© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
A4. Direct effect
GENERAL​
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Directive provision unconditional and sufficiently precise
"[51] It must be borne in mind that, in accordance with settled case-law (see, in particular, Case 8/81 Becker [1982] ECR 53, paragraph 25, Case C-193/91 Mohsche [1993] ECR I-2615, paragraph 17, and Case C-134/99 IGI [2000] ECR I-7717, paragraph 36), wherever the provisions of a directive appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed period, be relied upon as against any national provision which is incompatible with the directive or in so far as the provisions define rights which individuals are able to assert against the State." (Kugler C-141/00)
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“Consequently, the adoption of national measures correctly implementing a directive does not exhaust the effects of the directive. Member states remain bound actually to ensure full application of the directive even after the adoption of those measures. Individuals are therefore entitled to rely before national courts, against the state, on the provisions of a directive which appear, so far as their subject matter is concerned, to be unconditional and sufficiently precise whenever the full application of the directive is not in fact secured, that is to say, not only where the directive has not been implemented or has been implemented incorrectly, but also where the national measures correctly implementing the directive are not being applied in such a way as to achieve the result sought by it.” (Marks & Spencer Plc C-62/00)
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- As far as subject matter is concerned
“[51] It must be borne in mind that, in accordance with settled case-law (see, in particular, Case 8/81 Becker [1982] ECR 53, paragraph 25, Case C-193/91 Mohsche [1993] ECR I-2615, paragraph 17, and Case C-134/99 IGI [2000] ECR I-7717, paragraph 36), wherever the provisions of a directive appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed period, be relied upon as against any national provision which is incompatible with the directive or in so far as the provisions define rights which individuals are able to assert against the State.” (Ambulanter Pflegedienst Kügler GmbH C-141/00)
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- Unconditional: obligation not qualified or subject to the taking of measures
"[27] A provision of EU law is unconditional where it sets forth an obligation which is not qualified by any condition, or subject, in its implementation or effects, to the taking of any measure either by the institutions of the European Union or by the Member States (judgment of 16 July 2015, Larentia + Minerva and Marenave Schiffahrt, C‑108/14 and C‑109/14, EU:C:2015:496, paragraph 49 and the case-law cited)." (Golfclub Schloss Igling C-488/18)
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- Sufficiently precise: obligation set out in unequivocal terms
"[28] It is sufficiently precise where it sets out an obligation in unequivocal terms (judgment of 1 July 2010, Gassmayr, C‑194/08, EU:C:2010:386, paragraph 45 and the case-law cited)." (Golfclub Schloss Igling C-488/18)
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Direct effect applies against the state (where it has failed to correctly implement)
"[78] It must be borne in mind that, in accordance with settled case-law (see, in particular, Case 8/81 Becker [1982] ECR 53, paragraph 25; Case C-193/91 Mohsche [1993] ECR I-2615, paragraph 17; Case C-134/99 IGI [2000] ECR I-7717, paragraph 36; and Kügler, cited above, paragraph 51), wherever the provisions of a directive appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed period, be relied upon as against any national provision which is incompatible with the directive or in so far as the provisions define rights which individuals are able to assert against the State." (Dornier C-45/01) (Linneweber C-453/02, §33)
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- Directive cannot impose obligations on an individual
"[42] The fact remains that the Court has also consistently held that a directive cannot of itself impose obligations on an individual and cannot therefore be relied upon as such against an individual (see, inter alia, judgments of 26 February 1986, Marshall, 152/84, EU:C:1986:84, paragraph 48; of 14 July 1994, Faccini Dori, C‑91/92, EU:C:1994:292, paragraph 20; and of 5 October 2004, Pfeiffer and Others, C‑397/01 to C‑403/01, EU:C:2004:584, paragraph 108). If the possibility of relying on a provision of a directive that has not been transposed, or has been incorrectly transposed, were to be extended to the sphere of relations between individuals, that would amount to recognising a power in the European Union to enact obligations for individuals with immediate effect, whereas it has competence to do so only where it is empowered to adopt regulations (see, to that effect, judgment of 14 July 1994, Faccini Dori, C‑91/92, EU:C:1994:292, paragraph 24).
