The recent Court of Justice (CJEU) case C-348/22 Comune of Ginosa presents a significant opportunity to address the issue of EU primacy and the direct effects of directives within national legal orders. Special attention should be paid to paragraphs 60 to 79 of the judgment, where the Court clarified that Article 12(1) and (2) of Directive (2006/123/EC) have direct effect. Consequently, both national courts and administrative bodies, including municipal authorities, are required to apply the unconditional and sufficiently precise provisions of a directive and refrain from applying national regulations that conflict with these provisions.

However, the pivotal question arises from the Court’s decision in paragraph 79 (case C-348/22), where it stated that Article 288(3) TFEU should be construed as signifying that ‘[…] the assessment of the direct effect of the obligation and of the prohibition provided for in Article 12(1) and (2) of Directive 2006/123 and the obligation to disapply conflicting national provisions lie with the national courts and with the administrative authorities, including municipal authorities’.

The assertion in paragraph 79 of the judgment should not lead to inferring that national courts and authorities, including those of municipalities, are invariably required to abstain from applying domestic legislation which is contrary to Article 12 of the Services Directive. Actually, the evaluation conducted by the CJEU, which pertains to the legislative conflict between national law and the directive having direct effect, does not inherently necessitate that national authorities are automatically under the obligation to disapply domestic law. On the contrary, such a remedy represents just one of the potential consequences, albeit possibly the most noticeable, of the conflict between national provisions and directives. Therefore, the term ‘lie with’ (English version) should be interpreted to mean that both national judiciaries and authorities are permitted, but not obliged, to set aside domestic measures that conflict with the provisions of the directive having direct effect. The same conclusion can be reached if one considers the Italian version ‘incombono’ (Case C-348/22) or the French one ‘incombent’ (Case C-348/22), which, within the realm of procedural terminology, can take on the meaning of being competent to undertake a determined action. This implies that the recognition of the direct effect of the directive does not inherently impose a duty on every national authority to disapply conflicting domestic regulations. It follows that both the judicial bodies and public administrations may employ the remedy of non-application, provided they adhere to the functional limitations of the doctrine of direct effect of directives.

The limits to the doctrine of direct effect of directives

As is common knowledge, the CJEU has explicitly confined the application of the doctrine of direct effect solely to vertical disputes, specifically those involving an individual and a Member State failing to meet its obligations to comply with EU law (Case C-148/78). The limit of the horizontal prohibition can be attributed to several factors: firstly, the adoption of directives is an expression of a limited exercise of competence by the European Union (Case C-91/92); secondly, directives are intended exclusively for the Member States (Case C-573/17); and lastly, the adverse consequences stemming from a Member State’s failure to fulfill its obligations should affect the state itself and not its own citizens (Case C-148/78).

Furthermore, the CJEU has also established the unidirectional nature of invoking the direct effects of a directive, ensuring that only individuals may take advantage of it vis-à-vis the Member State and never vice versa (Case C-148/78). This stems from the sanctioning rationale inherent in the doctrine of direct effect, as manifested in the principle of ‘estoppel’, which essentially means that a Member State cannot gain an advantage from its failure to comply with its obligations. Accordingly, a directive having direct effect can only be invoked by a private individual to either produce a ‘substitution’ or an ‘exclusion’ effect, and this can only be pursued against the non-compliant Member State, not in a horizontal dispute. Hence, to comprehend the implications of the Comune of Ginosa ruling within Member States, it becomes fundamental to examine how these two constraints operate within the framework of state-owned maritime concessions.

The limit of unidirectionality of direct effect in the state-owned maritime concessions area.

The introductory remarks above lead us to assert that the remedy of non-application cannot be invoked when, as was the case in the Comune of Ginosa matter, a public authority, albeit an independent one (the Italian Antitrust Authority, AGCM), rather than a private party, relies on the direct effect of the Services Directive. Indeed, if a challenge against the administrative measure implementing the automatic renewal of a maritime concession, as prescribed by law, is initiated by a state body, the constraint of the unidirectional nature of direct effect must be applied. Consequently, the challenge should be rejected. In particular, in this scenario, it is evident that the dismissal of the action is not due to the lawfulness of the administrative decision granting the extension request by the outgoing concession holder but is rather a consequence of the application of the limitation of the unidirectionality of direct effect. This limitation precludes the offending State (and its internal entities) from invoking a directive with direct effect against its own nationals and thereby causing adverse effects in the legal realm of private third parties.

The limit of the prohibition of horizonal direct effect in the state-owned maritime concessions area.

Conversely, whenever the Services Directive is invoked by a private entity, or when the legislative conflict is identified ex officio by the administration or the national court, the remedy of disapplication can be employed, provided that the adverse consequences of the State’s non-compliance do not impact private entities.

