Albert Sánchez Graells, Reader in Economic Law, University of Bristol*

EU law can be complicated, especially when it comes to Directives. Unlike Regulations, Directives are not automatically binding between private parties. However, individuals can use Directives against the State, creating a need to define what “State” means in this context, given the variety of public-private relationships across the EU.

EU law addresses this through the concept of “emanation of the State,” which clarifies which bodies are subject to Directives. A key case, Foster and Others v British Gas, established a test for this, but its interpretation has been debated. While later rulings offered some clarification, the Court of Justice of the European Union (CJEU) provided a more thorough explanation in its Farrell judgment.

The Foster test initially stated that an “emanation of the State” is a body tasked by the State to provide a public service under State control, with special powers beyond those typical in private relationships. However, Foster also suggested a broader definition, encompassing bodies under State authority or control or possessing special powers.

This ambiguity led to debate among legal scholars regarding the criteria for an “emanation of the State,” particularly whether a body must meet all criteria or just one, and which criteria were essential. This uncertainty persisted until the CJEU’s Farrell judgment provided much-needed clarity.

The Farrell case, dealing with liability for improper implementation of an EU motor insurance Directive, clarified that the Foster test’s conditions are not cumulative. This means a body doesn’t have to meet all conditions to be considered an “emanation of the State.” The court clarified that even a private entity tasked with a public service and granted special powers qualifies.

The CJEU emphasized that the Foster test shouldn’t be interpreted as a catch-all definition. Instead, it highlighted that the relevant part of Foster indicates that Directives can be used against entities controlled by the State or possessing special powers. Essentially, the CJEU clarified that a body only needs to meet one of these criteria.

For further clarity, the CJEU explained that “emanations of the State” are distinct from individuals and resemble the State in one of three ways: they are public law entities, controlled by a public body, or tasked with a public service and given special powers. This clarification means even private entities with a public service mission and special powers can be subject to Directives.

This clarification is positive, potentially improving EU law effectiveness. It establishes three clear criteria for “emanation of the State”: public law governance, control by a public body, or performance of a public interest task with special powers. This could impact other areas of EU law and encourages a practical approach.

This clarification might lead to future litigation focusing on the definition of “special powers” and their required extent for an entity to qualify as an “emanation of the State.” The Farrell case offered a clear example, but difficulties may arise in situations with less explicit power dynamics, particularly in contracted-out public services.

However, the Farrell judgment resolves a significant ambiguity regarding the effectiveness of EU secondary legislation, making it a welcome development.

Barnard & Peers: chapter 6

Photo credit: Yahoo.com

*Reblogged from the ‘How to Crack a Nut’ blog