UK: State Liability On Failure To Implement An EC Directive

Last Updated: 21 December 2007
Article by Stephen Netherway and Jennifer Tubbs

The Court of Appeal has recently considered the liability of EU Member States to compensate individuals where the State has failed to implement a Directive into national law.

Lloyd’s Names brought proceedings to recover underwriting losses, alleging that the British government had failed to introduce proper regulation of Lloyd’s syndicates. The claim was unsuccessful at first instance and the Names appealed. The Court of Appeal dismissed the appeal.

  • For a Member State to be liable for failing to implement a Directive the Directive should involve the grant of rights to individuals and those rights must be the particular right being claimed as justification for the proceedings.
  • It was not enough to argue that the Directive was intended to protect the individual’s economic welfare.

To view the article in full, please see below:


Full Article

State Liability On Failure To Implement An EC Directive

The Court of Appeal has recently given judgment in an appeal brought by a group of Names in the Lloyd’s market. The judgment provides guidance on the conditions on which liability of a Member State would arise where a State has failed to implement a Directive. It is also an interesting commentary on how the courts dealt with arguments that Lloyd’s Names have suffered loss due to an alleged failure of regulation.

Background

The case concerned claims brought by a substantial number of disaffected Lloyd’s Names who suffered considerable underwriting losses between 1980 and 1996. Having failed to secure redress through proceedings against Lloyd’s, a claim was brought on the basis that, as a result of inadequate market regulation, they had accepted risks and suffered losses that proper regulation would have identified or lessened.

To ground such a claim, the Names had to point to a failure to transpose into national law an EC Directive that granted them specific rights. The Directive pointed to was council Directive 73/239EEC.

This Directive concerns the co-ordination of national provisions on the taking up and pursuit of direct insurance business. The Directive requires consistency in regulation to promote freedom of establishment across the Community.

The claimants sued the British government, in the form of HM Treasury, for failure to implement Directive 73/239. They sued for their underwriting losses on the basis that these were caused by the failure to implement proper regulation accordingly, specifically that the Directive obliged the government to create national laws that ensured that syndicates had adequate reserves to meet liabilities, which did not happen. Langley J gave judgment in favour of the government. This judgment was appealed.

Issue

The Court of Appeal analysed whether the Names could claim a failure to transpose the Directive into domestic law against the national government. The main issue was whether there was a sufficient "Grant of Rights" to the claimant Names pursuant to the Directive.

The ECJ case of Francovich was a major point of reference. Francovich provides that Member States are obliged to compensate individuals where the State has breached Community law and is responsible for the individual’s loss and damage. The ECJ set out three conditions that together create State liability:

  • The Directive should involve the grant of rights to individuals
  • The content of those rights should be identifiable in the Directive
  • A causal link between the breach of the State’s obligation and the loss and damage suffered by the injured parties should exist.

Decision

The Names contended that the Francovich test was satisfied if some right, not necessarily the right being claimed as justification for the proceedings, was conferred, or if the Directive was intended to protect the claimants’ economic welfare. The Court of Appeal ruled against the Names’ arguments. The court reasserted the conventional interpretation and understanding of the Francovich decision.
The court commented that the recitals and terms of Directive 73/239 meant that an insured under a policy might have a right to expect that his government will require an insurer to meet certain requirements before being permitted to do business. However, to submit that an individual claimant Name, as in this case, has a right to expect the government to require such regulation of him was to assert in substance that such an individual had a right to be regulated. This was regarded as nonsensical.

The judge at first instance was correct to reject the idea that the Directive granted rights to the claimants. The Court of Appeal unanimously decided to dismiss the appeal. Reference to the ECJ was neither required, nor permitted.

Comment

The case reveals the Court of Appeal’s endorsement of the standard interpretation of the three-step test in Francovich. Should anybody wish to bring a claim, in an insurance context, against the government for failure to implement a Directive, the first -major- hurdle still remains showing that the Directive concerned grants rights to the claimant.

Further reading: Frederick Thomas Poole & Ors v Her Majesty’s Treasury [2007] EWCA Civ 1021

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 18/12/2007.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions