Examine the view that the distinction between the vertical and horizontal direct effect of directives is more theoretical than real and that, in the interests of reinforcing the rule of law, the Intergovernmental Conference ought to amend the Treaties so as to give full direct effect to directives that are unconditional and sufficiently precise.
The first part of this paper illustrates that although the distinction between horizontal and vertical direct effect is not purely theoretical, by virtue of the numerous devices created to circumvent the distinction, it is well on its way thereto. The second part aims to argue that the distinction ought to be done away with: first, by exposing the problems and inconveniences that the circumventive devices create; and secondly, by engaging, countering, and ultimately rejecting the arguments that favor retaining treating horizontal and vertical claims differently.
In Van Duyn v Skips for hire Scotland the European Court of Justice (“the Court”) confirmed that Directives are capable of having direct effect. In Marshall No.1 the Court, interpreting then Art. 189 EC (now Art. 288 TFEU), enunciated that ‘vertical’ direct effect, i.e, direct effect invoked by a private party against the state, is permissible, whereas ‘horizontal’ direct effect, i.e, direct effect invoked by a private party against another, is not. Against the backdrop of this general denial of horizontal direct effect, i.a, three key developments emerged that whittle down the restriction on horizontal direct effect and carve substantial conceptual inroads into its underlying rationale.
First, the broadening of ‘the state’ concept. Foster v British Gas created a wide notion of what constitutes the state and its emanations, namely, “a body, whatever its legal form…which has been responsible for providing public service under the control of the state… ”. The effect is that more bodies than would otherwise be the case are caught by the definition of ‘the state’ and are thus subject to direct effect. Second, the development of the doctrine of ‘indirect effect’, i.e, the requirement to interpret national law consistently with Community law. It was first introduced in Von Colson, later extended in Marleasing so as to apply to national law passed both before and after the passing of the relevant directive, and limited only by a no contra legem requirement in Pupino.
Finally, the emergence of ‘indirect horizontal’ effect. In CIA Securities and Unilever Italia, the Court held that where the state improperly implements a directive, it renders that national law unenforceable. Resultantly, a private party may rely upon the directive to shield itself from another private party’s claim towards which it would otherwise be defenseless.