Direct effect

Author Definition

Definition

Direct effect is a concept, which is mainly used in the situations of parallel application of two or more legal systems: national and inter-/supranational or state and federal. Its rationale concerns the question of establishing legally binding and directly enforceable rights and obligations for the individuals vis-à-vis the states (vertical direct effect) and individuals vis-à-vis one another (horizontal direct effect). Usually, the principle is associated with the problems of the division of competences between the coexisting legal systems concerning the instances of a deeper and a more systematic application of the provisions of the upper legal system. The term is also relevant for purely domestic situations. For example, when deciding upon enforceability of certain constitutional provisions, which are broad and allow different (and conflicting) interpretations.

Commentary

From the purely juristic point of view, the norm can only have direct effect if it is clear, complete, precise and does not contain clarificatory references to other norms (the element of executability or ratione materiae) and if it concerns a definable group of individuals (the element of determination or ratione personae). The narrower and the better articulated the norm, the easier it is to assign to it a direct effect. In reality, the level of precision may vary. The term ‘direct effect’ is sometimes confusingly used for defining the nature of EU legislative acts, when distinguishing the acts requiring a separate domestic implementation (e.g. directives) and those not requiring such implementation (e.g. regulations). EU regulations always have direct applicability, but not all provisions of the directly applicable (i.e. not requiring further transposition by a domestic legislative act) EU laws, are necessarily directly effective; and vice versa, even some provisions of the EU legislative acts, which are not designed to be directly applicable (i.e. EU directives) may become directly effective if not transposed by the Member State in due course. The concept of direct effect is also closely linked – but again only partially – with the principle of primacy of (some provisions of) one legal system over the other. The fact that the provisions of international or EU law may have primacy over the provisions of domestic law does not automatically imply the direct effectiveness of such provisions; and vice versa, not all directly effective provisions of EU law have necessarily the primacy over the domestic law.

The issue of direct effect is particularly relevant in the context of EU law. Historically, the Court of Justice of the European Union (CJEU) designated direct effectiveness to many provisions of EU primary and secondary law (starting with the seminar van Gend en Loos, 1963) paving thereby the way to a more harmonious and comprehensive European integration. In this sense, the former is instrumental to the latter.

In the context of EU competition law, the provisions of Art 101 and 102 TFEU were confirmed as having horizontal direct effect in 1973 (BRT v SV SABAM, 1974). The concept of horizontal direct effect continues to have a paramount importance in the field of private enforcement as it enables bringing stand-alone and follow-on actions against the infringers of the provisions of Art 101 and 102 TFEU. This is particularly relevant for the follow-on actions, relieving the plaintiffs from various procedural burdens related to the discovery of evidence and proof of the infringement, allowing them to focus mainly on the issues of proving harm and showing causality. But stand-alone actions are not uncommon too.

The compensatory rationale was established in a landmark 2001 Courage v Crehan judgment, in which the individual right to claim damages for the infringement of competition law was explicitly acknowledged (This was elaborated further by expanding the right to damages to the loss of profits in Manfredi, 2006). An important spillover of this ruling was a much wider and consistent use of the mechanism of private enforcement at the national courts of the EU Member States.

Direct effect of EU competition law does not answer the question of which jurisdiction – domestic or EU – has primacy over applying the law, it only stipulates conditions under which the provisions of EU competition law may be applied by individuals in cases of breach of EU competition law. The parallelism in applying the provisions of Art 101 and 102 TFEU has been reaffirmed, institutionalised and calibrated by the Modernisation Regulation of 2003. While ideally the provisions of the directly effective EU norms must be read and interpreted uniformly in all Member States, the remedies available for individuals may differ from one national legal system to the other, as the relevant norms could only be directly enforced via the substantive and procedural mechanisms of domestic legal systems, which are inherently unique and can be very different. A number of effective steps aimed at the unification of EU rules and practices related to damages in competition law cases have been introduced, though room for further improvements remains wide as the issue of damages goes to the heart of the procedural and substantive specificities of the national laws of EU Member States. One of the most problematic issues in this respect is the binding effect of national competition authorities’ decisions declaring infringements of Articles 101 and 102 TFEU (Miguel Sousa Ferro). The doctrine of direct effect plays a paramount role in integrating and approximating the national legal systems of the EU Member States and contributes to the increasing role of European law in all EU Member States.

