S1E31: EU Direct Effect Explained Van Gend en Loos

Understanding Direct Effect: Concept, Applicability, and Judicial Role Hi everyone, and welcome to the 31st episode of Study with Me European Union Law Podcast. This podcast helps you get ready for your university exams and gain a deeper understanding of the subject. OK, let's just dive right in. Our mission today is to really get to grips with one of the most fundamental concepts in all of EU law. I'm talking about direct effect. Speaker 2 It's a total game changer. Speaker 1 It really is. It's the tool that turns these, you know, big abstract promises made in Brussels into actual enforceable rights for you as an individual in your local court. Speaker 2 But before we get into the weeds, there's one distinction we absolutely have to make clear from the start. Speaker 1 Direct applicability versus direct effect. Speaker 2 Exactly. They sound similar but they do completely different jobs so. Speaker 1 Direct applicability is. Speaker 2 What think of it as the on switch. It's a quality that some EU laws have, especially regulations, Article 288 of the treaty says. So it means the law just appears in the national legal system automatically. Speaker 1 No implementation needed by the government. Speaker 2 None at all. No national act, Nothing. The moment it's passed at the EU level, it exists as law in, say, Germany or Ireland. It's on the shelf, so to speak. Speaker 1 OK, so applicability is about the law's existence? Speaker 2 Right. And direct effect is about its usability. It's the power of that rule. Can you, an individual, pick it up off that shelf and actually use it in a courtroom? Speaker 1 So it's about giving a person a specific right they can point to. Speaker 2 Precisely, it's the capacity of an EU rule to confer a right or impose an obligation that you can rely on in front of a national judge and. Speaker 1 What does this mean for that judge? I mean, that's where it all happens. Speaker 2 It creates a massive obligation. If an EU provision has direct effect, the national judge must apply it. And here's where it gets really interesting. The clash of war. If that judge sees a national law that conflicts with the EU rule, they are obliged to set aside or disapply the national law they have to. The EU rule wins. This is where direct effect and the principle of primacy meet. Speaker 1 But what if the judge isn't sure? I mean, what if they're looking at an article and thinking, is this really clear enough to have direct effect? I don't know. Speaker 2 And that's the beauty of the system. There's a mechanism for that. Under Article 267 of the Treaty, the judge can pause the case and send a question, a preliminary reference to the European Court of Justice in Luxembourg. Speaker 1 To get the final word. Speaker 2 For the definitive ruling, the ECJ says yes, this has direct effect, or no it doesn't and that ruling is binding, ensuring the law is applied the same way everywhere. Speaker 1 And this duty, it isn't just for judges, is it? Speaker 2 Not at all. And that's a key point from cases like Fratelli Costanzo. It binds all public authorities, your local council, a government agency, Everyone has to apply the EU rule. It seeps into the entire state structure. Speaker 1 To understand the mechanism, we have to go back to the beginning, the origin story. Speaker 2 1963 The case of von Ghent on loose. Speaker 1 The birth certificate and direct effect. Speaker 2 Absolutely. So Von Ghent on Loose was a Dutch company, a transport company. They were importing some chemicals from Germany into the Netherlands and the Dutch authorities hit them with a new customs duty. But the company turned around and said hang on. Article 12 of the EEC Treaty says member states can't introduce new customs duties. Speaker 1 And the government's argument was basically, that's an international treaty, it's between US and other countries. You're a company. You have no say in this. Speaker 2 Exactly. The question for the ECJ was huge. Can a provision in a treaty between nations actually create rights that a private citizen can enforce against their own government? Speaker 1 And the answer changed everything. Speaker 2 It was revolutionary, the court said. The EEC treaty wasn't just any old international treaty, it had created a new legal order. Speaker 1 A new legal order? What does that actually mean? Speaker 2 It means that it's subjects aren't just the Member States, they're also. Speaker 1 The individuals within them. Speaker 2 Exactly. You, me, companies, we're not just objects of the law anymore. We're active participants. We have rights. Speaker 1 Why was that so necessary? Wasn't there already a system for when states broke the rules? Speaker 2 There was the infringement procedure so the Commission could sue a member state, but the court said that's just not enough because it's slow, it's political and it's a public law remedy. It's about protecting the system, not about protecting your individual rights right now. Speaker 1 So direct effect was created as a necessary counterpart, A corollary to make the Member States obligations real for people on the ground. Speaker 2 Perfect. Here's a great phrase for an exam. You can even say it aloud. The ECJ invented direct effect to ensure the effectiveness the effect utile of the treaty by empowering private individuals. Applying Direct Effect: Types, Conditions, and EU Law Sources OK. Speaker 1 So we know why it exists, let's talk about how it works in practice. There are two main types, right? Speaker 2 2 main types. The 1st is vertical direct effect. This is always about a dispute between a private individual and