A Critical Analysis of Case C-91/92 Paolo Faccini Dori –v- Recreb Srl (1994)
Executive Summary
EU directives are considered not to have horizontal direct effect, i.e. the provisions of the European directive cannot be relied upon by private individuals, when it comes to a legal dispute where they have not been transposed by member states into international law. This was the position in the case in question, here, of Faccini and has been largely supported by future case law and academic analysis in this area. Despite this, there have been some cases which argue that there should be a direct effect[1]. Although these have been distinguished on a matter of fact between the position in Faccini and the decisions reached in later cases, it is argued, here, that the basic rule remains current and good law, albeit with an element of uncertainty, particularly where there is an aspect of public law and order and an obligation on the member states, rather than it being downplayed as a purely contractual relationship between the individual parties.
Facts of the Case
EU Directive 85/577[2] places a requirement on member states to protect consumers when they are entering into contracts which are negotiated away from the business place, for example, over the phone or, more recently, this would apply to internet-based purchases. This offers a right to cancellation and although there is a degree of flexibility offered to member states in how they ensure that consumers are protected in this way (article 4 and article 5 of directive), there are still minimum rights being afforded to consumers in this situation; the precise terms may also vary from member states to member state, in terms of how the consumers are informed of this right. However, fundamentally, the right is still present[3].
In this case, Faccini Dori contracted with Interdiffusion Srl, in order to purchase an English language course. However, she later attempted to cancel the purchase because, in the meantime, the provision of the course had been assigned to Recreb Srl, who then sued Faccini Dori for the cost of the course which she had failed to pay, as she wished to cancel her purchase. Faccini Dori argued that she would have been entitled to cancel the contract, as it had been a business arrangement made outside of the business premises, under the EU directive; however, it was the failure of the Italian government to implement the contents of the directive, which meant that the provisions did not seemingly apply in the case of Recreb Srl. The question, therefore, arose as to whether or not this directive had horizontal directive effect, thus enabling the individual to rely on the directive when dealing with a dispute between two private individuals. The weakness in the Faccini’s argument was based on the fact that the directive had not been implemented and the question arose as to whether or not an unimplemented directive can be relied upon as, had it been implemented, it would be part of Italian law in any event.
Decision of the Case
In this case, relying on the Marshall case, it was held that Faccini could not rely on the directive, as it has not been implemented into Italian law and therefore it was not possible for individuals to apply the rules contained within the directive, as this lacked horizontal directive applicability and could not therefore be used as the basis for a legal action[4]. According to Article 249 (was 189 at the time of the case) of the Treaty on the Functioning of the European Union, a European directive is binding on the member states, in terms of achieving the objectives of the directive, but that it is up to member states to determine how this will apply in their jurisdiction. The argument, therefore, arose as to whether or not this means that the directive enables individuals to rely on the concept of the directive in a private action, even where the member state had failed to transpose the directive into national law.
In this case, however, it was held that the directive was applicable vertically and could be seen to impose an obligation on the member states, but not be used by individuals in a horizontal plane i.e. between private parties.
As noted in the cited case of Marshall[5], the Faccini case relied on this and argued that, whilst it would be possible for private individuals to bring an action against the state for their failure to enact the provisions of the directive, it could not be used as the basis of legal action between the two individuals.
Beyond the Approach in Faccini
Although the rules laid out in the Faccini case seemed to state clearly that a non-enacted directive could not be relied upon by a private individual, although there has been some future debate as to whether case law has made inroads into this strict position. Case law has developed in this area to such an extent that it creates a situation where it would be possible to have a direct effect or direct link between individuals, even when they have not been transposed into national law[6].
