Chapter 8 Guidance on answering assessment questions

EU liability in damages

Critically discuss the development by the Court of Justice of the ‘general principles’ referred to in Article 340 TFEU. 

Article 340 TFEU provides that the EU is liable, in accordance with the general principles of law common to the Member States, to make good any damage caused by its institutions or servants. In Alfons Lütticke v Commission (Case 4/69) [1971] ECR 325, the Court of Justice stated that these general principles required an applicant to prove a wrongful act by the EU, damage, and a causal link between the two.  These are common features of national law relating to non-contractual liability in the Member States (see, for example, the English law of tort) and therefore this interpretation of Article 340 TFEU is scarcely surprising. 

The applicant must prove that the allegedly wrongful act fulfils the test laid down in Bayerische HNL and others v Council and Commission (Joined Cases 83 & 94/76 and 4, 15 & 40/77 [1978] ECR 1209) that it must be a sufficiently serious breach of a rule of law which is for the protection of individuals. Such rules of law include most Treaty Articles and the general principles of law recognized by the Court of Justice, such as non-discrimination.

In Bayersiche HNL and subsequent cases, the Court of Justice has stated that there would be a sufficiently serious breach only where the EU had manifestly and gravely disregarded the limits on the exercise of its powers. Where that discretion is minimal, any breach will be sufficiently serious (Commission v Fresh Marine Company A/S Case C-472/00 [2003] ECR I-7541).  However, it is difficult to predict whether the EU’s discretion in a particular area will be regarded as sufficiently minimal for this approach to be invoked.

The Court of Justice will require applicants to prove their damage (GAEC v Council and Commission Case 253/84 [1987] ECR 123), and to mitigate their loss. In Mulder and Others v Council and Commission (Joined Cases C–104/89 & C–37/90 [1992] ECR I-3061) the Court of Justice reduced the damages awarded by the amount that the producers could have earned had they reasonably undertaken replacement activities.  Again, these principles reflect well established elements of most domestic laws on non-contractual liability. 

It is for the applicants to prove causation; the Court of Justice will not make an assumption merely because of the existence of a wrongful act and damage have been proved. In Dumortier Frères SA and others v Council and Commission (Joined Cases 64 & 113/76 [1979] ECR 3091), Court of Justice held that the abolition of subsidies had not lead to increased prices, and therefore could not be proved to have caused the reduction in sales. It also ruled that the factory closures and bankruptcy were not sufficiently direct consequences of the abolition of subsidies.  While causation can be difficult for applicants to prove, it would not be appropriate for the EU – any more than any other defendant in a non-contractual action – to pay damages in respect of losses which might not have been a direct consequence of its actions. 

In conclusion, the stringent nature of the test applied by the Court of Justice, particularly in relation to whether the act is wrongful, reflects the concern that fear of litigation could hamper the EU in its policy making and legislative activities in support of the single market, and the fact that any damages awarded come out of public funds. It is also consistent with the development of Member State liability in damages under Brasserie du Pêcheur SA v Germany and R v Secretary of State for Transport, ex parte Factortame Ltd and others (Factortame III) (C-46/93 and C-48/93 [1994] ECR I-1593).  However, it can mean that individuals or business which have suffered loss as a result of the actions of the EU cannot recover compensation or can only do so in part, as in Roquette Frères v Commission (Case 20/88) [1989] ECR 1553.