Case references

Cases C-295 to C-298/04, Manfredi and Others v Lloyd Adriatico Assicurazioni SpA and Others [2006] ECR I-6619.

Case C-453/99 Courage Ltd v Bernard Crehan and Bernard Crehan v Courage Ltd and Others [2001] ECR I-6297

Case 127/73 Belgische Radio en Televisie (BRT) v SV SABAM [1974] ECR 51.

Case 26/62, NV Algemene Transporten Expeditie Onderneming van Gend en Loos v Nederlandse Administratis der Belastingen [1963] ECR 1

Bibliography

Miguel Sousa Ferro, ‘Antitrust Private Enforcement and the Binding Effect of Public Enforcement Decisions’, Market and Competition Law Review, Vol. 3, No. 2, 2020.

Barry Rodger, Miguel Sousa Ferro, Francisco Marcos, ‘The EU Antitrust Damages Directive: Transposition in the Member States’, Oxford University Press, 2018.

Szilárd Gáspár-Szilágyi, ‘The ‘Primacy’ and ‘Direct Effect’ of EU International Agreements’, European Public Law, Vol. 21, No. 2, 2015.

Richard Whish, ‘The Enforcement of EC Competition Law in The Domestic Courts of Member States’, European Business Law Review, Vol. 5, No. 1, 1994.

Paul Craig, ‘Once upon a Time in the West: Direct Effect and the Federalisation of EEC Law’, Oxford Journal of Legal Studies, Vol. 12, No. 3, 1992.

Institution Definition

The principle of direct effect enables individuals to immediately invoke a European provision before a national or European court. This principle only relates to certain European acts. Furthermore, it is subject to several conditions.The direct effect of European law is, along with the principle of precedence, a fundamental principle of European law. It was enshrined by the Court of Justice of the European Union (CJEU). It enables individuals to immediately invoke European law before courts, independent of whether national law test exist. The direct effect principle therefore ensures the application and effectiveness of European law in EU countries. However, the CJEU defined several conditions in order for a European legal act to be immediately applicable. In addition, the direct effect may only relate to relations between an individual and an EU country or be extended to relations between individuals.

Definition : The direct effect of European law has been enshrined by the Court of Justice in the judgement of Van Gend en Loos of 5 February 1963. In this judgement, the Court states that European law not only engenders obligations for EU countries, but also rights for individuals. Individuals may therefore take advantage of these rights and directly invoke European acts before national and European courts. However, it is not necessary for the EU country to adopt the European act concerned into its internal legal system.

Horizontal and vertical direct effect : There are two aspects to direct effect: a vertical aspect and a horizontal aspect. Vertical direct effect is of consequence in relations between individuals and the country. This means that individuals can invoke a European provision in relation to the country. Horizontal direct effect is consequential in relations between individuals. This means that an individual can invoke a European provision in relation to another individual. According to the type of act concerned, the Court of Justice has accepted either a full direct effect (i.e. a horizontal direct effect and a vertical direct effect) or a partial direct effect (confined to the vertical direct effect).

Direct effect and primary legislation : As far as primary legislation is concerned, i.e. the texts at the top of the European legal order, the Court of Justice established the principle of the direct effect in the Van Gend & Loos judgment. However, it laid down the condition that the obligations must be precise, clear and unconditional and that they do not call for additional measures, either national or European. In the Becker judgment (Judgment of 19 January 1982), the Court of Justice rejected the direct effect where the countries have a margin of discretion, however minimal, regarding the implementation of the provision in question (Judgment of 12 December 1990, Kaefer & Procacci).