[43] Accordingly, even a clear, precise and unconditional provision of a directive seeking to confer rights on or impose obligations on individuals cannot of itself apply in a dispute exclusively between private persons (judgments of 5 October 2004, Pfeiffer and Others, C‑397/01 to C‑403/01, EU:C:2004:584, paragraph 109; of 24 January 2012, Dominguez, C‑282/10, EU:C:2012:33, paragraph 42; and of 15 January 2014, Association de médiation sociale, C‑176/12, EU:C:2014:2, paragraph 36)." (Smith v. Meade C-122/17)
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- No disapplication to impose an additional obligation on an individual
"[67] It follows from the foregoing that, even a clear, precise and unconditional provision of a directive does not allow a national court to disapply a provision of its national law which conflicts with it, if, in doing so, an additional obligation were to be imposed on an individual (see, to that effect, judgments of 3 May 2005, Berlusconi and Others, C‑387/02, C‑391/02 and C‑403/02, EU:C:2005:270, paragraphs 72 and 73; of 17 July 2008, Arcor and Others, C‑152/07 to C‑154/07, EU:C:2008:426, paragraphs 35 to 44; of 27 February 2014, OSA, C‑351/12, EU:C:2014:110, paragraphs 46 and 47; of 7 August 2018, Smith, C‑122/17, EU:C:2018:631, point 49; and of 22 January 2019, Cresco Investigation, C‑193/17, EU:C:2019:43, paragraph 73)." (Poplawski C-573/17)
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- Applies against bodies subject to authority or control of the State
"[45] A national court is obliged to set aside a provision of national law that is contrary to a directive only where that directive is relied on against a Member State, the organs of its administration, such as decentralised authorities, or organisations or bodies which are subject to the authority or control of the State or which have been required by a Member State to perform a task in the public interest and, for that purpose, possess special powers beyond those which result from the normal rules applicable to relations between individuals (see, to that effect, judgments of 24 January 2012, Dominguez, C‑282/10, EU:C:2012:33, paragraphs 40 and 41; of 25 June 2015, Indėlių ir investicijų draudimas and Nemaniūnas, C‑671/13, EU:C:2015:418, paragraphs 59 and 60; and of 10 October 2017, Farrell, C‑413/15, EU:C:2017:745, paragraphs 32 to 42)." (Smith v. Meade C-122/17)
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Cannot rely on direct effect for some purposes but not others
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- Cannot rely on incompatible domestic law exemption but also rely on direct effect to claim input VAT
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"[45] It follows from the foregoing that, even where an exemption provided for by national law is incompatible with the VAT Directive, Article 168 of that directive does not permit a taxable person both to benefit from that exemption and to exercise the right to deduct tax." (MDDP C-319/12)
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Effect​
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- Direct reliance on EU law right
"[27] In a case where directly effective EU rights are in issue, EU law must be the starting point of the analysis. It may also be the finishing point, since it takes priority over domestic law in accordance with the provisions of the European Communities Act 1972.
