitted, therefore, that it was open to the Court to distinguish the facts arising in Magorrian from those in Barber on these grounds, rather than by reference to the somewhat artificial device of categorising the dispute as one concerning denial of access to a pension scheme. On this basis the Court could have equally ruled that periods of service dating from 8 April 1976, rather than 17 May 1990, were to be taken into account for the purposes of awarding additional benefits.

Further, if this approach had been taken, the focus of the judgment might have been directed more sharply on the national law which caused most grief to the applicants. It will be recalled that Section 2(5) of the Equal Pay Act placed a two-year temporal restriction on in arrears payments, while Regulation 12 of (p. 135 ) the Occupational Pension Schemes (Equal Access to Membership) Regulations (Northern Ireland) placed a two-year limit on the right be admitted to pension schemes, to be measured from the date of institution of proceedings. The Court of Justice placed the locus of its ruling on the latter of these rules, and made no reference to the former, even though the essence of the applicants' case concerned payments that were, allegedly, unlawfully withheld.

And finally, application of the Steenhorst/Johnson No 2 test to s2(5) of the Equal Pay Act may have led, in any event, to a finding that measures of this kind were incompatible with Community law, even though the (supposedly) similar provisions in issue in Steenhorst and Johnson No 2 were declared compatible. This was so because both the Steenhorst and Johnson cases emphasized that the rule in question reflected ‘the need to preserve financial balance in a scheme in which claims submitted by insured persons in the course of the year must in principle be covered by the contributions collected during the same year’.¹²⁰ Given that the additional payments in question in Maggorian were not dependent on the payment of contributions, and the monies concerned were limited to ‘top up’ sums rather than payment of an entire pension, it is far less clear whether the ‘financial balance’ of the pension scheme in Magorrian needed the protection of s2(5) of the Equal Pay Act. On the other hand there was no doubt that Mrs Magorrian and Mrs Cunningham had suffered indirect discrimination, and that national rules were rendering their right to equal treatment impossible in practice to enforce. The latter conclusion was in fact reached by the Court of Justice in Magorrian, but in the absence of reference to arguments pertaining to ‘financial balance’.

The Magorrian case therefore failed to shed any further light on the circumstances in which a national law will render Community law impossible in practice or excessively difficult to enforce. It indicated rather that the Court will assess this question on a case-to-case basis.

3.4 Levez

The ‘conduct’ principle, elaborated in Ansaldo Energia, Edis, Spac and Santex, in the context of time-limits for bringing proceedings, was also applied by the Court of Justice in Levez, but in the context of temporal restrictions on the payment of sums due.

In February 1991 Mrs Levez was recruited as a manager of a betting shop owned by Jennings on a salary of £10,000 per annum. In December 1991 she was appointed a manager of another shop belonging to Jennings, replacing a man who had received an annual salary of £11,400. Her salary, however, was raised to only £10,800, Jennings having falsely declared that this was the salary paid to her male predecessor. Her salary was not raised to £11,400 until April 1992. (p. 136 ) Upon leaving her job in March 1993 Mrs Levez became aware of the pay disparity which had run from February 1991 to April 1992. On 17 September 1993 she brought an action under the United Kingdom Equal Pay Act (1970). However, a decision in her favour from the United Kingdom Industrial Tribunal ordering in arrears payment of her salary was challenged by Jennings on the grounds that the Industrial Tribunal had breached Article 2(5) of the Equal Pay Act. This was so because Article 2(5) restricts in arrears payments of unlawfully withheld salary to two years prior to the date on which proceedings were instituted, and, as a matter of domestic law, the Industrial Tribunal was not empowered to extend that period. This meant that Mrs Levez could only recover six months of the withheld salary, given that she had received ‘equal pay for equal work’ from April 1992. Given that the case concerned Mrs Levez' rights under Article 141 of the EC Treaty, and Council Directive 75/117/EEC of 10 February 1975 on the approximation of the laws of the Member States relating to the application of the principle of equal pay for men and women,¹²¹ the Employment Appeals Tribunal referred a series of questions to the Court of Justice concerning her right to a remedy under Community law.

The aspect of the case concerning the conduct of Levez is most illuminating. The Court of Justice reiterated that neither reasonable time-limits for bringing proceedings,¹²² nor restrictions on in arrears remuneration¹²³ rendered Community law impossible in practice or excessively difficult to enforce, and were not, in and of themselves, open to criticism. However, the Court of Justice added the following important caveat:

It is clear…that it was because of…inaccurate—or indeed, deliberately misleading—information provided by the employer that Mrs Levez was in no position to realise that, even after December 1991, she had been the victim of sex discrimination….

Where an employer provides an employee with inaccurate information as to the level of remuneration received by employees of the opposite sex performing like work, the employee so informed has no way of determining whether he is being discriminated against or, if so, to what extent. Consequently, by relying on the rule at issue in that situation, the employer would be able to deprive his employee of the means provided for by the Directive of enforcing the principle of equal pay before the courts….¹²⁴

3.5 Marks & Spencer

In this ruling, the Court of Justice crafted the ‘adequate transitional periods’ principle, with respect to temporal restrictions on the sums recoverable principle that it later applied in Grundig. It thus represents an important limitation to the Johnson No 2/Steenhorst principle. Further, it confirmed that breach of legitimate expectations was a ground on which the compliance of Member State remedies and procedural rules with Community law could be assessed.¹²⁷

In Case C–62/00 Marks & Spencer plc v Commissioners of Customs and Excise,¹²⁸ a United Kingdom legislative enactment restricted repayment of VAT that had been wrongfully paid under Sixth VAT Directive¹²⁹ to three years before the making of the claim,¹³⁰ when the period had previously been six years.¹³¹ Further, the three-year time-limit was imposed retroactively. On 4 December 1996 it was passed by the House of Commons, but the legislative enactment provided that the change in periods with respect to which VAT was recoverable entered into force from 18 July 1996. Marks & Spencer claimed recovery of unlawfully paid VAT on 31 October 1996.¹³² Thus, the change in the law impacted severely on the amount of VAT to which Marks & Spencer were entitled under national law.

The Court of Justice reiterated the established principle that right to obtain a refund of charges levied in a Member State in breach of Community law is the consequence and the complement of the right conferred on individuals by Community provisions as interpreted by the Court.¹³³ However, it also ruled that the general rule allowing reasonable time-limits for bringing proceedings was subject to the principles that (i) it must not be intended to specifically limit the consequences of a judgment of the Court to the effect that national legislation is incompatible with Community law,¹³⁴ and (ii) the time set for the application of the time-limit must be sufficient to ensure that the right to repayment is effective.

