Costa v ENEL

Flaminio Costa was an Italian lawyer and a shareholder in Edison Volta, an electricity company operating in Italy. In 1962, the Italian legislature enacted Law No. 1643, which nationalised the electricity industry and transferred the assets and operations of private electricity undertakings to a newly created public body, Ente Nazionale Energia Elettrica (ENEL). Costa, who had a direct financial interest in the companies affected by nationalisation, objected to the measure on principled legal grounds.

When presented with an electricity bill by ENEL, Costa refused to pay the modest sum demanded. He argued before the Giudice Conciliatore (a magistrates' court) in Milan that the nationalisation law was incompatible with the EEC Treaty to which Italy was a contracting party. Specifically, he contended that Law No. 1643 of 1962 conflicted with various provisions of the Treaty of Rome, including those relating to the freedom of establishment, the free movement of services, and competition rules.

The Italian government and ENEL argued, in essence, that the matter was governed entirely by Italian domestic law. They contended that Law No. 1643 of 1962, as a later statute, superseded any obligations arising under the EEC Treaty, which had been incorporated into Italian law by an earlier statute. Under the traditional Italian constitutional principle of lex posterior derogat legi priori, the more recent legislation would prevail in the event of any conflict.

The Giudice Conciliatore referred questions to both the Italian Constitutional Court and the Court of Justice of the European Communities under what is now Article 267 of the Treaty on the Functioning of the European Union (then Article 177 EEC). The Italian Constitutional Court, hearing a parallel reference, ruled that the Italian court was bound to apply the later domestic statute, taking the view that EEC Treaty provisions, having been incorporated by ordinary statute, could be overridden by subsequent ordinary legislation in accordance with standard constitutional doctrine.

The reference to the Court of Justice therefore raised directly the question of whether a national court was obliged to apply EEC law even where a subsequent domestic statute conflicted with it. The Court of Justice's answer was to have profound and enduring constitutional consequences for the relationship between Community law and the laws of the Member States.

The primary issue before the Court of Justice was whether a national court was entitled, or indeed required, to apply provisions of the EEC Treaty in preference to subsequent conflicting national legislation. This required the Court to determine the constitutional relationship between the Community legal order and the domestic legal orders of the Member States.

A secondary but closely related issue was whether the EEC Treaty created rights and obligations capable of being invoked before national courts in circumstances where a Member State had enacted domestic legislation post-dating its accession to the Treaty that was incompatible with Treaty obligations. This raised fundamental questions about the nature of Community law as a legal order distinct from, and in certain respects superior to, public international law.

Underlying both issues was the broader structural question of whether the uniform application of Community law across all Member States could be guaranteed if individual states retained the power to legislate in derogation from Treaty obligations without Community-level consequence. The Court was therefore invited to articulate, for the first time with full constitutional clarity, the principle that has since become known as the supremacy of EU law.

The Court of Justice opened its analysis by distinguishing the EEC Treaty from ordinary international treaties. Drawing expressly upon its earlier landmark ruling in Van Gend en Loos v Nederlandse Administratie der Belastingen (Case 26/62), the Court affirmed that the EEC Treaty created a new legal order of international law for the benefit not only of the Member States but also of their nationals. That new legal order was integrated into the legal systems of Member States and was binding upon their courts. The Community thus constituted more than a conventional framework of international obligations between sovereign states; it was a self-standing legal order with its own subjects and its own institutions.

The Court placed considerable weight on the institutional character of the Community. By establishing a Community of unlimited duration, endowed with its own institutions, its own legal personality, its own legal capacity, and capacity of representation on the international plane, and, more particularly, with real powers stemming from a limitation of sovereignty or a transfer of powers from the Member States to the Community, the Member States had permanently and irrevocably limited their sovereign rights. This was not a temporary or conditional limitation but a structural feature of the Community architecture to which Member States had freely assented.

The Court rejected the argument that domestic constitutional rules, including rules about the relationship between earlier and later statutes, could determine the effect of Community law within the national legal order. To allow domestic constitutional principles to govern the status of Community law would be to subject the uniform application of Community law to the contingencies of domestic legislation. Different Member States would then accord different degrees of authority to the same Community norm depending on whether their domestic law treated international treaty obligations as superior to, or merely equivalent with, ordinary legislative acts.

This reasoning led directly to the Court's articulation of the necessity of supremacy. The Court held that the executive force of Community law cannot vary from one state to another in deference to subsequent domestic laws without jeopardising the attainment of the objectives of the Treaty and giving rise to discrimination prohibited by the Treaty itself. Supremacy is therefore not merely a formal constitutional rule but is functionally necessary to the coherence and effectiveness of the entire Community project.

The Court further reasoned that the transfer of rights and obligations from the national legal order to the Community legal order carried with it a corollary limitation on the legislative competence of Member States. Having accepted obligations on a reciprocal basis, Member States could not unilaterally undermine those obligations by subsequent domestic action. To permit a Member State to enact legislation incompatible with Community law and to have that legislation take effect would be to allow unilateral acts to prevail over a legal system accepted on a reciprocal and permanent basis, which the Court held was conceptually incompatible with the nature of the Community.

