Editorial of October 2016

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by Sophie Perez Fernandes, Junior Editor

Engaging EU liability within the European Stability Mechanism framework

Last September 20th, the European Court of Justice (ECJ) delivered two judgments regarding the role of the European Commission and, to a lesser extent, the European Central Bank, in the negotiation and signing of the Memorandum of Understanding concluded between the Republic of Cyprus and the European Stability Mechanism (ESM) during the 2012-2013 financial crisis, and, in particular, in the restructuring of the banking sector in Cyprus imposed as a condition for the grant of financial assistance.

In Mallis and Malli (Joined Cases C-105/15 P to C-109/15 P), actions were brought against the European Commission and the European Central Bank for the annulment of the Eurogroup’s statement of 25 March 2013 concerning, inter alia, the restructuring of the banking sector in Cyprus. In turn, in Ledra Advertising (Joined Cases C-8/15 P to C-10/15 P), depositors of two large Cypriot banks brought actions against the European Commission and the European Central Bank for the partial annulment of the Memorandum of Understanding of 26 April 2013 adopted jointly by the ESM and the Republic of Cyprus and also for compensation for damages allegedly suffered following the request for financial assistance and the ensuing restructuring of the two banks in question.

The ECJ had already been called upon to rule on judicial protection questions raised by the ESM framework. Created in order to provide, where needed, financial assistance to the Member States whose currency is the euro, the ESM was instituted through an international agreement between euro area Member States – the Treaty establishing the ESM, concluded in Brussels the 2th February 2012, in force since the 27th September 2012. Thus, the ESM Treaty is not part of the EU legal order, as confirmed by the ECJ in the famous Pringle judgment (C-370/12). As a consequence, when creating the ESM, or acting within its framework, Member States do not act within the scope of application of EU law for the purposes, in particular, of Article 51(1) CFREU. Individuals seeking to challenge Member States’ measures adopted pursuant the conditions laid down in a Memorandum of Understanding would not, therefore, find in the preliminary ruling mechanism an indirect means of access to the ECJ in order to assess their compliance with EU law and, in particular, the CFREU as the former was not in question and the latter was hence out of reach.

What the above mentioned judgments, and especially Ledra Advertising, emphasize is the link nonetheless existing between the ESM framework and the EU legal order. Quoting Alicia Hinarejos (EU Law Analysis), in order to carry out its functions, the ESM “borrows” two EU institutions, the European Commission and the European Central Bank, two thirds of the infamously known Troika. The question is whether (and, if so, when) EU institutions’ actions within the ESM framework might be reviewed and, when harmful, give rise to compensation under EU law and, in particular, in light of the CFREU.

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Summary of Brasserie du Pêcheur & Factortame – C-46/93 and C-48/93

 

by José Ricardo Sousa, student of the Master's degree in EU Law of UMinho

Keywords: liability of the state; legislator; claims; repair; individual’s rights

Court: CJEU | DateMarch 5th 1996 | Cases: C46/93 and C-48/93 | Applicants: Brasserie du Pêcheur vs Federal Republic of Germany

Summary: This judgment contains two similar cases connected to the same matter: liability of the State.

In the first case, the French company Brasserie du Pêcheur was obliged to cease their exportations from Germany due to German authorithies’ allegations that the beer did not fulfill purity requirement. European Comission interfered in this case and stated that this provisions were contrary to article 30 of EEC Treaty and brought an infringement proceedings against German Federal Republic. On 12th March 1987, the court confirmed EC’s arguments and consequently condemned the German act. Therefore, Brasserie du Pêcheur moves another action to reclaim their losses. The Court had doubts related to the limits of liability of the State and internal law and so they decided to send a question to the CJEU.

In the second case, Factortame intented an action in High Court of Justice with the purpose to challenge the compatibility of Part II of the Merchant Shipping Act with article 52 of the EEC Treaty. This law predicted a new register for British fishing boats and it pretended to obligate vessel’s registration, including those already registered, according to some conditions relating to nationality. The boats that couldn’t be registered were forbidden to fish. In another previous judgement, CJEU considered that this law was contrary to Communitary law, but it was not contrary that all the boats in UK suffered more controled by the authorities. On 4th August 1989, European Comission brought infringement proceedings against UK to suspend nationality requests because they were contrary to articles 7, 52 and 221 of the EEC Treaty. Afterwards, the Court decided to call the intervenients to show the amount of claims, however the Court had doubts in what refers to include a claim for inconstitutional behaviour and send a question to CJEU.

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Summary of Francovich – 6/90

by José Ricardo Sousa, student of the Master's degree in EU Law of UMinho

Keywords: social policy; liability; directive implementation; failure to fulfil an obligation; compensation.

Court: CJEU | DateNov. 19th 1991 | Case: 6/90 | Applicants: Andrea Francovich vs Italian Republic

Summary: The Directive 80/897 goal was to assure a minimum protection for all European workers in case of bankruptcy of a company. For this purpose, it predicted specific guarantees for the payment of claims relating to debt remuneration. Italian Government didn’t implement the mentioned policy in time. Mr Francovich and Mrs Bonifaci filed in court arguing that it was the Italian Government’s obligation to implement the Directive 80/897 and so they claimed a state compensation. The national court suspended the case and referred the following questions to CJEU:

“Under the system of Community law in force, is a private individual who has been adversely affected by the failure of a Member State to implement Directive 80/897 — a failure confirmed by a judgment of the Court of Justice — entitled to require the State itself to give effect to those provisions of that directive which are sufficiently precise and unconditional, by directly invoking the Community legislation against the Member State in default so as to obtain the guarantees which that State itself should have provided and in any event to claim reparation of the loss and damage sustained in relation to provisions to which that right does not apply?”

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