State Liability On Failure To Implement An EC Directive

The Court of Appeal has recently considered the liability of EU Member States to compensate individuals where the State has failed to implement a Directive into national law.

Lloyd's Names brought proceedings to recover underwriting losses, alleging that the British government had failed to introduce proper regulation of Lloyd's syndicates. The claim was unsuccessful at first instance and the Names appealed. The Court of Appeal dismissed the appeal.

For a Member State to be liable for failing to implement a Directive the Directive should involve the grant of rights to individuals and those rights must be the particular right being claimed as justification for the proceedings.

It was not enough to argue that the Directive was intended to protect the individual's economic welfare.

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State Liability On Failure To Implement An EC Directive

The Court of Appeal has recently given judgment in an appeal brought by a group of Names in the Lloyd's market. The judgment provides guidance on the conditions on which liability of a Member State would arise where a State has failed to implement a Directive. It is also an interesting commentary on how the courts dealt with arguments that Lloyd's Names have suffered loss due to an alleged failure of regulation.

Background

The case concerned claims brought by a substantial number of disaffected Lloyd's Names who suffered considerable underwriting losses between 1980 and 1996. Having failed to secure redress through proceedings against Lloyd's, a claim was brought on the basis that, as a result of inadequate market regulation, they had accepted risks and suffered losses that proper regulation would have identified or lessened.

To ground such a claim, the Names had to point to a failure to transpose into national law an EC Directive that granted them specific rights. The Directive pointed to was council Directive 73/239EEC.

This Directive concerns the co-ordination of national provisions on the taking up and pursuit of direct insurance business. The Directive requires consistency in regulation to promote freedom of establishment across the Community.

The claimants sued the British government, in the form of HM Treasury, for failure to implement Directive 73/239. They sued for their underwriting losses on the basis that these were caused by the failure to implement proper regulation accordingly, specifically that the Directive obliged the...