The Court drew attention to the fact that the Treaty contains no provision permitting Member States to give precedence to unilateral subsequent measures over Community norms. The absence of any such reservation clause was itself significant: the Member States had created a legal order without building in any mechanism by which domestic legislatures could override it. This structural silence supported the interpretation that supremacy was an inherent attribute of Community law from the moment of the Treaty's entry into force.

The Court also addressed the risk of discrimination between nationals of different Member States. If a Member State were free to enact legislation conflicting with Community rules, its nationals would be subject to a different legal regime from those in other Member States. This would produce precisely the kind of discriminatory divergence that the Treaty was designed to eliminate. Supremacy thus serves the Treaty's substantive objectives of market integration and equal treatment, as well as its formal constitutional structure.

Having established the principle of supremacy, the Court considered its application to the specific facts before it. The Court examined the provisions of the EEC Treaty relied upon by Costa and assessed whether Italian Law No. 1643 of 1962 was incompatible with those provisions. While the Court ultimately concluded, on the specific Treaty articles in question, that the Italian nationalisation law did not in fact violate the particular provisions invoked — meaning Costa did not succeed on the merits — the constitutional principle enunciated was unambiguous and of the highest generality.

Critically, the Court declined to accept the reasoning of the Italian Constitutional Court that the ordinary Italian rules on the temporal succession of statutes governed the relationship between the EEC Treaty and domestic legislation. For the Court of Justice, the question was not one of Italian constitutional law at all; it was a question of Community law, to be answered by Community law principles. The Court of Justice was the authoritative interpreter of Community law, and the national courts were bound to apply that interpretation.

The Court's reasoning also implicitly addressed questions of judicial competence. By conferring on national courts the obligation to apply Community law in preference to conflicting national provisions, the Court empowered every national court, however subordinate within its domestic hierarchy, to disapply national legislation where it was incompatible with Community law. This was a radical departure from the constitutional traditions of many Member States, where only supreme or constitutional courts possessed the power to strike down legislation.

The Court of Justice held that the EEC Treaty created an independent legal order integrated into the legal systems of Member States and binding upon their courts. By reason of its special and original nature, Community law cannot be overridden by domestic legal provisions, however framed, without being deprived of its character as Community law and without the legal basis of the Community itself being called into question. Community law therefore has supremacy over all conflicting provisions of national law, including national legislation enacted after the date of the relevant Community provision.

National courts are required to apply Community law in any case falling within its scope, giving full effect to Community provisions and setting aside any conflicting provision of domestic law. This obligation arises by virtue of Community law itself and does not depend upon any constitutional provision of domestic law authorising such disapplications.

On the specific facts, the Court found that the particular provisions of the EEC Treaty invoked by Costa did not preclude the nationalisation effected by Italian Law No. 1643 of 1962, and accordingly Costa's substantive challenge to the electricity bill did not succeed. Nevertheless, the constitutional principle of supremacy was definitively established as a cornerstone of the Community legal order.

Costa v ENEL (Case 6/64) stands as one of the most constitutionally significant judgments ever delivered by the Court of Justice. Together with Van Gend en Loos (Case 26/62), which established the doctrine of direct effect, it provides the twin constitutional foundations of the EU legal order as it is understood today. Supremacy ensures that Community rights conferred on individuals cannot be removed or undermined by the unilateral legislative action of any Member State, while direct effect ensures that those rights are capable of enforcement before national courts without the need for further domestic implementing measures.

The principle of supremacy was subsequently elaborated and extended in a series of important judgments. In Amministrazione delle Finanze dello Stato v Simmenthal SpA (Case 106/77), the Court reinforced that every national court must immediately disapply conflicting national legislation without waiting for the national legislature or a supreme court to do so. This extended the practical impact of the supremacy doctrine by ensuring that it operated at all levels of the judicial hierarchy and in real time, not merely prospectively. In Factortame Ltd v Secretary of State for Transport (Case C-213/89), the Court went further still, holding that national courts must grant interim relief, even if domestic procedural law did not permit it, where Community rights might otherwise be rendered ineffective.

The reception of the supremacy doctrine in the constitutional orders of Member States has not been unconditional. Several national constitutional courts, including the German Federal Constitutional Court (Bundesverfassungsgericht) and the Danish Supreme Court, have reserved the right to review Community acts against national constitutional standards, particularly in respect of fundamental rights and the limits of attributed competences. The Bundesverfassungsgericht's doctrine of Solange and its subsequent jurisprudence on constitutional identity represent the most developed articulation of this qualified acceptance. Nonetheless, for practical purposes and in the vast majority of cases, the supremacy of EU law operates as an effective constitutional principle throughout the Member States.

Following the United Kingdom's withdrawal from the European Union, the principle of supremacy no longer applies in the domestic legal order of the United Kingdom in respect of legislation enacted after the European Union (Withdrawal) Act 2018. However, retained EU law — being EU law as it existed immediately before exit day — continued to enjoy a form of qualified supremacy over pre-Brexit domestic legislation by virtue of that Act, illustrating the lasting structural imprint that the Costa v ENEL doctrine made even upon a legal system that has since departed from the EU. The case thus retains its significance both as a matter of EU constitutional law and as a reference point for comparative analysis of the relationship between international obligations and domestic legal orders.