The case that changed the European law forever

Apr 28

Article Author: Boris Atanasov, Chief Legal Analysist

I. Introduction

The European legal framework is a unique accomplishment that is ever hardly spoken about. When a country joins the European Union, the state is giving a part of its sovereignty to a bigger and universal authority. Therefore, the laws enacted by the established procedures are legally binding to all Member States. Furthermore, EU law has primacy over the domestic legislation of the Member States, meaning that if there is a contradiction between EU law and national law, the European norm has the advantage and should be the one applied.

However, this principle was not clear and certain at the beginning of the European project. Member States were not taking into consideration the EU norms, but rather depended on their own legislation, often undermining the concept of shared sovereignty. This was until a certain case was brought before the European Court of Justice. The case of Costa v ENEL (Case 6/64) is the most fundamental judgment for EU law. It was decided in 1964 and established the doctrine of supremacy of European Union law. To understand how this happened, the case shall be analysed, as well as the reasoning of the Court.

II. Facts of the case

The case happened in Italy. Flaminio Costa, who was a shareholder in an electrical company called “Edisonvolta”, was affected by a law that nationalized several private electric companies under one called “ENEL”, which is therefore state-owned. This was an act that was part of a broader policy reform of the Italian state at that time.

Flaminio Costa protested this reform by not paying his bill, which was reportedly 1925 lire at the time, issued by ENEL. He argued that the nationalization law was in fact in contradiction with the Italian Constitution and the EEC Treaty(Treaty of Rome 1957 - which created the European Economic Community). So, what did Costa do? He issued a lawsuit in Milan. As a lawyer himself, he stated that the case should be referred to the Italian Constitutional Court (established in 1948 by the Constitution)and to the European Court of Justice. However, the case reached only the Italian Constitutional Court, which argued that the laws of the European Union are treated like ordinary ones and are not superior, arguing that the European legal framework does not change the ranking of domestic sources.

Consequently, Flaminio Costa challenged ENEL again in another court in Milan, but this time the case was finally referred to the European Court of Justice for interpretation. The claim of Costa was the same: EU law should prevail over conflicting national law. The Justice of the Peace in Milan had no other option but to ask whether the controversial nationalization law was consistent with the EEC Treaty’s provisions.

III. Legal issues

The main issue was simple: can a Member State rely on its own domestic legislation in every aspect, even when there is a contradiction with the provisions of the European treaties, thereby challenging the whole legal order of the European Community? In the case of Costa v ENEL, the two main fundamental questions are whether national laws can prevail over European norms and, second, whether an individual from a Member State can invoke those provisions directly before national courts. Costa argued that the nationalization law was inconsistent with several provisions of the Treaty of Rome, particularly Article 37, Article 53, and Article 102. The problem with Article 37 is that this provision regulates state monopolies and avoids discrimination between nationals of Member States, something that the nationalization law undermines, according to Mr. Costa. Article 53, on the other hand, is the provision that prohibits new restrictions on the freedom of establishment, and furthermore Article 102 addresses distortions of competition within the common market. According to Costa, all the principles set in these norms, part of valid European legal sources, were undermined by the Italian state, and that is why he was advocating for fair competition and market integration, all guaranteed by the Treaty of Rome.

As mentioned in the beginning, the legal status of the provisions of the Treaty of Rome was uncertain. It was not explicitly written whether Community law had supremacy over national legislation, but rather it was left to develop gradually over time. Additionally, it was not clearly defined under what conditions individuals can invoke provisions from the Treaty of Rome before national courts. However, it is important to note here that the case of Van Gend en Loos (Van Gend en Loos v Nederlandse Administratie der Belastingen - Case 26/62), and more accurately the European Court of Justice’s decision, established the doctrine of direct effect, allowing individuals to invoke certain provisions of Community law. The broader question here is associated with the hierarchy between domestic law of Member States and the law of the European Community. National courts, especially constitutional courts, viewed the Treaty of Rome as an ordinary international agreement, incorporated into domestic law. Therefore, the Member States relied only on their legislation and on the principle that later laws prevail over earlier ones (in the first interpretation of the Italian Constitutional Court, the principle of “lex posterior derogat priori” was a main argument against Costa regarding the application of the norms of the Treaty of Rome).

Therefore, this uncertainty reflected a deeper constitutional tension between national sovereignty and supranational integration. If states constantly override the universal legal framework, from which they all agreed to be part of, the effectiveness of Community law would be severely compromised. On the other hand, recognizing the primacy of Community law would limit the legislative autonomy of national parliaments. So, the European Court was required to provide a coherent interpretation for the functioning of the European Union legal system.

IV. The court’s reasoning

The Court’s reasoning is important in this case, as the interpretation will bring clarity to the uncertainty regarding the hierarchy of legal sources. The judgment of Costa v ENEL was not based on a provision, as there was no established article in the Treaty of Rome regarding the supremacy of Community law. Therefore, the Court’s reasoning was based on the principles of nature, structure, and purpose of the European Community itself.

