In several landmark cases, the European Court of Justice has ruled that member states of the European Union are liable in damages caused by an infringement of European law such as the treaty of Rome. However liability is not dependent on the violation of European law per se, but on the additional qualification, that the violation is sufficiently serious. This article analyses the incentive effects of liability rules on member states to avoid discriminatory trade related regulation under the disguise of consumer, environmental or health protection. The results of the analysis are ambiguous. Even a per se liability rule might lead to over- or undercompliance. However some arguments are presented, which support the view, that a restricted form of liability (sufficiently serious breach or liability for obvious misconduct) is more efficient than a per se liability for violation of European law.