585, Court of Justice of the European Communities
In 1962, Italy nationalized its electric power industries into a single entity, the National Electricity Board (ENEL). A lawyer named Costa, who owned a stake in one of the companies, protested his loss of dividends by refusing to pay his electric bill. He claimed that ENEL existed in violation of the EEC Treaty. An arbitration tribunal in Milan referred the case to the European Court of Justice in order to clarify the question.
The ECJ established that:
- "By contrast with ordinary international treaties, the EEC Treaty has created its own legal system which, on the entry into force of the Treaty, became an integral part of the legal systems of the Member States and which their courts are bound to apply."
- "The transfer by the States from their domestic legal system to the Community legal system of the rights and obligations arising under the Treaty carries with it a permanent limitation of their sovereign rights, against which a subsequent unilateral act incompatible with the concept of the Community cannot prevail."
The Italian Constitutional Court
had already upheld the act creating the ENEL, stating that since the EEC treaty had been adopted as a normal law
, it was subject to implied repeal
. The ECJ ruling, however, overturned the Italian decision and established that states could not deviate from Community treaties without prior permission: high courts had to consult the ECJ before deciding on an incompatibility between state and EC law. It set an important precedent
for the supremacy of Community law
within the European Community
, and later the European Union