[28] The Framework Directive confers on all persons, including police officers, a directly effective right to be treated in accordance with the principle of equal treatment in relation to employment and working conditions, including dismissals: article 3(1)(c)..." (P v. Commissioner of Police [2017] UKSC 65)
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"[18] The critical point is that, if the supplies fall within the exemptions in Article 15 (9) or (13) of the Directive, their direct effect means that there is no need for the Taxpayers to rely on national law. Directly effective provisions of EC law can be relied on by citizens, though not by the State itself, in domestic courts and tribunals. If, however, the supplies do not fall within Article 15, the Taxpayers maintain their contention that the supplies fall within the exemptions in national law. If they do, they can be relied on by the Taxpayers, even if it is impossible by the principle of compatible construction to read the national law compatibly with EC law. A breach of EC law by the UK in the implementation of the Directive into national law would not affect the right of the Taxpayer, as against the State, to rely on national law." (HMRC v. EB Central Services Limited [2008] EWCA Civ 486, Mummery LJ)
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- Estoppel against Member State
"[48] On the face of article 288, it is not self-evident that a directive could have direct effect because the manner of its implementation in domestic law is left to Member States. However, in Van Duyn v Home Office (C-41/74) [1975] Ch 358, the ECJ first held that a clear and precise provision of a directive was capable of having direct effect once the period for transposing it into domestic law had elapsed and the Member State had failed to transpose it or had failed to do so correctly or fully. In Pubblico Ministero v Ratti (C-148/79) [1979] ECR 1629 the ECJ developed the basis of the vertical direct effect of directives in what came to be known as the "estoppel" argument. At paragraphs 21 and 22 the ECJ explained that directives impose duties on Member States to adopt a certain course of action:
"Consequently a Member State which has not adopted the implementing measures required by the directive in the prescribed periods may not rely, as against individuals, on its own failure to perform the obligations which the directive entails."" (CG Fry & Son Ltd v. Secretary of State [2024] EWCA Civ 730)
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- Disapplication of national law that is contrary to directly effective EU law right
"[33] Accordingly, a national court is not required, solely on the basis of EU law, to disapply a provision of its national law which is contrary to a provision of EU law if the latter provision does not have direct effect (judgment of 24 June 2019, Popławski, C‑573/17, EU:C:2019:530, paragraph 68), without prejudice, however, to the possibility, for that court, or for any competent national administrative authority, to disapply, on the basis of domestic law, any provision of national law which is contrary to a provision of EU law that does not have such effect." (Thelen Technopark Berlin GmbH C-261/20)
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"[68] As confirmed by the case-law recalled in paragraphs 64 to 67 above, a national court’s obligation to disapply a provision of its national law which is contrary to a provision of EU law, if it stems from the primacy afforded to the latter provision, is nevertheless dependent on the direct effect of that provision in the dispute pending before that court. Therefore, a national court is not required, solely on the basis of EU law, to disapply a provision of its national law which is contrary to a provision of EU law if the latter provision does not have direct effect." (Poplawski C-573/17)
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- Disapplication only relevant if confirming interpretation not possible
"[41] In that regard, it is true that the question whether a national provision must be disapplied in so far as it conflicts with EU law arises only if no interpretation of that provision in conformity with EU law proves possible (judgments of 24 January 2012, Dominguez, C‑282/10, EU:C:2012:33, paragraph 23, and of 10 October 2013, Spedition Welter, C‑306/12, EU:C:2013:650, paragraph 28)." (Smith v. Meade C-122/17)
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"[61] I also do not understand it to be controversial that, where compliance would not be secured by interpreting the statute in accordance with ordinary domestic principles of interpretation, a conforming interpretation will be adopted if that is possible: in addition to the passage just cited from FII CA2, see for example Test Claimants in the FII Group Litigation v Revenue and Customs Commissioners [2010] EWCA Civ 103 ("FII CA1") at [97], discussed in Prudential Assurance Co Ltd v Revenue and Customs Commissioners [2016] EWCA Civ 376, [2016] STC 1798 ("Prudential CA") at [104]. The alternative, which is a disapplication of the offending provision, will only be resorted to if a conforming interpretation is not possible (see for example Prudential CA at [107]-[108])." (HMRC v. Post Prudential Applicants [2025] EWCA Civ 166)
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CONDITIONAL PROVISIONS​
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- Can rely on direct effect to overcome unlawful conditions imposed by Member State
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“[60] The fact that that provision confirms the existence of a discretion for Member States is not such as to call that interpretation into question if, according to objective evidence, the supply at issue meets the criteria for that exemption (see, by analogy, Case C-45/01 [2003] ECR I-12911, paragraph 81).
