On 13 September 2017, the Court of Justice of the European Union (CJEU) delivered its decision in Pappalardo and Others v Commission. Essentially, the Court suggests that the principle of non-discrimination may not always entitle individuals to hold the EU liable for violations thereof. However, reaching this conclusion on a conceptually questionable basis, the Court unnecessarily creates further confusion in an area of little certainty.

Background

Pappalardo and the other applicants are Italian purse seine fishermen. In 2008, the Commission prohibited purse-seine fishing for bluefin tuna by adoption of emergency measures (Regulation 530/2008), in order to protect that species from overfishing. The prohibition took effect as of 16 June 2008 for seiners flying the flag of Greece, France, Italy, Cyprus, or Malta (Article 1 Regulation 530/2008), but as of 23 June 2008 (hence, one week later) for those flying the flag of Spain (Article 2 Regulation 530/2008).

As was to be expected, the Italian seiners were unhappy about these measures. Not having been allowed to exhaust their fishing quota allocated for 2008, they argued, cost them millions. Thus, on 11 June 2013, they lodged an action for damages with the CJEU, seeking compensation from the Union for the loss they suffered.

The Court has consistently held that the Union is liable to pay compensation when three cumulative conditions are met: (1) the conduct complained of is unlawful, (2) there is a victim that suffered damage, and (3) there is a causal relationship between the Union’s unlawful conduct and the victim’s damage.

That the Commission’s emergency measures were unlawful, was undisputed. The Court itself had indeed already partly annulled them in 2011 in Case C-221/09 AJD Tuna. According to the Court, the difference in treatment between Greek, French, Italian, Cypriot, and Maltese seiners on the one hand, and Spanish seiners on the other, was not objectively justified. It thus amounted to a violation of the principle of non-discrimination. The Court later clarified that the invalidity only affected Article 2, allowing Spanish seiners to fish a week longer. Article 1, the prohibition to fish after 16 June 2008 applicable to all other seiners, thus remained in force. As explained below, this particular aspect turned out decisive.

Whilst unlawfulness is a necessary condition for the Union’s liability to arise, ‘mere unlawfulness’ is not sufficient. There are two requirements a breach must fulfil, if the victim is to get compensation. First, the rule infringed must be intended to confer rights on individuals and, second, the breach must be sufficiently serious. In other words, Pappalardo and the other seiners only get compensation if the Commission’s breach of the principle of non-discrimination violates their rights in a sufficiently serious manner. The case revolved around these two qualifications of the condition of unlawfulness.

Judgment of the CJEU

Unfortunately for Pappalardo, the General Court (first instance) and the Court of Justice (second instance) agreed that the threshold of ‘qualified unlawfulness’ was not met and the applicants were not entitled to receive compensation. Interestingly, though, they did so for different reasons.

Both Courts took the violation of the principle of non-discrimination arising from the adoption of Article 2 Regulation 530/2008 as a starting point. The General Court dismissed Pappalardo’s claim because it found that the Commission’s infringement of the principle of non-discrimination did not amount to a sufficiently serious breach. In contrast, the Court of Justice found that, in this specific case, the principle of non-discrimination did not confer rights on Pappalardo and thus substituted the General Court’s reasoning with its own.

Simply speaking, for a provision to confer rights on individuals, it needs to serve the protection of individuals, rather than the general public at large. The principle of non-discrimination, the Court has held on other occasions, qualifies as a general principle of Union law for the protection of individuals. Thus, it confers rights on individuals that they can rely on for the purposes of receiving compensation for breaches thereof.

In Pappalardo, however, the Court limited the circumstances in which the principle of non-discrimination may be relied on in the context of an action for damages. It found that ‘the principle of equal treatment must be reconciled with the principle of legality, according to which a person may not rely … on an unlawful act committed in favour of a third party’ (para 52). The Court went on to emphasise that only the provision that worked in favour of the Spanish seiners (Article 2), but not the provision that prohibited Pappalardo and the other applicants to fish (Article 1), was in breach of the principle of non-discrimination (para 53). Since the unlawfulness hence did not affect the applicants’ situation (para 54), they could not rely on it in support of their action (para 55). In the view of the Court, the General Court was thus wrong to find that the principle of non-discrimination, in this specific case, conferred rights on the applicants (para 55).

Limiting individual rights in the area of non-contractual liability?

The Court’s approach has a fundamental flaw. The Court essentially dismisses the claim because Pappalardo cannot rely on the breach arising from Article 2 (see in particular paras 54-55). By doing so, the Court fails to distinguish between the breach of EU law, and the provision that is breached. Article 2 of the emergency measures, allowing Spanish seiners to fish a week longer than all the others, is the former. It breaches EU law. The principle of non-discrimination is the latter. It is the rule breached. Importantly, for a right to compensation to arise, the rule breached (not ‘the breach’) must confer rights on individuals. Consequently, the Court focusses on the wrong question when it analyses whether the breach arising from Article 2 confers rights on individuals. Pappalardo does not rely on ‘the breach’, but on his right not to be discriminated against conferred on him by the principle of non-discrimination.

The aim of the Court appears to be to bar applicants from using their right to non-discrimination in order to claim, by way of an action for damages, advantages that others received unlawfully (see in particular para 52). This aim, however, may be better achieved by focussing on the question of causation. In this respect, it is indeed relevant that Article 2 alone, but not the entire Regulation containing the emergency measures was unlawful. The crux of the matter lies in the fact that the provision in question (Article 2) was discriminatory, but did not lead to any damage for Pappalardo. The provision that did was Article 1, which was found by the Court to be valid. In other words, Pappalardo would still not have been able to fish any longer than 16 June 2008, had the Commission acted lawfully. Any loss Pappalardo may have suffered, was caused by the Commission’s lawful emergency measures, but not by its unlawful conduct. Thus, there is simply no causal link between the breach and the damage. That in itself is sufficient to dismiss an action for damages.

In sum, the Court rightly argues that Pappalardo cannot claim to receive compensation for not having been able to fish after 16 June 2008. However, the reason is that there is no causal link between the breach and the damage, not that he lacks a right to rely on the principle of non-discrimination.

By asking the wrong questions, the Court creates a dichotomy between situations where the principle of non-discrimination confers rights on individuals and situations where it does not. Rather strangely, when discrimination is achieved through illegally giving advantages to someone else, this does not—in the words of the Court—affect the situation of those that have not received that same treatment. These situations are violations of the principle of non-discrimination, but do not appear to be violations of the right not to be discriminated against. This not only puts unnecessary limits on individuals’ rights and the possibility of enforcing them within the EU legal order. Importantly, it also creates further confusion in an area of little certainty.