The Court then applied this principle to Member State measures restricting periods in which repayment could be made:

Whilst national legislation reducing the period within which repayment of sums collected in breach of Community law may be sought is not incompatible with the principle of (p. 138 ) effectiveness, it is subject to the condition not only that the new limitation period is reasonable but also that the new legislation includes transitional arrangements allowing an adequate period after the enactment of the legislation for lodging the claims for repayment which persons were entitled to submit under the original legislation. Such transitional arrangements are necessary where the immediate application to those claims of a limitation period shorter than that which was previously in force would have the effect of retroactively depriving some individuals of their right to repayment, or of allowing them too short a period for asserting that right.¹³⁵

Finally, the Court of Justice also found that there had been a breach of legitimate expectations. It was held to preclude national legislation which deprives retroactively a taxable person of a right (to repayment) of taxes levied in breach of the Sixth VAT Directive.¹³⁹ This is most significant, because the Government of the United Kingdom had argued that, in determining the compatibility of national procedural law with EC law, the only relevant principles were that of effectiveness and non-discrimination.¹⁴⁰ The Court simply observed that ‘the principle of the protection of legitimate expectations forms part of the Community legal order and must be observed by the Member States when they exercise the powers conferred on them by the Community directives’,¹⁴¹ before reaching its conclusions on retroactive removal of repayment rights.

Thus, the case law allowing, as a general rule, retroactive limits on sums reclaimable, as established in Steenhorst and Johnson No 2, has been as flexible as the law on national time-limits for bringing proceedings. While such limitations are compatible with Community law, in so far they are reasonable, and ensure sound administration and preserve financial balance, they will not be operative if conduct of the wrong-doer has contributed to the imposition of unfavourable temporal restrictions, or if transitional provisions have been insufficient to ensure (p. 139 ) the effective enforcement of rights claimed. Retroactive limits on sums claimable will also have to be disapplied if they breach the principle of effectiveness.

This is an area where the Court of Justice has continued to be interventionist, albeit inconsistently. Even though the policy evidenced in Steenhorst and Johnson No 2 suggested that the Court of Justice was moving toward minimising the circumstances in which it will disrupt national limitation periods, soon after it gave notice that there will be circumstances in which it will review procedural time-limits for the raising of arguments on appeal. The Court will do so if such measures render the application of Community law impossible or excessively difficult. Of the six leading cases on this topic, four have resulted in disapplication of the national restriction.

4.1 Peterbroeck

The Peterbroeck case¹⁴² concerned a Belgian law which banned the raising of new arguments in taxation cases if 60 days had lapsed since the submission by a taxing authority of the case file to an appeal court. Although this period had already expired, the applicants in Peterbroeck wished to broaden the grounds of their claim to breach of Article 43 (Article 52) of the EC Treaty, on the basis that a Dutch company, for whom the applicants acted as legal representatives in Belgium, suffered discriminatory treatment at the hands of the Belgian tax authorities when compared with companies ‘resident’ in Belgium. The Belgian Cour d'Appel was of the view that these provisions of national law prevented it from raising, of its own motion, legal arguments that had not been submitted by the parties in good time, including arguments based on Community law. Further, while local law provided three exceptions to this restriction, namely if the matter under dispute was res judicata, or the applicants were prevented from raising arguments at an earlier stage of proceedings due to force majeur, or when the substantive issue under review was the imposition of a tax that was time-barred, these exceptions appeared to be of no relevance to the applicant's circumstances.

However, the Cour d'Appel was aware that these measures severely curtailed its powers to examine whether domestic law complied with Article 43, and that it also hampered its authority to request guidance from the Court of Justice under the Article 234 mechanism on substantive issues.¹⁴³ In the light of this quandary, the Cour d'Appel in Peterboeck made an Article 234 reference to the Court of (p. 140 ) Justice, and asked whether Community law obliged it to disapply domestic rules which limited its capacity to raise issues of its own motion, when a limited exception to this rule was supplied by national law.¹⁴⁴

The Court of Justice commenced its decision by citing the Article 10 duty on Member States to ensure the legal protection which individuals derive from Community law, and restated the traditional principle that national courts retain jurisdiction in relation to procedures and designation of courts having jurisdiction for disputes concerning EC measures, subject to the principles of effectiveness and non-discrimination.¹⁴⁵ In addition, the Court recalled that rules of national law which prevented the Article 234 procedure from being followed had to be set aside.¹⁴⁶

The Court then provided what has become its standard guidance on how these general rules might be applied in individual disputes. It held as follows:

each case which raises the question whether a national procedural rule renders application of Community law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its progress and its special features, viewed as a whole, before the various national instances. In the light of that analysis the basic principles of the domestic judicial system, such as protection of the rights of the defence, the principle of legal certainty and the proper conduct of procedure, must, where appropriate, be taken into consideration.¹⁴⁷

…Community law precludes application of a domestic procedural rule whose effect, in procedural circumstances such as those in question in the main proceedings, is to prevent the national court, seized of a matter falling within its jurisdiction, from considering of its own motion whether a measure of domestic law is compatible with a provision of Community law when the latter provision has not been invoked by the litigant within a certain period.¹⁵²

With regard to the principle of non-discrimination, the former Advocate General stressed that this concept did not oblige national judges to automatically extend any preferential treatment that might be provided by domestic law to all arguments based on Community rules.¹⁵⁴ After due consideration of the exceptions mentioned above that were available in Belgian law (viz, imposition of a tax out of time, res judiciata, and force majeur) former Advocate General Jacobs concluded that they had no application to the facts at hand.¹⁵⁵

The former Advocate General also dismissed the notion that the principles of Belgian law under review breached the principle of effectiveness. He distinguished the findings of the Court of Justice in Simmenthal¹⁵⁶ and Factortame No 1¹⁵⁷ on the basis that these rulings were ‘necessary to ensure that the court seised was not precluded from giving effect to the Community rights claimed in the respective national proceedings’.¹⁵⁸ He argued as follows:

…it will be noted that in both cases the effect of Community law was to exclude a national rule which would have made the judicial protection of Community rights by the court seised wholly impossible. Those cases show, therefore, that it must always be possible for (p. 142 ) an individual to bring a claim before a national court and to require the national court to protect his community rights. They do not suggest that it must in all circumstances be open to the national court, as a matter of Community law, to raise of its own motion issues which the parties have failed to raise.¹⁵⁹