Direct effect and secondary legislation : The principle of direct effect also relates to acts from secondary legislation, that is those adopted by institutions on the basis of the founding Treaties. However, the application of direct effect depends on the type of act: (i) the regulation: regulations always have direct effect. In effect, Article 288 of the Treaty on the Functioning of the EU specifies that regulations are directly applicable in EU countries. The Court of Justice clarifies in the judgement of Politi of 14 December 1971 that this is a complete direct effect; (ii) the directive: the directive is an act addressed to EU countries and must be transposed by them into their national laws. However, in certain cases the Court of Justice recognises the direct effect of directives in order to protect the rights of individuals. Therefore, the Court laid down in its case-law that a directive has direct effect when its provisions are unconditional and sufficiently clear and precise and when the EU country has not transposed the directive by the deadline (Judgement of 4 December 1974, Van Duyn). However, it can only have direct vertical effect; EU countries are obliged to implement directives but directives may not be cited by an EU country against an individual (Judgement of 5 April 1979, Ratti); (iii) the decision: decisions may have direct effect when they refer to an EU country as the addressee. The Court of Justice therefore recognises only a direct vertical effect (Judgement 10 November 1992, Hansa Fleisch); (iv) international agreements: in the Demirel Judgement of 30 September 1987, the Court of Justice recognised the direct effect of certain agreements in accordance with the same criteria identified in the Judgement Van Gend en Loos; (v) opinions and recommendations: opinions and recommendations do not have legal binding force. Consequently, they are not provided with direct effect. © European Commission

Case Comments

Raphaël Vuitton Brexit: The European Commission releases a new communication outlining the legal framework for State aid since the end of the Brexit transition period, especially concerning Northern Ireland, following the adoption of the Windsor framework

On February 27, 2023, an agreement between the United Kingdom and the European Union amended the Northern Ireland Protocol annexed to the UK Withdrawal Agreement, now referred to, in its amended version, as the "Windsor Framework". In order to set out the applicable state aid situation (...)

Matthew Readings, James Webber, Elvira Aliende Rodriguez, Sylvain Petit, Alexandre Kohler The EU Court of Justice resurrects an old doctrine to permit the challenge of completed mergers that fall outside the merger thresholds under Art. 102 TFEU (Towercast)

Overview The European Court of Justice (CJEU) brought back to life an old theory which allows acquisitions, which fall below EU and national merger control thresholds, to be challenged post-completion under abuse of dominant position rules (Article 102 TFEU). The judgment creates yet another (...)

Virginie Coursiere-Pluntz Property in the private domain of public persons: The French Administrative Supreme Court rules that no obligation of advertising and competition is imposed on public persons for the conclusion of leases on property belonging to their private domain, including when the lease is taken for an economic activity (Hôtel du Palais)

In the case which gave rise to the judgment under review, two municipal councillors of the municipality of Biarritz had challenged the deliberation of the municipal council which had authorized the conclusion of an emphyteutic lease on the walls and outbuildings of the Hôtel du Palais for the (...)

Phedon Nicolaides The EU Commission approves a Greek aid scheme whose objective is to support vulnerable and less prosperous households and micro or small enterprises struggling to repay mortgages and loans

An Innovative Scheme to Support Individual Borrowers* Individuals and households are not undertakings. However, any public funding of individuals or households may constitute indirect aid to undertakings. Such aid may be exempted on the basis of Article 107(2)(a) TFEU. Introduction (...)

Francesco Martucci Services Directive: The Court of Justice of the European Union clarifies the conditions for the invocability of the Services Directive in a horizontal dispute in which minimum fees for the services of architects and engineers are at issue (Thelen Technopark Berlin)

In a judgment dated January 18, 2022, the Court of Justice of the European Union ruled that Directive 2006/123/EC of the European Parliament and of the Council of December 12, 2006, on services in the internal market cannot be invoked in a dispute between individuals concerning the fixing of (...)

Alexandre Lacresse, Barbara Monti Jurisdiction: The Court of Justice of the European Union rules that a national court has jurisdiction to apply Article 101 TFEU and Article 53 of the Agreement on the European Economic Area in a private law dispute for damages for facts occurring before the entry into force of Regulation 1/2003 (Stichting Cartel Compensation et al.)

At the beginning of this preliminary ruling, the European Commission had sanctioned 19 legal entities for having coordinated their tariff policies in the air freight sector between 1999 and 2006 (Comm. eur., dec. 17 March 2017, Fret Aérien, AT.39258, OJ C 188, p. 14-19). This decision was (...)

Grégory Marson Concession contract: The French Supreme Administrative Court provides some clarification on the "Transmanche" appeal and clearly indicates that the disregard of the rules of advertising and competition is not likely, "in the absence of particular circumstances", to vitiate a concession contract with a defect of such gravity as to impede its performance (Ile de Sein Energies)

In the case under review, the Conseil d’État was seized of an appeal against the decision of the Syndicat Départemental d’Energie et d’Equipement du Finistère (Finistère Departmental Energy and Equipment Union) to refuse the request sent to it by the company Ile de Sein Energies ["IDSE"] to (...)

