The TAP case and state liability

The judgement of the EU Court of Justice

In a previous post, I discussed how two supreme courts reached completely different rulings on the always tricky subject of ‘transfer of undertaking’. In this post, I will discuss the judgement of the EU Court in the TAP judgement on the subject of State liability. This is particularly interesting because it involves an unlawful judgment. What the court considered on this subject was not new, but it contains a useful reminder of the Court’s previous case law on the subject, including some famous judgements.

What was the situation again?

In the TAP case, the question of whether there was a transfer of undertaking, had been litigated up to the Portuguese Supreme Court. The nine employees who were not employed by TAP lost out. Their lawyer then decided to hold the Portuguese state liable and managed to do what had not succeeded in the first case: get the (lower) Portuguese court to submit questions to the EU Court on the issue that was of major importance to the national court. Questions that the Portuguese Supreme Court refused to ask because, according to this highest national court, there was ‘no doubt of any significance’ about the correct interpretation.

State liability?

These new proceedings had been initiated on the grounds that the Portuguese state was liable for the damages the aggrieved workers claimed to have suffered as a result of what they considered to be an incorrect interpretation of the concept of ‘transfer of undertaking’. The judgement of the Supremo Tribunal de Justiça was unlawful according to the claiming workers.

Previous case law of the EU court

The EU Court begins its assessment on this point (TAP case, paragraph 47) by referring to its previous case law, namely the Köbler case. That judgement of September 30, 2003 (Case C-224/01, EU:C:2003:513) in turn was built on earlier judgements of the Court with regard to State liability (see references in Köbler, paragraphs 30-32), such as the famous Franchovich and Brasserie du pêcheur and Factortame judgements.

Franchovich and Brasserie du pêcheur and Factortame judgements

In these judgements the Court held that the principle that a Member State is liable for damages suffered by individuals as a result of breaches of EU law, if these breaches are attributable to that Member State. This isis inherent to the system of the EU Treaty (judgements of 19 November 1991, Franchovich and others, C-6/90 and C-9/90, ECR I-5357, paragraph 35; judgements of March 5, 1996 Brasserie du pêcheur and Factortame, C-46/93 and C-48/93, ECR I-1029, paragraph 31). According to this case law, the principle of State liability applies to all cases of breach of law by an EU state, regardless of the institution of the Member State whose act or omission constitutes the breach (Brasserie du pêcheur and Factortame, cited above, paragraph 32).

The state is also liable for its courts

This therefore also applies to the courts of a Member State. The EU Court previously considered that in the international legal order, when the State is liable for the breach of an international obligation, it is considered as a whole, regardless of whether the breach that led to the damage is attributable to the legislative, judicial or executive power. This applies in particular to the legal order created by the European treaties ‘since all State authorities, including the legislature, are bound in performing their tasks to comply with the rules laid down by Community law directly governing the situation of individuals’ (Brasserie du pêcheur and Factortame judgement, paragraph 34).

Principles of equivalence and effectiveness

The Court recalled in the TAP case (paragraph 50), ‘that where the conditions for a State to incur liability are satisfied, a matter which it is for the national courts to determine, it is on the basis of national law that the State must make reparation for the consequences of the loss or damage caused, provided that the conditions laid down by national law in respect of reparation of loss or damage are not less favourable than those relating to similar domestic claims (principle of equivalence) and are not so framed as to make it, in practice, impossible or excessively difficult to obtain reparation (principle of effectiveness)’. In the TAP case, one of the defences put forward was that under Portuguese law, damages can only be claimed ‘if the decision that caused the loss or damage has not been set aside’. In other words: since this is a decision of the highest court, no damages can be claimed. Because of this, the EU Court noted that this rule could make it ‘excessively difficult’ to obtain reparation for the damages caused by the infringement of EU law in question (paragraph 51). Indeed, the Court had found that ‘the situations in which decisions of the Supremo Tribunal de Justiça may be subject to review, are extremely limited.’ (paragraph 52).

The principle of res judicata and legal certainty not a valid defence

In its defence, the Portuguese State still relied on the principle of res judicata and the principle of legal certainty, but those defences did not succeed either. Regarding the principle of res judicata, the Court held that it is not affected by the principle of State liability. Indeed, an action brought to establish the liability of the State will not necessarily obtain a declaration invalidating the status of res judicata of the judicial decision which was responsible for the damage (paragraph 55). Regarding the principle of legal certainty, the Court stated that this principle also cannot affect the principle of State liability (paragraph 56). According to the Court, this principle is ‘inherent in the system of the Treaties on which the European Union is based’ (paragraph 58).