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Cite as:
Eric Allen Engle Harmonisation of rights of privacy and personality in the European Union, 1 London Law Review 215-240 (2005).


Volume 1, October 2005, Issue 2



Kevin Martin

President of the Law Society of England and Wales

Following an extremely successful, widely praised first issue, The London Law Review returns with another journal of academic excellence. The content in this issue is as diverse as that of the last. My own paper on funding access to justice is followed up by an insightful piece on the law of restitution and an article on the payment of damages claims from Denzil Lush, Master of the Court of Protection.

The main body of the journal looks closely at citizenship, personality, privacy, and human rights both in the U.K and in Europe. At a time when the threat of terrorism continues to weigh on our minds, Elspeth Guild, a senior partner at Kingsley Napley, offers her thoughts on the U.K courts, human rights and foreigners in exceptional times. Joanna Krzeminska of the University of Bremen provides an insight into the freedom of commercial speech in the European Union, while Eugenia Dacaronia of the University of Athens gives us an overview of the interpretation of wills under Greek law.

It gives me great pleasure to express my support for this publication. Students involved with the editorial side of the Review gain critical exposure to the work of leading academics and legal practitioners while honing their writing, research and analytical skills. Revenues created through subscriptions go straight back into legal education in the form of scholarships and prize money. I would encourage the legal community to support The London Law Review in its aims and objectives, as articles and notes in the Review provide an important source of academic scholarship. This provides both barristers and solicitors with a forum to broaden their knowledge, while leading and inspiring tomorrow’s generation of legal advocates.

Kevin Martin

President of the Law Society of England and Wales


June 2005


Volume 1, October 2005, Issue 2

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Volume 1, October 2005, Issue 2



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Volume 1, October 2005, Issue 2


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Volume 1, October 2005, Issue 2


Rt. Hon. Lord Chief Justice of England & Wales

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Volume 1, October 2005, Issue 2


This second issue of the London Law Review is even more exciting and diverse than the first. The reader will find a variety of topics surrounding the central theme of ‘Government v. The People’. We have attempted to publish articles of current topical value in light of the recent trends in amendments to terrorist legislation that affect fundamental human rights. Issue 3 (Jan 2006) will deal with a variety of topics surrounding comparative and commercial law.

The Law Review has grown a great deal over the past few months, inducting a growing number of law students from London’s universities. In addition, a number of academic and legal professionals have joined the editorial advisory board, ensuring our standard of excellence through quality peer review. The central most important aim of this journal is to make a substantial contribution to legal academic scholarship, while developing student writing, analytical and research skills.

Our continued development is centrally founded in the willingness of top ranked academics and legal professionals that encourage our work by providing an academic forum, enabling student development. We are grateful for this support, and would like to encourage your feedback about the articles provided in this second issue.

We would also like to express our sincere gratitude to Lord Justice May for his fist edition foreword. His support and praise for our goals and objectives has helped fuel a growing number of subscriptions. Finally, our heartfelt appreciation to Lord Woolf, we wish him a happy retirement and look forward to his future contributions.

T. A. Andrew de Beaulac, Editor in Chief

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Kevin Martin


Legal aid is crucial in guaranteeing access to justice for all in England and Wales. The principle that free legal advice should be available for those who need it, but are unable to pay is one of the hallmarks of a free and democratic society.

Without legal aid huge numbers of people would simply be unable to get legal advice at the times when they need it most. In this country legal aid is comparatively well funded when considered, in a global context, alongside the small or almost non-existent schemes that operate in some jurisdictions. However, that does not mean that the legal aid system in England and Wales does not face profound problems. The difficulty we are facing in this jurisdiction today is that the existing system for providing legal aid has begun to crack under the strain of the volume of work and the impact of changes in government policy.

The foundations of the modern legal aid system in England and Wales were laid by the Legal Aid Act 1948, which was part of the Attlee Government’s commitment to state support for people in need. By the end of the 1970s, the scheme had been extended to cover almost all court proceedings and the financial conditions for eligibility had been set at a level which made access to justice a reality for almost everyone.

The current position

Since those halcyon days successive governments have allowed that original commitment to be undermined, primarily through under-funding. The original vision for legal aid when it was introduced was that it should be a front line service alongside health and education. That vision was never really quite fulfilled but the objective was sound, because legal aid can play a significant role in protecting rights and tackling social exclusion. The UK Government spends some £75billion on health services. By comparison, £2billion on legal aid is a drop in the ocean. How best to make use of the funds available is now the central problem. It is clearly time for change and the Government recognises this too.

The Lord Chancellor recently appointed a member of the House of Lords, Lord Carter, to conduct a review of the procurement of publicly funded legal services. Lord Carter has been asked to produce a plan for the implementation of reforms of the procurement system and his terms of reference state that any new system will

Kevin Martin is president of the Law Society of England and Wales. This paper draws on parts of the Law Society’s 2003 publication Protecting Rights and Tackling Social Exclusion.


need to achieve maximum value for money and control over spending, whilst ensuring quality and fairness of the justice system.

At present a huge amount of the criminal legal aid budget is spent on a few very long crown court cases. The legal aid system requires further investment if we are to ensure true access to justice for all. A recent report by the Legal Services Commission (LSC) indicated that:

‘decisions taken beyond the remit and direct influence of the LSC and of defence lawyers have had a significant effect on criminal legal expenditure, and account for a significant proportion of the increase in expenditure over the past decade’. The report went on to point out that: ‘It is rarely the case that the legal aid expenditure implications of policies are considered when policies that may impact on criminal legal aid are being developed.’1.

The concern about the growth in criminal legal aid spending highlights one of the most important questions in relation to legal aid, which is the issue of how the budget is divided between criminal cases and civil cases. In criminal cases the state has an obligation to provide legal assistance to anyone charged with a criminal offence. This right is articulated in article 6 of the European Convention on Human Rights, where the right to legal assistance is recognised as essential to a fair trial. The state is not under such an obligation in civil law cases, though governments have generally recognised the wider benefits that flow from the provision of legal advice and assistance to those who face social problems relating to housing, immigration and family problems.

The human rights obligation to provide legal assistance to those charged with a criminal offence means that spending on criminal legal aid is necessarily demand led. Civil legal aid and criminal legal aid come out of the same budget, so as spending on criminal cases has grown, increasing pressure has bee put on the funds available for civil legal aid. While no one denies the vital importance of criminal legal aid, civil legal aid has a crucial place too if we are to sustain a society which treats everybody with decency and dignity, and which seeks genuinely to diminish social exclusion. It is an extremely important way of stemming the tide of problems that can face those living in disadvantaged circumstances.

Perhaps the most important change that Government needs to make is to completely separate the budget for criminal legal aid from the budget for civil legal aid. If spending on criminal legal aid was clearly ring-fenced, then any growth in spending on crime – whether as a result of an increase in cases before the courts, or as a consequence of changes in government policy and the introduction of new offences

– would not affect the amount of funding available for civil legal aid. This is not an

1 Demand Induced Supply? Identifying Cost Drivers in Criminal Defence Work, by Ed Cape and Richard Moorhead, published by the Legal Services Research Centre, Legal Services Commission, London, July 2005, p.66.




idea considered by the Lord Chancellor in his recent paper A Fairer Deal for Legal Aid,2 but it is one that demands serious consideration.

Of course, in looking at how we fund the legal aid system we must be prepared to consider a whole range of different ideas and potential reforms. We need to look at new ways of delivering legal advice, and at different ways of funding the services offered.

It is these questions that I propose to consider in the rest of this paper. Are there new ways of providing services which will help solve problems more quickly and effectively, and in a fashion which is better suited to clients? Are there different funding structures which would enable legal aid to be delivered more efficiently and in a more cost effective fashion?

New Approaches to Delivery of Service

There are indeed a number of alternative ways of delivering publicly funded legal advice and here I describe some with the most potential, including alternative dispute resolution, consumer redress schemes, ‘unbundling’ of legal services, greater use of technology and telephone services and diagnostic and second-tier legal services.

Many problems need never to go anywhere near a court room but that doesn’t mean that sound, expert legal advice is not necessary. Some problems, if they remain unaddressed will end up in court, yet if they had been tackled at an early stage could have been resolved much more quickly on an informal basis. This is why it is so important to help people get the help they need promptly, and this is why alternative means of delivery can really help. Greater use of mediation and early neutral evaluation of cases can also be extremely helpful in some cases – not always cheaper, but perhaps more effective in providing lasting solutions to problems. Consumer redress schemes must be more effectively publicised and made use of where appropriate. There are initiatives developing in some of these areas, but the Government, the LSC and the legal profession needs to redouble their efforts to extend them and entrench them where possible and appropriate.

Alternative Dispute Resolution

Litigation through the courts must be the last resort for those with legal problems. It is important that, wherever possible, other methods of dispute resolution such as mediation and early neutral evaluation are attempted, in the interests of the parties themselves as well as in the interest of making best use of the legal aid budget.

In fact, mediation does not necessarily provide a cheaper solution,3 but it can help deliver lasting solutions to problems, particularly in family matters. If mediation is

2Published July 2005.

3LSC Annual Report 2002/03 p35



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successful, it reduces the likelihood of repeated applications being made to the court. Mediation is now beginning to establish an appropriate role in family disputes and it is likely that, as more consumers become aware of its potential, its use in other kinds of cases, e.g. neighbourhood disputes, will increase. The Government has recognised the importance of extending the use of mediation in appropriate cases.

Effective Consumer Redress Schemes

Many service providers offer consumer redress schemes, but not all promote them to consumers of their services. Utility service providers, local authorities and pension funds rarely inform their members clearly either about their own dispute resolution schemes, or in the case of pensions, about the Pensions Ombudsman. Any provider of services should be required to set out openly and clearly to consumers what forms of redress are available to them in the event of dissatisfaction or dispute.

Unbundling of Legal Services

The Government and lawyers sometimes assume, erroneously, that individuals who qualify for legal aid are incapable of acting on their own behalf to resolve their disputes. Of course, many vulnerable clients do not have the capacity to progress their matters in any way. However, some clients do have the capacity to undertake some work – or all of it – for themselves. This should be encouraged, supported by sound legal advice at the outset, where requested, perhaps reverting for further legal advice at a later stage where necessary. For some, the ability to progress their issues in some measure may help to restore a sense of self-worth at a time of crisis in their lives. The principle underpinning self-help must, however, be that it is designed to empower the able, rather than remove services from the vulnerable.

Greater Use of Technology

Technology provides many opportunities for lawyers and other providers of legal advice to reach out to those in need in their communities, particularly in remote areas with poor transport links. As a starting point, the provision of general legal information to the community could be provided through the internet. In the medium term, technology could help facilitate the establishment of remote drop-in clinics, with advisers able to access clients’ files by means of a link to the firm’s network. Some courts have set up video kiosks to guide users through the court process.

In some areas, video-conferencing facilities would help promote access for those unable to travel to a solicitor’s office. Video-conferencing facilities within suppliers’ offices could also reduce the costs of meeting with experts, saving travelling and waiting time all around. The provision of video-conferencing facilities in suppliers’ premises could also help consumers to access referral agencies, which may be some distance from their homes. For this to be effective there needs to be a network of video conferencing facilities for consumers to use.




It is equally important that courts and other government departments and agencies with which solicitors conduct business invest in technology, with integrated systems capable of ‘talking to each other’ to promote greater efficiencies across the justice system, allowing consumers to access information about their cases when they need to. Lack of proper investment in technology is a considerable barrier to much needed change in the court system; the Government must remedy that.

Better use of Telephony Services

The provision of information and advice by telephone appears to offer a range of possibilities. At one end of the spectrum, basic information might be made available. This would be particularly useful for those unable to access the internet and perhaps those living in more remote communities. At the other end of the spectrum, very specialised advisers could be available at the end of the telephone to provide detailed advice. Such a model would inevitably be more expensive at the front end, but is likely to produce long-term savings, as meritorious matters would be identified quickly and non-meritorious matters would be removed from the system promptly.

The LSC is already operating small pilot projects into the usefulness of telephone advice for those in need of advice in areas of civil law. Similar schemes operate well in the National Health Service, where callers are able to obtain basic advice and information without having to visit their GP or local hospital. It is essential that anyone providing advice or information over the telephone is sufficiently well- trained to be able to recognise the issues presented by the caller and capable both of providing advice within the limits of their competence and of referring them for more specialist help as appropriate.

Diagnostic and Second Tier Services

Research has shown that few people have one legal problem in isolation – more commonly people have ‘clusters’ of problems, all of which require resolution if the individual is to achieve a lasting solution to the presenting problem. It is therefore important that all of the problems, both presenting and underlying, are identified at a very early stage. Successful diagnosis must depend on early intervention by experienced advisers. This would entail front-loading of the costs, but it is likely that it could also produce long-term savings, since the entire cluster of problems could be identified and remedied simultaneously, rather than dealing with each one only when it manifests itself at the point of crisis.

The ability to diagnose a problem does not necessarily equate to the ability to advise on the most appropriate way of dealing with the problem. Research undertaken on behalf of the LSC,4 suggests that all too often, suppliers in both the private and not- for-profit sectors continue to act in matters beyond the limit of their competence.

4 R, Moorhead et al: ‘Quality and Cost: Final Report on the Contracting of Civil, Non-Family Advice and Assistant Pilot’ (The Stationery Office, 2001)



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This is not in the interests of the consumer, nor of the public purse. Equally, in more remote regions, suppliers may not be able to specialise in one or two disciplines, since they need to offer a more generalist service to their community. It is important that, in offering that type of service, they take care not to continue to act beyond the limits of their competence.

In some areas, expert advice on certain issues is becoming increasingly scarce, with the specialists centred in areas where there is greater demand for advice on those issues. To remove the barriers this raises for consumers living in areas of scarcity of supply, greater use of second tier services may be appropriate. In this way, front-line suppliers could obtain from specialists the necessary advice to take the matter forward on behalf of clients. This could have the advantage of enhancing the front- line advisers’ expertise in the relevant area of practice. The LSC is already piloting the provision of specialist support services; the associated research is likely to help determine whether and, if so, the system should be extended.

New Approaches to Funding

In tackling the funding conundrum, it is essential that proper consideration is given to new ways of funding legal aid. There are a number of different options that should be looked at.

A Salaried Service

In a 2003 consultation paper,5 the Law Society explored the possibility of introducing some form of salaried service for civil as well as criminal legal aid. Some of those who responded to the consultation expressed fears that this would jeopardise the solicitor’s independence and so compromise the client’s access to justice. Nevertheless, the idea needs careful study where the need for it can be demonstrated. There can be no automatic assumption that solicitors working in private practice should be the dominant mode of legal aid provision after all – other jurisdictions satisfactorily incorporate largely salaried provision. In considering this option, it is important to be clear about what the Law Society means by professional independence. We believe it must include three basic tenets:

freedom to represent clients in a way which allows for direct challenge of Government legislation, Government Departments, local authorities and other public bodies.

freedom to advise individual clients according to best professional judgement

freedom for all employed solicitors (including those employed in private practice) to act in accordance with their professional judgement without the risk of damaging their career prospects.

5 The Law Society: ‘The Future of Publicly Funded Legal Services: A Consultation Paper’ (The Law Society, Feb 2003)




On this analysis, there may be a number of ways in which a salaried element could be introduced, without jeopardising professional independence.

One approach might be for the Government to establish salaried offices, similar to the PDS (Public Defender Service) model, in areas where there are real problems of access and neither private practice firms, nor the not-for-profit sector are able to reach out to those in need of legal services. Such a model would be likely to separate out the functions of providing legal advice from those required to manage the practice.

Another solution would be for the Government, through the LSC, to introduce a salaried element into private practice firms contracted to provide legal aid work. Under this model, the LSC would provide a firm with funding to cover the salary and overheads of a solicitor(s) employed to deal with publicly funded matters. The LSC would, undoubtedly, want to audit the work undertaken by the funded solicitor(s) within the firm. However, this might be simpler to achieve than under the current system of auditing work undertaken on a piece-work basis.

Extension of the Role of the Not-for-profit Sector

Traditionally, the not-for-profit sector was made up of advice agencies and, since 1970, of Law Centres. Over the past few years, however, some solicitors have set up their firms as not-for-profit enterprises.

Not-for-profit Solicitors’ Practices

It is likely that increasing numbers of solicitors will wish to provide social welfare law as not-for-profit enterprises, and that is an approach supported by the Law Society. In addition, the prospect of new alternative models of practice such as legal disciplinary practices might provide imaginative ways of delivering legal services to tackle social exclusion.

Law Centres

Law Centres have made an important contribution to the delivery of legal aid services since the first was established in 1969 with the North Kensington Law Centre. They have a number of different roles, including diagnostic advice, second tier and specialist advice, holistic practice, community education, pro bono add-ons, services at the margins of financial eligibility for public funding and some law reform work. It is of concern that Law Centres still have to compete for local authority funding, particularly when many of their successful actions are against local authorities, for example in housing and education matters.

Law Centres set out to fulfil the aims of the Government’s social inclusion programme by reaching out to marginalised individuals and groups in the



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community to ensure they have access to free legal services and education about legal rights and responsibilities. Some Law Centres already receive funding from regeneration and neighbourhood renewal programmes or from the European Social Fund or Regional Development Fund and are able to target vulnerable or disaffected groups in the community such as young people, people with disabilities, black and minority ethnic groups or women’s groups.

Law Centres provide representation at tribunals where there is no legal aid, such as the Employment Tribunal, Social Security Tribunals, Disability Tribunals and Education Appeals. These vital areas of social welfare law fall outside of the scope of legal aid certificates and representation and can only be undertaken where there is alternative funding, such as core funding from a local authority.

It should not always be assumed that everyone with a legal problem needs to see a solicitor; there are some areas, such as welfare benefits and debt, where advice agencies are often better placed to offer advice than many solicitors’ firms. Citizens Advice Bureaux are increasingly well known to consumers and many of those in need of advice know that CABx offer advice free of charge.

Although there are some good referral mechanisms between advice agencies and solicitors’ firms, the LSC’s research ‘Quality and Cost’ concluded that neither solicitors nor advice workers are particularly good at referring cases on where they have reached the limits of their competence. Many continue to advise the client under tolerances6 in their contract with the LSC, but the researchers found such advice and follow-up work to be of significantly poorer quality. However, what must be factored into this is the risk of referral fatigue, where a client gives up rather than face moving between advisers on different issues.

It is important to emphasise again that although those with legal problems may present with only one problem, it is unusual for there to be only one problem; for example, housing issues may well be linked to welfare benefits, debt and possibly employment issues. The FAInS model7 could be developed in other areas of practice. This would facilitate referrals between advice worker and solicitor – or other external agencies – in a more controlled and purposeful manner. Clients would know, from the outset, which other agencies they needed to see and why, thus affording them more involvement and empowerment in the process as well as a clearer understanding of the need for referrals. This would

6Contractors are permitted to do some work outside of those categories in respect of which they have contracts, e.g., welfare benefits work might be done for a client in a family matter.

7Under this model, an experienced solicitor provides a diagnostic advice service for clients from the outset. The solicitor’s role is to enable the client to achieve a holistic solution to the many issues facing them at the time of the breakdown of the relationship. The solicitor will provide advice on the legal issues, but also guide the client in a purposeful way to other services he or she might need. This could include housing, counselling, mediation, debt and welfare benefits advice or children’s services. The model recognises that clients with family difficulties often face a multiplicity of legal and emotional issues and is designed to provide lasting solutions to those issues by identifying them and addressing them as early as possible.




avoid clients feeling they were being passed from ‘pillar to post’, which causes many to give up – and perhaps present at some later point when the situation has escalated, needing more complex and expensive intervention.

Extension of Conditional Fee Agreements

Conditional fee agreements (CFAs) have already replaced legal aid in mainstream personal injury matters and their use, by both plaintiffs and defendants, has expanded in other areas of law. The scope for extending use of CFAs depends on identifying categories of case where assessments of the prospects of success can be made at a sufficiently early stage to ensure that virtually all cases meriting support will be able to secure a CFA. Accordingly, replacing legal aid with CFAs in medical negligence work would present real difficulties. Medical negligence matters are frequently complex and require substantial investigation before any sensible assessment can be made as to the prospects of success.

There may, however, be areas where the LSC could provide start-up funding for early investigation, though not continuous funding, which could be secured through CFAs.

The Government could explore with the profession and the insurance industry the appropriateness of CFAs in other types of cases – if the market can support expansion into other areas, consumers might be expected to avail themselves of such opportunities. However, this should not be as an absolute alternative to public funding. If the adviser can justify why, in the circumstances of the case and the individual, a CFA would not be appropriate, public funding should be granted.

New Approaches to Remuneration

While it is important to innovate where appropriate in the way legal services are delivered, the fact remains that the funding available for legal aid in the recent years has been inadequate. Since 1997, only one increase has been made in the rates of remuneration, despite the year on year increase in the cost of living driven by inflation.

In the short term, if the Government wishes to sustain a viable supplier base, it is essential that a significant increase in remuneration rates is awarded. Failure to do so will result in large numbers of solicitors giving up legal aid work, while the number of trainee lawyers choosing to go into publicly funded work will go into terminal decline.

While we are keen to deal with the problems that currently face legal aid lawyers, it is also important to look at alternative structures for remuneration, and to weigh up the advantages and disadvantages of those other approaches. The review now



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underway, under the chairmanship of Lord Carter8 is expected to address precisely this area, in particular, block funding, price competitive tendering and the concept of lead suppliers.

Price Competitive Tendering

In January 2005 the Legal Services Commission (LSC) published a consultation on proposals to introduce a competitive bid round for the award of Criminal Defence Service (CDS) contracts in London. The Commission indicated that it believes that by introducing managed competition based first on quality and then on price, it will improve the value for money that it currently derives from purchasing CDS services. The consultation paper made it clear that following what appears to be a threshold quality assessment, price will be the factor determining successful bids, with contracts being awarded to the lowest bidder. There are sigificant concerns that the quality of service to clients will deteriorate as a result, since firms may submit unrealistically low bids simply in order to obtain a contract. Price competitive tendering may also lead to a reduction in the supplier base, and the possible loss of the public service ethos that attracts people to legal aid work.

This is a matter of profound concern. The consultation document proposed a scheme which will inevitably reduce access to justice and the quality of advice and representation available to legally aided clients.

There are also equality and diversity implications of the proposals for minority firms and clients. It seems likely that price competitive tendering would have the greatest damaging impact on small firms, in which black and minority ethnic solicitors are disproportionately represented. A reduction of diversity in the supplier base would inevitably lead to less choice for minority clients. In the long run this could lead to a loss of confidence by minority groups in the criminal justice system.

Block Funding Arrangements

The current funding arrangement for private practice, under which firms are paid for individual pieces of work, is far from being the most efficient mechanism. Significant effort is expended by suppliers in reporting on each piece of work undertaken; and the funder, the LSC, then expends similar effort and resources in auditing that work.

An alternative arrangement might be for the LSC to contract with suppliers in private practice to deliver a fixed number of hours of work in an agreed category of practice. Suppliers would then be able to deliver services as they deemed necessary and appropriate in the interests of those in need. This arrangement would resemble arrangements already in place in the not-for-profit sector. Budgetary control could

8 See page 162 above




be achieved by giving the firms with established quality credentials an upper limit on their contracted monthly payments, which could only be raised by agreement.

A Model based on the new General Medical Services Contracts for GPs

The Law Society studied the new General Medical Services (GMS) contracts introduced for GPs in 2004, and concluded that this model should be examined closely by the LSC and the Government as a possible basis for an alternative way of funding legal aid services in some cases.

Under the new GMS contracts, the GP package comprises funding for premises, quality services, enhanced services, general services (including out-of-hours work) and, at least for now, a minimum practice income guarantee. Funding is linked to the profile of the population in a practice’s catchment’s area, so that resources are targeted at those most in need. GPs can choose not to do out-of-hours work, but their budget is reduced (about 6% is deducted from the general services’ element of the budget) to reflect this.

GP practices know in advance what budget will be available to them and they are free to allocate expenditure as they see fit – for example, one practice could determine that it needs to employ another doctor on a salaried contract, whereas another might decide to invest in practice nurses or a third might decide to employ both.

Through the Primary Care Trust, GPs are provided with full financial support for Information Management and Technology and are free to choose the systems they invest in. There is a separate budget to cover work in developing Doctor Patient Partnerships. This might include, for example, education on self-management and basic triage, so that the GP is not seen as the first port of call, where other services (for example, pharmacists) might be able to deal with the problem.

Exploration of methods of funding based on this model, and the model proposed for dentists working in the NHS, is worthy of examination as part of a strategic review of the delivery of legal aid services.

Legal aid Centres of Provision – Shared Risk

Consideration should be given to developing a scheme, with the LSC, to provide legal aid services from centres run on a ‘shared risk’ basis. The LSC would pay for premises and infrastructure, including IT support and a franchise/contracts manager. Individual firms, or individuals from firms, would then attend at the premises to offer legal aid services to their clients. A range of services could be offered by solicitors specialising in different areas of law, so that a client’s total legal needs could be met under one roof, even if not by one solicitor.

Firms and individuals offering legal aid services through these centres would have to agree shared standards for the purposes of their legal aid work, and the legal aid



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work would be monitored by the franchise/contracts manager, who would act as the liaison link with the Legal Services Commission.

The benefit to the client would be that all the services would be available under one roof. The benefit to the solicitors would be that they would be able to focus on providing legal services to clients while maintaining (if they wished to do so) non- legal aid work at their own offices. The benefit to the LSC would be that it would be able to undertake a single centralised audit, rather than an audit of each firm.


This is a difficult and challenging time for legal aid and for those that deliver legal services within the legal aid system. Few disagree with the original purpose for which legal aid was introduced, but the world has changed so dramatically that is not surprising that substantive reform is necessary. Legal aid is a service worth investing in it is a key public service alongside health and education. A denial of access to justice is as damaging as a denial of access to education or healthcare. It is essential that we find the right way of funding legal aid to ensure that as many people as possible benefit from the invaluable support it offers.

We all need to be flexible, creative and open-minded about finding new ways of delivering legal advice so that it reaches those that need it most, and helps resolve problems efficiently, appropriately and promptly. The timely provision of legal aid services can prevent people becoming socially excluded or rescue those who have become so. This can result in very significant savings in public expenditure and ideas discussed in this paper could help increase the impact of efforts made. Nonetheless, if we do genuinely want to innovate in some of the ways that I have discussed, proper investment will also be necessary. It is essential to recognise that achieving a fair justice system which delivers access to justice to all depends – at least in part – on valuing those who work in it, and promoting a working environment where efficiency and independence can co-exist.


Raphael Thunhart


In English law there is a rather strict rule that benefits transferred under an illegal agreement cannot be reclaimed. The rigid application of the this defence, which bars restitutionary claims regardless of the kind of illegality involved, causes dispropor- tionate and harsh effects in many cases. Thus, most of the English commentators hold that the present restitutionary rules on illegality are in urgent need for reform.1 There have been many proposals, all of them agree that there should be no rigid rule barring recovery in any case of illegality, but a more flexible approach, which is able to consider the individual circumstances of the particular case.2

In 1986 the Court of Appeal tried to introduce a discretionary approach in Thackwell v Barclays Bank plc. In this decision the claim for recovery was denied, but only after the consideration of all circumstances of the case, including the quality of ille- gality involved and whether granting relief would assist the plaintiff in his unlawful act.3 In consequence this attempt to introduce a more flexible approach was pre- vented by the House of Lords in Tinsley v. Milligan.4 The House of Lords firmly rejected the ‘public conscious test’ because of being uncertain and inconsistent with the present rules of law. It was held, that the claimant’s right shall not depend on such an imponderable factor as the extent to which the public conscience would be affronted by recognising rights created by illegal transactions.

Later on, in 1999 the Law Commission published a consultant paper on the effects of illegality on contracts and trusts where it is proposed that the courts shall have discretion to decide whether or not a claim for restitution is granted despite illegal- ity.5 According to the Law Commission, this discretion shall require the court to take into account (i) the seriousness of illegality involved, (ii) the knowledge and intention of the plaintiff, (iii) whether denying relief will act as a deterrent, (iv) whether the dismissal of the claim would further the purpose of the rule which ren- ders the transaction illegal and (v) whether denying relief is proportionate to the

VA Mag. Dr. Raphael Thunhart, Professor of Law, University of Graz. Dr Thunhart is on the Trento Common Core Project and specialises in a number of fields in law. His emphasis: Public Commercial Law, Liability Law, Confidence Protection in Private Law, General Agency Rights, Enriching Rights, Comparative Law.

1For example R. Goff & G. Jones, The Law of Restitution, 6th ed. (2002) para. 24-019.

2For a list of options for reform see P. Giliker in S. Hedley & M. Halliwell (ed.), The Law of Restitution (2002) p. 331.

3[1986] 1 All E.R. 676.

4[1994] 1 A.C. 340.

5Illegal Transactions: The Effect of Illegality on Contracts and Trusts, Law Com. C.P. 154 (1999) p. 98.



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illegality involved.6

The Law Commission’s proposal of a discretionary

approach has also been criticised for uncertainty, since the factors which guide the exercise of the direction are stated in broad terms.7

In fact, naming factors which shall be considered is no more than a leap in the dark by shifting the responsibility for a fair decision to the court in the particular case. The introduction of a discretionary approach is not likely to improve the present state of the law, if there is no rethinking of the policies involved. Therefore, the following article provides a critical discussion of the arguments behind the present doctrine of illegality. It will be argued that the claimant should not necessarily lose legal protection even where the agreement is tainted by illegality. Whether or not relief is granted shall be decided with regard to the purpose of the rule which renders the transaction illegal. To show possible impacts of a reform the English rules will be compared with Austrian law, which has adopted a more flexible approach to- wards illegality.

The in pari delicto doctrine in present law

As a general rule English courts do not allow to reclaim payments made under an illegal or immoral contract. Illegality is regarded as a defence to standard grounds of restitution. For example in the well known case of Parkinson v. College of Ambu- lance Ltd. the secretary of the defendant charity fraudulently represented to the claimant that it would be possible to arrange a knighthood, if the defendant made a large donation to the funds of this charity.8 The claimant paid the money, but no knighthood was forthcoming. Realising that he had been fooled, the claimant wanted to recover the money paid. His action failed. The denial of restitution was based upon the illegal and immoral conduct of the plaintiff, who consciously entered into an illegal agreement, and therefore did not merit legal assistance. Many decisions are based on the roman maxims ‘ex turpi causa non oriatur actio’ and ‘nemo suam turpidudinem allegans audiendus est’.9 No court shall lend its aid to someone who founds his claim upon his immoral or illegal conduct.10 A figurative expression of that rule is given by C. J. Wilmot in Collins v. Blantern:

No polluted hand shall touch the pure fountains of justice. Whoever is a party to an unlawful contract; if he hath once paid the money stipulated to be paid in pursuance thereof, he shall not have the help of the court to fetch it back again.11

Only where the claimant innocently participated in the illegality a claim for restitu- tion is allowed, since in these cases the parties are regarded to be not in pari delicto. According to this, an action for recovery succeeds, where the claimant was in a

6Illegal Transactions: The Effect of Illegality on Contracts and Trusts, Law Com. C.P. 154 (1999) pp.

102et seqq.

7N. Enonchong, ‘Illegal Transactions: The Future?’ (2000) 8 R.L.R. 82, 95.

8[1925] 2 K.B. 1.

9For further references R. Goff & G. Jones, The Law of Restitution, 6th ed. [2002] para. 24-002.

10W. M. Mansfield in Holman v. Johnson [1775] 1 Cowp. 341.

11(1767) 2 Wils. 341, see also Holman v. Johnson [1775]1 Cowp. 341, 98 E.R. 1120.




mistake that the transfer of a benefit was illegal, for example because of the defen- dant’s misrepresentation.12 Further, the defence does not apply where the illegal transaction has been caused by duress. Thus, in Smith v. Cuff a creditor, who de- manded extra money from the debtor for entering into a composition agreement, which means to defraud the other creditors, was held bound to repay that extra money.13 Restitution is also allowed, where contracts or transactions infringe class protecting statutes, especially the Rent Act, which aims to protect the plaintiff from actual or potential exploitation of his relatively weak position. Therefore a tenant can recover a premium paid even though he might be aware that such payments contradict the law.14 In all these cases the plaintiff cannot be blamed for his role in the illegality, meaning that the parties are not in pari delicto, which grants legal protection to the claimant.

Relief is also permitted where the plaintiff withdraws from an illegal agreement before the illegal purpose has been carried out. This well established exception of the in-pari-delicto-defence wants to ensure, that the party who withdraws is not penalised for her or his involvement, and thereby deters the performance of illegal contracts.15 This withdrawal must be voluntary, so it is not sufficient that a party withdraws simply because her or his plan had been discovered.16

The scope of application of this defence in English law is very broad since it applies to all agreements or transactions tainted by immorality or illegality, irrespective of the kind or seriousness of the infringement involved. This has harsh impacts upon the effects of illegal foreign exchange dealings: In Bigos v. Busted the plaintiff de- posited a share certificate and the defendant agreed to provide Italian currency for the plaintiff’s wife and daughter in Italy. The defendant failed to provide the prom- ised currency and refused to pay back the deposit. The plaintiff’s claim for recovery failed, because such agreements were illegal by English law at that time.17

Furthermore, the defence of illegality applies where the plaintiff knows, that his per se legal performance of the agreement will enable the defendant to commit a crime or a civil wrong. For example, a cab driver knowing that he is going to bring a bur- glar to the scene of his crime loses any contractual or restitutionary claim for remu- neration.18 This rule has serious effects where property is transferred to defraud creditors. The illegality of such agreements makes the transferor being barred from the recovery of his property.19 Additionally, a building constructor, who agrees in a conspiracy to defraud an insurance company and inflates the price, is not permitted to succeed on his claim for payment of any services rendered under the agreement.20

12Oom v. Bruce [1810] 12 East. 225, 104 ER 87; Kiriri Cotton Co. Ltd. v. Dewani [1960] AC 192.

13[1817] 6 M. & S. 160, 105 E.R. 1203.

14Gray v. Southouse [1949] 2 All E.R. 1019.

15Tribe v. Tribe [1996] Ch. 107.

16Tribe v. Tribe [1996] Ch. 107; nevertheless, the exact limits of voluntary withdrawal, especially where the aims of the agreement have ceased to be needed, seems unclear; see R. Merkin, ‘Restitution by With- drawal from Executory Illegal Contracts’ (1981) 97 L.Q.R. 420, 428.

17Bigos v. Busted [1951] 1 All E.R. 92.

18Wild v. Simpson [1919] 2 K. B. 544 (obiter dictum).

19Taylor v. Bowers [1876] 1 Q.B.D. 291; Tribe v. Tribe [1996] Ch. 107.

20Taylor v. Bhail [1995] 50 Con. L.R. 70.



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In another case, payments made under a frustrated contract including the signing of false documents to deceive a finance company were held to be not recoverable.21

Even where the transaction of the benefit and its purpose are lawful, the use of con- tract terms, which infringe statutory provisions, may cause the application of the defence of illegality. In Wild v. Simpson a solicitor entered into an agreement with a client, whereby the client agreed to pay a percentage of the amount recovered by the solicitor. At that time such an agreement was clearly champertous and therefore illegal. The solicitor, on being successful, sought to recover at least his costs for

services rendered. His action was denied, because the contract of services was ille- gal.22

Policies behind the present doctrine and critical comments

Upholding the dignity of the courts

In many judgements the dismissal of the plaintiff’s claim for restitution is justified by the dignity of the court. Especially where gross moral turpitude is involved, like the payment to commit a murder, the court will strictly refuse any aid.23 It was said, that it would shock the public conscience, if a man could use the courts to enforce a money claim by reason of having committed such acts.24 Apart from such extreme cases, there is nevertheless a fear, that the court itself could be tainted by illegality where a claim is granted that founds on the unlawful conduct of the claimant.25 It is said that courts should not be used to distribute the wages of illegality and if they were, morality standards would be inevitably weakened.26

Taking a closer look at this argument the vague reference to the dignity of the court is not convincing. In fact, the justification of the illegality defence by the court’s dignity is hard critiqued. So it was objected, that this argument would suggest that courts are more concerned with their own dignity than the need to secure justice between the parties.27 It is not the function of judges to be shocked, far less to point out public outrage where non may exist.28 Critics pointed out, that the system of justice is no intact world, but an important instrument social coexistence, which requires courts to judge upon such cases, too.29

Further, the refuse of legal aid seems disproportionate to a claimant, who is not guilty but of a minor transgression, and one who offends involuntarily against one of

21Birkett v Acorn Business Machines Ltd. [1999] 2 All E.R. (Comm.) 429.

22Wild v. Simpson [1919] 2 K. B. 544; the same Awwad v. Geraghty & Co. [2000] 1 All E.R. 608.

23Tappenden v. Randall [1801] 2 Bos. & Bull. 467.

24Gray v. Barr [1971] 2 Q.B. 544 (Salmon L.J.); see also J. Devlin, The Enforcement of Morals (1965) p.

25Collins v. Blantern [1767] 2 Wils. 347.

26P. Devlin, The Enforcement of Morals (1965) p. 53.

27G. Virgo, The Principles of the Law of Restitution (1999) p. 745.

28J. Shand, ‘Unblinkering the Unruly Horse: Public Policy in the Law of Restitution’, (1972) 30 C.L.J. 144, 152.

29J. Shand, ‘Unblinkering the Unruly Horse: Public Policy in the Law of Restitution’, (1972) 30 C.L.J. 144, 152.




a multiplicity of regulations, should not lose legal protection.30 But even where gross turpitude is involved, the forfeiture of legal protection is problematic. In fact, it seems to be in these those most shocking cases, where positive intervention is most needed, while disclaiming responsibility in the matter would perpetuate the effects of the illegal transaction.31 Therefore, everyone should be entitled to his just deserts, whether he has broken the law or kept it.32 Even where the claimant is to blame for his behaviour, granting a rightful claim for restitution, i.e. because of failure of consideration, is necessary to do justice between the parties. To decide on that claims is the task of the courts, which shall not withdraw from their responsibil- ity.


In some cases the defence of illegality to restitutionary claims was justified by deter- rence and general prevention. The risks of losing recovery shall discourage people to participate in immoral or illegal agreements.33 The strict disclaiming of recovery is understood as a message to keep away from illegal agreements, otherwise no recov- ery of benefits transferred will be allowed.34 But there is reasonable doubt, if the denial of legal aid is capable to deter parties from entering into illegal agreements. Even if the parties knew the law, the absence of recovery might have contrary ef- fects. The party who expects to receive a benefit is more likely to enter the agree- ment, when he or she is aware that there is no liability to refund.35 For example, knowing that bribes may be retained makes such agreement even more attractive, whereas the allowance of restitution and the risk of recovery seems to have a stronger deterrent effect.36 Consequentially, it was even proposed to grant restitution for not encouraging illegal conduct.37

As a matter of fact, most parties won’t be aware of the legal situation and its impli- cations. Punishment by criminal law seems to be far more effective to prevent unlawful conduct.38 In fact, one can be sure that where the criminal law has failed to deter, the risk of not being able to sue for the recovery benefits transferred is not likely to change the party’s intent either.

30See St. John Shipping Corporation v. Joseph Rank Ltd. [1957] 1 Q.B. 267.

31J. K. Grodecki, ‘In pari delicto potior est conditio defendentis’, (1955) 71 L.Q.R. 254, 265 et seq.

32See P. Devlin, The Enforcement of Morals (1965) p. 59.

33Euro-Diam Ltd v. Bathurst [1990] Q.B. 1, 35; Tinsley v. Milligan [1994] 1 A.C. 340.

34Taylor v. Bhail [1995] 50 Con. L.R. 70.

35J. K. Grodecki, ‘In pari delicto potior est conditio defendentis’, (1955) 71 L.Q.R. 254, 268; G. Virgo, ‘The Effect of Illegality on Claims for Restitution in English Law’, in W. Swadling (Ed.), The Limits of Restitutionary Claims: A Comparative Analysis (1997) 141, 183 et seq.; G. Virgo, The Principles of the Law of Restitution (1999) p. 744.

36J. Aston in Walker v. Chapman [1773] Lofft. 342.

37W. M. Mansfield in Smith v. Bromley [1760] 2 Doug. 696.

38G. Virgo, The Principles of the Law of Restitution (1999) pp. 744 et seq.



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As a further justification of the in pari delicto defence, it is said that the refuse of restitutionary claims shall punish the plaintiff for his participating in an illegal or immoral agreement.39 The punishment of the plaintiff for his obnoxious behaviour was accepted as a legitimate aim of the illegality rules by the Law Commission in the consultant paper on the consequences of illegal transactions, too.40 However, this argument is object of hard criticism. Critics point out that in many cases the plain- tiff’s loss is far above the punishment a court would impose this infringement of law.41 The loss caused by the denial of civil law claims is not in any way related to the illegality involved, which is likely to cause punishment disproportionate to the offence.42

Therefore, the Law Commission noted that the penal effects of the in pari delicto rule need careful application and must be proportionately to the illegality involved in any case.43 It was found problematic, that the rigidity of the current law punishes just minor infringements of statutory provisions with disproportionate high penal- ties. Such penalties might infringe Article 1 of the first protocol of the European Convention of Human Rights (ECHR), which was incorporated into UK domestic legislation in 1998.44

In 2001 the problem of disproportionate punishment forced the Court of Appeal to a qualified application of the defence in Al-Kishtaini v. Shanshal.45 The claimant sought to recover payments made under a contract that breached statutory provisions prohibiting transactions with persons normally resident in Iraq following its invasion in Kuwait. It was alleged that the rejection of his claim would amount to a depriva- tion of his right to possession of the money claimed and therefore infringe the ECHR. Nevertheless, in this particular case the Court of Appeal refused the recovery and held that the denial of the plaintiff’s claim is compatible with the Convention because of the public interest exception within Article 1 of the first protocol. This exception can be successfully invoked as long as there is a ‘fair balance’ between the demands of general interests and the requirements of the protection of an indi- vidual’s fundamental rights.46 In the particular case the court considered the public interest not to undermine the statutory purpose to be very strong, whereas the claim- ant was aware of the illegality involved and nevertheless entered into the agreement. However, the court expressively points out, that it may be insufficient merely to say that the defence of illegality is rooted in the public interest, but that there is a need for fair balance of policies involved. According to this, in future English courts will

39Tinsley v. Milligan [1992] Ch. 310.

40Illegal Transactions: The Effect of Illegality on Contracts and Trusts, Law Com CP 154 (1999) pp. 89 et seq.

41P. Devlin in St. John Shipping Corp. v. Joseph Rank Ltd. [1957] 1 Q.B. 267.

42J. Shand, ‘Unblinkering the Unruly Horse: Public Policy in the Law of Restitution’, C.L.J. 30 (1972) 144, 150; R. Merkin, ‘Restitution by withdrawal from executory illegal Contracts’, (1981) 97 L.Q.R. 420, 444; P. Jaffey, The Nature and Scope of Restitution – Vitated Transfers, Imputed Contracts and Dis- gorgement (2000) pp. 222 et seq.

43Illegal Transactions: The Effect of Illegality on Contracts and Trusts, Law Com. C.P. 154 (1999) p. 90.

44Illegal Transactions: The Effect of Illegality on Contracts and Trusts, Law Com. C.P. 154 (1999) p. 10.

45[2001] EWCA Civ 264, [2001] 2 All E.R. (Comm) 601.

46[2001] EWCA Civ 264, [2001] 2 All ER (Comm) 601.




not regard

illegality as a defence to restitutionary claims where the plaintiff’s

loss would be disproportionate to his offence.


However, in case of serious infringements of law the question remains, if the forfei- ture of the claim is a suitable instrument to punish the claimant. If the claimant has committed an offence he is liable to prosecution. Where a criminal punishment is imposed, the refusal of restitutionary claims to recover benefits transferred inevita- bly leads to a double-punishment of the plaintiff.47 Where the criminal punishment is reasonable and proportionate to the offence, the dismissal of the claimants rightful claim means to impose an excessive sentence. According to this there is serious doubt if the forfeiture of restitutionary claims is a reasonable instrument of punish- ment.

Furthermore, in each case where the plaintiff’s claim for recovery is barred by ille- gality, the denial of restitution leaves a large windfall to the defendant. The courts regard this as nothing but an unwelcome, but necessary side effect of the present law and invoke the maxim: ‘Let the estate lie, where it falls’.48 One is well aware of the fact that this means an unjust enrichment of the defendant. Sometimes the courts overriding duty to public interests is pleaded, which is regarded to supersede the interests of the parties in the litigation.49 The classical statement is Lord Mansfield’s:

It is not for (the defendant’s) sake ... that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has ad- vantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may so say.50

Nevertheless, the unjust enrichment of the defendant at the claimant’s expense is found to be gross unfair by many commentators.51 The imposition of punishment on the claimant, who participated in an illegal agreement, rewards a benefit to the de- fendant of equal guilt.52 Even worse, in some cases like Parkinson v. College of Ambulance Ltd, the plaintiff’s fraudulent misrepresentation is rewarded.53 In any case, the defence of illegality to restitutionary claims leaves the defendant the pos- session of money, goods or land to which, apart from the unlawful and void con- tract, he has no right whatsoever, which allows him to reap the fruits of his own turpitude.54 As a result, barring the claimant’s lawful claim is no suitable instrument to punish the parties of an illegal agreement, since the punishment of one party ne- cessitates the reward of the other.

47St. John Shipping Corporation v. Joseph Rank Ltd. [1957] 1 Q. B. 267 (P. Devlin)

48Muckleston v. Brown [1801] 6 Ves. Jun. 52; see also Tinsley v. Milligan [1993] 3 All E.R. 65.

49Birkett v. Acorn Business Machines Ltd. [1999] 2 All E.R. (Comm) 429.

50Holman v. Johnson [1775] 1 Cowp. 341.

51See also J. Hutchinson in Thackwell v. Barclays Bank plc. [1986] 1 All E.R. 676.

52P. Jaffey, The Nature and Scope of Restitution – Vitated Transfers, Imputed Contracts and Disgorge- ment (2000) p. 223.

53See R. Merkin, ‘Restitution by Withdrawl from executory illegal Contracts’, (1981) 97 L.Q.R. 420,

54J. K. Grodecki, ‘In pari delicto potior est conditio defendentis’, (1955) 71 L.Q.R 254, 266.



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of unlawful conduct and reinterpretation of the defence

As it was shown, the traditional arguments in favour of a strict illegality defence to restitutionary claims are not convincing, which necessitates a rethinking of policies involved. In this situation a comparative analysis of the effects of illegality in other countries is of interest. Most of the European private laws have adopted a defence of illegality, which founds on the roman condictio ob turpem vel iniustam causam. In Roman law it was held that, when both parties, giver and recipient, are tainted by illegality, the possessor is stronger and no recovery is allowed even though the pay- ment was made under a stipulation.55 For example, where money is given to pervert a judgement, recovery was excluded.56 Nevertheless the roman defence of illegality was not regarded as a strict rule. Wherever recovery appeared to be more consonant with justice and policy, restitution was allowed.57 Thus, the bribing of a recruiting agent to escape enrolment was recoverable; so was the money given to somebody to stop him revealing a theft.58 In fact the scope and limits of this maxim were quite uncertain.

Modern legal systems give rather different interpretations of the roman law. How- ever, the legal situation in Germany is very similar to the English law. According to § 817 BGB benefits transferred under an infringement of law are not recoverable. Similar to the English state of discussion the rigidity of this rule is criticised by many commentators and handled very restrictively by German courts.59 In contrast, under modern Austrian law illegality is no strict defence to restitutionary claims. Therefore a comparative analysis of Austrian law can show possible effects of a discretionary approach towards illegality in the law of restitution.

Unlike the English and German law, the Austrian law of restitution does not know a general defence of illegality.60 Nevertheless, the Roman condictio ob turpem vel iniustam causam is part of the law of mandate. § 1174 of the Austrian Civil Code (ABGB) provides that:

Benefits transferred knowingly for the achievement of an impossible or unlawful purpose cannot be recovered. In which cases such benefits forfeit to the state is provided in Public and Criminal Law.

By the introduction of the Austrian Civil Code in 1811 this rule was explained by the turpitude of the plaintiff’s conduct, which bars him from legal assistance.61 At the beginning of the 20th century, some commentators still understood § 1174 ABGB as a general defence to restitutionary claims for the recovery of benefits transferred under illegal contracts.62 Similar to the position in England, it was said

55Dig. 12. 5. 8.

56Dig. 12. 5. 3.

57See also examples at J. K. Grodecki, ‘In pari delicto potior est conditio defendentis’ (1955) 71 L.Q.R. 254, 256.

