fb-100b.png twitter-100.pnglinkedin-64.png | NEWSLETTER  |  CONTACT |

Clarifying the interplay between primacy and direct effect: the limits on the duty to disapply national legislation contrary to EU law

Alicja Slowik , 4 février 2022

In its recent judgement Thelen Technopark Berlin (C-261/20), the Grand Chamber of the CJEU found that a national court ruling on a dispute between private individuals is not required to disapply a piece of national legislation contrary to a provision of EU law if the latter provision does not have direct effect.

                The dispute at stake concerned the execution of a service contract concluded between MN (applicant), an engineering firm and Thelen (defendant), a real estate company. Pursuant to the agreement, MN undertook to provide services for a construction project in return for a payment of a flat-rate fee. The services in question were covered by the German decree on fees for services provided by architects and engineers establishing minimum remuneration rates for service providers. Importantly, the flat-rate fee agreed upon by MN and Thelen was considerably lower than the one imposed by the decree. After the termination of the contract, the applicant issued invoice for his services based on the minimum rates guaranteed by the national decree. The defendant refused to pay the entirety of the required sum on the ground that the aforementioned decree had been found to be incompatible with Articles 15(1), (2)(g) and (3) of Directive 2006/123 on services in the internal market (see the CJEU’s judgement Commission v Germany, C‑377/17 and the order hapeg dresden, C-137/18) and shall be therefore disapplied in the present proceedings.

Confronted with the question of the possible application of EU instrument, the Bundesgerichtshof (Federal Court of Justice) decided to ask the CJEU whether, in the context of a dispute between private parties, Article 15 of Directive 2006/123 has direct effect so that the national decree contrary to that directive should be disapplied. Subsidiarily, the referring jurisdiction wondered whether the decree could be set aside on the ground of its potential incompatibility with article 49 TFEU or “other general principles of EU law”. 

In its response, the CJEU first stated that the principle of primacy requires national courts to interpret national legislation in conformity with EU law, specifically when hearing disputes between private individuals. Yet, this duty cannot result in the contra legem interpretation of national law. According to the referring judge it was indeed impossible to interpret the decree in conformity with Directive 2006/123 in the case at hand. Continuing the reasoning, the Court applied the solution developed in the seminal case Popławski (C‑573/17). It recalled that “a national court is not required, solely on the basis of EU law, to disapply a provision of its national law which is contrary to a provision of EU law if the latter provision does not have direct effect” (paragraph 33). Although article 15 of Directive 2003/123 has been previously found as unconditional and sufficiently precise to produce direct effect, the case at hand concerned a horizontal dispute. The German decree could not thus be set aside on the basis of its incompatibility with the EU provision deprived itself of direct effect. This conclusion could not be affected by the judgement Commission v Germanyin which the court clearly stated that, by maintaining the fixed tariffs for certain services, Germany had failed to fulfil its obligations under article 15 of the Directive. Concluding that a piece of national legislation is contrary to a provision of UE law does not change the nature of the latter: in particular, it does not endow it with a horizontal direct effect.

The Court added that the individual who cannot invoke the directive to set aside a national provision may still rely on the principle of State liability established in the Francovich (C-6/90 and C-9/90) case. In this regard, the circumstance that the breach of EU law (incorrect transposition of the directive) persisted despite the CJEU’s judgement in Commission v Germany would amount to a  serious breach. Moving to the second preliminary question of the referring judge, the CJEU blatantly excluded the application of article 49 TFEU because the facts of the case were confined to a single Member State (Germany).

It is worth noting that the solution put forward by the Court in the present case significantly differs from the one proposed by the Advocate General. AG Szpunar came to conclusion that the national court should disapply the national decree in the present case on two grounds.

Firstly, Article 15 of Directive 2006 gives specific expression to the freedom of establishment enshrined in Article 49 TFEU. Drawing on the interplay between primary and secondary sources of such fundamental freedom, AG Szpunar convincingly argued that, by adopting the directive, the legislator intended to give “specific expression” to the freedom enshrined in the Treaty. Thus, “a special approach should be taken to the issue of horizontal application of that directive” (paragraph 42).  The individual should have the possibility to rely on the directive against another individual just he or she may rely on the freedom of establishment guaranteed by the Treaty in similar situations. Secondly, AG Szpunar points out that the obligation to set aside national legislation would result from the necessity to respect the fundamental right of the freedom of contract enshrined in Article 16 of the Charter. One may regret that these points were not touched upon by the Court, and that more especially because the asking judge explicitly referred in his question not solely to Article 49 TFEU but also to the “other general principles of EU law”, possibly targeting the content of the Charter.

Reiterating the Popławskicase law, Thelen Technopark Berlin illustrates how the absence of (horizontal) direct effect of a particular provision of EU law may alleviate the far-reaching consequences of the doctrine of primacy. Even a piece of national legislation manifestly incompatible with a provision of an EU directive will not be set aside in a dispute between private parties. However powerful, the doctrine of primacy cannot trump another key principle of EU legal order, the one of the absence of horizontal direct effect of directives.

Alicja Słowik, Clarifying the interplay between primacy and direct effect: the limits on the duty to disapply national legislation contrary to EU law, actualité du CEJE n°3/2022, 4 février 2022, disponible sur www.ceje.ch