Francovich v Italy (C6/90) [1991] EUECJ C-6/90

Italian employees sought unpaid wages after their employers became insolvent. Italy had failed to implement EU Directive 80/987 protecting employees in insolvency cases. The Court established that Member States must compensate individuals for losses caused by failure to implement directives, creating the principle of state liability.

Facts

Andrea Francovich had worked for CDN Elettronica SnC in Vicenza but received only sporadic wage payments. After obtaining a judgment for approximately 6 million lire, he was unable to enforce it. Danila Bonifaci and 33 other employees had been employed by Gaia Confezioni Srl, which was declared insolvent in April 1985, leaving them owed over 253 million lire with no prospect of payment.

Council Directive 80/987/EEC required Member States to establish guarantee institutions to protect employees’ unpaid wage claims in cases of employer insolvency. The deadline for implementation was 23 October 1983. Italy failed to implement the directive, and this failure was confirmed by the Court in Case 22/87 Commission v Italy.

Issues

Direct Effect of the Directive

Whether the provisions of Directive 80/987 determining employees’ rights could be directly enforced against the State in national courts despite the absence of implementing measures.

State Liability

Whether a Member State is obliged to compensate individuals for losses caused by its failure to transpose a directive.

Judgment

On Direct Effect

The Court found that while the directive’s provisions were sufficiently precise and unconditional regarding the identity of persons entitled to the guarantee and the content of that guarantee, they could not be directly enforced. This was because the directive did not identify the person liable to provide the guarantee:

Those provisions do not identify the person liable to provide the guarantee, and the State cannot be considered liable on the sole ground that it has failed to take transposition measures within the prescribed period.

On State Liability

The Court established the fundamental principle of state liability for breaches of Community law:

The full effectiveness of Community rules would be impaired and the protection of the rights which they grant would be weakened if individuals were unable to obtain redress when their rights are infringed by a breach of Community law for which a Member State can be held responsible.

The Court held:

It follows that the principle whereby a State must be liable for loss and damage caused to individuals as a result of breaches of Community law for which the State can be held responsible is inherent in the system of the Treaty.

Conditions for State Liability

The Court established three conditions for state liability where a Member State fails to implement a directive:

1. The result prescribed by the directive should entail the grant of rights to individuals
2. It should be possible to identify the content of those rights on the basis of the provisions of the directive
3. There must be a causal link between the breach of the State’s obligation and the loss suffered

The Court further held that while national law governs the detailed procedural rules, such conditions must not be less favourable than those for similar domestic claims and must not make it virtually impossible or excessively difficult to obtain reparation.

Implications

This landmark judgment established the principle of Member State liability for breaches of EU law, creating a crucial enforcement mechanism in EU law. It ensures that individuals have effective remedies when Member States fail to implement directives properly. The case is foundational to EU constitutional law and has been developed in subsequent cases including Brasserie du Pêcheur and Factortame III.

Verdict: The Court ruled that: (1) The provisions of Directive 80/987 determining employees’ rights cannot be directly enforced against the State where no implementing measures are adopted within the prescribed period; (2) A Member State is required to make good loss and damage caused to individuals by failure to transpose Directive 80/987.

Source: Francovich v Italy (C6/90) [1991] EUECJ C-6/90