58C. 4. 7. 3; Dig. 12. 5. 5.

59For further details see H. Thomas in O. Palandt (ed.), Bürgerliches Gesetzbuch, 63rd ed. (2004) § 817 para. 20.

60See § 817 German Civil Code (BGB).

61F. Zeiller, Commentar über das Allgemeine Bürgerlich Gesetzbuch, vol. 3/2 (1811) p. 525.

62L. Pfaff & J. Krainz, System des österreichischen allgemeinen Privatrechts, 3rd ed., vol. 2 (1900) § 415.




that nobody shall be entitled to found a claim on his own unlawful conduct and punishment was regarded to be one of the main policies behind this provision.63 Thus, for example, these commentators did not allow a claim where the defendant denied to pay for goods which were delivered under an illegal contract.64

Nowadays § 1174 ABGB is understood in a very different manner. The old interpre- tation has been abandoned in Austrian law for two reasons. First, a rigid application of the defence would leave the defendant an unjust enrichment at the claimant’s expense.65 The second reason for a different interpretation of § 1174 ABGB was that the punishment of the plaintiff could easily be disproportionate to his offence.66 Obviously, the situation was very similar to the current discussion in England. In Austria these arguments have led to a completely different interpretation of the de- fence.

The only reason to refuse a restitutionary claim under § 1174 ABGB is now re- garded to be the prevention of putting pressure on the defendant to engage in illegal conduct.67 It is held, that allowing the recovery of benefits transferred might encour- age the recipient to commit a crime or civil wrong.68 Especially where high sums are involved, the risk of recovery is likely to put pressure on the defendant. To allow such a claim would help the plaintiff to enforce the commission of a wrong. This understanding is not alien to English law. Commentators in England as well have pointed out the need for depriving the plaintiff of a weapon for compelling the com- pletion of the illegal plan, and that the allowance to retain the money works as an incentive to the defendant for not performing the illegal act.69

This understanding necessitates a restrictive reinterpretation of the doctrine accord- ing to the purpose of the defence. Illegality is no more a strict defence to restitution- ary claims. The defence only applies where benefits are transferred as an incentive for the commission of a wrong. Thus, like in English law, payments for the commis- sion of a murder or bribes are not recoverable under Austrian Law, because this would indirectly enforce the carrying out of a crime or a civil wrong.

In contrast, the defence does not apply to benefits transferred under illegal agree- ments, where the recovery does not encourage illegal conduct.70 Therefore, in many cases English and Austrian Courts reach rather different results. For example, the Austrian Supreme Court used to grant a claim for the recovery of money transferred in order to be exchanged under an illegal foreign exchange deal.71 This is in contrast with the decision of the King’s Bench Division in Bigos v. Busted.72 From an Aus-

63H. Swoboda in H. Klang, Kommentar zum ABGB, 1st ed., vol. 3 (1932) p. 443.

64H. Swoboda in H. Klang, Kommentar zum ABGB, 1st ed., vol. 3 (1932) p. 447.

65W. Wilburg in H. Klang (ed.), Kommentar zum ABGB, V, 2nd ed. (1952) p. 471.

66W. Wilburg in H. Klang (ed.), Kommentar zum ABGB, V, 2nd ed. (1952) p. 471.

67R. Rebhahn in M. Schwimann (ed.), Kommentar zum ABGB, 2nd ed., vol. 5 (1997) § 1174 para. 3; P. Rummel in P. Rummel (ed.), Kommentar zum ABGB, 3rd ed., vol. 1 (2000) § 1174 para. 2.

68OGH 20.12.1990 5 Ob 590/90.

69P. Birks, Introduction to the Law of Restitution (1985) pp. 300 and 427; A. Burrows, The Law of Restitution, 2nd ed. (2002) p. 572.

70See for example OGH 28.6.1909 GlUNF 4692, 18.9.1930 ZBl 1930/352 and 8.9.1955 EvBl 1956/22.

71OGH 13.12.1950 3 Ob 677/50; 2.7.1952 5 Ob 500/52.

72(1951) All E.R. 92.



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trian point of view, in these cases, recovery does not put pressure on the defendant to carry out the unlawful act, because even if he decides to fulfil the agreement he would have to deliver the promised currency. On the other hand, the denial of relief is regarded to impose disproportionate punishment upon the plaintiff.

The absence of any punishment policy in Austrian law is most obvious where the Austrian Supreme Court allowed the recovery of money transferred to an agent for the purpose of bribing a third party.73 The defence does not apply because there is no incentive for the plaintiff’s commission of the wrong, and the recovery does not put pressure on the defendant since, even if he decided to fulfil his promise, he would have to give away the money received. Of course, from the English point of view, this decision clearly contradicts the maxim that no court shall allow an action, which is based on the unlawful conduct of the claimant. On the other hand, the denial of relief would leave the defendant a large windfall, who participated in the unlawful agreement and has no right to retain the benefit.

The prevailing view in Austrian law also means, that recovery is allowed where the illegal purpose cannot be carried out by the defendant. In these cases, there is no risk of compelling the commission of a wrong, since it cannot be carried out anyway.74 Punishment is not regarded to be a sufficient justification for dismissing the claim. According to this, Parkinson v. College of Ambulance Ltd., where the secretary of the defendant charity fraudulently misrepresented his ability to arrange a knight- hood, would probably have been decided in a different way in Austria.75

Austrian courts have not decided upon cases of withdrawal from illegal transactions as yet. Nevertheless, the English maxim of voluntary withdrawal from illegal trans- actions is known in Austrian commentary literature and considered to be a useful and necessary addition to Austrian Law.76 Since the allowance of recovery in these cases encourages the plaintiff to withdraw and deters the commission of a wrong, Austrian courts would probably adopt the English rule and grant relief.

Reference to the purpose of the law

If illegality is no strict defence to restitutionary claims, the question remains whether or not benefits transferred under an illegal agreement are recoverable. As it turns out, cases where illegality is involved are rather different. According to this, it seems unlikely that a single rule can provide adequate decisions in any case. Instead, whether relief shall be granted or not depends on the particular case and the purpose of the law which renders the transaction illegal.

Decisions with reference to the law which renders the transaction illegal are not new to English courts. Where statutory provisions are infringed, English courts have already broken the strict boundaries of the in pari delicto defence and grant restitu- tionary claims with regard to the policy of the statute. Courts held that the parties are

73OGH 28.6.1909 GlUNF 4692; 11.6.1918 ZBl 1919/259; 13.3.1951 EvBl 1951/273.

74W. Wilburg in H. Klang (ed.), Kommentar zum ABGB, 2nd ed., vol. 5 (1952) p. 479.

75(1925) 2 KB 1.

76See W. Wilburg in H. Klang (ed.), Kommentar zum ABGB, 2nd ed., vol. 5 (1952) p. 480.




not in

pari delicto where the plaintiff belongs to that class

of persons, which

the statute intents to protect.77 Thus, the decision whether or not relief is granted depends on the intent and policy of the law causing illegality. For example, in Green v. Portsmouth Stadium Ltd. a bookmaker brought a claim for the recovery of charges paid in excess of the amount allowed by the Betting and Lotteries Act.78 The Court of Appeal dismissed the action because of the act clearly not having any intention to protect bookmakers. On the other hand, in Kiriri Cotton Co. Ltd. v. Dewani the tenant was allowed to recover the payment of premiums contrary to the provision of the landlord and tenant law, because the intent of the statute was regarded as protect- ing tenants.79 In fact, there is no reason why the application of this discretionary approach should be restricted to statutory law. Even where common law or public policy has been violated a decision with regard to the purpose of the rule, which has been infringed enables the court to give a reasonable and fair decision to the particu- lar case.

Possible effects of this approach can be seen in Austrian law, where courts decide by reference to the policy of the statute, whether or not a restitutionary claim suc- ceeds.80 In accordance with English law, tenants are allowed to recover the payment of premiums contrary to the provision of the landlord and tenant law, because the intent of the statute is to protect tenants looking for accommodation from exploita- tion by landlords.81 Denying relief would frustrate the intent of the statute, whereas restitution deprives the landlord of the profits made by the illegal transfer and rein- stalls a fair balance between the parties.

In fact, there are many cases, where English and Austrian law reach the same re- sults. For example, in a recent case the plaintiff had contracted to procure foreign workers without labour permit to the defendant company, which were illegally em- ploying them. The Austrian Supreme Court refused any contractual or restitutionary claim for a reasonable payment of the services rendered, because allowing remu- neration for the illegal performance would frustrate the intent of the statutory provi- sions.82 This is in accordance with English law: In Mohamed v. Alaga & Co. a pro- fessional translator had an agreement with a law firm to introduce asylum seekers and provide translating service in return for half of the fee received from the Legal Aid Board, which is contrary to the Solicitors’ Practice Rules. The Court of Appeal did not allow any claim for the payment of services rendered, because this would contradict and circumvent the law.83

Nevertheless, there are quite different results, for example, English courts do not allow a Solicitor who enters into an illegal agreement, whereby his client agrees to pay a percentage of the amount recovered, a claim for the payment of his services

77Kiriri Cotton Co. Ltd. v. Dewani [1960] 1 All E.R. 177.

78[1953] 2 Q.B. 190.

79[1960] 1 All E.R. 177.

80OGH 23.3.1983 RdW 1984, 9; 28.6.1989 SZ 62/123 = EvBl 1990/13; 7.6.1990 NZ 1991, 32 = JBl 1991, 44.

81OGH 18.9.1952 EvBl 1952 and 30.6.1954 Arb 6018; P. Rummel, Kondiktion bei verbotenen und sittenwidrigen Geschäften, ÖJZ 1978, 253.

82OGH 25.4.2001 9 Ob 83/01y.

83Mohamed v. Alaga & Co. [1999] 3 All E.R. 699.



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rendered. It was held that a restitutionary claim must fail because otherwise the solicitor would never be in a worse position financially for the illegality and could always recover as much as an innocent solicitor.84 Under Austrian Law champertous agreements are illegal, too, but the punishment of the claimant alone is not regarded to be a sufficient reason for the denial of restitutionary claims. At least where the proceeding was successful, Austrian courts grant a restitutionary claim for a reason- able payment of services rendered.85 The claim can be justified with regard to the intent of the statute to protect clients from exploitation by disproportionate claims, which means that the client’s obligation to pay a reasonable amount for services rendered does not frustrate the statute.

Under Austrian Law, the same approach applies where the illegality is recognised as public policy. A recent case dealt with a claim for recovery of payments from a fiancé’s father to the bride’s father for the release of his daughter. Under Romany tradition such payments are understood as a compensation for the daughter’s future working not for her father’s but for her husband’s family. After a few weeks the woman left her husband. Because of the infringement of the freedom of the bride’s choice, such an agreement is against public policy under Austrian Law. Neverthe- less, the Austrian Supreme Court granted relief with regard to the policy involved. It was held that leaving the bride’s father the benefit might encourage him to enforce the marriage by putting pressure on his daughter’s right of free will.86

It should be noted that different results in English and Austrian law are also found upon the different approaches to the effects of illegality involved to the enforceabil- ity of contracts. For example, the Austrian Supreme Court allows the plaintiff a claim for specific performance despite the parties agreement to defraud the fiscal authority by indicating deflated prices.87 The court held that the contract itself is lawful and does not infringe tax law. Only the signing of false documents as a fiscal fraud is illegal and subject to penalty, but under Austrian law this does not taint the validity of the obligation between the parties. In contrast, English courts refuse the recovery of payments or services rendered under contracts which include the signing of false documents to defraud third parties, even if there is a total failure of consid- eration.88 The abandoning of punitive policies in the law of restitution would proba- bly lead to different results in England, since the obligation to pay for services ren- dered does not frustrate the aims of tax law. The parties are liable to prosecution anyway. Furthermore, leaving the defendant the money paid would award him for his participation in fraud. Thus, there is no serious reason why a claim for services rendered under total failure of consideration should fail.

84Wild v. Simpson [1919] 2 K.B. 544; similar Awwad v. Geraghty & Co. [2000] 1 All E.R. 608. These results are criticised by G. Virgo, ‘The Effect of Illegality on Claims for Restitution in English Law’, in W. Swadling (ed.), The Limits of Restittutionary Claims: A Comparative Analysis (1997) p. 141, 184.

85§ 879 (2) ABGB; OGH 5.10. 1966 SZ 39/160 = RZ 1967, 56; otherwise for example Awwad v. Ger-

aghty & Co. [2000] 1 All E.R. 608.

86OGH 11.6.2002 5 Ob 129/02k.

87OGH 11.7.1951 SZ 24/183; 3.4.1975 SZ 48/36; see also G. Iro, Zivilrechtliche Probleme bei Verträgen mit Schwarzarbeitern, JBl 1987, 1.

88Taylor v. Bhail [1995] 50 Con. L.R. 70; Birkett v. Acorn Business Machines Ltd.. [1999] 2 All E.R. (Comm.) 429.





There is broad consent that a strict application of the illegality defence leads to harsh and unfair results. A reform of the law requires a questioning of the policies behind the traditional rules. In the article it was shown that arguments given in favour of a rigid illegality defence to restitutionary claims are not convincing. A party who took part in an illegal agreement should not forfeit legal protection. Furthermore, the refusal of relief is no suitable instrument to punish a party for his or her taking part in an illegal agreement, since the dismissal of the rightful claim leaves a large wind- fall to the defendant of equal guilt. Therefore a claimant who participated in an ille- gal agreement should not necessarily be barred from recovery where he has a lawful ground for restitution.

However, there is a principle that recovery must not encourage illegal conduct. Where benefits are given as an incentive for the commission of a crime or civil wrong, recovery must be denied, since this claim would enable the giver to put pres- sure on the recipient to engage in illegal conduct. This seems to be the core of the defence of illegality, where any claim must fail. Furthermore, there is a second rule: relief must be denied where the recovery of the benefit would frustrate the purpose of law which renders the transaction illegal. In any other case illegality should not be a defence to restitutionary claims.

It has been shown that sometimes recovery can promote the purpose of the rule which was infringed, whereas the denial of relief is likely to frustrate the law. Courts will have to find out in which cases the consequences of refusing relief meet the aims of law where not. Taking into consideration the purpose of the law which ren- ders the transaction illegal provides the necessary flexibility to give effect to the policy objectives behind the illegality. This gives the court the power to find a rea- sonable and fair solution in the particular case.

* * *





Denzil Lush

On 1 April, section 2(1) of the Damages Act 1996, as amended by the Courts Act 2003, came into force. This enables the court to impose an order for periodical payments in respect of future pecuniary losses without the consent of the parties, which is precisely what Mr Justice Mitting did on 20 April at Leeds, in Godbald v Mahmood1. He ordered the defendant to pay the claimant RPI-linked sums of £50,000 a year until October 2009, and £61,000 a year thereafter for the rest of the claimant’s life.

The Civil Procedure Rules set out the factors to which the court should have regard when making a periodical payments order, and these include the form of award preferred by the claimant and the reasons for that preference. This article looks at the take-up rate for periodical payments during the three months immediately preceding 1 April 2005, and examines why some claimants prefer a conventional lump sum to periodical payments.

Damages awards and the Court of Protection

The Court of Protection is an office of the Supreme Court. Its powers are set out in Part VII - sections 93 to 113 - of the Mental Health Act 1983, and its function is to protect and manage the property and financial affairs of people who are incapable, by reason of mental disorder, of managing and administering their own property and affairs. Such persons are technically known as ‘patients’. The court looks after about 25,000 patients, and they fall into four distinct groups: the elderly mentally infirm; people with mainstream psychiatric illnesses; people with intellectual disabilities; and people with acquired brain damage, who have been awarded damages for personal injury.

The Court of Protection deals with approximately 400 new damages awards each year. The figures for 2003, which appear in the introduction to Facts & Figures 2004, compiled by the Professional Negligence Bar Association, show that roughly 50% of these are road traffic accidents, 30% are clinical negligence cases, and the remaining 20% are a mixture of work injuries, criminal assaults, occupier’s liability cases, and Fatal Accident Act dependency claims.

Master of the Court of Protection of England and Wales (Since 1996). This article was originally presented as a paper at the London Common Law and Commercial Bar Association’s seminar on structured settlements and periodical payments on 19 April 2005.

1 Unreported.



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The total value of these awards is just over half a billion pounds a year. The average road traffic accident case involving a Court of Protection patient settles at about £925,000, and the average clinical negligence award tends to settle at around £2,500,000. The largest award managed by the court, which was also the British record for damages for personal injury, was the £12,000,000 awarded in October 2002 in Parkin v. Bromley Hospitals NHS Trust. Of this award, £7,000,000 was received as a lump sum, and the remaining £5,000,000 was used to generate a tax- free, annual income of £250,000.

Cases that settled on a periodical payments basis during the three months from 1 January 2005 to 31 March 2005

During the first three months of 2005 the Court of Protection approved an order for periodical payments in nine out of a total of thirty-one cases involving the final settlement of a clinical negligence claim. In each case the annual payments were index-linked by reference to the Retail Prices Index. They were:

Bosano v Barts and Royal London

Lump sum of £450,000

Hospital NHS Trust


Annual payments of £100,000




(Conventional offer: £950,000)

Dhillon v Royal Free Hampstead

Lump sum of £1,000,000.

NHS Trust



Annual payments of




o £42,000 to age 8




o £90,000 from 8 to 21





£140,000 thereafter




(Conventional offer: £4,000,000)

Dibdin v St Helier NHS Trust

Lump sum of £800,000




Annual payments of




o £20,000 to age 19





£40,000 thereafter




(Conventional offer: £2,400,000)

Eyre v Avon, Gloucestershire and

Lump sum of £1,100,000




Annual payments of




o £90,000 to age 19





£122,000 thereafter




(Conventional offer: £3,400,000)

Garner v



Lump sum of £1,000,000

Strategic Health Authority

Annual payments of £25,500




(Conventional offer: £1,800,000)




Green v North East Lincolnshire

Lump sum of £965,000


NHS Trust


Annual payments of




o £33,000 to age 19





£45,000 thereafter




(Conventional offer £2,300,000)


Gregory v Trent Strategic Health

Lump sum of £500,000




Annual payments of




o £7,000 to age 19





£20,000 thereafter




(Conventional offer: £1,000,000)


Poole v North Bristol NHS Trust

Lump sum of £1,540,000




Annual payments of




o £42,000 to age 18




o £83,000 from 18 to 21





£120,000 thereafter




(Conventional offer: £2,800,000)


Sales v Maidstone and Tunbridge

Lump sum of £1,000,000


Wells NHS Trust


Annual payments of




o £65,000 to age 19 and £128,000 thereafter



(Conventional offer: £2,900,000)


Nine periodical payments orders out of a possible thirty-one may seem rather a disappointing take-up rate however the other cases included nine where the award was under £1,000,000. Periodical payments were rejected in all three of the largest settlements, where the awards exceeded £4,500,000.

Because of prevailing market conditions, very few cases other than clinical negligence claims have settled by way of a structured settlement, or periodical payments. The two exceptions involving Court of Protection patients during the period from 1 January 2005 to 31 March 2005 were:

Summers v Bashford. Mr Summers was born 1961, and suffered a work injury in 1995 when he fell through a roof. Liability was compromised on the basis of 15% contributory negligence. The claim settled on 4 February 2005 for £2,700,000, of which £500,000 was used to purchase an annuity from the Pension Annuity Friendly Society, yielding £25,695 a year, rising at a rate of 2.5% compound, and payable for a minimum of 10 years.

Lindsay v Oswald. Mrs Lindsay, who was born 1968, was injured in a road traffic accident in 2000. There was 25% contributory negligence. The claim settled in February 2005 for £2,250,000, from which two structured settlement annuities were purchased, namely:



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1)£400,000 in a Scottish Widows annuity, RPI-linked, yielding £9,960 a year, and guaranteed for 15 years; and

2)£400,000 in a Pension Annuity Friendly Society annuity, initially yielding £13,396 a year, increasing annually by 2.5%, and guaranteed for 10 years.

Belief that a conventional lump sum will outperform periodical payments

A discernable trend in recent months in cases where claims have settled on a conventional basis, rather than by acceptance of an offer of periodical payments, has been the predisposition of some solicitors, counsel and specialist financial advisers towards a conventional lump sum award in the belief that, if it is prudently invested, it is likely to outperform the periodical payments.

A good illustration of the long-term growth of a segregated, activelymanaged portfolio is Lim Po Choo v. Camden and Islington Area Health Authority2. This was the first damages award to reach around £250,000, although the House of Lords subsequently reduced it to £229,000. Dr Lim Po Choo was born in October 1936 in Malaysia, and qualified as a psychiatrist. She suffered devastating brain damage during a minor gynaecological operation at the Elizabeth Garrett Anderson Hospital, St Pancras, in February 1973. She is still alive and living in a nursing home in north London. Her nursing home fees are £65,000 a year, and have been an equivalent sum for the last thirty years or so. Her investments, which have been continuously managed by the stockbrokers, Gerrard and its predecessors, are currently worth £1,379,000. Of course, there are cases where the opposite has occurred; where the fund has diminished in value, or been entirely exhausted.

The following are examples of clinical negligence cases in which periodical payments have been rejected by the claimants and their advisers during the first quarter of 2005.

Burrows v Airedale NHS Trust involved a birth injury in 1996. Liability had been compromised in April 2004 on the basis that the claimant would recover 60% of damages to be assessed. The NHS offered a lump sum of £675,540 (of which £500,00 had already been received in interim payments, and £160,000 was payable in respect of gratuitous past care) plus RPI-linked annual payments of £56,000 to age 19 and £67,380 thereafter. This award was valued in conventional terms at £2,746,000. It was decided to settle for the conventional lump sum, mainly because the contingency fund would have been only £15,000.

In Haran v Heatherwood and Wexham Park Hospitals NHS Trust, which involved a birth injury in 1994, the specialist financial adviser recommended acceptance of a lump sum of £486,000 (after interim payments of £1,000,000) and periodical payments of £33,000 to age 16, £41,000 from 16 to 19, and £97,500 thereafter. However, the patient’s receiver – a partner in one of the leading claimant personal

2 (1979) 1 QB 196, varied [1980] AC 174.




injury firms in the country – preferred to take a conventional lump sum of £3,800,000, because of his conviction that a lump sum provides more scope for growth. The claimant’s parents agreed with him.

Peters v South West Peninsula Health Authority arose from a birth injury in 1981. The financial adviser recommended rejection of the NHS’s offer to settle for a lump sum of £550,000 (less £450,000 interim payment and £25,000 for the purchase of a suitable vehicle, which would have left a contingency fund of £75,000), and RPI- linked annual payments of £27,500. Instead, the case settled on a conventional lump sum basis for £1,600,000.

Chilcott v West Yorkshire Strategic Health Authority involved a birth injury in 1981. £4,850,000 was offered on a conventional lump sum basis (worth £5,700,000 on a full liability basis), of which £354,000 was payable to the parents in respect of their gratuitous past care over a period of twenty-four years. The NHS made an offer to structure the award on the basis of a lump sum of £1,500,000 plus RPI-linked annual payments of £165,000, but this was rejected on the grounds that the claimant’s care costs were very high, £190,000 a year. His actual annual requirements were £223,000 a year, and the annual payments offered by the NHS fell well below these requirements.

The size of the contingency fund

In some of the examples given above there were concerns about the adequacy of the contingency fund, or capital reserve. On 3 April 2005 I received the following e- mail:

‘We act for [the claimant] in an action in the Queen’s Bench Division of the High Court of Justice against Heatherwood and Wexham Park Hospitals NHS Trust’.

‘Liability has been ordered in the proportion of 95% of the full amount of the damages.’

‘We are dealing with quantum of damage. ’

‘We would be most grateful if you would let us have any views that you have on the amount of contingency sums in relation to structured settlements and as to whether you have a rule of thumb for those contingency sums.’

I confirmed that the Court of Protection has no specific rule of thumb regarding the size of the contingency fund, and would not be so rash as to impose one. The optimum amount to be set aside depends on the particular circumstances of each individual case. We have a few cases – but only a few where there is no contingency fund at all, just periodical payments to cover the cost of care in a nursing home or



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other institutional setting. However, as the case Beattie v Secretary of State for Social Security illustrates, it is unwise to dispense with a contingency fund entirely.

The Retail Prices Index has failed to keep pace with care cost inflation

Charlie Beattie was born in 1970. On 19 July 1988, shortly before his eighteenth birthday, he was knocked off his motorbike near Cockermouth, Cumbria, when a car driven in the opposite direction skidded on to his side of the road and collided with him head-on. The case settled in October 1992 for £1,530,000, which was made up as follows:

Payments to parents for past care


Interim payments


Contingency fund in the Court of Protection


Structured sum






The structured settlement annuity, which incidentally, was the first to reach and exceed £1,000,000,was taken out with Cigna Insurance Company of Europe, was RPI-linked, and was guaranteed for a minimum of ten years. The initial yield was £64,500. It is now yielding nearly £87,000. A house was bought for £215,000 from the interim payments.

Although the annuity had risen in line with the Retail Prices Index, which increased by about 35% between 1992 and 2004, it had failed to keep up with Mr Beattie’s care costs, which have risen in line with the Average Earnings Index, and have grown by nearly 60% during the same period. He claimed income support to cover the shortfall, but in September 1999 a Social Security Commissioner held that he was not entitled to income support after the end of October 1992, because from then onwards his income exceeded the applicable amount. In 2001, the Court of Appeal dismissed an appeal from the Commissioner’s decision.3 The effect of this decision was subsequently reversed by the Social Security Amendment (Personal Injury Payments) Regulations 2002 (SI 2002/2442).

It is an open question whether a conventional lump sum award or a more substantial contingency fund would have fared any better. Certainly, there was no question of Mr Beattie getting into debt to pay his care costs. He was simply unable to afford the care package he really needed.

Accommodation costs can erode the contingency fund

There is a risk when an expensive property is purchased from an interim payment that the claimant could die unexpectedly and the value of the interim payment could

3 Beattie v Secretary of State for Social Security (2001) Lloyds Rep Med 297.




then exceed the residual value of the claim. In one case the NHS reluctantly obtained an order for the sale of the property in which the deceased claimant’s family lived. Twice recently a purchase has been effected on the basis that, for the time being, the property belongs to the NHS and that it will not be transferred to the claimant until the claim has been finalised.

One of the reasons why there has been a relatively low take-up of periodical payments orders in clinical negligence cases is that the lump sum the NHS has offered is insufficient to meet the claimant’s and his or her family’s accommodation expectations – which should be distinguished from their actual needs or requirements.

Wood v Wirral Hospitals NHS Trust was a case that did settle on a periodical payments basis, but it illustrates the problems that can arise in connection with the purchase of suitable alternative accommodation. This was a claim for a birth injury in 1998, which settled in November 2004 by way of a lump sum of £575,000 (less £80,000 interim payments and £70,000 for past care) and a tax-free, index-linked annual income of £92,000. Shortly after settlement, I was asked to approve in principle the purchase of a property for around £500,000. After deducting the interim payment and the parents’ gratuitous past care award, the contingency fund was only £405,000. The solicitors said, ‘This is not a case of Mr and Mrs Wood wishing to buy a ‘grand mansion’, but simply something that will suit [their daughter]. They have done a full property search and all properties in the area that are suitable for her needs are over £500,000.’ In fact, a mortgage had to be obtained and funded from the annual payments.

The claimant’s expert had estimated her life expectancy to age 14, the defendant’s expert to age 10. As a courtesy to the solicitors involved, I suggested they warn the claimant’s parents that, if, as was likely, the claimant were to die prematurely the family would have an Inheritance Tax problem. So far as the value of the property exceeds the nil rate band of £275,000, tax is payable on the excess at a rate of 40%. Unwittingly my warning prompted an application for a gift to mitigate Inheritance Tax that raised some interesting policy issues. However, the claimant died before they could be resolved, a few days before her seventh birthday.

The availability of suitable accommodation is basically a postcode lottery. The Wood family had difficulties finding a property under £500,000 in The Wirral, where the average house price is £293,128, but only a few miles away in Birkenhead the average house costs £114,942, 60% less. This problem is particularly acute in some London boroughs and in the Home Counties, and is one of the consequences of the formula laid down by the Court of Appeal in Roberts v Johnstone4 for the recovery of the cost of purchasing and adapting suitable alternative accommodation necessitated by the claimant’s injuries.

4 (1989) QB 878.



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The effect on the family of the premature death of the claimant

When advocating periodical payments in preference to a lump sum it is usually suggested that if the claimant dies prematurely there will be no windfall for his or her estate. The underlying assumption is that this would be a desirable, just and equitable outcome. For example, the Lord Chancellor’s Department said in its consultation paper, Damages for future loss: giving the courts power to order periodical payments for future loss and care costs in personal injury cases (March 2002):

‘If a claimant dies much earlier than expected, a lump sum award will provide a windfall for the heirs of that claimant, and it will be they who benefit most from the award. It is sometimes argued that this does not matter because the lump sum payment still serves to penalise the defendant. But the purpose of tort law in these cases is to compensate claimants for loss, in particular by restoring them, so far as possible, to the financial position they enjoyed before the accident: it is not to punish defendants or provide heirs of the deceased with a financial gain beyond any compensation that was awarded to them by the court. And the cost of any ‘windfall’ or ‘profit’ is ultimately borne, for example, by other insurance premium payers or by users of the NHS.’

The following extract, from a recent advice on settlement written by a leading personal injury silk, provides a slightly different, more humane and maybe more realistic perspective on the effect of the claimant’s premature death on his or her family. In this case the claimant’s mother and litigation friend preferred to accept a conventional lump sum of £2,850,000, and this was one of her reasons for making that decision:

‘Although she has not herself expressed a wish in these terms, it occurs to us as advisers on his behalf, to suggest that if, indeed, there is (as there appears to be) a very significant risk of early mortality, Jack would, had he been able to do so, have expressed the wish that he would leave the house, and funds to maintain it, to his mother and siblings, and although making provision for leaving an estate upon death is not, and could not reasonably be, one of the nominated purposes of any scheme of compensation (which must address directly the loss suffered by the injured party, on the restitutionary principle) nonetheless it may be said to satisfy better a social need of the claimant in the particular circumstances of his case. Periodical payments would cease on his death. A lump sum is likely to leave an inheritance.’

I am inclined to agree. The argument about a potential windfall for undeserving beneficiaries tends to be overstated. In most cases, one or both of the claimant’s parents have given up work to care for their child and may be the primary carers for many years. They become dependent on the damages award and the child indirectly




assumes responsibility for their maintenance.5 There is often little prospect of their returning to the labour market if the child dies prematurely and they could face hardship when the periodical payments cease on the claimant’s death and their income stream vanishes instantaneously.

I mentioned earlier the case of Wood v Wirral Hospitals NHS Trust, where the claimant died a few days before her seventh birthday. With hindsight (and anyone can be wise after the event), it would have been preferable from her parents’ perspective to have accepted a conventional lump sum instead of opting for periodical payments. Her premature death has left them with a property they can no longer afford to live in. They have a mortgage of £100,000, no means to pay it, and an Inheritance Tax bill of £50,000.

Concerns about an ongoing relationship with the tortfeasor

Some people have concerns about having an ongoing relationship with the person or organisation that caused the injuries in the first place. The following extract is from an e-mail I received on 14 April 2005 from a solicitor who was acting in a clinical negligence claim against the Basildon and Thurrock General Hospitals NHS Trust. An offer had been made of a lump sum of £700,000 and annual payments of £50,000 to age 11, £90,000 between 11 and 19and £145,000 thereafter. One of the NHS’s requirements when it makes periodical payments is that there should proof once a year that the claimant is still alive:

‘Periodic payments are particularly helpful in this case where the claimant’s legal team are fairly convinced that the life expectancy evidence on both sides is flawed and [the claimant] will live a great deal longer than experts suggest - devoted care of parents, general excellent health, outdated research and modern active treatments for children with cerebral palsy to name but a few reasons.

However the parents have raised concerns about the practicalities of the ongoing payments.

Mum in particular is phobic about the hospital and will not go within a 5 mile radius - the family are moving from Essex to avoid ever having to attend Basildon Hospital in an emergency. She hates the idea that she will have to deal with the trust forever re these payments.

I am concerned that, whilst the lump sum will of course be paid into the Court of Protection the periodic payments may avoid the court entirely. I cannot imagine that that was the intention behind the legislation. I have arranged for a professional receiver to be appointed for the first 12 months thereafter the receiver will probably be one of the parents.

5 See the decision of the Court of Appeal in Re B (deceased) (2000) 1 All ER 665.



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Could you possibly consider whether given that it will be necessary for Joe's status i.e. whether he is alive-to be confirmed to the body paying the periodic payments it would be possible for an annual sum to be paid into the Court of Protection who could also verify whether [the claimant] was still alive. [The claimant’s] parents would rather deal with the Court of Protection than the NHS Trust or its representatives.’

I have to say I find this a fairly feeble reason for opting for a conventional lump sum rather than periodical payments, even though the lady in question clearly feels very bitter about the local NHS Trust and wants no further contact with it. She is by no means the only parent to have expressed feelings of this kind. This problem is peculiar to clinical negligence cases, where the NHS self-funds the periodical payments. It doesn’t generally apply in other accident claims where the defendant’s insurer usually purchases a commercial annuity.

Fluctuating care requirements and the need for emergency funding

Another reason why periodical payments have been rejected in clinical negligence claims is the unpredictability of the claimant’s health and the knock-on effect this might have on his or her care needs at any given time. The following is an extract from an advice on settlement on a clinical negligence claim against Coventry Primary Care Trust. The claimant was born in 1989 and has spastic quadriplegic cerebral palsy, cortical blindness and epilepsy arising from asphyxia at the time of her birth. She is doubly incontinent and has no communication skills. Her estimated life expectancy is to about the age of 30.

‘Careful consideration has been given to the question of whether any conventional award should be subdivided into a lump sum and structured settlement award, or whether periodical payments should be sought.

Hayley is now 15 years of age. She has very complex care needs, which vary tremendously from year to year according to her presenting condition at any particular time. At present the majority of her needs are met by her family (at great personal cost). There is a pressing immediate need for more suitable accommodation, but the family need considerable flexibility to provide not only for the immediate future, but to devise a solution that will be a whole family solution for the relatively few remaining years of Hayley’s life. There are likely to be many changes in the next few years. Hayley will complete her education, and then there will be many challenges to ensuring a maximum quality of life, particularly as she makes the transition to adulthood. The years between 17 and 25 are likely to require substantial capital expenditure on a sporadic basis. On the current projections of Hayley’s life expectancy, there will be no long period when she has settled into a routine of adult life, where she will require regular income. The positive features of a structured settlement or periodical payment solution are unlikely to apply in Hayley’s case. There is considerable concern on the part of the litigation friend that, by tying up an




undue proportion of the award in fixed longer term payments, the ability to ensure that the quality of Hayley’s life is maximized during any particular period will be reduced.

The litigation friend is therefore content to resolve the matter upon a conventional lump sum basis, with the funds recovered by Hayley being paid into the Court of Protection for administration by the court on her behalf and in her interests.’

Similar considerations can be found in the following extract from the leading counsel in Jack’s case, from which I have already quoted:

‘The claimant himself can have no particular preference, being a child, and brain damaged but his litigation friend has expressed a very clear preference for a lump sum award. In particular, she is concerned that if Jack should show signs of further deterioration (or bouts of it) she should be in a position to alleviate that condition as best money can provide (this suggests having the availability of emergency funding, most easily provided if there is a lump sum available) and if it seems that his young life is in a terminal phase, the ability to spend considerably to make those last few days as amenable to him as possible.

The effect of recovering less than the full value of the claim

In Capel v West Yorkshire Strategic Health Authority issues of causation and liability had been compromised on the basis that the claimant would receive 60% of his damages to be assessed. The NHS offered, as an alternative to a conventional lump sum of £1,600,000 a smaller capital sum of £500,000 plus RPI-linked annual payments of £15,000 to age 25 and £47,000 thereafter. In his report on periodical payments the specialist financial adviser said:

‘Given that Darren is only receiving 60% of his damages, I believe that the defendant’s offer of periodical payments together with a lump sum leaves little flexibility from which to meet future capital expenditure.

Furthermore, the periodical payments would, in the longer term, be insufficient to meet Darren’s care needs and as such any shortfall would need to be generated from the contingency fund. When one considers the capital required to purchase and adapt a property and also to purchase a suitable vehicle and specialist equipment it is clear that this would leave insufficient capital from which to generate the additional income.

The conventional lump sum therefore offers a greater degree of comfort and flexibility, as care costs can be provided as and when they arise, rather than the fixed scale predetermined by the periodical payment offer.



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In conclusion I would recommend that Darren’s representatives accept the lump sum offer of £1,600,000 in settlement of Darren’s claim.’

The effect of marriage breakdown

72% of the Court of Protection’s road traffic accident victims are male. Typically, they were involved in a car accident three months before their 20th birthday and the claim settles when they are 26. In April 2005 the average date of birth of these claimants was 1 May 1979, and the average date of injury was 1 February 1999 and these cases take, on average, six years and two months to settle or come to trial.

Despite assurances in cases such as C v C (Financial Provision: Personal Injury Damages),6 a damages award is not entirely immune from a property adjustment order in the event of a divorce.

In an isolated case in 1997 the following injunction was issued by Barnsley County Court:

‘DB is forbidden (whether by himself or by his agent or by instructing or encouraging any other person) from utilising the damages to be awarded or settled upon for the benefit of the Respondent in the action DB v The Personal Representatives of Anthony Miller deceased, 1993 B No 5477 in such a way as to defeat the making of a lump sum order in these ancillary relief proceedings pending further order.’

The purpose of the injunction was to prevent the patient from settling his claim by means of a structured settlement or periodical payments because his wife believed that she would be considerably better off financially if he were to receive a conventional lump sum award. And she was probably right.

Generally speaking marriage is not an issue for most of the victims of medical accidents but problems can occur if their parents divorce. The following e-mail, sent by one of the Lord Chancellor’s General Visitors on 13 April 2005, demonstrates the potential impact the parents’ matrimonial difficulties can have on a claimant’s fund:

‘Stephanie has cerebral palsy and is highly dependent, since leaving school her mother has employed a full time day carer, she looks after the client at night and weekends.

The client’s father left the family last year and a bitter divorce has ensued. Mr C wants the family to move out of the home they have lived in for many years to free up his share of the equity so he can buy a new house for himself. The house has increased in value and is now worth so much the client cannot afford to buy him out. Mrs C may now have breast cancer. I was contacted by Mrs C in desperation, she said wanted to talk to me about

6 (1995) 2 FLR 171.




a number of things, she said she had raised things with the casework team but the people she spoke to did not seem well informed and she never seemed to get a proper answer to her questions.

Mrs C wants to know if she can disclose details of the client’s income and capital to her solicitor.

Mrs C would like to know the court’s view on the idea of the client buying out her father’s interest in the house and confirmation that the client would not be allowed to take out a mortgage (this is what the client’s father’s solicitor is insisting she do) Mrs C does not think the client has enough capital to buy out her father.

Mrs C has asked for extra funds to cover the cost of night care while she has a short break in April, she needs an urgent reply to this request.

Mrs C’s only income is carer’s allowance of £44 per week, she has some savings for her retirement but does not want to dip into these, but this means she cannot claim Income Support. She has never had a parental care allowance. She has no qualifications and is at an age where it would be difficult to get work. If she did, she would need to employ carers to cover what she does and this would cost the client. She says she does not see how she can continue. I feel there needs to be a meeting perhaps with the Master to discuss all the financial implications of these problems. Mrs C said she would welcome the chance to speak to someone, preferably in May after her break and hospital treatment. Could this be arranged?’

A problem the Court of Protection encounters quite often is where the parents have separated but still share the care of their disabled child in rotation, maybe for a few days at a time. In several cases the claimant has had to purchase two properties out of the contingency fund in order to provide separate accommodation for each of his or her parents who are unable to finance a property purchase from their own resources.

Advantages of a periodical payments order

The main advantages of periodical payments are that they are payable for the rest of the claimant’s life, so the money never runs out, and any argument about the claimant’s life expectancy is irrelevant. Periodical payments are secure, predictable, and tax-free and they avoid the need for ongoing investment advice to manage a large capital sum. I propose briefly to consider a few less obvious reasons why periodical payments might be more attractive than a conventional lump sum.

Faster resolution of claims

A noticeable effect of the availability of periodical payments is that claims are being



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resolved much earlier thereby reducing the stress caused to claimants and their families by years of ongoing litigation. The following extract is from counsel’s opinion on settlement in White v Hull and East Yorkshire Hospitals NHS Trust . Thomas White was born on 5 April 2002 and the claim was settled with almost unprecedented haste in slightly over three years from his birth. He has severe cerebral palsy and is dependent on oxygen 24 hours a day. His next respiratory infection might kill him and survival into his teens is unlikely. According to the experts his life expectancy is to age 10 years and 4 months.

‘This is a complex and high value case, which has been investigated and litigated on behalf of the claimant at high speed. Everyone concerned is to be congratulated. Until recently, and for the most part even now, this sort of case is not finally decided until the claimant is a teenager and very often a young adult. This means that the family live at their wits end for many years and the claims are reduced in size (in theory at least) because of the long period of past care at non-commercial rates and the inability to move to appropriate accommodation. The family are worn out and the best years of their life are blighted. Where the claimant has a short life expectancy, as Thomas has, virtually the whole of the claim can be one for past non- commercial loss. Sometimes the claimant dies before the disposal of the action, which is a very real risk here; as every year goes by Thomas is at a substantial risk of premature death. His chance of death even over the next year cannot be ignored, and if it happens and the claim is not settled, its value will be slashed. Hence, bold moves are required in a case such as this to balance the risks in the litigation and out of a profound sense of common humanity.’

The risk of dissipation of the award by family members

For the Court of Protection to impose an order for periodical payments against the wishes of the claimant would be a hostile step and the court is only likely to do so in exceptional circumstances. These are where the claimant’s friends or family are not acting in his or her best interests, and if there is a serious risk that they will seek to dissipate a conventional lump sum award.

One such case – let’s call it R – involves a birth injury in 1997 worth £3,150,000 in conventional terms. The Official Solicitor was appointed as the claimant’s litigation friend because both of her parents had been convicted of fraud and her father was sentenced to 3½ years’ imprisonment. The claimant’s parents were adamant that her award should be accepted as a conventional lump sum rather than as periodical payments. The following is an ‘anonymized’ letter that was sent to the chief executive of the defendant NHS Trust and to the editor of a local newspaper in December 2004:

‘I would take this opportunity to point out to you that the £3.15 million paid out to Mr and Mrs R by your hospital has been paid to the wrong people.




Mr and Mrs R do not and have never looked after their disabled child. [The claimant] has from birth been looked after by her grandparents. The grandmother transports [the claimant] down to the R’s house first thing in the morning, where, a short time after, a minibus arrives to take her to school. In the evenings [the claimant] is taken straight to her grandparents’ house, where she remains until the following morning.

As a ‘family’ [the claimant’s] mother and father are currently in the process of purchasing a large detached bungalow in [location] with the proceeds of the insurance claim, not with the intention of making life easier for [the claimant], but to enjoy their ‘lottery windfall’ as they view it. They have been bragging for some time about how the money will transform their lives for the better, referring to material goods, holidays etc, for themselves, not [the claimant], who only holidays with her grandparents. Mrs R has never entertained the idea of looking after [the claimant] and has no intention of looking after her in the future.

I am not against the payout in principle, but I do feel that the money has gone to the wrong people, and that [the claimant] and her grandparents, who should be getting the benefit of it, will be the last in line.

Once again the R’s have conned people/organisations out of large sums of money to fund their extravagant life style.’

Shari’a law

4.5% of patients who receive damages for personal injury or clinical negligence are Muslim and one of the advantages of periodical payments is that they avoid the problems encountered in selecting appropriate Islamic investments. In Shari’a law the receipt of interest (riba), or effortless profit, is forbidden. The following extract is from a letter from a firm of solicitors in Yorkshire:

‘Our client is very concerned about investments because he is a strict Muslim and his religious beliefs specify that he should not receive any interest and that all investments should be in appropriately ethical business.

We have considered this matter with our investments department and would consider that it may later be appropriate to purchase equities from the FTSE Global Islamic Index.

However, there is some difficulty with regard to the holding of cash and purchase of gilts and bonds as these would raise interest. We wonder if you have any experience or suggestions of how the funds may be held in an appropriate manner without this being the case.’

Another advantage of periodical payments is that they moderate the effect of zakat. Damages for personal injuries are calculated on a multiplier basis. A claimant’s



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annual requirements (say, £50,000) are multiplied by a multiplier, which represents both a number of years and the principle of accelerated benefit, and can be as high as 33 thus producing, in this example, a total of £1,650,000. The whole point of periodical payments is that they dispense with the need for a multiplier.

Zakat or almsgiving is obligatory on all Muslims and involves a 2.5% levy on most assets including cash and stocks and shares held for a full year if their total value is more than a basic minimum, known as nisab, which at present is around £750. It is usually paid during the holy month of Ramadan and a Muslim can donate an additional sum on top of the basic zakat as an act of voluntary charity (sadaqah) to obtain further blessings from Allah. As can be seen from the illustration given above there is an enormous difference between donating 2.5% of £50,000 (£1,250) annually to Muslim charities, which may be sustainable, and giving away 2.5% of £1,650,000 (£41,250) each year.

The following letter was written by the same firm of solicitors in Yorkshire, in respect of a different client, who had been awarded damages of £350,000 for injuries he incurred in a road traffic accident.

‘Mr Fayyaz is a devout Muslim and wishes to adhere to the third pillar of Islam in terms of giving away part of his wealth each year. It is our understanding from Mr Fayyaz that it is appropriate for 2½% of his capital to be forwarded to Muslim charities or charitable causes each year. He wishes to make this payment on an annual basis. Naturally, if this is to be paid, this causes awful difficulties in managing his funds for the future but it must be recognized that the religious requirements of Mr. Fayyaz’s faith would probably take precedence to his own personal welfare in these circumstances. The total sum involved, given the calculations that we have made, is £7,109.54.’

Regardless of whether the claimant is Muslim his or her religious beliefs, particularly if devoutly held, may need to be taken into account when determining the form the final award should take.

Mental capacity

In Masterman-Lister v Brutton & Co7, the Court of Appeal held that a person’s capacity is function-specific and time-specific. This means that an individual may have the capacity to manage his or her financial affairs when receiving periodical payments, but may be incapable of managing a large conventional lump sum. It is possible, though unlikely, that the opposite would be true. The time-specific nature of capacity was recently considered by Mrs Justice Cox in Mitchell v Alasia8 in which she held that the claimant was currently a patient, but it was unlikely to be so

7(2003) 3 All ER 162.

8(2005) EWHC 11 (QB).




in three years’ time, upon completing a course of rehabilitation at the Oliver Zangwill Centre in Ely.

The possibility that periodical payments could empower a claimant to manage his own affairs with minimal interference from outside should always be considered, particularly where the claimant has borderline capacity. This is something the Court of Protection is keen to promote. One of the fundamental principles in the Mental Capacity Act 2005, which received the Royal Assent on 7 April, is the ‘least restrictive alternative’. In other words the court’s intervention in a person’s life should be as limited in duration and scope as the circumstances reasonably permit.


At this stage, it is not fully clear what impact the ability of the court to impose periodical payments will have. Early indications are that in 70% of the higher value cases coming into the Court of Protection claimants, their families and their legal and financial advisers, when given the choice, would prefer to settle on a conventional lump sum basis and they usually have sound reasons for doing so. These reasons are not simply financial, but extend across a much broader range of considerations – medical, social, cultural, rights-based and personal and are more holistic insofar as they treat the claimant as a member of a family rather than in isolation. It is interesting to note that in recent months counsel’s opinions on settlement in clinical negligence cases have contained a much more comprehensive analysis than hitherto of the advantages and disadvantages of settling the claim one way or the other.

As far as the Court of Protection is concerned if the claimant wishes to settle on a periodical payments basis, rather than by way of a conventional lump sum, the court is likely to support that stand even if the defendant opposes it. This is because the court is under a statutory obligation to act in a patient’s best interests and this includes having regard to his or her wishes and feelings. If the court is satisfied that claimants and their families wish to settle on a conventional basis having received competent and impartial advice and having carefully weighed the pros and cons, it will not seek to interfere with their decision. There will of course always be a small number of cases where the court has good reason to believe that a family is not acting in the claimant’s best interests and in those cases it would reserve the right to impose a periodical payments order against the claimant’s will.