[61] Consequently, the fact that Article 13B(d)(6) of the Sixth Directive allows Member States a discretion, indicating that they are responsible for defining special investment funds, does not prevent the persons concerned from relying directly on that provision (see, by analogy, , paragraph 81), where a Member State exercising that discretion has adopted national measures which are incompatible with that directive (see, to that effect, , paragraphs 36 and 37).
[62] The answer to the fourth question must, therefore, be that Article 13B(d)(6) of the Sixth Directive has direct effect, in that it can be relied on by a taxable person before a national court in order to challenge the application of national legislation alleged to be incompatible with that provision.” (JP Morgan Fleming Claverhouse Investment Trust plc C-363/05)
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“[34] As regards more specifically Article 13B of the Sixth Directive, it is apparent from the case-law that, whilst that provision undoubtedly confers upon the Member States a discretion as regards laying down the conditions for the application of certain of the exemptions it provides for, a Member State may not rely, as against a taxpayer who is able to show that his tax position actually falls within one of the categories of exemption laid down in the directive, upon its failure to adopt the very provisions which are intended to facilitate the application of that exemption (, cited above, paragraph 33).
[35] It must be added that the fact that Article 13B(f) of the Sixth Directive confirms the discretion which the Member States have by specifying that they have the power to lay down the conditions and limitations to which the exemption for games of chance and gambling is subject, is not such as to call that interpretation into question. Since those games are, as a rule, exempt from VAT, any operator of such games can directly rely on that exemption provided that the Member State concerned has waived the power expressly conferred on it by Article 13B(f) of the Sixth Directive or has failed to exercise that power.
[36] It is important to note, moreover, that the principle which applies where a Member State has not exercised the powers conferred on it by Article 13B(f) of the Sixth Directive must apply where, in exercising that power, a Member State has adopted national provisions which are not compatible with the directive.
[37] It follows that, as the Advocate General pointed out in point 72 of her Opinion, where, as in the cases in the main proceedings, the conditions or limitations which a Member State imposes on the exemption from VAT for games of chance or gambling are contrary to the principle of fiscal neutrality, that Member State cannot rely on such conditions or limitations to refuse an operator of such games the exemption which he may legitimately claim under the Sixth Directive.
[38] Accordingly, the answer to the third question in Case C-453/02 and the second question in Case C-462/02 must be that Article 13B(f) of the Sixth Directive has direct effect in the sense that it can be relied on by an operator of games of chance or gaming machines before national courts to prevent the application of rules of national law which are inconsistent with that provision.” (Linneweber C-453/02)
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Mandatory exemptions giving member state discretion ​
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- Requirement to lay down conditions to ensure correct application does not prevent direct effect
"[79] In addition, although Article 13A(1) of the Sixth Directive provides that the Member States are to apply the exemptions prescribed by that provision under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse, a Member State may not rely, as against a taxpayer who is able to show that his tax position actually falls within one of the categories of exemption laid down in the Sixth Directive, on its failure to adopt the very provisions which are intended to facilitate the application of that exemption (Kügler, cited above, paragraph 52)." (Dornier C-45/01)
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"[52] First, although Article 13(A)(1) of the Sixth Directive provides that the Member States are to apply the exemptions prescribed by that provision ‘under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse, a Member State may not rely, as against a taxpayer who is able to show that his tax position actually falls within one of the categories of exemption laid down in the Sixth Directive, upon its failure to adopt the very provisions which are intended to facilitate the application of that exemption (see, in relation to Article 13(B) of the Sixth Directive, Becker, cited above, paragraph 33)." (Kugler C-141/00)
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- Option to lay down additional conditions does not prevent direct effect
"[59] This conclusion cannot be affected by the possibility under Article 13(A)(2) of the Sixth Directive of making the grant of the exemptions provided for in Article 13(A)(1) subject to one or more conditions.
