Foster v British Gas, [1990] ECR I-3313 (ECJ)

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Althea is employed by CRN Water, a regional water supplier that was historically state-owned but recently became partially privatized. The government retains a significant shareholding and appoints directors to the board, ensuring oversight of the company’s strategic decisions. CRN Water operates under a specific statutory framework that grants it mandatory powers, such as compulsory water meter installations. Althea has brought a claim relying on an unimplemented EU directive mandating equal remuneration and working conditions for public service providers. The national court is uncertain whether CRN Water qualifies as an emanation of the state, allowing direct invocation of the directive in domestic proceedings.


Which of the following is the best reason that CRN Water is likely to be treated as an emanation of the state for the purposes of direct effect of the unimplemented EU directive?

Introduction

The case of Foster v British Gas, citation [1990] ECR I-3313, represents a significant ruling by the European Court of Justice (ECJ), now known as the Court of Justice of the European Union (CJEU). At its core, this case addresses the question of which entities can be considered ‘emanations of the state’ for the purpose of enforcing European Union (EU) directives within national legal systems. Specifically, it defines a legal test to determine when a body, although not formally a part of the state apparatus, is sufficiently connected to it to be bound by EU law. The technical principle at play here involves the direct effect of EU directives. Directives, unlike regulations, usually require implementation by member states; however, under certain circumstances, they can create obligations directly enforceable against state entities. Key requirements for a body to be classified as an emanation of the state, as established by this judgment, include being responsible for providing a public service, under state control, and possessing special powers. This case provided clarity on how EU directives could be applied to state-owned or state-controlled entities, filling a gap in the legal framework.

Defining "Emanation of the State"

The judgment in Foster v British Gas provides a structured definition for what constitutes an ‘emanation of the state.’ This classification is critical because it determines whether a private individual can invoke an unimplemented EU directive against a particular body in national courts. The ECJ established a three-part test that a body must meet to qualify as an emanation of the state: Firstly, the body must be responsible for providing a public service. This implies that the entity’s activities are directed towards fulfilling a general interest or need of the population. Secondly, the body must be under the control of the state. This element considers the extent of state influence over the body's operations and decision-making processes. Thirdly, the body must possess special powers that exceed those available to individuals. These powers often involve regulatory or coercive authority granted by the state. When all three criteria are satisfied, the entity is deemed an emanation of the state, and therefore, susceptible to the direct effect of EU directives. British Gas, as a nationalized public utility responsible for gas supply, was found to meet this definition.

The Facts of the Case

The specific facts of Foster v British Gas are crucial for understanding the judgment’s rationale. The claimants in the case were female employees of British Gas who were being required to retire at the age of 60, while male employees were required to retire at 65. This discrepancy in retirement ages was challenged under the principle of equal treatment, as articulated in the EU’s Equal Treatment Directive. At the time, the directive had not been fully implemented into UK national law, the period allowed for this implementation having elapsed. The primary legal question put before the ECJ concerned whether the Equal Treatment Directive could be directly invoked against British Gas, even in the absence of national implementing legislation. British Gas, despite being a nationalized company, was not directly part of the state administration. Therefore, its legal status in relation to EU law was not immediately obvious. The situation created a legal problem: could an individual rely on an EU directive against a national entity not directly a government department.

Application of the Direct Effect Principle

The direct effect principle in EU law is essential to the Foster v British Gas decision. Direct effect enables individuals to rely on EU law before national courts, even when member states have failed to implement directives correctly or at all. This is particularly important for directives, as they require transposition into national law, meaning they don't automatically become part of each member's legal framework. However, under the conditions defined by the case law, certain directives, when clear, precise, and unconditional, can be directly effective and therefore create rights for individuals that they can invoke against certain public bodies. The direct effect doctrine is designed to secure the full practical benefit of EU law and prevents national governments from circumventing their EU obligations by inaction or faulty implementation. In Foster v British Gas, the ECJ extended the application of direct effect beyond its initial scope, allowing claimants to invoke the Equal Treatment Directive against British Gas, as the court determined British Gas met the definition of ‘an emanation of the state’ established in the judgment. This was a critical extension of the principle.

Implications for Public Bodies

Foster v British Gas has significant implications for public bodies across EU member states. It established that entities performing state functions, even if not formally part of the state’s administrative structure, can be subject to direct effect of EU directives. This ruling increased the scope of legal challenges that private individuals can bring against such entities. The case has also shaped how courts across Europe identify ‘emanations of the state,' creating a legal framework that prioritizes the application of EU law. Public bodies must now consider the potential applicability of EU directives, even in the absence of national implementation laws. This means that national governments cannot avoid EU obligations by delegating public service provision to entities that appear to be “private” but are ultimately state-controlled.

Connections to Subsequent Case Law

The ruling in Foster v British Gas has been influential in shaping subsequent case law. The test established in the ruling has been repeatedly used in the CJEU and national courts to ascertain whether a body can be considered an emanation of the state. For example, the principle was tested in cases involving local authorities and publicly owned companies, and bodies operating in utilities, healthcare, and education sectors. The case law that followed has further clarified and sometimes modified aspects of the Foster test, adding layers of interpretation. It demonstrates the lasting effect of the Foster v British Gas decision as a foundational ruling in EU legal theory, impacting how public bodies in Europe are accountable to individuals under EU law. The case is still cited in litigation involving public entities and is a standard reference for legal interpretation in this area of EU law.

Conclusion

The case of Foster v British Gas holds a significant place within the body of EU law concerning the direct effect of directives. The three-part test devised by the ECJ to define ‘emanations of the state' provides a clear method for assessing the connection between an entity and the state, determining whether EU directives apply. This framework ensures that member states cannot evade their obligations under EU law. This ruling has also broadened the reach of EU law, allowing private individuals to seek remedy through their own national court systems when EU directives have been breached, even if those directives have not been implemented properly into national law. Furthermore, it has influenced the direction of subsequent EU case law, maintaining the foundational principles regarding enforcement of EU law across public bodies in Europe and impacting both the public and private sector. The judgment serves as an important example of the power of the CJEU in defining how the law of the European Union applies throughout the EU's legal framework.

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