On 5 March 1996 the European Court of Justice handed down its long-awaited judgment in joined cases C-46/93 and C-48/93: the Brasserie du P--cheur case, referred by the Bundesgerichtshof and the Factortame III case referred by the High Court.

Both required the court to consider the conditions for state liability for breaches of EU law and arose out of politically sensitive litigation.The Brasserie du P--cheur reference arises in an action brought against the German government for loss allegedly suffered by a French company which had to discontinue exports of beer to Germany in late 1981 as they failed to comply with the German beer purity laws.

These la ws were later held to be incompatible with art 30 of the Treaty (case 178/84).

The Factortame III case is the latest chapter in the history of the legal challenge to the Merchant Shipping Act 1988.

The claimants in the present reference, failing to comply with the conditions on nationality and domicile, were not allowed to fish under the British flag -- conditions held to be incompatible with arts 7, 52 and 221 of the Treaty (case C-221/89 and case C-246).The court first concluded, unsurprisingly, that state liability can in principle be engaged regardless of whether the breach was attributable to the legislature, the executive or the judiciary.

Nor was the court impressed by the argument that the action for reparation lies only where the EU law provision breached is not directly effective.The second issue concerned the conditions under which a right to reparation arises out of the breach.

It was clear from the court's decision in the Francovich case (joined cases C-6/90 and C-9/90) that a state's liability to pay compensation was not unconditional.

Three preconditions to liability were expressly laid down by the ECJ: the relevant provision of EU law must directly confer rights on individuals; the legal right must be breached by an act for which the state can be held responsible; and there must be a causal link between the breach and the harm suffered by the claimant.

It was not clear whether or not these preconditions were the only preconditions to an EU law entitlement to damages or whether, for example, by analogy with the case law under art 215, the right to claim damages should be restricted to cases where there was 'a sufficiently flagrant violation'.

This question has been addressed by the court in the most difficult and the most interesting part of its judgment.

The court affirmed that the EU cannot incur liability unless the institution 'manifestly and gravely' disregarded the limits on the exercise of its powers.

The court decided that member states should only incur liability in comparable situations where they are acting in a field where they have a wide discretion comparable to that of the EU institutions in implementing EU policies (para 47).

Where a state does have wide discretion as well as the conditions referred to in the Francovich decision, the claimant must demonstrate that the breach is 'sufficiently serious'.

Factors that the court can take into account include the clarity and precision of the rule breached; the measure of discretion left to the national authorities; whether the infringement and damage caused was intentional or involuntary; and whether any error of law was excusable or inexcusable.

Accordingly, the new area for debate will be to define those circumstances in which a member state is likely to be held to have a wide discretion and those in which it is not.

Most importantly, the judgment suggests that a member state may be held to have a narrow discretion in every case where it is under an obligation to implement a Directive (see para 46 and the opinion of the Advocate-General at para 80).

If this is right it means that the member states will not be able to defend a claim for damages on the grounds that the failure properly to implement was due to the vagueness or ambiguity of the Directive's provisions.

This would be likely to lead to implementation being increasingly by way of simple adoption of a Directive -- ambiguities and all.Unsurprisingly, the measure of damages is to be left to the national courts, subject to the usual proviso that the remedy is not less favourable than that applying to similar claims based on domestic law and not such as in practice make it impossible or excessively difficult to obtain reparation.

The court indicates that reparation should be commensurate with the loss suffered; total exclusion of loss of profit as a head of damage would be incompatible with EU law.

Importantly, the court confirms that the national court is entitled to take into account whether or not the claimant has mitigated his loss, and also whether or not he has availed himself of all the legal remedies available to him.

It may be possible to limit a claim for damages for breach of a directly effective provision by arguing that the claimant could have limited his losses by seeking to rely upon his directly effective EU law rights in the national courts.

The ECJ rejected the application by the German government to limit the temporal effects of its judgment.As with every Factortame judgment, the ECJ's decision has been criticised as a further erosion of UK parliamentary sovereignty and has led to calls to 'denounce' or 'renounce' the Treaty.

It seems likely that the UK will seek a review of the common fisheries policy at the Turin inter-governmental conference.

The common fisheries policy may not be to the benefit of the UK fishing industry.

Yet this does not make the ECJ's judgment a bad one.

The supremacy of EU law over national law is hardly a new concept.

Whilst the renegotiation of the fisheries policy may be the political outcome of the decision, to lawyers the outcome will no doubt be an increased number of reparation claims in the national courts based on infringements of EU law.MAIN POINTS OF THE ECJ'S RULING-- Confirmation by the ECJ that state liability is engaged where the national legislature is responsible for a breach of EU law.-- In every case where a claimant seeks reparation, he must show that the EU rule breached was intended to confer rights on him and that there is a direct causal link between his damage and the breach.-- Where -- and only where -- a member state has a 'wide discretion' to make legislative choices, a claimant will also have to demonstrate that the breach was 'sufficiently serious'.-- The measure of damages is left to the national courts but should be commensurate with the loss suffered, no less favourable than that available in a similar action in domestic law and not such as in practice makes it impossible or excessively difficult to obtain reparation.-- Claimants must mitigate their losses.