Bauer: Rescuing the Case Law on Directives' Direct Effect?
Contrary to primary EU law (Van Gend en Loos), Directives do not enjoy full direct effect. While Directives are of vertical direct effect post the expiration of the deadline for their implementation if they are sufficiently clear and precise (Van Duyn) and if they are invoked against the state and not invoked by the state against a private party (Kolpinghaus Nijmegen), they do not enjoy horizontal direct effect. The CJEU has, however, carved out multiple exceptions to this rule, slowly hollowing out the rule against horizontal direct effect through the case law. The CJEU’s case law on the horizontal direct effect of Directives has created unfairness and also a degree of uncertainty for both private parties and actors that may be considered emanations of the state. While the decision in Bauer is a welcome move towards a reliance on codified primary EU law in the form of the Charter of Fundamental Rights, which may increase legal certainty in the long run, significantly more case law is needed on the Charter to allow parties to be certain of whether or not their situation falls within a Charter right. Until then, the certainty of the previous case law will likely continue to be relevant for parties and, depending on how restrictive the Charter will be interpreted by the CJEU in future cases, the case law on horizontal direct effect may persist to haunt litigants.
1. Horizontal Direct Effect of Directives: Exceptions in the Case Law
As a general rule, the CJEU has held that Directives are not capable of horizontal direct effect since Directives are addressed to Member States and can, therefore, only create vertical direct effect (Marshall I). Furthermore (although Marshall I relied on the textual argument), the court’s estoppel reasoning in Ratti could not be extended to private parties. While the state, which failed to implement the Directive it was bound to implement, could be estopped from relying on its own failure to fulfil its Union law obligations, a private party, which had no control over the implementation of the Directive, could not be estopped. But the CJEU has carved out multiple exceptions to its rule against the horizontal direct effect of Directives, which apply once the deadline for the Directive has expired and if the Directive is sufficiently clear and precise (Marshall I). Those exceptions have led to a decrease in legal certainty and, more generally, to arbitrary results.
1.1 Emanations of the State
The first exception carved out by the CJEU is that Directives can be relied on by private parties against emanations of the state. The CJEU adopted a wide view of the state, even counting a health authority as such (Marshall I). Initially, for there to be an emanation of the state, the state needed to have adopted a measure for the provision of public services under the state’s control and the emanation received special powers for it (Foster). The CJEU later loosened this test in Farrell, where it only required a task in the public interest for which it has special powers.
This line of cases has created both unfairness and uncertainty. The CJEU’s loose test in Farrell and the CJEU’s ruling in Foster that a body’s status as a private entity under national law does not prevent them from being considered an emanation of the state make it difficult for bodies to know whether they are an emanation of the state. Furthermore, litigants’ ability to invoke Directives depends on the arbitrary distinction of whether they are suing an emanation of the state. In the case of Marshall I, employment by a private health provider would have prevented the claim, but employment by a public health authority made it possible. It is unfair that this arbitrary distinction decides over whether litigants can rely on Directives.
1.2 Domestic Courts’ Duty of Consistent Interpretation
The CJEU has further required domestic courts to interpret national law in line with the Directive, whether it is the national legislation implementing the Directive (Von Colson) or even national law pre-dating the Directive (Marleasing). Since this influences the interpretation of national law that applies between private parties, it essentially creates horizontal effect through the back door. But this horizontal effect is limited as there first needs to be a national law that can be interpreted like this, national courts are not required to adopt contra legem interpretations (Wagner) and it cannot be used in cases where the rule’s application would retroactively create or aggravate criminal offences (Kolpinghaus Nijmegen).
While this duty has created increased fairness by making reliance on Directives available to more litigants, it has also introduced increased uncertainty since established interpretations of national law may change, even if there is a case law which parties may have used to inform themselves about their legal situation (Egenberger).
1.3 ‘Incidental Direct Effect’
In cases such as CIA Security and Unilever, the CJEU has carved out a fact-specific exception which applies where a state has failed to comply with its duty under the Directive to notify the Commission of its regulations prior to their taking effect in national law. In such a case, the regulations cannot be applied. These cases are confined to very specific facts and play little role for most litigants, therefore, their effect for the uncertainty and unfairness for litigants is limited.
1.4 Embodiment of General Principles
The final exception created by the court applies where a Directive is found to embody a general principle of EU law (Mangold). Applicants can then rely on the general principle as a part of primary EU law that is embodied in the Directive. Since the general principles of EU law are not codified, they can only be elucidated through the case law, creating great uncertainty for litigants.
1.5 The Case Law and Considerations of Uncertainty and Unfairness
As pointed out above, the various exceptions created by the CJEU have contributed to litigants’ lack of legal certainty and unfairness. Dashwood argues that this effect has been brought about by the CJEU’s indecisiveness over which objective it should prioritise - the objective of ensuring Union law’s effectiveness (weighing in favour of giving Directives as much direct effect as possible) and the objective of preserving Directives’ characteristic of not having horizontal direct effect (A Dashwood, ‘From Van Duyn to Mangold via Marshall: Reducing Direct Effect to Absurdity? (2007) 9 Cambridge Yearbook of European Legal Studies 81). Prechal concludes that the courts’ case law has become so diluted and so many exceptions have been carved out, that the doctrine of Directives’ direct effect should be abandoned (S Prechal, ‘Does Direct Effect Still Matter?’ (2000) 37(5) Common Market Law Review 1047). But is there another way? The court has offered a new way in Bauer:
2. The Bauer Decision
The CJEU held in Bauer, similarly to its previous case law on the exception related to the embodiment of general principles, that a Directive’s content can be of direct horizontal effect if it constitutes the content of a right contained in the Charter of Fundamental Rights. In Bauer, the court held that the Directive was an expression of Art 31(2) of the Charter. But the Bauer case was special in the sense that the Directive’s wording and the wording of Art 31(2) were so similar that the embodiment of the right was clear.
It remains to be seen how wide some rights contained in the Charter will be interpreted and until there is sufficient case law on this, litigants remain in uncertain waters when relying on Charter rights to be able to rely on Directives. Nonetheless, the court’s move from relying on uncodified general principles to relying on the codified Charter is an improvement for legal certainty, even though more case law is needed for more legal certainty for litigants.
Until the Court has clarified the scope of all rights in the Charter (which is likely to take years given the length of the Charter and the need for specific cases to arise for such clarifications), litigants will likely have to continue to alternatively rely on the previously established exceptions of the case law. And until the scope of the Charter rights has become clearer, litigants remain in legal uncertainty about whether they will be able to avoid the general rule against Directives’ horizontal direct effect. And depending on how restrictive the court will interpret the scope of the Charter rights, the unfair arbitrary distinctions in cases such as Marshall may remain because if the Charter rights will apply not to all situations, some applicants will continue to be prevented from relying on Directives based on the purely arbitrary distinction of who, for example, is their employer (like in Marshall I).
In conclusion, the CJEU’s pre-Bauer case law has created unfairness and a lack of legal certainty for litigants. The decision in Bauer may be a move towards increased legal certainty and fairness, but the achievement of these objectives remains far in the future as future case law is needed to achieve these objectives. Until then, litigants remain in an unfavourable situation created by a multitude of exceptions and the uncertain scope of relying on Charter rights.