Finally, former Advocate General Jacobs rejected the notion that the Courts case law on Article 234 was relevant to the claim at hand. The former Advocate General acknowledged that these rulings established that, where a question of Community law was raised before the national court, no rule of national law could preclude the national court from referring a question to the Court of Justice. However, he pointed out that this principle did not address ‘the prior question’ of the circumstances in which a national court can raise an issue of Community law of its own motion.¹⁶² The former Advocate General also observed that the Court of Justice, in a 1991 decision, had refrained from adopting a suggestion proffered by Advocate General Darmon to the effect that a national court has a duty to raise of its own motion the existence of a Community rule.¹⁶³

The above precis of the Peterbroeck case reveals, therefore, that it will sometimes be difficult to predict whether a national procedural rule imposing temporal restrictions will breach the Court's guidelines on remedies and procedures. Indeed, the distinction between rules that ‘wholly frustrate’ a claim and those that are ‘reasonably justifiable by principles such as the requirement of legal certainty or the proper conduct of procedure’¹⁶⁴ seems to beg resolution on a case-to-case basis. However, as will be revealed by the discussion to follow, confusion in this area of the law might be further compounded by the development of distinct rules depending on the ‘public’ or ‘private’ nature of a legal dispute. The van Schijndel case suggested that national laws governing the conduct of litigation between private parties are less likely to precipitate a compliance failing with respect to Community rules on remedies and procedures, than the same kind of principles when government authorities are accused of breaching Community obligations. Yet, this assumption was upset subsequently, in other horizontal cases, namely (p. 143 ) Case C–126/97 Eco Swiss China Time Ltd v Benetton International NV¹⁶⁵ and in Case C–473/00 Cofidis SA v Jean-Louis Fredout.¹⁶⁶

4.2 Van Schijndel

Indications that the Court's policy on national procedural rules might vary by reference to the ‘public’ or ‘private’ nature of litigation appeared in the van Schijndel decision.¹⁶⁷ The van Schijndel dispute bore a strong resemblance to the conundrum which was addressed in the Peterbroeck case, in that the Court of Justice was asked to review the compatibility with Community law of a Member State rule which restricted the rights of appeal Judges to raise new arguments of their own motion. However, van Schijndel differed from Peterbroeck in that it concerned an attempt by one private party to enforce Community law against another. It will be recalled that in Peterbroeck the applicants sought to invoke a right grounded in EC law against Belgian Government taxation authorities.

The plaintiff physiotherapists in van Schijndel sought to set aside Dutch laws which provided for compulsory membership in an occupational pension scheme. They argued that these rules were incompatible with principles of Competition law as laid down in Articles 81 and 82 (Articles 85 and 86) of the EC Treaty, along with Articles 10, 86, 43, 48, 49 to 55 (Articles 5, 90 52, 58 and 59 to 66). However, the plaintiffs first raised these issues on appeal before the Hoge Raad (Dutch Supreme Court), and Dutch law precluded the raising of new arguments in pleas of cassation that would entail examination of the facts. New submissions in claims of this kind were to be confined to points of law. Further, even though Article 48 of the Netherlands Code of Civil Procedure obliged Dutch courts to raise points of law, if necessary by their own motion, the competing principle of judicial passivity in civil matters prevented the Hoge Raad from going beyond the ambit of the dispute defined by the parties, or from relying on facts or circumstances other than those on which the claim was based. That being the case, the Hoge Raad referred a series of questions to the Court of Justice under Article 234, which included a request for guidance with respect to the plaintiffs' procedural difficulties.

The Court of Justice first observed that if there were a national law which obliged, or even entitled, national courts to raise issues of their own motion, it would have to be extended to litigation concerning binding Community rules. This was said to arise from the Article 10 duty on national courts ‘to ensure the legal protection which persons derive from the direct effect of provisions of Community law’.¹⁶⁸ The Court then moved to considering the specific procedural rule at issue, first (p. 144 ) observing that the matter should be resolved by reference to the principals of effectiveness and non-discrimination, and then noting that rules of national law which prevented the Article 234 procedure from being followed had to be set aside.¹⁶⁹ The Court repeated the observation made in the Peterbroeck¹⁷⁰ case, to the effect that, in determining whether a national law renders the application of Community law impossible or excessively difficult, analysis would need to be made of the role that provision took in the procedure, its progress and its special features. Further, the Court reiterated that basic principles of domestic law would be taken into consideration, such as protection of the rights of defence, the principle of legal certainty, and the proper conduct of procedure.¹⁷¹

However, in van Schijndel application of this rule of thumb led to a result which was diametrically opposed to the ruling in Peterbroeck.¹⁷² With respect to Dutch rules obliging courts in civil procedures to keep to the subject matter of the dispute, and to found its decision only on the facts before it, the Court held as follows:

That limitation is justified by the principle that, in a civil suit, it is for the parties to take the initiative, the court being able to act of its own motion only in exceptional cases where the public interest requires its intervention. That principle reflects conceptions prevailing in most of the Member States as to the relations between the State and the individual; it safeguards the rights of the defence; and it ensures proper conduct of proceedings by, in particular, protecting them from the delays inherent in examination of new pleas.¹⁷³

4.3 Eco Swiss

The Court of Justice established in Eco Swiss that limits will be placed on van Schijndel procedural autonomy when a dispute between private parties is being heard, for the first time, by a judicial as opposed to an arbitral body. It was held in Case C–126/97 Eco Swiss China Time Ltd v Benetton International NV¹⁷⁵ that, because arbitral tribunals are not empowered to make Article 234 references to the Court of Justice,¹⁷⁶ Community law requires that questions on the interpretation of Article 81(1) ‘should be open to examination by national courts when asked to determine the validity of an arbitration award and that it should be possible for those questions to be referred, if necessary, to the Court of Justice for a preliminary ruling’.¹⁷⁷ This was so even though breach of Article 81 had not been raised by either party in the arbitral proceedings, and the national court reviewing the award was restricted under domestic law, inter alia, to assessing whether there had been a failure to observe national rules of public policy. It was held that when annulment may be granted, under national law, for breach of public policy, then it must also be available for failure to comply with Article 81(1), given that it is a ‘fundamental provision which is essential for accomplishment of the tasks entrusted to the Community’.¹⁷⁸ The Court of Justice upheld, however, the compatibility with Community law of a national provision laying down a three-month time-limit for lodging an application for annulment of an arbitral award, observing that this period was not ‘excessively short compared with those prescribed in the legal systems of other Member States’ and did ‘not render excessively difficult or virtually impossible the exercise of rights conferred by Community law.’¹⁷⁹ The Court reached this conclusion even though it meant that the national court, in the event of failure of the parties to comply with the three-month time-limit, would be unable to consider whether a breach of Article 81 had occurred.¹⁸⁰

This second finding, however, is difficult to reconcile with the ruling of the Court of Justice in Peterbroeck. It will be recalled that a sixty-day time-limit on the raising of arguments before an appeal court (post-transmission of the file to the court from the tax authorities), precipitated breach of the principle of effectiveness. In Eco Swiss one might have thought that a similar conclusion would have been reached, given that the arbitral tribunal, like the taxation authority in Peterbroeck, was equally bereft of authority to make an Article 234 reference to the Court of Justice. This meant, as it had in Peterbroeck, that the judicial body empowered (p. 146 ) to hear the Eco Swiss appeal was the first tribunal with authority to make an Article 234 reference. Be that as it may, a three-month time-limit for referring the arbitral award to an appeal court was considered in Eco Swiss to be compatible with Community law, irrespective of the findings in the Peterbroeck case.