By private entities, we refer, on the one hand, to the prospective concessionaire who should be entitled to invoke the right to participate in a competitive procedure that the Services Directive aimed to grant – the invocation of the directive as both a sword and a shield –. On the other hand, the directive must not have detrimental effects on the incumbent concessionaire.

With regard to the latter private entity, there seems to be no prohibition on any in malam partem effect. Indeed, in accordance with established CJEU’s case law, national authorities may resort to the disapplication remedy for national provisions conflicting with a directive with direct effect, provided that such non-application does not impose ‘an additional obligation’ on the incumbent concessionaire (Case C-573/17). Hence, the critical consideration is whether the revocation of the measure granting the extension of the maritime concession can be deemed to impose an additional obligation.

The CJEU’s case law has determined that there is an additional obligation in cases like Berlusconi and Others (Joined Cases C-387/02, C-391/02 and C-403/02), Smith (Case C-122/17), Cresco Investigation (Case C-193/17), and Popławski II (Case C-573/17), while in cases similar to CIA Security International (Case C-194/94), Unilever (Case C-443/98), Arcor and Others (Joined cases C-152/07 to C-154/07), and Wells (Case C-201/02), it has determined that the disapplication of national legislation contrary to the directive merely results in ‘adverse repercussions on the rights of third parties’ (Case C-201/02). It follows from the reasoning carried out by the CJEU in those cases in which it recognised the presence of ‘adverse repercussions on the rights of third parties’, that the additional obligation arises whenever the disapplication of the domestic legislation imposes on a third party an obligation which, in the light of the disapplied national measure, did not previously exist. Applying analogous logic to the Comune of Ginosa judgment (Case C-348/22), it becomes evident that revoking or suspending the concession relationship does not impose any supplementary obligation upon the departing concessionaire, but merely entails the forfeiture of an unlawful benefit. Therefore, akin to what transpired in the Wells case (Case C-201/02), it can be argued that national administrations and courts may refrain from implementing conflicting national provisions because the incumbent concessionaire is not burdened with any additional obligation, and prospective private concessionaires should be ensured the right to participate in a competitive procedure.

There are at least three legal grounds to substantiate the claim that the outgoing concessionaire does not assume any additional obligations when the automatically extended concession is revoked.

Firstly, contending that the adverse consequences of the State’s non-compliance should not impact the nationals of that Member State does not imply that the outgoing concessionaire cannot be precluded from benefiting from the same transgression. In a balance of interests, the right of the potential concessionaire to participate in a competitive procedure should take precedence over the unlawful assertion of the outgoing concessionaire.

Secondly, the incumbent concessionaire does not assume any additional obligations because the alleged decrease in its assets is essentially illusory and not actual. This is due to the fact that the automatic renewal of the concession was provided for by a law conflicting with the directive and, as such, is to be regarded as if it never existed (tamquam non esset). This is true even though it should be borne in mind that in some legal orders, including the Italian one, it is laid down that if the national authority refrains from disapplying the national law, the administrative act remains valid until it is withdrawn – either with a specific act adopted by the administration or through a domestic court’s ruling resulting from an annulment action –.

Lastly, the remedy of disapplication may be employed as there is no infringement upon the legitimate expectations of the outgoing concessionaire. Indeed, the safeguarding of legitimate expectations cannot be warranted because, as also established in the CJEU’s case law, ‘[…] where a prudent economic operator could foresee the adoption of a measure likely to affect his interests, he cannot rely on the benefit of the protection of legitimate expectations in the event that such a measure is adopted […]’ (Case C-67/09 P).

Final remarks.

In conclusion, it is important to emphasize that the remedies available within the EU legal framework and the CJEU’s case law cannot be applied in a rigid, one-size-fits-all manner. Their applicability depends on the specific circumstances of each case, including the nature of the dispute and the parties involved, and, consequently, the constraints governing the functioning of the direct effects doctrine.

The key issue of the entire matter revolves around the legal characterization of the harm suffered by the outgoing concessionaire. If, on the one hand, the harm arising from the non-application of conflicting domestic legislation is deemed to be solely adverse consequences, then the authorities of the Member States may employ the disapplication remedy. If, on the other hand, such harm is classified as an additional obligation, then it would be more appropriate to consider alternative remedies such as obtaining reparation for a breach of EU law for which a Member State may be held responsible or resorting to the infringement procedure. However, it is imperative to acknowledge that the ultimate and definitive solution lies in the hands of the Member State legislature. This entails taking legislative actions to abolish conflicting provisions, as there exists an enduring obligation to comply with Article 12 of the Services Directive (Case 102/79).

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Posted by Francesco Liguori, PhD candidate in EU law at “Sapienza” University of Rome.

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Suggested citation: Francesco Liguori, “Direct effect and EU primacy in the state-owned maritime concessions area”, REALaw.blog, available at https:// realaw.blog/?p=2960