EU law-breakers may be forced to pay damages

Date: 23/11/1995

By Fiona McHugh

GOVERNMENTS which break EU law may soon be forced to compensate citizens for their unlawful behaviour.

Two cases currently being studied by the European Court of Justice will determine whether or not victims of illegal government decisions should be awarded financial compensation for any losses they may have suffered as a result.

If the Court eventually rules in favour of a French brewery and a group of non-British fishing companies, Germany and the UK will be forced to pay back millions of ecu in losses. However, the stakes are much higher than that. Legal experts warn that a victory for the companies in question would open the door to a flood of similar cases which could cost member states millions more.

One of the Court's advocates-general will deliver his opinion on the two cases next week. Although his findings are not binding on the full Court, which will deliver a final verdict some months later, its judges usually follow the advice of their advocates-general - so his opinion will be scrutinised closely by member state governments.

Under EU single market rules, products which are lawfully marketed or sold in one member state automatically qualify for sale in every other member state.

Accordingly, in 1987, the Court ordered Germany to lift a six-year-old ban on beer made by a French brewery, Brasserie du Pêcheur, which German authorities had claimed did not meet national purity standards.

Now the Court must determine whether, and to what extent, the brewery should be compensated for beer it might have sold to Germans during that period if the ban had not been in place.

Similarly, it must decide whether or not a group of fishing companies know as Factortame Limited and Others has the right to sue the UK for damages.

The case dates back to 1988 when a crew of fishermen and fishing companies took the British government to court for refusing to grant them a licence to fish in British waters because of their nationality.

Under the British Merchant Shipping Act, fishing vessels may only be registered in the UK if their owners meet a list of conditions relating to nationality, residence and domicile. Unregistered boats are not allowed to fish. The Court ruled in 1991 that the act went against EU single market regulations, and must now rule on whether the firms should be compensated.

Germany and the UK, backed by a number of other member states and the European Commission, argue that compensation should be awarded only when the breach in question is “manifest and grave” - for instance, when a member state has been found guilty of disobedience by the Court of Justice, but has failed to change its ways, or quite simply, when it has flagrantly flouted Union law.

Member states also want compensation to be made conditional on fault. In other words, they think governments should not have to pay for mistakes made by officials who are ignorant of EU law. If there is any doubt as to the guilty official's intention, governments should not have to pay up, they say.

But the companies argue it is virtually impossible to prove, beyond a doubt, that a civil servant willingly broke EU law, especially when access to critical government documents is often restricted.

They also want the Court, should it rule in their favour, to tell national courts how much to award and they want that sum to include interest which might have accrued on lost profits.