4.4 Cofidis

This ruling established that national limitations on the raising of arguments may have to fall when they conflict with the aims of a Directive. This is a highly significant development, and carries the potential for the wholesale resurrection of the Emmott rule, if the purpose pursued by the Directive demands it. Yet, as will be seen below, it was not followed in the subsequent case of Kappferer concerning recognition and enforcement of foreign judgments, and Regulation 44/2001 in the context of consumer contracts.¹⁸¹

The Cofidis case concerned the interpretation of Council Directive 93/13 on Unfair Terms in Consumer contracts,¹⁸² and more specifically an attempt by a consumer to argue, in a dispute in which an undertaking sought the enforcement of a credit agreement with the consumer, that certain financial terms were unfair. However, a term of the Viennese Code de la Consommation provided for a time-limit of two years, with respect to consumer credit transactions, arising from the event which gave rise to the dispute, otherwise it was time barred. Thus, even though the national court was of the view that certain financial terms were unfair, it also felt that the two-year time-limit applied, and that it was thus prevented from annulling them.

The Court of Justice, in Cofdis, first applied its findings in Joined Cases C–240/98 to C–244/98 Océano Grupo Editorial SA v Rocío Muriano Quintero,¹⁸³ in which it had been established that power of a court, of its own motion, to consider whether a term of a contract was unfair, was necessary in order due to achieve the aim envisaged under the Directive. That power was necessary to ensure that the consumer enjoys effective protection, in view in particular of the real risk that he is unaware of his rights and might encounters difficulties in enforcing them.¹⁸⁴ The protection conferred by the Directive thus extended to failure of the consumer to raise the unfairness, either because he is unaware of them, or because he has been deterred because of the cost of the legal proceedings involved.¹⁸⁵

The Court then extended on its findings in Océano Grupo, and expressly held that the fixing of a time-limit on the power of a court to set aside unfair terms is liable to impair the effectiveness of the protection intended by the Directive. It was held that to ‘deprive consumers of the benefit of that protection, sellers or suppliers would merely have to wait until the expiry of the time-limit fixed by the national legislature before seeking enforcement of the unfair terms they would (p. 147 ) continue to use in contracts’.¹⁸⁶ It would also render application of the protection intended by the Directive excessively difficult.¹⁸⁷

But perhaps most significantly, the Court of Justice then, and without explanation, applied further detailed elements of the acquis on Member State remedies and procedural rules, to this fully horizontal case; a private individual was relying on interpretation of the Unfair Terms Directive in an action brought against it by a private legal entity. In meeting the argument that the Court of Justice had, in the past, ‘cleared’ shorter national time-limits for compliance with the principle of effectiveness, the Court cited the Peterbroeck case, which concerned a vertical dispute, in support of the established principle that ‘each case which raises the question whether a national procedural provision renders application of Community law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its progress and its special features, viewed as a whole, before the various national instances’.¹⁸⁸ As a consequence of this, each case required assessment on a case-by-case basis.¹⁸⁹ The Opinion of Advocate General Tizzano matched that of the ruling of the Court of Justice, and perhaps went slightly further. He was of the view that ‘effective protection of consumers in terms of Article 6 can be guaranteed only if it is accepted that it is possible to plead the unfairness of the term relied upon by the supplier in the action at any time, and thus without any limitation period’.¹⁹⁰

Consumer protection is therefore an area in which national time-limits are particularly vulnerable for challenge by reference to the principle of effectiveness, principally due to the aims pursued by the Directive.¹⁹¹ More significantly, this is equally so in the context of both horizontal and vertical situations. It was unfortunate that neither the Court of Justice nor the Advocate General explained how the remedies acquis could be relevant in the context of such actions in which there is a, perhaps increasingly, theoretical prohibition on the horizontal effect of Directives.

4.5 Kapferer

As mentioned in chapter 3, Case C–234/04 Rosemarie Kapferer v Schlank &Schick GmbH¹⁹² upheld the principle of res judicata, in that it established that an appeal court was not bound to consider whether a national court had jurisdiction over a (p. 148 ) consumer contract, pursuant to the relevant provisions of Regulation 44/2001,¹⁹³ when a First Instance court had decided that it did, and the point was not raised by either of the parties before the appeal court. The appeal court entertained doubts as to whether jurisdiction should have been assumed at First Instance, but the Court of Justice ruled that issue was closed. Yet, the Court's approach differed from that employed in Peterbroeck and Cofidis; it reverted to a van Schijndel style analysis, even though this case too concerned a vulnerable consumer, and bore a resemblance to the Cofidis case, which was not considered.

In order to ensure both stability of the law and legal relations and the sound administration of justice, it is important that judicial decisions which have become definitive after all rights of appeal have been exhausted or after expiry of the time-limits provided for in that connection can no longer be called into question (Case C–224/01 Köbler [2003] ECR I-10239, paragraph 38)….

By laying down the procedural rules for proceedings designed to ensure protection of the rights which individuals acquire through the direct effect of Community law, Member States must ensure that such rules are not less favourable than those governing similar domestic actions (principle of equivalence) and are not framed in such a way as to render impossible in practice the exercise of rights conferred by Community law (principle of effectiveness) (see, to that effect, Case C–78/98 Preston and Others [2000] ECR I-3201, paragraph 31 and the case law cited). However, compliance with the limits of the power of the Member States in procedural matters has not been called into question in the dispute in the main proceedings as regards appeal proceedings.¹⁹⁴

1.1 Unjust Enrichment

The general entitlement of recipients of unlawful subsidies to avoid repayment if their enrichment has been passed on has been extended, as a general principle, to this field of the law. However, the details of Comateb unjust enrichment rules have not been grafted on, by the Court of Justice, to the entitlement of individuals to argue that they would suffer ‘loss of enrichment’ if they were obliged to repay monies erroneously awarded to them under a Community Regulation. As a result, it may well be easier to resist recovery in subsidies cases, than secure it in cases concerning repayment from a Member State of unlawfully levied charges.

