Albert Sánchez
Graells, Reader in Economic Law, University of Bristol*
One of the great complications of
EU law is that EU Directives – unlike Regulations – do not have ‘direct effect’
horizontally, meaning that a private party cannot rely on them as such against another
private party. However, there are other means of enforcing Directives, and in
any event they do apply vertically,
ie an individual can invoke a
Directive against the State. This distinction between vertical and horizontal
direct effect means that it is necessary to define exactly what is the ‘State’
for this purpose, given that there are many types of complex public-private
relationships in each EU country.
More precisely, EU case law has indicated
how to determine if a particular legal body is an ‘emanation of the State’, which
is therefore covered by the principle of vertical direct effect. The key
authority on this issue is the case of Foster
and Others v British Gas, C-188/89, EU:C:1990:313. While some later judgments have touched on this
definition, the Court of Justice of the European Union (CJEU) today clarified
the position more thoroughly in its judgment in Farrell, C-413/15, EU:C:2017:745, broadly following the Opinion of AG
Sharpston (here) – just in time for the start of many law students’ study
of EU law.
The test for defining an ‘emanation
of the State’, as applied in Foster,
was formulated in the following terms:
... a body,
whatever its legal form, which has
been made responsible, pursuant to a measure adopted by the State, for
providing a public service under the control of the State and has for that
purpose special powers beyond those which result from the normal rules
applicable in relations between individuals is included in any event
among the bodies against which the provisions of a directive capable of having
direct effect may be relied upon (C-188/89 at [20], emphasis added).
However, also in Foster, the CJEU had offered a broader
formulation of the test, indicating that:
a directive
[capable of direct effect] could be relied on against organisations or bodies
which were subject to the authority
or control of the State or had special powers beyond those which
result from the normal rules applicable to relations between individuals
(C-188/89 at [18], emphasis added).
The interpretation of the Foster-test has been a relatively
contentious issue in EU scholarship since its formulation in 1990. In
particular, there have been opposing views on whether the conditions in which
the test breaks down are cumulative (ie, a body needs to satisfy both criteria
to be an emanation of the State) or not and, in case they are cumulative,
whether they include three conditions (entrustment of public service, State
control and special powers), or only two (thus suppressing the requirement to
provide a public service) [cfr eg M Bobek, 'The effects of EU law in
the national legal systems', in C Barnard & S Peers (eds), European
Union Law, 2nd edition (Oxford,
OUP, 2017) 154 (two conditions, non-cumulative), TC Hartley, The Foundations of European Union Law,
7th edn (Oxford, OUP, 2010) 232 (identifying four conditions, cumulative, but
indicating that the test is non-exhaustive), K Lenaerts & P Van
Nuffel, European Union Law, 3rd
edn (London, Sweet & Maxwell, 2011) 903-04 (two conditions, including
public service provision, cumulative), or R Schütze, European Union Law (Cambridge, CUP, 2015) 100 (equally,
two conditions, including public service provision, cumulative)].
Uncertainty about the exact
limits and implications of the Foster-test
have remained for a surprisingly long time, and the CJEU had so far only
provided limited and piecemeal clarifications--most recently, in its Judgment
of 12 December 2013 in Portgás, C-425/12, EU:C:2013:829, where the CJEU still referred in less than
clear-cut terms to 'bodies which, under the control of [the] authorities [of a
Member State], have been given responsibility for a public-interest service and
which have, for that purpose, special powers' (at [34], for discussion,
see here).
In Farrell, concerning who was liable for failure to implement an EU motor insurance Directive properly following a car accident, the CJEU has clarified that the conditions set out in the
so-called Foster-test are not cumulative (ie, a body does not need to satisfy both criteria to be
an emanation of the State) and, in any event, that it suffices for an entity
(even a private law one, not necessarily subjected to State control) to have
been delegated the performance of a task in the public interest by the Member
State and to possess for that purpose special powers.
According to the CJEU, in Foster, 'the Court was not attempting to
formulate a general test designed to cover all situations in which a body might
be one against which the provisions of a directive capable of having direct
effect might be relied upon' (at [26]) and, consequently, that '[p]aragraph 20
of [Foster] must be read in the light
of paragraph 18 of the same judgment, where the Court stated that such
provisions can be relied on by an individual against organisations or bodies
which are subject to the authority or control of the State or have special
powers beyond those which result from the normal rules applicable to relations
between individuals' (at [27]). Ultimately, then, the CJEU has clarified that
the Foster-test is actually
formulated at [18] (see also Farrell at
[33]) and, consequently, that
... the
conditions that the organisation concerned must, respectively, be subject to
the authority or control of the State, and must possess special powers beyond
those which result from the normal rules applicable to relations between
individuals cannot be conjunctive (C-413/15
at [28], emphasis added).
Adding some further clarity, the
CJEU explained that the 'emanations of the State' that are relevant for the
purposes of ensuring direct effect of EU Directives after the expiry of their
transposition period
... can be
distinguished from individuals and must be treated as comparable to the
State, either because they
are legal persons governed by public law that are part of the State in the
broad sense, or because they
are subject to the authority or control of a public body, or because they have been
required, by such a body, to perform a task in the public interest and have
been given, for that purpose, such special powers.
Accordingly, a
body or an organisation, even one governed by private law, to which a Member
State has delegated the performance
of a task in the public interest and which possesses for that purpose special
powers beyond those which result from the normal rules applicable to
relations between individuals is one against which the provisions of a
directive that have direct effect may be relied upon (C-413/15 at [34]-[35],
emphasis added).
In my view, this is a welcome
clarification and one that can potentially catalyse a higher level of
effectiveness of secondary EU law. It comes to clearly establish three prongs
for the test of whether an entity is an emanation of the State (shall we
re-label it the Farrell-test,
for clarity?), which the entity will be if either (1) it is governed by public
law, (2) it is subject to the authority or control of a public body, or (3) it
performs a public interest task on the basis of special powers. This can have
interesting implications in areas other than general EU law (eg in State aid
law, to the effect of reducing the scope of the Judgment of 30 May 2013
in Doux Élevages and Coopérative
agricole UKL-AREE, C-677/11, EU:C:2013:348--as criticised here) and, more generally, follows a welcome functional
approach.
I envisage that the next
potential frontier for litigation will concern what should be considered
special powers, and whether they have to be substantial for an entity carrying
out tasks in the public interest by delegation of the State to be considered
'emanations of the State' for these purposes. In Farrell, the special powers consisted in statutory powers 'to
require [private entities] to become members of [the entity considered an
emanation of the State] and to contribute funds for the performance of the task
conferred on it by the [the Member] State' (C-413/15 at [40]). This seemed like
a clear instance. However, there may be more difficulties in drawing clear
lines where the powers are exercised in the context of a situation of a
relationship of special dependence from the State, where the special powers
form part of the task delegated to the entity. This can be particularly
relevant in the context of contracted-out public services in sectors such as
care, corrections or education, where the existence or not of special powers
(eg to discipline) will trigger complex issues in the future.
On the whole, however, it seems
to me that Farrell resolves
one of the important areas of uncertainty in the area of the effectiveness of
EU secondary legislation. It should thus be welcome.
Barnard & Peers: chapter 6
Photo credit: Yahoo.com
*Reblogged from
the ‘How to Crack a Nut’ blog