[60] That limitation on the rule excluding liability to tax is purely contingent in nature and a Member State which has omitted to adopt the measures necessary for that purpose cannot rely on its own omission in order to refuse a taxpayer entitlement to an exemption which he may legitimately claim under the Sixth Directive." (Kugler C-141/00)
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"[35] It must be added that the fact that Article 13B(f) of the Sixth Directive confirms the discretion which the Member States have by specifying that they have the power to lay down the conditions and limitations to which the exemption for games of chance and gambling is subject, is not such as to call that interpretation into question. Since those games are, as a rule, exempt from VAT, any operator of such games can directly rely on that exemption provided that the Member State concerned has waived the power expressly conferred on it by Article 13B(f) of the Sixth Directive or has failed to exercise that power." (Linneweber C-453/02, §33)
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- Discretion to identify beneficiaries of exemption does not prevent direct effect
"[51] The Court has, however, already held that the fact that that provision of the VAT Directive laying down an exemption grants the Member States a discretion to establish the beneficiaries thereof does not prevent that provision from being held to be sufficiently precise to be relied upon directly if, according to objective evidence, the supply at issue meets the criteria for that exemption (see, inter alia, JP Morgan Fleming Claverhouse Investment Trust and The Association of Investment Trust Companies, paragraphs 60 and 61 and case-law cited)." (MDDP C-319/12)
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- Direct effect only applies where limits of discretion exceeded by identifying body that could not objectively be recognised
"[51] The Court has, however, already held that the fact that that provision of the VAT Directive laying down an exemption grants the Member States a discretion to establish the beneficiaries thereof does not prevent that provision from being held to be sufficiently precise to be relied upon directly if, according to objective evidence, the supply at issue meets the criteria for that exemption (see, inter alia, JP Morgan Fleming Claverhouse Investment Trust and The Association of Investment Trust Companies, paragraphs 60 and 61 and case-law cited).
[52] Likewise, where a Member State has exceeded its discretion by exempting supplies or taxable persons with regard to which such an exemption could not objectively be granted under that provision of the VAT Directive, the person concerned may rely directly on that provision so that that exemption is not applied to him.
[53] It follows that it is only where the Member State has exceeded its discretion, by defining a taxable person as an organisation with objects similar to those of bodies governed by public law, that that taxable person may then rely on point (i) of Article 132(1) of the VAT Directive in order to contest national legislation and have its services made liable to VAT." (MDDP C-319/12)
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MEMBER STATE TO DEFINE ELEMENT OF EXEMPTION​
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- Can have direct effect if supply objectively meets criteria
"[60] The fact that that provision confirms the existence of a discretion for Member States is not such as to call that interpretation into question if, according to objective evidence, the supply at issue meets the criteria for that exemption (see, by analogy, Case C-45/01 Dornier [2003] ECR I-12911, paragraph 81).
[61] Consequently, the fact that Article 13B(d)(6) of the Sixth Directive allows Member States a discretion, indicating that they are responsible for defining special investment funds, does not prevent the persons concerned from relying directly on that provision (see, by analogy, Dornier, paragraph 81), where a Member State exercising that discretion has adopted national measures which are incompatible with that directive (see, to that effect, Linneweber and Akritidis, paragraphs 36 and 37)." (JP Morgan C-363/05)
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EXEMPTION APPLYING ONLY TO "CERTAIN" SUPPLIES​
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EXAMPLES ​
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- Cannot be read as requiring all supplies to be exempt, no direct effect
"[34] To interpret Article 132(1)(m) of the VAT Directive as meaning that, notwithstanding the use of the word ‘certain’ to describe the supplies constituting the transaction to be exempted, Member States are obliged to exempt ‘all’ services closely linked to sport or physical education would be liable to extend the material scope of the exemption beyond that word, contrary to the Court’s case-law stating that the terms used to specify the exemptions in Article 132(1) of that directive are to be interpreted strictly (see, by analogy, judgment of 15 February 2017, British Film Institute, C‑592/15, EU:C:2017:117, paragraph 17 and the case-law cited).