* * *



Viola Heutger


Law and language are interacting partners all over the world. However, I will focus, in my paper on the situation within the European Union. In the last 30 years, the interaction of law and language has grown to be a particular problem for European lawyers and translators/interpreters due to the internal market and its sets of laws. The 25 Member States have twenty, or when taking Irish into account, twenty-one national or official languages among them. The linguistic expansion started in 1973 with the first enlargement of the EC when the UK, Ireland and Denmark joined the Community. With the latest enlargement of 2004, the language number increased rapidly above 20 different languages. To translate directly into 20 languages by language pair translators will require a staff of 380 translators.1 Due to the high level requirements, all these translators must also be experts in comparative law. Immediate translation from one language to another will be nearly impossible. New methods for the cross-legal dialogue need to be found. There is no legal comparatist speaking all 20 languages in order to diminish the infrastructure problems. In addition, there are well over one hundred regional or minority languages spoken in various parts of the EU.

The use of different languages is one of the obstacles to the EU-integration process. To reach a common use of legal language we need to develop a curriculum for a more coherent linguistic and terminological use inside the European Union.2 Legal text of a certain quality can only be drafted where the legislator has a fundamental linguistic and legal knowledge. In a multilingual environment much more attention must be drawn to the interplay and symbiosis of linguistic as well as legal knowledge.

The interconnection between law and language

Law needs language and there are many interconnected relationships.3 The interpretation of legal texts from the point of view of grammar is closely related to linguistic methods for using a language. In regard to this interpreting instrument, it must be stated that law and language interact with each other. Language is the means of expressing the law.4 Its use gives rise to specific terminology.5 Lawyers

Viola Heutger is researcher in the field of European Private Law and team-manager of the Utrecht Working Team on a European Sales Law

1Creech, Richard L., Law and Language in the European Union, The Paradox of a Babel “United in Diversity”, European Law Publisher, 2005 p.27.

2Pozzo, Barbara, Harmonisation of European Contract Law and the Need of Creating a Common Terminology, in European Review of Private Law, Volume 11, No. 6 –2003 p.754.

3De Groot, Gerard-René, Language and law, in Netherlands Reports to the fifteenth international congress of comparative law, Intersentia, Antwerp/Groningen, 1998 p.21.

4Sacco, Rudolfo, Einführung in die Rechtsvergleichung, Baden Baden 2001, translated by Jacob Joussen,

the original title in Italian, Introduzione al diritto comparato, was edited by UTET p.34.



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from the same legal system subsequently understand this terminology. Nevertheless, a term in one language does not necessarily hold the same meaning in another language that can have a completely different implication in another legal system. So, the transposition of one legal term of one legal system to another legal system already poses problems.6 The same term will not always correspond to the same concept. Shifted away from the national legal system, the use of a common European Commission language would yield an important impact.

Through language a single term can express a whole concept.7 So the addressee will not only understand the chosen language, but will also pick up a message, in the case of a legal discourse a whole concept, which is expressed by a single term.8


In the last few years at the working group meetings of the Study Group on a European Civil Code,9 we had long discussions about the word ‘guarantee’. The term sounds very much the same in many languages: garanzia, Garantie, garantie etc. However, it has more than one legal meaning. Depending on its national legal or European background, it means: warranty; legal rights; extra rights of a buyer in case of defect goods added to the buyer’s legal rights; a security; a pure consumer guarantee or a confirmation that something will not change.

Another example is the term ‘consumer’ as defined in article 1 paragraph 2 of the Consumer Sales Directive 1999/44/EC as ‘a natural person who, ..., is acting for purposes which are outside his trade, business or profession.’ Already in other European Union Directives from the same legislator another definition is given. Let us have a look at the definition provided in the door-to-door selling directive, where the consumer is defined as ‘a natural person who.... is acting for purposes which can be regarded as outside his trade or profession’ (Art. 2). The price indication directive defines the consumer as a ‘natural person who buys a product for purposes that do not fall within the sphere of his commercial or professional capacity’ (Art. 2(e)).

Two common features in the consumer definitions are that the consumer is a natural person and that the purpose should be outside some kind of business, commercial or trade activity. However, the given definitions are far from being coherent.

This example shows that the European Union legislator cannot be seen as a standard setter due to his incoherence. I will not provide here more definitions of the consumer notion from national codifications. It is sufficient to say that those are not identical and they all offer a variety of open questions.

5Rüthers, Bernd, Rechtstheorie, München 1999 p.118.

6Creech, Richard L., Law and Language in the European Union, The Paradox of a Babel “United in Diversity”, European Law Publisher, 2005 p.28.

7Münzel, Frank, Lexicographical Musings – The Variegated Language of Sales Law: a Modern Tower of

Babel, in Uniform Law Review, 2003 p.64.

8Grossfeld, Bernhard, Macht und Ohnmacht der Rechtsvergleichung, Tübingen, 1984 p151, p163.




Cross-border trade in an multilingual environment

The European Commission is drafting legal texts in languages which already exist and, therefore, in the original language the words already have a fixed legal connotation. Quite often, these terms have another connotation on the national level than they have on the European Union level, creating a conflict among EU members speaking several languages. These divergences lead to problems e.g. in the harmonization process on the path towards a European legal integration.

Development’s in recent years’ shows that the Commission has not been very sensitive in language use. In order to bring more coherence to their enactments several projects now exits to assuage these issues. In the field of European contract law, the communication from the Commission to the European Parliament and the Council [titled ‘A more coherent European contract law – An action plan’, published in Brussels in 2003 (COM(2003) 68 final)] was a first step towards rethinking legal harmonization and the responsible use of legal concepts and definitions. The Commission expressed their hope in the document to provide through a common frame of reference more transparency and a better accessibility of enacted regulations.

Legal language and legal culture

In the nineties Pierre Legrand, a Canadian, who is now Professor of Law and Director of Postgraduate Comparative Legal Studies at the Université Panthéon- Sorbonne, became famous for his view on legal culture. He believes that comparative law requires a contemplation process that can be achieved only by committing oneself intellectually and emotionally to the legal systems to be compared.10 Legrand has developed a theory of law as culture. In his view, law is something local that cannot be detached from its cultural background. I will give two exaggerated examples: extended ski lift regulations will be of no need for the Netherlands, where you find only one small hill close to Maastricht; as well as maritime law will be of no use for Liechtenstein or the Vatican, countries’ with no sea border. Such kind of legal harmonization will be against the countries cultural und geographic background. Therefore, harmonization of law has to fail in the long run.

When we transfer these our problems into different legal languages, the conclusion is that only a lawyer who know the language and has investigated the legal system of the society, will have a chance to become acquainted to legal concepts that are different from his or her own legal system. Following this theory, the whole endeavor of developing a European legal integration and harmonization would be an impossible way to go.

10 Van Erp, J. H. M., European Private Law: Postmodern Dilemmas and Choices - Towards a Method of Adequate Legal Analysis,



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Recent history has taught us the reverse. The European Union is already a fact and European integration is continuing to grow. Therefore, we have to cope with reality and find our way as citizens of the European Union.

Cohesion and legal terminology in systems which have the same language

If we examine the use of language on a national level, we realize that there are system or sector specific legal languages within one national language. We therefore have specialist legal language in medical liability law, another legal language in economics, another in criminal law and yet another in private law.11

It can even be stated that the Dutch legal language or the Swedish legal language as used in European Union documents is also a separate legal language, detached from the national legal language use.

Legal language even differs between countries having the same tongue. The use of German in legal language differs in its terminological use in Germany, Switzerland, Liechtenstein, Austria, South Tyrol and Belgium.12 Turning to only Germany, Switzerland and Austria it must be stated that these countries do not have a political unity and even no common legal source. Furthermore, there is a lack of interaction.13 These countries do not have a common legal discourse; therefore, they live with more than one German legal language.

Other countries with the same language have chosen an alternative approach. The Dutch legislator Meijers helped his Belgian colleague Van Dievoet to translate the French version of the Belgium Civil Code into Flemish in the early fifties.14 Furthermore, in Scandinavia a close cooperation in law-making is known.

But let us return to the German formalistic Civil Law codification, which is largely unreadable as far as a non-German lawyer is concerned. Without any special indication as to the use of terminology this codification can rarely be understood. If use the German language, we must realize that knowledge of German legal terminology, even the other German-speaking legal systems (e.g. Switzerland and Austria) are not automatically accessible.15 Very simple terms have different meanings. When a German speaks of Besitz, he means factual possession. However, an Austrian lawyer understands Besitz as the factual possession including the animus domini. What a German understands under Besitz, is for an Austrian Innehabung. Even German speaking lawyers from Austria, Germany, Liechtenstein and Switzerland will not automatically understand each other’s concept-based legal terminology. It cannot be expected, for example, that a German knows what is

11Fraser, Janet, The Discourse of official texts and how it can impede public service translators, Journal of multilingual and multicultural development, Vol. 20, No. 3, 1999 p.194.

12, Sacco, Rudolfo, Einführung in die Rechtsvergleichung, Baden Baden 2001, translated by Jacob Joussen, the original title in Italian, Introduzione al diritto comparato, was edited by UTET p.39.

13Lopez-Rodriguez, Ana M., Towards a European civil code without a common European legal culture? The link between law, language and culture, Brookl. Journal of International law, Vol. 29:3 p.1209.

14Van Dievoet, Guido C.E., Het Nederlands als wetstaal in België in de negentiende en de twintigste eeuw, Pro Memorie, 5.1 p.96-p.118.

15Grossfeld, Bernhard, Macht und Ohnmacht der Rechtsvergleichung, Tübingen, 1984, p.180.


meant by the Austrian terms of a Präsenzdiener or a Landeshauptmann, a

Aufsandungsurkunde or a Superädifikat.

One and the same language in the use of the European Union

If we now shift these language problems to the level of the language used in the official legal language of the European Union we can expect far more problems in the future than on the level of different legal systems using the same national language, but not a common legal language or system.

Therefore, it can be said that each legal term is equivalent to a particular legal concept in its own system-specific legal and national surrounding. However, the use of a term in a single language may cover many different concepts. A term may determine something completely different in private law than in public law. The use of the same term in another country sharing the same language may deliver even another understanding of the legal concept. The national use of a term in its specific surrounding is not mirroring the European use of the same term in the same specific surrounding. On the European level a completely different concept may stand behind the chosen term. Furthermore, the same term may be used in a translation of a document with another meaning or concept, when this term is later implemented into national law the concept behind could have been shifted once again. In the end there is one term from which many different concepts are arising. Harmonization of language will not be reached by using the same language. Understanding each other will only be possible by being aware of each other’s concepts and by training lawyers to be more sensible in language matters.

A legal language curriculum

If continue to use databases and dictionaries as the only means for interpretation, the result may well be a complete misunderstanding. We are in urgent need of a new curriculum for the use of legal languages. If we do not quickly change our habits towards legal linguistic topics, we may be too late to correct the multitude of misunderstood legal concepts being developed today. Perhaps it would be easier or more effective to create a completely new and artificially common pan-European legal language than to synchronize the use of one language and its legal terminology in different national states.

Law is a discipline that develops and changes, not every term will be used for the same concept forever. There are terms, which are used only for a period of time. For example, in Roman time we were confronted with the codification of the XII tables with the term lessum,16 where now 2500 years later we have no clear idea about the meaning. Other terms change their meaning, so the New Dutch Civil Code changed the concept of possession. Legal developments do not stop on the European level. Therefore, the European Constitution has foreseen the use of new legal instruments

16 TABULA X: Hominem mortuum in urbe ne sepelito neve urito. . . . hoc plus ne facito: rogum ascea ne polito. Mulieres genas ne radunto neve lessum funeris ergo habento. Homine mortuo ne ossa legito, quo post funus faciat. Qui coronam parit ipse pecuniave eius honoris virtutisve ergoduitur ei . . . Neve aurum addito. At cui auro dentes iuncti escunt. Ast in cum illo sepeliet uretve, se fraude esto.



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with terms that are already in use with another concept. So Article 33 of the Constitution provides definitions for the legal terms: European laws, European framework laws, European regulations, European decisions, recommendations and opinions. These definitions are not identical with those in use now. Legal language is not drafted for eternity. Language is an instrument to understand each other.

The way towards a coherent European legal language

Exact and coherent use of legal terms may be understood as a process of standardization. Legal linguistic standardization within the European Union will help to keep integration growing. There is a clear need for the review of the existing acquis communautaire that means the existing legal documents enacted by the Commission, and for harmonization and standardization. Cross-border trade is only possible with standards and the parties’ confidence in the regulations.

The use of standardized legal terms seems to be a process that can only be achieved through a coherent use of language and the lessons learned from integrating activities that were not implemented as successfully as intended,17 like the example given with the consumer notion. Nevertheless, we must be aware that law and language are developing creating a need to develop terminology for new legal instruments and to accept that those terms can have an only temporary connotation.

Standardization could be achieved in different ways,18 through the use of Common Principles on European Private Law, which should be drafted by a pan-European network and enacted by the European Union. Here, I establish a doctrine based upon the Principles of European Contract Law and the outcome of the working teams of the Study Group on a European Civil Code.

Making available a common frame of reference that would provide definitions of terms and concepts for a sector-specific use should help to develop a uniform coherent language use. This common frame of reference, as also mentioned in the Action Plan on a more coherent European contract law, should mirror the discussion and consultation process of stakeholders, academics and the policy decisions of the Commission itself. Furthermore, the common frame of reference should offer the results of the revision of the existing acquis communautaire.

Moreover, a new method of drafting legal texts for a multilingual environment must be developed. A monitoring period should be the start. Future experiences have to show whether drafting in only one language is the way to go. There will then be one document as a reference for all later translations. Another probable way will be the drafting of European documents in two authentic language versions and a further way will be the drafting of documents with legislators from at least three different language and legal backgrounds who represent quite different linguistic groups, like e.g. German, English and Italian. These different techniques of drafting should be

17 Action Plan on a more coherent European contract law: p.68.

18 Sacco, Rudolfo, Riflessioni di un giurista sulla lingua, Rivista di diritto civile, 1996 p.57.




monitored and be evaluated for a better drafting method in the future to grant a more coherent and plain language for the multilingual context of the European Union.

The struggle between legal and linguistic requirements

European integration cannot proceed without attention being given to linguistic matters. For the time being the official legal language of the European Union is far from a common pan-European standard. The implementation of European Directives on minimum standards offers a wide range of linguistic interpretations and opens the door to different uses of language.

There is a clear need for a more coherent approach. From a legal perspective a one and for all solution would be the best: one enormous codification in one time in order to change everything completely, coherent and with one authentic linguistic text. This would be the only way to go to avoid a fragmentation and different language use. However, this solution does not take into account different legal backgrounds, legal culture and linguistic diversity. Therefore, additionally another way to go must be investigated: the path via sector specific minimum harmonization. This way, going along with small steps, will grant a slow and natural development of the European language use. Citizens will get time to become familiar with new terminology. They do not have to be acquainted to an artificial legal language with an enormous amount of legal terms in one time.

Over recent years the Commission has opted for a new approach. The Commission opened the path to a maximum harmonization in several fields of law. Especially, the law of credit agreements seems to be seen in the light of an overall maximum harmonization. Not only material legal matters are solved but also formal requirements where no legal remedy can be set against. This approach forms a problem on the one hand for the tradition of legal systems and on the other hand additionally for development of national legal doctrines. A complete harmonization will not stay away from linguistic diversity as we know it from the Austrian, German and Swiss traditions and experience with the implementation of the European Union Directives.

Anyhow, the recent changes in this area show that the European Union is aware of the problem of linguistic diversity within the enlarging Union. Unfortunately, there is no institution on EU level, which interacts with the European lawyers, linguists and citizens to train them and to encourage them to express themselves in more than their own native language. And there is no European Law Institute safeguarding a coherent legal language use.

A monitoring process must be started. This process should be led by legal and linguistic experts in order to come up with an interdisciplinary and innovative solution for a better legal understanding.

Participation in the legal integration process

Nevertheless, in the last few years the European Union started a discourse with interested parties and stakeholders through the means of Communications and



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Action Plans - it concerns the following documents: COM (2001) 398 final, COM (2003) 68 final and COM (2004) 651 final - where it was possible to send reactions to the Commission. Reaction send in by legal linguists are completely lacking and nearly no reaction is considering language problems as an obstacle on the path towards a European Contract Law.

The process of elaborating a European Contract Law started before the enlargement with ten new Member States. These States have nearly not used their possibility to react with requests for a better linguistic approach. Now it is an open question. Do lawyers take care of language problems? Is there anyhow a need for an interacting institution for supporting linguistic integration?

The way to go

Let me conclude by reaffirming that the European Union is aware of the problem(s) of interpreting and translating legal language. However, efforts to strengthen the use of harmonized legal language in all the European Union Member States must be seen in a critical light. Practically no official legal paper or database deals with the linguistic problems of an enlarging Union. I would suggest that the following action is needed to effectively address these issues:

1.To strengthen the forces an interacting institution for supporting linguistic integration is urgently needed;

2.Parallel to each of the mentioned ways, legal education should pay more attention to the use of foreign languages in the teaching process. At least optional courses should be held in foreign languages. Students must be trained in more than one language and must, as a part of their academic curriculum, be able to express themselves in more than one or two languages;

3.Another problem so far is the fact that no language experts or translators are involved in the process of drafting legal documents for cross-border use. So, in most cases a Commission document is drafted in one or two languages and then translated afterwards. At the drafting stage normally no co-drafting procedure is taken in order

to achieve a more coherent linguistic quality. Only Canada knows a principle of co- drafting.19 There is an urgent need to change the drafting process. Lawyers and linguists should be involved in the future drafting processes on the European Union level in order to grant a more coherent linguistic quality of the EU-legislations;

4.In the long run, the way to go will not be a process of harmonizing misleading European Union documents. The path to the future should be an ex ante approach20 that takes linguistic knowledge and a multilingual context into account at a very early drafting stage;

19Salmi-Tolonen, Tarja, Legal linguistic knowledge and creating and interpreting law in multilingual environments, Brookl. Journal of International law, Vol. 29:3, p.1173.

20Salmi-Tolonen, Tarja, Legal linguistic knowledge and creating and interpreting law in multilingual environments, Brookl. Journal of International law, Vol. 29:3, p.1191.




5.Lawyers and linguists should not be afraid of sometimes introducing terms only for temporary use. Legal language is a tool, not an everlasting art;

6.Furthermore, linguists must also participate in the legal consultation and discussion process and send in reactions to calls open to all interested parties on legal subjects;

7.The interplay of law and language is very exciting and important and should become an individual subject on the academic agenda, next to subjects like sociology of law and legal theory.

* * *


Eric Engle


The objectives of this paper are: 1) To outline the similarities and differences between the common law and the civil law in order to determine possible methods for their harmonization; 2) To determine the basic laws of personality rights in the civil law and the common law. To do so it uses the examples of the U.K, the U.S, France and Germany; 3) To indicate possible paths of judicial harmonisation. These include a structural reconception of the common law, terminological and conceptual rapprochement between the common law and civil law, privatisation through contract, and universal law such as the European Convention on Human Rights.

The paper limits its discussion to the classical core of privacy and personality rights. It does not discuss harder questions such as: 1) Does the right to privacy limit the power of the police to conduct searches and seize evidence? 2) Are internet service providers liable for the content of web sites which they host?1 3) What is the correct balance between the right of a victim to privacy and the right of a criminal defendant to a fair trial? 4) What level of immunity should politicians have for statements made by them in their office, or for statements made against politicians or other celebrities?

This paper does not address the grey areas of this ill defined legal field because their resolution can only be harmonised through legislation. Further detailing these grey areas in three or more legal systems would require much more space than is available in an article. Harmonisation in those aspects of personality law will require legislation at the E.U. level.

Bases for harmonisation of personality and privacy rights in the European Union

The rights of personality are, at least within the common law, a conceptually undefined subset of the set of torts. Those rights could include protection against invasions of one’s privacy, whether by the police or private persons, against false statements to others, against intrusions, against misuse of one’s image, and in fact a wide variety of social situations that do not admit an easy definition.

J.D., St. Louis University; DEA Paris II (Mention); DEA Paris X, Nanterre; LL.M Eur. Universität Bremen. He teaches courses on English legal terminology at Bremen where he has just submitted his doctoral thesis on private law remedies to human rights violations

1 See, e.g. Potts and Harris, ‘Defamation and the Internet’, . There is, perhaps unsurprisingly, an abundance of on-line material in all aspects of computer law.



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In European tort law these rights are marked by an absence of uniformity among the different national laws.2 Although these rights are ill defined we can nonetheless set out three theoretical points which will help us determine the existence and extent of those rights.

First, privacy rights often raise questions of the limits of the freedom of the press.3 As such they are a clash of rights – namely the public’s ‘right to know’ and the individual’s ‘right to be let alone.’ Secondly, privacy rights protect either economic interests of persons over some alienable property right (e.g. the right to their image, their voice, or they protect inalienable moral rights). This inquiry as to whether the right in question is an alienable property right or an inalienable moral right of the person will determine the extent of that right.

These two viewpoints - the clash of privacy and publicity and the question whether the right is economic or moral - will help define and determine the extent of protection of the right of privacy.

We can add a third viewpoint which will also help shape our analysis: if the privacy rights often present a clash between the freedom of the press and the individual’s right of privacy that clash can be decided by balancing the interests. Where the privacy right is a property right by a comparison of cost/benefits and risks/rewards we can determine the appropriate economic balance of these rights.

All privacy rights are not however property rights. In cases where the right is an inalienable moral right, balancing economic interests really is not appropriate. But in the former case economic cost-benefit analysis4 can determine the extent of the right in question.

2Westerman and Grosheide, „BGH Urteil Caroline von Monaco’, European Review of Private Law 2: 237-260, 252 (1997).

3Ibid, 258.

4Gerhard Wagner, „Geldersatz für Persönlichkeitsverletzung’, Zeitschrift für Europäischen Private Recht Vol. 8, 200, 207 (2000).




Resolving the conflict between the individual’s right to privacy and the right of society to know the truth requires balancing competing claims to fundamental rights. As a consequence, much of the law of the rights of personality is case law.5 These facts explain why harmonising the national laws of the Member States will be difficult. It also explains why E.U. codification would be desirable. This paper will nevertheless attempt to show ways in which the judiciary can balance these competing interests and methods the judiciary can use to harmonize the divergent laws in the field of personality rights. Comparative law can thus serve to harmonise national laws in the interest of substantive justice.6 This brief comparison of the differing legal systems of the common law and civil law using the examples of the U.K, the U.S, France, and Germany hopes to contribute to that process.

A. Systemic Similarities between the Common Law and Civil Law

Despite cacophony in the field of personality rights, the national legislators often rely on similar conceptual pools. This leads to some de facto harmonisation.7 How is the E.U. to transform this de facto similarity into de jure unity?

Efforts to harmonise the common law and the civil law would do well to first consider the history and the structure of the two systems. Their common history and structure are a theoretical basis for harmonisation. Part of the task of transforming that theory into practice will be the elaboration of common legal terms and concepts. Both terms and concepts within the two systems already exhibit elements of commonality. Nevertheless at present the law of privacy involves as many divergences as convergences. The task of European law is to encourage the latter and discourage the former.

1. Historical Commonality

Efforts to harmonise the law of privacy and personality in the European Union should begin with an understanding of the common history and methods which are the foundation of both the common law and the civil law. Historically speaking the common law and civil law are both branches of Roman law tradition.

5 ‘Das deutsche Recht des Persönlichkeit ist seit jeher eine Schöpfung der Rechtsprechung’,

Gerhard Wagner, „Geldersatz für Persönlichkeitsverletzung’, Zeitschrift für Europäischen Private Recht Vol. 8, 200 (2000).

6 Walter van Gerven,

‘The Case law of the ECJ and National Courts as a Contribution to the Europeanisation of Private Law’, European Review of Private Law

Vol. 3, 367-378 (1995).

7 Westerman and Grosheide, „BGH Urteil Caroline von Monaco’, European Review of Private Law 2: 237-260, 260 (1997).



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Historical developments later on also show that there are in fact civil elements in the common law. International law, chancery,8 canon law and canons of construction,9 and Scottish law10 are clearly influenced by the civil law. Lex mercatoria and admiralty are also influenced by the civil law. 11 So there are valid historical reasons to see the common law as another national law system within the Roman law tradition which however relies much more strongly on custom and does not rely on doctrine (the works of learned scholars), maxims or general deductive principles for its interpretation. Nevertheless basic concepts such as property, crime, tort/delict and contract permeate both systems. The two systems are substantively very similar though procedurally divergent.

Harmonisation can be used by drawing on common conceptual pools, especially in substantive law. But those common points of reference exist side by side with lurking procedural divergences which cannot be ignored if they are to be unified. Unlike continental civil law, the common law did not evolve out of universities12 but rather through the courts and is based principally on custom embodied in authoritative legally binding judicial decisions: In contrast the civil law does not admit a principle of stare decisis. Legal inference in the common law is inductive, whereas inference in the civil law is generally deductive. Finally, general principles of law, with the notable exceptions of international law and constitutional law, do not exist as a source of authority in the common law.

This is not to say that customary law played no role in the civilian tradition. It did, especially in land law. History also shows us, perhaps surprisingly, that the French legal system prior to the French revolution looked remarkably similar to that of England: juries, great judicial discretion, and the binding power of precedent were features of French law prior to the revolution. However the role of custom in the civilian tradition was not as extensive in practice as in the common law. And since the French revolution, the jury in France as an institution has been almost completely eliminated and the notion of judicial police (Greffiers, Huissiers, and the parquet) is alien to the common law. So in the desire to achieve a unified European legal system we should be careful not to overemphasize the commonalities lest we ignore the points of divergence.

2. Structural Similarities and Divergences

Structurally speaking the organisation of the civil law is perhaps the point of greatest theoretical divergence between the civil law and the common law. The civilian organisation of the law into the four branches of Public/Private law and National/International law is wonderfully logical. However while the public/private distinction exists in international law there is no great divide between public and

8Reinhard Zimmerman, ‚Der Europäischer Charakter des Englischen Rechts’, ZEuP (Zeitschrift für Europäisches Privatrecht)

Vol. 1, No. 1 4, 27(1993).

9Ibid, p. 21.

10Ibid, 36.

11Ibid, 29, 51.

12Ibid. 10.




private law in the national law of the common law jurisdictions. The notion of autonomous branches of law each with their own rules of interpretation does not exist in the common law. Despite this fact similarities in the sources of law and similar legal mechanisms and methods permit harmonisation of these two systems, particularly if the common law adopts the civil law typology – and in international law it already does.

a. Sources of Law

The fact that the common law is one branch of the Roman law tradition can be seen most clearly when we consider the sources of law. The sources of law in both systems are custom, statute, judicial opinion and the works of learned scholars. Both systems also feature similar interpretative principles (the canons of statutory construction) and express the essence of the law in latin maxims.

There are some divergences here however. The common law does not recognize general principles of law outside of international law. Doctrine (i.e. the works of learned scholars) is not recognized as a source of law or even as a persuasive authority in the common law – at least not since Blackstone. The various civil law regimes generally only grant doctrine persuasive authority (which was not the case under Roman law which saw doctrine as obligatory).

Most of the divergences are to the weight given the sources of law, i.e. whether the authority is obligatory or merely persuasive. Case precedents are obligatory in the common law (they are not in fact a source of law but rather evidence of customary law). Case law is, at least theoretically, merely persuasive in the civil law. While the general principles of law outside of international law had no role in the common law they are beginning to enter into the common law via treaties with domestic application such as the Treaty of Amsterdam and the European Convention on Human Rights. At their base, both European legal systems are founded upon the idea of the rule of law: their similarities, especially if only substantive law is considered, are much greater than their differences.



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b. Substantive and Procedural Law

Just as the sources of law are similar in the two systems so also are the legal methods applied by each system in the administration of law. Both the common law and civil law employ the concepts of legal personality, legal capacity, and presumptions (which are either rebutable or irrebutable). Though the particularized rules of a Werkvertrag or Arbeitsvertrag do not find any similar formal expression in the common law, i.e. “a contract is a contract” they do in French law (e.g. contrat de travaille, CDD CDI…). Apart from this statutory particularity of certain contracts (e.g. work contracts) English, French and German contract law are remarkably similar: all three apply basic principles13 of contract law: freedom of contract, offer, acceptance, and absence of incapacity. These common methods could form the basis for judicial interpretation14 of general principles of European law, i.e. a ius commune.

Admittedly, procedural aspects of the common law and civil law can be very different in terms of positive law. However, even here the conceptual objectives and practical applications are similar. Thus, for example, an affidavit, a Bestätigung, and an attestation all look suspiciously familiar to each other. Further, each system uses a set of general rules with specific exceptions and presumptions (irrebutable or rebutable) to determine substantive rights.

If the history and structure of the two systems allow harmonisation in theory, transforming that theory into practice will require a unified legal terminology and unified legal concepts. While there are plenty of similarities even at the terminological level, it is also clear that the terminological divergences are the most readily remedied. Reform of terminology can even occur merely through doctrinal and lexicographical work.

13Indeed once one understands the importance of general principles of law – corresponding roughly to the notion of fundamental rights – in the interpretation of civil law one can be tempted to think that through a linkage of general principles of European ius commune would be a way to harmonise European law – a sort of ‘reverse functionalism’. This approach could be taken and is not impossible, however the abstraction of general principles indicates that they would lead to concrete divergences in national laws and thus, probably, would not lead to a real harmonisation. Thus one can be both sceptical and hopeful toward the idea of a harmonisation of European law through judicial interpretations relying upon general principles of ius commune. On the illusion of general principles as a source of harmonisation see:

Jaap Spier, Olav Haazen,

‘The European Group on Tort Law (Tilberg Group) and the European Principles of Tort Law’,

ZEuP (Zeitschrift für Europäisches Privatrecht) Vol. 7, No. 3 471-472 (1999).

14Van Gerven,

‘The Case law of the ECJ and National Courts as a Contribution to the Europeanisation of Private Law’, European Review of Private Law

Vol. 3, p. 367-378, 367 (1995).




3. Terminological Similarities

Legal terminology can in practice either be a bridge or an obstacle to harmonisation. Almost every Member State has its own language and each Member State’s language has equal value. That leads to a situation not unlike the legendary tower of Babel.15 Because of linguistic polyarchy, terminological incertitude is an inherent problem in harmonising the private law order.16 Each legal system has its own terms which it uses to describe legal concepts. These terms may be similar or even the same, but that is not always the case. Because of divergence in terms, there is a great deal of room for ambiguity, uncertainty and confusion in European law.17

This can be illustrated abstractly. Term A in one Member State has meanings one, two and three. Term B in another Member State has meanings two, three and four. While both terms do describe the facts which lead to law two and three they also diverge on terms one and four. Some scholars of linguistics, notably Willard Quine,18 think that this sort of ambiguity is inevitable in language. As Quine points out, language is in fact recursive: terms of a language are defined by other terms in the language. However even if language is only a social construct (Saussure),19 having an arbitrary character because it is only purely symbolic,20 lawyers nonetheless agree to use and construct an intersubjective linguistic array21 which they then deploy to “solve” legal problems. In practical terms, the construction of an intersubjective lexicography for the development of a common European law is the eventual goal of European comparative law scholarship.

15Dieter Martiny, ‘Babylon in Brussel?’, ZEuP (Zeitschrift für Europäisches Privatrecht) Vol. 6, No. 2 (1998).

16On the possibilities and problems of creating a common european legal language see, e.g. Daniela Caruso,

‘The Missing View of the Cathedral: The private law paradigm of European Integration’, European Law Journal

Vol. 3 No. 1, 3-32, 3 (1997).

17Spier, J. and Haazen, O. ‘The European Group on Tort Law (Tilberg Group) and the European Principles of Tort Law’, ZEuP (Zeitschrift für Europäisches Privatrecht)

Vol. 7, No. 3 469, 472 (1999).

18‘Both Willard Van Orman Quine’s and Donald Davidson’s theories of reference and meaning are holistic in character. According to that view, the interpretation of an utterance is necessarily based on the interpreter’s system of knowledge, beliefs, and attitudes including those about and towards the speaker. Quine’s concept indeterminacy of translation (1960: ch. 2) that has also inspired Davidson at numerous occasions (cf. essays 2, 4, 9-11, 13, and 14 in Davidson 1984) is central to the two authors’ accounts of linguistic interaction.’

Tilo Weber, ‘Shared Background and Repair in German Conversation Committee’,

19‘Saussure argues that the relation between a sound pattern and a concept is arbitrary; that the linguistic sign is an ‘arbitrary’ relation.’

Christopher Walker, ‘The Swiss and The Sign.’,

20‘Saussure argues that the relation between a sound pattern and a concept is arbitrary; that the linguistic sign is an ‘arbitrary’ relation.’,

Christopher Walker, ‘The Swiss and The Sign.’ ,

21Drucilla Cornell ‘Transformations’ (1993), ,



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So despite the syntactical problems, harmonisation of legal terms and legal concepts is possible. The first difficulty, an absence of a common legal language, can be resolved to some extent by resort to law Latin, and also to philology. Terms within the Latin countries are all roughly cognates. Many English law terms are in fact French, and thus can be traced to homologous concepts and cognate terms in French law – and other Latin countries as well. Philologically speaking, harmonisation is also helped by the fact that at least for now (with the exception of Finland and Basque land) the EU Member States are members of either the Latin or Germanic group of languages. So there is a real basis for terminological convergence in European law. Semiotics and linguistics, rather than being a source of further confusion are in fact valuable tools to work toward harmonisation.

4. Conceptual Similarities

Terminological divergence is thus a manageable problem and by unification of terms a potential bridge towards harmonisation. What about conceptual divergence? Conceptual divergence is unfortunately a real problem. Different legal systems have different legal concepts which may be similar but which are rarely congruent. Even where similar terms are found in neighboring lands referring to similar concepts the degree of correlation is imperfect. For example, defamation in English law may be a term which corresponds to diffamation in French law, but even if the legal elements are similar or the same the procedural methods of proof will only be similar, and the assessment of the available damages will probably be very different. Another example: in contract law, the French notion of “cause” and the English concept of “consideration” might appear at first glance tantalizingly similar – but in fact there are real differences between the two! So while conceptual similarity encourages harmonisation it should not lead us to ignore conceptual differences which must be squarely addressed.

5. Conclusion

Divergences in the positive law of the two systems are not the result of radically different legal structures. Nor are they the result of differing legal cultures. Since both systems seek to govern the same material phenomena that also cannot be the source of divergence. Divergences in the positive law are in fact the result of legislative and interpretative decisions in individual instances. Thus building a European ius commune which would operate to harmonise the French droit commun, i.e. the civil law, and the English common law is feasible.22

22 Walter van Gerven,

‘The Case law of the ECJ and National Courts as a Contribution to the Europeanisation of Private Law’, European Review of Private Law

Vol. 3, 367-378 (1995).




B. Possible Methods for Harmonisation

Legal diversity leads to divergent legal terms, concepts and rules which increase transaction costs. What are the possible solutions to this “tower of Babel” of rules, terms and concepts?

1. Theories of Liability

Despite differences in substantive law both theories of liability and measuring damages in the two systems will be similar. By focusing on this judges can harmonise their decisions to those of other Member States.

The objective of the damage award may be to compensate the plaintiff for their loss or the defendant’s gain.23 The imputation of tort liability may also seek to punish – though at least in British law, the goal of torts against personality rights is not to punish, but to compensate.24 The determination of tort liability may also seek to prevent further torts,25 either by the tort feasor or by other potential tort feasors. Thus tort law can serve the role of deterrence.26 The imputation of tort liability may also seek to provide an emotional satisfaction to the injured party for the wrong that was done to them.27 Finally, economic rationales will also justify the imputation or non-imputation of tortious liability.28

None of these general conditions change the fact that the competing interests of privacy and freedom of the press lead to legal ambiguity. Thus, for example, monetary compensation for immaterial damages in German law is in a grey area between a theory of punishment and compensation for damages (Schadensersatz).29

Roman law answered these questions by focusing primarily on damage to one’s fortune in torts of personality rather than on the injury to the honor of the victim.30 Cases of injury to one’s honor would be remedied under a theory of vengeance.31 However, these theories of liability will be available in both systems.

2. Measure of Damages

Once a theory admits liability of the defendant for the loss to the plaintiff, the question arises, how those damages are to be measured? Again, by focusing attention on common methods of measuring damages some harmonisation can be achieved via judicial decision.

23Westerman and Grosheide, ‘BGH Urteil Caroline von Monaco’, European Review of Private Law 2: 237-260, 258 (1997).


25Ibid, 241.

26Gerhard Wagner, „Geldersatz für Persönlichkeitsverletzung’, Zeitschrift für Europäischen Private Recht Vol. 8, 2000. p. 200, 201.

27Ibid, 241.

28Ibid, 201.

29Ibid, 204.

30Ibid, 202.

31Ibid, 202.



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The measure of the damages will be determined according to the theory which determined the liability of the defendant and also taking into account the substantive damage.32 There is sufficient ambiguity in the evaluation of damages generally to permit a voluntarist judicial harmonisation.

When assessing material damages the inquiry as to their market value can either focus on the loss to the plaintiff, the gain to the defendant or both. In determining that question we must examine whether the correct measure is to look at what the defendant would buy the right for, what the defendant would sell the right for, or what the market would pay for the right,33 which should correlate to the appropriate measure of damages.34 We may also have to determine whether and to what extent punitive damages should be imposed.35

Ambiguity in evaluating the measure of damage also arises whenever the damaged interest is not a material good. For example injuries to one’s pride, embarrasment, or emotional injuries are clearly injuries but are not injuries to fungible goods.36 How are those injuries to be measured?

All of these facts show why economic analyses of law are not a panacea and raise as many methodological issues as they claim to solve. It is no simpler and is not even necessarily more objective to balance competing economic interests than it is to balance any other clash of interests. However, their very manipulability could allow them to be used to serve the ends of harmonisation.

Currently however, the national regime has its own answers to these questions because these are normative questions. Yet the divergences in the determination of the correct measure of damages are greater than the divergences in determining whether conduct constitutes a tort. So this paper focuses its comparison on the determination of the existence of a tort. In the long term however a European civil code will have to supplement and replace national efforts at harmonisation, precisely because of these divergences, and will have to define both what constitutes a tort and what is the correct measure of damages.

3. General Principles of Law

One proposed solution to harmonise law would be to rely upon the general principles of law to create overarching concepts which would be used to harmonize divergent national rules. This solution is possible but must be aware of systemic differences between the common law and the civil law.

32Ibid, 210.

33Ibid, 211.


35Ibid, 215.

36Ibid, 211.




In the civil law, general principles of law provide abstract general guidelines for the interpretation of statutes and can even be the source of substantive rights (e.g. jus cogens). However, the use of the general principles of law as a method for harmonisation runs into the difficulty that the general principles of law, as a source of law, or even as persuasive evidence of the law, were not recognized at the common law level. An analagous concept of ‘fundamental rights’ already exist in U.S. and Canadian law. The ‘canons of construction’ and rules of interpretation also exist in the common law jurisdictions and these interpretative principles are the same or broadly similar to the general principles of law recognized by civil law jurisdictions. Indeed legal maxims, which in civil law are evidence of the general principles, do exist in English common law but are merely synopses of other authoritative sources.

The most likely inroad for the general principles of law to enter into the common law is via treaties such as the European Convention of Human Rights (ECHR). The ECHR was incorporated into the national law of the United Kingdom with the passage of the Human Rights Act 1998. As time passes the notion of fundamental rights and general principles will make inroads into British law and the use of the general principles of law as a method to harmonise European Community law will become more and more likely.

It is the case that we are witnessing the emergence37 of general principles of European law through an imminent logic of justice.38 However, the analysis should not be taken too far for fear that it disappoints itself. There is as of yet no general European unified tort law like Unidroit, or the Vienna Convention which would create a harmonised European law.39 On the other hand, Article 8 of the European Convention on Human Rights provides for the protection of privacy. Unifying laws such as the ECHR will likely provide part of the solution to the problem of the contents of the rights of personality.

4. Harmonisation of Typological Differences

If the common law is to harmonise with the civil law than it would do well to examine and adopt the eminent logic of the civil law typology which divides the law into four great trunks: public international law, private international law, public national law, and private national law. Each of these main branches has sub- branches, some of which have their own proper rules sometimes including their own

37Micklity, H. ’Rechtsprinzipien im Europäischen Privatrecht sind erst rudimentär erkennbar:’ ’Perspektiven eines Europäisches Privatrechts’ (Zeitschrift für Europäischen Private Recht) Vol. 6, 253,


38Hans Micklitz, ibid., 274 speaks of ‘eine... immanente Gerechtigkeitslogik’ common to all European law. The jus naturel argument implicit here should be met with scepticism if only out of prudence as divergent practices have always shattered natural law theories of imminant legal unity and harmony leaving us with cold positivism and hard facts.

39Jaap Spier, Olav Haazen,

‘The European Group on Tort Law (Tilberg Group) and the European Principles of Tort Law’,

ZEuP (Zeitschrift für Europäisches Privatrecht) Vol. 7, No. 3 469, 469 (1999).



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autonomous rules of interpretation. The common law does distinguish between national and international law, but makes no distinction as to ‘private v. public’ law, which is part of the reason that private international law is also known as a conflict of law, at least in the United States. The different branches of civil law, even when subject to autonomous rules of interpretation, are all guided by general principles of law.

While the common law as a body of rules of law creation and interpretation does not develop different principles of interpretation (with the possible exception of administrative law including tax law – even there the distinctions are merely procedural and are not considered by appellate courts) in its different branches, it is nonetheless true that there are some conceptual differences between the typology of private national law and the common law. Unlike the civil law, the common law clearly distinguishes between tort and contract. Contract and tort can be distinguished by the fact that one transaction is voluntary and the other is involuntary. Tort ordinarily implies some sense of fault, or at least negligence, while breach of contract is not necessarily the result of fault. Torts in common law, unlike the delikt in civil law, are also distinguished from crimes by different procedural rules. The tort, as it is not a crime, does not have to meet a heightened standard of proof. Further the tort feasor must be generally shown to be only negligent, and does not need to be proven to have been willful or malicious – though the tortfeasor’s mens rea can in fact influence awards of punitive damages and, in the U.S, court costs.

All this is conceptually rather different from the civil law. In the civil law tort and contract are lumped together as the sub-branch of private national law known as obligations. However, criminal torts (i.e. intentional (or even negligent) torts) are considered délits (in German, delikts). Happily English law does have, though rarely uses, the term delict. A délit is less severe than a crime, and French law does indeed use the terms “délit” and “crime” to distinguish between what the common lawyer would call a “tort”40 and a “crime” which could be analogised to the distinction between misdemeanor (a crime bearing less than one year of imprisonment) and felony (a crime punishable by one year or more of penal servitude).

5. Private Law

Another proposed solution is the use of private law relationships to provide harmonisation de facto via private law contracts.

40 One of the ironies of the common law is that the word tort is derived from a French word which means: ‘wrong’ and a latin word meaning ‘twist’ (torquere).




It is true that creation of a single European market has led to an increasing application of private law41 and attendant problems42 which may or may not be overcome with Euro-Enthusiasm.43 ‘Privatisation’ of the law through contract (e.g. permitting contracts to be governed by the law of a certain jurisdiction) is a partial and imperfect solution.44 If Europe is to develop a common private law of obligations it will eventually have to develop a European Civil Code,45 even in fields such as tort law.46 Whether codification includes Britain or the the Nordic countries is another question: a “two speed Europe” with a federal core and a confederal rim may be the way forward for “reluctant Europeans” – though it would not be the more economical choice.

A comparison of the law of personality and privacy rights in English, French and German law

In the first half of the paper we considered general issues regarding the harmonisation of the European private law. In this section we turn our attention to a comparison of the private law of personality rights in the common law (U.S, U.K.) and the civil law (France, Germany).

As was mentioned in the introduction, the individual rights of privacy and personality are in conflict with the right of society to know the truth and the right of individuals to freedom of speech. These competing interests will be balanced differently if the right in question is an inalienable right of the person over their personality (i.e. a moral right) or instead is merely an alienable property right.47 This determination, whether the right is personal and inalienable or economic and alienable will also influence the remedy for injury to those rights. Determining whether these rights are property rights or moral rights may well best be left for a legislator - which underscores the necessity of an EU civil code.

41 Gerrit Betlem, Ewoud Hondius,

‘European Private Law after the Treaty of Amsterdam’, European Review of Private Law

1: 3-20, Vol. 9 No. 1 p. 3 (2001).

42Ibid, p. 9.

43Ibid, p. 11.

44Klaus Berger,

‘The Principles of European Contract Law and the concept of the creeping codification of law’, European Review of Private Law

1: 21-34 Vol 9, No. 1 (2001).

45There is no absence of material calling for codification (i.e. the creation of a common European Civil Code) See, inter allia Tilman, W. ‘Towards a European Civil Code’, ZEuP (Zeitschrift für Europäisches Privatrecht) Vol. 3, No. 3 (1997); van Gerven, W., ‘The Case law of the ECJ and National Courts as a Contribution to the Europeanisation of Private Law’ (European Review of Private Law) Vol. 3, 367-378 (1995).

46Spier, J. and Haazen, O.‚’The European Group on Tort Law (Tilberg Group) and the European Principles of Tort Law’, ZEuP (Zeitschrift für Europäisches Privatrecht) Vol. 7, No. 3 p 469 at 470 (1999).

47Identity or Property? ‘The traditional privacy torts of disclosure, intrusion, false light, and appropriation in American law require an invasion, an intrinsic harm caused by someone’s doing something to us without our consent. Theorists have attempted to reduce all invasions of privacy, to one harm. It has been argued that all invasions disclose information and so deny our freedom to regulate how



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To a common law lawyer, particularly to an American common law lawyer, this question of personal rights vs. property might appear moot. The remedy for breach of a right in the common law is ordinarily the monetary value of that right. Almost all rights in the common law are de facto fungible, and one could fairly speak of a presumption in practice of fungibility of rights in the common law. That is not however the case in the civil law.

In the common law the general rule is that remedy for injury is monetary compensation, exceptionally however non-pecuniary remedies such as injunctions are available. Some common law rights have no economic value and yet are protected by remedies such as abatement (to prevent a nuisance) or nominal damages (to provide satisfaction to the injured parties where there is injury without damages – damnum sine injuria or where the damages are so trifling as to be without measure - de minimis non curat lex ). Such examples however are exceptions to the general rule, and raise the theoretical question whether the right is fungible but uncompensated or infungible because they cannot be measured. The answer would probably depend on the facts of the case.

Given the common law’s penchant for pragmatism and tendancy to monetise, schools of economics and the law find fertile soil in the common law.48 The economic theory of law argues that all rights are de facto, and should be, de jure, fungible because they believe that the competition to buy and sell rights leads to wealth maximisation. That position, while comprehensible, ignores the fact that certain goods cannot in fact be priced. The limits of economic valuation also explain the limits of an economic analysis of rights. Some goods cannot be valued by a market economy, and other “goods” (“bads” in fact) should not be marketable.

The limits of economic reasoning about the law can be shown by a reductio: if there were to be no personal sphere of existence apart from the economic then slavery and contract killing would be permitted as leading to the efficient use of slaves and the useful elimination of uneconomic actors. Where to draw the line between alienable economic rights and inalienable human rights is a political question and should be determined, at least in its broad lines, by referenda or at least by directly elected legislators. Not only does Europe need a civil code, it also needs a truly democratic legislator to enact it.

Lacking such codification, harmonistion efforts at present must focus on the existing national law orders and more particularly on developing common terms, concepts,

others perceive us and that they are all intrusions in which we are treated as objects. But the way in which our privacy is being put at risk has changed because we are now voluntarily giving up information about ourselves - to our physicians, for instance - that is being gathered into data bases to be appropriated. This leads to a new understanding of the concept of privacy which reconciles that divergent set of values which marked our understanding of the old privacy torts. There is something appropriated, but it is our identity, not our property. But taking our identity as one takes a piece of property is to deny our standing as autonomous moral agents.’ Robison, W., ‘Privacy and the Appropriation of Identity’,

48 See, e.g. Landesand, Posner, ‘The Economic Structure of Tort Law’, Cambridge: Harvard Univ. Press 1987).




and legal methods. We now turn our attention to a study of the rights of personality in the common law, in France and in Germany.

A. Rights of the Person in the Common Law

At common law, as opposed to statute, the torts of defamation, trespass, and malicious falsehood are the bases for an action to protect the right of the personality. There was no right to privacy as such, although such a right has emerged in the U.S. through the constitution and case law, and in Britain through the European Convention on Human Rights.