Darius Maximilian Mosleh The EU Court of Justice clarifies the eligibility requirements of claims for indirect damages caused by a violation of Art. 101 TFEU (Otis / Land Oberösterreich)

The parties Otis GmbH, is an Austria based manufacturer and provider of maintenance services for elevators and escalators. Taken over in 1969, they are now a subsidiary of the American Otis Elevator Company Corp. Schindler (Schindler Liegenschaftsverwaltung GmbH and Schindler Aufzüge und (...)

Donald Slater, Alexi Dimitriou The EU Court of Justice clarifies that a public body granting promotional loans to the purchaser of products covered by a cartel is entitled to claim damages for loss caused by the cartel (Otis / Land Oberösterreich)

On 12 December 2019, the European Court of Justice ("ECJ") provided important clarification, holding that Article 101 TFEU must be interpreted as meaning that a public body which granted promotional loans to purchasers of products covered by a cartel are entitled to claim damages for loss (...)

Jarod Bona The US Supreme Court holds that App store consumers are direct purchasers of the Big Tech company and are thus not precluded from suing for damages under federal antitrust law (Apple / Pepper)

This article has been nominated for the 2021 Antitrust Writing Awards. Click here to learn more about the Antitrust Writing Awards. This is part two of an article about the Supreme Court’s 2019 decision in Apple v. Pepper, the classic antitrust cases of Illinois Brick and Hanover Shoe, (...)

Michelle Polizzano, Timothy G. Fleming, William H. Rooney The US Supreme Court affirms the right of app purchasers to sue an app company for monopolization under the indirect-purchaser rule of Illinois Brick as a rule of contractual privity rather than a rule of proximate cause (Apple / Pepper)

This article has been nominated for the 2020 Antitrust Writing Awards. Click here to learn more about the Antitrust Writing Awards. In Apple Inc. v. Pepper, a 5-4 Supreme Court affirmed the right of app purchasers under the indirect-purchaser rule of Illinois Brick Co. v. Illinois to sue (...)

Sharis A. Pozen The US Supreme court reaffirms the "direct purchaser" rule for private claims under federal antitrust laws but also allows for monopolization claims against a mobile app store owner (Apple / Pepper)

This article has been nominated for the 2020 Antitrust Writing Awards. Click here to learn more about the Antitrust Writing Awards. On May 13, 2019, the U.S. Supreme Court reaffirmed that private claims under the federal antitrust laws cannot be brought by "indirect purchasers" who did not (...)

Articles

Nils Wahl Recent trends at the Court of Justice of the European Union

This editorial is the written version of a speech given at the ’Concurrences’ Annual Dinner at New York on 6 September 2018. It identifies and discusses three recent trends of antitrust litigation at the European Court of Justice. These three trends are, respectively, of a structural, (...)

Catherine Prieto, Florian Wagner-von Papp, Frank Kroes, Jens-Uwe Franck, Marcella Negri Binding effect of decisions of national authorities (Implementation of the EU Damages Directive into Member State law - Würzburg, May 5, 2017)

Article 9 of the Damages Directive requires Member States to ensure that an infringement of competition law found by a final decision of a national competition authority is deemed to be irrefutably established for the purposes of an action for damages brought before their national courts. (...)

David Spector The impact of competition policy on firms’ valuation

Une analyse statistique des décisions rendues par le Conseil de la concurrence entre 1992 et 2000 montre que la politique de la concurrence a eu un impact important sur les entreprises sanctionnées, bien supérieur au dommage directement infligé par les amendes, au demeurant modestes au cours (...)

Events

Aymeric Discours, Laurent Eymard, Peter Roth, Julie Klein Private Enforcement #4 Overview of recent national case law in the European Union

4th Webinar of the « 5th Private Enforcement Conference » organised by Concurrences, in partnership with McDermott Will & Emery and Hexagon Economics, with Aymeric Discours (Partner, McDermott Will & Emery), Laurent Eymard (Founding partner, Hexagon Economics), Julie Klein (Professor, University of Rouen) and Sir Peter Roth (President, Competition Appeal Tribunal).

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