In Case C–298/96 Oelmühle Hamburg AG, Jb Schmidt Söhne GmbH and Co. KG v Bundesanstalt für Landwirtschaft und Ernährung²⁶⁴ the Federal Office of Agriculture and Food in Germany sought repayment of a subsidy for the production of colza that had been unduly paid to two oil mills under Regulation 136/66 on the establishment of a common organization of the market in oils and (p. 162 ) fats.²⁶⁵ The oil mills argued inter alia that part of the enrichment it had received had been lost, because it had passed on the pecuniary advantage it had received through payment of the subsidy to its suppliers. This was so because it had duly paid the target price for colza set by Community law. Further, any right of action it may have had against the suppliers was ‘virtually worthless’, because the time-limits for bringing proceedings had expired, and the suppliers were insolvent.²⁶⁶ Given that German law recognized ‘loss of enrichment’ as a ground for waiving the obligation to revoke decisions unlawfully conferring benefits,²⁶⁷ the oil mills argued that they were not bound to repay aid unlawfully awarded subsidier under the terms of the Regulation.

The Court of Justice reiterated the principles laid down in Deutsche Milchkontor,²⁶⁸ referred to in chapter 3, and asserted that, in the absence of provisions of Community law, disputes concerning recovery of amounts unduly paid were to be decided by reference to national law subject to the principles of effectiveness and non-discrimination, and the proviso that, if national law requires the various interests in question to be weighed against one another, then full account must be taken of ‘the interests of the Community’.²⁶⁹ The Court observed that in Deutsche Milchkontor²⁷⁰ it had been expressly held that Community law did not preclude domestic legislation from taking account of criteria such as ‘loss of the unjust enrichment’,²⁷¹ but issued the following, more specific, guidance to the national judge.

Should the national court decide that the oil mills acted in good faith, it would not be contrary to Community law to take into consideration the plea of loss of unjust enrichment. Since that principle also forms part of the Community legal system, it cannot be considered contrary to Community law for domestic legislation to apply that principle in a field such as that of recovery of unduly paid Community subsidies….

…it must be stated that one of the requirements to be satisfied in order to plead lost enrichment is that the national court should have established in the specific circumstances the trader has no possibility of recourse against his suppliers.

The information provided by the national court shows that the general rule applying in domestic law is for unduly paid subsidies to be recovered and that the plea of lost enrichment is accepted, purely by way of exception, where compensation by third parties is not possible. In those circumstances, the mere presumption that the financial situation of the producer is generally deplorable…is not sufficient to establish that recovery is practically impossible in the sense contemplated in the Deutsche Milchkontor case law.²⁷²

With regard to the Comateb scenario of recovery of unlawfully levied charges, more complicated instructions have been issued, which are perhaps less favourable to the trader pleading unjust enrichment. As explained above,²⁷³ it involves detailed investigation of whether a charge has in fact been passed on, in whole or in part, and whether the existence of the charge caused collateral loss such as a drop in sales. If, as a result of this investigation, it is discovered that only part of the loss was passed on, then the Member State concerned must compensate that sum.

1.2 Time-Limits for Bringing Proceedings

Further, the Court of Justice has shown greater deference to national time-limits for bringing proceedings in the subsidies cases than in the recovery cases. As illustrated above, expiry of reasonable time-limits for bringing proceedings can bar recovery of sums unlawfully paid, provided the wrong-doer has done nothing to discourage institution of proceedings in good time.²⁷⁴

However, in the context of subsidies, the Court of Justice has ruled that the expiry of national time-limits for effecting recovery will work in the traders' favour. In Case C–366/95 Landbrugsministeriet-EF-Direktoratet v Steff-Houlberg Export I/S (and Others),²⁷⁵ the prohibition on the application of national principles rendering it impossible in practice or excessively difficult to implement Community rules, and compliance with the principle of non-discrimination,²⁷⁶ did not preclude the Member State concerned from failing to recoup an EC subsidy because a national time-limit had passed. Under Danish law, authorities maintained a discretion not to seek recovery, due for the period of time that had elapsed since the aid was granted. It concluded that Community law did not prohibit account being taken of grounds of equity of this kind, provided that the conditions laid down in Deutsche Milchkontor were taken into account,²⁷⁷ and the trader has acted in good faith. Neither ‘equity’ or ‘good faith’ have been relevant in the cases concerning recovery of unlawfully levied charges.

Further, subject to the observance of good faith on the part of the trader, Community law was held not to preclude rules respecting traders' legitimate (p. 164 ) expectations.²⁷⁸ This is, of course, subject to the national court taking into account the Community's interest in seeking recovery.²⁷⁹ As will be shown by the discussion to follow, the ruling illustrates that there is broader scope for the protection of legitimate expectation in unlawful subsidy cases than there is in unlawful state aids cases. It is only relatively recently that protection of legitimate expectations has crept into the ‘recovery’ cases. As explained above, the Court of Justice ruled in Marks & Spencer²⁸⁰ that retroactive limits on sums recoverable will be incompatible with Community law if they breach the legitimate expectations of the trader concerned.

No reference was made in Steff-Houlberg to whether the time-limit was reasonable, or whether the conduct of the trader in any way frustrated the national agency from seeking recovery in a timeous fashion. Thus, the only common thread in the case law determining the compliance with Community law of time-limits with respect to bringing proceedings in the context of subsidy cases, as opposed to the general rules governing this field, lies in the fact that both require consideration of the principles of effectiveness and non-discrimination, while further and more particular rules are relevant in the subsidies domain.

