Liability of the State Treasury for injury caused by violation of EU law
It is theoretically possible to pursue damages from the State Treasury for injury caused by violation of EU law, such as non-implementation of directives. But procedural difficulties discourage most litigants from taking this path.
Art. 4(3) of the Treaty on European Union requires the member states and the EU to assist each other in carrying out their treaty obligations in “sincere cooperation.” The member states also promise to take all necessary means to perform their obligations under EU law, and thus to ensure the effectiveness of EU law in their territory. TEU Art. 19(1) in turn require the member states to “provide remedies sufficient to ensure effective legal protection in the fields covered by Union law.” The Court of Justice of the European Union has stressed in its rulings numerous times that the principle of effective legal protection is a fundamental right protected by the European Convention on Human Rights and the Charter of Fundamental Rights of the European Union, recognised by the member states through their common constitutional tradition.
The state’s liability for injury caused to individuals as a result of violation of rights vested in them by EU law or national law constitutes an element of effective legal protection.
Grounds for liability
The key rulings by the Court of Justice for determining the rules of member states’ liability for violation of EU law are C-6/90 and C-9/90 Francovich and Bonifaci, C-46/93 Brasserie du Pêcheur, and C-48/93 Factortame.
In these judgments, the Court of Justice held that a member state is liable if:
- The rule of law infringed is intended to confer rights on individuals
- The breach is sufficiently serious
- There is damage, and
- There is a direct causal link between the breach of the member state’s obligation and the damage sustained by the injured party.
The state is regarded as a whole, regardless of whether the violation causing the injury can be attributed to the legislative, judicial, or executive authorities. The member state’s liability is not conditioned on a previous judgment by the CJEU confirming the violation.
Serious violation
The notion of a sufficiently serious breach has been explained in the CJEU case law to mean a manifest and grave disregard of the limits on the exercise of the member state’s discretion. In examining a breach, the degree of the clarity and precision of the violated norm should be considered, as well as the range of discretion left to the national authorities by the norm in question, the intentional or unintentional nature of the breach and the injury, the justified or unjustified nature of any error in applying the law, and whether the behaviour of any EU institution could have contributed to the failure to act or issuance or maintaining in force of regulations or national practice inconsistent with EU law.
It should be regarded as a serious breach when the violation has continued despite issuance of a judgment or preliminary ruling or the existence of established case law of the Court of Justice in the given area, demonstrating the unlawful nature of the behaviour by the member state. Failure to make timely transposition of a directive constitutes a serious breach of EU law.
Procedural autonomy
Damages are pursued in accordance with the national procedure, before the courts of the member state. Under the principle of equivalence, the conditions for reparation of loss laid down by the national law of the member state must not be less favourable than those relating to similar domestic claims and must not be so framed as to make it virtually impossible or excessively difficult to obtain reparation.
The national procedures may provide for a limitations period on pursuit of the claim, rules for determining the causal connection, mitigation of damages and valuation of the extent of the damages. But the rule is that the damages must cover both actual loss and lost benefits.
Polish procedure
Art. 417 of the Civil Code provides for the liability of the State Treasury for injury caused by an unlawful act or omission in exercise of public authority. Under Art. 4171, the injury may be caused by issuance of a normative act, a final judgment or a final decision, or by failure to issue a normative act, judgment or decision. Art. 4171 also provides that if the injury is caused by failure to issue a normative act which is required by law to be issued, the unlawfulness of failure to issue the act will be determined by the court hearing the case seeking damages.
But with respect to issuance of a normative act, final ruling or final decision, or failure to issue a ruling or decision, Art. 4171 requires, as a prerequisite to filing an action for damages, an earlier proceeding (prejudykat) finding the normative act, final ruling or final decision to be unlawful, or finding that there is an obligation to issue a ruling or decision.
In light of the rules discussed above for a member state’s liability for violation of EU law, the principle of effectiveness of legal protection and the CJEU’s holding that there is no obligation to obtain an earlier judgment from the CJEU confirming the violation of treaty obligations by the member state, the requirement in Poland to obtain a prior finding (prejudykat) constitutes an impermissible limitation on pursuing damages for a normative act inconsistent with EU law. Consequently, the requirement to obtain a prior finding of inconsistency of a normative act with EU law should be bypassed, and the violation of EU law should be determined by the court hearing the case seeking damages (as is the case for failure to issue a normative act).
With respect to the possibility of setting aside a final ruling or final decision, and in the case of injury caused by failure to issue a ruling or decision, the proceedings for issuance of a preliminary ruling must be laid down in the same manner with respect to objections connected with violation of national law and objections related to violation of EU law (under the principles of equivalence and effectiveness of EU law).
With respect to the causal connection, Civil Code Art. 361 indicates that liability extends to the ordinary consequences of an act or omission causing the injury, and includes both immediate losses suffered by the injured party and lost benefits.
Two judgments from the Supreme Court
In a resolution by a seven-judge panel of 19 May 2009 (Case III CZP 139/08), the Supreme Court of Poland held that Civil Code Art. 417 constituted the legal basis for the state’s liability in damages for violation of Community law (including for failure to implement a directive by the applicable deadline) from the time of Poland’s accession to the European Union (1 May 2004), and thus prior to entry into force of Art. 4171 §4.
In the judgment of 19 June 2013 (Case I CSK 392/12), the Supreme Court conducted an extensive analysis of the rules for liability of the State Treasury in the case of legislative inaction involving EU law. The court stressed there that the violated obligation to issue a legal act must arise from specific regulations of law and must be specific in terms of timing and content. The court pointed out that the right to seek damages is held only by persons whose legal situation would have been shaped advantageously by the provisions of the unissued normative act. It must also be found that the financial detriment would not have occurred if not for the legislative inaction, leading to a finding that the detriment is a normal consequence of such inaction. The Supreme Court held that the conditions for liability in damages under Polish law for legislative inaction are not less favourable than those arising under EU law concerning the liability in damages of member states to individuals for violation of EU law.
Interestingly, the Supreme Court pointed out in the judgment of 19 June 2013 that EU law does not condition the member state’s liability for damages on a prior finding by the CJEU of violation of EU law. As the court held, “Ruling on whether there was a violation of EU law—in whatever form (legislative action, issuance of a decision or ruling, or legislative inaction or non-issuance of a decision or ruling)—is up to the court of the member state where the statement of claim for damages was filed.”
This passage from the judgment demonstrates that the requirement to obtain a preliminary finding before filing a claim for damages, as specified in Civil Code Art. 4171, should in the opinion of the Supreme Court be ignored with respect to all forms of violation of EU law by the member state.
Summary
The state’s liability for injury resulting from violation of EU law arises directly out of EU law. Within the bounds of their procedural autonomy, the member states must ensure realisation of this right. The Polish procedure concerning the State Treasury’s tort liability does not impose more severe requirements than those arising out of EU law with respect to pursuing damages for a legislative failure to act. However, with respect to pursuing damages in the event of inconsistency of a normative act with EU law, the requirement to obtain a preliminary finding (prejudykat) is stricter than required by EU law, and is consequently contrary to EU law.
In the procedure for pursuing damages from a member state for violation of EU law, the principle of the effectiveness of EU law and the principle of equivalence must be observed. If these principles would be violated in the process of pursuing damages, the national court should refuse to apply the national regulations that are inconsistent with EU law.
Agnieszka Kraińska, EU Law Practice, Wardyński & Partners
