Francovich and Bonifaci v Italy Joined Cases C-6/90 and C-9/90 [1991] ECR I-5357

Council Directive 80/987 required Member States to create guarantee arrangements for employees' unpaid wage claims when their employers became insolvent. Italy failed to implement the Directive by the prescribed deadline. Andrea Francovich had worked for an insolvent undertaking and received only occasional payments, while Danila Bonifaci and other employees had unpaid claims against another insolvent employer. They brought proceedings against Italy, seeking either the minimum guarantee required by the Directive or compensation for the State's failure to transpose it. The Italian courts referred questions to the European Court of Justice. Although the Directive identified the protected employees and the substance of the guarantee with sufficient precision, it left Member States discretion over the organisation and financing of the guarantee institution.

Could the employees rely directly on the unimplemented Directive, and, if not, did EU law require Italy to compensate loss caused by its failure to transpose the Directive?

The European Court of Justice held that the Directive could not itself identify the body liable to pay the guarantee, so the employees could not enforce payment directly against the State merely because Italy had failed to transpose it. The Court nevertheless recognised State liability as inherent in the Treaty system. EU law would be less effective if individuals could not obtain reparation where a Member State's breach deprived them of EU rights. For failure to implement this Directive, compensation was required if its intended result conferred rights on individuals, the content of those rights was identifiable from the Directive, and a causal link existed between the State's breach and the loss. National liability rules governed the claim, subject to equivalence and effectiveness.

EU law requires a Member State to make good loss caused to individuals by a breach attributable to it. In the failure-to-transpose context addressed in Francovich, the measure must confer identifiable rights and the State's breach must cause the loss. National remedial rules must not be less favourable than comparable domestic rules or make recovery excessively difficult.

The judgment supplied a damages remedy where direct effect could not deliver the benefit promised by a directive. Brasserie du Pêcheur and Factortame (No 3) later expressed the general conditions for State liability: a rule intended to confer rights, a sufficiently serious breach, and a direct causal link. Köbler confirmed that the principle can extend to a sufficiently serious breach by a court of last instance. For current UK law, Schedule 1 to the European Union (Withdrawal) Act 2018 removed the general domestic right to Francovich damages after withdrawal, subject to the Act's transitional and specific withdrawal arrangements.