The Court of Justice of the European Union declares contrary to EU law the system of the State’s liability to pay damages provided in Laws 39/2015 and 40/2015 (CJEU of 28 June 2022. Case C-278/20).
The judgment of the Court of Justice of the European Union (CJEU) of 28 June 2022 has declared that the Spanish legislation on liability in the event of damage arising from the application of rules that are contrary to European Union law (EU law) does not comply with the principle of effectiveness.
As a result, the Grand Chamber of the CJEU obliges Spain to eliminate the requirements set out in Laws 39/2015, of 1 October, on the Common Administrative Procedure of the public Administrations (LPACAP) and 40/2015, of 1 October, on the Legal Regime of the Public Sector (LRJSP), so that individuals can obtain compensation for damages suffered caused by the legislating State due to non-compliance with EU law.
It should be recalled that Article 32.5 of the LRJSP establishes that, if the damage is a consequence of the application of a rule declared contrary to EU law, compensation is appropriate when the individual has obtained, at any instance, a final judgment rejecting an appeal against the administrative action that caused the damage. Furthermore, it is necessary that, in that action, the individual has pleaded the infringement of EU law which is subsequently found to have been committed.
In accordance with the settled case-law of the CJEU (Judgments of 5 March 1996, Brasserie du pêcheur and Factortame – cases C-46/93 and C-48/93 –, 23 May 1996 Hedley Lomas – case C-5/95 – and 26 January 2010, Transportes Urbanos y Servicios Generales – case C-188/08), the same article also requires that:
- The rule in question confers rights to individuals;
- The breach is sufficiently severe; and
- There is a direct causal link between the breach of the obligation imposed on the Administration responsible and the damage suffered by the individuals.
In addition to the aforementioned paragraph, article 34.1 of the LRJSP adds a further obstacle to the compensation of the individual, as it establishes that only damages occurring within the five years prior to the date of publication of the judgment declaring the rule to be contrary to European Union law shall be compensable, unless the judgment provides otherwise.
Finally, it should be recalled that article 67 LPACAP establishes that the right to claim is subject to a limitation period of one year from the publication of the judgment in the Official Journal of the European Union (OJEU).
The regulation configured by these precepts was called into question in the framework of the action brought by the European Commission on 24 June 2020 against the Kingdom of Spain, which alleged non-compliance regarding the principles of equivalence and effectiveness of the Union.
In this context, the CJEU has found a breach of the principle of effectiveness, according to which the conditions for compensation cannot be articulated in such a way that, in practice, they make it impossible or excessively difficult to obtain compensation. More precisely, the Court declared the following requirements to be contrary to EU law:
- The existence of a judgement of the Court of Justice declaring that the applied rule having the status of law is contrary to EU law.
The Court states that subjecting the compensation for the damage caused by the State to an individual as a result of the infringement of EU law to the requirement of a prior declaration by the CJEU of that infringement is contrary to the principle of effectiveness. In accordance with the case-law of the Court (judgment of 24 March 2009 in Case C-445/06 Danske Slagterier), it is not necessary for the Court to have given a ruling in order for a sufficiently serious breach of EU law to be established.
With the elimination of this condition, any injured individual may obtain compensation for the damage, provided that he or she continues to comply with the other conditions required by law, even in the absence of a judgment finding an infringement of EU law.
- Obtaining, at any instance, a final judgment dismissing the appeal against the administrative action that caused the damage, without any exception being made for cases in which the damage derives directly from an act or omission of the legislature contrary to EU law and there is no administrative action that can be challenged.
EU law does not preclude national rules from requiring legal action to have been brought in order to obtain compensation for the damage. However, in accordance with the configuration of Spanish law, when the damage derives from an act or omission of the legislature which is contrary to the EU Law and there is no challengeable administrative act, the injured individual cannot bring an appeal.
In this regard, the Court has declared that this requirement infringes the principle of effectiveness and states that an exception must be provided for in cases such as the one mentioned above, where the exercise of the action cannot reasonably be required of the injured party.