1.3 The Burden of Proof and Interest

There are two further areas in which subsidies cases are yet to attract the application of general rules elaborated by the Court of Justice with respect to Member State remedies and procedural rules. First, the Court is yet to remove the authority of national law to determine the burden of proof when subsidies are recovered, although this remains subject to review against the principles of effectiveness and non-discrimination.²⁸¹ Second, national law is yet to be influenced by Court of Justice case law on the payment of interest discussed below in Part G. Member States are free to decide whether or not to charge interest on unlawfully paid subsidies, subject to the compliance with the principle of equivalence.²⁸²

Given then, these significant differences, it is difficult accept the assertion that ‘[c]learly, the Court's approach to the repayment or recovery of wrongly granted Community subsidies is closely aligned to the current period of general case law concerning national remedies and procedural rules for the enforcement by individuals of their subjective Treaty rights’²⁸³ It might rather be more accurately viewed as an exceptional area, in which the general rules are supplemented by important counterbalancing principles and factors.²⁸⁴

The specific rules on actions seeking to compel recovery of unlawfully paid state aids differ significantly from those applicable to recovery of unlawfully paid subsidies; it is more difficult for individuals to resist recovery by reference to national procedural rules, than it is to recover unlawful subsidies. The tougher line taken by the Court of Justice in the context of state aids is explicable by the fact that full recovery of state aids is necessary to overcome the distortion of competition necessarily resulting from such payments; the same urgency does not arise in the context of agricultural markets subject to extensive Community regulation that is sanctioned by the EC Treaty.²⁸⁵

Actions recovering unlawfully paid state aids can end up before the national courts, either because (i) an undertaking has been adversely affected by the payment of aid to another, and has sought to enforce, before the national courts, the directly effective procedural requirements of Article 88(3)²⁸⁶ or (ii) a Member State has commenced a recovery action because of a definitive decision of the Commission establishing the illegality of the sums paid. In both cases, the actions for recovery are governed by the procedural laws of the Member State concerned.²⁸⁷ Where a Member State is ordered to recover unlawfully paid state aid, it is obliged under Article 249 to take all measures necessary to ensure the implementation of the Commission's decision.²⁸⁸ If a national court finds breach of Article 88(3) procedural requirements, it must in principle allow an application for its repayment.²⁸⁹ Thus, while recovery actions in the field of state aids is subject to regulation by reference to the principles of effectiveness and non-discrimination, the Community's interests in recovery of the aid is key among the factors which a national court is bound to apply. Any ‘individual rights’ of the recipient of the aid are secondary to these imperatives. Due to the obligations imposed by Article 249, the sole defence available to Member States for failing to secure repayment arises when repayment was ‘absolutely impossible’.²⁹⁰

(p. 166 ) 2.1 Loss of Enrichment

Thus, in Case C–24/95 Land Rheinland-Pfalz v Alcan Deutschland,²⁹¹ an obligation was cast on the German Government to recover unlawful aid, despite arguments forwarded by the defendant, and that were recognized under German law, to the effect that the donees had irreversibly disposed of any advantage, and were thus exempt from an obligation to repay it. In other words, an attempt was made to rely on the ‘loss of enrichment’ principle of C–298/96 Oelmühle Hamburg AG. The Court ruled as follows:

Moreover, as the Advocate General emphasised in point 38 of his Opinion, an undertaking which incurs losses after the grant of aid may nevertheless obtain ongoing benefits from its temporary survival in terms of, for instance, retention of its place on the market, reputation and goodwill.²⁹²

2.2 National Time-Limits

The distinction between the rules that apply in the two types of case is not limited to the issue of enrichment. The Court of Justice further ruled in Alcan that application of the principles of effectiveness and non-discrimination, coupled with the taking of due account of the Community interest,²⁹⁴ meant that, when national authorities were late in complying with a decision requiring repayment of unlawfully levied State aid, the lapse of a national time-limit for instituting recovery could not be invoked to preclude recovery. Otherwise ‘recovery of unduly paid sums would be rendered practically impossible and the Community provisions concerning State aid deprived of all effectiveness’.²⁹⁵ Pursuant to Article 15 of Regulation 659/1999,²⁹⁶ the Commission has a ten-year period in which to recover unlawful State aids. Only the expiry of this time-limit will allow Member States to remain inactive.

There is equally little scope for the traders to rely on legitimate expectations.²⁹⁷ Only in exceptional circumstances, possibly entailing contribution by the (p. 167 ) Commission to the misapprehension of the legality of the aid paid, will traders be entitled to rely on legitimate expectations.²⁹⁸ Thus, the special procedures which operate under Community State aids law, in which the Commission are authorized to make final and binding decisions on the legality of granted aid, place it in a distinct category from recovery of subsidies, particularly, although not exclusively, in the context of legitimate expectations.

There are two further ways in which the Court of Justice has attenuated the authority of national courts to apply national principles relating to remedies with respect to State aids. First, it has precluded all Member State measures which purport to justify, retroactively, un-notified State aids.²⁹⁹ This contrasts with the complex rules elaborated in Part B above which permits Member States to impose retroactive limits on the recovery of sums paid by individuals in breach of Community law, subject inter alia, to the provision of adequate transitional arrangements and respect for the legitimate expectations of the individuals concerned. Second, it has borrowed from established principles on the right to effective judicial protection³⁰⁰ (discussed below in Part G) in supplying a broad interpretation of individuals having an ‘interest’ in the enforcement of the prohibition on implementation of un-notified State aids in Article 88(3). It extends to those who have paid a tax in breach of its requirements; the individual concerned need not additionally show that they have been affected by a distortion of competition resulting from the payment of aid.³⁰¹ The adoption of a generous view of who can sue to enforce EC State aids rules complements, rather than conflicts with, the Community interest.

The Court of Justice has also borrowed from its general principles on interim relief in obliging national authorities to refrain, pending the determination of the legality of aid, from making payments.³⁰² This has been based on the direct effect of Article 88(3). Traders can also petition the Court of First Instance seeking interim suspension of final Commission decisions that State aids are unlawful.³⁰³ Finally, pursuant to Article 14(2) of Regulation 659/1999,³⁰⁴ sums recovered are to include lost interest.

Therefore, case law on Member State remedies and procedural rules and State aids has an odd relationship with the general remedial principles that have been elaborated by the Court of Justice. On the one hand, in the context of time-limits for bringing proceedings, prevention of unjust enrichment of traders, and national measures designed to place retroactive limits on recovery, distinct principles of law (p. 168 ) have emerged that apply only in the context of State aids. However, the right of access to a court, and the right to interim relief, have been elaborated by reference to general principles.³⁰⁵

It is unfortunate that Court of Justice case law in this field has been characterized by less rigour than that which has been elaborated by Strasbourg. First, it has caused significant fissures between Strasbourg and Luxembourg legal principles.³³⁴ Thus, the Strasbourg jurisprudence requires those affected by, and wishing to argue, breach of a right to a fair and public hearing, to prove that their claim relates to a ‘civil right’ or ‘obligation’, or a ‘criminal charge’. Yet the Court of Justice in Luxembourg has never applied this as a threshold test for the application of the right of access to an effective judicial remedy; the EC right thus appears to extend to all forms of administrative decision making. What Community law requires is ‘effective judicial scrutiny of the decisions of national authorities taken pursuant to the applicable provision of Community law’.³³⁵ This is additionally evidenced by the fact that there is no reference to criminal charges or civil rights or obligations in Article 47 of the EU Charter.³³⁶ Further, under EU law, the right to a remedy includes an entitlement to a ‘judicial’ remedy, and is not confined to an administrative remedy.³³⁷ Article 13 ECHR, however, can be satisfied by the availability of adequate non-judicial remedies.

