There was a council directive that said that a state had to make provision for employees to be paid upon the insolvency of a company. Italy failed to implement that directive. When Francovich’s company was closed down he could not obtain payment he was owed. The ECJ ruled that, where a member state had failed to implement a directive, in the following circumstances, the state had a liability and would have to make good any loss or damage caused to the individual. The conditions are:
- the result prescribed by the Directive must entail creation of rights for individuals;
- and the content of those rights must be ascertainable from the Directive itself; and
- there must be a causal link between the failure of the Member State concerned to implement the Directive and the harm suffered by the individual.
- The breach of EC law had to be sufficiently serious
The ECJ said that EC law would be ineffective if states were not liable for failures to implement EC law and therefore, breach of EC law by states required state liability.