In its reasoning, the Court emphasized the importance of the Treaty of Rome, because it created a new legal order. Therefore, the Court highlighted the importance of the universal legal framework, because the European project was not just a traditional international organization, but rather an agreement between states. Furthermore, the EEC Treaty created rights and obligations for the Member States and for individuals as well; therefore, Community law should be applicable to all Member States’ national courts (at that time: Belgium, France, Germany, Italy, Luxembourg, and the Netherlands). The earlier decision of Van Gend en Loos was also a fundamental argument of the Court, because it established the principle of direct effect, meaning that Community law could create directly enforceable rights for individuals. Another important point that the Court made in its reasoning is that, by joining the European project, Member States admitted limiting their sovereignty in certain areas, and the limitation was legally binding to all States, as it is covered in the Treaty of Rome. Once states had transferred powers to the Community, they could not later defeat Community obligations by passing conflicting domestic laws. If a Member State adopted a national law after the Treaty of Rome, it would become optional rather than binding.

The Court also focused on the need for uniformity. Community law had to be applied in every country without exceptions. The Court argued that if national courts were allowed to give priority to domestic legislation, the universal legal framework could have different effects and could not serve the goals the European Community had set, such as the common market and legal certainty. For instance, one state could comply with the Community’s rules, but another could try to avoid them using domestic legislation, as the case of Costa v ENEL demonstrates. The Court declared that such conduct is incompatible with the purposes of European integration. Lastly, the principle of effectiveness was an element that the Court relied on. It is an important principle because it allows the European Court of Justice to interpret the law in a way that serves the purposes of the European project. The main argument behind the need for such interpretations is that, without them, the Treaty of Rome would lose its practical effect and purpose.

V. Judgment and significance of the case

The Court held that Community law has primacy over national law. Member States cannot invoke domestic legislation to avoid European norms. They agreed to pass some of their sovereignty for the purposes of the Treaty of Rome. National courts must apply EU law over conflicting domestic legislation. Lastly, individuals are allowed to invoke the provisions of European treaties before national courts.

These four important points made by the Court provided certainty and clarity to Community law in general. Moreover, these ideas are used in contemporary reasoning of the European Court. The principle of “primacy” is fundamental, and without it, the legal system of the European Union cannot function effectively. Furthermore, the case of Costa v ENEL is the first case that clearly established this doctrine. A common European legal framework also means strengthening European integration. As mentioned in the Court’s reasoning, the European project is not a mere international organization, but a supranational order which is not only politically, but also legally binding. The decision of the case also led to the empowerment of national courts. By affirming that individuals can rely on EU law, the case strengthened, to a certain level, the role of national courts as enforcers of European legal obligations.

Nevertheless, it is important to note that the principles established in Costa v ENEL did not remain isolated but were further developed and strengthened in subsequent case law of the European Court of Justice. One example isSimmenthal v Commission, where the Court ruled that national courts have the obligation to give full effect to European Union law when there are conflicting domestic provisions, even before the Constitutional Court declares them unconstitutional. In other words, the Costa v ENEL case ensured the effective application of European Union law across all Member States.

VI. Words of the author and conclusion

The case of Costa v ENEL should always be taken into consideration when a question about European Union law arises. The principle of supremacy is unique but also limits Member States in some respects. There are some controversial characteristics of this doctrine. One criticism is the fact that Member States differ, and there are different social and legal norms which suit each state. So, can this universal framework function in all states? For example, one law can work in one Member State, but in another it may not be practical. Even if there is representation from every Member State in the process of creating laws, it is not enough to guarantee the practical application of the norm and its functionality.

Ten years ago, Poland and Hungary wanted to have a fully independent and separate judicial system from the European one, as their argument was that certain European norms were in contradiction with domestic ones regarding their judicial structure. Hungary and Poland were fined by the European Commission, and furthermore, the execution of Article 7 of the Treaty of the European Union (TEU Article 7 - allowing the suspension of a Member State’s membership rights, such as voting in the Council, if it seriously and persistently breaches fundamental European Union principles) was initiated against them. Why am I mentioning this? The principle of “supremacy” can never be undermined, and national courts should apply it in every necessary case. Furthermore, if an interpretation of European law is required, courts should make a reference for a preliminary ruling to the European Court of Justice. Otherwise, sanctions may be imposed and there may be a potential suspension of fundamental Member States’ rights. I believe that the principle of supremacy should be respected; however, in its interpretation, the European Court should take into account the political and social obstacles of Member States. A more interdisciplinary approach is required, in my opinion, in the Court’s reasoning, because even though domestic legislation is inferior, sometimes it is more suitable for application by national courts. That is why, in some Member States like Bulgaria, Romania, andCroatia, based on the practice of the domestic courts there, national norms are tailored to local needs and function better than European ones.

In conclusion, Costa v ENEL is a case that created an important principle in modern law. A universal legal framework, which is legally binding to European states, is a unique creation that differs from the traditional multinational structure. This case is the most important in the history of European Union law because it highlighted the importance of European integration not only in a political aspect, but also in a legal one. National courts shall respect the doctrine of supremacy and adapt it to their judicial practice. The purpose of all this is simple: all states should contribute to serving the purposes of the European Union, even if that means limiting their sovereignty. Costa v ENEL is a landmark case that always needs to serve as a precedent in European legal reasoning. And whether European law should continue having supremacy over national law is a question that will be answered in the future.