The criteria for direct effect

It is obvious that people who seek to enforce their legal rights in court must be in a position to say what they claim those rights to be. In terms of EU law, the technical terminology that covers this point is the criteria for direct effect.

clear and precise in its expression (so that the court can know what it is being asked to enforce); and

self-contained (in the sense that its implementation must not depend on the exercise of discretion by the public authorities of member states).

If we decide that a particular provision of EU law is of a type which is capable of direct effect, and that it also satisfies the criteria for direct effect (so that it is, therefore, actually directly effective), we then come to the second additional question posed above:

is the direct effect:

– only vertical; or

– both vertical and horizontal?

A provision’s direct effect will be only vertical if a private individual or organisation can enforce it only against the state. Its direct effect will also be horizontal if a private individual or organisation can also enforce it against another private individual or organisation.

Although this statement may seem rather dense on a first reading, it is, in fact, underpinned by some very clear logic. Both treaty articles and regulations present no difficulties: they are both directly applicable and capable of having direct effect. Furthermore, there is no reason to limit their direct effect; and, therefore, in the interests of making EU law as effective as possible, their direct effect is both vertical and horizontal.

As we have seen, Directives require member states to take some action, and therefore they are not directly applicable. However, where a member state fails to implement a Directive by the due date, the result will be that people within that state will be deprived of rights which they would have had if the state in question had complied with its obligations under EU law.

Where this situation arises, therefore, if a person brings an action against the member state which is in default, that state may well reply: but you do not have the rights you are seeking because we have not implemented the Directive. However, such a reply would be a clear violation of the fundamental principle of justice that nobody should be allowed to gain advantage from their own wrongdoing, and therefore the Court of Justice has held that, under these circumstances, the Directive can be enforced against the defaulting member state. (Grad v Finanzamt Traustein [1970] ECR 825.) In other words, it will have vertical direct effect.

However, if an action is brought against another private individual or organisation, the same logic will not apply. After all, it is not the fault of any private individual or organisation that the state has not complied with its obligations under EU law, and therefore the argument based on gaining advantage from wrongdoing does not even get off the ground. In other words, the potential direct effect of Directives can only ever be vertical, and not horizontal.

By way of example, suppose a Directive requires employers to provide free annual eyesight tests for all their employees who drive motor vehicles. If a member state fails to implement this Directive by the due date, government employees could enforce the Directive against the state, but employees of private organisations could not enforce it against their employers, because the failure to implement the Directive is not their employers’ fault.

The TFEU does not make Decisions directly applicable, but it does make them binding on the people to whom they are addressed. As the Court of Justice said in Grad, the effectiveness of Decisions would be seriously reduced if the courts of member states could not treat them as part of EU law. In other words, Decisions are both directly applicable and capable of vertical direct effect.

This leaves the question of whether their direct effect is only vertical, or both vertical and horizontal. Although the Court of Justice has never been called upon to decide this point (which is, therefore, presumably of little importance in purely practical terms), there is no reason, in principle, to withhold horizontal direct effect from Decisions. For example, where a Decision addressed to a company has the consequence that one of its contracts is void because it is contrary to EU law, the other party to the contract should be able to rely on the voidness in an action against the company. Any other conclusion would mean that the company to whom the Decision is addressed would gain an advantage (in this case, a valid contract) by breaching the Decision which rendered the contract void.