(p. 175 ) Second, the content, then, of the right to an effective judicial remedy lacks certainty under EU law, in comparison with the Strasbourg jurisprudence. While it is clear that, as a general rule, it is for the legal system of each Member State to determine which court or tribunal has jurisdiction to hear disputes involving individual rights, the channels chosen must ensure effective protection of those rights.³³⁸ The contours of the case law that has emerged might be described as follows.

It is now established that the scale of judicial review that Member State courts are required to supply is influenced directly by the degree of discretion Member States enjoy in their implementation of the EC measure in question. The greater the discretion, the less rigorous judicial review will be required, and vice versa.

2.1 Upjohn

Thus, Johnston v RUC³³⁹ concerned a national measure that precluded the exercise of a fundamental right in the Community legal order, namely, right of access to a court. This is a legal principle with respect to which the Member States have very limited discretion. However, as was exemplified by the later Upjohn case,³⁴⁰ with respect to exercise of delegated authorities by Member State agencies governing the pharmaceuticals industry, national courts have more restricted review powers. Thus, the Court of Justice rejected the argument that United Kingdom courts must have full powers to undertake fact and merit review of a decision to deregister a drug by a United Kingdom authority; the fact that the refusal was made within the context of a Directive that regulated the process provided no support for a contrary conclusion.³⁴¹ Even though Article 12 of the Directive required the Member States to ensure that decisions suspending or revoking marketing authorizations were open to challenge by way of legal proceedings, it left to the Member States the task of organizing their own systems of judicial review.³⁴² While the Court of Justice accepted the direct effect of Articles 11 and 21 of the Directive 65/65³⁴³ (those provisions laid down the criteria for the revocation of marketing authorizations),³⁴⁴ the consequences flowing from this were that designation of courts and procedural rules to enforce these rights were matters for the Member States, subject to the principles of effectiveness and non-discrimination.³⁴⁵ The Court was of the view that it did ‘not appear that the only appropriate means of preventing exercise of rights conferred by Community law from being rendered virtually impossible or excessively difficult would be a procedure of judicial review (p. 176 ) of national decisions’³⁴⁶ that empowered the national court to make their own assessment of the facts, and more particularly of scientific evidence relied in the support of revocation of marketing licences.³⁴⁷

The Court of Justice drew a parallel between the role of national courts and that of the Union judicature injudicial review proceedings. It observed as follows:

where a Community authority is called upon, in the performance of its duties, to make complex assessments, it enjoys a wide measure of discretion, the exercise of which is subject to a limited judicial review in the course of which the Community judicature may not substitute its assessment of the facts for the assessment made by the authority concerned. Thus, in such cases, the Community judicature must restrict itself to examining the accuracy of the findings of fact and law made by the authority concerned and to verify, in particular, that the action taken by the authority is not vitiated by a manifest error or misuse of powers and that it did not clearly exceed the bounds of its discretion.

Consequently, Community law does not require the Member States to establish a procedure for judicial review of national decisions revoking marketing authorisations, taken pursuant to Directive 65/65 and in the exercise of complex assessments, with a more extensive review than that carried out by the Court in similar cases.³⁴⁸

2.2 Evans

In Case C–63/01 Samuel Sidney Evans v The Secretary of State for the Environment, Transport and the Regions³⁵² the Court of Justice again upheld a national judicial review scheme, contrary to the Opinion of the Advocate General,³⁵³ under which UK law provided no avenue for a full appeal to a court, even though rights arising under a Directive were in issue. This question arose in the context of national rules implementing a Directive's obligation on Member States to establish compensation schemes for uninsured or inadequately insured drivers, and in which fact review occurred only before an arbitrator reviewing the original (p. 177 ) compensation decision. Beyond that UK courts were limited to considering error of law or serious irregularity affecting the arbitration.

The Court of Justice held that, in determining whether the judicial review provided by UK law was adequate, it would be influenced by (i) the aim pursued by the Directive,³⁵⁴ which, in the case at hand, was to provide a simple mechanism for compensating victims, and (ii) the role of the provisions in the procedure, its progress and its special features viewed as a whole, before the various national instances. Thus, account had to be taken of the basic principles of the domestic legal system, such as the protection of the rights of the defence, the principle of legal certainty, and the proper conduct of procedure.³⁵⁵ As a result of this analysis, it was concluded that exclusion of fact review by a judicial body did not render it impossible in practice or excessively difficult to exercise the right to compensation conferred on victims of damage or injury caused by unidentified or insufficiently insured vehicles.³⁵⁶

The Advocate General, after undertaking a closer examination of the component elements of the requirement of ‘effective legal protection’, and indeed the national review scheme itself,³⁵⁷ concluded that the requirement of effective legal protection had been breached.³⁵⁸ Further, the Advocate General expressly distinguished the situation before him from that which appeared in Upjohn, because that case entailed the carrying out of ‘complex assessments in the medico-pharmacological field’ which called for a ‘certain discretionary scope’.³⁵⁹

2.3 Distilling the Appropriate Approach

In the light of these cases, and others considered by the Court of Justice, the approach employed in assessing the scale or depth of judicial review available at national level might be summarized as follows. The Court of Justice will study the relevant national scheme of review, in order to determine, in the light of the level of discretion enjoyed by the Member State agency concerned, whether the judicial review available complies with the requirement of effective protection. Thus, in Schneider it was held that a national legal system which provided three levels of review for violation of the (low-discretion) fundamental right to equal treatment ‘undeniably’ satisfied the requirement of adequate and effective judicial protection.³⁶⁰ On the other hand, confining the review of (p. 178 ) a decision to withdraw an invitation to tender to whether the decision was arbitrary was held, in Hospital Ingenieure, to be insufficient, perhaps, implicitly, because of the low levels of discretion afforded by the Directive concerned. The Court of Justice reached this conclusion partly because the Directive in issue³⁶¹ aimed at strengthening remedies.³⁶² Similarly, in Connect Austria, limiting judicial review to ‘cases where the applicant claims to have been injured by the infringement of a constitutionally guaranteed right or by the application of an unlawful regulation, an unconstitutional statute or an unlawful international treaty’ was held not to be a ‘suitable mechanism’ for parties to appeal decisions of national regulatory authorities in the telecommunications sector.³⁶³ Further, it was established in Stadt Halle that an individual Directive can secure specific aims, such as ensuring the availability of rapid judicial remedies, and confirmed that decisions not to initiate a public procurement procedure at all must be judicially reviewable.³⁶⁴

2.4 Relationship with State Liability

However, in a further raft of cases concerning the interpretation of Directives on public procurement,³⁶⁵ the Court of Justice has held back from ruling that national bodies established for the review of decisions made in alleged breach of an EC Directive concerning public supply and public works contracts³⁶⁶ were bound also to rule on the interpretation of a Directive on public service contracts,³⁶⁷ when provision for the latter had not been made under national law. In such circumstances, the remedy for aggrieved persons lay in the State liability rules.