1. Defamation

Defamation is defined as ‘Protection against non-corporal injuries to one’s person’.49 There are two types of defamation, slander and libel.50 Both have common elements, namely an untrue statement which causes injury leading to damages. To give rise to a

cause of action the defamatory statement must be communicated to a third party (i.e. someone other than the tort feasor and his or her victim).51

Truth is a defence to defamation.52 The consent of the plaintiff is also a defence.53 Since truth is a defence it must, like other affirmative defences, be proven by the defendant. Every other element of the claim must be proven by the plaintiff like any other tort.

a. Slander

Slander is oral defamation.54 Because slander is “merely” oral communication, the plaintiff must show that the slander caused him or her pecuniary harm.55 That is, damages in cases of slander, like most other torts, must be proven. This is not however the case in libel!

b. Libel

49Defamation: ‘An attack on the good reputation of a person, by slander or libel’, DuHaimes Legal Dictionary,

50Hanson, A. ‘ Libel and Related Torts’. New York: American Newspaper Publishers (1969) p. 21-25.

51For example the plaintiff must prove that the defendant published or stated defamatory words or conduct. The defendant however then may prove that the defamation was in fact true.

52Malone, W. ‘Torts’, St. Paul: West Publishing (1979) p. 143.

53Arthur Hanson, Libel and Related Torts, New York: American Newspaper Publishers (1969) p. 81-85.

54Wex Malone, Torts St. Paul: West Publishing (1979) p. 106.

55With four exceptions:

a.Crime: Statements imputing morally culpable criminal behavior;

b.Loathsome disease: Statements alleging that P currently suffers from a venereal or other loathsome and communicable disease;

c.Business, profession, trade or office: An allegation that adversely reflects on P’s fitness to conduct her business, trade, profession or office;

d.Sexual misconduct: Statement imputing serious sexual misconduct to.



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Libel is written defamation.56 In cases of libel, damages resulting from the defamation need not be proven,57 they are presumed.58 Thus the defendant bears the burden of proving that the plaintiff was not in fact injured by libelous publications.59

Libel may result from print, image60 or sound. The sale of each copy of a published libel is itself a distinct offense.61 The libelous publication must be malicious; evidence of the malice may be either express or implied and a prima facie libel will impute malice to its author though none be proven.62

Cases of libel communicated solely to the person libelled are not actionable.63

c. Privileged communications

Some communications are privileged and will not be able to be the object of a cause of action for defamation. Privileged communications are either absolute or relative.

Absolute Privilege:

56LIBEL, libellus, and criminal law: ‘A malicious defamation expressed either in printing or writing, or by signs or pictures, tending to blacken the memory of one who is dead, with intent to provoke the living; or the reputation of one who is alive, and to expose him to public hatred, contempt, or ridicule’. Hawk. b. 1, c. 73, s. 1; Wood's Inst, 444; 4 Bl. Com. 150; 2 Chitty, Cr. Law, 867; Holt on Lib. 73; 5 Co. 125; Salk. 418; Ld. Rgym. 416; 4. T. R. 126; 4 Mass. R. 168; 9 John. 214; 1 Den. Rep. 347; 2 Pick. R. 115; 2 Kent, Com. 13.’,

Bouvier’s Law Dictionary, .

57See, e.g. Hinsdale v. Orange County Publications, 171 NY2d 284.

58‘[T]he plaintiff in an action of defamation need not show that the imputation has in fact damaged his reputation, but only that it has a tendency to do so. Once he has established such a tendency he is entitled to damages.’

Le Grand Dictionnaire Terminologique, ,

59Wex Malone, Torts, St. Paul: West Publishing (1979) p. 111.

60‘The reduction of the slanderous matter to writing, or printing, is the most usual mode of conveying it. The exhibition of a picture, intimating that which in print would be libelous, is equally criminal. 2 Camp. 512; 5 Co. 125; 2 Serg. & Rawle 91. Fixing a gallows at a man's door, burning him in effigy, or exhibiting him in any ignominious manner, is a libel. Hawk. b. 1, c. 73, s. 2,; 11 East, R. 227.’,

Bouvier’s Law Dictionary,

61‘The sale of each copy, where several copies have been sold, is a distinct publication, and a fresh offence.’,

Bouvier’s Law Dictionary,

62Bouvier’s Law Dictionary,,

4 Co. 14; 2 Burr. 807; Hawk. B. 1, c. 73, s. 8; 1 Saund. 131, n. 1; 1 Lev. 240; 2 Chitty's Cr. Law, 869; 2 Serg. & Rawle, 23.

63 ‘[I]t is not ordinarily actionable to send a libellous letter directly to the person defamed’, Le Grand Dictionnaire Terminologique, .




An absolute privilege is a defence to defamation even where the defamation was malicious.64 Statements made during judicial or legislative proceedings, as well as statements by government officials, will enjoy an absolute privilege, as do

communications between spouses65 and publications which the plaintiff consents to.66

Qualified Privilege:

Other privileges are merely ‘qualified’ or ‘conditional’ ones.67 Defendants can lose their qualified privilege if they act from malice or if the reason for the privilege is not served by the privilege.68

d. Group Defamation?

Unlike in French law, there is no concept of “group defamation” or “hate speech” in the common law. Statutory reforms have in some places been introduced, but not without resistance. If the group defamed is sufficiently small, say a work-group or family or a church, the individual members might have a cause of action.

But defamations which inveigh against a class as such are not sanctioned at common law. 69 This could be justified if the personality right is merely an economic right: the right to slur an individual would not be able to be bought or sold and so its worth could not be determined. However, if the personality right is a moral right to the integrity of one’s person then that right is injured by epithets and slurs and the measure of damages would not be the market benefit to the plaintiff but the moral detriment to the defendant. And thus the damage award would be determined not by a rationale of compensation but by a rationale of prevention, deterrence and possibly retribution, i.e. punishment.

2. A Right of Privacy?

As we have mentioned, the common law recognizes no right of privacy as such. Rather a variety of torts protect privacy interests: trespass for example protects a landowner or leaseholder from unwanted visitors. Britain has no written constitution and British judges exercise more restraint in invading the legislative function so any developments in the right of privacy outside of trespass, defamation, or an action on the case (trespass on the case)70 will have to arise from treaties such as the Human Rights Act which incorporates the European Convention on Human Rights into domestic British law.

64Arthur Hanson, Libel and Related Torts, New York: American Newspaper Publishers (1969) p. 85.

65Wex Malone, Torts, St. Paul: West Publishing (1979) p. 164.

66Arthur Hanson, Libel and Related Torts, New York: American Newspaper Publishers (1969) p. 81-85.

67Malone, W. ‘Torts’, St. Paul: West Publishing (1979) p. 165.

68Hanson, A. ‘Libel and Related Torts’, New York: American Newspaper Publishers (1969) p. 95.

69Malone, W. ‘Torts’, St. Paul: West Publishing (1979) p. 133.

70This is the name of an action in very general use, which lies where a party sues for damages for any wrong or cause of complaint to which covenant or trespass will not lie. Steph. Pl. 153 Wodd. 167 Ham. N. P. 1. Vide Writ of trespass on the case. In its most comprehensive signification, case includes assumpsit



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A plaintiff could also rely on the theory of trespass on the case. Trespass on the case is a catch-all category for any tort which did not fit into the facts foreseen in the other torts. The remedy for injury suffered depends on the case, i.e. on the actual facts of the case at bar71 and hence the name of the tort.

Privacy interests against nuisances such as excessive noise or overuse of adjacent roads could also be remedied via injunction – one of the exceptional instances of a non-monetary remedy in common law. Other than the possibility of an action for trespass on the case, the privacy rights will have to be developed through the Human Rights Act which is the enabling act for the European Convention on Human Rights.

American constitutional law, unlike Britain, has developed four independent torts designed to protect privacy rights. The interest of the American law is only as a source of comparison and information as opposed to harmonisation. U.S. tort law recognizes the “right to be let alone.”72 There are four emanations of this general right:

(1)the tort of intrusion upon plaintiff's seclusion or solitude, or into her private affairs – which would also be a cause of action for trespass;

(2)public disclosure of embarrassing private facts about the plaintiff – which may or may not have been protected at common law, such as a medical, clerical or marital secret;

(3)publicity which places the plaintiff in a false light in the public eye;73 and

(4)appropriation, for the defendant's advantage, of the plaintiff's name or likeness,74 which might also give rise to a common law cause for conversion.

as well as an action in form ex delicto; but when simply mentioned, it is usually understood to mean an action in form ex delicto. 7 T. R. 36. It is a liberal action; Burr, 906, 1011 1 Bl. Rep. 199; bailable at common law. 2 Barr 927-8; founded on the justice and conscience of the plaintiff's case, and is in the nature of a bill in equity 3 Burr, 1353, 1357 and the substance of a count in case is the damage assigned. 1 Bl. Rep. 200.’ Bouvier’s Law Dictionary, .

71‘action on the case (torts) an action on the facts of the particular case i.e. an action that does not come within any of the ancient categories’, Peter Underwood, Australian Legal Information Institute, .

72Pavesich v. New England Life Ins. Co., 122 Ga. 190, 50 S.E. 68, 71 (1905); Summers v. Bailey, United States Court of Appeals, Eleventh Circuit, .

73‘False light has been called a ‘lite’ version of libel. Indeed, the two legal theories are so similar that some states do not recognize a separate cause of action for false light. Plaintiffs who sue for false light must prove that the media published something false about them, just as in a libel suit. However, the plaintiff need not show that his or her reputation was damaged, but rather that he or she was falsely portrayed in a manner that a reasonable person would consider offensive. False light is intended to compensate for hurt feelings rather than damaged reputation.’, Reporter’s Committee of Freedom of the Press, ‘The Privacy Paradox: Civil Suits’, .

74Yarbray v. Southern Bell Tel. & Tel. Co., 261 Ga. 703, 409 S.E.2d 835, 836 (1991); Cabaniss v. Hipsley, 114 Ga.App. 367, 151 S.E.2d 496, 500 (1966).




Whether these rights should be adapted into European law is an eventual question for the European Parliament.

3. Economic Torts

Economic torts are common law consumer protection. They do not protect the person or personality, rather they protect property rights.

a. The tort of passing off75

The tort of “passing off” is simply the tort committed by fraudulent misrepresentation to a buyer which injures a competitor’s trade.76 As such there is an element of false statement regarding reputation which does explain the similarity to the privacy rights or to defamation.

The injured party is the competitor, although the tort does serve to protect the interests of consumers as well as producers. The right protected is clearly economic and not that of the moral integrity of the person. Nevertheless recent case law in several common law jurisdictions recognizes a personality right against misappropriation of one’s image as protected by the tort of passing off.77

b. The tort of deceit

The tort of deceit does not protect the interest of a competitor but rather that of the consumer. However, the interest protected is economic and not that of the moral integrity of the person. Essentially, tort law will punish intentional misrepresentations intended to induce reliance which causes damage to the person thereon relying.78 The reliance must have caused some damage, but all damages, whether forseeable or not, will be compensated.79

75Baldwin’s Law Firm, ‘Australian Passing Off Law’, .

76‘In Erven Warnink BV v. J Towned & Sons (Hull) Ltd (1979) Lord Dipolock identified the five key elements of the tort of passing off: 1. a misrepresentation; 2. made by a trader in the course of a trade; 3. to his prosective or ultimate customers; 4. which is claculated to to injure the business or goodwill of another trader or injury to the business or goodwill is a reasonably foreseeable consequence; and 5. which actually casuses damage to the business or goodwill of the claimant trader or will probably do so.’ ‘Law Machine’, .

77‘The New Tort of Appropriation of Personality’, B. St. Michael Hylton and Peter Goldson

78‘1. [A] defendant makes a false representation to the claimant;

2.the false representation made is one of existing fact;

3.the representation of fact made by the defendant was known to be false to the defendant, or the defendant was reckless as to its truth or falsity;

4.the false statement was made with the intention that the claimant should act in reliance upon the statement;

5.the claimant does act in reliance upon the statement; and

6.the claimant suffers damage on acting in reliance upon the statement.’ .

79‘In order to establish a claim for deceit the claimant must show that he suffered some damage in

consequence of the defendant's false statement. The measure of damages for deceit is by reference to



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4. The European Convention on Human Rights

The European Convention on Human Rights is not self executing, that is it is not automatically transposed upon enactment into domestic law because the U.K is a dualist regime. Thus an enabling act was necessary to make the convention applicable before British courts,80 namely the Human Rights Act, which incorporates the ECHR into British law.81

Prior to the Human Rights Act however the rights guaranteed under the ECHR could be defended before the the European Court of Human Rights. For example, the British police practice of intercepting phone calls was held to be a breach of the convention obligations of Great Britain.82 Interpretation of the ECHR can ultimately lead to a harmonised European law of rights of personality and this is one road to harmonisation.

As we can see the situation even within one legal system is not without confusion: on the one hand we see overlapping multiple causes of action (e.g. for invasions of privacy). On the other hand we also see unprotected areas, e.g. for group defamations. One could conclude that the common law protects the wealthy land owner more than religious or racial minorities. However European legislation would probably recognise the right of integrity of the person as a group right, thus muffling some criticism.

B. Droits de personnalité in French law

We begin our comparison with France because it provides terms and even concepts which are often homologues to the common law and thus serves as the best example for harmonisation by terminological rapprochement. The French legal system, like that of Germany, organises injuries into either ‘obligations’ or ‘délits’. Délits are crimes and as such may be punished by imprisonment – unlike tort in English law. Obligations on the other hand may either be contractual or tortuous.

1. Droit de la vie Privée

reparation for all the loss suffered by the claimant regardless of whether any consequential loss was foreseeable or not (see Doyle v. Olby (1969)).’

80Sénat Francais : « La Protection de la Vie Privée Face aux Médias », .

81British Parliament, ‘The Human Rights Act’,

82Malone v. Commissioner for the Metropolitan Police (no.2) [1979] Chancery Division 344,


Unlike the British common law French law recognises a general right of privacy in Article 9 of the French Civil Code.83 The limits of that right have been described in the case law. This right can be limited by the public interest, for example the amount of a person’s revenue. 84

Remedies for breach of this right include seizure or suppression of materials, damages and interest, and publication of the court decision. Because suppression of the texts is in fact censorship that remedy is only available if the divulgation is intolerable to the plaintiff. 85

2. Diffamation

The English law of defamation has its homologue in diffamation. CP Art. R.622-1 of the French Penal Code describes the délit of defamation.86 Truth is a defence and provocation can mitigate or excuse the diffamation. (CP Art. R.621-2). Unlike the common law, diffamation in the French Penal Code specifically outlaws racist or discriminatory defamation.87 Also unlike the common law a business entity can be judged guilty of a crime,88 and subject to punishment via forfeiture. US criminal law instead of targeting the corporation targets its directors.

83‘[C]hacun a droit au respect de sa vie privée’. The civil code, like Art. 1 and 2 of the German Grundgesetz, does not define the contours and content of this right. Sénat Francais, ‘La Protection de la vie privée fac aux Médias’,,

84Sénat Francais, ‘La Protection de la vie privée face aux Médias’,

‘[O]n peut conclure que le droit au respect de la vie privée est ‘le droit pour une personne d'être libre de mener sa propre existence avec le minimum d'ingérences extérieures’, ce droit comportant ‘la protection contre toute atteinte portée au droit au nom, à l'image, à la voix, à l'intimité, à l'honneur et à la réputation, à l'oubli, à sa propre biographie’.

Les domaines inclus dans la protection de la vie privée comprennent essentiellement l'état de santé, la vie sentimentale, l'image, la pratique religieuse, les relations familiales et, plus généralement, tout ce qui relève du comportement intime. La jurisprudence admet que des informations sur le patrimoine ou les revenus cessent de relever de la vie privée dans certains cas. Le critère retenu est celui de la pertinence de l'information par rapport au ébat d'intérêt public. Il peut donc être légitime de consacrer une série de reportages à des affaires criminelles ayant eu un grand retentissement dans le passé. En revanche, on ne doit pas fournir, à cette occasion, des renseignements sur la vie personnelle actuelle d'une personne condamnée lors d'un des procès en question et ayant purgé sa peine, sur sa famille et sur ses habitudes. Ceci ne correspond en effet à aucune nécessité pour l'information du public.

85Sénat Francais, ‘‘La Protection de la vie privée face aux Médias’,

86Art. R.621-1 Code Pénal: La diffamation non publique envers une personne est punie de l'amende prévue pour les contraventions de la 1ère classe. La vérité des faits diffamatoires peut être établie conformément aux dispositions législatives relatives à la liberté de la presse.

87Art. R.624-3, Code Pénal,

«La diffamation non publique commise envers une personne ou un groupe de personnes à raison de leur origine ou de leur appartenance ou de leur non-appartenance, vraie ou supposée, à une ethnie, une nation, une race ou une religion déterminée est punie de l'amende prévue pour les contraventions de la 4ème classe. »

88Article R.624-6m, Code Pénal

« Les personnes morales peuvent être déclarées responsables pénalement, dans les conditions prévues par l'article 121-2, des infractions définies aux articles R.624-3 et R.624-4. »



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Unauthorised use of a person’s image is sanctioned in the French Penal Code by Art. 226-8, which however, only imposes a pecuniary sanction.89

3. Calomnie

Calumny, or “bearing false witness”90 is not an independent cause of action in the common law but is one form of defamation.

The word does however exist, and has its homologue in French law where we observe the délit of calomnie. Knowingly bearing false witness before an officer or agent of the state leads to 5 years in prison and a fine. (Art. 226-10):91

4. Breach of Confidence (atteinte au secret)

The common law protects trade secrets and privileged communication with attorneys and physicians. French law also protects professional secrets. Violating the professional secret is a délit punishable by one year of prison and a fine.92 Under some cases however the state imposes a duty to divulge professional secrets, in which case the punishment does not apply. (Art. 226-14). Reading or inhibiting others’ mail is also punished as a délit (Art. 226-15), including intercepting telecommunications. Art. 226 also protects against unauthorised, illicit, or fradulent abuse of computer databases containing personal data.

As we can see the statutory torts in French law rather closely track the same common law torts in Anglo-Saxon law. We now turn our attention to Germany. There we will see less similarity but still some points in common.

C. Persönlichkeitsrechte in Germany

Like the English common law and the French civil law, the basic contours of protection of the rights of personality under German law revolve around a clearly defined central core which became recognized in the post war era. This doctrinal similarity, stemming from similar goals sought by differing positive laws, is also

89 Art. 226-8 Code Pénal,

« Est puni d'un an d'emprisonnement et de 100 000 F d'amende le fait de publier, par quelque voie que ce soit, le montage réalisé avec les paroles ou l'image d'une personne sans son consentement, s'il n'apparaît pas à l'évidence qu'il s'agit d'un montage ou s'il n'en est pas expressément fait mention. »

90‘Calumny: The intentional and generally vicious false accusation of a crime or other offense designed to damage one's reputation.’,

91Art. 226-10, Code Pénal : Le dénonciation, effectuée par tout moyen et dirigée contre une personne déterminée, d'un fait qui est de nature à entraîner de sanctions judiciaires, administratives ou disciplinaires et que l'on sait totalement ou partiellement inexact, lorsqu'elle est adressée soit à un officier de justice ou de police administrative ou judiciaire, soit à une autorité ayant le pouvoir d'y donner suite ou de saisir l'autorité compétente, soit aux supérieurs hiérarchiques ou à l'employeur de la personne dénoncée, est punie de cinq ans d'emprisonnement et de 300 000 F d'amende.

92Art. 226-13, Code Pénal : ‘La révélation d'une information à caractère secret par une personne qui en est dépositaire soit par état ou par profession, soit en raison d'une fonction ou d'une mission temporaire, est punie d'un an d'emprisonnement et de 100 000 F d'amende’.




seen in the “grey areas” which are outside of this well defined core: the rights of the deceased; the rights – or absence thereof – of political persons or even stage “stars” as the price or prize of fame; the rights to political speech; whether groups can be defamed and if so to what extent.

We will discuss the uncontroversial core of personality rights and compare that with the other regimes of this study.

1. § 823 and § 1004 BGB

One can raise a claim in tort for violation of privacy right as a general claim in tort under § 823 BGB. Because the rights of personality are not defined in § 823 and § 1004,93 the determination of the nature and extent of this right is, as in France, largely a matter of case law decisions.94 An injury to one’s right to privacy can give rise to monetary damages, including a right to recover the unjust enrichment of the defendant95 and a right of retraction.96 Like English law, German law does not offer punitive damages to the plaintiff.97

2. 1 and 2 GG

Invasions of privacy in German law can also be attacked on a theory of unconstitutionality. An action based on the articles one and two of the German constitution are based on a theory not of compensation for damages (Schadenersatz) but upon a claim for satisfaction (Genugtuung).98

3. § 187 StGB Verleumdung

Verleumdung appears similar to the tort of defamation: the assertion must be false, and known to be false by the tort-feasor. The reputation and good credit of the person are defended and the false statement which injures those interests will be punished. Publication of the tortious assertion augments the penalty from two to five years of penal servitude – or monetary punishment.99 The objective of this tort, at least according to the code, is not compensation but punishment.

93Westerman and Grosheide, „BGH Urteil Caroline von Monaco’, European Review of Private Law 2: 237-260 1997, 241.


95Ibid, 248.

96Ibid, 242.

97Ibid, 258.

98Ibid, 201.

99‚Nach § 187 StGB macht sich derjenige strafbar, der wider besseres Wissen über einen anderen eine unwahre Tatsache behauptet, um diesen verächtlich zu machen, in der öffentlichen Meinung herabzuwürdigen oder dessen Kreditfähigkeit zu beeinträchtigen (siehe auch üble Nachrede). Die Strafe ist Freiheitsstrafe bis zu zwei Jahren oder Geldstrafe. Wird die Tat öffentlich, in einer Versammlung oder durch Schriften begangen, so ist die Strafe Freiheitsstrafe bis zu fünf Jahren oder Geldstrafe’; Götze, E. ’Rechtslexikon’, Fischer - Heymanns (2001),



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4. § 186 StGB: Üble Nachrede

Üble Nachrede, which might be translated as calumny, is defined in article 186 of the German Penal Code. The tort of üble Nachrede punishes statements which, objectively speaking, will bring a person into bad public opinion. Truth is a defence. Statements which are subjective and which injure another may constitute injury (Beleidigung). Publication is an aggravating factor and elevates the imprisonment from one to two years or may augment the monetary punishment.100

5. § 185 StGB Beleidigung

There is no tort in the common law which corresponds exactly to the German Delikt of Beleidigung: perhaps calumny would be closest. Beleidigung compensates plaintiffs for injurious words uttered or written by the defendant which insult the defendant and which bring them into bad public opinion. The fact that, at least in theory, injurious words, even when subjective, can be punished under German law meets two objections in the common law: First, the injury appears subjective, and certainly non-economic. The common law has to a certain extent developped a general principle that damage must be measurable in market terms to be compensated and that damages are to be calculated in terms of market value. Second, at least from an American perspective, punishing speech could be seen as a case of the state violating the right to free speech.101

Morally however there is much to be said for the German position. The callous indifference and amorality (or if you prefer the cold logic) of the common law shows itself here. This harshness can be seen elsewhere as well. The common law imposes no general obligation to help others. This is not the case in either the civil law of France or of Germany. The absence of legal duty is presumed under the common law, unlike the civil law, and still only rarely imposed statutorily. The

100Nach § 186 StGB macht sich derjenige strafbar, der in Beziehung auf einen anderen eine Tatsache behauptet oder verbreitet, die dazu geeignet ist, den anderen in der öffentlichen Meinung herabzuwürdigen. Keine strafbare üble Nachrede liegt dann vor, wenn die Tatsache nachweislich wahr ist. Die Tatsachen sind von den bloßen Werturteilen und anderen subjektiven Wertungen zu unterscheiden, die bloße Meinungen ausdrücken, ohne daß sie durch Tatsachen elegt werden. Solche Werturteile fallen nicht unter den Tatbestand der üblen Nachrede, können jedoch eine Beleidigung darstellen. Die Strafe bei übler Nachrede ist Freiheitsstrafe bis zu einem Jahr oder Geldstrafe. Wird die Tat öffentlich oder durch Verbreiten von Schriften begangen, so ist die Strafe Freiheitsstrafe bis zu zwei Jahren oder Geldstrafe: Götze, E. ’Rechtslexikon’,

Fischer - Heymanns (2001),

101Nach § 185 StGB wird die Beleidigung mit Freiheitsstrafe bis zu einem Jahr oder mit Geldstrafe bestraft. Ist die Beleidigung mittels einer Tätlichkeit begangen, so ist die Strafe Freiheitsstrafe bis zu zwei Jahren oder Geldstrafe. Die Beleidigung ist ein Privatklagedelikt und wird nach § 194 StGB fast ausschließlich nur auf Antrag verfolgt. Der Gesetzgeber hat die Beleidigung nicht näher definiert. Es handelt sich um einen rechtswidrigen Angriff auf die Ehre eines Anderen durch die Kundgabe der Mißachtung oder Nichtachtung. Die Ehre ist die durch Art. 1 GG geschützte Würde des Menschen. Also, sein innerer und äußerer Wert und seine Geltung in der Gesellschaft.

E. Götze, ‘Rechtslexikon’, Fischer - Heymanns (2001)




unconvincing justifications for the presumption that no duty exists between persons in the common law are concerns over freedom and the role of the state vis-à-vis the individual.

This is not the only instance of amoral indifference of the common law. In French law, even words which menace, i.e. threaten, another can be punished as a crime. Assault can be merely words, but must be words sufficient to place the victim in apprehension of imminent bodily harm.

Another example is the case of group defamation. Again, unlike the common law, both the French and German legislators have had no problem in determining first the existence of a legal concept of group defamation and second a corresponding sanction for those who choose to malign groups. Germany has shown itself more reluctant to recognise group defamation, but does in fact recognise such a case in the specific instance of hate speech against those persecuted by the national socialist regime.102

Whether group defamation should result in compensation to the victims or the state is another question. But that speech designed to incite groups to hatred and violence should be punished seems clear, since such speech cannot contribute to political debate but is indeed the very method used to squelch it. Further for all the talk of “vigorous counter speech in the market place of ideas” the reality has been unilateral oppression of the weak by the strong, whether that oppression be racial, sexual, or economic. In a democracy unpopular minorities are always in danger of oppression by the majority.

Because of a history of racial segregation and despite the fact that democratic discourse requires tolerance hate speech remains generally unrecognised in the common law jurisdictions. Attempts to legislate against hate speech generally fail and even if legislated risk being stricken as an unconstitutional infringement on the freedom of speech. Sometimes the lessons of comparative law are negative, i.e. what not to do. “Hate speech” may be a problematic area of harmonisation.

As we have just intimated, it is possible under German law to commit a collective injury, i.e. a group Beleidigung.103 The group injured does not necessarily have to be racial or religious; it could merely be a group of co-workers or social associates. It must however be definite.

Written publication is not necessary for this tort to arise. But although publication is not required the injurious words must be stated in public: family discussions and private functions are excluded from liability. Further this tort will not be initiated by the state’s prosecutor, and must be prosecuted by the injured.

102Johannes Hager, Januar 1999, BGB § 823 C 25

103Op. Cit., Note 101.



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Truth is a defence to Beleidigung. Injurious words and mutual exchanges of injurious words may ‘cancel each other out’.104


The classical personality and privacy rights in the common law and civil law provide a basic framework of remedies against fraudulent misrepresentation of the person. There are enough similiarities in these laws that they could be harmonised without a European legislator. However, the rise of mass media has forced the law to evolve beyond its classical origins to balance the rights of privacy against the freedom of the press. The hard questions of whether to protect the élite from paparazzi and tabloids, the personality rights of the deceased, and whether politicians should be exempt from defamation – either as tortfeasor or victim – are political questions. As such they are best answered by legislators – and the national legislators have reached divergences that would be too great to be harmonised merely by judicial approximation.

The normativity of those issues explains why legislative solutions are preferable. Harmonisation will thus require an E.U. Civil Code. There are too many Member States (currently fifteen with another half dozen seeking entry) and some of the laws in question are too normative for any other solution to work. The EU needs a European Civil Code – and a democratically elected legislature to enact it.

104 „Eine Beleidigung ist dann nicht rechtswidrig (und damit nicht strafbar), wenn es sich z.B. um tadelnde Urteile über wissenschaftliche, künstlerische oder gewerbliche Leistungen, die Wahrnehmung berechtigter Interessen sowie Vorhaltungen oder Rügen dienstlicher Vorgesetzter handelt (§ 193 StGB). Das gleiche gilt, wenn es sich um wahre Tatsachen handelt, es sei denn, daß die Form der Bekanntgabe beleidigend ist (§ 192 StGB).

Bei wechselseitigen Beleidigungen kann der Richter nach § 199 StGB einen oder beide Täter für straffrei erklären. Um wechselseitige Beleidigungen handelt es sich dann, wenn eine Beleidigung auf der Stelle durch eine andere Beleidigung erwidert wird.’

E. Götze, ‘Rechtslexikon’,

Fischer - Heymanns (2001)



Csongor István Nagy


At Maastricht, the Member States (hereafter: MSs) inserted into the body of the Treaty establishing the European Community (hereafter: EC Treaty) a citizenship clause.1 At first sight, this provision did not do more than stating the obvious: it acknowledged and summarized the rights granted to EU nationals by other provisions of the Treaty and emphasized that these rights are subject to limitations and conditions, which in any case had already been included in the Treaty beforehand. What the citizenship clause formally did was to summarize some of the dispersed rights of the nationals of Member States. It created a general rule for that purpose but did not grant any new rights to EU citizens.2 However, what the citizenship clause in fact triggered was the expansion of those rights. This is especially astonishing given the wording of the clause and the fact that the reason for introducing the citizenship clause was somewhat propagandistic. The drafters of the EU Treaty intended to make the Maastricht Treaty, which encountered several national referenda, more appealing to the European citizens. No substantive enlargement of the rights of other MSs’ nationals was backed by a political compromise. Accordingly, what the drafters did was that they created a nice sounding provision, which awarded European citizens what they had already possessed: ‘citizens of the Union shall enjoy the rights conferred by (…) [the EC] Treaty and shall be subject to the duties imposed thereby.’3

The EC Treaty enumerates a bundle of rights attached to European citizenship. The most important one for the purpose of the present article is ‘the right to move and reside freely within the territory of the Members States, subject to the limitations and conditions laid down in (…) [the EC] Treaty and by the measures adopted to give it effect.’4 European citizens are granted ‘the right to vote and to stand as a candidate’ at municipal elections and in elections to the European Parliament.5

LLM (Central European University, Budapest/Cornell University, New York), SJD student (Central European University), lecturer in law (International Business School, Budapest, Zsigmond Király School of Economics, Budapest and István Bibó College of Law, Budapest)

1Treaty on European Union (hereafter: EU Treaty), [2002] Official Journal C 325, Article G. Initially, the EU Treaty inserted Articles 8-8e into the EC Treaty.

2Cf. Theodora Kostakopoulou, Nested ‘Old’ and ‘New’ citizenships in the European Union: Bringing Out the Complexity, 5 Columbia Journal of European Law 389, 391 (1999). Catherine Jacqueson, Union Citizenship and the Court of Justice: Something New under the Sun? Towards Social Citizenship, 26 European Law Review 260, 260 and 263 (2002). D. O' Keeffe, Union Citizenship, in Legal Issues of the Maastricht Treaty 94 (D. O'Keeffe & P. Twomey eds., 1994). Jo Shaw, The many pasts and futures of citizenship in the European Union, 22 European Law Review 554, 556 (1998). Sybilla Fries & Jo Shaw,

Citizenship of the Union: First steps in the European Court of Justice, 4 European Public Law 533 (1998). Opinion of Mr Advocate General La Pergola delivered on 30 September 1999 in Arben Kaba v Secretary of State for the Home Department. Case C-356/98. [2000] ECR page I-02623. Commission’s Report on the operation of the Treaty on the European Union, SEC(95) 731 of 10/5/1995.

3EC Treaty, Article 17(2)

4Article 18(1).

5Article 19.



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Every European citizen is entitled to diplomatic protection of any MS in a third country where his or her home state is not represented.6 This provision of the EC Treaty is odd. What is more, it is futile since it is the rules of public international law that prescribe which country may provide diplomatic protection for a particular person and traditional rules of public international law say that a bond of nationality between the injured individual and the intervening state is an indispensable precondition of diplomatic protection.7 The unilateral declaration of the EC Treaty will work only if it is accepted by the third country concerned. However, that third country is not obliged to accept, for instance, the intervention of the Netherlands for the protection of a Spanish national. European citizens have the right to petition the European Parliament and to apply to the European Ombudsman.8 The Treaty of Amsterdam supplanted this enumeration with the right to apply to any Community institution in one of the official languages of the EU and to get an answer in that language and the right to have access to the documents of the European Parliament, the Council and the Commission.9 Finally, all European citizens are protected against discrimination based on nationality,10 sex, race, religion, disability, age or sexual orientation,11 even though these prohibitions are not restated in the citizenship clause.

Nonetheless, it is essential to start with an ontological question: what is meant by European citizenship? It is telling that in addition to stressing that European citizenship is meant to complement and not to replace national citizenships,12 that are constituting EU citizenship.13 In some European languages the term used for European citizenship differs from the phrase used for designating the citizenship of a state by omitting the ‘state’ component from the term:

Staatsbürgerschaft/Bürgerschaft, állampolgárság/polgárság etc. It is not clear what end European citizenship is meant to serve if it has any at all. Of course, whatever its end might be it is tightly attached to the aim of the European integration. Since there are several questions related to the destiny and fate of European citizenship it is time to make a caveat. Such issues are not covered by the present article, which deals with the way and means in which the European Court of Justice (hereafter: ECJ) filled with content the empty concept of European citizenship making it the central legal mechanism for free movement of persons.

In the present article, I will show that the ECJ departed from the initial constitutional intentions and the wording of the citizenship clause. The Court, whilst leaving the

6Article 20.

7See Craig Forcese, Shelter from the Storm: Rethinking Diplomatic Protection of Dual Nationals in Modern International Law, 37 George Washington International Law Review 469, 480-481 (2005). Cf. Judgment of the Permanent Court of International Justice in Mavrommatis (CPJI, Series A, No. 2, 12). First Report on Diplomatic Protection by Mr. John R. Dugard, Special Rapporteur, U.N. GAOR, Int’l Law Comm’n, 52d Sess., at 11, U.N. Doc. A/CN.4/506 (2000).

8Article 21.

9Now Article 22 and 255. Treaty of Amsterdam, Article 2, [1997] Official Journal C 340.

10Article 12.

11Article 13.

12Article 17.

13Treaty establishing the European Community (hereafter: EC Treaty), [2002] Official Journal C

325, Article 17(1). Cf. Criminal proceedings against Florus Ariël Wijsenbeek (hereafter: Wijsenbeek). Case C-378/97. [1999] ECR page I-06207, para. 41-45.




rules on actual entry and residence in another MS untouched, created step by step a uniform legal status for all EU citizens lawfully residing in a MS different from their home country. This move is based on the extensive interpretation of the right to equal treatment. For the time being, all European citizens that are lawfully resident in another MS enjoy the very same bunch of rights irrespective of their reason of entry and residence, e.g. worker, student.

Formal changes entailed by the citizenship clause regarding free movement of persons

Prior to the citizenship clause, the right of free movement, recognized as fundamental was an economic right having particular economic functions, i.e. market integration, promotion of the efficiency of the common market, etc. Irrespective of the language the ECJ constantly used in its judgments, the right of free movement was the right of free movement of one of the factors of production, i.e. labour. This situation changes with the adoption of the citizenship clause in Maastricht and its amendments in Amsterdam and Nice, even though the European citizen is regarded as a consumer of rights since the citizenship clause does not confer political rights on the right-holders and thus it is still a market oriented concept.

Article 18 (1) of the EC Treaty – which provides that ‘every citizen of the Union shall have the right to move and reside freely within the territory of the Member States, subject to the limitations and conditions laid down in this Treaty and by the measures adopted to give it effect’ – appears at first glance to be nothing else but a nice declaration having no effect as to the substance and content of the right of free movement. However, this provision really adds something new to the free movement of persons even in legalistic sense. Prior to the citizenship clause, there were several individual grounds for the right of residence. For example, workers could move freely and students could reside in the territory of another Member State only if they showed that they will not be a burden of the social security system of the host MS. Now the line of reasoning has changed. The citizenship clause creates a new general principle and all the rules that governed somebody’s residence in the territory of another MS are considered to be the exception. All this has several implications. First of all, the principal has to be interpreted broadly while the exception is to be construed, narrowly. Second, the citizenship clause shifts the burden of proof. Now it is on the MS to prove that the conditions of the exception are met. This is again a favour for nationals of other MSs. These are the formal changes that the citizenship clause brought with itself. There are substantive changes, too, which are not enshrined in the wording of the clause itself but in the constantly evolving jurisprudence of the ECJ.

The ECJ’s grasp of the European citizenship



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Right to enter v. right to equal treatment: an asymmetric development

There is a remarkable split between two fields of the citizenship clause regarding the development caused by the ECJ. The stricto sensu right of entry and residence into a MS has undergone no material change, i.e. an EU national may enter a MS other then his or her home state and reside there only if it is granted that right by the relevant provisions of the EC Treaty and the secondary legislation. However, once an EU citizen is lawfully resident in a MS other than his or her own, the rights he or she enjoys is expanded due to the wider judicial construction of the scope of Article 12 of the EC Treaty prohibiting discrimination based on nationality.

Entering another MS and establishing lawful residence: no material expansion

As opposed to the spectacular development regarding what rights are granted to EU citizens if lawfully resident in another MS the right to move did not experience such a remarkable extension, indeed it did not experience any extension at all. The ECJ stuck to the dispersed grounds of residence provided mainly in secondary legislation. The classic formulation of the Court is that at the present stage of development of Community law the right of nationals of MSs to reside in another Member State is not unconditional. The Court’s position is based, first, on the Treaty provisions on free movement of persons and the secondary legislation adopted to give them effect and, second, on Article 18 of the EC Treaty, which, whilst granting citizens of the Union the right to move and reside freely within the Member States, expressly refers to the limitations and conditions laid down in the Treaty and by the measures adopted to give it effect.14 This standard ruling of the Court read in conjunction with the legal development reached regarding the rights that an EU citizen lawfully residing in a MS other then his or her home one enjoys suggests that the Court tends to treat the second indent of Article 18(1) of the EC Treaty as referring only to the right to enter and reside in another MS but these limitations, in principle, are not so tonic or they are even absent in cases where the Court deals with the status of migrants successfully overcoming the threshold question of lawful residence.

In Wijsenbeek, the issue was whether MS can require European citizens who are nationals of another MS to present a passport or identity card when entering its territory. The ECJ answered the question in the affirmative; however, it ignored a related issue raised by Advocate General Cosmas, who argued that Article 18(1) prevails over the limitations included in the secondary legislation and the citizenship clause should impose its own requirements on secondary legislation and state

14 Arben Kaba v Secretary of State for the Home Department. Case C-356/98. [2000] ECR page I-02623, para. 30. Arben Kaba v Secretary of State for the Home Department. Case C-466/00. [2003] ECR page I- 02219, para. 46. Georgios Orfanopoulos and Others (C-482/01) and Raffaele Oliveri (C-493/01) v Land Baden-Württemberg (hereafter: Orfanopoulos). Joined cases C-482/01 and C-493/01. [2004] ECR page I- 05257. The citizenship clause was also raised in Criminal proceedings against Donatella Calfa. Case C- 348/96. [1999] ECR page I-00011. However, the Court ignored the interpretation of the citizenship clause since the case could be solved on the basis of the old law. See Martina Doppelhammer, Expulsion: a Test Case for European Union Citizenship 24 European Law Review 621, 622-623 and 625-626 (1999).




measures.15 The issue of crossing the external border of the MSs is largely de- emphasised due to the Schengen acquis. Nonetheless, it may still lead to controversies owing to MSs’ right to invoke safeguard clauses, which they occasionally do invoke for justifying provisional border controls.16

In Georgios Orfanopoulos and Others the Court dealt with the expulsion of two migrants from Germany for committing certain crimes repeatedly and for being a hardened offender. The ECJ delivered a remarkable interpretation when suggesting that the citizenship clause creates not additional rights of entry and residence and it does not expand these rights to situations that were not covered previously, i.e. the previous secondary legislation and case-law remain untouched. ‘(…) it is for the national court to determine the provisions of Community law, if any, other than Article 18(1) EC, on which a national of a Member State (…) may rely in the circumstances of the proceedings which gave rise to case.’17

However, this moderate approach of the Court is to be read together with the secondary legislation, which was amended recently. Directive 2004/38 put onto a common ground the dispersed rights of actual entry and residence, which were and are partially still based on the person’s status as a worker, student etc. The new Directive beyond codifying the rules on actual entry and residence draws along no material change since the general rule remains that economically non-active persons are entitled to a residence for more than three months in case they have a comprehensive sickness insurance and they have sufficient resources not to become a burden on the social assistance system of the host Member State.18

Broadening the scope of the rights of EU citizens lawfully resident in a MS other then their home state

As opposed to the Court’s position regarding the right of entry and residence, the ECJ was very activist in expanding the rights of European citizens lawfully residing in the territory of a MS other than their home country. The reason for that was that the citizenship clause, according to the Court, broadened the scope of the EC Treaty

15‘(…) any obstacle whatsoever which is liable to hamper or to render less attractive the exercise of the rights guaranteed by this article complies with Community law if it meets the following conditions: it must first be non-discriminatory, secondly it must be justified by overriding reasons of public interest, it must then be appropriate for ensuring attainment of the objective it pursues and finally it must not go beyond what is necessary for that purpose. It is in the light of these criteria that the compatibility of controls at the internal frontiers of the Community and the imposition of a general obligation to present a passport or identity card with Community law must be examined.’ Opinion of Mr Advocate General Cosmas delivered on 16 March 1999 in Wijsenbeek, supra n. 12, at para. 105.

16Jacqueson, supra n. 2, at 263.

17Orfanopoulos, supra n. 13, at para. 54.

18Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States amending Regulation (EEC) No 1612/68 and repealing Directives 64/221/EEC, 68/360/EEC, 72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC. [2004] Official Journal L 158, page. 0077-0123, Article 7. Cf. Corrigendum to Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States amending Regulation (EEC) No 1612/68 and repealing Directives 64/221/EEC, 68/360/EEC, 72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC. [2004] Official Journal L 229, page 35 – 48, Article 7.



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and accordingly the ambit of Article 12 prohibiting discrimination based on nationality. This anti-discrimination provision read in conjunction with the citizenship clause oblige MSs to grant several benefits and entitlements to EU citizens, which were previously reserved to their own nationals. This move was accomplished by gradually superseding Article 12 and the citizenship clause over the traditional free movement rules of the Treaty and the secondary legislation in the question.

Beating new paths: the message of Martinez Sala

The first case dealing with the effects of the citizenship clause was Martinez Sala.19 The dispute concerned a Spanish national residing in Germany who applied for a child raising allowance. According to German law, the allowance was granted only to persons possessing a valid residence permit. Martinez Sala did not have such a permit because the validity of hers expired. In other words, even though she was lawfully residing in Germany her permit was no longer valid. The ECJ held that the residence permit cannot have a constitutive value and it can serve only administrative or probationary purposes.20 A MS has a valid interest in having statistical data of the migrant workers residing in its territory. However, it is all it can do. In the absence of a constitutive effect of the residence permit, the subsequent issue was whether Ms. Sala was entitled to a right of residence under Community law, for instance for being a worker. Having stated that the Court could have carried along the legal analysis according to its old case law, which presumably would have led to the same outcome the Court actually reached at the end of the day. It could have said that the child-raising allowance was a family benefit within the meaning of Article 4(1)(h) of Regulation No 1408/7121 and also a social advantage within the meaning of Article 7(2) of Regulation No 1612/68.22 Ms. Sala was in all probability a worker – even though the ECJ left the determination of this issue to the national court23 – and as such he could benefit from the anti-discrimination provision of Article 7(2) of Regulation No 1612/68. It had also been well-settled case-law of the court that residence permit can have only declaratory functions and they cannot be the prerequisites of the exercise of the rights granted by the EC Treaty.24 The Court could have said that but it did not. What the Court did was that it changed the legal test applicable and it referred directly to the citizenship clause, which referred forward to the Treaty prohibition of discrimination based on nationality. The Court introduced the following formula:

19The ECJ touched upon the citizenship clause already in Sofia Skanavi. However, here the Court confined itself to sating that Article 52 of the Treaty is the specific formulation of the citizenship clause since the dispute could be solved on the basis of the former. Criminal proceedings against Sofia Skanavi and Konstantin Chryssanthakopoulos. Case C-193/94. [1996] ECR page I-00929. para. 21-22.

20María Martínez Sala v Freistaat Bayern (hereafter: Martínez Sala). Case C-85/96. [1998] ECR page I- 02691, para. 53.

21Id., at para 22. Ingrid Hoever and Iris Zachow v Land Nordrhein-Westfalen. Joined cases C-245/94 and C-312/94. [1996] ECR page I-04895, para. 27.

22Martínez Sala, supra n. 19, at para 25. Vera Hoeckx v Openbaar Centrum voor Maatschappelijk Welzijn, Kalmthout. Case 249/83. [1985] ECR page 00973, para. 20.

23Martínez Sala, supra n. 19, at para. 45.

24See BMW Belgium SA and others v Commission of the European Communities. Joined cases 32/78, 36/78 to 82/78. [1979] ECR page 02435, para. 50.




‘a national of a Member State lawfully residing in the territory of another Member State, the appellant in the main proceedings comes within the scope ratione personae of the provisions of the Treaty on European citizenship. Article 8(2) [now Article 17(2)] of the Treaty attaches to the status of citizen of the Union the rights and duties laid down by the Treaty, including the right, laid down in Article 6 [now Article 12] of the Treaty, not to suffer discrimination on grounds of nationality within the scope of application ratione materiae of the Treaty. It follows that a citizen of the European Union (…) lawfully resident in the territory of the host Member State, can rely on Article 6 [now Article 12] of the Treaty in all situations which fall within the scope ratione materiae of Community law, including the situation where that Member State delays or refuses to grant to that claimant a benefit that is provided to all persons lawfully resident in the territory of that State on the ground that the claimant is not in possession of a document which nationals of that same State are not required to have and the issue of which may be delayed or refused by the authorities of that State.’25

The analytical steps done by the court in the case were the following. First, are child-raising allowances covered by EC law ratione materiae. Second, is Martinez Sala covered ratione personae – which is met if she is the national of a MS lawfully residing in the territory of another MS. And, finally, is the prohibition of discrimination breached?26 The Court’s reasoning was telling when it said that all citizens lawfully residing in another MS come into the personal scope of the citizenship clause and citizens are afforded the right for no discrimination based on nationality for matters covered by the material scope of the Treaty. Since Ms. Sala was lawfully resident in Germany and the child-raising allowance was covered by the Treaty ratione materiae it was to be examined whether the national measure meets the requirements of the anti-discrimination provision.27 The novelty of the case was that by referring directly to the rules of the Treaty the Court suggested that all EU citizens once lawfully residing in a MS other than their home country are entitled to equal treatment for matters within the material scope of the Treaty irrespective of their original status, e.g. worker, student etc. That is, the Court seemed to suggest that these European citizens have a uniform package of rights as opposed to the different packages of rights attached to different statuses.28 Although the judgment raised several issues, which had to be dealt with by subsequent decisions, it opened the door to the creation of a universal right to equal treatment including also welfare rights. All this, however, means that the holder of the right are no more treated as one factor of production whose free flow is to be ensured by the prohibition of discrimination but as persons who are granted rights by the reason

25Martínez Sala, supra n. 19, at para. 61-63.

26Contrary to the submission of the Commission, the Court considered that it does not have to decide the question whether the new citizenship clause creates new a right of actual residence since that issue is too remote to the fact pattern of the case. As Ms Sala was a worker that issue could be decided on the basis of the old 1612/68. Regulation and the Court refused to engage into academic or hypothetical questions. Id., at para. 59-60.

27Id., at para. 61-63.

28Jacqueson, supra n. 2, at 266.



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of their belonging to a community.29 This potential perspective was inherent in the reasoning of the Court but it was not spelled out. The subsequent case law lived up to these expectations.