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[36] In the judgment of 15 February 2017, British Film Institute (C‑592/15, EU:C:2017:117), it was precisely the use of the term ‘certain’ in the wording of Article 13A(1)(n) of the Sixth Directive – which corresponds to Article 132(1)(n) of the VAT Directive – which led the Court to consider that that provision allowed the Member States a discretion in determining the cultural services to be exempted and to deduce that the provision did not satisfy the conditions for being capable of being relied on directly before the national courts (see, to that effect, judgment of 15 February 2017, British Film Institute, C‑592/15, EU:C:2017:117, paragraphs 14, 16, 23 and 24).
[37] Given the similarity of the respective wording of points (m) and (n) of Article 132(1) of the VAT Directive, that same reasoning must be applied to the interpretation of the exemption under Article 132(1)(m) of that directive.
[38] A consistent interpretation of those two provisions is all the more warranted given that the supply of services linked to sport or physical education and the supply of cultural services, to which the exemptions under points (m) and (n) of Article 132(1) of the VAT Directive respectively apply, are both public-interest entertainment and leisure activities, which distinguishes them from the public-interest activities covered by the 15 other exemptions under Article 132(1) of that directive." (Golfclub Schloss Igling C-488/18)
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- Medical exemptions
"[80] As regards the content of Article 13A(1)(b) and (c) of the Sixth Directive, the Court finds that, contrary to the assertions of the German Government, those provisions indicate in a sufficiently precise and unconditional manner the activities to which the exemption applies (see, by analogy, as regards Article 13A(1)(g) of the Sixth Directive, Kügler, cited above, paragraph 53)." (Dornier C-45/01)
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Direct effect ​
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- Gambling exemptions
"[38] Accordingly, the answer to the third question in Case C-453/02 and the second question in Case C-462/02 must be that Article 13B(f) of the Sixth Directive has direct effect in the sense that it can be relied on by an operator of games of chance or gaming machines before national courts to prevent the application of rules of national law which are inconsistent with that provision." (Linneweber C-453/02)
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- Fund management exemption
"[62] The answer to the fourth question must, therefore, be that Article 13B(d)(6) of the Sixth Directive has direct effect, in that it can be relied on by a taxable person before a national court in order to challenge the application of national legislation alleged to be incompatible with that provision." (JP Morgan C-363/05)
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- Value of deemed supply rules (Article 74)
"[38] It must be pointed out that Article 74 of the VAT Directive sets out, clearly and unconditionally, the criteria for determining the taxable amount in respect of the application of goods by a taxable person in the event of cessation of his taxable economic activity. That provision therefore meets those conditions."​(Marinov C-142/12)
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No direct effect ​
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- Cultural and sports related exemption
"[36] In the judgment of 15 February 2017, British Film Institute (C‑592/15, EU:C:2017:117), it was precisely the use of the term ‘certain’ in the wording of Article 13A(1)(n) of the Sixth Directive – which corresponds to Article 132(1)(n) of the VAT Directive – which led the Court to consider that that provision allowed the Member States a discretion in determining the cultural services to be exempted and to deduce that the provision did not satisfy the conditions for being capable of being relied on directly before the national courts (see, to that effect, judgment of 15 February 2017, British Film Institute, C‑592/15, EU:C:2017:117, paragraphs 14, 16, 23 and 24).
[37] Given the similarity of the respective wording of points (m) and (n) of Article 132(1) of the VAT Directive, that same reasoning must be applied to the interpretation of the exemption under Article 132(1)(m) of that directive." (Golfclub Schloss Igling C-488/18)
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