The Court has reached this conclusion, even though the services Directive provides that the ‘Member States shall take the measures necessary to ensure that, as regards contract award procedures…decisions taken by the contracting authorities may be reviewed effectively and, in particular, as rapidly as (p. 179 ) possible…on the grounds that such decisions have infringed community law in the field of public procurement or national rules implementing that law’.³⁶⁸ The Court of Justice ruled that the services Directive did not indicate which national bodies were to be the competent bodies to perform review duties,³⁶⁹ and recalled the autonomy of the Member States to determine which court or tribunal has jurisdiction to hear disputes involving individual rights derived from Community law, provided those rights are effectively protected.³⁷⁰ The Court reminded the national referring Courts of their duty to interpret national law with Community law, in so far as it was possible to do so,³⁷¹ and concluded that, if the relevant national law could not be interpreted in conformity with the relevant national Directive, the persons concerned could, using the appropriate domestic procedures, claim compensation for damage caused by failure to transpose the Directive in good time.³⁷² The Opinion of Advocate General Fennelly in one of these cases is most instructive. He explained why principles elaborated in Factortame No 1³⁷³ did not bind judicial authorities empowered, under national law, to review the public supply and public works Directive, to also take jurisdiction with respect to the public services Directives. He argued as follows:

The present case is quite different, in my view, from the situation in a case such as Factortame and Others, which was mentioned by the Bundesvergabeamt in its order for reference. In that case, the Court required the national court to set aside a national rule precluding, in certain circumstances, the grant of interim relief, which was deemed essential for Community-law rights to have full force and effect. However, it was clear that the national court, the House of Lords, had jurisdiction over the subject-matter of the dispute and was properly seised of it. I do not accept the applicant's argument that, as a matter of Community law, all national courts and tribunals have jurisdiction to apply all directly effective provisions of Community law in the absence of a domestic-law provision expressly excluding such jurisdiction. As Advocate General Tesauro said (p. 180 ) in his Opinion in Dorsch Consult, 'this would encroach on the domain of the national legislator'.³⁷⁴

Yet, in Case C–185/97 Coote v Granada Hospitality,³⁷⁵ which was considered in chapter 2 with respect to the remedies that attach to Directives, the Court of Justice made no reference to state liability principle in broadly interpreting the duty on national courts to supply remedies that are effective and dissuasive of breach. In that case the applicant brought a claim before the United Kingdom Industrial Tribunal, alleging that she was being victimized by Granada, her former employer, in that the company had refused to provide her with references. This in turn had impaired her ability to find new employment. Previous to this Mrs Coote had brought a claim for sex discrimination against Granada, alleging that she had been dismissed from her post due to pregnancy. The claim was settled out of court, and the employment relationship was terminated by mutual consent.

The difficulty with Mrs Coote's victimization action lay in the fact that the United Kingdom Sex Discrimination Act (1975) only prohibited retaliatory measures from an employer whose prejudicial effects appeared during the employment relationship. The Industrial Tribunal rules in favour of Granada, stating that it reached that decision with some regret, since it left Mrs Coote without a remedy. The Employment Appeal Tribunal, to which the case was appealed, entertained reservations on the compatibility of the relevant provisions of the Sex Discrimination Act³⁷⁶ with the Equal Treatment Directive, and referred questions to the Court of Justice to clarify the issue.

The Court of Justice first reiterated the prohibition on the horizontal enforcement of Directives, and that such measures cannot be relied upon against a private sector employer.³⁷⁷ It recalled, however, the duty on national judges to interpret national laws, and in particular legislative measures like the Sex Discrimination Act which were specifically introduced to implement a Directive, and concluded that the questions had been put by the Employment Appeal Tribunal ‘for the purposes of interpreting national provisions transposing the Directive’.³⁷⁸

Primary attention, however, was focussed on Article 6 of the Equal Treatment Directive, in its capacity as a general principle of law common to the Member States, and as enshrined in Article 6 of the European Convention of Human Rights.³⁷⁹ It was held that Member States were bound to ensure ‘effective judicial control’³⁸⁰ to ensure compliance with the principle of equal treatment between men and women, and that Article 6 was ‘an essential factor for attaining the (p. 181 ) fundamental objective of equal treatment for men and women, which…is one of the fundamental human rights whose observance the Court has a duty to ensure’.³⁸¹ The Court reached the following conclusion:

The principle of effective judicial control laid down in Article 6 of the Directive would be deprived of an essential part of its effectiveness if the protection which it provides did not cover measures which, as in the main proceedings in this case, an employer might take as a reaction to legal proceedings brought by an employee with the aim of enforcing compliance with the principle of equal treatment. Fear of such measures, where no legal remedy is available against them, might deter workers who considered themselves the victims of discrimination from pursuing their claims by judicial process, and would consequently be liable seriously to jeopardise implementation of the aim pursued by the Directive.³⁸²

Some difficulties arise, however, when Coote is compared with the raft of cases, mentioned above, on the right to an effective remedy to enforce EC public procurement law. It will be recalled that the Court of Justice has held, on a number of occasions, that a national tribunal is not obliged to expand its jurisdiction of its own volition in order to comply with the requirement to supply an effective remedy laid down in public procurement Directives. Emphasis was rather laid on the Court's case law on State liability in damages as the applicants' appropriate remedy, an avenue of redress which did not rate a mention in the Coote case. Would not a state liability action against the UK Government have been an adequate remedy in her case? The answer may lie in the fact that in Coote, there seemed to be reasonable grounds for assuming that there was some scope for construing the Sex Discrimination Act in conformity with the Equal Treatment Directive, while the cases concerning public procurement concerned the situation of ‘vacuum’, in that there seemed to be no measure of national law in existence that was open to an interpretation that complied with the relevant Directive.³⁸⁴