Going further gradually: the subsequent jurisprudence of the Court

The first case where the citizenship clause had a real impact on the final outcome of the case and where it actually created a new right is Grzelczyk.30 Mr. Grzelczyk was a French citizen studying in Belgium where he had pursued and financed his studies for three years. In the fourth year, however, he encountered financial difficulties since he was not able to take up even a part time job due to his preparing for the final exams. As a consequence, he applied for the support called minimex. If Grzelczyk had been a Belgian national or a worker31 he could have received the aid but as he was neither of them his application was refused.32 It was well-settled case law of the ECJ that, in case of students, enrolment and tuition fees are covered by the anti-discrimination provision of the EC Treaty but maintenance expenses are not, i.e. MSs are not required to support the studies of the national of other MSs.33 Under the Directive applicable to students MSs may require students to have a health insurance and to prove that they have sufficient financial resources not to become a burden on the host MS.34 In sum, Mr. Grzelczyk did not enjoy a right to the minimex under the pre-citizenship law. However, afterwards the court went on and extracted new rights from the initially blank citizenship clause.

Even though the Court acknowledged its previous case law that students were not afforded that wide protection as workers get,35 it announced that ‘Union citizenship is destined to be the fundamental status of nationals of the Member States, enabling those who find themselves in the same situation to enjoy the same treatment in law irrespective of their nationality, subject to such exceptions as are expressly provided for.’36 It is remarkable that European citizenship is not but it is only destined to be the fundamental status of EU nationals. Having said that the question arises whether the citizenship clause creates a new right or new rights? The Court answers the question in the affirmative. The Court argued that in the case at stake the fact that Grzelczyk was not a Belgian national was the only ground for refusal. The Court finally held that maintenance grants are covered by the anti-discrimination provision of EC law: ‘It is true that, in (…) [Brown],37 the Court held that, at that stage in the development of Community law, assistance given to students for maintenance and training fell in principle outside the scope of the EEC Treaty for the purposes of Article 7 thereof [later Article 6 of the EC Treaty]. However, since Brown, the Treaty on European Union has introduced citizenship of the European Union into

29Sybilla Fries & Jo Shaw, supra n. 2, at 536. Jacqueson, supra n. 2, at 267.

30Rudy Grzelczyk v Centre public d'aide sociale d'Ottignies-Louvain-la-Neuve (hereafte: Grzelczyk). Case C-184/99. [2001] ECR page I-06193.

31Minimex was a social advantage within the meaning of Article 7(2) of that Regulation 1612/68.

32Grzelczyk, supra n. 29, at para. 13.

33Steven Malcolm Brown v The Secretary of State for Scotland (hereafter: Brown). Case 197/86. [1988] ECR page 03205, para. 18.

34Council Directive 93/96/EEC of 29 October 1993 on the right of residence for students. [1993] Official Journal L 317, page 0059-0060.

35Grzelczyk, supra n. 29, at para. 27-28

36Grzelczyk, supra n. 29, at para. 31.

37Brown, supra n. 32, at para. 18.




the EC Treaty and added to Title VIII of Part Three a new chapter 3 devoted to education and vocational training. The fact that a Union citizen pursues university studies in a Member State other than the State of which he is a national cannot, of itself, deprive him of the possibility of relying on the prohibition of all discrimination on grounds of nationality laid down in Article 6 [now Article 12] of the Treaty.’ This ruling contains apparently two novelties. First, Grzelczyk exercised its right of free movement and residence directly based on the citizenship clause. Second, the raione materiae of the prohibition of discrimination was widened. However, the ECJ did not stop here and what it gave with one of its hands almost took back with the other. It proceeded to interpret the secondary legislation to justify derogations from the general rule established by the Treaty. The Court held that the foregoing

‘interpretation does not, however, prevent a Member State from taking the view that a student who has recourse to social assistance no longer fulfils the conditions of his right of residence or from taking measures, within the limits imposed by Community law, either to withdraw his residence permit or not to renew it. Nevertheless, in no case may such measures become the automatic consequence of a student who is a national of another Member State having recourse to the host Member State’s social assistance system.’38

In short, MSs cannot refuse to grant the maintenance allowance but they may expel the student for the very same reason that is the preconditions of acquiring the maintenance, although the withdrawing of the residence permit cannot be automatic.

However, the judgment of the ECJ did not leave untouched the preconditions of withdrawing one’s residence permit, either, but it departed slightly from its old jurisprudence in favour of European citizens. The Court established that withdrawal of the residence permit is justified only if the person concerned is an unreasonable burden on the host MS.39 Accordingly, it does not suffice if he or she is a burden, it must be an unreasonable burden:

‘whilst Article 4 of Directive 93/96 does indeed provide that the right of residence is to exist for as long as beneficiaries of that right fulfil the conditions laid down in Article 1, the sixth recital in the Directive’s preamble envisages that beneficiaries of the right of residence must not become an unreasonable burden on the public finances of the host Member State. Directive 93/96, like Directives 90/364 and 90/365, thus accepts a certain degree of financial solidarity between nationals of a host Member State and nationals of other Member States, particularly if the difficulties which a beneficiary of the right of residence encounters are temporary.’

The curiosity of this ruling is that the ECJ interpreted the preamble in a way that broke down the operative part of the Directive.

38Grzelczyk, supra n. 29, at para. 42-43

39Ibid., at para. 44.



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All in all, the Court’s judgment in Grzelczyk introduced three novelties. First, an EU resident may be expelled from another MS only if it is an unreasonable burden on the public finances of the host MS. It is not longer sufficient to show that the person generates costs for the host MS. It must be presented that these costs are more than reasonable and note that the burden of proof is on the MS. Second, once an EU citizen is admitted to the MS the state has to show some financial solidarity if the person gets into such difficulties. Nonetheless, it was still not clear whether EU citizens lawfully residing in the territory of another MS than their own are granted a uniform status consisting of particular rights irrespective of the ground their right of residence, e.g. irrespective of whether they are workers, economically not active etc. The Court’s reasoning was quite timid and is focused mainly on the situation of Grzelczyk as a whole and not the nature of the benefit itself. The line of reasoning seems to suggest that it was all the circumstances of Grzelczyk that caused the Court’s judgment and not the fact that the benefit at stake was covered by the EC Treaty ratione materiae and, accordingly, it is covered by the provision of equal treatment without any further.40 Moreover, the Court used intensively the argument that, beside the introduction of the citizenship clause, one of the major changes in the stance of Community law that trigger the overruling of the previous case law was the introduction of a Community policy on education and vocational training. Accordingly, the question was not settled whether the citizenship clause in itself was sufficient ground for breaking though the old case-law.41 It was only the Portuguese government that argued in that direction, however, its reasoning was not endorsed by the Court, explicitly.42 However, as a third point, the ruling of the Court makes it clear that even though the host MS may be obliged to provide the support it may withdraw the residence permit for the very same ground that justified the grant of the aid. Beside this ambiguity the judgment does contribute to the widening the content of free movement of persons.

In Baumbast the case dealt only partially with the significance of the citizenship clause.43 The national court asked whether Mr Baumbast as an EU citizen enjoyed a directly effective right of residence in another EU Member State pursuant to Article 18 of the EC Treaty in circumstances where he no longer enjoys rights of residence as a worker under Article 39 of the Treaty of Rome, and does not qualify for residence in the host State under any other provision of EU law? Here, the Court had the chance to summarize the development of the previous case-law and to spell out the concept of an independent right to free movement and residence based on the citizenship clause and it did live up to chance. First, the Court held that ‘the right to reside within the territory of the Member States under Article 18(1) EC (…) is conferred directly on every citizen of the Union by a clear and precise provision of the EC Treaty.’44 Afterwards, the Court went on to enquire the limitation of this right. The Court observed the reason of restricting the right of free movement and residence by limitations and conditions is that MSs have certain legitimate interests, which must be respected. This in fact means that the beneficiaries of the citizenship

40Cf. Jacqueson, supra n. 2, at 270.

41Grzelczyk, supra n. 29, at para. 35.

42Id., at para. 23.

43See Baumbast and R v Secretary of State for the Home Department (hereafter: Baumbast). Case C- 413/99. [2002] ECR page I-07091, question 3.

44Id., at para. 84.




clause cannot become an unreasonable burden on the public finances of the host MS.45 And now the Court starts doing something new. Previously, there was not doubt that the free movement and residence rights attached to the status of European citizen are subject to the limitations expressed both in the EC Treaty and the secondary legislation. Actually, the secondary legislation justified derogations from the fundamental right established by Article 18(1) of the Treaty.

However, what the Court in the next step did, instead of enquiring what kind of limitations the Treaty and secondary legislation contains, was that it established conditions and requirements for these limitations and conditions. Accordingly, by determining what requirements the limitations on the right should meet it superimposed these requirements over the secondary legislation, which initially was not the case. Following this line of reasoning, the Court observed that the ‘limitations and conditions [concerned] must be applied in compliance with the limits imposed by Community law and in accordance with the general principles of that law, in particular the principle of proportionality. That means that national measures adopted on that subject must be necessary and appropriate to attain the objective pursued.’46 Moreover, ‘the application of the limitations and conditions acknowledged in Article 18(1) [of the] EC [Treaty] in respect of the exercise of that right of residence is subject to judicial review.’47

Now let us see the practical consequences of that ruling for the dispute before the bench. The Court observes that both Mr Baumbast and his family members were covered by a comprehensive sickness insurance in their home country, which covered all types of risks in the host MS except emergency treatment.48 That is, in fact the sickness insurance of Mr Baumbast was not complete at all. Still, the Court held that ‘under those circumstances, to refuse to allow Mr Baumbast to exercise the right of residence which is conferred on him by Article 18(1) EC by virtue of the application of the provisions of Directive 90/364 on the ground that his sickness insurance does not cover the emergency treatment given in the host Member State would amount to a disproportionate interference with the exercise of that right.’49

It is apparent that this is almost the end of the story. The Court not only acknowledged a new general right but it lifted both the general right and all its exceptions to the level of primary Community law. The consequence of this move has been, for the time being, that the secondary legislation dealing with the free movement of persons was re-interpreted to some extent giving it a meaning that is in compliance with the requirement created by the Court.50 However, what the Court says actually justifies invalidation of secondary legislation rules if they do not comply with the legal test construed by the ECJ; and presumably the time will come

45Id., at para. 90. The Court here seems to say that since the restrictions on the right serve a particular end they shall not extent any further than the pursuance of that end requires.

46Baumbast, supra n. 42, at para. 91.

47Id., at para. 86.

48Id., at para. 89.

49Id., at para. 93.

50See, for instance, the addition of the term ‘unreasonable’ to the rule that persons shall not become a burden on the host MS’s public finances system.



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when the Court abolishes secondary legislation provisions for the reason that they are contrary to the EC Treaty.

In D’Hoop the dispute concerned Belgian legislation granting tide-over allowances to Belgian nationals only on the condition that they have completed their secondary education in Belgium.51 The ECJ when interpreting the prohibition of discrimination based on nationality considered that the scope of Community law covers also situations where the fundamental freedoms granted by the Treaty are exercised. Given that European citizens may move and reside freely within the territory of all MSs, of course subject to conditions and limitations, they must also enjoy equal treatment, as well, because otherwise the effective operation of the fundamental freedom conferred by the Treaty on EU nationals would be undermined and frustrated. A national measure that grants less favourable treatment to its own nationals in case they avail themselves of the opportunity ensured by the Treaty as compared to nationals that do not exercise their fundamental right in this respect goes counter the fundamental rights ensured by the Treaty and its effective operation.52 Such an unequal treatment may be justified only if it is based ‘on objective considerations independent of the nationality of the persons concerned and were proportionate to the legitimate aim of the national provisions.’53 In the concrete case the Court acknowledged that it is legitimate for a MS to demand that there be a real link between the citizen applying for the tide-over allowance and the geographic labour market concerned. However, singling out the place where the diploma of the applicant was acquired is too general and exclusive in nature. Such a requirement has no reasonable connection with the end pursued, i.e. ensuring that the persons benefiting form the tide-over allowance have a real link with the labour market in question; namely, the place where the diploma of completion of secondary education was obtained has theoretically nothing to do with question whether there is a real link between the EU citizen and the MS’s employment market.54

In Carlos Avello another aspect of discrimination came before the bench.55 The dispute concerned the surnames of two children of a Spanish father and a Belgian mother who had dual Spanish and Belgian citizenship. According to Belgian the offspring must bear the surname of the father while the Spanish custom is that the children acquire the surnames of both of their parents. The couple asked the Belgian authorities to register their children according to the Spanish custom; however, they refused to do so. The controversy came before the ECJ in the form of a preliminary reference. The issue was whether the fact that Belgian law does not allow the entry into the birth register any surname but that of the father is discriminatory against the

51Marie-Nathalie D’Hoop v Office national de l’emploi (hereafter : D’Hoop). Case C-224/98. [2002] ECR page I-06191.

52Id., at para. 29-31.

53Id., at para. 36. Cf. Criminal proceedings against Horst Otto Bickel and Ulrich Franz (hereafter: Bickel and Franz). Case C-274/96. [1998] ECR page I-07637, para. 27.

54D’Hoop, supra n. 50, at para. 36-39. Or else, with the euphemism used by the Court, ‘it unduly favours an element which is not necessarily representative of the real and effective degree of connection between the applicant for the tideover allowance and the geographic employment market, to the exclusion of all other representative elements. It therefore goes beyond what is necessary to attain the objective pursued.’ Id., at para. 39.

55Carlos Garcia Avello v Belgian State (hereafter: Garcia Avello). Case C-148/02. [2003] ECR page I- 11613.




offspring of a national of another MS especially when in the home country of one of the parents the custom is that children inherit the surnames of both parents.

The Court’s starting point was the anti-discrimination provision of the EC Treaty read in conjunction with the citizenship clause. The status of an EU citizen guarantees that European citizens in the same or comparable situations are treated alike while situations of a different nature are treated differently in case the issue is within the scope of the Treaty.56 The exercise of one of the fundamental freedoms granted by the Treaty, e.g. the freedom to move and reside within the territory of the MSs, is obviously within the scope of the Treaty. So are situations linked to the exercise of that fundamental freedom. Moreover, a citizen being entered into the birth registries of two MS with different names is treated less favourably than persons having only Belgian nationality due to the inconvenience caused to them.57 The next question was whether treating dissimilar situations similarly is justified by objective considerations independent of the nationality of the persons concerned and is proportionate to the objective being legitimately pursued. However, since the Court established that there was in fact discrimination the burden was on the Belgian government to prove that there are legitimate considerations justifying such a provision and it failed to do so.58

The ECJ made an additional step in superimposing the citizenship clause over the secondary legislation on free movement of persons in Collins.59 Mr Collins had a dual American and Irish nationality. In 1980, he took up a part-time job in the UK thereafter he left the EU and lived in the US. In 1998, he returned to the UK claiming income-based jobseekers’ allowance. That was refused by the competent authority due to the fact that he was not habitually resident in the UK. Mr. Collins went to law and the UK court made a preliminary reference. The issue of the case relevant for the theme enquired was whether the national of one of the MSs – who is not a worker neither has a right to reside in the United Kingdom pursuant to Directive No 68/360 – is entitled to the payment of a social security benefit and if he or she is then under what conditions. The Court interpreted the anti-discrimination provisions of the EC Treaty in conjunction with the citizenship clause in two stages. First, it held – after restating its previous case-law on the material scope of the equal treatment rule – that ‘it is no longer possible to exclude from the scope of Article 48(2) of the Treaty (…) a benefit of a financial nature intended to facilitate access to employment in the labour market of a Member State.’60 Second, it determined what conditions a MS may impose on granting a social security benefit and in particular a jobseekers’ allowance as in the present case.

56Id., at para. 23 and 31.

57Id., at para. 36. This outcome is not affected by the fact that the holders of the right have dual citizenship and Belgian law treats Belgian nationals having also another nationality as having solely Belgian nationality. Id., at para. 24-29.

58The Court dismissed the motion that the immutability of surnames would justify such a measure. Neither did the Court accept the argument that forcing EU citizens who are nationals of another MS, as well, to be registered according to the Belgian rules facilitates their integration into the Belgian society. Id., at para. 39-43.

59Brian Francis Collins v Secretary of State for Work and Pensions (hereafter: Collins). Case C-138/02. [2004] ECR page I-02703.

60Id., at para. 61-63.



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As regards the first issue the Court – in a similar fashion as in Grzelczyk judgment – expressly overruled its previous case-law61 by stating that the interpretation of the ‘principle of equal treatment in relation to access to employment must reflect’ the development that the insertion of the citizenship clause into the EC Treaty meant.62 Since the principle of equal treatment now also covers social benefits and assistance granted in order to facilitate access to the labour market the Court went on to enquire the second issue, i.e. is the MS regulation at stake in fact discriminatory and if it is what are the criteria that justify such a difference in treatment. UK law introduced a covert discrimination by making the grant of the jobseekers’ allowance conditional upon the applicant’s being habitually resident in the UK since ‘that requirement is capable of being met more easily by the State’s own nationals.’63 Such an in fact discrimination, however, may escape the prohibition of discrimination ‘if it is based on objective considerations that are independent of the nationality of the persons concerned and proportionate to the legitimate aim of the national provisions. (…) [it is] legitimate for a Member State to grant such an allowance only after it has been possible to establish that a genuine link exists between the person seeking work and the employment market of that State.’64 The genuine link consists in the EU citizens intention and efforts of genuinely seeking employment in the labour market of the host MS.65 Moreover, the conditions of granting such a social benefit – which must be, of course, proportionate, i.e. is they cannot go beyond what is necessary for achieving the legitimate public end – ‘must rest on clear criteria known in advance and provision must be made for the possibility of a means of redress of a judicial nature.’66

The comedy has come to an end: new and uniform bunch of rights incorporated into the citizenship clause

The Court went one step further in one of its recent judgments. In Bidar67 a French national – after completing his final three years of secondary education – continued his studies in the UK. During that he applied for a student loan. Namely, in the UK assistance for students’ maintenance costs is mainly provided via state student loan, i.e. students are entitled to a loan to cover the costs of their studies the interest rates of which are lower than those of commercial loans, what is more, they are obliged to start repaying the loan only once they begin earning above a given amount of money. Nationals of other MSs are eligible for such a student loan if they are settled in the UK within the meaning of the Immigration Act 1971 and they have lived in the UK for three years prior to starting their studies.68 As regards the condition of

61Centre public d’aide sociale de Courcelles v Marie-Christine Lebon. Case 316/85. [1987] ECR page 02811, para. 26. Commission of the European Communities v Kingdom of Belgium. Case C-278/94. [1996] ECR page I-04307, para. 39-40. Sylvie Lair v Universität Hannover. Case 39/86. [1988] ECR page 03161, para. 32-33.

62Collins, supra n. 58, at para. 64. Cf. Commission of the European Communities v Kingdom of Belgium. Supra n. 60.

63Collins, supra n. 58, at para. 65.

64Id., at para. 66-67 and 69.

65Id., at para. 72.

66Id., at para. 72

67The Queen (on the application of Dany Bidar) v London Borough of Ealing and Secretary of State for Education and Skills (hereafter: Bidar). Case C-209/03. [2005] ECR page 00000.

68Id., at para. 15.




being settled it is apparent that a student residing in the UK for the sole purpose of receiving full-time education cannot obtain the status of being settled.69 The ECJ faced two issues in this case. First, whether maintenance support granted in form of subsidized student loan falls inside the scope of the EC Treaty. Second, what are the criteria which should govern the conditions of granted the assistance.70

The Court answered the first question in the affirmative. The reasoning of the Court made it clear that European citizens are awarded rights by the citizenship clause and they cannot be deprived of these rights by means of secondary legislation. As a response to the argument of the governments submitting observations, including the UK, and the arguments put forward by the Commission the Court acknowledged that Council Directive 93/36/EEC of 29 October 1993 on the right of residence for students71 indeed precluded in Article 3 the right to payment of maintenance grants for students lawfully residing in the territory of the host MS.72 However, the Court also observed that the mere fact that the foregoing Directive excluded from its scope maintenance grants does not deprive EU citizens who are lawfully resident by virtue of Article 18 EC and Directive 90/364 in a MS other than their home state of the right to rely on ‘the fundamental principle of equal treatment enshrined in the first paragraph of Article 12 EC.’73 This argumentation of the Court implies the principle that a secondary legislation cannot deprive European citizens of the rights they are granted under Article 18(1), what is more, since Article 3 of Directive 93/36 became outdated due to the development of primary law it cannot be applied.

What is curious is that the Court made on more remarkable step to superimpose the citizenship clause over the secondary legislation in this theme. In Grzelczyk the Court dealt with Article 3 of Directive 93/36 only superficially. There the ECJ held that ‘Article 3 of Directive 93/96 makes clear that the directive does not establish any right to payment of maintenance grants by the host Member State for students who benefit from the right of residence. On the other hand, there are no provisions in the directive that preclude those to whom it applies from receiving social security benefits.’74 This ruling of the Court seems to suggest that there is a distinction between maintenance grants and social security benefits and the latter are not excluded from the scope of the Directive.75 However, the ruling also raised the question whether provisions of secondary legislation may be abrogated by the citizenship clause in certain circumstances, i.e. whether there are residence rights based on primary law.76

However, The Court avoided this hot issue through making the above questionable distinction.77 The Court did not devote more time to deal with this particular provision. One might have inferred from the judgment that the Court’s position in

69Id., at para. 17-18.

70Id., at para. 28-49.

71[1993] Official Journal L 317, page 59

72Bidar, supra n. 66, at para. 44-45.

73Id., at para. 46.

74Id., at para. 39.

75Jacqueson, supra n. 2, at 275.

76Id., at 274.

77Cf. Id., at 260.



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favour of Mr. Grzelczyk was justified by the exceptional circumstances of the case, which brought the principle of financial solidarity into the picture, but it was that principle that determined the final outcome of the case, that is Article 3 is in principle still applicable but in exceptional cases the principle of financial solidarity justifies derogation from it. In Collins the ECJ enunciated that the citizenship clause establishes rights that the secondary legislation does not. Even if secondary legislation does not provide for equal treatment regarding social benefits like jobseekers’ allowance that are meant to facilitate the access to the market the citizenship may provide for that. In this regard the EC Treaty supplanted the rights enumerated in the secondary legislation. It was only one step to hold that the citizenship clause prevails completely over secondary legislation in the sense that even rights expressly excluded by the secondary legislation are ensured by the citizenship clause. Accordingly, the novelty of the judgment in Bidar is that it made clear that Article 3 of Directive 93/36 is in fact abolished by the citizenship clause since EU citizens lawfully resident in a MS different from their home MS may base their rights directly on the citizenship clause.

The second issue was umbilical to the first one. If the citizenship clause supersedes the secondary legislation in question then what is the content of the citizenship clause in terms of discretion granted to MSs. Put it more concretely as regards the fact pattern before the bench: if maintenance grants are covered then what are the criteria that a MS measure must comply with when regulating the access to them.78 The Court then went on to formulate a necessity/proportionality test. First, ‘the principle of equal treatment prohibits not only overt discrimination based on nationality but also all covert forms of discrimination which, by applying other distinguishing criteria, lead in fact to the same result.’79 Second, the Court – apparently implying that facial discrimination based on nationality is always illegal80

re-enunciated its ancient ruling that ‘a difference in treatment can be justified only if it is based on objective considerations independent of the nationality of the persons concerned and is proportionate to the legitimate aim of the national provisions.’81 Thereafter the ECJ concretized what kind of measures may be deemed to be objective and proportionate in the field of maintenance grants for students: measures envisaged ensuring the workability of the student maintenance systems of the MSs.

The Court held that ‘it is permissible for a Member State to ensure that the grant of assistance to cover the maintenance costs of students from other Member States does not become an unreasonable burden which could have consequences for the overall level of assistance which may be granted by that State.’82 The foregoing end of ensuring a certain level of assistance justifies that a MS grants ‘such assistance only to students who have demonstrated a certain degree of integration into the society of that State [but MSs] cannot (…) require the students concerned to establish a link

78Bidar, supra n. 66, at para. 49.

79Id., at para. 51.

80Id., at para. 64; Siofra O'Leary, Putting Flesh on the Bones of European Union Citizenship, 24 European Law Review 68, 74-75.

81Bidar, supra n. 66, at para. 54. Cf. Bickel and Franz, supra n. 52, at para. 27. D’Hoop, supra 50, at para. 36. Garcia Avello, supra n. 54, at para. 31.

82Bidar, supra n. 66, at para. 56.




with its employment market. [However,] the existence of a certain degree of integration may be regarded as established by a finding that the student in question has resided in the host Member State for a certain length of time.’83 Accordingly, the UK measure at stake was partially unjustifiable. While requiring a certain period of residence in the host MS may be justified the Court found the requirement of being settled in the UK to be groundless since an EU citizen as a student could not earn the status of being settled in the UK. ‘Such treatment prevents a student who is a national of a Member State and who is lawfully resident and has received a substantial part of his secondary education in the host Member State, and has consequently established a genuine link with the society of the latter State, from being able to pursue his studies under the same conditions as a student who is a national of that State and is in the same situation.’84

Note that the Court while explicitly objecting to the requirement of being settled in the UK did not endorse the provision that made residence of three years a precondition to the student loan. The Court only said that the requirement of three years residence guarantees that the person applying for the assistance is sufficiently integrated into the society of the host Member State.85


It took more than 10 years for the European judiciary to spell out what European citizenship means but it spelled it out for the time being, definitely. The building of European citizenship consists of two components. The first one is the threshold issue of actual entry and residence, which has not been changed, materially. The general rule is still that economically non-active persons, i.e. non-workers and persons not being self-employed, may reside for more than 3 months in the territory of a MS different from their home country if they have a comprehensive sickness insurance and they have sufficient resources not to become a burden on the social assistance system of the host Member State. The second issue is the bunch of rights European citizenship consists in. While the first component varies according to the personal characteristics of the migrant, once EU citizens are lawfully resident in a MS they are entitled to the very same bunch of rights irrespective of the ground of their residence. Moreover, the social and welfare dimension of their rights is substantially extended. They are entitled to equal treatment regarding all social and welfare benefits that are provided to the nationals of the MS. This extended interpretation of equal treatment puts all European citizens in a MS on equal footing as regards social and welfare rights, however, it is still questionable where the borderline of the material scope of the Treaty is.

The jurisprudence of the Court has nonetheless one more open question. Even though the principles of interpreting the citizenship clause are put down the Court has not ever dealt with persons who are neither workers or self-employed persons nor students, i.e. the Court has not encountered cases involving ‘playboys’ yet. An

83Id., at para. 57-59.

84Id., at para. 62.

85Id., at para. 60.



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ECJ holding in that regard is missing; the principles of deciding such a case are clearly defined, though.


Elspeth Guild


At the moment in Europe a dramatic expansion of the power of judges is underway. The elevation of the rule of law as a fundamental principle, incorporated into the preamble of the draft EU Constitution (in the form of respect for law), indicates this change in the balance between the spheres of politicians and judges. As the democratic legitimacy of law in the EU remains weak (most importantly through the weak status of the European Parliament and the domination of the European Council by the executives of the Member States) the legality of law has been emphasised. The rule of law is expected to compensate for weak democratic control over the legislative process. For this approach to gain respectability, the rule of law must extend beyond the legislative process itself. Clearly, the rule of law cannot compensate for an overbearing executive if it is bound exclusively to implement the laws of the executive. Thus the role of international human rights treaties, in the EU the European Convention on Human Rights in particular fills the gap. Rule of law can be presented as a means of protecting the individual against the overbearing executive without the intermediary of the democratic because the judges will temper excessive laws of the executive through the application of the supra national rules which underpin the rule of law.

Guarnieri and Pederzoli identify three sets of elements that may directly affect the expansion of judicial power.1 These are: the judges themselves (status and recruitment); the judicial system (its operation, means of access and powers) and the characteristics of the political system. Within this framework, the most dramatic change which is increasing the power of the judges in Europe at the moment is the transformation of the political system. In this essay I will look at three recent decisions of UK courts which point towards a globalisation of justice which is empowering judges at the national level to place limitations on the power of the state. Supra-national law interpreted by judges in different jurisdictions is being knitted together into a coherent whole which places constraints on the use of power by the state. Further, the enforcement of law is no longer exclusively premised on the monopoly of violence to enforce it but on the force of the principle of respect for the Rule of Law.

Elspeth Guild is a partner in the immigration department at Kingsley Napley, solicitors and Professor of European Migration Law at the Radboud University of Nijmegen. Her most recent monograph is the Legal Elements of European Identity published by Kluwers. She is also currently acting as special advisor to the House of Lords Select Committee on the European Union, Sub Committee F, inquiry into EU Economic Migration. The research on which this article is based was made possible by the European Commission generous funding to the Framework 6 project CHALLENGE, which examines the changing relationship of security and liberty after 11 September 2001 and 11 March 2004 – see

1 C Guarnieri & P Pederzoli The Power of Judges OUP, Oxford 2002.



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The three judgments at the core of this article were all handed down in December 2004 in the UK High Court. All rely on the interpretation of the European Convention on Human Rights (ECHR) and all define into the category of rights holders to whom the state owes human rights obligations, foreigners whom the state has specifically excluded. The cases are:

(1)A (FC) and others (FC) v Secretary of State for the Home Department; X (FC) and another (FC) v Secretary of State for the Home Department; 2

(2)R v Immigration Office at Prague Airport and another ex parte European Roma Rights Centre and others; 3

(3)R (Al Skeini and others) v Secretary of State for Defence. 4

A (FC) and others (FC) v Secretary of State for the Home Department; X (FC) and another (FC) v Secretary of State for the Home Department

This is the final UK judgment on the indefinite detention of foreigners which I described in some detail in ‘Exceptionalism and Transnationalism: UK Judicial Control of the Detention of Foreign 'International terrorists'.5 The challenge arises from Part 4 of the Anti-Terrorism, Crime and Security Act 2001 passed on 14 December 2001 as the UK’s main response to the 11 September 2001 attacks in the USA. That part of the Act permits the Secretary of State to designate foreign nationals are suspected international terrorists. The result of such a designation is that they may be detained until they choose to leave the UK, a rather impossible choice for those of them who fear torture and persecution in their countries of origin. Nine men (eight detained in December 2001 and one in February 2002) appealed against their detention. One was released on bail with strict conditions in April 2004 and another was released without conditions in September 2004. Tow left the UK voluntarily one to Morocco on 22 December 2001 and one to France (of which he was a national) on 13 March 2002.

The men, mainly from North Africa (none from Iraq or Afghanistan), challenged their detention on the grounds that the statute under which they have been detained fails to comply with the ECHR right of liberty of the person in conjunction with the right to non-discrimination. At first instance, before the Special Immigration Appeal Commission, their appeal was allowed on the basis that the legislation discriminated, contrary to the duty of non-discrimination (Article 14 ECHR) in conjunction with the right to liberty (Article 5 ECHR from which the UK had derogated for the purposes of passing the legislation). The main thrust of the SIAC

2(2004) UKHL 56

3(2004) UKHL 55

4(2004) EWHC 2911

5Alternatives/Special English Language Issue of Cultures & Conflicts Vol 28 No 4 August Oct 2003 pp





judgment was that as such legislation could not be applied to British citizens it was inconsistent with the ECHR to apply it exclusively to foreigners, many of whom it appears, were suspected of being international terrorists as a result of their association with British citizens. The Court of Appeal very rapidly reversed this find and held that the position of foreigners and those of citizens could not be considered comparable for the purposes of the application of the rule against discrimination.

The House of Lords, again relying on Article 14 ECHR (in conjunction with Article 5), found that the legislation offends against the ECHR and issued a declaration of incompatibility.6

The ECHR protects the right of liberty of the person in Article 5. That article does provide for an exception to the strict rule of liberty of the person where the detention is for the purpose of expulsion or to prevent an unauthorised entry into the state. However, as the men involved could not be expelled on account of the risk of torture or persecution, the exception was not effective. Thus the UK Government was forced to derogate from Article 5 ECHR for the purposes of the legislation. The procedure for derogation is set out in Article 15 ECHR and is only permitted in respect of certain provisions of the ECHR (For instance the prohibition on torture cannot be the subject of a derogation). According to Article 15, derogation is only possible ‘in time of war or other public emergency threatening the life of the nation’. The measures which a state may take in such circumstances to derogate must not exceed the extent strictly required by the exigencies of the situation and provided that such measures are not inconsistent with its other obligations under international law.

The majority of House of Lords’ judges in the case accepted that it was for the UK Government to determine when a state of public emergency threatening the life of the nation. Judicial control over this assessment would be light. In the lead judgment, Lord Bingham gives three reasons for refusing to interfere with the decision on the state of emergency: (1) the SIAC saw confidential material which was not available to the other Courts and on the basis was satisfied that the Government was justified in declaring a state of emergency, the House of Lords should not lightly interfere with that finding; (2) The European Court of Human Rights (ECtHR) permits a wide breadth of margin of appreciation on this issue to national authorities (and the Judge reviewed all the ECtHR jurisprudence on the point); (3) the political nature of the decision: ‘The more purely political (in a broad or narrow sense) a question is, the more appropriate it will be for political resolution and the less likely it is to be an appropriate matter for judicial decision. The smaller, therefore will be the potential role of the court. It is the function of political and not judicial bodies to resolve political questions. Conversely, the greater the legal content of any issue, the greater the potential role of the court, because under our constitution and subject to the sovereign power of Parliament it is the function of the courts and not of political bodies to resolve legal question.’

6 This is the procedure set out in the Human Rights Act 1998 which incorporated the ECHR into national law.



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However, the judges agreed that the measure taken (indefinite detention) was not proportionate to the risk. Faced with the charge of usurping the political, Lord Bingham stated ‘But the function of independent judge’s charges to interpret and apply the law is universally recognised as a cardinal feature of the modern democratic state, a cornerstone of the rule of law itself. The Attorney General is fully entitled to insist on the proper limits of judicial authority, but he is wrong to stigmatise judicial decision making as in some way undemocratic.’

One final comment on the question of the legality of the declaration of a state of emergency came from Lord Scott, ‘The Secretary of State is unfortunate in the timing of the judicial examination in these proceedings of the “public emergency” that he postulates’. It is certainly true that the judiciary must in general defer to the executive’s assessment of what constitutes a threat to national security or to ‘the life of the nation’. But judicial memories are no shorter than those of the public and the public have not forgotten the faulty intelligence assessments on the basis of which United Kingdom forces were sent to take part, and are still taking part, in the hostilities in Iraq. For my part I do not doubt that there is a terrorist threat to this country and I do not doubt that great vigilance is necessary, not only on the part of the security forces but also on the part of individual members of the public, to guard against terrorist attacks. But I do have very great doubt whether the ‘public emergency’ is one that justifies the description of ‘threatening the life of the nation’. Nonetheless, I would, for my part, be prepared to allow the Secretary of State the benefit of the doubt on this point and accept that the threshold criterion of article 15 is satisfied.’

The judges were in agreement that while the determination of the state of emergency should only be subject to a light judicial scrutiny, the measures taken which were effectively to institute indefinite detention for foreigner nationals did not satisfy the ‘strictly required’ test of Article 15. Thus while the state may declare a state of emergency without a strong judicial control over the reasoning, the measures which the state then takes as a result of that declaration of a state of emergency will be subject to a much stricter test regarding their necessity. Undoubtedly, the seriousness of the emergency is in fact judged by the severity of the measures which the judges consider acceptable or not under the strictly required test.

The benchmark against which the state’s right to declare the state of emergency and to take measures as a result of it is external to the control of the state – here the European Convention on Human Rights and its interpretation by the ECtHR. The UK itself is not capable of changing the ECHR nor its interpretation. As a result of the embedding of the ECHR both at the national level and at the EU level, it is no longer possible for the UK to escape from the effect of the ECHR and its interpretation both internationally by the ECtHR and by its own courts. Further, a dialogue has begun between the national courts, here the House of Lords and the ECtHR on the nature meaning and effect of the state of emergency and measures taken as a result of such a declaration by a state. This dialogue seems unlikely to result in the ECtHR reversing the House of Lords judgment in favour of greater state control. Sovereignty is being transformed though the application of supranational




rules at the national level. The medium through which this process is occurring in the UK is the body of the foreigner.

R v Immigration Office at Prague Airport and another ex parte European Roma Rights Centre and others7

In February 2001 the UK authorities entered into an agreement with the Czech Government that the former could temporarily station immigration officers at Prague Airport to make decisions on admission to the UK before passengers boarded flights. The purpose, from the UK’s perspective was to ‘stem’ the flow of asylum seekers of Roma origin to the UK. Although the numbers ore negligible, 515 applications from Czech Roma for asylum in the UK in 1998 and 1200 in 2000, their arrival triggered a sense of crisis in the UK Immigration Service. Something had to be done.

According to Lord Bingham, giving the lead judgment, ‘British immigration officers were posted to Prague airport to ‘pre-clear’ all passengers before they boarded flights for the UK. Leave to enter was granted to those passengers requiring it who satisfied the officers that they were intending to visit the UK for a purpose within the Immigration Rules. Others who required leave to enter, including those who stated that they were intending to claim asylum in the UK and those who the officers concluded were intending to do so, were refused leave to enter. This effectively prevented them from travelling to this country, since no airline would carry them here. This operation was mounted at Prague Airport intermittently, usually for a few days or weeks at a time, without advance warning. Its object was to stem the flow of asylum seekers from the Czech Republic. That was its effect. In the three weeks before the operation began there were over 200 asylum claims (including dependants) made by Czech nationals at entry points in the UK. Only 20 such claims were made in the three weeks after it began, during which period 110 intending travellers were refused leave to enter at Prague Airport.’

However, the UK is committed to respect the UN Convention relating to the State of Refugees 1951 and its 1967 Protocol (The Geneva Convention). That Convention requires it to determine applications of asylum seekers arriving in the UK before they can be returned to a country where they claim a fear of persecution. Under the Geneva Convention a person can only be a refugee when he or she is outside his or her country of origin. Six Czech Roma who wished to go to the UK and seek asylum but were refused access to a plane at Prague Airport by British Immigration Officers appealed against their exclusion. They lost their claims at first and second instance. The final instance, the House of Lords determined in their favour on 9 December 2004.

The challenge before the House of Lords rested on two main grounds: first and most importantly, the that the protection of refugees requires states signatories of the Geneva Convention not to take measures specifically designed to prevent persons who fear persecution from leaving their country of origin to arrive in the state of

7 (2004) UKHL 55



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refuge; and secondly, that the application of the pre-clearance procedure in Prague amounted to unlawful discrimination on the basis of race.

The judges did not attack the UK Government’s action on the basis of its clear intention of frustrating the application of the Geneva Convention. On this point they adopted a supine position, reaffirming the right of states to refuse to admit or to admit to their territory any person according to their own laws. Lord Bingham asserted that ‘The power to admit, exclude and expel aliens was among the earliest and most widely recognised powers of the sovereign state. In England, it was a prerogative power of the crown’.8 He then went on to stress many times over and using many authorities the fact that a foreign national must, under the Geneva Convention be outside his or her country of nationality in order to qualify as a refugee. Thus anyone still within their country of origin, by definition cannot be a refugee. Thus according to the judges the duty to refugees starts only at the border of the nation state, not at the beginning of the trip. This view prevailed notwithstanding the bald statement by Lord Steyn ‘The essential features of the operation can be stated quite simply. It was designed as a response to an influx of Czech Roma into the United Kingdom. The immigration officers knew that the reason why they were stationed in Prague was to stop asylum seekers travelling to the United Kingdom. They also knew that almost all Czech asylum seekers were Roma, because the Roma are a disadvantaged racial minority in the Czech Republic. Thus there was from the outset a high risk that individuals recognised as Roma would be targeted by specially intrusive and sceptical questioning. There was a striking difference in treatment of Roma and non Roma at the hands of immigration officers operating at Prague Airport. The statistics show that almost 90% of Roma were refused leave to enter and only 0.2% of non Roma were refused leave to enter. Roma were 400 times more likely than non Roma to be refused permission. No attempt was made by the Home Office to explain by the evidence of immigration officers the difference in treatment of Roma and non Roma.’9 Lord Steyn makes no reference to the Geneva Convention in his judgment.

The attempts by the advocates to promote the argument that at the very least the UK authorities were under a duty of good faith, by their adherence to the Geneva Convention not to prevent aspiring refugees from leaving their country of origin met with no success. Lord Hope, arguing a very strict reading of the Geneva Convention stated that while good faith may be a principle of general application it cannot be a source of an obligation.10 In reformulating the question he is able to avoid it. First he states ‘The question then is whether the appellants are seeking to do no more by appealing to this principle than insist that the rights and obligations which the 1951 Convention creates are exercised within the law, as Mr Goodwin-Gill put it, or whether they are seeking to enlarge what it provides so as to impose new obligations on the contracting states. In my opinion the answer to this question must be found in the language of the Convention, interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the

8Ibid. para 11

9Ibid. para 34

10Ibid. para 62




light of its object and purpose, as article 31 of the Vienna Convention requires. The argument that good faith requires the state to refrain from actions which are incompatible with the object and purpose of the treaty can only be pressed so far. Everything depends on what the treaty itself provides.’11

Then he is able to refute the good faith article stating ‘What the Convention does is assure refugees of the rights and freedoms set out in Chapters I to V when they are in countries that are not their own. It does not require the state to abstain from controlling the movements of people outside its borders who wish to travel to it in order to claim asylum. It lacks any provisions designed to meet the additional burdens which would follow if a prohibition to that effect had been agreed to. The conclusion must be that steps which are taken to control the movements of such people who have not yet reached the state's frontier are not incompatible with the acceptance of the obligations which arise when refugees have arrived in its territory. To argue that such steps are incompatible with the principle of good faith as they defeat the object and purpose of the treaty is to argue for the enlargement of the obligations which are to be found in the Convention.’12 This particularly unattractive argument may well fail to convince people of good conscience who believe that states should be required to live up, not only to the letter of a Convention, but also to its spirit.

The judgment, however, does not end here. The judges then struck down the action of the UK authorities at Prague airport on the grounds that the checks were carried out in an unlawfully discriminatory manner, in that all would be travellers of Roma origin were treated less favourably than non-Roma were. According to Baroness Hale ‘In particular it is alleged that they were subjected to longer and more intrusive questioning, they were require to provide proof of matters which were taken on trust from non-Roma, and far more of them were refused leave to enter than were non Roma.’ The charge is one of direct discrimination.

UK law prohibited discrimination on the basis of race or ethnic origin since 1968 however the public service has always been exempted from this prohibition on discrimination. Only in 2001 were changes made to the legislation as a result both of a national investigation into racism in the police and the EU directive against race discrimination to include within the ambit of the prohibition the public service. Nonetheless in the national legislation, a specific power was granted to a Minister to authorise race discrimination for certain acts in immigration and nationality cases.13 Shortly before the Prague operation began in July 2001 the Minister made an authorisation under this provision permitting immigration officers to discriminate against a number of groups, including the Roma.14 At the first round of court hearings, the Government argued that the Immigration Officers were not discriminating at all only treating different passengers differently. The judge accepted this argument. At the second level, Court of Appeal accepted that the

11Ibid. para 63

12Ibid. para 64

13s19D Race Relations (Amendment) Act 2000)

14Race Relations (Immigration and Asylum) (No 2) Authorisation 2001.



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Roma were treated differently and worse than the non Roma but accepted the argument that this treatment was not qua Roma but rather qua potential asylum seeker and therefore not discrimination on the basis of race. This whole line of reasoning was rejected by the House of Lords. Baroness Hale, speaking for the whole House found that ‘The inevitable conclusion is that the operation was inherently and systematically discriminatory and unlawful.’ One of the central issues to this finding is the question of what is comparable and what is not. The Court of Appeal, in rejecting the discrimination argument had defined it in the following way, what we are postulating is this:

1The immigration officers at Prague have treated all passengers in the same way irrespective of race in the sense that they have genuinely tried their utmost not to discriminate against Roma but rather to give Roma and non-Roma alike a fair and equal opportunity to satisfy them on the balance of probabilities that they are coming for a permitted purpose and will not apply for asylum on arrival. So the judge below has found and so to my mind he was entitled to find.

2Being aware, however, that Roma alone as a group suffer discrimination (whether or not amounting to persecution) in the Czech Republic and so in general have a much greater incentive than others to seek asylum and therefore, when being questioned at Prague airport, to lie about their intentions in visiting the United Kingdom, immigration officers on that account are inevitably more sceptical of a Roma applicant’s true intentions than those of a non-Roma, and are less easily persuaded that the Roma is genuinely intending to come only for a permitted purpose.

3Generally, therefore, Roma are questioned for longer and more

intensively than non-Roma and are more likely to be refused leave to enter than non-Roma.’15

This formulation of the question permitted the Court of Appeal judge to find ‘I would hold either that the Roma applicants are not being treated less favourably than others in the respects alleged, alternatively, if they are, that this is not ‘on racial grounds’. If necessary I would hold that there are no relevant comparators against whom to judge the treatment of Roma applicants. I believe that the true analysis of this case is that, so far from Roma applicants being treated less favourably than others in a comparable position, in reality there is being applied to them a requirement or condition which is applied equally to others - the requirement that they satisfy the immigration officer that they are not travelling to the UK with a view to claiming asylum.’16 Thus it is the fact of needing protection which places the individual in such a different category that he or she can no longer be compares with

15para 67 (2003) EWCA Civ 666.

16Ibid. para 87




someone who does not need protection and thus there is no discrimination between the treatment of the two persons.

In the House of Lords this approach was rejected. Baroness Hale addresses the point directly ‘How did the immigration officers know to treat them more sceptically? Because they were Roma. That is acting on racial grounds.’17 Further she notes that ‘That risk [of racial discrimination] was exacerbated by the very existence of the Authorisation. This sanctioned discriminatory treatment of the very ethnic group to which the vast majority of the people against whom the Prague operation was targeted belonged.’18 The examples from the evidence of the six Czech nationals who brought the case which the Baroness includes in her judgment are enlightening: ‘Mr Vasil, a Czech Roma working for the ERRC, observed most flights leaving for the UK on 11 days in January, 13 days in February, 14 days in March and 13 days in April 2002. He was able to identify the Roma travellers by their physical appearance, manner of dress and other details which were recognisable to him as a Roma himself. His observations showed that 68 out of 78 Roma were turned away whereas only 14 out of 6170 non-Roma were rejected. Thus any individual Roma was 400 times more likely to be rejected than any individual non-Roma. The great majority of Roma were rejected. And only a tiny minority of non-Roma were rejected. It is, of course, entirely unsurprising that a far higher proportion of Roma were turned away. But if the officers began their work with a genuinely open mind, it is more surprising that so many of the Roma were refused. If all or almost all asylum seekers are Roma, it does not follow that all or almost all Roma are asylum seekers. It is even more surprising that so few of the non-Roma were refused. One might have expected that there would be more among them whose reasons for wanting to travel to the UK were also worthy of suspicion. The apparent ease with which non-Roma were accepted is quite consistent with the emphasis given in the Instructions and training materials to the sensible targeting of resources at busy times. The respondents have not put forward any positive explanation for the discrepancy.’19

While the judges were willing to turn their faces away from the government’s clear objective of frustrating asylum seekers from leaving their country of nationality to come to the UK to seek protection, they were not willing to turn away from racial discrimination. Baroness Hale states ‘All the evidence before us, other than that of the intentions of those in charge of the operation, which intentions were not conveyed to the officers on the ground, supports the inference that Roma were, simply because they were Roma, routinely treated with more suspicion and subjected to more intensive and intrusive questioning than non-Roma. There is nothing surprising about this. Indeed, the Court of Appeal considered it 'wholly inevitable'. This may be going too far. But setting up an operation like this, prompted by an influx of asylum seekers who are overwhelmingly from one comparatively easily identifiable racial or ethnic group, requires enormous care if it is to be done without discrimination. That did not happen. The inevitable conclusion

17Ibid. para 82

18Ibid. para 86

19Ibid. para 92



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is that the operation was inherently and systemically discriminatory and unlawful.’ The existence of the Authorisation could not save the operation from its illegal nature.

The judge based her finding not only on UK domestic law but also on Article 2 Universal Declaration of Human Rights, Article 2 International Covenant on Civil and Political Rights, Article 2 International Convention on the Elimination of all Forms of racial Discrimination (neither of which have been incorporated into national law not have supra national courts for the interpretation of their provisions) and Article 14 ECHR and Article 4 Geneva Convention.

In effect, the actions of the UK authorities outside the UK and in respect of foreigners, specifically authorised on the basis of national law and authorisations to discriminate, were held unlawful by the national court on the basis of supranational norms.