the state. Speaker 1 And that breaks down a bit further. Speaker 2 It does. The most common form is upward vertical effect. That's you, the individual using EU law against the state, just like in Van Gandon Luce. Speaker 1 And what about the other way? Speaker 2 Around that's downward vertical effect. That's the state trying to impose an EU law obligation on you. It can happen, but the conditions are much, much stricter. Speaker 1 OK, and the second main type? Speaker 2 That's horizontal direct effect. This is when you're in a dispute with another private party, an individual against another individual, or a company. Speaker 1 Like an employee suing their private employer. Speaker 2 A classic example. We see it all the time in anti discrimination cases. Speaker 1 So not every piece of EU law can have this power. It has to pass a a kind of quality control test first. Speaker 2 That's a great way to put it. We call it the CPCU test 4 conditions. What's the first one? First, the provision must be clear. It's meaning has to be obvious. A national court needs to be able to understand what it commands without needing more legislation to explain it. OK. Speaker 1 Clear. Speaker 2 In second, precise, so it must spell out who has the right, who has the obligation and what that right or obligation actually is. All the details need to be there for a judge to apply it. And 3rd, it has to be unconditional. This one's huge. It can't depend on any further action or discretion from the member State. An obligation to not do something is usually unconditional. An obligation that says a Member State may do something? Probably not. Speaker 1 Right. And the last condition. Speaker 2 It must confer a right. The rule has to be intended to give a specific right to the person who's trying to use it, whether that's a substantive right like equal pay or just a procedural 1. Speaker 1 So let's look at which sources actually pass this test, starting with the treaties of Selves Vengen. All news confirmed they have vertical effect, but what about horizontal? Speaker 2 Oh absolutely. The landmark case there is de Friend from 1976. Speaker 1 That was the flight attendant case, right? Speaker 2 That's the one. Gabrielle de Friend sued her employer, a private airline called Sabina, for paying male colleagues more. The ECJ said the treaty principle of equal pay was clear and precise enough to be used directly by an employee against their private employer. Speaker 1 So that opened the door for horizontal effect for treaty articles. And it's not just social rights, is it? Speaker 2 Not at all. Think about competition law articles one O 1 and one O2. Cases like Courage and Manfredi confirm that you as an individual or a company can sue another private company for damages if they've broken competition rules. Like, you know, fixing prices. Speaker 1 OK, what about secondary law? Regulations seem like the easy case. Speaker 2 They're the easiest because they are directly applicable. As we said at the start, they are born with direct effect. They're designed to apply to everyone, so they naturally have both vertical and horizontal effect. Speaker 1 And decisions. Speaker 2 Similar story. A decision is binding on who it's addressed to, but the court said in the Grad case that if a decision addressed to a member state contains clear, precise and unconditional obligations, then individuals can rely on those. It would weaken the decision if they couldn't. Speaker 1 Which brings us to a really hot topic right now, the Charter of Fundamental Rights. Speaker 2 Yes, this is where a lot of the action is. The court has confirmed that certain Charter rights, if they meet the CPCU test, do have direct effect. Very example. Well, the Egan Berger case confirmed that Article 47, the right to an effective judicial remedy, has vertical direct effect. You can use that against the state. Speaker 1 But the really powerful development is on the horizontal side. Speaker 2 It is Article 21 of the Charter. The general ban on discrimination has been used in private disputes. Cresco investigation applied it to holiday rights between private parties. Speaker 1 And there were those big cases on paid leave, Bauer and Max Planck. Speaker 2 Exactly. They confirm that Article 312, the right to paid annual leave, has direct horizontal effect. That means you can use the charter to claim paid holiday from your private employer even if your national law says something different. Navigating the Directive Dilemma: Limits, Workarounds, and Conclusion It's huge. Speaker 1 OK, all of this success brings us to the well, the problem child of EU law. Speaker 2 Directives. Speaker 1 The directive dilemma it's built into their design isn't that they're biphasic. Speaker 2 That's the perfect word for it. Article 288 says a directive sets a result to be achieved, but it leaves the choice of form and method to the Member State. Speaker 1 So they need to be transposed into national law. Speaker 2 They do, which means by definition when a directive is first passed, it's not unconditional, It needs more action from the state. So in theory it should never have direct effect. Speaker 1 But theory runs into reality when a member state just fails to transpose a directive on time or gets it wrong. Speaker 2 And the individual is left in limbo. The ECJ saw this and created a solution vertical direct effect for directives. If a provision in a directive is clear, precise and unconditional, you can rely on it against the state that failed to implement it. Speaker 1 And the logic here is purely about punishing the state. Speaker 2 It's a sanctioning logic, yes. The court basically says a member