Verfassungsblog wins the prize for the law geek question of the week/year/decade: Now that the European Court of Justice, in Digital Rights Ireland, has annulled Directive 2006/24, can Sweden get its infringement fine back? After all, in Case c-185/09 (proper judgement in French and Swedish only) the Court found that “by failing to adopt, within the prescribed period, the provisions necessary to comply with Directive 2006/24/EC of the European Parliament and of the Council of 15 March 2006 on the retention of data generated or processed in connection with the provision of publicly available electronic communications services or of public communications networks and amending Directive 2002/58/EC, the Kingdom of Sweden has failed to fulfil its obligations under that directive” and in Case C-270/11, the Court found that Sweden had still not transposed the directive correctly, and imposed a fine of € 3 million. Reasonably, they should be able to get that money back. But can they?
The annullment of a piece of legislation works, as the title of this post puts it, ex tunc. This means that legally the legislation is deemed to have never existed. Anything that was done to comply with it becomes retroactively without grounds. The Member States were never required to transpose this directive, because the directive “entails a wide-ranging and particularly serious interference with [art. 7 and 8 of the Charter], without such an interference being precisely circumscribed by provisions to ensure that it is actually limited to what is strictly necessary“. If the Member States were never required to transpose this directive, the Court of Justice acted unlawfully by saying the opposite, and by imposing the fine. And as art. 340 TFEU tells us:
In the case of non-contractual liability, the Union shall, in accordance with the general principles common to the laws of the Member States, make good any damage caused by its institutions or by its servants in the performance of their duties.
This does not seem to make any kind of exception for liability because of a wrongful court judgement. Moreover, if the concept of an unlawful court judgement makes your head hurt, there is a well-established line of cases in various courts about Member States being liable for their courts’ failure to comply with EU law. On the same day as the Digital Rights Ireland judgement, the European Court of Human Rights down the road in Strasbourg held that Italy had violated art. 6(1) of the Convention because its Court of Cassation didn’t ask a prejudicial question to the ECJ when it should have, and sentenced Italy to pay almost € 20.000 in damages (Dhahbie v. Italy). In that case, the ECtHR dodged the question of whether Ms. Dhahbie had properly exhausted national remedies, given that she hadn’t filed a civil damages suit against Italy under the ECJ’s Köbler precedent. In that case, the ECJ concluded:
The principle that Member States are obliged to make good damage caused to individuals by infringements of Community law for which they are responsible is also applicable where the alleged infringement stems from a decision of a court adjudicating at last instance where the rule of Community law infringed is intended to confer rights on individuals, the breach is sufficiently serious and there is a direct causal link between that breach and the loss or damage sustained by the injured parties. In order to determine whether the infringement is sufficiently serious when the infringement at issue stems from such a decision, the competent national court, taking into account the specific nature of the judicial function, must determine whether that infringement is manifest. It is for the legal system of each Member State to designate the court competent to determine disputes relating to that reparation.
There is no reason not to apply that principle to the EU itself. The ECJ was manifestly wrong in deciding that Sweden was required to transpose the data retention directive, so the EU should compensate Sweden for the damage caused thereby, i.e. the € 3 million fine Sweden has already paid.
The counter-argument can be stated in several different ways. Perhaps the simplest way to put it is to say that the Court was not wrong in Case 185/09, the original infringement case. The problem is that Sweden did not argue that the Directive was invalid, it only argued that it had already transposed the directive, or that it was in the process of doing so. In those circumstances, for the Court to declare the Directive invalid would have been ultra petita. The Court must give judgement in the dispute in the form that the parties present it. Only in extraordinary circumstances can a court be required to raise such issues sua sponte, of its own accord. It follows that there was no error, much less a manifest one.
A slightly different way to approach this is to say that Sweden already litigated the issue of its obligation to transpose once before. There was litigation, there was a judgement. In those circumstances, the doctrine of res judicata bans Sweden from re-litigating the same question in the form of a damages suit. The fact that Sweden did not realise that it should have made a human rights argument is irrelevant. Parties overlook promising arguments all the time. They get one bite at the apple, and that is it. If the Court allowed such a damages suit, before long it would be up to its eyeballs in re-litigated infringement suits.
In general the question is whether Member States have an obligation to litigate or transpose. The answer is that probably they do. When faced with an obligation to transpose a directive that is arguably invalid, the Member State should either transpose it or bring an action for annullment. The invalidity argument should be made at the very last during the infringement litigation. Sweden failed to bring an action, and failed to raise the argument in either of its infringement cases, so it was under an obligation to transpose, notwithstanding the later holding that the directive is invalid. So probably the fine stands.