R (Al Skeini and others) v Secretary of State for Defence20

The final case which I will consider here is that of the Iraqi nationals killed in Iraq by British military personnel following the occupation of Iraq by the US and UK (plus Coalition) forces in 2004. The families of a number of men so killed brought actions in the UK courts seeking official investigations into the killing of their family members. The legal basis was Article 2 ECHR – the right to life and Article 3 ECHR, the prohibition on torture. In accordance with the jurisprudence of the ECtHR, where an individual is tortured and killed there is a duty on the state to investigate the crime in an open and thorough manner. Where public officials are allegedly involved this duty is even more serious.

The case is the result of the claims of six claimants, relatives respectively of Iraqi citizens who have died in provinces of Iraq where and at a time when the United Kingdom was recognised as an occupying power (viz between 1 May 2003 and 28 June 2004). The first five claimants’ relatives were shot in separate armed incidents involving British troops. The sixth claimant’s son, Mr Baha Mousa, died in a military prison in British custody. For the purposes of the court proceedings, only two questions are at issue:

1.Did the deaths take place within the UK’s jurisdiction within the meaning of the ECHR and the Human Rights Act which incorporates it into national law; and

2.If so, had there been an adequate inquiry into the deaths as required by the ECHR.

The Divisional Court found that only the death of Baha Mousa, who died in a UK controlled military prison came within the jurisdiction of the UK for the purposes of the ECHR. But that the investigation into his death was not in compliance with the requirements of the ECHR. The cases are being appealed to the Court of Appeal and undoubtedly from there they will be appealed further to the House of Lords.

20 (2004) EWHC 2911




An interesting point to note is that the Court accepted that the UK’s occupation of Southern Iraq ended on 28 June 2004 when, after extensive consultations with the UN Special Adviser, authority was transferred from the Coalition Provisional Authority to the Iraq Interim Government. While the national Court has accepted the limitation of the UK’s responsibility in Iraq, this is not the case internationally. The UN Committee Against Torture, established under the UN Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, published on 10 December 2004 its Conclusions and recommendation regarding the UK’s report on application of the Convention within its jurisdiction. The UK had refused to provide the Committee with information regard Afghanistan or Iraq. The Committee expressed its concern (among other points) ‘the State party’s limited acceptance of the applicability of the Convention to the actions of its forces abroad, in particular its explanation that ‘those parts of the Convention which are applicable only in respect of territory under the jurisdiction of a State party cannot be applicable in relation to actions of the United Kingdom in Afghanistan and Iraq’; the Committee observes that the Convention protections extend to all territories under the jurisdiction of a State party and considers that this principle includes all areas under the de facto effective control of the State party’s authorities;’

According to the judgment, UK military records indicate that between May 2003 and March 2004 49 Iraqis were killed in incidents in which British troops used force. The investigation of civilian deaths was originally the job of non- commissioned officers in the Royal Military Police who evaluated whether the act came within the Rules of Engagement. However, this system was changed with great rapidity, each time removing the direct involvement of the non-commissioned officers and placing the decision on investigation higher and within the chain of command of the military personnel involved in the incidents. Of the six cases, I will set out the details only of two, the first and last, as described by the Court:

Case 1: Hazim Jum’aa Gatteh Al-Skeini.

The first claimant, Mazin Jum’aa Gatteh Al-Skeini (‘Mazin Al-Skeini’), is the brother of the deceased, Hazim Jum’aa Gatteh Al-Skeini (‘Hazim Al-Skeini’), who was unemployed and aged 23 at the time of his death. Hazim Al-Skeini was one of two Iraqis from the Beini Skein tribe who were shot dead in the Al Majidiyah area of Basra just before midnight on 4 August 2003 by Sergeant Ashcroft, the commander of a British patrol from the 1st Battalion The King’s Regiment.

In his witness statement, Mazin Al-Skeini explained that, during the evening in question, various members of his family had been gathering at a house in Al Majidiyah for a funeral ceremony. In Iraq it is customary for guns to be discharged at a funeral. Mazin Al-Skeini stated that he was engaged in receiving guests at the house, as they arrived for the ceremony, and saw his brother fired upon by British soldiers as he was walking along the street towards the house. According to Mazin Al-Skeini, his brother was unarmed and only about ten metres away when he was shot and killed. He had no idea why the soldiers opened fire.



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According to the British account of the incident, the patrol saw and heard heavy gunfire from a number of different points in Al Majidiyah. The intensity of firing appeared to increase as the patrol approached the area on foot and in darkness. The patrol thought that a firefight between rival groups was in progress. When the patrol encountered two Iraqi men in the street, Sergeant Ashcroft opened fire because the two men were armed and Sergeant Ashcroft considered them to represent an immediate threat to his life and to the lives of the other members of the patrol. Both Iraqis (one of them the deceased) were killed by the shots fired by Sergeant Ashcroft.

The following day, Sergeant Ashcroft produced a written statement describing the incident. This was passed to the CO of the 1st Btn. The King’s Regiment, Lieutenant Colonel Ciaran Griffin (Colonel Griffin), who took the view that the incident fell within the ROE and duly wrote a report to that effect. Colonel Griffin sent the report to Brigade, where it was considered by Brigadier Moore. Brigadier Moore queried whether the other man had been pointing his gun at the patrol. Colonel Griffin wrote a further report that dealt with this query to Brigadier Moore’s satisfaction. The original report was not retained in Brigade records. Having considered Colonel Griffin’s further report, as did his deputy chief of staff and his legal adviser, Brigadier Moore was satisfied that the actions of Sergeant Ashcroft did fall within the ROE and so he did not order any further investigation.’21

Case 6: Baha Mousa.

Daoud Mousa has been a policeman for 24 years and is now a colonel in the Basra police force. He is the father of Baha Mousa, who was aged 26 when he died whilst in the custody of the British Army, three days after having been arrested by soldiers from a unit of the QLR on 14 September 2003.

According to Daoud Mousa, on the night of 13/14 September 2003, his son Baha Mousa had been working as a receptionist at the Ibn Al Haitham Hotel in Basra. Early in the morning of the 14 September, Daoud Mousa went to the hotel to pick up his son from work. On his arrival he noticed that a British unit from the QLR had surrounded the hotel. He saw soldiers breaking open a safe. They had a plastic bag in which they put various items that they found in the safe. Daoud Mousa also noticed that three of the soldiers were pocketing money taken from the safe. Daoud Mousa reported what he had seen to the officer in charge, whom he recalls being called ‘Lieutenant Mike’. Lieutenant Mike called the soldiers over, reprimanded them, took their weapons and ordered them inside an army personnel carrier.

Whilst this was going on, Daoud Mousa noticed that his son and six other hotel employees were lying on the floor of the hotel lobby with their hands behind their heads. Daoud Mousa expressed his concern to Lieutenant Mike, who reassured him that it was a routine investigation that would be over in a couple of hours.

21 Ibid. paras 56-59




On the third day after his son had been detained, Daoud Mousa was visited by a military police unit. He was told that his son had been killed in custody and was asked to accompany them to identify the corpse. What happened thereafter is best described in Daoud Mousa’s own words, as follows:

‘When I saw the corpse I burst into tears and I still cannot bear to think about what I saw. I was horrified to see that my son had been severely beaten and his body was literally covered in blood and bruises. The cover was removed from his body to allow me to see all of it. He had a badly broken nose. There was blood coming from his nose and mouth. The skin on one side of his face had been torn away to reveal the flesh beneath. There were severe patches of bruising over all of his body. The skin on his wrists had been torn off and the skin on his forehead torn away and there was no skin under his eyes either. I literally could not bear to look at him.

I insisted that there was a proper post-mortem and a proper medical report on my son’s death. A Professor Hill came over from the UK and he conducted an autopsy on Baha. I was not allowed to see a copy of his report. However he told me in front of one of the clerks that he thought that my son had died from asphyxiation. ‘22

One of the other hotel employees who were arrested on 14 September 2003 was Kifah Taha Al-Mutari. In his witness statement he described what happened at the hands of the British troops after the prisoners had been taken to a British military base in Basra called Darul Dhyafa. According to Kifah Al-Mutari, once the prisoners had arrived at the base, the British soldiers started beating them. Hoods were placed over their heads. The soldiers kicked and punched them in the abdomen. The prisoners were forced to crouch for hours with their arms out straight in front of them. At the same time they were beaten about the neck, chest and genital areas. During the detention, Baha Mousa was taken into another room where he received more beatings.

During the night, Kifah Al-Mutari could hear the sound of Baha Mousa moaning in the separate room where he was detained. Kifah Al-Mutari heard him saying that he was bleeding from his nose and that he was dying. The last words that he heard Baha Mousa say were ‘I am dying …blood…blood.’

Brigadier Moore had taken part in the operation in which Baha Mousa was arrested. At the time of his arrest, Brigadier Moore was up on the roof of the hotel. At the end of the operation, he was told that 1 QLR had arrested 9 suspected terrorists. Brigadier Moore did not himself see any evidence of violent arrest.

22 See paras 8 and 9 of his witness statement



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The next thing that Brigadier Moore heard in relation to the matter was the report that he received late on 15 September that Baha Mousa had died whilst being held by 1 QLR and that other prisoners had also been beaten. It was the first case of its kind that Brigadier Moore had come across during his military career. He realised that it was very serious and needed to be investigated by RMP (SIB), which had already been called in by the commanding officer of the QLR. Brigadier Moore did not himself conduct an investigation into the death of Baha Mousa, beyond establishing the basic facts. However, he personally went to considerable lengths to apologise to Baha Mousa’s father and brother for what had happened (including preparing an official statement for publication in a local newspaper) and to reassure

them that those responsible for any crime that had been committed would be brought to justice.23

In paragraphs 43 to 48 of her witness statement, Captain Logan described the SIB investigation into the death of Baha Mousa and the difficulties that were encountered. In particular, there were logistical problems with identification parades, the local hospitals were on strike and doctors were unavailable at the time. In the event, arrangements were made for a home office pathologist to be flown out from the UK to carry out the post-mortem in very makeshift conditions. According to Captain Logan, the SIB investigation was concluded in early April 2004 and the report of the investigation distributed to the unit’s chain of command.’24

The Court, after setting out the facts seeks to identify what the meaning of the UK’s jurisdiction is for the purposes of the ECHR. If the UK’s jurisdiction extends to all those places under its effective control, then the actions of the UK military in Iraq are subject to the same rules as the actions of other UK authorities in the UK. The central question is the meaning of Article 1 of the ECHR which states: ‘The High Contracting Parties shall secure to everyone within their jurisdiction the rights and freedoms defined in Section 1 of this Convention.’ After a long and tortuous consideration of all the jurisprudence of the ECtHR in which any mention of Article 1 is made and of any national jurisprudence on the issue brought to the attention of the Court, it held that the scope of the ECHR is primarily territorial, limited to a European public space. However, there is an exception: acts resulting from the extra-territorial activity of state agents. Somewhat quixotically, the Court then decides that ‘on our analysis of the jurisprudence, the case of deaths as a result of military operations in the field, such as those complained of by the first five claimants, selected as reflecting various broadly representative examples of such misfortunes, do not seem to us to come within any possible variation of the examples of acts by state authorities in or from embassies, consulates, vessels, aircraft, (or, we would suggest, courts or prisons) to which the authorities repeatedly refer.’25

The Court finds differently though in respect of Baha Mousa. ‘The sixth case of Mr Baha Mousa, however, as it seems to us, is different. He was not just a victim, under

23See paras 55 to 60 of Brigadier Moore’s witness statement

24(2004) EWHC 2911

25ibid para 284




however unfortunate circumstances, of military operations. He was not, as we understand the matter, a prisoner of war. He was, prima facie at any rate, a civilian employee. He was arrested by British forces on suspicion of involvement with weapons hidden in the hotel where he worked as a receptionist, on suspicion therefore of involvement in terrorism. He was taken into custody in a British military base. There he met his death, it is alleged by beatings at the hands of his prison guards. The death certificate referred to ‘cardio respiratory arrest: asphyxia’.

In the circumstances the burden lies on the British military prison authorities to explain how he came to lose his life while in British custody. It seems to us that it is not at all straining the examples of extra-territorial jurisdiction discussed in the jurisprudence considered above to hold that a British military prison, operating in Iraq with the consent of the Iraqi sovereign authorities, and containing arrested suspects, falls within even a narrowly limited exception exemplified by embassies, consulates, vessels and aircraft, and in the case of Hess v. United Kingdom26, a prison. It seems to us that our interpretation of Drozd also lends support to our conclusion, as do the two cases discussed from Canada and the United States, viz Cook v. The Queen27 and Rasul v. Bush. We can see no reason in international law considerations, nor in principle, why in such circumstances the United Kingdom should not be answerable to a complaint, otherwise admissible, brought under articles 2 and/or 3 of the Convention.’28


Returning then to the starting point of this essay, what is the power of judges in the EU? All three cases which I have considered here, all decided within one month, December 2004, indicate a transformation of the relationship of the courts, the state and the supranational. The actions of the UK state, which in all three cases may well seem overbearing to many observers, were the consequences of political decisions approved by the UK Parliament. In all three cases, the argument of the political actors in favour of the decision, whether, the creation of a state of exception, the exclusion of asylum seekers or the invasion of Iraq, was the protection of the citizen, the British citizen. In all three cases the protection of the British citizen is dependent on the separation of rights of that citizen from the rights of foreigners. In the first case, territorially within the UK through the creation of a state of exception, in the second case by moving the place of immigration control outside the territory of the UK in order to exclude the foreigner before he or she could acquire a claim in international human rights law to protection, in the third case by seeking to limit the application of human rights standards to Europe, excluding Iraqis as non- beneficiaries of human rights. By refusing to accept the differentiation between the citizen and the foreigner, the courts destroy the basis for the exclusion of the foreigner from human rights. The mechanism by which the courts do so is the incorporation of international human rights law into the national level. So by reaching out to the globalisation of justice, the judges reinforce their position as the

26(1975) 2 D&R 72

27(1986) 1 SCR

28(2004) EWHC 2911



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arbiters of national action and behaviour whether within or outside the state. The border is no longer place of determination, be it the border of the state, the border of the state of exception or the border between the citizen and the foreigner.

Multilevel Governance Alliances:

Distributive Stakes in the Harmonization of

European Law

Fernanda G. Nicola


There are two opposed scholarly views addressing the debate on the harmonization of European law and multilevel governance in the European Union (EU). Both views refer to the harmonization process by focusing on the constitutionality of European institutions and the legitimacy of their decision-making processes. If some scholars argue that harmonization reinforces a constitutional asymmetry, for which the EU is mostly committed to free market instead of social policy, others predict that further harmonization will trigger the constitutionalisation of private law, which entails new deliberative processes at the supranational level. While addressing constitutional concerns, both views seem to converge in setting aside the distributive consequences of the harmonization process and its diverse socio-economic impact on local contexts. Through the analysis of several European Court of Justice judgements on the harmonization of the laws, this essay highlights the emergence of multilevel governance alliances among institutional, private and social actors along complex distributive lines. As it emerges from the two opposed scholarly approaches analysed in this essay, the distributive stakes of multilevel governance alliances remain a significant blind spot in the current literature on harmonization, which in turn reflects the policy arguments made by European lawyers.

The first two sections analyze two opposed scholarly views on the constitutional change spurred by European integration. A ‘sceptical’ view identifies those scholars concerned with a ‘constitutional asymmetry’ built into the structure of the EU. According to this view, the process of European integration, driven by law instead of politics, will lead towards market deregulation and race to the bottom. Sceptical lawyers understand the integration process in terms of an opposition between the European level, intrinsically connected to the free market and economic citizenship, and the state level, intrinsically connected to the welfare state and social citizenship.1 In contrast, a ‘procedural’ view identifies those lawyers who look favorably at new deliberative processes triggered by the harmonization of contract law entailing the constitutionalisation of private law.2 This view celebrates the

Adjunct Professor, New England School of Law . SJD Candidate (Harvard). This paper was presented at the conference Rethinking Ideology & Strategy: Progressive Lawyering, Globalization and Markets, November 6-8, 2003, Northeastern University, Boston. For encouragement and discussions of this essay I am particularly indebted to Daniela Caruso, Jerry Frug, Oliver Gerstenberg, Michele Graziadei, Janet Halley, Duncan Kennedy, Fabio Marchetti, Hani Sayed, Alvaro Santos and Dongsheng Zang. Errors are mine only.

1See Joseph H. Weiler, The Transformation of Europe, YALE LAW J. 100 (1991) and FRITZ SCHARPF, supra note 2 and The European Social Model: Coping with the Challenges of Diversity, Vol.5, JCMS (2003).

2See Christian Joerges, On the Legitimacy of Europeanising Europe’s Private law, EUI Working Paper N.2003/3; European Challenge to Private Law: on False Dichotomies true Conflicts and Nere for a Constitutional perspective (1998) 18 Legal Studies, 146-166.



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experimentalism emerging in supranational processes as well as new forms of governance arising in the European scenario.3 In moving beyond a dichotomized understanding of European integration as law versus politics and free market versus social goals, this view points at the possibilities triggered off by supranational deliberative networks.4

In order to contextualize these two contrasting views, sections three and four analyze two cases tackling the European tobacco advertising directives and EC contract law. These sections cast light on the emergence of multilevel governance alliances as coalitions among local, national and supranational actors. If European harmonization increases the fragmentation of member states’ interests, it also opens up possibilities to create multilevel alliances with different strategic goals within varied local contexts. The scholarly views addressing the harmonization through the lenses of European constitutionalism fall short to evaluate the distributive stakes of multilevel governance alliances. In contributing to the harmonization debate, this essay suggests to suspend questions about the nature and the object of constitutionalism and shift the focus to the distributive consequences triggered by the harmonization process in different contexts.5

The Sceptical View: The Concern over Constitutional Asymmetry

During the mid-1980s the European Commission launched the project for the completion of the internal market. The instruments to envisage such completion required both market-making strategies and market-correcting ones.6 By 1992, a single market transcending national boundaries was created through the implementation of the four freedoms (goods, capital, services and labor) and by re- regulation, through several Community harmonization provisions and other market-


ECONOMY: EUROPEAN AND AMERICAN EXPERIMENTS (OUP 2003) and Joanne Scott and David M. Trubek, Mind the Gap: Law and New Approaches to Governance in the European Union, 8 European Law Journal, no.1(2002)1-18.

4Christian Joerges, ‘Deliberative Supranationalism’ -Two Defenses, ELJ, Vol.8, N.1 (2002); J. Cohen and C. Sabel, Directly-Deliberative Polyarchy (1997) 3ELJ, 313-342.

5See JANET HALLEY AND WENDY BROWN (EDS.), LEFT LEGALISM AND LEFT CRITIQUE (2002). In their joint introduction the editors explain that another way to think about ‘left legalism’ requires a step back from constitutionalism in order to reconsider the distributive consequences of governance. To apprehend side effects ‘we need to step back from our legalism, to open the space for politics that can put legalism under a viewfinder, and to examine both politics and legalism with the attitude of critique.’ at 19.

6The landmark decision of the ECJ concerning the free movement of goods is Cassis de Dijon Case Rewe-Zentrale AG v. Bundesmonopolverwaltung für Branntwein (Case 120/78). In interpreting article 28 EU Treaty that regulates the free movement of goods, the Cassis court asserted its competence to assess the intrinsic reasonableness of all national health, safety, or environmental product regulations that could have a negative impact on free trade, and it announced the principle of mutual recognition. See FRITZ SCHARPF, REGULATING EUROPE (1999) explaining, ‘Whenever national regulations did not serve a valid public-interest purpose (as defined by the Court), there was no need for harmonization since products lawfully marketed in one member state must be admitted in all member states of the Community. By judicial fiat, in other words, the freedom to sell and to consume had achieved constitutional protection against the political judgment of democratically legitimized legislatures’ at 56.




correcting strategies.7 The European Court of Justice (ECJ) and the European Commission actively participated in both market-making processes, by supporting the rationale of the four freedoms,8 and in market correcting ones by stressing the need of Community re-regulation in particular sectors.

Some scholars claim that this process of European integration reflects a constitutional asymmetry in the European institutional arrangement, for which the EU is mostly committed to free market instead of social policy. Moreover, European scholars have referred to a ‘democratic deficit’ intrinsic to the Community decision- making processes, which according to Joseph Weiler is to be traced back to the Treaty of Rome (1957). The Treaty gave greater power to supranational executive and judiciary branches embodied in the Council, the Commission and the ECJ, than to the legislative branch represented by the European Parliament.9 In Weiler’s view European policies were ramifying and expanding beyond the economic sphere, thus fuelling decision-making processes with low transparency and accountability. According to Weiler these structural deficiencies were aggravated by two other elements. Legal, rather than political processes promoted European integration. Moreover, the ECJ, acting as a quasi-federal judiciary shaped the European economic constitution, thereby producing a legitimacy concern: an activist judiciary was driving European integration, leaving behind politics and democratically elected bodies and reinforcing the asymmetry between law and politics in the EU. 10

In the mid-1990s, drawing on Weiler’s thesis of a cleavage between European law and politics, Fritz Scharpf distinguished between a strong negative integration and a weak positive integration in the EU. According to Scharpf, negative integration and deregulation were successfully accomplished by means of EC law through the constitutionalisation of the Treaty provisions on competition and free movement. In contrast, the limited competences of the Community and the economic constraints of European integration enabled only a weak positive integration with few market-


8This rationale required that domestic regulations should not pose legal obstacles to the free movement of goods, services, persons and capitals, unless national regulations explicitly addressed a public interest according to the ECJ proportionality test of Cassis de Dijon, supra not 2. On the Cassis test as a form of federal economic regulation by the ECJ see MADURO M. P., WE, THE COURT (2000) and WEILER J.H., THE EU, THE WTO AND THE NAFTA: TOWARDS A COMMON LAW OF INTERNATIONAL TRADE (OUP, 2000)

9See JOSEPH H. WEILER, THE CONSTITUTION OF EUROPE (1999), where he explains that the notion of a democratic deficit reinforced the fear that the Community would increasingly decide on issues that are perceived to be of national competence, thus triggering off reactions from French or Germans citizens that the Brussels bureaucrats would tell us ‘how to run our lives’.

10See J.H.Weiler, Community, Member states and European Integration at 51 and The Transformation of Europe, 100 YALE LAW J. (1991) 2403 at 2410. According to J.H.Weiler, in the aftermath of the Maastricht Treaty in 1992, the transformation of Europe led to a paradoxical situation: On the one hand, political scientists speculated that increasing intergovernmentalism slowed down the process of European integration, while, on the other hand, lawyers, observing the federal judiciary, perceived European integration as ‘powerfully moving ahead.’



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correcting strategies.11 Despite Scharpf’s awareness that in some sectors Europeanization increased the level of protection of consumers and improved banking services,12 he emphasized that the regulatory capacity of member states was constrained by the legal prohibitions established to promote negative integration and by the downward pressure of regulatory competition.13 The liberalization and deregulation of EU policies eliminated the possibility of using the public sector as an employment buffer, thus leading to a ‘fundamental asymmetry between policies promoting market efficiencies and those promoting social protection and equality.’ 14

In Scharpf’s view ‘economic policies have been Europeanized, while social protection policies remained at the national level,’15 therefore; European integration strengthens a constitutional asymmetry in the EU. The imbalance at the European level between law and politics, inherent in the democratic deficit claim, has been paired since the mid-1990s by the claim of an imbalance between negative and positive integration. This picture has reinforced a deep-seated concern over constitutional asymmetry in the EU.

A skeptical view on European integration, presumes that any social provision contained in a contract, tort or property regime that was not voided by the ECJ jurisprudence on the four freedoms could become a barrier to trade entailing new harmonization measures. The belief in a constitutional asymmetry reinforces the institutional competence claim according to which the European level is inherently associated with the free market whereas the national level is associated with social goals.16 If scholars perceive ‘social Europe’ as constitutionally limited because welfarist regulations remain mostly possible at the national level, similarly, for private lawyers, who conceive contract law as a solidaristic tool, the harmonization of contract law threatens the social provisions contained in domestic private-law regimes. Daniela Caruso describes the ‘national resistance’ put forward by the legal professions and politicians in France against the implementation of the European directive on product liability.17 Hugh Collins suggests that the Community decision

11See FRITZ SCHARPF supra note 2 at 59-60. Through the ‘constitutionalisation’ of competition law, the European Court of Justice (ECJ) launched a successful ‘legal attack on the privileged status of the public service (…) on the grounds that the authorizing legislation was in violation of competition law’.

12See Christian Joerges and Jürgen Neyer, Transforming strategic interaction into deliberative problem- solving: European comitology in the foodstuffs sector, 4 (1997) JOURNAL OF EUROPEAN PUBLIC POLICY, 609-625, Adrienne Heritier, Market Integration and Social Cohesion: The Politics of public Services in European regulation, 8:5 JOUR. EUROP. PUBLIC POLICY, 825-52 (2001) and Niamh Moloney, New frontiers in EC capital markets law: From market construction to market regulation, COMMON MARKET

LAW REVIEW, 40 (4): 809-843 (2003).

13See FRITZ SCHARPF supra note 2 at 117.

14See Fritz Scharpf, supra note 6 where he explains that ‘European legal constraints have greatly reduced the capacity of national governments to influence growth and employment in the economies for whose performance they are politically accountable’ at 112 and at 129.

15Id. at 129.

16For a similar perception among international lawyers see David Kennedy, Receiving the International,

CONN. J. OF INT. LAW, VOL.10 (1994) and The Politics of the Invisible College: International Governance and the Politics of Expertise, 5 EUROPEAN HUMAN RIGHTS L.R. (2001) 463-598.

17See Daniela Caruso, The Missing View of the Cathedral: The Private Law Paradigm of European Legal Integration, 3 EUROPEAN L. J. 3 (1997).




maker should deploy more widely the subsidiarity principle to restrict EU competences and thereby preserve the autonomy of its member states.18 In doing so the Community decision-maker would allow member states to maintain greater legal and cultural diversity, which is for some lawyers such as Pierre Legrand in itself an important source of anti-formalism in legal thought.19

The skeptical view is suspicious of new governance strategies launched by the European Commission, which seek to increase participation, regulatory transparency and flexibility through ‘soft law’ or ‘best practices.’20 Because of the democratic deficit in the EU, new forms of governance appear likely to be risky processes that could be captured by strong interest groups driven by free market rationales. They increase the skepticism of scholars due to an excessive reliance on expertise instead of direct participation. For instance, a skeptic view aligns with the criticism put forward by political scientists such as Claus Offe, for whom the use of the Open Method of Coordination (OMC)21 when employed for labor and employment policies, it remains highly indeterminate, especially for the very diverse European labor market.22 According to Offe, the procedural and voluntaristic approach of the OMC tends to follow the logic of the market and its pressure groups in deciding, ‘which arrangements are in fact affordable and employment-enhancing, and which ones must be dropped as a competitive liability.’ 23

The Procedural View: The Constitutionalisation of Private Law

Some lawyers hold a view on European integration that differs strikingly from the sceptical one. According to an procedural view, the four freedoms of European integration have created new constitutional rights that citizens can use in order to

18Art 5 (ex 3b) EU Treaty contains the principle of subsidiarity: In areas which do not fall within its exclusive Competence, the Community shall take action in accordance with the principle of subsidiarity, only in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale effects of the proposed action, be better achieved by the community. For an interpretation of this principles in light of the harmonization private law see Hugh Collins, European Private Law and Cultural Identity of States, 3 EUROPEAN REV. OF PRIVATE LAW n. 2 (1995) 353 and Hugh Collins, Transaction Costs and Subsidiarity in European contract law, in S. GRUNDMANN AND J. STUYCK (EDS), AN ACADEMIC GREEN PAPER TO EUROPEAN CONTRACT LAW (2003).

19See Pierre Legrand, Against a European Civil Code, 60 MLR (1997) 44-62 and On the Unbearable Localness of the Law: Academic Fallacies and Unseasonable Observations, 1 EUROPEAN REV. OF

PRIVATE LAW 61-67 (2002).

20See Ugo Mattei, Hard Code Now! GLOBAL JURIST FRONTIERS VOL. 2: N.1 Art.1 (2002). Mattei attacks the use of soft law instruments that are easily captured by corporate powers and makes a plea for a hard European codification protecting weaker parties. For a sceptical view on the new forms of governance strategies launched by the European Commission’s WHITE PAPER ON EUROPEAN GOVERNANCE, (COM (2001) 428 final) see the critical comment by Fritz W. Scharpf, European Governance: Common Concerns vs. The Challenge of Diversity, Jean Monnet working paper No.6/01,

21See David M. Trubek and Joanne Scott, supra note 8, and David M. Trubek, Louise G. Trubek, supra note 13, and Charles Sabel, Learning by Monitoring: The Institutions of Economic Development in SMELSER AND SWEDBERG (EDS.) THE HANDBOOK OF ECONOMIC SOCIOLOGY (1994).

22Claus Offe, The European Model of ‘Social’ Capitalism: Can It Survive European Integration? THE

JOURNAL OF POLITICAL PHILOSOPHY, VOL.11, N.4, 437-469 (2003) at 462. 23 Id. at 463.



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mount legal challenges against domestic regulations standing in the way of free movement. The right of free movement generates not a disruptive but a productive tension in EU law. Free movement across member states represents at the same time a threat to national regulations but also an enhancement of liberal autonomy by means of the expansion of individual rights. In contrast to the fear that forms of denationalized multilevel governance is disruptive of political communities and social democracy, Christian Joerges suggests that Europeanization leads to a ‘productive ambivalence,’ which includes both of the following possibilities: the integration process is a move towards dissociation and loss of national solidarity and, at the same time, is a move towards new individual rights. For instance, the four freedoms enable European citizens to challenge the potentially oppressive ties of local political communities in order to invent new forms of inter-subjectivity.24 The persistent ambiguity embedded in EU multi-level governance threatens nationally legitimated processes, but it also provides freedom-enhancing mechanisms that open the possibility for new regulatory and justificatory processes.25

In rejecting the perception that the European level is tied to the free market whereas the national level is tied to welfare goals, these lawyers have embraced the democratic experimentalism of new European forms of governance. New forms of governance emerging at the European level allow a variety of actors to engage in innovative deliberative processes while replacing the hierarchy of national regimes through transnational networks among agencies, governments, courts and stakeholders. According to Joerges and Nyer, deliberative supranational processes do not represent a threat for social democracies; rather they improve participation by conveying to European citizens not only economic freedoms but also political rights.26

When tackling European contract law, procedural lawyers oppose the notion that a purely individualist and efficiency rationale or a purely welfarist and altruist rationale pervades contract rules. Christian Joerges draws upon the law and society approach, emphasizes the importance of the relational dimension of contract law despite the increasing rationalization inherent to the Europeanization process. The

24The irresolvable and irreducible ambivalence between individualism and altruism is captured in, or at least provides a vantage point from which to describe, not only the new European governance but also the role of private law adjudication with a particular look at European contract law. See C. Joerges, The Europeanization of Private Law as a Rationalization Process and as a Contest of Disciplines- As Analysis of the Directive on Unfair Terms in Consumer Contracts, EUROPEAN REVIEW OF PRIVATE LAW

(1995). On the fundamental contradiction in private law adjudication see Duncan Kennedy, Form and Substance in Private Law Adjudication, 89 HARVARD LAW REVIEW 1685 (1976) and The Structure of Blackstone’s Commentaries, 28 BUFFALO LAW REVIEW 205 (1979).

25See C. Joerges and F. Neyer, From Intergovernmental Bargaining to Deliberative Political Processes: The Constitutionalisation of Comitology, (1997) 3 ELJ, 237-299 and O.Gerstenberg and C. Sabel,

Directly-Deliberative Polyarchy. An Institutional Ideal for Europe?

26See C. Joerges, European Integration Impact on Private Law: Reductionist Perceptions, true Conflicts and A New constitutional Perspective, EUROPEAN LAW JOURNAL, Vol. 3, N.4, (1997) at 389 and





work of Gunther Teubner on European contract law highlights the paradoxes intrinsic to the harmonization of diverse legal system.27 Through the coexistence of freedom and coercion, discrete and relational contracts,28 they perceive the Europeanization process as an irritating phenomenon for domestic legal regimes. The promise of the constitutionalisation of private law entails the possibility of ‘hybrid networks’ which go beyond contracts and organization and require judges together with private individuals to find original doctrinal solutions.29 The constitutionalisation of private law enables member states and European courts to mutually supervise contractual rights and duties and to provide a forum generating further deliberation.30

These lawyers are familiar with the notion of ‘proceduralization’ put forward by Rudolf Wiethölter.31 According to Wiethölter, proceduralization triggers off new forms of justification and explanations of legal arguments that occurred by means of legal processes. In this sense the European level and its procedural mechanisms, supranational courts and transnational networks, promote impartial and discursive forum that generate new justifications for contract law rules.32 Participation in transnational processes allows private actors to justify their claims at the European level and improves the legitimacy of the processes involving supranational institutions.33 The constitutionalisation of private law promotes the participation of private actors in the European discourse, which in turn legitimates new contract rules. The focus on a horizontal dimension of European law suggests new forms of legitimacy spurring from the discursive interplay between decentralized, spontaneous and private sources of law.34 In engaging with the constitutionalisation

27Gunter Teubner, Legal Irritants: Good Faith in British Law or How Unifying Law Ends Up in New Divergences, MODERN LAW REVIEW 61:1 (1998).

28See C. Jeorges supra note 28 at 181.

29See Gunther Teubner, Coincidentia Oppositorum: Hybrid Networks Beyond Contract and Organization, Storrs Lectures Series, Yale Law School 2003-2004, available at http://www.jura.uni-

30See Oliver Gerstenberg, What Constitutions Can Do (but Courts Sometimes Don’t): Property, Speech and the Influence of Constitutional Norms on Private Law, 17 CAN. J.L. & JURIS 61 (2004).

31See C. Joerges, Relational Contract Theory in a Comparative Perspective: Tensions between Contract and Antitrust Law Principles in the Assessment of Contract Relations between Automobile Manufacturers and Their Dealers in Germany, 1985 WIS. LAW REV. 581, at 611and see IAN MCNEIL, THE RELATIONAL


32Rudolf Wiethölter, Materialization and Proceduralization in Modern Law, G. TEUBNER (ED.) DILEMMAS OF LAW IN THE WELFARE STATE (1986) and for a comment see Duncan Kennedy, Comment on Rudolf Wiethölter’s ‘Materialization and Proceduralization in Modern Law and ‘Proceduralization of the Category of Law’ in C. JOERGES AND D.M. TRUBEK (EDS.) CRITICAL LEGAL THOUGHT: AN

AMERICAN-GERMAN DEBATE (1989) and for a genealogical approach on these two authors Gunther Teubner, Dealing with Paradoxes of Law: Derrida, Luhmann, Wiethölter. (‘Storrs Lectures 2003/04’ Yale Law School), in OREN PEREZ UND GUNTHER TEUBNER (HG.) ON PARADOXES AND SELF-REFERENCE IN LAW (2004, forthcoming).

33See C. Joerges, supra note 22, at 612.

34See Gunther Teubner, Societal Constitutionalism: Alternatives to State-centred Constitutional theory?

(‘Storrs Lectures 2003/04’ Yale Law School) in CHRISTIAN JOERGES, INGE-JOHANNE SAND UND

GUNTHER TEUBNER (HG.) CONSTITUTIONALISM AND TRANSNATIONAL GOVERNANCE (2004, forthcoming) and Global private regimes: Neo-spontaneous Law and Dual Constitution of Autonomous Sectors in World Society? in KARL-HEINZ LADEUR (HG.) GLOBALIZATION AND PUBLIC GOVERNANCE

(2003, forthcoming).



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of private law and supranational deliberative networks, the procedural view predicts that the harmonization process will give voice to local and peripheral actors before new deliberative for a, thus leading to greater procedural fairness.

Distributive consequences of the Tobacco Advertising directive

The ECJ tobacco advertising judgment (2000)35 exemplifies how the two scholarly views run short in exploring the distributive stakes of the harmonization process. This blind spot characterizes the debate among European lawyers, technocrats and judges addressing the harmonization of European law, not only in its more ‘public’ and constitutional dimension but also in its more ‘private’ dimension concerning the harmonization of European contract law.

Fearing the expansion of Community competences at the expense of member states, Germany challenged the legitimacy of a directive that harmonized member states law by imposing a total ban on tobacco advertising.36 The German challenge alleged that the center of gravity of the directive was not market harmonization but public health, which fell under the regulatory competence of member states.37 The ECJ annulled the tobacco-advertising directive for lack of legal basis on the grounds that the directive was a disguised health measure rather than an internal market provision.38

The Court held that within a predominantly local market of advertising for tobacco products, there was no appreciable obstacle to trade and distortion of competition. The ECJ relied on the opinion by Advocate General Fennelly claiming that differences among the tobacco advertising regulations of member states did not justify a total ban on tobacco advertising.39 Instead of improving the functioning of the internal market by eliminating appreciable distortions of competition, the directive eradicated the sector of advertising of tobacco products on posters, ashtrays and parasols and for sporting events such as Formula 1.

But the tobacco advertising holding opened the possibility for new re-regulation in case of future barriers to trade arising from the circulation of periodicals and sponsorship events in cross-border trade. A few months after the judgment, the Commission drafted a new directive that included a ban on tobacco advertising for all printed publications, Internet services, radio broadcasting, and sponsorship events with cross-border effects. This new directive was rapidly approved and published in

35See the ‘Tobacco Advertising’ decision delivered on October 5th, 2000 by the ECJ, Case C-376/98 Federal Republic of Germany v. European Parliament and Council of the European Union, voiding Directive 98/43/EC on the Advertising and sponsorship of tobacco products.

36See ‘Tobacco Advertising’ Directive 98/43/EC on the advertising and sponsorship of tobacco products.

37See the Tobacco Advertising decision at § 31-32.

38Art 95 is a provision that the Community legislature deploys to approximate national laws with the express objective of establishing the single market. See the ‘Tobacco Advertising’ decision delivered on 5 October 2000 by the ECJ, Case C-376/98, Federal Republic of Germany v. European Parliament and Council of the European Union.

39See Opinion of Advocate General Fennelly delivered on 15 June 2000 in Case C-376/98 Federal Republic of Germany v. European Parliament and Council of the European Union.




2003.40 However, the story of the first tobacco advertising directive is likely to be repeated because of new pending challenges before the ECJ in which Germany once again has challenged the directive, alleging its lack of a proper legal base.41

The harmonization of tobacco regulation in the EU has highly fragmented national interests according to the distributive consequences ensuing from the implementation of the tobacco-advertising directive. The complex behavior of the tobacco manufacturers and the member states exemplifies the strategic purpose multilevel governance alliances which are no longer captured in terms of an opposition between member state versus the EU or in terms of an opposition between tobacco manufacturers versus consumers. Instead, European multilevel governance develops by means of strategic alliances among public and private actors, local governments and supranational institutions, domestic and European courts. This plethora of public and private actors strategically allies along complex distributive lines, which are characterized by the disparate impact of the harmonization of European law in diverse local contexts.

For instance, the first tobacco-advertising directive is part of a long-standing European anti-tobacco agenda that since 1989 was sponsored by the European Commission.42 What characterized the long struggle for the adoption in 1997 of the first tobacco advertising directive was that the drafting process was the main target of tobacco lobbies at national as well as European level.43 In the 1990s the common goal of what appeared to be a monolithic tobacco industry was to prevent the implementation of the directive through litigation. 44 This goal was successfully accomplished with the tobacco advertising judgment. However, when in 2003 the Council rapidly approved a second advertising directive, the tobacco industry became highly fragmented and divided. Now, well-consolidated tobacco manufacturers with a large impact on the EU market no longer oppose the second

40See Directive 2003/33/EC of the European Parliament and of the Council of 26 May 2003 on the approximation of the laws, regulations and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products Official Journal L 152 , 20/06/2003 P. 0016 – 0019.

41See F.Marchetti, F.Nicola, Constitutionalizing Tobacco: The Ambivalence of European Federalism, 46 HARV. INT. L.J. 507-525 explaining that in the pending cases before the ECJ (Germany, C-380/03; Nürburgring: T-311/03; Kreuzer Medien: T-310/03) Germany alleges that the tobacco advertising directive is not necessary because there are no appreciable distortions to trade in periodicals and sponsorship events that would create obstacles to cross-border trade.

42Directive on ‘Television without Frontiers’ Council Directive 89/552/EEC of 3 October 1989 on the

coordination of certain provisions laid down by Law, Regulation or Administrative Action in Member States concerning the pursuit of television broadcasting activities, Official Journal L 298 of 17/10/1989 P. 0023 – 0030. See Tamara K. Hervey, Up in smoke? Community (anti)-tobacco law and policy, 26 EUROPEAN LAW REVIEW (2001).

43See how the Tobacco industry elaborated different strategies to influence the outcomes of the European Community’s tobacco legislation Mark Neuman, Asaf Bitton, Stanton Glantz, Lancet 2002; 359: 1323-30. As the anti-tobacco lawyers put it: ‘The tobacco industry sought to delay, and eventually defeat, the EC directive on tobacco advertising and sponsorship by seeking to enlist the aid of figures at the highest levels of European politics while at times attempting to conceal the industry's role’.





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tobacco-advertising directive, whereas the other tobacco manufacturers lobbied against it.45

Moreover, just before the approval of the second advertising directive, tobacco manufacturers were divided and one company allied with the Commission in favor of the directive whereas the others allied with the German government to lobby against it. Likewise, member states governments were internally divided. In Italy the Ministry of Finance lobbied against the ban, because of their high stakes in tax revenues from tobacco consumption, while the Ministry of Public Health allied with the Commission in favor of the ban.46 The emergence of multilevel alliances divided the Commission, the dominant tobacco manufacturers and Italian Ministry of Public Health on one side, while Germany, the rest of the tobacco industries and the Italian Ministry of Finance, on the other side. The behavior of tobacco manufacturers and member states’ governments exemplifies how the harmonization of tobacco advertising in the EU has fragmented both private and public interests and triggered multilevel governance alliances along distributive lines.

European scholarship has addressed at length the constitutional implications of the tobacco advertising judgment but its complex distributive consequences have remained a blind spot in the literature. For instance, the tobacco-advertising directive affected differently communities located in various Europeans setting. The directive created a major economic disadvantage for Spa, a Belgian city that hosts a Formula 1 event every year. After the early implementation of the directive by the Belgian government, the Formula 1 race was re-located to China.47 Again, the ban on tobacco advertising might contribute significantly to the disappearance of local newspapers in Germany, where, in contrast to other member states, there is an important local editorial tradition. Finally, with regards to the tobacco industry the directive might consolidate the dominant position of one tobacco manufacturer at the expense of the others, thus creating a preferential treatment for cigarettes already manufactured and extensively sold in the EU.48

45Comments by Fabio Marchetti (JT International) at the talk delivered at Harvard Law School on 03/01/2003 with Professor Alexander Somek on ‘Good News for a Bad Habit: Competence Allocation in the EU post the Tobacco cases’,

46This type of fragmentation is peculiar to each political tradition of European member state. On this see the insightful distinction between simple and compound polities by Vivien A. Schmidt, The European Union: Democracy and Legitimacy in a Regional State? 42 JCMS N.4 (December 2004, forthcoming).

47See EU Business, EU tobacco ban puts Union, Formula 1 racing collision course by B. O’Rourke at explaining the case of Spa-Francorchamps in Belgium where the Belgian Grand Prix because of the government complying with the Tobacco advertising directive banned the display of tobacco advertisements on the cars and the course, the Federation Internationale d’Automobile (FIA) decided to reallocate the race to China’

48See the Directive 2001/37/EC of the European Parliament and of the Council on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco products, challenged before the ECJ and upheld in the ‘Tobacco Labeling decision’, Case C-491/01 The Queen v Secretary of State for Health ex parte: British American Tobacco (Investments) Ltd and Imperial Tobacco Ltd. § 43 and note147. The Tobacco labeling judgment was referred to the ECJ by an English court for a preliminary ruling. The questions raised by two British Tobacco manufacturers concerned the validity and the interpretation of directive 2001/37 on the manufacture, presentation and sale of tobacco products. They argued that this was a disguised measure mainly intended to ensure the protection of public heath rather than the free movement of tobacco




Policy arguments for the New European Contract Law

Like the tobacco advertising saga, the harmonization of contract law has opened up the possibility, through the preliminary reference procedure from ordinary courts to the ECJ,49 to interpret national contract law rules before the court of Luxembourg and thus opened up the possibility to create new multilevel governance alliances along complex distributive lines.50 The possibility for local actors to challenge national regulation before the ECJ has created a new leverage, especially for private for lawyers, by means of the ‘new European contract law.’51 This lawyering tool has been greatly exploited by private businesses,52 peripheral courts53 and grass root movements54 in challenging domestic regulation for very different distributive purposes.55 Yet in producing legal arguments before the ECJ, private lawyers when arguing in favor of a particular interpretation of a contract provision are reluctant to address the distributive consequences of the harmonization through policy arguments.56

In Océano Groupo Editorial SA v. Rocio Murciano Quintero57, two Spanish sellers of encyclopaedias sued five buyers before the Court of First Instance of Barcelona for unpaid sums due under a contract of adhesion for the sale of encyclopaedias on deferred payments terms. In April 1998, the Court of First Instance of Barcelona referred the case to the ECJ for interpretation of the Directive on Unfair Contract Terms (93/13). The conflict emerged between a rule of Spanish civil procedure and the substantive law contained in the European directive. The summary proceedings for unpaid sums before the Court of First Instance of Barcelona were based on the exclusive jurisdiction clause contained in the contract of adhesion, which resulted in

products within the internal market. The challenge raised the question of Community competences – including its power to harmonize national provisions. By referring to its interpretation of art. 95 EC, the ECJ upheld the directive and clarified that the Community did not have the competence to harmonize national rules in the domain of public health as such, but that it could do so if the measure ‘genuinely’ had the object of improving the establishing and functioning of the internal market. See supra note 34, Fabio Marchetti explains that due to the ban on misleading descriptors such as ‘light’, ‘mild’ and ‘ultra-light’ contained in the Labeling directive, JT international was prevented from marketing ‘Mild 7’, the second most sold brand in the world after Malboro. Therefore the directive favored those tobacco companies that competed with Mild 7 and through the directive obtained its exclusion from the European market.

49See See J. H. WEILER, supra note 11 at 193-5 and on the judicial cooperation triggered off by article

234(ex-177) EU Treaty. See also Burley A.M. and Mattili, W., Europe Before The Court: A Political Theory of Legal Integration, INTERNATIONAL ORGANIZATION 47 (1993), 41.

50See Case C-45/96, Bayerische Hypotheken- und Wechselbank AG and Edgar Dietzinger. On March 17, 1998 the ECJ delivered its judgment on a question about the interpretation of the Doorstep Selling Directive that was referred to the Court by a German tribunal.


52See Case C-23/89 Quiet Lynn Limited.

53See Pretore di Salo’ v. Person Unknown, Case 14/86 (1987) ECR 2545.

54See World Wildlife Fund v. Autonome Provinz Bozen, Case C-435/97 (1999) ECR I-5613.

55For example in the UK, equality actors forced a conservative government to lift a cap on sex discrimination awards to compensate women dismissed from the military because they were pregnant and to equalize pension benefits for women See KAREN ALTER, ESTABLISHING THE SUPREMACY OF EU LAW (2001) AT 224.


57See Oceano Groupo Editorial C-240/98, ECJ decision on, 27 June 2000.



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an ‘unfair contract term’ under the classification of contractual terms adopted by the EC directive. By means of the preliminary ruling provision (Art. 234 TEC), the Spanish judge referred the following question to the ECJ: ‘Is the scope of the consumer protection provided by the Directive on unfair contract terms in consumer contracts such that the national court may determine of its own motion whether a term of a contract is unfair when making its preliminary assessments as to whether a claim should be allowed to proceed before ordinary courts?’58 The ECJ holding allowed Spanish judges to declare the term void of their own motion.59 In other words, the ECJ recognized that it would have been paradoxical to oblige the consumers to accept the jurisdiction of the Court of Barcelona in order to prove that the court had no jurisdiction.

European scholars wrote extensively on this judgment and some of them attacked the ECJ interpretation of the unfair contract term directive through different policy arguments. Through a moral argument they suggested that consumers should look out for their own interests, having the choice to show up or not to show up in court. Through an efficiency argument, they sustained that the judgment created drawbacks for competition and market freedom and thus discouraged consumers’ self-determination and their ability to look out for themselves. Finally, through an administrability argument they concluded that Océano imposed on national judges the requirement to decide over the unfairness of contractual terms by creating new equity standards that were both inefficient and difficult to administer.60

Without responding to the efficiency and the welfare arguments raise above, the responses by European lawyers to the Océano decision were relying either on the procedural or the sceptical view. Some lawyers acclaimed the Océano judgement, since it was in line with the remedy created by the directive in allowing domestic courts to actively intervene in determining the unfairness of contractual terms. They justified the ECJ decision through a mix of arguments about rights and expectations, according to which the Directive on Unfair Contract Terms required member states to introduce a system of protection that mandated a national judge to enforce consumer rights.61 In contrast, those lawyers concerned with constitutional asymmetry relied on a set of institutional competence arguments, which aroused a new skepticism for the ECJ decision. They claimed that Océano was not a significant judgment, since it was only eliminating a paradoxical situation without limiting the free-market rationale of the European economic constitution.62 They

58See supra note 40, judgment at § 19.

