European briefing | Scope of damages

Case C-420/11 Leth (Fourth Chamber, 14 March 2013) gave the ECJ an opportunity to explain the principles governing causation and remoteness of damages in Francovich damages claims.

Ms Leth owned a house near Vienna-Schwechat airport. Various developments had been carried out at the airport without the environmental impact assessments required by Directive 85/337/EEC. Ms Leth complained that her property's value had been reduced by the developments and the increased noise and nuisance that resulted from them, and claimed damages under EU law.

Her case proceeded through the Austrian courts, where she met and apparently overcame various obstacles relating to limitation. But the Austrian Supreme Court was troubled by what it saw as a mismatch between the purpose of the directive (which was to protect the environment) and the object of Ms Leth's claim (which was for economic loss in the form of a reduction in the value of her property). It therefore made a preliminary reference to the ECJ, asking whether such economic damage could be recoverable.

Although the ECJ did not explicitly analyse the issue in this way, the question was one of remoteness of damage. In order to recover damages for a member state's breach of a directive, the claimant must show that the rule in question was intended to confer rights on the claimant, that the breach was sufficiently serious and that there is a direct causal link between the breach and the loss or damage sustained: see Case C-429/09 Fu [2010] ECR I-12173, para 47.
But what link, if any, is required between the rule needing to confer rights on the claimant and the causal link between the breach and loss? If the purpose of the rule is to safeguard one kind of interest, can a claim be brought in relation to a different sort of interest?

In Leth the argument was as follows. The purpose of the directive is to safeguard the environment. That certainly includes preventing the harm that excessive noise may cause to human beings who live in the vicinity of a development, including harm to their quality of life. But it is not the directive's purpose to safeguard property values. Therefore, it was suggested, Ms Leth's complaint fell outside the relevant scope of protection. This argument assumed, in other words, that it is necessary for the claimant to show that the damage caused by the breach is damage to an interest which it is the function of the rule to protect.

The ECJ regarded this as too narrow. The relevant question is whether there is a "direct" causal connection between the breach and the loss suffered. But that does not mean showing that the harm is of a kind that the relevant measure aimed directly to prevent. It agreed that safeguarding property values was not something that the directive was aiming to achieve (and that, as such, effects on property values were not relevant to an environmental impact assessment). But that did not make such losses irrecoverable, if they were a direct result of a breach of the directive.

The test is therefore one of causation, and the relevant causal connection is that between the breach and the loss. It is not in itself also necessary to show that the loss is within a category that the rule in question specifically aimed to avoid or prevent. In so far as there is any remoteness test, it is provided by the requirement of "direct" causation. The ECJ did not, in Leth, explain precisely what that would entail. That is understandable, for on any view the connection between a decline in environmental quality and quality of life and a loss of value for residential property is close. It is readily foreseeable that one will result in the other, and there is no long sequence of intermediate steps leading from one to the other. The very notion of "direct" causation however assumes that there might be cases in which the relationship between the damage and the breach is too indirect to support a claim.

Leth, then, does not explore the outer limits of the requirement of "direct" causation, but it still serves a very useful negative role, by making it clear that the limits are not fixed by the type of interest that the measure in question aimed to protect. But causation is undoubtedly required, and it is here that Ms Leth's claim floundered. For, although pointing out that it was ultimately a matter for the national court, the ECJ could not see how Ms Leth could show causation at all. The directive requires an assessment. But it does not dictate the result of that assessment. It is just a matter of procedure. The difficulty for Ms Leth, therefore, was going to be in showing that her position would have been any different if an assessment had in fact been carried out.

There may conceivably be cases in which an individual can show either that they would have acted differently (for instance, as the advocate general suggested, that the publicity surrounding an impact assessment would have dissuaded them from buying the property). Presumably it would also be theoretically possible to show that the assessment would have led to a different outcome in practice, for causation is a matter of fact. But, although the ECJ's conclusion on remoteness keeps the scope of the damages remedy theoretically broad, its comments on factual causation show that it remains a blunt instrument, especially for the vindication of essentially procedural rights.