state can't benefit from its own failure. You can't break your EU law promises and then use that failure to deny rights to your own citizens. Speaker 1 But there are some very strict limits on this. We need to be crystal clear here. Speaker 2 Two critical limits. First, the deadline for transposition has to have passed. Speaker 1 Of course, you have to give the state a chance to comply. Speaker 2 And second, this is only upward vertical effect individual against the state. A Member State can never use a non transpose directive to impose an obligation on an individual. Never. Speaker 1 OK, so this brings us to the big one, the $1,000,000 question, horizontal direct effect for directives. Speaker 2 The hard no. Speaker 1 Can you use a non transposed directive against another private person? The case to know is ficini Dory. Speaker 2 A brilliant case. It's so simple. Miss Ficini Dory is at Milan train station and she gets signed up for an English language course. Speaker 1 Happens to the best of. Speaker 2 Us She gets home, regrets it and wants to cancel. An EU directive gave her the right to cancel contracts signed away from business premises. The problem? Italy hadn't transposed the directive yet. Speaker 1 So she tried to use the directive directly against the language School, a private company. Speaker 2 And the ECJ gave a clear definitive answer. No, you cannot. Directives do not have horizontal direct effect, ever. Speaker 1 And they gave three very specific reasons why not. This is critical for an exam. Speaker 2 It is first, the sanctioning logic just doesn't work here. The private company didn't do anything wrong. The state failed to act. You can't punish the company for the state's mistake. Speaker 1 OK, that makes sense. Reason 2. Speaker 2 Legal certainty. Private citizens and companies should only be expected to know the law that's actually published in their country. They can't be bound by a directive that's still just sitting in Brussels. Speaker 1 And the third reason is about the Treaty itself. Speaker 2 It's structural. If you allowed horizontal effect, you'd basically be turning directives into regulations. You'd erase the distinction in Article 288. You'd be rewriting the treaty. Speaker 1 But this no horizontal effect rule creates a really unfair situation. An employee at a state owned company can enforce their rights, but someone doing the exact same job at a private company can't. Speaker 2 It's a huge discrimination problem, and the court knew it, so it started looking for creative workarounds that didn't technically violate the Ficini Dory rule. Speaker 1 What's the first workaround? Speaker 2 You expand the definition of the state as much as possible. Speaker 1 So you can bring more defendants under the vertical effect umbrella. Speaker 2 Exactly. So the state isn't just the central government, it's local authorities, public health bodies and any company that is controlled by the state or provides a public service under state authority. Speaker 1 So even a company with private shareholders could be considered the state for these purposes. Speaker 2 Potentially, yes, if they've been given special powers by the state. It stretches the sanctioning logic as far as it can go. Speaker 1 And the second solution is even more, I guess elegant. Speaker 2 It is. It's using general principles of EU law. The court realized that many directives are just giving concrete form to a fundamental principle that already exists, like the principle of non discrimination. Speaker 1 So the judge isn't enforcing the directive itself, but the principle behind the directive. Speaker 2 That's it. The directive acts as a guide to what the principle means, and the general principle can have horizontal effect. We saw this in the mangled and corrective Vecchi cases about age discrimination. The principle was applied between private parties. Speaker 1 So the director's content sort of sneaks in through the back door. Speaker 2 It's a way of bypassing the fuchini Dory block. Now this does create some tension with legal certainty, which the court admits. But in cases like dance industry, it has confirmed that at the end of the day, fundamental principles have to win out. Speaker 1 OK, so to recap the essentials for everyone studying direct effect is what turns EU law into individual rights. It was born in Van Gand and Luce. Speaker 2 Regulations, decisions, treaties and key Charter rights can have both vertical and horizontal effect if they pass that CPCU test. Speaker 1 But directives are the big exception. They only get vertical effect, and that's a sanction against a failing state. Speaker 2 And the ban on horizontal effect from Pacini Dory is absolute, even though the court has found clever ways to get around its harshest consequences. Speaker 1 So for your exam, always anchor your answer in the cases. Van Gend on loose for the Foundation. The friend for horizontal treaty rights. Vecchini Dory for the hard line on directives. Speaker 2 And try to understand the why. The court wasn't just making rules, it was building an entire unique legal system from the ground up. And as a final thought, something for you to think about on your own. We talked a lot about the sanctioning rationale, punishing the negligent member state. But how well does that logic really hold up when a publicly owned company is forced to comply? That company had no say in the government's failure to transpose the law. Speaker 1 So is vertical effect really just a sanction, or has it become something else, a broader tool to just maximize the enforcement of EU law no matter who gets caught in the crossfire? Something to think about.