59See Id., judgment at §23 where the ECJ stated, ‘The aim of the Directive requires Member States to lay down that unfair terms are not binding on the consumer. However this would not be achieved if the consumer were himself obliged to raise the unfair nature of such terms. In disputes where the amounts involved are often limited, the lawyers' fees may be higher than the amount at stake, which may deter the consumer from contesting the application of an unfair term.’

60See Jules Stuyck, Annotation, 38 COMMON MARKET LAW REV. 719 (2001).

61See Steven Weatherill, Can There Be Common Interpretation of European Private Law? 31 GA. J. INT'L & COMP. L. 139 (2002) at 163.

62See Oliver Gerstenberg, ‘Integrity, Anxiety’ and the Constitutionalisation of European Private Law, in KIMMO NUOTIO (ED.) EUROPE IN SEARCH OF `MEANING AND PURPOSE' (Helsinki: Forum Iuris, forthcoming, 2005).




highlighted the troublesome contrast between a supranational court endowed with tremendous deregulatory powers and the Community decision-maker that encounters numerous obstacles in drafting welfarist legislation. Their fear was that the ECJ could challenge those national private law provisions whenever these did not comply with the contractual or liability standards set up in Brussels.63 Their concern over legitimacy derived from the enormous power concentrated in the hands of the European judiciary, which can void domestic provisions that have been democratically approved by national parliaments.

The resistance of European lawyers to produce social welfare and distributive arguments in response to efficiency claims in order to influence the choice of a particular contract rule is even more striking in a recent judgment before the Court of Luxembourg. Freiburger Kommunalbauten64 stands also as an example of how social welfare arguments are becoming increasingly important to determine the interpretation of European contract law rules. In contrast with Océano, the ECJ in Freiburger Kommunalbauten was not persuaded by either rights or expectations arguments made by the lawyers of the plaintiffs in the proceeding against a municipal construction company.

The municipal construction company acting in the course of its business, had sold to two consumers, Mr. And Mrs. Hofstetter, a parking pace located in a car park that the company was going to build. Under a contract clause, the whole price of the parking place was due by the consumers upon delivery by the contractor of a security in form of a bank guarantee. Moreover, in case of late payment, the contract clause established that the purchaser was liable to pay default interests. When the bank guarantee was delivered to the consumers, they refused to make the payment alleging that the contract clause requiring payment of the whole price was contrary to article 9 of the AGBG, the law on standards business terms, which governs the unfair contract term directive under German law.65 In refusing to pay the price upon delivery of the bank guarantee, Mr. and Mrs. Hofstetter made clear that they would pay the entire amount only after they accepted the parking space free of defects. The municipal company sued the consumers to recover default interests for late payments; the claim was first dismissed by the regional court but then successfully appealed on a point of law before the Bundesgerichtshof. The court of appeal held that the disputed contract clause, which might not be unfair under German law, fell under the scope of article 3(2) of the directive on unfair contract terms,66 and as a

63See Maria Victoria Gonzalez Sanchez v. Medicina Asturiana, Case C-183/00, 25 April 2002.

64See Freiburger Kommunalbauten GmbH Baugesellschaft & Co. KG, Case C-237/02, April 1st, 2004.

65See AGBG, article 9.

66See art. 3 of the Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts:

‘(1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ right and obligations arising under the contract, to the detriment of the consumer.

(2) A term shall always be regarded as individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term, particularly in the context of a pre-formulated standard contract’.



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preliminary ruling, referred the ECJ the question whether the clause of the contract at stake was to be regarded as unfair within the meaning of article 3(2) on the directive.67

The municipal company and the German government argued that the term was not unfair because the disadvantages for the consumer were counterbalanced by the bank guaranteed which offered two advantaged to the consumers: a lower price of the good since the company will not borrow money, and the guarantee of repayment of the sums paid in case of non-performance or defective performance even if the builder was insolvent.68 In contrast, Mr. and Mrs. Hofsetter claimed that the clause was unfair because it contravened the general principle civil law of ‘equality of arms’, that mutual obligation must be performed contemporaneously otherwise, once litigation arises, this will create detriment for the consumer in a weaker position.69 After revising the arguments of each party, the ECJ followed the conclusions of both the European Commission70 and the Advocate General (A.G.) by holding that:

‘it is for the national court to decide whether a contractual term such as that at issue in the main proceedings satisfies the requirements for it to be regarded unfair under article 3(1) of the Directive.’71

In holding that the interpretation of an unfair term in a contract between a private party and a public administration was to be decided by the national tribunal, the ECJ established that the interpretation of a general criterion of unfairness of a contract term was to be developed according to a determined local context with a particular socio-economic purpose and therefore, the contract term should ‘be considered in light of the particular circumstances of the case in question.’72 The hard task of the Court was to depart from its own precedent, since in Océano the ECJ interpreted the directive through a ‘general criteria’ which defined the concept of contractual unfairness deployed by the Community legislature. In departing from Océano, the ECJ referred to the A.G. opinion holding that the Court

‘[…] should not rule on the application of these general criteria to a particular term, which must be considered in light of the particular circumstances of the case in question.’73

The A.G. differentiation between the two cases is based on article 4 of the unfair contract term directive, which answers to the question whether a particular term in a contract is, or is not, unfair. The article suggests addressing the nature of the goods or services for which the contract is concluded and by referring, at the time of

67See Freiburger Kommunalbauten GmbH Baugesellschaft & Co. KG, Case C-237/02, § 14.

68Id, § 16.

69Id, § 17.

70See Id, § 18.

71See Id, § 25.

72Id. § 22.

73Id, § 22.




conclusion of the contract, to all circumstances attending its conclusion. In light of this article, in Océano court decided about the unfairness of a contract clause, because the term in question

‘[…] was solely to the benefit of the seller and contained no benefit in return for the consumer (…) it thereby undermined the effectiveness of the legal protection of the rights which the Directive affords to the consumer.’74

In contrast, after balancing the different considerations presented by the municipal corporation on the one hand, and the consumers on the other, the ECJ held that in Freiburger Kommunalbauten, in light of the nature of the contract, the clause was not completely one-sided with a pro-seller rational, as the clause addressed by the Oceano court. Despite the arguments made by the lawyers of Mr. and Mrs. Hofstetter, in Freiburger Kommunalbauten the ECJ after ‘balancing of the advantages and the disadvantages of the disputed clause under the national law’75 remanded the judgment to the local tribunal. The judicial reasoning of the Court in Freiburger Kommunalbauten departs from a teleological interpretation based on ‘general criteria of interpretation’ of Community legislation in order to adopt a balancing approach between conflicting considerations entailing advantages or disadvantages to each party involved in the dispute. In light of this balancing approach, the ECJ remanded the decision back to the Bundesgerichtshof that was better apt to balance the conflicting interests of the parties and evaluate the consequences of the contract rule in question.

Blind Spots and Caveats for Distributive Considerations

When lawyers embrace the sceptical view towards European integration they are concerned with the paradigm of constitutional asymmetry. In this light the Tobacco advertising judgment stands as evidence for the intrinsic connection between the European level and the free market and the national level and the welfare state. However, this view provides a one-sided approach to the legal reasoning of European adjudication that Alexander Somek has addressed through the notion of ‘market holism,’ which pervades the reasoning of the Court.76 In contrast, when lawyers embrace the procedural view they argue in favor a constitutionalisation approach through European adjudication. The tobacco advertising judgment has entailed new deliberative processes because despite the annulment of the directive, the ECJ decision opened a new possibility for the Commission to draft a second tobacco-advertising ban. In this light, the constitutionalisation approach provides an insightful view on the collaborative interplay between domestic and European actors, which gives voice to a multitude of different actors European level, thus insuring more procedural fairness. But in reconciling and normalizing colliding

74Id, § 23.

75Id, § 15.

76See Alexander Somek, Market Holism: Toward a Reconstruction of the ECJ’s new Theory of Community competences,



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interests at the European level, these lawyers set aside too soon those irreconcilable conflicts which can be healthy for democratic political processes.77 Their focus on the constitutionalisation processes sets aside too early the distributive consequences of harmonization. Their prediction that proceduralization, discourse and learning by monitoring will produce optimal distributive outcomes is not always the case in the European scenario.

In the realm of European contract law, when advocating for a particular distributive outcome, private lawyers have an important lawyering tool, which entails the creation of multilevel alliances to achieve greater bargaining power for determined groups in each national context through the changing of legal rules. For example in Océano, the harmonization of contract law allows an ordinary court to ally with the ECJ in order to challenge domestic legal provisions. European lawyers addressing the harmonization debate seem mostly concerned with different constitutional approaches rather than with distributive considerations. However, when sceptical or procedural lawyers fail to engage with social welfare arguments and distributive consequences of European contract law they also undermine the possibility of creating successful governance alliances between local or peripheral actors and the ECJ (Freiburger Kommunalbauten).

The skepticism of some European lawyers towards multilevel governance alliances derives from the fear that multilevel alliances can easily be instrumentalized for deregulatory purposes, while undermining the comprehensiveness of national constitutional protection. Supporting this skepticism, the history of European adjudication shows that private interests have successfully challenged domestic legislation that burdened their businesses before the ECJ.78 By means of the free movement provisions enshrined in the EU Treaty, private businesses have achieved and are still obtaining important deregulatory effects in the well-known cases of Cassis de Dijon (1979),79 Centros (2000),80 and Gambelli (2003).81 When sceptical

77For this critique see Rosa Comella, SJD dissertation HLS 2004, on file with the author. However, I would be more cautious to extend this critique to private law theory since Gunther Teubner explained that in dealing with paradoxes the law maintains its inherent conflicts in order to find new doctrinal solutions, supra note 34.

78See Quiet Lynn Limited, supra note 60.

79See Cassis de Dijon, supra note 1.

80See Centros, Case C-212/97. When Danish authorities denied the freedom of establishment (art. 43 TEU) to Centros, a private limited company registered in the UK trying to circumvent national rules concerning the paying-up of minimum capital, the ECJ ruled that Danish regulation on company capital is contrary to the free movement. Similarly to the mutual recognition principle the Centros ruling establishes that since the company was legally incorporated in accordance with the law of another member state (UK), it has the right to register its branch in Denmark.

81See Gambelli, Case C-243/01. In 2003, the Gambelli judgement shows the consistency of the ECJ jurisprudence on the four freedoms. Mr. Gambelli gathered bets from Italian gamblers on sports events and transmitted these data electronically to a UK betting company. This activity constituted a fraud against Italian law, which requires that each gambling activity on sporting events obtain a license. The ECJ ruled that Italian administrative and criminal rules were not compatible with the free movement of services and persons contained in the ECJ treaty. The concern over constitutional asymmetry emerging from the Gambelli and similar cases is that the ECJ can, by means of a counter-majoritarian ruling, void national criminal and administrative provisions that were approved by democratically elected national parliaments.




lawyers put forward a constitutional asymmetry concern, they are pleading for greater caution on the part of the ECJ in annulling domestic regulation approved by national parliaments.82 But the constitutional asymmetry paradigm inevitably leads some lawyers to be overly sceptical towards European contract law. In contrast, in referring to the constitutionalisation of private law, other lawyers are optimist about the possibilities for supranational adjudication. In arguing that European deliberative procedures oblige parties to cooperate,83 these lawyers predict that political conflict can be solved by means of new justifications, thus entailing optimal distributive outcomes. But, as the Tobacco advertising case demonstrates, when the ECJ decides in favor of a particular justification, the distributive effects of its decision inevitably have an uneven impact on European citizens. Thus, even when procedural fairness is ensured, the outcome of a decision is not a free agreement among parties, but the result of coercion and disagreement, which is reflected by the uneven distribution of resources among the different actors characterizing the multilevel alliances.

The creation of multilevel alliances could then reallocate some bargaining power through legal rules and influence the distributive outcomes of EC law.84 Never the less there are caveats for such consequences. Multilevel alliances could increase market efficiency that will benefit certain business or have distributive effects among differently situated groups by reallocating resources from richer to poorer consumers. However, the effort of European lawyers lies in figuring out some of these effects by producing policy arguments in order to justify the distributive consequences in the interpretation of contract rules.85 In Freiburger Kommunalbauten the ECJ was not persuaded by either a right-based analysis or by following the general principled criteria of Community law as in Océano. Differently, the ECJ held that the arguments presented by the lawyers required a balancing of the advantages and disadvantages created by the clause under a national law. Maybe European lawyers did not to produce sufficient welfare arguments to demonstrate which groups would have benefited by a particular interpretation of the contract term, however the reasoning of the court sheds a different light on European adjudication, openly engaging with conflicting policy considerations while taking distance from general principles approaches to be found in Community law.

In light of this adjudication trend, European lawyers tend to address the different constitutional dimensions of the harmonization process from either a sceptical or an procedural approach and they rarely elaborate consequentialist arguments to ascertain the distributive gains and losses triggered off by the harmonization. But when European lawyers produce social welfare arguments to address the consequences of the harmonization, there is a further caveat to keep in mind. As the tobacco advertising saga shows, the fragmentation of interests within the European context opens up important possibilities to create multilevel governance alliances along complex distributive lines. Because of the European-wide impact of

82See Daniela Caruso, supra note 64.


84See Duncan Kennedy, The Political Stakes in Merely Technical Issues in Contract Law, 1 EUROPEAN


85See Duncan Kennedy, Distributive and Paternalist Motives in Contract and Tort Law, With Special Reference to Compulsory Terms and Unequal Bargaining Power, 41 MARYLAND LAW R. 563 (1982).



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harmonization lawyers need to consider not only the gains for certain groups or certain local communities, but also the inevitable losses triggered by harmonization in different contexts.86

86 See Richard T. Ford, Bourgeois Communities: A Review of Gerald Frug’s City Making, 56 STANFORD

L. REV. 231-252 (2003).



Joanna Krzeminska


The European lawyer is not familiar with the notion of commercial speech. The commercial speech doctrine has been originally developed under the First Amendment case law in the United States and does not have its counterpart in Europe. Closer investigation of the European jurisprudence shows, however, that commercial speech has already and increasingly does give the European courts and scholars a splitting headache.

What encourages the discussion on commercial speech in Europe?

The European Court of Human Rights has held on several occasions, that statements made in the commercial context shall come within the realm of protection provided for by Article 10 of the European Convention on Human Rights and Fundamental Freedoms (hereinafter: ECHR). According to Article 10 ECHR ‘Everyone has the right to freedom of expression’. This is a rather general declaration, as it does not specify which categories of expression are to be protected. The Court noted that it does not distinguish between various forms of expression.1 Consequently all expression, whatever its content, falls within the scope of Article 10 ECHR. The key question is therefore the scrutiny of the justification for interference under Art. 10

(2) ECHR.2 The necessity test is less strict with regard to commercial statements than in the case of political speech. The states enjoy a wider margin of appreciation in commercial matters, which implies that they may interfere with commercial speech to a greater extent than would be allowed with regard to other kinds of expression (e.g. political speech).3 Consequently, the jurisprudence of the European Court of Human Rights encourages the discussion on the extent to which political speech occupies a higher level of constitutional protection.

Law Degree (Wroclaw University, Poland. Diploma European and English Law – (Cambridge), British Law Centre, Warsaw. 2000-2001 Studies at the University of Salzburg, Austria, on Erasmus grant (incl. participation on the Wilhelm C. Vis International Commercial Arbitration Moot). 1999-2000 Employee at the law periodical ‘Prawo i

Zycie’ (Warsaw). Participation at the summer school in Poland and Ireland (1999 scholarship of Columbus School of Law, Washington; 2000 scholarship at the University of Limerick and scholarship of the Centre International de Formation Européenne, Nice). 2001-2002 LL.M studies of European and International Law at the University of Bremen. Since December 2002 pre-doctoral researcher at ZERP for the Research Training Network ‘Fundamental Rights and Private Law in the European Union’ funded by the European Commission. Since July 2005 employed at the European Commission, Directorate-General for Energy and Transport.’ Paper based on a presentation at the 9th EUSA Biennial Conference in Austin, Texas

1Müller v. Switzerland [1988] 13 EHRR 212, para 27.

2Munro, The Value of Commercial Speech, (2003) 3 Cambridge Law Journal, 138.

3Markt Intern Verlag GmbH and Klaus Beermann v. Germany (1989) 12 EHRR 161.



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To speak about fundamental rights in Europe poses a certain risk of neglecting the complexity of the multiple systems of protection of fundamental rights on the European continent. There are three systems to be taken into account: (1) national constitutions, (2) the Council of Europe’s European Convention on Human Rights and Fundamental Freedoms, and the system of protection of fundamental rights and freedoms established in the European Union/Community. Yet, it does not suffice to discuss these three systems separately. The main difficulty when speaking about fundamental rights in Europe is to reveal and analyse the mutual interactions and links between these systems. This paper examines the status of commercial speech in the context of the protection of rights under the European Convention on Human Rights and in the European Community.

Why does commercial speech create problems?

The need to communicate is the key characteristic of our society. The constitutional right to impart and receive information, encompassed by freedom of expression, is a reflection of this need. The increasing presence of business in society raises a question of the scope of protection accorded to speech by commercial actors.

The source of the problem with commercial speech is the social dimension of business. This notion reflects on one hand the development of advertising techniques and on the other the involvement of business entities in debates on issues of public concern. In today’s world of mass communication and increased competition, advertising is constantly meeting new challenges. It becomes more and more sophisticated, not only in the sense of developing new techniques to draw consumers’ attention to a particular product. The public awareness and sensitivity to social problems and human rights issues tremendously influences business strategies. Businesses are more sensitive to social and human rights issues. Complying with good commercial standards and human rights has obtained an important commercial dimension. More and more often the producers will try not to attract us to a particular product but to the company itself. They sell us an image. Due to all these reasons, advertisements break existing standards and go beyond definitions that legal systems used to ascribe to them.

The aim of this study is to deal with speech, which includes both commercial and non-commercial elements and constitutes therefore a mix of commercial self-interest and a comment on issues of public concern. The analysis will mainly concentrate on the relationship between freedom of speech and fair competition in cases of disparaging comment by a competitor and statements by business entities about their own activity, which may be capable of distorting competition. Therefore, the influence of constitutional freedom of expression provisions on general clauses in unfair competition laws will be analysed.

For the sake of clarity three categories of speech have been singled out in this paper:

(1) political speech, which enjoys full constitutional protection, (2) commercial speech (e.g. ‘purely commercial’ advertising), which does enjoy some constitutional




protection4 (It has been assumed, however, that it is basically subject to the strict liability regime of unfair competition and misleading advertising laws), (3) so-called mixed speech, including both commercial and non-commercial statements.

Restrictions on advertising constitute the core of commercial speech doctrine (2nd group above). Bans on tobacco or professional advertising raise concerns about their compatibility with the fundamental right to freedom of expression. The question of how far governmental regulation can go in restricting truthful information on lawful activity is repeatedly dealt with by courts in Europe and the United States. In this regard, the American courts emphasise the importance of commercial information for consumer choice. In Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council5 the US Supreme Court held, that ‘[p]eople will perceive their own best interests if only they are well enough informed, and … the best means to that end is to open the channels of communication rather than to close them…6 Justice Blackman put it quite strongly: ‘[a]s to the particular consumer’s interest in the free flow of commercial information, that interest may be as keen, if not keener by far, than his interest in the day’s most urgent political debate’.7

The third group consists of cases, in which commercial and non-commercial elements of speech are strongly intertwined. It is one of the main aims of this study to establish whether this kind of speech, due to its non-commercial element should be lifted to the higher protection standard accorded traditionally to political speech, or whether it should be subjected to strict liability regimes resulting from unfair competition and misleading advertising laws. The examples of cases belonging to this group are Markt Intern8 and Hertel9 cases decided by the European Court of Human Rights. These cases, which will be discussed in more detail later in this paper, concern disparaging statements by competitors, which constituted part of a public debate. Another case belonging to this group has been decided in Germany10. It concerned a dispute between Kirch-Gruppe and Deutsche Bank over statements about creditworthiness (or lack thereof) of the former, made by the management board’s speaker of Deutsche Bank – Mr Breuer. During a World Economic Forum, Mr Breuer had been interviewed in New York about general economic developments in Germany, the situation of Deutsche Bank and, finally - at that time the topic in Germany – the situation of the heavily indebted Kirch-Gruppe, of which Deutsche Bank happened to be one of the creditors. Mr Breuer implied that Kirch- Gruppe would probably not obtain any further help from the financial sector. Deutsche Bank and Mr Breuer were sued for the contractual breach of

4An extensive, comparative study analysing the constitutional parameters of advertising, has been carried out in a form of research project initiated in 1992 by Confederation of European Community Cigarette Manufactures. The project has been co-ordinated by Professor Wassilios Skouris from the Thessaloniki Centre of International and European Economic Law. National reports were published in 1994 in: Skouris (ed.), Advertising and Constitutional Rights in Europe (1994).

5Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 US 748 (1976).

6Ibid., at 770.

7Ibid., at 763.

8Markt Intern v. Germany (supra note 3).

9Hertel v. Switzerland (1998) 28 EHRR 534.

10OLG München, Urt. v. 10.12.2003, NJW 2004; LG München I, Urt. v. 18.02.2003, NJW 2003, 1046.



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confidentiality duty through having revealed details about the financial situation of the debtor. Mr Breuer raised the freedom of expression defence by claiming that the information on the lack of creditworthiness of the plaintiff was generally accessible by the public from the media and that the statements made constituted a contribution to a debate on an issue of public concern.

What is commercial speech?

There is no satisfactory definition of commercial speech, neither in Europe nor in America. The attempts to define commercial speech have constituted the core of commercial speech doctrine in the United States. It is considered useful to take a look at the American developments before analysing how commercial speech is treated in Europe.

As defined in the First Amendment case law11 commercial speech is ‘a speech that does nothing more than propose a commercial transaction’. Therefore it may also be referred to as transactional speech, whose content is primarily determined by the underlying transaction. ‘Such speech indeed raises concerns different from those raised by pure speech, alone because it is intertwined with, and an inseparable component of, the underlying commercial transaction itself.’12 It is however important to distinguish core transactional speech from non-transactional speech by commercial speakers. The U.S. Supreme Court presented different approaches when defining commercial speech. The attempts to construe a positive definition by stating what commercial speech is, are definitely overshadowed by statements as to what commercial speech is not. It is not speech on which money is spent to project.13 It is not speech in a form sold for profit.14 It is not speech that solicits money.15 It is not speech on a commercial subject.16 In Central Hudson,17 commercial speech was defined as expression related solely to the economic interests of the speaker and its audience.

The most recent case decided by the California Supreme Court - Kasky v. Nike18 - started anew the debate on the necessity of revision of the American commercial speech doctrine. On June 26, 2003, the U.S. Supreme Court dismissed a previously granted writ of certoriari as improvidently granted.19 In the background of the

11Virginia State Board of Pharmacy (supra note 5) 762; see also Edenfield v. Fane, 507 US 761, 767 (1993); Lorillard Tobacco Co. V. Reilly, 533 US 525, 544 (2001); United States v. United Foods, Inc.,

533US 405, 409 (2001).

12Nike, Inc., et al. v. Marc Kasky, On Writ of Certiorari to the Supreme Court of California, Brief of Amicus Curiae, Centre for Individual Freedom in support of Petitioners, February 28, 2003, No. 02-575, p. 6.

13Kozinski/Banner, Who’s Afraid of Commercial Speech, (1990) 76 Virginia Law Review, 638; Virginia State Board of Pharmacy (supra note 5).

14Ibid., at 638.

15Ibid., at 638.

16Ibid., at 638.

17Central Hudson Gas and Electricity Corporation v. Public Service Commission, 447 US 557, 561 (1980).

18Marc Kasky v. Nike, Inc., et al., 27 Cal. 4th 939.

19539 US 1 (2003).




dispute lay a debate over globalisation, in particular over the conditions under which multinational corporations invested in developing countries. At some point of this heated debate Nike became the target of allegations that the working conditions in its factories in Southeast Asia were dangerous, that workers were underpaid and mistreated, and finally that child labour was being used. To meet with this criticism Nike wrote letters to newspaper editors and to universities and was publishing communications addressed to the general public. Independent investigations were carried out and concluded that some allegations against Nike did have merit. Nike commissioned an independent investigation carried by a former United Nations Ambassador Andrew Young, who then concluded that the charges were false. The results of this investigation were published by Nike in the form of an ‘editorial advertisement’ (i.e. paid political advertisement). Mark Kasky, a California resident acting on behalf of the general public, brought a suit against Nike, under California unfair trade practices and false advertising laws, submitting that the statements were untrue and amounted to misrepresentations. The statutes invoked imposed strict liability (even non-negligent misstatements are actionable, and even truth is not a defence when the truthful statements are deemed misleading). It had been submitted that Nike’s statements, although addressed to the public generally, were also intended to reach and influence actual and potential purchasers of Nike’s products. Nike claimed full First Amendment protection due to the fact that the statements constituted a part of a political debate in which certain allegations were formulated with regard to its practices in the overseas factories. Kasky argued the opposite, claiming that Nike’s speech was commercial and therefore merited only limited, if any, First Amendment protection. The classification of the speech as commercial stems from the fact that Nike took part in a debate only for its own commercial purposes, in order to convince the consumers and therefore maintain or even raise the sales of its products. Kasky alleged that Nike’s statements were false and misleading and should thus be subjected to unfair competition and false advertising laws’ regimes. The California Supreme Court agreed with Marc Kasky.20

The question posed in the motion to the U.S. Supreme Court to revise the Kasky judgement was as follows:

‘[w]hen a corporation participates in a public debate – writing letters to newspaper editors and to educators and publishing communications addressed to the general public on issues of great political, social, and economic importance – may it be subjected to liability for factual inaccuracies on the theory that its statements are ‘commercial speech’ because they might affect consumers’ opinions about business as a good corporate citizen and thereby affect their purchasing decisions?’21

20Marc Kasky v. Nike, Inc., et al. (supra note 18).

21Nike, Inc., et al. v. Marc Kasky, On Writ of Certiorari to the Supreme Court of California, Brief of Amicus Curiae, Centre for Individual Freedom in support of Petitioners, February 28, 2003, No. 02-575, p. 3.



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A more detailed analysis of the case falls outside the limited scope of this paper. It has been mentioned in order to give the reader an example of a possible variable of commercial speech which reveals the difficulty of distinguishing between political and commercial speech in order to define the latter.

In the light of numerous efforts by American doctrine and jurisprudence to define commercial speech the question arises whether it is at all possible to fashion such a definition of commercial speech, which would coherently encompass all its variables. As Allan Howard puts it ‘[a]s a matter of definition, there are no convincing reasons why one definition of commercial speech is better than another22 Consequently, a clear and coherent guidance enabling the distinction between commercial and non-commercial speech remains an open question.

Part I. Commercial expression and the European Convention on Human Rights and fundamental freedoms

The European Court of Human Rights held on several occasions that statements made in commercial context shall come within the realm of protection of Article 10 ECHR. The provision of this article reads as follows:

‘Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authorities and regardless of frontiers. This article shall not prevent States from requiring the licensing of broadcasting, television or cinema enterprises.

This is a rather general declaration, as it does not specify what categories of expression are to be protected. The Court noted that it does not distinguish between various forms of expression.23 Consequently, all expression, whatever its content, falls within the scope of Article 10 ECHR. The key point is therefore the scrutiny of the justification for interference under Art. 10 (2) ECHR.24 It provides that:

‘[t]he exercise of these freedoms [freedom to hold opinions and to receive and impart information and ideas], since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals, for the protection of the reputation or rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary.’

22Howard, The Constitutionality of Deceptive Speech Regulations: Replacing the Commercial Speech Doctrine with a Tort-Based Relational Framework, (1991) 41 Case Western Reserve Law Review, 1136.

23Müller v. Switzerland (supra note 1), para 27.

24Munro, The Value of Commercial Speech, (2003) 3 Cambridge Law Journal, 138.




Thus, for an interference to come within the margin of appreciation it has to be:

(1)prescribed by law,

(2)pursuing one or more of the legitimate aims set out in the second paragraph of Art. 10 ECHR and,

(3)necessary in a democratic society to achieve such aims.

The necessity test is less strict with regard to commercial statements than in the case of political speech.25 The states enjoy a wider margin of appreciation in commercial matters, which implies that they may interfere with commercial speech to a greater extent than would be allowed with regard to other kinds of expression (e.g. political speech).

The commentators point out that advertisement is a form of speech, since - though often in an embellished or exaggerated manner - it aims at conveying information or opinions.26 The profit-making purpose is considered irrelevant.27 Neither the financial element nor the competition-related promotional statements are excluded from the ambit of protection of Art. 10 ECHR.28 The justification for considering advertising a protected form of speech is that an individual (consumer) has got the right to receive information helping him or her to make an informed choice, regardless of whether this information concerns a political party or candidate s/he should vote for or the characteristics of a product s/he is planning on to buy.29

According to some opinions, the fact that the speaker defends a particular interest, economic or any other, does not deprive him or her of protection.30 Nor does the speaker’s professional status remove the speech from the realm of protection. In the Barthold case the ECtHR held that a rule of professional conduct, prohibiting a veterinary doctor from advertising, could not be invoked so as to prevent him from uttering statements on the need for an emergency veterinary service.31 The Court held that the strict approach to the prohibition of advertising contained in the professional rules of conduct is not consistent with the freedom of expression. Such an approach, prohibiting the speech if there is even a slightest likelihood that the utterances will entail an advertising effect, deprives the members of a particular profession from contributing to the public debate and hampers the press in its role as public watchdog.32

25Markt Intern v. Germany (supra note 3).

26Jayawickrama, The Judicial Application of Human Rights Law National, Regional and International Jurisprudence (2002) p. 677.

27Casado Coca v Spain (1994) 18 EHRR 1.

28Barthold v Germany (1985) 7 EHRR 383, Casado Coca (supra note 27) para 35.

29Jayawickrama (supra note 26), p. 677.

30Markt Intern v Germany (supra note 3), joint dissenting opinion of Judges Golcuklu, Pettiti, Russo, Spielmann, De Meyer, Carrillo Salcedo and Valticos.

31Barthold (supra note 28) para 61.

32Barthold v Germany (supra note 28). See also: Jayawickrama (supra note 26), p. 681, Ovey/White, The European Convention on Human Rights (3rd edn. 2001) p. 276, Reid, A Practitioner’s Guide to the European Convention on Human Rights (1998) p. 239.



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The European approach to commercial speech – balancing the interests at stake

The leading case concerning speech in commercial context - Markt Intern33 - concerned a publisher of a trade bulletin, who represented the interests of small and medium sized retail businesses in their competition with large distribution companies (e.g. supermarkets and mail-order companies). The bulletins published by Markt Intern contained information on developments in the market with special emphasis on the commercial practices of large-scale companies. In a bulletin for chemist and beauty product retailers - ‘Markt Intern – Dorgerie- und Perfuemeriefachhandel’, Klaus Beermann described an incident involving an English mail-order firm – Cosmetic Club International. It allegedly did not return the purchase price to a client, who – not satisfied with the goods received - returned them to the seller. The article was based on one incident only and requested further feedback from the readers as to whether the event described constituted general business practice by Cosmetic Club International. The German court denied the freedom of expression protection for Markt Intern’s statements on the ground that they were made for the purposes of competition. The Commission (finding that there was a breach of Art. 10 ECHR) stated that the society is based on the articulation of economic interests.34

The main analysis in cases concerning speech in commercial context focuses on the third prerequisite for interference mentioned above: necessary in a democratic society to achieve the aims pursued. This question has been analysed by the European Court of Human Rights on several occasions already. On this basis, generally applicable criteria to determine the level of protection of the contested speech can be established:

1.the court identifies the interests at stake (e.g. the right to speak freely on one hand and the interests of persons who may be injured by speech on the other),

2.the contested speech is analysed – commercial and non-commercial elements of speech,

3.the balancing of commercial and non-commercial elements takes place within the framework of ‘public debate’ test; the question, which has to be answered in this regard: can the contested speech contribute to a public debate on a particular issue?

4.if the non-commercial element overweighs the commercial, a higher level of protection will be accorded to the contested speech,

5.conflicting interests at stake (see point 1 above) are once again balanced.

The key question in establishing its level of protection is therefore the distinction and weighting between commercial and non-commercial elements of speech. As

33Markt Intern v. Germany (supra note 3).

34Ibid., para 202 – 03.




some commentators put it, the level of protection accorded by the Court will partly depend on the extent of the commercial involvement.35 Consequently, the problem how to define commercial speech becomes highly relevant. Due to its many variables, commercial speech cannot be defined with reference to one characteristic only. Below, the approach to speech in commercial context adopted by the European Court of Human Rights is presented. It has to be noted, however, that in Markt Intern36 and Jakubowski37 cases the Court did not place an emphasis on distinguishing between commercial and non-commercial elements of the speech. By stating that the German authorities did not overstep the margin of appreciation it upheld the reasoning of the German courts.

Balancing - what interest does the speech serve?

Freedom of expression serves the interest on the part of the general public in a free flow of information. In the Markt Intern case the European Court of Human Rights referred to the well-established line of the German case-law that statements ‘intended to promote, in the context of commercial competition, certain economic interests to the detriment of others disqualifies the ability of the speech to contribute a public debate38. According to this line of reasoning, as soon as the commercial purpose is identified the speaker’s interests are accorded lower level of protection. Other purposes by which the speaker has been driven when making the statement are usually overshadowed by the commercial objective. The position of the German jurisprudence has been presented in the Jakubowski case:

In the first place, the motives of the person concerned and, linked to them, the aim and purpose of the comment are crucial. If the comment is motivated not by personal interests of an economic nature, but by concern for the political, economic, social or cultural interests of the community, if it serves to influence public opinion, the appeal will probably qualify for the protection of Article 5 para. 1 of the Basic Law (German Constitution), even if private and, more particularly, economic interests are adversely affected as a result. Conversely, the importance of protecting the latter interests is the greater, the less the comment is a contribution to public debate on a major issue of public concern and the more it is immediately directed against those interests in the course of business and in pursuit of a self-serving goal (see Constitutional Court Decisions [vol.] 66, 116 at 139) such as improving one's own competitive position…’39

35Clement/Mole/Simmons, European Human Rights. Taking a Case under the Convention (1999), p.

36Markt Intern v. Germany, (supra note 3).

37Jakubowski v. Germany [1994] 19 EHRR 64.

381 BvR 108/80 and others [Entscheidungen des Bundesverfassungsgerichts, volume 62, pp. 230-248] as cited in Markt Intern v. Germany (supra note 3), para 19; see also: ‘Reminder Notice’ case, BVerfGE 62,


39Jakubowski v. Germany (supra note 37), para 19.



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According to some opinions, the judgement of the European Court of Human Rights in the Markt intern case is unacceptable, because the ‘[s]uppression of dissemination of true statements is clearly in violation of Art. 10 ECHR’.40

Distinguishing between commercial and non-commercial elements of speech - a ‘public debate’ test

The European Court of Human Rights dealt with the question of distinction between commercial and non-commercial elements of speech. In this regard the Hertel41 case provides for the most clear and helpful hints. The case involved an injunction against Mr. Hertel, who published results of his research, which proved that preparing food in microwave oven had some serious negative effects on human’s health. The Swiss Association of Manufactures and Suppliers of Household Electrical Appliances instituted proceedings under the Swiss Unfair Competition Act. The Court held that in this case the margin of appreciation was reduced as the applicant had not made purely commercial statements but had participated in a debate on an issue of public concern.

In determining the scope of margin of appreciation afforded to national authorities the Court tried to establish whether Mr. Hertel could contribute to a debate on issues of public concern:

[A] margin of appreciation is particularly essential in commercial matters, especially in an area as complex and fluctuating as that of unfair competition. (…) It is however necessary to reduce the extent of margin of appreciation when what is at stake is not a given individual’s purely ‘commercial’ statements, but his participation in a debate affecting the general interest, for example, over public health; in the instant case, it cannot be denied that such a debate existed.’42

According to the Court’s reasoning, a decisive argument in determining the extent of the margin of appreciation afforded to national authorities is the existence of a public debate to which the statement in question may significantly contribute. The criteria applied by the Court in Hertel can definitely find a general application in distinguishing between commercial and non-commercial elements of the speech.43 The first criterion is therefore the existence of a public debate on a particular issue, which is also the subject matter of contested speech. The second criterion is whether or not the contested speech has got the potential of contributing significantly to the

40 Ellger, The European Convention on Human Rights and Fundamental Freedoms and German Private Law, in: Friedmann/Barak-Erez, Human Rights in Private Law (2001), p. 174.

41Hertel v. Switzerland (supra note 9).

42Ibid., para 47.

43Scheyli, Die Abgrenzung zwischen ideellen und kommerziellen Informationsgehalten als Bemessungsgrundlage der „margin of appreciation’ im Rahmen von Art. 10 EMRK, EuGRZ 2003, p.




above-mentioned debate.44 The criteria applied in Hertel were also applied in the

Barthold45 case.

Demuth v. Switzerland

In the case of Demuth v. Switzerland46 the Court clearly departed from its previous approach. The case concerned state grants, or - refusing to grant a broadcasting licence to a private enterprise – Car TV AG. Car TV intended to broadcast a television programme primarily on cars, which would also deal with energy policies, traffic security, environmental issues (all of these being without any doubt issues of public concern). Consequently, the Court established it had to deal with mixed speech, including both – commercial and non-commercial elements. Having done so, the Court did not apply the ‘Hertel/Barthold- public debate’ test. It did not consider whether there was a public debate to which the applicant could contribute. Instead, it referred to the enterprise’s objectives.

The character of the speech determined through reference to the enterprise’s objectives

In the light of the previous case-law an emphasis on the objectives of the enterprise comes somewhat surprisingly. The Court stated that ‘the purpose of Car TV AG was primarily commercial in that it intended to promote cars and, hence, further car sales’.47 Then the Court concludes that ‘where commercial speech is at stake, the standards of scrutiny may be less severe’.48 It seems that the commercial character of the speech was established merely on the basis of the commercial objectives of the enterprise. Consequently the question arises whether the objectives of an enterprise are decisive in determining the character of the speech. When a commercial actor speaks is it always commercial speech?

The judgement in the Demuth case has to be criticised. In his dissenting opinion, Judge Jörundsson, pointed out the importance of taking into account the contents of the programme, which ‘went well beyond the commercial framework49, as it intended to deal with issues of great public concern like traffic safety, energy policies, environmental issues. As Judge Jörundsson stated:

‘These matters were indubitably of general and public interest and would have contributed to the ongoing, general debate on the various aspects of a motorised society. It is, therefore, necessary to reduce the margin of appreciation pertaining to the authorities, since what was at stake was not

44Weber, Menschenrechte. Texte und Praxis (2004), p. 338.

45Barthold v. Germany (supra note 28).

46Demuth v. Switzerland (2004) 38 EHRR 20.

47Ibid., para 42.

48Ibid., para 42.

49Demuth v. Switzerland (supra note 46), dissenting opinion of Judge Joerundsson, p. 435.



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merely a given individual’s purely ‘commercial’ interests, but his participation in an ongoing debate affecting the general interest.’50

The analysed case brings into question the approach applied by the Court so far. In as much as the speaker element of the speech has to be taken into account, the objective of the speaker’s activity definitely plays a role. It cannot, however, be a decisive factor in deciding the scope of protection for a particular statement. The content of the speech and the context in which it has been spoken are much more important and have to be taken into account adequately.

To sum up the arguments in this part of the paper it has to be noted that commercial speech clearly falls within the realm of protection of Art. 10 ECHR. The key question in defining its level of protection is the scrutiny of the justification for restriction in accordance with Art. 10 (2) ECHR. In assessing the extent of the necessity of an interference, the state enjoys a certain margin of appreciation, which is wider in commercial matters. It follows that where commercial speech is at stake, the standards of scrutiny may be less severe.51 The ECtHR held that a wider margin of appreciation is essential in particular in an area as complex and fluctuating as that of unfair competition.52 The scope of the margin is however subjected to European supervision. In exercising this supervision, the ECtHR applied a ‘public debate’ test, in that it determined whether there exists a public debate to which the contested statement may significantly contribute. Clearly, the non-commercial element of the speech touching upon the issues of public concern plays an essential role in determining the level of protection of speech in commercial context.

Part II. Commercial Speech in the law of the European Union

When established in the 1950s, the European Communities were predominantly concerned with the creation and operation of the common market, based on the four fundamental freedoms (freedom of movement of goods, services, capital and persons). This dominating emphasis has been gradually balanced by the growing concerns about the need to have recourse to the protection of fundamental rights, in order to legitimise the regulation of the common market. Consequently, the internal market law has been influenced by fundamental rights as enshrined in the ECHR and resulting from the constitutional traditions common to the Member States. It remains to be seen if the instinctive assumption, that the EU Charter of Fundamental

Rights will mark a watershed in the development of the internal market law, will prove to be true.53

The impact of fundamental rights on the internal market law can be dual, in that it concerns either the process of approximation of laws or the limitations imposed on

50Ibid., p. 436.

51Ibid., para H9.

52Markt Intern v. Germany (supra note 3), para 55.

53For a discussion on the impact of the Charter of Fundamental Rights on the internal market law see: Weatherill, The EU Charter of Fundamental Rights and the Internal Market, Francisco Lucas Pires Working Papers Series on European Constitutionalism, Working Paper 2003/03, Lisboa.




fundamental freedoms. The fundamental rights serve as signposts for the manner in which the process of approximation of law is being carried out, in that the new harmonising rules have to be scrutinised for their conformity with fundamental rights, underpinning the internal market. They serve as a yardstick on which to judge the legality of Community law. The impact of fundamental rights on a fundamental freedom may be dual, in that it may serve either as a limitation on a limitation to a fundamental freedom or as a limitation to a fundamental freedom. The first aspect embraces situations in which a Member State is imposing a restriction on the freedom of movement and this restriction is claimed to run counter to the requirements of the protection of fundamental rights. The second aspect covers cases in which the Member States rely on the fundamental rights when they justify the exceptions to the fundamental freedoms. The fundamental rights must serve as signposts for the Member States when they rely on exceptions to fundamental freedoms.54 According to the ERT judgment, ‘where a Member State relies on an overriding requirement relating to the public interest or on ground for justification stipulated in the Treaty in order to justify a national rule which is likely to obstruct the exercise of a fundamental freedom arising from the Treaty, such justification must be interpreted in the light of the general principles of law and in particular of fundamental rights.’55 In this particular case the freedom to provide services had to be interpreted ‘in the light of the general principle of freedom of expression embodied in Art. 10 of the European Convention on Human Rights’.56 The restriction on broadcasting activities imposed by Greek law had to pass the test of conformity with the right to free speech as incorporated in Art. 10 ECHR. The fundamental right works here as a limitation to a Member State’s limitation to the fundamental freedom.

In the light of the above-mentioned adherence to fundamental rights, it is not surprising, that in the context of an emphasis placed on the economic aspects of market integration, the issues concerning the freedom of commercial expression have been referred to the European Court of Justice for adjudication. The issue of commercial speech was raised on the occasion of the challenge to the legality of the Tobacco Advertising Directive (Directive 98/43/EC of the European Parliament and the Council of 6 July 1998, on the approximation of the laws, regulations, and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products).57 Germany instituted proceedings seeking the annulment of the Directive. In the discussion on tobacco advertising the lawfulness of restrictions imposed on speech about lawful products comes under close scrutiny. The question whether a restriction allegedly pursuing public health objectives is proportional under the ‘necessity test’ set out in Art. 10 (2) of the European Convention on Human Rights is thoroughly examined. Several possible grounds for

54Craig/De Burca, EU Law, Text, Cases, and Materials (3rd edn. 2003) pp. 210 et seq.; De Burca, Human Rights: The Charter and Beyond, Jean Monnet Working Paper No.10/01, p. 10 et seq.; Clapham, A Human Rights Policy for the European Community (1990) 10 YBEL 309.

55ERT v. Dimotiki Case C-260/89 [1991] ECR I-2925; [1994] 4 C.M.L.R. 546, para 42 et seq; see also: Familiapress Case C-368/95 (1997) ECR I-3689, (1997) 3 C.M.L.R. 1329, para 24.

56Ibid., para 45.

57Germany v. Parliament Case C-376/98 (2000) ECR I-8419; (2000) 3 C.M.L.R. 1175



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annulment have been raised, inter alia the violation of the right to freedom of speech. This paper will analyse the reasoning presented by Advocate General Fennelly in this respect. The issue of compatibility of the restriction on advertising and sponsorship of tobacco products with the right to freedom of expression has not been addressed in the Court’s judgment, due to the fact that it upheld the challenge on the ground of lack of proper Treaty basis and annulled the Directive.

Scope and interpretation of the right to free speech in the EU

The EU Charter of Fundamental Rights, incorporated into the Constitutional Treaty, embodies the right to free expression. Art. II-11 reads as follows:

1.Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers.

2.The freedom and pluralism of the media shall be respected.

Although not explicitly codified, the right to free speech as provided for in Art. II-11 of the Charter is not a novelty and has been present in the Community legal order. According to the well established case law, fundamental rights form an integral part of the general principles of law, the observance of which the European Court of Justice ensures. Art. 6 of the Treaty on the European Union provides for the protection of fundamental rights in the Community legal order. It reads as follows:

‘[t]he Union shall respect fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms signed in Rome on 4 November 1950 and as they result from constitutional traditions common to the Member States , as general principles of Community law.’

The Court draws inspiration from the constitutional traditions of the Member States and international human rights treaties on which the Member States have collaborated or to which they are signatories.58 The ECHR has been accorded a special role in this respect.

Title VII of the Charter contains general clauses which relate to the interpretation and application of the Charter. Art. II-52 contains a clause defining the conditions for the restrictions on rights and freedoms.59 According to this provision:

‘[a]ny limitation on the exercise of the rights and freedoms recognised by this Charter must be provided for by law and respect the essence of those rights and freedoms. Subject to the principle of proportionality, limitations

58See: Nold KG v. Commission, Case 4/73 [1974] ECR 491.

59For criticism see: Triantafyllou, The European Charter of Fundamental Rights and the ‘Rule of Law’: Restricting Fundamental Rights by Referrence, (2002) 39 CMLR, 53.




may be made only if they are necessary and genuinely meet objectives of general interest recognised by the Union or need to protect the rights and freedoms of others.’

In other words a restriction to pass a scrutiny test must be:

1.prescribed by law,

2.respect the essence of the right or freedom at issue,60

3.necessary but proportionate to genuinely meet

a.the objectives of general interest recognised by the Union,

b.need to protect the rights and freedom of others.

This test greatly resembles the ‘necessity test’ as set out in Art. 10 (2) ECHR.

Art. II-52 (3) of the Charter has special significance in defining the scope of protection of rights and freedom. It reads that:

‘[i]nsofar as this Charter contains rights which correspond to rights guaranteed by the Convention for the Protection of Human Rights and Fundamental Freedoms, the meaning and scope of those rights shall be the same as those laid down by the said Convention. This provision shall not prevent Union law providing more extensive protection.’

This provision deals with the relation between Charter and ECHR, already much discussed in the literature.61 A general clause including ECHR but referring to international human rights instruments and constitutional provisions of Member States is contained in Art. II-53 (which to some extent resembles Art. 53 ECHR on safeguards for existing human rights62):

‘Nothing in this Charter shall be interpreted as restricting or adversely affecting human rights and fundamental freedoms as recognised, in their specific fields of application, by Union law and international law and by international agreements to which the Union or all the Member States are party, including the European Convention for the Protection of Human

60The prerequisite that the limits imposed on rights must be justified by the overall objective pursued by the Community, on condition that the substance of these rights is left untouched, has been established by the ECJ. See: Nold KG v. Commission (supra note 58), para 14.

