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Indirect effect is a principle of European Union Law stating that EU directives can override the laws of member states under certain circumstances. In the EU, a "directive" is a legislative order that requires implementation in every member state by the domestic government. While the member state has the freedom to draft their own implementing law, the law must comply with the aim of the original directives. As a result, implementation may take different forms across the member states. This is in contrast to a "regulation," a single law for the entire Union that has is directly effective in every member state.
The concept was defined by the European Court of Justice in Case 148/78 Pubblico Ministero v. Ratti ( ECR 1629). Ratti, the defendant in the case, had violated an Italian law in order to follow an EEC directive on product packaging. The Court ruled that because the Italian government had not implemented the EU directive within the dictated time frame of the directive, it had no authority to prosecute Ratti based on actions compliant with the directive.
Indirect effect and individuals
Individuals can sue a state for not implementing an EU directive. However, they cannot use an unimplemented directive as a basis to sue other individuals: directives lack "horizontal direct effect." The definition of "state" is generally interpreted to mean any entity under the control of the government: in Case C-188/89 Foster v. British Gas ( ECR I-3133), the Court of Justice ruled that parastatal companies were part of the state, but gave member state courts the power to determine what constituted a parastatal company (or any other category of "state" entity). Administrative authorities, including municipal governments, are also legally bound to implement directives even if they contradict national laws (see Case 103/88 Fratelli Costanzo v. Milano,  ECR 1839).
While directives do not have direct effect on suits between individuals, they do have an "incidental effect" on almost all legal matters, including civil suits.
Indirect effect and states
In general, states are bound to implement directives as the directives are laid out. State courts are also bound to interpret state laws in a manner that conforms with directives: this is called conform-interpretation. In Case 14/83 Von Colson and Kamann v. Land Nordrhein-Westfalen ( ECR 1891), the Court of Justice ruled that Germany was in breach of an EU directive because it did not provide for appropriate sanctions against violators of the directive. According to the ECJ's opinion, state courts are required to guarantee substantial protection of rights enumerated in EU directives, and are also required to provide substantial deterrents for violators.
If a member state's government has not implemented a directive, but the deadline for implementation has not yet passed, the directive cannot be used by itself to overturn contradictory national laws. This was established in Case 80/86 Officier van Justitie v. Kolpinghuis Nijmegen ( ECR 3969). However, the state government, including the courts, are bound to take "all appropriate measures" to achieve the desired results of each directive, so courts can interpret national laws in methods sympathetic to the spirit of the directives (see Case C-106/89 Marleasing SA v. La Comercial Internacional de Alimentacion SA,  ECR I-4135).
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