It should be highlighted that, on this point, the judgment departs from the Opinion of the EU Advocate General, who had held that the requirement regarding the fact that the individual must have pleaded the infringement of EU law in the context of the action against the administrative act which caused the damage was contrary to the principle of effectiveness. According to the Advocate Opinion, an individual cannot be criticised for not having identified the provision of EU law infringed himself, which would place a burden on him that goes beyond the diligence that is reasonably required of him. However, the CJEU has not held that this requirement infringes EU law and, consequently, it will not be necessary to remove it from the complaint procedure.
- Claim within the limitation period of one year from the publication in the Official Journal of the European Union of the judgment of the Court of Justice declaring that the rule with the status of law applied is contrary to EU law, without covering those cases in which this judgment does not exist.
As stated before, the publication of that judgment in the OJEU cannot constitute the only possible starting point for the limitation period for the action to claim liability because there are cases in which it will not exist. Consequently, reparation of the damage cannot be subordinated to the requirement of claiming liability within the limitation period of one year in those cases in which there is no judgment of the CJEU that has declared the non-performance, a fact that will determine the modification of article LPACAP.
- Limitation of compensation to damage which occurred within the five years prior to the date of the aforementioned publication, unless the judgement provides otherwise.
Compensation for damage caused to individuals by infringements of EU law must be proportionate to the damage suffered, in the sense that it must make it possible, if necessary, to compensate in full for the damage actually suffered. For this reason, the judgment declares that the requirement of having obtained a judgment of the CJEU declaring the rule to be contrary to EU law and the requirement of a final judgment dismissing the action brought against the act which caused the damage make it impossible or excessively difficult in practice to obtain compensation capable of compensating for the damage suffered, especially if the limitation of the claim to the five years prior to the publication of the CJEU is taken into account.
In addition, as stated, even if this requirement were to make it possible to obtain compensation for the damage suffered, it would not be in conformity with EU law insofar as it does not provide an exception for cases where there is no CJEU judgment declaring the infringement of the EU law.
On the other hand, the CJEU does not consider that the Spanish legislation infringes the principle of equivalence, according to which national legislation may not treat claims based on EU law less favourably than similar claims under national law.
The Commission had alleged infringement of that principle on the ground that liability based on infringement of the EU law requires the conditions arising from the case-law of the CJEU mentioned above (Brasserie du pêcheur and Factortame – cases C-46/93 and C-48/93 -, of 23 May 1996, Hedley Lomas – case C-5/94 – and of 26 January 2010, Transportes Urbanos y Servicios Generales – case C-118/08 -), and the one based on unconstitutionality does not.
The Court considers that Member States may lay down such conditions as they deem appropriate for the right to compensation to arise, and that the principle of equivalence can only come into play once the existence of the right to compensation has been established.
Member States may therefore allow a right to compensation to arise in accordance with conditions more favourable than those laid down by the case-law of the Court of Justice without there being an infringement of the principle of equivalence. Consequently, the fact that a liability claim based on the unconstitutionality of a rule having the status of a law lays down fewer conditions than one based on Community law for a claim to arise is in accordance with the EU law.
It should be added that, although the debate in the judgment is limited to determining the non-compliance of the EU law, the same precepts also regulate the requirements for compensation of damages arising from the application of a rule declared unconstitutional. In this sense, the CJEU does not require these provisions to be changed. Despite the above, it remains to be seen whether the changes that will necessarily have to be made to the regulation of these precepts will also entail a new configuration for the claim derived from the damage suffered as a result of a rule with the status of law declared unconstitutional.
Indeed, since these requirements have been declared contrary to the EU law because they imposed a disproportionate burden on injured parties, contrary to the principle of effectiveness, it is reasonable to think that they may also be contrary to the principle of liability of public authorities and effective judicial protection guaranteed by the Constitution. Consequently, this ruling could open the way for the modification of this regulation by means of a possible question of unconstitutionality brought before the Constitutional Court.
In short, it remains to be seen how the legislator will adapt this ruling to reconfigure the procedure provided for in the LPAC and LRJSP laws, and what will happen with the claims that are raised until the Spanish legislator has adapted the regulations to the ruling of the CJEU. In this regard, it is recalled that, if Spain does not abolish the aforementioned requirements and the Commission considers that the judgment has not been complied with, the Commission may bring a new appeal requesting the imposition of the corresponding financial penalties.
Júlia Arbós Aguilar
PAREJA & ASSOCIATS, ADVOCATS