61Lemmens, The Relationship between the Charter of Fundamental Rights of the EU and the ECHR: Substantive Aspects, (2001) 8 MJ, 49; Lenaerts/de Smijter, The Charter and the Role of the European Courts, (2001) 8 MJ, 49; Lenaerts/de Smijter, A ‘Bill of Rights’ for the European Union, (2001) CMLR,

290et seq.; Tulkens, Towards a Greater Normative Coherence in Europe: The Implications of the Draft Charter of Fundamental Rights of the European Union, (2000) 21 HRLJ, 329; Parmar, International Human Rights Law and the EU Charter, (2001) 8 MJ, 351, McCrudden, The Future of the EU Charter of Fundamental Rights, Jean Monnet Working Paper No.10/01, p. 17 et seq.; Andrej Victor Mykola Wasyl Busch, Die Bedeutung der Europäischen Menschenrechtskonvention für den Grundrechtsschutz in der Europäiachen Union (2003).

62Art. 53 ECHR: Nothing in this Convention shall be construed as limiting or derogating from any of the human rights and fundamental freedoms which may be ensured under the laws of any High Contracting Party or under any other agreement to which it is a Party.


Rights and Fundamental Freedoms, and by the Member States’ constitutions’.

The explanations to the Charter state that Art. 53 (Art. II-53 of the Constitutional Treaty) aims at safeguarding the level of protection already afforded. The importance of the ECHR is emphasised. As it has been stated in the explanations: ‘[t]he level of protection afforded by the Charter may not, in any instance, be lower than that guaranteed by the ECHR, with the result that the arrangements for limitations may not fall below the level provided for in the ECHR.’63

In Art. II-52 (4) the Charter refers also to the common constitutional traditions of Member States by stating that insofar as ‘the Charter recognises fundamental rights as they result from the constitutional traditions common to the Member States, those rights shall be interpreted in harmony with those traditions.’

Last but not least it has to be mentioned that the Constitutional Treaty includes an explicit competence for the Union to accede to the European Convention on Human Rights (Art. II–7 (2)).64

Freedom of expression submissions in the ‘Tobacco Advertising’ case

The applicants submitted that ‘commercial speech such as advertising by which undertakings can give the public useful information about their products’ comes within the realm of protection of Art. 10 ECHR.65 On this basis they concluded that such protection exists also in the Community legal order. The defendants on the other hand emphasised that freedom of expression is not absolute and Art. 10 (2) ECHR permits restrictions thereupon in the interests of public health.66 The dispute in the case at hand concentrated therefore on legitimacy and proportionality of restrictions based on the objectives of public health alongside with the those relative to the achievement of the internal market.

63Text of the explanations relating to the complete text of the Charter as set out in CHARTE 4487/00 CONVENT 50, Brussels, 11 October 2000, CHARTE 4473/00 CONVENT 49.

64For analysis of the problem of accession, in particular Opinion 2/94 (Opinion 2/94 on Accession of the Community to the ECHR [1996] ECR I-1759), see: Toth, The European Union and Human Rights: the Way Forward, (1997) CMLR 491 – 529; De Burca, Human Rights: The Charter and Beyond, Jean Monnet Working Paper No.10/01, p. 8; Craig/De Burca, (supra note 53), chapter 8; Krueger, Reflections Concerning Accession of the European Communities to the European Convention on Human Rights, (2002) 21 Penn State International Law Review, 89 - 99; Imbert, Speech at the Judges’ Symposium: The Council of Europe’s European Convention on Human Rights and the European Union’s Charter of Fundamental Rights, Luxembourg (16.09.2002), available at; Lemmens, The Relationship between the Charter of Fundamental Rights of the EU and the ECHR: Substantive Aspects, (2001) MJ, 49; Krzeminska, Przystapienie Unii Europejskiej do Europejskiej Konwencji o Ochronie Praw Czlowieka i Podstawowych Wolnosci, (2005) Radca Prawny, pp. 5 – 11; Wetzel, Improving Fundamental Rights Protection in the European Union: Resolving the Conflict and Confusion between the Luxembourg and Strasbourg Courts, (2003) Fordham Law Review, 2823; Andrej Victor Mykola Wasyl Busch, Die Bedeutung der Europäischen Menschenrechtskonvention für den Grundrechtsschutz in der Europäiachen Union (2003).

65Case C-376/98 (supra note 56), para 54.

66Ibid., para 55.




Defining commercial speech and its scope of protection in the Community

Advocate General Fennely defines commercial speech as:

‘the provision of information, expression of ideas or communication of images as part of the promotion of a commercial activity and the concomitant right to receive such communication’67

A clear statement as to the need for protection of commercial expression follows:

‘commercial expression should also be protected in Community law. Commercial expression does not contribute in the same way as political, journalistic, literary or artistic expression do, in a liberal democratic society, to the achievement of social goods such as, for example, the enhancement of democratic debate and accountability or the questioning of current orthodoxies with a view to furthering tolerance or change. However, in my view, personal rights are recognised as being fundamental in character, not merely because of their instrumental, social functions, but also because they are necessary for the autonomy, dignity and personal development of individuals. Thus, individuals’ freedom to promote commercial activities derives not only from their right to engage in economic activities and the general commitment, in the Community context, to a market economy based upon free competition, but also from their inherent entitlement as human beings freely to express and receive views on any topic, including the merits of the goods or services which they market or purchase.’68

According to the above-mentioned definition commercial speech encompasses statements strictly linked to the commercial promotion of products and services. This group of statements has been classified in this paper as purely commercial speech, strictly concerned with the achievement of price and sales-volume targets. On the basis of the Advocate General’s opinion a conclusion may be drawn that commercial speech is also protected in the Community. The method of protection accorded to commercial speech under the European Convention on Human Rights is likely to be applied by analogy to the scope of protection accorded to commercial speech in Community legal order. The European Convention on Human Rights has been incorporated by the European Court of Justice to the Community legal order as a source of inspiration in fleshing out the general principles of law. Since the adoption of the Treaty establishing the Constitution for Europe, freedom of expression became a codified right as expressed in the Charter of Fundamental Rights, which was incorporated as a part of the European Constitution. The Charter does not mention commercial expression nor does it explicitly limit the protection to non-commercial (political, literary, artistic etc.) expression. Because the right to

67Opinion of Advocate General Fennelly, Case C-376/98 (supra note 56), para 153.

68Ibid., para 154.



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freedom of expression has been construed (in terms of its wording) similarly to its concomitant in the ECHR, and moreover on the basis of Art. II-52 (3), insofar as the rights in the Charter correspond to rights guaranteed by the ECHR, ‘the meaning and scope of those rights shall be the same as those laid down by the said Convention’, the protection accorded to commercial speech in the Union’s law will be construed on the basis of the interpretation of Art. 10 ECHR as developed by the ECtHR. This conclusion is all the more legitimate in the light of the European Union’s accession to the European Convention on Human Rights (Art. II-7 (2) Constitutional Treaty).

The ECJ referred, on many occasions, to the case law of the ECtHR. This method of fleshing out the general principles of law and after the adoption of the Constitutional Treaty the provisions of the Charter of Fundamental Rights will continue. It resembles the practice of national courts in signatory countries to the ECHR when dealing with cases concerning human rights, of referring to the provisions of the European Convention on Human Rights or case-law of the ECtHR. Of course the intensity of this practice and therefore the intensity of the influence of the Convention on the interpretation and application of national law by national courts differs from country to country (it is for instance a common practice in Poland). In order to safeguard the internal, European-wide consistency of the system of protection of human rights and to avoid the conflict of interpretation between the two European courts the common reference to the ECHR is highly desirable. In light of the future membership of the EU in the ECHR, such a conflict is no longer likely to occur. Preceding the adoption of the Constitutional Treaty and the clear competence for the Union to accede to the Convention discussion on the relationship between the two legal orders, many commentators emphasised that although conflict between the two courts was not likely, accession would have anyway been highly recommended.69

To conclude the arguments in this section it has to be noted that commercial speech is clearly recognised by the Community law.70 Its protection is based on the general statement that all speech regardless of form is protected. The exact scope of protection will be established by reference to the restrictions.

Restrictions upon commercial speech in the Community law

Freedom of expression is not absolute and may be subject to restrictions so as to

achieve certain objectives of relevance for the common good or to secure the rights of others.71

In the Tobacco Advertising Directive the restriction upon freedom of speech was justified by the need to protect public health.72 Advocate General stated that the

69Weatherill, The EU Charter of Fundamental Rights and the Internal Market, Francisco Lucas Pires Working Papers Series on European Constitutionalism 2003, p. 36.

70Ibid., p. 36.

71Opinion of Advocate General Fennelly, Case C-376/98 (supra note 56), para 155.

72Once again the reference will be made to the opinion of Advocate General Fennelly on this matter. For the sake of argument, in order to discuss the problem of constitutional protection of commercial speech,




objective of protecting public health is recognised as an objective justifying restriction on speech under the European Convention on Human Rights and as an objective justifying restrictions on the fundamental freedoms in the Community legal order (Art. 36 TEC).73 The argument put forward in the Tobacco Advertising case is that the reduction of tobacco advertising will reduce the consumption and therefore improve public health.

In scrutinising the proportionality of legislative choices made by the institutions in complex fields, the Court has to examine whether the exercise of discretion is vitiated by a manifest error or a misuse of powers or whether the institutions did not clearly exceeded the bounds of their discretion.74 Advocate General referred to the rules governing the imposition of restrictions on rights under the European Convention on Human Rights and distinguished between the general rule in this regard and the specific case of commercial expression. As a rule the restrictions imposed on the exercise of rights have to be justified by presenting evidence of a pressing social need for their imposition.75 The commercial expression represents a special case in this regard. The ECtHR held that limits thereupon are acceptable where the competent authorities ‘on reasonable grounds’ had considered the restrictions to be necessary.76 Similarly in the RTL case, the Advocate General Jacobs referred to two cases of the European Court of Human Rights – Casado Coca v Spain and VGT Verein Gegen Tierfabriken v Switzerland – and stated that the ECtHR is willing to accept considerable restrictions on commercial advertising and that a wider margin of appreciation for national authorities is important, particularly in an area as complex and fluctuating as that of advertising.77

In the Tobacco Advertising case the difference in treatment has been justified by reference to different functions and interactions with more general public interest. The Advocate General concluded that ‘political expression serves certain extremely important social interest (…) commercial speech does not normally perform a wider

Advocate Fennelly assumed (contrary to what he has concluded in sections V(i) and (iii) to (v) of his opinion) that Tobacco Advertising Directive was a lawful and proportionate mean to pursue internal market objectives (Opinion of Advocate General Fennelly, Case C-376/98 (supra note 56), para 152).

73Ibid., para 156.

74Ibid., para 157.

75Sunday Times v. United Kingdom, judgment of 26 April 1979, Series A, No 30, (1979-80) 2 EHRR 245; Observer and Guardian v. United Kingdom, judgment of 26 November 1991, Series A, No 216, (1992) 14 EHRR 153, para 70 – 71 (71. The adjective 'necessary' within the meaning of Article 10(2) of the Convention is not synonymous with 'indispensable' or as flexible as ' reasonable' or 'desirable', but it implies the existence of a pressing social need. 72. The notion of necessity implies that the interference of which complaint is made corresponds to this pressing social need, that it is proportionate to the legitimate aim pursued and that the reasons given by the national authorities to justify it are relevant and sufficient.); Barthold v. Germany, (1985) 7 E.H.R.R. 383, para 55.

76Opinion of Advocate General Fennelly, Case C-376/98 (supra note 56), para 158; Markt Intern v. Germany (supra note 3), para 37; Groppera v. Switzerland, judgement of 28 March 1990, Series A, No 173, para 55.

77Opinion of Advocate General Jacobs, Case C-245/01 RTL Television GmbH v Niedersächsische Landesmedienanstalt für privaten Rundfunk, [2003] ECR I-0000, para 54.



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social function of the same significance.78 Consequently the adoption of a similar approach the Community legal order has been advocated:

‘where it is established that a Community measure restricts freedom of commercial expression, as the Advertising Directive clearly does, the Community legislator should also be obligated to satisfy the Court that it had reasonable grounds for adopting the measure in question in the public interest. In concrete terms, it should supply coherent evidence that the measure will be effective in achieving the public interest objective invoked

– in these cases, a reduction in tobacco consumption relative to the level which would otherwise have obtained – and that less restrictive measures would not have been equally effective.’79

Free Speech Meets Free Movement

The analysis mandated by the concept of commercial speech appears to demand a broad inquiry into the position of the right to free speech in the commercial context of Community market regulation. A discussion on the impact of the right to free speech on the economic law of the internal market reveals an interesting area of conflict between fundamental rights and fundamental freedoms in the Community law context. The fundamental freedoms, on which the common European market is based, have been present in the Community legal order since its very beginning. The fundamental rights, on the other hand, found their way into this system later, through general principles of law, mostly due to the judicial activism of the European Court of Justice. They have come a long way from not being considered at all to their full and explicit recognition in the Charter of Fundamental Rights, incorporated into the Constitutional Treaty.80

‘Art. 10 ECHR is no stranger to the European Court’s case law on free movement.’81 In the case Familiapress v. Heinrich Bauer Verlag82 the ECJ dealt with the conflict between the fundamental freedom to free movement of goods and the right to freedom of speech. A German magazine granted readers a prize for solving a crossword puzzle. Such practice was not permitted Austria where the publisher intended to sell the said magazine. The relevant Austrian unfair competition law provision was said to protect smaller publishers. The Austrian government submitted that through offering free gifts large publishers were in a better position to attract consumers and eliminate smaller publishers unable to finance this expensive

78Opinion of Advocate General Fennelly, Case C-376/98 (supra note 56), para 158.

79Ibid., para 159.

80Craig/De Burca, (supra note 53); Pernice, Grundrechtsgehalte im Europäischen Gemeinschaftsrecht

(1979); Cassese/Clapham/Weiler (Eds.), Human Rights and the European Community ( Vol. 3 1991); Von Bogdandy, The European Union as Human Rights Organisation? Human Rights and the Core of the European Union, (2000)CMLR, pp. 1307 – 1338; De Burca, Human Rights: The Charter and Beyond, Jean Monnet Working Paper No.10/01;

81Weatherill, The EU Charter of Fundamental Rights and the Internal Market, Francisco Lucas Pires Working Papers Series on European Constitutionalism 2003, p. 32.

82Vereinigte Familiapress Zeitungs- und Vertriebs GmbH v. Heinrich Bauer Verlag, Case C-368/95 (1997) ECR I-3689.




promotion method. The restriction on cross-border trade was therefore justified as serving the objective of maintaining press diversity, which in turn was considered as a mean to safeguard freedom of expression. Clearly, the protection of fundamental rights adversely affected intra-Community trade. The ECJ held that Member States may uphold restrictions on cross-border trade, by appealing to the requirements of safeguarding the protection of fundamental rights. Interestingly, although the ECJ was rather sceptical of the positive effects of upholding the Austrian rule, it left it for the national court to balance the competing interests.83

The question of the relationship between the fundamental rights and fundamental freedoms has already commanded considerable attention of the European Court of Justice. The Schmidberger case raised the question of the need to reconcile the requirements of the protection of fundamental rights in the Community with fundamental freedom enshrined in the EC Treaty. It regarded the question of the scope of freedom of expression and assembly, as guaranteed by Art. 10 and 11 ECHR, and the free movement of goods, in the circumstances when the former are relied upon as a justification for the restriction of the latter.84 Schmidberger was a German transport undertaking, essentially involved in transporting steel and timber between southern Germany and northern Italy, using the Brenner motorway in Austria. The Transitforum Austria Tirol, an environmental protection association, gave notice to the Austrian authorities of an intention to hold a demonstration, principally against the pollution caused by the heavy transport in the Tirol region. It would involve blocking of the said route. The competent authorities granted permission. The demonstration had been widely publicised and alternative routes were suggested. Schmidberger brought proceedings against Austria claiming that the authorities failed to guarantee the freedom of movement of goods in accordance with the EC Treaty, and claimed damages in respect of standstill periods, loss of earnings and additional related expenses.85

The Advocate General Jacobs pointed out that it was conceivable that cases in which a Member State would invoke the necessity to protect fundamental rights to justify a restriction of one of the fundamental freedoms, may become more frequent in the future, as many of the grounds of justification currently recognised by the Court could also be formulated as being based on fundamental rights considerations.86 This statement was strengthened by referral to another case in which the Court was required to reconcile the conflict between the fundamental rights and fundamental freedoms – Omega Spielhallen- und Automatenaufstellung-GmbH v. Oberbürgemeisterin der Bundesstadt Bonn87. In this case, Advocate General Stix- Hackl was dealing with the question of the order of precedence that is to be afforded

83Weatherill, The EU Charter of Fundamental Rights and the Internal Market, Francisco Lucas Pires Working Papers Series on European Constitutionalism 2003, p. 35.

84Eugen Schmidberger, Internationale Transporte und Planzüge v. Republic of Austria, Case C-112/00, (2003) ECR I-5659, para 77.

85Ibid., para 6 et seq.

86Opinion of Advocate General Jacobs, Schmidberger (supra note 84), para 89.

87Omega Spielhallen- und Automatenaufstellung-GmbH v. Oberbürgemeisterin der Bundesstadt Bonn, ECJ Case C-36/02 (2005) 1 CMLR 5.



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to fundamental rights as general principles of Community law and pointed out that it is particularly questionable whether there is in fact an order of rank between the fundamental rights applicable as general principles of law and the fundamental freedoms enshrined in the EC Treaty.88 He concluded by stating:

‘it appears to me to be significant that in cases such as this the necessary weighing-up of the interests involved ultimately takes place in the context of the actual circumstances in which in particular fundamental rights are restricted. The need ‘to reconcile’ the requirements of the protection of fundamental rights cannot therefore mean weighing up fundamental freedoms against fundamental rights per se, which would imply that the protection of fundamental rights is negotiable.’

The comparison between the next discussed case – Commission v. France89 - and Schmidberger is symptomatic of the need to weigh up the competing interests in the context of the actual circumstances of the case. The Court emphasised that the circumstances characterising the Schmidberger case were clearly distinguishable from the situation in the case giving rise to the judgment in Commission v. France. In the latter the Commission brought an action against France for failing to guarantee the freedom of movement of goods on ground that the government did not take appropriate measures in protecting importers of agricultural products from Spain against the demonstration of French farmers. The demonstration in Schmidberger took place after a permission granted by the competent authorities. It blocked the traffic on a single route and on a single occasion. The demonstrators were undoubtedly exercising their fundamental right by manifesting in public an opinion on a subject of public concern. They did not intend to restrict trade in goods of a particular type or from a particular source. By contrast, the French demonstrators in Commission v. France were preventing the free trade in particular type of goods originating from Member States other than France, not only by obstructing the transport thereof, but also by destroying the products in transit and those put on display in shops.90 Consequently, in Schmidberger the Court held that the Austrian authorities were entitled to consider that the outright ban on the demonstration would have constituted unacceptable interference with the fundamental rights to freedom of expression and assembly.

Furthermore, the Court held, that Member States enjoy a wide margin of discretion in circumstances such as those in this case. It remains to be seen whether the scope of margin of discretion will depend on the kind of speech involved. According to the line of reasoning adopted by the ECtHR where commercial speech is at stake, the standards of scrutiny may be less severe91. Given the possible variables of commercial speech, the problem becomes more complex. The thesis put forward in this paper is that in cases where the fundamental rights will conflict with the

88Ibid., para 48.

89Commission v. France, Case C-265/95, (1997) ECR I-6959.

90Schmidberger (supra note 84), para 82 – 90.

91Demuth v. Switzerland (supra note 46), para H9.




fundamental freedom, the speech in question will come under close scrutiny. Depending on how much it can contribute to the public debate it will be less or more difficult for the Member States to rely on the fundamental right to free speech in restricting the fundamental freedom.

The ‘public debate’ test in the Community law context

The public debate test has been applied by the ECtHR in determining the level of protection accorded to the speech in a commercial context. The same test has been explicitly applied by the ECJ in the case which gave rise to the preliminary ruling in

Herbert Karner Industrie-Auktionen GmbH and Troostwijk GmbH92. The case concerned Paragraph 30 (1) of the Austrian Law on Unfair Competition. This provision prohibits any public announcements or notices intended for a large circle of persons from making reference to the fact that the goods advertised originate from an insolvent estate when the goods in question, even though that was their origin, no longer form part of the insolvent estate.93 The provisions of such information is deemed to be capable of attracting consumers, who believe to make purchases at advantageous prices because the company is wound up, not being in the position to determine whether the sale has been organised by the insolvency administrator or by a party who had acquired the goods from the insolvent estate. Kerner and Troostwijk were involved in the sale by auction of industrial goods and purchasing of the stock of the insolvent companies. On the application by Kerner, the Austrian court issued an injunction against Troostwijk, prohibiting Troostwijk to refer in its advertisements for sale that the goods were from an insolvent company. Troostwijk appealed against that injunction, questioning the compatibility of Paragraph 30 (1) Austrian Law on Unfair Competition with the Treaty provisions on freedoms of movement of goods and Art.10 ECHR embodying the freedom of expression.

The Court recognised that Member States enjoy discretion in balancing the competing interests. In this regard, however, ‘[w]hen the exercise of the freedom does not contribute to a discussion of public interest and, in addition, arises in a context in which the Member States have a certain amount of discretion, review is limited to an examination of the reasonableness and proportionality of the interference. This holds true for the commercial use of freedom of expression, particularly in a field as complex and fluctuating as advertising’.94 On this ground the Court held that the restrictions imposed by Paragraph 30 (1) Austrian Law on Unfair Competition were reasonable and proportionate in the light of the legitimate objectives pursued, namely consumer protection and fair trading.95 In the light of this judgment a conclusion may be drawn that the Court seems to differentiate between the exercise of freedom of expression which does and does not contribute to a discussion on matters of public concern. As a consequence a less strict test is

92Herbert Karner Industrie-Auktionen GmbH and. Troostwijk GmbH, ECJ Case C-71/02 (2004) 2 CMLR

93Ibid., para 9.

94Ibid., para 51.

95Ibid., para 52.



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applied in scrutinising the restrictions imposed on the exercise of the right to free speech.


Commercial speech comes in many shapes and forms, in many variables. A considerable difficulty in categorising and defining this type (or types) of speech leads to an uncertainty with regard to the scope of its protection. Most commentators on the notion of commercial speech stick with the question whether advertising can be accorded a level of protection equal to political or artistic speech. The thesis put forward in this paper is that an intermediate category of speech has to be singled out, which is a mix of commercial self-interest and comment on issues of public concern. The increasing presence of businesses in the society with their growing involvement in debates on issues of public concern cannot be ignored. The commercialisation of political life and politicisation of commercial life make the distinction between political and commercial not easy. The mere fact that a business entity, in its own name, takes position on a particular issue, cannot automatically lead to the denial of the right to freedom of speech. It has nevertheless proved to be hard to find a point of equilibrium between the rights of commercial actors to freely express their opinion and the requirements of protecting the public, consumers and other competitors against unfair or deceptive practices. Indeed, the commercial statements, even partly commercial are more resistant then political or artistic speech. The commercial actors will always speak - they have to in order to earn money. It may support the thesis that commercial speech even including some non- commercial statements shall be less protected. The possibility of developing some intermediate liability regime for mixed statement should not be excluded.

It has been stated that commercial speech should be defined with reference to a set of characteristics (speaker, content and context). Some hints can be decoded from the case-law of the European Court of Human Rights and German courts. The German courts put an emphasis on the purpose of speech. In Hertel and Barthold cases, the European Court of Human Rights weighed the commercial and non- commercial elements by applying the ‘public debate’ test. Within its framework the question as to whether or not the contested speech can contribute to the public debate has to be answered. Similarly, commercial speech has been clearly recognised in the Community legal order as meriting protection. This recognition is based on the ECtHR’s interpretation of the scope of application of Art. 10 ECHR. In the Karner judgment, the ECJ clearly laid foundations for the ‘public debate’ test in the Community law context. The comparison of the attitudes to commercial speech applied by the two European courts – the European Court of Justice and the European Court of Human Rights – reveals a far reaching coherence of these systems of fundamental rights protection.


Cristina Poncibò

Rossella Incardona


Commercial practices between businesses and consumers within the internal market are benefited today by a uniform set of rules: Council Directive 2005/29/EC (‘Commercial Practice Directive’ hereinafter).1 The Commercial Practices Directive fully harmonises measures seeking to curb unfair commercial practices harmful to the economic interests of consumers. Furthermore, the Commercial Practices Directive pursues the double aim of contributing to the smooth functioning of the internal market, and providing consumers a high level of protection.

The existence and the correct functioning of the internal market have positive effects for consumers, businesses, and traders.2 The correct functioning of the internal market requires respecting and giving effect to concurrent diverse policies, all fashioned in the interest of consumers, to guarantee the free movement of goods and services, the freedom to establish businesses across borders, the non-restriction of competition, and the safeguarding of the environment.3 The protection of consumers’ interests and the resulting emergence of ‘a confident consumer’4 will contribute to strengthening the internal market and to improving its operations. The other interests envisaged in

Cristina Poncibò is PhD Florence Law Faculty, avvocato, The Authors are grateful to Jack Cumming for his comments to the first draft of this paper

Rossella Incardona is PhD candidate Palermo Law Faculty, avvocato

1Council Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No. 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’), in [2005] OJ L149, ,22-39. The European Commission presented a Proposal for a Directive concerning unfair business-to-consumer commercial practices in the internal market on 18 June 2003. The negotiation process came to an end in March 2005, when the European Parliament completed its second reading, following which the Council communicated its willingness to accept the text of the Directive at that point.

2‘Traders’ here is used in the narrow sense of the Directive, rather than with its dictionary meaning. See Article 2(b).

3G De Bürca, Differentiation within the Core: the Case of the Common Market in G. De Bürca - J. Scott, Constitutional Change in the EU: from Uniformity to Flexibility? ( Oxford 2000) 140

4S Weatherill, The Evolution of European Consumer Law and Policy: From Well Informed Consumer to Confident Consumer? in HW Micklitz (ed) Rechtseinheit oder Rechtsvielfalt in Europa? (Baden Baden, 1996). A critical perspective on the ‘confident consumer’ in T Wilhelmsson, The Abuse of the Confident Consumer’ as a Justification for EC Consumer Law, in [2004] Journal of Consumer Policy, p. 317.



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the Treaty of Rome must also be simultaneously respected, pursued, and balanced.5

The Commercial Practices Directive employs a general clause designed to preclude unfair commercial behaviour by traders in most circumstances. In contrast to most other directives in the consumer protection field, the Consumer Practices Directive does not permit Member States to deviate from the standards it specifies, even where this would result in a higher level of protection for consumers. With the implementation of the Commercial Practices Directive, the same substantive rules defining what constitutes business to consumer unfair practice will apply throughout the internal market, independently of the jurisdiction in which the business or the consumer is domiciled or located. Meanwhile, the Directive prohibits Member States from using the Commercial Practices Directive as an obstacle to the free movement of goods and services.6

The benefits of the Commercial Practices Directive will not, however, be realized at its effective date.7 Thus, the benefits to result from the harmonization, the movement toward a growing sense of economic community, greater legal certainty, and transactional confidence for businesses and consumers will be deferred. The Commercial Practices Directive allows Member States for an extended period of up to 6 years to continue to apply national provisions more stringent than those it envisages, in compliance with pre-existing minimum harmonization directives.8

This paper first outlines the limited scope of the Commercial Practices Directive, its general prohibition, its notion of misleading and aggressive practice, and its failure to address fully the potential of codes of conduct in the field of unfair commercial practice. Secondly, this paper analyzes the developing notion of an ‘average consumer,’ and how it will play a pivotal role in the application of the Commercial Practices Directive. Finally, the US experience with fair trade laws is examined with some concluding, remarks on the relationship between the consumer, competion, and unfair practice laws.

5J Stuyck, European Consumer Law After the Treaty of Amsterdam: Consumer Policy in or Beyond the Internal Market? in [2000] CMLR, 389-392. According to F Gomez, ‘The proper role and economic rationale for consumer law…is to address the problems of imperfect information in consumer markets…To burden EC consumer policy with the extra task of increasing the amount of competition in European consumer markets does not seem to me a sound policy prescription. It is a task which this branch of EC Law is ill-suited to accomplish successfully’, in EC Consumer and EC Competition Law: How Related Are They? A Law and Economics Perspective, in H Collins (ed), The Forthcoming EC Directive on Unfair Commercial Practices, (The Hague-London-New York 2004) .p. 208.

6See Article 4.

7Member States are to implement the Directive before 12 June 2007 and to apply the implementing measures by 12 December 2007 (Article 19).

8This time-limited exemption from maximum harmonization could be even extended for a further limited period of time, not exactly defined by the Directive (Articles 3(5) and 18).




Scope of application of the Directive

The Commercial Practices Directive protects the economic interests of consumers who are able to show the unfairness of a commercial practice, independent of any proof of damages, negligence, or intent on the part of the trader.9 Contrary to what was established in an earlier directive on misleading and comparative advertising,10 the Commercial Practices Directive does not intrude into the realm of national legislation regarding unfair practices affecting economic interests of business competitors. It is, however, evident from the Commercial Practices Directive that transactions between business and consumers are the other side of the coin of commercial practices among businesses. If traders could also apply the unfair commercial practices specified in the Commercial Practices Directive to their advantage, as well as to the advantage of consumers, the result would be a more efficient control over its effective application.

The preparation and promulgation of the Commercial Practices Directive provided a chance, now lost, to begin to discipline the sphere of unfair competition among companies at the Community level. By distinguishing between unfair practices and their negative effects as far as consumers are concerned, and unfair practices with negative effects as far as companies are concerned, the EU has moved backward with regard to the directive on misleading and comparative advertising. Continuing along this track will merely result in further division at the Community level, thereby diminishing the hopes for increased legal certainty and legislative simplification.

Unfair practices among competitors, although not completely neglected by Community law,11 still remains predominately a national concern.12 Even ‘taking full account of the principle of subsidiarity,’ Member States will still continue to be able to regulate such practices in conformity with Community law, if they choose to do so (Recital 6). Therefore, in Italy the provisions of the

9See Article 11(2).

10Council Directive 84/450/EEC, OJ L250, 19/9/1984, pp. 17-20. Directive as amended by Directive 97/55/EC of the European Parliament and of the Council, OJ L290, 23/10/1997, 18.

11See Mars, judgement of the ECJ of 6 July 1995, case C-470/93, ECR, 1995, I, p. 1923, § 15; Keck & Mithouard, judgement of the ECJ of 24 November 1993, case C-267/91 and 268/91, ECR, 1993, I, p. 6097, § 18; Schutzverband gegen Unwesen in der Wirtschaft v Yves Rocher GmbH, judgement of the ECJ of 18 maggio 1993, case C-126/91, ECR, 1993, I, p. 2361, §§ 17 e 22; GB-Inno-BM SA c. Confederation du Commerce Luxemborgeois ASBC judgement, judgement of 7 March 1990, case 362/88, ECR, 1991, I, p. 667, §§ 10 and 21; Pall Corp. v Dalhausen & Co., judgement of the ECJ of

13December 1990, case C-238/89, in ECR, 1990, I, p. 4827, § 23; Buet v Pubblico Ministero, judgement of the ECJ of 16 May 1989, case C-328/87, ECR, 1989, I, p. 1235, § 11; Oosthoek, judgement of the ECJ of 15 October 1982, case C-286/81, ECR, 1982, I, p. 4575, § 21.

12J Kirkbride, The Law on Unfair Competition: Is there an E.C. Approach?, Comp. Law., 2000, pp. 230-233. As to the author: ‘Whether legal harmonisation is necessary in the field of unfair competition law in the EC remains uncertain. Although certain measures have been adopted which may affect certain aspects of unfair competition law, especially in the areas of industrial property and advertising, there has not been any particular legislative attempt at the harmonisation of unfair competition law itself.’



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civil code concerning unfair commercial practices among competitors (i.e. ’concorrenza sleale’) will continue only to protect directly business competitors, who are given standing before the courts, while consumers are limited to asserting their claims only before the Italian competition authority. In Austria and Germany, in accordance with the respective UWG (Gesetz gegen den unlauteren Wettbeweb), rules on unfair or misleading practices protect both consumers and businesses and allow both access to national courts. Similarly, in Denmark and Sweden (in accordance with, respectively, the Marketing Practices Act, and the– Marknadsforingslagen, the rules on unfair practices protect the interests of consumers and businesses and are enforced by an independent public authority, the Consumer Ombudsman.13

Prohibition of Unfair Commercial Practices

Article 5 is the crucial point of the Directive. It imposes on traders a general prohibition of unfair commercial practices,14 and places such into two categories: those which are misleading, and those which are aggressive. The prohibition of unfair commercial practices applies at both the promotional stage and to the after-sale of a product. Article 5(1) is limited to affirming that ‘unfair commercial practices shall be prohibited.’ This wording has the clear advantage of conforming easily to the constant evolution of sales and promotional techniques, but it could also have proven to be difficult to apply if the Commercial Practices Directive had not specified the two criteria for assessing possible unfairness of commercial practices (Article 5(2)).

In particular, a commercial practice is unfair, and therefore prohibited, if two cumulative conditions are satisfied; 1) it is contrary to the requirements of professional diligence, and 2) it materially distorts or is likely to distort the economic behaviour with regard to the product of the average consumer whom it reaches or to whom it is addressed, or of ... a particular group of consumers (the ‘consumer detriment test’).

The appeal to professional diligence reflects the concept of correct professional conduct which appears in the majority of the legal systems of the Member States and varies according to the type of traders (e.g. professional, company, SME, artisan), the market where they work and the consumers they target.15 In the Consumer Practices Directive, professional diligence ‘means the standard of special skill and care which a trader may reasonably be expected to exercise towards consumers, commensurate with honest market practice and/or the

13R. Schulze, H. Schulte-Nolke, Report ‘Analysis of National Fairness Laws Aimed at Protecting Consumers in Relation to Commercial Practices’, published in June 2003, at

14Article 2(d) defines the business-to-consumers’ commercial practice as ‘any act omission, course of conduct or representation, commercial communication including advertising and marketing by a trader directly connected with the promotion, sale or supply of a product to consumers.’

15R. Bradgate, R. Brownword, C. Twigg-Flesner, The Impact of Adopting a Duty to Trade Fairly, July 2003,




general principle of good faith in the trader’s field of activity.’16 The trader’s field of activity is the standard of reference for the honest market practice. This could lead to the argument that, in sectors where bad practice is rife, the standard demanded is correspondingly low. However, concern for this criticism is unwarranted since the adjective ‘honest’ implies a normative standard of integrity. It is not simply market practices which set the benchmark, but rather honest market practices. A debate concerning the extent to which this requires the best standards to be respected may develop, since honest market practices might differ from best practices. However, the reference to honest[y] and good faith imposes a qualitative standard which will act to prevent mere existing practice from becoming the legally accepted fair practices.17

According to the Commercial Practices Directive, the behaviour of the consumer is ‘materially distorted,’ when the trader employs a commercial practice which ‘appreciably impair[s] the consumer’s ability to make an informed decision, thereby causing the consumer to take a transactional decision that he would not have taken otherwise.’18 A transactional decision is ‘any decision taken by a consumer concerning whether, how and on what terms to purchase, make payment in whole or in part for, retain or dispose of a product or to exercise a contractual right in relation to the product, whether the consumer decides to act or to refrain from acting.’19 This definition is broad, ranging from whether to purchase to whether to exercise or not a right arising from the purchase. The unfair practice usually will induce the consumer to make a regrettable decision.

A practice is thus unfair when (1) it does not respect the professional standards of correctness required or customary in a given field, and (2) influences significantly the economic behaviour of the average consumer by preventing the calm and informative evaluation of a commercial proposal. In any case, the two criteria of professional diligence and consumer detriment, flexible as they may be, can be useful when a commercial practice is neither misleading, aggressive, nor specified in Annex 1 of the Commercial Practice Directive. Annex 1 describes those commercial practices which will always be considered unfair, independently of any test or evidence. (‘Black List’ hereinafter)

Misleading Commercial Practices

Misleading commercial practices make use of information which is false or, even if factually correct on the whole, serves to influence the consumer to make a transactional decision which would not have otherwise been taken.20 The

16Article 2(h)) (emphasis added).

17The reference to honesty and good faith is not novel in discussions on business behaviours, the resort to codes of ethics and to ‘the importance of the visible hand of morality in the economy’ is

increasingly seen as an answer ‘between the failures of the market’s ‘invisible hand’ and those of the encumbering foot of Government’, L Sacconi, The Social Contract of the Firm, (Springer, 2000) p.

18Article 2(e).

19Article 2(k).

20Article 6(l).



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definition and the criteria for identifying misleading commercial practices, as well as the examples contained in the Black list, acclaim the consumer right to correct and complete material information.21 To make organic a piecemeal system, Annex 2 of the Commercial Practices Directive further lists the obligations of information outlined in pre-existing directives.

Misleading commercial practices can be carried out both by action and by omission.

Misleading actions relate to:

a)the existence or the nature of the product;22

b)the characteristics of a product;23

c)the commitments of the trader, the motives for the commercial practice, and the nature of the sale process, any statement or symbol relative to the sponsorship or to any indirect approval of the trader or the product;

d)the price or the calculation of the price or the existence of specific price advantages;

e)the need for maintenance, parts, replacement or repair regarding the product;

f)pertinent information on the trader;

g)the consumer’s rights and the risks that he/she might incur.

The Commercial Practices Directive also considers as misleading commercial practices marketing activity, including comparative advertising, which can generate confusion with other products or with the trade marks of a competitor.24 Misleading omissions are those commercial practices which, within the overall context of the case, omit material information, or conceal such information or present it in an ambiguous, unintelligible, or unclear way.25

The Black List considers per se misleading and forbids statements such as ‘shirts for 10 Euro’ when, in relation to the extent of the advertising campaign, the trader is unable to provide that product at that price and in reasonable quantity during a certain period of time.26 Point 7 of the Black List prohibits false statements aimed at pressuring the consumer into buying a product without giving it enough thought, e.g. ‘x for the price of y for this week only.’ Similarly,

21S Haupt, An Economic Analysis of Consumer Protection Law, in 11 German Law Journal, 2003, < 1164_Private_Haupt.pdf> .

22Article 6(a). This statement, which might seem obvious and redundant, can assume significance with reference to products as a set of rights and obligations. The Directive, in fact, defines broadly the ‘product’ and refers to it as ‘any goods or service, including property, rights and obligations.

Article 2(c) (emphasis added).

23The list of the product characteristics is exemplificative and adopts the samples of Article 3 of Council Directive 84/450/CE on misleading and comparative advertising, with the only difference being that under the Directive, the information on the product characteristics must also apply to post- sale activities.

24See Article 6(2)(a).

25See Articles 7(1) and (2).

26Point 5 prohibits bait or propagandistic advertising.




an advertisement that presents consumer rights already established by law as if they were a distinctive feature of the trader’s offer is prohibited by Point 10. Also prohibited by the Black List are statements such as ‘independent laboratory research proves that….’ which uses an editorial style to promote a product, without specifying or making clear to the consumer that this is a promotion paid for by the trader.

Traders can no longer resort to multilevel marketing systems (e.g. snowball systems, pyramid sale system) to promote or sell their products. The trader wishing to sell its products through a large number of persons spread throughout a particular area must use a legal employment framework, and cannot require them to pay (or rather purchase a certain quantity of the product, the so called ‘starter kit’) to enter into a sales system based on the ability of the salesperson to recruit other salespersons. Hence, statements such as ‘need sure cash now? Introduce our products to your friends!’ or rather ‘initiate, manage or promote a system of the pyramid type in which the consumer supplies a contribution, receiving in exchange the possibility of compensation deriving principally from the entrance of other consumers into the scheme rather than through the sale or use of a product’ are prohibited under Point 14.

Traders can neither falsely state that they are going out of business, when the trader is not in fact closing, moving or redoing the premises (point 15), or state ‘take it for free’ if the consumer has to pay anything other than delivery or collection costs to have a product advertised or offered as free or without charge (point 20). Furthermore, the statement ’ ‘payment to be made within 15 days of receiving goods,’ that is, including with promotional material a request for payment which gives the consumer the impression to have already ordered a product which is in reality thusly being offered for sale is prohibited under Point 21. Lastly, promotions stating ‘call our number 12345 to receive full assistance by our qualified operators,’ which has the effect of promising in the pre-sale phase a post-sale assistance without specifying that this service will actually be in another language or in another country are prohibited under Points 8 and 23.

Aggressive Commercial Practices

The concept of aggressive commercial practices is freshly introduced by the Commercial Practices Directive. Such practices are considered aggressive when by means of harassment, coercion or undue influence they significantly impair or are likely to impair the average consumer’s freedom of choice, thereby causing him/her to take a transactional decision that would not have otherwise been taken.27 The Commercial Practices Directive intends to protect consumers from all those practices which, even if not characterised by violence or threat, prey on the sensitivity, emotions, conditions, state of mind, or simply the patience of the consumer, impairing considerably his/her decisional capacity and inhibiting the capacity to make an attentive and judicious economic decision.

27 See Article 8 and Recital 16



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Article 9, with the intent of determining whether a commercial practice is aggressive, suggests taking into account the following elements. First, the timing, location, nature or persistence of the commercial practice. The reference is, generically, to the ‘nature’ of the commercial practice, and not, as well, to the ‘means’ employed (e.g. telephone, post, internet). Among its unfair practices the Black List includes repeated and unwanted sales pitches by phone, fax, e-mail or by use of any other means of communication, except under the circumstances and to the extent to which they are justified by national law with the objective being the enforcement of a contract (point 26).

It is not considered per se aggressive to initiate telephone solicitations, allowing the consumer to choose to further be ‘informed’ on the product, and which is aimed only at consumers who have previously consented to receive telephone solicitations. It may, however, be aggressive when a recorded voice which every day proposes to the ‘consumer-victim’ the purchase of something, five times a day for a month and allows the consumer to get rid of that voice only by not answering the telephone. Besides violating the Consumer Practices Directive, this solicitation may further breach various laws on privacy protection.

Secondly, the practice of resorting to threat or abusive language or behaviour is considered aggressive by the Consumer Practices Directive. The Black List Point 24 specifies that it is an aggressive commercial practice to create the impression that the consumer cannot leave the commercial premises until the contract is concluded. Incentives such as offering incentives such as a beverage or free transportation to the commercial premises of the trader are not considered, however, unfair commercial practices.

Additionally, the exploitation on the part of the trader of any tragic event or circumstances serious enough to alter the judgment capacity of the consumer, with the intention of influencing the decision related to the product is considered an aggressive practice. This rule could have some interesting case-law developments. It is common for the trader to attempt to take advantage of a consumer’s particular situation to sell a product. To what extent such exploitative behaviour can be equivalent to an aggressive commercial practice depends on the circumstances of the specific case. Point 30 of the Black List does, however, expressly state that the practice of stating to the consumer that the trader’s/seller’s professional livelihood depends on the product’s purchase.

Fourthly, any disproportionately difficult obstacle not included in the contract but created by the trader in the event that the consumer intends to exercise his/her contractual rights, including the right to rescind on a contract or to exchange the product or go to another trader.

Lastly, any threat to begin legal action when such action is not legally allowed is considered to be aggressive. The Black List also deems aggressive per se demands for immediate or deferred payment or the restitution or the custody of products which the trader supplied without any request from the consumer (point 29).




Codes of Conduct

The Commercial Practices Directive stops short of directly encouraging Codes of Conduct,28 and does not give them a fundamental role in the prevention and resolution of controversies related to unfair commercial practices between companies and consumers.29 The Commercial Practices Directive limits itself to recognising the existence of codes of conduct and procedures which can be added but cannot replace the judicial and administrative proceedings established by each member States to resolve disputes arising from unfair commercial practices between businesses and consumers.30

Member States ‘can encourage’ the control exercised by those responsible for the codes of conduct, but they are not expressly held to do so.31 Codes of Conducts would naturally regulate unfair commercial practices, efficiently operating to satisfy the needs of business and consumers more quickly, and more flexibly than national laws are able to do. The Commercial Practices Directive could have followed suit from the positive experience of the self-regulation of commercial practices generated in many Member States to promote the recourse to Codes of Conduct, or the creation of codes at European level so as to develop standards widely recognised by traders and elaborated in discussion with consumer associations.

Self-regulation can give rise to monitoring and enforcement problems. Satisfactory rules may be monitored poorly, or sanctions may be inadequate to promote compliance. Others may fear that the compliance with a code of conduct may not imply a true observance of honest market practices. The business community might tune the standard level of the honest market practice, and to some extent the establishment of widely respected codes is already conformed, to minimum expectations. Codes of Conduct in the same sector could reflect differing views of honest market practices. But these are difficulties that can be worked out with time, so it is unfortunate that this salutary mechanism for promoting a fair market ground in good faith between the transacting parties has been overlooked in the development of the Commercial Practices Directive.

28Codes of Conduct, source of soft law and expression of private self-regulation, are defined and often mentioned in the Directive and were extensively discussed in the Green Paper on European Union Consumer Protection, Brussels, 02/10/2001, COM (2001) 531 final, and in the Green Paper Follow-up Communication to the Green Paper on EU Consumer Protection, Brussels, 11/6/2002, COM (2002) 289 final.

29G Howells, Co-Regulation’s Role in the Development of European Fair Trading Laws, in H. Collins (editor), The Forthcoming EC Directive on Unfair Commercial Practices, (The Hague- London-New York, 2004) pp. 208, 119.

30See the ‘Codice di autodisciplina pubblicitaria’ (, the British Code of Advertising and Sales Promotion < ), the EASA Principles (, and the International Code on Advertising Practices (

31Article 10.



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These criticisms can all easily be addressed. Codes of Conduct should comply with the Commercial Practices Directive and its Black List, which is clear and rather strict concerning what constitutes an unfair practice. In the Member States, where there is no culture of self-regulation, Codes of Conduct may be subject to approval procedures operated by independent authorities. This would allow public authorities to set out a blueprint which business associations would have to follow in order to secure approval. Alternatively, to guarantee a high standard for Codes of Conduct might be to promote the participation of consumers' representative organisations in the drawing up of the rules.32

The Average Consumer

The Commercial Practices Directive does not, however, protect the consumer who is distracted or uninformed on the goods or services which are the subject matter of a commercial practice, nor those consumers who naively allow themselves be convinced by deceptive exaggerations in advertising. The Commercial Practices Directive protects the ‘average consumer,’33 the benchmark consumer known in the case law of the European Court of Justice (ECJ) as the ‘reasonably well-informed and reasonably observant and circumspect consumer.’34

This concept of the average consumer is one of the most promising challenges offered by the Commercial Practices Directive to Member States and traders. The reaction of the average consumer to a particular commercial practice is not pre-defined, and will thus be subject to the evaluative judgments of national authorities under established case-law.35

The ECJ has developed a consumer concept which adopts the ‘reasonably well- informed and reasonably observant and circumspect consumer’ as its

32C Scott, J Black, Cranston’s Consumers and the Law, 3rd edition, Butterworths, 2000, pp. 66-67.

33E Alexandridou, Advertising in the Internal Market - A Few Remarks, in L Krämer, HW Micklitz, K Tonner (eds), Law and Diffuse Interests in the European Legal Order, Liber amicorum Norbert Reich, (Baden-Baden, 1997) p. 409; S Weatherill, Recent case law concerning the free movements of goods: mapping out the frontiers of market deregulation, CMLR, 1999, p. 51; S Weatherill,

Consumer Policy, in P Craig, G De Bürca (eds), The Evolution of EU Law, (Oxford, 1999) p. 699 ss.; L Gradoni, Libera circolazione delle merci, denominazioni ingannevoli e tutela della salute. Alcune osservazioni sul diritto dei consumatori in margine al caso Darbo, in Dir. Un. Eur., 2000, p.

34J Davis, Locating the Average Consumer: his Judicial Origins, Intellectual Influences and Current Role in European Trade Mark Law, I.P.Q., (2005), p. 183. The jurisprudence on the average consumer has been mostly elaborated with reference labelling and trademarks cases, see G. Schricker, F. Henning-Bodewig, New Initiatives for the Harmonisation of Unfair Competition Law in Europe, E.I.P.R. (2002), pp. 271-276.

35See recital 28 of the Directive and Douwe Egberts NV v. Westrom Pharma NV, Christophe Souranis and Douwe Egberts NV v. FICS-World BVBA, judgment of the ECJ of 15 July 2004, C- 239/02, ECR, (2004), p. 0, <!celexapi!prod!CELEXnumdoc&lg=EN&numdo c=62002J0239&model=guichett> .




benchmark.36 The origins of the ECJ jurisprudence on the average consumer can be traced in Gut Springenheide.37 Gut Springenheide marketed ready- packed eggs under the description ‘6-grain-10