Take, for example, the case relating to CIA Security[7], where an argument arose between three private individuals all of whom were competitors in the provision of security systems. In this argument, it was alleged that CIA Security was not suitably authorised and therefore should not be selling alarm systems, under Belgian law. An argument was presented by CIA that there had been unfair trading practices based on the fact that adopting the requirements to be authorised without notification was a breach of directive 83/189, article 8[8]. It was argued, in this case, that it was possible for the individuals to rely on the provisions of this directive as part of the case of the national court. In this situation, the court held that the provisions of the directive could be relied upon, which seemed to go against the decision in Faccini. As part of the judgement, Advocate Elmer distinguished from the Faccini case by stating that the provisions in directive 83/189 had been written in such a way that there were duties being imposed on the member state, whereas the directive in the Faccini case had placed the requirement on the individuals, alone, and not with the relationship between individuals.
A better update emerged in the Unilever case[9]. This case dealt with a contractual relationship between two parties and a boundary dispute between Unilever and Central Food whereby Unilever had been supplying olive oil to Central Food. However, Central Food then took issue with Unilever, given the fact that the oils had not been labelled correctly, so they were no longer in compliance with the appropriate Italian law. As a result, Central Food stated that it would not pay for the oil delivered by Unilever. Unilever’s counterargument was that, although the Italian government had observed certain parts of the provisions of directive 83/189, the actual national law had not taken into account article 9 of the directive and therefore should not have been enacted and should not be applied.
In this case, it was held that as the directive had been misapplied and this had resulted in a national standard which was opposed to the directive, national standards could not therefore be applied and could not be enforced against individuals. Certain distinctions were drawn between the Unilever and the CIA case, primarily based on the fact that it was a contractual relationship between the parties and was not linked to arguments associated with unfair trade practices and thus allowed the decisions to be distinguished from the case of Faccini.
The difficulty going forward, therefore, is how cases such as the CIA case can potentially create a situation where there is horizontal direct effect to directives allowing private parties to rely upon the provisions of any unimplemented directive, in order to impact on their own personal dispute. On the face of it, therefore, it would appear that the CIA case had indeed created a situation whereby the basic ruling in the Faccini case could be softened. The main argument for this development is that, in the CIA case, there is a public law element, as there had been a failure on behalf of the member state, rather than a pure issue of private law such as contractual relations[10].
Conclusions
There are clear difficulties when it comes to reconciling the basic provision laid out in Marshall and the Faccini cases; however, although it has been argued that there is a public law element in the cases which have been decided in a different way from the Faccini case, the net result is that this creates a different relationship between private individuals. Despite this, it is contended here that the basic rule in Faccini, in that the directive does not have horizontal direct effect, and therefore cannot be relied upon as a legal basis for action between private individuals, remains. There is, however, the need to consider cases such as CIA, which can create at least some uncertainty as to whether or not this will be strictly applied, in all situations.
References
Case C-194/94, CIA Security International SA v. Signalson SA and Securitel SPRL [1996] ECR1-2201, para. 13-15.
Case 152/84, Marshall v. Southampton and South-West Hampshire Area Health Authority (Teaching) [1986] ECR 723, para. 48.
Case C-91/92 Paolo Faccini Dori –v- Recreh Srl (1994)
Case C-443/98, Unileverltalia SpA v. Central Food SpA [2000] ECR1-7535.
Council Directive (EC) 85/577 Consumer Protection in the Case of Contracts Negotiated Away from Business Premises
Council Directive (EC) 83/189 laying down a procedure for the provision of information in the field of technical standards and regulations
Michael. Dougan, “The “Disguised” Vertical Direct Effect of Directives?”, The Cambridge Law Journal, 2000, vol. 59(3), pp.586-612 at 587
Paul Craig, “Directives: Direct Effect, Indirect Effect and the Construction of National Legislation”, EL Rev., 1997, vol. 22, pp.519-538 at 519.
Paul Craig and Grainne de Burca, EU Law Text, Cases, and Materials, (3rd Ed., Oxford University Press, United Kingdom 2003), p.202, 203
Stephen Weatherhill, “Breach of Directives and Breach of Contract”, EL Rev., 2001,
vol.26, pp. 177-186 at 182.
