## Facts

- Italy enacted Law No. 1643/1962 and implementing decrees nationalizing the electricity sector and granting Ente Nazionale per l’Energia Elettrica (ENEL) a monopoly over electricity supply.
- Flaminio Costa, a lawyer in Milan, was an electricity customer of a private supplier, Edisonvolta S.p.A., and also held shares in that company.
- In May 1963, as a result of the nationalization measures, Edisonvolta transferred its undertaking and assets to ENEL.
- ENEL issued Costa an electricity bill for power supplied after the transfer.
- Costa refused to pay, arguing that he had not contracted with ENEL and that the nationalization measures conflicted with provisions of the EEC Treaty (Treaty of Rome), including rules on state monopolies and other Treaty constraints.
- The Milan Giudice conciliatore (Conciliation Judge) suspended the proceedings and sent questions to the Italian Constitutional Court and to the European Court of Justice (ECJ) under the preliminary-ruling procedure (then Article 177 EEC).
- The Italian Constitutional Court held that the nationalization law and decrees were constitutional under Italian law.
- The ECJ was asked to interpret the EEC Treaty provisions raised by Costa and to address the relationship between Community law and conflicting national law in the context of the pending bill-dispute.

## Issues

1. Whether the ECJ could give a preliminary ruling on Treaty interpretation in a private dispute where the national court’s questions were connected to the effect of a national statute and where the Italian Constitutional Court had already ruled on constitutionality.
2. Whether EEC (Community) law prevails over conflicting national law, including a later-enacted national statute.
3. Whether, and to what extent, the Treaty provisions invoked by Costa (including provisions on state monopolies and other market rules) could be relied upon by an individual before a national court.
4. How Article 37 EEC on state monopolies should be applied to a state measure creating or expanding a monopoly in a way that could affect trade between Member States.

## Decision

- The ECJ held that the reference was admissible and that it had jurisdiction to interpret the Treaty under Article 177 EEC; in preliminary rulings the ECJ interprets Community law and does not decide the validity of national measures as such.
- The ECJ held that the EEC Treaty created a Community legal order that became part of Member States’ legal systems and binds both Member States and individuals; Member States cannot set aside Community obligations by later unilateral legislation.
- The ECJ stated that, where applicable Community rules are in conflict with national law, Community law takes precedence, including over subsequent national statutes.
- On the Treaty provisions relied on by Costa, the ECJ drew distinctions between provisions capable of being invoked by individuals and provisions that primarily establish inter-institutional control mechanisms:
  - Article 37 EEC requires Member States to adjust state monopolies so as to exclude discrimination in conditions of supply and marketing between nationals of Member States; if national measures lead to such discrimination affecting trade in products that lend themselves to competition and exchanges between Member States, national courts must protect the rights that follow from that rule.
  - The Court indicated that “standstill” type Treaty obligations (such as prohibitions on introducing new restrictions in the relevant field) may be suitable for judicial application where they are clear and unconditional, but the national court must assess their application to the dispute.
  - Provisions framed around Commission/Council supervision and procedures (including state-aid control mechanisms) were not treated as creating, by themselves, a general private-law cause of action allowing an individual to disapply national legislation in ordinary civil litigation.
- The ECJ left it to the referring court to apply the interpreted Treaty provisions to the facts and to decide the outcome of Costa’s claim regarding payment.

## Legal Principles

- Community law is a distinct legal order that forms part of the legal systems of Member States, and national courts must apply it.
- The preliminary-ruling mechanism allows national courts to seek authoritative Treaty interpretation when needed to decide a pending case; domestic doctrines or prior constitutional rulings cannot remove the ECJ’s role of interpretation under the Treaty.
- In the event of conflict, Community law prevails over national law, including later national legislation, because Member States accepted lasting limits on their legislative freedom within fields covered by the Treaty.
- Whether a Treaty provision can be invoked by individuals in national courts depends on whether it sets out a clear and unconditional obligation suitable for judicial determination; provisions centered on institutional supervision and procedures generally do not, on their own, create individual claims in ordinary national litigation.
- Article 37 EEC addresses discriminatory operation of state monopolies affecting trade between Member States and requires adjustment of monopolies to prevent discrimination in conditions of procurement and marketing.

## Conclusion

Costa v. ENEL confirmed that EEC law has priority over conflicting national legislation, even when the national law is enacted later, and that national courts may need to protect individual rights flowing from certain clear Treaty obligations (including the non-discrimination duty for state monopolies in Article 37), while other Treaty provisions structured around institutional control mechanisms do not automatically give individuals a direct basis to set aside national measures in private disputes.


Costa v. Ente Nazionale per L'Energia Elettrica, [1968] CMLR 267 (1968)