Why is this ruling so important?
In this ground-breaking ruling, the European Court of Justice held that European Law is of a higher legal order than National Law. In case of contrary national legislation, the European rules therefore prevail.
In the early sixties, the Italian government nationalized the electricity sector. Mister Flaminio Costa disagreed with this course of affairs, because he owned shares in a small private electricity company that was now being merged into a state owned company: ENEL. As reprisal, he refused to pay his electricity bills, with a total sum of almost 2000 Lire. In the Italian court, he argued that the nationalization was against European Law. The Italian government however, held that under no conditions, a domestic court could set aside national law.
What was decided?
The European Court of Justice ruled that in this case the nationalisation of the electricity sector was a matter the European Commission should deal with, since the commission was competent to review such acts against European Law.
Please note that In casu, mister Costa did not win the argument. However, the court was very clear on one thing: the Italian government was wrong in assuming that no domestic court could set aside domestic law.
Important quotes from the verdict
The obligations undertaken under the treaty establishing the community would not be unconditional, mut merely contingent, if they could be called in question by subsequent legislative acts of the signatories. Wherever the Ttreaty grants the states the rights unilaterally, it does this by clear and precise provisions.
It follows from all these observations that the law stemming from the treaty, and independent source of law, could not, because of its special and original nature, 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.
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Art. 288 TFEU (ex Art. .249 TEC, in the original ruling a reference is made to the earlier Art. 189 of the EEC treaty).